-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OxyZ5EuUgZn6Ko+Nx+f5c+z6ngSFrGqma7jLeSG7KzM4INBC53wu+Rqe+QUZovJb ZPz/zwFWUk3ZzOhdzJt9pA== 0000750556-98-000011.txt : 19981116 0000750556-98-000011.hdr.sgml : 19981116 ACCESSION NUMBER: 0000750556-98-000011 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19981113 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-Q/A SEC ACT: SEC FILE NUMBER: 001-08918 FILM NUMBER: 98746484 BUSINESS ADDRESS: STREET 1: 25 PARK PLACE N E CITY: ATLANTA STATE: GA ZIP: 30313 BUSINESS PHONE: 4045887711 MAIL ADDRESS: STREET 1: 25 PARK PLACE N E CITY: ATLANTA STATE: GA ZIP: 30313 10-Q/A 1 FORM 10-Q/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 1998 Commission File Number 1-8918 SUNTRUST BANKS, INC. (Exact name of registrant as specified in its charter) Georgia 58-1575035 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 303 Peachtree Street, N.E., Atlanta, Georgia 30308 (Address of principal executive offices) (Zip Code) (404) 588-7711 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (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. Yes __X__ No _____ At April 30, 1998, 211,107,402 shares of the Registrant's Common Stock, $1.00 par value were outstanding. Page 1 TABLE OF CONTENTS PART I FINANCIAL INFORMATION Page Item 1. Financial Statements (Unaudited) Consolidated Statements of Income 3 Consolidated Balance Sheets 4 Consolidated Statements of Cash Flows 5 Consolidated Statements of Shareholders' Equity 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-21 PART II OTHER INFORMATION Item 1. Legal Proceedings 22 Item 2. Changes in Securities 22 Item 3. Defaults Upon Senior Securities 22 Item 4. Submission of Matters to a Vote of Security Holders 22 Item 5. Other Information 22 Item 6. Exhibits and Reports on Form 8-K 22 SIGNATURES 22 PART I - FINANCIAL INFORMATION The following unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and accordingly do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1998 are not necessarily indicative of the results that may be expected for the full year 1998. Page 2 CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31 (Dollars in thousands except per share data)(Unaudited) 1998 1997 Interest Income Interest and fees on loans $ 804,347 $ 716,152 Interest and dividends on investment securities Taxable interest 117,528 110,690 Tax-exempt interest 8,644 10,650 Dividends (1) 10,845 9,205 Interest on funds sold 15,609 14,048 Interest on deposits in other banks 163 274 Other interest 2,260 2,064 Total interest income 959,396 863,083 Interest Expense Interest on deposits 284,512 276,964 Interest on funds purchased 100,555 77,707 Interest on other short-term borrowings 23,517 18,438 Interest on long-term debt 61,392 27,498 Total interest expense 469,976 400,607 Net Interest Income 489,420 462,476 Provision for loan losses 28,626 26,190 Net interest income after provision for loan losses 460,794 436,286 Noninterest Income Trust income 93,099 78,370 Service charges on deposit accounts 62,140 59,742 Other charges and fees 71,359 51,139 Credit card fees 20,461 18,805 Securities gains (losses) 910 1,391 Other noninterest income 38,348 16,355 Total noninterest income 286,317 225,802 Noninterest Expense Salaries and other compensation 235,058 202,408 Employee benefits 34,375 32,382 Net occupancy expense 33,072 32,530 Equipment expense 32,007 30,147 Operating supplies 8,967 9,601 Marketing and customer development 17,259 16,802 Postage and delivery 10,795 11,338 Outside processing and software 21,957 14,888 Other noninterest expense 77,574 63,908 Total noninterest expense 471,064 414,004 Income before income taxes 276,047 248,084 Provision for income taxes 95,173 87,028 Net Income $ 180,874 $ 161,056 Average common shares - diluted 211,693,568 218,226,968 Average common shares - basic 208,441,847 214,939,509 Net income per average common share - diluted $ 0.85 $ 0.74 Net income per average common share - basic 0.87 0.75 Dividends declared per common share 0.250 0.225 (1) Includes dividends on common stock of The Coca-Cola Company 7,240 6,757 See notes to consolidated financial statements
Page 3 CONSOLIDATED BALANCE SHEETS
March 31 December 31 March 31 (Dollars in thousands)(Unaudited) 1998 1997 1997 Assets Cash and due from banks $ 2,550,594 $ 2,991,263 $ 2,755,113 Interest-bearing deposits in other banks 11,053 15,417 58,522 Trading account 127,734 178,434 346,819 Investment securities (1) 12,003,611 11,729,298 10,747,319 Funds sold 1,017,059 996,583 1,310,143 Loans 41,264,007 40,135,505 36,428,048 Allowance for loan losses (658,488) (651,830) (634,501) Net loans 40,605,519 39,483,675 35,793,547 Premises and equipment 969,490 964,169 944,314 Intangible assets 429,727 292,370 277,216 Customers' acceptance liability 358,938 488,632 488,917 Other assets 1,916,507 942,895 1,111,369 Total assets $ 59,990,232 $ 58,082,736 $ 53,833,279 Liabilities & Shareholders' Equity Noninterest-bearing deposits $ 8,524,404 $ 8,927,796 $ 8,176,616 Interest-bearing deposits 28,220,179 29,269,732 28,484,693 Total deposits 36,744,583 38,197,528 36,661,309 Funds purchased 7,757,380 6,483,055 6,285,390 Other short-term borrowings 1,573,718 1,989,415 1,765,397 Long-term debt 4,189,360 3,171,832 1,721,319 Acceptances outstanding 358,938 488,632 488,917 Other liabilities 3,552,023 2,491,892 2,034,097 Total liabilities 54,176,002 52,822,354 48,956,429 Preferred stock, no par value; 50,000,000 shares authorized; none issued - - - Common stock, $1.00 par value; 350,000,000 shares authorized 213,108 211,608 225,608 Additional paid in capital 396,726 296,751 302,749 Retained earnings 2,940,944 2,812,645 3,146,532 Treasury stock and other (107,619) (109,503) (465,914) Realized shareholders' equity 3,443,159 3,211,501 3,208,975 Accumulated other comprehensive income 2,371,071 2,048,881 1,667,875 Total shareholders' equity 5,814,230 5,260,382 4,876,850 Total liabilities and shareholders' equity $ 59,990,232 $ 58,082,736 $ 53,833,279 Common shares outstanding 211,521,440 209,909,204 215,889,057 Treasury shares of common stock 1,586,617 1,698,853 9,719,000 (1) Includes unrealized gains (losses) on investment securities $ 3,832,666 $ 3,311,979 $ 2,695,129 See notes to consolidated financial statements.
Page 4 CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31 (Dollars in thousands)(Unaudited) 1998 1997 Cash flows from operating activities: Net income $ 180,874 $ 161,056 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 41,683 36,878 Provision for loan losses 28,626 26,190 Provision for losses on other real estate 478 536 Amortization of compensation element of restricted stock 2,354 2,330 Securities (gains) and losses, net (910) (1,391) (Gains) and losses on sale of equipment, other real estate and repossessed assets, net (22,543) (5,856) Recognition of unearned loan income (21,272) (58,310) Originations of loans for sale (776,188) (675,643) Proceeds from sale of loans 777,183 661,772 Change in period-end balances of: Trading account 50,700 (266,442) Interest receivable (18,296) (3,743) Prepaid expenses (41,578) (22,647) Other assets (891,608) (254,489) Taxes payable 87,005 79,310 Interest payable 1,057 (9,377) Other liabilities 775,991 182,456 Net cash provided by (used in) operating activities 173,556 (147,370) Cash flows from investing activities: Proceeds from maturities of investment securities 758,082 326,174 Proceeds from sales of investment securities 147,780 320,484 Purchases of investment securities (644,154) (734,382) Net decrease (increase) in loans (1,121,844) (965,931) Capital expenditures (35,819) (204,434) Proceeds from sale of equipment, other real estate and repossessed assets 10,562 2,369 Net funds received in acquisitions 13,420 - Other (20,638) (7,503) Net cash used in investing activities (892,611) (1,263,223) Cash flows from financing activities: Net decrease in deposits (1,452,945) (229,080) Net increase in funds purchased and other short-term borrowings 847,025 1,135,134 Proceeds from the issuance of long-term debt 1,274,131 240,798 Repayment of long-term debt (256,603) (84,820) Proceeds from the exercise of stock options 1,029 2,722 Payments to acquire treasury stock (65,564) (254,574) Dividends paid (52,575) (48,424) Net cash provided by financing activities 294,498 761,756 Net decrease in cash and cash equivalents (424,557) (648,837) Cash and cash equivalents at beginning of period 4,003,263 4,772,615 Cash and cash equivalents at end of period $ 3,578,706 $ 4,123,778 Supplemental Disclosure Interest paid $ 471,033 $ 391,230 Taxes paid 9,142 7,286 See notes to consolidated financial statements
Page 5 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated Additional Treasury Other Common Paid in Retained Stock and Comprehensive (Dollars in thousands)(Unaudited) Stock Capital Earnings Other Income Total Balance, January 1, 1997 $ 225,608 $ 310,612 $3,033,900 $(230,918) $1,601,778 $4,940,980 Net income - - 161,056 - - 161,056 Cash dividends declared on common stock, $0.225 per share - - (48,424) - - (48,424) Proceeds from exercise of stock options - (8,973) - 11,695 - 2,722 Acquisition of treasury stock - - - (254,574) - (254,574) Issuance of treasury stock for 401(k) - 1,110 - 5,553 - 6,663 Issuance, net of forfeitures, of treasury stock as restricted stock - - - (1,017) - (1,017) Compensation element of restricted stock - - - 1,017 - 1,017 Amortization of compensation element of restricted stock - - - 2,330 - 2,330 Change in unrealized gains (losses) on securities, net of taxes - - - - 66,097 66,097 Balance, March 31, 1997 $ 225,608 $ 302,749 $3,146,532 $(465,914) $1,667,875 $4,876,850 Comprehensive Income - March 31, 1997 $ 227,153 Balance, January 1, 1998 $ 211,608 $ 296,751 $2,812,645 $(109,503) $2,048,881 $5,260,382 Net income - - 180,874 - - 180,874 Cash dividends declared on common stock, $0.25 per share - - (52,575) - - (52,575) Proceeds from exercise of stock options - (9,794) - 10,823 - 1,029 Issuance of common stock for acquisitions 1,500 - - - - 1,500 Issuance of treasury stock for acquisition - 109,268 - 47,257 - 156,525 Acquisition of treasury stock - - - (65,564) - (65,564) Issuance of treasury stock for 401(k) - 280 - 7,235 - 7,515 Issuance, net of forfeitures, of treasury stock as restricted stock - 221 - 8,927 - 9,148 Compensation element of restricted stock - - - (9,148) - (9,148) Amortization of compensation element of restricted stock - - - 2,354 - 2,354 Change in unrealized gains (losses) on securities, net of taxes - - - - 322,190 322,190 Balance, March 31, 1998 $ 213,108 $ 396,726 $2,940,944 $(107,619) $2,371,071 $5,814,230 Comprehensive Income - March 31, 1998 $ 503,064 See notes to consolidated financial statements. Balance at March 31, 1997 includes $419,796 for Treasury Stock and $46,118 for Deferred Compensation. Balance at March 31, 1998 includes $42,785 for Treasury Stock and $64,834 for Deferred Compensation.
Page 6 Notes to Consolidated Financial Statements (Unaudited) Note 1 - Accounting Policies The consolidated interim financial statements of SunTrust Banks, Inc. ("SunTrust" or "The Company") are unaudited. All significant intercompany accounts and transactions have been eliminated. These financial statements should be read in conjunction with the Annual Report on Form 10-K/A for the year ended December 31, 1997. Note 2 - Recent Accounting Developments In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information, which is effective for annual and interim periods beginning after December 15, 1997. However, this statement is not required in interim financial statements in the initial year of its application. This statement establishes standards for the method that public entities use to report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographical areas and major customers. The anticipated disclosure, when fully implemented, will provide required information by reportable operating segment using the current internal management reporting system which is prepared on a geographic basis. During the first quarter of 1998, the American Institute to Certified Public Accountants issued Statement of Position (SOP) 98-1, "Accounting for Costs of Computer Software Developed or Obtained for Internal Use". SOP 98-1 requires capitalization of computer software costs that meet certain criteria. The statement is effective for fiscal years beginning after December 15, 1998. Adoption of SOP 98-1 is not expected to have a material effect on the Company's financial position or results of operations. Note 3 - Derivative Financial Instruments Derivatives are used to hedge interest rate exposures by modifying the interest rate characteristics of related balance sheet instruments. The specific criteria required for derivatives used for such purposes are described below. Derivatives that do not meet these criteria are carried at market value with changes in value recognized currently in earnings in the current period. It is not the Company's policy to hold derivatives that do not qualify as hedges. There has not been a material change in derivative related market risk this quarter. Derivatives used as hedges must be effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the derivative contract. Derivatives used for hedging purposes include swaps, forwards, futures, and purchased options. The fair values of derivative contracts are carried off-balance sheet and the unrealized gains and losses on these contracts are generally deferred. The interest component is recognized over the life of the contract in net interest income for derivatives used as hedges or those used to modify the interest rate characteristics of assets and liabilities. Upon contract settlement or termination, the cumulative change in the market value of such derivatives is recorded as an adjustment to the carrying value of the underlying asset or liability and recognized in net interest income over the expected remaining life of the related asset or liability. If the underlying instrument is sold, the cumulative change in the value of the associated derivative is recognized immediately in the earnings of the underlying instrument. Page 7 Notes to Consolidated Financial Statements (Unaudited) - continued Note 4 - Acquisitions On September 26, 1997, the Company signed a definitive agreement to acquire Equitable Securities Corporation, a Nashville, Tennessee-based investment banking, securities brokerage and investment advisory firm. The merger, which was accounted for as a purchase, was completed on January 2, 1998, and the new subsidiary was renamed SunTrust Equitable Securities Corporation (SESC). Consideration tendered, including contingently returnable shares, aggregated 2.3 million shares of the Company's common stock. Note 5 - Comprehensive Income Under Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income", certain transactions and other economic events that bypass the income statement must be displayed as other comprehensive income. The Company's comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale, net of income taxes. Comprehensive income for the first quarter of 1998 and 1997 is calculated as follows: COMPREHENSIVE INCOME
Before Income Net of (Dollars in thousands) Tax Tax Tax Unrealized gains (net) recognized in other comprehensive income: Quarter ended March 31, 1998 $527,316 $205,126 $322,190 Quarter ended March 31, 1997 $108,178 $ 42,081 $ 66,097
(Dollars in thousands) 1998 1997 Amounts reported in net income: Gain on sale of securities $ 910 $ 1,391 Net amortization (accretion) (280) (400) Reclassification adjustment 630 991 Income tax expense (245) (385) Reclassification adjustment, net of tax 385 606 Amounts reported in other comprehensive income: Unrealized gain arising during period, net of tax 322,575 66,703 Reclassification adjustment, net of tax (385) (606) Unrealized gains (net) recognized in other comprehensive income 322,190 66,097 Net income 180,874 161,056 Total comprehensive income $503,064 $227,153
Page 8 Notes to Consolidated Financial Statements (Unaudited) - continued Note 6 - Earnings Per Share Reconciliation In the calculation for basic and diluted EPS, net income is identical. Below is a reconciliation for the quarters ended March 31, 1998 and March 31, 1997 of the difference between average basic common shares outstanding and average diluted common shares outstanding. Note 7 - Restatement of certian prior years Financial Statements In connection with the review by the staff of the Securities and Exchange Commission of documents related to SunTrust's acquisition of Crestar Financial Corporation and the staff's comments there on, SunTrust has lowered its provision for loan lossses in 1996, 1995 and 1994 by $40 million, $35 million and $25 million respectively. The effect of this action was to increase net income in these years by $24.4 million, $21.4 million and $15.3 million respectively. Further, as of December 31, 1997 and 1996 the allowance for loan losses has been decreased by a total of $100 million and shareholders' equity has been increased by a total of $61 million. Statement re: Computation of Per Share Earnings (In thousands, except per share data)
Three Months Ended March 31 1998 1997 Basic Net income $180,874 $161,056 Average common shares 208,442 214,940 Earnings per common share - basic $ 0.87 $ 0.75 Diluted Net income $180,874 $161,056 Average common shares outstanding 208,442 214,940 Incremental shares outstanding : 3,252 3,287 Average diluted common shares 211,694 218,227 Earnings per common share - diluted $ 0.85 $ 0.74 Includes the incremental effect of stock options and restricted stock outstanding computed under the treasury stock method.
Three Months Ended March 31 (In thousands) 1998 1997 Average common shares - basic 208,442 214,940 Effect of dilutive securities: Stock options 1,635 1,510 Performance restricted stock 1,617 1,777 Average common shares - diluted 211,694 218,227
Page 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW SunTrust Banks, Inc. is a multi-state bank holding company with its headquarters in Atlanta, Georgia. The Company's principal banking subsidiaries are SunTrust Banks of Florida, Inc., SunTrust Banks, of Georgia, Inc. and SunTrust Banks of Tennessee, Inc., all of which are bank holding companies in their respective states. Credit card services are provided through SunTrust BankCard, N.A. of Orlando, Florida. SunTrust has several wholly owned nonbanking subsidiaries that are engaged in various businesses. They include SunTrust Mortgage, Inc., which originates and services mortgage loans on both residential and income property, principally throughout Florida, Georgia and Tennessee. SunTrust Insurance Company operates as a reinsurer for credit life, accident and health insurance sold to loan customers of SunTrust. SunTrust Securities, Inc. engages in securities brokerage services and conducts incidental activities such as offering custodial and cash management services. SunTrust Equitable Securities Corporation, which conducts various business activities including investment banking, securities brokerage, investment advisory services, raising equity capital, underwriting of debt issues and selling investment securities to corporations, institutions and government entities. SunTrust Personal Loans, Inc. operates as a consumer finance company. STI Credit Corporation operates as a leasing subsidiary, primarily for commercial customers. Other nonbank subsidiaries primarily support the Company's banking operations, providing data processing and other services. SunTrust continues to believe that its plans for dealing with the Year 2000 issue will result in timely and adequate modifications of its systems and technology. There have not been any material changes since the annual report was filed. SunTrust has made, and may continue to make, various forward-looking statements with respect to financial and business matters. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, all of which may change over time. The actual results that are achieved could differ significantly from the forward-looking statements contained in this document. The following analysis of the financial performance of SunTrust for the first quarter of 1998 should be read in conjunction with the financial statements, notes and other information contained in this document. The results of operations for the three months ended March 31, 1998 are not indicative of the results that may be attained for any other period. In this discussion, net interest income and the net interest margin are presented on a taxable- equivalent basis and the ratios are presented on an annualized basis. EARNINGS ANALYSIS SunTrust reported record net income of $180.9 million for the first quarter of 1998, an increase of 12.3% compared with $161.1 million in the first quarter of 1997. Diluted earnings per share grew 14.9% to $0.85 from $0.74 in the same periods. The growth in net income resulted from increases in noninterest income and continued strong loan demand. Page 10 TABLE 1 - SELECTED QUARTERLY FINANCIAL DATA (Dollars in millions except per share data)
Quarters 1998 1997 1 4 3 2 1 Summary of Operations Interest and dividend income $ 959.5 $ 954.4 $ 934.9 $ 898.4 $ 863.1 Interest expense 470.0 469.0 458.1 428.7 400.6 Net interest income 489.5 485.4 476.8 469.7 462.5 Provision for loan losses 28.6 32.6 29.0 29.2 26.2 Net interest income after provision for loan losses 460.9 452.8 447.8 440.5 436.3 Noninterest income 286.3 247.4 232.9 228.1 225.8 Noninterest expense 471.1 433.9 424.4 413.3 414.0 Income before provision for income taxes 276.1 266.3 256.3 255.3 248.1 Provision for income taxes 95.2 94.1 87.7 89.9 87.0 Net income $ 180.9 $ 172.2 $ 168.6 $ 165.4 $ 161.1 Net interest income (taxable equivalent) $ 497.5 $ 494.1 $ 485.7 $ 479.2 $ 472.0 Per common share Net income - diluted $ 0.85 $ 0.82 $ 0.80 $ 0.77 $ 0.74 Net income - basic 0.87 0.83 0.81 0.78 0.75 Dividends declared 0.250 0.250 0.225 0.225 0.225 Book value 27.49 25.06 23.92 24.50 22.59 Common stock market price High 77.44 75.25 70.44 59.00 54.75 Low 65.25 61.13 54.75 44.13 46.13 Close 75.38 71.38 67.94 55.06 46.38 Selected Average Balances Total assets $58,468.4 $56,663.4 $55,160.2 $53,598.3 $52,006.5 Earning assets 50,089.7 48,970.5 47,672.1 46,238.1 45,054.0 Loans 40,526.4 39,230.1 37,898.9 37,000.9 35,894.2 Total deposits 36,316.3 35,940.2 36,115.7 36,078.8 35,519.5 Realized shareholders' equity 3,417.6 3,211.0 3,188.6 3,189.2 3,290.2 Total shareholders' equity 5,471.8 5,067.0 5,151.4 5,068.8 5,027.6 Common shares - diluted (thousands) 211,694 210,554 211,671 213,572 218,227 Common shares - basic (thousands) 208,442 207,138 208,391 210,608 214,940 Financial Ratios ROA 1.33 % 1.27 % 1.29 % 1.31 % 1.33 % ROE 21.46 21.27 20.98 20.81 19.85 Net interest margin 4.03 4.00 4.04 4.16 4.25 ROA, ROE and net interest margin are calculated excluding unrealized gains on investment securities because the unrealized gains are not included in income.
Page 11 TABLE 2A - CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE AND AVERAGE YIELDS EARNED AND RATES PAID (Dollars in millions; yields on a taxable-equivalent basis)
Quarter Ended March 31, 1998 December 31, 1997 September 30, 1997 Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/ Balances Expense Rates Balances Expense Rates Balances Expense Rates Assets Loans Taxable $39,835.4 $795.0 8.09 % $38,531.7 $787.5 8.11 % $37,205.4 $766.1 8.17 % Tax-exempt 691.0 13.4 7.85 698.4 13.8 7.83 693.5 13.5 7.75 Total loans 40,526.4 808.4 8.09 39,230.1 801.3 8.10 37,898.9 779.6 8.16 Investment securities: Taxable 7,643.8 128.4 6.81 7,681.3 129.6 6.69 7,679.8 128.8 6.66 Tax-exempt 607.4 12.6 8.46 653.1 13.8 8.37 689.3 14.7 8.46 Total investment securities 8,251.2 141.0 6.93 8,334.4 143.4 6.82 8,369.1 143.5 6.80 Funds sold 1,106.4 15.6 5.72 1,166.1 17.0 5.82 1,139.9 16.6 5.75 Other short-term investments 205.7 2.5 4.90 239.9 1.4 2.33 264.2 4.1 6.18 Total earning assets 50,089.7 967.5 7.83 48,970.5 963.1 7.80 47,672.1 943.8 7.85 Allowance for loan losses (650.9) (645.1) (641.6) Cash and due from banks 2,356.1 2,395.4 2,238.7 Premises and equipment 965.5 958.0 949.4 Other assets 2,385.4 1,985.6 1,766.9 Unrealized gains(losses) on investment securities 3,322.6 2,999.0 3,174.7 Total assets $58,468.4 $56,663.4 $55,160.2 Liabilities and Shareholders' Equity Interest-bearing deposits: NOW/Money market accounts $10,908.5 $ 74.0 2.75 % $10,603.1 $ 72.9 2.73 % $10,424.8 $ 71.6 2.73 % Savings 5,239.9 46.8 3.62 5,184.4 47.2 3.61 5,202.2 47.1 3.59 Consumer time 6,877.9 88.9 5.24 6,976.0 92.1 5.24 6,946.6 91.2 5.21 Other time 5,388.3 74.8 5.63 5,374.8 76.2 5.62 6,084.9 86.0 5.61 Total interest-bearing deposits 28,414.6 284.5 4.06 28,138.3 288.4 4.07 28,658.5 295.9 4.10 Funds purchased 7,655.0 100.6 5.33 7,593.4 102.7 5.36 6,440.0 86.9 5.36 Other short-term borrowings 1,671.2 23.5 5.71 1,935.4 20.6 4.23 1,906.4 27.7 5.75 Long-term debt 3,898.8 61.4 6.39 3,073.2 57.3 7.40 2,826.0 47.6 6.68 Total interest-bearing liabilities 41,639.6 470.0 4.58 40,740.3 469.0 4.57 39,830.9 458.1 4.56 Noninterest-bearing deposits 7,901.7 7,801.9 7,457.2 Other liabilities 3,455.3 3,054.2 2,720.7 Realized shareholders' equity 3,417.6 3,211.0 3,188.6 Accumulated other comprehensive income 2,054.2 1,856.0 1,962.8 Total liabilities and shareholders' equity $58,468.4 $56,663.4 $55,160.2 Interest rate spread 3.25 % 3.23 % 3.29 % Net Interest Income $497.5 $494.1 $485.7 Net Interest Margin 4.03 % 4.00 % 4.04 % Interest income includes loan fees of $25.8, $26.2, $26.5, $24.1 and $23.2 in the quarters ended March 31, 1998, and December 31, September 30, June 30, and March 31, 1997. Nonaccrual loans are included in average balances and income on such loans, if recognized, is recorded on a cash basis. 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. The net taxable-equivalent adjustment amounts included in the above table aggregated $8.0, $8.7, $8.9, $9.5 and $9.5 in the quarters ended March 31, 1998, and December 31, September 30, June 30, and March 31, 1997. Interest rate swap transactions used to help balance the Company's interest-sensitivity position increased interest expense by $0.8 in the quarter ended March 31, 1998, and $1.3, $1.2, $0.8 and $0.4 in the quarters ended December 31, September 30, June 30, and March 31, 1997. Without these swaps, the rate on other time deposits and the net interest margin would have been 5.57% and 4.03%, 5.52% and 4.01%, 5.53% and 4.05%, 5.52% and 4.16%, and 5.38% and 4.25%, respectively.
Page 12 TABLE 2b - CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE AND AVERAGE YIELDS EARNED AND RATES PAID (Dollars in millions; yields on a taxable-equivalent basis)
June 30, 1997 March 31, 1997 Average Income/ Yields/ Average Income/ Yields/ Balances Expense Rates Balances Expense Rates Assets Loans Taxable $36,296.5 $738.0 8.16 % $35,193.9 $707.2 8.15 % Tax-exempt 704.4 14.0 7.95 700.3 13.4 7.77 Total loans 37,000.9 752.0 8.15 35,894.2 720.6 8.14 Investment securities: Taxable 7,412.5 123.7 6.69 7,275.6 119.9 6.68 Tax-exempt 708.5 15.1 8.57 731.1 15.7 8.70 Total investment securities 8,121.0 138.8 6.85 8,006.7 135.6 6.87 Funds sold 845.5 13.3 6.27 969.4 14.0 5.88 Other short-term investments 270.7 3.8 5.69 183.7 2.4 5.24 Total earning assets 46,238.1 907.9 7.88 45,054.0 872.6 7.85 Allowance for loan losses (633.5) (628.1) Cash and due from banks 2,197.8 2,259.8 Premises and equipment 945.0 885.4 Other assets 1,813.8 1,629.2 Unrealized gains(losses) on investment securities 3,037.1 2,806.2 Total assets $53,598.3 $52,006.5 Liabilities and Shareholders' Equity Interest-bearing deposits: NOW/Money market accounts $10,494.5 $ 71.2 2.72 % $10,489.4 $ 71.0 2.75 % Savings 5,297.6 47.4 3.59 5,403.2 47.8 3.59 Consumer time 7,016.1 90.6 5.18 7,050.2 89.5 5.15 Other time 5,808.1 80.7 5.58 5,142.7 68.7 5.41 Total interest-bearing deposits 28,616.3 289.9 4.06 28,085.5 277.0 4.00 Funds purchased 5,827.0 77.8 5.35 6,108.1 77.7 5.16 Other short-term borrowings 1,762.1 24.9 5.66 1,358.9 18.4 5.50 Long-term debt 2,191.7 36.1 6.61 1,659.0 27.5 6.72 Total interest-bearing liabilities 38,397.1 428.7 4.48 37,211.5 400.6 4.37 Noninterest-bearing deposits 7,462.5 7,434.0 Other liabilities 2,669.9 2,333.4 Realized shareholders' equity 3,189.2 3,290.2 Accumulated other comprehensive income 1,879.6 1,737.4 Total liabilities and shareholders' equity $53,598.3 $52,006.5 Interest rate spread 3.40 % 3.48 % Net Interest Income $479.2 $472.0 Net Interest Margin 4.16 % 4.25 % See note on table 2A. See note on table 2A. See note on table 2A.
Page 13 Net Interest Income/Margins. The Company's net interest margin of 4.03% for the first quarter of 1998 was 22 basis points lower than the first quarter of last year. The rate on earning assets was 7.83% in the first quarter of 1998 and 7.85% in the first quarter of 1997. At the same time, the rate on interest bearing liabilities increased 21 basis points due to the increased use of purchased funds. Interest income which the Company was unable to recognize on nonperforming loans in the first three months of 1998 had a negative impact of 1 basis point on the net interest margin as compared to 3 basis points in the first three months 1997. Table 2 contains more detailed information concerning average balances and interest yields earned and rates paid. Noninterest Income. Noninterest income in the first three months of 1998, adjusted to exclude the effect of securities gains (losses), increased $61.0 million, or 27.2%, from the comparable period a year ago. SunTrust Equitable Securities Corporation (SESC), which was acquired on January 2, 1998, accounted for $16.1 million of the increase. Trust income, the Company's largest source of noninterest income, increased $14.7 million, or 18.8%, over the same period. Mortgage fees increased $8.3 million, or 89.8% over the same period due to higher volume in our mortgage banking business. The increase in loan volume is due to the increase in new home sales and refinancing activity as long term interest rates have declined in the past year. TABLE 3 - NONINTEREST INCOME (In millions)
Quarters 1998 1997 1 4 3 2 1 Trust income $ 93.1 $ 82.5 $ 79.0 $ 78.7 $ 78.4 Service charges on deposit accounts 62.1 63.8 62.4 61.9 59.7 Corporate and institutional investment income 10.9 6.4 8.6 4.6 5.0 Retail investment income 10.4 8.4 8.3 8.5 8.0 Credit card fees 20.5 18.9 17.5 18.4 18.8 Mortgage fees 17.5 13.6 12.2 10.9 9.2 Other charges and fees 32.6 28.0 27.2 29.5 29.0 Securities gains (losses) 0.9 0.4 0.1 (0.4) 1.4 Trading account profits and commissions 11.0 5.2 4.0 4.8 4.0 Other income 27.3 20.2 13.6 11.2 12.3 Total noninterest income $286.3 $247.4 $232.9 $228.1 $225.8
Page 14 Noninterest Expense. Noninterest expense increased $57.1 million, or 13.8% in the first quarter of 1998 compared to the same period last year. Personnel expense, consisting of salaries, other compensation and employee benefits, increased $34.6 million, or 14.8% over the earlier period. The SESC acquisition accounted for $13.6 million, or 23.8% of the total increase in noninterest expense. The increase in other noninterest expense of $9.3 million, or 23.1% is due to expenditures made in connection with various projects to stimulate business growth and development. The efficiency ratio increased from 59.3% in the first quarter of 1997 to 60.1% in the first quarter of 1998. Various growth projects accounted for the increase with most of the change due to the acquisition of SESC. After adjusting for the purchase of SESC, the efficiency ratio for the first quarter would have been 59.6%. TABLE 4 - NONINTEREST EXPENSE (In millions)
Quarters 1998 1997 1 4 3 2 1 Salaries $183.8 $178.7 $175.2 $169.8 $167.0 Other compensation 51.2 42.9 39.2 36.0 35.4 Employee benefits 34.4 22.0 27.5 29.5 32.4 Net occupancy expense 33.1 30.9 30.9 32.5 32.5 Equipment expense 32.0 29.6 30.7 30.3 30.1 FDIC premiums 1.3 1.3 1.3 1.4 1.8 Marketing and customer development 17.3 19.2 15.9 16.9 16.8 Postage and delivery 10.8 10.7 10.1 10.5 11.3 Operating supplies 9.0 9.8 8.7 9.1 9.6 Other real estate expense (2.4) (5.8) (3.1) (1.3) (1.2) Communications 9.9 8.7 8.9 8.6 9.1 Consulting and legal 7.3 9.3 8.1 5.4 5.7 Amortization of intangible assets 11.2 10.0 8.3 8.0 7.7 Outside processing and software 22.0 19.4 18.0 16.1 14.9 Other expense 50.2 47.2 44.7 40.5 40.9 Total noninterest expense $471.1 $433.9 $424.4 $413.3 $414.0 Efficiency ratio 60.1 % 58.5 % 59.1 % 58.4 % 59.3 %
Provision for Loan Losses. The Company increased the provision for loan losses in the first quarter of 1998 to $28.6 million from $26.2 million in the same period last year, the provision exceeded net charge-offs by $6.7 million. Net loan charge-offs were $21.9 million in the first three months of this year, representing 0.22% of average loans. The comparable net charge-off amount in 1997 was $17.5 million or 0.20% of average loans. The Company's allowance for loan losses totaled $658.5 million at March 31, 1998, which was 1.60% of quarter-end loans and 504% of total nonperforming loans. These ratios at December 31, 1997 were 1.62% and 509% and at March 31, 1997 were 1.74% and 332%. Page 15 TABLE 5 - SUMMARY OF LOAN LOSS EXPERIENCE (Dollars in millions)
Quarters 1998 1997 1 4 3 2 1 Allowance for Loan Losses Balances - beginning of quarter $ 651.8 $ 647.1 $ 639.8 $ 634.5 $ 625.8 Provision for loan losses 28.6 32.6 29.0 29.2 26.2 Charge-offs: Commercial (4.8) (7.2) (6.8) (4.7) (4.8) Real estate: Construction (0.1) (0.4) (1.3) (0.5) (0.1) Residential mortgages (1.6) (2.6) (2.0) (1.5) (1.1) Other (0.9) (2.5) (1.3) (1.8) (1.4) Lease financing (1.1) (0.6) (0.4) (0.3) (0.3) Credit card (15.1) (13.4) (13.2) (12.5) (11.6) Other consumer loans (12.3) (14.8) (12.4) (14.0) (12.7) Total charge-offs (35.9) (41.5) (37.4) (35.3) (32.0) Recoveries: Commercial 3.9 4.9 4.3 2.5 4.6 Real estate: Construction 0.1 0.7 1.0 - 0.1 Residential mortgages 0.3 0.4 0.2 0.4 0.6 Other 2.2 1.0 2.6 1.1 1.3 Lease financing 0.2 0.1 0.2 0.1 0.1 Credit card 1.8 1.6 2.0 1.8 2.4 Other consumer loans 5.5 4.9 5.4 5.5 5.4 Total recoveries 14.0 13.6 15.7 11.4 14.5 Net charge-offs (21.9) (27.9) (21.7) (23.9) (17.5) Balance - end of quarter $ 658.5 $ 651.8 $ 647.1 $ 639.8 $ 634.5 Quarter-end loans outstanding: Domestic $41,001.9 $39,875.7 $38,185.3 $37,382.9 $36,148.1 International 262.1 259.8 290.2 301.4 279.9 Total $41,264.0 $40,135.5 $38,475.5 $37,684.3 $36,428.0 Ratio of allowance to quarter-end loans 1.60 % 1.62 % 1.68 % 1.70 % 1.74 % Average loans $40,526.4 $39,230.1 $37,898.9 $37,000.9 $35,894.2 Ratio of net charge-offs (annualized) to average loans 0.22 % 0.28 % 0.23 % 0.26 % 0.20 %
Page 16 TABLE 6 - NONPERFORMING ASSETS (Dollars in millions)
1998 1997 March 31 December 31 September 30 June 30 March 31 Nonperforming Assets Nonaccrual loans: Commercial $ 20.6 $ 20.9 $ 35.2 $ 29.1 $ 36.5 Real Estate: Construction 2.9 1.8 2.8 12.6 13.6 Residential mortgages 52.0 49.7 57.8 54.8 59.5 Other 42.6 41.2 47.1 55.0 59.9 Lease financing 2.3 3.0 0.7 1.0 1.3 Consumer loans 7.6 8.8 8.7 8.5 10.2 Total nonaccrual loans 128.0 125.4 152.3 161.0 181.0 Restructured loans 2.7 2.7 2.7 11.0 9.9 Total nonperforming loans 130.7 128.1 155.0 172.0 190.9 Other real estate owned 31.4 22.5 35.7 41.9 43.9 Total Nonperforming Assets $162.1 $150.6 $190.7 $213.9 $234.8 Ratios: Nonperforming loans to total loans 0.32 % 0.32 % 0.40 % 0.46 % 0.52 % Nonperforming assets to total loans plus other real estate owned 0.39 0.37 0.50 0.57 0.64 Allowance to nonperforming loans 503.9 508.9 417.5 372.0 332.3 Accruing Loans Past Due 90 Days or More $ 43.3 $ 40.8 $ 41.4 $ 25.9 $ 33.9
Nonperforming Assets. Nonperforming assets consist of nonaccrual loans, restructured loans and other real estate owned. Nonperforming assets have increased 7.6%, or $11.5 million since December 31, 1997 and decreased 31.0%, or $72.7 million since March 31, 1997. Included in nonperforming loans at March 31, 1998 are loans aggregating $14.2 million which are current as to the payment of principal and interest but have been placed in nonperforming status because of uncertainty over the borrowers' ability to make future payments. In management's opinion, all known material potential problem loans are included in Table 6. Interest income on nonaccrual loans, if recognized, is recorded on a cash basis. During the first three months of 1998, the gross amount of interest income that would have been recorded on nonaccrual loans and restructured loans at March 31, 1998, if all such loans had been accruing interest at the original contractual rate, was $3.1 million. Interest income recognized in the three months ended March 31, 1998 on all such nonperforming loans at March 31, 1998, was $1.8 million. Page 17 Table 7 - Loan Portfolio by Types of Loans (in millions)
1998 1997 March 31 December 31 September 30 June 30 March 31 Commercial: Domestic $15,165.7 $14,139.9 $12,968.2 $12,668.3 $12,267.0 International 249.6 247.4 278.0 289.9 268.4 Real estate: Construction 1,451.8 1,442.6 1,400.7 1,411.2 1,416.5 Residential mortgages 13,195.2 12,992.9 12,726.3 12,326.0 11,839.2 Other 4,820.5 4,778.7 4,766.4 4,751.7 4,656.1 Lease financing 783.1 725.7 663.6 632.3 607.9 Credit card 982.7 1,041.3 1,022.5 993.9 904.9 Other consumer loans 4,615.4 4,767.0 4,649.8 4,611.0 4,468.0 Loans $41,264.0 $40,135.5 $38,475.5 $37,684.3 $36,428.0
Loans. During the first three months of 1998, average loans increased 12.9% over the same period a year ago. Since the first quarter of 1997, the two loan categories experiencing significant growth were 1-4 family residential mortgage loans (most of which are variable rate loans) and domestic commercial loans. The average loan to deposit ratio was 111.6% in the first quarter of 1998 compared with 101.1% in the same period of 1997. At March 31, 1998, international outstandings, which include loans, acceptances, deposits in other banks, foreign guarantees and accrued interest, net of write-downs totaled $272.4 million, a decrease of 4.9% from $286.4 million at December 31, 1997. Income Taxes. The provision for income taxes was $95.2 million in the first quarter of 1998 compared to $87.0 million in the same period last year. This represented a 34% effective tax rate in the first quarter of 1998 and an effective tax rate of 35% in the same quarter last year. Investment Securities. The investment portfolio continues to be managed to maximize yield over an entire interest rate cycle while providing liquidity and minimizing risk. The portfolio yield increased from an average of 6.87% in the first quarter of 1997 to 6.93% in the first quarter of this year. The portfolio size (measured at amortized cost) decreased by $270 million during the first quarter to $7.9 billion at quarter end. The average life of the portfolio was approximately 1.7 years at March 31, 1998. At March 31, 1998, approximately 22% of the portfolio consisted of U.S. Treasury securities, 8% U.S. government agency securities, 53% mortgage-backed securities, 9% trust preferred securities and 8% municipal securities (calculated as a percent of total par value). All of the Company's holdings in mortgage-backed securities are backed by U.S. government or federal agency guarantees limiting the credit risk associated with the mortgage loans. At March 31, 1998, the carrying value of the securities portfolio was $3.8 billion over its amortized cost, consisting mostly of a $3.7 billion unrealized gain on the Company's investment in common stock of The Coca-Cola Company. Page 18 Liquidity Management. Liquidity is managed to ensure there is sufficient cash flow 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. Liquidity is enhanced by an investment portfolio structured to provide liquidity as needed. It is also strengthened by ready access to regional and national wholesale funding sources including fed funds purchased, securities sold under agreements to repurchase, negotiable certificates of deposit and offshore deposits, as well as an active bank note program, commercial paper issuance by the Parent Company, and Federal Home Loan Bank (FHLB) advances for subsidiary banks who are FHLB members. Average total deposits for the first three months of 1998 increased $.8 billion, or 2.2%, over the same period a year ago. Interest-bearing deposits represented 78.2% of average deposits for the first three months of 1998, compared to 79.1% for the same period in 1997. In the first quarter of 1998, average net purchased funds (average funds purchased less average funds sold) increased $1.4 billion over the same period in 1997. Net purchased funds were 13.1% of average earning assets for the first three months of 1998 as compared to 11.4% in the same period a year ago. Derivatives. The Company enters into various derivatives contracts in a dealer capacity for customers and in managing its own interest rate risk. Where contracts have been created for customers, the Company enters into offsetting positions to eliminate the Company's exposure to interest rate risk. The principal derivative contract used by the Company is the interest rate swap. Interest rate swaps are contracts in which a series of interest rate flows, based on a specific notional amount and a fixed and floating interest rate, are exchanged over a prescribed period. The Company also monitors its sensitivity to changes in interest rates and uses interest rate swap contracts to limit the volatility of net interest income. Table 8 details interest rate swaps as of March 31, 1998 used for managing interest rate sensitivity. TABLE 8 - INTEREST RATE SWAPS
Average Average Average (Dollars in millions) Notional Fair Maturity Rate Rate At March 31, 1998 Value Value In Months Paid Received Gain position: Receive fixed $ 717.1 $38.4 84.2 5.75 % 6.87 % Pay fixed 99.8 1.3 14.1 5.45 5.43 Basis swaps 250.0 0.6 13.8 5.41 5.68 Total gain position 1,066.9 40.3 Loss position: Receive fixed 1,173.0 (2.0) 3.4 5.69 5.37 Pay fixed 768.0 (8.7) 43.3 6.32 5.69 Basis swaps 750.0 (3.3) 28.0 5.37 5.62 Total loss position 2,691.0 (14.0) Total $3,757.9 $26.3
The swaps are designated as hedges on investments, deposits and other interest- bearing liabilities. During the three months ended March 31, 1998, hedge swaps decreased net interest income by $0.8 million, compared with a $0.4 million decrease in the corresponding 1997 period. Page 19 TABLE 9 - CAPITAL RATIOS (Dollars in millions)
1998 1997 March 31 December 31 September 30 June 30 March 31 Tier 1 capital: Realized shareholders' equity $ 3,443.2 $ 3,211.5 $ 3,172.2 $ 3,137.6 $ 3,209.0 Trust preferred securities 850.0 600.0 600.0 600.0 - Intangible assets other than servicing rights (357.9) (292.6) (286.2) (276.1) (278.3) Total Tier 1 capital 3,935.3 3,518.9 3,486.0 3,461.5 2,930.7 Tier 2 capital: Allowable allowance for loan losses 633.9 600.1 566.0 561.0 526.3 Allowable long-term debt 950.0 950.0 1,055.1 958.2 858.2 Regulatory adjustment 1,119.4 965.6 - - - Total Tier 2 capital 2,703.3 2,515.7 1,621.1 1,519.2 1,384.5 Total capital $ 6,638.6 $ 6,034.6 $ 5,107.1 $ 4,980.7 $ 4,315.2 Risk-weighted assets $51,805.4 $48,922.3 $45,201.7 $44,803.9 $42,000.0 Risk-based ratios: Tier 1 capital 7.59 % 7.19 % 7.71 % 7.72 % 6.98 % Total capital 12.81 12.33 11.29 11.12 10.27 Tier 1 leverage ratio 7.16 6.59 6.74 6.88 6.00 Total shareholders' equity to assets 9.69 9.06 9.09 9.36 9.06
Capital Resources. Consistent with the objective of operating a sound financial organization, SunTrust maintains capital ratios well above regulatory requirements. The rate of internal capital generation has been more than adequate to support asset growth. Table 9 presents capital ratios for the five most recent quarters. Regulatory agencies measure capital adequacy with a framework that makes capital requirements sensitive to the risk profiles of individual banking companies. The guidelines define capital as either Tier 1 (primarily shareholders' equity) or Tier 2 (certain debt instruments and a portion of the allowance for loan losses). 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%. The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) requires the establishment of a capital-based supervisory system of prompt corrective action for all depository institutions. The Regulator's implementation of FDICIA defines "well capitalized" institutions as those whose capital ratios equal or exceed the following minimum ratios: Tier 1 capital ratio of 6%, total risk-based capital ratio of 10%, and a Tier 1 leverage ratio of 5%. Under regulations proposed in 1997, a portion of the unrealized gains on equity securities are included in the Tier 2 capital calculation. At March 31, 1998, the Company's Tier 1 capital, total risk-based capital and Tier 1 leverage ratios were 7.59%, 12.81% and 7.16%, respectively. SunTrust is committed to maintaining well capitalized banks. In April 1997, the Board of Directors authorized the Company to repurchase up to 15,000,000 shares of SunTrust common stock. At March 31, 1998, the Company had 12,154,894 shares remaining to be repurchased under this authorization. Page 20 TABLE 10 - FINANCIAL HIGHLIGHTS - BANKING SUBSIDIARIES (Dollars in Millions)
SunTrust Banks SunTrust Banks SunTrust Banks of Florida, Inc. of Georgia, Inc. of Tennessee, Inc. 1998 1997 1998 1997 1998 1997 Summary of Operations Net interest income (FTE) $ 256.7 $ 248.3 $ 171.1 $ 157.5 $ 73.9 $ 72.7 Provision for loan losses 8.1 9.6 5.5 4.5 1.7 2.3 Trust income 43.0 38.4 34.6 28.5 11.1 9.7 Other noninterest income 93.1 74.2 54.8 47.0 23.7 19.9 Personnel expense 91.1 85.9 60.1 56.1 28.3 27.5 Other noninterest expense 133.9 123.7 83.5 71.0 34.4 29.9 Net income 99.1 87.1 72.3 65.6 27.3 26.3 Selected Average Balances Total assets 27,346 24,755 22,045 20,328 7,941 7,421 Earning assets 25,719 23,254 17,342 15,987 7,612 7,152 Loans 19,629 17,567 14,421 12,607 5,996 5,538 Total deposits 18,831 18,446 11,516 11,376 6,041 5,736 Realized shareholders' equity 2,171 2,044 1,571 1,413 629 584 At March 31 Total assets 27,825 25,319 22,886 20,786 8,059 7,456 Earning assets 25,986 23,403 17,661 16,456 7,711 7,137 Loans 19,819 17,690 14,748 13,007 6,117 5,589 Allowance for loan losses 386 375 202 198 109 114 Total deposits 19,363 18,783 11,365 12,070 6,036 5,879 Realized shareholders' equity 2,217 2,092 1,595 1,473 640 603 Total shareholders' equity 2,238 2,087 3,915 3,136 646 604 Credit Quality Net loan charge-offs 2.0 3.7 4.6 2.4 2.0 2.1 Nonperforming loans 79.2 114.5 39.2 54.3 11.9 21.9 Other real estate owned 12.2 25.7 2.8 4.9 16.4 13.0 Ratios ROA 1.47 % 1.43 % 1.56 % 1.51 % 1.39 % 1.44 % ROE 18.51 17.29 18.66 18.82 17.54 18.24 Net interest margin 4.05 4.33 4.00 4.00 3.93 4.12 Efficiency ratio 57.26 58.05 55.14 54.56 57.79 56.14 Total shareholders' equity/assets 8.04 8.24 17.11 15.09 8.02 8.10 Net loan charge-offs to average loans 0.04 0.09 0.13 0.08 0.14 0.15 Nonperforming loans to total loans 0.41 0.66 0.27 0.42 0.20 0.40 Nonperforming assets to total loans plus other real estate owned 0.47 0.81 0.29 0.46 0.47 0.64 Allowance to loans 1.99 2.18 1.39 1.54 1.83 2.09 Allowance to nonperforming loans 486.7 327.7 514.7 364.2 917.7 520.6 For the three month period ended March 31. At March 31. Annualized for the first three months.
Page 21 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of shareholders of the Registrant was held on April 21, 1998. At the meeting, the following individuals were elected directors of the Registrant: Summerfield K. Johnston, Jr., Larry L. Prince, R. Randall Rollins, James B. Williams and M. Douglas Ivester. Votes for ranged from 181,064,933 to 181,603,794 and votes withheld ranged from 1,996,464 to 2,535,325. J. Hyatt Brown, Alston D. Correll, David H. Hughes, Scott L. Probasco, Jr., A.W. Dahlberg, L. Phillip Humann and Joseph L. Lanier, Jr. will continue as directors of the Registrant. The shareholders also approved: (i) the Company's Amendment to Articles of Incorporation to increase the number of authorized common shares outstanding from 350 million shares to 500 million shares. 177,948,161 shares voted for, 4,386,825 voted against and 1,265,272 abstained from approval of the amendment and (ii) ratification of the selection of Arthur Andersen LLP as independent auditors to audit the financial statement of the Company for 1998. 182,292,366 shares voted for, 583,751 shares voted against and 724,141 abstained from ratification. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits Exhibit 3.1 Articles of Incorporation as Amended B. Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized this 12th day of May, 1998. SunTrust Banks, Inc. (Registrant) /s/ W.P. O'Halloran William P. O'Halloran Senior Vice President and Controller (Chief Accounting Officer) Page 22 EX-3.1 2 EXHIBIT 3.1 Articles of Incorporation as Amended ARTICLES OF AMENDMENT OF SUNTRUST BANKS, INC. 1. The name of the Corporation is SunTrust Banks, Inc. (the "Corporation"). 2. On February 10, 1998 the Board of Directors of the Corporation approved an amendment to Article 5(a) of the Restated Articles of Incorporation of the Corporation as follows: "5(a). The aggregate number of common shares (referred to in these Articles of Incorporation as "Common Stock") which the Corporation shall have the authority to issue is 500,000,000 shares with a par value of $1.00 per share. Each holder of Common Stock shall be entitled to one vote for each share of such stock held." 3. The amendment was duly approved by the shareholders of the Corporation on April 21, 1998 in accordance with the provisions of O.C.G.A. 14-2-1003. IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed by its duly authorized officer and its corporate seal to be affixed hereto, as of the 21st day of April, 1998. SUNTRUST BANKS, INC. By: /c/ Raymond Fortin Raymond D. Fortin Title: Senior Vice President [SEAL] ARTICLES OF RESTATEMENT OF THE ARTICLES OF INCORPORATION OF SUNTRUST BANKS, INC. Pursuant to the Georgia Business Corporation Code, SunTrust Banks, Inc., a Georgia corporation (the "Corporation"), submits these Articles of Restatement and Restated Articles of Incorporation and shows as follows: 1. The Corporation hereby certifies that, by resolution adopted on November 14, 1989, the Board of Directors did adopt these Articles of Restatement and Restated Articles of Incorporation of the Corporation, as set forth in paragraph 2 below. Shareholder approval of amendments to the Articles of Incorporation contained in the Articles of Restatement was not required. 2. The Articles of Incorporation of the Corporation shall be amended by the deletion in their entirety of Articles 10 and 16, by the redesignation of (i) existing Article 18 as Article 10 and (ii) existing Article 17 as Article 16, by the addition of new Article 5(c), and by restating all other provisions of the Articles of Incorporation, as heretofore amended, now in effect and not being amended by foregoing amendments, and substituting therefor in all respects the Restated Articles of Incorporation as follows: RESTATED ARTICLES OF INCORPORATION 1. The name of the Corporation is SunTrust Banks, Inc. 2. The Corporation is organized pursuant to the provisions of the Georgia Business Corporation Code. 3. The Corporation shall have perpetual duration. 4. The purpose for which the Corporation is organized is to conduct any businesses and to engage in any activities not specifically prohibited to corporations for profit under the laws of the State of Georgia. 5. (a). The aggregate number of common shares (referred to in these Articles of Incorporation as "Common Stock") which the Corporation shall have the authority to issue is 350,000,000 with a par value of $1.00 per share. Each holder of Common Stock shall be entitled to one vote for each share of such stock held. (b). The aggregate number of preferred shares (referred to in these Articles of Incorporation as "Preferred Stock") which the Corporation shall have authority to issue is 50,000,000 with no par value per share. The terms, preferences, limitations and relative rights of the Preferred Stock are as follows: So long as any of the shares of the Preferred Stock are outstanding, no dividends (other than (i) dividends on Common Stock payable in Common Stock, (ii) dividends payable in stock junior to the Preferred Stock both as to dividends and upon liquidation, and (iii) cash in lieu of fractional shares in connections with any such dividend) shall be paid or declared, in cash or otherwise, nor shall any other distribution be made, on the Common Stock or on any other stock junior to the Preferred Stock as to dividends, unless (a) there shall be no arrearages in dividends on the Preferred Stock for any past dividend period and the full dividends for the current quarterly dividend period shall be paid or declared and funds set aside therefor, and (b) the Corporation shall not be in default on its obligation to redeem any of the shares of the Preferred Stock called for redemption. Subject to the foregoing provisions, such dividends as may be determined by the Board of Directors of the Corporation may be declared and paid from time to time on any stock or shares of the Corporation other than the Preferred Stock without any right of participation therein by the holders of shares of the Preferred Stock. Dividends on the Preferred Stock shall be cumulative. No interest shall be payable in respect of any dividend payment which may be in arrears. If at any time the Corporation shall fail to pay full cumulative dividends on any shares of the Preferred Stock, thereafter until such dividends shall have been paid or declared and set apart for payment, the Corporation shall not purchase, redeem or otherwise acquire for consideration any shares of any class of stock then outstanding and ranking on a parity with or junior to the Preferred Stock. If there are any arrearages in dividends for any past dividend period on any series of the Preferred Stock or any other class or series of preferred stock ranking on a parity with the Preferred Stock as to dividends, or if the full dividend for the current quarterly dividend period shall not have been paid or declared and funds set aside therefor on all series of the Preferred Stock and all other classes and series of preferred stock ranking on a parity with the Preferred Stock as to dividends (to the extent that dividends on such other class or series of preferred stock are cumulative), any dividends paid or declared on the Preferred Stock or on any other class or series of preferred stock ranking on a parity with the Preferred Stock as to dividends shall be shared first ratably by the holders of the Preferred Stock and the holders of all such other classes and series of preferred stock ranking on a parity with the Preferred Stock as to dividends in proportion to such respective arrearages and unpaid and undeclared current cumulative dividends, and thereafter by the holders of shares of noncumulative classes and series of preferred stock ranking on a parity with the Preferred Stock as to dividends. In the event of any voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, after payment or provision for payment of debts and other liabilities of the Corporation and before any distribution to the holders of shares of Common Stock or any stock junior to the Preferred Stock as to the distribution of assets upon liquidation, the holders of each series of the Preferred Stock shall be entitled to receive out of the net assets of the Corporation an amount in cash for each share equal to the amount fixed and determined by the Board of Directors in the resolution providing for the issuance of the particular series of the Preferred Stock, plus an amount equal to all dividends accrued and unpaid on each such share of the Preferred Stock up to the date fixed for distribution, and no more. If the assets of the Corporation are insufficient to permit the payment of the full preferential amounts payable in such event to the holders of the Preferred Stock and any class or series of preferred stock ranking on a parity with the Preferred Stock as to the distribution of assets upon liquidation, then the assets available for distribution to holders of shares of the Preferred Stock and such other classes and series of preferred stock ranking on a parity with the Preferred Stock as to the distribution of assets upon liquidation shall be distributed ratably to the holders of shares of each series of the Preferred Stock and such classes and series of preferred stock in proportion to the full preferential amounts payable on their respective shares upon liquidation. Neither the sale, conveyance, exchange or transfer of all or substantially all the property and assets of the Corporation, the consolidation or merger of the Corporation with or into any other corporation, nor the merger of consolidation of any other corporation into or with the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation. The Board of Directors is expressly authorized at any time and from time to time to provide for the issuance of shares of the Preferred Stock in one or more series, with such voting powers, full or limited, but not to exceed one vote per share, or without voting powers, and with such designations, preferences and relative, participating, optional or other special rights, qualifications, limitations or restrictions, as shall be fixed and determined in the resolution or resolutions providing for the issuance thereof adopted by the Board of Directors, and as are not stated and expressed in these Articles of Incorporation or any amendment hereto, including (but without limiting the generality of the foregoing) the following: (i) The distinctive designation of such series and number of shares which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors in creating such series) or decreased (but not below the number of shares thereof then outstanding) from time to time by resolution of the Board of Directors. (ii) The rate of dividends payable on shares of such series, the times of payment, and the date from which such dividends shall accumulate; (iii) Whether shares of such series can be redeemed, the time or times when, and the price or prices at which shares of such series shall be redeemable, the redemption price, terms and conditions of redemption, and the purchase, retirement or sinking fund provisions, if any, for the purchase or redemption of such shares; (iv) The amount payable on shares of such series and the rights of holders of such shares in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation; (v) The rights, if any, of the holders of shares of such series to convert such shares into, or exchange such shares for, shares of Common Stock or shares of any other class or series of the Preferred Stock and the terms and conditions of such conversion or exchange; and (vi) The rights, if any, of the holders of shares of such series to vote. Except in respect of the relative rights and preferences that may be provided by the Board of Directors as hereinbefore provided, all shares of the Preferred Stock shall be of equal rank and shall be identical, and each share of a series shall be identical in all respects with the other shares of the same series, except as to the date, if any, from which dividends thereon shall accumulate. (c). The Corporation may acquire its own shares. Any such shares shall become, upon acquisition, treasury shares to be classified as issued but not outstanding shares. 6. Shares of the Corporation may be issued by the Corporation for such consideration, not less than the par value thereof (in the case of shares having a par value), as shall be fixed from time to time by the Board of Directors. 7. No holder of shares of any class of the capital stock of the Corporation shall have as a matter of right any pre-emptive or preferential right to subscribe for, purchase, receive, or otherwise acquire any part of any new or additional issue of stock of any class, whether now or hereafter authorized, or of any bonds, debentures, notes, or other securities of the Corporation, whether or not convertible into shares of stock of the Corporation. 8. Subject to the provisions of the Georgia Business Corporation Code, the Board of Directors shall have the power to distribute a portion of the assets of the Corporation, in cash or in property, to holders of shares of the Corporation out of the capital surplus of the Corporation. 9. The Corporation shall have all powers necessary to conduct the businesses and engage in the activities set forth in Article 4 hereof, including, but not limited to, the powers enumerated in the Georgia Business Corporation Code or any amendment thereto. In addition, the Corporation shall have the full power to purchase and otherwise acquire, and dispose of, its own shares and securities granted by the laws of the State of Georgia and shall have the right to purchase its shares out of its unreserved and unrestricted capital surplus available therefor, as well as out of its unreserved and unrestricted earned surplus available therefor. 10. The names and addresses of the Incorporators are: Robert Strickland One Park Place, N.E. Atlanta, Georgia 30303 Joel R. Wells, Jr. 200 South Orange Avenue Orlando, Florida 32801 11. I. (A) In addition to any affirmative vote required by law, these Articles of Incorporation or otherwise with respect to any shares of capital stock of the Corporation, and except as otherwise expressly provided in paragraph II of this Article 11: (i) any merger or consolidation of the Corporation or any Subsidiary (as hereafter defined) with (a) any Interested Shareholder (as hereinafter defined) or (b) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of and Interested Shareholder; or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate of any Interested Shareholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $1,000,000 or more; or (iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Shareholder or any Affiliate of any Interested Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $1,000,000 or more; or (iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Shareholder or any Affiliate of any Interested Shareholder; or (v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Shareholder or any Affiliate of any Interested Shareholder; shall require the affirmative vote of the holders of at least seventy-five percent (75%) of the then outstanding shares of Common Stock of the Corporation, including the affirmative vote of the holders of at least seventy-five percent (75%) of the then outstanding shares of Common Stock of the Corporation other than those beneficially owned by the Interested Shareholder. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (B) The term "Business Combination" as used in this Article 11 shall mean any transaction which is referred to in any one or more of clauses (i) through (v) of subparagraph (A) of this paragraph I. II. The provisions of paragraph I of this Article 11 shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law and any other provision of these Articles of Incorporation, if all of the conditions specified in either of the following subparagraphs (A) or (B) are met: (A) The Business Combination shall have been approved by three-fourths of all Directors. (B) All of the following conditions shall have been met: (i) The aggregate amount of (x) cash and (y) the Fair Market Value (as hereinafter defined) as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the highest amount determined under subclauses (a), (b), (c) and (d) below (taking into account all stock dividends and stock splits): (a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder or any of its Affiliates or Associates for any share of Common Stock acquired by the Interested Shareholder (1) within the two-year period immediately prior to the first public announcement of the proposal of the Business Combination (the "Announcement Date") or (2) in the transaction in which it became an Interested Shareholder, whichever is higher; (b) the highest Fair Market Value per share of Common Stock during the 30-day period ending on the Announcement Date or during the 30-day period ending on the date on which the Interested Shareholder became an Interested Shareholder (such latter date is referred to in this Article 11 as the "Determination Date"), whichever is higher. (c) (if applicable) the price per share equal to the highest Fair Market Value per share of Common Stock determined pursuant to subparagraph B(i)(b) above, multiplied by the ratio of (1) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder or any of its Affiliates or Associates for any shares of Common Stock acquired by the Interested Shareholder within the two-year period immediately prior to the Announcement Date to (2) the Fair Market Value per share of Common Stock on the date that the Interested Shareholder became a beneficial owner of shares of Common Stock during such two-year period; and (d) (if applicable) the book value per share of Common Stock on the last day in the month preceding the date of the consummation of the Business Combination multiplied by the ratio of (1) the highest price paid by the Interested Shareholder or any of its Affiliates or Associates per share of Common Stock as determined pursuant to subparagraph B(i)(a) above to (2) the book value per share of Common Stock on the last day in the month preceding the date on which the highest price as determined pursuant to B(i)(a) above was paid. (ii) The aggregate amount of (x) the cash and (y) the Fair Market Value as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of shares of any series of outstanding Preferred Stock shall be at least equal to the highest of the following (it being intended that the requirements of this paragraph B(ii) shall be required to be met with respect to every series of outstanding Preferred Stock, whether or not the Interested Shareholder or any of its Affiliates or Associates has previously acquired any shares of any particular series of Preferred Stock): (a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder or any of its Affiliates or Associates for any share of such series of Preferred Stock acquired by the Interested Shareholder (1) within the two-year period immediately prior to the Announcement Date or (2) in the transaction in which it became an Interested Shareholder, whichever is higher; and (b) (if applicable) the highest preferential amount per share to which the holders of shares of such series of Preferred Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation. (iii) The consideration to be received by holders of outstanding Common Stock and by holders of a particular series of outstanding Preferred Stock shall be in cash or in the same form as the Interested Shareholder or any of its Affiliates or Associates has previously paid for shares of each such kind of stock. If the Interested Shareholder or any of its Affiliates or Associates has paid for shares of Common Stock or for shares of any series of Preferred Stock with varying forms of consideration, the form of consideration for each such kind of stock shall be either cash or the form used to acquire the largest number of shares of each such kind of stock previously acquired by it. (iv) After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination: (a) except as approved by three-fourths of all Directors, there shall have been no failure to declare and pay at the regular date therefor dividends in full (whether or not cumulative) on the outstanding Preferred Stock; (b) there shall have been (1) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by three-fourths of all Directors and (2) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization, or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by three-fourths of all Directors; and (c) such Interested Shareholder shall not have become the beneficial owner of any additional shares of Common Stock except as part of the transaction which results in such Interested Shareholder becoming an Interested Shareholder. (v) After such Interested Shareholder has become an Interested Shareholder, such Interested Shareholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation or any of its Subsidiaries, whether in anticipation of or in connection with such Business Combination or otherwise. (vi) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to public shareholders of the Corporation at least 30 days prior to the meeting at which the Business Combination will be voted upon (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The proxy or information statement shall contain on the cover page thereof a statement as to how members of the Board of Directors voted on the proposal in question and any recommendation as to the advisability or inadvisability of the Business Combination that any director wishes to make, and shall also contain the opinion of a reputable national investment banking firm as to the fairness of the terms of the Business Combination, from the point of view of the remaining public shareholders of the Corporation (such investment banking firm to be engaged solely on behalf of the remaining public shareholders, to be paid a reasonable fee for its services by the Corporation upon receipt of such opinion and to be an investment banking firm which has not previously been associated with the Interested Shareholder or any of its Affiliates or Associates). III. For the purposes of this Article 11: A. A "person" shall mean any individual, firm, corporation or other entity. B. "Interested Shareholder" shall mean any person (other than the Corporation, any Subsidiary or either the Corporation or any Subsidiary acting as Trustee or in a similar fiduciary capacity) who or which: (i) is the beneficial owner of more than 10% of the outstanding Common Stock; or (ii) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the then outstanding Common Stock; or (iii) acquired any shares of Common Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Shareholder, if such acquisition shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. C. A person shall be a "beneficial owner" of any Common Stock: (i) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (ii) which such person or any of its Affiliates or Associates has, directly or indirectly, (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Common Stock. D. For the purposes of determining whether a person is an Interested Shareholder pursuant to paragraph B of this Section III, the number of shares of Common Stock deemed to be outstanding shall include shares deemed owned through application of paragraph C(ii)(a) of this Section III but shall not include any other shares of Common Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. E. (i) An "Affiliate" of a specified person is a person that directly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. (ii) The term "Associate" used to indicate a relationship with any person means (1) any firm, corporation or other entity (other than the Corporation or any Subsidiary) of which such person is an officer or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities, (2) any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity, and (3) any relative or spouse of such person, or any relative of such spouse who has the same home as such person. F. "Subsidiary" means any corporation of which a majority of any class of equity securities is owned, directly or indirectly, by the Corporation unless owned solely as trustee or other similar fiduciary capacity. G. "Fair Market Value" means: (i) in the case of stock, the closing sales price of a share of such stock on the Composite Tape on the New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended, on which such stock is listed, or, if such stock is not listed on any such exchange, the closing sales price or the sales price or the average of the bid and asked prices reported with respect to a share of such stock on the National Association of Securities Dealers, Inc. Automatic Quotation System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board in good faith; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board in good faith. H. In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in paragraphs B(i) and (ii) of Section II of this Article 11 shall include the shares of Common Stock and/or the shares of any series of outstanding Preferred Stock retained by the holders of such shares. I. The term "acquire" or "acquired" means the acquisition of beneficial ownership. IV. The Directors of the Corporation shall have the power and duty to determine for the purposes of this Article 11, on the basis of information known to them after reasonable inquiry, (i) whether a person is an Interested Shareholder, (ii) the number of shares of Common Stock beneficially owned by any person, (iii) whether a person is an Affiliate or Associate of another, and (iv) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $1,000,000 or more. V. Nothing contained in this Article 11 shall be construed to relieve any Interested Shareholder or any of its Affiliates or Associates from any fiduciary obligation imposed by law. VI. Nothwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the Corporation), the affirmative vote of the holders of at least seventy-five percent (75%) of the shares of the outstanding Common Stock of the Corporation, including the affirmative vote of the holders of at least seventy-five percent (75%) of the outstanding shares of Common Stock of the Corporation other than those beneficially owned by any Interested Shareholder, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article 11 of these Articles of Incorporation, in addition to any affirmative vote required by law or these Articles of Incorporation with respect to any other shares of capital stock of the Corporation. 12. The Board of Directors of the Corporation, when evaluating any offer of a person (as defined in Article 11), other than the Corporation itself, to (a) make a tender or exchange offer for any equity security of the Corporation or any other security of the Corporation convertible into any equity security, (b) merge or consolidate the Corporation with another person, or (c) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation (an "Acquisition Proposal"), shall, in connection with the exercise of its business judgment in determining what is the best interests of the Corporation and its shareholders, give due consideration to all relevant factors, including without limitation the consideration being offered in the Acquisition Proposal in relation to the then-current market price, but also in relation to the then-current value of the Corporation in a freely negotiated transaction and in relation to the Board of Directors' then estimate of the future value of the Corporation as an independent entity, the social and economic effects on the employees, customers, suppliers and other constituents of the Corporation and its subsidiaries and on the communities in which the Corporation and its subsidiaries operate or are located and the desirability of maintaining independence from any other entity. 13. Nothwithstanding anything to the contrary in the Bylaws of the Corporation and subject to the rights of holders of any series of Preferred Stock then outstanding, the shareholders may amend or repeal, or adopt any provision inconsistent with, Article 11 of the Corporation's Bylaws only by the same affirmative vote as is required to amend or repeal or adopt any provision inconsistent with Article 11 of these Articles of Incorporation as provided for in paragraph VI of said Article 11, or in the alternative, by the vote of 75% or more of the Directors, the Board of Directors may amend or repeal or adopt any provision inconsistent with Article 11 of the Corporation's Bylaws. Any amendment or repeal of any part of Article X of the Corporation's Bylaws effected by the Directors shall require the affirmative vote of at least 75% of the full Board of Directors following at least ten days prior written notice to all Directors of the specific proposal. 14. In addition to any powers provided by law, in the Bylaws, or otherwise, the Corporation shall have the power to indemnify any person who becomes a party or who is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including any action by or in the right of the Corporation), by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. 15. (a). No director of the Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for breach of his duty of care or other duty as a director; provided that this provision shall eliminate or limit the liability of a director only to the maximum extent permitted from time to time by the Georgia Business Corporation Code or any successor law or laws. (b). Any repeal or modification of Article 15(a) by the shareholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. 16. The Corporation shall not commence business until it shall have received not less than $500 in payment for the issuance of its shares. Said Restated Articles of Incorporation supersede the original Articles of Incorporation as heretofore amended. IN WITNESS WHEREOF, SunTrust Banks, Inc. has caused these Articles of Restatement to be executed, its corporate seal to be affixed, and its seal and execution hereof to be attested, all by its duly authorized officers, this 13th day of November, 1998. SUNTRUST BANKS, INC. /s/ W. P. O'Halloran William P. O'Halloran Senior Vice President and Controller (Chief Accounting Officer) (CORPORATE SEAL) Attest: /c/ Thomas C. Duer Thomas C. Duer Corporate Secretary EX-27 3 ARTICLE 9 FDS FOR 10K
9 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 2,550,594 11,053 1,017,059 127,734 12,003,611 0 0 41,264,007 758,488 59,890,232 36,744,583 9,331,098 3,871,961 4,189,360 213,108 0 0 5,540,122 59,890,232 804,347 137,017 18,032 959,396 284,512 469,976 489,420 28,626 910 471,064 276,047 180,874 0 0 180,874 0.85 0.85 4.03 127,952 43,338 2,721 0 712,447 36,128 14,160 758,488 0 0 758,488
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