ATLANTA -- Sun Trust Banks Inc. so far has been the bashful beau at the merger dance. It hasn't done a major acquisition in six years.

But the company definitely is willing to do deals, insists John W. Spiegel, the chief financial officer. In fact, he confirms, Atlanta-based Sun Trust last month assigned an executive to scout and evaluate merger opportunities.

Mr. Spiegel says SunTrust, with $35 billion in assets, would consider buying banks in any of the 10 states that have been reciprocal banking agreements with Georgia. However, he adds, "it's a little easier to think about something closer rather than farther."

Decentralized Style

Key criteria for any out-of-state acquisition would be major market share, strong credit duality, and proven management. Mr. Spiegel stresses that SunTrust, with its decentralized operating style, cannot afford to manage a large acquisition from Atlanta.

In addition, Mr. Spiegel says, SunTrust would consider smaller banks or thrifts in the three states where it now operates: Georgia, Florida, and Tennessee. The criteria for these inmarket deals would be acquisitions that help SunTrust in areas where it is already strong, such as trust operations, Mr. Spiegel says. There's no question SunTrust as the financial firepower to do a deal. The company's stock trades at nearly two times book value, higher than all of its regional peers except Wachovia Corp., Winston-Salem, N.C., whose stock trades at just over two times book.

The AmSouth Option

Analysts say SunTrust could afford to do a $1 billion stock swap with most potential targets and still avoid diluting its own shareholders.

"They're in a good position to consider [a deal]," said Richard I. Stillinger, an analyst with Keefe, Bruyette & Woods Inc. in New York.

First on everyone's list of potential targets is Birmingham-Ala.-based AmSouth Bancorp., with $9.2 billion in assets. The company operates the dominant retail franchise within Alabama, as well as the state's biggest trust operation, a particular draw for SunTrust.

On the negative side, Alabama's growth lags behind Florida and Georgia, where SunTrust has most of its assets. If SunTrust paid a substantial premium for AmSouth, it would have difficulty earning that back, analysts say.

Other Potential Targets

It would face a similar problem if acquired First Alabama Bancshares Inc. The $7.1 billion asset banking company boasts excellent credit quality, but is only ranked third in market share.

First Tennessee National Corp. in Memphis, with $7.7 billion in assets, meets all of SunTrust's criteria for credit quality and management strength, but trades at 173% of its book value - a relatively high multiple.

Again, SunTrust would have difficulty earning back any premium it paid. The same holds true for Baltimore-based Mercantile Bankshares Corp., with $5.1 billion in assets, which has the added drawback of geographical distance.

Assuming SunTrust does wish to venture into Virginia, a strong growth market, Crestar Financial Corp., assets of $12.2 billion, and Signet Banking Corp., $11.3 billion, both offer statewide franchises.

But asset-quality problems at the two Richmond-based banks have hurt their earnings in recent years and SunTrust is extremely wary of taking on problems.

New Merger Scout

SunTrust has traditionally managed the pricing and bidding of its acquisition through its treasurer's department in Atlanta, which is currently headed by senior vice president Donald T. Heroman. The department's personnel assigned to work on the bids varied with each project.

But last month the company transferred Ronald W. Eastburn to Atlanta from its Orlando-based subsidiary to explore merger opportunities.

Mr. Eastburn 43, was responsible for strategic planning as a senior vice president in SunTrust's

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Florida bank. In Atlanta, he will be a first vice president and second in command of the treasurer's department.

"Our approach to acquisitions has not changed," Mr. Spiegel insists. "We're just coordinating our resources to do it in a little more defined way."

Mr. Spiegel denies that the change was related to some recent failed bids in Florida. But it is known that SunTrust bid unsuccessfully for Southeast Banking Corp., Miami, last September; Security First Federal Savings and Loan Associations, Daytona, in April; and Tampa-based First Florida Banks Inc. in May. Mr. Eastburn was involved in the preparation of those bids.

Southeast and Security First were sold by federal regulators at government auction. The successful bidder in both cases was First Union Corp., Charlotte. First Florida marketed itself to interested buyers and accepted a bid from Jacksonville-based Barnett Banks Inc.

While none of the losing bids were made public, the banks involved have privately confirmed that SunTrust substantially underbid for Southeast and First Florida.

In the case of Security First, SunTrust came close to First Union's winning bid of $46 million.

Mr. Spiegel insists he has no regrets. "Our approach to valuing transactions is what they are worth to us, and a reasonable return to our shareholders, rather than what it takes to buy the deal. We think our approach is a solid one and we see no change in it," he says.

Mr. Spiegel admits he gets frequent calls from securities analysts questioning whether SunTrust has missed opportunities, particularly in Florida, where it ranks fourth in market share.

During the past year, First Union has engineered a string of government-assisted acquisition to add $14 billion in Florida assets, claiming the No. 2 spot.

Barnett, meanwhile, cemented its No. 1 position with the First Florida bid, and the newly merged NationsBank combined the Florida banks previously belonging to NCNB Corp,m Charlotte, and Atlanta-based C&S/Sovran Corp. to take third place.

But SunTrust accomplished only one purchase during the same period, the $385.6 million-asset Florida Westcoast Banks Inc., Venice, boosting its total Florida assets to $18 billion.

Now, with all the large Florida banks already bought up and federal regulators having run through most of their inventory of failed thrifts, the window of opportunity is fast closing in the Sunshine State.

More Conservative Approach

"Some believe it is a race. Our approach is not that it's a race," Mr. Spiegel says.

Mr. Spiegel says SunTrust and Wachovia Corp., Winston-Salem, have taken a more conservative approach in acquisitions than First Union and NationsBank. "Both [approaches] work, frankly. For the shareholder, I'm not sure there's one right answer," he says.

SunTrust officials have conceded in the past that a big reason for their wariness was their 1986 purchase of Nashville-based Third National Corp. SunTrust paid $631 million, or 1.8 times book value, for Third National just before the Nashville region fell into a profound real estate slump.

Third National was subsequently responsible for $225 million in chargeoffs, depressing SunTrust's stock price for several years.

Third National's nonperforming assets didn't peak until the second quarter of 1991, when they reached $282 million, or 7.83% of total loans and foreclosed real estate.

The Third National experience helps explain why SunTrust remains cautious amid the merger mania.

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