SunTrust Set to Go It Alone, Says CEO Jimmy Williams

ATLANTA - SunTrust Banks Inc., the nation's 18th-largest banking company, is sitting out the current merger mania.

It has plenty of capital to back an acquisition binge. But, for now, chief executive James B. Williams is leaving the buying to his southern counterparts - such as NCNB Corp.'s Hugh L. McColl Jr. and Wachovia Corp.'s John G. Medlin Jr.

"We've got the things that really count going for us, and we're just going to finetune it," says Mr. Williams, who is also chairman of the board.

"If we were to make a deal someday, it would be because we felt it was a prudent deal at the time, and not because of anything NCNB or Wachovia has done."

Solo Tendencies

SunTrust, with $33.1 billion in assets, has good reason to want to go it alone. The Atlanta-based company, while solidly profitable, is still spooked by its misadventures of five years ago in Tennessee, where it acquired the state's top-performing bank - only to see it run into serious credit problems.

Mr. Williams, 57, says the company's experience with Nashville-based Third National Corp. has given it a painful appreciation of the difficulty of spotting problem loans. He says Third National's credit problems are finally under control, but the deal has made him wary of acquiring a bank known to have problems.

That is why SunTrust has not bothered to scrutinize the books of Southeast Banking Corp., Miami, although the troubled institution would complement SunTrust's already sizable presence in Florida.

Pointing to SunTrust's inability to forecast Third National's rising nonperformers, Mr. Williams says: "These are banks we own, banks we live with everyday. So how in the world are we going to go down to Southeast and say we've done due diligence and come out with the right answer?"

That sense of cautiousness has marked Mr. Williams' 15-month reign as chief executive. While he is widely considered one of banking's top operating executives, some observers privately question whether he has the strategic vision needed to exploit the wave of consolidation now rocking the industry.

"Jimmy knows what he is," says one analyst who has known the executive for many years. "He's a hell of a good operator, but he's looking to others for [strategic] direction."

Insiders cite chief financial officer John W. Spiegel and Trust Company Bank president Robert R. Long as key players in helping Mr. Williams set the company's strategic direction.

Yet so far company observers are hard pressed to identify any significant changes in SunTrust's road map since Mr. Williams took over. Indeed, Mr. Williams himself cannot list any major new initiatives.

Instead, he prefers to talk of avoiding missteps. "We don't want to make a mistake," he says. "But if we make one, it's not likely going to be doing something wrong. It's going to be not doing something we should have done."

SunTrust has clearly done a lot of things right. The company last year earned $350 million. This represented a 1.13% return on assets at that time and ranked SunTrust second in profitability among southeastern superregionals, surpassed only by Wachovia.

Its core capital is equal to 8.84% of risk-based capital standards, more than twice as high as required. With nonperforming assets equal to a relatively low 2% of total loans, it has weathered the downturn in the region's economy without serious damage. And it intends to stay out of danger.

Soothing on the Nerves

"SunTrust moves deliberately," said Richard I. Stillinger, banking analyst with Keefe, Bruyette & Woods Inc. in New York. "It's not going to startle people."

Third National, with $5.6 billion in assets, is clearly SunTrust's biggest problem. The bank earned only $223 million last year, half the level it reported in 1989. Nonperforming assets account for 7.81% of total loans, an embarrassingly high level.

Ironically, SunTrust's 1986 purchase of Third National was widely hailed as a coup by analysts and the press. And it did seem like a good idea at the time.

Nashville's growth rate was so dynamic in the mid-1980s that its hopes of becoming the "second Atlanta" seemed possible. American Airlines had just established a Nashville hub and major automobile plants were being built nearby, including General Motors Co.'s Saturn facility in Spring Hill.

Damage-Control Scenario

But shortly after SunTrust closed the deal, for $631 million, or 1.8 times book value, middle Tennessee slid into a real estate recession from which it has not yet entirely recovered.

SunTrust seems to have the damage under control, mainly by aggressive chargeoffs and a complete withdrawal from real estate lending. Under SunTrust's ownership, Third National has scarcely grown.

"I don't think there's going to be much more bad news in Nashville on nonperformers," Mr. Williams says. "The big bad news won't be the addition of more so much as the deterioration of the ones that we've already got."

Total Recall

Like most of SunTrust's senior management, Mr. Williams is a career employee of Trust Company, the company's lead Georgia bank. He first joined in 1955, served a stint in the Air Force, and then returned in 1958 to begin his climb up the management ladder.

He was aided along the way by a prodigious appetite for hard work and a photographic memory. Former Trust Company officer D. Alan Najjar, who now runs a community bank in Atlanta, recalled his days as a trainee, when Mr. Williams would host the monthly officers' meeting and report the previous month's earnings.

"He would stand up and recite figures for the balance sheet and income statement without a single note," Mr. Najjar says.

Telegraphic Compression

Mr. Williams's conversational style is as spare as his office, which is decorated with only a few family photographs. He eschews complete sentences in favor of short, clipped phrases, leaving it to the listener to complete his thoughts.

"He doesn't waste words or time," says board member David H. Hughes, president of a building materials company in Florida.

By the early 1980s, when Trust Company embarked upon its period of greatest growth, Mr. Williams was solidly ensconced as the bank's number two man, behind then-chief executive Robert Strickland, the son of a former Trust Company president. Throughout the decade, the two men enjoyed a partnership that was apparently free of jealousy or ego conflicts.

This emphasis on teamwork permeates SunTrust's corporate culture. Mr. Williams bubbles with pride when describing the company's senior management commitee, reaching for one of his heartfelt sports analogies.

"I'd be damn near willing to take them out and play the Hawks," the Atlanta basketball team, he declares.

Having spent most of its century-long history as Atlanta's blue-chip corporate bank, Trust Company did not become a true statewide bank until Georgia liberalized its banking laws in the late 1970s. The company then went on a great buying binge, snatching up 24 banks from 1976 to 1986 and increasing its assets to $8.8 billion from $1.8 billion.

In 1984, Trust Company swooped down into Florida to acquire Orlando-based Sunbanks, which had $9 billion in assets. The merger created the current holding company, SunTrust, and expanded the Strickland-Williams team into a triumvirate, with the addition of Sun Banks chairman Joel R. Wells Jr.

Daily Regimen

As vice chairman of SunTrust, Mr. Wells concentrated his efforts on strategic planning and was happy to leave day-to-day management to Mr. Williams.

"When I was thinking about getting work out on Tuesday, [Mr. Wells] was thinking about banking in the year 2008," Mr. Williams recalls. Mr. Wells died in February after a long bout with cancer.

Sun Banks expanded even more rapidly than Trust Company during the 1980s and lacked the Atlanta bank's disciplined credit culture. As Trust Company's resident trouble-shooter, Mr. Williams was sent to whip the Florida bank into shape, serving as Sun Banks president for three years, from 1986 to 1988.

Lofty Ambitions

His main task was to enforce tight expense controls and encourage its managers to meet new, stricter profitability goals. Today, Sun Banks earns a return on assets of 1.14%, compared with 0.71% in 1984.

Buck Jones, managing director of corporate finance for J.C. Bradford & Co., describes Mr. Williams as "disarmingly likeable, but gets the message across." Bradford is a brokerage firm in Nashville, where Mr. Williams also supervised efforts to right the listing Third National ship.

In April 1990, Mr. Strickland relinquished the chief executive role to Mr. Williams, and became chairman of the executive committee. Mr. Strickland, 64, wanted to prepare an orderly transition to his mandatory retirement next year.

The change has had little effect on the bank. "Jimmy was the dominating force, even before. There was no question, even before the changes, whose hand was on the wheel," says Mr. Hughes, the board member.

Looking ahead, Mr. Williams' only prediction is that trust operations, which contribute 34% of SunTrust's noninterest income, will become "a more dominant part of the whole thing." He also foresees residential real estate lending becoming a larger part of the loan portfolio, taking up the slack left by commercial real estate.

PHOTO : LESSON LEARNED: Jimmy Williams' SunTrust is still spooked by its

PHOTO : misadventures in Tennessee five years ago.

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