SunTrust 2005 Annual Report Download - page 59

SUNTRUST  ANNUAL REPORT 57
SUPERVISION AND REGULATION
As a bank holding company and a financial holding company, the Company
is subject to the regulation and supervision of the Board of Governors of
the Federal Reserve System (the “Federal Reserve”). SunTrust Bank is a
Georgia state bank which has branches in Georgia, Florida, Tennessee,
Alabama, Virginia, West Virginia, Maryland, North Carolina, South Carolina,
the District of Columbia, Mississippi and Arkansas. SunTrust Bank is a
member of the Federal Reserve System, and is regulated by the Federal
Reserve, the Federal Deposit Insurance Corporation (the “FDIC”) and the
Georgia Department of Banking and Finance. In certain markets, SunTrust
Bank operates under the name “Wal-Mart Money Center by SunTrust,” and
SunTrust Bank also operates certain branches under the name “El Banco”
in Georgia.
The Company also owns a % ownership interest in First Market,
FSB. First Market Bank, FSB is a federal savings bank primarily regulated
by the Office of Thrift Supervision (the “OTS”). The Company has entered
into a definitive agreement to sell its % interest in First Market, FSB. The
completion of the sale is subject to a number of conditions and receipt of
required regulatory approvals. Although it is currently anticipated that the
sale will take place in the first quarter of , the Company cannot give
any assurance as to when, or if, the sale will occur.
The Company’s banking subsidiaries are subject to various require-
ments and restrictions under federal and state law, including require-
ments to maintain reserves against deposits, restrictions on the types and
amounts of loans that may be made and the interest that may be charged
thereon, and limitations on the types of investments that may be made and
the types of services that may be offered. Various consumer laws and regu-
lations also affect the operations of the bank and its subsidiaries. In addition
to the impact of regulation, commercial banks are affected significantly by
the actions of the Federal Reserve as it attempts to control the money sup-
ply and credit availability in order to influence the economy. Pursuant to
the Riegle-Neal Interstate Banking and Branching Efficiency Act of ,
bank holding companies from any state may acquire banks located in any
other state, subject to certain conditions, including concentration limits. In
addition, a bank may establish branches across state lines by merging with a
bank in another state, subject to certain restrictions.
There are a number of obligations and restrictions imposed on bank
holding companies and their depository institution subsidiaries by fed-
eral law and regulatory policy that are designed to reduce potential loss
exposure to the depositors of such depository institutions and to the FDIC
insurance fund in the event the depository institution becomes in danger of
default or is in default. For example, under a policy of the Federal Reserve
with respect to bank holding company operations, a bank holding com-
pany is required to serve as a source of financial strength to its subsidiary
depository institutions and commit resources to support such institutions
in circumstances where it might not do so absent such policy. In addition,
the “cross-guarantee” provisions of federal law require insured depository
institutions under common control to reimburse the FDIC for any loss suf-
fered or reasonably anticipated as a result of the default of a commonly
controlled insured depository institution or for any assistance provided by
the FDIC to a commonly controlled insured depository institution in danger
of default. The federal banking agencies have broad powers under current
federal law to take prompt corrective action to resolve problems of insured
depository institutions. The extent of these powers depends upon whether
the institutions in question are “well capitalized,” “adequately capitalized,”
“undercapitalized,” “significantly undercapitalized” or “critically undercapi-
talized” as such terms are defined under regulations issued by each of the
federal banking agencies.
There are various legal and regulatory limits on the extent to which
the Company’s subsidiary banks may pay dividends or otherwise supply
funds to the Company. In addition, federal and state bank regulatory agen-
cies also have the authority to prevent a bank or bank holding company
from paying a dividend or engaging in any other activity that, in the opinion
of the agency, would constitute an unsafe or unsound practice.
FDIC regulations require that management report annually on its
responsibility for preparing its institution’s financial statements, and estab-
lishing and maintaining an internal control structure, and procedures for
financial reporting, and compliance with designated laws and regulations
concerning safety and soundness. The Company’s nonbanking subsidiar-
ies are regulated and supervised by various regulatory bodies. For example,
SunTrust Capital Markets, Inc. is a broker-dealer and investment adviser reg-
istered with the Securities and Exchange Commission (“SEC”) and a mem-
ber organization of the New York Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. (“NASD”). SunTrust Investment
Services, Inc. is also a broker-dealer and investment adviser registered with
the SEC and a member of the NASD. Trusco is an investment adviser regis-
tered with the SEC.
On November , , financial modernization legislation known
as the Gramm-Leach-Bliley Act (the “Act”) was signed into law. Under the
Act, a bank holding company which elects to become a financial holding
company may engage in expanded securities activities, insurance sales,
and underwriting activities, and other financial activities, and may also
acquire securities firms and insurance companies, subject in each case to
certain conditions. The Company has elected to become a financial holding
company under the Act. In addition to the Act, there have been a number
of legislative and regulatory proposals that would have an impact on the
operation of bank/financial holding companies and their bank and nonbank
subsidiaries. It is impossible to predict whether or in what form these pro-
posals may be adopted in the future and, if adopted, what their effect will
be on the Company.
A WARNING ABOUT FORWARDLOOKING INFORMATION
This Annual Report contains forward-looking statements. The Company
may also make forward-looking statements in periodic reports to the SEC,
proxy statements, offering circulars and prospectuses, press releases, and
other written materials and oral statements made by SunTrust’s officers,
directors, or employees to third parties. Statements that are not historical
facts, including statements about the Company’s beliefs and expectations,
are forward-looking statements. These statements are based on beliefs and
assumptions of SunTrust’s management and on information currently avail-
able to such management. The forward-looking statements are intended
to be subject to the safe harbor protection provided by Section A of the
Securities Act of  and Section E of the Securities Exchange Act of
. Forward-looking statements include statements preceded by, fol-
lowed by, or that include the words “believes,” “expects,” “anticipates,”
“plans,” “estimates,” or similar expressions or future conditional verbs
such as “will,” “should,” “would,” and “could.” Forward-looking statements
speak only as of the date they are made, and the Company undertakes no
obligation to update publicly any of them in light of new information or
future events.