As filed with the U.S. Securities and Exchange Commission on March 11, 2008

Registration No. 333-147874

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

PRE-EFFECTIVE

AMENDMENT NO. 1

TO

 

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

 

SunTrust Banks, Inc.

(Exact name of registrant as specified in its charter)

 

 

303 Peachtree Street, NE

Atlanta, GA 30308

(404) 588-7711

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 

RAYMOND D. FORTIN

Corporate Executive Vice President and General Counsel

303 Peachtree Street, NE

Atlanta, GA 30308

(404) 588-7711

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

 

 

 

 

Copies to:

 

 

 

 

 

Approximate date of commencement of proposed sale of the securities to the public:  As soon as practicable after this registration statement becomes effective and all other conditions to the merger described in this document have been satisfied or waived.

 

If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

PROPOSED MERGER — YOUR VOTE IS VERY IMPORTANT

 

The boards of directors of GB&T Bancshares, Inc. (“GB&T”) and SunTrust Banks, Inc. (“SunTrust”) have each unanimously agreed to the acquisition of GB&T by SunTrust pursuant to the merger of GB&T with and into SunTrust. SunTrust will be the surviving bank holding company in the merger. GB&T shareholders are being asked to approve the merger at a special meeting of shareholders to be held on April 24, 2008. SunTrust shareholders are not required to approve the merger under Georgia law.

 

If the merger is completed, GB&T shareholders will receive, for each share of GB&T common stock they own immediately prior to the merger, 0.1562 shares of SunTrust common stock. In addition, each outstanding option to purchase shares of GB&T common stock will be converted into an option to purchase the number of shares of SunTrust common stock (rounded down to the nearest whole share) equal to the number of shares of GB&T common stock subject to the stock option multiplied by 0.1562.

 

Based upon a maximum of 14,230,796 shares of GB&T common stock and 682,790 options to purchase shares of GB&T common stock (or other equity-based awards) expected to be outstanding as of the effective time of the merger, SunTrust expects to issue, or reserve for issuance, up to 2,329,503 shares of its common stock in connection with the merger. SunTrust common stock is listed on the New York Stock Exchange under the symbol “STI.” GB&T common stock is listed on the Nasdaq Global Select Market under the symbol “GBTB.”

 

A special meeting of the GB&T shareholders will be held at the Gainesville Civic Center, 830 Green St., NE, Gainesville, Georgia 30501, on Thursday, April 24, 2008 at 10:00 a.m. local time. At the special meeting, you will be asked to approve the Agreement and Plan of Merger, dated November 2, 2007, between SunTrust and GB&T, which is referred to in this proxy statement/prospectus as the “merger agreement.” Approval of the merger agreement requires bank regulatory approvals and the affirmative vote of a majority of the shares of GB&T common stock outstanding on March 5, 2008, the record date.

 

Your vote is very important. The GB&T board of directors recommends that you vote FOR approval of the merger agreement and FOR the authorization to adjourn, if necessary. The board urges you to sign and date the enclosed proxy and return it promptly in the enclosed envelope to make sure that your vote is counted. Of course, if you attend the meeting, you may vote in person, even if you have returned your proxy. You can also vote on the Internet or by telephone by following the instructions on the proxy card.

 

You should read carefully this entire proxy statement/prospectus and the documents incorporated in this proxy statement/prospectus by reference because they contain important information about the merger. In particular, you should read carefully the information under the section entitled “Risk Factors Relating to the Merger,” beginning on page 13.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this proxy statement/prospectus or determined if this proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The shares of SunTrust common stock to be issued in the merger are not deposits or savings accounts or other obligations of any bank or savings association, and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

 

This proxy statement/prospectus is dated March 11, 2008 and is first being mailed to the GB&T shareholders on or about March 13, 2008.

 

ADDITIONAL INFORMATION

 

This proxy statement/prospectus incorporates important business and financial information about SunTrust and GB&T from documents that are not included in or delivered with this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 65. This information is available to you without charge upon your written or oral request. You can obtain documents incorporated by reference in this proxy statement/prospectus by requesting them in writing or by telephone from SunTrust or GB&T at the following addresses:

 

 

You also may obtain these documents at the Securities and Exchange Commission’s website, “www.sec.gov,” and you may obtain certain of these documents at SunTrust’s website, “www.suntrust.com,” by selecting “Investor Relations” and then selecting “Financials & Regulatory Filings” and then selecting “SEC Filings,” and at GB&T’s website, “www.gbtbancshares.com,” by selecting “Corporate Information” and then selecting “Documents.” Information contained on the SunTrust and GB&T websites is expressly not incorporated by reference into this proxy statement/prospectus.

 

If you would like to request documents, please do so before April 17, 2008, in order to receive them before the GB&T special meeting.

 

GB&T BANCSHARES, INC.
500 Jesse Jewell Parkway SE
P.O. Box 2760
Gainesville, Georgia 30501

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To Be Held on April 24, 2008

 

To the Shareholders of GB&T Bancshares, Inc.:

 

GB&T will hold a special meeting of shareholders at the Gainesville Civic Center, 830 Green St. NE, Gainesville, Georgia 30501, on Thursday, April 24, 2008 at 10:00 a.m., local time, for the following purposes:

 

1. Merger.  To approve the Agreement and Plan of Merger, dated November 2, 2007, between SunTrust Banks, Inc. and GB&T Bancshares, Inc., pursuant to which SunTrust will acquire GB&T through the merger of GB&T with and into SunTrust. A copy of the merger agreement is attached to the accompanying proxy statement/prospectus as Appendix A.

 

2. Adjournment.  To consider and vote on a proposal to authorize the board of directors to adjourn the special meeting to allow time for further solicitation of proxies if there are insufficient votes present at the special meeting, in person or by proxy, to approve the merger agreement.

 

3. Other business.  To transact such other business as may properly come before the special meeting or any adjournments of the special meeting.

 

Only shareholders of record at the close of business on March 5, 2008, the record date, are entitled to notice of and to vote at the special meeting or any adjournments of the special meeting. The approval of the merger agreement requires the affirmative vote of a majority of the shares of GB&T common stock outstanding on the record date.

 

After careful consideration, your board of directors supports the merger and recommends that you vote FOR approval of the merger agreement and FOR the authorization to adjourn, if necessary. Although we do not know of any other matters to be presented at the special meeting, if other matters are properly presented, the persons named as proxies will vote on such matters at their discretion.

 

You are cordially invited to attend the special meeting in person, but regardless of whether you plan to attend, please return the enclosed proxy card or cast your vote by telephone or the Internet.

 

By Order of the Board of Directors

 

Richard A. Hunt

President and Chief Executive Officer

 

Gainesville, Georgia

March 13, 2008

 

 

 

 

 

TABLE OF CONTENTS

 

 

About the Merger

 

 

 

 

 

 

 

 

 

 

About the GB&T Special Meeting

 

 

 

 

 

 

 

 

 

 

 

 

How to Get More Information

 

 

 

 

 

SUMMARY OF THE MERGER

 

Information about the Companies (pages 22 and 23)

 

GB&T Will Merge with and into SunTrust (page 25)

 

What GB&T Shareholders Will Receive in the Merger (page 37)

		SunTrust Closing				GB&T Closing				Equivalent
		Price				Price				Price per Share
November 1, 2007		$	69.13			$	8.80			$	10.80
March 10, 2008		$	54.56			$	8.03			$	8.52

Closing Price per Share of		Equivalent Price per Share of
SunTrust Common Stock		GB&T Common Stock
$70.00		$	10.93
69.00			10.78
68.00			10.62
67.00			10.47
66.00			10.31
65.00			10.15
64.00			10.00
63.00			9.84
62.00			9.68
61.00			9.53
60.00			9.37
59.00			9.22
58.00			9.06
57.00			8.90
56.00			8.75
55.00			8.59
54.00			8.43
53.00			8.28
52.00			8.12
51.00			7.97
50.00			7.81

 

Material United States Federal Income Tax Consequences to GB&T Shareholders (page 50)

 

SunTrust’s Future Dividend Policy

 

The GB&T Board of Directors’ Recommendation to GB&T Shareholders (page 21)

 

Certain Individuals Have Executed Voting Agreements (page 48)

 

GB&T’s Financial Advisor Has Provided an Opinion as to the Fairness of the Merger Consideration, from a Financial Point of View, to GB&T Shareholders (page 30)

 

The GB&T Board of Directors’ Reasons for the Merger (page 28)

	•	its knowledge of the current environment in the financial services industry, including national and economic conditions, continued consolidation, substantially increased operating costs, evolving trends in technology and increasing nationwide and global competition, the current financial market conditions, including the recent difficulties in the sub-prime mortgage lending and residential real estate market and the likely effects of these factors on GB&T’s potential growth, development, productivity, profitability and strategic options relative to SunTrust’s, and the historical market prices of GB&T’s common stock;
	•	the decline in the prices of financial services stocks generally and, in particular, the declining stock price of GB&T relative to its peers during the time in which the GB&T board of directors was considering SunTrust’s proposal;
	•	the financial analyses presented by KBW to the GB&T board of directors, and the opinion delivered to GB&T by KBW to the effect that, as of November 1, 2007, and based upon and subject to the assumptions made, matters considered and limitations set forth in the opinion, the merger consideration specified in the merger agreement was fair from a financial point of view to the holders of shares of GB&T common stock;
	•	the GB&T board of directors’ belief that a merger with SunTrust would allow GB&T shareholders to participate in a combined company that would have better future prospects than GB&T was likely to achieve on an independent basis, with greater market penetration in and around GB&T’s historical markets and more diversified customer bases and revenue sources; and
	•	SunTrust’s historical stock price, liquidity, and history of paying regular quarterly cash dividends on its common stock (see “Comparative Market Prices and Dividends” beginning on page 9) and the fact that SunTrust’s quarterly dividend payouts would represent a substantial increase over the dividend traditionally paid by GB&T.

 

Certain Interests of GB&T Directors and Executive Officers in the Merger (page 54)

	•	the continuation of employee benefits;
	•	provisions in the merger agreement relating to director and officer liability insurance and the indemnification of the GB&T officers and directors for certain liabilities;
	•	potential change-in-control payments that may be owed following the merger; and

	•	a potential consulting or employment agreement that may be entered into with Richard A. Hunt, GB&T’s President and Chief Executive Officer, following the merger.

 

Quorum and Vote Required to Approve the Merger (page 19)

 

Neither SunTrust nor GB&T Shareholders Have Dissenters’ Rights (page 53)

 

GB&T Shareholders’ Meeting to be Held on April 24, 2008 (page 19)

 

The Merger is Expected to Occur in the Second Quarter of 2008 (page 39)

 

GB&T Stock Options Will Convert Into SunTrust Stock Options (page 37)

 

Completion of the Merger Is Subject to Certain Conditions (page 39)

	•	approval and adoption of the merger agreement by the GB&T shareholders;
	•	approval for listing on the NYSE of the shares of SunTrust common stock issuable pursuant to the merger agreement, subject to official notice of issuance;
	•	SunTrust’s registration statement on Form S-4, which includes this proxy statement/prospectus, becoming effective;
	•	absence of any legal prohibition on completing the merger;

	•	absence of any threatened order, injunction or decree which represents a reasonable probability of preventing completion of the merger or imposing damages that would reasonably be expected to have a material adverse effect on SunTrust, GB&T or the surviving corporation (see “The Merger — Representations and Warranties” beginning on page 40);

	•	absence of the enactment of any law that would make completion of the merger illegal;
	•	accuracy, as of the closing date of the merger, of the representations and warranties made by each party to the extent specified in the merger agreement;
	•	performance of the obligations of, and the covenants made by, each party to the extent specified in the merger agreement;
	•	receipt of all required regulatory approvals and expiration of all related statutory waiting periods; and
	•	receipt of tax opinions by each party, dated as of the closing date of the merger, to the effect that for United States federal income tax purposes the merger will constitute a reorganization within the meaning of Section 368(a) of the Code.

 

The Merger Agreement May Be Terminated (page 46)

	•	a governmental authority that must grant a regulatory approval denies approval of the merger, and such denial has become final and nonappealable;
	•	a governmental entity of competent jurisdiction issues a final and nonappealable order enjoining or otherwise prohibiting the merger;
	•	the GB&T shareholders do not approve the merger;
	•	the merger is not completed on or before July 31, 2008 (although this termination right is not available to a party whose failure to comply with the merger agreement resulted in the failure to complete the merger by that date); or

	•	the other party is in breach of any of its covenants, agreements, representations or warranties in the merger agreement, which breach is not cured within 45 days following written notice to the party committing the breach, or which breach, by its nature, cannot be cured prior to the closing date of the merger, and which breach, individually or together with all other breaches, would, if occurring or continuing on the date of the merger’s completion, result in the failure of any of the conditions relating to tax opinions, regulatory approvals, performance of obligations and covenants, or representations or warranties described under “The Merger — Conditions to the Completion of the Merger” beginning on page 39, provided that the terminating party is not then in breach of any covenant, agreement, representation or warranty contained in the merger agreement.

	•	fails to publicly recommend the approval of the merger and the adoption of the merger agreement;
	•	in a manner adverse to SunTrust, withdraws, modifies or qualifies its recommendation of the merger and the merger agreement to the GB&T shareholders (or proposes to take such action);
	•	in a manner adverse to SunTrust, takes a public action or makes a public statement in connection with the GB&T shareholders’ meeting (including not taking action to convene such meeting) that is inconsistent with its obligations under the merger agreement; or

	•	in a manner adverse to SunTrust, recommends any proposal for an Alternative Transaction to the GB&T shareholders (see “The Merger — No Solicitation of Alternative Transactions” beginning on page 44).

 

Certain Fees May Be Payable on Termination of the Merger Agreement (page 47)

	•	does not publicly recommend that the GB&T shareholders approve the merger agreement;
	•	in a manner adverse to SunTrust, after recommending approval of the merger agreement, withdraws, modifies or amends its recommendation;

	•	in a manner adverse to SunTrust, takes public action or makes a public statement in connection with the GB&T shareholders’ meeting (including not taking action to convene such meeting) that is inconsistent with its obligation to recommend the merger agreement to the GB&T shareholders; or

	•	in a manner adverse to SunTrust, recommends a proposal for an Alternative Transaction to the GB&T shareholders (see “The Merger — No Solicitation of Alternative Transactions” beginning on page 44).

 

We May Amend or Waive Provisions of the Merger Agreement (page 52)

 

SunTrust Will Account for the Merger Using the “Purchase” Method of Accounting (page 53)

 

Comparison of the Rights of GB&T Shareholders and SunTrust Shareholders (page 56)

 

Comparative Market Prices and Dividends

		SunTrust												GB&T
		High				Low				Dividends				High				Low				Dividends
Quarter Ending
March 31, 2008 (through March 10, 2008)		$	70.00			$	53.30			$	0.77			$	10.97			$	7.81			$	0.000
Quarter Ended
December 31, 2007		$	78.76			$	60.02			$	0.73			$	13.35			$	8.75			$	0.095
September 30, 2007			90.47				73.61				0.73				17.14				12.85				0.095
June 30, 2007			94.18				78.16				0.73				18.80				15.91				0.095
March 31, 2007			87.43				80.76				0.73				22.28				17.53				0.090
Quarter Ended
December 31, 2006		$	85.64			$	76.75			$	0.61			$	22.86			$	20.55			$	0.090
September 30, 2006			81.59				75.11				0.61				22.00				20.20				0.090
June 30, 2006			78.33				72.56				0.61				22.85				20.55				0.090
March 31, 2006			76.75				69.68				0.61				22.70				20.31				0.085
Quarter Ended
December 31, 2005		$	75.46			$	65.32			$	0.55			$	23.60			$	19.53			$	0.085
September 30, 2005			75.77				68.85				0.55				24.24				20.25				0.085
June 30, 2005			75.00				69.60				0.55				24.50				18.89				0.085
March 31, 2005			74.18				69.00				0.55				25.01				21.02				0.076

SunTrust historical		$	69.13
GB&T historical		$	8.80
GB&T pro forma equivalent(1)		$	10.80

(1)		Reflects the pro forma equivalent closing price of the SunTrust common stock that would be received by GB&T shareholders in the merger based on an exchange ratio of 0.1562 of a share of SunTrust common stock for each share of GB&T common stock.

 

SunTrust Selected Consolidated Historical Financial Data

		Year Ended December 31
		2007				2006				2005				2004				2003
		(In millions except per share and other data)
Summary of Operations
Interest, fees and dividend income		$	10,035.9			$	9,792.0			$	7,731.3			$	5,218.4			$	4,768.8
Interest expense			5,316.4				5,131.6				3,152.3				1,533.2				1,448.5
Net interest income			4,719.5				4,660.4				4,579.0				3,685.2				3,320.3
Provision for loan losses			664.9				262.5				176.9				135.6				313.6
Net interest income after provision for loan losses			4,054.6				4,397.9				4,402.1				3,549.6				3,006.7
Noninterest income			3,428.7				3,468.4				3,155.0				2,604.4				2,303.0
Noninterest expense			5,233.8				4,879.9				4,690.7				3,897.0				3,400.6
Income before provision for income taxes			2,249.5				2,986.4				2,866.4				2,257.0				1,909.1
Provision for income taxes			615.5				869.0				879.2				684.1				576.8
Net income			1,634.0				2,117.4				1,987.2				1,572.9				1,332.3
Preferred stock dividends			30.3				7.7				—				—				—
Net income available to common shareholders		$	1,603.7			$	2,109.7			$	1,987.2			$	1,572.9			$	1,332.3
Net interest income — FTE		$	4,822.2			$	4,748.4			$	4,654.5			$	3,743.6			$	3,365.3
Total revenue — FTE			8,250.9				8,216.8				7,809.5				6,348.0				5,668.3
Per Average Common Share
Diluted
Net income		$	4.55			$	5.82			$	5.47			$	5.19			$	4.73
Basic
Net income			4.59				5.87				5.53				5.25				4.79
Dividends paid per average common share			2.92				2.44				2.20				2.00				1.80
Selected Average Balances
Total assets		$	177,795.5			$	180,315.1			$	168,088.8			$	133,754.3			$	122,325.4
Consumer and commercial deposits			98,020.2				97,175.3				93,355.0				77,091.5				69,443.7
Total shareholders’ equity			17,808.0				17,546.7				16,526.3				11,469.5				9,083.0
As of December 31
Total assets		$	179,573.9			$	182,161.6			$	179,712.8			$	158,869.8			$	125,250.5
Long-term debt			22,956.5				18,992.9				20,779.2				22,127.2				15,313.9
Preferred stock			500.0				500.0				—				—				—

 

GB&T Selected Consolidated Historical Financial Data

		Year Ended December 31
		2007				2006				2005				2004				2003
		(In thousands except per share and other data)
Summary Income Statement
Interest income		$	137,105			$	126,575			$	90,185			$	58,274			$	46,792
Interest expense			72,647				57,393				33,836				17,952				15,288
Net interest income			64,458				69,182				56,979				40,322				31,504
Provision for loan losses			23,727				15,744				5,916				1,406				1,406
Net interest income after provision for loan losses			40,731				53,438				51,063				38,916				30,098
Other income			11,364				10,513				11,631				11,778				9,928
Other expense			68,015				50,159				44,825				36,180				29,693
Income (loss) before provision for income taxes			(15,920	)			13,792				17,869				14,514				10,333
Provision for income taxes			(3,431	)			4,271				5,878				4,676				2,608
Net income (loss)		$	(12,489	)		$	9,521			$	11,991			$	9,838			$	7,725
Summary Balance Sheet Data
Total loans		$	1,500,704			$	1,497,701			$	1,231,410			$	955,880			$	709,958
Allowance for loan losses			27,369				24,676				12,773				11,061				8,726
Net loans(1)			1,473,335				1,473,025				1,218,637				944,819				701,232
Total assets			1,939,012				1,900,376				1,584,094				1,274,136				944,278
Total deposits			1,495,432				1,480,168				1,197,026				928,603				728,629
Subordinated debt			29,898				29,898				29,898				29,898				15,464
Shareholders’ equity(2)			218,399				233,338				198,711				174,715				96,843
Net Income (Loss) Per Share (3)
Diluted		$	(0.87	)		$	0.68			$	0.93			$	1.04			$	1.03
Basic			(0.88	)			0.70				0.96				1.05				1.06
Cash dividends declared			0.38				0.36				0.33				0.30				0.29
Book value			15.35				16.51				15.54				14.84				11.40
Selected Average Balances
Total loans		$	1,528,509			$	1,379,203			$	1,131,883			$	807,340			$	608,131
Intangible assets			92,282				84,108				70,947				42,030				17,331
Total assets			1,962,831				1,776,709				1,496,792				1,082,701				813,134
Total deposits			1,525,203				1,374,419				1,123,577				834,100				637,688
Shareholders’ equity			234,960				223,112				198,004				118,271				73,114
Other Data
Common shares outstanding			14,231				14,132				12,784				11,772				8,493
Basic average shares outstanding			14,192				13,652				12,562				9,340				7,313
Diluted average shares outstanding			14,325				13,956				12,880				9,472				7,469

(1)		Net loans include the outstanding principal balances of loans less unearned income, net deferred fees and the allowance for loan losses.

(2)		The increase in shareholders’ equity for the years ended December 31, 2006, 2005 and 2004 related to business combinations was 15%, 12% and 34%, respectively. Net income less dividends declared represented 2%, 4% and 7% of the total increase for the same periods, respectively. The net loss plus dividends declared represented 8% of the total decrease for the year ended December 31, 2007.

(3)		The per share financial data presented in this summary has been adjusted to give effect to the five-for-four stock split accomplished in the form of a stock dividend on June 18, 2004.

 

Comparative Historical and Pro Forma Per Share Data

		Year Ended
		December 31,
		2007
SunTrust Historical
Net income per common share:
Basic		$	4.59
Diluted			4.55
Dividends			2.92
Book value at end of period			50.38
SunTrust Pro Forma Combined
Net income per common share:
Basic		$	4.55
Diluted			4.50
Dividends(1)			2.92
Book value at end of period			50.50
GB&T Historical
Net income per common share:
Basic		$	(0.88	)
Diluted			(0.87	)
Dividends			0.38
Book value at end of period			15.35
GB&T Pro Forma (equivalent)(2)
Net income per common share:
Basic		$	0.71
Diluted			0.70
Dividends			0.46
Book value at end of period			7.89

(1)		Same as SunTrust’s historical because no change in dividend policy is anticipated as a result of the merger.

(2)		Equivalent pro forma per share data represent the pro forma per share amounts attributed to one share of GB&T common stock that has been exchanged for SunTrust common stock. Equivalent pro forma per share amounts are calculated by multiplying the pro forma combined amounts by an implied exchange ratio of 0.1562.

 

In addition to the other information included in this proxy statement/prospectus, including the matters addressed under the heading “Forward-Looking Statements” beginning on page 16, you should carefully consider the matters described below. You should also consider the risk factors discussed in SunTrust’s Annual Report on Form 10-K for the year ended December 31, 2007, and the risk factors discussed in GB&T’s Annual Report on Form 10-K for the year ended December 31, 2007, in determining whether to adopt and approve the merger agreement.

 

Because the market price of SunTrust common stock will fluctuate, you cannot be sure of the market value of the SunTrust common stock that you will receive in the merger.

 

Each share of GB&T common stock you own will be converted into the right to receive 0.1562 shares of SunTrust common stock. The price of SunTrust common stock you receive may vary from the price of SunTrust common stock on the date the merger was announced, and may differ on the date that this document is mailed to GB&T shareholders and on the date of the meeting of GB&T shareholders.

 

Stock price changes may result from a variety of factors, including general market and economic conditions, changes in the values and perceptions of financial services stocks generally, changes in SunTrust’s business, operations and prospects, and regulatory considerations. Many of these factors are beyond SunTrust’s control. Accordingly, at the time of the special meeting, you will not necessarily know or be able to calculate the exact value of the shares of SunTrust common stock you will receive upon completion of the merger. Additionally, the value of the shares of SunTrust common stock received by a GB&T shareholder may decline immediately after, including, as a result of, the completion of the merger.

 

Combining the two companies may be more difficult, costly or time-consuming than we expect.

 

SunTrust and GB&T have operated, and, until completion of the merger, will continue to operate, independently. It is possible that the integration process for this acquisition could result in the loss of key employees or disruption of each company’s ongoing business or inconsistencies in standards, procedures and policies that would adversely affect SunTrust’s ability to maintain relationships with clients and employees or to achieve the anticipated benefits of the merger. If SunTrust has difficulties with the integration process, it might not achieve the economic benefits expected to result from the acquisition. As with any merger of banking institutions, there also may be business disruptions that cause SunTrust to lose customers or cause customers to remove their deposits or loans from SunTrust’s banks and move their business to competing financial institutions.

 

The loss of key personnel may adversely affect SunTrust.

 

After the completion of the merger, SunTrust expects to integrate GB&T’s business into its own. The integration process and SunTrust’s ability to successfully conduct GB&T’s business after the merger will require the experience and expertise of key employees of GB&T. Therefore, the ability to successfully integrate GB&T’s operations with those of SunTrust, as well as the future success of the combined company’s operations, will depend, in part, on SunTrust’s ability to retain key employees of GB&T following the merger. SunTrust may not be able to retain these or other key employees for the time period necessary to complete the integration process or beyond. The loss of such employees could adversely affect SunTrust’s ability to successfully conduct its business in the markets in which GB&T now operates, which could have an adverse effect on SunTrust’s financial results and the value of its common stock.

 

The merger agreement limits GB&T’s ability to pursue alternatives to the merger.

 

The merger agreement contains provisions that limit GB&T’s ability to discuss competing third-party proposals to acquire all or a significant part of GB&T. In addition, GB&T has agreed to pay SunTrust a fee of $6 million if the transaction is terminated because GB&T decides to pursue another acquisition transaction. These provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of GB&T from considering or proposing that acquisition even if it were prepared to pay a

higher per share market price than that proposed in the merger, or might result in a potential competing acquiror proposing to pay a lower per share price to acquire GB&T than it might otherwise have proposed to pay.

 

Certain GB&T directors and executive officers have interests in the merger that are different from, or in addition to, their interests as shareholders.

 

GB&T executive officers and SunTrust negotiated the terms of the merger agreement. The GB&T and SunTrust boards of directors approved the merger agreement and the GB&T board of directors recommended that its shareholders vote to approve the merger agreement. In considering these facts and the other information in this proxy statement/prospectus, you should be aware that certain GB&T directors and executive officers have interests in the merger other than their interests as shareholders. The GB&T board of directors was aware of these interests at the time it approved the merger. These interests may cause GB&T’s directors and executive officers to view the merger proposal differently and more favorably than you may view it. See “The Merger — Certain Interests of GB&T Directors and Executive Officers in the Merger” beginning on page 54 for more information.

 

If the merger is not consummated by July 31, 2008, either GB&T or SunTrust may choose not to proceed with the merger.

 

Either GB&T or SunTrust may terminate the merger agreement if the merger has not been completed by July 31, 2008, unless the failure of the merger to be completed by such date has resulted from the failure of the party seeking to terminate the merger agreement to perform its obligations.

 

GB&T shareholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

 

GB&T shareholders currently have the right to vote in the election of the GB&T board of directors and on other matters affecting GB&T. When the merger occurs, each GB&T shareholder that receives shares of SunTrust common stock will become a shareholder of SunTrust with a percentage ownership in the combined company that is much smaller than the shareholder’s percentage ownership of GB&T. In fact, it is expected that the former shareholders of GB&T as a group will own less than 1% of the outstanding shares of SunTrust immediately after the merger. Because of this, GB&T’s shareholders will have less influence on the management and policies of the combined company than they now have on the management and policies of GB&T.

 

The shares of SunTrust common stock to be received by GB&T shareholders as a result of the merger will have different rights from the shares of GB&T common stock.

 

Upon completion of the merger, GB&T shareholders will become SunTrust shareholders and their rights as shareholders will be governed by the articles of incorporation and bylaws of SunTrust. The rights associated with GB&T common stock are different than the rights associated with SunTrust common stock. See “Comparison of GB&T and SunTrust Shareholders’ Rights” beginning on page 56.

 

HomeTown Bank of Villa Rica, one of GB&T’s bank subsidiaries, is subject to a cease-and-desist order.

 

On November 26, 2007, HomeTown Bank of Villa Rica (“HomeTown Bank”), a wholly owned subsidiary of GB&T, entered into a Stipulation and Consent Agreement with the Federal Deposit Insurance Corporation (“FDIC”) and the Georgia Department of Banking and Finance agreeing to the issuance of a Cease and Desist Order (the “Order”). The Order became effective on December 6, 2007. The FDIC and the Georgia Department of Banking and Finance found that HomeTown Bank had engaged in unsafe and unsound practices and violated various banking laws and regulations. HomeTown Bank, without admitting or denying the alleged charges, stipulated to the findings in the Stipulation and Consent Agreement and consented to the issuance of the Order.

Under the terms of the Order, HomeTown Bank has agreed to take a number of affirmative steps, including, among other things: increasing the participation of the board of directors in the affairs of HomeTown Bank; assessing the qualifications and experience of management to comply with the requirements of the Order and operate HomeTown Bank in a safe and sound manner; achieving and maintaining a Tier 1 Capital ratio equal to or exceeding 7.0% of HomeTown Bank’s total assets; in addition to a fully funded loan reserve, developing a plan to meet the minimum risk-based capital requirements as described in the FDIC Statement of Policy on Risk-Based Capital; eliminating certain assets classified as “loss,” “doubtful” or “substandard”; performing a risk segmentation analysis and reducing concentrations in the loan portfolio; establishing effective systems for loan review and grading, loan documentation, and allowance for loan and lease losses; and establishing a written strategic business plan. Over the past several months, HomeTown Bank has begun the implementation of many of the items contained in the Order and many of the conditions imposed by the Order are extensions of these actions. We can make no assurance that HomeTown Bank will be able to implement the steps required under the Order or to otherwise satisfy the bank regulatory agencies. If HomeTown Bank is not able to accomplish the objectives required under the Order and the completion of the merger is delayed, it could have a material adverse effect on GB&T’s financial condition and results of operations.

 

GB&T has reported that its internal control over financial reporting is not effective, and any unidentified material weaknesses could cause GB&T to fail to meet its SEC and other reporting requirements.

 

In connection with an evaluation of the effectiveness of GB&T’s internal control over financial reporting for the year ended December 31, 2007, management determined that GB&T’s internal control over financial reporting was not effective, as demonstrated by a material weakness in the controls over loan approval procedures related to loan proceeds disbursement on construction and development loans, and problem loan identification and reporting. GB&T can provide no assurances that these material weaknesses have been fully corrected or that additional material weaknesses or significant deficiencies in its internal control over financial reporting will not be discovered in the future. If GB&T fails to remediate any such material weaknesses, its operating results or client relationships could be adversely affected or it may fail to meet its SEC reporting requirements or its financial statements may contain a material misstatement.

 

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives or of preventing fraud due to its inherent limitations, regardless of how well designed or implemented. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Because of these limitations, there is a risk that material misstatements or instances of fraud may not be prevented or detected on a timely basis by GB&T’s internal control over financial reporting.

 

This proxy statement/prospectus, including information included or incorporated by reference in this document, contains certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, intentions, future performance and business of each of SunTrust and GB&T and other statements that are not historical facts, as well as certain information relating to the merger, including, without limitation:

 

 

These forward-looking statements have been made pursuant to the provisions of, and in reliance on the safe harbor under, the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve certain risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the factors discussed under “Risk Factors Relating to the Merger” above, as well as the following factors:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in reports filed with the Securities and Exchange Commission by SunTrust and GB&T. See “Where You Can Find More Information” beginning on page 65.

 

Forward-looking statements speak only as of the date hereof or the date of any document incorporated by reference in this document. All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this proxy statement/prospectus and attributable to SunTrust or GB&T or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, neither SunTrust nor GB&T undertakes any obligation to update forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events.

 

You have received this proxy statement/prospectus because the GB&T board of directors is soliciting your proxy for the special meeting of shareholders to be held on Thursday, April 24, 2008 at the Gainesville Civic Center, 830 Green St., NE, Gainesville, Georgia 30501, at 10:00 a.m. local time. Each copy of this proxy statement/prospectus mailed to holders of GB&T common stock is accompanied by a proxy card for use at the meeting and at any adjournments of the meeting.

 

At the meeting, shareholders will consider and vote upon:

 

 

If you have not already done so, please complete, date and sign the accompanying proxy card and return it promptly in the enclosed, postage paid envelope or follow the instructions on the proxy card to vote on the Internet or by telephone. If you do not return your properly executed card or do not attend and cast your vote at the special meeting, the effect will be a vote against the merger agreement and as an abstention from the proposal to adjourn the special meeting.

 

The record date for the special meeting is March 5, 2008. The GB&T shareholders of record as of the close of business on that day will receive notice of the meeting and will be entitled to vote at the special meeting. As of the record date, there were 14,230,796 shares of GB&T common stock issued and outstanding and entitled to vote at the meeting, held by approximately 3,789 holders of record.

 

The presence, in person or by proxy, of a majority of the shares of GB&T common stock entitled to vote on the merger agreement is necessary to constitute a quorum at the meeting. Each share of GB&T common stock outstanding on the record date entitles its holder to one vote on any matter that properly comes before the special meeting and any adjournment of that meeting.

 

Approval of the merger agreement requires the affirmative vote of the holders of a majority of the issued and outstanding shares of GB&T common stock as of the record date for the special meeting. Approval of the authorization to adjourn the special meeting requires that the number of votes in favor of the proposal exceed the number of votes against the proposal. A broker non-vote (discussed below) will not count as a vote cast on the proposal to adjourn the special meeting and will not affect the outcome of that vote.

 

To determine the presence of a quorum at the meeting, GB&T will count as present at the meeting the shares of GB&T common stock present in person but not voting and the shares of common stock for which GB&T has received proxies but with respect to which the holders of such shares have abstained.

 

As of the record date, GB&T’s directors and executive officers and their affiliates beneficially owned approximately 8%, in the aggregate, of the outstanding shares of GB&T common stock, including shares subject to options currently exercisable but not exercised.

 

Concurrently with the signing of the merger agreement, individuals who are also GB&T’s directors and who beneficially own approximately 8% of the outstanding voting power of GB&T executed voting agreements with SunTrust pursuant to which they agreed to vote their shares in favor of the merger. See “The Merger — Description of Voting Agreements” beginning on page 48.

 

As of the date of this proxy statement/prospectus, the only known beneficial holder of more than 5% of GB&T’s common stock is Dimensional Fund Advisors LP, 1299 Ocean Avenue, Santa Monica, California, 90401. According to its Schedule 13G filed February 6, 2008, with respect to securities owned as of December 31, 2007, Dimensional Fund Advisors LP was deemed to be the beneficial owner of 1,035,716 shares of GB&T common stock, representing approximately 7.3% of the outstanding voting power of GB&T. According to its Schedule 13G, Dimensional Fund Advisors LP has sole voting power as to 1,035,716 shares, shared voting power as to no shares, sole dispositive power with respect to 1,035,716 shares and shared dispositive power with respect to no shares. Moreover, according to its Schedule 13G, Dimensional Fund Advisors LP disclaims beneficial ownership of these shares.

 

If you have delivered a proxy for the meeting, you may revoke it at any time before it is voted by:

 

 

The proxy holders will vote as directed on all proxy cards that are received at or prior to the meeting and that are not subsequently revoked. If you complete, date and sign your proxy card but do not provide instructions as to your vote, the proxy holders will vote your shares FOR approval of the merger agreement and FOR authorization to adjourn the special meeting, if necessary. If any other matters are properly presented at the meeting for consideration, the persons named in the proxy card will have discretionary authority to vote your shares on those matters. The GB&T board of directors is not aware of any matter to be presented at the meeting other than the proposal to approve the merger agreement and the proposal to authorize the adjournment of the special meeting, if necessary.

 

If you hold shares of GB&T in a broker’s name (sometimes called “street name”), then you must provide voting instructions to the broker. If you do not provide instructions to the broker, the shares will not be voted on any matter on which the broker does not have discretionary authority to vote, which includes the vote on the merger agreement. A vote that is not cast for this reason is called a “broker non-vote.” Broker non-votes will be treated as shares present for the purpose of determining whether a quorum is present at the meeting. For purposes of the vote on the merger agreement, however, a broker non-vote is the same as a vote against the merger agreement. For purposes of the vote on the proposal to adjourn and on other matters properly brought at the special meeting, broker non-votes will not be counted.

 

Each of SunTrust and GB&T will pay its costs and expenses in connection with the merger and related transactions, except that each of the parties will pay one-half of the costs and expenses for printing and mailing this proxy statement/prospectus and one-half of all filing and other fees paid to the Securities and Exchange Commission in connection with the merger. GB&T will solicit shareholder votes by mail, and perhaps by telephone or other means of telecommunication. Directors, officers and employees of GB&T may also solicit shareholder votes in person. If these individuals solicit your vote in person, they will receive no compensation for doing so. GB&T will reimburse brokerage firms and other persons representing beneficial owners of shares for their reasonable expenses in forwarding solicitation materials to those beneficial owners. In addition, GB&T has engaged Innisfree M&A Incorporated, a proxy solicitation firm, to assist in soliciting proxies and will pay a fee of approximately $25,000 in connection with such engagement.

 

You should not send any stock certificates with your proxy card. If the merger agreement is approved, you will receive instructions for exchanging your stock certificates after the merger has been completed.

 

Pursuant to Section 14-2-1302(c) of the GBCC, the holders of GB&T common stock are not entitled to dissenters’ rights with respect to the merger because GB&T common stock is listed on the Nasdaq Global Select Market and the GB&T shareholders are receiving shares of SunTrust common stock, which is listed on the NYSE, as consideration in the merger. Therefore, although holders of GB&T common stock may vote against the merger, they will not have the right under Georgia law to demand from GB&T an appraisal proceeding to determine the “fair value” of their shares. A holder of GB&T common stock who receives shares of SunTrust common stock in the merger and who does not wish to be a SunTrust shareholder may elect to sell his or her shares at any time in the public market at the value set by the market.

 

The GB&T board of directors has unanimously approved the merger agreement and the transactions contemplated thereby and believes that the merger is in the best interests of GB&T and its shareholders. The GB&T board of directors recommends that you vote FOR approval of the merger agreement and FOR the authorization to adjourn the special meeting, if necessary.

 

In the course of reaching its decision to approve the merger agreement and the transactions contemplated in the merger agreement, the GB&T board of directors, among other things, consulted with its legal advisor, Troutman Sanders LLP, regarding the legal terms of the merger agreement, and with Keefe, Bruyette & Woods, Inc., its financial advisor, which rendered a fairness opinion to the GB&T board of directors. For a discussion of the factors considered by the board of directors in reaching its conclusion, see “The Merger — Background of the Merger” beginning on page 25 and “The Merger — GB&T’s Reasons for the Merger; Recommendation of the Merger by the GB&T Board of Directors” beginning on page 28.

 

SunTrust Banks, Inc., with assets of $179.6 billion as of December 31, 2007, is one of the nation’s largest financial services holding companies.

 

Through its flagship subsidiary, SunTrust Bank, SunTrust provides deposit, credit and trust and investment services. Additional subsidiaries provide mortgage banking, insurance, asset management, equipment leasing, brokerage and capital market services. SunTrust’s client base encompasses a broad range of individuals and families, high-net-worth clients, businesses and institutions.

 

SunTrust enjoys strong market positions in some of the highest-growth markets in the United States and also serves clients in selected markets nationally. Its priorities include consistency in financial performance, quality in customer service and a strong commitment to all segments of the communities it serves.

 

As of December 31, 2007, SunTrust had 1,682 retail and specialized service branches and 2,507 ATMs, which are located primarily in Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee, Virginia and the District of Columbia. In addition, SunTrust provides clients with a selection of technology-based banking channels including Internet, PC and Telephone Banking. SunTrust’s internet address is “www.suntrust.com.”

 

As of December 31, 2007, SunTrust had total assets under advisement of $250.0 billion. This includes $208.4 billion in trust assets as well as $41.6 billion in retail brokerage assets. SunTrust’s mortgage servicing portfolio grew to $114.6 billion as of December 31, 2007.

 

For more information about SunTrust’s business, reference is made to SunTrust’s Annual Report on Form 10-K for the year ended December 31, 2007, which is incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 65.

 

The principal office of SunTrust is located at 303 Peachtree Street, NE, Atlanta, Georgia 30308, telephone number (404) 588-7711.

 

General

 

GB&T was incorporated under the laws of the State of Georgia in 1997. All of GB&T’s activities are currently conducted through its wholly-owned subsidiaries, Gainesville Bank & Trust, which was organized as a Georgia banking corporation in 1987, and its divisions Southern Heritage Bank, Lumpkin County Bank and Bank of Athens; United Bank & Trust Company, which was acquired as a result of a merger with UB&T Financial Services Corporation in March 2000; Community Trust Bank, which was acquired as a result of a merger with its holding company, Community Trust Financial Services Corporation, on June 30, 2001; HomeTown Bank of Villa Rica, which was acquired as a result of a business combination on November 30, 2002; First National Bank of the South, which was acquired as a result of a merger with its holding company, Baldwin Bancshares, Inc., on August 31, 2003; First National Bank of Gwinnett, which was acquired as a result of a merger with its holding company, FNBG Bancshares, Inc., on March 1, 2005; and Mountain State Bank, which was acquired as a result of a merger with its holding company, Mountain Bancshares, Inc. on May 1, 2006.

 

GB&T has three subsidiary trusts, GB&T Bancshares Statutory Trust I, GB&T Bancshares Statutory Trust II and Southern Heritage Statutory Trust I, which own subordinated debentures carrying the same rate of interest as the trust preferred securities issued to finance the investment in such debentures. As of December 31, 2007, GB&T had $29.9 million in aggregate principal amount of trust preferred securities outstanding.

 

At December 31, 2007, GB&T had total consolidated assets of approximately $1.9 billion, total consolidated deposits of approximately $1.5 billion, total consolidated loans of approximately $1.5 billion, and total consolidated shareholders’ equity of approximately $218.4 million. GB&T had consolidated net loss for the year ended December 31, 2007 of $12.5 million, or $(0.87) per diluted share, compared to consolidated net income of $9.5 million, or $0.68 per diluted share, for the year ended December 31, 2006.

 

For more information about GB&T’s business, reference is made to GB&T’s Annual Report on Form 10-K for the year ended December 31, 2007, which is incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 65.

 

The principal office of GB&T is located at 500 Jesse Jewell Parkway, SE, P.O. Box 2760, Gainesville, Georgia, 30501, telephone number (770) 532-1212.

 

Recent Developments

 

On November 26, 2007, HomeTown Bank of Villa Rica (“HomeTown Bank”), a wholly owned subsidiary of GB&T, entered into a Stipulation and Consent Agreement with the Federal Deposit Insurance Corporation (“FDIC”) and the Georgia Department of Banking and Finance agreeing to the issuance of a Cease and Desist Order (the “Order”). The Order became effective on December 6, 2007. The FDIC and the Georgia Department of Banking and Finance found that HomeTown Bank had engaged in unsafe and unsound practices and violated various banking laws and regulations. HomeTown Bank, without admitting or denying the alleged charges, stipulated to the findings in the Stipulation and Consent Agreement and consented to the issuance of the Order.

 

Among other things, the Order addresses the supervision and education of HomeTown Bank’s board of directors, HomeTown Bank’s management team, HomeTown Bank’s equity capital and reserves in relation to the volume and quality of assets held, HomeTown Bank’s level of poor quality loans, the Bank’s allowance for loan and lease losses (“ALLL”), HomeTown Bank’s lending and collection practices, HomeTown Bank’s routine and internal controls policies, and alleged violations of certain laws, regulations and FDIC statements of policy.

 

Under the terms of the Order, HomeTown Bank has agreed to take a number of affirmative steps, including, among other things: increasing the participation of the board of directors in the affairs of HomeTown Bank; assessing the qualifications and experience of management to comply with the requirements

of the Order and operate HomeTown Bank in a safe and sound manner; achieving and maintaining a Tier 1 Capital ratio equal to or exceeding 7.0% of HomeTown Bank’s total assets; in addition to a fully funded loan reserve, developing a plan to meet the minimum risk-based capital requirements as described in the FDIC Statement of Policy on Risk-Based Capital; eliminating certain assets classified as “loss,” “doubtful” or “substandard”; performing a risk segmentation analysis and reducing concentrations in the loan portfolio; establishing effective systems for loan review and grading, loan documentation, and allowance for loan and lease losses; and establishing a written strategic business plan. Over the past several months, HomeTown Bank has begun the implementation of many of the items contained in the Order and many of the conditions imposed by the Order are extensions of these actions.

 

The following description of the material information pertaining to the merger, including the summary of the material terms and provisions of the merger agreement, which is incorporated by reference, and the financial advisory opinion, is qualified in its entirety by reference to the more detailed appendices to this proxy statement/prospectus. We urge you to read all of the appendices to this proxy statement/prospectus in their entirety.

 

The SunTrust board of directors and the GB&T board of directors each has approved the merger agreement, which provides for the merger of GB&T with and into SunTrust. SunTrust will be the surviving corporation in the merger. Completion of the merger is anticipated to occur in the second quarter of 2008. Each share of SunTrust common stock issued and outstanding at the effective time of the merger will remain issued and outstanding as one share of common stock of SunTrust, and each share of GB&T common stock issued and outstanding at the effective time of the merger will be converted into shares of SunTrust common stock, as described below. See “— Merger Consideration” beginning on page 37.

 

The SunTrust articles of incorporation will be the articles of incorporation of the surviving corporation after completion of the merger, and the SunTrust bylaws will be the bylaws of the surviving corporation. Following the merger, the SunTrust board of directors will serve as the directors of the surviving corporation.

 

The merger agreement provides that SunTrust may change the structure of the merger. No such change may alter the kind or amount of consideration to be provided to GB&T shareholders, adversely affect the tax consequences to GB&T shareholders in the merger or the tax treatment of either GB&T or SunTrust, or materially impede or delay completion of the merger.

 

The GB&T board of directors has periodically reviewed with GB&T senior management the state of the business and competitive position of GB&T and developments and trends affecting GB&T and its business, including consolidation in the industry and markets in which GB&T operates. The GB&T board of directors and senior management also periodically discussed various potential strategic options for GB&T, including those directed at strengthening GB&T’s shareholder value through business, credit quality and marketing initiatives, as well as the possibility of strategic business combinations with other financial institutions.

 

More recently, the GB&T board of directors and senior management began analyzing the recent downward trends in credit and asset quality both at GB&T and for financial institutions in general. In addition to these conditions, problems in the loan portfolio at one of GB&T’s banking subsidiaries, HomeTown Bank of Villa Rica, were brought to light in a regulatory examination in early 2007 relating primarily to several loan relationships originated by the president of that bank. After investigation, it became clear that the bank did not follow numerous bank loan policies and procedures, including loan approval authorities, collateral requirements, adequate documentation requirements, and other underwriting guidelines. In connection with the discoveries at HomeTown Bank of Villa Rica, management identified apparent internal control deficiencies and undertook to tighten its internal controls and implement more stringent credit administration policies over the next several months. Management was concerned that a breakdown in internal controls at one of its subsidiaries created the possibility that such deficiencies could manifest themselves at other subsidiary banks. Over the course of the several months leading up to the announcement of the merger, management became concerned that these deficiencies, coupled with the continuing struggles of the financial institutions sector in general, could lead to a more rapid deterioration in the quality of GB&T’s loans.

 

In early summer of 2007, Richard A. Hunt, President and Chief Executive Officer of GB&T, was approached by representatives of several larger financial institutions with respect to their views regarding the banking industry and their respective companies’ strategic direction, which led to informal conversations about potential business combinations with each of those larger financial institutions. Upon Mr. Hunt’s conveying these conversations to the GB&T board of directors, the GB&T board of directors had preliminary discussions

about the relative benefits and risks involved in a potential business combination with a larger partner as opposed to remaining independent. Those discussions and Mr. Hunt’s conversations with those financial institutions did not proceed beyond the exploratory stage, and no understanding with respect to the terms of any potential transaction was discussed or reached.

 

In the wake of these conversations, general economic trends and the credit and asset quality issues associated with the problems at HomeTown Bank of Villa Rica, the GB&T board of directors invited representatives of Keefe, Bruyette & Woods, Inc. (“KBW”) to its strategic planning meeting on July 28, 2007 to discuss the range of strategic alternatives that could be considered to enhance shareholder value, including possible business combinations or a sale of GB&T.

 

At this strategic planning meeting, KBW gave a presentation covering, among other items:

 

 

KBW identified a list of institutions which might be interested in pursuing a transaction with GB&T and discussed the potential value of such acquirors over time as compared to the potential valuation of an independent GB&T over the same time period. At that meeting, the GB&T board of directors reviewed the list of potential buyers and, in light of KBW’s familiarity with GB&T and their knowledge of and substantial experience with the financial institutions industry and the mergers and acquisition environment in general, authorized KBW to approach ten institutions to determine their interest in a possible business combination.

 

On August 17, 2007, GB&T executed an engagement letter with KBW to render exclusive advisory services to GB&T in connection with the possible sale of GB&T. From August 17, 2007 through mid-September 2007, KBW engaged the authorized potential transaction partners in discussions regarding a potential combination with GB&T. As a result of these discussions, KBW received initial interest in a business transaction from, and provided a confidential information memorandum describing GB&T and its business to, five of these institutions. KBW requested that each party make a preliminary proposal to GB&T concerning a possible business combination by September 29, 2007.

 

On October 3, 2007, KBW representatives attended a meeting of the GB&T board of directors to deliver a report on the preliminary proposals received. KBW advised the GB&T board of directors that, after the five parties’ review of the confidential information memorandum, only SunTrust had submitted a nonbinding preliminary proposal. This proposal was subject to SunTrust’s due diligence investigation and review. The proposal was based on GB&T’s publicly available financial statements for the quarter ended June 30, 2007 and provided that, assuming satisfactory due diligence results, GB&T would merge with and into SunTrust, and SunTrust would issue to the GB&T shareholders consideration in the form of SunTrust common stock at an exchange ratio which, as of such date, was valued at $19.50 per share of GB&T common stock. KBW representatives delivered a presentation summarizing the offer and the process for moving ahead, should the GB&T board of directors choose to do so. During the presentation, KBW representatives cautioned that, during SunTrust’s due diligence period, any perceived or actual continued erosion in GB&T’s financial condition and, in particular, asset quality, may cause SunTrust to downgrade its offer. The GB&T board of directors evaluated the advantages and disadvantages of the proposal. After a thorough review, the GB&T board of directors authorized KBW and management, with the assistance of Troutman Sanders LLP, to negotiate with SunTrust to determine whether a definitive agreement could be reached.

During the following two weeks, SunTrust conducted its due diligence investigation through use of an on-line, secure data site. On October 11 and 12, 2007, SunTrust representatives continued their due diligence investigation at the offices of Troutman Sanders LLP, during which they reviewed requested loan files from various GB&T subsidiary banks, as well as other material documents, financial records, board minutes and corporate governance documents, and conducted interviews with GB&T senior management. KBW, on behalf of GB&T, requested that SunTrust submit a revised proposal reflecting the results of its due diligence by October 19, 2007, which proposal would include a mark-up of the proposed definitive merger agreement previously circulated by GB&T. SunTrust indicated that it needed more time to complete and analyze its due diligence, and SunTrust continued its due diligence and analysis over the next week.

 

On October 29, 2007, SunTrust submitted a final bid letter and a mark-up of the proposed merger agreement to KBW offering to acquire GB&T in a merger providing for consideration to GB&T shareholders of SunTrust common stock at a fixed exchange ratio of 0.1562 shares of SunTrust common stock for each share of GB&T common stock at the closing. As of Friday, October 26, 2007, based on the market value of SunTrust’s common stock, this exchange ratio represented a valuation of $11.50 per share of GB&T common stock. This final indication of interest was set to expire and become null and void at 5:00 p.m. (Atlanta, Georgia time) on November 2, 2007, unless sooner rejected or accepted by GB&T.

 

The GB&T board of directors met on October 29, 2007 at 4:00 p.m. to discuss the SunTrust offer. At this meeting, the GB&T board of directors listened to the views of each member of GB&T’s executive management team regarding the potential advantages and disadvantages of GB&T remaining independent as well as their views on the proposed SunTrust merger transaction. A representative of KBW gave a presentation reviewing the points made at the October 3, 2007 meeting and analyzing the changes that had occurred in the financial services market in general and at GB&T in particular since SunTrust’s preliminary offer. More specifically, KBW updated the GB&T board of directors on certain metrics used in its previous presentation, including current market conditions, the worsening asset quality at GB&T, GB&T’s impending negative earnings report for the third quarter of 2007, and GB&T’s declining stock price. The GB&T board of directors then discussed with the KBW representative the potential relative benefits and risks of the potential business combination with SunTrust as opposed to developing, enhancing or revising GB&T’s current business model and continuing to operate as an independent company, and engaged the representative from KBW and executive management of GB&T in a lengthy question-and-answer session regarding the current state of GB&T, the practical expectations for GB&T going forward on an independent basis, and the value that the GB&T shareholders could reasonably expect to realize over time under either the merger or remaining independent scenarios. The GB&T board of directors also received a presentation from Troutman Sanders LLP detailing the responsibilities of the directors with respect to their fiduciary duties to GB&T and its shareholders and the directors’ role in considering GB&T’s strategic alternatives. After counsel’s presentation, the GB&T board of directors discussed in more detail the continuing credit and asset problems at GB&T, the potential regulatory enforcement action at HomeTown Bank of Villa Rica pending at the time, and the views of GB&T senior management and KBW regarding the status of GB&T, its future and its prospects. After taking into consideration those factors and the factors described under “GB&T’s Reasons for the Merger; Recommendation of the Merger by the GB&T Board of Directors” immediately below, the GB&T board of directors concluded that final negotiations with SunTrust should go forward in order to arrive at a definitive merger agreement and to determine whether a more favorable exchange ratio could be obtained.

 

On October 30 and October 31, 2007, representatives from KBW and Troutman Sanders engaged in further discussion and negotiation with representatives from SunTrust and SunTrust’s counsel, King & Spalding LLP, regarding the exchange ratio and terms of the proposed merger agreement. As part of the negotiations, SunTrust, through King & Spalding, proposed forms of a voting agreement and a noncompetition agreement for all GB&T directors to sign as a condition to executing the final merger agreement. SunTrust sought voting agreements from each of the directors in an effort to evidence those individuals’ support of the transaction and sought noncompetition agreements to prevent those individuals from competing with SunTrust following the merger in the counties in which GB&T operates. Following these discussions, the SunTrust board of directors voted, in a meeting held at 5:00 p.m. on November 1, 2007, to approve the merger with GB&T providing for consideration to GB&T shareholders of common stock at the same conversion ratio of

0.1562 shares of SunTrust common stock for each share of GB&T common stock. As of November 1, 2007, based on the market value of SunTrust’s common stock, this exchange ratio represented a valuation of $10.80 per share of GB&T common stock.

 

At 6:00 p.m. on November 1, 2007, the GB&T board of directors convened a meeting to consider the offer from SunTrust and the merger agreement. Representatives from Troutman Sanders LLP presented a summary of the merger agreement and its terms. During the presentation, members of the GB&T board of directors asked a number of questions clarifying the legal and business implications of the transaction. After this discussion, KBW rendered to the GB&T board of directors KBW’s oral opinion (which was subsequently confirmed in writing), as described under “Opinion of Keefe, Bruyette & Woods, Inc., GB&T’s Financial Advisor” beginning on page 30, that, as of November 1, 2007 and based upon and subject to the assumptions made, matters considered and limitations described in the opinion, the merger consideration proposed by SunTrust was fair, from a financial point of view, to holders of GB&T common stock. Following extensive review and discussion among the directors and final negotiations of the merger agreement and the respective voting and noncompetition agreements, the GB&T board of directors voted unanimously to approve the merger with SunTrust and adopt the merger agreement, and each director agreed to enter into a voting agreement and noncompetition agreement.

 

The merger agreement between GB&T and SunTrust was executed by the parties, and the voting agreements and noncompetition agreements were executed by the directors and SunTrust, on the morning of November 2, 2007. The transaction was announced later that morning before opening of the market by a press release issued by SunTrust and GB&T.

 

In reaching its decision to adopt and approve the merger agreement and recommend the merger to its shareholders, the GB&T board of directors consulted with GB&T’s management, as well as its legal and financial advisors, and considered a number of factors, including:

 

 

 

In addition to the perceived advantages of the merger discussed above, the GB&T board of directors also discussed various risks and disadvantages of the merger, including:

 

 

The foregoing discussion of the factors considered by the GB&T board of directors is not intended to be exhaustive, but, rather includes all material factors considered by the GB&T board of directors. In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, the GB&T board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The GB&T board of directors considered all these factors as a whole, determined that the advantages clearly outweighed the disadvantages, and overall considered current conditions to be favorable to, and to support, its determination to go forward with the merger. It should be noted that this explanation of the GB&T board of directors’ reasoning and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Forward-Looking Statements” above.

 

For the reasons set forth above, the GB&T board of directors has unanimously approved and adopted the merger agreement as advisable and in the best interests of GB&T and its shareholders and

recommends that the GB&T shareholders vote FOR the approval and adoption of the merger agreement.

 

GB&T engaged Keefe, Bruyette & Woods, Inc. (“KBW”) to act as its exclusive financial advisor in connection with the merger. KBW agreed to assist GB&T in analyzing and effecting a transaction with SunTrust. GB&T selected KBW because KBW is a nationally recognized investment banking firm with substantial experience in transactions similar to the merger and is familiar with GB&T and its business.

 

As part of its investment banking business, KBW is continually engaged in the valuation of financial businesses and their securities in connection with mergers and acquisitions.

 

On November 1, 2007, the GB&T board of directors held a meeting to evaluate the proposed merger with SunTrust. At this meeting, KBW reviewed the financial aspects of the proposed merger and rendered an opinion that, as of that date, the merger consideration in the merger was fair to the GB&T shareholders from a financial point of view.

 

The full text of KBW’s written opinion is attached as Appendix B to this document and is incorporated in this document by reference. The GB&T shareholders are urged to read the opinion in its entirety for a description of the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by KBW.

 

KBW’s opinion is directed to the GB&T board of directors and addresses only the fairness, from a financial point of view, of the merger consideration to the GB&T shareholders. It does not address the underlying business decision to proceed with the merger and does not constitute a recommendation to any GB&T shareholder as to how the shareholder should vote at the GB&T special meeting on the merger or any related matter.

 

In rendering its opinion, KBW:

 

 

 

 

 

 

In conducting its review and arriving at its opinion, KBW relied upon and assumed the accuracy and completeness of all of the financial and other information provided to or otherwise made available to KBW or that was discussed with, or reviewed by or for KBW, or that was publicly available. KBW did not attempt or assume any responsibility to verify such information independently. KBW relied upon GB&T management as to the reasonableness and achievability of the financial and operating forecasts and projections (and assumptions and bases therefor) provided to KBW. KBW assumed, without independent verification, that the aggregate allowances for loan and lease losses for SunTrust and GB&T are adequate to cover those losses. KBW did not make or obtain any evaluations or appraisals of any assets or liabilities of SunTrust or GB&T, and KBW did not examine any books and records or review individual credit files.

 

The projections furnished to KBW and used by it in certain of its analyses were prepared by GB&T’s senior management. GB&T does not publicly disclose internal management projections of the type provided to KBW in connection with its review of the merger. As a result, such projections were not prepared with a view towards public disclosure. The projections were based on numerous variables and assumptions which are inherently uncertain, including factors related to general economic and competitive conditions. Accordingly, actual results could vary significantly from those set forth in the projections.

 

For purposes of rendering its opinion, KBW assumed that, in all respects material to its analyses:

 

 

KBW further assumed that the merger will be accounted for as a purchase transaction under generally accepted accounting principles. KBW’s opinion is not an expression of an opinion as to the prices at which shares of GB&T common stock or shares of SunTrust common stock will trade following the announcement of the merger or the actual value of the shares of common stock of the combined company when issued pursuant to the merger, or the prices at which the shares of common stock of the combined company will trade following the completion of the merger.

 

In performing its analyses, KBW made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of KBW, GB&T and SunTrust. Any estimates contained in the analyses performed by KBW are not

necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. In addition, the KBW opinion was among several factors taken into consideration by the GB&T board of directors in making its determination to approve the merger agreement and the merger. Consequently, the analyses described below should not be viewed as determinative of the decision of the GB&T board of directors or GB&T management with respect to the fairness of the merger consideration.

 

The following is a summary of the material analyses performed by KBW in connection with its November 1, 2007 opinion. The summary is not a complete description of the analyses underlying the KBW opinion or the presentation made by KBW to the GB&T board of directors, but summarizes the material analyses performed and presented in connection with such opinion. The preparation of a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, KBW did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. The financial analyses summarized below include information presented in tabular format. Accordingly, KBW believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion. The tables alone do not constitute a complete description of the financial analyses.

 

Transaction Summary

 

KBW calculated the merger consideration to be paid as a multiple of GB&T’s book value per share, tangible book value per share, latest twelve months’ earnings per share and estimated 2007 earnings per share. KBW also calculated the merger consideration to be paid as a “Core Deposit Premium.” Core Deposit Premium equals the difference between the aggregate merger consideration and GB&T’s tangible equity divided by core deposits. Additionally, KBW has adjusted throughout its analyses the financial data to exclude any non-recurring income and expenses and any extraordinary items. The merger consideration was based on a fixed exchange ratio of 0.1562 shares of SunTrust common stock for each share of GB&T common stock, with 100% of the merger consideration being in SunTrust common stock. These computations were based on GB&T’s stated book value per share of $16.22 as of September 30, 2007, tangible book value per share of $9.75 as of September 30, 2007, latest twelve months’ earnings per share of ($0.09) as of September 30, 2007 and core deposits of $1.08 billion as of September 30, 2007. Based on those assumptions and SunTrust’s closing price of $69.13 as of November 1, 2007, the per share consideration of $10.80 would represent 67% of book value per share, 111% of tangible book value per share, 270 times estimated 2007 earnings per share and a Core Deposit Premium of 1.5%. The multiple of GB&T’s latest twelve months’ earnings per share was not meaningful.

 

Selected Transaction Analysis

 

KBW reviewed certain financial data related to a set of comparable bank transactions announced since December 31, 2004 with deal values between $50.0 million and $400.0 million where the target’s ratio of non-performing assets to assets at announcement was greater than 1.2% (11 transactions).

KBW compared multiples of price to various factors for the proposed merger to the same multiples for the comparable group’s mergers at the time those mergers were announced. The results were as follows:

 

Comparable Transactions

 

 

KBW also analyzed the financial data for the period ended September 30, 2007 for GB&T and reporting periods prior to the announcement of each transaction for each target in the Selected Transactions Analysis. The results were as follows:

 

Comparable Targets

 

 

No company or transaction used as a comparison in the above analysis is identical to SunTrust, GB&T or the merger. Accordingly, an analysis of these results is not purely mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the value of the companies to which they are being compared.

 

Discounted Cash Flow Analysis

 

Using discounted dividends analysis, KBW estimated the present value of the future stream of dividends that GB&T could produce over the next five years, under various circumstances, assuming GB&T performed in accordance with management’s earnings forecasts for 2008 and earnings are grown 12.0% annually from 2009 to 2013. KBW then estimated the terminal values for GB&T stock at the end of the period by applying multiples ranging from 10.0x to 12.0x projected earnings in year six. The cash flows were then discounted to present values using different discount rates (ranging from 16.0% to 20.0%) chosen to reflect different assumptions regarding the required rates of return to holders or prospective buyers of GB&T common stock. This discounted dividend analysis indicated reference ranges of between $7.53 and $10.46 per share of GB&T common stock. These values compare to the consideration offered by SunTrust to GB&T in the merger of $10.80 per share of GB&T common stock as of November 1, 2007.

 

Relative Stock Price Performance

 

KBW also analyzed the price performance of SunTrust common stock from December 31, 2004 to November 1, 2007 and compared that performance to the performance of the Philadelphia Exchange/Keefe, Bruyette & Woods Bank Index (“Keefe Bank Index”) over the same period. The Keefe Bank Index is a market cap weighted price index composed of 24 major commercial and savings banks stocks. The Keefe Bank Index is traded on the Philadelphia Exchange under the symbol “BKX”. This analysis indicated the following cumulative changes in price over the period:

 

Selected Peer Group Analysis

 

KBW compared the financial performance and market performance of SunTrust to those of a group of comparable bank holding companies. The comparisons were based on:

 

 

 

 

 

To perform this analysis, KBW used the financial information as of and for the quarter ended September 30, 2007 and market price information as of November 1, 2007. The 13 companies in the peer group included select publicly traded banks as defined in SunTrust’s investor presentation. This peer group includes Bank of America Corporation, BB&T Corporation, Comerica Incorporated, Fifth Third Bancorp, First Horizon National Corporation, KeyCorp, M&T Bank Corporation, National City Corporation, PNC Financial Services Group, Inc., Regions Financial Corporation, U.S. Bancorp, Wachovia Corporation and Wells Fargo & Company. This analysis was based on First Call’s 2007 and 2008 published earnings estimates for the 13 companies in the peer group and SunTrust. “First Call” is a data service that monitors and publishes a compilation of earnings estimates produced by selected research analysts regarding companies of interest to institutional investors. KBW has adjusted throughout its analysis the financial data to exclude certain non-recurring income and expenses and any extraordinary items.

 

KBW’s analysis showed the following concerning SunTrust’s financial performance:

 

Selected Peer Group:

 

KBW’s analysis showed the following concerning SunTrust’s market performance:

 

Selected Peer Group

 

 

KBW also compared the financial performance and market performance of GB&T to those of a group of comparable banks and bank holding companies. The comparisons were based on:

 

 

 

 

 

To perform this analysis, KBW used the financial information as of and for the quarter ended September 30, 2007. The 10 companies in the peer group included select publicly traded banks in high growth markets in the southeastern United States. This peer group includes Capital City Bank Group, Inc., CenterState Banks of Florida, Inc., Fidelity Southern Corporation, Green Bankshares, Inc., PAB Bankshares, Inc., Pinnacle Financial Partners, Inc., SCBT Financial Corporation, Seacoast Banking Corporation of Florida, Security Bank Corporation and TIB Financial Corp. This analysis was based on First Call’s 2007 and 2008 published earnings estimates for the 10 companies in the peer group. KBW has adjusted throughout its analysis the financial data to exclude certain non-recurring income and expenses and any extraordinary items.

KBW’s analysis showed the following concerning GB&T’s financial performance:

 

Selected Peer Group