 |
Filed
by SunTrust Banks, Inc. pursuant to Rule 425 under the Securities Act of 1933, as amended and deemed filed under Rule 14a-12 under the Securities Exchange Act of 1934, as amended |
|
Subject Company: National Commerce Financial
Corporation Exchange Act File Number of Subject Company: 001-16607 |
This filing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the benefits of the merger between SunTrust Banks, Inc. ("SunTrust") and National Commerce Financial Corporation ("NCF"), including future financial and operating results, SunTrust's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of SunTrust's and NCF's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the ability to obtain governmental approvals of the merger on the proposed terms and schedule; the failure of SunTrust and NCF stockholders to approve the merger; the risk that the businesses will not be integrated successfully; the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take longer to realize than expected; disruption from the merger making it more difficult to maintain relationships with clients, employees or suppliers; increased competition and its effect on pricing, spending, third-party relationships and revenues; the risk of new and changing regulation in the U.S. and internationally. Additional factors that could cause SunTrust's and NCF's results to differ materially from those described in the forward-looking statements can be found in the 2003 Annual Reports on Form 10-K of SunTrust and NCF, and in the Quarterly Reports on Form 10-Q of SunTrust and NCF filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission's internet site (http://www.sec.gov). The forward-looking statements in this filing speak only as of the date of the filing, and neither SunTrust nor NCF assumes any obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements.
Stockholders are urged to read the joint proxy statement/prospectus regarding the proposed transaction when it becomes available because it will contain important information. Stockholders will be able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about SunTrust and NCF, without charge, at the Securities and Exchange Commission's internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the filings with the Securities and Exchange Commission that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to SunTrust Banks, Inc., 303 Peachtree St., N.E., Atlanta, Georgia 30308; Attention: Investor Relations; or National Commerce Financial Corporation, One Commerce Square, Memphis, Tennessee, 38159; Attention: Investor Relations.
The respective directors and executive officers of SunTrust and NCF and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed merger. Information regarding SunTrust's directors and executive officers is available in the proxy statement filed with the Securities and Exchange Commission by SunTrust on March 2, 2004, and information regarding NCF's directors and executive officers is available in the proxy statement filed with the Securities and Exchange Commission by NCF on March 17, 2004. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the Securities and Exchange Commission when they become available.
An Incomparable High-Growth Banking Franchise
May 10,
2004
This
presentation contains forward-looking statements within the meaning of the
Private Securities Litigation
Reform Act of 1995. Such
statements include, but are not limited to, statements about the benefits of
the
merger between SunTrust Banks, Inc. (“SunTrust”) and National
Commerce Financial Corporation (“NCF”),
including future
financial and operating results, SunTrust’s plans, objectives,
expectations and intentions and
other statements that are not historical
facts. Such statements are based upon the current beliefs and
expectations of SunTrust’s and NCF’s management and are subject
to significant risks and uncertainties.
Actual results may
differ from those set forth in the forward-looking statements. The
following factors, among
others, could cause actual results to differ from
those set forth in the forward-looking statements: the ability to
obtain
governmental approvals of the merger on the proposed terms and schedule; the
failure of SunTrust and
NCF stockholders to approve the merger; the risk
that the businesses will not be integrated successfully; the
risk that the
cost savings and any revenue synergies from the merger may not be fully
realized or may take
longer to realize than expected; disruption from the
merger making it more difficult to maintain relationships with
clients,
employees or suppliers; increased competition and its effects on pricing,
spending, third-party
relationships and revenues; the risk of new and
changing regulation in the U.S. and internationally. Additional
factors that could cause SunTrust’s and NCF’s results to differ
materially from those described in the forward-
looking statements can be
found in the 2003 Annual Reports on Form 10-K of SunTrust and NCF, and in the
Quarterly Reports on Form 10-Q of SunTrust and NCF filed with the
Securities and Exchange Commission and
available at the Securities and
Exchange Commission’s internet site (http://www.sec.gov). The
forward-looking
statements in this presentation speak only as of the date
of the filing, and neither SunTrust nor NCF assumes
any obligation to
update the forward-looking statements or to update the reasons why actual
results could differ
from those contained in the forward-looking
statements.
1
Stockholders
are urged to read the joint proxy statement/prospectus regarding the proposed
transaction when it
becomes available because it will contain important
information. Stockholders will be able to obtain a free copy
of
the joint proxy statement/prospectus, as well as other filings containing
information about SunTrust and NCF,
without charge, at the Securities and
Exchange Commission’s internet site
(http://www.sec.gov). Copies of the
joint proxy
statement/prospectus and the filings with the Securities and Exchange
Commission that will be
incorporated by reference in the joint proxy
statement/prospectus can also be obtained, without charge, by
directing a
request to SunTrust Banks, Inc., 303 Peachtree St., N.E., Atlanta,
Georgia 30308, Attention:
Investor Relations; or
National Commerce Financial Corporation, One Commerce Square, Memphis,
Tennessee 38159, Attention: Investor Relations.
The
respective directors and executive officers of SunTrust and NCF and other
persons may be deemed to be
participants in the solicitation of proxies in
respect of the proposed merger. Information regarding
SunTrust’s
directors and executive officers is available in the proxy
statement filed with the Securities and Exchange
Commission by SunTrust on
March 2, 2004, and information regarding NCF’s directors and executive
officers is
available in the proxy statement filed with the Securities and
Exchange Commission by NCF on March 17,
2004. Other information
regarding the participants in the proxy solicitation and a description of their
direct and
indirect interests, by security holdings or otherwise, will be
contained in the joint proxy statement/prospectus
and other relevant
materials to be filed with the Securities and Exchange Commission when they
become
available.
2
Transaction Summary
Implied Consideration Per Share $33.46 in value for each National Commerce share (1)
Stock /
Cash Election Shareholders
to elect between SunTrust common stock and cash
subject
to pro ration
Form of Consideration Approximately 74% stock / 26% cash (1)
Implied Aggregate Value $6.98 billion (1)
Stock component: Approximately 77.5 million SunTrust shares
Cash component: Approximately $1.8 billion
Tax Structure Tax-free reorganization (cash taxed as capital gains)
Accounting Structure Purchase
(1) Based on SunTrust closing price of $66.88 on May 7, 2004 and 208.7 diluted shares outstanding. Refer to Appendix for greater detail on calculation.
3
Transaction Summary
Walk-away/Caps/Collars None
Termination Fee $280 million
National Commerce Board Representation Four of 18
Due Diligence Completed
Approvals Regulatory
and shareholder approvals
for
SunTrust and National Commerce
Expected Closing 4th Quarter 2004
4
Strategic Themes
Dramatically Broadens the “Best Footprint in Banking”
Franchise concentrated in high-growth Southeast
Highest growth markets for Top 20 banks
Five new high growth markets in the Top 25 in the Southeast
Complementary Business Models
Best of Breed retail model
Broader product and client resources
Combined Organization Poised for Accelerated Growth
SunTrust performance momentum and prospects
National Commerce brings proven capabilities and expertise
Significant business synergies
Attractive Financial Profile
Reasonable and achievable assumptions
5
“Best
Footprint in
Banking”…”just got better”
“Best
Footprint in
Banking”
Enhanced
overall growth
rate
Expanded
product offering
to be overlaid across
expanded customer bases/
distribution systems
SunTrust
National Commerce
Pro Forma Result
The
acquisition of National Commerce represents much more than a logical geographic
extension
of SunTrust’s franchise
Large, high
growth, MSA–
focused franchise
Entry into
attractive new
markets—North Carolina
Minimal overlap
Strong retail
franchise with
leading de novo / in-store
expertise
Small business
Commercial RE
Mortgage
Large
corporate/middle
market
Cash
management/trust
Asset management
Investment
banking/brokerage
Mortgage
Large retail franchise
Proven de novo
growth
strategy
Entrepreneurial,
high–
growth, revenue-based
culture
Focus on efficiency
Established/leadership
positions in high
growth markets
Greater capital
resources
Compelling Strategic Combination
6
Makes Best Footprint Better
Financial scale
$25+bn market cap
$148bn assets
$97bn deposits
1,723
full-service offices in
11 states plus D.C.
#3 in
market share in
Southeast
Top 5 rank
in 20 of 25
largest high growth
markets in Southeast
Adds
meaningful
presence in some of the
highest growth North
Carolina
and South
Carolina markets
Solidifies
positions in
Virginia and Tennessee
7
Highly Complementary Footprints
Source: SNL Financial
Note: * represents a limited presence.
Fastest growing Southeastern MSAs with greater than $5bn of deposits
Overlapping (O) /
MSA
Deposits
Rank
Deposits
Pop Growth
Inc Growth
1)
Naples
$
0.3
7
$7.0
19.0%
12.3%
2)
Orlando
5.8
1
22.5
14.3
13.4
3)
Fort Myers
1.1
2
7.4
12.8
9.1
O
4)
Atlanta
14.3
2
74.2
12.6
14.6
N
5)
Raleigh-Durham
2.6
2
15.4
11.0
16.9
6)
Fort Pierce
0.4
6
5.3
10.5
9.5
7)
Daytona Beach
1.4
3
7.5
10.3
10.5
8)
West Palm Beach
1.4
6
27.3
10.2
14.8
N
9)
Charlotte-Gastonia
1.4
5
67.1
10.1
17.3
10)
Sarasota-Bradenton
1.9
2
12.4
10.0
11.9
11)
Jacksonville
0.9
4
16.5
10.0
15.9
12)
Fort Lauderdale
2.1
5
28.0
9.2
13.6
13)
Melbourne-Titusville
0.8
3
5.3
8.7
10.4
14)
Washington, DC
11.7
3
104.1
8.4
12.2
15)
Tampa-St.Petersburg
4.7
3
36.0
8.1
14.2
16)
Miami
3.9
4
55.9
7.3
12.0
O
17)
Nashville
3.9
1
20.2
6.4
17.3
N
18)
Greensboro-Winston
2.1
3
21.9
6.0
12.3
O
19)
Richmond-Petersburg
3.2
4
27.8
5.9
14.4
20)
Columbia
7.3
5.8
14.0
N
21)
Greenville-Spartanburg
1.1
5
12.5
5.1
13.1
22)
Norfolk-Virginia Beach
2.0
4
14.1
4.2
12.7
23)
Charleston
5.5
4.2
13.9
O
24)
Knoxville
1.7
1
10.4
4.1
13.7
N
25)
Memphis
3.9
3
24.0
3.5
18.0
New (N) Markets
Pro Forma
Total MSA
8
High Growth Markets
Note: Top 20 U.S. banks and thrifts by market cap as of May 7, 2004. Weighted average based on MSA deposits.
Source: SNL Financial
8.7
8.2
7.3
7.3
7.3
7.2
6.8
6.7
6.4
5.4
5.3
5.0
4.7
4.3
3.5
3.0
3.0
2.4
1.9
1.8
1.6
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
9
Highest
growth markets for Top 20 banks and
in the Southeast
Arguably the “Best Footprint in Banking”
Market Expansion
New Market MSA Deposits for SunTrust by State
Target MSA Deposits
New
Markets
for SunTrust
80.7%
Overlap with
SunTrust
19.3%
North
Carolina
57.2%
Tennessee
32.5%
South
Carolina
8.9%
West
Virginia
1.4%
Adds Some of
the Highest Growth North Carolina and South Carolina Markets and Solidifies
Virginia /
Tennessee Presence
(1) Represents Target MSAs where SunTrust does not currently have branches.
Source: SNL Financial; Deposits as of June 30, 2003.
New Markets(¹)
Deposits %
of
Total Market
# of
Household Median
Rank MSA ($mm) Deposits
Share Branches Population Income HHI
2003-2008 Growth
10
3
Memphis
$3,874
23.8
%
16.1
%
46
3.5
%
18.0%
$45,698
2
Raleigh-Durham
2,640
16.2
17.1
71
11.0
16.9
55,835
3
Greensboro-Winston
2,111
13.0
9.6
57
6.0
12.2
45,337
5
Charlotte-Gastonia
1,373
8.4
2.1
36
10.1
17.3
52,274
5
Greenville-Spartanburg
1,056
6.5
8.5
47
5.1
13.1
43,043
5
Asheville
279
1.7
9.3
10
5.6
13.2
40,741
6
Hickory-Morganton
235
1.4
6.0
5
6.1
12.4
42,329
7
Wilmington
169
1.0
5.0
7
9.8
14.8
44,035
MSA Weighted Average
6.6
15.7
47,600
U.S. Overall
5.3
13.6
46,868
Overview of NCF Franchise
(1)
As of December 31, 2003
(2)
As of March 31, 2004.
(3)
Based on 2003 pre-tax income.
Loan Mix(1)
Deposit Mix(2)
Business Mix(3)
Financial Summary
Asset Quality
$ millions 2001 2002 2003 CAGR
Yield: 5.52%
Cost 1.22%
$449.6 mm
Commercial
12%
1-4 Fam.
25%
Comm. RE
19%
Construc.
17%
HELOC
13%
Consumer
11%
Other
3%
Savings,
NOW, MM
37%
Consumer
Time
31%
Non-int.
Bearing
17%
Jumbo
CDs,
Brokered,
Foreign
15%
Traditional
Banking
90%
Financial
Enterprises
10%
11
Assets
$19,274
$21,472
$23,017
9.3
%
Net Loans
11,818
12,761
13,080
5.2
Deposits
12,619
14,495
15,550
11.0
GAAP Net Income
$225
$324
$312
17.8
GAAP EPS
1.09
1.55
1.51
17.7
Efficiency ratio
58.7
%
54.5
%
58.4
%
ROAA
1.3
1.6
1.4
ROATCE
18.8
24.7
21.6
Create “Best of Breed” Retail Model
National Commerce Expertise
Customized
pricing strategy
based on market maturity
Industry
leading
in-store strategy
Proven de
novo expertise into
new markets
SunTrust’s Large Retail Franchise
Households Served 3.8mm
Deposit Accounts 4.3mm
Loan Accounts 2.3mm
Retail Branches 1,207
In-store 153
ATMs 2,235
Retail Deposits $53.4bn
12
National
Commerce’s In-store Model
Represents Strength for Combined
Enterprise
8
4
Employees
2,000
400-500
Square feet
1
2.3
Visits per week
3 thousand
16 – 24 thousand
Traffic per week
36 Months
18 Months
Breakeven
$400,000
$225,000
Operating
Expenses
$1-2 million
$200,000
Capex
In a
stand-alone
bank branch
With an
In-store
Partner
De novo
in-store branch meets 8,000 of our competitor’s
customers within 1
week
13
Target high-population, high growth MSAs
Partner with
the store that has leading market share (#1 or #2), high
weekly traffic
volume and an excellent reputation for service and
quality
Identify locations where “hub” branches will be easy to add
Train and incentivize the employees to sell
87% of total
assets, excluding CCB merger, obtained via de novo
growth equating to a 15%
annualized de novo total asset growth
Strategy
Timeline
Start-up
phase
Years 1—2
Deposits
priced 50-100 bps above local
competition
Loan volumes
are low and deposits are
reinvested in lower yielding investment
securities
ROA of 40-50 bps
ROE of 5-10%
Stage 1
High growth
phase
Years 3—6
Deposit costs begin to decline
Loan volume increases
NIM expansion
and improvement in
efficiency ratio
ROA of 1.00%-1.20%
ROE of 14%-17%
Stage 2
Mature
phase
Years 7+
Deposit rates at market
Loan demand matches deposit growth
Branch has reached a steady-state growth
ROA of 1.50+%
ROE of 20+%
Stage 3
Source: National Commerce investor presentations
National Commerce Expansion History
Assets ($ millions)
18 Years
3 Years
National
Commerce’s Retail Engine: De Novo
Branching Expertise
14
First Market Bank — Financial Summary
Source: Company documents, SNL Financial
1 Branch data as of December of the respective year
2 Data as of June 30 of the respective year
National
Commerce’s Retail Engine: De Novo
Model In Practice
15
1999
2003
‘99
’03
CAGR
Branches
1
In
-
store
16
22
8.3
Traditional
6
8
7.5
Financial metrics
Loans ($mm)
$179.1
$582.4
34.5%
Deposits ($mm)
382.8
874.5
22.9
Fee revenue ($mm)
1.7
9.5
53.8
Net income ($mm)
1.0
10.2
78.7
ROAA (%)
0.17
0.94
ROAE (%)
2.2
14.4
Richmond MSA
2
First Market mkt share
2.4%
4.2%
Total MSA deposits ($mm)
$13,416
$19,278
9.5%
National
Commerce’s De Novo Success Story –
Wal-Mart
Partnered with America’s #1 Retailer
Wal-Mart’s
sales on one day last fall - $1.42 billion – were larger than the GDPs of
36
countries
Store traffic of 35,000 - 50,000 customers per week
National Bank of Commerce / Wal-Mart
18 North Georgia branches (2 “hubs”, 16 in-store)
$472 million in deposits
$112 million in loans
$0.03 per share annually for NCF
Opportunities for growth
Signed master agreement with Wal-Mart for major expansion
Have identified 70 locations (approximately 75% in Florida, 25% in Georgia)
Evaluating additional locations for growth
16
Complementary Commercial Capabilities
Significant commercial lending opportunity
Leading capabilities across all market segments
$10 - $50mm of revenue National Commerce
$50 - $250mm of revenue SunTrust
Highly
significant middle market opportunity within
existing National Commerce
banking footprint
Complementary credit cultures
17
Significant
Middle Market Commercial
Opportunity
SunTrust Has Excellent Middle Market Capability ($50-250MM segment)
Market
position – tied for 1st across its
footprint in the number of primary bank
relationships (40% increase from
2000 to 2002)
Number 1 in
the proportion of lead customers citing bank as “above average or
excellent”
Number 2 in
the proportion of lead customers awarding the bank with “above
average
or excellent” satisfaction citations
High
Potential
for Middle
Market
Commercial
Product and
Contribution
Growth
80% rank STI
Account
Officers’ overall
performance “excellent” or
above average” vs. peer norm of
74%
Deposits
Branches
New National Commerce MSAs
Raleigh-Durham-Chapel Hill
$
2.6
71
Memphis
3.9
46
Greensboro-Winston-Salem-High Point
2.1
57
Asheville
0.3
10
Greenville-Spartanburg-Anderson
1.1
47
Hickory-Morganton-Lenoir
0.2
5
Wilmington
0.2
7
Charlotte-Gastonia-Rock Hill
1.4
36
18
Source
Note: Findings cited are based on independent research conducted by
a global financial services research firm; the survey data is based on more
than 4,600
interviews with small businesses and 5,900 interviews with
commercial & middle market firms in FL, GA, MD, TN, VA and the District of
Columbia; qualified respondents
are the primary decision maker of banking
services within their firm. Among small businesses, the respondents
are typically the owner or president of the company;
among
commercial/middle market firms, the respondent is generally the CFO or
treasurer
SunTrust’s
Wealth Management Model
Represents Strength for Combined
Enterprise
Registered Representatives
Trusco AUM Growth
Investment Management Income
Superb New Customer Sales and Retention
Financial
metrics strong given performance of overall equity markets and when compared to
peers
19
Combines Compatible Credit Cultures
NPAs / Total Loans + OREO
NCOs / Average Loans
Note: All financial data for full-year ended December 31, 2003. Top 10 U.S. banks by market cap as of May 7, 2004.
Source: SNL Financial
Reserves / NPAs
Conservative credit profile
Conservative risk tolerance
Best people / practices
20
Combining
Complementary Platform:
Accelerating Growth
21
Q103 to Q104 Growth
Net interest income
3.5%
7.7%
Non
-
interest income
16.7
6.5
Non
-
interest expense
9.1
2.3
Net income
14.0
12.5
Loans
7.3
12.9
Non
-
interest bearing deposits
12.1
13.5
22
Combining
Complementary Platforms:
Accelerating Performance
1Q04 Ratios
Net interest margin
3.13%
3.86%
Fee income ratio
40.6
35.5
E
fficiency
ratio
61.0
51
.5
NCOs / Average loans
0.30
0.28
B
usiness
S
egments
Leveraged for
E
conomic
T
urn
Comment
Corporate / Investment
Banking
Corporate lines utilization rate at all time low
Capital market capabilities
Private Client Services
Financial performance linked with improving
marke
ts
New business and retention strength
Expanded product capability
Treasury
Duration and portfolio yields poised for rising
rates
Growth in DDA accounts will prove more
valuable in higher
-
rate environment
23
SunTrust’s
Core Strengths Leveraged For An
Improving Economy
Pro Forma Earnings Impact
Note: Net income based on IBES mean EPS estimates. 2006E Net Income applies IBES mean long-term growth rate to 2005 values.
(1)
Purchase accounting adjustments include mark to market amortization / accretion and other transaction related income and expense adjustments.
(Dollars in millions)
2005E
2006E
SunTrust Net Income
$
1,582
$
1,722
National Commerce Net Income
425
473
Total Net Income
$
2,007
$
2,194
Adjustments:
After-tax Cost Savings
$
44
$
76
Incremental Interest Expense
(42)
(41)
Intangible Amortization, net
(21)
(22)
Incremental Marketing Spend
(11)
(3)
Purchase Accounting Adjustments
(1)
2
15
Pro Forma Net Income
$
1,980
$
2,219
24
Pro Forma EPS Impact
Note: Based on IBES mean EPS estimates. 2006E EPS applies IBES mean long-term growth rate to 2005 value.
2005E
2006E
Pro Forma Diluted Shares Outstanding (mm)
361
361
Pro Forma GAAP EPS
$
5.48
$
6.15
SunTrust Standalone GAAP EPS
5.58
6.07
Accretion / (Dilution)
(1.7)%
1.3%
Pro Forma Cash EPS
$
5.72
$
6.35
SunTrust Standalone Cash EPS
5.72
6.18
Accretion / (Dilution)
0.1%
2.7%
25
Transaction Multiples
Transaction(1) Precedent(2)
Market Premium One Month Average 22.6 % 35.5 %
2004E GAAP EPS 18.3 x 17.8 x
2004 PEG Ratio 1.6 x 1.8 x
Price / Stated Book Value 2.5 x 3.0 x
(1)
Based on indicated value per share of $33.46.
(2)
Represents median values for U.S. bank and thrift acquisitions since 1997 with aggregate transaction values greater than $2.0 billion. Source: SNL Financial
13% IRR
26
Pro Forma Valuation Perspectives
GAAP $6.15 10.9 x
Cash 6.36 10.5
2006 EPS 2006 P/E Multiple(1)
10% 1.09x 1.30 1.10 0.95
11 0.99
12 0.91
2006
GAAP
Blended Growth Rate PEG
Ratio
High Median Low
2006 PEG of Southeast Peers
(1)
Based on SunTrust closing price on May 7, 2004 of $66.88.
27
Conservative Transaction Assumptions
Cost
Savings $117
million (pre-tax)
Phase-in
schedule: 60% in 2005, 100% in 2006 and thereafter
Revenue Synergies None used in model
Identifiable
Intangibles Core deposit
intangible of 2.75% of NCF’s core deposits
amortized over
10 years using sum-of-the-years digits method
Other
identifiable intangibles of $75 million amortized over 10 years
(straight-line)
Restructuring Reserve $245mm (pre-tax)
Cost of Debt 3.5% (pre-tax)
Earnings Uses IBES mean
estimates for 2005
Applies IBES
long-term mean EPS growth rate of 11.2% for National
Commerce and
8.8% for SunTrust for 2006
28
Synergy Build-Up
(1)
Represents percentage of National Commerce’s 1Q 2004 annualized operating expenses of $590.2 million (excludes intangible amortization).
(2)
Represents percentage of SunTrust’s & National Commerce’s 1Q 2004 annualized operating expenses of $4,087 million (excludes intangible amortization).
(3)
Represents average value for U.S. bank and thrift acquisitions announced since 2001 with aggregate transaction values greater than $2.0 billion.
% of NCF
(Dollars in millions)
Expense Base
(1)
Personnel
$
12.6
2.1
%
0.3
%
Facilities / Branches
30.0
5.1
0.7
Operations / Technology
41.0
6.9
1.0
Line of Business
30.6
5.2
0.7
Other Operating Expenses
3.0
0.5
0.1
Total
$
117.1
19.8
%
2.9
%
Precedent Transactions
(3)
26.5
%
8.0
%
Pre-Tax
Synergies
Percent of
Combined
(2)
29
Very
reasonable assumptions when compared to precedent transactions and
branch
proximity
Branch
Proximity
SunTrust
and National Commerce
Overlapping Branches Within 0.5 Miles Within 1.0 Miles
NCF # Branches(1) 77 139
Total NCF Deposits $2.0 billion $3.3 billion
% of NCF’s Total Deposits(2) 12.6% 21.0%
Source: SNL Financial
(1) Total number of National Commerce branches that overlap with SunTrust branches.
(2) Based upon March 31, 2004 deposits of $15.8 billion.
30
Compelling Strategic Combination
Dramatically Broadens the “Best Footprint in Banking”
Franchise concentrated in high-growth Southeast
Highest growth markets for Top 20 banks
Five new high growth markets in the Top 25 in the Southeast
Complementary Business Models
Best of Breed retail model
Broader product and client resources
Combined Organization Poised for Accelerated Growth
SunTrust performance momentum and prospects
National Commerce brings proven capabilities and expertise
Significant business synergies
Attractive Financial Profile
Reasonable and achievable assumptions
31
Appendix
Growth Opportunities
Retail
De novo branching
Wal-Mart
Deepen market share in existing and new markets
Product opportunities
Commercial
Commercial product penetration in attractive NCF markets ($50-250 million)
Improved penetration in SunTrust markets ($5-50 million)
Private Client Services
Full product set for NCF retail customers
Capitalize on institutional opportunities in NCF markets
33
Restructuring Reserve
(Dollars in millions)
Employee-Related
$
30.0
Operations
43.6
Facilities
5.6
Balance Sheet
96.7
Other
69.0
Total
$
244.9
As Multiple of Pre-Tax Cost Savings
2.1
x
Pre-Tax Charge
34
Mitigating Integration and Execution Risk
Leadership Don Downing (EVP, Chief Strategic Officer, SunTrust)
John Presley (EVP, Chief Financial Officer, National Commerce)
Achieving Cost Savings on Schedule Conservative base assumptions
Potential for expedited close
Integration team already in place
Systems Integration Operate on similar platforms
“Best of breed” for overlapping operations (mortgage)
Social Issues “Buy in” early in process from both senior teams
Branch-based retail employees job assurances
Incorporating In-store Strategy Target is leader in executing in-store strategy
Opportunity to market SunTrust product suite
Learning effects applied to SunTrust in-store effort
Customer Run-off Proactive, pre-close marketing effort
Integration Issues Mitigating Factors
35
Integration Expertise – Huntington
Closed February 15, 2002
Smooth Integration
20 week planning and integration planning period
Built on highly successful One Bank integration and project experience
Telescoped
time-frame & simultaneous divestiture confirm skill at complex
integration
Achieved Cost Savings
$48 million
36% of estimated Huntington Florida
Cumulative phase-in:
Year 1 65%
Year 2 100%
Closed or consolidated 45 traditional / 35 in-store branches
Franchise
Net addition of 59 branches / 313 ATMs / 250,000 new clients
Retail, Commercial Banking and Private Services operations
$4.4 billion deposits / $2.6 billion loans
Customer Retention
Core retail household retention of 92% after one year
36
Precedent Transaction Comparison
37
Announce
Trans.
Price /
Target IBES
Purchase
Date
Buyer / Target
Value ($bn)
Forward EPS
EPS Growth
PEG
(1)
10-May-04
SunTrust / National Commerce
$
7.0
18.3
x
11.2
%
1.6
x
4-May-04
RBOS / Charter One
$
10.6
15.1
x
10.0
%
1.5
x
16-Feb-04
National City / Provident Financial
2.1
16.8
8.0
2.1
27-Oct-03
Bank of America / FleetBoston
49.3
18.9
9.0
2.1
21-Jan-03
BB&T / First Virginia Banks
3.4
17.4
7.5
2.3
21-May-02
Citigroup / Golden State Bancorp
5.8
11.7
10.0
1.2
25-Jun-01
Washington Mutual / Dime Bancorp
5.2
14.9
11.0
1.4
15-Apr-01
First Union / Wachovia
13.6
12.9
10.0
1.3
26-Jan-01
Royal Bank of Canada / Centura Banks
2.3
15.8
11.0
1.4
Median for Precedent Transactions
(2)
15.5
x
10.0
%
1.5
x
Average for Precedent Transactions
15.4
9.6
1.7
Source: SNL Financial and FactSet
(1)
Represents purchase price / forward EPS to Target’s IBES estimated long-term EPS growth rate.
(2)
Represents bank acquisitions announced since January 1, 2001 with aggregate transaction values greater than $2.0 billion. Excludes merger of equals.
Pro Forma Business Mix
(1) Based on 2003 earnings before tax.
(2) SunTrust’s retail, commercial and mortgage segments are included in the traditional banking segment.
38
Su
nTrust
National Commerce
Pro Forma
Loans
Commercial
34%
1-4 Fam.
21%
Comm. RE
11%
Construc.
5%
HELOC
8%
Consumer
14%
Other
7%
Commercial
12%
1-4 Fam.
25%
Comm. RE
19%
Construc.
17%
HELOC
13%
Consumer
11%
Other
3%
Commercial
31%
1-4 Fam.
21%
Comm. RE
12%
Construc.
7%
HELOC
9%
Consumer
14%
Other
6%
Yield: 4.52%
Yield: 5.52%
Yield: 4.66%
Deposits
Savings,
NOW,
MM
50%
Non-int.
Bearing
25%
Jumbo CDs,
Brokered,
Foreign
16%
Consumer Time
9%
Savings,
NOW,
MM
37%
Non-int.
Bearing
17%
Jumbo CDs,
Brokered,
Foreign
15%
Consumer
Time
31%
Savings,
NOW, MM
48%
Non-int.
Bearing
24%
Jumbo CDs,
Brokered,
Foreign
16%
Consumer Time
12%
Cost: 0.79%
Cost 1.22%
Cost: 0.86%
Business Mix
1
Traditional
Banking
71%
Corp & Inv
Banking
18%
PCS
10%
Other
2%
2
Traditional Banking
90%
Financial Enterprises
10%
Traditional Banking
74%
Corp & Inv
Banking
15%
PCS
8%
Financial Enterprises
2%
Other
1%
2
$1,954.2 mm
$449.6 mm
$2,403.7 mm
2
Pro Forma Balance Sheet
SunTrust
NCF
Combined
(1)
Assets
Cash Equivalents
$4,695
$628
$5,323
Securities and Trading Assets
28,262
6,475
34,736
Gross Loans and HFS
85,065
13,696
98,761
Allowance for Loan Losses
(943)
(173)
(1,116)
Goodwill
1,080
1,090
2,170
Amortizable Intangibles (ex. MSRs)
175
159
333
Other Assets
6,911
1,164
8,075
Total Assets
$125,245
$23,039
$148,283
Liabilities
Deposits
$80,870
$15,791
$96,661
Borrowings
28,156
3,827
31,983
Other Liabilities
6,129
621
6,750
Total Liabilites
$115,154
$20,240
$135,394
Shareholders' Equity
Realized Equity
$8,309
$2,785
$11,094
Other Comprehensive Income
1,782
14
1,795
Total Shareholders' Equity
$10,090
$2,799
$12,889
Total Liabilities and Shareholders' Equity
$125,245
$23,039
$148,283
As of March 31, 2004
39
(1)
Excludes any purchase accounting or transaction adjustments.
National Commerce Historical Income Statement
40
($ in millions)
Y-o-Y
2000
2001
2002
2003
1Q2003
1Q2004
Growth
Income Statement
Interest Income
$
938.0
$
1,222.9
$
1,130.5
$
1,054.1
$
263.4
$
260.5
(1.1)%
Interest Expense
(517.2)
(571.8)
(396.9)
(314.6)
(85.9)
(69.5)
(19.2)
Net Interest Income
420.8
651.1
733.6
739.5
177.4
191.1
7.7
Provision for Losses
(16.5)
(29.2)
(32.3)
(48.4)
(7.7)
(12.1)
57.3
Non-Interest Income
185.0
310.2
369.0
451.0
102.1
109.0
6.7
Securities Gains/Loss
4.5
6.6
11.5
3.8
2.5
10.9
NM
Total Income
593.8
938.7
1,081.8
1,145.8
274.4
298.9
8.9
Non-Interest Expense
(513.9)
(580.0)
(607.8)
(724.4)
(180.1)
(163.7)
(9.1)
Net Income before Tax
79.9
358.7
474.0
421.4
94.2
135.2
43.4
Net Income
$ 45.3
$ 225.3
$ 323.6
$ 311.7
$ 64.1
$ 90.2
40.8
%
Selected Ratios
Effective Tax Rate
43.3
%
37.2
%
31.7
%
32.0
%
32.0
%
33.3
%
ROAA
0.4
1.3
1.6
1.4
1.2
1.6
Net Interest Margin
4.0
4.4
4.3
3.9
4.0
3.8
ROAE
3.0
9.3
12.6
11.5
9.5
13.0
Fee Income Ratio
30.5
32.3
33.5
37.9
36.5
36.3
Cash Efficiency Ratio
48.1
46.4
47.1
49.0
50.3
48.1
National Commerce Historical Balance Sheet
41
($ in millions)
Y-o-Y
2000
2001
2002
2003
1Q '03
1Q '04
Growth
Balance Sheet
Cash and Investments
$
5,024
$
5,379
$
6,450
$
7,684
$
7,275
$
7,136
(1.9)%
Gross Loans
11,008
11,871
12,494
13,035
11,882
13,419
12.9
Loan Loss Reserves
(144)
(156)
(163)
(170)
(163)
(173)
6.5
Net Loans
10,865
11,818
12,761
13,080
12,126
13,523
11.5
Intangibles
1,222
1,198
1,314
1,258
1,298
1,249
(3.8)
Assets
17,746
19,274
21,472
23,017
21,722
23,039
6.1
Deposits
$
11,980
$
12,619
$
14,495
$
15,550
$
14,926
$
15,791
5.8
%
Borrowings
2,901
3,488
3,617
4,251
3,364
3,827
13.8
Liabilities
15,331
16,576
18,551
20,236
18,787
20,240
7.7
Equity
$
2,365
$
2,455
$
2,682
$
2,781
$
2,696
$
2,799
3.8
%
Selected Ratios
TCE/TA
6.92
%
6.96
%
6.79
%
7.00
%
6.85
%
7.11
%
Tier 1 Risk Capital Ratio
9.52
11.04
10.87
11.03
10.50
10.95
Risk-Based Capital Ratio
10.79
12.25
12.00
12.10
11.57
12.02
NPA/Loans
0.14
0.31
0.52
0.49
0.57
0.48
NCOs/Average Loans
0.20
0.22
0.26
0.32
0.25
0.28
Loans/Deposits
90.7
93.7
88.0
84.1
81.2
85.6
NCF
Shareholder Pro Ration Mechanism
Example
42
Total Consideration
Approximatey $1.8 billion in cash
Approximatey 77.5 million in SunTrust shares
SunTrust Five-Day Average Closing Price Before Consumation
May 7th Closing Price
May 4th Closing Price
$
65.00
$
66.88
$
69.70
$
72.00
Total Deal Value ($bn)
$
6.8
$
6.9
$
7.2
$
7.4
Per NCF Share
$
32.76
$
33.46
$
34.50
$
35.36
Implied Stock / Cash Mix
74 / 26
74 / 26
75 / 25
76 / 24
Election Example - Per Share
-100% Stock
0.504
x
0.500
x
0.495
x
0.491
x
-100% Cash
(1)
$
32.76
$
33.46
$
34.51
$
35.36
-Full pro ration
$8.625 / 0.3713 x
$8.625 / 0.3713 x
$8.625 / 0.3713 x
$8.625 / 0.3713 x
(1)
Represents sum of $8.625 plus 0.3713 times the five-day average closing price before consummation.