Order Approving the Acquisition of a Bank Holding Company.

SunTrust Banks, Inc. ("SunTrust"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. [sections] 1842(a)(3)) to acquire Crestar Financial Corporation ("Crestar"), and thereby acquire Crestar's subsidiary bank, Crestar Bank, both of Richmond, Virginia.(1) SunTrust also has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. [sections] 1843(c)(8)) and section 225.24 of the Board's Regulation Y (12 CFR 225.24) to acquire the nonbanking subsidiaries of Crestar and thereby engage in the nonbanking activities listed in the Appendix.(2)

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (63 Federal Register 47,499 and 49,358 (1998)). The time for filing comments has expired, and the Board has considered the application and notice and all comments received in light of the factors set forth in sections 3 and 4 of the BHC Act.

SunTrust, with total consolidated assets of approximately $61.4 billion, operates banks in Florida, Georgia, Tennessee, and Alabama, and engages in a number of permissible nonbanking activities.(3) SunTrust is the second largest commercial banking organization in Georgia, controlling deposits of approximately $10.3 billion, representing 12.6 percent of total deposits in commercial banking organizations in the state ("state deposits"). Crestar, with total consolidated assets of approximately $26.2 billion, operates a bank with branches in Virginia, Maryland, and the District of Columbia. Crestar is the largest commercial banking organization in Virginia, controlling deposits of approximately $10.1 billion, representing 13.3 percent of Virginia state deposits. Crestar is the fourth largest commercial banking organization in Maryland, controlling deposits of approximately $4.9 billion, representing 8.9 percent of Maryland state deposits. In the District of Columbia, Crestar is the fifth largest commercial banking organization, controlling deposits of approximately $922.6 million, representing 9.1 percent of deposits in the District of Columbia.

Interstate Analysis

Section 3(d) of the BHC Act allows the Board to approve an application by a bank holding company to acquire control of a bank located in a state other than the home state of such bank holding company, if certain conditions are met. For purposes of the BHC Act, the home state of SunTrust is Georgia, and Crestar controls a bank that operates in Virginia, Maryland, and the District of Columbia.(4) All the conditions for an interstate acquisition enumerated in section 3(d) are met in this case.(5) In view of all the facts of record, the Board is permitted to approve the proposal under section 3(d) of the BHC Act.

Competitive Considerations

The BHC Act prohibits the Board from approving an application under section 3 of the BHC Act if the proposal would result in a monopoly or if the proposal would substantially lessen competition in any relevant banking market and, in the latter case, the Board has not found that the anticompetitive effects of the proposal are clearly outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served.(6) SunTrust and Crestar do not compete in any banking market. Based on all the facts of record, the Board concludes that consummation of the proposal would not have a significantly adverse effect on competition or on the concentration of banking resources in any relevant banking market. Accordingly, the Board has determined that competitive factors are consistent with approval of the proposal.

Financial, Managerial, and Other Supervisory Factors

The Board has carefully considered the financial and managerial resources and future prospects of SunTrust and Crestar, and their respective subsidiaries, and other supervisory factors in light of all the facts of record. As part of this consideration, the Board has reviewed relevant reports of examination and other supervisory information prepared by the Reserve Banks and other federal agencies. The Board notes that the bank holding companies and their subsidiary banks are currently well capitalized and are expected to remain so after consummation of the proposal.

The Board also has considered other aspects of the financial condition and resources of the two organizations and the structure of the proposed transaction. Based Oh these and other facts of record, the Board concludes that considerations relating to the financial and managerial resources and future prospects of SunTrust, Crestar, and their respective subsidiaries are consistent with approval of the proposal, as are the other supervisory factors that the Board must consider under section 3 of the BHC Act.

Convenience and Needs Factor

The Board has carefully considered the effect of the proposed acquisition on the convenience and needs of the communities to be served in light of all the facts of record, including comments on the effect the proposal would have on the communities to be served by the combined organization. Overall, the Board received approximately 45 comments in favor of the proposal and nine opposed to, or expressing concern about, the proposal.

Most of the comments supporting the proposal were submitted by public officials and community-based organizations and commented favorably on SunTrust's record of performance under the Community Reinvestment Act (12 U.S.C. [sections] 2901 et seq.) ("CRA").(7) These commenters generally commended the assistance SunTrust provided in community redevelopment activities and praised SunTrust for reinvesting in various communities. The letters expressing concern about the proposal urged SunTrust to make commitments to lending in rural and small metropolitan areas or criticized various aspects of the CRA performance or home mortgage lending records of SunTrust and Crestar, including their lending records to minorities and in low- to moderate-income ("LMI") areas, in part on the basis of data submitted under the Home Mortgage Disclosure Act (12 U.S.C. [sections] 2801 et seq.) ("HMDA").(8)

In reviewing the convenience and needs of the communities to be served, the Board notes that SunTrust provides a full range of financial services through its bank and nonbank subsidiaries, including commercial and retail banking, trust and investment management, and corporate and investment banking services. SunTrust has stated that the proposed acquisition would enhance and expand the banking services available to all of its and Crestar's customers, including LMI households. The Board has given substantial consideration to the comments received in addition to SunTrust's and Crestar's existing record of helping to serve the convenience and needs of all their communities, as reflected in SunTrust's and Crestar's CRA and supervisory examinations and in their current programs and policies.

CRA Performance Examinations. The Board has long held that consideration of the convenience and needs factor includes a review of the records of the relevant depository institutions under the CRA. As provided in the CRA, the Board evaluates the convenience and needs factor in light of examinations of the CRA performance records of the relevant institutions by their appropriate federal financial supervisory agencies. An institution's most recent CRA performance examination is a particularly important consideration in the applications process be, cause it represents a detailed, on-site evaluation of the institution's overall record of performance under the CRA by its appropriate federal supervisor.(9) The Board has reviewed the records of performance of the subsidiary depository institutions of SunTrust and Crestar in light of their most recent CRA performance examinations and all other facts of record.

The reports of these examinations indicate that the subsidiary depository institutions of SunTrust and Crestar are helping to meet the convenience and needs of the communities they serve. All of SunTrust's 28 subsidiary banks, which operate in four states, received ratings of "satisfactory" or better from the appropriate federal supervisor at their most recent examinations for performance under the CRA. SunTrust's lead subsidiary bank, SunTrust Bank, Atlanta, Georgia, which accounts for approximately 28 percent of SunTrust's consolidated assets, received a "satisfactory" rating from the Federal Reserve Bank of Atlanta at its most recent examination for CRA performance, as of December 1996 (the "1996 Examination").(10) Crestar Bank received an "outstanding" rating from the Federal Reserve Bank of Richmond at its most recent examination for CRA performance, as of May 1996.(11)

The 1996 Examination concluded that the management of SunTrust Bank had taken an active and affirmative role in meeting credit needs throughout the bank's assessment area, including the credit needs of LMI areas and individuals and small businesses and small farms. Examiners found that SunTrust Bank's CRA-related investments exhibited a high level of complexity and responsiveness to credit and community development needs, that the bank's branch network was accessible to most segments of the communities it served,(12) and that the bank provided a significant number and variety of community development services.(13)

Lending Record of SunTrust. The 1996 Examination concluded that SunTrust Bank's level of lending within its assessment area was excellent, and that the bank's level of qualified loans constituted a significant percentage of the bank's total assets and total loans. Examiners noted that the bank extended a large dollar volume of small business loans during 1995 and the first two quarters of 1996. During this review period, the bank made 6,612 small business loans, totalling $840 million. More than 80 percent of these loans, totalling $291 million, were in amounts of less than $250,000. The bank also originated 27 Small Business Administration ("SBA") loans, totalling $56 million, during the review period, and an additional 12 SBA loans, totalling $16.6 million, during the third quarter of 1996. Examiners noted that the bank offered a variety of flexible and innovative business products and participated in several business development and microloan programs.(14) Examiners further noted that the bank's institutional community development loans, primarily to nonprofit organizations and community service providers in the Atlanta Metropolitan Statistical Area ("MSA"), totalled $378 million in 1995 and $445 million in 1996.

According to the 1996 Examination, the bank had an excellent record of extending home improvement, Federal Housing Administration ("FHA") and Veterans Administration ("VA") loans to LMI borrowers and in LMI census tracts. SunTrust Bank also offered numerous flexible home purchase lending programs. The 1996 Examination found that the bank assisted LMI borrowers to obtain affordable housing through a variety of programs that featured reduced down payment and closing cost requirements and flexible underwriting standards. In addition, SunTrust supports efforts to provide affordable housing through its community development activities. During the review period of the 1996 Examination, SunTrust Bank originated loans of approximately $17.4 million to support the development of 437 affordable housing units in the Atlanta MSA. SunTrust has stated that, since the 1996 Examination, the bank has made approximately $29 million in construction loans for affordable single family homes.

Examiners also concluded that the lending records of SunTrust's lead Florida and Tennessee banks, SunTrust Bank, Central Florida, Orlando, Florida ("STB-Central Florida"), and SunTrust Bank, Nashville, N.A., Nashville, Tennessee ("STB-Nashville"), respectively, reflected a responsiveness to their communities' identified credit needs. Examiners noted that STB-Central Florida had been active in meeting the primary community development lending need in its assessment areas, which was affordable housing for LMI individuals, and stated that the bank originated $70.2 million in community development loans during the review period, most of which were for housing-related projects for LMI individuals. Examiners further stated that STB-Central Florida used innovative and flexible lending practices to serve the credit needs of its communities.(15) Examiners of STB-Nashville also favorably noted the bank's flexible credit products designed for LMI individuals and described the bank as an active lender to small businesses, explaining that the bank had made more than 6,700 small business loans, totalling almost $800 million, from January 1, 1994, to June 30, 1996.(16) Examiners found no evidence of prohibited discrimination or other illegal credit practices and found no violations of fair lending laws at STB-Central Florida or STB-Nashville.

SunTrust has indicated that its subsidiary banks, during 1997 and the first half of 1998, made 14,000 mortgage loans, totalling $679 million, to LMI borrowers, representing 21.3 percent of all mortgages made by the banks, and 6,500 mortgage loans, totalling $404 million, in LMI census tracts. SunTrust also has asserted that its subsidiary banks, during this same period, made 76,000 consumer loans, totalling $791 million, to LMI borrowers, representing 34 percent of all consumer loans made by the banks, and 27,000 consumer loans, totalling $591 million, in LMI census tracts. Moreover, during this time period, SunTrust's subsidiary banks originated 41,000 small business loans, totalling $4.1 billion. Approximately 64 percent of these loans were made to small businesses with annual revenues of less than $1 million, 76 percent were made in amounts of $100,000 or less, and 23 percent were made to businesses in LMI census tracts.(17)

SunTrust also has a strong record of small farm lending. SunTrust and its subsidiaries originated more than 50 percent of the farm loans having an original principal amount of $500,000 or less ("small loans to farms") and the loans to farms having gross annual revenues of $1 million or less ("loans to small farms") made by all financial institutions in the state of Florida in 1996 and 1997. In Georgia, SunTrust and its subsidiaries originated approximately 29 percent of the small loans to farms and approximately 35 percent of the loans to small farms made by financial institutions in the aggregate during the same period.(18)

Lending Record of Crestar. The CRA performance examinations of Crestar's subsidiary depository institutions indicated that Crestar's banks, thrift, and mortgage company subsidiary, Crestar Mortgage Corporation, Richmond, Virginia, actively marketed mortgage products and actively solicited residential mortgage applications from LMI individuals. The examinations also noted that Crestar offered a number of affordable housing products and participated in a variety of government-sponsored loan programs, including those available through the FHA, VA, Virginia Housing Development Authority, the Maryland Community Development Authority, and the D.C. Housing Finance Agency. Crestar also participates in an affordable housing program sponsored by the Federal Home Loan Bank. Through this program, Crestar has helped develop 350 units of low-cost housing by providing $35 million in loans and grants.

In addition, Crestar has created special business loan centers to underwrite credit to small businesses in its service areas. Crestar also participates in several government programs to promote small business lending, including programs sponsored by the SBA, the Economic Development Administration, and the Virginia Small Business Financing Authority. Examiners also concluded that Crestar's depository institutions' delineations of their service areas were reasonable and did not exclude any LMI neighborhoods, and that the banks' offices were reasonably accessible to all segments of their communities.

During 1997 and the first half of 1998, Crestar made more than 13,600 mortgage loans, totalling approximately $945 million, to LMI borrowers, representing approximately 42 percent of all HMDA-reportable loans made by Crestar. During this same period, Crestar and its subsidiaries made more than 36,200 consumer loans, totalling $441 million, to LMI borrowers, representing 40 percent of all consumer loans made by Crestar, and more than 11,500 consumer loans, totalling $168 million, in LMI census tracts, representing 32 percent of all consumer loans made by Crestar. Moreover, during this time period, Crestar originated approximately 14,800 small business loans, totalling $1.4 billion; more than 80 percent of these loans were made in amounts of $100,000 or less, and approximately 20 percent were made to businesses in LMI census tracts.

HMDA Data. The Board also has considered SunTrust's and Crestar's lending record in light of comments on the HMDA data of the organizations' subsidiaries. The 1997 data indicate that Crestar Bank and Crestar Mortgage Corporation originated loans for a larger percentage of housing-related loan applications received from African Americans, LMI individuals, and residents of census tracts with predominately minority and LMI residents ("minority and LMI census tracts") in Virginia than did lenders in the aggregate. The 1997 data also generally indicate that SunTrust's subsidiary banks originated loans for a significantly larger percentage of housing-related loan applications, and denied a significantly smaller percentage of such applications, received from African Americans, Hispanics, LMI individuals, and residents of minority and LMI census tracts in Georgia, Florida, and Tennessee than did lenders in the aggregate in those states.

The data reflect, however, certain disparities in the rates of loan denials by racial group and income level. The Board is concerned when the record of an institution indicates disparities in lending, and believes that all banks are obligated to ensure that their lending practices are based on criteria that ensure not only safe and sound lending but also equal access to credit by creditworthy applicants regardless of their race or income level. The Board recognizes that HMDA data alone provide an incomplete measure of an institution's lending in its community because these data cover only a few categories of housing-related lending. HMDA data, moreover, provide only limited information about the covered loans.(19) HMDA data, therefore, have limitations that make them an inadequate basis, absent other information, for concluding that an institution has not adequately assisted in meeting its community's credit needs or has engaged in illegal lending discrimination.

Because of the limitations of HMDA data, the Board has considered these data carefully in light of other information. Examiners found no evidence of prohibited discrimination or other illegal credit practices at the subsidiary depository institutions of SunTrust and Crestar at their most recent completed examinations. Examiners reviewed the fair lending policies and procedures maintained by the banks and found the policies and procedures to be comprehensive and appropriate for monitoring compliance with fair lending laws. The Board also has considered the HMDA data in light of SunTrust's and Crestar's lending records, which show that the organizations' subsidiary depository institutions assist significantly in helping to meet the credit needs of their communities, including LMI areas.

Conclusion on Convenience and Needs Considerations

The Board has carefully considered all the facts of record, including the public comments received, responses to the comments, and the CRA performance records of the subsidiary depository institutions of SunTrust and Crestar. including relevant reports of examination. Based on a review of the entire record, and for the reasons discussed in this order, the Board has concluded that convenience and needs considerations, including the CRA performance records of the subsidiary depository institutions of SunTrust and Crestar, are consistent with approval.

Nonbanking Activities

SunTrust also has filed notice under section 4(c)(8) of the BHC Act to acquire the nonbanking subsidiaries of Crestar and thereby engage in a number of nonbanking activities. including extending credit and servicing loans, providing leasing services, providing financial and investment advice, providing agency transactional services (other than acting as a futures commission merchant), underwriting and dealing to a limited extent in debt and equity securities, buying and selling bullion and related activities for the account of customers, insurance agency activities, community development activities, and data processing and management consulting activities through an automated teller machine ("ATM") and point-of-sale network. The Board previously has determined by regulation or order that each of these activities is closely related to banking for purposes of section 4(c)(8) of the BHC Act.(20) SunTrust proposes to conduct these activities in accordance with Regulation Y and all relevant Board interpretations and orders.

A. Insurance Agency Activities

SunTrust also has applied to acquire and operate subsidiaries of Crestar that engage in certain insurance activities. These subsidiaries, Crestar Insurance Agency, Inc. ("Crestar Insurance"), and Crestar Securities Corporation ("Crestar Securities"), both of Richmond, Virginia, engage in insurance agency activities pursuant to Exemption G ("Exemption G") of Title VI of the Garn-St Germain Depository Institutions Act of 1982 ("Garn-St Germain Act"), which allows a bank holding company and its subsidiaries to continue to engage in any insurance agency activity if the bank holding company or subsidiary was engaged in insurance agency activities prior to January 1, 1971, as a consequence of approval by the Board prior to that date.(21) SunTrust argues that it should be permitted to acquire and engage in insurance agency activities through Crestar Insurance and Crestar Securities on the basis of Exemption G rights that accrue to Crestar.

The Board previously has determined that Exemption G rights expire when the bank holding company possessing the Exemption G rights is acquired by another bank holding company that does not independently qualify for Exemption G rights.(22) In this case, SunTrust does not qualify for Exemption G rights because it was not engaged in insurance activities prior to January 1, 1971, as a consequence of Board approval. The Board does not believe that the facts of this case justify a different conclusion.(23) For the foregoing reasons, the Board concludes that Crestar's Exemption G rights will expire when SunTrust acquires Crestar, and SunTrust is not entitled to engage, directly or through Crestar Insurance or Crestar Securities, in general insurance agency activities pursuant to Exemption G.

In the alternative, SunTrust proposes to acquire and conduct insurance agency activities through Crestar Insurance and Crestar Securities pursuant to Exemption D ("Exemption D") of Title VI of the Garn-St Germain Act.(24) Exemption D permits a bank holding company and any subsidiary of a bank holding company to continue to engage in any insurance agency activity in which the company was engaged on May 1, 1982, or which the Board approved for such company on or before May 1, 1982. The Board previously has determined that a company with Exemption D rights does not lose those rights on its acquisition by a nongrandfathered bank holding company, provided that the grandfathered company retains its separate corporate structure, its insurance activities are not conducted by other companies within the acquiring banking organization, and the company conducts its insurance activities in accordance with the limits in Exemption D.(25)

Although SunTrust would not qualify for Exemption G rights after its acquisition of Crestar, the Board notes that Crestar Insurance and Crestar Securities may qualify for Exemption D rights.(26) SunTrust may provide additional evidence to the Board that Crestar Insurance or Crestar Securities acted as agent in the sale of particular types of insurance in particular states on May 1, 1982.(27) On such a showing, the relevant company would be permitted to continue to act as agent for those types of insurance in Virginia, the states adjacent to Virginia, and the states in which the company was lawfully engaged in such activity on May 1, 1982.

B. Proper Incident Considerations

In order to approve the proposal, the Board also must determine that the performance of the proposed activities is a proper incident to banking, that is, that the proposed transaction "can reasonably be expected to produce benefits to the public ... that outweigh adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."(28)

The Board expects that the acquisition of Crestar by SunTrust would provide added convenience to customers of both institutions and is likely to result in increased operating efficiencies for the combined organization. Additionally, there are public benefits to be derived from permitting capital markets to operate so that bank holding companies can make potentially profitable investments in nonbanking companies and from permitting banking organizations to allocate their resources in the manner they consider to be most efficient, when such investments and actions are consistent, as in this case, with the relevant considerations under the BHC Act.

As part of its evaluation of the statutory factors, the Board considers the financial and managerial resources of the notificant, its subsidiaries, and any company to be acquired; the effect the transaction would have on such resources; and the management expertise, internal control and risk management systems, and capital of the entity conducting the activity.(29) For the reasons discussed above, and based on all the facts of record, the Board has concluded that financial and managerial considerations are consistent with approval of the notice.

The Board also has carefully considered the competitive effects of the proposed acquisition of Crestar's nonbanking subsidiaries. Nonbank subsidiaries of SunTrust and Crestar compete in securities underwriting and dealing activities, securities brokerage, asset management and investment advisory activities, mutual fund advisory and share brokerage activities, credit card operations, mortgage origination and servicing activities, trust services, and selling insurance to the extent permissible for bank holding companies. The Board notes that the market for each of the nonbanking services is unconcentrated, that there are numerous providers of the services, and that there is minimal geographic overlap in the areas in which SunTrust and Crestar primarily offer these services. Consummation of the proposal, therefore, would have a de minimis effect on competition, and the Board has concluded that the proposal would not have a significantly adverse effect on competition in any relevant market.

The Board believes that the conduct of the proposed activities within the framework established under Regulation Y and prior orders is not likely to result in adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices, that would not be outweighed by the public benefits of the proposal, such as increased convenience and gains in efficiency. Accordingly, based on all the facts of record, the Board has determined that the balance of public benefits that the Board must consider under the proper incident to banking standard of section 4(c)(8) of the BHC Act is favorable and consistent with approval of the proposal.(30)

Conclusion

Based on the foregoing and all the other facts of record, the Board has determined that the application and notice should be, and hereby are, approved. The Board's approval is specifically conditioned on compliance by SunTrust with all the commitments made in connection with the proposal and all the conditions in this order.

The Board's determination on the nonbanking activities also is subject to all the terms and conditions set forth in Regulation Y, including those in sections 225.7 and 225.25(c) of Regulation Y (12 C.F.R. 225.7 and 225.25(c)), and to the Board's authority to require such modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to ensure compliance with, and to prevent evasion of, the provisions of the BHC Act and the Board's regulations and orders issued thereunder. For purposes of this order, the commitments and conditions relied on by the Board in reaching this decision are deemed to be conditions imposed in writing by the Board in connection with its findings and decisions, and, as such, may be enforced in proceedings under applicable law.

The acquisition of Crestar Bank may not be consummated before the fifteenth calendar day following the effective date of this order, and the proposal may not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Atlanta, acting pursuant to delegated authority.

By order of the Board of Governors, effective October 28, 1998.

Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Meyer, Ferguson, and Gramlich. Absent and not voting: Governor Kelley.

(1.) SunTrust proposes to acquire Crestar by merging its wholly owned subsidiary, SMR Corporation, formed solely for the purpose of effecting the acquisition, with and into Crestar.

(2.) SunTrust also has requested the Board's approval to hold and exercise an option to purchase up to 19.9 percent of the voting shares of Crestar if certain events occur. The option would expire on consummation of the proposal.

(3.) Asset data are as of June 30, 1998, and state deposit and ranking data are as of June 30, 1997.

(4.) A bank holding company's home state is that state in which the operation of the bank holding company's banking subsidiaries were principally conducted on July 1, 1966, or the date on which the company became a bank holding company, whichever is later. 12 U.S.C. [sections] 1841(o)(4)(C).

(5.) See 12 U.S.C. [subsections] 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). SunTrust is adequately capitalized and adequately managed, as defined by applicable law. Crestar Bank has been in existence and continuously operated for the minimum period of rive years. On consummation of the proposal, SunTrust would control less than 10 percent of the total amount of deposits of insured depository institutions in the United States. SunTrust also would not exceed applicable state law deposit limitations, as calculated under state law, in any state in which Crestar operates. See Md. Code Ann., [sections] 5-1013 (1997). All other requirements of section 3(d) of the BHC Act would be met on consummation of the proposal.

(6.) 12 U.S.C. [sections] 1842(c)(1).

(7.) These commenters included nine public officials and the following community groups: Atlanta Neighborhood Development Partnership, Inc., The College Fund/UNCF, Community Equity Investments. Inc., Community Housing Resource Center, The Enterprise Foundation, Florida Community Loan Fund, Greater Miami Neighborhoods. Inc., Keystone Challenge Fund, and Tampa Bay Economic Development Corporation.

(8.) These commenters were CANICCOR, Metropolitan Washington Planning & Housing Association, Withlacoochee Regional Planning Council, Apalachee Regional Planning Council, CSRA Regional Development Center, Southwest Tennessee Development District, Southeast Georgia Regional Development Center, and two individuals.

(9.) The Statement of the Federal Financial Supervisory Agencies Regarding the Community Reinvestment Act provides that a CRA examination is an important and often controlling factor in the consideration of an institution's CRA record and that reports of these examinations will be given great weight in the applications process. See 54 Federal Register 13,742 and 13,745 (1989); see also 62 Federal Register 52,105 (1997).

(10.) More than 25 percent of SunTrust's subsidiary banks received ratings of "outstanding" from the appropriate federal supervisors at their most recent examinations for CRA performance.

(11.) Since that examination, Crestar Bank has merged with Crestar's other subsidiary depository institutions, each of which also received an "outstanding" rating from the appropriate federal supervisor at its most recent CRA performance examination. Crestar Bank MD, Bethesda, Maryland, received an "outstanding" CRA performance rating from the Federal Reserve Bank of Richmond, as of August 1996; Crestar Bank, N.A., Washington, D.C., received an "outstanding" CRA performance rating from the Office of the Comptroller of the Currency, as of November 1994; and Crestar Bank FSB, Baltimore, Maryland, received an "outstanding" CRA performance rating from the Office of Thrift Supervision, as of April 1996.

(12.) A commenter questioned whether the proposal would result in any branch closings or service reductions in the District of Columbia. SunTrust has indicated that it does not expect the transaction to result in the closure of any branches and that it would make no immediate changes in the terms and conditions of products and services offered by Crestar.

(13.) One commenter alleged, without providing any supporting facts. that SunTrust's subsidiary banks had dealt improperly with the commenter's SunTrust shares. The Board has provided copies of the comment to the appropriate federal supervisors of the relevant SunTrust subsidiary banks for their consideration. The Board retains sufficient authority to take appropriate supervisory action against SunTrust if the allegations can be substantiated.

(14.) These programs included the Entrepreneurial Development Loan Fund, which makes loans to small businesses and businesses owned by minorities in Atlanta, and the GRASP, Inc., Microloan Program, which provides entrepreneurs access to loans in amounts of $500 to $25,000.

(15.) Examiners discussed the SunTrust Affordable Housing Program, a proprietary program providing down payment assistance, flexible debt ratios, below market interest rates, and no mortgage insurance; the Community Home Buyers Program, a proprietary program offering flexible debt ratios and no discount points or origination fees; and the Florida Housing Finance Agency Homeowner Mortgage Revenue Bond Program, a statewide program that offers a below market interest rate and down payment assistance.

(16.) Examiners also noted that approximately 23 percent of the bank's small business loans in 1995 and the first half of 1996 were made to borrowers in LMI census tracts.

(17.) Many of SunTrust's banks operate in rural and small metropolitan areas and were recognized in their examinations for their small business and small farm lending. Several of these banks participated in government-sponsored programs, such as those offered by the Rural Development Agency.

(18.) Several commenters have urged SunTrust and Crestar to define their commitment to economic development investment and lending in rural and small metropolitan areas. SunTrust has indicated that the six SunTrust subsidiary banks whose communities include the service areas of the commenters have average loan-to-deposit ratios of more than 104 percent and make the majority of their loans within their delineated communities. In addition, several of SunTrust's banks that operate in rural areas offer government-sponsored loan programs, including those of the Rural Development Agency, and were commended in their most recent CRA performance examinations for the volume of their small business and small farm loan originations. Moreover, Crestar Bank offers Rural Housing and Community Development Service loans and has invested in the Virginia Economic Development Corporation, a private organization that provides equity and other forms of financing to small- and medium-sized businesses in rural areas throughout Virginia.

(19.) The data, for example, do not account for the possibility that an institution's outreach efforts may attract a larger proportion of marginally qualified applicants than other institutions attract and do not provide a basis for an independent assessment of whether an applicant who was denied credit was, in fact, creditworthy. Credit history problems and excessive debt levels relative to income (reasons most frequently cited for a credit denial) are not available from HMDA data.

(20.) See 12 C.F.R. 225.28 (b)(1), (3), (6), (7), (8), (9), (11), (12), and (14); United Virginia Bancshares, Inc., 73 Federal Reserve Bulletin 309 (1987); Barnett Banks, Inc., et al., 83 Federal Reserve Bulletin 131 (1997).

(21.) 12 U.S.C. [sections] 1843(c)(8)(G).

(22.) See Trustcorp. Inc., 73 Federal Reserve Bulletin 827, 829 (1987) ("Trustcorp"); C&S/Sovran Corporation, 76 Federal Reserve Bulletin 853 (1990) ("C&S/Sovran").

(23.) SunTrust argues that, because Crestar would continue to exist after the proposed transaction, the language of Exemption G indicates that Crestar Insurance and Crestar Securities would retain their Exemption G rights even after Crestar's acquisition by SunTrust. The Board previously has considered and rejected this interpretation of Exemption G. See Trustcorp, at 829.

(24.) 12 U.S.C. [sections] 1843(c)(8)(D).

(25.) See Sovran Financial Corporation, 73 Federal Reserve Bulletin 672 (1987), aff'd, National Ass'n of Professional Insurance Agents v. Board of Governors of the Federal Reserve System, 856 F.2d 282 (D.C. Cir. 1988), cert. denied, 490 U.S. 1090 (1989).

(26.) The Board previously has determined that acquiring bank holding companies which did not qualify for Exemption G rights in connection with their acquisition of a grandfathered bank holding company could qualify for Exemption D rights. See Trustcorp: C&S/ Sovran.

(27.) This evidence should be consistent with the types of evidence relied on by the Board in previous orders in which the Board found that a company met the requirements of Exemption D. See Mid-American Corporation, 76 Federal Reserve Bulletin 559 (1990); Citicorp, 76 Federal Reserve Bulletin 70 (1990).

(28.) 12 U.S.C. [sections] 1843(c)(8).

(29.) See 12 C.F.R. 225.26.

(30.) SunTrust and Crestar each currently owns an approximately 20 percent nonvoting equity interest in a company that engages in impermissible activities ("Company"). As part of this transaction, SunTrust would acquire Crestar's 20 percent interest in Company. As a condition of the order, SunTrust is required to divest or reduce its interest in Company to comply with the Board's Policy Statement on Nonvoting Equity Investments, 12 C.F.R. 225.143, within two years of consummation of the proposal.

Appendix

Crestar Financial Corporation's Nonbanking Subsidiaries

(1) Crestar Securities Corporation, Richmond, Virginia ("Crestar Securities"), and thereby engage in extending credit and servicing loans, providing leasing services, providing financial and investment advisory services, providing securities brokerage, riskless principal, and private placement services, underwriting and dealing in bank-eligible securities, entering into futures, forwards, and options contracts for hedging purposes, and buying and selling bullion and related activities for the account of customers pursuant to sections 225.28(b)(1), (3), (6), (7), and (8) of Regulation Y (12 C.F.R. 225.28(b)(1), (3), (6), (7), and (8)); and underwriting and dealing in, to a limited extent, certain municipal revenue bonds, 1-4 family mortgage-related securities, consumer receivable-related securities, and commercial paper, as previously approved by the Board in Crestar Financial Corporation, 83 Federal Reserve Bulletin 512 (1997).

(2) Crestar Insurance Agency, Inc., Richmond, Virginia, and thereby engage in insurance agency activities, with Crestar Securities, pursuant to section 225.28(b)(11)(iv) of Regulation Y (12 C.F.R. 225.28(b)(11)(iv)), as discussed more fully in the Order.

(3) Crestar Community Development Corporation, Richmond, Virginia, and thereby engage in community development activities, pursuant to section 225.28(b)(12) of Regulation Y (12 C.F.R. 225.28(b)(12)).

(4) Honor Technologies, Inc., Maitland, Florida, and thereby engage in data processing and management consulting activities through the operation of an ATM and point-of-sale network, pursuant to sections 225.28(b)(9) and (14) of Regulation Y (12 C.F.R. 225.28(b)(9) and (14)).

ROBERT DEV. FRIERSON

Associate Secretary of the Board