<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 COMMISSION FILE NUMBER 1-7476
AMSOUTH BANCORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 63-0591257
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OFINCORPORATION OR ORGANIZATION)
AMSOUTH--SONAT TOWER 35203
1900 5TH AVENUE NORTH (ZIP CODE)
BIRMINGHAM, ALABAMA
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(205) 320-7151
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
AS OF NOVEMBER 8, 1996 AMSOUTH BANCORPORATION HAD 56,134,774 SHARES OF COMMON
STOCK OUTSTANDING.
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<PAGE>
AMSOUTH BANCORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statement of Condition--September 30, 1996, December 31, 1995,
and September 30, 1995.................................................... 3
Consolidated Statement of Earnings --Nine months and three months ended
September 30, 1996 and 1995............................................... 4
Consolidated Statement of Shareholders' Equity--Nine months ended
September 30, 1996........................................................ 5
Consolidated Statement of Cash Flows--Nine months ended September 30, 1996
and 1995.................................................................. 6
Notes to Consolidated Financial Statements................................. 7
Independent Accountants' Review Report..................................... 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................... 10
Part II. Other Information
Item 1. Legal Proceedings.......................................................... 21
Item 6. Exhibits and Reports on Form 8-K........................................... 21
Signatures................................................................................... 22
Exhibit Index................................................................................ 23
</TABLE>
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1996 1995 1995
------------ ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and due from banks................. $ 632,117 $ 651,641 $ 594,064
Federal funds sold and securities pur-
chased under agreements to resell...... 26,400 1,775 7,250
Trading securities...................... 4,238 2,978 11,128
Available-for-sale securities........... 2,712,197 2,479,813 522,805
Held-to-maturity securities (market
value of $2,703,451, $2,193,421 and
$3,273,713, respectively).............. 2,722,661 2,167,009 3,258,715
Mortgage loans held for sale............ 49,547 62,017 70,841
Loans................................... 11,918,492 11,819,809 12,001,811
Less: Allowance for loan losses......... 179,350 178,451 179,550
Unearned income....................... 85,855 76,536 79,355
----------- ----------- -----------
Net loans............................ 11,653,287 11,564,822 11,742,906
Premises and equipment, net............. 293,967 276,426 275,845
Customers' acceptance liability......... 1,627 2,007 1,631
Accrued interest receivable and other
assets................................. 519,039 530,307 519,050
----------- ----------- -----------
$18,615,080 $17,738,795 $17,004,235
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits and interest-bearing liabili-
ties:
Deposits:
Noninterest-bearing demand............ $ 1,867,463 $ 1,834,853 $ 1,768,953
Interest-bearing demand............... 3,544,414 3,912,506 3,784,405
Savings............................... 1,050,745 1,005,099 995,434
Time.................................. 5,218,366 5,672,586 5,743,774
Certificates of deposit of $100,000 or
more................................. 775,231 995,243 885,362
----------- ----------- -----------
Total deposits....................... 12,456,219 13,420,287 13,177,928
Federal funds purchased and securities
sold under agreements to repurchase... 1,258,905 1,861,090 1,317,393
Other borrowed funds................... 1,952,071 478,736 534,881
Long-term Federal Home Loan Bank ad-
vances................................ 883,883 15,014 29,947
Other long-term debt................... 421,687 425,885 276,351
----------- ----------- -----------
Total deposits and interest-bearing
liabilities......................... 16,972,765 16,201,012 15,336,500
Acceptances outstanding................. 1,627 2,007 1,631
Accrued expenses and other liabilities.. 242,222 152,301 278,885
----------- ----------- -----------
Total liabilities.................... 17,216,614 16,355,320 15,617,016
----------- ----------- -----------
Shareholders' equity:
Preferred stock -- no par value:
Authorized -- 2,000,000 shares; Issued
and outstanding -- none.............. -0- -0- -0-
Common stock -- par value $1 a share:
Authorized -- 200,000,000 shares;
Issued -- 60,024,582, 60,030,242 and
59,980,078 shares, respectively...... 60,025 60,030 59,980
Capital surplus........................ 589,065 590,882 589,582
Retained earnings...................... 835,552 788,170 763,688
Cost of common stock in treasury--
3,370,512, 2,765,000, and 1,500,000
shares, respectively.................. (97,188) (73,192) (24,173)
Deferred compensation on restricted
stock................................. (3,950) (4,120) (4,467)
Unrealized gains on available-for-sale
securities, net of deferred taxes..... 14,962 21,705 2,609
----------- ----------- -----------
Total shareholders' equity........... 1,398,466 1,383,475 1,387,219
----------- ----------- -----------
$18,615,080 $17,738,795 $17,004,235
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------ -------------------
1996 1995 1996 1995
--------- -------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUE FROM EARNING ASSETS
Loans................................ $ 750,958 $754,034 $ 252,423 $ 256,133
Securities:
Trading securities.................. 134 280 45 27
Available-for-sale securities....... 122,392 27,407 43,008 8,900
Held-to-maturity securities......... 132,083 160,018 46,586 52,706
--------- -------- --------- ---------
Total securities................... 254,609 187,705 89,639 61,633
Mortgage loans held for sale......... 4,631 4,265 1,218 1,192
Federal funds sold and securities
purchased under agreements to re-
sell................................ 1,046 998 315 13
--------- -------- --------- ---------
Total revenue from earning assets.. 1,011,244 947,002 343,595 318,971
--------- -------- --------- ---------
INTEREST EXPENSE
Interest-bearing demand deposits..... 87,712 108,098 28,305 33,139
Savings deposits..................... 20,875 20,690 7,294 6,805
Time deposits........................ 245,685 244,298 79,029 85,978
Certificates of deposit of $100,000
or more............................. 38,246 39,159 12,296 14,018
Federal funds purchased and securi-
ties sold under agreements to repur-
chase............................... 68,642 47,853 24,365 14,966
Other borrowed funds................. 29,820 26,370 10,806 8,522
Long-term Federal Home Loan Bank ad-
vances.............................. 13,560 3,276 8,680 673
Other long-term debt................. 23,789 16,921 7,765 5,605
--------- -------- --------- ---------
Total interest expense............. 528,329 506,665 178,540 169,706
--------- -------- --------- ---------
NET INTEREST INCOME.................. 482,915 440,337 165,055 149,265
Provision for loan losses............ 46,674 30,049 17,505 9,398
--------- -------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES..................... 436,241 410,288 147,550 139,867
--------- -------- --------- ---------
NONINTEREST REVENUES
Service charges on deposit accounts.. 70,826 63,137 23,819 21,940
Trust income......................... 42,465 36,811 14,566 12,339
Credit card income................... 10,723 9,710 3,821 3,617
Investment services income........... 12,613 4,946 4,802 2,074
Mortgage income...................... 2,409 36,620 578 430
Interchange income................... 6,308 4,007 2,305 1,543
Letters of credit income............. 5,840 4,926 1,886 1,504
Portfolio income..................... 6,763 4,087 2,715 638
Other operating revenues............. 16,828 15,714 5,685 4,342
--------- -------- --------- ---------
Total noninterest revenues......... 174,775 179,958 60,177 48,427
--------- -------- --------- ---------
NONINTEREST EXPENSES
Salaries and employee benefits....... 173,275 173,661 58,921 52,832
Net occupancy expense................ 40,202 41,896 13,903 12,168
Equipment expense.................... 39,257 39,090 13,191 11,213
Marketing expense.................... 13,387 12,662 4,522 4,087
Postage and office supplies.......... 17,465 17,576 5,794 5,684
Telephone expense.................... 11,691 9,669 4,046 3,342
Professional fees.................... 8,249 8,698 2,649 2,671
FDIC premiums........................ 7,875 16,835 2,637 2,109
SAIF assessment...................... 24,196 -0- 24,196 -0-
Foreclosed properties expense........ 1,054 (415) 178 (2)
Amortization......................... 13,073 16,568 4,471 4,229
Other operating expenses............. 53,536 53,867 17,561 16,656
--------- -------- --------- ---------
Total noninterest expenses......... 403,260 390,107 152,069 114,989
--------- -------- --------- ---------
INCOME BEFORE INCOME TAXES........... 207,756 200,139 55,658 73,305
Income taxes......................... 76,695 73,076 20,465 27,210
--------- -------- --------- ---------
NET INCOME......................... $ 131,061 $127,063 $ 35,193 $ 46,095
========= ======== ========= =========
Average common shares outstanding.... 56,717 58,273 56,623 58,418
Earnings per common share............ $ 2.31 $ 2.18 $ 0.62 $ 0.79
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
UNREALIZED
COMMON CAPITAL RETAINED TREASURY DEFERRED GAINS/(LOSSES)
STOCK SURPLUS EARNINGS STOCK COMPENSATION ON SECURITIES TOTAL
------- -------- -------- -------- ------------ -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1996................... $60,030 $590,882 $788,170 $(73,192) $(4,120) $21,705 $1,383,475
Net income.............. -0- -0- 131,061 -0- -0- -0- 131,061
Cash dividends declared
($1.20 per common
share)................. -0- -0- (67,850) -0- -0- -0- (67,850)
Common stock transac-
tions:
Purchase of common
stock................. -0- -0- -0- (61,354) -0- -0- (61,354)
Employee stock plans... (5) (1,803) (3,486) 16,866 170 -0- 11,742
Dividend reinvestment.. -0- (14) (106) 4,124 -0- -0- 4,004
Retirement of debt..... -0- -0- (12,237) 16,368 -0- -0- 4,131
Unrealized losses on
available-for-sale
securities, net of
deferred taxes......... -0- -0- -0- -0- -0- (6,743) (6,743)
------- -------- -------- -------- ------- ------- ----------
Balance at September 30,
1996................... $60,025 $589,065 $835,552 $(97,188) $(3,950) $14,962 $1,398,466
======= ======== ======== ======== ======= ======= ==========
</TABLE>
See notes to consolidated financial satatements.
5
<PAGE>
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30
--------------------
1996 1995
---------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.......................................... $ 131,061 $127,063
Adjustments to reconcile net income to net cash pro-
vided by operating activities:
Provision for loan losses.......................... 46,674 30,049
Foreclosed property provision (recoveries)......... 301 (322)
Depreciation and amortization of premises and
equipment......................................... 20,698 20,768
Amortization of premiums and discounts on held-to-
maturity securities and available-for-sale
securities........................................ (2,398) (3,950)
Net decrease in mortgage loans held for sale....... 12,470 59,382
Net increase in trading securities................. (1,260) (2,748)
Net gains on sales of available-for-sale securi-
ties.............................................. (4,936) (3,170)
Net gains on calls of held-to-maturity securities.. (288) (481)
Net decrease in accrued interest receivable and
other assets...................................... 18,167 83,274
Net increase in accrued expenses and other liabili-
ties.............................................. 40,937 74,399
Provision for deferred income taxes................ 27,408 10,782
Amortization of intangible assets.................. 12,858 17,219
Other.............................................. 2,558 802
---------- --------
Net cash provided by operating activities......... 304,250 413,067
---------- --------
INVESTING ACTIVITIES
Proceeds from maturities and prepayments of avail-
able-for-sale securities........................... 433,504 22,309
Proceeds from sales of available-for-sale securi-
ties............................................... 1,174,447 219,606
Purchases of available-for-sale securities.......... (1,114,678) (336,671)
Proceeds from maturities, prepayments and calls of
held-to-maturity securities........................ 308,565 237,658
Purchases of held-to-maturity securities............ (863,501) (157,421)
Net (increase) decrease in federal funds sold and
securities purchased under agreements to resell.... (24,625) 145,275
Net increase in loans............................... (860,412) (426,072)
Net purchases of premises and equipment............. (38,239) (12,835)
Net cash used for acquisitions...................... -0- (13,221)
---------- --------
Net cash used by investing activities............. (984,939) (321,372)
---------- --------
FINANCING ACTIVITIES
Net decrease in demand deposits and savings ac-
counts............................................. (289,836) (354,579)
Net (decrease) increase in time deposits............ (667,815) 379,582
Net (decrease) increase in federal funds purchased
and securities sold under agreements to repurchase. (602,185) 104,670
Net (decrease) increase in other borrowed funds..... 1,467,942 (133,330)
Issuance of long-term Federal Home Loan Bank ad-
vances and other long-term debt.................... 1,045,000 765
Payments for maturing long-term Federal Home Loan
Bank advances and
other long-term debt............................... (176,861) (74,757)
Cash dividends paid................................. (67,850) (44,278)
Proceeds from employee stock plans.................. 14,124 7,657
Purchase of common stock............................ (61,354) -0-
---------- --------
Net cash provided by financing activities......... 661,165 (114,270)
---------- --------
(Decrease) increase in cash and cash equivalents.... (19,524) (22,575)
Cash and cash equivalents at beginning of period.... 651,641 616,639
---------- -------- ---
Cash and cash equivalents at end of period.......... $ 632,117 $594,064
========== ========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
General--The consolidated financial statements conform to generally accepted
accounting principles and to general industry practices. The accompanying
interim financial statements are unaudited; however, in the opinion of
management, all adjustments necessary for the fair presentation of the
consolidated financial statements have been included. All such adjustments are
of a normal recurring nature. Certain amounts in the prior year's financial
statements have been reclassified to conform with the 1996 presentation. These
reclassifications had no effect on net income. The notes included herein
should be read in conjunction with the notes to consolidated financial
statements included in AmSouth Bancorporation's (AmSouth) 1995 annual report
on Form 10-K.
Effective January 1, 1996, AmSouth adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," (Statement 121). The statement requires
that long-lived assets and certain identifiable intangibles to be held and
used by the entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. An impairment loss is recognized when the sum of the future cash
flows (undiscounted and without interest charges expected from the use of the
asset and its eventual disposition) is less than the carrying amount of the
asset. The adoption of Statement 121 resulted in no material impact on
AmSouth's financial condition or results of operations.
Statement of Financial Accounting Standards No. 122, "Accounting for
Mortgage Servicing Rights, an amendment of FASB Statement No. 65" (Statement
122) was adopted by AmSouth effective January 1, 1996. In accordance with
Statement 122, the cost of mortgage loans purchased or originated with a
definitive plan to sell the loans and retain the mortgage servicing rights is
allocated between the loans and the servicing rights based on their estimated
fair values at the purchase or origination date. The adoption of Statement 122
resulted in no material impact on AmSouth's financial condition or results of
operations.
In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities,"
(Statement 125). Statement 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of liabilities
based on consistent application of a "financial-components approach" that
focuses on control. Under that approach, after a transfer of financial assets,
an entity recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control has
been surrendered and derecognizes liabilities when extinguished. Statement 125
provides standards for consistently distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings. The impact
of Statement 125, when adopted on January 1, 1997, on AmSouth's financial
condition or results of operations has not been determined at this time.
Cash Flows--For the nine months ended September 30, 1996 and 1995, AmSouth
paid interest of $522,674,000 and $497,491,000, respectively, and income taxes
of $59,442,000 and $43,691,000, respectively. Noncash transfers from loans to
foreclosed properties for the nine months ended September 30, 1996 and 1995
were $15,333,000 and $11,050,000, respectively, and noncash transfers from
foreclosed properties to loans were $942,000 and $2,914,000, respectively. For
the nine months ended September 30, 1996, noncash transfers from loans to
available-for-sale securities of approximately $706,525,000 and noncash
transfers from loans to other assets of approximately $5,309,000 were made in
connection with mortgage loan securitizations. For the nine months ended
September 30, 1996, a $4,131,000 transfer from long-term debt to shareholders'
equity was made due to the redemption of convertible debt.
Shareholders' Equity--On March 1, 1996, AmSouth purchased 1,000,000 shares
of its common stock at a cost of $40,506,000 for the purpose of satisfying
requirements of employee benefit and dividend reinvestment
7
<PAGE>
plans. This repurchase was part of a plan approved in October 1995 and all
authorized shares have been repurchased.
On July 18, 1996, AmSouth's Board of Directors authorized a new plan to
repurchase up to five percent of AmSouth's outstanding shares of common stock
as of June 30, 1996, or approximately 2.8 million shares, from time to time.
The shares will be used to fund stock issued under AmSouth's dividend
reinvestment and employee benefit plans or for general corporate purposes.
During the third quarter of 1996, AmSouth purchased 550,000 shares of its
common stock at a cost of $20,848,000.
8
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
AmSouth Bancorporation
We have reviewed the accompanying consolidated statement of condition of
AmSouth Bancorporation and subsidiaries as of September 30, 1996 and 1995, and
the related consolidated statement of earnings for the three-month and nine-
month periods ended September 30, 1996 and 1995, and the consolidated
statement of cash flows for the nine-month periods ended September 30, 1996
and 1995. These financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with the standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which will
be performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of condition of AmSouth Bancorporation
and subsidiaries as of December 31, 1995, and the related consolidated
statements of earnings, shareholders' equity, and cash flows for the year then
ended (not presented herein) and in our report dated January 31, 1996, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
statement of condition as of December 31, 1995, is fairly stated, in all
material respects, in relation to the consolidated statement of condition from
which it has been derived.
/s/ ERNST & YOUNG LLP
November 12, 1996
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
AmSouth's reported net income for the nine months ended September 30, 1996
was $131.1 million, a 3.1% increase over net income of $127.1 million for the
same period of 1995. On a per common share basis, earnings were $2.31 and
$2.18, respectively. Included in year-to-date net income for 1996 was a one-
time, pre-tax charge of $24.2 million, or $.27 per share net of tax, required
under recently passed federal legislation to recapitalize the Savings
Association Insurance Fund (SAIF). Year-to-date net income for 1995 included a
pre-tax gain of $25.0 million from the sale of AmSouth's third-party mortgage
servicing portfolio. Also included in 1995 year-to-date net income was $22.2
million in nonrecurring expenses primarily associated with productivity
initiatives and a refund from the Federal Deposit Insurance Corporation (FDIC)
of approximately $5.0 million. Year-to-date earnings for 1996 resulted in an
annualized return on average assets (ROA) of .97% and an annualized return on
average equity (ROE) of 12.74% compared to 1.01% and 12.62%, respectively, for
the first nine months of 1995. Exclusive of the one-time SAIF assessment, ROA
and ROE for 1996 was 1.09% and 14.14%, respectively. AmSouth's 1996 year-to-
date operating efficiency ratio improved to 60.65% compared to 62.03% for the
prior year. Exclusive of the one-time SAIF assessment, 1996 year-to-date
operating efficiency ratio was 57.01%.
Net income for the third quarter of 1996 was $35.2 million, or $.62 per
common share, compared to $46.1 million, or $.79 per common share, for the
same period of 1995. Exclusive of the one time SAIF assessment, 1996 third
quarter net income was $50.4 million, or $.89 per common share. ROA and ROE
for the third quarter of 1996 were .77% and 10.08%, respectively, compared to
1.09% and 13.38% for the third quarter of 1995. Third quarter 1996 ROA and ROE
were 1.10% and 14.42%, respectively, exclusive of the one-time SAIF
assessment.
Net Interest Income
Net interest income on a fully taxable equivalent basis for the nine months
ended September 30, 1996 was $490.1 million, an 8.9% increase over the same
period of 1995. The improvement in net interest income was primarily the
result of a $1.2 billion increase in year-to-date average earning asset
balances. The net interest margin increased four basis points to 3.90% .
The increase in year-to-date average earning assets was primarily due to an
increase in average securities. Average securities increased $1.3 billion as a
result of the securitization of approximately $1.0 billion of variable rate
residential first mortgages during the previous twelve months and additional
purchases of securities. Average loans net of unearned income decreased $68.9
million. Exclusive of residential first mortgages, average loans net of
unearned income increased $880.1 million, or 11.9%, primarily in commercial,
dealer indirect and consumer revolving credit loans.
The year-to-date average balance of interest-bearing liabilities increased
$1.0 billion, funding 85.9% of the growth in average earning assets. An
increase of $690.5 million in average Federal funds purchased and securities
sold under agreements to repurchase was the primary reason for the increase.
Other significant increases included a $303.9 million increase in treasury,
tax and loan notes, a $149.8 million increase in parent company subordinated
long-term debt, related to the issuance of 6.75% debentures in the fourth
quarter of 1995, and a $193.9 million increase in Federal Home Loan Bank
advances. These increases were partially offset by a $214.1 million decrease
in interest-bearing deposits. The remaining growth in average earning assets
was funded by decreases in noninterest-earning assets and increases in
noninterest-bearing liabilities and shareholders' equity.
Asset/Liability Management
AmSouth maintains a formal asset and liability management process to
quantify, monitor and control interest rate risk and to assist management in
maintaining stability in the net interest margin under varying interest rate
environments. This is accomplished through the development and implementation
of lending, funding and pricing strategies designed to maximize net interest
income performance under varying interest rate environments subject to
specific liquidity and interest rate risk guidelines.
10
<PAGE>
The primary tool used by AmSouth to measure interest rate risk is an
earnings simulation model which evaluates the impact of different interest
rate scenarios on the corporation's projected business plan over a 12 to 24
month horizon. Management feels that a more traditional interest sensitivity
gap analysis does not provide a complete picture of the corporation's exposure
to interest rate changes since static gap models are a point-in-time
measurement and, therefore, do not incorporate the effects of future balance
sheet trends, changes in the relationship between yields earned and rates
paid, patterns of rate movements in general or changes in prepayment speeds
due to changes in rates. AmSouth's earnings simulation model incorporates the
effect of these factors in addition to the impact of certain embedded interest
rate caps and floors on certain assets and liabilities while also reflecting
management's anticipated action under varying interest rate environments.
Interest rate scenarios are simulated on a regular basis to determine the
range of interest rate risk. Net interest income performance is measured under
scenarios ranging from plus or minus 100 basis points to plus or minus 300
basis points over 12 months compared to a stable interest rate environment.
The net interest income differential is expressed as a percent of net interest
income over twelve months if interest rates are unchanged. As of September 30,
1996, the earnings simulation model results indicated that the corporation was
in a relatively neutral interest rate risk position with net interest income
in a plus or minus 200 basis point scenario being less than 2% of projected
net interest income in a stable interest rate scenario. This level of interest
rate risk is well within the corporation's policy guidelines. A very important
factor in determining this interest rate risk position is the extent to which
pricing on administered rate deposit products, including interest checking,
savings, and money market accounts would be affected under varying interest
rate scenarios. At AmSouth, pricing for these products is assumed to be more
variable in rising rate scenarios than in declining rate scenarios. While
these assumptions are somewhat subjective, management reviews the anticipated
pricing for these products on a regular basis and alters these assumptions
whenever trends or market conditions dictate.
Over the last few years, AmSouth has, from time to time, utilized various
off-balance sheet instruments such as interest rate swaps, caps and floors to
assist in managing interest rate risk. At September 30, 1996, AmSouth had $1.0
billion notional amount of caps outstanding, consisting of $500.0 million of
caps sold and $500.0 million of caps purchased, as hedges on $500.0 million of
prime rate loans. This transaction effectively locked in the historically wide
300 basis points spread between Federal funds and the prime rate in a rising
rate environment. Additionally, $110.0 million notional amount of caps
outstanding hedge the cost of designated liabilities. In addition to the caps,
AmSouth had interest rate swaps in the aggregate notional amount of $150.0
million which were purchased to hedge the cost of $150.0 million of 6.75%
subordinated debentures issued in the fourth quarter of 1995. These swaps
effectively converted the fixed rate applicable to these debentures to a
floating rate tied to the one-month LIBOR rate. AmSouth also had $220.0
million notional amount of interest rate swaps to hedge designated securities
and deposits. At September 30, 1996, AmSouth also held other off-balance sheet
instruments to provide customers and AmSouth a means of managing the risks of
changing interest and foreign exchange rates. These other off-balance sheet
instruments were immaterial. At September 30, 1996, no off-balance sheet
instruments were held for trading purposes.
Credit Quality
AmSouth maintains an allowance for loan losses which it believes is adequate
to absorb losses inherent in the loan portfolio. A formal review is prepared
quarterly to assess the risk in the portfolio and to determine the adequacy of
the allowance for loan losses. The review includes analyses of historical
performance, the level of nonperforming and adversely rated loans, specific
analyses of certain problem loans, loan activity since the previous quarter,
reports prepared by the Loan Review Department, consideration of current
economic conditions, and other pertinent information. The level of allowance
to net loans outstanding will vary depending on the overall results of this
quarterly review. The review is then presented to and subsequently approved by
senior management and the Audit and Community Responsibility Committee of the
Board of Directors.
Table 7 presents a five quarter analysis of the allowance for loan losses.
At September 30, 1996, the allowance for loan losses was $179.4 million, or
1.52% of loans net of unearned income, compared to $179.6 million, or 1.51%,
for the prior year. The coverage ratio of the allowance for loan losses to
nonperforming loans
11
<PAGE>
increased from 200.94% at September 30, 1995 to 221.40% for the same period in
1996 as the level of nonperforming loans decreased $8.3 million.
For the three months ended September 30, 1996, net charge-offs were $16.9
million, an increase of $8.0 million compared to the same period of 1995.
Year-to-date net charge-offs were $45.8 million compared to $23.4 million for
the prior year. Increases for both periods were primarily in the consumer
revolving credit and dealer indirect loan portfolios which grew 25.6% and
14.3%, respectively, from September 30, 1995 to September 30, 1996. However,
these portfolios comprised only 4.2% and 10.0%, respectively, of the total
loan portfolio. Declining trends in credit quality in the consumer sector of
the economy also contributed to the increase in net charge-offs. Annualized
net charge-offs to average loans net of unearned income for the three months
ended September 30, 1996 was .57% compared to .30% for the same period of the
prior year. Year to date, the ratio was .52% compared to .27% for the prior
year. The increased level of net charge-offs, combined with the growth in the
consumer loan portfolio, which traditionally has a higher risk of loss,
resulted in a provision for loan losses for the three months and nine months
ended September 30, 1996, of $17.5 million and $46.7 million, respectively.
Net charge-offs of impaired loans for the nine months ended September 30, 1996
were $2.3 million.
Table 8 presents a five quarter comparison of the components of
nonperforming assets. As a percentage of loans net of unearned income,
foreclosed properties and repossessions, nonperforming assets decreased from
.88% at September 30, 1995 to .82% at September 30, 1996. The level of
nonperforming assets decreased $6.9 million during the same period.
Included in nonperforming assets at September 30, 1996 and 1995, were $47.4
million and $52.7 million, respectively, in loans that were considered to be
impaired, substantially all of which were on a nonaccrual basis. Collateral
dependent loans, which were measured at the fair value of the collateral,
constituted approximately all of these impaired loans. There was $2.9 million
in the allowance for loan losses specifically allocated to these impaired
loans. The average balance of impaired loans for the three months ended
September 30, 1996 and 1995 was $44.3 million and $56.9 million, respectively,
and $50.0 million and $58.8 million, respectively, for the nine months ended
September 30, 1996 and 1995. AmSouth recorded no material interest income on
its impaired loans during the three months and nine months ended September 30,
1996.
Noninterest Revenues and Noninterest Expenses
Year-to-date noninterest revenues totaled $174.8 million at September 30,
1996 compared to $180.0 million for the same period of the prior year.
Included in mortgage income for the prior year is a $25.0 million gain from
AmSouth's sale of its third-party mortgage servicing portfolio in the second
quarter of 1995. Exclusive of the gain, year-to-date noninterest revenues
increased 12.8% over the prior year. Compared to the prior year, service
charges on deposit accounts increased $7.7 million, or 12.2%. This increase is
attributable to a revenue enhancement initiative that was implemented in the
second quarter of 1995 to automate the payment of certain demand deposit
account service fees. Trust income increased 15.4% to $42.5 million primarily
from new employee benefit plan administration accounts, increased personal
trust accounts and higher fees. Investment services income increased $7.7
million primarily as a result of a higher sales volume of annuity products.
The introduction of the AmSouth CheckCardSM in 1995 and the expansion of
AmSouth's ATM network were the primary reasons for a 57.4% increase in
interchange income. Credit card income increased 10.4% reflecting a higher
level of customer activity and an increased number of cardholder accounts.
Noninterest revenues for the third quarter of 1996 were $60.2 million, a
24.3% increase over the same period of the prior year. Changes were primarily
for the same reasons discussed in the year-to-date analysis.
Year-to-date noninterest expenses totaled $403.3 million at September 30,
1996 compared to $390.1 million for the same period of the prior year.
Exclusive of the one-time SAIF assessment in 1996 and the $22.2 million in
nonrecurring productivity initiative expenses and the approximately $5.0
million FDIC refund in 1995, noninterest expenses increased 1.7%. Salaries and
employee benefits, net of $6.7 million of expenses related to business and
branch consolidations in 1995, increased $6.3 million primarily due to a
higher company match of
12
<PAGE>
employee thrift plan contributions and enhancements to employee life insurance
benefits. Net occupancy expense increased $3.8 million, net of costs of $5.5
million for branch consolidations in 1995. This increase is primarily related
to a lease in a new office complex. Adjusted for $4.7 million for development
costs of new financial systems and the write-off of various leases in 1995,
equipment expense increased $4.9 million primarily due to investments in
technology for the consumer and commercial lines of business. Telephone
expense increased $2.0 million as the network was established for the consumer
and commercial technology projects. Exclusive of the one-time SAIF assessment
in 1996 and a refund from the Federal Deposit Insurance Corporation (FDIC) in
the third quarter of 1995, FDIC premiums decreased $14.0 million. FDIC
premiums are lower as a result of the FDIC reducing the premium rate on
deposits insured by the Bank Insurance Fund (BIF) to zero beginning in 1996.
After the one-time assessment, AmSouth's cost for deposit insurance will be
lowered by approximately $7.0 million per year primarily due to the reduction
in SAIF deposit premium rates. Amortization expense decreased $3.5 million due
to the elimination of purchased mortgage servicing rights when AmSouth's
third-party mortgage servicing portfolio was sold in June 1995.
Noninterest expenses for the third quarter of 1996 totaled $152.1 million.
Net of the effects of the SAIF assessment and the FDIC refund, noninterest
expenses increased $7.9 million , or 6.6% over the third quarter of 1995.
Changes for the quarter were primarily for the same reasons discussed in the
year-to-date analysis.
Capital Adequacy
At September 30, 1996, shareholders' equity totaled $1.4 billion or 7.51% of
total assets. Since December 31, 1995, shareholders' equity has increased
$15.0 million due to net income of $131.1 million, reduced by dividends of
$67.9 million and partially offset by the purchase of 1,550,000 shares of
AmSouth common stock for $61.4 million. The purchase of 1,000,000 shares in
March 1996 completed a program approved by the Board of Directors in 1995 to
repurchase 2,265,000 shares to provide shares for AmSouth's employee benefit
and dividend reinvestment plans and other corporate purposes. In July 1996,
the Board of Directors approved an additional program to repurchase from time
to time up to five percent of AmSouth's outstanding shares of common stock as
of June 30, 1996 or approximately 2.8 million shares. The shares will be used
for the same purposes as the previous program. In August 1996, 550,000 shares
were purchased under this program.
Table 11 presents the calculation of the risk-adjusted capital ratios for
AmSouth at September 30, 1996 and 1995. At September 30, 1996, AmSouth
remained above the regulatory minimum required risk-adjusted Tier 1 Capital
Ratio of 4.00% and the regulatory required risk-adjusted Total Capital Ratio
of 8.00%. In addition, the risk-adjusted capital ratios for AmSouth's banking
subsidiaries were above the regulatory minimum and each subsidiary was well-
capitalized at September 30, 1996.
13
<PAGE>
TABLE 1--FINANCIAL SUMMARY
<TABLE>
<CAPTION>
SEPTEMBER 30
------------------------------ %
1996 1995 CHANGE
-------------- -------------- -------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
BALANCE SHEET SUMMARY
End-of-period balances:
Loans net of unearned
income................. $ 11,832,637 $ 11,922,456 (0.8)%
Total securities........ 5,415,847* 3,788,449* 43.0
Total assets............ 18,615,080 17,004,235 9.5
Total deposits.......... 12,456,219 13,177,928 (5.5)
Shareholders' equity.... 1,398,466 1,387,219 0.8
Year-to-date average bal-
ances:
Loans net of unearned
income................. $ 11,658,708 $ 11,727,594 (0.6)%
Total securities........ 5,017,533* 3,746,248* 33.9
Total assets............ 17,969,164 16,869,446 6.5
Total deposits.......... 13,074,206 13,294,728 (1.7)
Shareholders' equity.... 1,374,003 1,346,145 2.1
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
-------------------- % -------------------- %
1996 1995 CHANGE 1996 1995 CHANGE
--------- --------- ------ --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Net income............. $ 131,061 $ 127,063 3.1% $ 35,193 $ 46,095 (23.7)%
Per common share....... 2.31 2.18 6.0 0.62 0.79 (21.5)
SELECTED RATIOS
Return on average
assets (annualized)... 0.97% 1.01% 0.77% 1.09%
Return on average
equity (annualized)... 12.74 12.62 10.08 13.38
Average equity to
average assets........ 7.65 7.98 7.62 8.13
Allowance for loan
losses to loans net of
unearned income....... 1.52 1.51 1.52 1.51
Efficiency ratio....... 60.65 62.03 66.86 57.40
COMMON STOCK DATA
Cash dividends
declared.............. $ 1.20 $ 1.14 $ 0.40 $ 0.38
Book value at end of
period................ 24.68 23.72 24.68 23.72
Market value at end of
period................ 44.50 38.00 44.50 38.00
Average common shares
outstanding........... 56,717 58,273 56,623 58,418
WITHOUT SAIF ASSESSMENT
Net income............. $ 146,280 $ 127,063 15.1% $ 50,412 $ 46,095 9.4%
Per common share....... 2.58 2.18 18.3 0.89 0.79 12.7
Return on average
assets (annualized)... 1.09% 1.01% 1.10% 1.09%
Return on average
equity (annualized)... 14.14 12.62 14.42 13.38
Efficiency ratio....... 57.01 62.03 56.22 57.40
</TABLE>
- --------
* Excludes adjustment for market valuation on available-for-sale securities.
14
<PAGE>
TABLE 2--YEAR-TO-DATE YIELDS EARNED ON AVERAGE EARNING ASSETS
AND RATES PAID ON AVERAGE INTEREST-BEARING LIABILITIES
<TABLE>
<CAPTION>
1996 1995
------------------------------ ----------------------------
NINE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------------------ ----------------------------
AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
----------- ---------- ------ ----------- -------- ------
(TAXABLE EQUIVALENT BASIS-DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans net of unearned
income................ $11,658,708 $ 752,662 8.62% $11,727,594 $756,320 8.62%
Trading securities..... 3,986 134 4.49 6,745 290 5.75
Available-for-sale
securities............ 2,414,356 122,392 6.77 502,981 27,407 7.29
Held-to-maturity
securities:
Taxable............... 2,396,223 120,952 6.74 2,965,488 145,192 6.558
Tax-free.............. 202,968 16,612 10.93 271,034 22,126 10.91
----------- ---------- ----------- --------
Total held-to-maturity
securities........... 2,599,191 137,564 7.07 3,236,522 167,318 6.91
----------- ---------- ----------- --------
Total securities.... 5,017,533 260,090 6.92 3,746,248 195,015 6.96
Other earning assets... 119,147 5,677 6.36 103,019 5,263 6.83
----------- ---------- ----------- --------
Total earning assets.. 16,795,388 1,018,429 8.10 15,576,861 956,598 8.21
Cash and other assets.. 1,330,009 1,467,199
Allowance for loan
losses................ (178,548) (175,936)
Market valuation on
available-for-sale
securities............ 22,315 1,322
----------- -----------
$17,969,164 $16,869,446
=========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing
liabilities:
Interest-bearing demand
deposits.............. $ 3,711,128 87,712 3.16 $ 3,917,453 108,098 3.69
Savings deposits....... 1,028,268 20,875 2.71 946,992 20,690 2.92
Time deposits.......... 5,692,628 245,685 5.76 5,769,648 244,298 5.66
Certificates of deposit
of $100,000 or more... 887,055 38,246 5.76 899,062 39,159 5.82
Federal funds purchased
and securities sold
under agreements to
repurchase............ 1,771,159 68,642 5.18 1,080,661 47,853 5.92
Other interest-bearing
liabilities........... 1,528,263 67,169 5.87 958,309 46,567 6.50
----------- ---------- ----------- --------
Total interest-bearing
liabilities.......... 14,618,501 528,329 4.83 13,572,125 506,665 4.99
----------- ---------- ----- ----------- -------- -----
Incremental interest
spread................ 3.27% 3.22%
===== =====
Noninterest-bearing
demand deposits....... 1,755,127 1,761,573
Other liabilities...... 221,533 189,603
Shareholders' equity... 1,374,003 1,346,145
----------- -----------
$17,969,164 $16,869,446
=========== ===========
Net interest
income/margin on a
taxable equivalent
basis.................. 490,100 3.90% 449,933 3.86%
===== =====
Taxable equivalent
adjustment:
Loans.................. 1,704 2,286
Securities............. 5,481 7,310
---------- --------
Total taxable
equivalent
adjustment........... 7,185 9,596
---------- --------
Net interest income.. $ 482,915 $440,337
========== ========
</TABLE>
- --------
Note: The taxable equivalent adjustment has been computed based on a 35%
federal income tax rate.
15
<PAGE>
TABLE 3--QUARTERLY YIELDS EARNED ON AVERAGE EARNING ASSETS AND RATES PAID ON
AVERAGE INTEREST-BEARING LIABILITIES
<TABLE>
<CAPTION>
1996
----------------------------------------------------------------------------------------
THIRD QUARTER SECOND QUARTER FIRST QUARTER
---------------------------- ---------------------------- ----------------------------
AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
----------- -------- ------ ----------- -------- ------ ----------- -------- ------
(TAXABLE EQUIVALENT BASIS-DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans net of
unearned income.. $11,726,594 $252,951 8.58% $11,575,473 $248,233 8.63% $11,673,313 $251,472 8.66%
Trading
securities....... 3,816 45 4.69 4,366 48 4.42 3,778 41 4.36
Available-for-
sale securities.. 2,468,474 43,008 6.93 2,419,311 40,912 6.80 2,354,687 38,472 6.57
Held-to-maturity
securities:
Taxable.......... 2,566,379 43,162 6.69 2,477,564 41,531 6.74 2,142,855 36,259 6.81
Tax-free......... 191,680 5,106 10.60 201,702 5,594 11.15 215,647 5,912 11.03
----------- -------- ----------- -------- ----------- --------
Total held-to-
maturity
securities...... 2,758,059 48,268 6.96 2,679,266 47,125 7.07 2,358,502 42,171 7.19
----------- -------- ----------- -------- ----------- --------
Total
securities..... 5,230,349 91,321 6.95 5,102,943 88,085 6.94 4,716,967 80,684 6.88
Other earning
assets........... 98,454 1,533 6.19 152,586 2,390 6.30 106,629 1,760 6.64
----------- -------- ----------- -------- ----------- --------
Total earning
assets.......... 17,055,397 345,805 8.07 16,831,002 338,708 8.09 16,496,909 333,916 8.14
Cash and other
assets........... 1,332,692 1,324,032 1,333,274
Allowance for
loan losses...... (178,764) (178,475) (178,402)
Market valuation
on available-
for-sale
securities....... 13,767 21,508 31,764
----------- ----------- -----------
$18,223,092 $17,998,067 $17,683,545
=========== =========== ===========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Interest-bearing
liabilities:
Interest-bearing
demand deposits.. $ 3,587,581 28,305 3.14 $ 3,700,373 29,051 3.16 $ 3,846,787 30,356 3.17
Savings deposits.. 1,044,721 7,294 2.78 1,025,627 6,899 2.71 1,014,277 6,682 2.65
Time deposits..... 5,586,176 79,029 5.63 5,771,320 83,283 5.80 5,721,558 83,372 5.86
Certificates of
deposit of
$100,000 or
more............. 853,058 12,296 5.73 880,157 12,602 5.76 928,322 13,348 5.78
Federal funds
purchased and
securities
sold under
agreements to
repurchase...... 1,870,288 24,365 5.18 1,767,378 22,473 5.11 1,674,720 21,805 5.24
Other interest-
bearing
liabilities...... 1,894,780 27,251 5.72 1,492,290 21,822 5.88 1,193,692 18,096 6.10
----------- -------- ----------- -------- ----------- --------
Total interest-
bearing
liabilities...... 14,836,604 178,540 4.79 14,637,145 176,130 4.84 14,379,356 173,659 4.86
-------- ----- -------- ----- -------- -----
Incremental
interest spread.. 3.28% 3.25% 3.28%
===== ===== =====
Noninterest-
bearing demand
deposits......... 1,781,474 1,767,696 1,715,922
Other liabilities. 216,683 219,469 211,581
Shareholders'
equity........... 1,388,331 1,373,757 1,376,686
----------- ----------- -----------
$18,223,092 $17,998,067 $17,683,545
=========== =========== ===========
Net interest
income/margin on
a taxable
equivalent basis. 167,265 3.90% 162,578 3.89% 160,257 3.91%
===== ===== =====
Taxable equivalent
adjustment:
Loans............. 528 574 602
Securities........ 1,682 1,849 1,950
-------- -------- --------
Total taxable
equivalent
adjustment...... 2,210 2,423 2,552
-------- -------- --------
Net interest
income......... $165,055 $160,155 $157,705
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1995
----------------------------------------------------------
FOURTH QUARTER THIRD QUARTER
---------------------------- ----------------------------
AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
----------- -------- ------ ----------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans net of
unearned income.. $11,806,113 $257,968 8.67% $11,816,908 $256,878 8.62%
Trading
securities....... 5,348 29 2.15 2,797 27 3.83
Available-for-
sale securities.. 642,444 10,627 6.56 496,588 8,900 7.11
Held-to-maturity
securities:
Taxable.......... 3,158,591 52,453 6.59 2,908,333 48,044 6.55
Tax-free......... 232,750 6,315 10.76 255,893 6,957 10.79
----------- -------- ----------- --------
Total held-to-
maturity
securities...... 3,391,341 58,768 6.88 3,164,226 55,001 6.90
----------- -------- ----------- --------
Total
securities..... 4,039,133 69,424 6.82 3,663,611 63,928 6.92
Other earning
assets........... 73,533 1,310 7.07 87,315 1,205 5.48
----------- -------- ----------- --------
Total earning
assets.......... 15,918,779 328,702 8.19 15,567,834 322,011 8.21
Cash and other
assets........... 1,413,087 1,404,025
Allowance for
loan losses...... (178,948) (179,588)
Market valuation
on available-
for-sale
securities....... 5,761 4,324
----------- -----------
$17,158,679 $16,796,595
=========== ===========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Interest-bearing
liabilities:
Interest-bearing
demand deposits.. $ 3,823,303 31,756 3.30 $ 3,830,799 33,139 3.43
Savings deposits.. 1,002,444 6,810 2.70 986,486 6,805 2.74
Time deposits..... 5,770,288 85,680 5.89 5,800,011 85,978 5.88
Certificates of
deposit of
$100,000 or
more............. 997,469 15,120 6.01 919,357 14,018 6.05
Federal funds
purchased and
securities
sold under
agreements to
repurchase...... 1,388,274 19,329 5.52 1,044,177 14,966 5.69
Other interest-
bearing
liabilities...... 833,555 14,036 6.68 905,252 14,800 6.49
----------- -------- ----------- --------
Total interest-
bearing
liabilities...... 13,815,333 172,731 4.96 13,486,082 169,706 4.99
-------- ----- -------- -----
Incremental
interest spread.. 3.23% 3.22%
===== =====
Noninterest-
bearing demand
deposits......... 1,738,426 1,730,937
Other liabilities. 221,993 213,217
Shareholders'
equity........... 1,382,927 1,366,359
----------- -----------
$17,158,679 $16,796,595
=========== ===========
Net interest
income/margin on
a taxable
equivalent basis. 155,971 3.89% 152,305 3.88%
===== =====
Taxable equivalent
adjustment:
Loans............. 682 745
Securities........ 2,083 2,195
-------- --------
Total taxable
equivalent
adjustment...... 2,765 3,040
-------- --------
Net interest
income......... $153,206 $149,265
======== ========
</TABLE>
- ----
Note: The taxable equivalent adjustment has been computed based on a 35%
federal income tax rate.
16
<PAGE>
TABLE 4--INTEREST RATE SWAPS, CAPS AND FLOORS
<TABLE>
<CAPTION>
SWAPS
-------------------------
RECEIVE PAY CAPS
FIXED FIXED BASIS OTHER & FLOORS TOTAL
------- ----- ----- ----- -------- ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996........... $150 $-0- $-0- $-0- $1,110 $1,260
Additions........................... 220 -0- -0- -0- -0- 220
Maturities.......................... -0- -0- -0- -0- -0- -0-
Calls............................... -0- -0- -0- -0- -0- -0-
Terminations........................ -0- -0- -0- -0- -0- -0-
---- ---- ---- ---- ------ ------
Balance at September 30, 1996........ $370 $-0- $-0- $-0- $1,110 $1,480
==== ==== ==== ==== ====== ======
</TABLE>
TABLE 5--MATURITIES ON CAPS AND INTEREST RATES EXCHANGED ON SWAPS
<TABLE>
<CAPTION>
MATURE DURING
---------------------------------
1996 1997 1998 1999 2000 TOTAL
----- ---- ----- ----- ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Receive fixed swaps:
Notional amount..................... $ 150 $ 65 $ 115 $ 40 $ -0- $ 370
Receive rate........................ 6.28% 6.89% 6.66% 6.70% 0.00% 6.55%
Pay rate............................ 5.50% 5.55% 5.55% 5.66% 0.00% 5.54%
Caps:
Notional amount..................... $ 33 $ 77 $ -0- $ -0- $1,000 $1,110
</TABLE>
- --------
Note: The maturities and interest rates exchanged are calculated assuming
that interest rates remain unchanged from average September 1996 rates. The
information presented could change as future interest rates increase or
decrease.
TABLE 6--LOANS AND CREDIT QUALITY
<TABLE>
<CAPTION>
NET CHARGE-OFFS
LOANS NONPERFORMING LOANS* NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
----------------------- ----------------------- ------------------
1996 1995 1996 1995 1996 1995
----------- ----------- -------------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial.............. $ 3,505,912 $ 3,033,409 $ 17,410 $ 11,554 $ 2,331 $ 2,971
Commercial real estate:
Commercial real estate
mortgages............. 1,619,213 1,476,494 26,361 27,138 (75) 1,393
Real estate construc-
tion.................. 688,892 496,067 1,930 11,843 (274) 229
----------- ----------- -------- -------- -------- --------
Total commercial real
estate.............. 2,308,105 1,972,561 28,291 38,981 (349) 1,622
----------- ----------- -------- -------- -------- --------
Consumer:
Residential first mort-
gages................. 2,961,250 4,272,370 27,637 30,922 2,045 612
Other residential mort-
gages................. 811,945 665,629 1,061 1,106 301 (193)
Dealer indirect........ 1,190,890 1,041,744 4,647 4,525 10,922 5,012
Revolving credit....... 502,272 399,981 -0- -0- 20,924 10,274
Other consumer......... 638,118 616,117 1,961 2,267 9,601 3,121
----------- ----------- -------- -------- -------- --------
Total consumer........ 6,104,475 6,995,841 35,306 38,820 43,793 18,826
----------- ----------- -------- -------- -------- --------
$11,918,492 $12,001,811 $ 81,007 $ 89,355 $ 45,775 $ 23,419
=========== =========== ======== ======== ======== ========
</TABLE>
- --------
* Exclusive of accruing loans 90 days past due.
17
<PAGE>
TABLE 7--ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
1996 1995
----------------------------------- -----------------------
3RD QUARTER 2ND QUARTER 1ST QUARTER 4TH QUARTER 3RD QUARTER
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at beginning of
period................. $ 178,724 $ 177,930 $ 178,451 $ 179,550 $ 179,002
Loans charged off....... (21,202) (18,442) (20,626) (13,998) (12,290)
Recoveries of loans pre-
viously charged off.... 4,323 5,187 4,985 2,809 3,440
--------- --------- --------- --------- ---------
Net charge-offs......... (16,879) (13,255) (15,641) (11,189) (8,850)
Addition to allowance
charged to expense..... 17,505 14,049 15,120 10,090 9,398
--------- --------- --------- --------- ---------
Balance at end of peri-
od..................... $ 179,350 $ 178,724 $ 177,930 $ 178,451 $ 179,550
========= ========= ========= ========= =========
Allowance for loan
losses to loans net of
unearned income........ 1.52% 1.55% 1.55% 1.52% 1.51%
Allowance for loan
losses to nonperforming
loans.................. 221.40% 213.83% 195.70% 185.41% 200.94%
Allowance for loan
losses to nonperforming
assets................. 183.67% 182.29% 163.06% 154.49% 171.73%
Net charge-offs to aver-
age loans net of un-
earned income
(annualized)........... 0.57% 0.46% 0.54% 0.38% 0.30%
</TABLE>
TABLE 8--NONPERFORMING ASSETS
<TABLE>
<CAPTION>
1996 1995
------------------------------ ------------------------
SEPTEMBER 30 JUNE 30 MARCH 31 DECEMBER 31 SEPTEMBER 30
------------ ------- -------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans........ $81,007 $83,583 $ 90,919 $ 96,246 $ 89,355
Foreclosed properties... 13,874 12,845 14,764 16,150 13,144
Repossessions........... 2,769 1,614 3,439 3,114 2,052
------- ------- -------- -------- --------
Total nonperforming as-
sets*................. $97,650 $98,042 $109,122 $115,510 $104,551
======= ======= ======== ======== ========
Nonperforming assets* to
loans net of unearned
income, foreclosed
properties and
repossessions.......... 0.82% 0.85% 0.95% 0.98% 0.88%
Accruing loans 90 days
past due............... $39,535 $39,944 $ 40,110 $ 39,618 $ 45,548
</TABLE>
- --------
* Exclusive of accruing loans 90 days past due.
18
<PAGE>
TABLE 9--SECURITIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
---------------------- ----------------------
CARRYING MARKET CARRYING MARKET
AMOUNT VALUE AMOUNT VALUE
----------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Held-to-maturity:
U.S. Treasury and federal agency
securities..................... $ 2,267,306 $2,243,054 $ 3,004,790 $3,007,257
State, county and municipal se-
curities....................... 191,773 199,774 247,375 259,991
Other securities................ 263,582 260,623 6,550 6,465
----------- ---------- ----------- ----------
$ 2,722,661 $2,703,451 $ 3,258,715 $3,273,713
=========== ========== =========== ==========
Available-for-sale:
U.S. Treasury and federal agency
securities..................... $ 2,431,074 $ 333,090
Other securities................ 281,123 189,715
----------- -----------
$ 2,712,197 $ 522,805
=========== ===========
</TABLE>
- --------
Notes:
1. The weighted average remaining life, which reflects the amortization on
mortgage related and other asset-backed securities, and the weighted
average yield on the combined held-to-maturity and available-for-sale
portfolios at September 30, 1996 were approximately 4.5 years and 6.95%,
respectively. Included in the balance was $4.1 billion of mortgage-backed
securities, $1.2 billion of which were variable rate. The weighted average
remaining life and the weighted average yield of mortgage-backed securities
at September 30, 1996 were approximately 4.8 years and 7.00%, respectively.
The duration of the combined portfolios, which considers the repricing
frequency of variable rate securities, is approximately 2.6 years.
2. The available-for-sale portfolio included a net unrealized gain of $23.2
million and $4.2 million at September 30, 1996 and 1995, respectively.
TABLE 10--OTHER INTEREST-BEARING LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------
1996 1995
---------- --------
(IN THOUSANDS)
<S> <C> <C>
Other borrowed funds:
Treasury, tax, and loan notes............................. $1,779,946 $275,482
Federal Home Loan Bank advances........................... 155,000 161,950
Term federal funds purchased.............................. -0- 82,030
Floating Rate Notes Due 1999.............................. 6,769 6,899
Other..................................................... 10,356 8,520
---------- --------
Total other borrowed funds.............................. $1,952,071 $534,881
========== ========
Other long-term debt:
6.75% Subordinated Debentures Due 2025.................... $ 149,841 $ -0-
7.75% Subordinated Notes Due 2004......................... 149,297 149,206
Subordinated Capital Notes Due 1999....................... 99,666 99,537
7.50% Convertible Subordinated Debentures................. -0- 3,986
Other..................................................... 22,883 23,622
---------- --------
Total other long-term debt.............................. $ 421,687 $276,351
========== ========
</TABLE>
19
<PAGE>
TABLE 11--CAPITAL RATIOS
<TABLE>
<CAPTION>
SEPTEMBER 30
------------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Risk-adjusted capital ratios:
Total assets........................................ $18,615,080 $17,004,235
Adjusted allowance for loan losses.................. 170,669 162,136
Adjustment for risk-weighting of balance sheet
items.............................................. (6,413,442) (5,912,037)
Adjustment for off-balance sheet items.............. 1,568,075 1,994,340
Unrealized gains on available-for-sale securities... (23,644) (4,184)
Less certain intangible assets...................... (272,271) (288,866)
----------- -----------
Total risk-adjusted assets......................... $13,644,467 $12,955,624
=========== ===========
Shareholders' equity................................ $ 1,398,466 $ 1,387,219
Unrealized gains on available-for-sale securities
(net of deferred taxes)............................ (14,962) (2,609)
Less certain intangible assets...................... (272,271) (288,866)
----------- -----------
Tier I capital...................................... 1,111,233 1,095,744
----------- -----------
Adjusted allowance for loan losses.................. 171,465 162,136
Qualifying long-term debt........................... 339,003 208,928
----------- -----------
Tier II capital..................................... 509,672 371,064
----------- -----------
Total capital...................................... $ 1,620,905 $ 1,466,808
=========== ===========
Tier I capital to total risk-adjusted assets........ 8.14% 8.46%
Total capital to risk-adjusted assets............... 11.88% 11.32%
Other capital ratios:
Leverage............................................ 6.19% 6.64%
Equity to assets.................................... 7.51% 8.16%
Tangible equity to assets........................... 6.14% 6.57%
</TABLE>
20
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Several of AmSouth's subsidiaries are defendants in legal proceedings arising
in the ordinary course of business. Some of these proceedings seek relief or
damages that are substantial. The actions relate to AmSouth's lending,
collections, servicing, investment, trust and other activities.
Among the actions which are pending against AmSouth subsidiaries are actions
filed as class actions in the State of Alabama. The actions are similar to
others that have been brought in recent years in Alabama against financial
institutions in that they seek punitive damage awards in transactions
involving relatively small amounts of actual damages. In recent years, juries
in Alabama state courts have made large punitive damage awards in such cases.
Legislation which would limit these lawsuits has been proposed from time to
time in the Alabama legislature but has not been enacted into law. AmSouth
cannot predict whether any such legislation will be enacted.
It may take a number of years to finally resolve some of these legal
proceedings pending against AmSouth subsidiaries, due to their complexity and
for other reasons. It is not possible to determine with any certainty at this
time the corporation's potential exposure from the proceedings. However, based
upon the advice of legal counsel, AmSouth's management is of the opinion that
the ultimate resolution of these legal proceedings will not have a material
adverse effect on AmSouth's financial condition or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
ITEM 6(A)--EXHIBITS
The exhibits listed in the Exhibit Index at page 23 of this Form 10-Q are
filed herewith or are incorporated by reference herein.
ITEM 6(B)--REPORTS ON FORM 8-K
No report on Form 8-K was filed by AmSouth during the period June 30, 1996 to
September 30, 1996.
21
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AMSOUTH
HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED
THEREUNTO DULY AUTHORIZED.
/s/ C. Dowd Ritter
November 13, 1996 By: _________________________________
C. Dowd Ritter
Chairman of the Board, President and
Chief Executive Officer
/s/ Dennis J. Dill
November 13, 1996 By: _________________________________
Dennis J. Dill
Executive Vice President and
Chief Accounting Officer
22
<PAGE>
EXHIBIT INDEX
The following is a list of exhibits including items incorporated by reference.
3-a Restated Certificate of Incorporation of AmSouth Bancorporation (1)
3-b By-Laws of AmSouth Bancorporation (2)
11 Statement Re: Computation of Earnings per Common Share
15 Letter Re: Unaudited Interim Financial Information
21 AmSouth Bancorporation List of Subsidiaries
27 Financial Data Schedule
NOTES TO EXHIBITS
(1) Filed as Exhibit 3-b to AmSouth's Form 10-Q Quarterly Report for the
quarter ended March 31, 1993, incorporated herein by reference.
(2) Filed as Exhibit 3-b to AmSouth's Form 10-Q Quarterly Report for the
quarter ended March 31, 1996, incorporated herein by reference.
23
<PAGE>
EXHIBIT 11
AMSOUTH BANCORPORATION
STATEMENT REGARDING COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------- -------------------
1996 1995 1996 1995
-------- -------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net income............................... $131,061 $127,063 $ 35,193 $ 46,095
======== ======== ========= =========
Average shares of common stock
outstanding............................. 56,717 58,273 56,623 58,418
======== ======== ========= =========
Earnings per common share................ $ 2.31 $ 2.18 $ 0.62 $ 0.79
======== ======== ========= =========
</TABLE>
<PAGE>
EXHIBIT 15
Exhibit 15--Letter Re: Unaudited Interim Financial Information
Board of Directors
AmSouth Bancorporation
We are aware of the incorporation by reference in the following Registration
Statements and in their related Prospectuses, of our report dated November 12,
1996 relating to the unaudited consolidated financial statements of AmSouth
Bancorporation and subsidiaries which are included in its Form 10-Q for the
quarter ended September 30, 1996:
Form S-3 No. 33-55683 pertaining to the Dividend Reinvestment and Common
Stock Purchase Plan;
Form S-8 No. 33-52243 pertaining to the assumption by AmSouth
Bancorporation of FloridaBank Stock Option Plan and FloridaBank Stock
Option Plan-1993;
Form S-8 No. 33-52113 pertaining to the 1989 Long Term Incentive
Compensation Plan;
Form S-8 No. 33-35218 pertaining to the 1989 Long Term Incentive
Compensation Plan;
Form S-8 No. 33-37905 pertaining to the AmSouth Bancorporation Thrift Plan;
Form S-8 No. 33-9368 pertaining to the Long Term Incentive Compensation
Plan;
Form S-8 No. 33-2927 (as amended) pertaining to the Employee Stock Purchase
Plan;
Form S-8 No. 2-97464 pertaining to the Long Term Incentive Compensation
Plan;
Form S-3 No. 33-35280 pertaining to the Dividend Reinvestment and Common
Stock Purchase Plan;
Form S-8 No. 33-19016 pertaining to the Long Term Incentive Compensation
Plan;
Form S-8 No. 33-18653 pertaining to the 1987 Substitute Stock Option Plan;
Form S-8 No. 33-58777 pertaining to the Director Restricted Stock Plan;
Form S-8 No. 333-02099 pertaining to the AmSouth Bancorporation Thrift
Plan;
Form S-3 No. 333-06641 pertaining to the AmSouth Bancorporation 7 1/2%
Convertible Subordinated Debentures; and
Form S-8 No. 333-05631 pertaining to the AmSouth Bancorporation 1996 Long
Term Incentive Compensation Plan.
Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not a
part of the registration statements prepared or certified by accountants
within the meaning of Sections 7 or 11 of the Securities Act of 1933.
/s/ Ernst & Young LLP
November 12, 1996
<PAGE>
EXHIBIT 21
AMSOUTH BANCORPORATION
LIST OF SUBSIDIARIES
The following is a list of all subsidiaries of AmSouth Bancorporation and the
jurisdiction in which they were organized. Each subsidiary does business under
its own name.
Name Jurisdiction Where Organized
---- ----------------------------
AmSouth Bank of Alabama Alabama
AmSouth Leasing Corporation Alabama
AmSouth Investment Services, Inc. Alabama
AmSouth Riverchase, Inc. Alabama
Fifth Avenue Realty Company (unincorporated joint venture)
First Gulf Insurance Agency, Inc. Alabama
Five Points Capital Advisors, Inc. Alabama
National Properties and Mining Company, Inc. Delaware
AmSouth of Louisiana, Inc. Louisiana
Alabanc Properties, Inc. Delaware
AmSouth Bank of Florida Florida
AmSouth Insurance Agency, Inc. Florida
AmSouth Retirement Services, Inc. Florida
Fortune Mortgage Corporation Florida
Service Mortgage and Insurance Agency, Inc. Florida
AmSouth Bank of Georgia Georgia
Amsouth Bank of Tennessee Tennessee
FMLS, Inc. Tennessee
AmSouth Bank of Walker County Alabama
Trivest Enterprises, Inc. Florida
Fortune Equity Corporation Florida
First Clearwater Corporation Florida
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF CONDITION, THE CONSOLIDATED STATEMENT OF EARNINGS, AND
TABLES 3, 7 AND 8 OF ITEM 2 OF THE AMSOUTH BANCORPORATION FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 632,117
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 26,400
<TRADING-ASSETS> 4,238
<INVESTMENTS-HELD-FOR-SALE> 2,712,197
<INVESTMENTS-CARRYING> 2,722,661
<INVESTMENTS-MARKET> 2,703,451
<LOANS> 11,918,492
<ALLOWANCE> 179,350
<TOTAL-ASSETS> 18,615,080
<DEPOSITS> 12,456,219
<SHORT-TERM> 1,952,071
<LIABILITIES-OTHER> 243,849
<LONG-TERM> 1,305,570
0
0
<COMMON> 60,025
<OTHER-SE> 1,338,441
<TOTAL-LIABILITIES-AND-EQUITY> 18,615,080
<INTEREST-LOAN> 750,958
<INTEREST-INVEST> 254,609
<INTEREST-OTHER> 5,677
<INTEREST-TOTAL> 1,011,244
<INTEREST-DEPOSIT> 392,518
<INTEREST-EXPENSE> 528,329
<INTEREST-INCOME-NET> 482,915
<LOAN-LOSSES> 46,674
<SECURITIES-GAINS> 5,224
<EXPENSE-OTHER> 403,260
<INCOME-PRETAX> 207,756
<INCOME-PRE-EXTRAORDINARY> 207,756
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 131,061
<EPS-PRIMARY> 2.31
<EPS-DILUTED> 2.31
<YIELD-ACTUAL> 3.90
<LOANS-NON> 81,007
<LOANS-PAST> 39,535
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 178,451
<CHARGE-OFFS> 60,270
<RECOVERIES> 14,495
<ALLOWANCE-CLOSE> 179,350
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
