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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NUMBER 1-7476
AMSOUTH BANCORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 63-0591257
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
AMSOUTH-SONAT TOWER 35203
1900 FIFTH AVENUE NORTH (ZIP CODE)
BIRMINGHAM, ALABAMA
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(205) 320-7151
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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<S> <C>
Common Stock, par value $1.00 per
share New York Stock Exchange
Floating Rate Notes Due 1999 New York Stock Exchange
Stock Purchase Rights New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the common equity held by nonaffiliates of the
registrant as of February 17, 1998 was $4,359,580,000. (Note 1)
As of February 28, 1998 AmSouth Bancorporation had 80,631,759 shares of
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference herein:
Annual Report to Shareholders for the year ended December 31, 1997: Part I,
Part II
Proxy Statement for Annual Meeting to be held April 16, 1998: Part III
Note 1: In calculating the market value of the common equity held by
nonaffiliates of AmSouth as disclosed on the cover page of this Form 10-K,
AmSouth has treated as common equity held by affiliates only voting stock
owned as of February 17, 1998 by its directors and principal executive
officers and voting stock held by AmSouth's employee benefit plans. AmSouth
has not treated stock held by any of AmSouth's subsidiaries as pledgee or in a
fiduciary capacity as stock held by affiliates of AmSouth. AmSouth had no non-
voting common equity outstanding at February 17, 1998. AmSouth's response to
this item is not intended to be an admission that any person is an affiliate
of AmSouth for any purpose other than this response.
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AMSOUTH BANCORPORATION
FORM 10-K
INDEX
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PAGE
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PART I
Item 1. Business....................................................... 1
Item 2. Properties..................................................... 7
Item 3. Legal Proceedings.............................................. 7
Item 4. Submission of Matters to a Vote of Security Holders............ 7
Executive Officers of the Registrant..................................... 7
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters................................................................. 9
Item 6. Selected Financial Data........................................ 10
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 11
Item 7A.Quantitative and Qualitative Disclosures about Market Risk....... 11
Item 8. Financial Statements and Supplementary Data.................... 11
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................... 11
PART III
Item 10. Directors and Executive Officers of the Registrant............ 11
Item 11. Executive Compensation........................................ 11
Item 12. Security Ownership of Certain Beneficial Owners and
Management.............................................................. 11
Item 13. Certain Relationships and Related Transactions................ 11
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K..................................................................... 12
SIGNATURES............................................................... 13
EXHIBIT INDEX............................................................ 15
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PART I
ITEM 1. BUSINESS
GENERAL
AmSouth Bancorporation (AmSouth) is a bank holding company which was
organized in 1970 as a corporation under the laws of Delaware and commenced
doing business in 1972. At December 31, 1997, AmSouth had total consolidated
assets of approximately $18.6 billion. AmSouth offers a broad range of bank
and bank-related services through its subsidiaries. AmSouth's principal
subsidiary is AmSouth Bank (the Bank).
The Bank is a banking corporation organized under the laws of the State of
Alabama and a wholly-owned subsidiary of AmSouth. As of December 31, 1997, the
Bank had total consolidated assets of $18.6 billion, total consolidated
deposits of $12.9 billion and total consolidated equity capital of $1.7
billion. As of December 31, 1997, the assets of the Bank constituted virtually
all of the assets of AmSouth.
The Bank offers a complete range of consumer and commercial banking and
trust services to businesses and individuals through approximately 275 banking
offices located in Alabama, Florida, Tennessee and Georgia. The Consumer
Banking Group of the Bank provides a wide variety of transaction, credit and
financial services to meet the needs of its retail customer base. The Bank's
Commercial Banking Group offers a variety of products and services, including
commercial lending, international banking and cash management sales and
operations. The Bank operates a network of over 600 automated teller machines
that are linked with shared automated tellers in all 50 states. The Capital
Management Group of the Bank offers a complete array of trust services,
including estate and trust planning, investment management for individuals and
corporations, land and natural resources management, employee benefit
administration and management and administration, as corporate trustee, of
debt issues and provision of transfer agent services for corporations.
The Bank's subsidiaries include AmSouth Leasing Corporation, a specialized
lender providing equipment leasing, and AmSouth Investment Services, Inc., a
registered broker-dealer that provides securities brokerage services. At
December 31, 1997, the Bank also had an equity investment in an investment
management firm called Rockhaven Asset Management, LLC.
As of February 28, 1998, AmSouth and its subsidiaries had 6,407 employees.
COMPETITION
AmSouth's subsidiaries compete aggressively with banks located in Alabama,
Florida, Tennessee and Georgia, as well as large banks in other major
financial centers, and with other financial institutions, such as savings and
loan associations, credit unions, consumer finance companies, brokerage firms,
insurance companies, investment companies, mortgage companies and financial
service operations of major retailers. Competition is based on a number of
factors, including prices, interest rates, services and availability of
products. AmSouth also competes with the other bank holding companies
headquartered in Alabama, Florida, Tennessee, Georgia and other states for the
acquisition of financial institutions.
At December 31, 1997, AmSouth was the third largest bank holding company
headquartered in Alabama in terms of equity capital and total assets. However,
in some geographic areas of Alabama, AmSouth's market share is smaller than
that of other banks and financial institutions competing in those areas. Also,
AmSouth is significantly smaller than many of the financial institutions
competing in Florida, Tennessee and Georgia.
Various regulatory developments and existing laws have allowed financial
institutions to conduct significant activities on an interstate basis for a
number of years. During recent years, a number of financial institutions
expanded their out-of-state activities, and various states enacted legislation
intended to allow certain interstate banking combinations which otherwise
would have been prohibited by federal law. For a number of years, the Bank
Holding Company Act of 1956, as amended (the BHCA), generally provided that no
company which
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owned or controlled a commercial bank in the United States could acquire
ownership or control of a commercial bank in a state other than the state in
which the company's banking subsidiaries were principally located unless the
acquisition was specifically authorized by the laws of the state in which the
bank being acquired was located.
For a number of years Alabama had a reciprocal interstate banking law that
allowed banks in several other states (primarily in the Southeast) and the
District of Columbia to acquire banks in Alabama provided there was reciprocal
legislation in the other jurisdictions. Alabama bank holding companies were
thereby permitted to acquire banks in the jurisdictions specified in the law
which had adopted such reciprocal legislation. These laws resulted in a
significant increase in competition for banking services in Alabama, Florida,
Tennessee, Georgia and the other affected areas.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
IBBEA) authorized interstate acquisitions of banks and bank holding companies
without geographic limitation beginning September 29, 1995. In addition,
beginning June 1, 1997, the IBBEA authorized a bank to merge with a bank in
another state as long as neither of the relevant states had opted out of
interstate branching by May 31, 1997. A bank may also establish and operate a
de novo branch in a state in which the bank does not already maintain a branch
if that state expressly permits de novo branching. Once a bank has established
branches in a state through an interstate merger transaction, the bank may
establish and acquire additional branches at any location in the state where
any bank involved in the interstate merger transaction could have established
or acquired branches under applicable federal or state law. A bank that has
established a branch in a state through de novo branching may establish and
acquire additional branches in such state in the same manner and to the same
extent as a bank having a branch in such state as result of an interstate
merger. If a state opted out of interstate branching within the specified time
period, no bank in any other state may establish a branch in the opting out
state, whether through an acquisition or de novo. None of the states in which
AmSouth had subsidiary banks on June 1, 1997 "opted out" of the provisions of
the IBBEA permitting interstate branching by acquisition. Accordingly, on June
25, 1997, AmSouth merged its subsidiary banks in Alabama, Florida, Tennessee
and Georgia to form AmSouth Bank, as permitted by the IBBEA. Although the
management of AmSouth cannot predict with certainty the full effect of the
IBBEA on AmSouth, it is probable that the IBBEA will result in greater
consolidation within the banking industry.
BUSINESS COMBINATIONS
AmSouth continually evaluates business combination and acquisition
opportunities and sometimes conducts due diligence activities in connection
with them. As a result, business combination discussions and, in some cases,
negotiations take place, and transactions involving cash, debt or equity
securities can be expected. Any future business combination or series of
business combinations that AmSouth might undertake may be material, in terms
of assets acquired or liabilities assumed, to AmSouth's financial condition.
Recent business combinations in the banking industry have typically involved
the payment of a premium over book and market values. This practice may result
in dilution of book value and net income per share for the acquirers.
SUPERVISION AND REGULATION
The following discussion addresses the regulatory framework applicable to
bank holding companies and their subsidiaries, and provides certain specific
information relevant to AmSouth. Regulation of financial institutions such as
AmSouth and its subsidiaries is intended primarily for the protection of
depositors, the deposit insurance funds of the Federal Deposit Insurance
Corporation (the FDIC) and the banking system as a whole, and generally is not
intended for the protection of stockholders or other investors.
The following is a summary of certain statutes and regulations that apply to
the operation of banking institutions. Changes in the applicable laws, and in
their application by regulatory agencies, cannot necessarily be predicted, but
they may have a material effect on the business and results of banking
organizations, including AmSouth.
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GENERAL
As a bank holding company, AmSouth is subject to the regulation and
supervision of the Board of Governors of the Federal Reserve System (the
Federal Reserve Board) under the BHCA. Under the BHCA, bank holding companies
may not, in general, directly or indirectly acquire the ownership or control
of more than 5 percent of the voting shares or substantially all of the assets
of any company, including a bank, without the prior approval of the Federal
Reserve Board. In addition, bank holding companies are generally prohibited
under the BHCA from engaging in nonbanking activities, subject to certain
exceptions.
The Bank is a state bank, chartered under the laws of Alabama, and is a
member of the Federal Reserve System. It is generally subject to regulation
and supervision by both the Federal Reserve Board and the Office of the
Superintendent of Banking of the State of Alabama. The Bank is also an insured
depository institution, and, therefore, is also subject to regulation by the
FDIC. The Bank is also subject to various requirements and restrictions under
federal and state law, including requirements to maintain reserves against
deposits, restrictions on the types and amounts of loans that may be granted
and the interest that may be charged thereon, and limitations on the types of
investments that may be made and the types of services that may be offered.
Various consumer laws and regulations also affect the operations of the Bank.
In addition to the impact of regulation, commercial banks are affected
significantly by the actions of the Federal Reserve Board as it attempts to
control the money supply and credit availability in order to influence the
economy.
Various legislative proposals have been made that would affect the
operations of bank holding companies and their subsidiaries, including
proposals to revise the bank regulatory system and to allow affiliations
between bank holding companies and non-bank entities that are restricted under
current law. AmSouth is unable to predict whether any of these proposals will
be adopted and, if so, what their effect on AmSouth would be.
PAYMENT OF DIVIDENDS
AmSouth is a legal entity separate and distinct from its banking and other
subsidiaries. The principal source of cash flow for AmSouth, including cash
flow to pay dividends on AmSouth's capital stock and to pay interest and
principal on any debt of AmSouth, is dividends from the Bank. There are
statutory and regulatory limitations on the payment of dividends by the Bank
to AmSouth as well as by AmSouth to its shareholders. The payment of dividends
by AmSouth and the Bank also may be affected by other factors, such as the
requirement to maintain capital at or above regulatory guidelines. See
"Capital Adequacy and Related Matters" below.
Under Alabama law, a bank may not pay a dividend in excess of 90 percent of
its net earnings until the bank's surplus is equal to at least 20 percent of
capital. The Bank is also required by Alabama law to obtain the prior approval
of the Superintendent of the State Banking Department of Alabama for the
payment of dividends if the total of all dividends declared by the Bank in any
calendar year will exceed the total of (a) the Bank's net earnings (as defined
by statute) for that year plus (b) its retained net earnings for the preceding
two years, less any required transfers to surplus. Also, no dividends may be
paid from the Bank's surplus without the prior written approval of the
Superintendent.
In addition, as a member of the Federal Reserve System, the Bank is required
by federal law to obtain regulatory approval for the payment of dividends if
the total of all dividends declared by the Board of Directors of the Bank in
any year would exceed the total of (a) the Bank's net profits (as defined and
interpreted by regulation) for that year, plus (b) the Bank's retained net
profits (as defined and interpreted by regulation) for the preceding two
years, less any required transfers to surplus or a fund for the retirement of
preferred stock, if any is outstanding. The Bank also can pay dividends only
to the extent that its retained net profits (including the portion transferred
to surplus) exceed its losses and bad debts.
Furthermore, if, in the opinion of the applicable federal bank regulatory
authority, a bank under its jurisdiction is engaged in or is about to engage
in an unsafe or unsound practice (which, depending on the financial condition
of the bank, could include the payment of dividends), such authority may
require, after notice
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and a hearing, that such bank cease and desist from such practice. The Federal
Reserve Board has indicated that paying dividends that deplete a bank's
capital base to an inadequate level would be an unsafe and unsound banking
practice. In addition, the Federal Deposit Insurance Act (the FDI Act) imposes
additional restrictions on the payment of dividends by the Bank, as described
under "Capital Adequacy and Related Matters--Prompt Corrective Action" below.
Moreover, the Federal Reserve Board has issued a policy statement which
provides that bank holding companies and state member banks should generally
pay dividends only out of current operating earnings.
At December 31, 1997, under dividend restrictions imposed under federal and
Alabama law, including those described above, the Bank, without obtaining
government approvals, could declare aggregate dividends of approximately $157
million.
CAPITAL ADEQUACY AND RELATED MATTERS
Capital Guidelines
The Federal Reserve Board has adopted risk-based capital guidelines for bank
holding companies. The minimum guideline for the ratio of total regulatory
capital (Total Capital) to risk-weighted assets (including certain off-
balance-sheet items, such as standby letters of credit) is 8 percent. At least
half of the Total Capital must be composed of common stockholders' equity,
minority interests in the equity accounts of consolidated subsidiaries,
qualifying noncumulative perpetual preferred stock, and a limited amount of
qualifying cumulative perpetual preferred stock, less goodwill and certain
other intangible assets (Tier 1 Capital). The remainder may consist of
subordinated debt, certain other types of debt, other preferred stock and a
limited amount of loan loss reserves. At December 31, 1997, AmSouth's
consolidated Tier 1 Capital and Total Capital ratios were 7.16 percent and
10.38 percent, respectively.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. The guidelines provide for a
minimum ratio of Tier 1 Capital to average assets, less goodwill and certain
other intangible assets (the Leverage Ratio), of 3 percent for bank holding
companies that meet certain specific criteria, including having the highest
regulatory rating. All other bank holding companies generally are required to
maintain a Leverage Ratio of at least 3 percent, plus an additional cushion of
100 to 200 basis points. AmSouth's Leverage Ratio at December 31, 1997 was
6.19 percent. The guidelines also provide that bank holding companies
experiencing internal growth or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. Furthermore, the
Federal Reserve Board has indicated that it will consider a "tangible Tier 1
Capital Leverage Ratio" (deducting all intangibles) and other indicators of
capital strength in evaluating proposals for expansion or new activities.
The Bank is also subject to risk-based and leverage capital requirements,
similar to those described above. The Bank was in compliance with applicable
minimum capital requirements as of December 31, 1997. Neither AmSouth nor the
Bank has been advised by any federal banking agency of any specific minimum
Leverage Ratio requirement applicable to it.
The Federal Reserve Board adopted modifications to the Tier 1 Capital and
Total Capital ratios applicable to both banks and bank holding companies that
are intended to address "market risk" arising from large trading portfolios.
These modifications are applicable only to banks and bank holding companies
whose trading activities exceed certain thresholds, and to those who
voluntarily comply with the market risk capital requirement. AmSouth does not
anticipate that it will be subject to, nor voluntarily adopt, these new
requirements.
Bank regulators have the authority generally to raise capital requirements
applicable to banking organizations beyond their current levels, and several
proposals are under consideration that would modify the capital guidelines to
address particular issues. However, the management of AmSouth is unable to
predict whether and when higher capital requirements would be imposed, and, if
so, at what levels and on what schedule.
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Prompt Corrective Action
The FDI Act requires the federal banking regulators to take prompt
corrective action in respect of FDIC-insured depository institutions that do
not meet minimum capital requirements. The FDI Act establishes five capital
tiers: "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized." Under
applicable regulations, a state member bank is defined to be well capitalized
if it maintains a Leverage Ratio of at least 5 percent, a risk-adjusted Tier 1
Capital Ratio of at least 6 percent, and a Total Capital Ratio of at least 10
percent and is not subject to any order or written directive to maintain any
specific capital level. A state member bank is defined to be adequately
capitalized if it maintains a Leverage Ratio of at least 4 percent, a risk-
adjusted Tier 1 Capital ratio of at least 4 percent and a Total Capital Ratio
of at least 8 percent. In addition, a state member bank will be considered:
(a) undercapitalized if it fails to meet any minimum required measure; (b)
significantly undercapitalized if it is significantly below such measure; and
(c) critically undercapitalized if it fails to maintain a level of tangible
equity equal to not less than 2 percent of total assets. A state member bank
may be deemed to be in a capitalization category that is lower than is
indicated by its actual capital position if it is operating in an unsafe or
unsound manner or receives an unsatisfactory examination rating. AmSouth
believes that at December 31, 1997, the Bank had capital ratios sufficient to
qualify as "well capitalized".
The capital-based prompt corrective action provisions of the FDI Act and the
implementing regulations apply to FDIC-insured depository institutions such as
the Bank, and are not directly applicable to holding companies, like AmSouth,
that control such institutions. However, the Federal Reserve Board has
indicated that, in regulating bank holding companies, it will take appropriate
action at the holding company level based on an assessment of the
effectiveness of supervisory actions imposed upon subsidiary depository
institutions pursuant to such provisions and regulations. Although the capital
categories defined under the prompt corrective action regulations are not
directly applicable to AmSouth under existing law and regulations, if AmSouth
were placed in a capital category based on its capital ratios calculated under
the guidelines that apply to it, it would qualify as well-capitalized as of
December 31, 1997.
The FDI Act generally prohibits an FDIC-insured depository institution from
making any capital distribution (including payment of dividends) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized insured depository
institutions are subject to restrictions on borrowing from the Federal Reserve
System. In addition, undercapitalized depository institutions are subject to
growth limitations and are required to submit capital restoration plans. An
insured depository institution's holding company must guarantee the capital
restoration plan, up to an amount equal to the lesser of 5 percent of the
depository institution's assets at the time it becomes undercapitalized or the
amount of the capital deficiency when the institution fails to comply with the
plan. The federal banking agencies may not accept a capital restoration plan
without determining, among other things, that the plan is based on realistic
assumptions and is likely to succeed in restoring the depository institution's
capital. If an insured depository institution fails to submit an acceptable
plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized insured depository institutions may be
subject to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to
reduce total assets and cessation of receipt of deposits from correspondent
banks. Critically undercapitalized insured depository institutions are subject
to appointment of a receiver or conservator.
Brokered Deposits and Pass-Through Insurance
The FDIC has adopted regulations under the FDI Act governing the receipt of
brokered deposits. Under the regulations, an FDIC-insured depository
institution cannot accept, rollover or renew brokered deposits unless (a) it
is well capitalized or (b) it is adequately capitalized and receives a waiver
from the FDIC. A depository institution that cannot receive brokered deposits
also cannot offer "pass-through" insurance on certain employee benefit
accounts. Whether or not it has obtained such a waiver, an adequately
capitalized depository institution may not pay an interest rate on any
deposits in excess of 75 basis points over certain prevailing market rates
specified by regulation. There are no such restrictions on a depository
institution that is well capitalized. Because
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the Bank was well capitalized as of December 31, 1997, AmSouth believes the
brokered deposits regulation will have no material effect on the funding or
liquidity the Bank.
HOLDING COMPANY STRUCTURE
There are various legal restrictions on the extent to which AmSouth and its
nonbank subsidiaries may borrow or otherwise obtain funding from the Bank. The
Bank (and its subsidiaries) is limited in engaging in borrowing and other
"covered transactions" with nonbank and non-savings bank affiliates to the
following amounts: (a) in the case of any single such affiliate, the aggregate
amount of covered transactions of the Bank and its subsidiaries may not exceed
10 percent of the capital stock and surplus of the Bank; and (b) in the case
of all affiliates, the aggregate amount of covered transactions of the Bank
and its subsidiaries may not exceed 20 percent of the capital stock and
surplus of the Bank. Covered transactions also are subject to certain
collateralization requirements. "Covered transactions" are defined by statute
to include a loan or extension of credit, as well as a purchase of securities
issued by an affiliate, a purchase of assets (unless otherwise exempted by the
Federal Reserve Board) from the affiliate, the acceptance of securities issued
by the affiliate as collateral for a loan and the issuance of a guarantee,
acceptance, or letter of credit on behalf of an affiliate.
Under Federal Reserve Board policy, AmSouth is expected to act as a source
of financial strength to, and to commit resources to support, the Bank. This
support may be required at times when, absent such Federal Reserve Board
policy, AmSouth may not be inclined to provide it. In addition, any capital
loans by a bank holding company to a subsidiary bank are subordinate in right
of payment to deposits and to certain other indebtedness of such subsidiary
bank. In the event of a bank holding company's bankruptcy, any commitment by
the bank holding company to a federal bank regulatory agency to maintain the
capital of a subsidiary bank will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
The FDI Act provides that, in the event of the "liquidation or other
resolution" of an insured depository institution, the claims of depositors of
such institution (including claims by the FDIC as subrogee of insured
depositors) and certain claims for administrative expenses of the FDIC as
receiver would be afforded a priority over other general unsecured claims
against the institution including any claims of the bank's holding company as
a creditor. If an insured depository institution fails, insured and uninsured
depositors, along with the FDIC, will be placed ahead of unsecured, nondeposit
creditors, including a parent holding company such as AmSouth, in its capacity
as creditor, in order of priority of payment.
FDIC DEPOSIT INSURANCE ASSESSMENTS
The Bank is subject to FDIC deposit insurance assessments pursuant to two
separate assessment schedules, one applicable to those deposits insured by the
Bank Insurance Fund (BIF) and another applicable to those deposits insured by
the Savings Association Insurance Fund (SAIF). The FDIC has reduced the
assessments it charges on bank deposits insured by the BIF and the SAIF to the
statutory minimum of $2,000.00 for most "well-capitalized" banks.
In addition, the Deposit Insurance Fund Act of 1996 requires that depository
institutions pay assessments to pay for the cost of Financing Corporation or
"FICO" bonds. The assessments to be imposed on insured depository institutions
for this purpose through January 1, 2000 are $1.30 per $100.00 with respect to
deposits insured by the BIF and $6.48 per $100.00 with respect to deposits
insured by the SAIF. Currently, all of AmSouth's deposits are insured by the
BIF. Beginning January 1, 2000, the FICO-related assessment rates for BIF and
SAIF deposits will both be $2.43 per $100.00.
LIABILITY FOR AFFILIATE INSURED DEPOSITORY INSTITUTIONS
Under the FDI Act, an insured depository institution, such as the Bank, can
be held liable for any loss incurred by, or reasonably expected to be incurred
by, the FDIC in connection with (a) the default of a commonly controlled FDIC-
insured depository institution or (b) any assistance provided by the FDIC to
any commonly controlled FDIC-insured depository institution "in danger of
default." "Default" is defined generally as the appointment of a conservator
or receiver and "in danger of default" is defined generally as the existence
of certain conditions indicating that a default is likely to occur in the
absence of regulatory assistance. AmSouth currently has no depository
institutions subsidiaries other than the Bank; however, it may in the future.
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ITEM 2. PROPERTIES
The executive offices of AmSouth are located in the 30-story AmSouth-Sonat
Tower in downtown Birmingham, Alabama. An undivided one-half interest in this
building is owned by the Bank through an unincorporated joint venture. The
Bank is a principal tenant of this building. The Bank is also a principal
tenant of the AmSouth/Harbert Plaza, a 32-story office building also located
in downtown Birmingham, Alabama, and of another office complex in the
Birmingham area. The Bank's headquarters and most of its operations are
located in these facilities. The Bank also has other banking and operational
offices located in Alabama, Florida, Tennessee and Georgia.
At December 31, 1997, AmSouth and its subsidiaries had 290 offices
(principally bank buildings) of which 178 were owned and 112 were either
leased or subject to a ground lease.
ITEM 3. 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 damages 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. At times,
class actions are settled by defendants without admission or even an actual
finding of any wrongdoing but with payment of some compensation to purported
class members and large attorney's fees to plaintiff class counsel.
Nonetheless, 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters brought to a vote of security holders during the
fourth quarter of 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of AmSouth, their ages, the positions held by them
with AmSouth and certain of its subsidiaries, and their principal occupations
for the last five years are as follows:
C. Dowd Ritter 50 Chairman (September 1996 to date) and President
and Chief Executive Officer (January 1996 to
date) of AmSouth and AmSouth Bank; Director of
AmSouth and AmSouth Bank. Formerly, President
and Chief Operating Officer, AmSouth and
AmSouth Bank of Alabama (August 1994 to
December 1995), Vice Chairman of the Board of
AmSouth and AmSouth Bank of Alabama (July 1993
to August 1994), and Senior Executive Vice
President of AmSouth and Senior Executive Vice
President and General Banking Group Head of
AmSouth Bank of Alabama (May 1991 to July
1993).
7
<PAGE>
Michael C. Baker 50 Senior Executive Vice President and Capital
Management Group Head of AmSouth and AmSouth
Bank (October 1995 to date).
Formerly, President and Chief Executive Officer
of Barnett Banks Trust Co., N.A. (1989 to July
1995).
Sloan D. Gibson, IV 44 Senior Executive Vice President (October 1994
to date), Chief Financial Officer (October 1997
to date) and Finance, Commercial and Credit
Group Head (October 1993 to date) of AmSouth
and AmSouth Bank. Formerly, Executive Vice
President (1993 to October 1994), Head of
Consumer Banking Administration (July 1993 to
October 1993) and Senior Vice President,
General Banking Group (1992 to 1993), all of
AmSouth Bank of Alabama.
W. Charles Mayer, III
43 Senior Executive Vice President of AmSouth
(October 1994 to date),
Alabama/Tennessee/Georgia Banking Group Head of
AmSouth Bank (November 1997 to date) and
Birmingham City President of AmSouth Bank (May
1995 to date). Formerly, Alabama Banking Group
Head of AmSouth (May 1995 to October 1997),
President and Chief Executive Officer of
AmSouth Bank of Tennessee (January 1993 to
April 1995) and Executive Vice President of
AmSouth (January 1993 to October 1994).
Candice W. Rogers 48 Senior Executive Vice President and Consumer
Banking Group Head of AmSouth and AmSouth Bank
(August 1995 to date). Formerly, Executive Vice
President and Director of Marketing of AmSouth
and AmSouth Bank of Alabama (July 1994 to
August 1995) and Senior Vice President and
Director of Marketing, Bank One Texas (February
1991 to July 1994).
E. W. Stephenson, Jr.
51 Senior Executive Vice President of AmSouth
(July 1993 to date) and Senior Executive Vice
President of AmSouth Bank and Florida Banking
Group Head (July 1997 to date). Formerly,
Chairman of the Board and Chief Executive
Officer of AmSouth Bank of Florida (July 1993
to June 1997) and Executive Vice President and
Consumer and Marketing Division Head of AmSouth
Bank of Alabama (May 1991 to July 1993).
Alfred W. Swan, Jr. 55 Senior Executive Vice President of AmSouth and
West Coast of Florida Area Executive (1994 to
date) and Senior Executive Vice President of
AmSouth Bank (July 1997 to date). Formerly,
Chief Executive Officer of AmSouth Bank of
Florida (1992 to July 1993) and Executive Vice
President of AmSouth (1992 to October 1994).
David B. Edmonds 44 Executive Vice President and Human Resources
Director of AmSouth and AmSouth Bank (October
1994 to date). Formerly, Director Human
Resources, Southeast Business Unit of Pepsi-
Cola, Inc. (1986 to September 1994).
O. B. Grayson Hall, Jr.
40 Executive Vice President (June 1994 to date)
and Operations and Technology Division Head
(January 1993 to date) of AmSouth and AmSouth
Bank.
Stephen A. Yoder 44 Executive Vice President and General Counsel of
AmSouth and AmSouth Bank (August 1995 to date).
Formerly, Assistant General Counsel (1992 to
1995) of Mellon Bank Corporation.
8
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
AmSouth's common stock, par value $1.00 per share, is listed for trading on
the New York Stock Exchange under the symbol ASO. The following table sets
forth certain common stock data for the last five years.
<TABLE>
<CAPTION>
COMMON STOCK DATA* 1997 1996 1995 1994 1993
- ------------------ -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Cash dividends declared......... $ 1.14 $ 1.08 $ 1.03 $ 0.95 $ 0.81
Book value...................... 17.20 16.61 16.11 15.05 14.32
Tangible book value............. 14.07 13.42 12.79 10.99 12.23
Market value at year end........ 54.31 32.25 26.92 17.17 20.83
Market price range:
High.......................... 57.06 33.92 27.59 23.25 23.92
Low........................... 31.50 22.92 17.17 16.92 18.25
Total trading volume (In thou-
sands)......................... 43,926 37,007 49,566 31,448 31,589
Dividend yield at year end...... 2.21% 3.47% 3.96% 5.90% 4.48%
Dividend payout ratio........... 41.30 50.15 51.33 63.56 42.21
Price earnings ratio**.......... 19.89X 15.14X 13.60X 11.60X 10.96X
Shareholders of record at year
end............................ 12,480 13,165 14,037 14,674 12,985
Average shares outstanding (In
thousands)..................... 82,039 84,908 87,393 84,791 76,272
Average diluted shares outstand-
ing (In thousands)............. 82,746 85,843 88,639 85,964 77,507
</TABLE>
- --------
* Restated for three-for-two common stock split in April 1997.
** Calculated using diluted earnings per common share.
Quarterly high and low sales prices of and cash dividends declared on
AmSouth common stock are set forth in Note V of the Notes to Consolidated
Financial Statements, which are incorporated by reference into Item 8 of this
Form 10-K.
As of February 17, 1998, there were approximately 14,000 holders of record
of AmSouth's common stock.
Restrictions on the ability of the Bank to transfer funds to the holding
company at December 31, 1997 are set forth in Note Q of the Notes to
Consolidated Financial Statements, which are incorporated by reference into
Item 8 of this Form 10-K.
A discussion of certain limitations on the ability of the Bank to pay
dividends to AmSouth, and the ability of AmSouth to pay dividends on its
common stock, is set forth in Part I under the headings "Supervision and
Regulation--Payment of Dividends" and "Supervision and Regulation--Capital
Adequacy and Related Matters."
9
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the last five
years.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Revenue from earning as-
sets................... $ 1,377,788 $ 1,353,823 $ 1,272,939 $ 1,047,741 $ 840,617
Interest expense........ 701,511 701,442 679,396 480,414 339,326
----------- ----------- ----------- ----------- -----------
Net interest income..... 676,277 652,381 593,543 567,327 501,291
Provision for loan loss-
es..................... 67,399 65,171 40,139 30,103 27,966
----------- ----------- ----------- ----------- -----------
Net interest income af-
ter provision for loan
losses................. 608,878 587,210 553,404 537,224 473,325
Noninterest revenues.... 266,004 235,274 231,671 175,355 199,237
Noninterest expenses.... 526,192 534,232 509,898 519,239 453,999
----------- ----------- ----------- ----------- -----------
Income before income
taxes.................. 348,690 288,252 275,177 193,340 218,563
Income taxes............ 122,523 105,576 100,222 66,050 71,843
----------- ----------- ----------- ----------- -----------
Net income............ $ 226,167 $ 182,676 $ 174,955 $ 127,290 $ 146,720
=========== =========== =========== =========== ===========
COMMON STOCK DATA*
Net income per common
share.................. $ 2.76 $ 2.15 $ 2.00 $ 1.50 $ 1.92
Diluted net income per
common share........... $ 2.73 $ 2.13 $ 1.98 $ 1.48 $ 1.90
Cash dividends declared
per common share....... $ 1.14 $ 1.08 $ 1.03 $ 0.95 $ 0.81
Average shares outstand-
ing.................... 82,039 84,908 87,393 84,791 76,272
Average diluted shares
outstanding............ 82,746 85,843 88,639 85,964 77,507
SELECTED YEAR END BAL-
ANCES
Loans net of unearned
income................. $12,237,668 $12,080,246 $11,743,273 $11,429,907 $ 8,540,412
Assets.................. 18,622,256 18,407,264 17,738,795 16,777,951 13,469,621
Deposits................ 12,945,197 12,467,599 13,420,287 13,203,101 10,374,183
Long-term Federal Home
Loan Bank advances..... 1,198,146 1,023,729 15,014 103,092 1,745
Other long-term debt.... 435,078 411,946 425,885 275,581 163,446
Shareholders' equity.... 1,385,245 1,395,829 1,383,475 1,310,458 1,142,725
SELECTED AVERAGE BAL-
ANCES
Loans net of unearned
income................. $12,059,249 $11,694,849 $11,747,385 $ 9,918,274 $ 7,634,984
Assets.................. 18,042,143 17,989,621 16,942,326 15,293,985 12,377,333
Deposits................ 12,564,197 12,926,343 13,304,092 11,572,725 9,543,705
Long-term Federal Home
Loan Bank advances..... 989,802 511,583 54,000 112,550 555
Other long-term debt.... 428,657 423,623 298,945 219,229 159,152
Shareholders' equity.... 1,369,777 1,380,532 1,357,336 1,243,151 1,031,373
SELECTED RATIOS
Return on average as-
sets................... 1.25% 1.02% 1.03% 0.83% 1.19%
Return on average equi-
ty..................... 16.51 13.23 12.89 10.24 14.23
Net interest margin..... 4.09 3.93 3.87 4.14 4.56
Operating efficiency.... 55.43 59.56 60.98 68.72 63.48
Allowance for loan
losses to loans net of
unearned income........ 1.46 1.48 1.52 1.50 1.54
Nonperforming assets to
loans net of unearned
income, foreclosed
properties and
repossessions.......... 0.68 0.78 0.98 1.16 1.00
Ending equity to ending
assets................. 7.44 7.58 7.80 7.81 8.48
Average equity to aver-
age assets............. 7.59 7.67 8.01 8.13 8.33
WITHOUT 1996 SAIF AS-
SESSMENT
Net income.............. $ 226,167 $ 197,895 $ 174,955 $ 127,290 $ 146,720
Net income per common
share*................. 2.76 2.33 2.00 1.50 1.92
Diluted net income per
common share*.......... 2.73 2.31 1.98 1.48 1.90
Return on average as-
sets................... 1.25% 1.10% 1.03% 0.83% 1.19%
Return on average equi-
ty..................... 16.51 14.26 12.89 10.24 14.23
Operating efficiency.... 55.43 56.86 60.98 68.72 63.48
</TABLE>
- --------
* Restated for three-for-two common stock split in April 1997.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of AmSouth's 1997 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is included on page 40 of
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", which is incorporated herein pursuant to Item 7, above.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of AmSouth and Subsidiaries, the
accompanying Notes to Consolidated Financial Statements, Management's
Statement on Responsibility for Financial Reporting, and the Report of
Independent Auditors contained in AmSouth's 1997 Annual Report to Shareholders
are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the directors and director nominees of AmSouth included at
pages 6, 8, and 10 of AmSouth's Proxy Statement for the Annual Meeting of
Shareholders to be held on April 16, 1998 (the Proxy Statement) is hereby
incorporated herein by reference. Information on AmSouth's executive officers
is included in Part I of this report.
Information regarding late filings under Section 16(a) of the Securities
Exchange Act of 1934 included at page 13 of the Proxy Statement under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance" is hereby
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding compensation of directors and executive officers
included at pages 13 through 22 of the Proxy Statement is hereby incorporated
herein by reference. However, the information provided in the Proxy Statement
under the headings "Executive Compensation Committee Report on Executive
Compensation" and "Performance Graph" shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission, or
subject to Regulation 14A or 14C, other than as provided in Item 402 of
Regulation S-K, or to liabilities of Section 18 of the Securities Exchange Act
of 1934.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Voting Securities and Principal
Holders Thereof " at pages 1 through 5 of the Proxy Statement is hereby
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth in the Proxy Statement under the caption "Certain
Relationships, Related Transactions and Legal Proceedings" at page 13 thereof
is hereby incorporated herein by reference.
11
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS
The following management's statement on responsibility for financial
reporting, report of independent auditors and consolidated financial
statements of AmSouth and its subsidiaries included in AmSouth's 1997 Annual
Report to Shareholders are incorporated by reference in Item 8.
Management's Statement on Responsibility for Financial Reporting
Report of Ernst & Young LLP, Independent Auditors
Consolidated Statement of Condition--December 31, 1997 and 1996
Consolidated Statement of Earnings--Years ended December 31, 1997, 1996 and
1995
Consolidated Statement of Shareholders' Equity--Years ended December 31,
1997, 1996 and 1995
Consolidated Statement of Cash Flows--Years ended December 31, 1997, 1996
and 1995
Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULES
All schedules to the consolidated financial statements required by Article 9
of Regulation S-X and all other schedules to the financial statements of
AmSouth required by Article 5 of Regulation S-X are not required under the
related instructions or are inapplicable and therefore have been omitted.
(B) REPORTS ON FORM 8-K
One report on Form 8-K was filed during the fourth quarter of 1997. On
December 18, 1997 AmSouth filed a report on Form 8-K regarding the approval by
the Board of Directors of the extension and updating of AmSouth's stockholder
protection rights plan.
(C) EXHIBITS
The exhibits listed in the Exhibit Index at page 15 of this Form 10-K are
filed herewith or are incorporated herein by reference.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
AmSouth Bancorporation
/s/ C. Dowd Ritter
By __________________________________
C. DOWD RITTER
Chairman of the Board, President and
Chief Executive Officer
Date: March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ C. Dowd Ritter /s/ Sloan D. Gibson, IV
By ________________________________ By ________________________________
C. DOWD RITTER SLOAN D. GIBSON, IV
Chairman of the Board, President Senior Executive Vice President
and Chief Executive Officer Chief Financial Officer
(Principal Executive Officer) (Principal Financial Officer)
Date: March 30, 1998 Date: March 30, 1998
/s/ Robert R. Windelspecht
By ________________________________
ROBERT R. WINDELSPECHT
Executive Vice President
Controller
(Principal Accounting Officer)
Date: March 30, 1998
13
<PAGE>
* *
By ________________________________ By ____________________________________
J. HAROLD CHANDLER RONALD L. KUEHN, JR.
A Director A Director
Date: March 30, 1998 Date: March 30, 1998
*
By ________________________________ By ____________________________________
JAMES E. DALTON, JR. JAMES R. MALONE
A Director A Director
Date: March 30, 1998 Date: March 30, 1998
* *
By ________________________________ By ____________________________________
RODNEY C. GILBERT FRANCIS A. NEWMAN
A Director A Director
Date: March 30, 1998 Date: March 30, 1998
* *
By ________________________________ By ____________________________________
VICTORIA JACKSON GREGORICUS CLAUDE B. NIELSEN
A Director A Director
Date: March 30, 1998 Date: March 30, 1998
* *
By ________________________________ By ____________________________________
ELMER B. HARRIS BENJAMIN F. PAYTON, PH.D
A Director A Director
Date: March 30, 1998 Date: March 30, 1998
* *
By ________________________________ By ____________________________________
DONALD E. HESS HERBERT A. SKLENAR
A Director A Director
Date: March 30, 1998 Date: March 30, 1998
- --------
* Carl L. Gorday, by signing his name hereto, does sign this document on
behalf of each of the persons indicated above pursuant to powers of attorney
executed by such persons and filed with the Securities and Exchange
Commission.
/s/ Carl L. Gorday
By ____________________________________
CARL L. GORDAY
Attorney in Fact
14
<PAGE>
EXHIBIT INDEX
The following is a list of exhibits including items incorporated by
reference. Compensatory plans and arrangements are identified by an asterisk.
<TABLE>
<S> <C>
3-a Restated Certificate of Incorporation of AmSouth Bancorporation (1)
3-b Bylaws of AmSouth Bancorporation, as amended (2)
4-a Instruments defining the rights of security holders (3)
4-b Stockholder Protection Rights Agreement dated as of December 18, 1997 between
AmSouth Bancorporation and AmSouth Bank, as Rights Agent, including as Exhibit A
the forms of Rights Certificate and of Election to Exercise and as Exhibit B the
form of Certificate of Designation and Terms of the Preferred Stock (4)
*10-a AmSouth Bancorporation Executive Incentive Plan
*10-b AmSouth Bancorporation Relocation Policy for Executive Officers (5)
*10-c AmSouth Bancorporation Supplemental Retirement Plan (6)
*10-d AmSouth Bancorporation Long Term Incentive Compensation Plan (7)
*10-e Amendment No. 1 to the AmSouth Bancorporation Long Term Incentive Compensation
Plan (8)
*10-f Amendment No. 2 to the AmSouth Bancorporation Long Term Incentive Compensation
Plan (9)
*10-g Amendment No. 3 to the AmSouth Bancorporation Long Term Incentive Compensation
Plan (10)
*10-h Amendment No. 4 to the AmSouth Bancorporation Long Term Incentive Compensation
Plan (11)
*10-i Amendment No. 5 to the AmSouth Bancorporation Long Term Incentive Compensation
Plan (12)
*10-j Amendment No. 6 to the AmSouth Bancorporation Long Term Incentive Compensation
Plan (13)
*10-k 1989 AmSouth Bancorporation Long Term Incentive Compensation Plan (14)
*10-l Amendment No. 1 to the 1989 AmSouth Bancorporation Long Term Incentive
Compensation Plan (15)
*10-m Amendment No. 2 to the 1989 AmSouth Bancorporation Long Term Incentive
Compensation Plan (16)
*10-n Director Restricted Stock Plan (17)
*10-o 1997 Performance Incentive Plan (18)
*10-p 1996 Long Term Incentive Compensation Plan (19)
*10-q Amended and Restated Deferred Compensation Plan for Directors of AmSouth
Bancorporation
*10-r AmSouth Bancorporation Supplemental Thrift Plan (20)
*10-s Amendment Number One to the AmSouth Bancorporation Supplemental Thrift Plan (21)
*10-t Employment Agreement for C. Dowd Ritter
*10-u Form of Executive Severance Agreement for Certain Executive Officers (22)
*10-v AmSouth Bancorporation Deferred Compensation Plan
*10-w Additional Agreement for Executive Officer
11 Statement Regarding Computation of Earnings per Share
13 AmSouth Bancorporation's 1997 Annual Report to Shareholders, excluding the
portions thereof not incorporated by reference in this Form 10-K
21 List of Subsidiaries of AmSouth Bancorporation
23 Consent of Ernst & Young LLP, Independent Auditors
24 Powers of Attorney
27 Financial Data Schedule
</TABLE>
15
<PAGE>
NOTES TO EXHIBITS
<TABLE>
<S> <C>
(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
June 30, 1997, incorporated herein by reference
(3) Instruments defining the rights of holders of long-term debt of AmSouth are not
filed herewith pursuant to Item 601(b)(4)(iii) of Regulation S-K, and AmSouth hereby
agrees to furnish a copy of said instruments to the SEC upon request
(4) Filed as Exhibit 4.l to AmSouth's Report on Form 8-K filed on December 18, 1997,
incorporated herein by reference
(5) Filed as Exhibit 10-b to AmSouth's Form 10-K Annual Report for the year ended
December 31, 1996, incorporated herein by reference
(6) Filed as Exhibit 10-c to AmSouth's Form 10-K Annual Report for the year ended
December 31, 1995, incorporated herein by reference.
(7) Filed as part of Exhibit 23 to AmSouth's Form 10-Q Quarterly Report for the quarter
ended March 31, 1984, incorporated herein by reference (filed with the Securities
and Exchange Commission in Washington D.C., SEC File No. 1-7476, former File No. 0-
6907)
(8) Filed as Exhibit 10-e to AmSouth's Form 10-K Annual Report for the year ended
December 31, 1985, incorporated herein by reference (filed with the Securities and
Exchange Commission in Washington D.C., SEC File No. 1-7476, former File No. 0-6907)
(9) Filed as Exhibit 10-b to AmSouth's Form 10-Q Quarterly Report for the quarter ended
March 31, 1987, incorporated herein by reference (filed with the Securities and
Exchange Commission in Washington D.C., SEC File No. 1-7476, former File No. 0-6907)
(10) Filed as Exhibit 10(b) to AmSouth's Form 10-Q Quarterly Report for the quarter ended
September 30, 1988, incorporated herein by reference (filed with the Securities and
Exchange Commission in Washington D.C., SEC File No. 1-7476, former File No. 0-6907)
(11) Filed as Exhibit 10-i to AmSouth's Form 10-K Annual Report for the year ended
December 31, 1988, incorporated herein by reference (filed with the Securities and
Exchange Commission in Washington D.C., SEC File No. 1-7476, former File No. 0-6907)
(12) Filed as Exhibit 10-i to AmSouth's Form 10-K Annual Report for the year ended
December 31, 1994, incorporated herein by reference
(13) Filed as Exhibit 10-b to AmSouth's Form 10-Q Quarterly Report for the quarter ended
September 30, 1995, incorporated herein by reference
(14) Filed as Exhibit 10 to AmSouth's Form 10-Q Quarterly Report for the quarter ended
March 31, 1993, incorporated herein by reference
(15) Filed as Exhibit 10-k to AmSouth's Form 10-K Annual Report for the year ended
December 31, 1994, incorporated herein by reference
(16) Filed as Exhibit 10-a to AmSouth's Form 10-Q Quarterly Report for the quarter ended
September 30, 1995, incorporated herein by reference
(17) Filed as Exhibit 4.1 to AmSouth's Registration Statement on Form S-8 (Registration
No. 33-58777), incorporated herein by reference
(18) Filed as Appendix A to AmSouth's Proxy Statement, dated March 10, 1997, for the
Annual Meeting of Shareholders on April 17, 1997, incorporated herein by reference
(19) Filed as Exhibit 10-p to AmSouth's Form 10-K Annual Report for the year ended
December 31, 1996, incorporated herein by reference
(20) Filed as Exhibit 10-q to AmSouth's Form 10-K Annual Report for the year ended
December 31, 1995, incorporated herein by reference
(21) Filed as Exhibit 10-r to AmSouth's Form 10-K Annual Report for the year ended
December 31, 1995, incorporated herein by reference
(22) Agreements in this form have been entered into with the following Executive
Officers: Michael C. Baker, David B. Edmonds, Sloan D. Gibson, IV, O.B. Grayson
Hall, Jr., W. Charles Mayer, III, Candice W. Rogers, E. W. Stephenson, Jr., Alfred
W. Swan, Jr. and Stephen A. Yoder
</TABLE>
16
<PAGE>
EXHIBIT 10-a
AMSOUTH BANCORPORATION
EXECUTIVE INCENTIVE PLAN
ARTICLE I
---------
ESTABLISHMENT AND PURPOSES
1.1 By this document AmSouth Bancorporation (further referenced as "AmSouth" or
the "Corporation") restates, effective for Plan Years beginning on or after
January 1, 1998, the AmSouth Bancorporation Executive Incentive Plan (the
"Plan").
1.2 The purposes of the Plan are:
A. To optimize AmSouth's profitability and growth consistent with its
goals and objectives.
B. To optimize retention of a highly competent executive management
group by providing Participants short-term incentive compensation,
which, when combined with base salary, long-term incentive
compensation, and benefits, is fully competitive with other Peer
Banks.
C. To pay incentive awards within the Plan that correlate well with the
relative contributions made by Participants.
D. To encourage teamwork and involvement on the part of Participants by
connecting the major portion of the incentives paid to the
performance of AmSouth as a whole.
E. To encourage accountability on the part of Participants by
connecting a portion of the incentives paid to the performance
results of the specific organizational units for which the
Participants are responsible.
ARTICLE II
----------
CERTAIN DEFINITIONS
2.10 "Award" means the cash determined under this Plan to be due to a
Participant as a result of performance during a Plan Year, which shall be
paid, or the payment of which may be deferred, as provided in this Plan.
2.11 "Award Date" means that date, as soon as practicable after the applicable
performance evaluations are completed, on which awards are paid, or
deferred as the case may be.
2.12 "Base Compensation" means the base salary of a Participant in effect at
the beginning of the Plan Year.
2.13 "Beneficiary" means the beneficiary named by a Participant in writing
filed with Corporate Human Resources. If a Participant does not wish to
name a Beneficiary, the Beneficiary under this Plan will be the same as
his or her beneficiary under the AmSouth Bancorporation Thrift Plan, or
any successor thereto, in effect on the date of the Participant's death.
2.14 "Committee" means the Executive Compensation Committee of the Board of
Directors of AmSouth Bancorporation or any successor thereto performing
similar functions. This Committee administers and interprets the Plan; any
decision made by the Committee is final and binding on the Participant and
the Participant's Beneficiary.
<PAGE>
2.15 An "Officer/Director" is an employee who holds a position as one of the
most senior officers of AmSouth, is a member of the Corporate Management
Committee, and is also a member of the AmSouth Bancorporation Board of
Directors.
2.16 A "Participant" is an AmSouth Officer/Director or Senior Executive who is
approved each year by the Committee to participate with respect to the
next Plan Year.
2.17 "Peer Banks" are bank holding companies comparable to AmSouth the asset
sizes of which range from one half to two times the asset size of AmSouth.
2.18 "Plan Year" means a calendar year.
2.19 A "Senior Executive" is an officer who manages a major group, division, or
area and is a member of the Corporate Management Committee, but who is not
an Officer/Director.
ARTICLE III
-----------
PARTICIPATION
A Participant will not be qualified to receive an Award for a Plan Year unless
he or she was approved for entry into the Plan by the Committee and is still
working for AmSouth on the Award Date for that Plan Year. However, retirement,
death, disability or an approved leave of absence will not disqualify a
Participant; rather, a prorated payment, based on the time worked during the
Plan Year, will be made to the Participant or to his or her Beneficiary, as the
case may be. If a Participant leaves AmSouth's employ for any other reason, the
Committee may, in its sole discretion, make an Award to him or her of a prorated
payment based on the time worked during the Plan Year.
ARTICLE IV
----------
DETERMINATION OF AWARDS
4.1 Goals will be set for AmSouth and goals will be set for each Participant
based on the business unit that he or she manages. The major portion of the
incentives paid (100% in the case of Officer/Directors) will be based on the
performance results of AmSouth as a whole to encourage teamwork on the part
of each Management Committee member. In addition, for Senior Executive
Participants, a portion of the incentives paid will be based on the
performance results of the Participant's specific organizational unit
managed to encourage an appropriate degree of individual focus.
4.2 The importance of sound goal setting is critical to the success of this
Plan. The goal setting process will be directly connected to the annual
business plan and resulting budget, and will begin at the top of the
Corporation. Goals for performance purposes under this Plan may include one
or more of the following in any given year:
. Earnings per share
. Return on Average Assets
. Return on Average Equity
. Credit Quality Measures
. Efficiency Ratio
. Loan Growth
2
<PAGE>
. Deposit Growth
. Non-Interest Revenue Growth.
The corporate goals for AmSouth and the weightings placed on each will be
approved by the Committee at the beginning of each Plan Year. The corporate
goals will become the entire goals for any Officer/Director in the Plan and
the major goals for the remaining Participants in the Plan. In addition, the
remaining Participants in the Plan also will have goals approved by the
Chief Executive Officer for their units managed. The goals for the
individually managed units will support (in the case of staff support
executives) or add up to (in the case of line delivery executives) the goals
for the Corporation. The corporate goals and the individual unit goals will
both be weighted. The corporate goals will receive the heavier weighting and
the two weightings will total 100%. Once determined, goals for all Senior
Executive Participants will be documented on the Executive Incentive Plan
Goal Setting and Evaluation Form.
4.3 A "corporate rating" will be determined at year end based on the
Committee's evaluation of the Corporation's results against the annual goals
approved by the Committee at the beginning of the Plan Year. The corporate
rating can range from 0.0 to 2.0, with 1.0 basically representing goal
attainment. This rating will apply to the Officer/Director Participants.
For other Participants (Senior Executives), results will be evaluated
against goals established for their units at the beginning of the Plan Year.
One of the following five general achievement levels will apply for each
goal resulting in a performance rating from 0.0 to 2.0.
<TABLE>
<CAPTION>
PERFORMANCE PERFORMANCE PERFORMANCE
CATEGORIES DESCRIPTION RATING RANGE
<S> <C> <C>
Outstanding Significantly Exceeded Goals 1.6 - 2.0
More Than Expected Exceeded Goals 1.2 - 1.5
Expected Met Goals 0.9 - 1.1
Needs Improvement Fell Short of Goals 0.1 - 0.8
Unacceptable Significantly Fell Short of Goals 0.0
</TABLE>
Performance under the Plan will be rated at mid-year and at year-end
utilizing an Executive Incentive Plan Goal Setting and Evaluation Form. The
ratings will be weighted and the heavier weighted corporate rating will be
added to the lesser weighted rating for the Participant's assigned unit to
determine the overall rating.
4.4 A "base bonus opportunity" (BBO) will be set for each Participant as a
percent of Base Compensation by referencing Peer Bank market data on an
annual basis. This will represent the percentage payout associated with the
overall basic achievement of established goals at both the corporate and the
Participant's specific organizational unit levels. An overall performance
rating ranging from 0.0 - 2.0 will determine the tentative payout percentage
for a Participant. A rating of 1.0 will basically indicate that goals have
been achieved and that 100% of the BBO will be the payout percentage for a
Participant. Overall performance ratings above or below 1.0 can cause the
payout percentage to be as high as 200% of the BBO or as low as 0%. The
actual calculation of the payout percentage is performed by multiplying the
BBO by the overall performance rating.
3
<PAGE>
4.5 The actual Awards will be determined for Officer/Directors based on the
corporate rating assigned by the Committee, the BBO's, and the Base
Compensation. The actual awards for Senior Executive Participants will be
determined based on the weighted combined corporate rating and individual
unit performance ratings recommended by the Chief Executive Officer, the
BBO's, and the Base Compensation. The maximum amount which may be paid to a
Participant for any given Plan Year under this Plan is $2,000,000.
Notwithstanding the foregoing, the Committee may exercise downward
discretion with respect to payouts under this Plan.
ARTICLE V
---------
DISTRIBUTION OF AWARDS
Unless a Participant has elected to defer receipt of his or her Award under
Article VI, the Award will be paid in the form of a cash bonus. However, if a
Participant dies prior to the Award Date, the designated Beneficiary will be
paid the amount of the Award in a single cash sum whether or not the Participant
has made an election to defer any part or all of the Award as provided for in
Article VI. All Awards will be paid on an annual basis within 90 days of the
end of the Plan Year and will be net of any required federal, FICA, state or
local tax withholdings.
ARTICLE VI
----------
ELECTIONS
6.1 Before the beginning of each Plan Year, each Participant, may elect to defer
his or her Award, if any, for the upcoming year, pursuant to the terms of
the AmSouth Bancorporation Deferred Compensation Plan.
ARTICLE VII
-----------
MISCELLANEOUS
7.1 AmSouth will not under any circumstances make any payment under this Plan to
any assignee or creditor of a Participant or of his or her Beneficiary.
Before a Participant actually receives a payment under this Plan, neither he
or she, nor a designated Beneficiary, has any right, even in anticipation of
receiving a payment, to assign, pledge, grant a security interest in,
transfer or otherwise dispose of any interest under this Plan. Furthermore,
a Participant's rights cannot be assigned or transferred even by operation
of law.
7.2 This Plan gives the Participant no right to be retained in AmSouth's
employment.
7.3 The Committee can end or change this Plan at any time. However, neither the
Committee nor the Board of Directors of AmSouth Bancorporation can take
away any Award which a Participant has already been paid or which a
Participant has deferred, or any Award a Participant might receive for the
Plan Year when the Committee acts.
7.4 This Plan is to be governed and interpreted as provided in the laws of the
State of Alabama.
7.5 Neither an executive nor any officer or employee of AmSouth Bancorporation
or any of its subsidiaries has any claim or right to be included in the Plan
or to be granted an Award unless and until (i) he or she has become a
Participant for the Plan Year in question and (ii) his or her Award has been
made.
4
<PAGE>
EXHIBIT 10-q
AMENDED AND RESTATED
DEFERRED COMPENSATION PLAN
FOR DIRECTORS OF
AMSOUTH BANCORPORATION
ARTICLE I
Purpose: Status of Deferred Compensation
----------------------------------------
1.1 Purpose. The Plan provides a method of deferring payment to a
-------
Director of certain compensation to which such person would otherwise be
entitled under applicable resolutions of the Board of Directors of AmSouth
Bancorporation ("AmSouth") in force from time to time and provides for
distribution of all sums so deferred with earnings thereon in the manner and at
the time hereinafter set forth. The Board of Directors of AmSouth
Bancorporation or a committee thereof may designate that directors of one or
more direct or indirect subsidiaries of AmSouth be considered a "Director" for
purposes of this Plan.
1.2 Any sums due under the Plan to or for the benefit of a Participant
shall not be funded by AmSouth or any subsidiary thereof nor shall any asset of
AmSouth or any subsidiary thereof be otherwise pledged for, subjected to legal
or equitable lien or encumbrance to secure, or set aside for, the payment of any
sums hereunder. Sums due hereunder shall be payable solely from the general
assets of AmSouth.
ARTICLE II
Effective Date; Manner of Participation
---------------------------------------
2.1 Effective Date. The Plan shall go into effect on July 1, 1986.
--------------
2.2 Participation. A Director becomes a Participant in the Plan by
-------------
delivering to the Administrator a duly executed election form in the form
attached hereto. For Directors who submit election forms prior to July 1, 1986,
participation shall be effective July 1, 1986. For Directors who submit
election forms at any time on or after July 1, 1986, participation shall begin
on the first day of the calendar quarter following receipt of the election form
by the Administrator.
2.3 Termination of Participation. A Director may terminate participation
----------------------------
in the Plan by delivering a signed written notice to that effect to the
Administrator. Termination shall become effective at the end of the calendar
quarter in which the Administrator receives the notice. Termination of
participation in the Plan shall not affect amounts previously deferred; said
amounts shall continue to be deferred and shall be paid in accordance with the
initial election form and the terms of the Plan.
<PAGE>
2.4 Participation after Termination. In no event shall a Director who
-------------------------------
has terminated participation in the Plan be entitled again to participate in the
Plan for a period of three years after the termination became effective. Such a
Director may then again participate in the manner described in Section 2.2,
provided, however, that the Director may not alter the payment options selected
pursuant to Sections 5.1 and 5.2 in his or her initial election form.
ARTICLE III
Deferred Compensation
---------------------
3.1 Amounts Available for Deferral. A Director who is a Participant may
------------------------------
choose to defer under the Plan:
(a) all or any specified portion of the retainer (if any) earned by him or
her from AmSouth from time to time, or
(b) all (but not a portion of) meeting fees paid to him or her by AmSouth,
or both. The amount chosen from time to time by a Director to be deferred is
referred to in this Plan as "Deferred Compensation."
3.2 Manner of Specifying Amount. A Director shall, in the first election
---------------------------
form submitted by him or her, specify the amount to be deferred within the
limits set forth in Section 3.1.
3.3 Changing the Amount to be Deferred. A Director may, at any time,
----------------------------------
submit to the Administrator a new election form changing, within the limits
specified in Section 3.1, the amounts to be deferred, provided that the
specified changes shall become effective at the beginning of the calendar
quarter next following receipt of said election form by the Administrator.
ARTICLE IV
Deferred Compensation Accounts
------------------------------
4.1 Earnings on Deferred Compensation. The Administrator shall maintain
---------------------------------
on its books and records an accurate account of all Deferred Compensation in a
separate Account for each Participant, which shall, with respect to deferrals
made on and after January 1, 1998, be deemed to be invested in "deferred" shares
of AmSouth Bancorporation common stock, $1.00 par value per share ("AmSouth
Stock"). Accounting for deferred shares may include fractions, but no fractional
share of AmSouth Stock will be distributed to a Participant. When dividends are
paid on AmSouth Stock an equivalent per share amount shall be deemed to be paid
on shares of deferred stock (including any fractional share) credited to a
2
<PAGE>
Participant's Account ("Deemed Dividends"). Deemed Dividends on deferred shares
will be reinvested in additional deferred stock as of the relevant dividend
payment date. The number of shares of deferred stock shall be determined based
on the closing price of AmSouth Stock on the day the retainer and/or meeting
fees would otherwise be paid to a Director or the day the dividend is payable on
shares of AmSouth Stock, as applicable.
4.2 Statements of Account. The Administrator shall prepare and distribute
---------------------
to each Participant a report reflecting the amounts in such Account once each
calendar quarter.
4.3 Prior Deferred Compensation. With respect to deferrals made prior to
---------------------------
January 1, 1998, each Participant who has an Account in the Plan shall be given
the opportunity to make a one-time written election with respect to deferrals
credited to such Participant's Account prior to December 31, 1997 ("Prior
Deferred Compensation") to either (i) continue to have his or her Prior Deferred
Compensation deemed to be invested in "phantom" shares of AmSouth Stock and
receive at the appropriate time a cash payment of such deferrals, or (ii) have
such Prior Deferred Compensation classified as deferred shares of AmSouth Stock
based on the closing price of AmSouth Stock on December 31, 1997 and receive (at
the appropriate time) payment for such Prior Deferred Compensation in shares of
AmSouth Stock. If a Participant elects to have his or her Prior Deferred
Compensation deemed to be converted into shares of AmSouth Stock, the provisions
of Section 5.1(b) shall be applicable to such Prior Deferred Compensation
notwithstanding the Participant's original deferral election. The provisions of
Section 5.1(b) shall not apply with respect to any Prior Deferred Compensation
unless such Prior Deferred Compensation is deemed to be converted into shares of
AmSouth Stock and is payable solely in shares of AmSouth Stock.
4.4 Adjustment of Accounts. In the event of any AmSouth Stock dividend,
----------------------
stock split, combination or exchange of shares, recapitalization or other change
in the capital structure of AmSouth, corporate separation or division of AmSouth
(including, but not limited to, a split-up, spin-off, split-off or distribution
to AmSouth stockholders other than a normal cash dividend), sale by AmSouth of
all or a substantial portion of its assets (measured on either a stand-alone or
consolidated basis), reorganization, rights offering, a partial or complete
liquidation, or any other corporate transaction, AmSouth share offering or event
involving AmSouth and having an effect similar to any of the foregoing, the
Administrator may adjust the number of shares of deferred AmSouth Stock credited
to an Account, as the Administrator may determine is equitable, and any other
characteristics or terms as the Administrator shall deem necessary or
appropriate to reflect equitably the effects of such changes to the Participant.
ARTICLE V
Payment of Deferred Compensation
--------------------------------
5.1 Commencement of Payment. (a) In the first election form submitted by
-----------------------
a Director to the Administrator, a Director may choose between the following
3
<PAGE>
times for payment of Benefits (which shall consist of all Deferred Compensation
and all accumulated earnings thereon) to begin:
(i) on January 15 of the year following the year in which the Director
retires from or his or her service is otherwise terminated from the Board of
AmSouth, or
(ii) on January 15 of the year in which the Director attains any age
selected by him or her in said first election form.
The choice so made shall be final and binding on the Director and may not be
changed on any subsequently submitted election form or otherwise except as
provided in (b) below. Payment shall commence on the date specified in
accordance with this Section 5.1 or as soon as reasonably practicable
thereafter.
(b) Notwithstanding the foregoing provisions of this Section 5.1 or the
terms of any election form made by a Participant, Benefits shall be payable
immediately in a single lump sum upon a Change in Control of AmSouth, unless the
Plan is maintained on substantially the same terms following a Change in
Control.
5.2 Period for Payment. In the first election form submitted by a
------------------
Director to the Administrator, a Director may choose between the following time
periods for payment of Deferred Compensation:
(a) in a lump sum on the January 15 specified in accordance with the
provisions of Section 5.1, or
(b) in any specified number of annual installments commencing with the
January 15 specified in accordance with the provisions of Section 5.1.
The following limitations shall apply to the administration of any election
under this Subsection (b):
(i) each annual installment will be a minimum of 100 shares even if the
minimum payment amount shortens the number of annual installments otherwise
elected (for example, if the Benefits totaled 750 shares and the Director had
elected to be paid in eight annual installments, the Director will receive six
installments of 100 shares and a final seventh installment of 150 shares),
(ii) if at the time payment is due to commence, the amount of the Benefits
is 500 shares or less, the entire amount shall be paid in a lump sum,
(iii) the provisions of Section 5.3 concerning death of the Director shall
apply , and
(iv) if installment payments have begun at the time of a Change in Control
of AmSouth, the remaining shares due to a Director shall be payable immediately
in a single lump sum upon a Change in Control.
4
<PAGE>
5.3 Effect of Death of a Participant. Despite any provision of the Plan
--------------------------------
or any election or other instruction of a Participant, all shares due to be
distributed under the Plan shall be distributed to the beneficiary designated by
the Participant (or, in the absence of a beneficiary, to the legal
representative of a Participant) in a lump sum as soon as practicable following
receipt by the Administrator of written notice of the death of the Participant.
5.4 Calculation of Installment Payments. When annual installments are
-----------------------------------
due to commence under this Article V, the Administrator shall calculate the
total amount of the Benefits as of December 31 of the previous year and divide
said total by the number of annual installments elected by the Participant to
derive the Participant's Annual Payment amount. On each January 15 until said
total is completely paid, the Administrator shall pay to the Participant the
Annual Payment plus such number of additional deferred shares as are
attributable to Deemed Dividends credited to the Participant's Account since the
immediately preceding installment payment to the Participant. In all cases, the
limitations provided in Section 5.2(b) shall apply. The Annual Payment amount
shall be adjusted if the number of shares in the Participant's Account is
adjusted pursuant to Section 4.4.
5.5 Form of Payment. All Deferred Compensation deferred on and after
---------------
January 1, 1998 shall be payable only in the form of shares of AmSouth Stock
which have been credited to the Participant's Account. Prior Deferred
Compensation shall be paid in the form specified in the Participant's one-time
written election described in Section 4.3. At the time the final payment is to
be made to a Participant any fractional share remaining in such Participant's
Account shall be rounded up to the next highest whole number of shares.
ARTICLE VI
Miscellaneous
-------------
6.1 Other than the Participant and the legal representative of his or her
estate, no person, whether a creditor or assignee of a Participant or of the
estate of a Participant or otherwise, shall have an interest in the Plan, or the
Deferred Compensation or earnings thereon; and no person, including the
Participant and estates of Participants, shall have the right to demand or be
entitled to payment of any sums under the Plan prior to the time payments are
due in strict accordance with the terms of the Plan nor to a form of payment not
otherwise due strictly in accordance with the provisions of Article V of the
Plan. In amplification but not in limitation of the foregoing, before a
Participant or estate of a deceased Participant actually receives any payment of
any sum hereunder, no Participant or estate has the right to assign, pledge,
grant a security interest in, transfer or otherwise dispose of any interest
under the Plan.
5
<PAGE>
6.2 No Director will acquire any rights or entitlement to continue as such
or to any other office by or as a result or consequence, directly or indirectly,
of the establishment or operation of the Plan.
6.3 The Board of Directors of AmSouth or a committee thereof may,
prospectively, amend or modify the Plan from time to time or terminate the Plan.
However no amendment or termination of the Plan shall adversely affect the
rights of Participants and their estates to Benefits as of the date of such
amendment or termination as expressly set forth in the Plan prior to such
amendment or termination.
6.4 The Plan is governed by and construed in accordance with the laws of
the State of Alabama.
6.5 If, and to the extent that, any provision of the election form
attached hereto or submitted by a Director is inconsistent with any provision of
the Plan, the Plan provision shall be final and binding.
6.6 The Plan and the obligation to pay Benefits in accordance with its
terms shall be and remain the obligation of AmSouth and its successors by
operation of law, merger, consolidation or other reorganization or purchase of
all or substantially all of its assets.
ARTICLE VII
Definitions
-----------
Some of the terms used herein are defined in this Article; others are
defined in context in the Plan.
7.1 "Administrator" means the Controller of AmSouth Bank, unless and until
the Board of Directors or Director Affairs Committee of AmSouth Bancorporation
shall designate another to act as Administrator.
7.2 "Change in Control" of AmSouth shall have the same meaning as set
forth in the Executive Severance Agreements of AmSouth, as they may be amended
from time to time.
7.3 "Director" means any director of AmSouth Bancorporation or its
successors and assigns or any director designated pursuant to Section 1.1;
provided, however, that the term shall not include any officer or employee
thereof nor any advisory director by whatever name such advisory position may be
known.
7.4 "Plan" means this Deferred Compensation Plan as the same may be
hereafter amended from time to time and shall, as to a specific Director, be
deemed to include that person's election form (provided for in Section 2.2
hereof), unless otherwise expressly provided to the contrary herein.
6
<PAGE>
EXHIBIT 10-t
AmSouth Bancorporation
Employment Agreement For C. Dowd Ritter
This EMPLOYMENT AGREEMENT is made, entered into, and is effective as of this
18th day of December, 1997 (the "Effective Date"), by and between AmSouth
Bancorporation, a Delaware corporation, (the "Company"), and C. Dowd Ritter (the
"Executive").
WHEREAS, the Executive is presently employed by the Company in the capacity of
Chairman, President and Chief Executive Officer; and
WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, its policies, methods,
personnel, and operations; and
WHEREAS, the Company recognizes that the Executive's contributions have been
substantial and meritorious and, as such, the Executive has demonstrated unique
qualifications to act in an executive capacity for the Company; and
WHEREAS, the Company is desirous of assuring the continued employment of the
Executive in the above stated capacities, and Executive is desirous of having
such assurance;
WHEREAS, the Executive and the Company previously entered into an employment
agreement effective as of the 15th day of June, 1995 (the "1995 Agreement") and
the Executive and the Company now desire to amend and restate the 1995 Agreement
hereby;
NOW THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements of the parties set forth in this Agreement, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
Article 1. Term of Employment
The Company hereby agrees to employ the Executive and the Executive hereby
agrees to continue to serve the Company, in accordance with the terms and
conditions set forth herein, for an initial period of three (3) years,
commencing as of the Effective Date of this Agreement, as indicated above.
1
<PAGE>
Upon each new day of the three (3) year period of employment from the
Effective Date until the Executive's sixty-second (62nd) birthday, the term of
this Agreement automatically shall be extended for one (1) additional day, to be
added to the end of the then-existing three (3) year term. Accordingly, at all
times prior to (i) the Executive's attaining age 62 and (ii) a notice of
employment termination (or an actual termination), the term of this Agreement
shall be three (3) full years. However, either party may terminate this
Agreement by giving the other party written notice of intent not to renew in
accordance with the terms of the agreement. Additionally, the automatic
extensions of the term of this Agreement shall immediately be suspended upon an
employment termination by reason of death, Disability, (as defined in Section
6.2), or Retirement (as defined in Section 6.1), or an employment termination
made voluntarily by the Executive (other than for Good Reason as defined in
Section 6.6), or involuntarily for Cause (as defined in Section 6.5). The
provisions applicable to such suspensions of the term of this Agreement are set
forth in those Sections pertaining to each of such types of employment
terminations.
In the event the Executive gives notice of employment termination, the term of
this Agreement shall expire upon the ninetieth (90th) day following the delivery
to the Company of such notice of employment termination. Except as otherwise
provided in the following paragraph with respect to a voluntary termination for
Good Reason (defined in Section 6.6 herein), a voluntary employment termination
by the Executive shall result in the termination of the rights and obligations
of the parties under this Agreement; provided, however, that the terms and
provisions of Article 9 shall continue to apply prior to a Change in Control
(defined in Section 7.1).
In the event the Company desires to involuntarily terminate the employment of
the Executive (for purposes of this Agreement, a voluntary employment
termination by the Executive for Good Reason shall be treated as an involuntary
termination of the Executive's employment without Cause), the Company shall
deliver to the Executive a notice of employment termination, and the following
provisions shall apply:
(a) In the event the involuntary termination is for Cause (defined in Section
6.5 herein), the term of this Agreement shall expire on the ninetieth
(90th) day following the delivery to the Executive of such notice of
termination. Such a termination for Cause shall result in the termination
of all rights and obligations of the parties under this Agreement;
provided, however, that the terms and provisions of Article 9 shall
continue to apply, and Section 6.5 shall apply until payments required
thereunder have been made.
(b) In the event the involuntary termination is without Cause, the Executive
shall be entitled to receive the severance benefits set forth in Section
2
<PAGE>
6.4 herein; provided, however, that the terms and provisions of Article 9
shall continue to apply prior to a Change in Control (defined in Section
7.1) and Section 6.4 shall apply until payments required thereunder have
been made.
Article 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to serve as Chairman,
President and Chief Executive Officer of the Company, and as a member of the
Company's Board of Directors if so elected. In his capacity as Chairman,
President and Chief Executive Officer of the Company, he shall have
responsibility for all operations of the Company. The Executive shall have the
same status, privileges, and responsibilities normally inherent in such
capacities in financial institutions of similar size and character to the
Company.
Article 3. Standard of Care
During the term of this Agreement, the Executive agrees to devote
substantially his full time, attention, and energies to the Company's business
and shall not be engaged in any other business activity, whether or not such
business activity is pursued for gain, profit, or other pecuniary advantage.
However, the Executive may serve as a director of other companies so long as
such service is not injurious to the Company, and provided that such service is
approved by the Board of the Company as may be required under the By-Laws of the
Company. The Executive covenants, warrants, and represents that he shall:
(a) Devote his full and best efforts to the fulfillment of his employment
obligations; and
(b) Exercise the highest degree of loyalty and the highest standards of
conduct in the performance of his duties.
This Article 3 shall not be construed as preventing the Executive from
investing assets in such form or manner as will not require his services in the
daily operations of the affairs of the companies in which such investments are
made.
Article 4. Compensation
As remuneration for all services to be rendered by the Executive during the
term of this Agreement, and as consideration for complying with the covenants
herein, the Company shall pay and provide to the Executive the following:
4.1 Base Salary. The Company shall pay the Executive a Base Salary in an
amount which shall be established from time to time by the Board of Directors of
3
<PAGE>
the Company or the Board's designee; provided, however, that such Base Salary
shall not be less than $700,000 (effective January 1, 1998) and if subsequently
increased shall not be less than such increased amount ("Base Salary"). This
Base Salary shall be paid to the Executive in equal semimonthly installments
throughout the year, consistent with the normal payroll practices of the
Company.
The Base Salary shall be reviewed at least annually following the Effective
Date of this Agreement, while this Agreement is in force, to ascertain whether,
in the judgment of the Board or the Board's designee, such Base Salary should be
increased, based primarily on the performance of the Executive during the year.
If so increased, the Base Salary as stated above shall, likewise, be increased
for all purposes of this Agreement.
4.2 Annual Bonus. In addition to his salary, the Executive shall be entitled
to receive an opportunity to earn a cash bonus (the "Bonus") under the AmSouth
Bancorporation Executive Incentive Plan established as of January 1, 1995, or
any successors thereto, as amended from time to time (the "Executive Incentive
Plan").
4.3 Long-Term Incentives. During the term of this Agreement, the Executive
shall be entitled to participate in any and all long-term incentive programs at
a level that is commensurate with his position with the Company. Such programs
include the AmSouth Bancorporation 1996 Long Term Incentive Compensation Plan,
the AmSouth Bancorporation Performance Incentive Plan, or any successors
thereto, as amended from time to time.
4.4 Retirement Benefits. The Company shall provide to the Executive
participation in all Company qualified defined benefit and defined contribution
retirement plans, subject to the eligibility and participation requirements of
such plans. The Executive's retirement benefits shall not be less than those
that would be provided him under the terms of the Supplemental Retirement Plan
and the Supplemental Thrift Plan, or as such benefits shall be increased,
whether or not such benefits under the Supplemental Retirement Plan and the
Supplemental Thrift Plan shall otherwise be decreased or eliminated. The
obligations of the Company pursuant to this Section 4.4 shall survive the
termination of this Agreement.
4.5 Supplemental Life Insurance. The Company shall provide the Executive with
a Supplemental Life Insurance Policy which will replace the group term life
insurance beyond $50,000 provided by the Company and will take into account the
maximum coverage amounts allowed under the group term policy. This Supplemental
Life Insurance will be provided in the form of a survivorship policy which will
be funded on the basis of a split dollar endorsement method. The Company will
meet its obligation to pay its portion of premiums and meet all other
commitments to the Executive under the policy.
4
<PAGE>
4.6 Employee Benefits. The Company shall provide to the Executive all benefits
to which other executives and employees of the Company are entitled to receive,
as are commensurate with the Executive's position, subject to the eligibility
requirements and other provisions of such plans or arrangements. Such benefits
shall include, but not be limited to, group term life insurance, comprehensive
health and major medical insurance, dental and life insurance, and disability
insurance.
4.7 Perquisites. The Company shall provide to the Executive, at the Company's
cost, all perquisites to which other senior executives are entitled to receive
and such other perquisites which are suitable to the character of the
Executive's position with the Company and adequate for the performance of his
duties hereunder.
4.8 Right to Change Plans. By reason of Sections 4.6 and 4.7 herein, the
Company shall not be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan, program, or perquisite, so long as
such changes are similarly applicable to executive employees generally.
Article 5. Expenses
The Company shall pay or reimburse the Executive for all ordinary and
necessary expenses, in a reasonable amount, which the Executive incurs in
performing his duties under this Agreement including, but not limited to,
travel, entertainment, professional dues and subscriptions, and all dues, fees,
and expenses associated with membership in various professional, business, and
civic associations and societies in which the Executive's participation is in
the best interest of the Company. As part of the above referenced commitment,
the Company will specifically pay the Executive a net amount after taxes of
$5,000 at the beginning of each calendar year for business related expenses,
including gifts.
Article 6. Employment Terminations
6.1 Termination Due to Retirement or Death. In the event the Executive's
employment is terminated while this Agreement is in force by reason of early or
normal retirement (as defined under the then established rules of the Company's
tax-qualified retirement plan) ("Retirement"),or death, the Company's obligation
under this Agreement to pay and provide to the Executive the elements of pay
described in Sections 4.1, 4.2 and 4.3, shall immediately expire. Upon the
effective date of such termination, the Executive's benefits including, without
limitation, benefits under Section 4.4, 4.5, 4.6 and 4.7 shall be determined in
5
<PAGE>
accordance with the Company's retirement, survivors' benefits, insurance, and
other applicable programs of the Company then in effect.
However, the Executive shall receive all other rights and benefits that he is
vested in, pursuant to other plans and programs of the Company. In addition,
subject to any conflicting terms of any short-term incentive program which would
provide for greater benefits following such termination, the Company shall pay
to the Executive (or the Executive's beneficiaries or estate, as applicable), a
Pro Rata ("Pro Rata" as used in this agreement shall mean consideration of the
number of days elapsed prior to the executive's termination date as a percentage
of the number of days in the fiscal year) share of his Bonus for the fiscal year
in which employment termination occurs, based on Base Bonus Opportunity ("Base
Bonus Opportunity" as used in this Agreement shall have the meaning as defined
in the Executive Incentive Plan or its successor.) and the Company's
performance for such fiscal year. This Pro Rata Bonus amount shall be determined
at the sole discretion of the Company's Board of Directors, and shall be paid
within sixty (60) days of the effective date of employment termination.
Also, all unvested stock awards (including, but not limited to, any stock
options and restricted stock) will vest in full on the date of termination.
6.2 Termination Due to Disability. In the event that the Executive is
determined to have a Disability (as defined below) during the term of this
Agreement, the Company shall have the right to terminate the executive's active
employment as provided in this Agreement. However, the Board shall deliver
written notice to the Executive of the Company's intent to terminate the
Executive's employment for Disability at least thirty (30) calendar days prior
to the effective date of such termination and only after any period or process
for determining the Disability has been satisfied and completed.
A termination of employment for Disability shall become effective upon the end
of the thirty (30) day notice period specified above. Upon such effective date,
the Company's obligation to pay and provide to the Executive the element of pay
described in Sections 4.1, 4.2 and 4.3 shall immediately expire.
However, the Executive shall receive all rights and benefits that he is vested
in, pursuant to other plans and programs of the Company. In addition, subject
to any conflicting terms of any short-term incentive program which would provide
for greater benefits following such termination, the Company shall pay to the
Executive a Pro Rata share of his Bonus for the fiscal year in which employment
termination occurs, based on the Base Bonus Opportunity for such fiscal year.
This Pro Rata Bonus amount shall be determined at the sole discretion of the
Company's Board of Directors, and shall be paid within sixty (60) days of the
effective date of termination for Disability.
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Also, all unvested stock awards (including, but not limited to, any stock
options and restricted stock) will vest in full on the date of termination.
The term "Disability" shall mean, for all purposes of this Agreement, the
total and permanent incapacity of the Executive, due to injury, illness,
disease, or bodily or mental infirmity, to engage in the performance of
substantially all of the usual duties of employment with the Company as
contemplated by Article 2 herein for more than twelve consecutive calendar
months, such Disability to be determined by the Board of Directors of the
Company upon receipt and in reliance on competent medical advice from one (1) or
more individuals, selected by the Executive who are qualified to provide such
professional medical advice, and who are acceptable to the Board, which
acceptance shall not be unreasonably withheld.
It is expressly understood that the Disability of the Executive for a period
of twelve calendar months or less in the aggregate during any period of twenty-
four (24) consecutive months, in the absence of any demonstration that his
Disability will exist for more than such a period of time, shall not constitute
a failure by him to perform his duties hereunder and shall not be deemed a
breach or default, and the Executive shall receive full compensation for any
such period or for any other temporary illness or incapacity during the term of
this Agreement.
6.3 Voluntary Termination by the Executive. The Executive may terminate this
Agreement at any time by giving the Board of Directors of the Company written
notice of intent to terminate, delivered at least ninety (90) calendar days
prior to the effective date of such termination. This Section 6.3 shall not
apply if the Executive terminates employment because of Retirement.
The Company shall pay the Executive his full Base Salary, at the rate then in
effect as provided in Section 4.1 herein, through the effective date of
termination, plus all other benefits to which the Executive has a vested right
at that time (for this purpose, the Executive shall not be paid any Bonus with
respect to the fiscal year in which voluntary termination under this Section
6.3 occurs). In the event that the voluntary termination is for Good Reason, the
terms of Section 6.6 herein shall govern the parties' rights and obligations
hereunder.
6.4 Involuntary Termination by the Company Without Cause. At any time during
the term of this Agreement, the Board may terminate the Executive's employment,
as provided under this Agreement, for reasons other than death, Disability,
Retirement, or for Cause, by notifying the Executive in writing of the Company's
intent to terminate, at least ninety (90) calendar days prior the effective date
of such termination.
Following the expiration of the ninety (90) day notice period, the Company
shall pay to the Executive a lump sum cash payment equal to the sum of the
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amounts described in the following paragraphs (a) through (h), and shall provide
the benefits as described in paragraphs (i) and (j).
(a) The Base Salary which would have been paid to the Executive throughout the
remaining years of the term of this Agreement;
(b) An amount equal to the product of the number of years remaining in the
term of this Agreement and the greatest of: (i) the Executive's greatest
annual Bonus earned (whether actually paid or deferred) in the three (3)
consecutive fiscal years most recently completed prior to the year in
which occurs the Executive's termination of employment; (ii) the
Executive's Base Bonus Opportunity established under the AmSouth
Bancorporation Executive Incentive Plan or its successor for the Bonus
plan year in which the Executive's termination of employment occurs; or
(iii) the Executive's Bonus for the fiscal year in which occurs the
termination of employment based on the actual performance of the Company
and the Executive through the date of termination, multiplied by a
fraction, the numerator of which is 12 and the denominator of which is the
number of calendar months to have elapsed prior to the Executive's
termination in the fiscal year of termination.
(c) An amount equal to the Executive's unpaid Base Salary, and a Pro Rata
portion of the Executive's Base Bonus Opportunity for the Bonus plan year
in which the termination occurs determined as the greatest of (i) the
Executive's greatest annual Bonus earned (whether actually paid or
deferred) in the three (3) full consecutive fiscal years most recently
completed prior to the termination of employment; (ii) the Executive's
Base Bonus Opportunity for the Bonus plan year in which the Executive's
termination of employment occurs; or (iii) the Executive's Bonus for the
fiscal year in which occurs the termination of employment based on the
actual performance of the Company and the Executive through the date of
termination of employment, multiplied by a fraction, the numerator of
which is 12 and the denominator of which is the number of calendar months
to have elapsed in the fiscal year prior to the Executive's termination in
the fiscal year of termination.
(d) An amount equal to the product of (i) the value determined by a
consulting firm with a national reputation to be a competitive annual
long term incentive grant (defined as a size-adjusted, 50th percentile
grant as of the date of determination as compared to the Company's peer
group), and (ii) the number of years remaining in the term of this
Agreement; provided, however, that if both of the conditions specified in
the next sentence are present at the time of the Executive's termination,
the number of years in clause (ii) shall be reduced by multiplying such
number of years by the quotient of the number of full calendar months
remaining until the conclusion of the performance measurement period for
the Executive's grant divided by the total number of months in the
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performance measurement period. The conditions which both must be present
for reduction of the number of years otherwise applicable under clause
(ii) of the prior sentence are: (A) the Executive's termination of
employment occurs on or after the effective date of a Change in Control
(as defined in Section 7) and (B) the Executive's currently outstanding
grant under the Company's long term incentive compensation plan had a
performance measurement period of more than one year.
(e) An amount equal to the actuarial present value equivalent of the
aggregate benefits accrued by the Executive as of the date of termination
under the terms of the Supplemental Retirement Plan. For this purpose, the
Executive's interest under the Supplemental Retirement plan shall be fully
vested and such benefits shall be calculated under the assumption that the
Executive's employment continued following the date of termination for the
number of years remaining in the term of this Agreement (i.e., additional
years of service credits shall be added); provided, however, that, for the
purposes of determining "final average pay" under the benefit calculation,
the Executive's actual pay history as of the date of termination shall be
used. Further, the payment provided under this Subsection 6.4(e) shall be
made in lieu of, and shall completely supersede and replace the
Executive's benefits payable under the AmSouth Bancorporation Supplemental
Retirement Plan.
(f) An amount equal to the aggregate benefits accrued by the Executive as of
the effective date of termination under the terms of the Supplemental
Thrift Plan. The payment provided under this Subsection 6.4(f) shall be
made in lieu of, and shall completely supersede and replace, the
Executive's benefits payable under the AmSouth Bancorporation Supplemental
Thrift Plan.
(g) An amount equal to the entire balance of the Executive's account, if any,
established under the AmSouth Bancorporation Deferred Compensation Plan,
or any successors thereto, as amended from time to time.
(h) The amount of the Executive's annual club dues bonus in the year of
termination, multiplied by the remaining years of the term of this
Agreement.
(i) For a thirty-six-month period following the date of the termination or
until the Executive shall have obtained employment, comparable to his
position with the Company on the date of termination, whichever is
earlier, out-placement services, the scope and provider of which shall be
selected by the Executive in the Executive's sole discretion, are provided
at the expense of the Company, but not to exceed a reasonable cost.
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(j) A continuation of all benefits pursuant to any and all welfare benefit
plans under which the Executive and/or the Executive's family is eligible
to receive benefits and/or coverage as of the date of termination or as
the same may be increased from time to time. Such benefits shall be
provided to the Executive at the same premium cost, and at the same
coverage level, as in effect as of the Executive's date of termination.
The welfare benefits described in this Subsection 6.4(j) shall continue
following the date of termination for the number of years remaining in the
term of this Agreement; provided, however, that such benefits shall be
discontinued prior to the end of such period in the event the Executive
receives substantially similar benefits from a subsequent employer.
Also, all unvested stock awards (including, but not limited to, any stock
options and restricted stock) will vest on the date of termination. The payments
described in this Section 6.4, as well as Section 6.6, shall be in part to
compensate the Executive for being subject to the provisions of Article 9 (if
applicable) thereafter, even though the Executive's employment has been
terminated without Cause or for Good Reason as provided in Section 6.6.
Also, the Company shall transfer (or cause to be transferred) to the Executive
title to the Executive's Company car, without cost to the Executive, and shall
pay to the Executive a lump sum cash payment in an amount necessary to fully
gross-up the income tax effect of said transfer.
6.5 Termination For Cause. Nothing in this Agreement shall be construed to
prevent the Board from terminating the Executive's employment under this
Agreement for "Cause."
"Cause" shall be determined by the Board in the exercise of good faith and
reasonable judgment; and shall be defined as the conviction of the Executive for
the commission of an act of fraud, embezzlement, theft, or other criminal act
constituting a felony under the generally enforceable laws of the State of
Alabama; or the gross neglect of the Executive in the performance of any or all
material covenants under this Agreement, for reasons other than the Executive's
death, Disability, or Retirement. The Company's Board of Directors, by majority
vote, shall make the determination of whether Cause exists, after providing the
Executive with notice of the reasons the Board believes Cause may exist, and
after giving the Executive the opportunity to respond to the allegation that
Cause exists.
In the event this Agreement is terminated by the Board for Cause, the Company
shall pay the Executive his Base Salary through the effective date of the
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employment termination and the Executive shall immediately thereafter forfeit
all rights and benefits (other than vested benefits) he would otherwise have
been entitled to receive under this Agreement. The Company and the Executive
thereafter shall have no further obligations under this Agreement provided,
however, that the provisions of Article 9 shall continue to apply.
A termination for Cause shall be permitted hereunder only if the Company
provides the written notice of intent to terminate not later than six (6) months
after the date the Company first knew or should have reasonably known of the act
or omission to act or conviction giving rise to the termination for Cause. The
six (6)-month period shall be tolled during any permitted period of correction
or administrative procedure.
6.6 Termination for Good Reason. At any time during the term of this
Agreement, the Executive may terminate this Agreement for Good Reason (as
defined below) by giving the Board of Directors of the Company ninety (90)
calendar days written notice of intent to terminate, which notice sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
such termination. The Executive's ability to terminate for Good Reason is
contingent upon his agreement to allow the Company to remedy, within such ninety
(90)-day period, the events constituting Good Reason.
Upon the failure of the Company to remedy the events constituting Good Reason
prior to the expiration of the ninety (90)-day notice period, the Good Reason
termination shall become effective, and the Company shall pay and provide to the
Executive the benefits set forth in Section 6.4 herein (as if the termination
were an involuntary termination without Cause.)
A termination for Good Reason shall be permitted hereunder only if the
Executive provides the written notice to terminate not later than six (6) months
after the date the Employee first knew or should have known of the act or
omission to act giving rise to the termination for Good Reason. The six (6)-
month period shall be tolled during any permitted period of correction or
administrative procedure.
Good Reason shall mean, without the Executive's express prior written consent,
the occurrence of any one or more of the following:
(i) The assignment of the Executive to duties materially inconsistent with the
Executive's authorities, duties, responsibilities, and status (including
titles and reporting requirements) as an officer of the Company, or a
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material reduction or alteration in the nature or status of the
Executive's authorities, duties, or responsibilities from those in effect
as of the Effective Date (or as subsequently increased), other than an
insubstantial and inadvertent act that is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(ii) The Company's requiring the Executive to be based at a location in excess
of thirty-five (35) miles from the location of the Executive's principal
job location or office as of the Effective Date.
(iii) A reduction by the Company of the Executive's Base Salary as in effect
on the Effective Date, or as the same shall be increased from time to
time;
(iv) A reduction by the Company of the Executive's aggregate incentive
opportunity under the Company's short-term incentive program, as such
opportunity exists on the Effective Date, or as such opportunity may be
increased after the Effective Date. For this purpose, prior to a Change in
Control (defined in Section 7.1) a reduction in the Executive's short-term
incentive opportunity shall be deemed to have occurred in the event his
Base Bonus Opportunity and/or the degree of probability of attainment of
such opportunity is diminished from the levels and probability of
attainment that existed as of the Effective Date or as such opportunity
and/or degree of probability have been increased from time to time. On and
after the date of a Change in Control (defined in Section 7.1) a reduction
in the Executive's incentive opportunity shall be deemed to have occurred
in the event his Bonus incentive award opportunity and/or the degree of
probability of attainment of such award opportunity would result in a
Bonus of less than the greatest of (i) the Executive's greatest annual
Bonus earned in the three (3) consecutive fiscal years most recently
completed prior to the fiscal year in which occurs the Change in Control
(as defined in Section 7.1); (ii) the Executive's Base Bonus Opportunity
for the Bonus plan year most recently completed; or (iii) the Executive's
Bonus for the fiscal year most recently completed based on the actual
performance of the Company and the Executive.
(v) A reduction by the Company of the Executive's aggregate annualized
incentive opportunity under the Company's long-term incentive program as
such opportunity exists on the Effective Date, or as such opportunity may
be increased after the Effective Date. For this purpose, a reduction in
the Executive's incentive opportunity shall be deemed to have occurred if
the Executive's annualized long term incentive opportunity is less than
the value as determined by a consulting firm with a national reputation to
be a competitive annual long term incentive grant (defined as a size-
adjusted, 50th percentile grant as of the date of determination as
compared to the Company's peer group).
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(vi) The failure of the Company to maintain the Executive's relative level of
coverage under the Company's employee benefit or retirement plans,
policies, practices, or arrangements in which the Executive participates as
of the Effective Date, both in terms of the amount of benefits provided and
the relative level of the Executive's participation, or as such coverage
may be increased from time to time. For this purpose, the Company may
eliminate and/or modify existing programs and coverage levels; provided,
however, that the Executive's level of coverage under all such programs
must be at least as great as is such coverage provided to executives who
have the same or lesser levels of reporting responsibilities within the
Company's organization;
(vii) The failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform the Company's
obligations under this Agreement, as contemplated in Article 11 herein;
(viii) Any purported termination by the Company of the Executive's employment
that is not effected pursuant to a notice of termination satisfying the
requirements of Article 1 herein, and for purposes of this Agreement, no
such purported termination shall be effective;
(ix) Any failure to maintain reasonable and adequate indemnification and
director and officer liability insurance in respect of the Executive's
services as a director and an officer; and
(x) Any material increase, either as to frequency or time expended, in the
travel of the Executive relative to the discharge of his responsibilities
to the Company after the date of a Change in Control (defined in Section
7.1).
The Executive's right to terminate employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute a consent to, or a waiver
of rights with respect to, any circumstance constituting Good Reason herein.
Upon a termination of the Executive's employment for Good Reason at any time
during the term of this Agreement, the Executive shall be entitled to receive
the same payments and benefits as he is entitled to receive following an
involuntary termination of his employment by the Company without Cause, as
specified in Section 6.4 herein.
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Article 7. Change in Control
7.1 For purposes of this Agreement, "Change in Control" of the Company shall
be deemed to have occurred as of the first day that any one or more of the
following conditions have been satisfied:
(a) Any Person (other than those Persons in control of the Company as of the
Effective Date, or other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or a corporation
owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company), who becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing twenty percent (20%) or more of the
combined voting power of the Company's then outstanding securities; or
(b) During any period of two (2) consecutive years (not including any period
prior to the Effective Date of this Agreement), individuals who at the
beginning of such period constitute the Board (and any new Director, whose
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the Directors then still in office who either were
Directors at the beginning of the period or whose election or nomination
for election was so approved, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board) cease for
any reason to constitute at least sixty percent (60%) thereof; or
(c) The stockholders of the Company approve: (A) a plan of
complete liquidation of the Company; or (B) an agreement for the sale or
disposition of all or substantially all the Company's assets; or (C) a
merger, consolidation, or reorganization of the Company with or involving
any other corporation, other than a merger, consolidation, or
-----
reorganization that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), at least sixty percent (60%) of the combined voting
power of the voting securities of the Company (or the surviving entity, or
an entity which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one
or more subsidiaries) outstanding immediately after such merger,
consolidation, or reorganization.
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However, in no event shall a Change in Control be deemed to have occurred,
with respect to the Executive, if the Executive is part of a purchasing group
which consummates the Change-in-Control transaction. The Executive shall be
deemed "part of a purchasing group" for purposes of the preceding sentence if
the Executive is an equity participant in the purchasing company or group
(except for: (i) passive ownership of less than three percent (3%) of the stock
of the purchasing company; or (ii) ownership of equity participation in the
purchasing company or group which is otherwise not significant, as determined
prior to the Change in Control by a majority of the non-employee Directors who
were Directors prior to the transaction, and who continue as Directors following
the transaction).
For purposes of this Section 7.1, the following terms should have the
following meanings:
"Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended ("Exchange Act").
"Person" shall have the meaning ascribed to such term in Section 3(a)(9) of
the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d).
7.2 Annual Bonus Pay. Notwithstanding any provision to the contrary in this
-----------------
Agreement or in the Company's annual Bonus opportunity arrangement in respect of
the Executive, in the event of a Change in Control, if the Executive remains
employed by the Company through the end of the fiscal year of the Change in
Control (defined in Section 7.1), the Bonus for the fiscal year in which occurs
the Change in Control shall be the greatest of: (i) the Executive's greatest
annual Bonus earned in the three (3) consecutive fiscal years most recently
completed prior to the fiscal year in which occurs the Change in Control; (ii)
the Executive's Base Bonus Opportunity for the fiscal year in which occurs the
Change in Control; or (iii) the Executive's Bonus for the fiscal year in which
the Change in Control occurs based on the actual performance of the Company and
the Executive through the date of the consummation of the Change in Control,
multiplied by a fraction, the numerator of which is 12 and the denominator of
which is the number of calendar months to have elapsed in the fiscal year prior
to the calendar month in which the Change in Control occurs in the fiscal year
of the Change in Control.
Article 8. Excise Tax Gross-Up
8.1 Equalization Payment. In the event that the Executive becomes entitled to
severance benefits under Section 6.4 or 6.6 or 7.2 herein ("Severance
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Benefits"), if any of the Total Payments will be subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any similar tax that may hereafter be imposed, the Company
shall pay to the Executive in cash an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive after deduction of (i) any
Excise Tax on the Total Payments and (ii) any Federal, state, and local income
and employment taxes and Excise Tax on the Gross-Up Payment provided for by this
Section 8.1, shall be equal to the Total Payments. Such payment shall be made by
the Company to the Executive as soon as practicable following the effective date
of termination, but in no event beyond thirty (30) days from such date.
"Total Payments" means the sum of the Executive's Severance Benefits and all
other payments and benefits provided to the Executive by the Company and its
affiliates which constitute "excess parachute payments" within the meaning of
Code Section 280G(b)(1). Without limiting the generality of the foregoing,
Total Payments shall include any and all excess parachute payments associated
with outstanding long-term incentive grants (to include, but not be limited to,
early vesting of stock options or restricted stock).
8.2 Tax Computation. For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amounts of such Excise Tax:
(a) Any other payments or benefits received or to be received by the Executive
in connection with a Change in Control of the Company or the Executive's
termination of employment (whether pursuant to the terms of this Plan or
any other plan, arrangement, or agreement with the Company, or with any
individual, entity, or group of individuals or entities (individually and
collectively referred to in this Section 8.2 as "Persons") whose actions
result in a Change in Control of the Company or any Person affiliated with
the Company or such Persons) shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Internal Revenue Code, and
all "excess parachute payments" within the meaning of Code Section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to the Executive, such other payments or benefits
(in whole or in part) do not constitute parachute payments, or unless such
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Code
Section 280G(b)(4) of the Code in excess of the base amount within the
meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to
the excise tax;
(b) The amount of the Total Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of: (i) the amount of the Total
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Payments; or (ii) the amount of excess parachute payments within the
meaning of Code Section 280G(b)(1) of the Code (after applying clause (a)
above); and
(c) The value of any non-cash benefits or any deferred payment or benefit
shall be determined by the Company's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code. The base
amount shall be determined by the Company's independent auditors in
accordance with the principles of sections 280G(d)(3) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the Executive
shall be deemed to pay Federal income taxes at the highest marginal rate of
Federal income taxation in the calendar year in which the Gross-Up Payment is to
be made, and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence on the effective
date of termination, net of the maximum reduction in Federal income taxes which
could be obtained from deduction of such state and local taxes.
8.3 Subsequent Recalculation. In the event the Internal Revenue Service
adjusts the computation of the Company under Section 8.1 herein, which
adjustment becomes binding on the Service, the Company, and the Executive, so
that the Executive did not receive the greatest net benefit, the Company shall
reimburse the Executive for the full amount necessary to make the Executive
whole, plus a market rate of interest, as determined by the Board of Directors.
Article 9. Noncompetition
9.1 Prohibition on Competition. Without the prior written consent of the
Company, during the term of this Agreement, and for twenty-four (24) months
following the expiration of this Agreement, the Executive shall not, as an
employee or an officer, engage directly or indirectly in any business or
enterprise which is "in competition" with the Company or its successors or
assigns. For purposes of this Agreement, a business or enterprise will be deemed
to be "in competition" if it is a banking institution, the headquarters of which
is within one hundred (100) miles from the location of the Executive's principal
job location or office at the time of termination of employment.
However, the Executive shall be allowed to purchase and hold for investment
less than three percent (3%) of the shares of any corporation whose shares are
regularly traded on a national securities exchange or in the over-the-counter
market.
9.2 Disclosure of Information. The Executive recognizes that he has access to
and knowledge of certain confidential and proprietary information of the Company
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which is essential to the performance of his duties under this Agreement. The
Executive will not, during or after the term of his employment by the Company,
in whole or in part, disclose such information to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever, nor shall he
make use of any such information for his own purposes.
9.3 Specific Performance. The parties recognize that the Company will have no
adequate remedy at law for breach by the Executive of the requirements of this
Article 9 and, in the event of such breach, the Company and the Executive hereby
agree that, in addition to the right to seek monetary damages, the Company will
be entitled to a decree of specific performance, mandamus, or other appropriate
remedy to enforce performance of such requirements.
9.4 Limitation. The provisions of this Article 9 shall be null and void and
without any force or effect on and after the date of a Change in Control.
Article 10. Indemnification
The Company hereby covenants and agrees to indemnify and hold harmless the
Executive in a manner consistent with the provisions of the Company's Restated
Certificate of Incorporation as of the effective date.
Article 11. Assignment
11.1 Assignment by Company. This Agreement may and shall be assigned or
transferred to, and shall be binding upon and shall inure to the benefit of, any
successor of the Company, and any such successor shall be deemed substituted for
all purposes of the "Company" under the terms of this Agreement. As used in this
Agreement, the term "successor" shall mean any person, firm, corporation, or
business entity which at any time, whether by merger, purchase, or otherwise,
acquires all or substantially all of the assets or the business of the Company.
Notwithstanding such assignment, the Company shall remain, with such successor
jointly and severally liable for all its obligations hereunder.
Failure of the Company to obtain the agreement of any successor to be bound by
the terms of this Agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement, and shall immediately entitle the Executive
to compensation from the Company in the same amount and on the same terms as the
Executive would be entitled in the event of an termination of employment, as
provided in Section 6.4 herein.
Except as herein provided, this Agreement may not otherwise be assigned by the
Company.
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11.2 Assignment by Executive. The services to be provided by the Executive to
the Company hereunder are personal to the Executive, and the Executive's duties
may not be assigned by the Executive; provided, however that this Agreement
shall inure to the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors, heirs,
distributees, devisees, and legatees. If the Executive dies while any amounts
payable to the Executive hereunder remain outstanding, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee or, in the
absence of such designee, to the Executive's estate.
Article 12. Dispute Resolution and Notice
12.1 Dispute Resolution. The Executive shall have the right and option to
elect to have any good faith dispute or controversy arising under or in
connection with this Agreement settled by litigation or by arbitration.
If arbitration is selected, such proceeding shall be conducted before a panel
of three (3) arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of his principal place of employment, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the award of the arbitrators in any court
having competent jurisdiction.
All expenses of such litigation or arbitration, including the reasonable fees
and expenses of the legal representative for the Executive, and necessary costs
and disbursements incurred as a result of such dispute or legal proceeding, and
any prejudgment interest, shall be borne by the Company.
12.2 Notice. Any notices, requests, demands, or other communications provided
for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he has filed
in writing with the Company or, in the case of the Company, to an executive
officer of the Company, at the Company's principal offices.
Article 13. Miscellaneous
13.1 Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto, or between the
Executive and the Company, with respect to the subject matter hereof, and
constitutes the entire agreement of the parties with respect thereto. Without
limiting the generality of the foregoing sentence, this Agreement completely
replaces and supersedes the terms of the 1995 Agreement, and continues to
replace and supersede the terms of the Change in Control Compensation Agreement,
entered into by and between the Company and the Executive on December 16, 1993,
concerning the Executive's entitlement to payments and benefits arising as a
result of a Change in Control of the Company.
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13.2 Modification. This Agreement shall not be varied, altered, modified,
canceled, changed, or in any way amended except by mutual agreement of the
parties in a written instrument executed by the parties hereto or their legal
representatives.
13.3 Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
13.4 Counterparts. This Agreement may be executed in one (1) or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
13.5 Tax Withholding. The Company may withhold from any benefits payable under
this Agreement all Federal, state, city, or other taxes as may be required
pursuant to any law or governmental regulation or ruling.
13.6 Beneficiaries. The Executive may designate one or more persons or
entities as the primary and/or contingent beneficiaries of any amounts to be
received under this Agreement. Such designation must be in the form of a signed
writing acceptable to the Board or the Board's designee. The Executive may make
or change such designation at any time.
Article 14. Governing Law
To the extent not preempted by Federal law, the provisions of this Agreement
shall be construed and enforced in accordance with the laws of the state of
Alabama.
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EXHIBIT 10-u
Personal & Confidential
Executive Severance Agreement
For Executive
AmSouth Bancorporation
<PAGE>
Contents
- --------------------------------------------------------------------------------
Page
Article 1. Definitions 1
Article 2. Severance Benefits 6
Article 3. Form and Timing of Severance Benefits 9
Article 4. Excise Tax Gross-Up 10
Article 5. The Company's Payment Obligations 11
Article 6. Term of Agreement 11
Article 7. Legal Remedies 12
Article 8. Successors 12
Article 9. Miscellaneous 12
<PAGE>
AmSouth Bancorporation
Executive Severance Agreement
THIS AGREEMENT is made and entered into as of the 18th day of December,
1997, by and between AmSouth Bancorporation, a Delaware corporation (hereinafter
referred to as the "Company"), and Executive (hereinafter referred to as the
"Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has approved the Company
entering into severance agreements with certain key executives of the Company
and its subsidiaries;
WHEREAS, the Executive is a key executive of the Company or of its
subsidiary;
WHEREAS, should the possibility of a Change in Control of the Company
arise, the Board believes it is imperative that the Company and the Board should
be able to rely upon the Executive to continue in his or her position, and that
the Company should be able to receive and rely upon the Executive's advice, if
requested, as to the best interests of the Company and its shareholders without
concern that the Executive might be distracted by the personal uncertainties and
risks created by the possibility of a Change in Control;
WHEREAS, should the possibility of a Change in Control arise, in addition
to his or her regular duties, the Executive may be called upon to assist in the
assessment of such possible Change in Control, advise management and the Board
as to whether such Change in Control would be in the best interests of the
Company and its shareholders, and to take such other actions as the Board might
determine to be appropriate; and
NOW THEREFORE, to assure the Company that it will have the continued
dedication of the Executive and the availability of his or her advice and
counsel notwithstanding the possibility, threat, or occurrence of a Change in
Control of the Company, and to induce the Executive to remain in the employ of
the Company, and for other good and valuable consideration, the Company and the
Executive agree as follows:
Article 1. Definitions
Whenever used in this Agreement, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized:
(a) "Agreement" means this Executive Severance Agreement.
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(b) "Base Bonus Opportunity" means the base bonus opportunity as defined
in the Executive Incentive Plan and the Management Incentive Plan, or
a comparable opportunity under a specialized incentive plan, or their
successors, whichever of the foregoing is applicable to the Executive.
(c) "Base Salary" means the salary of record paid to the Executive as
annual salary, excluding amounts received under incentive or other
bonus plans, whether or not deferred.
(d) "Beneficial Owner" shall have the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Exchange
Act.
(e) "Beneficiary" means the persons or entities designated or deemed
designated by the Executive pursuant to Section 9.2 herein.
(f) "Board" means the Board of Directors of the Company.
(g) "Cause" shall be determined by the Committee, in the exercise of good
faith and reasonable judgment, and shall mean the occurrence of any
one or more of the following:
(i) The willful and continued failure by the Executive to
substantially perform his or her duties (other than any such
failure resulting from the Executive's Disability), after a
written demand for substantial performance is delivered by the
Committee to the Executive that specifically identifies the
manner in which the Committee believes that the Executive has
not substantially performed his or her duties, and the Executive
has failed to remedy the situation within thirty (30) calendar
days of receiving such notice;
(ii) The Executive's conviction for committing an act of fraud,
embezzlement, theft, or other act constituting a felony under
the generally enforceable laws of the State of Alabama; or
(iii) The willful engaging by the Executive in gross misconduct
materially and demonstrably injurious to the Company, as
determined by the Committee. However, no act or failure to act,
on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that his or her action or omission
was in the best interest of the Company.
Notwithstanding the foregoing, Cause shall not be deemed to have
occurred with respect to any act or failure to act which is (a)
directed by the Board, or by the officer of the Company to whom the
Executive directly or indirectly reports, or (b) in accordance with
the advice of the Company's legal counsel.
(h) "Change in Control" of the Company shall be deemed to have occurred as
of the first day that any one or more of the following conditions have
been satisfied:
(i) Any person (other than those Persons in control of the Company
as of the Effective
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Date, or other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or a
corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportions as their
ownership of stock of the Company), becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the combined voting
power of the Company's then outstanding securities; or
(ii) During any period of two (2) consecutive years (not including
any period prior to the Effective Date of this Agreement),
individuals who at the beginning of such period constitute the
Board (and any new Director, whose election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3)
of the Directors then still in office who either were Directors
at the beginning of the period or whose election or nomination
for election was so approved, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as
a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual
or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board) cease for any reason to
constitute at least sixty percent (60%) thereof; or
(iii) The stockholders of the Company approve: (A) a plan of complete
liquidation of the Company; or (B) an agreement for the sale or
disposition of all or substantially all the Company's assets; or
(C) a merger, consolidation, or reorganization of the Company
with or involving any other corporation, other than a merger,
consolidation, or reorganization that would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity),
at least sixty percent (60%) of the combined voting power of the
securities of the Company (or the surviving entity, or an entity
which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) outstanding immediately after
such merger, consolidation or reorganization.
However, in no event shall a Change in Control be deemed to have occurred,
with respect to the Executive, if the Executive is part of a purchasing
group which consummates the Change-in-Control transaction. The Executive
shall be deemed "part of a purchasing group" for purposes of the preceding
sentence if the Executive is an equity participant in the purchasing
company or group (except for: (i) passive ownership of less than three
percent (3%) of the stock of the purchasing company; or (ii) ownership of
equity participation in the purchasing company or group which is otherwise
not significant, as determined prior to the Change in Control by a majority
of the nonemployee Directors who were Directors prior to the transaction,
and who continue as Directors following the transaction).
(i) "Code" means the United States Internal Revenue Code of 1986, as
amended.
(j) "Committee" means the Executive Compensation Committee of the Board,
or any other committee appointed by the Board to perform the functions
of the Executive Compensation Committee.
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(k) "Company" means AmSouth Bancorporation, a Delaware corporation
(including any and all subsidiaries), or any successor thereto as
provided in Article 8 herein.
(l) "Disability" means permanent and total disability, within the meaning
of Code Section 22(e)(3), as determined by the Committee in the
exercise of good faith and reasonable judgment, upon receipt of and in
reliance on sufficient competent medical advice from one or more
individuals, selected by the Committee, who are qualified to give
professional medical advice.
(m) "Effective Date" is December 18, 1997.
(n) "Effective Date of Termination" means the date on which a Qualifying
Termination occurs which triggers the payment of Severance Benefits
hereunder.
(o) "Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
(p) "Executive" means Executive.
(q) "Good Reason" means, without the Executive's express written consent,
the occurrence after a Change in Control of the Company of any one or
more of the following:
(i) The assignment of the Executive to duties materially
inconsistent with the Executive's authorities, duties,
responsibilities, and status (including titles and reporting
requirements) as an officer of the Company, or a material
reduction or alteration in the nature or status of the
Executive's authorities, duties, or responsibilities from those
in effect as of ninety (90) days prior to the Change in Control,
other than an insubstantial and inadvertent act that is remedied
by the Company promptly after receipt of notice thereof given by
the Executive in accordance with Section 2.8 hereof;
(ii) The Company's requiring the Executive to be based at a location
in excess of thirty-five (35) miles from the location of the
Executive's principal job location or office immediately prior
to the Change in Control;
(iii) A reduction by the Company of the Executive's Base Salary as in
effect on the Effective Date, or as the same shall be increased
from time to time;
(iv) A reduction by the Company of the Executive's aggregate
incentive opportunity under the Short-Term Incentive Plan, as
such opportunity exists on the Effective Date, or as such
opportunity may be increased after the Effective Date. For this
purpose, a reduction in the Executive's incentive opportunity
shall be deemed to have occurred in the event his or her Base
Bonus Opportunity and/or the degree of probability of attainment
of such opportunity would result in a bonus of less than the
greatest of (i) the Executive's greatest annual bonus earned
(whether paid or deferred) in the three (3) consecutive fiscal
years most recently completed prior to the commencement of the
Window Period; (ii) the Executive's Base Bonus Opportunity for
the bonus plan year
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most recently completed; or (iii) the Executive's bonus which
was earned (whether paid or deferred) for the fiscal year most
recently completed based on the actual performance compared to
pre-established criteria under the Short Term Incentive Plan;
(v) A reduction by the Company of the Executive's aggregate
annualized incentive opportunity under the Company's long-term
incentive program, as such opportunity exists on the Effective
Date, or as such opportunity may be increased after the
Effective Date. For this purpose, a reduction in the Executive's
incentive opportunity shall be deemed to have occurred if the
Executive's annualized long-term incentive opportunity is less
than the value as determined by a compensation consulting firm
with a national reputation to be a competitive annual long term
incentive grant (defined as a size-adjusted, 50th percentile
grant as of the date of determination as compared to the
Company's peer group).
(vi) The failure of the Company to maintain the Executive's relative
level of coverage under the Company's employee benefit or
retirement plans, policies, practices, or arrangements in which
the Executive participates as of the Effective Date, both in
terms of the amount of benefits provided and the relative level
of the Executive's participation or as such coverage may be
increased from time to time. For this purpose, the Company may
eliminate and/or modify existing programs and coverage levels;
provided, however, that the Executive's levels of coverage under
all such programs must be at least as great as such coverage
provided to executives who have the same or lesser levels of
reporting responsibilities within the Company's organization;
(vii) The failure of the Company to obtain a satisfactory agreement
from any successor to the Company to assume and agree to perform
the Company's obligations under this Agreement, as contemplated
in Article 8 herein;
(viii)Any purported termination by the Company of the Executive's
employment that is not effected pursuant to a notice of
termination satisfying the requirements of Section 2.8 herein,
and for purposes of this Agreement, no such purported
termination shall be effective;
(ix) Any failure to maintain reasonable and adequate indemnification
and director and officer liability insurance in respect of the
Executive's services as an officer; and
(x) Any material increase, either as to frequency or time expended,
in the travel of the Executive relative to the discharge or his
or her responsibilities to the Company.
The Executive's right to terminate employment for Good Reason
shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not
constitute a consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason herein.
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(r) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d).
(s) "Pro-Rata" means that a calculation will take into consideration the
number of days elapsed prior to the Executive's Effective Date of
Termination as a percentage of the number of days in the fiscal or
other applicable year.
(t) "Qualifying Termination" means any of the events described in Section
2.3 herein, the occurrence of which triggers the payment of Severance
Benefits hereunder.
(u) "Severance Benefits" means the payment of severance compensation as
provided in Section 2.4 herein.
(v) "Severance Multiplier" means the lesser of: (i) numbertimes
(numericx); or (ii) a fraction, the numerator of which is the number
of full months between the Effective Date of the Executive's
Qualifying Termination and the Executive's sixty-fifth (65th)
birthday, and the denominator of which is twelve (12). For this
purpose, the Severance Multiplier following the attainment of age
sixty-five (65) shall be zero (0) in all cases.
(w) "Short Term Incentive Plan" means the annual incentive plan applicable
to the Executive which may include the Company's Executive Incentive
Plan, Management Incentive Plan, or other specialized plans or their
successors.
(x) "Total Payments" means the sum of the Executive's Severance Benefits
and all other payments and benefits provided to the Executive by the
Company and its affiliates which constitute "excess parachute
payments" within the meaning of Code Section 280G(b)(1). Without
limiting the generality of the foregoing, Total Payments shall include
any and all excess parachute payments associated with outstanding
long-term incentive grants (to include, but not be limited to, early
vesting of stock options or restricted stock).
(y) "Window Period" means the time period commencing upon a Change in
Control, as defined in Section (h) of this Article 1, and ending
twenty-four months after the latter to occur of: (i) any of the events
defined as a Change in Control in Section 1(h); or (ii) final
consummation of the liquidation, sale or disposition of assets, or the
merger, consolidation or reorganization of the Company as described in
Section 1(h)(iii).
Article 2. Severance Benefits
2.1. Right to Severance Benefits. The Executive shall be entitled to
receive from the Company Severance Benefits as described in Section 2.4 herein,
if there has been a Change in Control of the Company and if, within the Window
Period, the Executive's employment with the Company shall end for any reason
specified in Section 2.3 herein.
The Executive shall not be entitled to receive Severance Benefits, if he or
she is terminated for Cause, or if his or her employment with the Company ends
due to death, Disability, retirement on or
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after early retirement age (as defined under the then established rules of the
Company's tax-qualified retirement plan applicable to the Executive), or due to
a voluntary termination of employment by the Executive without Good Reason.
2.2. Services During Certain Events. In the event a Person begins a tender
or exchange offer, circulates a proxy to shareholders of the Company, or takes
other steps seeking to effect a Change in Control, the Executive agrees that he
or she will not voluntarily leave the employ of the Company and will render
services until such Person has abandoned or terminated his or her, or its
efforts to effect a Change in Control, or until six (6) months after a Change in
Control has occurred; provided, however, that the Company may terminate the
Executive for Cause at any time, and the Executive may terminate his or her
employment any time after the Change in Control for Good Reason.
2.3. Qualifying Termination. The occurrence of any one or more of the
following events within the Window Period shall trigger the payment of Severance
Benefits to the Executive under this Agreement:
(a) An involuntary termination of the Executive's employment by the
Company for reasons other than Cause;
(b) A voluntary termination of employment by the Executive for Good
Reason;
(c) A successor company fails or refuses to assume the Company's
obligations under this Agreement, as required by Article 8 herein; or
(d) The Company or any successor company breaches any of the provisions of
this Agreement.
2.4. Description of Severance Benefits. In the event that the Executive
becomes entitled to receive Severance Benefits, as provided in Sections 2.1 and
2.3 herein, the Company shall pay to the Executive a lump sum cash payment equal
to the sum of the amounts described in the following paragraphs (a) through (h)
and provide the benefits and/or distributions as described in paragraphs (i)
through (k):
(a) An amount equal to the Severance Multiplier times the highest rate of
the Executive's annual Base Salary in effect at any time up to and
including the Effective Date of Termination.
(b) An amount equal to the Severance Multiplier times the greatest of: (i)
the Executive's greatest annual bonus earned (whether paid or
deferred) in the three (3) full consecutive fiscal years most recently
completed prior to the Effective Date of Termination; (ii) the
Executive's Base Bonus Opportunity for the bonus plan year in which
the Executive's Effective Date of Termination occurs, or (iii) the
Executive's bonus for the fiscal year in which occurs the Effective
Date of Termination based on the actual performance compared to
pre-established criteria under the Short Term Incentive Plan through
the Effective Date of Termination, multiplied by a fraction, the
numerator of which is 12 and the denominator of which is the number of
calendar months to have elapsed preceding the Effective Date of
Termination in the fiscal year of the Effective Date of Termination.
(c) An amount equal to the Severance Multiplier times the sum of: (i) the
Executive's annual club dues bonus (if applicable); plus (ii) the
Executive's annual automobile allowance (if
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applicable), for the year in which the Executive's Effective Date of
Termination occurs.
(d) An amount equal to the product of (i) the value determined by a
consulting firm with a national reputation to be a competitive annual
long term incentive grant (defined as a size-adjusted, 50th percentile
grant as of the date of determination as compared to the Company's
peer group), and (ii) the Severance Multiplier, provided, however,
that if the Executive's then currently outstanding grant under the
Company's long term incentive compensation plan has a performance
measurement period of more than one year, the number of years in
clause (ii) shall be reduced by multiplying such number of years by
the quotient of the number of full calendar months remaining until the
conclusion of the performance measurement period for the Executive's
grant divided by the total number of months in the performance
measurement period.
(e) An amount equal to the Executive's unpaid Base Salary, a Pro Rata
portion of the Executive's bonus for the fiscal year in which
termination occurs determined as the greatest of (i) the Executive's
greatest annual bonus earned (whether paid or deferred) in the three
(3) full consecutive fiscal years most recently completed prior to the
Effective Date of Termination; (ii) the Executive's Base Bonus
Opportunity for the bonus plan year in which the Executive's Effective
Date of Termination occurs; (iii) the Executive's bonus for the fiscal
year in which occurs the Effective Date of Termination based on the
actual performance compared to pre-established criteria under the
Short Term Incentive Plan through the Effective Date of Termination,
multiplied by a fraction, the numerator of which is 12 and the
denominator of which is the number of calendar months to have elapsed
preceding the Effective Date of Termination of the fiscal year in
which occurs the Effective Date of Termination, and accrued vacation
pay through the Effective Date of Termination.
(f) An amount equal to the actuarial present value equivalent of the
aggregate benefits accrued by the Executive as of the Effective Date
of Termination under the terms of the AmSouth Bancorporation
Supplemental Retirement Plan (if applicable). For this purpose, the
Executive's interest under the Supplemental Retirement Plan shall be
fully vested as of the effective date of the Change in Control and
such benefits shall be calculated under the assumption that the
Executive's employment continued following the Effective Date of
Termination for the number of years equal to the Severance Multiplier
(i.e., additional years of service credits shall be added); provided,
however, that for the purposes of determining "final average pay"
under the benefit calculation, the Executive's actual pay history as
of the Effective Date of Termination shall be used. Further, the
payment provided under this Subsection 2.4(f) shall be made in lieu
of, and shall completely supersede and replace the Executive's
benefits payable under the Supplemental Retirement Plan or its
successor.
(g) An amount equal to the aggregate benefits accrued by the Executive as
of the Effective Date of Termination under the terms of the AmSouth
Bancorporation Supplemental Thrift Plan (if applicable). The payment
provided under this Subsection 2.4(g) shall be made in lieu of, and
shall completely supersede and replace the Executive's benefits
payable under the Supplemental Thrift Plan or its successor.
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(h) An amount equal to any relocation benefits accrued by the Executive
under the relocation policy of the Company or its successor as are
available to employees in the same class or category as the Executive
immediately prior to the Change in Control.
(i) Distribution of the entire balance of the Executive's account, if any,
established under the AmSouth Bancorporation Deferred Compensation
Plan or its successor.
(j) A continuation of all benefits pursuant to any and all welfare benefit
plans under which the Executive and/or the Executive's family is
eligible to receive benefits and/or coverage as of the effective date
of the Change in Control or as the same may be increased from time to
time, including but not limited to, group life insurance,
hospitalization, disability, medical and dental plans. Such benefits
shall be provided to the Executive at the same premium cost, and at
the same coverage level, as in effect as of the Executive's Effective
Date of Termination.
The welfare benefits described in this Subsection 2.4(j) shall
continue following the Effective Date of Termination for the number of
years equal to the Severance Multiplier; provided, however, that such
benefits shall be discontinued prior to the end of such period in the
event the Executive receives substantially similar benefits from a
subsequent employer, as determined by the Committee.
(k) A provision of outplacement services at the expense of the company for
the number of years equal to the Severance Multiplier following the
Effective Date of Termination or until the Executive shall have
obtained employment comparable to his or her position with the Company
on the Effective Date of Termination, whichever is earlier, the scope
and provider of which shall be commensurate with the Executive's
position in the Company.
2.5. Termination for Total and Permanent Disability. Following a Change in
Control of the Company, if the Executive's employment is terminated due to
Disability, the Executive shall receive his or her Base Salary through the
Effective Date of Termination, at which point in time the Executive's benefits
shall be determined in accordance with the Company's retirement, insurance, and
other applicable plans and programs then in effect.
2.6. Termination for Retirement or Death. Following a Change in Control of
the Company, if the Executive's employment is terminated by reason of his or her
retirement (as defined under the then-established rules of the Company's
tax-qualified retirement plan), or death, the Executive's benefits shall be
determined in accordance with the Company's retirement, survivor's benefits,
insurance, and other applicable programs of the Company then in effect.
2.7. Termination for Cause or by the Executive Other Than for Good Reason.
Following a Change in Control of the Company, if the Executive's employment is
terminated either: (i) by the Company for Cause; or (ii) by the Executive other
than for Good Reason, the Company shall pay the Executive his or her full Base
Salary and accrued vacation through the Effective Date of Termination, at the
rate then in effect, plus all other amounts to which the Executive is entitled
under any compensation plans of the Company, at the time such payments are due,
and the Company shall have no further obligations to the Executive under this
Agreement.
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2.8. Notice of Termination. Any termination by the Company for Cause or by
the Executive for Good Reason shall be communicated by Notice of Termination (as
herein defined) to the other party. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated. A
termination for Cause shall be permitted hereunder only if the Company provides
the Notice of Termination not later than six (6) months after the date the
Company first knew or should have reasonably known of the act or omission to act
or conviction giving rise to the termination for Cause. A termination for Good
Reason shall be permitted hereunder only if the Employee provides the Notice of
Termination not later than six (6) months after the date the Employee first knew
or should have known of the act or omission to act giving rise to the
termination for Good Reason. In either case, the six (6)-month period shall be
tolled during any permitted period of correction or administrative procedure.
Article 3. Form and Timing of Severance Benefits
3.1. Form and Timing of Severance Benefits. The Severance Benefits
described in Sections 2.4(a) through (h) herein shall be paid in cash to the
Executive in a single lump sum, and the distribution under 2.4 (i) herein shall
be made, as soon as practicable following the Effective Date of Termination, but
in no event beyond thirty (30) days from such date.
3.2. Withholding of Taxes. The Company shall be entitled to withhold from
any amounts payable under this Agreement all taxes as legally shall be required
(including, without limitation, any United States Federal taxes, and any other
state, city, or local taxes).
3.3. Annual Bonus Pay. Notwithstanding any provision to the contrary in
this Agreement or the Company's annual Base Bonus Opportunity arrangement for
the Executive in the event of a Change in Control, if the Executive remains
employed by the Company through the end of the fiscal year of the Change in
Control, the bonus for the fiscal year in which occurs the Change in Control
shall be the greatest of: (i) the Executive's greatest annual bonus earned
(whether paid or deferred) in the three (3) full consecutive fiscal years most
recently completed prior to the fiscal year in which occurs the Change in
Control; (ii) the Executive's Base Bonus Opportunity for the fiscal year in
which occurs the Change in Control; or (iii) the Executive's bonus for the
fiscal year in which the Change in Control occurs based on the actual
performance compared to pre-established criteria under the Short Term Incentive
Plan through the date of the consummation of the Change in Control multiplied by
a fraction, the numerator of which is 12 and the denominator of which is the
number of calendar months to have elapsed in the fiscal year prior to the
calendar month in which the Change in Control occurs in the fiscal year of the
Change in Control. Payment of this annual bonus will be made in accordance with
the Short Term Incentive Plan.
Article 4. Excise Tax Gross-Up
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4.1 Equalization Payment. In the event that the Executive becomes entitled
to Severance Benefits, if any of the Executive's Total Payments will be subject
to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any
similar tax that may hereafter be imposed), the Company shall pay to the
Executive in cash an additional amount (the "Gross-up Payment") such that the
net amount retained by the Executive after deduction of any Excise Tax on the
Total Payments and any federal, state, and local income and employment taxes and
Excise Tax upon the Gross-up Payment provided for by this Section 4.1, shall be
equal to the Total Payments. Such payment shall be made by the Company to the
Executive as soon as practicable following the Effective Date of Termination,
but in no event beyond thirty (30) days from such date.
4.2 Tax Computation. For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amounts of such Excise Tax:
(a) Any other payments or benefits received or to be received by the
Executive in connection with a Change in Control of the Company or the
Executive's termination of employment (whether pursuant to the terms
of this Plan or any other plan, arrangement, or agreement with the
Company, or with any Person whose actions result in a Change in
Control of the Company or any Person affiliated with the Company or
such Persons) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax, unless in the opinion of tax
counsel selected by the Company's independent auditors and acceptable
to the Executive, such other payments or benefits (in whole or in
part) do not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the base amount within the
meaning of Section 280G(b)(3) of the Code, or are otherwise not
subject to the excise tax;
(b) The amount of the Total Payments which shall be treated as subject to
the Excise Tax shall be equal to the lesser of: (i) the total amount
of the Total Payments; or (ii) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) (after applying clause (a)
above); and
(c) The value of any noncash benefits or any deferred payment or benefit
shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the
Code.
For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay Federal income taxes at the highest marginal
rate of Federal income taxation in the calendar year in which the Gross-Up
Payment is to be made, and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's residence on the
Effective Date of Termination, net of the maximum reduction in Federal income
taxes which could be obtained from deduction of such state and local taxes.
4.3 Subsequent Recalculation. In the event the Internal Revenue Service
adjusts the computation of the Company under Section 4.2 herein, which
adjustment becomes binding on the Service, the Company and the Executive, so
that the Executive did not receive the greatest net benefit, the
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Company shall reimburse the Executive for the full amount necessary to make the
Executive whole, plus an appropriate market rate of interest, as determined by
the Company's Board of Directors.
Article 5. The Company's Payment Obligation
5.1 Payment Obligations Absolute. The Company's obligation to make the
payments and the arrangements provided for herein shall be absolute and
unconditional, and shall not be affected by any circumstances, including,
without limitation, any offset, counterclaim, recoupment, defense, or other
right which the Company may have against the Executive or anyone else. All
amounts payable by the Company hereunder shall be paid without notice or demand.
Each and every payment made hereunder by the Company shall be final, and the
Company shall not seek to recover all or any part of such payment from the
Executive or from whomsoever may be entitled thereto, for any reasons
whatsoever.
The Executive shall not be obligated to seek other employment in mitigation
of the amounts payable or arrangements made under any provision of this
Agreement, and the obtaining of any such other employment shall in no event
effect any reduction of the Company's obligations to make the payments and
arrangements required to be made under this Agreement, except to the extent
provided in Section 2.4(j) herein.
5.2 Contractual Rights to Benefits. This Agreement establishes and vests in
the Executive a contractual right to the benefits to which he or she is entitled
hereunder. However, nothing herein contained shall require or be deemed to
require, or prohibit or be deemed to prohibit, the Company to segregate,
earmark, or otherwise set aside any funds or other assets, in trust or
otherwise, to provide for any payments to be made or required hereunder.
Article 6. Term of Agreement
This Agreement will commence on the Effective Date and shall terminate on
December 17, 2000; provided however that this Agreement shall be extended
automatically for one (1) additional year at the end of this initial term and at
the end of each additional year thereafter, unless the Committee delivers
written notice twelve (12) months prior to the end of such term, or extended
term, to the Executive, that the Agreement will not be extended. In such case,
the Agreement will terminate at the end of the term, or extended term, then in
progress.
However, in the event a Change in Control occurs during the original or any
extended term, this Agreement will remain in effect for the longer of: (i) the
duration of the Window Period; or (ii) until all obligations of the Company
hereunder have been fulfilled, and until all benefits required hereunder have
been paid to the Executive.
Article 7. Legal Remedies
7.1 Payment of Legal Fees. To the extent permitted by law, the Company
shall pay all legal fees, costs of litigation, prejudgment interest, and other
expenses incurred in good faith by the Executive as a result of the Company's
refusal to provide the Severance Benefits to which the Executive becomes
entitled under this Agreement, or as a result of the Company's contesting
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<PAGE>
the validity, enforceability, or interpretation of this Agreement, or as a
result of any conflict between the parties pertaining to this Agreement.
7.2 Arbitration. The Executive shall have the right and option to elect (in
lieu of litigation) to have any dispute or controversy arising under or in
connection with this Agreement settled by arbitration, conducted before a panel
of three (3) arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of his or her job with the Company, in
accordance with the rules of the American Arbitration Association then in
effect.
Judgment may be entered on the award of the arbitrator in any court having
proper jurisdiction. All expenses of such arbitration, including the fees and
expenses of the counsel for the Executive, shall be borne by the Company.
Article 8. Successors
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) of all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform the Company's obligations under this Agreement in the same manner and to
the same extent that the Company would be required to perform them if no such
succession had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effective date of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as he or she would be entitled
to hereunder if he or she had terminated his or her employment with the Company
voluntarily for Good Reason. The date on which any such succession becomes
effective shall be deemed the Effective Date of Termination.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. If the Executive should
die while any amount would still be payable to him or her hereunder had he or
she continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement, to the Executive's
Beneficiary. If the Executive has not named a Beneficiary, then such amounts
shall be paid to the Executive's devisee, legatee, or other designee, or if
there is no such designee, to the Executive's estate.
Article 9. Miscellaneous
9.1 Employment Status. The Executive and the Company acknowledge that,
except as may be provided under any other agreement between the Executive and
the Company, the employment of the Executive by the Company is "at will," and,
prior to the effective date of a Change in Control, may be terminated by either
the Executive or the Company at any time, subject to applicable law. Upon a
termination of the Executive's employment prior to the effective date of a
Change in Control, there shall be no further rights under this Agreement;
provided, however, that if such an employment termination shall arise in
connection with, or in anticipation of, a Change in Control, then the
Executive's rights shall be the same as if the termination had occurred within
two (2) years following a Change in Control.
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9.2 Beneficiaries. The Executive may designate one or more persons or
entities as the primary and/or contingent Beneficiaries of any Severance
Benefits owing to the Executive under this Agreement. Such designation must be
in the form of a signed writing acceptable to the Committee. The Executive may
make or change such designation at any time.
9.3 Entire Agreement. This Agreement contains the entire understanding of
the Company and the Executive with respect to the subject matter hereof.
9.4 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular, and the singular shall include the plural.
9.5 Severability. In the event any provision of this Agreement shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Agreement, and the Agreement shall be
construed and enforced as if the illegal or invalid provision had not been
included. Further, the captions of this Agreement are not part of the provisions
hereof and shall have no force and effect.
9.6 Modification. No provision of this Agreement may be modified, waived,
or discharged unless such modification, waiver, or discharge is agreed to in
writing and signed by the Executive and by an authorized member of the
Committee, or by the respective parties' legal representatives and successors.
9.7 Applicable Law. To the extent not preempted by the laws of the United
States, the laws of the state of Alabama shall be the controlling law in all
matters relating to this Agreement.
<PAGE>
EXHIBIT 10-v
AMSOUTH BANCORPORATION
DEFERRED COMPENSATION PLAN
Effective October 2, 1997
<PAGE>
ARTICLE 1
ESTABLISHMENT
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AmSouth Bancorporation, a Delaware corporation (hereinafter referred to as the
"Company"), hereby establishes a deferred compensation plan to be known as the
"AmSouth Bancorporation Deferred Compensation Plan" (hereinafter referred to as
the "Plan") effective as of October 2, 1997. This document constitutes the
provisions of the Plan. The Company sponsors the Plan on behalf of all of its
affiliates and shall be the agent for all such entities. This Plan is intended
to be an unfunded, deferred compensation plan for a select group of management
or highly compensated employees, as described in sections 201(2), 301(a)(3), and
401(a)(1) of the Employee Retirement Income Security Act of 1974 ("ERISA").
ARTICLE 2
DEFINITIONS
- -----------
The following sections of this ARTICLE 2 provide basic definitions of terms used
throughout the Plan, and whenever used herein in a capitalized form, except as
otherwise expressly provided, the terms shall be deemed to have the following
meanings:
2.1 "Account" means the record of a Participant's interest under the Plan
composed of (a) Deferrals made prior to the Effective Date pursuant to
the EIP and\or the MIP, (b) Prior Deferrals posted on or after the
Effective Date, (c) any dividends, income and gains deemed credited to,
and all losses charged to, such account and (d) all distributions
charged to such account.
2.2 "Affiliate" means any corporation, partnership, association, limited
liability company, joint-stock company, trust, unincorporated association
or other person or entity (other than the Company) that directly or
indirectly controls, is controlled by, or is under common control with,
the Company.
2.3 "Beneficiary" means, with respect to the balance of a Participant's
Account as of the death of such Participant, each person designated by
the Participant on his or her most recent beneficiary designation form
approved by the Committee or its designee; provided that if a Participant
fails to designate a Beneficiary on a beneficiary designation form or if
all such designated persons have predeceased the Participant without the
Participant's completing a new, approved beneficiary designation form,
then Beneficiary means any person designated by the Participant (actually
or by default) to receive the balance of any of his or her accounts which
are payable with respect to the death of such Participant under the
Company's Thrift Plan. A Beneficiary's participation continues until the
related Account is distributed.
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2.4 "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.
2.5 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.6 "Bonus Award" means the amount of annual incentive compensation payable to
a Participant for service during the Plan Year.
2.7 "Change in Control" of the Company shall have the meaning set forth in the
Company's Executive Severance Agreements as such agreements may be amended
from time to time.
2.8 "Committee" means the Executive Compensation Committee of the Board of
Directors or such other committee or individual to whom the Executive
Compensation Committee has delegated the responsibility to administer this
Plan. In the absence of an appointment, the Board shall be the Committee.
2.9 "Company" means AmSouth Bancorporation.
2.10 "Company Stock" or "Common Stock" means the common stock, par value
$1.00 per share, of AmSouth Bancorporation.
2.11 "Conversion Date" means the date as of which the cash values posted to
an Account are credited with the number of shares of Company Stock (or
other units) as determined by the Committee pursuant to the Plan.
2.12 "Deferrals" or "Bonus Deferrals" means amounts deferred by a
Participant based upon the Participant's Deferral Election to defer some
or all of his or her Bonus Award.
2.13 "Deferral Amount" means the dollar amount of a Participant's Bonus
Award for the relevant period which is to be deferred and posted to a
Participant's Account pursuant to this Plan.
2.14 "Deferral Election" or "Election" means an irrevocable election (as to
the Participant) made by a Participant (a) to reduce his or her Bonus
Award for a Plan Year by an amount equal to the product of his or her
Deferral Percentage and his or her Bonus Award subject to the Deferral
Election; and (b) to select a Payment Date for those Deferrals. A
Participant's Deferral Election shall constitute the Participant's
agreement to and acceptance of the terms of this Plan. A Deferral
Election may include an election by the Participant entered into prior to
the Effective Date.
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2.15 "Deferral Percentage" means the percentage of a Participant's Bonus
Award for the relevant period which is to be deferred and posted to this
Plan.
2.16 "Effective Date" means October 2, 1997, the date upon which the
provisions of this document become effective.
2.17 "EIP" means the AmSouth Bancorporation Executive Incentive Plan as
from time to time amended, or any successor thereto identified by the
Committee.
2.18 "Employee" means any person, including an officer of the Employer
(whether or not he or she is also a Director thereof), who is employed by
the Employer.
2.19 "Employer" means the Company and any Affiliate whose Employees are
eligible to participate in the Plan.
2.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.21 "Fair Market Value" means the Fair Market Value of the Company Stock
as determined by the Committee or under procedures determined by the
Committee. Unless otherwise determined by the Committee, the Fair Market
Value per share of the Company Stock as of any date shall be determined on
the basis of the closing sale price on the principal securities exchange
on which the shares of Company Stock are traded or, if there is no such
sale on the relevant date, then on the last previous day on which a sale
was reported. The Committee shall not be under any obligation to take into
account non-public information regarding the Company or the Company Stock.
2.22 "Insider" means a Participant who is subject to the reporting
requirements of Section 16 of the Exchange Act as a result of his or her
position with the Company or any Affiliate.
2.23 "Internal Revenue Code" or "Code" means the Internal Revenue Code of
1986, as amended, and subsequent Internal Revenue Code and final Treasury
Regulations. If there is a subsequent Internal Revenue Code, any
references herein to Internal Revenue Code sections shall be deemed to
refer to comparable sections of any subsequent Internal Revenue Code.
2.24 "MIP" means the AmSouth Bancorporation Management Incentive Plan as
from time to time amended, or any successor thereto identified by the
Committee.
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2.25 "Notice Date" means the date established as the deadline for the
receipt of a Deferral Election or any other notification with respect to
an administrative matter in order to be effective under this Plan. The
Notice Date with respect to receipt of a Deferral Election shall be
December 31 of the year prior to the Plan Year to which the deferral
relates unless a different date is established by the Committee.
2.26 "Participant" means an Employee who participates in the Plan or a
former Employee who has been paid all of his or her Deferrals or Prior
Deferrals.
2.27 "Payment Date" means the earliest of:
(a) the date designated by the Participant for the distribution or
commencement of distribution of his or her Account, which date shall not
be earlier than the third anniversary of the first day of the Plan Year to
which the Deferral Election relates (i.e. a deferral of a Bonus Award
which is compensation for the 1998 Plan Year may be distributed after
December 31, 2000);
(b) the Participant's Termination of Employment (notwithstanding a later
Payment Date designated under Section 2.27(a));
(c) the date of the Plan's termination; and
(d) the date of a Change in Control of the Company, unless the Plan is
maintained on substantially the same terms after the Change in Control.
A Participant's Payment Date under (c) or (d) shall apply notwithstanding
a later Payment Date under (a).
2.28 "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Section 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.29 "Plan" means the AmSouth Bancorporation Deferred Compensation Plan, as
set forth herein and as hereafter may be amended from time to time.
2.30 "Plan Year" means the annual accounting period of the Plan which ends
on each December 31.
2.31 "Prior Deferrals" means deferrals made by a Participant under the EIP
and/or MIP prior to the Effective Date.
2.32 "Thrift Plan" means the AmSouth Bancorporation Thrift Plan as from
time to time amended, or any successor thereto identified by the
Committee.
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2.33 "Termination of Employment" occurs when a person ceases to be an
Employee as determined by the personnel policies of the Employer. A
transfer of employment from the Company or an Affiliate to the Company or
another Affiliate shall not constitute a Termination of Employment for
purposes of this Plan.
ARTICLE 3
PARTICIPATION
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3.1 Eligibility. Each Employee who is eligible to defer receipt of a Bonus
Award pursuant to the terms of the EIP or MIP shall be eligible to
participate in this Plan. Provided, however, that no Employee shall
participate in the Plan if such Employee is not a member of a select group
of management or highly compensated Employees. A person shall continue as
a Participant (subject to Section 3.2) until the earlier of the
Participant's death or the date the Participant's Account has no value.
3.2 Continuing Deferrals. The Committee shall have discretion to determine
whether a Participant is eligible to make a Deferral Election in or with
respect to any Plan Year.
ARTICLE 4
PARTICIPANT DEFERRALS
- ---------------------
4.1 Deferral Election.
(a) Subject to Committee discretion, for each Plan Year, a Participant
who is an Employee and who desires to have a Bonus Deferral made on his or
her behalf shall file a Deferral Election pursuant to procedures
specifying his or her Deferral Percentage which shall be not less than 25%
nor more than 100% (stated as a whole integer percentage) and authorizing
his or her Bonus Award payable for a Plan Year to be reduced and deferred
hereunder to such Participant's Payment Date. Notwithstanding the
preceding sentence, a Participant may not choose a Deferral Percentage
which will yield a Deferral Amount of less than $10,000. As an alternative
to choosing a Deferral Percentage, a Participant may choose a Deferral
Amount (stated as a whole integer) which shall be not less than $10,000
nor more than the total Bonus Award.
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<PAGE>
(b) Notwithstanding the foregoing subsection (a) hereof, for any Plan
Year the Committee may, without amending this Plan, determine that the
minimum or maximum Deferral Percentage with respect to any Participant
shall be greater or lesser than the percentages set forth in subsection
(a). Otherwise, the minimum and maximum Deferral Percentages as provided
in subsection (a) hereof shall apply. The Committee may, without
amending this Plan, determine that the minimum or maximum Deferral Amount
with respect to any Participant shall be greater or lesser that the amount
set forth in subsection (a).
(c) The amount of any Bonus Award to be deferred shall be reduced by any
taxes or other payment to be made or distributed in respect of or on
behalf of a Participant. Any Deferral Election which has not been
properly completed will be deemed not to have been received and will be
void. A Participant's Deferral Election shall be effective only if
received by the Committee on or before the Notice Date for a Plan Year.
4.2 Election Procedures. If properly received by the Committee, a
Deferral Election will be effective only with respect to a Bonus Award
paid for the Plan Year to which the Deferral Election applies and only
with respect to a Bonus Award paid after the Notice Date for the Deferral
Election. Consistent with the above, the Committee may establish rules
and procedures governing when a Deferral Election will be effective and
what Bonus Award will be deferred by the Deferral Election; provided such
rules and procedures are not more permissive than the terms and provisions
of this Plan.
4.3 Coordination with Thrift Plan. Notwithstanding a Participant's
Deferral Election, if a Participant makes a "401(k) hardship" withdrawal
from the Thrift Plan during a Plan Year, the "401(k) hardship"
withdrawal rules of such plan are incorporated by reference herein and
made a part hereof, but only to the extent required by Treasury Regulation
Section 1.401(k)-l, in order for the Thrift Plan to be a qualified cash or
deferred arrangement.
4.4 Prior Deferrals. A Participant's Account shall include Prior
Deferrals which shall be treated as follows:
(a) In the case of a Participant whose Termination of Employment
occurred prior to January 1, 1997 or in the case of a Participant who
elected effective January 1, 1997 to have all or part of his or her Prior
Deferrals deemed to be invested at the Prime Time/PFS time deposit fixed
rate (30 month) in effect at the beginning of each calendar year, such
Prior Deferrals for such Participant shall on and after the Effective Date
continue to be deemed to be so invested and, notwithstanding anything to
the contrary in this Plan, shall not be deemed to be converted into
shares of Company Stock. Furthermore, such Prior Deferrals shall be paid
in cash at the time specified in the Participant's original Deferral
Election.
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<PAGE>
(b) In the case of a Participant who elected prior to the Effective
Date to have all or part of his Prior Deferrals deemed to be invested in
"phantom" shares of Company Stock, such Participant shall be entitled to
make a one-time written election to either (i) continue to have such Prior
Deferrals deemed to be invested in phantom shares and receive at the
appropriate time a cash payment of such deferrals or (ii) have such Prior
Deferrals deemed to be classified as deferred shares of Company Stock and
receive (at the appropriate time) payment for such Prior Deferrals in
shares of Company Stock. If a Participant elects to have his or her Prior
Deferrals deemed to be classified as shares of Company Stock, the
provisions of Section 2.27(d) shall be applicable to such Prior Deferrals
notwithstanding the Participant's original deferral election. The
provisions of Section 2.27(d) shall not apply with respect to any Prior
Deferrals unless such Prior Deferrals are deemed to be converted into
shares of Company Stock and are payable solely in shares of Company Stock.
ARTICLE 5
DEFERRALS AND POSTING
- ---------------------
Bonus Deferral. Subject to the limits of this Plan and to the Committee's
authority to limit Deferrals under the terms of this Plan, for each period for
which a Deferral Election is in effect with respect to a Bonus Award, the
Employer shall post to this Plan on behalf of each Participant an amount equal
to the amount designated by the Participant as a Bonus Deferral on his or her
Deferral Election. The Bonus Deferral shall be posted to the Account of such
Participant as of the date such Bonus Award would otherwise have been paid to
the Participant.
ARTICLE 6
PARTICIPANTS' ACCOUNTS
- ----------------------
6.1 Individual Participant Accounting.
(a) The Committee shall cause the Account for each Participant to
reflect amounts posted to the Account based on the Deferral Election, and
the deemed investment thereof in Company Stock. As of each Conversion Date
that a cash amount of Bonus Award or other amount is credited to a
Participant's Account (other than in connection with a Payment Date), such
cash amount shall be deemed to be converted into the number of shares of
Company Stock equal to the amount of cash so credited (and not previously
converted) divided by the Fair Market Value of a share of Company Stock on
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<PAGE>
the Conversion Date. A fractional share shall be rounded to the next
higher whole number of shares. The amount of cash so converted shall be
charged to the Account, and the number of shares of Company Stock into
which the cash has been deemed to have been converted under the preceding
sentence shall be credited to the Account. Dividends, or other returns or
adjustments in respect of the Company Stock, if any, shall be reinvested
in deferred stock in the same manner provided above, except that in the
case of dividends the number of shares shall be determined based on the
Fair Market Value of a share of Company Stock on the last business day of
the quarter immediately preceding the date the dividend is paid. Account
values may be maintained in shares, units, or dollars (as determined by
the Committee). In the absence of a determination by the Committee,
Account values shall be maintained in shares. The Committee may maintain
more than one Account for any Participant. The Committee is responsible
for determining the dollar value of deferrals, and the share or unit value
of Company Stock.
(b) The Committee may correct any errors or omissions in the
administration of this Plan by restoring or charging any Participant's
Account with the amount that would have been credited or charged to the
Account had no error or omission been made; provided, however, that a
Participant's Account will be deemed to be correct unless the Participant
notifies the Committee or its designee of an error or omission within 30
days after receipt of the first statement on which the error or omission
is reflected.
(c) In the event of any Company Stock dividend, stock split,
combination or exchange of shares, recapitalization or other change in the
capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off,
or distribution to Company stockholders other than a normal cash
dividend), sale by the Company of all or substantial portion of its assets
(measured on either a stand-alone or consolidated basis),
reorganization, rights offering, a partial or complete liquidation, or any
other corporate transaction, Company share offering or event involving the
Company and having an effect similar to any of the foregoing, the
Committee may adjust the number of shares of Common Stock credited to an
Account, as the Committee may determine is equitable, and any other
characteristics or terms as the Committee shall deem necessary or
appropriate to reflect equitably the effects of such changes to the
Participant; provided however, that any fractional shares resulting from
such adjustment shall be eliminated by rounding to the next higher whole
number of shares.
6.2 Investment Not Required. Notwithstanding any other provision of this
Plan, including the foregoing provisions of this ARTICLE 6, the Employer
need not make an actual investment in shares of Company Stock. If the
Employer, in its discretion, should from time to time make such
investment, such investment shall be solely for the Employer's own
account and the Participant shall have no right, title, or interest in any
such investment. In all events the benefits payable to Participants
hereunder shall be the value of and earnings or losses on the amounts
credited or charged to each Participant's Account. If and to the extent
shares of Company Stock shall be held or purchased, the Committee, in its
sole discretion, shall exercise all voting or tender rights without any
fiduciary obligation or other obligation to a Participant or Beneficiary
if such stock has voting rights.
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ARTICLE 7
VESTING AND FORFEITURES
- -----------------------
A Participant shall be fully vested and have a non-forfeitable right to his or
her Account at all times.
ARTICLE 8
DISTRIBUTIONS
- -------------
Benefits payable under this Plan shall be paid in the form and time prescribed
below.
8.1 Accounts.
(a) Form of Payment. Except as may have been elected by a Participant
with respect to Prior Deferrals, the form of payment of the balance of a
Participant's Account will be shares of Common Stock equal to the
number of deferred shares in the Participant's Account. For each Deferral
Amount which a Participant elects to defer to the Participant's
Termination of Employment, the Participant may choose to have shares of
Common Stock distributed in either (i) one lump sum distribution, (ii) 5
annual installments, or (iii) 10 annual installments. For each such
Participant there shall be established three distribution subaccounts: the
Lump Sum Subaccount, the 5-year Subaccount and the 10-year Subaccount.
Deferral Amounts which a Participant chooses to defer to a point in time
prior to the Participant's Termination of Employment shall automatically
be credited to the Participant's Lump Sum Subaccount and the Participant
shall not be able to elect installment distributions with respect to such
Deferral Amounts.
As soon as administratively feasible after a Payment Date (other than a
Payment Date described in Section 2.27(a), (c) or (d)) the Company shall
distribute to a Participant (i) the number of shares of Common Stock, if
any, posted to the Participant's Lump Sum Subaccount; plus (ii) one-fifth
of the number of shares of Common Stock, if any, posted to the
Participant's 5-year Subaccount; plus (iii) one-tenth of the number of
shares of Common Stock, if any, posted to the Participant's 10-year
Subaccount. Subsequent annual distributions, if any, shall consist of the
applicable portion of the 5-year Subaccount (1/4, 1/3, 1/2 and all,
respectively) and the applicable portion of the 10-year Subaccount (1/9,
1/8, 1/7 and so forth, respectively). Notwithstanding the foregoing, if
at any time the number of shares in the Participant's 5-year Subaccount
and 10-year Subaccount total 1,000 shares or less in the aggregate, the
total number of shares in such Subaccounts shall be distributed to the
Participant in a lump sum distribution.
In the case of a Payment Date described in Section 2.27(a) the Company
shall distribute to the Participant as soon as administratively feasible
in one lump sum distribution such number of shares of Common Stock in the
Participant's Lump Sum Subaccount as corresponds to the Deferral Amount
with respect to which the Participant elected the particular Payment Date.
In the case of a Payment Date described in Section 2.27(c) or (d) the
Company shall distribute to the Participant as soon as administratively
feasible in one lump sum distribution the total number of shares of Common
Stock in the Participant's Account without regard to any Subaccounts.
(b) Time of Payment. Except as may have been elected by a Participant
with respect to Prior Deferrals, the time of payment of a Participant's
Account shall be the Payment Date.
8.2 Death Benefit of Accounts. Notwithstanding anything in Section 8.1, upon
the death of a Participant, the remaining balance in his or her Account
shall be paid to the Participant's Beneficiary in a single distribution of
Common Stock as soon as administratively possible after the Participant's
death.
8.3 Limitation. Except for a Payment Date under Section 2.27(d), if any
payment that would be made would result in any portion of the payment (or
any other amount paid to a Participant or Beneficiary during the same Plan
Year) not being deductible by the Company by reason of Code Section
162(m), the Committee may defer payment to a later Payment Date designated
by it; provided that the Committee reasonably determines that either the
Participant will cease to be a "covered employee" (as defined in Section
162(m) of the Code) or that a delay in the Payment Date of not more than
12 months will mitigate the effect of Section 162(m) of the Code.
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ARTICLE 9
AMENDMENT AND TERMINATION CLAIMS PROCEDURE
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9.1 Amendment and Termination. The Company by action of its Board of Directors
reserves the right to amend this Plan from time to time or to terminate
this Plan at any time; provided, however, without the written consent of
each Participant and Beneficiary, no such action may reduce or relieve any
Employer of any obligation to pay the balance of an Account maintained
under this Plan as of the date of such amendment or termination except to
the extent the Committee determines such action is advisable to avoid
liability under the Exchange Act. Upon termination of this Plan, all
Account balances shall be paid immediately in a single distribution of
Common Stock to the Participants or Beneficiaries thereof, unless the
Participant and the Committee have agreed to a later Payment Date.
Notwithstanding the preceding, the Chief Executive Officer of the Company
shall have the power to amend or terminate this Plan on behalf of the
Company.
9.2 Claim for Distribution. Any Participant who has a dispute regarding the
distribution of an Account (a "Claimant") must submit his or her claim for
distribution to the Committee or its agent in writing. Such claim shall be
filed no later than 60 days after the date the Participant first knew or
had reason to know of such claim. A Claimant shall have no right to seek
review of a denial of distribution, or to bring any action in any court to
enforce a claim for distribution, prior to his or her filing a claim for
distribution and exhausting his or her rights hereunder. Any claim for
distribution shall be evaluated and the Claimant shall be notified by the
Committee or its agent of its approval or denial within ninety (90) days
after the receipt of such claim unless special circumstances require an
extension of time for processing the claim. If the Committee or its agent
does not respond within ninety (90) days after receipt of such claim, the
claim shall be deemed to be a denial. If a claim is denied, in whole or in
part, the Claimant shall be given written notice which shall contain
(i) the specific reasons for the denial;
(ii) references to pertinent Plan provisions upon which the denial is
based;
(iii) a description of any additional material or information
necessary to perfect the claim and an explanation of why such material
or information is necessary; and
(iv) the Claimant's rights to seek review of the denial.
9.3 Review of Claim Denial. If a claim is denied, in whole or in part (or if
within the time periods prescribed for in the initial claim, the Committee
or its agent has not furnished the Claimant with a denial and the claim is
therefore deemed denied), the Claimant shall have the right to request
that the Committee review the denial, provided that the Claimant files a
written request for review with the Committee within sixty (60) days after
the date on which the Claimant received written notification of the denial
(or the date the claim was deemed to be denied). A Claimant (or his or
her duly authorized representative) may review pertinent documents and
submit issues and comments in writing to the Committee. Within sixty (60)
days after a request for review is received, the review shall be made and
Claimant shall be advised in writing by the Committee of the decision
on review, unless special circumstances require an extension of time for
processing the review, in which case the Claimant shall be given a written
notification by the Committee within such initial sixty (60) day period
specifying the reasons for the extension and when such review shall be
completed (provided that such review shall be completed within one hundred
and twenty (120) days after the date on which the request for review was
filed). The decision on review shall be forwarded to the Claimant by the
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Committee or its agent in writing and shall include specific reasons for
the decision and references to Plan provisions upon which the decision
is based. A decision on review shall be final and binding on all persons
for all purposes. If a Claimant shall fail to file a request for review
in accordance with the procedures described in this Section, such Claimant
shall have no right to review and shall have no right to bring action in
any court and the denial of the claim shall become final and binding on
all persons for all purposes.
ARTICLE 10
MISCELLANEOUS PROVISIONS
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10.1 Administration. This Plan shall be administered by the Committee which
shall be comprised of one or more persons. The Committee may authorize any
one or more if its members or an officer of the Company to execute and
deliver documents on behalf of the Committee. A member of the Committee
shall not exercise any discretion respecting himself or herself under the
Plan. The Committee may allocate among one or more of its members, or may
delegate to one or more of its agents, such duties and responsibilities
as it determines.
Among other things, the Committee shall have the authority, subject to the
terms of this Plan:
(a) to select those persons who will be Participants;
(b) to determine the amount and time of Deferrals hereunder;
(c) to determine the number of shares of Company Stock to be credited to
an Account hereunder;
(d) to provide the forms to be utilized in connection with this Plan;
(e) to determine whether and with what effect a Participant has a
Termination of Employment;
(f) to determine what securities law requirements are applicable to this
Plan and to require of a Participant that appropriate action be taken with
respect to such requirements;
(g) to require the withholding from a Participant of the amount of any
federal, state or local taxes as may be necessary in order for the Company
or an Affiliate to obtain a deduction;
(h) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of this Plan; and
(i) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
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The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing this Plan as it
shall, from time to time, deem advisable, to interpret the terms and
provisions of this Plan (and any agreement) and to otherwise supervise the
administration of this Plan. The Committee's policies and procedures may
differ with respect to different times or to different Participants.
Any determination made by the Committee pursuant to the provisions of this
Plan shall be made in its sole discretion. All decisions made by the
Committee pursuant to the provisions of this Plan shall be final and
binding on all persons, including the Company and Participants. Any
determination shall not be subject to de novo review if challenged
-------
in court.
10.2 Finality of Determination. The determination of the Committee as to any
disputed questions arising under this Plan, including questions of
construction and interpretation shall be final, binding, and conclusive
upon all persons.
10.3 Indemnification and Exculpation. The Company shall indemnify and hold
harmless the members of the Committee, the Company's agents, officers,
directors and employees (other than in their capacity as a Participant or
Beneficiary) and directors and employees of each Employer (other than in
their capacity as a Participant or Beneficiary) from and against any and
all loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting from any
claim, action, suit, or proceeding to which they may be a party or in
which they may be involved by reason of any action taken or failure to
act under this Plan from and against any and all amounts paid by them in
settlement (with the Company's written approval) or paid by them in
satisfaction of a judgment in any such action, suit, or proceeding. The
foregoing provision shall not be applicable to any person if the loss,
cost, liability or expense is due to such person's gross negligence or
willful misconduct. This indemnification shall be in addition to, and not
a limitation upon, any other indemnification to which such persons may be
entitled pursuant to the Certificate of Incorporation or Bylaws of the
Company or otherwise.
10.4 Funding. The obligation of this Plan is an unsecured obligation of the
Employer. While all benefits payable under this Plan constitute general
corporate obligations, the Company may establish a separate irrevocable
grantor trust for the benefit of all Participants, which trust shall be
subject to the claims of the general creditors of the Employer in the
event of the Employer's insolvency, to be used as a reserve for the
discharge of the Employer's obligations under this Plan to such
Participants. Any payments made to a Participant under the separate trust
for his or her benefit shall reduce the amount payable to the Participant
from the general assets of the Employer. The amounts payable under this
Plan shall be reflected on the accounting records of the Employer but
shall not be construed to create or require the creation of a trust,
custodial, or escrow account, except as described above in this section.
No Participant (or Beneficiary of a Participant) shall have any right,
title, or interest whatever in or to any investment reserves, accounts, or
funds that the Employer may purchase, establish, or accumulate to aid in
providing benefits under this Plan. Nothing contained in this Plan, and
no action taken pursuant to its provisions, shall create a trust or
fiduciary relationship of any kind between any Employer, the Committee
and a Participant, Beneficiary or any other person. Neither a Participant
nor a Beneficiary shall acquire any interest greater than that of an
unsecured creditor.
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10.5 Corporate Action. Any action required of or permitted by the Company
under this Plan may be by resolution of the Committee or by the action of
the Chief Executive Officer of the Company or his designee. The Plan and
actions taken pursuant to the Plan are subject to the articles of
incorporation and bylaws of the Company and all applicable law.
10.6 Interests Not Transferable. The interests of the Participants and their
Beneficiaries under this Plan are not subject to the claims of their
creditors (or any other sort of claimant) and may not be voluntarily or
involuntarily transferred, assigned, alienated, encumbered, sold,
pledged, conveyed, gifted, hypothecated, alienated, or otherwise disposed
of by them.
10.7 Effect on Other Benefit Plans. Whether amounts credited or paid under
this Plan shall be considered to be compensation for the purposes of any
other employee benefit plan or arrangement, shall be determined pursuant
to the provisions of such other plan or arrangement.
10.8 Distribution. The Employer shall deduct from the amount to be distributed
such amount as the Employer, in its sole discretion, deems proper to
protect the Employer against liability in respect of the Participant, and
out of money so deducted, the Employer may discharge any such liability
and pay the amount remaining to the Participant, the Beneficiary, or the
deceased Participant's estate, as the case may be.
10.9 Withholding. The Employer may withhold whatever taxes (including FICA,
local, state or federal taxes, domestic or foreign) it, in its sole
discretion, deems proper to protect the Employer against liability for the
payment of such withholding taxes and out of the money so deducted, the
Employer may discharge any such liability. Withholding for this purpose
may come from any wages due to the Participant or, if none, from the
Participant's Account hereunder. Participants may elect to satisfy the
withholding requirement, in whole or in part, by having the Company
withhold shares of Company Stock valued at the Fair Market Value on the
date the tax is to be determined. All such elections shall be made in
writing, signed by the Participant, and shall be subject to any
restrictions or limitations that the Committee, in its sole discretion,
deems appropriate.
10.10 Representation. The Committee shall establish such procedures as it
deems appropriate for a Participant to designate a Beneficiary to whom any
amounts payable in the event of the Participant's death are to be paid.
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10.11 Controlling Law. This Plan and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
Alabama (other than its law respecting choice of law), except to the
extent the General Corporation Law of the State of Delaware would be
applicable. This Plan shall be construed to comply with all applicable
law, and to avoid liability to the Company, an Affiliate or a Participant,
including, without limitation, under Section 16(b) of the Exchange Act.
10.12 Offset. Any amounts owed to the Company or an Affiliate by the
Participant of whatever nature may be offset by the Company from the value
of any Common Stock, cash or other thing of value under this Plan to be
transferred to the Participant, and no Common Stock, cash or other thing
of value under this Plan shall be transferred unless and until all
disputes between the Company and the Participant have been fully and
finally resolved and the Participant has waived all claims to such against
the Company or an Affiliate.
10.13 Fail-Safe. With respect to an Insider, transactions under this Plan are
intended to comply with all applicable conditions of Exchange Act Rule
16b. To the extent any provision of the Plan or action by the Committee
or Participant fails to so comply and would result in liability, it shall
be deemed null and void, to the extent deemed advisable by the Committee.
Moreover, in the event the Plan does not include a provision, or the
Committee has not formally taken any action necessary, to avoid liability
under Section 16 of the Exchange Act, such provision shall be deemed to be
incorporated by reference into the Plan with respect to Insiders or deemed
to have been taken by the Committee with respect to Insiders.
10.14 Right to Capitalize. The grant of an Award shall in no way affect the
right of the Company to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets
10.15 Mitigation of Excise Tax. Subject to any other agreement between the
Participant and the Company or an Affiliate with respect to excise
taxes, if any payment or right accruing to a Participant under this Plan
(without the application of this Section 10.15), either alone or
together with other payments or rights accruing to the Participant from
the Company or an Affiliate ("Total Payments") would constitute a
"parachute payment" (as defined in Section 280G of the Code regulations
thereunder or under any law with a similar purpose), such payment or right
shall be reduced to the largest amount or greatest right that will result
in no portion of the amount payable or right accruing under this Plan
being subject to an excise tax under Section 4999 of the Code, or under
any law with a similar purpose or being disallowed as a deduction under
Section 280G of the Code or under any law with a similar purpose. The
determination of whether any reduction in the rights or payments under
this Plan is to apply shall be made by the Committee in good faith after
consultation with the Participant, and such determination shall be
conclusive and binding on the Participant. The Participant shall
cooperate in good faith with the Committee in making such determination
and providing the necessary information for this purpose. The foregoing
provisions of this Section 10.15 shall apply with respect to any person
only if after reduction for any applicable federal excise tax imposed by
Section 4999 of the Code, or under any law with a similar purpose, and
federal income tax imposed by the Code, the Total Payments accruing to
such person would be less than the amount of the Total payments as
reduced, if applicable, under the foregoing provisions of this Plan and
after reduction for only federal income taxes. Notwithstanding the
foregoing, in the event the Participant is entitled to indemnification in
respect of excise taxes imposed under the Code, the foregoing provisions
of this Section 10.15 regarding reduction of any payment or right accruing
to such Participant shall not apply.
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10.16 Rights with Respect to Continuance of Employment. Nothing contained
herein shall be deemed to alter the relationship between the Company or an
Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed
to constitute a contract of employment between the Company or an Affiliate
and a Participant. The Company or an Affiliate and each of the
Participants continue to have the right to terminate the employment or
service relationship at any time for any reason, except as provided in a
written contract. The Company or an Affiliate shall have no obligation to
retain the Participant in its employ or service as a result of this Plan.
There shall be no inference as to the length of employment or service
herein, and the Company or an Affiliate reserves the same rights to
terminate the Participant's employment or service as existed prior to the
individual becoming a Participant in this Plan.
10.17 Termination by Affiliate. Any Affiliate may, by resolution of the board
of directors of such Affiliate, with the consent of the Board of Directors
and subject to such conditions as may be imposed by the Board of
Directors, terminate its participation in this Plan.
10.18 Delay. If on the Payment Date the Participant is an Insider, any time
period provided for under this Plan or a Deferral Election shall be
suspended and delayed to the extent necessary to avoid the imposition of
liability on the Participant under any law. The Company shall have the
right to suspend or delay any time period described in this Plan if the
Committee shall determine that the action may constitute a violation of
any law or result in liability under any law to the Company, an Affiliate
or a stockholder of the Company until such time as the action required or
permitted shall not constitute a violation of law or result in liability
to the Company, an Affiliate or a stockholder of the Company. The
Committee shall have the discretion to suspend the application of the
provisions of this Plan to comply with Rule 16b-3 if the Committee shall
determine that Rule 16b-3 does not apply to this Plan or one or more
Participants.
10.19 Pooling. Notwithstanding anything in the Plan to the contrary, if any
right under this Plan would cause a transaction to be ineligible for
pooling of interest accounting that would, but for the right hereunder, be
eligible for such accounting treatment, the Committee may modify or adjust
the right so that pooling of interest accounting shall be available.
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<PAGE>
10.20 Facility of Payment. If a Participant or Beneficiary is declared
incompetent or is a minor, or a conservator, guardian, or other person
legally charged with his or her care has been appointed, any benefits to
which such Participant or Beneficiary is entitled shall be payable to such
conservator, guardian, or other person legally charged with his or her
care. The decision of the Committee in such matters shall be final,
binding, and conclusive upon all Employers and upon each Participant,
Beneficiary, and every other person or party interested or concerned. The
Company and the Committee shall not be under any duty to see to the proper
application of such payments.
10.21 Successor. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) of all or
substantially all of the business and/or assets of the Company to
expressly assume and agree to perform the Company's obligations under this
Plan in the same manner and to the same extent that the Company would be
required to perform them if no such succession had taken place. Failure
of the Company to obtain such assumption and agreement prior to the
effective date of any such succession will be a breach of its obligations
hereunder and will entitle the Participant to compensation from the
Company in the same amount and on the same terms as the Participant would
be entitled to hereunder if a Change in Control had taken place.
10.22 Gender and Number. Except when the context indicates to the contrary,
when used herein, masculine terms shall be deemed to include the feminine,
and singular the plural.
10.23 Invalidity of Certain Provisions. If any provision of this Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provisions hereof and this Plan shall be construed
and enforced as if such provisions, to the extent invalid or
unenforceable, had not been included.
10.24 Headings. The headings or articles are included solely for convenience
of reference, and if there is any conflict between such headings and the
text of this Plan, the text shall control.
10.25 Notice and Information Requirements. Except as otherwise provided in this
Plan or as otherwise required by law, the Employer shall have no duty or
obligation to affirmatively disclose to any Participant or Beneficiary,
nor shall any Participant or Beneficiary have any right to be advised of,
any material information regarding the Employer, at any time prior to,
upon or in connection with any crediting or debiting (or decision
regarding the crediting or debiting) of any Company Stock to any Account.
10.26 Expenses. The expenses of administering the Plan shall be borne by the
Company, except that the Committee may cause expenses or charges in
respect of Company Stock to be charged to the Accounts.
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EXHIBIT 10-w
[AMSOUTH BANK LETTERHEAD APPEARS HERE]
October 7, 1997
Ms. Kristen M. Hudak
4212 Antietam Drive
Birmingham, AL 35213
Dear Kris:
This letter will confirm our agreement regarding the terms of your future
employment relationship with AmSouth Bank (together with its affiliates,
"AmSouth").
1. Duties
(a) From the date of your acceptance of this agreement until December 31,
1997 (the "First Employment Period"), you will continue with your current duties
as Senior Executive Vice President, Financial and Operations Group, including
your duties as Chief Financial Officer of AmSouth. Notwithstanding the
foregoing, if in the judgment of the Chief Executive Officer of AmSouth it would
be in the best interests of AmSouth for you to relinquish some or all of such
duties on a date prior to December 31, 1997, then you agree to do so and in such
case the First Employment Period will end on that earlier date.
(b) If as of the last day of the First Employment Period you have not begun
full-time employment with a new employer (as used in this agreement, new
employment shall include full-time, self-employment), then during the period
(the "Second Employment Period") beginning on the day next following the First
Employment Period and ending on March 31, 1998, and during any Third Employment
Period that you may be employed by AmSouth as provided in Section 2(a) hereof,
your duties will be to handle such special projects as may be assigned to you
from time to time by the Chief Executive Officer of AmSouth. You and AmSouth
agree that you may be employed by both a new employer and by AmSouth during the
Second Employment Period only. In such event, your duties at AmSouth would be
adjusted so as not to prevent you from performing your duties for your new
employer and your compensation would be as provided in Section 2 hereof. In
addition, in such event you agree that you will not hold yourself out to your
new employer as still being under the direction of AmSouth, will disclaim any
right to be covered under AmSouth's indemnification policies or under its
director and officer liability or other insurance and will take such other
actions as may be reasonably requested by AmSouth so as to avoid any such
insurance covering you or your actions in your new employment or in any other
activity.
<PAGE>
(c) You agree to use your best efforts to obtain new employment as soon as
possible. You agree that until you obtain new employment, your primary activity
will be to obtain new employment. On a monthly basis and otherwise when and if
from time to time requested, you will advise the Executive Vice President, Human
Resources as to the status of your search for new employment.
(d) Notwithstanding anything to the contrary in this agreement, (i) you may
voluntarily terminate your employment relationship with AmSouth at any time and
thereby forego any and all compensation otherwise payable to you after such date
as a result of such relationship as described in Section 2 hereof, and (ii) you
agree that your employment with AmSouth may be terminated at any time by AmSouth
and that you would not receive any compensation otherwise payable to you after
such termination, upon (x) during the First Employment Period, your willful and
continued failure to substantially perform your duties (other than any such
failure resulting from your disability as defined in the AmSouth Bancorporation
1996 Long Term Incentive Compensation Plan), after a written demand from the
Chief Executive Officer to you that specifically identifies the manner in which
the Chief Executive Officer believes that you have not substantially performed
your duties, and you have failed to remedy the situation within thirty calendar
days of receiving such notice, (y) your conviction for committing an act of
fraud, embezzlement, theft or another act constituting a felony or (z) the
willful engaging by you in gross misconduct materially and demonstrably
injurious to AmSouth, as determined by the Chief Executive Officer, provided
that no act or failure to act on your part will be considered "willful" unless
done, or omitted to be done, by you not in good faith and without reasonable
belief that your action or omission was in the best interest of AmSouth.
2. Compensation
(a) Base Salary. You will continue to be paid your base salary at a rate
of $27,917 per month during the First Employment Period. During the Second
Employment Period you will continue to be paid a base salary at such rate until
the date that you begin new employment elsewhere. If you have already begun new
employment elsewhere as of the first day of the Second Employment Period you
will not receive any base salary but will nonetheless continue to be considered
employed by AmSouth during the Second Employment Period. If as of March 31,
1998 the Second Employment Period is still continuing and you advise the
Executive Vice President, Human Resources in writing on that date that you do
not expect to begin new employment elsewhere by April 1, 1998, then a final
period of employment (the "Third Employment Period") will begin as of April 1,
1998 and will end on the earlier to occur of (i) the date that you begin
employment elsewhere or (ii) June 30, 1998. You will continue to be paid a base
salary at a rate of $27,917 per month during the Third Employment Period, if
any.
<PAGE>
(b) Continuation of Certain Benefits. AmSouth will continue to pay the
current premiums which it now pays for your present medical and dental and life
insurance benefits through the First Employment Period and the Second Employment
Period, and if there is a Third Employment Period through such Third Employment
Period. You will receive separate information regarding your rights to
continuation of health insurance following your termination of employment. To
the extent that you have such rights, this agreement will not impair those
rights.
(c) Other Benefits. You will continue to receive your current car
allowance, matching payments under any defined contribution retirement plan,
payment of home security service fees, reimbursement for country club and other
club dues, reimbursement for financial planning services and any other
perquisites which you are currently receiving (except for health and insurance
benefits which are covered in Section 1(b) and except for other compensation or
benefits which may be covered expressly below in this agreement) only until
December 31, 1997. You will not receive any such amounts after December 31,
1997. Notwithstanding the foregoing, AmSouth will continue to pay for the
financial planning services of The Ayco Company, L.P. through April 30, 1998 if
requested by you.
(d) EIP. You will be considered to be working for AmSouth as of the
"Award Date" for the 1997 "Plan Year" as defined in the AmSouth Bancorporation
Executive Incentive Plan (the "EIP Plan"), and will be eligible for an Award
under the normal terms of such EIP Plan on such Award Date. AmSouth agrees that
such Award Date will be not later than March 31, 1998.
(e) LTIP. Subject to Section 1(d) hereof, you will be considered to be
employed by AmSouth during the First Employment Period and the Second Employment
Period and during any Third Employment Period, and will thereby be eligible
during such Employment Periods as may occur to exercise "Options" and to vest in
any shares of "Restricted Stock" as may have been heretofore granted to you
under the AmSouth Bancorporation 1989 Long Term Incentive Compensation Plan and
the AmSouth Bancorporation 1996 Long Term Incentive Compensation Plan (together,
the "LTIP Plan"), so long as any such exercise or vesting is in accordance with
the normal terms of the LTIP Plan (other than the terms of such plan concerning
accelerated vesting in the event of a change in control of AmSouth). For
purposes of clarity, this means that, subject to Section 1(d) hereof, you will
have a total of 45,000 Options under the LTIP Plan which will be exercisable
prior to the end of the Third Employment Period, and a total of 15,000 shares of
Restricted Stock which will vest prior to the end of the Third Employment
Period. You agree that you will sign an agreement at the time that you receive
such shares of Restricted Stock by which you make the same waiver and release as
of such date as is made in Section 4(f) hereof.
(f) Outplacement Benefits. During any part of the First or Second
Employment Periods that you have not yet begun new employment, and during any
Third Employment Period, you will be eligible for outplacement benefits,
including use of office facilities that provide you with a separate office with
a door and secretarial support and access to career counseling services.
<PAGE>
(g) No Rights to Other Compensation. You agree that you will have no
rights to any other compensation or benefits, whether under a plan or otherwise,
from AmSouth or any plan sponsored by AmSouth during any Employment Period or
thereafter, or otherwise as a result of this agreement, except as expressly
provided above. Notwithstanding the generality of the foregoing, you expressly
acknowledge and agree that you will have no right to (i) receive any "Restricted
Stock" or any "Opportunity" under the terms of the AmSouth Bancorporation 1997
Performance Incentive Plan, (ii) receive any payments under any AmSouth
severance plan or (iii) receive any amounts under your Executive Severance
Agreement, or any amounts under any compensation plan or grant letter under any
compensation plan, which amounts are payable solely as a result of a change in
control of AmSouth which occurs after December 31, 1997. Without limiting the
foregoing, you hereby waive any right you might otherwise have for notice of
termination of your Executive Severance Agreement, other than the notice
provided in the previous sentence.
3. Resignation
(a) You agree that you will voluntarily resign, in writing addressed to the
Chief Executive Officer of AmSouth, from your employment with AmSouth effective
as the last date of your employment but no later than July 1, 1998. The
effective date of such resignation, whether on or before July 1, 1998, is
hereinafter referred to as the "Resignation Effective Date"). You will also
agree to sign such other documents as may be reasonably be requested by AmSouth
as of the Resignation Effective Date, including without limitation the document
contemplated by Section 3(b) hereof.
(b) As of the Resignation Effective Date you will acknowledge in writing
that (i) you have been paid for your earned salary and benefits through that
date and (ii) you make the same waiver and release as of such date as is made in
Section 4(f) hereof.
(c) You agree that by not later than the last day of the First Employment
Period you will have returned to AmSouth, and will acknowledge in writing that
you have returned to AmSouth (i) any information you have about AmSouth's
practices, procedures, trade secrets, customer lists, product marketing, or
nonpublic financial information or strategic plans and (ii) any company badges,
company identification cards, company credit cards, pagers, or other company
property.
4. Actions During and After Continued Employment
(a) You agree that during your employment with AmSouth you will continue to
be bound by and will comply with the AmSouth Statement of Responsibilities, as
the same may be amended from time to time. You further agree that you will be
bound by and will comply with such Statement after your employment with AmSouth
ends, to the extent that the Statement so requires.
<PAGE>
(b) Without limiting subsection (a) of this Section 4, you agree that
unless required or otherwise permitted by law, you will not disclose to others
any information regarding the following:
(i) Any information regarding AmSouth's practices, procedures, trade
secrets, customer lists, product marketing or nonpublic financial information or
strategic plans; or
(ii) The terms of this agreement, the payments to be made to you as
described herein or the fact of their payment, which are confidential except
that you may disclose this information to your spouse, attorney, accountant or
other professional advisor to whom you must make the disclosure in order for
them to render professional services to you. You will instruct them, however,
to maintain the confidentiality of this information just as you must. AmSouth
agrees that it will not disclose internally or externally the terms of this
agreement, the payments to be made to your as described herein or the fact of
their payment, except that it may disclose such information to employees,
directors or agents of AmSouth who have a business need to know such information
and except that AmSouth retains sole discretion to determine the content of any
disclosure that in the opinion of counsel to AmSouth is required by law or
regulation.
(c) You agree that you will reasonably cooperate with and assist AmSouth in
the future in responding to any government agency inquiries to the extent your
assistance is reasonably necessary. You also agree that you will reasonably
cooperate with and assist AmSouth in responding to any claims or lawsuits to the
extent your assistance is reasonably necessary. AmSouth agrees that it will pay
your reasonable out-of-pocket expenses, if any, in connection with any such
cooperation and assistance on your part described in the prior two sentences.
In addition, as an employee or former employee of AmSouth you are entitled to
indemnification and for advancement of expenses if and to the extent provided
for in the Certificate of Incorporation of AmSouth.
(d) You agree that you will not seek unemployment compensation benefits and
that the basis for your separation of employment makes you ineligible for such
benefits.
(e) You agree that you will not make any disparaging, false, misleading or
negative comments or remarks about or regarding (i) your employment and
separation of employment from AmSouth, and (ii) AmSouth and its predecessors,
subsidiaries, related entities, officers, directors, shareholders, agents,
attorneys, employees, successors or assigns. AmSouth agrees that it will not
make any disparaging, false, misleading or negative comments or remarks about or
regarding you or your separation of employment from AmSouth.
(f) You waive and release and promise never to assert any and all claims
that you have or might have against AmSouth and its predecessors, subsidiaries,
related entities, officers, directors, shareholders, agents, attorneys,
employees, successors, or assigns, arising from or related to your employment
with AmSouth and/or the termination of your employment with AmSouth. These
claims include, but are not limited to, claims arising under federal, state and
local statutory or common law, such as the Age Discrimination in Employment Act,
Title VII of the Civil Rights Act, as amended, including the amendments of the
Civil Rights Act of 1991, the
<PAGE>
Americans with Disabilities Act, the Civil Rights Act of 1866, 42 U.S.C. Section
1981, the Rehabilitation Act of 1973, the Employee Retirement Income Security
Act, the Fair Labor Standards Act, Executive Order 11246, the Family Medical
Leave Act, the Occupational Safety and Health Act, the National Labor Relations
Act, any other federal, state, or local law or regulation, and the law of
contract and tort.
(g) You do not waive rights or claims that may arise after the date this
agreement is signed by you.
5. Communications
(a) You and AmSouth will mutually agree upon the content of any internal or
external communications concerning your relinquishment of your current duties as
contemplated in Section 1(b) above and your resignation from employment as
contemplated in Section 3 above; provided, however, that AmSouth will retain
sole discretion to determine the content of any disclosure that in the opinion
of counsel to AmSouth is required by law or regulation.
(b) You acknowledge and agree that AmSouth's policy is to provide neutral
references concerning existing or former employees and that such policy will be
applied to you.
6. Miscellaneous
(a) You agree that this agreement constitutes the entire agreement between
you and AmSouth and cannot be modified except in a writing signed by you and
AmSouth. You agree that in executing this agreement you are not relying on any
statements, promises, or representations except as expressly contained herein.
You further agree that this agreement is governed by the laws of the State of
Alabama.
(b) You agree that in the event there is any dispute over the terms and
conditions of this agreement or the enforcement of this agreement, the exclusive
jurisdiction and venue for the resolution of any such disputes shall be the
state or federal courts located in Jefferson County, Alabama. You further agree
to waive any right to jury trial with respect to any disputes regarding the
terms and conditions of this agreement or the enforcement thereof.
(c) You agree that in the event that you breach any of your obligations
under this agreement or as otherwise imposed by law, AmSouth will be entitled to
recover the benefits and other compensation paid to you from and after the date
hereof, to refuse to pay any further benefits and compensation after such breach
and to obtain all other relief provided by law or equity. Additionally, you
agree that in the event you breach any of your obligations under this agreement
AmSouth will be entitled to its reasonable attorney's fees and costs in
enforcing the agreement.
<PAGE>
(d) The following is required by the Older Workers Benefit Protection Act:
(i) You have up to twenty-one (21) days from the date of this letter
or until close of business on October 28, 1997, to accept the terms of this
Agreement, although you may accept it at any time within those twenty-one (21)
days. You are advised to consult an attorney about the agreement.
(ii) To accept the agreement, please date and sign this letter and
return it to me. An extra copy for your files is enclosed. Once you do so, you
will still have an additional seven (7) days in which to revoke your acceptance.
To revoke, you must send me a written statement of revocation by registered
mail, return receipt requested. If you do not revoke, the eighth day after the
date of your acceptance will be the effective date of the agreement.
(e) You acknowledge and agree that the arrangements described in this
agreement, including without limitation the arrangements permitting you to
continue your current duties through the First Employment Period as provided in
Section 1 hereof for the compensation described in Section 2, are preferable to
you than an earlier termination of your employment, and constitute sufficient
consideration for your obligations hereunder including without limitation your
agreement contained in Section 4(f) hereof.
Sincerely,
/s/ David B. Edmonds
--------------------
David B. Edmonds
Executive Vice President
Human Resources
By signing this letter, I acknowledge that I have had the opportunity to
review this agreement carefully with an attorney of my choice; that I have read
this agreement and understand the terms of this agreement; and that I
voluntarily agree to them.
Dated: October 10, 1997
/s/ Kristen M. Hudak
--------------------
Kristen M. Hudak
<PAGE>
EXHIBIT 11
AMSOUTH BANCORPORATION
STATEMENT REGARDING COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31 December 31
-------------------- ---------------------
1997 1996 1997 1996
--------------------------------------------
(In thousands except per share data)
<S> <C> <C> <C> <C>
Net income.............................................. $ 58,892 $ 51,615 $226,167 $182,676
======= ======= ======= =======
Average shares of common stock outstanding.............. 80,577 84,411 82,039 84,906
======= ======= ======= =======
Earnings per common share............................... $ 0.73 $ 0.61 $ 2.76 $ 2.15
======= ======= ======= =======
Diluted average shares of common stock outstanding...... 81,392 85,058 82,746 85,843
======= ======= ======= =======
Diluted earnings per common share....................... $ 0.72 $ 0.61 $ 2.73 $ 2.13
======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT 13
AMSOUTH BANCORPORATION'S 1997 ANNUAL REPORT TO SHAREHOLDERS, EXCLUDING THE
PORTIONS THEREOF NOT INCORPORATED BY REFERENCE IN THIS FORM 10-K
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Summary of Consolidated Financial Performance
AmSouth Bancorporation (AmSouth) reported diluted earnings per common share in
1997 of $2.73 compared to $2.13 per share for 1996 and $1.98 per share in 1995.
Net income for the same periods totaled $226.2 million, $182.7 million and
$175.0 million, respectively. The higher level of earnings in 1997 was
primarily the result of an increase in net interest income, significant growth
in noninterest revenues and lower noninterest expenses. Partially offsetting
the improvement was a modest increase in the loan loss provision.
The increase in earnings for 1996 was due primarily to higher net interest
income and an increase in noninterest revenues. These improvements were offset,
in part, by a higher provision for loan losses and an increase in noninterest
expenses. Included in net income for 1996 was a one-time, pre-tax charge of
$24.2 million, or $.18 per share after tax, required by federal legislation
passed during the third quarter to recapitalize the Savings Association
Insurance Fund (SAIF). Net income in 1996, without the effect of the SAIF
assessment, was $197.9 million or $2.31 per share on a diluted basis.
Contributing to the improvement in earnings for 1995 were higher net
interest income, growth in noninterest revenues and control of noninterest
expenses. An increase in the provision for loan losses in 1995 partially offset
the improvement in earnings. Net income for 1995 included a pre-tax gain of
$25.0 million from the sale of AmSouth's third-party mortgage servicing
portfolio and pre-tax expenses of $22.2 million recorded during the second
quarter associated primarily with productivity initiatives, including business
and branch consolidations and the development of new systems.
Two key measures of profitability in the banking industry are return on
average equity (ROE) and return on average assets (ROA). ROE was 16.51 percent
in 1997 versus 13.23 percent in 1996 and 12.89 percent in 1995. ROA was 1.25
percent in 1997 compared to 1.02 percent in 1996 and 1.03 percent in 1995.
Excluding the one-time SAIF charge in 1996, ROE and ROA for 1996 would have been
14.26 percent and 1.10 percent, respectively. See graphs below.
[BAR GRAPH APPEARS HERE]
20
<PAGE>
<TABLE>
<CAPTION>
Table 1
Composition of Earning Assets
(Dollars in thousands) 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
Average Percent Average Percent Average Percent
Balance of Total Balance of Total Balance of Total
<S> <C> <C> <C> <C> <C> <C>
Loans net of unearned income.......... $12,059,249 72.2% $11,694,849 69.6% $11,747,385 75.0%
Held-to-maturity securities........... 2,451,358 14.7 2,621,070 15.6 3,275,545 20.9
Available-for-sale securities......... 2,113,217 12.7 2,391,748 14.2 538,133 3.4
Other earning assets.................. 72,561 0.4 107,352 0.6 101,918 0.7
-----------------------------------------------------------------------------------
$16,696,385 100.0% $16,815,019 100.0% $15,662,981 100.0%
===================================================================================
</TABLE>
Note: Available-for-sale securities excludes adjustment for market valuation.
This section of the annual report provides a narrative discussion and
analysis of AmSouth's financial condition and results of operations for the
previous three years. All tables, graphs and financial statements included in
this report should be considered an integral part of this analysis.
In March 1997, AmSouth's Board of Directors declared a three-for-two stock
split in the form of a 50 percent stock dividend. The shares were distributed
April 30, 1997 to stockholders of record as of April 4, 1997. For all years
presented in this discussion, shares outstanding and per share data have been
adjusted to reflect the stock split.
Forward Looking Information This Annual Report to Shareholders contains certain
forward looking information with respect to the financial condition, results of
operations and business of AmSouth including statements relating to: (A)
AmSouth's ability to achieve certain financial and strategic goals; (B) net
interest margin; (C) noninterest revenues; (D) loan losses; (E) operating
efficiency; (F) legal proceedings; (G) growth in various categories of loans and
(H) Year 2000 compliance.
These forward looking statements involve certain risks, uncertainties,
estimates and assumptions by management. Factors that may cause actual results
to differ materially from those contemplated by such forward looking statements
include, among others, the following: (1) the rate of growth of the economy,
especially in the Southeast; (2) the level and trend of interest rates; (3)
relative strength/weakness in the consumer credit sector; (4) AmSouth's ability
to improve sales and service quality and to develop profitable new products; (5)
the successful implementation of technological enhancements; (6) the outcome of
litigation involving AmSouth, which depends on judicial interpretations of law
and findings of juries; (7) the strength of the real estate markets; (8) the
level of consumer confidence; (9) the success of AmSouth's marketing and sales
efforts; (10) the performance of the stock and bond markets; (11) the condition
of foreign financial markets and economies; (12) the effects of competitive
pressures and (13) the inherent uncertainties in achieving Year 2000 compliance
with respect to AmSouth and its vendors, suppliers and loan customers.
Earnings Analysis
Net Interest Income Net interest income (NII), defined as the amount of revenue
generated by earning assets less the interest cost of funding those assets, is
the principal source of earnings for AmSouth, constituting 72.0 percent of total
net revenues in 1997, 73.8 percent in 1996 and 72.3 percent in 1995. For
purposes of this earnings analysis, NII has been adjusted to a fully taxable
equivalent basis for certain tax-exempt loans and investments included in
earning assets.
21
<PAGE>
Table 2
Yields Earned on Average Earning Assets and Rates
Paid on Average Interest-Bearing Liabilities
<TABLE>
<CAPTION>
(Taxable equivalent basis - dollars in thousands) 1997
====================================================================================================================================
Average Revenue/ Yield/
Balance Expense Rate
<S> <C> <C> <C>
Assets
Earning assets:
Loans net of unearned income................................................ $ 12,059,249 $ 1,053,837 8.74%
Available-for-sale securities............................................... 2,113,217 155,600 7.36
Held-to-maturity securities:
Taxable.................................................................. 2,305,336 156,138 6.77
Tax-free................................................................. 146,022 15,989 10.95
------------ ------------
Total held-to-maturity securities..................................... 2,451,358 172,127 7.02
------------ ------------
Total investment securities........................................ 4,564,575 327,727 7.18
Trading securities.......................................................... 3,393 78 2.30
Federal funds sold and securities purchased under agreements to resell...... 17,602 964 5.48
Mortgage loans held for sale................................................ 51,566 2,223 4.31
------------ ------------
Total earning assets..................................................... 16,696,385 1,384,829 8.29
------------
Cash and other assets.......................................................... 1,490,195
Allowance for loan losses...................................................... (179,656)
Market valuation on available-for-sale securities.............................. 35,219
------------
$ 18,042,143
============
Liabilities And Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits............................................ $ 3,727,911 123,586 3.32
Savings deposits............................................................ 1,045,121 29,928 2.86
Time deposits............................................................... 5,109,045 281,838 5.52
Certificates of deposit of $100,000 or more................................. 861,733 48,735 5.66
Federal funds purchased and securities sold under agreements to repurchase.. 1,478,394 78,461 5.31
Other borrowed funds........................................................ 972,299 52,837 5.43
Long-term Federal Home Loan Bank advances................................... 989,802 53,945 5.45
Subordinated Capital Notes Due 1999......................................... 99,763 9,530 9.55
6 3/4% Subordinated Debentures Due 2025..................................... 149,854 9,299 6.21
7 3/4% Subordinated Notes Due 2004.......................................... 149,366 11,696 7.83
7 1/2% Convertible Subordinated Debentures.................................. -0- -0- --
Other long-term debt........................................................ 29,674 1,656 5.58
------------ ------------
Total interest-bearing liabilities....................................... 14,612,962 701,511 4.80
------------ -----
Net interest spread................................................... 3.49%
=====
Noninterest-bearing demand deposits............................................ 1,820,387
Other liabilities.............................................................. 239,017
Shareholders' equity........................................................... 1,369,777
------------
$ 18,042,143
============
Net interest income/margin on a taxable equivalent basis.............. 683,318 4.09%
=====
Taxable equivalent adjustment:
Loans....................................................................... 1,712
Held-to-maturity securities................................................. 5,329
Other earning assets........................................................ -0-
------------
Total taxable equivalent adjustment...................................... 7,041
------------
Net interest income................................................... $ 676,277
============
</TABLE>
Note: The taxable equivalent adjustment has been computed based on a 35% federal
income tax rate and has given effect to the disallowance of interest expense,
for federal income tax purposes, related to certain tax-free assets. Loans net
of unearned income includes nonaccrual loans for all years presented.
22
<PAGE>
<TABLE>
<CAPTION>
(Taxable equivalent basis - dollars in thousands) 1996
====================================================================================================================================
Average Revenue/ Yield/
Balance Expense Rate
<S> <C> <C> <C>
Assets
Earning assets:
Loans net of unearned income................................................... $ 11,694,849 $ 1,006,658 8.61%
Available-for-sale securities.................................................. 2,391,748 164,473 6.88
Held-to-maturity securities:
Taxable..................................................................... 2,422,940 163,159 6.73
Tax-free.................................................................... 198,130 22,204 11.21
------------ ------------
Total held-to-maturity securities........................................ 2,621,070 185,363 7.07
------------ ------------
Total investment securities........................................... 5,012,818 349,836 6.98
Trading securities............................................................. 4,124 144 3.49
Federal funds sold and securities purchased under agreements to resell......... 22,307 1,224 5.49
Mortgage loans held for sale................................................... 80,921 5,242 6.48
------------ ------------
Total earning assets........................................................ 16,815,019 1,363,104 8.11
------------
Cash and other assets............................................................. 1,327,974
Allowance for loan losses......................................................... (178,592)
Market valuation on available-for-sale securities................................. 25,220
------------
$ 17,989,621
============
Liabilities And Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits............................................... $ 3,670,068 115,192 3.14
Savings deposits............................................................... 1,036,240 28,432 2.74
Time deposits.................................................................. 5,593,123 318,410 5.69
Certificates of deposit of $100,000 or more.................................... 859,468 49,311 5.74
Federal funds purchased and securities sold under agreements to repurchase..... 1,771,305 91,790 5.18
Other borrowed funds........................................................... 754,369 39,500 5.24
Long-term Federal Home Loan Bank advances...................................... 511,583 27,210 5.32
Subordinated Capital Notes Due 1999............................................ 99,634 9,513 9.55
6 3/4% Subordinated Debentures Due 2025........................................ 149,836 9,145 6.10
7 3/4% Subordinated Notes Due 2004............................................. 149,274 11,696 7.84
7 1/2% Convertible Subordinated Debentures..................................... 2,390 145 6.07
Other long-term debt........................................................... 22,489 1,098 4.88
------------ ------------
Total interest-bearing liabilities.......................................... 14,619,779 701,442 4.80
------------ -----
Net interest spread...................................................... 3.31%
=====
Noninterest-bearing demand deposits............................................... 1,767,444
Other liabilities................................................................. 221,866
Shareholders' equity.............................................................. 1,380,532
------------
$ 17,989,621
============
Net interest income/margin on a taxable equivalent basis................. 661,662 3.93%
=====
Taxable equivalent adjustment:
Loans.......................................................................... 2,178
Held-to-maturity securities.................................................... 7,103
Other earning assets........................................................... -0-
------------
Total taxable equivalent adjustment......................................... 9,281
------------
Net interest income...................................................... $ 652,381
============
<PAGE>
<CAPTION>
(Taxable equivalent basis - dollars in thousands)................................. 1995
====================================================================================================================================
Average Revenue/ Yield/
Balance Expense Rate
<S> <C> <C> <C>
Assets
Earning assets:
Loans net of unearned income................................................... $ 11,747,385 $ 1,014,288 8.63%
Available-for-sale securities.................................................. 538,133 38,034 7.07
Held-to-maturity securities:
Taxable..................................................................... 3,014,160 197,645 6.56
Tax-free.................................................................... 261,385 28,441 10.88
------------ ------------
Total held-to-maturity securities........................................ 3,275,545 226,086 6.90
------------ ------------
Total investment securities........................................... 3,813,678 264,120 6.93
Trading securities............................................................. 6,331 319 5.04
Federal funds sold and securities purchased under agreements to resell......... 15,590 1,095 7.02
Mortgage loans held for sale................................................... 79,997 5,478 6.85
------------ ------------
Total earning assets........................................................ 15,662,981 1,285,300 8.21
------------
Cash and other assets............................................................. 1,453,599
Allowance for loan losses......................................................... (176,695)
Market valuation on available-for-sale securities................................. 2,441
------------
$ 16,942,326
============
Liabilities And Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits............................................... $ 3,893,721 139,854 3.59
Savings deposits............................................................... 960,969 27,500 2.86
Time deposits.................................................................. 5,769,819 329,979 5.72
Certificates of deposit of $100,000 or more.................................... 923,866 54,278 5.88
Federal funds purchased and securities sold under agreements to repurchase..... 1,158,196 67,182 5.80
Other borrowed funds........................................................... 573,921 32,819 5.72
Long-term Federal Home Loan Bank advances...................................... 54,000 3,825 7.08
Subordinated Capital Notes Due 1999............................................ 99,505 9,495 9.54
6 3/4% Subordinated Debentures Due 2025........................................ 22,987 1,489 6.48
7 3/4% Subordinated Notes Due 2004............................................. 149,182 11,717 7.85
7 1/2% Convertible Subordinated Debentures..................................... 3,931 404 10.28
Other long-term debt........................................................... 23,340 854 3.66
------------ ------------
Total interest-bearing liabilities.......................................... 13,633,437 679,396 4.98
------------ -----
Net interest spread...................................................... 3.23%
=====
Noninterest-bearing demand deposits............................................... 1,755,717
Other liabilities................................................................. 195,836
Shareholders' equity.............................................................. 1,357,336
------------
$ 16,942,326
============
Net interest income/margin on a taxable equivalent basis................. 605,904 3.87%
=====
Taxable equivalent adjustment:
Loans.......................................................................... 2,968
Held-to-maturity securities.................................................... 9,383
Other earning assets........................................................... 10
------------
Total taxable equivalent adjustment......................................... 12,361
------------
Net interest income...................................................... $ 593,543
============
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Table 3
Volume and Yield/Rate Variances
1997 Compared to 1996 1996 Compared to 1995
(Taxable equivalent basis - in thousands) Change Due to Change Due to
- -------------------------------------------------------------------------------------------------------------------------------
Yield/ Yield/
Volume Rate Net Volume Rate Net
<S> <C> <C> <C> <C> <C> <C>
Revenue Earned On:
Loans net of unearned income........................... $ 31,688 $15,490 $ 47,178 $ (4,525) $ (3,105) $ (7,630)
Available-for-sale securities.......................... (19,997) 11,124 (8,873) 127,495 (1,056) 126,439
Held-to-maturity securities:
Taxable............................................. (7,961) 940 (7,021) (39,686) 5,200 (34,486)
Tax-free............................................ (5,717) (498) (6,215) (7,066) 829 (6,237)
---------------------------------------------------------------------
Total held-to-maturity securities...................... (13,678) 442 (13,236) (46,752) 6,029 (40,723)
---------------------------------------------------------------------
Total investment securities............................ (33,675) 11,566 (22,109) 80,743 4,973 85,716
Trading securities..................................... (23) (43) (66) (93) (82) (175)
Federal funds sold and securities purchased
under agreements to resell.......................... (258) (2) (260) 404 (275) 129
Mortgage loans held for sale........................... (1,571) (1,448) (3,019) 62 (298) (236)
---------------------------------------------------------------------
Total earning assets................................... (3,839) 25,563 21,724 76,591 1,213 77,804
---------------------------------------------------------------------
Interest Paid On:
Interest-bearing demand deposits....................... 1,838 6,556 8,394 (7,716) (16,946) (24,662)
Savings deposits....................................... 246 1,250 1,496 2,096 (1,164) 932
Time deposits.......................................... (26,931) (9,641) (36,572) (10,063) (1,506) (11,569)
Certificates of deposit of $100,000 or more............ 130 (706) (576) (3,717) (1,250) (4,967)
Federal funds purchased and securities sold
under agreements to repurchase...................... (15,498) 2,169 (13,329) 32,407 (7,799) 24,608
Other borrowed funds................................... 11,793 1,544 13,337 9,632 (2,951) 6,681
Long-term Federal Home Loan Bank advances.............. 26,047 688 26,735 24,569 (1,184) 23,385
Subordinated Capital Notes Due 1999.................... 12 5 17 12 6 18
6 3/4% Subordinated Debentures Due 2025................ 1 153 154 7,747 (91) 7,656
7 3/4% Subordinated Notes Due 2004..................... 14 (14) -0- 35 (56) (21)
7 1/2% Convertible Subordinated Debentures............. (73) (73) (146) (126) (133) (259)
Other long-term debt................................... 386 172 558 (32) 276 244
---------------------------------------------------------------------
Total interest-bearing liabilities..................... (2,035) 2,103 68 54,844 (32,798) 22,046
---------------------------------------------------------------------
Net interest income on a taxable equivalent basis...... $ (1,804) $23,460 21,656 $ 21,747 $ 34,011 55,758
======================== ===================
Add taxable equivalent adjustment...................... 2,240 3,080
-------- -------
Net interest income.................................... $ 23,896 $58,838
======== =======
</TABLE>
Notes:
1. The change in interest resulting from both volume and yield/rate has been
allocated to change due to volume and change due to yield/rate in
proportion to the relationship of the absolute dollar amounts of the change
in each.
2. The computation of the taxable equivalent adjustment has given effect to
the disallowance of interest expense, for federal income tax purposes,
related to certain tax-free assets.
24
<PAGE>
The level of NII is determined primarily by variations in the volume and mix
of earning assets and interest-bearing liabilities, and changes in their related
yields and interest rates paid. During 1997, NII reached $683.3 million, an
increase of 3.3 percent over 1996. This improvement is attributable to higher
yields on both loans and investment securities in 1997 aided by a shift in the
composition of earning assets to include a greater proportion of loans. The
yield earned on average loans, net of unearned income, in 1997 was 8.74 percent
compared to 8.61 percent in 1996, while the yield earned on total average
investment securities improved to 7.18 percent in 1997 versus 6.98 percent the
previous year. Average net loans as a percentage of total average earning
assets increased to 72.2 percent in 1997 from 69.6 percent in 1996. Total
average earning assets declined $118.6 million between years primarily due to
management's efforts during 1997 to reduce the level of narrower spread assets
held on the balance sheet.
Further evidence of the effects of these actions included the widening of the
net interest spread or the difference between the average yield earned on
earning assets on a fully taxable equivalent basis and the average rate paid for
interest-bearing liabilities. The net interest spread in 1997 was 3.49 percent
versus 3.31 percent in 1996, an increase of 18 basis points. A major factor
contributing to the increase in the net interest spread in 1997 was the lower
cost of time deposits. The average rate paid for time deposits during the year
was 5.52 percent, a decline of 17 basis points from the 5.69 percent paid in
1996. This decrease was primarily due to a program conducted during the latter
half of 1996 to reprice and restructure the maturities of $1.6 billion of
consumer certificates of deposit. Despite increases in the cost of other
deposits, the decrease in the cost of time deposits kept the rate paid on total
interest-bearing liabilities in 1997 at 4.80 percent, unchanged from 1996.
The widening of the net interest spread, in turn, was the primary reason for
the improvement in the net interest margin (NIM) to 4.09 percent for 1997 from
3.93 percent reported in the prior year. The NIM is computed by dividing fully
taxable equivalent NII by average earning assets and measures how effectively
the bank utilizes its earning assets in relationship to the interest cost of
funding them.
In 1996, NII increased due to a higher volume of average earning assets.
Average earning assets in 1996 increased 7.4 percent over 1995 levels. The
increase was primarily due to an increase in available-for-sale securities.
These were purchased to more effectively manage interest rate risk and to take
advantage of attractive opportunities in the financial markets.
The funding for the increase in average earning assets in 1996 was provided by
a combination of short and long-term borrowings. This was necessary because of
a decrease in average deposits between years of 2.8 percent or $377.7 million.
The decline in deposits in 1996 was primarily due to a shift in customers'
investment preferences because of the strong financial and stock markets during
the year, coupled with a program in the latter half of 1996 to lower the cost
and restructure the maturities of $1.6 billion of consumer certificates of
deposit.
The NIM was 3.93 percent in 1996 compared to 3.87 percent for 1995.
Contributing to the increase in the NIM in 1996 was a widening in the net
interest spread to 3.31 percent versus 3.23 percent in 1995. The generally
declining interest rate environment throughout most of 1996 combined with
proactive pricing of deposits and a change in the mix of interest-bearing
liabilities to lower cost funds were the primary reasons for the improvement as
the rates paid on interest-bearing liabilities decreased 18 basis points between
years.
Management anticipates a stable to modest narrowing of the NIM in 1998
provided the economy continues to grow at a moderate pace, interest rates
remain relatively stable and the composition of earning assets does not change
significantly. However, competitive pressures adversely affecting AmSouth's
ability to set deposit rates and price loans may exacerbate such a narrowing.
25
<PAGE>
Provision for Loan Losses The provision for loan losses is the charge to
operating earnings necessary to maintain the allowance for loan losses at an
adequate level to absorb losses inherent in the loan portfolio. The provision
for loan losses in 1997 totaled $67.4 million, a $2.2 million increase from the
$65.2 million reported in 1996 and $27.3 million higher than the $40.1 million
recorded in 1995. At the same time, net charge-offs in 1997 increased to $67.3
million from $64.6 million in 1996 and $34.6 million in 1995. The increases in
1997 resulted from increased loan volumes, higher commercial and consumer loan
net charge-offs and lower net recoveries of commercial real estate loans. The
increase in consumer loan net charge-offs was lessened due to higher recoveries
of dealer indirect loans as a direct result of enhancements made to the
collection process for such loans during the year.
The large increase during 1996 in net charge-offs, and, consequently, the
provision for loan losses, was concentrated in consumer loans. Total consumer
loan losses, net of recoveries, rose to $61.3 million in 1996 from $28.4 million
the previous year. Losses were higher in every consumer loan category during
1996. The increases were primarily the result of an increase in delinquencies
and rising bankruptcies throughout the year, which reflected the weakness in the
consumer sector of the economy during 1996. Aggressive direct marketing
initiatives in prior years to develop new business, particularly in credit
cards, also contributed to the increase in consumer net charge-offs in 1996, as
the accounts resulting from such marketing initiatives experienced higher
charge-off rates than other parts of the portfolio.
Measured as a percentage of average net loans, net charge-offs followed the
same pattern as the absolute level of losses during the past three years. In
1997, net charge-offs were .56 percent of average net loans versus .55 percent
in 1996 and .29 percent in 1995. Management expects net loan losses in 1998 to
decline modestly from the levels experienced in 1997 provided the overall
economy remains strong and management is able to achieve at least the same level
of collection success as the previous year.
For additional details on net charge-offs, see Tables 17 and 18. Also,
additional discussion of asset quality trends may be found in the section of
this report entitled Credit Risk Management Process and Loan Quality.
Noninterest Revenues Noninterest revenues are a growing source of income for
AmSouth, representing 28.0 percent of total, tax equivalent, net revenues in
1997, up from 26.2 percent in 1996. Total noninterest revenues increased 13.1
percent to $266.0 million in 1997, compared to $235.3 million in 1996 and $231.7
million in 1995. Growth occurred across all major revenue categories, led by
investment services income, service charges on deposits, other operating
revenues and trust income.
Service charges on deposit accounts, the single largest category of
noninterest revenues, increased $3.8 million or 4.0 percent in 1997. This
growth reflects increases primarily in consumer checking account fees,
commercial account analysis fees and check enclosure fees. The increase in
consumer checking account fees is primarily due to a decrease in fee waivers
during the
Provision for Loan Losses and
Net Charge-Offs to Average Loans
[BAR GRAPH APPEARS HERE]
Provision
Net Charge-Offs to Average Loans
26
<PAGE>
year. Also contributing to the increase were increases in transaction volumes
and account activity.
Trust income in 1997 reached $62.1 million, an increase of $4.7 million or 8.3
percent over 1996. Revenue growth was led by new business in employee benefit
plan and personal trust administration and higher market values of assets.
Total trust assets under administration at year-end 1997 were $29.0 billion, up
from $20.6 billion at the end of 1996, while total assets under management,
which are included in total trust assets under administration, reached $8.4
billion at the end of 1997 compared to $7.1 billion at year-end 1996.
Investment services income was $23.5 million in 1997, up $6.6 million or 38.7
percent from 1996. The principal reason for the increase was a 13.0 percent
increase in the number of employees registered to sell investment products in
1997. In addition, the number of AmSouth proprietary mutual funds was expanded
during the year to include equity income, large capitalization, fixed income and
additional money market funds and now totals 15 funds. Total assets in the
AmSouth mutual funds at year-end 1997 were $3.3 billion.
Credit card income in 1997 increased 1.0 percent to $15.1 million compared to
$14.9 million in 1996. The modest increase was the result of higher fees offset
by a reduction in the number of active cardholder accounts between years.
Interchange income, which is equally divided between fees derived from debit
cards and automated teller machine (ATM) transactions, had substantial growth in
1997, increasing $3.2 million or 35.3 percent. The principal reasons for the
increase include an increase in the number of activated debit cards during the
year and the expansion of the ATM network, initially begun in the latter half of
1996. There were 622 AmSouth ATMs in service at year-end 1997.
A new noninterest revenue category was created at the end of 1996 with the
purchase of $150 million, principal amount, of bank-owned life insurance
(BOLI). The effect of this transaction was to reduce NII by the amount
previously earned on the principal amount invested and to increase noninterest
revenues by the earnings received from the insurance policies. Because the
proceeds from life insurance policies are exempt from federal income taxes, the
corporation's effective tax rate in 1997 was reduced. An additional $50 million
of principal amount of BOLI was purchased in the third quarter of 1997 bringing
the total BOLI purchased to $200 million, principal amount, at year-end 1997.
The income recorded in 1997 from BOLI purchases totaled $11.3 million.
Other operating revenues were $43.3 million in 1997, an increase of $1.0
million or 2.4 percent. The primary cause of the increase was growth in
mortgage income due to increases in servicing fees on loans sold and higher
gains on the sales of mortgages.
Total noninterest revenues in 1996 increased 1.6 percent to $235.3 million
from the $231.7 million reported for 1995. Other operating revenues in 1995
included a $25.0 million gain from AmSouth's sale of its third-party mortgage
servicing portfolio. Excluding this amount from 1995, total noninterest
revenues in 1996 rose 13.8 percent.
Service charges on deposit accounts increased $9.7 million or 11.4 percent in
1996. The principal reasons for the increase were higher prices for services,
fewer waived fees and increased account activity.
Trust income in 1996 increased $7.1 million, or 14.1 percent, compared to the
prior year. The improvement was due to an increase in the number of employee
benefit plan administration and personal trust accounts and higher fees.
Investment services income was up $9.6 million or 131.3 percent in 1996. One
of the primary reasons for the increase was higher sales volume due to an
expansion of the sales force in late 1995 and early 1996. During this period,
the number of salespersons increased 44.4 percent. Another factor was the
continued strong performance of the financial and stock markets during 1996.
Also, the introduction of a new proprietary fixed annuity product in the second
quarter of 1996 contributed to the increase.
27
<PAGE>
Credit card income increased $1.6 million or 12.0 percent in 1996. This was
due primarily to an increase in the number of cardholder accounts from direct
mail marketing campaigns conducted in 1995 and 1996.
Interchange income grew $3.2 million or 56.3 percent in 1996 to $8.9 million
at year-end. The primary reasons for the improvement include an increase in the
number of activated debit card accounts year over year and an expansion in the
ATM network to 612 machines at the end of the year from 275 at year-end 1995.
Mortgage income declined $5.5 million or 64.0 percent to $3.1 million in 1996
due to the sale of third party mortgage servicing during 1995.
Other operating revenues in 1996 reached $39.2 million, an increase of $2.8
million or 7.9 percent over 1995 levels, after excluding the $25.0 million gain
recorded during 1995 from the sale of third-party mortgage servicing. The
primary reason for the increase in this category was an increase in portfolio
income, as the financial markets provided attractive opportunities throughout
the year to profitably restructure the securities portfolio.
Management expects, on a recurring basis, total noninterest revenues in 1998
to exceed the levels reported in 1997 provided the economy continues to grow at
a moderate pace and management is able to improve sales and service quality and
to develop new products which generate noninterest revenues. Performance of the
stock and bond markets will also influence management's ability to achieve its
noninterest revenue goals.
Each of the major categories of noninterest revenues for 1992 through 1997,
with a five year compound growth rate for each component, is shown in Table 4.
Noninterest Expenses Noninterest expenses totaled $526.2 million in 1997, a
decrease of $8.1 million or 1.5 percent compared to 1996. Noninterest expenses
in 1996 included a one-time, pre-tax charge of $24.2 million required by federal
legislation to recapitalize SAIF. Before consideration of this item in 1996,
noninterest expenses in 1997 compared to 1996 increased $16.2 million or 3.2
percent. Increases occurred in salaries and employee benefits expense, net
occupancy expense, equipment expense and other operating expenses, offset, in
part, by lower Federal Deposit Insurance Corporation (FDIC) deposit insurance
premiums.
The largest category of noninterest expenses, salaries and employee benefits,
increased $17.6 million or 7.6 percent in 1997 versus 1996. The increase was
due primarily to merit increases and higher performance based incentive
compensation. The total number of employees at AmSouth on December 31, 1997 was
6,397 compared to 6,474 at year-end 1996.
Net occupancy expense in 1997 was $55.8 million versus $54.2 million in 1996,
an increase between years of $1.6 million or 2.9 percent. The main reason for
the increase was higher lease payments related to increased occupancy during the
year in a new office complex.
Equipment expense of $57.0 million in 1997 represented an increase of $2.0
million or 3.6 percent over the amount recorded in the prior year. The increase
was primarily the result of increased costs of investments in technology,
principally to support the consumer and commercial lines of business.
FDIC premium expense for deposit insurance declined in 1997 to $2.6 million
from the $7.8 million incurred in 1996. For 1996, deposits insured by the Bank
Insurance Fund (BIF) did not have an assessment for the best capitalized banks,
while deposits insured by the SAIF continued to be assessed at a rate of 23
basis points on every $100 in deposits. Effective January 1, 1997, deposits of
the best capitalized institutions insured by the SAIF are assessed at a rate of
6.5 basis points, while deposits insured by the BIF are assessed at 1.3 basis
points.
Other operating expenses in 1997 were $161.1 million and remained essentially
unchanged from the level reported in 1996. Within this expense category,
communications expense increased $4.2 million in 1997 due to higher costs
associated with the establish
28
<PAGE>
ment of a wide area network to support the enhanced technology in the consumer
and commercial lines of business. This increase was offset by lower
miscellaneous operating expenses during 1997.
Total noninterest expenses increased to $534.2 million in 1996, an increase of
$24.3 million or 4.8 percent over the levels incurred in 1995. Excluding the
one-time SAIF assessment in 1996 and the $22.2 million in nonrecurring
productivity initiatives expenses in 1995, total noninterest expenses increased
4.6 percent in 1996.
Salaries and employee benefits expense increased $5.8 million or 2.5 percent
in 1996. Excluding the $6.7 million of expenses related to business and branch
consolidations in 1995, personnel expense in 1996 increased $12.5 million or 5.7
percent. The primary reasons for the increase were higher company match of
employee thrift plan contributions, enhancements to employee life insurance
benefits, additional personnel and higher performance based incentive
compensation.
In 1996, net occupancy expense increased $293 thousand or less than one
percent. Netting out $5.5 million of nonrecurring costs related to branch
consolidations in 1995, occupancy expense increased in 1996 by $5.8 million or
12.0 percent. This increase was primarily related to increases in lease and
leasehold improvement costs associated with the occupation of new office space
during 1996.
Equipment costs in 1996 rose $4.8 million or 9.5 percent. Adjusting 1996 for
a $2.5 million accrual for the write-off of software and equipment anticipated
to become obsolete with the implementation of technology projects and 1995 for
$4.7 million of systems development costs and the write-off of equipment leases,
equipment expense in 1996 increased $7.0 million or 15.3 percent. The principal
reason for the increase was the investment in several technology projects, the
largest of which were for the consumer and commercial lines of business.
Excluding the one-time SAIF charge of $24.2 million in 1996, as previously
discussed, FDIC premium expense declined $12.5 million in 1996. This cost was
lower as a result of the FDIC reducing the premium rate on deposits insured by
the BIF to zero in 1996.
Adjusting 1995 for $4.5 million of nonrecurring initiatives expense, other
operating expenses in 1996 increased $6.3 million or 4.0 percent between years.
The primary cause of the increase was an increase in telephone expense related
to the establishment of the network to support the technology projects.
Each of the major categories of noninterest expenses for 1992 through 1997,
with a five year compound growth rate for each component, is shown in Table 4.
Operating Efficiency Productivity in the banking industry is commonly measured
by the operating efficiency ratio. It measures the amount of expense dollars
utilized to generate a dollar of revenue. The ratio is calculated by dividing
total noninterest expenses by the sum of NII and total noninterest revenues. In
1997, AmSouth's operating efficiency ratio was 55.43 percent compared to 59.56
percent in 1996 and 60.96 percent in 1995. Excluding the SAIF assessment in
1996, the ratio was 56.86 percent. The improvements in efficiency the last
three years reflect the strong growth in NII and noninterest revenues coupled
with tight control of expenses. Management's ability to continue the
improvement in operating efficiency during 1998 will depend upon its ability to
continue similar trends in revenues and expenses experienced during the previous
three years. In the early stages of new business initiatives, expenses often
exceed revenues, which can adversely affect the overall efficiency ratio of the
company.
Income Taxes AmSouth's income tax expense was $122.5 million in 1997, $105.6
million in 1996 and $100.2 million in 1995. The increases in income tax expense
in all three years were due primarily to increases in pre-tax income. The
effective tax rate for 1997 was 35.1 percent compared to 36.6 percent in 1996
and 36.5 percent in 1995. The 1997 decrease resulted from an increase in tax-
exempt income from the purchase of BOLI and improved tax planning. Detail of
the deferred
29
<PAGE>
Table 4
Noninterest Revenues and
Noninterest Expenses
<TABLE>
<CAPTION>
Compound
(Dollars in thousands) Years Ended December 31 Growth Rate
- --------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1997/1992
<S> <C> <C> <C> <C> <C> <C> <C>
Noninterest Revenues:
Service charges on deposit accounts......... $ 98,546 $ 94,765 $ 85,085 $ 68,780 $ 60,541 $ 53,670 12.92%
Trust income................................ 62,094 57,354 50,272 46,121 41,659 40,069 9.16
Consumer investment services income......... 23,500 16,944 7,325 5,314 485 6,167 30.68
Credit card income.......................... 15,063 14,915 13,316 11,565 12,115 10,132 8.25
Other operating revenues.................... 66,801 51,296 75,673 43,575 84,437 58,681 2.63
----------------------------------------------------------------
$266,004 $235,274 $231,671 $175,355 $199,237 $168,719 9.53%
================================================================
Noninterest Expenses:
Salaries and employee benefits.............. $249,655 $232,076 $226,317 $232,050 $222,756 $181,766 6.55%
Net occupancy expense....................... 55,791 54,211 53,918 46,770 36,537 32,524 11.40
Equipment expense........................... 57,033 55,044 50,289 41,432 39,213 32,548 11.87
FDIC premiums............................... 2,625 7,814 20,315 24,664 21,413 18,868 (32.60)
SAIF assessment............................. -0- 24,196 -0- -0- -0- -0- --
Other operating expenses.................... 161,088 160,891 159,059 174,323 134,080 130,407 4.32
----------------------------------------------------------------
$526,192 $534,232 $509,898 $519,239 $453,999 $396,113 5.84%
================================================================
</TABLE>
tax assets and liabilities is included in Note S of the Notes to Consolidated
Financial Statements.
Year 2000 Compliance The Year 2000 issue is the result of computer programs
being written to store and process data using two digits rather than four to
define the applicable year. Any of AmSouth's computer programs that have date
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in a system failure or miscalculations causing
disruptions of operations.
AmSouth has established a company-wide task force to review all computer-based
systems and applications in relation to the Year 2000 issue. This task force
identified project managers to develop company-wide plans to ensure that
AmSouth's computer and information systems will function properly in the year
2000 and beyond. AmSouth's plans include reviews of third party systems on which
it depends for certain processing services. AmSouth has already completed an
analysis of its mainframe systems which comprise most of its critical systems.
The task force is finishing its review of non-critical systems.
AmSouth is currently in the process of modifying and replacing systems that
have date-related problems. Certain systems are already compliant, but require
certification testing. Others require new releases from vendors or are awaiting
installation. Testing for these systems is scheduled throughout 1998. Year 2000
modifications for critical systems are planned to be completed within one year
or not later than December 31, 1998. All non-critical systems are expected to be
Year 2000 compliant either prior to or during 1999.
During 1998, AmSouth will initiate communications and reviews with its large
commercial customers to
30
<PAGE>
Operating Efficiency Ratio
[LINE GRAPH APPEARS HERE]
identify, assess and control potential risks, including credit risk, associated
with customers' failure to adequately address the Year 2000 issue. However,
there can be no guarantee that the inability of loan customers to adequately
remediate the Year 2000 issue and thus suffer a deterioration in
creditworthiness would not have a material adverse effect on AmSouth.
The total cost of AmSouth's Year 2000 projects are not estimated to be
material to the financial performance of the company. All non-capitalizable
costs associated with Year 2000 will be expensed as incurred. However, a portion
of the cost associated with Year 2000 compliance will be attributable to the
purchase of new software and hardware which will be capitalized.
The total cost of the Year 2000 projects and the date on which AmSouth plans
to complete the Year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events
including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
those plans. Specific factors that might cause such material differences
include, but are not limited to, the capability of third party vendors to
provide Year 2000 compliant releases on a timely basis, the availability and
cost of personnel trained in this area, the ability to locate and correct all
relevant computer codes and similar uncertainties. While AmSouth presently
believes that its Year 2000 plans will mitigate the Year 2000 issue, if such
modifications and conversions are not made, or are not completed in a timely
manner, the Year 2000 issue could have an impact on the operations of AmSouth.
Balance Sheet Analysis
At December 31, 1997, AmSouth reported total assets of $18.6 billion compared to
$18.4 billion at the end of 1996. Average total assets were $18.0 billion in
1997, unchanged from 1996.
Earning Assets In banking, the predominant earning assets are loans and
investment securities. The proportion of earning assets to total assets measures
the effectiveness of management's efforts to invest available funds into the
most efficient and profitable uses. In 1997, earning assets were 92.5 percent of
total average assets compared to 93.5 percent in 1996. The decrease in 1997 was
primarily a reflection of management's efforts to reduce the level of low spread
earning assets.
Securities AmSouth classifies its debt and equity securities as either held-to-
maturity, available-for-sale or trading securities. Securities are classified as
held-to-maturity and carried at amortized cost only if AmSouth has the positive
intent and ability to hold those securities to maturity. If not classified as
held-to-maturity, such securities are classified as trading securities or
available-for-sale securities. Trading securities are carried at market value
with unrealized gains and losses included in other operating revenues.
Available-for-sale securities are also carried at market value with unrealized
gains and losses, net of deferred taxes, reported as a separate component of
shareholders' equity.
31
<PAGE>
At December 31, 1997, available-for-sale securities totaled $2.5 billion and
represented 52.5 percent of the total portfolio compared to $2.3 billion or 46.4
percent in available-for-sale securities at the end of 1996. These securities at
year-end 1997 consisted of U.S. Treasury securities, variable and fixed rate
mortgage-backed securities, other private asset-backed securities and equities.
The average life of the portfolio is estimated to be 3.9 years with a duration
of 2.0 years. Total realized gains of $7.9 million from the sale of available-
for-sale securities were included in other operating revenues for 1997 compared
to $7.5 million of realized gains in 1996. Unrealized gains on these securities
of $26.6 million, net of deferred taxes, were included as an addition to
shareholders' equity on December 31, 1997.
Held-to-maturity securities were $2.3 billion at the end of 1997 compared to
$2.6 billion at year-end 1996. Securities classified as held-to-maturity at the
end of 1997 consisted primarily of collateralized mortgage obligations, federal
agency securities, mortgage-backed securities and state, county and municipal
obligations. The average life of these securities is estimated to be 3.0 years
with a duration of 1.7 years. At December 31, 1997, the held-to-maturity
portfolio had an unrealized gain, before taxes, of $14.9 million.
Average Earning Assets as a
Percentage of Average Assets
[BAR CHART APPEARS HERE]
Table 5
Securities
(In millions) December 31
=============================================================================
1997 1996 1995
Trading securities................................. $ 1 $ 4 $ 3
Available-for-sale securities :
U.S. Treasury and federal agency securities....... 2,331 2,001 2,138
Other securities.................................. 177 289 342
----------------------
2,508 2,290 2,480
----------------------
Held-to-maturity securities :
U.S. Treasury and federal agency securities....... 1,940 2,211 1,842
Other securities.................................. 205 255 101
State, county and municipal securities............ 127 179 224
----------------------
2,272 2,645 2,167
----------------------
$4,781 $4,939 $4,650
======================
32
<PAGE>
Table 6
Available-for-Sale Securities and Held-to-Maturity Securities
Relative Contractual Maturities and Weighted-Average Yields
<TABLE>
<CAPTION>
Due Within Due After One but Due After Five but Due After
(Taxable equivalent basis--dollars in thousands) One Year Within Five Years Within Ten Years Ten Years
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available-for-sale securities:
U.S. Treasury and federal
agency securities.......................... $ 364 6.08% $ 91,980 6.22% $ 265,242 7.08% $1,931,654 7.26 %
Other securities............................ -0- --- -0- --- -0- --- 148,175 6.96
----------------------------------------------------------------------------------
$ 364 6.08% $ 91,980 6.22% $ 265,242 7.08% $2,079,829 7.24 %
==================================================================================
Held-to-maturity securities:
U.S. Treasury and federal
agency securities.......................... $ 4,797 7.29% $ 242,006 5.99% $ 272,415 6.70% $1,421,204 7.11 %
State, county and municipal obligations..... 38,938 11.43 47,311 11.62 25,070 10.57 15,848 9.94
Other securities............................ 152 8.90 1,025 7.94 100 6.52 203,288 6.74
----------------------------------------------------------------------------------
$ 43,887 10.97% $ 290,342 6.92% $ 297,585 7.02% $1,640,340 7.09 %
==================================================================================
Taxable equivalent adjustment
for calculation of yield..................... $ 1,557 $ 1,925 $ 927 $ 551
</TABLE>
Notes:
1. The weighted-average yields were computed by dividing the taxable
equivalent interest income by the amortized cost of the appropriate
securities. The taxable equivalent interest income does not give effect to
the disallowance of interest expense, for federal income tax purposes,
related to certain tax-free assets.
2. The amount of available-for-sale securities indicated as maturing after
five but within ten years includes $210 million of mortgage-backed
securities, and those indicated as maturing after ten years include $2.0
billion of mortgage-backed securities. Although these securities have
long-term maturities, according to mortgage industry standards, the
estimated weighted-average remaining life of these securities held in
AmSouth's investment portfolio is less than four years.
3. The amount of held-to-maturity securities indicated as maturing after five
but within ten years includes $172 million of mortgage-backed securities,
and those indicated as maturing after ten years include $1.6 billion of
mortgage-backed securities. Although these securities have long-term
maturities, according to mortgage industry standards, the estimated
weighted-average remaining life of these securities held in AmSouth's
investment portfolio is four years.
4. Federal Reserve Bank stock, Federal Home Loan Bank stock and equity stock
of other corporations held by AmSouth are not included in the above table.
Trading securities are primarily held to provide a short-term inventory of
securities for sale to customers of AmSouth's investment services. The balance
at December 31, 1997 decreased to $1.0 million from $4.0 million at the end of
1996. See Table 5.
AmSouth's policy requires all securities purchased for the securities
portfolio, except state, county and local municipal obligations, to be rated
investment grade or better. Securities backed by the U.S. Government and its
agencies, both on a direct and indirect basis, represented approximately 92.7
percent of the portfolio at December 31, 1997. Approximately 74.7 percent of
state, county and local municipal securities at year-end 1997 were rated either
single A or above by the rating agencies or were escrowed in U.S. Treasury
obligations.
Loans Loans are the single largest category of earning assets for AmSouth and
produce the highest level of revenues. At December 31, 1997, loans, net of
unearned income, totaled $12.2 billion, an increase of 1.3 percent from the
$12.1 billion reported at the end of 1996. The growth in loans during 1997 would
have been greater, except for management's decisions to further reduce the
proportion of residential first mortgages held
33
<PAGE>
in the loan portfolio and to sell participations in certain narrow spread
commercial loans. To reduce the proportion of residential first mortgages held
in the loan portfolio, $354 million of loans were securitized and reclassified
as securities in 1997. In addition, the loans were allowed to run-off through
normal pay-downs, maturities and prepayments. At the same time, residential
first mortgages continued to be originated but, for the most part, were sold
into the secondary market. The culmination of these events resulted in a decline
in residential first mortgages of $369 million or 12.4 percent between year-end
1997 and 1996.
In an effort to reduce the amount of narrow spread commercial loans maintained
on the balance sheet while retaining the customer relationships and loan
servicing, AmSouth, in mid-year 1997, began using off-balance sheet loan funding
vehicles called conduits. AmSouth continues to service the loans contained in
the conduits. At year-end 1997, there were approximately $413 million of
commercial loans in the conduits.
Adding the loans contained in the conduits at the end of 1997 to total loans,
net of unearned income, total loans at AmSouth in 1997 grew 4.7 percent over
year-end 1996. Excluding residential first mortgages, but including the loans in
the conduits, total loans, net of unearned income, increased 10.3 percent
between the end of 1997 and the prior year-end.
The loan portfolio at AmSouth is comprised of four main components: commercial
loans, commercial real estate loans, consumer loans and within the consumer loan
category, residential first mortgages. At the end of 1997, commercial loans
represented 31.2 percent of the total portfolio, commercial real estate loans
were 20.9 percent, while consumer loans, excluding residential first mortgages,
were 26.8 percent and residential first mortgages comprised 21.1 percent. This
compares with 30.4 percent, 19.3 percent, 25.9 percent and 24.4 percent at the
end of 1996 for commercial loans, commercial real estate loans, consumer loans
and residential first mortgages, respectively. The shift in the mix of the loan
portfolio between years was primarily the result of the decision to reduce the
proportion of residential first mortgages held in the portfolio while increasing
other consumer, commercial and commercial real estate loans.
Commercial loans at the end of 1997, as reported, were $3.9 billion compared
to $3.7 billion at December 31, 1996, an increase of 4.2 percent. Including the
loans in the conduits at year-end 1997, commercial loans grew 15.3 percent year
over year. The strong growth was primarily a function of management's strategy,
formulated several years ago, to apply targeted sales efforts and relationship
banking concepts across all lines of business. In 1997, this approach produced
solid results in many commercial lending segments and increases in several
industry groups. An area where AmSouth has developed a specialty over the last
several years is lending to the health services industry. Commercial loans to
this industry increased 5.3 percent in 1997 and 32.7 percent in 1996, reflecting
the generally strong growth in the industry and demand from the large number of
healthcare providers and related businesses in AmSouth's pri-
Loan Composition
[PIE CHART APPEARS HERE]
34
<PAGE>
Table 7
Major Loan Categories
(In millions) December 31
================================================================================
1997 1996 1995 1994 1993
Commercial.......................... $ 3,854 $ 3,700 $ 3,112 $ 2,699 $ 2,461
-----------------------------------------
Commercial real estate :
Commercial real estate mortgages... 1,714 1,653 1,523 1,371 1,217
Real estate construction........... 867 693 526 541 416
-----------------------------------------
Total commercial real estate...... 2,581 2,346 2,049 1,912 1,633
-----------------------------------------
Consumer :
Residential first mortgages........ 2,602 2,971 3,802 4,276 2,488
Other residential mortgages........ 1,099 872 693 632 512
Dealer indirect.................... 1,246 1,225 1,058 887 599
Revolving credit................... 454 490 477 350 341
Other consumer..................... 507 564 629 740 578
-----------------------------------------
Total consumer.................... 5,908 6,122 6,659 6,885 4,518
-----------------------------------------
12,343 12,168 11,820 11,496 8,612
Less unearned income................ 105 88 77 66 72
-----------------------------------------
$12,238 $12,080 $11,743 $11,430 $8,540
=========================================
mary markets. Another area of emphasis is equipment lease financing, which
expanded significantly in 1997 and 1996, increasing 35.7 percent and 86.2
percent, respectively. The increases were centered in the transportation,
communication and utilities industry groups with most counterparties rated
investment grade. Finally, increases were also experienced in the manufacturing
and trade industries during 1997 and 1996.
Management expects further growth in commercial loans in 1998 due to new
business development, expansion of healthcare lending and equipment lease
financing and further application of its relationship banking concept. In order
for this growth to occur, the economy must remain stable or improve throughout
the year for loan demand to be sufficient to meet the company's goals. In
addition, management must be able to provide satisfactory sales and service
quality and develop new products in the commercial lending area.
Commercial real estate loans are comprised of two primary categories:
commercial real estate mortgages and real estate construction loans. In 1997,
commercial real estate mortgage loans increased $61.0 million or 3.7 percent.
Real estate construction loans also increased in 1997 to $867.0 million from
$693.0 million reported at the end of 1996, an increase of $174.0 million or
25.1 percent. The increases reflect the strength of the real estate markets in
AmSouth's four state area of the southeastern U.S., particularly Florida.
On a combined basis, owner occupied properties totaled $755.0 million or 29.2
percent of total commercial real estate loans in 1997, while nonowner occupied
properties were $1.8 billion or 70.8 percent of the total. This compares with
$781.0 million or 33.3 percent of owner occupied properties and $1.6 billion or
66.7 percent of nonowner occupied properties at the end of 1996.
Management anticipates both categories of commercial real estate loans to
increase during 1998, provided the economy and AmSouth's real estate markets
35
<PAGE>
Table 8
Selected Loan Maturities and Sensitivity to
Change in Interest Rates
<TABLE>
<CAPTION>
Due in One Due After One
(In millions) Year or Less But Within Five Years Due After Five Years
============================================================================================= =================================
Fixed Variable Fixed Variable
Rate Rate Total Rate Rate Total Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial........................... $1,431 $ 648 $1,041 $1,689 $ 492 $ 242 $ 734 $3,854
Commercial real estate mortgages..... 288 465 412 877 370 179 549 1,714
Commercial real estate construction.. 293 116 283 399 73 102 175 867
---------------------------------------------------- ---------------------------------
$2,012 $1,229 $1,736 $2,965 $ 935 $ 523 $1,458 $6,435
==================================================== =================================
</TABLE>
remain strong, sales goals are met and credit quality can be maintained.
Consumer loans, excluding residential first mortgages, primarily include
dealer indirect loans, other residential mortgages, which consist primarily of
home equity loans and lines of credit, revolving credit and other consumer
loans. Dealer indirect loans were $1.2 billion at the end of 1997, unchanged
from the end of 1996. These loans consist primarily of loans made to
individuals to finance the purchase of new and used automobiles. The absence of
growth in this loan category in 1997 was the result of competitive pricing
pressures, particularly in the Florida market.
Home equity loans and lines of credit experienced strong growth in all of
AmSouth's markets during 1997. At the end of 1997, these loans were $1.1
billion, an increase from the prior year-end of $227.0 million or 26.0 percent.
Measured on an average basis, home equity loans and lines of credit increased
30.8 percent in 1997 versus 1996. The increase was primarily the result of new
customers acquired in 1997 from direct mail marketing promotions and the cross-
selling of home equity loans and lines of credit in the branches.
Revolving credit, which consists primarily of bankcard outstandings, decreased
$36.0 million or 7.3 percent in 1997 from year-end 1996. The primary reason for
the decrease was a decrease in the number of cardholders in 1997.
Management anticipates in 1998 that consumer loans will continue to grow,
provided the economy remains stable or grows and consumer borrowing patterns
remain at least stable. Whether growth will be achieved will also depend on the
success of management's planned direct mail marketing campaigns and on the
success of its continued emphasis on cross-selling and service quality.
Other Earning Assets Other earning assets consist primarily of federal funds
sold and securities purchased under agreements to resell (resell agreements) and
mortgage loans held for sale. Federal funds sold and resell agreements serve as
temporary investments in the corporation's overall funding and cash management
operations. Average federal funds sold and resell agreements in 1997 were $17.6
million, a decrease of $4.7 million from 1996. Mortgage loans held for sale
averaged $51.6 million in 1997, a decrease of $29.4 million from 1996.
Deposits Deposits are AmSouth's primary source of funding and their cost is the
largest category of interest expense. Average total deposits were $12.6 billion
in 1997, representing a decrease of $362.1 million or 2.8 percent from total
average deposits in 1996 of $12.9 billion. There are five principal categories
of deposits: noninterest-bearing demand, interest-bearing demand, savings, time
and certificates of deposit of $100,000 or more. The largest category, and one
of the most costly,
36
<PAGE>
is time deposits, which consist primarily of consumer certificates of deposit.
Management, as part of an overall program to restructure the balance sheet, has
reduced AmSouth's reliance on these deposits for funding through two principal
initiatives. The first of these, which occurred in the third and fourth
quarters of 1996, was to reprice and restructure the maturities of the
portfolio. The result was the run-off of approximately $400 million of mostly
high cost, single service household consumer certificates of deposit.
Approximately 70 percent of the $1.6 billion of deposits maturing at the time
were retained while costs, on average, were lowered by 1.25 percent and
maturities were more widely dispersed. This initiative was the primary reason
for the decline in total time deposits in 1997 versus 1996. These deposits
decreased to $5.1 billion in 1997 from $5.6 billion in 1996, a decrease of 8.7
percent.
The second, ongoing, initiative is emphasizing the growth of transaction
account households through various promotions, direct mail campaigns, sales
contests and cross-selling efforts. In 1997, two product promotions in
particular, free checking accounts and the offer of higher interest rates on
selected money market accounts, proved to be especially successful. During
1997, all three transaction account categories, non-interest-bearing demand,
interest-bearing demand and savings deposits, experienced increases over 1996.
See Table 9 for the detail amounts.
The combination of these efforts resulted in a decline in total average time
deposits measured as a percentage of total average deposits to 40.7 percent in
1997 from 43.3 percent in 1996. At the same time, average noninterest-bearing
demand deposits increased to 14.4 percent of total average deposits from 13.7
percent, average interest-bearing demand deposits increased to 29.7 percent from
28.4 percent and average savings deposits in 1997 increased to 8.3 percent of
total average deposits from 8.0 percent the prior year.
Another deposit category is certificates of deposit of $100,000 or more.
These accounts comprised 6.9 percent of total average deposits in 1997. They
increased $2.3 million on average during the year. These deposits, for the most
part, are competitively bid and fluctuate based on the level of interest rates
and management's determination of the need for such deposits from time to time.
Table 10 provides a maturity schedule for time deposits of $100,000 or more at
December 31, 1997, 1996 and 1995.
Other Interest-Bearing Liabilities Other interest-bearing liabilities include
all interest-bearing liabilities except deposits.
<TABLE>
<CAPTION>
Table 9
Average Deposits
(In thousands) December 31
====================================================================================================================================
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Noninterest-bearing demand.................. $ 1,820,387 $ 1,767,444 $ 1,755,717 $ 1,779,833 $ 1,611,428
Interest-bearing demand..................... 3,727,911 3,670,068 3,893,721 3,820,580 3,263,054
Savings..................................... 1,045,121 1,036,240 960,969 918,132 773,131
Time:
Retail..................................... 4,007,392 4,443,282 4,652,502 3,343,936 2,359,352
Individual retirement accounts............. 896,973 926,633 928,901 784,736 639,866
Other...................................... 204,680 223,208 188,416 163,105 168,668
----------------------------------------------- -----------------------------
Total time................................ 5,109,045 5,593,123 5,769,819 4,291,777 3,167,886
----------------------------------------------- -----------------------------
Certificates of deposit of $100,000 or more. 861,733 859,468 923,866 762,403 728,206
----------------------------------------------- -----------------------------
$12,564,197 $12,926,343 $13,304,092 $11,572,725 $ 9,543,705
=============================================== =============================
</TABLE>
37
<PAGE>
Table 10
Maturity of Time Deposits of $100,000 or More
(In thousands) December 31
================================================================================
1997 1996 1995
Three months or less................... $ 349,027 $ 367,898 $ 505,304
Over three through six months.......... 104,014 123,449 131,062
Over six through twelve months......... 241,543 167,509 254,626
Over twelve months..................... 233,067 163,800 171,958
------------- ------------------------
$ 927,651 $ 822,656 $1,062,950
============= ========================
Short-term liabilities included in this category consist of federal funds
purchased and securities sold under agreements to repurchase (repurchase
agreements), and other borrowed funds. Average federal funds purchased and
repurchase agreements decreased in 1997 to $1.5 billion from $1.8 billion in
1996. Average other borrowed funds, which includes master notes, commercial
paper, short-term Federal Home Loan Bank (FHLB) advances, the current portion of
long-term debt and treasury, tax and loan notes, increased 28.9 percent in 1997
to $972.3 million versus $754.4 million in 1996.
At December 31, 1997, 1996 and 1995, federal funds purchased and repurchase
agreements totaled $1.4 billion, $1.9 billion and $1.9 billion, respectively,
with weighted-average interest rates of 5.31 percent, 5.18 percent and 5.80
percent, respectively. The maximum amount outstanding at any month end during
each of the last three years was $2.0 billion, $2.3 billion and $1.9 billion,
respectively. The average daily balance and average interest rates for each
year are presented in Table 2.
Long-term debt consists of Subordinated Capital Notes Due 1999, long-term FHLB
advances, 6 3/4% Subordinated Debentures Due 2025, 7 3/4% Subordinated Notes Due
2004 and long-term notes payable. The only significant increase in long-term
funding during 1997 was FHLB advances. The long-term FHLB advances increased to
$989.8 million on average in 1997 from $511.6 million in 1996. These funds were
utilized in 1997 because of their relatively low cost and the ability to match
their maturities with those of the assets being funded.
On January 14, 1998, AmSouth filed with the Securities and Exchange Commission
(SEC) a shelf registration statement in the amount of $500 million. This
statement, when it becomes effective with the SEC, gives AmSouth the ability to
either issue debt securities or sell shares of common or preferred stock in the
public financial markets for up to $500 million. There are no plans to utilize
this facility.
AmSouth Bank, the principal subsidiary of AmSouth, issued on January 30, 1998,
$300 million principal amount of 6.45% Subordinated Notes Due February 1, 2018.
The notes were issued with embedded put and call options which could require
AmSouth Bank to repurchase the notes at face value on February 1, 2008. If the
debt is not repurchased by the bank, the interest rate on the notes will be
reset on February 1, 2008 based on a set formula. AmSouth Bank is using the net
proceeds from the sale for general corporate and banking purposes in the
ordinary course of its business.
Shareholders' Equity At December 31, 1997, shareholders' equity totaled $1.4
billion, unchanged from the level reported in 1996. The sources of growth in
shareholders' equity during 1997 were the retention of net
38
<PAGE>
<TABLE>
<CAPTION>
Table 11
Capital Ratios
(Dollars in thousands) December 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996
<S> <C> <C>
Risk-based capital:
Shareholders' equity $ 1,385,245 $ 1,395,829
Unrealized gains on available-for-sale securities (net of deferred taxes) (26,593) (24,296)
Less certain intangible assets (251,657) (268,139)
---------------------------------------------
Tier I capital 1,106,995 1,103,394
Adjusted allowance for loan losses 179,197 175,346
Qualifying long-term debt 319,241 339,045
---------------------------------------------
Tier II capital 498,438 514,391
---------------------------------------------
Total capital $ 1,605,433 $ 1,617,785
---------------------------------------------
Risk-adjusted assets $15,467,538 $14,023,996
=============================================
Capital ratios:
Tier I capital to total risk-adjusted assets 7.16% 7.87%
Total capital to total risk-adjusted assets 10.38 11.54
Leverage 6.19 6.20
Ending equity to assets 7.44 7.58
Ending tangible equity to assets 6.17 6.22
</TABLE>
income, issuances of common stock under the various stock-based employee
benefit plans and a $2.3 million increase in unrealized gains on available-for-
sale securities. Offsetting the increases were cash dividends declared of $93.3
million and the purchase of 4.3 million shares of AmSouth common stock for
$170.6 million to provide shares for dividend reinvestment, employee benefit
plans and other corporate purposes. Information on prior years may be found in
the Consolidated Statement of Shareholders' Equity.
Shareholders' equity is monitored under guidelines contained in AmSouth's
capital and dividend policy. All of the guidelines contained within the policy
are based on industry standards, regulatory requirements, perceived risk of the
various lines of business and future growth opportunities. Periodically,
management re-evaluates the policy and presents its findings to the Board of
Directors to ensure that the policy continues to support corporate objectives,
the regulatory environment and changes in market conditions.
At December 31, 1997, AmSouth and its banking subsidiary met or exceeded all
of the minimum capital standards as established by the company's capital and
dividend policy. Refer to Table 11 and Note Q of the Notes to Consolidated
Financial Statements for specific information.
Risk Management
Risk identification and management are key elements in the overall management of
AmSouth. Management believes the primary risk exposures are interest rate,
liquidity and credit risk. Some of the more significant processes used to
manage and control these risks are described in the following paragraphs.
Asset and Liability Management AmSouth maintains a formal asset and liability
management process to quantify,
39
<PAGE>
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.
Interest Rate Risk A number of measures are used to monitor and manage interest
rate risk, including earnings simulation and interest sensitivity (gap)
analysis. An earnings simulation model is the primary tool used to assess the
direction and magnitude of changes in NII resulting from changes in interest
rates. Key assumptions in the model include prepayment speeds on mortgage-
related assets; cash flows and maturities of derivatives and other financial
instruments held for purposes other than trading; changes in market conditions,
loan volumes and pricing; deposit sensitivity; customer preferences and
management's financial and capital plans. These assumptions are inherently
uncertain and, as a result, the model cannot precisely estimate NII or precisely
predict the impact of higher or lower interest rates on NII. Actual results will
differ from simulated results due to timing, magnitude and frequency of interest
rate changes and changes in market conditions and management strategies, among
other factors.
Based on the results of the simulation model as of December 31, 1997, AmSouth
would expect an increase in NII of $3.5 million and a decrease in NII of $2.1
million if interest rates gradually increase or decrease, respectively, from
current rates by 100 basis points over a 12-month period. This level of interest
rate risk is well within the company's policy guidelines.
AmSouth has, from time to time, utilized various off-balance sheet instruments
such as interest rate swaps to assist in managing interest rate risk. AmSouth
had interest rate swaps as of December 31, 1997 in the notional amount of $895
million. Of these swaps, $490 million of notional value were used as asset
hedges to convert variable rate ARM securities and LIBOR commercial loans to
fixed rates. The remaining $405 million of notional value swaps were used as
liability hedges to convert fixed rate consumer certificates of deposit,
corporate debt and wholesale certificates of deposit to variable rates.
As of December 31, 1997, AmSouth held other off-balance sheet instruments as
hedges as well as futures and forward contracts to provide customers and AmSouth
a means of managing the risks of changing interest and foreign exchange rates.
These other off-balance sheet instruments are immaterial in amount.
Table 13 summarizes the activity, by notional amount, of off-balance sheet
financial instruments utilized in the asset and liability management process at
AmSouth for the years 1997, 1996 and 1995.
Table 14 summarizes the expected maturities on all of AmSouth's off-balance
sheet positions at December 31, 1997 and interest rates exchanged on swaps. Both
the timing of the maturities and the variable interest payments and receipts
vary as certain interest rates change. The maturities and interest rates
exchanged are calculated assuming that interest rates remain unchanged from
average December 1997 rates. The information presented could change as future
rates increase or decrease. See Note L of the Notes to Consolidated Financial
Statements.
Liquidity AmSouth's goal in liquidity management is to satisfy the cash flow
requirements of depositors and borrowers while at the same time meeting the cash
flow needs of the corporation. This is accomplished through the active
management of both the asset and liability sides of the balance sheet. The
liquidity position of AmSouth is monitored on a daily basis. In addition, the
Asset/Liability Committee reviews liquidity on a regular basis and approves any
changes in strategy that are necessary as a result of the asset/liability
management process or anticipated cash flow changes. Management also compares on
a monthly basis the company's liquidity position to established corporate
liquidity guidelines. At December 31, 1997, AmSouth was within all of the
guidelines which have been established. The primary sources of liquidity on the
asset side of the balance sheet
40
<PAGE>
<TABLE>
<CAPTION>
Table 12
Interest Sensitivity Analysis
(Dollars in thousands)
- ---------------------------------------------------------------------------------------------------------------
0-30 31-60 61-90 91-180
Days Days Days Days
<S> <C> <C> <C> <C>
Assets
Earning assets:
Federal funds sold and securities
purchased under agreements
to resell.......................... $ 19,000 $ -0- $ -0- $ -0-
Trading securities.................. 1,406 -0- -0- -0-
Available-for-sale securities....... 121,397 98,596 88,033 274,962
Held-to-maturity securities......... 128,740 53,604 44,478 133,393
Mortgage loans held for sale........ 80,820 -0- -0- -0-
Loans net of unearned income........ 4,811,723 505,400 406,693 751,308
---------------------------------------------------------------
Total earning assets............. 5,163,086 657,600 539,204 1,159,663
Cash and other assets.................. -0- -0- -0- -0-
Less: allowance for loan losses........ -0- -0- -0- -0-
Market valuation on
available-for-sale securities....... -0- -0- -0- -0-
---------------------------------------------------------------
$ 5,163,086 $ 657,600 $ 539,204 $ 1,159,663
===============================================================
Liabilities and
Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits.... $ 2,912,049 $ 13,310 $ 13,310 $ 39,931
Savings deposits.................... 314,844 9,043 9,043 27,128
Time deposits....................... 464,113 445,008 424,246 840,257
Certificates of deposit of
$100,000 or more.................. 155,867 96,415 62,985 103,663
Federal funds purchased and
securities sold under agreements
to repurchase..................... 1,435,925 -0- -0- -0-
Other borrowed funds................ 835,918 100,000 50,000 -0-
Long-term Federal Home
Loan Bank advances................ 1,000,181 25,000 115,000 -0-
Other long-term debt................ -0- -0- 25,000 -0-
---------------------------------------------------------------
Total interest-bearing
liabilities.................... 7,118,897 688,776 699,584 1,010,979
Noninterest-bearing demand deposits.... 205,179 31,487 31,487 94,461
Other liabilities...................... -0- -0- -0- -0-
Shareholders' equity................... -0- -0- -0- -0-
---------------------------------------------------------------
$ 7,324,076 $ 720,263 $ 731,071 $ 1,105,440
===============================================================
Off-balance sheet financial instruments $ (645,000) $ (110,000) $ (50,000) $ -0-
===============================================================
Rate sensitivity gap:
Dollar amount....................... $ (2,805,990) $ (172,663) $ (241,867) $ 54,223
Percent of total earning assets..... (16.4)% (1.0)% (1.4)% 0.3%
Cumulative dollar amount............ $ (2,805,990) $ (2,978,653) $ (3,220,520) $ (3,166,297)
<PAGE>
<CAPTION>
181-365 Over One and Over Five Total
Days Less Than Years
Five Years
<S> <C> <C> <C> <C>
Assets
Earning assets:
Federal funds sold and securities
purchased under agreements
to resell......................... $ -0- $ -0- $ -0- $ 19,000
Trading securities.................. -0- -0- -0- 1,406
Available-for-sale securities....... 488,040 854,070 539,822 2,464,920
Held-to-maturity securities......... 268,679 1,023,622 619,638 2,272,154
Mortgage loans held for sale........ -0- -0- -0- 80,820
Loans net of unearned income........ 1,236,814 3,675,475 850,255 12,237,668
------------------------------------------------------------
Total earning assets............. 1,993,533 5,553,167 2,009,715 17,075,968
Cash and other assets.................. -0- -0- 1,682,715 1,682,715
Less: allowance for loan losses........ -0- -0- (179,197) (179,197)
Market valuation on
available-for-sale securities....... -0- -0- 42,770 42,770
------------------------------------------------------------
$ 1,993,533 $ 5,553,167 $ 3,556,003 $ 18,622,256
============================================================
Liabilities and
Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits.... $ 79,861 $ 479,167 $ 423,340 $ 3,960,968
Savings deposits.................... 54,255 325,530 287,714 1,027,557
Time deposits....................... 1,402,035 1,323,120 101,756 5,000,535
Certificates of deposit of
$100,000 or more.................. 241,341 177,882 55,078 893,231
Federal funds purchased and
securities sold under agreements
to repurchase..................... -0- -0- -0- 1,435,925
Other borrowed funds................ -0- -0- -0- 985,918
Long-term Federal Home
Loan Bank advances................ 25,000 25,000 7,965 1,198,146
Other long-term debt................ -0- 110,829 299,249 435,078
------------------------------------------------------------
Total interest-bearing liabilities.. 1,802,492 2,441,528 1,175,102 14,937,358
Noninterest-bearing demand deposits.... 188,921 1,133,528 377,843 2,062,906
Other liabilities...................... -0- -0- 236,747 236,747
Shareholders' equity................... -0- -0- 1,385,245 1,385,245
------------------------------------------------------------
$ 1,991,413 $ 3,575,056 $ 3,174,937 $ 18,622,256
============================================================
Off-balance sheet financial instruments $ 295,000 $ 510,000 $ -0- $ -0-
============================================================
Rate sensitivity gap:
Dollar amount....................... $ (292,880)
Percent of total earning assets..... (1.7)%
Cumulative dollar amount............ $ (3,459,177)
</TABLE>
Note: Certain interest-sensitive assets and liabilities are included in the
table based on historical experience rather than contractual maturities.
41
<PAGE>
<TABLE>
<CAPTION>
Table 13
Interest Rate Swaps, Caps and Floors
Receive Fixed Caps
(In millions) Rate Swaps & Floors Total
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1995.................. $ -0- $ 440 $ 440
Additions................................ 150 1,000 1,150
Maturities............................... -0- (30) (30)
Calls.................................... -0- -0- -0-
Terminations............................. -0- (300) (300)
------------------------------
Balance at December 31, 1995................ 150 1,110 1,260
Additions................................ 220 -0- 220
Maturities............................... -0- (33) (33)
Calls.................................... -0- -0- -0-
Terminations............................. -0- -0- -0-
------------------------------
Balance at December 31, 1996................ 370 1,077 1,447
Additions................................ 740 -0- 740
Maturities............................... -0- (77) (77)
Calls.................................... (140) -0- (140)
Terminations............................. (75) (1,000) (1,075)
------------------------------
Balance at December 31, 1997................ $ 895 $ -0- $ 895
==============================
</TABLE>
are maturities and cash flows from both loans and investments as well as the
ability to securitize certain assets. Liquidity on the liability side is
generated primarily through growth in core deposits and the ability to obtain
economical wholesale funding in national and regional markets through a variety
of sources. AmSouth's most commonly used sources of wholesale funding are (1)
federal funds (i.e., the excess reserves of other financial institutions); (2)
repurchase agreements, whereby U.S. government and government agency securities
are pledged as collateral for short-term borrowings; and (3) pledges of
acceptable assets as collateral for public deposits and certain tax collection
monies.
In addition to these sources, AmSouth can access other wholesale funding
sources such as Eurodollar deposits, certificates of deposit, commercial paper
and
<TABLE>
<CAPTION>
Table 14
Maturities and Interest Rates Exchanged on Swaps
(Dollars in millions) Mature During
- -----------------------------------------------------------------------------------------------------------
1998 1999 2000 Total
<S> <C> <C> <C> <C>
Receive fixed rate swaps:
Notional amount............................. $ 385 $ 485 $ 25 $ 895
Receive rate................................ 6.68% 6.68% 7.15% 6.69%
Pay rate.................................... 5.92% 5.93% 5.60% 5.92%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table 15
Credit Ratings
Standard &
Moody's Poor's Bankwatch
========================================================================================
<S> <C> <C> <C>
7 3/4% Subordinated Notes Due 2004.............. A3 BBB+ A
6 3/4% Subordinated Debentures Due 2025......... A3 BBB+ A
Subordinated Capital Notes Due 1999............. A3 BBB+ A
Floating Rate Notes Due 1999.................... A2 A- -
Commercial paper................................ P-1 A-2 TBW-1
Certificates of deposit......................... AA3* A -
Short-term counterparty......................... P-1* A-1 -
Long-term counterparty.......................... AA3* A -
</TABLE>
*AmSouth Bank
lines of credit. The bank also has the ability to borrow from the FHLB. FHLB
advances are competitively priced and actively used as a source of funds with
usage expected to continue increasing in the future. Also, AmSouth Bank during
1997 renewed a short and medium-term note facility with a commitment of up to
$3.0 billion in borrowing capacity. There was $350 million outstanding under
the facility on December 31, 1997.
Maintaining adequate credit ratings on debt issues is critical to liquidity
because it affects the ability of AmSouth to attract funds from various sources
on a cost competitive basis. Table 15 summarizes AmSouth's credit ratings at
December 31, 1997.
Credit Risk Management Process and Loan Quality The loan portfolio at AmSouth
holds the highest degree of risk for the company. AmSouth manages and controls
risk in the loan portfolio through adherence to consistent standards established
by senior management, combined with a commitment to producing quality assets,
developing profitable relationships and meeting strategic growth targets.
AmSouth has written credit policies which establish underwriting standards,
place limits on exposure, and set other limits or standards as deemed necessary
and prudent. Also included in the policy, primarily determined by the amount
and type of loan, are various approval levels, ranging from the branch or
department level to those which are more centralized. AmSouth maintains a
diversified portfolio in order to spread its risk and reduce its exposure to
economic downturns which may occur in different segments of the economy or in
particular industries. Industry and loan type diversification is reviewed
quarterly.
Commercial real estate loans are categorized by the type of collateral. Owner
occupied properties include mortgages where the borrower is a primary tenant,
such as factory or warehouse loans. Nonowner occupied lending represents those
loans where the primary method of repayment is anticipated to come from rental
income and generally has inherently more risk than owner occupied lending.
Each commercial loan recorded at AmSouth is assigned a risk rating on a
numerical scale from one to nine by the loan officer using established credit
policy guidelines. Consumer loan portfolios are assigned ratings by pools on
the same scale as commercial loans and are based on the type of loan and its
performance. All risk ratings are subject to review by an independent Credit
Review Department. The risk profile of the loan portfolio established by these
ratings and trends is reported to management, the Audit and Community
Responsibility Committee and the Board of Directors. In addition, regular
reports are made to senior management and the Board of Directors regarding the
credit quality of the loan portfolio as well as trends in the portfolio.
<PAGE>
<TABLE>
<CAPTION>
Table 16
Nonperforming Assets
(Dollars in thousands) December 31
=====================================================================================================
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Nonaccrual loans.................................. $71,358 $78,048 $ 96,246 $ 89,545 $ 53,020
Restructured loans................................ -0- -0- -0- 13,203 2,420
------------------------------------------------
Nonperforming loans............................ 71,358 78,048 96,246 102,748 55,440
------------------------------------------------
Foreclosed properties............................. 11,433 14,445 16,150 28,263 29,273
Repossessions..................................... 632 1,822 3,114 2,079 1,081
------------------------------------------------
Total nonperforming assets*.................... $83,423 $94,315 $115,510 $133,090 $85,794
------------------------------------------------
Nonperforming assets* to loans net of
unearned income, foreclosed properties
and repossessions.............................. 0.68% 0.78% 0.98% 1.16% 1.00%
================================================
Accruing loans 90 days past due................... $37,797 $36,382 $ 39,618 $ 34,246 $ 20,917
================================================
</TABLE>
*Exclusive of accruing loans 90 days past due
The Credit Administration function includes designated credit officers, some
industry specialists, who are organizationally independent of the production
areas. They oversee the loan approval process, ensure adherence to credit
policies and monitor efforts to reduce nonperforming and classified assets.
Additionally, a centralized special assets function handles the resolution and
disposition of certain problem loans. Risk in the consumer loan portfolio is
further managed through utilization of computerized credit scoring, in-depth
analysis of portfolio components and specific account selection, management and
collection techniques. In addition, the consumer collection function is
centralized and automated to ensure timely collection of accounts and consistent
management of risk associated with delinquent accounts.
Finally, AmSouth has a Credit Review Department which performs ongoing,
independent reviews of the risk management process, proper documentation and
specific loans. This department is centralized and independent of the lending
function. The results of its examinations are reported to the Audit and
Community Responsibility Committee of the Board of Directors as well as
AmSouth's independent auditors.
Nonperforming Assets Management closely monitors loans and other assets which
are classified as nonperforming assets. Nonperforming assets include nonaccrual
loans, restructured loans, foreclosed properties and repossessions. Loans are
generally placed on nonaccrual if full collection of principal and interest
becomes unlikely (even if all payments are current) or if the loan is delinquent
in principal or interest payments for 90 days or more, unless the loan is well
secured and in the process of collection.
Nonperforming assets, excluding accruing loans 90 days past due, decreased
$10.9 million, or 11.5 percent, during 1997. This follows a $21.2 million, or
18.3 percent, decrease during 1996. The graph entitled Nonperforming Assets
Trend and Table 16 provide trend information and detail components of
nonperforming assets for each of the last five years.
The decline in nonperforming assets in 1997 compared to 1996 was primarily the
result of a decrease in nonperforming loans. Nonperforming loans were $71.4
million at the end of the year, a decline of $6.7 million or 8.6 percent.
Commercial real estate nonperforming loans were lower in 1997 by $8.0 million,
while total nonperforming consumer loans were lower by $3.3 million. The
improvement in the levels of nonperforming commercial real estate and consumer
loans during 1997 is attributable to a combination of lower interest rates,
relatively strong real estate markets throughout AmSouth's
<PAGE>
<TABLE>
<CAPTION>
Table 17
Nonperforming Loans and Net Charge-offs/(Recoveries)
(Dollars in thousands) Nonperforming Loans* Net Charge-offs/(Recoveries)
====================================================================================================================================
% of % of % of % of
December 31 Average December 31 Average December 31 Average December 31 Average
1997 Loans** per 1996 Loans** per 1997 Loans** per 1996 Loans** per
Category Category Category Category
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial......................... $ 19,439 0.54% $ 14,853 0.47% $ 5,111 0.14% $ 3,830 0.12%
-----------------------------------------------------------------------------------------
Commercial real estate:
Commercial real estate mortgages. 13,961 0.82 21,796 1.37 (255) (0.01) (193) (0.01)
Real estate construction......... 1,576 0.22 1,693 0.27 (69) (0.01) (404) (0.06)
-----------------------------------------------------------------------------------------
Total commercial real estate... 15,537 0.64 23,489 1.06 (324) (0.01) (597) (0.03)
-----------------------------------------------------------------------------------------
Consumer:
Residential first mortgages...... 25,943 0.92 28,527 0.87 2,022 0.07 2,742 0.08
Other residential mortgages...... 4,572 0.46 4,311 0.56 1,690 0.17 567 0.07
Dealer indirect.................. 3,848 0.32 4,273 0.38 11,422 0.94 14,057 1.26
Revolving credit................. -0- -- 165 0.03 31,838 6.98 29,904 6.08
Other consumer................... 2,019 0.38 2,430 0.39 15,492 2.90 14,070 2.26
-----------------------------------------------------------------------------------------
Total consumer................. 36,382 0.60 39,706 0.63 62,464 1.04 61,340 0.97
-----------------------------------------------------------------------------------------
$ 71,358 0.59% $ 78,048 0.67% $ 67,251 0.56% $ 64,573 0.55%
=========================================================================================
</TABLE>
* Exclusive of accruing loans 90 days past due
** Net of unearned income
service areas and continued aggressive collection efforts.
Table 17 presents nonperforming loans and year-to-date net charge-offs and
each as a percentage of average net loans by category for December 31, 1997 and
1996.
For the year ended December 31, 1997, the level of foreclosed properties
improved $3.0 million from the level reported at year-end 1996. The improvement
was due to a combination of an improved economic environment and continued
aggressive efforts to dispose of these properties.
Allowance for Loan Losses 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
analysis of historical performance, the level of nonperforming and adversely
rated loans, specific analysis of certain problem loans, loan activity since the
previous quarter,
Nonperforming
Assets Trends
(Dollars in millions)
[BAR GRAPH APPEARS HERE]
45
<PAGE>
Table 18
Allowance for Loan Losses
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Balance at January 1..................... $ 179,049 $ 178,451 $ 171,167 $ 131,509 $ 99,646
Loans charged off:
Commercial............................. (9,480) (8,348) (7,991) (13,304) (8,492)
Commercial real estate mortgages....... (2,358) (2,455) (3,474) (3,869) (2,581)
Commercial real estate construction.... (73) (88) (455) (154) (178)
Residential first mortgages............ (2,211) (2,977) (854) (2,724) (932)
Other residential mortgages............ (1,842) (596) (127) (68) (263)
Dealer indirect........................ (21,571) (20,203) (10,385) (4,270) (3,557)
Revolving credit....................... (36,304) (32,145) (17,203) (14,810) (15,449)
Other consumer......................... (20,146) (16,467) (6,793) (4,730) (4,917)
---------------------------------------------------------------------------------
Total charge-offs.................... (93,985) (83,279) (47,282) (43,929) (36,369)
---------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial............................. 4,369 4,518 3,396 7,420 4,464
Commercial real estate mortgages....... 2,612 2,648 2,077 3,639 6,749
Commercial real estate construction.... 142 492 270 224 217
Residential first mortgages............ 189 235 128 227 329
Other residential mortgages............ 152 29 280 107 28
Dealer indirect........................ 10,149 6,146 2,786 1,702 1,760
Revolving credit....................... 4,467 2,241 1,802 1,470 1,009
Other consumer......................... 4,654 2,397 1,935 2,245 2,065
---------------------------------------------------------------------------------
Total recoveries..................... 26,734 18,706 12,674 17,034 16,621
---------------------------------------------------------------------------------
Net charge-offs.......................... (67,251) (64,573) (34,608) (26,895) (19,748)
---------------------------------------------------------------------------------
Addition to allowance charged to expense. 67,399 65,171 40,139 30,103 27,966
Allowance acquired in bank purchases..... -0- -0- 1,753 36,450 23,645
---------------------------------------------------------------------------------
Balance at December 31................... $ 179,197 $ 179,049 $ 178,451 $ 171,167 $ 131,509
=================================================================================
Loans net of unearned income,
outstanding at end of period.......... $ 12,237,668 $ 12,080,246 $ 11,743,273 $ 11,429,907 $ 8,540,412
Average loans net of unearned income,
outstanding for the period............ $ 12,059,249 $ 11,694,849 $ 11,747,385 $ 9,918,274 $ 7,634,984
Ratios:
Allowance at end of period to
loans net of unearned income.......... 1.46% 1.48% 1.52% 1.50% 1.54%
Allowance at end of period to average
loans net of unearned income.......... 1.49 1.53 1.52 1.73 1.72
Allowance at end of period to
nonperforming loans*.................. 251.12 229.41 185.41 166.59 237.21
Allowance at end of period to
nonperforming assets*................. 214.81 189.41 154.49 128.61 153.28
Net charge-offs to average loans
net of unearned income................ 0.56 0.55 0.29 0.27 0.26
Net charge-offs to allowance
at end of period...................... 37.53 36.06 19.39 15.71 15.02
Recoveries to prior year charge-offs..... 32.10 39.56 28.85 46.84 36.10
</TABLE>
* Exclusive of accruing loans 90 days past due
46
<PAGE>
Table 19
Allocation of the Allowance for Loan Losses
<TABLE>
<CAPTION>
(Dollars in thousands) December 31, 1997 December 31, 1996 December 31, 1995
================================================================================================================================
Percentage of Percentage of Percentage of
Loans* in Each Loans* in Each Loans* in Each
Allowance Category to Allowance Category to Allowance Category to
Allocation Total Loans* Allocation Total Loans* Allocation Total Loans*
<S> <C> <C> <C> <C> <C> <C>
Commercial........................... $ 27,163 30.5% $ 24,919 29.6% $ 30,125 26.0%
------------------------------------------------------------------------------------
Commercial real estate:
Commercial real estate mortgages.. 16,615 14.0 21,243 13.7 29,177 13.0
Real estate construction.......... 8,421 7.1 8,677 5.7 5,302 4.5
------------------------------------------------------------------------------------
Total commercial real estate... 25,036 21.1 29,920 19.4 34,479 17.5
------------------------------------------------------------------------------------
Consumer:
Residential first mortgages....... 5,207 21.3 4,538 24.6 18,699 32.4
Other residential mortgages....... 3,099 9.1 1,766 7.3 4,188 6.0
Dealer indirect................... 15,659 10.2 14,701 10.1 13,809 8.8
Revolving credit.................. 31,019 3.7 41,824 4.3 23,837 4.1
Other consumer.................... 17,219 4.1 19,214 4.7 16,845 5.2
------------------------------------------------------------------------------------
Total consumer................. 72,203 48.4 82,043 51.0 77,378 56.5
------------------------------------------------------------------------------------
Unfunded commitments................. 11,010 --- 7,144 --- 6,685 ---
Standby letters of credit............ 2,696 --- 1,963 --- 3,880 ---
Unallocated.......................... 41,089 --- 33,060 --- 25,904 ---
------------------------------------------------------------------------------------
$179,197 100.0% $179,049 100.0% $178,451 100.0%
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
(Dollars in Thousands) December 31, 1994 December 31, 1993
===================================================================================================
Percentage of Percentage of
Loans* in Each Loans* in Each
Allowance Category to Allowance Category to
Allocation Total Loans* Allocation Total Loans*
<S> <C> <C> <C> <C>
Commercial............................. $ 29,184 23.6% $ 37,868 29.9%
-----------------------------------------------------
Commercial real estate:
Commercial real estate mortgages.... 30,464 12.0 21,385 13.3
Real estate construction............ 12,021 4.7 5,901 4.3
-----------------------------------------------------
Total commercial real estate..... 42,485 16.7 27,286 17.6
-----------------------------------------------------
Consumer:
Residential first mortgages......... 18,514 37.4 4,076 28.5
Other residential mortgages......... 2,289 5.6 719 6.2
Dealer indirect..................... 7,916 7.2 6,108 6.7
Revolving credit.................... 12,441 3.1 16,099 4.0
Other consumer...................... 9,381 6.4 4,514 7.1
-----------------------------------------------------
Total consumer................... 50,541 59.7 31,516 52.5
-----------------------------------------------------
Unfunded commitments................... 7,241 --- 5,650 ---
Standby letters of credit.............. 1,825 --- 1,660 ---
Unallocated............................ 39,891 --- 27,529 ---
-----------------------------------------------------
$171,167 100.0% $131,509 100.0%
=====================================================
</TABLE>
* Net of unearned income
reports prepared by the Credit 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.
At December 31, 1997, the allowance for loan losses to loans, net of
unearned income, was 1.46 percent while coverage of nonperforming loans was
251.1 percent. This compares with an allowance for loan losses to loans, net of
unearned income, at the end of 1996 of 1.48 percent and to nonperforming loans
for the same period of 229.4 percent.
47
<PAGE>
Supplemental Financial Statements
AmSouth Bancorporation and Subsidiaries
Consolidated Statement of Condition
December 31, 1987-1997
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Assets
Cash and due from banks................................ $ 658,500 $ 648,494 $ 651,641 $ 616,639 $ 614,698
Temporary investments.................................. 2,608,916 2,369,939 2,546,583 672,170 1,896,220
Held-to-maturity securities............................ 2,272,154 2,644,706 2,167,009 3,336,557 1,823,317
Loans net of unearned income........................... 12,237,668 12,080,246 11,743,273 11,429,907 8,540,412
Less allowance for loan losses......................... 179,197 179,049 178,451 171,167 131,509
----------------------------------------------------------------------------
Net loans.......................................... 12,058,471 11,901,197 11,564,822 11,258,740 8,408,903
Premises and equipment................................. 314,200 301,592 276,426 282,095 234,155
Other assets........................................... 710,015 541,336 532,314 611,750 492,328
----------------------------------------------------------------------------
Total assets....................................... $18,622,256 $18,407,264 $17,738,795 $16,777,951 $13,469,621
============================================================================
Liabilities and
Shareholders' Equity
Deposits............................................... $12,945,197 $12,467,599 $13,420,287 $13,203,101 $10,374,183
Federal funds purchased and repurchase agreements...... 1,435,925 1,872,286 1,861,090 1,212,723 793,177
Other interest-bearing liabilities..................... 2,619,142 2,461,058 919,635 906,225 829,266
----------------------------------------------------------------------------
Total deposits and interest-bearing liabilities.... 17,000,264 16,800,943 16,201,012 15,322,049 11,996,626
Acceptances outstanding................................ 10,926 3,190 2,007 6,979 6,264
Accured expenses and other liabilities................. 225,821 207,302 152,301 138,465 324,006
----------------------------------------------------------------------------
Total liabilities.................................. 17,237,011 17,011,435 16,355,320 15,467,493 12,326,896
Shareholders' equity................................... 1,385,245 1,395,829 1,383,475 1,310,458 1,142,725
----------------------------------------------------------------------------
Total liabilities and shareholders' equity......... $18,622,256 $18,407,264 $17,738,795 $16,777,951 $13,469,621
============================================================================
<CAPTION>
Consolidated Statement of Earnings
Years ended December 31, 1987-1997
(In thousands except per share data) 1997 1996* 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Revenue from earning assets............................ $ 1,377,788 $ 1,353,823 $ 1,272,939 $ 1,047,741 $ 840,617
Interest expense....................................... 701,511 701,442 679,396 480,414 339,326
----------------------------------------------------------------------------
Net interest income.................................... 676,277 652,381 593,543 567,327 501,291
Provision for loan losses.............................. 67,399 65,171 40,139 30,103 27,966
----------------------------------------------------------------------------
Net interest income after provision for loan losses.... 608,878 587,210 553,404 537,224 473,325
Noninterest revenues................................... 266,004 235,274 231,671 175,355 199,237
Noninterest expenses................................... 526,192 534,232 509,898 519,239 453,999
----------------------------------------------------------------------------
Income before income taxes............................. 348,690 288,252 275,177 193,340 218,563
Income taxes........................................... 122,523 105,576 100,222 66,050 71,843
----------------------------------------------------------------------------
Net income............................................. $ 226,167 $ 182,676 $ 174,955 $ 127,290 $ 146,720
============================================================================
Average common shares outstanding**.................... 82,039 84,908 87,393 84,791 76,272
Average diluted shares outstanding**................... 82,746 85,843 88,639 85,964 77,507
Earnings per common share**............................ $ 2.76 $ 2.15 $ 2.00 $ 1.50 $ 1.92
Diluted earnings per common share**.................... 2.73 2.13 1.98 1.48 1.90
Cash dividends declared per common share**............. 1.14 1.08 1.03 0.95 0.81
</TABLE>
* Excluding the one-time pre-tax third quarter charge against earnings of
$24,196,000, or $.18 per share required under federal legislation to
recapitalize the SAIF, net income for 1996 was $197,895,000 or $2.33 per
share.
** Restated for three-for-two common stock split in April 1997.
48
<PAGE>
<TABLE>
<CAPTION>
(In thousands) 1992 1991 1990 1989
==================================================================================================================
<S> <C> <C> <C> <C>
Assets
Cash and due from banks............................... $ 589,084 $ 560,249 $ 623,744 $ 495,013
Temporary investments................................. 806,257 676,604 178,944 221,231
Held-to-maturity securities........................... 2,607,748 2,780,821 2,214,608 2,166,410
Loans net of unearned income.......................... 6,716,595 6,293,509 6,382,299 6,316,472
Less allowance for loan losses........................ 99,646 95,392 92,946 96,142
-----------------------------------------------------------
Net loans......................................... 6,616,949 6,198,117 6,289,353 6,220,330
Premises and equipment................................ 182,305 160,984 154,761 143,638
Other assets.......................................... 313,984 363,214 382,196 371,159
-----------------------------------------------------------
Total assets...................................... $11,116,327 $10,739,989 $ 9,843,606 $ 9,617,781
===========================================================
Liabilities and
Shareholders' Equity
Deposits.............................................. $ 8,641,487 $ 8,538,296 $ 8,086,234 $ 7,613,948
Federal funds purchased and repurchase agreements..... 989,790 572,970 828,903 1,079,951
Other interest-bearing liabilities.................... 494,649 367,833 164,059 175,953
-----------------------------------------------------------
Total deposits and interest-bearing liabilities... 10,125,926 9,479,099 9,079,196 8,869,852
Acceptances outstanding............................... 6,005 3,498 22,245 24,422
Accured expenses and other liabilities................ 111,022 463,349 82,378 94,465
-----------------------------------------------------------
Total liabilities................................. 10,242,953 9,945,946 9,183,819 8,988,739
Shareholders' equity.................................. 873,374 794,043 659,787 629,042
-----------------------------------------------------------
Total liabilities and shareholders' equity........ $11,116,327 $10,739,989 $ 9,843,606 $ 9,617,781
===========================================================
<CAPTION>
Ten-Year
Compound
Growth Rate
(In thousands) 1988 1987 1997/1987
===================================================================================================
<S> <C> <C> <C>
Assets
Cash and due from banks.............................. $ 511,666 $ 463,219 3.58%
Temporary investments................................ 160,202 195,161 29.60
Held-to-maturity securities.......................... 2,185,972 1,887,610 1.87
Loans net of unearned income......................... 5,873,735 5,426,186 8.47
Less allowance for loan losses....................... 75,945 72,895 9.41
----------------------------------------
Net loans........................................ 5,797,790 5,353,291 8.46
Premises and equipment............................... 142,545 153,968 7.39
Other assets......................................... 408,220 400,590 5.89
----------------------------------------
Total assets..................................... $ 9,206,395 $ 8,453,839 8.22%
========================================
Liabilities and
Shareholders' Equity
Deposits............................................. $ 7,328,081 $ 6,563,364 7.03%
Federal funds purchased and repurchase agreements.... 883,237 964,187 4.06
Other interest-bearing liabilities................... 223,290 180,817 30.64
----------------------------------------
Total deposits and interest-bearing liabilities.. 8,434,608 7,708,368 8.23
Acceptances outstanding.............................. 90,123 104,166 (20.19)
Accured expenses and other liabilities............... 86,372 93,681 9.20
----------------------------------------
Total liabilities................................ 8,611,103 7,906,215 8.11
Shareholders' equity................................. 595,292 547,624 9.72
----------------------------------------
Total liabilities and shareholders' equity....... $ 9,206,395 $ 8,453,839 8.22%
========================================
<CAPTION>
(In thousands except per share data) 1992 1991 1990 1989
==================================================================================================================
<S> <C> <C> <C> <C>
Revenue from earning assets.............................. $772,251 $852,251 $880,032 $871,102
Interest expense......................................... 341,706 486,848 556,404 570,359
--------------------------------------------------------
Net interest income...................................... 430,545 365,403 323,628 300,743
Provision for loan losses................................ 38,581 48,647 45,407 47,766
--------------------------------------------------------
Net interest income after provision for loan losses...... 391,964 316,756 278,221 252,977
Noninterest revenues..................................... 168,719 169,379 136,619 130,863
Noninterest expenses..................................... 396,113 365,124 311,658 294,356
--------------------------------------------------------
Income before income taxes............................... 164,570 121,011 103,182 89,484
Income taxes............................................. 47,977 31,785 24,734 17,185
--------------------------------------------------------
Net income............................................... $116,593 $ 89,226 $ 78,448 $ 72,299
========================================================
Average common shares outstanding**...................... 70,026 65,478 62,934 64,643
Average diluted shares outstanding**..................... 71,302 66,392 63,600 65,439
Earnings per common share**.............................. $ 1.67 $ 1.36 $ 1.25 $ 1.12
Diluted earnings per common share**...................... 1.64 1.35 1.24 1.11
Cash dividends declared per common share**............... 0.71 0.65 0.63 0.59
<CAPTION>
Ten-Year
Compound
Growth Rate
(In thousands except per share data) 1988 1987 1997/1987
======================================================================================================
<S> <C> <C> <C>
Revenue from earning assets................................. $747,511 $600,865 8.65%
Interest expense............................................ 469,216 347,459 7.28
-------------------------------------
Net interest income......................................... 278,295 253,406 10.31
Provision for loan losses................................... 19,611 42,416 4.74
-------------------------------------
Net interest income after provision for loan losses......... 258,684 210,990 11.18
Noninterest revenues........................................ 128,714 121,167 8.18
Noninterest expenses........................................ 274,398 247,587 7.83
-------------------------------------
Income before income taxes.................................. 113,000 84,570 15.22
Income taxes................................................ 25,128 16,825 21.96
-------------------------------------
Net income.................................................. $ 87,872 $ 67,745 12.81%
=====================================
Average common shares outstanding**......................... 64,503 63,540 2.59%
Average diluted shares outstanding**........................ 65,294 64,294 2.56
Earnings per common share**................................. $ 1.36 $ 1.07 9.98
Diluted earnings per common share**......................... 1.35 1.06 9.92
Cash dividends declared per common share**.................. 0.56 0.53 8.03
</TABLE>
49
<PAGE>
Management's Statement on
Responsibility for Financial Reporting
The management of AmSouth is responsible for the content and integrity of the
financial statements and all other financial information included in this annual
report. Management believes that the financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis to reflect, in all material respects, the substance of events and
transactions that should be included, and that the other financial information
in the annual report is consistent with those financial statements. The
financial statements necessarily include amounts that are based on management's
best estimates and judgements.
Management maintains and depends upon AmSouth's accounting systems and related
systems of internal controls. The internal control systems are designed to
ensure that transactions are properly authorized and recorded in the
corporation's financial records and to safeguard the corporation's assets from
material loss or misuse. The corporation maintains an internal audit staff
which monitors compliance with the corporation's systems of internal controls
and reports to management and to the Audit and Community Responsibility
Committee of the Board of Directors.
The Audit and Community Responsibility Committee of the Board of Directors,
composed solely of outside directors, has responsibility for recommending to the
Board of Directors the appointment of the independent auditors for AmSouth. The
Audit and Community Responsibility Committee meets periodically with the
internal auditors and the independent auditors to review the scope and findings
of their respective audits. The internal auditors, independent auditors and
management each have full and free access to meet privately as well as together
with the Audit and Community Responsibility Committee to discuss internal
controls, accounting, auditing or other financial reporting matters.
The consolidated financial statements of AmSouth have been audited by Ernst &
Young LLP, independent auditors, who were engaged to express an opinion as to
the fairness of presentation of such financial statements.
/s/ C. Dowd Ritter /s/ Sloan D. Gibson
C. Dowd Ritter Sloan D. Gibson
Chairman, President and Senior Executive Vice President
Chief Executive Officer Chief Financial Officer
50
<PAGE>
Report of Ernst & Young LLP,
Independent Auditors
Board of Directors
AmSouth Bancorporation
We have audited the accompanying consolidated statement of condition of AmSouth
Bancorporation and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of AmSouth
Bancorporation and subsidiaries at December 31, 1997 and 1996 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Birmingham, Alabama
February 10, 1998
51
<PAGE>
AmSouth Bancorporation and Subsidiaries
Consolidated Statement of Condition
(Dollars in thousands) December 31
- --------------------------------------------------------------------------------
1997 1996
Assets
Cash and due from banks............................. $ 658,500 $ 648,494
Federal funds sold and securities purchased under
agreements to resell............................... 19,000 15,000
Trading securities.................................. 1,406 3,879
Available-for-sale securities....................... 2,507,690 2,290,478
Held-to-maturity securities (market value of
$2,287,004 and $2,649,481, respectively)........... 2,272,154 2,644,706
Mortgage loans held for sale........................ 80,820 60,582
Loans............................................... 12,342,825 12,168,572
Less: Allowance for loan losses..................... 179,197 179,049
Unearned income............................... 105,157 88,326
-------------------------
Net loans..................................... 12,058,471 11,901,197
Premises and equipment, net......................... 314,200 301,592
Customers' acceptance liability..................... 10,926 3,190
Accrued interest receivable and other assets........ 699,089 538,146
-------------------------
$18,622,256 $18,407,264
=========================
Liabilities And Shareholders' Equity
Deposits and interest-bearing liabilities:
Deposits
Noninterest-bearing demand........................ $ 2,062,906 $ 1,951,543
Interest-bearing demand........................... 3,960,968 3,599,937
Savings........................................... 1,027,557 1,068,555
Time.............................................. 5,000,535 5,073,437
Certificates of deposit of $100,000 or more....... 893,231 774,127
-------------------------
Total deposits................................... 12,945,197 12,467,599
Federal funds purchased and securities sold under
agreements to repurchase.......................... 1,435,925 1,872,286
Other borrowed funds............................... 985,918 1,025,383
Long-term Federal Home Loan Bank advances.......... 1,198,146 1,023,729
Other long-term debt............................... 435,078 411,946
-------------------------
Total deposits and interest-bearing liabilities.. 17,000,264 16,800,943
Acceptances outstanding............................. 10,926 3,190
Accrued expenses and other liabilities.............. 225,821 207,302
-------------------------
Total liabilities................................ 17,237,011 17,011,435
-------------------------
Shareholders' equity:
Preferred stock -- no par value:
Authorized -- 2,000,000 shares; Issued and
outstanding -- none.............................. -0- -0-
Common stock -- par value $1 a share:
Authorized -- 200,000,000 shares
Issued -- 90,021,326 and 90,034,023 shares,
respectively..................................... 90,021 90,034
Capital surplus.................................... 562,475 562,459
Retained earnings.................................. 983,371 858,329
Cost of common stock in treasury -- 9,484,671 and
5,997,737 shares, respectively.................... (268,019) (128,889)
Deferred compensation on restricted stock.......... (9,196) (10,400)
Unrealized gains on available-for-sale securities,
net of deferred taxes............................. 26,593 24,296
-------------------------
Total shareholders' equity....................... 1,385,245 1,395,829
-------------------------
$18,622,256 $18,407,264
=========================
See notes to consolidated financial statements.
52
<PAGE>
AmSouth Bancorporation and Subsidiaries
Consolidated Statement of Earnings
<TABLE>
<CAPTION>
(In thousands except per share data) Years Ended December 31
- -----------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Revenue From Earning Assets
Loans..................................................... $1,052,125 $1,004,480 $1,011,320
Available-for-sale securities............................. 155,600 164,473 38,034
Held-to-maturity securities............................... 166,798 178,260 216,703
Trading securities........................................ 78 144 309
Mortgage loans held for sale.............................. 2,223 5,243 5,478
Federal funds sold and securities purchased under
agreements to resell..................................... 964 1,223 1,095
------------------------------------------------------------------
Total revenue from earning assets................... 1,377,788 1,353,823 1,272,939
------------------------------------------------------------------
Interest Expense
Interest-bearing demand deposits.......................... 123,586 115,192 139,854
Savings deposits.......................................... 29,928 28,432 27,500
Time deposits............................................. 281,838 318,410 329,979
Certificates of deposit of $100,000 or more............... 48,735 49,311 54,278
Federal funds purchased and securities sold under
agreements to repurchase................................. 78,461 91,790 67,182
Other borrowed funds...................................... 52,837 39,500 32,818
Long-term Federal Home Loan Bank advances................. 53,945 27,210 3,825
Other long-term debt...................................... 32,181 31,597 23,960
------------------------------------------------------------------
Total interest expense.............................. 701,511 701,442 679,396
------------------------------------------------------------------
Net Interest Income....................................... 676,277 652,381 593,543
Provision for loan losses................................. 67,399 65,171 40,139
------------------------------------------------------------------
Net Interest Income After Provision For Loan Losses....... 608,878 587,210 553,404
------------------------------------------------------------------
Noninterest Revenues
Service charges on deposit accounts....................... 98,546 94,765 85,085
Trust income.............................................. 62,094 57,354 50,272
Consumer investment services income....................... 23,500 16,944 7,325
Credit card income........................................ 15,063 14,915 13,316
Other operating revenues.................................. 66,801 51,296 75,673
------------------------------------------------------------------
Total noninterest revenues.......................... 266,004 235,274 231,671
------------------------------------------------------------------
Noninterest Expenses
Salaries and employee benefits............................ 249,655 232,076 226,317
Net occupancy expense..................................... 55,791 54,211 53,918
Equipment expense......................................... 57,033 55,044 50,289
FDIC premiums............................................. 2,625 7,814 20,315
SAIF assessment........................................... -0- 24,196 -0-
Other operating expenses.................................. 161,088 160,891 159,059
-------------------------------------------------------------------
Total noninterest expenses.......................... 526,192 534,232 509,898
-------------------------------------------------------------------
Income Before Income Taxes................................ 348,690 288,252 275,177
Income taxes.............................................. 122,523 105,576 100,222
-------------------------------------------------------------------
Net Income......................................... $ 226,167 $ 182,676 $ 174,955
===================================================================
Average common shares outstanding......................... 82,039 84,908 87,393
Earnings per common share................................. $2.76 $2.15 $2.00
Diluted average common shares outstanding................. 82,746 85,843 88,639
Diluted earnings per common share......................... $2.73 $2.13 $1.98
</TABLE>
See notes to consolidated financial statements.
53
<PAGE>
<TABLE>
<CAPTION>
AmSouth Bancorporation and Subsidiaries
Consolidated Statement of Shareholders' Equity
Common Capital Retained Treasury
(In thousands) Stock Surplus Earnings Stock
- -------------------------------------------------------------------------------------------------------------
Balance at January 1, 1995.................... $ 89,334 $ 549,801 $ 703,121 $ (24,173)
Net income.................................... -0- -0- 174,955 -0-
Cash dividends declared
($1.03 per common share)................... -0- -0- (89,906) -0-
Common stock transactions:
Employee stock plans....................... 711 11,066 -0- -0-
Purchase of common stock................... -0- -0- -0- (49,019)
Unrealized gains on available-for-sale
securities, net of deferred taxes.......... -0- -0- -0- -0-
-----------------------------------------------------------
Balance at December 31, 1995.................. 90,045 560,867 788,170 (73,192)
Net income.................................... -0- -0- 182,676 -0-
Cash dividends declared
($1.08 per common share)................... -0- -0- (91,378) -0-
Common stock transactions:
Employee stock plans....................... (11) 1,487 (8,796) 36,538
Dividend reinvestment plan................. -0- 105 (106) 5,274
Purchase of common stock................... -0- -0- -0- (113,877)
Retirement of debt......................... -0- -0- (12,237) 16,368
Unrealized gains on available-for-sale
securities, net of deferred taxes.......... -0- -0- -0- -0-
-----------------------------------------------------------
Balance at December 31, 1996.................. 90,034 562,459 858,329 (128,889)
Net income.................................... -0- -0- 226,167 -0-
Cash dividends declared
($1.14 per common share)................... -0- -0- (93,307) -0-
Common stock transactions:
Employee stock plans....................... (13) (215) (7,679) 26,421
Dividend reinvestment plan................. -0- 231 (139) 5,059
Purchase of common stock................... -0- -0- -0- (170,610)
Unrealized gains on available-for-sale
securities, net of deferred taxes.......... -0- -0- -0- -0-
-----------------------------------------------------------
Balance at December 31, 1997.................. $ 90,021 $ 562,475 $ 983,371 $ (268,019)
===========================================================
<CAPTION>
Unrealized
Gains/
Deferred (Losses) on
(In thousands) Compensation Securities Total
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1995.......................... $ (3,031) $ (4,594) $ 1,310,458
Net income.......................................... -0- -0- 174,955
Cash dividends declared
($1.03 per common share)......................... -0- -0- (89,906)
Common stock transactions:
Employee stock plans............................. (1,089) -0- 10,688
Purchase of common stock......................... -0- -0- (49,019)
Unrealized gains on available-for-sale
securities, net of deferred taxes................ -0- 26,299 26,299
-------------------------------------
Balance at December 31, 1995........................ (4,120) 21,705 1,383,475
Net income.......................................... -0- -0- 182,676
Cash dividends declared
($1.08 per common share)......................... -0- -0- (91,378)
Common stock transactions:
Employee stock plans............................. (6,280) -0- 22,938
Dividend reinvestment plan....................... -0- -0- 5,273
Purchase of common stock......................... -0- -0- (113,877)
Retirement of debt............................... -0- -0- 4,131
Unrealized gains on available-for-sale
securities, net of deferred taxes................ -0- 2,591 2,591
-------------------------------------
Balance at December 31, 1996........................ (10,400) 24,296 1,395,829
Net income.......................................... -0- -0- 226,167
Cash dividends declared
($1.14 per common share)............................ -0- -0- (93,307)
Common stock transactions:
Employee stock plans............................. 1,204 -0- 19,718
Dividend reinvestment plan....................... -0- -0- 5,151
Purchase of common stock......................... -0- -0- (170,610)
Unrealized gains on available-for-sale
securities, net of deferred taxes................ -0- 2,297 2,297
-------------------------------------
Balance at December 31, 1997........................ $ (9,196) $ 26,593 $ 1,385,245
=====================================
</TABLE>
See notes to consolidated financial statements.
54
<PAGE>
AmSouth Bancorporation and Subsidiaries
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
(In thousands) Years Ended December 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Operating Activities
Net income........................................................................ $ 226,167 $ 182,676 $ 174,955
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses...................................................... 67,399 65,171 40,139
Depreciation and amortization of premises and equipment........................ 34,149 27,696 27,825
Amortization of premiums and discounts on held-to-maturity securities
and available-for-sale securities........................................... (2,590) (3,802) (5,172)
Net (increase) decrease in mortgage loans held for sale........................ (20,238) 1,435 68,275
Net decrease (increase) in trading securities.................................. 2,473 (901) 5,300
Net gains on sales of available-for-sale securities............................ (7,883) (7,530) (3,717)
Net (increase) decrease in accrued interest receivable and other assets........ (163,338) (933) 73,841
Net (decrease) increase in accrued expenses and other liabilities.............. (36,744) 2,000 16,990
Provision for deferred income taxes............................................ 54,008 54,806 2,598
Amortization of intangible assets.............................................. 16,556 16,642 21,402
Other operating activities, net................................................ 9,411 4,473 (3,075)
---------------------------------------------
Net cash provided by operating activities................................... 179,370 341,733 419,361
---------------------------------------------
Investing Activities
Proceeds from maturities and prepayments of available-for-sale securities......... 349,132 512,102 64,561
Proceeds from sales of available-for-sale securities.............................. 1,137,413 1,678,997 225,546
Purchases of available-for-sale securities........................................ (1,337,136) (1,282,598) (496,766)
Proceeds from maturities, prepayments and calls of held-to-maturity securities.... 577,942 407,397 353,823
Purchases of held-to-maturity securities.......................................... (204,262) (883,502) (692,966)
Net (increase) decrease in federal funds sold and securities
purchased under agreements to resell.............................................. (4,000) (13,225) 150,750
Net increase in loans............................................................. (598,793) (1,132,183) (612,821)
Net purchases of premises and equipment........................................... (46,757) (52,862) (20,473)
Net cash used for acquisitions.................................................... -0- -0- (13,221)
---------------------------------------------
Net cash used by investing activities....................................... (126,461) (765,874) (1,041,567)
---------------------------------------------
Financing Activities
Net increase (decrease) in demand deposits and savings accounts................... 431,396 (133,073) (150,913)
Net increase (decrease) in time deposits.......................................... 46,734 (819,362) 288,685
Net (decrease) increase in federal funds purchased
and securities sold under agreements to repurchase................................ (436,361) 11,196 648,367
Net (decrease) increase in other borrowed funds................................... (64,465) 486,757 (60,118)
Issuance of long-term Federal Home Loan Bank advances and other long-term debt.... 1,140,400 1,245,000 150,592
Payments for maturing long-term debt.............................................. (917,960) (186,655) (89,317)
Cash dividends paid............................................................... (93,307) (91,378) (89,906)
Proceeds from employee stock plans and dividend reinvestment plan................. 21,270 22,386 8,837
Purchase of common stock.......................................................... (170,610) (113,877) (49,019)
---------------------------------------------
Net cash (used) provided by financing activities............................ (42,903) 420,994 657,208
---------------------------------------------
Increase (decrease) in cash and cash equivalents................................. 10,006 (3,147) 35,002
Cash and cash equivalents at beginning of year.................................... 648,494 651,641 616,639
---------------------------------------------
Cash and cash equivalents at end of year.......................................... $ 658,500 $ 648,494 $ 651,641
=============================================
</TABLE>
See notes to consolidated financial statements.
55
<PAGE>
Notes to Consolidated Financial Statements
Note A - Summary of Significant Accounting Policies
AmSouth Bancorporation (AmSouth), through its wholly owned subsidiaries,
provides a broad array of financial products and services throughout Alabama,
Florida, Tennessee and Georgia. AmSouth's principal activities include retail
and commercial banking and trust operations. On June 25, 1997, AmSouth merged
its five subsidiary banks with the resulting bank operating under the name
"AmSouth Bank". The accounting policies of AmSouth and the methods of applying
those policies which materially affect the accompanying financial statements are
presented below.
Basis of Presentation The consolidated financial statements include the
accounts of AmSouth and its subsidiaries. All significant intercompany balances
and transactions have been eliminated. Results of operations of companies
purchased are included from the dates of acquisition. Certain amounts in the
prior years financial statements have been reclassified to conform with the 1997
presentation. These reclassifications are immaterial and had no effect on net
income.
Use of Estimates The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash Flows For the Consolidated Statement of Cash Flows, AmSouth has defined
cash and cash equivalents as those amounts included in the Consolidated
Statement of Condition caption as "Cash and due from banks". For the years
ended December 31, 1997, 1996 and 1995, AmSouth paid interest of $701,796,000,
$703,449,000 and $663,834,000, respectively. For the years ended December 31,
1997, 1996 and 1995, noncash transfers from loans to foreclosed properties were
$17,377,000, $20,469,000 and $16,731,000, respectively. Noncash transfers from
foreclosed properties to loans for the years ended December 31, 1997, 1996 and
1995 were $2,399,000, $1,284,000 and $2,987,000, respectively. Noncash
transfers from held-to-maturity securities to available-for-sale securities were
$1,544,737,000 for the year ended December 31, 1995. For the years ended
December 31, 1997, 1996 and 1995, noncash transfers from loans to available-for-
sale securities of approximately $351,946,000, $704,525,000 and $352,000,000,
respectively, were made in connection with mortgage loan securitizations. In
addition, for the years ended December 31, 1997 and 1996, respectively,
$2,657,000 and $5,309,000 of noncash transfers were made from loans to other
assets in connection with mortgage loan securitizations. For the year ended
December 31,1996, a transfer of $4,131,000 from long-term debt to shareholders'
equity was made in connection with the redemption of convertible debt.
Securities Securities are classified as either held-to-maturity, available-for-
sale or trading. AmSouth defines held-to-maturity securities as debt securities
which management has the positive intent and ability to hold to maturity. Held-
to-maturity securities are stated at cost, adjusted for amortization of premiums
and accretion of discounts on the constant effective yield method. Trading
securities are carried at market. Market adjustments and realized gains or
losses on the sale of trading securities are reported as other operating
revenues. Available-for-sale securities are defined as equity securities and
debt securities not classified as trading securities or held-to-maturity
securities. Available-for-sale securities are carried at fair value.
Unrealized holding gains or losses, net of deferred taxes, on available-for-sale
securities are excluded from earnings and reported as a separate component of
shareholders' equity. AmSouth determines the appropriate classification of
56
<PAGE>
debt securities at the time of purchase. Gains and losses from sales of
available-for-sale securities are computed using the specific identification
method.
Mortgage Loans Held For Sale Mortgage loans held for sale are carried at the
lower of aggregate cost or market value. Market adjustments and realized gains
and losses are classified as other operating revenues.
Securities Purchased Under Agreements to Resell and Securities Sold Under
Agreements to Repurchase Securities purchased under agreements to resell and
securities sold under agreements to repurchase are generally treated as
collateralized financing transactions and are recorded at the amount at which
the securities were acquired or sold plus accrued interest. It is AmSouth's
policy to take possession of securities purchased under resale agreements. The
market value of the collateral is monitored and additional collateral obtained
when deemed appropriate. Securities sold under repurchase agreements are
delivered to either broker-dealers or to custodian accounts for customers. The
broker-dealers may sell, loan or otherwise dispose of such securities to other
parties in the normal course of their operations, but have agreed to resell to
AmSouth identical securities at the maturity of the agreements.
Interest Rate Contracts and Other Off-Balance Sheet Financial Instruments
AmSouth has from time to time utilized various off-balance sheet instruments
such as interest rate swaps and caps which are designated to hedge imbalances in
sensitivity to fluctuating interest rates for designated assets and liabilities.
To qualify as a hedge used to manage interest rate risk, the following criteria
must be met: (1) the asset or liability to be hedged exposes the institution, as
a whole, to the interest rate risk, (2) the instrument alters or reduces
sensitivity to interest rate changes and (3) the instrument is designated and
effective as a hedge. Accrual accounting is applied for off-balance sheet
investment products classified as a hedge. Under accrual accounting, any gains
or losses realized as a result of termination of an off-balance sheet investment
product are deferred and amortized as yield/rate adjustments of the hedged
assets or liabilities over the original life of the contract. If the
designated asset or liability being hedged is terminated, matures or is sold,
any realized or unrealized gain or loss from the related off-balance sheet
investment product would be recognized in income coincident with the
extinguishment or termination. If the balance of the related balance sheet item
falls below that of the related off-balance sheet investment product, the excess
portion of the off-balance sheet investment product is marked to market and the
resulting gain or loss included in income. If an off-balance sheet investment
product does not satisfy the criteria for a hedge, including those to be used in
trading activities, it is carried at market value. Any changes in market value
are recognized in other operating revenue.
AmSouth has entered into interest rate swap agreements to modify the interest
characteristics of some of its subordinated debt and mortgage-backed securities
held in its available-for-sale portfolio. These interest rate swap agreements
are designated to hedge a portion or all of the principal balance and term of a
specific debt obligation or mortgage-backed securities. These agreements
involve the exchange of amounts based on a fixed interest rate for amounts based
on variable interest rates over the life of the agreement without an exchange of
the notional amount upon which the payments are based. The differential to be
paid or received as interest rates change is accrued and recognized as an
adjustment of interest expense related to the debt or interest income related to
the mortgage-backed securities (the accrual accounting method described above).
The related amounts payable to or receivable from counterparties are included in
other liabilities or assets.
Loans Interest income on commercial and real estate loans is accrued daily
based upon the outstanding principal amounts except for those classified as
nonaccrual loans. Interest income on certain consumer loans is accrued monthly
based upon the outstanding principal amounts except for those classified as
nonaccrual loans. Interest accrual is discontinued when it appears that future
collection of principal or interest according
57
<PAGE>
to the contractual terms may be doubtful. Interest collections on nonaccrual
loans for which the ultimate collectibility of principal is uncertain are
applied as principal reductions. Otherwise, such collections are credited to
income when received.
Impaired loans are specifically reviewed loans for which it is probable that
the creditor will be unable to collect all amounts due according to the terms of
the loan agreement. Impairment of a loan is measured by comparing the recorded
investment in the loan with the present value of expected future cash flows
discounted at the loan's effective interest rate, at the loan's observable
market price, or the fair value of the collateral if the loan is collateral
dependent. A valuation allowance is provided to the extent that the measure of
the impaired loans is less than the recorded investment. A loan is not
considered impaired during a period of delay in payment if the ultimate
collectibility of all amounts due is expected. Larger groups of homogeneous
loans such as consumer installment, bankcard and residential real estate
mortgage loans are collectively evaluated for impairment. Impaired loans are
therefore primarily commercial loans and commercial real estate loans. Payments
received on impaired loans for which the ultimate collectibility of principal is
uncertain are generally applied first as principal reductions.
Allowance for Loan Losses The allowance for loan losses is maintained at a
level which is considered adequate to provide for potential losses based upon
management's evaluation of known and inherent risk characteristics of the loan
portfolio, the fair value of underlying collateral, recent loan loss experience,
current economic conditions and other pertinent factors. A provision for loan
losses is charged to operations based on management's periodic evaluation of
these risks.
Premises and Equipment Premises and equipment are stated at cost, less
accumulated depreciation and amortization. The provisions for depreciation and
amortization are computed generally by the straight-line method over the
estimated useful lives of the assets or terms of the leases, as applicable. The
annual provisions for depreciation and amortization have been computed
principally using estimated lives of five to forty years for premises and three
to ten years for furniture and equipment.
Intangible Assets Intangible assets, primarily goodwill, are included in other
assets. Goodwill is amortized on a straight-line basis primarily over twenty to
twenty-five years. AmSouth reviews on a regular basis the carrying value of
goodwill to determine if any impairment has occurred or if the period of
recoverability has changed. If this review indicates that goodwill will not be
recoverable, as determined based on the undiscounted cash flows of the entity
acquired over the remaining amortization period, AmSouth's carrying value of the
goodwill will be reduced by the estimated shortfall of such cash flows. At
December 31, 1997, 1996 and 1995, goodwill, net of amortization, totaled
$250,922,000, $267,157,000 and $283,400,000, respectively.
Income Taxes The consolidated financial statements have been prepared on the
accrual basis. When income and expenses are recognized in different periods for
financial reporting purposes and for purposes of computing income taxes
currently payable, deferred taxes are provided on such temporary differences.
Deferred tax assets and liabilities are recorded for the expected future tax
consequences of events that have been recognized in the financial statements or
tax returns. Deferred tax assets and liabilities are measured using the enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be realized or settled.
Pension and Other Postretirement Employee Benefit Plans AmSouth has a pension
plan for the benefit of substantially all regular, full-time employees. The plan
is trusteed and noncontributory. Costs of AmSouth's pension plan are actuarially
determined by the projected unit credit method with actuarial gains or losses
recognized each year and amortized separately.
Stock-Based Compensation Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (Statement 123) issued in 1995
establishes a "fair value" based method of accounting
58
<PAGE>
for stock-based compensation plans and encourages entities to adopt that method
of accounting for their employee stock compensation plans. However, it also
allows an entity to continue to measure compensation cost for those plans using
the intrinsic value based method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees" (Opinion 25). AmSouth has elected to
follow Opinion 25 and related interpretations in accounting for its employee
stock options because, as discussed below, the alternative fair value accounting
provided for under Statement 123 requires use of option valuation models that
were not developed for use in valuing employee stock options. Under Opinion 25,
because the exercise price of AmSouth's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.
Statement 123 requires the disclosure of pro forma net income and earnings per
share determined as if AmSouth had accounted for its employee stock options
under the fair value method of that statement. The fair value for these options
was estimated at the date of grant using a Black-Scholes option pricing model.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
AmSouth's employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options. See Note P for a
further description of the assumptions used for preparing the pro forma
disclosures.
Earnings Per Common Share As of December 31, 1997 AmSouth adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (Statement 128).
For public entities with other than simple capital structures, Statement 128
requires a dual presentation of earnings per share using a basic and diluted
computation. The basic calculation of earnings per common share is calculated
by dividing net income available to common stockholders by the weighted average
outstanding shares of common stock. The diluted calculation of earnings per
share is calculated by dividing net income by the weighted average outstanding
shares of common stock adjusted for effects of stock options outstanding and
convertible debentures assumed issued under Statement 128. Application of
Statement 128 had no material effect on reported earnings per share. See Note O
for reconciliations of the numerators and denominators of the earnings per
common share and diluted earnings per common share computations.
A three-for-two stock split was completed on April 30, 1997 to common
stockholders. All common stock and per share data included in the consolidated
financial statements and in the notes to consolidated financial statements have
been retroactively adjusted to reflect the split.
Transfer of Assets and Liabilities On January 1, 1997, AmSouth adopted
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities,"
(Statement 125), except for the provisions relating to repurchase agreements,
securities lending and other similar transactions and pledged collateral, which
have been delayed until after December 31, 1997 by Statement of Financial
Accounting Standards No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125, an amendment of FASB Statement No. 125,"
(Statement 127). Statement 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of liabilities
based on a 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
59
<PAGE>
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 adoption of Statement 125 resulted in no material
impact on AmSouth's financial condition or results of operations. Statement 127
will be adopted as required in 1998 and is not expected to have a material
impact on AmSouth's financial condition or results of operations.
Recent Accounting Pronouncements In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting the components of comprehensive income and requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be included in a financial statement that is displayed with
the same prominence as other financial statements. Comprehensive income
includes net income as well as certain items that are reported directly within a
separate component of shareholders' equity and bypass net income. The
provisions of this statement are effective beginning with 1998 interim
reporting. These disclosure requirements will have no impact on AmSouth's
financial condition or results of operations.
In June 1997, FASB also issued Statement of Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information." This
statement changes the way public companies report segment information in annual
financial statements and requires public companies to report selected segment
information in interim financial reports to shareholders. Under the Statement's
"management approach," public companies are to report financial and descriptive
information about their operating segments. Operating segments are revenue-
producing components of an enterprise for which separate financial information
is produced internally and are subject to evaluation by the chief operating
decision maker in deciding how to allocate resources to segments. This
statement is effective for fiscal years beginning after December 15, 1997;
however, it is not required to be applied for interim reporting in the initial
year of application. These disclosure requirements will have no material impact
on AmSouth's financial position or results of operations.
Note B - Business Combinations
On February 16, 1995, AmSouth completed the acquisition of Community Federal
Savings Bank (Community), headquartered in Fort Oglethorpe, Georgia. Under the
terms of the agreement, AmSouth paid $65.50 for each of the outstanding shares
of Community common stock for a total purchase price of approximately
$17,000,000. The transaction was accounted for using the purchase method of
accounting. Approximately $7,500,000 of goodwill resulting from the acquisition
is being amortized on a straight-line basis over 20 years. Due to the
immateriality of the transaction, pro forma information is not presented. The
operating results of Community are included in AmSouth's consolidated statement
of earnings since the date of the acquisition.
Note C - Cash and Due From Banks
AmSouth's banking subsidiary is required to maintain reserve balances with the
Federal Reserve Bank based on a percentage of deposits. The average amount of
those reserves was approximately $24,000,000 and $61,000,000 for the years ended
December 31, 1997 and 1996, respectively.
Note D - Available-for-Sale Securities
The following is a summary of available-for-sale securities at December 31:
60
<PAGE>
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Carrying Amortized Unrealized Unrealized Carrying
Cost Gains Losses Amount Cost Gains Losses Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and federal
agency securities........ $ 171,965 $ 1,876 $ 525 $ 173,316 $ 323,420 $ 2,984 $2,297 $ 324,107
Mortgage-backed
securities............... 2,190,163 42,931 1,512 2,231,582 1,673,594 37,565 2,068 1,709,091
Equity securities......... 102,792 -0- -0- 102,792 172,838 -0- -0- 172,838
Other debt securities..... -0- -0- -0- -0- 82,396 2,046 -0- 84,442
------------------------------------------------------------------------------------------------------------------
$2,464,920 $44,807 $2,037 $2,507,690 $2,252,248 $42,595 $4,365 $2,290,478
==================================================================================================================
</TABLE>
The carrying amount and amortized cost of available-for-sale securities by
maturity at December 31, 1997, were as follows:
Amortized Carrying
(In thousands) Cost Amount
- -----------------------------------------------------
Due within 1 year........... $ 200 $ 200
Due after 1 year through
5 years................... 90,422 90,905
Due after 5 years through
10 years.................. 55,736 55,962
Due after 10 years.......... 25,607 26,250
Mortgage-backed securities.. 2,190,163 2,231,581
Equity securities........... 102,792 102,792
----------------------
$2,464,920 $2,507,690
======================
Sales of available-for-sale securities were $1,129,530,000, $1,671,010,000 and
$220,471,000 during 1997, 1996 and 1995, respectively. Gross gains of
$9,447,000, $9,977,000 and $4,621,000 and gross losses of $1,564,000, $2,447,000
and $904,000 were realized on these sales for 1997, 1996 and 1995, respectively.
Available-for-sale securities with a carrying amount of $2,128,547,000 and
$1,908,228,000 at December 31, 1997 and 1996, respectively, were pledged to
secure short-term borrowings, public deposits, trust funds and for other
purposes as required or permitted by law.
On November 15, 1995, the FASB staff issued a Special Report, "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities." In accordance with provisions in that Special Report,
AmSouth chose to reclassify securities from held-to-maturity to available-for-
sale. At the date of transfer, the amortized cost of those securities was
$1,544,737,000 and the unrealized gain on those securities was $21,290,000 which
was included in shareholders' equity.
Note E - Held-to-Maturity Securities
The amounts at which held-to-maturity securities are carried and their
approximate fair market values at December 31 are summarized as follows:
61
<PAGE>
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
Gross Gross Gross Gross
Carrying Unrealized Unrealized Market Carrying Unrealized Unrealized Market
Amount Gains Losses Value Amount Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
federal agency
securities....... $ 325,597 $ 1,367 $ 564 $ 326,400 $ 470,899 $ 1,594 $ 1,260 $ 471,233
State, county and
municipal
securities....... 127,167 4,354 2 131,519 178,959 6,998 31 185,926
Mortgage-backed
securities....... 1,818,113 18,641 8,946 1,827,808 1,993,571 16,490 18,929 1,991,132
Other securities... 1,277 -0- -0- 1,277 1,277 6 93 1,190
--------------------------------------------------------------------------------------------------------
$2,272,154 $24,362 $9,512 $2,287,004 $2,644,706 $25,088 $20,313 $2,649,481
========================================================================================================
</TABLE>
The carrying amount and approximate market value of held-to-maturity
securities by maturity at December 31, 1997, were as follows:
Carrying Market
(In thousands) Amount Value
- -----------------------------------------------------
Due within 1 year........... $ 39,338 $ 39,972
Due after 1 year through
5 years................... 273,008 275,364
Due after 5 years through
10 years.................. 125,847 127,381
Due after 10 years.......... 15,848 16,479
Mortgage-backed securities.. 1,818,113 1,827,808
----------------------
$2,272,154 $2,287,004
======================
There were no sales of held-to-maturity securities during 1997, 1996 and 1995.
Held-to-maturity securities with a carrying amount of $2,090,466,000 and
$2,410,132,000 at December 31, 1997 and 1996, respectively, were pledged to
secure short-term borrowings, public deposits, trust funds and for other
purposes as required or permitted by law.
Note F - Loans
The major categories of loans at December 31 are summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996
- -----------------------------------------------------------------------------------------
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Commercial......................... $3,853,854 31.2% $3,699,653 30.4%
----------------------------------------------------
Commercial real estate:............
Commercial real estate mortgages.. 1,713,556 13.9 1,652,990 13.6
Real estate construction.......... 867,255 7.0 693,417 5.7
----------------------------------------------------
Total commercial real estate..... 2,580,811 20.9 2,346,407 19.3
----------------------------------------------------
Consumer:
Residential first mortgages....... 2,601,590 21.1 2,971,250 24.4
Other residential mortgages....... 1,099,390 8.9 872,067 7.2
Dealer indirect................... 1,246,225 10.1 1,224,549 10.1
Revolving credit.................. 454,451 3.7 490,790 4.0
Other consumer.................... 506,504 4.1 563,856 4.6
----------------------------------------------------
Total consumer................... 5,908,160 47.9 6,122,512 50.3
----------------------------------------------------
$12,342,825 100.0% $12,168,572 100.0%
====================================================
</TABLE>
62
<PAGE>
At December 31, 1997 and 1996, nonaccrual loans totaled $71,358,000 and
$78,048,000, respectively. The amount of interest income actually recognized on
these loans during 1997 and 1996 was $1,662,000 and $1,467,000, respectively.
The additional amount of interest income that would have been recorded during
1997 and 1996 if the above amounts had been current in accordance with their
original terms was $5,664,000 and $6,720,000, respectively.
At December 31, 1997 and 1996, the recorded investment in loans that were
considered to be impaired under Statement 114 was $35,887,000 and $41,104,000,
respectively (primarily 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 impaired loans at December 31, 1997 and 1996.
There was approximately $6,742,000 and $6,100,000 at December 31, 1997 and 1996,
respectively, in the allowance for loan losses specifically allocated to
$21,726,000 and $25,312,000 of impaired loans, respectively. No specific
reserve was required for $14,161,000 and $15,792,000 of impaired loans at
December 31, 1997 and 1996, respectively. The average recorded investment in
impaired loans for the years ended December 31, 1997, 1996 and 1995 was
approximately $40,669,000, $48,133,000 and $60,475,000, respectively. No
material amount of interest income was recognized on impaired loans for the
years ended December 31, 1997, 1996 and 1995.
Certain directors of AmSouth and its significant subsidiaries, including their
immediate families and companies in which they are principal owners, were loan
customers of AmSouth during 1997 and 1996. Such loans are made in the ordinary
course of business at normal credit terms, including interest rates and
collateral, and do not represent more than a normal risk of collection. Total
loans to these persons at December 31, 1997 and 1996 amounted to $79,209,000 and
$109,793,000, respectively. Activity during 1997 in loans to related parties
included loans of approximately $1,029,128,000, payments of approximately
$1,104,463,000 and net additions of approximately $44,751,000 representing other
changes.
Note G - Allowance for Loan Losses
A summary of changes in the allowance for loan losses is shown below:
(In thousands) 1997 1996 1995
- -------------------------------------------------------------------
Balance at January 1............. $179,049 $178,451 $171,167
Loans charged-off................ (93,985) (83,279) (47,282)
Recoveries of loans
previously charged-off.......... 26,734 18,706 12,674
-------------------------------
Net charge-offs.................. (67,251) (64,573) (34,608)
Addition to allowance
charged to expense.............. 67,399 65,171 40,139
Allowance acquired in
bank purchases.................. -0- -0- 1,753
-------------------------------
Balance at December 31........... $179,197 $179,049 $178,451
===============================
Note H - Premises and Equipment
Premises and equipment at December 31 are summarized as follows:
(In thousands) 1997 1996
- ---------------------------------------------------------
Land............................... $ 54,039 $ 51,112
Buildings.......................... 142,348 138,466
Furniture and fixtures............. 61,953 61,439
Equipment.......................... 201,709 179,583
Leasehold improvements............. 72,272 64,340
-------------------
532,321 494,940
Less allowances for depreciation
and amortization.................. 218,121 193,348
-------------------
$314,200 $301,592
===================
Note I - Deposits
The aggregate amounts of time deposits of $100,000 or more, excluding
certificates of deposit of $100,000
63
<PAGE>
or more, in domestic bank offices at December 31, 1997 and 1996 were $34,420,000
and $41,525,000, respectively.
At December 31, 1997, the aggregate maturities, in thousands, of time deposits
are summarized as follows:
===========================================
1998....................... $4,217,270
1999....................... 1,015,113
2000....................... 438,501
2001....................... 64,338
2002 and thereafter........ 158,544
----------
$5,893,766
==========
Note J - Other Borrowed Funds
Other borrowed funds at December 31 are summarized as follows:
(In thousands) 1997 1996
=========================================================
Treasury, tax and loan notes.... $ 576,464 $ 732,712
Short-term Federal Home
Loan Bank advances............. 65,000 150,000
Short-term bank notes........... 325,000 125,000
Commercial paper................ 8,386 6,800
Floating Rate Notes due 1999.... 6,619 6,769
Other short-term debt........... 4,449 4,102
----------------------
$985,918 $1,025,383
======================
At December 31, 1997, AmSouth had a line of credit arrangement for short-term
debt enabling it to borrow up to $25,000,000 subject to such terms as AmSouth
and the lender may mutually agree. The arrangement is reviewed annually for
renewal of the credit line. The line is available solely to support commercial
paper borrowings and was not in use at December 31, 1997.
The interest rate on the treasury, tax and loan notes at December 31, 1997 was
5.93%. Short-term advances from the Federal Home Loan Bank had interest rates
ranging from 5.58% to 5.88% at December 31, 1997. The short-term bank notes had
an average rate of 5.83% at December 31, 1997. All other borrowed funds at
December 31, 1997 had interest rates ranging from 3.75% to 6.20%.
Note K - Long-Term Debt
Long-term debt at December 31 is summarized as follows:
(In thousands) 1997 1996
=============================================================
Long-term Federal
Home Loan Bank advances........... $1,198,146 $1,023,729
Other long-term debt:
6 3/4% Subordinated
Debentures Due 2025............... 149,863 149,845
7 3/4% Subordinated
Notes Due 2004.................... 149,412 149,320
Subordinated Capital
Notes Due 1999.................... 99,828 99,699
Long-term notes payable............. 35,975 13,082
----------------------
Total other long-term debt............ 435,078 411,946
----------------------
$1,633,224 $1,435,675
======================
Advances from the Federal Home Loan Bank (FHLB) had maturities ranging from
1998 to 2013 and interest rates ranging from 3.00% to 7.06%. Of the balances
outstanding at December 31, 1997, $675,000,000 is callable by the FHLB during
the first quarter of 1998. Under the Blanket Agreement for Advances and
Security Agreement with the FHLB, residential mortgage loans are pledged as
collateral for the FHLB advances outstanding.
The 6 3/4% Subordinated Debentures Due November 1, 2025 were issued November
6, 1995 at a discounted price of 99.883%. The net proceeds to AmSouth after
commissions totaled $148,900,000. The debentures will mature on November 1,
2025 and may be redeemed on November 1, 2005 at the option of the registered
holders thereof. AmSouth purchased
64
<PAGE>
an interest rate swap in the notional amount of $150,000,000 to hedge these
debentures. The swap requires AmSouth to pay a variable rate based on the 30 day
London Interbank Borrowing Rate (LIBOR) while receiving a fixed rate. This swap
effectively converts the fixed rate debt to floating rate.
The 7 3/4% Subordinated Notes Due 2004 were issued May 19, 1994 at a
discounted price of 99.389%. The net proceeds to AmSouth after commissions
totaled $148,100,000. The notes will mature on May 15, 2004 and are not
redeemable prior to maturity.
The Subordinated Capital Notes Due 1999 were issued in 1987 at a discounted
price of 99.125%. The net proceeds to AmSouth after commissions totaled
$98,450,000 for an effective rate to maturity of 9.60%. The notes will mature
on May 1, 1999 and will be repaid with either equity securities with a market
value of $100,000,000 or with cash generated from the sale of equity securities.
Long-term notes payable at December 31, 1997 included notes maturing from 1999
to 2000 with interest rates ranging from 3.90% to 5.93%.
The aggregate stated maturities, in thousands, of long-term debt outstanding
at December 31, 1997 are summarized as follows:
========================================
1998...................... $ 65,000
1999...................... 177,473
2000...................... 508,330
2001...................... -0-
2002...................... 526,741
Thereafter................ 355,680
----------
$1,633,224
==========
Note L - Off-Balance Sheet Financial Agreements
AmSouth enters into a variety of financial instrument agreements to help
customers manage their exposure to interest rate and foreign currency
fluctuations and to finance international activities. AmSouth also uses similar
instruments to manage its exposure to changes in interest and foreign exchange
rates, as well as to profit from arbitrage opportunities.
Futures and forward contracts provide customers and AmSouth a means of
managing the risks of changing interest and foreign exchange rates. These
contracts represent commitments either to purchase or sell securities, other
money market instruments or foreign currency at a future date and at a specified
price. AmSouth is subject to the market risk associated with changes in the
value of the underlying financial instrument as well as the risk that another
party will fail to perform. The gross contract amount of futures and forward
contracts represents the extent of AmSouth's involvement. However, those amounts
significantly exceed the future cash requirements as AmSouth intends to close
out open trading positions prior to settlement and thus is subject only to the
change in value of the instruments. The gross amount of contracts represents
AmSouth's maximum exposure to credit risk.
Interest rate swaps are agreements to exchange interest payments computed on
notional amounts. Swaps subject AmSouth to market risk associated with changes
in interest rates, as well as the risk that another party will fail to perform.
Interest rate caps and floors are contracts in which a counterparty pays or
receives a cash payment from another counterparty if a floating rate index rises
above or falls below a predetermined level. The present value of purchased caps
and floors in a gain position represents the potential credit risk to AmSouth.
Market risk resulting from a position in a particular off-balance sheet
financial instrument may be offset by other on or off-balance sheet
transactions. AmSouth monitors overall sensitivity to interest rate changes by
analyzing the net effect of potential changes in interest rates on the market
value of both on and off-balance sheet financial instruments and the related
future cash flow streams. AmSouth manages the credit risk of counterparty
defaults in these transactions by limiting the total amount of arrangements
outstanding, both by individual counterparty and in the aggregate, and by
mon-
65
<PAGE>
itoring the size and maturity structure of the off-balance sheet portfolio.
AmSouth requires collateralization by a counterparty on credit exposure above a
specified credit limit. Trading and dealer activities in the aggregate are not
material to AmSouth and are not separately disclosed.
The following table identifies the gross contract or notional amounts of off-
balance sheet financial instruments at December 31:
(In millions) 1997 1996
- -----------------------------------------------------------------------------
Forward contracts-commitments to sell............... $ 52.6 $ 42.9
Notional amount of interest rate swaps:
Receive fixed rate................................ 927.1 395.7
Receive variable rate............................. 32.3 25.7
Notional amount of interest
rate caps and floors.............................. -0- 1,077.0
Forward foreign exchange contracts:
Commitments to purchase........................... 43.2 17.5
Commitments to sell............................... 43.5 20.6
Written options sold................................ 190.0 2.0
Written options purchased........................... 13.4 2.0
The notional amounts of interest rate contracts used by AmSouth to hedge
balance sheet items at December 31 are shown below:
(In millions) 1997 1996
- -----------------------------------------------------------------------------
Loans............................................. $ 185 $1,000
Securities........................................ 305 155
Federal funds purchased and securities
sold under agreements to repurchase............. -0- 77
Deposits.......................................... 255 65
Long-term debt.................................... 150 150
------------------
$ 895 $1,447
==================
Note M - Commitments and Contingencies
AmSouth and its subsidiaries lease land, premises and equipment under
cancellable and noncancellable leases some of which contain renewal options
under various terms. The leased properties are used primarily for banking
purposes.
The total rental expense on operating leases for the years ended December 31,
1997, 1996 and 1995 was $39,563,000, $38,379,000 and $34,121,000, respectively.
There were no material contingent rental expenses for 1997, 1996 or 1995.
Future minimum payments, in thousands, by year and in the aggregate, for
noncancellable operating leases with initial or remaining terms of one year or
more consisted of the following at December 31, 1997:
- -------------------------------------------------------------------------------
1998.......................................................... $ 37,384
1999.......................................................... 32,207
2000.......................................................... 28,367
2001.......................................................... 25,761
2002.......................................................... 21,945
Thereafter.................................................... 151,153
---------
$ 296,817
=========
AmSouth and its subsidiaries are contingently liable with respect to various
loan commitments and other contingent liabilities in the normal course of
business. AmSouth's maximum exposure to credit risk for loan commitments
(unfunded loans and unused lines of credit), and standby letters of credit, at
December 31, 1997 was as follows (in millions):
- -------------------------------------------------------------------------------
Commitments to extend credit.................................. $7,496.9
Standby letters of credit..................................... 795.8
The credit risk associated with loan commitments and standby letters of credit
is essentially the same as that involved in extending loans to customers and is
subject to AmSouth's credit policies. Collateral is obtained
66
<PAGE>
based on management's assessment of the customer.
Various legal proceedings are pending against AmSouth and its subsidiaries.
Some of these proceedings seek relief or allege damages that are substantial.
The actions arise in the ordinary course of AmSouth's business and include
actions relating to its lending, collections, servicing, investment, trust and
other activities. Because some of these actions are complex and for other
reasons, it may take a number of years to finally resolve them. Based upon
legal counsel's opinion, management considers that any liability resulting from
the proceedings would not have a material impact on the financial condition or
results of operations of AmSouth.
Note N - Shareholders' Equity
AmSouth offers a Dividend Reinvestment and Common Stock Purchase Plan, whereby
shareholders can reinvest dividends to acquire shares of common stock.
Shareholders may also invest additional cash up to $5,000 per quarter with no
brokerage commissions or fees charged.
On June 15, 1989, AmSouth's Board of Directors (Board) approved a Stockholder
Protection Rights Agreement and distributed Rights to common shareholders. Each
Right entitles its registered holder, upon occurrence of certain events, to
purchase from AmSouth one one-hundredth of a share of Series A Preferred Stock,
without par value, for an exercise price of $51.11, subject to adjustment. The
Rights will be exercisable only if a person or group acquires 15% or more of
AmSouth's common stock or commences a tender offer that will result in such
person or group owning 15% or more of AmSouth's common stock. The Rights may be
redeemed by action of the Board for $.0044 per Right.
On December 18, 1997, the Board extended and updated its stockholder
protection arrangements by approving a new Stockholder Protection Rights
Agreement effective at the close of business on March 13, 1998. At that time,
Rights issued under the new Agreement will be distributed to AmSouth's common
shareholders and the existing Rights will be redeemed. The new Rights will have
an exercise price of $200 (subject to adjustment), are scheduled to be effective
until March 13, 2008 and may be redeemed by the Board for $0.01 per right.
Except as described, the new Rights operate in substantially the same way as
AmSouth's existing Rights.
On October 19, 1995, AmSouth's Board approved the repurchase by AmSouth of up
to an aggregate of 3,397,500 shares of its common stock through December
31,1998. During 1995, AmSouth purchased 1,897,500 shares of its common stock
under this approval at a cost of $49,019,000. The remaining 1,500,000 shares of
this program were purchased March 1, 1996 at a cost of $39,592,000. The shares
will be used for the purpose of satisfying requirements of employee benefit,
dividend reinvestment and other stock issuance plans.
On July 18, 1996, AmSouth's Board authorized a plan to repurchase up to five
percent of AmSouth's outstanding shares of common stock as of June 30, 1996, or
approximately 4,200,000 shares, from time to time. The shares will be used to
issue stock under AmSouth's dividend reinvestment and employee benefit plans or
for general corporate purposes. Under this plan, AmSouth purchased 2,475,000
shares at a cost of $74,285,000 during 1996. The remaining 1,725,000 shares
were purchased during the first half of 1997 at a cost of $60,343,000.
On March 20, 1997, AmSouth's Board authorized a three-for-two common stock
split in the form of a 50 percent stock dividend. The stock dividend was paid
April 30 to shareholders of record as of April 4. The Board also approved the
repurchase by AmSouth of up to 6,000,000 shares of its common stock. During
1997, AmSouth purchased 2,604,000 shares at a cost of $110,267,000 under this
plan.
At December 31, 1997, there were 902,023 shares reserved for issuance under
the Dividend Reinvestment and Common Stock Purchase Plan, 5,754,741 shares
reserved for issuance under stock compensation plans (1,485,291 shares represent
stock
67
<PAGE>
options outstanding) and 214,376 shares reserved for issuance under the employee
stock purchase plan for a total of 6,871,140 shares.
Note O - Earnings Per Common Share
The following table sets forth the computation of earnings per common share and
diluted earnings per common share:
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings per common share computation:
Numerator:
Net income.................................... $ 226,167 $ 182,676 $ 174,955
Denominator:
Average common shares outstanding............. 82,039 84,908 87,393
Earnings per common share........................... $ 2.76 $ 2.15 $ 2.00
Diluted earnings per common share computation:
Numerator:
Net income.................................... $ 226,167 $ 182,676 $ 174,955
Add interest on convertible long-term debt
(net of tax)................................. -0- 90 252
---------------------------------------
Adjusted net income..................... $ 226,167 $ 182,766 $ 175,207
Denominator:
Average common shares outstanding............. 82,039 84,908 87,393
Dilutive stock options........................ 707 623 617
Convertible long-term debt assumed converted.. -0- 312 629
---------------------------------------
Average diluted common shares outstanding........ 82,746 85,843 88,639
Diluted earnings per common share................... $ 2.73 $ 2.13 $ 1.98
</TABLE>
Note P - Long-Term Incentive
Compensation Plans
AmSouth has long-term incentive compensation plans which permit the granting of
incentive awards in the form of stock options, restricted stock awards and stock
appreciation rights. Generally, the terms of these plans stipulate that the
exercise price of options may not be less than the fair market value of
AmSouth's common stock at the date the options are granted. Options granted
generally vest one year from the date of the grant. Options granted generally
expire not later than ten years from the date of the grant.
FASB Statement 123 requires pro forma information regarding net income and
earnings per share. This pro forma information has been determined as if
AmSouth had accounted for its employee stock options under the fair value method
of that statement. The fair value for these options was estimated at the date
of grant using a Black-Scholes option pricing model with the following weighted-
average assumptions for 1997 and 1996, respectively: a risk-free interest rate
of 6.34% and 5.57%, a dividend yield of 3.33% and 4.01%, a volatil-
68
<PAGE>
ity factor of 19.51% and 19.00% and a weighted-average expected life of the
options of seven years. The weighted-average fair value of options granted
during 1997 and 1996 was $7.74 and $7.21, respectively.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. AmSouth's pro forma
information follows (in thousands except for earnings per share information):
1997 1996 1995
- -------------------------------------------------------------------------------
Net income:
As reported........................ $ 226,167 $ 182,676 $ 174,955
Pro forma.......................... 224,595 181,064 173,924
Earnings per share:
As reported........................ $ 2.76 $ 2.15 $ 2.00
Pro forma.......................... 2.74 2.13 1.99
Diluted earnings per share:
As reported........................ $ 2.73 $ 2.13 $ 1.98
Pro forma.......................... 2.71 2.11 1.96
The following table summarizes AmSouth's stock option activity and related
information during 1995, 1996 and 1997:
Weighted-
Number Option Price Average
of Shares per Share Exercise Price
- --------------------------------------------------------------------------------
Balance at
January 1, 1995............ 1,821,720 $ 3.02 - $ 21.00
Options exercised............. (511,104) 3.02 - 20.50
Options forfeited............. (62,488) 4.64 - 21.50
Options granted............... 681,825 19.17 - 26.67
---------
Balance at
December 31, 1995.......... 1,929,953 4.64 - 26.67 $ 16.73
Options exercised............. (846,823) 4.64 - 26.92 16.03
Options forfeited............. (22,388) 19.17 - 26.92 23.84
Options granted............... 540,300 25.83 - 31.75 26.98
---------
Balance at
December 31, 1996.......... 1,601,042 4.64 - 31.75 20.46
Options exercised............. (427,616) 4.64 - 26.92 19.59
Options forfeited............. (26,360) 4.64 - 34.17 30.48
Options granted............... 338,225 33.08 - 48.06 34.30
---------
Balance at
December 31, 1997.......... 1,485,291 $ 10.50 - $ 48.06 $ 23.69
=========
Of the options outstanding at December 31, 1997, those granted since January
1, 1997 have a one year restriction period from the date of grant. All other
options outstanding were exercisable. At December 31, 1997 and 1996, options
exercisable totaled 1,164,150 and 1,123,367, respectively, and had a weighted-
average option price per share of $20.76 and $17.69, respectively.
The following table presents the weighted-average remaining life as of
December 31, 1997 for options outstanding within the stated exercise price
ranges:
69
<PAGE>
<TABLE>
<CAPTION>
Outstanding Exercisable
- -------------------------------------------------------------------------------- -----------------------------------
Exercise Price Number of Weighted-Average Weighted-Average Number of Weighted-Average
Range Per Share Options Exercise Price Remaining Life Options Exercise Price
<S> <C> <C> <C> <C> <C>
$ 10.50 - $ 11.56 171,626 $ 11.01 2.43 years 171,626 $ 11.01
17.67 - 26.25 629,020 19.81 6.36 years 629,020 19.81
26.67 - 48.06 684,645 30.43 8.61 years 363,504 27.00
</TABLE>
AmSouth also has issued common stock as restricted stock awards to key
officers with the restriction that they remain employed with AmSouth for periods
of three years or longer. During 1995, 152,836 restricted shares were awarded,
67,176 restricted shares were forfeited and the restrictions were removed on
34,115 shares. During 1996, 273,270 restricted shares were awarded with a
weighted-average fair value of $31.93, 11,812 restricted shares were forfeited
and the restrictions were removed on 141,840 shares. During 1997, 70,215
restricted shares were awarded with a weighted-average fair value of $34.98,
37,575 restricted shares were forfeited and the restrictions were removed on
61,612 shares. During 1995, 43,788 restricted shares were also granted to, and
600 restricted shares were forfeited by, non-employee members of the Boards of
Directors of AmSouth and its subsidiaries. During 1996, 3,675 restricted shares
with a weighted-average fair value of $25.68 were granted to non-employee
members of the Boards of Directors of AmSouth and its subsidiaries. The
restrictions were removed from 9,213 shares held by non-employee members of the
Boards of Directors. There were no forfeitures by non-employee members of the
Boards of Directors during 1996. During 1997, 934 restricted shares with a
weighted-average fair value of $54.06 were granted to non-employee members of
the Boards of Directors of AmSouth and its subsidiaries. The restrictions were
removed on 16,650 shares held by non-employee members of the Boards of Directors
and 12,900 shares were forfeited. At December 31, 1997, AmSouth had 470,062
shares of common stock outstanding representing restricted stock awards.
At December 31, 1997, there were no stock appreciation rights outstanding.
Note Q - Regulatory Capital Requirements and Restrictions
Capital is the primary tool used by regulators to monitor the financial health
of insured banks and savings institutions. The Federal Reserve Board and the
Federal Deposit Insurance Corporation have historically had common capital
adequacy guidelines involving minimum leverage capital and risk-based capital
requirements. Under the capital adequacy quidelines and the regulatory
framework for prompt corrective action, AmSouth and its banking subsidiary must
meet specific capital guidelines that involve quantitative measures of their
assets, liabilities and certain off-balance sheet items as calculated under
regulatory accounting practices. The capital amounts and classification are
also subject to qualitative judgements by the regulators about components, risk
weightings and other factors. Based on the risk-based capital rules and
definitions prescribed by the banking regulators, should an institution's
capital ratios decline below predetermined levels, it would become subject to a
series of increasingly restrictive regulatory actions. AmSouth and its
subsidiary bank are required to have core capital (Tier 1) of at least 4% of
risk-weighted assets, total capital of 8% of risk-weighted assets and a leverage
ratio of 3% of adjusted quarterly average assets. Tier 1 capital consists
principally of shareholders' equity, excluding unrealized gains and losses on
securities available-for-sale, less goodwill and certain other intangibles.
Total capital consists of Tier 1 capital plus certain debt instruments and the
reserve for credit
70
<PAGE>
losses, subject to limitation. The regulations also define well capitalized
levels of Tier 1 capital, total capital and leverage as ratios of 6%, 10% and
5%, respectively, for banking entities. AmSouth's banking subsidiary had Tier 1
capital, total capital and leverage ratios above the well capitalized levels at
December 31, 1997 and 1996. Management believes that no changes in condition or
events have occurred since December 31, 1997 which would result in changes to
the bank's categories. The actual capital ratios and amounts for AmSouth and
its subsidiary are as follows:
(Dollars in thousands) 1997 1996
================================================================================
Amount Ratio Amount Ratio
Tier 1 capital:
AmSouth............. $ 1,106,995 7.16% $ 1,103,394 7.87%
AmSouth Bank........ 1,446,633 9.33 1,410,990 10.14
-----------------------------------------------------
Total capital:
AmSouth............. $ 1,605,433 10.38% $ 1,617,785 11.54%
AmSouth Bank........ 1,625,830 10.49 1,585,061 11.39
-----------------------------------------------------
Leverage:
AmSouth............. $ 1,106,995 6.19% $ 1,103,394 6.20%
AmSouth Bank........ 1,446,633 8.08 1,410,990 7.92
-----------------------------------------------------
Certain restrictions exist regarding the ability of banking subsidiaries to
transfer funds to the parent company as loans, advances or dividends. At
December 31, 1997, approximately $157,000,000 of the subsidiary bank's net
assets was available for dividends without prior regulatory approval.
Substantially all of the parent company's retained earnings at December 31, 1997
and 1996, represented undistributed earnings of its banking subsidiary.
Note R - Pension and Other
Employee Benefit Plans
As of December 31, 1997, AmSouth maintained a corporate pension plan, which
covers substantially all regular full-time employees. The pension plan benefits
are based on years of service and the employee's compensation during the last
120 months of employment. AmSouth's funding policy is to contribute an amount
that meets the minimum funding requirements set forth in the Employee Retirement
Income Security Act of 1974, plus such additional amounts as the corporation
determines to be appropriate.
Net periodic pension expense includes the following components:
(In thousands) Years Ended December 31
==================================== ===========================================
1997 1996 1995
Service cost of the current period... $ 5,702 $ 6,010 $ 5,104
Interest cost on the
projected benefit obligation........ 12,699 12,073 11,590
Actual return on
assets held in the plan............. (40,217) (19,635) (32,527)
Net amortization and deferral........ 22,418 3,648 20,360
--------------------------------------
Pension expense...................... $ 602 $ 2,096 $ 4,527
======================================
The following table sets forth the funded status of the plan and the amounts
shown in the accompanying Consolidated Statement of Condition at December 31:
71
<PAGE>
(In thousands) 1997 1996
================================================================================
Actuarial present value of
accumulated plan benefits:
Vested......................................... $ 158,299 $ 143,268
Nonvested...................................... 8,411 6,887
------------------------
Accumulated benefit obligation.................... $ 166,710 $ 150,155
========================
Actuarial present value of projected
benefit obligation for service
rendered to date.............................. $(188,391) $(166,997)
Plan assets at fair value,
primarily listed stocks and
bonds and U.S. obligations.................... 237,348 182,439
------------------------
Plan assets greater than
projected benefit obligation.................. 48,957 15,442
Recognition of transfer of
plan assets in excess
of projected benefit obligation............... -0- 4,803
Unrecognized prior service cost................... 1,505 2,044
Unrecognized net gain from
past experience different from
that assumed and effects of
changes in assumptions........................ (35,096) (27,329)
Unrecognized net transition asset................. -0- (1,159)
------------------------
Pension asset (liability) included in
Consolidated Statement of Condition........... $ 15,366 $ (6,199)
========================
The weighted-average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.25% and 4.50%, respectively, at December 31,
1997, 7.75% and 4.50%, respectively, at December 31, 1996, and 7.50% and 4.50%,
respectively, at December 31, 1995. The average expected long-term rate of
return on plan assets is approximately 9.00% at December 31, 1997 and 1996 and
8.50% at December 31, 1995. At December 31, 1997, the plan assets included
240,900 shares of AmSouth common stock with a market value of $13,084,000. The
plan received $295,000 in dividends on AmSouth stock during the year ended
December 31, 1997.
AmSouth also maintains a thrift plan and an employee stock purchase plan which
cover substantially all regular full-time employees. For each employee, during
1995, AmSouth made matching contributions of 50% of the first 5% of base pay
that each employee contributed to the thrift plan. Beginning January 1, 1996,
AmSouth began matching pre-tax contributions dollar for dollar on the first 6%
of base pay that each employee contributes to the thrift plan. After-tax
contributions to the thrift plan continue to be matched at 50 cents for every
dollar contributed by an employee but are matched through the first 6% of base
pay. Employees may make both pre-tax and after-tax contributions, but no
matching contributions are made on any employee contributions above 6%, with
pre-tax contributions being matched first. In addition, beginning January 1,
1996, all company matching contributions are no longer self directed by the
employee but instead are allocated to the AmSouth stock investment option. The
cost of the thrift plan for the years ended December 31, 1997, 1996 and 1995 was
$6,032,000, $5,632,000 and $2,379,000, respectively. Under the employee stock
purchase plan, an employee may invest up to $2,000 each calendar year in
purchases of AmSouth common stock and AmSouth will contribute a matching 25%
toward the purchase. Additional purchases of up to $8,000 may be made on an
unmatched basis with no administrative or brokerage fees charged. Under the
employee stock purchase plan, 65,127 and 69,861 shares of AmSouth common stock
were purchased during 1997 and 1996 with weighted-average fair values of $40.10
and $27.47, respectively.
In addition, AmSouth sponsors certain postretirement benefit plans. In
accordance with Statement of Financial Accounting Standards No. 106, "Employers
Accounting for Postretirement Benefits Other than Pensions," the effect of these
plans did not have a material impact on the financial condition or results of
operations of AmSouth for the years ended December 31, 1997, 1996 and 1995.
72
<PAGE>
Note S - Income Taxes
The provisions for income taxes charged to earnings are summarized as follows:
(In thousands) Years Ended December 31
================================================================================
1997 1996 1995
Current tax expense:
Federal...................... $ 63,336 $ 47,262 $ 86,138
State........................ 5,179 3,508 11,486
-------------------------------------------
68,515 50,770 97,624
-------------------------------------------
Deferred tax expense:
Federal...................... 48,473 49,388 2,455
State........................ 5,535 5,418 143
-------------------------------------------
54,008 54,806 2,598
-------------------------------------------
$ 122,523 $ 105,576 $ 100,222
===========================================
The differences between the actual income tax expense and the amount computed
by applying the statutory federal income tax rate to income before income taxes
were as follows:
(In thousands) Years Ended December 31
================================================================================
1997 1996 1995
Tax at federal income tax rate.. $ 122,041 $ 100,888 $ 96,312
State and local income taxes,
net of federal tax benefits.. 6,964 5,802 7,559
Goodwill amortization........... 5,581 5,558 5,540
Tax exempt interest............. (4,481) (6,169) (9,032)
Bank owned life insurance....... (3,972) -0- -0-
Other........................... (3,610) (503) (157)
-------------------------------------------
$ 122,523 $ 105,576 $ 100,222
===========================================
The significant temporary differences which create deferred tax assets and
liabilities at December 31 are as follows:
(In thousands) 1997 1996
================================================================================
Deferred tax assets:
Accrued expenses............................ $ 6,466 $ 12,220
Loan loss reserves.......................... 67,378 68,312
Interest income on nonaccruing
loans..................................... 1,555 3,118
Other....................................... 7,756 8,377
---------------------------
83,155 92,027
---------------------------
Deferred tax liabilities:
Employee benefits........................... (798) (2,822)
Leasing activities.......................... (115,123) (64,246)
Depreciation................................ (8,071) (8,928)
Discount accretion.......................... (1,612) (6,077)
Recapture tax loan loss
reserves.................................. (6,384) (10,602)
Statement 115 equity
adjustment................................ (16,101) (14,511)
Other....................................... (7,255) (7,266)
---------------------------
(155,344) (114,452)
---------------------------
Net deferred tax liability................ $ (72,189) $ (22,425)
===========================
Income taxes paid were $72,428,000, $59,054,000 and $79,405,000, for the years
ended December 31, 1997, 1996 and 1995, respectively. Applicable income tax
expense of $2,964,000, $2,946,000 and $1,676,000 on securities gains and losses
for the years ended December 31, 1997, 1996 and 1995, respectively, is included
in the provision for income taxes.
73
<PAGE>
Note T - Other Operating Revenues and Other
Operating Expenses
The components of other operating revenues and other operating expenses are as
follows:
(In thousands) Years Ended December 31
- --------------------------------------------------------------------------------
1997 1996 1995
Other operating revenues:
Interchange income........................ $ 12,155 $ 8,982 $ 5,747
Bank owned life insurance
policies................................... 11,349 -0- -0-
Gains on sale of available-for-sale
securities.............................. 7,883 7,530 3,717
Mortgage income........................... 6,583 3,087 8,572
Other portfolio income.................... 859 1,416 328
Gains on sale of mortgage
servicing............................... -0- -0- 29,826
Other..................................... 27,972 30,281 27,483
----------------------------------
$ 66,801 $ 51,296 $ 75,673
==================================
Other operating expenses:
Postage and office supplies.............. $ 22,199 $ 23,072 $ 23,399
Marketing................................ 18,055 16,755 17,299
Communications........................... 20,665 16,466 12,984
Professional fees........................ 12,459 12,580 12,886
Amortization of intangibles.............. 16,556 16,642 21,402
Other.................................... 71,154 75,376 71,089
----------------------------------
$ 161,088 $ 160,891 $ 159,059
==================================
Note U - Condensed Parent
Company Information
Statement of Condition
(In thousands) December 31
- --------------------------------------------------------------------------------
1997 1996
Assets
Investment in subsidiaries................. $1,719,883 $1,714,962
Securities purchased from bank
subsidiary under agreements
to resell.................................. 67,318 21,845
Other earning assets....................... -0- 54,852
Other assets............................... 16,632 20,947
----------------------------
$1,803,833 $1,812,606
============================
Liabilities and Shareholders' Equity
Commercial paper........................... $ 8,386 $ 6,800
Subordinated debt.......................... 399,102 398,864
Other borrowed funds....................... 6,619 6,919
Accrued interest payable
and other liabilities...................... 4,481 4,194
----------------------------
Total liabilities..................... 418,588 416,777
Shareholders' equity....................... 1,385,245 1,395,829
----------------------------
$1,803,833 $1,812,606
============================
Statement of Earnings
(In thousands) Years Ended December 31
- --------------------------------------------------------------------------------
1997 1996 1995
Income
Dividends from subsidiaries.............. $ 246,241 $ 125,809 $ 103,643
Interest and other....................... 3,429 5,761 3,662
----------------------------------
249,670 131,570 107,305
----------------------------------
Expenses
Interest................................. 31,266 31,059 23,942
Other.................................... 5,317 4,922 5,074
----------------------------------
36,583 35,981 29,016
----------------------------------
Income before income
taxes and equity in
undistributed earnings
of subsidiaries......................... 213,087 95,589 78,289
Income tax credit.......................... 11,565 10,462 8,582
----------------------------------
Income before equity in
undistributed earnings
of subsidiaries......................... 224,652 106,051 86,871
Equity in undistributed
earnings of subsidiaries................ 1,515 76,625 88,084
----------------------------------
Net income................................. $ 226,167 $ 182,676 $ 174,955
==================================
74
<PAGE>
Statement of Cash Flows
<TABLE>
<CAPTION>
(In thousands) Years Ended December 31
- -------------------------------------------------------------------------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Operating activities
Net income.................................... $ 226,167 $ 182,676 $ 174,955
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of goodwill................ 2,386 2,386 2,386
Other amortization and depreciation..... 1,615 1,375 1,243
Net decrease in accrued interest
receivable and other assets............ 2,817 1,116 1,535
Net increase in accrued expenses and
other liabilities...................... 965 4,243 2,934
Equity in undistributed earnings of
subsidiaries........................... (1,515) (76,625) (88,084)
--------------------------------------------
Net cash provided by operating
activities.......................... 232,435 115,171 94,969
--------------------------------------------
Investing activities
Net decrease (increase) in short-term
investments................................ 9,227 63,203 (92,535)
Net cash used for acquisitions................ -0- -0- (17,069)
--------------------------------------------
Net cash provided(used) by
investing activities................ 9,227 63,203 (109,604)
--------------------------------------------
Financing activities
Net increase in commercial paper.............. 1,586 4,949 65
Net decrease in other borrowed funds.......... (300) (130) (575)
Issuance of long-term debt.................... -0- -0- 149,827
Payments on long-term debt.................... -0- (150) (4,300)
Cash dividends paid........................... (93,307) (91,378) (89,906)
Proceeds from employee stock plans and
dividend reinvestment plan................. 21,270 22,386 8,837
Purchase of common stock...................... (170,610) (113,877) (49,019)
--------------------------------------------
Net cash (used) provided by
financing activities................ (241,361) (178,200) 14,929
--------------------------------------------
Increase in cash................................. 301 174 294
Cash at beginning of year........................ 501 327 33
--------------------------------------------
Cash at end of year.............................. $ 802 $ 501 $ 327
============================================
</TABLE>
75
<PAGE>
Note V - Quarterly Results of Operations
(Unaudited)
Selected quarterly results of operations for the four quarters ended December 31
are as follows:
<TABLE>
<CAPTION>
(In thousands except per share data) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter* Quarter Quarter
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue from earning
assets.................. $348,216 $346,283 $346,621 $336,668 $342,577 $343,595 $336,285 $331,364
Interest expense........... 178,194 176,821 176,995 169,501 173,111 178,540 176,130 173,659
Net interest income........ 170,022 169,462 169,626 167,167 169,466 165,055 160,155 157,705
Provision for loan
losses.................. 15,780 16,102 17,800 17,717 18,497 17,505 14,049 15,120
Income before income
taxes................... 90,090 87,822 86,270 84,508 80,496 55,658 77,266 74,832
Net income................. 58,892 56,802 55,900 54,573 51,615 35,193 48,705 47,163
Earnings per common
share................... .73 .70 .68 .65 .61 .41 .57 .55
Diluted earnings per
common share............ .72 .69 .67 .65 .61 .41 .57 .54
Cash dividends declared
per common share........... .30 .28 .28 .28 .28 .27 .27 .27
Market price range:........
High.............. 57.06 49.25 41.00 36.67 33.92 29.67 26.75 27.50
Low............... 45.50 37.88 31.58 31.50 28.59 22.92 24.00 24.50
</TABLE>
* Excluding the one-time, pre-tax third quarter charge of $24,196,000, or $.18
per share after tax, required under federal legislation to recapitalize the
Savings Association Insurance Fund, net income for the third quarter 1996 was
$50,412,000 or $.59 per share.
Note W - Fair Value of Financial Instruments
For purposes of this disclosure, the estimated fair value of financial
instruments with immediate and shorter-term maturities (generally 90 days or
less) is assumed to be the same as the recorded book value. These instruments
include the statement of condition lines captioned cash and due from banks,
federal funds sold and securities purchased under agreements to resell,
customers' acceptance liability, federal funds purchased and securities sold
under agreements to repurchase, other borrowed funds, and acceptances
outstanding.
The carrying amount and estimated fair values of other financial instruments
at December 31 is summarized as follows:
76
<PAGE>
<TABLE>
<CAPTION>
(In thousands) 1997 1996
==============================================================================================================================
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
Financial assets:
Net loans........................................................... $12,058,471 $12,100,554 $11,901,197 $11,877,655
Mortgage loans held for sale........................................ 80,820 80,820 60,582 60,582
Financial liabilities:
Deposits............................................................ 12,945,197 12,959,864 12,467,599 12,449,605
Long-term FHLB advances............................................. 1,198,146 1,213,058 1,023,729 1,046,752
Other long-term debt................................................ 435,078 455,161 411,946 422,696
Off-balance sheet:
Off-balance sheet financial instruments (net receivable position)... -- 14,544 -- 3,746
Commitments to extend credit and standby letters of credit.......... -- (3,108) -- (1,842)
</TABLE>
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" (Statement 107), requires the disclosure of
estimated fair values for all financial instruments, both assets and liabilities
on and off-balance sheet, for which it is practicable to estimate their value
along with pertinent information on those financial instruments for which such
values are not available.
Fair value estimates are made at a specific point in time and are based on
relevant market information which is continuously changing. Because no quoted
market prices exist for a significant portion of AmSouth's financial
instruments, fair values for such instruments are based on management's
assumptions with respect to future economic conditions, estimated discount
rates, estimates of the amount and timing of future cash flows, expected loss
experience, and other factors. These estimates are subjective in nature
involving uncertainties and matters of significant judgment; therefore, they
cannot be determined with precision. Changes in the assumptions could
significantly affect the estimates.
Statement 107 fair value estimates include certain on and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. For example, AmSouth has a substantial trust department
that contributes net fee income annually. The trust department is not considered
a financial instrument, and its value has not been incorporated into the fair
value estimates. Other significant assets and liabilities that are not
considered financial assets or liabilities include the mortgage banking
operation, brokerage network, premises and equipment, core deposit intangible
and goodwill. In addition, the tax ramifications related to the realization of
the unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates. As a result, the
Statement 107 fair value disclosures should not be considered an indication of
the fair value of the company taken as a whole.
The following methods and assumptions were used by AmSouth in estimating its
fair value disclosures for financial instruments:
Loans The fair values of variable rate loans that reprice frequently and have
no significant change in credit risk are assumed to approximate carrying
amounts. For credit card loans and equity lines of credit, the carrying value
reduced by an estimate of credit losses inherent in the portfolio is a
reasonable estimate of fair value. The fair values for other loans (e.g.,
commercial, commercial real estate, certain mortgage loans and consumer loans)
are estimated using discounted cash flow
77
<PAGE>
analyses, using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality and estimates of maturity based on
AmSouth's historical experience. The carrying amount of accrued interest
receivable approximates its fair value.
Securities and Mortgage loans held for sale Fair values for securities and
mortgage loans held for sale are based on quoted market prices, where available.
Where quoted market prices are not available, fair values are based on quoted
market prices of similar instruments, adjusted for any significant differences
between the quoted instruments and the instruments being valued.
Commitments to extend credit and Standby letters of credit The fair value of
commitments to extend credit is estimated based on the amount of unamortized
deferred loan commitment fees. The fair value of letters of credit is based on
the amount of unearned fees plus the estimated cost to terminate the letters of
credit.
Off-balance sheet instruments The fair value of interest rate swaps, financial
futures, and interest rate caps and floors are obtained from dealer quotes.
These values represent the estimated amount the company would receive or pay to
terminate the contracts or agreements, taking into account current interest
rates and, when appropriate, the current creditworthiness of the counterparties.
Deposit liabilities The fair value of deposits with no stated maturity, such as
noninterest-bearing demand deposits, savings accounts, and money market and
interest-bearing checking accounts is, by definition, equal to the amount
payable on demand (carrying amount). The fair values for variable rate fixed-
term money market accounts and certificates of deposit approximate their
carrying amounts. Fair values for fixed rate certificates of deposit are
estimated using a discounted cash flow calculation that applies interest rates
currently being offered on certificates of deposit to a schedule of aggregated
expected monthly maturities on time deposits.
Long-term borrowings The fair values of long-term borrowings (other than
deposits) are estimated using discounted cash flow analyses, based on AmSouth's
current incremental borrowing rates for similar types of borrowing arrangements.
Note X - Subsequent Events
On January 14, 1998, AmSouth filed with the Securities and Exchange Commission a
shelf registration statement in the amount of $500,000,000. This statement,
gives AmSouth the ability to issue either debt securities or sell shares of
common or preferred stock in the public financial markets for up to
$500,000,000. There are currently no plans to utilize this facility.
In February 1998, AmSouth's bank subsidiary issued $300,000,000 of 6.45%
subordinated notes due February 1, 2018 at a price of 101.7%. The net proceeds
to AmSouth's bank subsidiary after commissions totaled $303,156,000. The notes
were issued with embedded put and call options which could require AmSouth's
bank subsidiary to repurchase the notes at face value on February 1, 2008. If
the debt is not repurchased by the bank, the interest rate on the notes will be
reset on February 1, 2008 based on a set formula.
78
<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
---- ----------------------------
ALABANC PROPERTIES, INC. Delaware
AMSOUTH BANK Alabama
AmSouth Capital Corporation Delaware
AmSouth Finance Corporation Alabama
AmSouth Leasing Corporation Alabama
AmSouth Leasing, Ltd. Alabama
AmSouth Insurance Agency, Inc. Florida
AmSouth Investment Services, Inc. Alabama
AmSouth Retirement Services, Inc. Florida
AmSouth Riverchase, Inc. Alabama
Cahaba Corporation Delaware
Fifth Avenue Realty Company (unincorporated joint venture)
FirstGulf Insurance Agency, Inc. Alabama
Five Points Capital Advisors, Inc. Alabama
FMLS, Inc. Tennessee
Fortune Mortgage Corporation Florida
National Properties and Mining Company, Inc. Delaware
OakBrook Investments, LLC Delaware
Rockhaven Asset Management, LLC Delaware
Sawgrass Asset Management LLC Delaware
Service Mortgage and Insurance Agency, Inc. Florida
<PAGE>
EXHIBIT 23 - CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements of AmSouth Bancorporation and in the related Prospectuses of our
report dated February 10, 1998, with respect to the consolidated financial
statements of AmSouth Bancorporation and subsidiaries incorporated by reference
in the Annual Report (Form 10-K) for the year ended December 31, 1997.
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. 33-58777 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;
Form S-8 No. 333-05631 pertaining to the AmSouth Bancorporation 1996
Long Term Incentive Compensation Plan;
Form S-8 No. 333-27107 pertaining to the AmSouth Bancorporation
Employee Stock Purchase Plan;
Form S-8 No. 333-41599 pertaining to the AmSouth Bancorporation
Deferred Compensation Plan and the Amended and Restated Deferred
Compensation Plan for Directors of AmSouth Bancorporation; and
Form S-3 No. 333-44263 pertaining to the AmSouth Bancorporation
Shelf Registration Statement
/s/ ERNST & YOUNG LLP
Birmingham, Alabama
March 25, 1998
<PAGE>
Exhibit 24
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, Carl L. Gorday or William H. Caughran, Jr. and any of them, his true
and lawful attorney-in-fact and agent, for him and in his name, place and stead,
to execute and sign the Annual Report on Form 10-K for the year ended December
31, 1997 to be filed by the Company with the Securities and Exchange Commission,
and, further, to execute and sign any and all amendments to such Form 10-K and
any and all other documents in connection therewith, and to cause any and all
such documents to be filed with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
2nd day of March, 1998.
/s/ J. Harold Chandler
-----------------------------------
J. Harold Chandler
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, Carl L. Gorday or William H. Caughran, Jr. and any of them, his true
and lawful attorney-in-fact and agent, for him and in his name, place and stead,
to execute and sign the Annual Report on Form 10-K for the year ended December
31, 1997 to be filed by the Company with the Securities and Exchange Commission,
and, further, to execute and sign any and all amendments to such Form 10-K and
any and all other documents in connection therewith, and to cause any and all
such documents to be filed with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
27th day of February, 1998.
/s/ James E. Dalton, Jr.
-----------------------------------
James E. Dalton, Jr.
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, Carl L. Gorday or William H. Caughran, Jr. and any of them, his true
and lawful attorney-in-fact and agent, for him and in his name, place and stead,
to execute and sign the Annual Report on Form 10-K for the year ended December
31, 1997 to be filed by the Company with the Securities and Exchange Commission,
and, further, to execute and sign any and all amendments to such Form 10-K and
any and all other documents in connection therewith, and to cause any and all
such documents to be filed with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
2nd day of March, 1998.
/s/ Rodney C. Gilbert
-----------------------------------
Rodney C. Gilbert
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, Carl L. Gorday or William H. Caughran, Jr. and any of them, his true
and lawful attorney-in-fact and agent, for him and in his name, place and stead,
to execute and sign the Annual Report on Form 10-K for the year ended December
31, 1997 to be filed by the Company with the Securities and Exchange Commission,
and, further, to execute and sign any and all amendments to such Form 10-K and
any and all other documents in connection therewith, and to cause any and all
such documents to be filed with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
26th day of February, 1998.
/s/ Elmer B. Harris
-----------------------------------
Elmer B. Harris
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, Carl L. Gorday or William H. Caughran, Jr. and any of them, his true
and lawful attorney-in-fact and agent, for him and in his name, place and stead,
to execute and sign the Annual Report on Form 10-K for the year ended December
31, 1997 to be filed by the Company with the Securities and Exchange Commission,
and, further, to execute and sign any and all amendments to such Form 10-K and
any and all other documents in connection therewith, and to cause any and all
such documents to be filed with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
2nd day of March, 1998.
/s/ Donald E. Hess
-----------------------------------
Donald E. Hess
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, Carl L. Gorday or William H. Caughran, Jr. and any of them, his true
and lawful attorney-in-fact and agent, for him and in his name, place and stead,
to execute and sign the Annual Report on Form 10-K for the year ended December
31, 1997 to be filed by the Company with the Securities and Exchange Commission,
and, further, to execute and sign any and all amendments to such Form 10-K and
any and all other documents in connection therewith, and to cause any and all
such documents to be filed with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
2nd day of March, 1998.
/s/ Ronald L. Kuehn, Jr.
-----------------------------------
Ronald L. Kuehn, Jr.
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, Carl L. Gorday or William H. Caughran, Jr. and any of them, his true
and lawful attorney-in-fact and agent, for him and in his name, place and stead,
to execute and sign the Annual Report on Form 10-K for the year ended December
31, 1997 to be filed by the Company with the Securities and Exchange Commission,
and, further, to execute and sign any and all amendments to such Form 10-K and
any and all other documents in connection therewith, and to cause any and all
such documents to be filed with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
2nd day of March, 1998.
/s/ Francis A. Newman
-----------------------------------
Francis A. Newman
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, Carl L. Gorday or William H. Caughran, Jr. and any of them, his true
and lawful attorney-in-fact and agent, for him and in his name, place and stead,
to execute and sign the Annual Report on Form 10-K for the year ended December
31, 1997 to be filed by the Company with the Securities and Exchange Commission,
and, further, to execute and sign any and all amendments to such Form 10-K and
any and all other documents in connection therewith, and to cause any and all
such documents to be filed with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
28th day of February, 1998.
/s/ Claude B. Nielsen
-----------------------------------
Claude B. Nielsen
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, Carl L. Gorday or William H. Caughran, Jr. and any of them, his true
and lawful attorney-in-fact and agent, for him and in his name, place and stead,
to execute and sign the Annual Report on Form 10-K for the year ended December
31, 1997 to be filed by the Company with the Securities and Exchange Commission,
and, further, to execute and sign any and all amendments to such Form 10-K and
any and all other documents in connection therewith, and to cause any and all
such documents to be filed with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
26th day of February, 1998.
/s/ Benjamin F. Payton
-----------------------------------
Benjamin F. Payton
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, Carl L. Gorday or William H. Caughran, Jr. and any of them, his true
and lawful attorney-in-fact and agent, for him and in his name, place and stead,
to execute and sign the Annual Report on Form 10-K for the year ended December
31, 1997 to be filed by the Company with the Securities and Exchange Commission,
and, further, to execute and sign any and all amendments to such Form 10-K and
any and all other documents in connection therewith, and to cause any and all
such documents to be filed with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
25th day of February, 1998.
/s/ Herbert A. Sklenar
-----------------------------------
Herbert A. Sklenar
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, Carl L. Gorday or William H. Caughran, Jr. and any of them, her true
and lawful attorney-in-fact and agent, for her and in her name, place and stead,
to execute and sign the Annual Report on Form 10-K for the year ended December
31, 1997 to be filed by the Company with the Securities and Exchange Commission,
and, further, to execute and sign any and all amendments to such Form 10-K and
any and all other documents in connection therewith, and to cause any and all
such documents to be filed with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this
27th day of February, 1998.
/s/ Victoria Jackson Gregoricus
-----------------------------------
Victoria Jackson Gregoricus
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THE CONSOLIDATED STATEMENT OF CONDITION, THE CONSOLIDATED STATEMENT OF EARNINGS,
THE CONSOLIDATED STATEMENT OF CASH FLOWS OF ITEM 8, AND TABLES 2,16,18 AND 19 OF
ITEM 7 OF THE AMSOUTH BANCORPORATION FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 658,500
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 19,000
<TRADING-ASSETS> 1,406
<INVESTMENTS-HELD-FOR-SALE> 2,507,690
<INVESTMENTS-CARRYING> 2,272,154
<INVESTMENTS-MARKET> 2,287,004
<LOANS> 12,237,668
<ALLOWANCE> 179,197
<TOTAL-ASSETS> 18,622,256
<DEPOSITS> 12,945,197
<SHORT-TERM> 2,421,843
<LIABILITIES-OTHER> 236,747
<LONG-TERM> 1,633,224
90,021
0
<COMMON> 0
<OTHER-SE> 1,295,224
<TOTAL-LIABILITIES-AND-EQUITY> 18,622,256
<INTEREST-LOAN> 1,052,125
<INTEREST-INVEST> 322,398
<INTEREST-OTHER> 3,265
<INTEREST-TOTAL> 1,377,788
<INTEREST-DEPOSIT> 484,087
<INTEREST-EXPENSE> 701,511
<INTEREST-INCOME-NET> 676,277
<LOAN-LOSSES> 67,399
<SECURITIES-GAINS> 7,883
<EXPENSE-OTHER> 526,192
<INCOME-PRETAX> 348,690
<INCOME-PRE-EXTRAORDINARY> 348,690
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 226,167
<EPS-PRIMARY> 2.76
<EPS-DILUTED> 2.73
<YIELD-ACTUAL> 4.09
<LOANS-NON> 71,358
<LOANS-PAST> 37,797
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 179,049
<CHARGE-OFFS> 93,985
<RECOVERIES> 26,734
<ALLOWANCE-CLOSE> 179,197
<ALLOWANCE-DOMESTIC> 138,108
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 41,089
</TABLE>
