<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 COMMISSION FILE NUMBER 1-7476
AMSOUTH BANCORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 63-0591257
<S> <C>
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
AMSOUTH--SONAT TOWER 35203
1900 FIFTH AVENUE NORTH (ZIP CODE)
BIRMINGHAM, ALABAMA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
(205) 320-7151
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
As of November 10, 1998 AmSouth Bancorporation had 118,899,276 shares of
common stock outstanding.
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<PAGE>
AMSOUTH BANCORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statement of Condition--September 30, 1998, December 31,
1997, and September 30, 1997......................................... 3
Consolidated Statement of Earnings--Nine months and three months ended
September 30, 1998 and 1997.......................................... 4
Consolidated Statement of Shareholders' Equity--Nine months ended
September 30, 1998................................................... 5
Consolidated Statement of Cash Flows--Nine months ended September 30,
1998 and 1997........................................................ 6
Notes to Consolidated Financial Statements............................ 7
Independent Accountants' Review Report................................ 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 10
Part II. Other Information
Item 1. Legal Proceedings............................................. 22
Item 5. Other Information............................................. 22
Item 6. Exhibits and Reports on Form 8-K.............................. 22
Signatures................................................................ 23
Exhibit Index............................................................. 24
</TABLE>
Forward-Looking Information. This Quarterly Report on Form 10-Q contains
certain forward-looking statements with respect to the adequacy of the
allowance for loan losses, the effect of legal proceedings on AmSouth's
financial condition and results of operations and the Year 2000 issue. These
forward-looking statements involve certain risks, uncertainties, estimates and
assumptions by management.
Various factors could cause actual results to differ materially from those
contemplated by such forward-looking statements. With respect to the adequacy
of the allowance for loan losses, these factors include the rate of growth in
the economy, especially in the Southeast, the relative strength and weakness
in the consumer and commercial credit sectors of the economy and in the real
estate markets, the performance of the stock and bond markets and the
potential effects of the Year 2000 issue. With regard to the effect of legal
proceedings, various uncertainties are discussed in "Part II, Item 1. Legal
Proceedings." Moreover, the outcome of litigation is inherently uncertain and
depends on judicial interpretations of law and the findings of judges and
juries. The information regarding Year 2000 compliance is based on
management's current assessment. However, this is an ongoing process involving
continual evaluation and unanticipated problems could develop that could cause
compliance to be more difficult or costly than currently anticipated.
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1998 1997 1997
------------ ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and due from banks................. $ 532,758 $ 658,500 $ 579,032
Federal funds sold and securities pur-
chased under agreements to resell...... 500 19,000 2,775
Trading securities...................... 2,689 1,406 2,847
Available-for-sale securities........... 3,281,129 2,507,690 2,138,796
Held-to-maturity securities (market
value of $2,328,440, $2,287,004 and
$2,354,150, respectively).............. 2,297,091 2,272,154 2,341,661
Mortgage loans held for sale............ 81,483 80,820 59,947
Other interest earning assets........... 21,988 -0- -0-
Loans................................... 12,622,913 12,342,825 12,205,892
Less:Allowance for loan losses.......... 175,046 179,197 179,126
Unearned income......................... 95,745 105,157 98,619
----------- ----------- -----------
Net loans............................ 12,352,122 12,058,471 11,928,147
Premises and equipment, net............. 324,903 314,200 314,893
Customers' acceptance liability......... 1,047 10,926 8,154
Accrued interest receivable and other
assets................................. 797,633 699,089 681,946
----------- ----------- -----------
$19,693,343 $18,622,256 $18,058,198
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits and interest-bearing liabili-
ties:
Deposits:
Noninterest-bearing demand............. $ 2,040,880 $ 2,062,906 $ 1,930,694
Interest-bearing demand................ 4,185,796 3,960,968 3,817,238
Savings................................ 990,272 1,027,557 1,027,709
Time................................... 4,700,940 5,000,535 4,950,091
Certificates of deposit of $100,000 or
more.................................. 1,099,279 893,231 886,901
----------- ----------- -----------
Total deposits........................ 13,017,167 12,945,197 12,612,633
Federal funds purchased and securities
sold under agreements to repurchase... 1,283,025 1,435,925 884,834
Other borrowed funds................... 312,156 985,918 1,334,041
Long-term Federal Home Loan Bank ad-
vances................................ 2,515,118 1,198,146 1,022,974
Other long-term debt................... 739,803 435,078 437,029
----------- ----------- -----------
Total deposits and interest-bearing
liabilities.......................... 17,867,269 17,000,264 16,291,511
Acceptances outstanding................. 1,047 10,926 8,154
Accrued expenses and other liabilities.. 387,070 225,821 395,064
----------- ----------- -----------
Total liabilities..................... 18,255,386 17,237,011 16,694,729
----------- ----------- -----------
Shareholders' equity:
Preferred stock -- no par value:
Authorized -- 2,000,000 shares; Issued
and outstanding -- none............... -0- -0- -0-
Common stock -- par value $1 a share:
Authorized -- 200,000,000 shares; Is-
sued -- 135,090,051, 135,031,989 and
135,031,989 shares, respectively...... 135,090 135,032 135,032
Capital surplus........................ 515,969 517,464 517,560
Retained earnings...................... 1,096,249 983,371 949,344
Cost of common stock in treasury--
15,849,495, 14,227,007 and 13,972,716
shares, respectively.................. (333,797) (268,019) (257,835)
Deferred compensation on restricted
stock................................. (9,054) (9,196) (9,637)
Accumulated other comprehensive in-
come.................................. 33,500 26,593 29,005
----------- ----------- -----------
Total shareholders' equity............ 1,437,957 1,385,245 1,363,469
----------- ----------- -----------
$19,693,343 $18,622,256 $18,058,198
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
--------------------- ------------------
1998 1997 1998 1997
---------- ---------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUE FROM INTEREST-EARNING ASSETS
Loans.................................. $ 810,060 $ 784,128 $275,383 $266,778
Available-for-sale securities.......... 160,265 115,112 56,958 37,867
Held-to-maturity securities............ 121,763 128,054 39,058 40,881
Trading securities..................... 85 65 37 12
Mortgage loans held for sale........... 3,435 1,504 932 519
Federal funds sold and securities pur-
chased under agreements to resell..... 690 709 286 226
Other interest-earning assets.......... 336 -0- 215 -0-
---------- ---------- -------- --------
Total revenue from interest-earning
assets.............................. 1,096,634 1,029,572 372,869 346,283
---------- ---------- -------- --------
INTEREST EXPENSE
Interest-bearing demand deposits....... 106,562 90,661 37,924 34,373
Savings deposits....................... 22,288 22,473 7,343 7,398
Time deposits.......................... 204,286 210,869 67,869 70,736
Certificates of deposit of $100,000 or
more.................................. 44,263 35,757 15,969 12,105
Federal funds purchased and securities
sold under agreements to repurchase... 54,128 58,377 20,048 19,050
Other borrowed funds................... 23,468 42,868 5,109 11,860
Long-term Federal Home Loan Bank ad-
vances................................ 85,842 38,218 32,450 13,091
Other long-term debt................... 35,994 24,094 12,643 8,208
---------- ---------- -------- --------
Total interest expense............... 576,831 523,317 199,355 176,821
---------- ---------- -------- --------
NET INTEREST INCOME.................... 519,803 506,255 173,514 169,462
Provision for loan losses.............. 45,834 51,619 8,000 16,102
---------- ---------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES........................... 473,969 454,636 165,514 153,360
---------- ---------- -------- --------
NONINTEREST REVENUES
Service charges on deposit accounts.... 78,236 73,313 26,289 24,564
Trust income........................... 50,846 45,531 15,714 15,552
Consumer investment services income.... 23,148 17,550 7,862 6,281
Bank owned life insurance policies..... 13,874 7,016 3,952 2,614
Net gain on sale of businesses......... 27,974 -0- -0- -0-
Other noninterest revenues............. 67,296 51,645 23,380 16,538
---------- ---------- -------- --------
Total noninterest revenues........... 261,374 195,055 77,197 65,549
---------- ---------- -------- --------
NONINTEREST EXPENSES
Salaries and employee benefits......... 215,441 185,017 70,810 62,481
Net occupancy expense.................. 42,524 41,714 14,438 13,909
Equipment expense...................... 46,958 41,883 14,892 14,171
Marketing expense...................... 15,306 13,600 5,270 4,424
Postage and office supplies............ 18,017 16,863 6,056 5,864
Communications expense................. 17,250 15,269 5,771 5,279
Amortization expense................... 12,888 13,889 4,166 4,672
Other noninterest expenses............. 66,060 62,856 17,913 20,287
---------- ---------- -------- --------
Total noninterest expenses........... 434,444 391,091 139,316 131,087
---------- ---------- -------- --------
INCOME BEFORE INCOME TAXES............. 300,899 258,600 103,395 87,822
Income taxes........................... 106,562 91,325 36,551 31,020
---------- ---------- -------- --------
NET INCOME........................... $ 194,337 $ 167,275 $ 66,844 $ 56,802
========== ========== ======== ========
Average common shares outstanding...... 119,821 123,798 119,136 121,724
Earnings per common share.............. $ 1.62 $ 1.35 $ .56 $ .47
Diluted average common shares outstand-
ing................................... 121,765 124,805 120,955 122,839
Diluted earnings per common share...... $ 1.60 $ 1.34 $ .55 $ .46
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON CAPITAL RETAINED TREASURY DEFERRED COMPREHENSIVE
STOCK SURPLUS EARNINGS STOCK COMPENSATION INCOME TOTAL
-------- -------- ---------- --------- ------------ ------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1,
1998................... $ 90,021 $562,475 $ 983,371 $(268,019) $(9,196) $26,593 $1,385,245
Adjustment for the
effect of 3-for-2
common stock split..... 45,011 (45,011) -0- -0- -0- -0- -0-
-------- -------- ---------- --------- ------- ------- ----------
BALANCE AT JANUARY 1,
1998 RESTATED.......... 135,032 517,464 983,371 (268,019) (9,196) 26,593 1,385,245
-------- -------- ---------- --------- ------- ------- ----------
Comprehensive income:
Net income............. -0- -0- 194,337 -0- -0- -0- 194,337
Other comprehensive in-
come, net of tax:
Unrealized gains on
available-for-sale
securities, net of
reclassification
adjustment........... -0- -0- -0- -0- -0- 6,907 6,907
----------
Other comprehensive in-
come.................. 6,907
----------
Comprehensive income.... 201,244
Cash dividends declared
($.60 per common
share)................. -0- -0- (72,061) -0- -0- -0- (72,061)
Common stock transac-
tions:
Special rights and war-
rants................. -0- (355) -0- -0- -0- -0- (355)
Purchase of common
stock................. 140 (202) (143) (97,934) -0- -0- (98,139)
Employee stock plans... (82) (1,498) (9,189) 28,707 142 -0- 18,080
Dividend reinvestment.. -0- 560 (66) 3,449 -0- -0- 3,943
-------- -------- ---------- --------- ------- ------- ----------
BALANCE AT SEPTEMBER 30,
1998................... $135,090 $515,969 $1,096,249 $(333,797) $(9,054) $33,500 $1,437,957
======== ======== ========== ========= ======= ======= ==========
Disclosure of reclassi-
fication amount:
Unrealized holding gains
on available-for-sale
securities arising
during the period...... $10,389
Less: Reclassification
adjustment for gains
realized in net
income................. 3,482
-------
Net unrealized gains on
available-for-sale
securities, net of
tax.................... $ 6,907
=======
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30
----------------------
1998 1997
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................ $ 194,337 $ 167,275
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses............................ 45,834 51,619
Depreciation and amortization of premises and equip-
ment................................................ 28,639 25,400
Amortization of premiums and discounts on held-to-ma-
turity securities and
available-for-sale securities....................... (2,113) (1,747)
Net (increase) decrease in mortgage loans held for
sale................................................ (663) 635
Net (increase) decrease in trading securities........ (1,283) 1,032
Net gains on sales of available-for-sale securities.. (5,218) (6,136)
Net increase in accrued interest receivable and other
assets.............................................. (106,172) (146,319)
Net increase in accrued expenses and other liabili-
ties................................................ 69,600 7,688
Provision for deferred income taxes.................. 27,683 33,770
Amortization of intangible assets.................... 12,342 12,417
Other................................................ 6,780 7,181
----------- ---------
Net cash provided by operating activities........... 269,766 152,815
----------- ---------
INVESTING ACTIVITIES
Proceeds from maturities and prepayments of available-
for-sale securities.................................. 535,321 243,463
Proceeds from sales of available-for-sale securities.. 630,135 911,627
Purchases of available-for-sale securities............ (1,838,659) (667,373)
Proceeds from maturities, prepayments and calls of
held-to-maturity securities.......................... 885,245 375,277
Purchases of held-to-maturity securities.............. (880,140) (43,063)
Net decrease in federal funds sold and securities pur-
chased under agreements to resell.................... 18,500 12,225
Net increase in other earning assets.................. (21,988) -0-
Net increase in loans................................. (401,353) (299,131)
Net purchases of premises and equipment............... (39,342) (38,701)
----------- ---------
Net cash (used) provided by investing activities.... (1,112,281) 494,324
----------- ---------
FINANCING ACTIVITIES
Net increase in demand deposits and savings accounts.. 165,517 155,556
Net decrease in time deposits......................... (93,346) (10,108)
Net decrease in federal funds purchased and securities
sold under agreements to repurchase.................. (152,900) (987,452)
Net (decrease) increase in other borrowed funds....... (673,762) 283,658
Issuance of long-term Federal Home Loan Bank advances
and other long-term debt............................. 1,878,973 940,000
Payments for maturing long-term debt.................. (256,942) (890,753)
Cash dividends paid................................... (72,061) (69,365)
Cash payment for special rights and warrants on
stock................................................ (355) -0-
Proceeds from employee stock plans and dividend rein-
vestment plan........................................ 19,788 17,490
Purchase of common stock.............................. (98,139) (155,627)
----------- ---------
Net cash provided (used) by financing activities.... 716,773 (716,601)
----------- ---------
Decrease in cash and cash equivalents................. (125,742) (69,462)
Cash and cash equivalents at beginning of period...... 658,500 648,494
----------- ---------
Cash and cash equivalents at end of period............ $ 532,758 $ 579,032
=========== =========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
General--The consolidated financial statements conform to generally accepted
accounting principles and to general industry practices. The accompanying
interim financial statements are unaudited; however, in the opinion of
management, all adjustments necessary for the fair presentation of the
consolidated financial statements have been included. All such adjustments are
of a normal recurring nature. Certain amounts in the prior year's financial
statements have been reclassified to conform with the 1998 presentation. These
reclassifications had no effect on net income. All common share data presented
in the consolidated financial statements reflect a three-for-two stock split
completed on April 30, 1998. The notes included herein should be read in
conjunction with the notes to consolidated financial statements included in
AmSouth Bancorporation's (AmSouth) 1997 annual report on Form 10-K.
On January 1, 1998, AmSouth adopted the provisions of Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (Statement 125), relating
to repurchase agreements, securities lending and other similar transactions
and pledged collateral, which had 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
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 the additional
provisions of Statement 125 as amended by Statement 127 resulted in no
material impact on AmSouth's financial condition or results of operations.
On January 1, 1998, AmSouth also adopted 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 adoption of Statement 130 did not have a material
impact on AmSouth's financial condition or results of operations.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132, "Employers' Disclosures about
Pension and Other Postretirement Benefits--an amendment of FASB Statements No.
87, 88, and 106." This statement revises employers' disclosures about pension
and other postretirement benefit plans, but does not change the measurement or
recognition of those plans. It standardizes the disclosure requirements to the
extent practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis and eliminates certain disclosures that are no longer as useful as
they were when Statements 87, 88 and 106 were issued. This statement is
effective for fiscal years beginning after December 15, 1997. Restatement of
disclosures for previous periods provided for comparative purposes is required
unless the information is not readily available, in which case the notes to
the financial statements should include all available information and a
description of the information not available. These disclosure requirements
will have no material impact on AmSouth's financial condition or results of
operations.
In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and for Hedging Activities," (Statement
133), was issued by the Financial Accounting Standards Board. Statement 133
provides a comprehensive and consistent standard for the recognition and
measurement of
7
<PAGE>
derivatives and hedging activities. It requires all derivatives to be recorded
on the balance sheet at fair value and establishes unique accounting treatment
for the following three different types of hedges: hedges of changes in the
fair value of assets, liabilities or firm commitments, referred to as fair
value hedges; hedges of the variable cash flows of forecasted transactions,
referred to as cash flow hedges; and hedges of foreign currency exposures of
net investments in foreign operations. The accounting for each of the three
types of hedges results in recognizing offsetting changes in value or cash
flows of both the hedge and the hedged item in earnings in the same period.
Changes in the fair value of derivatives that do not meet the criteria of one
of these three types of hedges are included in earnings in the period of
change. Statement 133 is effective for fiscal years beginning after June 15,
1999. The impact of adopting Statement 133 on AmSouth's financial condition or
results of operations has not been determined at this time.
Earnings Per Common Share--The following table sets forth the computation of
earnings per common share and diluted earnings per common share:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS ENDED
ENDED SEPTEMBER 30 SEPTEMBER 30
------------------- -----------------
1998 1997 1998 1997
--------- --------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Earnings per common share computation:
Numerator:
Net income............................ $ 66,844 $ 56,802 $194,337 $167,275
Denominator:
Average common shares outstanding..... 119,136 121,724 119,821 123,798
Earnings per common share............... $ .56 $ .47 $ 1.62 $ 1.35
Diluted earnings per common share
computation:
Numerator:
Net income............................ $ 66,844 $ 56,802 $194,337 $167,275
Denominator:
Average common shares outstanding..... 119,136 121,724 119,821 123,798
Dilutive shares contingently issua-
ble.................................. 1,819 1,115 1,944 1,007
--------- --------- -------- --------
Average diluted common shares out-
standing............................ 120,955 122,839 121,765 124,805
Diluted earnings per common share....... $ .55 $ .46 $ 1.60 $ 1.34
</TABLE>
Cash Flows--For the nine months ended September 30, 1998 and 1997, AmSouth
paid interest of $557,583,000 and $516,113,000, respectively, and income taxes
of $58,408,000 and $48,770,000, respectively. Noncash transfers from loans to
foreclosed properties for the nine months ended September 30, 1998 and 1997
were $8,523,000 and $13,066,000, respectively, and noncash transfers from
foreclosed properties to loans were $364,000 and $2,290,000, respectively. For
the nine months ended September 30, 1998, noncash transfers from loans to
available-for-sale securities of approximately $49,183,000 were made in
connection with mortgage loan securitizations.
Shareholders' Equity--On March 20, 1997, AmSouth's Board of Directors
approved the repurchase by AmSouth of up to 9,000,000 shares of its common
stock for the purpose of funding employee benefit and dividend reinvestment
plans and for general corporate purposes. AmSouth purchased 3,841,000 shares
at a cost of $108,599,000 during 1997 and 2,551,000 shares at a cost of
$98,139,000 during the first nine months of 1998 under this authorization. At
September 30, 1998, approximately 2,608,000 shares remained authorized for
purchase.
On March 19, 1998, AmSouth's Board of Directors approved a three-for-two
common stock split in the form of a 50 percent common stock dividend. The
stock dividend was paid April 30 to shareholders of record as of April 3.
8
<PAGE>
Independent Accountants' Review Report
The Board of Directors
AmSouth Bancorporation
We have reviewed the accompanying consolidated statement of condition of
AmSouth Bancorporation and subsidiaries as of September 30, 1998 and 1997, and
the related consolidated statement of earnings for the three-month and nine-
month periods ended September 30, 1998 and 1997, the consolidated statement of
cash flows for the nine-month periods ended September 30, 1998 and 1997 and
the consolidated statement of shareholders' equity for the nine-month period
ended September 30, 1998. These financial statements are the responsibility of
the Company's management.
We conducted our reviews in accordance with the standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which will
be performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of condition of AmSouth Bancorporation
and subsidiaries as of December 31, 1997, and the related consolidated
statements of earnings, shareholders' equity, and cash flows for the year then
ended (not presented herein) and in our report dated February 10, 1998, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
statement of condition as of December 31, 1997 is fairly stated, in all
material respects, in relation to the consolidated statement of condition from
which it has been derived.
/s/ ERNST & YOUNG LLP
November 10, 1998
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
AmSouth reported net income of $194.3 million for the nine months ended
September 30, 1998, a 16.2% increase over net income of $167.3 million for the
same period of 1997. Diluted earnings per common share were $1.60 and $1.34
for the nine month periods ended September 30, 1998 and 1997, respectively.
Year-to-date earnings resulted in an annualized return on average assets (ROA)
of 1.34% and an annualized return on average equity (ROE) of 18.37% for 1998
compared to 1.24% and 16.30%, respectively, for the first nine months of 1997.
AmSouth's 1998 year-to-date operating efficiency ratio improved to 55.31%
compared to 55.33% for the prior year.
Net income for the third quarter of 1998 was $66.8 million compared to $56.8
million for the same period of 1997. Diluted earnings per common share were
$.55 and $.46, respectively. ROA and ROE for the third quarter of 1998 were
1.34% and 18.65%, respectively, compared to 1.26% and 16.64%, respectively,
for the third quarter of 1997.
Net Interest Income
Net interest income on a fully taxable equivalent basis for the nine months
ended September 30, 1998 was $524.1 million, a 2.4% increase over the same
period of 1997. Interest income earned on total interest-earning assets
increased $65.8 million and was partially offset by a $53.5 million increase
in interest paid on total interest-bearing liabilities. Average investment
securities increased $838.9 million, compared to the prior year, contributing
$37.6 million to the growth in interest income. A $347.7 million increase in
average loans net of unearned income resulted in a $25.9 million increase in
interest income. Managed loans, which includes loans sold to conduits,
increased $874.0 million to $13.0 billion compared to the same period of 1997.
Interest paid on other interest-bearing liabilities increased $40.1 million,
primarily due to a $1.2 billion increase in average long-term Federal Home
Loan Bank advances and the issuance of $304.6 million in 6.45% long-term
subordinated debt during the first quarter of 1998. These changes combined
with increased rates paid on interest-bearing deposits resulted in a 19 basis
point decrease in both the net interest margin and the net interest spread
compared to the first nine months of the prior year.
Net interest income on a fully taxable equivalent basis for the three months
ended September 30, 1998 was $175.0 million, a 2.3% increase over the same
period of 1997. The net interest margin decreased 31 basis points and the net
interest spread decreased 29 basis points compared to the prior year. The
reasons for the decreases were primarily the same as those discussed in the
year-to-date analysis. In addition, the net interest margin and incremental
interest spread for the quarter were impacted by a decrease in loans net of
unearned income resulting from the sale of approximately $170.0 million of
credit card loans during the second quarter of 1998.
Asset/Liability Management
AmSouth maintains a formal asset and liability management process to
quantify, monitor and control interest rate risk and to assist management in
maintaining stability in the net interest margin under varying interest rate
environments. The company accomplishes this process through the development
and implementation of lending, funding and pricing strategies designed to
maximize net interest income performance under varying interest rate
environments and in compliance with specific liquidity and interest rate risk
guidelines.
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 net interest income (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
10
<PAGE>
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 September 30, 1998,
AmSouth would expect decreases in NII of $.2 million and $4.2 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, from time to time, utilizes various off-balance sheet instruments
such as interest rate swaps, caps and floors to assist in managing interest
rate risk. During 1998, AmSouth has entered into additional interest rate
swaps in the notional amount of $419.0 million. There have been no maturities
of interest rate swaps in 1998. Interest rate swaps in the notional amount of
$50.0 million were terminated during the third quarter of 1998. Additionally,
interest rate swaps in the notional amount of $225.0 million were called
during the first nine months of 1998. At September 30, 1998, AmSouth had
interest rate swaps, all of which receive fixed rates, totaling a notional
amount of $1.0 billion. The swaps added in 1998 as hedges were designated to
certain commercial loans, available-for-sale securities and bank debt. At
September 30, 1998, AmSouth also held other off-balance sheet instruments to
provide customers and AmSouth a means of managing the risks of changing
interest and foreign exchange rates. These other off-balance sheet instruments
were immaterial.
Credit Quality
AmSouth maintains an allowance for loan losses which management believes is
adequate to absorb losses inherent in the loan portfolio. A formal review is
prepared quarterly to assess the risk in the portfolio and to determine the
adequacy of the allowance for loan losses. The review includes analyses of
historical performance, the level of nonperforming and adversely rated loans,
specific analyses of certain problem loans, loan activity since the previous
quarter, reports prepared by the Loan Review Department, consideration of
current economic conditions, and other pertinent information. The level of
allowance to net loans outstanding will vary depending on the overall results
of this quarterly review. The review is presented to and subsequently approved
by senior management and the Audit and Community Responsibility Committee of
the Board of Directors.
Table 6 presents a five-quarter analysis of the allowance for loan losses.
At September 30, 1998, the allowance for loan losses was $175.0 million, or
1.40% of loans net of unearned income, compared to $179.1 million, or 1.48%,
for the prior year. The coverage ratio of the allowance for loan losses to
nonperforming loans decreased from 265.83% at September 30, 1997 to 236.10%
for the same period in 1998. Over the same period, the level of nonperforming
loans increased $6.8 million.
Net charge-offs for the quarter ended September 30, 1998 were $7.0 million,
a decrease of $9.0 million or 56.2% from $16.1 million a year earlier. For the
nine months ended September 30, 1998, net charge-offs were $35.1 million, a
decrease of $16.4 million, or 31.8%, from $51.5 million for the same period of
1997. Annualized net charge-offs to average loans net of unearned income were
.22% and .38%, respectively, for the three months and nine months ended
September 30, 1998 compared to .53% and .57%, respectively, for the same
periods of the prior year. Decreases in net charge-offs occurred primarily in
the consumer loan portfolio. Consumer annualized net charge-offs fell to .43%
and .67% of average consumer loans for the three months and nine months ended
September 30, 1998, respectively, compared to .94% and 1.06% for the prior
year. The decrease occurred in all categories of consumer loans with the
largest in revolving credit loans. The decline in revolving credit net charge-
offs is the result of the sale of approximately $170.0 million of credit card
loans in the second quarter of 1998. Net charge-offs of impaired loans for the
three months and nine months ended September 30, 1998 totaled $611 thousand
and $5.5 million, respectively, compared to $1.9 million and $3.8 million for
the same periods in 1997. The provision for loan losses for the three months
and nine months ended September 30, 1998 was $8.0 million and $45.8 million,
respectively, compared to $16.1 million and $51.6 million, respectively, for
year-earlier periods.
11
<PAGE>
Table 7 presents a five-quarter comparison of the components of
nonperforming assets. At September 30, 1998, nonperforming assets as a
percentage of loans net of unearned income, foreclosed properties and
repossessions, increased one basis point to .67% compared to September 30,
1997. The level of nonperforming assets increased $4.4 million during the same
period.
Included in nonperforming assets at September 30, 1998 and 1997 was $42.2
million and $37.5 million, respectively, in loans that were considered to be
impaired, substantially all of which were on a nonaccrual basis. Collateral-
dependent loans, which were measured at the fair value of the collateral,
constituted approximately all of these impaired loans. At September 30, 1998
and 1997, there was $4.8 million and $8.4 million, respectively, in the
allowance for loan losses specifically allocated to these impaired loans. The
average balance of impaired loans for the three months ended September 30,
1998 and 1997 was $44.4 million and $40.3 million, respectively, and $48.1
million and $41.8 million, respectively, for the nine months ended September
30, 1998 and 1997. AmSouth recorded no material interest income on its
impaired loans during the three months and nine months ended September 30,
1998.
Noninterest Revenues and Noninterest Expenses
Year-to-date noninterest revenues totaled $261.4 million at September 30,
1998 compared to $195.1 million for the prior year. Included in noninterest
revenues was a $28.0 million net gain from the sale of AmSouth's bond
administration and stock transfer businesses and the sale of certain credit
card assets during the second quarter of 1998. Excluding this gain, year-to-
date noninterest revenues rose $38.3 million or 19.7% compared to the same
period a year earlier. Growth occurred in all major categories, including
trust income, consumer investment services income, service charges on deposit
accounts, and income from bank owned life insurance. Trust income increased
$5.3 million primarily due to new employee benefit plan administration and
personal trust accounts, fee increases and strength in financial markets
during the first half of 1998. Consumer investment services income increased
$5.6 million primarily as a result of a higher sales volume of mutual funds
and annuity products. Bank owned life insurance revenue increased $6.9 million
due primarily to an increase in policies outstanding. Other noninterest
revenues increased $15.7 million primarily due to an increase in mortgage
income.
Noninterest revenues for the third quarter of 1998 were $77.2 million, a
17.8% increase over the same period of the prior year. Changes for the quarter
were primarily for the same reasons discussed in the year-to-date analysis.
Year-to-date noninterest expenses increased 11.1% to $434.4 million at
September 30, 1998 compared to $391.1 million for the prior year. Salaries and
employee benefits increased $30.4 million when compared to the same period a
year ago. The increase is primarily due to merit increases, bonuses,
incentives and additions to staff for new initiatives. Equipment expense
increased $5.1 million primarily reflecting the costs of investments in
technology for the consumer and commercial lines of business and costs
associated with Year 2000 system compliance. Communications expense increased
$2.0 million primarily due to increasing expenses associated with a wide area
network to support the technology for the consumer and commercial lines of
business. Other noninterest expenses increased $3.2 million due primarily to
contributions to AmSouth's charitable foundation and operating costs
associated with new revenue initiatives.
Noninterest expenses for the third quarter were $139.3 million compared to
$131.1 million for the same period of the prior year. Changes were primarily
for the same reasons discussed in the year-to-date analysis.
Capital Adequacy
At September 30, 1998, shareholders' equity totaled $1.4 billion or 7.30% of
total assets. Since December 31, 1997, shareholders' equity has increased
$52.7 million as the increase from net income of $194.3 million was partially
offset by dividends of $72.1 million and the purchase of 2,551,000 shares of
AmSouth common stock for $98.1 million.
12
<PAGE>
Table 10 presents the capital amounts and risk-adjusted capital ratios for
AmSouth and AmSouth Bank at September 30, 1998 and 1997. At September 30,
1998, AmSouth exceeded the regulatory minimum required risk-adjusted Tier 1
Capital Ratio of 4.00% and risk-adjusted Total Capital Ratio of 8.00%. In
addition, the risk-adjusted capital ratios for AmSouth Bank were above the
regulatory minimums, and the bank was well capitalized at September 30, 1998.
Year 2000
The following information which appears in this section constitutes Year
2000 Readiness Disclosure, pursuant to the Year 2000 Information and Readiness
Disclosure Act.
The Year 2000 issue is the result of computer systems using a two-digit
format, as opposed to four digits, to indicate the year. Any of AmSouth's
computer programs or hardware that have date-sensitive software or embedded
chips may not appropriately interpret dates beyond the year 1999. This could
result in a system failure, miscalculation or other computer errors causing
disruptions of operations. AmSouth believes that it has an effective program
in place to resolve the Year 2000 issue in a timely manner and that it is
unlikely that Year 2000 issues will cause any significant problems with
customer service or otherwise have a material adverse impact on AmSouth's
operations or financial performance.
A Year 2000 project team, consisting of professionals from all areas of
AmSouth, was created last year to plan and oversee AmSouth's Year 2000
efforts. A plan was developed which involves the following five phases:
awareness, assessment, remediation, testing and implementation. The plan also
involves communicating with external service providers to ensure that they are
taking appropriate action to remedy any Year 2000 issues. To date, AmSouth has
fully completed its assessment phase of all systems that could be affected by
the Year 2000. As part of the assessment phase, systems which have the
greatest impact on the operations of AmSouth were designated as mission
critical systems.
The remediation and testing phases for all internal mission critical systems
is nearing completion. As of October 31, 1998, modifications of 100% of these
systems have been completed. Once systems are modified, AmSouth conducts unit
testing, integrated testing, and then completes implementation. These phases
may run concurrently for different systems. To date, AmSouth has completed the
testing of 95% of internal mission critical systems and has implemented 74% of
its remediated mission critical systems. AmSouth expects all testing of
internal mission critical systems to be completed prior to December 31, 1998.
While implementation of these systems is required to be completed no later
than June 30, 1999, AmSouth expects to have virtually all of its internal
mission critical systems fully implemented by December 31, 1998, fully six
months ahead of regulatory guidelines. Even after testing and implementation,
AmSouth will continue testing throughout 1999 to reaffirm the Year 2000
compliance of mission critical systems.
A small number of mission critical systems are provided by third parties on
a service bureau basis, such as credit card processing and services supporting
securities brokerage businesses. All such third party providers of mission
critical services have certified their Year 2000 readiness and are all on
schedule to complete their testing by March 31, 1999, as required by federal
banking regulations. AmSouth expects all third party mission critical systems
to be fully implemented by June 30, 1999.
While AmSouth's greatest focus and efforts to date have been on preparing
mission critical systems for the Year 2000, 82% of non-critical systems have
been remediated, tested and implemented as of October 31, 1998. Eleven percent
of non-critical systems have been remediated and are in the process of testing
or implementation, and 7% of non-critical systems are awaiting remediation.
Non-critical systems are expected to be Year 2000 compliant and in production
either prior to or during 1999.
In addition, AmSouth is in the process of determining the Year 2000
readiness of its significant customers, suppliers and counterparties. In
December 1997, AmSouth began researching the issue of Year 2000 and the
possible impact on its loan customers' liquidity and their ability to repay
their loans. Earlier this year, AmSouth
13
<PAGE>
established an education and assessment program for all of its commercial loan
customers with credit exposure of $100,000 or more. Meetings were held with
these customers to assess their understanding, progress and estimated costs
associated with preparing their systems to operate in the Year 2000. AmSouth
plans to continue to assess and evaluate the impact of Year 2000 in its credit
analysis of current and future loan customers throughout 1999 and into 2000.
AmSouth has also used a survey process to review its exposure with respect
to counterparties to various transactions. In domestic securities
transactions, AmSouth only enters into transactions with recognized dealers
that are monitored by U.S. regulators. AmSouth plans to suspend trading with
any domestic dealers who cannot demonstrate their Year 2000 compliance by the
fourth quarter of 1999. Annual lines with international securities dealers
will be reviewed by the end of 1998.
AmSouth has contacted all of its essential suppliers regarding their Year
2000 compliance and has completed an analysis of the possible impact of
noncompliance on their ability to fulfill their commitments to AmSouth. To
date, AmSouth is not aware of any external supplier with a Year 2000 issue
that would materially impact AmSouth's results of operations, liquidity, or
capital resources.
The potential impact of the Year 2000 issue on AmSouth's responsibilities
when it acts in a fiduciary capacity is also being considered. Assets will be
reviewed with the degree of emphasis varying based on the risk profile of the
asset. This will be combined with a review of accounts above a predetermined
dollar amount. Consideration of Year 2000 issues will be a part of ongoing
activities, including investment selection and acceptance of new accounts.
In recent years, AmSouth has invested heavily in new technology to improve
service and competitiveness. In addition, AmSouth utilizes common operating
systems company-wide. As a result, AmSouth estimates that the total
incremental cost of Year 2000 compliance, which excludes the cost to upgrade
and replace systems in the ordinary course of business, will not exceed $10.0
million and will not be material to AmSouth's financial performance.
As noted above, AmSouth believes that it has an effective program in place
to resolve the Year 2000 issue. However, if appropriate modifications and
conversions are not completed in a timely manner for some unexpected reason,
the Year 2000 issue could impact AmSouth's operations. In addition,
disruptions in the economy generally resulting from Year 2000 issues could
also materially impact AmSouth. There can also be no guarantee that the
systems of other companies on which AmSouth's systems rely will be converted
in a timely manner and not have any adverse impact on AmSouth's systems.
Accordingly, AmSouth is assessing the extent to which its operations are
vulnerable to other companies' systems and is developing contingency plans to
minimize the impact on AmSouth's operations if these organizations fail to
remediate their systems properly. For more information regarding the
uncertainties in estimating the cost and timing of Year 2000 compliance,
please see the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" section of AmSouth's Report on Form 10-K for the
year ended December 31, 1997.
14
<PAGE>
TABLE 1--FINANCIAL SUMMARY
<TABLE>
<CAPTION>
SEPTEMBER 30
----------------------- %
1998 1997 CHANGE
----------- ----------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET SUMMARY
End-of-period balances:
Loans net of unearned income.................... $12,527,168 $12,107,273 3.5%
Total investment securities*.................... 5,524,204 4,433,809 24.6
Total assets.................................... 19,693,343 18,058,198 9.1
Total deposits.................................. 13,017,167 12,612,633 3.2
Shareholders' equity............................ 1,437,957 1,363,469 5.5
Year-to-date average balances:
Loans net of unearned income.................... $12,370,269 $12,022,588 2.9%
Total investment securities*.................... 5,436,287 4,594,108 18.3
Total assets.................................... 19,432,513 18,007,394 7.9
Total deposits.................................. 12,890,941 12,509,595 3.0
Shareholders' equity............................ 1,414,533 1,372,227 3.1
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
-------------------- % -------------------- %
1998 1997 CHANGE 1998 1997 CHANGE
--------- --------- ------ --------- --------- ------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Net income............. $ 194,337 $ 167,275 16.2% $ 66,844 $ 56,802 17.7%
Per common share **.... 1.62 1.35 20.0 0.56 0.47 19.1
Per common share--
diluted **............ 1.60 1.34 19.4 0.55 0.46 19.6
SELECTED RATIOS
Return on average
assets (annualized)... 1.34% 1.24% 1.34% 1.26%
Return on average
equity (annualized)... 18.37 16.30 18.65 16.64
Average equity to
assets................ 7.28 7.62 7.16 7.57
End of period equity to
assets................ 7.30 7.55 7.30 7.55
End of period tangible
equity to assets...... 6.16 6.22 6.16 6.22
Allowance for loan
losses to loans net of
unearned income....... 1.40 1.48 1.40 1.48
Efficiency ratio....... 55.31 55.33 55.25 55.39
COMMON STOCK DATA **
Cash dividends
declared.............. $ 0.60 $ 0.56 $ 0.20 $ 0.19
Book value at end of
period................ 12.06 11.26 12.06 11.26
Market value at end of
period................ 34.13 32.30 34.13 32.30
Average common shares
outstanding........... 119,821 123,798 119,136 121,724
Average common shares
outstanding--diluted.. 121,765 124,805 120,955 122,839
</TABLE>
- --------
* Excludes adjustment for market valuation on available-for-sale securities.
** Restated for three-for-two common stock split in April 1998.
15
<PAGE>
TABLE 2--YEAR-TO-DATE YIELDS EARNED ON AVERAGE INTEREST-EARNING ASSETS
AND RATES PAID ON AVERAGE INTEREST-BEARING LIABILITIES
<TABLE>
<CAPTION>
1998 1997
----------------------------- -----------------------------
NINE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
----------------------------- -----------------------------
AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
----------- --------- ------ ----------- --------- ------
(TAXABLE EQUIVALENT BASIS-DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans net of unearned
income................ $12,370,269 $ 811,406 8.77% $12,022,588 $ 785,476 8.74%
Available-for-sale
securities............ 3,024,666 160,265 7.08 2,083,268 115,112 7.39
Held-to-maturity
securities:
Taxable................ 2,298,117 115,642 6.73 2,357,316 119,652 6.79
Tax-free............... 110,267 9,118 11.06 153,524 12,613 10.98
----------- --------- ----------- ---------
Total held-to-maturity
securities............ 2,408,384 124,760 6.93 2,510,840 132,265 7.04
----------- --------- ----------- ---------
Total investment
securities........... 5,433,050 285,025 7.01 4,594,108 247,377 7.20
Other interest-earning
assets................ 113,045 4,546 5.38 65,622 2,278 4.64
----------- --------- ----------- ---------
Total interest-earning
assets................ 17,916,364 1,100,977 8.22 16,682,318 1,035,131 8.30
Cash and other assets... 1,651,194 1,473,038
Allowance for loan
losses................. (175,764) (179,845)
Market valuation on
available-for-sale
securities............. 40,719 31,883
----------- -----------
$19,432,513 $18,007,394
=========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing
liabilities:
Interest-bearing demand
deposits.............. $ 3,998,916 106,562 3.56 $ 3,679,371 90,661 3.29
Savings deposits....... 1,023,954 22,288 2.91 1,050,441 22,473 2.86
Time deposits.......... 4,860,101 204,286 5.62 5,128,856 210,869 5.50
Certificates of deposit
of $100,000 or more .. 1,039,599 44,263 5.69 846,443 35,757 5.65
Federal funds purchased
and securities sold
under agreements to
repurchase ........... 1,378,322 54,128 5.25 1,471,987 58,377 5.30
Other interest-bearing
liabilities........... 3,448,590 145,304 5.63 2,426,567 105,180 5.80
----------- --------- ----------- ---------
Total interest-bearing
liabilities........... 15,749,482 576,831 4.90 14,603,665 523,317 4.79
--------- ----- --------- -----
NET INTEREST SPREAD.... 3.32% 3.51%
===== =====
Noninterest-bearing
demand deposits....... 1,968,371 1,804,484
Other liabilities...... 300,127 227,018
Shareholders' equity... 1,414,533 1,372,227
----------- -----------
$19,432,513 $18,007,394
=========== ===========
NET INTEREST
INCOME/MARGIN ON A
TAXABLE EQUIVALENT
BASIS................. 524,146 3.91% 511,814 4.10%
===== =====
Taxable equivalent
adjustment:
Loans.................. 1,346 1,348
Securities............. 2,997 4,211
--------- ---------
Total taxable
equivalent
adjustment........... 4,343 5,559
--------- ---------
Net interest income.. $ 519,803 $ 506,255
========= =========
</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 periods presented. Available-for-sale securities excludes certain
noninterest-earning, marketable equity securities.
16
<PAGE>
TABLE 3--QUARTERLY YIELDS EARNED ON AVERAGE INTEREST-EARNING ASSETS AND RATES
PAID ON AVERAGE INTEREST-BEARING LIABILITIES
<TABLE>
<CAPTION>
1998
-----------------------------------------------------------
THIRD QUARTER SECOND QUARTER FIRST QUARTER
---------------------------- ----------------------------- -----------------------------
AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
----------- -------- ------ ------------ -------- ------- ------------ -------- -------
(TAXABLE EQUIVALENT BASIS--DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans net of
unearned income.. $12,605,379 $275,905 8.68% $12,303,518 $270,372 8.81% $12,197,427 $265,129 8.82%
Available-for-
sale securities.. 3,271,460 56,958 6.91 3,101,694 54,860 7.09 2,694,502 48,447 7.29
Held-to-maturity
securities:
Taxable.......... 2,217,506 37,154 6.65 2,391,211 39,829 6.68 2,286,392 38,659 6.86
Tax-free......... 113,616 2,834 9.90 102,976 2,712 10.56 114,216 3,572 12.68
----------- -------- ------------ -------- ------------ --------
Total held-to-
maturity
securities....... 2,331,122 39,988 6.81 2,494,187 42,541 6.84 2,400,608 42,231 7.13
----------- -------- ------------ -------- ------------ --------
Total investment
securities...... 5,602,582 96,946 6.87 5,595,881 97,401 6.98 5,095,110 90,678 7.22
Other interest-
earning assets... 122,408 1,470 4.76 126,453 1,825 5.79 89,915 1,251 5.64
----------- -------- ------------ -------- ------------ --------
Total interest-
earning assets... 18,330,369 374,321 8.10 18,025,852 369,598 8.22 17,382,452 357,058 8.33
Cash and other
assets............ 1,653,319 1,665,235 1,634,825
Allowance for loan
losses............ (175,160) (172,135) (180,050)
Market valuation
on available-for-
sale securities... 40,383 37,000 44,824
----------- ------------ ------------
$19,848,911 $19,555,952 $18,882,051
=========== ============ ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing
liabilities:
Interest-bearing
demand deposits.. $ 4,132,755 37,924 3.64 $ 3,955,644 35,003 3.55 $ 3,905,855 33,635 3.49
Savings
deposits......... 1,002,891 7,343 2.90 1,034,423 7,528 2.92 1,034,900 7,417 2.91
Time deposits.... 4,787,203 67,869 5.62 4,848,525 67,964 5.62 4,946,323 68,453 5.61
Certificates of
deposit of
$100,000 or
more............. 1,111,031 15,969 5.70 1,037,385 14,702 5.68 968,818 13,592 5.69
Federal funds
purchased and
securities sold
under agreements
to repurchase.... 1,520,284 20,048 5.23 1,261,245 16,484 5.24 1,351,583 17,596 5.28
Other interest-
bearing
liabilities...... 3,577,479 50,202 5.57 3,702,694 51,980 5.63 3,059,910 43,122 5.72
----------- -------- ------------ -------- ------------ --------
Total interest-
bearing
liabilities...... 16,131,643 199,355 4.90 15,839,916 193,661 4.90 15,267,389 183,815 4.88
-------- ----- -------- ------- -------- -------
NET INTEREST
SPREAD............ 3.20% 3.32% 3.45%
===== ======= =======
Noninterest-
bearing demand
deposits.......... 1,969,029 2,000,507 1,935,206
Other
liabilities....... 326,336 294,212 279,315
Shareholders'
equity............ 1,421,903 1,421,317 1,400,141
----------- ------------ ------------
$19,848,911 $19,555,952 $18,882,051
=========== ============ ============
NET INTEREST
INCOME/MARGIN ON A
TAXABLE EQUIVALENT
BASIS............. 174,966 3.79% 175,937 3.91% 173,243 4.04%
===== ======= =======
Taxable equivalent
adjustment:
Loans............ 522 428 396
Securities....... 930 887 1,180
-------- -------- --------
Total taxable
equivalent
adjustment....... 1,452 1,315 1,576
-------- -------- --------
Net interest
income.......... $173,514 $174,622 $171,667
======== ======== ========
1997
-----------------------------------------------------------
FOURTH QUARTER THIRD QUARTER
----------------------------- -----------------------------
AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------------ -------- ------- ------------ -------- -------
(TAXABLE EQUIVALENT BASIS--DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans net of
unearned income.. $12,168,038 $268,361 8.75% $12,056,663 $267,195 8.79%
Available-for-
sale securities.. 2,202,087 40,488 7.29 2,026,440 37,867 7.41
Held-to-maturity
securities:
Taxable.......... 2,151,095 36,486 6.73 2,272,106 38,416 6.71
Tax-free......... 123,758 3,376 10.82 136,758 3,693 10.71
------------ -------- ------------ --------
Total held-to-
maturity
securities....... 2,274,853 39,862 6.95 2,408,864 42,109 6.94
------------ -------- ------------ --------
Total investment
securities...... 4,476,940 80,350 7.12 4,435,304 79,976 7.15
Other interest-
earning assets... 93,150 987 4.20 67,961 757 4.42
------------ -------- ------------ --------
Total interest-
earning assets... 16,738,128 349,698 8.29 16,559,928 347,928 8.34
Cash and other
assets............ 1,541,105 1,479,162
Allowance for loan
losses............ (179,095) (179,827)
Market valuation
on available-for-
sale securities... 45,118 41,515
------------ ------------
$18,145,256 $17,900,778
============ ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing
liabilities:
Interest-bearing
demand deposits.. $ 3,871,949 32,925 3.37 $ 3,901,202 34,373 3.50
Savings
deposits......... 1,029,337 7,455 2.87 1,029,446 7,398 2.85
Time deposits.... 5,050,259 70,969 5.58 5,060,864 70,736 5.55
Certificates of
deposit of
$100,000 or
more............. 907,105 12,978 5.68 846,684 12,105 5.67
Federal funds
purchased and
securities sold
under agreements
to repurchase.... 1,497,408 20,083 5.32 1,408,515 19,050 5.37
Other interest-
bearing
liabilities...... 2,284,497 33,784 5.87 2,223,116 33,159 5.92
------------ -------- ------------ --------
Total interest-
bearing
liabilities...... 14,640,555 178,194 4.83 14,469,827 176,821 4.85
-------- ------- -------- -------
NET INTEREST
SPREAD............ 3.46% 3.49%
======= =======
Noninterest-
bearing demand
deposits.......... 1,867,575 1,835,568
Other
liabilities....... 274,620 240,772
Shareholders'
equity............ 1,362,506 1,354,611
------------ ------------
$18,145,256 $17,900,778
============ ============
NET INTEREST
INCOME/MARGIN ON A
TAXABLE EQUIVALENT
BASIS............. 171,504 4.07% 171,107 4.10%
======= =======
Taxable equivalent
adjustment:
Loans............ 364 417
Securities....... 1,118 1,228
-------- --------
Total taxable
equivalent
adjustment....... 1,482 1,645
-------- --------
Net interest
income.......... $170,022 $169,462
======== ========
</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 periods presented. Available-for-sale securities excludes
certain noninterest-earning, marketable equity securities.
17
<PAGE>
TABLE 4--MATURITIES AND INTEREST RATES EXCHANGED ON SWAPS
<TABLE>
<CAPTION>
MATURE DURING
--------------------------
1998 1999 2000 2008 TOTAL
----- ----- ----- ----- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Receive fixed rate swaps:
Notional amount........................... $ 160 $ 625 $ 79 $ 175 $1,039
Receive rate.............................. 6.49% 6.62% 6.66% 6.13% 6.52%
Pay rate.................................. 5.64% 5.54% 5.43% 5.54% 5.55%
</TABLE>
- --------
NOTE: The maturities and interest rates exchanged are calculated assuming that
interest rates remain unchanged from September 30, 1998 rates. The
information presented could change as future interest rates increase or
decrease.
TABLE 5--LOANS AND CREDIT QUALITY
<TABLE>
<CAPTION>
NET CHARGE-OFFS
LOANS NONPERFORMING LOANS NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
----------------------- ------------------- ------------------
1998 1997 1998 1997 1998 1997
----------- ----------- --------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial.............. $ 3,607,687 $ 3,553,058 $ 19,224 $ 17,673 $ 5,357 $ 3,533
Commercial real estate:
Commercial real estate
mortgages............ 1,958,017 1,744,102 18,612 15,870 (39) 346
Real estate
construction......... 1,114,850 808,449 2,532 2,163 149 (69)
----------- ----------- --------- --------- -------- --------
Total commercial
real estate........ 3,072,867 2,552,551 21,144 18,033 110 277
----------- ----------- --------- --------- -------- --------
Consumer:
Residential first
mortgages............ 2,342,491 2,752,288 26,487 22,536 1,302 1,234
Other residential
mortgages............ 1,264,023 1,059,471 5,135 3,692 1,523 1,257
Dealer indirect....... 1,529,581 1,221,110 1,316 3,845 4,678 9,094
Revolving credit...... 251,606 444,222 -0- -0- 17,485 24,258
Other consumer........ 458,913 524,573 835 1,605 4,630 11,889
----------- ----------- --------- --------- -------- --------
Total consumer...... 5,846,614 6,001,664 33,773 31,678 29,618 47,732
----------- ----------- --------- --------- -------- --------
$12,527,168 $12,107,273 $ 74,141 $ 67,384 $ 35,085 $ 51,542
=========== =========== ========= ========= ======== ========
</TABLE>
- --------
NOTE: Loans are net of unearned income. Nonperforming loans do not include
accruing loans 90 days past due. Commercial real estate mortgages
include loans of $574.2 million and $553.5 million at September 30, 1998
and 1997, respectively, secured by owner-occupied properties. Real
estate construction loans include $289.0 million and $203.5 million,
respectively, of loans secured by owner-occupied properties. Residential
first mortgages include $459.0 million and $412.3 million at September
30, 1998 and 1997, respectively, of equity loans secured by first
mortgages.
18
<PAGE>
TABLE 6--ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
1998 1997
----------------------------------- -----------------------
3RD QUARTER 2ND QUARTER 1ST QUARTER 4TH QUARTER 3RD QUARTER
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at beginning of
period................. $174,079 $179,347 $179,197 $179,126 $179,081
Loans charged off....... (12,584) (19,248) (20,880) (22,864) (24,280)
Recoveries of loans pre-
viously charged off.... 5,551 5,446 6,630 7,155 8,223
-------- -------- -------- -------- --------
Net charge-offs......... (7,033) (13,802) (14,250) (15,709) (16,057)
Addition to allowance
charged to expense..... 8,000 23,434 14,400 15,780 16,102
Allowance sold.......... -0- (14,900) -0- -0- -0-
-------- -------- -------- -------- --------
Balance at end of peri-
od..................... $175,046 $174,079 $179,347 $179,197 $179,126
======== ======== ======== ======== ========
Allowance for loan
losses to loans net of
unearned income........ 1.40% 1.40% 1.47% 1.46% 1.48%
Allowance for loan
losses to nonperforming
loans.................. 236.10% 230.57% 202.06% 251.12% 265.83%
Allowance for loan
losses to nonperforming
assets................. 207.57% 206.51% 179.68% 214.81% 224.16%
Net charge-offs to
average loans net of
unearned income
(annualized)........... 0.22% 0.45% 0.47% 0.51% 0.53%
</TABLE>
TABLE 7--NONPERFORMING ASSETS
<TABLE>
<CAPTION>
1998 1997
------------------------------ ------------------------
SEPTEMBER 30 JUNE 30 MARCH 31 DECEMBER 31 SEPTEMBER 30
------------ ------- -------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans........ $74,141 $75,501 $88,760 $71,358 $67,384
Foreclosed properties... 9,225 8,035 9,902 11,433 11,518
Repossessions........... 967 761 1,154 632 1,008
------- ------- ------- ------- -------
Total nonperforming as-
sets*................. $84,333 $84,297 $99,816 $83,423 $79,910
======= ======= ======= ======= =======
Nonperforming assets* to
loans net of unearned
income, foreclosed
properties and
repossessions.......... 0.67% 0.68% 0.82% 0.68% 0.66%
Accruing loans 90 days
past due............... $29,586 $25,701 $32,363 $37,797 $33,466
</TABLE>
- --------
* Exclusive of accruing loans 90 days past due.
19
<PAGE>
TABLE 8--INVESTMENT SECURITIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
--------------------- ---------------------
CARRYING MARKET CARRYING MARKET
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
HELD-TO-MATURITY:
U.S. Treasury and federal agency
securities...................... $1,983,032 $2,010,063 $1,979,601 $1,987,841
State, county and municipal
securities...................... 125,751 129,483 131,873 136,473
Other securities................. 188,308 188,894 230,187 229,836
---------- ---------- ---------- ----------
$2,297,091 $2,328,440 $2,341,661 $2,354,150
========== ========== ========== ==========
AVAILABLE-FOR-SALE:
U.S. Treasury and federal agency
securities...................... $2,967,937 $2,016,618
Other securities................. 313,192 122,178
---------- ----------
$3,281,129 $2,138,796
========== ==========
</TABLE>
- --------
NOTES:
1. The weighted average remaining life, which reflects the amortization on
mortgage related and other asset-backed securities, and the weighted average
yield on the combined held-to-maturity and available-for-sale portfolios at
September 30,1998 were approximately 2.8 years and 6.86%, respectively.
Included in the combined portfolios was $4.9 billion of mortgage-backed
securities, $618 million of which were variable rate. The weighted average
remaining life and the weighted average yield of mortgage-backed securities
at September 30, 1998 were approximately 2.5 years and 6.85% respectively.
The duration of the combined portfolios, which considers the repricing
frequency of variable rate securities, is approximately 1.9 years.
2. The available-for-sale portfolio included net unrealized gains of $54.0
million and $46.6 million at September 30, 1998 and 1997, respectively.
TABLE 9--OTHER INTEREST-BEARING LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------
1998 1997
-------- ----------
(IN THOUSANDS)
<S> <C> <C>
OTHER BORROWED FUNDS:
Treasury, tax and loan notes............................. $ 100 $ 765,000
Short-term Federal Home Loan Bank advances............... -0- 225,000
Short-term bank notes.................................... 125,000 325,000
Other short-term debt.................................... 187,056 19,041
-------- ----------
Total other borrowed funds............................. $312,156 $1,334,041
======== ==========
OTHER LONG-TERM DEBT:
6.75% Subordinated Debentures Due 2025................... $149,876 $ 149,858
6.45% Subordinated Notes Due 2018........................ 304,642 -0-
7.75% Subordinated Notes Due 2004........................ 149,480 149,389
Subordinated Capital Notes Due 1999...................... 99,925 99,795
Long-term notes payable.................................. 35,880 37,987
-------- ----------
Total other long-term debt............................. $739,803 $ 437,029
======== ==========
</TABLE>
20
<PAGE>
TABLE 10--CAPITAL AMOUNTS AND RATIOS
<TABLE>
<CAPTION>
SEPTEMBER 30
----------------------------------
1998 1997
---------------- ----------------
AMOUNT RATIO AMOUNT RATIO
---------- ----- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
TIER 1 CAPITAL:
AmSouth................................... $1,164,901 6.91% $1,078,686 7.31%
AmSouth Bank.............................. 1,477,188 8.92 1,442,500 9.78
TOTAL CAPITAL:
AmSouth................................... $1,922,398 11.40% $1,577,018 10.68%
AmSouth Bank.............................. 1,952,234 11.79 1,621,626 10.99
LEVERAGE:
AmSouth................................... $1,164,901 5.94% $1,078,686 6.11%
AmSouth Bank.............................. 1,477,188 7.54 1,442,500 8.18
</TABLE>
21
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Several of AmSouth's subsidiaries are defendants in legal proceedings
arising in the ordinary course of business. Some of these proceedings seek
relief or damages that are substantial. The actions relate to AmSouth's
lending, collections, loan servicing, deposit taking, investment, trust and
other activities.
Among the actions which are pending against AmSouth subsidiaries are actions
filed as class actions in the State of Alabama. The actions are similar to
others that have been brought in recent years in Alabama against financial
institutions in that they seek punitive damage awards in transactions
involving relatively small amounts of actual damages. In recent years, juries
in Alabama State courts have made large punitive damage awards in such cases.
Legislation that 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 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 5. OTHER INFORMATION
Shareholder proposals submitted to AmSouth in compliance with SEC Rule 14a-8
(which concerns shareholder proposals that are requested to be included in a
company's proxy statement) must be received at AmSouth's executive offices on
or before November 15, 1998. Pursuant to SEC Rules 14a-4 and 14a-5 (which
concern the exercise of discretionary voting authority when a shareholder
commences his or her own proxy solicitation outside of the processes of Rule
14a-8) shareholders are advised that under the advance notice provisions of
AmSouth's bylaws a shareholder proposal will be considered untimely if
provided to AmSouth after February 15, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
ITEM 6(A)--EXHIBITS
The exhibits listed in the Exhibit Index at page 24 of this Form 10-Q are
filed herewith or are incorporated by reference herein.
ITEM 6(B)--REPORTS ON FORM 8-K
No report on Form 8-K was filed by AmSouth during the period July 1, 1998 to
September 30, 1998.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, AmSouth
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
/s/ C. Dowd Ritter
November 16, 1998 By: _________________________________
C. Dowd Ritter
Chairman of the Board, President and
Chief Executive Officer
November 16, 1998 /s/ Robert R. Windelspecht
By: _________________________________
Robert R. Windelspecht
Executive Vice President and
Controller
23
<PAGE>
EXHIBIT INDEX
The following is a list of exhibits including items incorporated by
reference.
3-a Restated Certificate of Incorporation of AmSouth Bancorporation (1)
3-b By-Laws of AmSouth Bancorporation (2)
15 Letter Re: Unaudited Interim Financial Information
27 Financial Data Schedule
NOTES TO EXHIBITS
(1) Filed as Exhibit 3-b to AmSouth's Form 10-Q Quarterly Report for the
quarter ended March 31, 1993, incorporated herein by reference.
(2) Filed as Exhibit 3-b to AmSouth's Form 10-Q Quarterly Report for the
quarter ended June 30, 1997, incorporated herein by reference.
24
<PAGE>
EXHIBIT 15
Exhibit 15--Letter Re: Unaudited Interim Financial Information
Board of Directors
AmSouth Bancorporation
We are aware of the incorporation by reference in the following Registration
Statements and in their related Prospectuses, of our report dated November 10,
1998 relating to the unaudited consolidated financial statements of AmSouth
Bancorporation and subsidiaries which are included in its Form 10-Q for the
quarter ended September 30,1998:
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-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.
Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not a
part of the registration statements prepared or certified by accountants
within the meaning of Sections 7 or 11 of the Securities Act of 1933.
/s/ ERNST & YOUNG LLP
November 10, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF CONDITION, THE CONSOLIDATED STATEMENT OF EARNINGS, THE
CONSOLIDATED STATEMENT OF CASH FLOWS OF ITEM 1 OF PART 1 AND TABLES 2, 6 AND 7
OF ITEM 2 OF PART 1 OF THE AMSOUTH BANCORPORATION FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 532,758
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 500
<TRADING-ASSETS> 2,689
<INVESTMENTS-HELD-FOR-SALE> 3,281,129
<INVESTMENTS-CARRYING> 2,297,091
<INVESTMENTS-MARKET> 2,328,440
<LOANS> 12,527,168
<ALLOWANCE> 175,046
<TOTAL-ASSETS> 19,693,343
<DEPOSITS> 13,017,167
<SHORT-TERM> 1,595,181
<LIABILITIES-OTHER> 388,117
<LONG-TERM> 3,254,921
0
0
<COMMON> 135,090
<OTHER-SE> 1,302,867
<TOTAL-LIABILITIES-AND-EQUITY> 19,693,343
<INTEREST-LOAN> 810,610
<INTEREST-INVEST> 282,113
<INTEREST-OTHER> 4,461
<INTEREST-TOTAL> 1,096,634
<INTEREST-DEPOSIT> 377,399
<INTEREST-EXPENSE> 576,831
<INTEREST-INCOME-NET> 519,803
<LOAN-LOSSES> 45,834
<SECURITIES-GAINS> 5,218
<EXPENSE-OTHER> 434,444
<INCOME-PRETAX> 300,899
<INCOME-PRE-EXTRAORDINARY> 300,899
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 194,337
<EPS-PRIMARY> 1.62
<EPS-DILUTED> 1.60
<YIELD-ACTUAL> 3.91
<LOANS-NON> 74,141
<LOANS-PAST> 29,586
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 179,197
<CHARGE-OFFS> 52,712
<RECOVERIES> 17,627
<ALLOWANCE-CLOSE> 175,046
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
