<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 June 30, 1999 Commission file number 1-7476
AmSouth Bancorporation
(Exact Name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 63-0591257
(State or other jurisdiction of
Incorporation or Organization) (I.R.S. Employer Identification No.)
AmSouth--Sonat Tower
1900 Fifth Avenue North
Birmingham, Alabama 35203
(Address of principal executive offices) (Zip Code)
</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 August 10, 1999, AmSouth Bancorporation had 176,480,140 shares of common
stock outstanding.
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<PAGE>
AMSOUTH BANCORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
----
<C> <C> <S> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)...................... 3
Consolidated Statement of Condition--June 30, 1999,
December 31, 1998, and June 30, 1998............... 3
Consolidated Statement of Earnings--Six months and
three months ended June 30, 1999 and 1998.......... 4
Consolidated Statement of Shareholders' Equity--Six
months ended June 30, 1999......................... 5
Consolidated Statement of Cash Flows--Six months ended
June 30, 1999 and 1998............................. 6
Notes to Consolidated Financial Statements............ 7
Independent Accountants' Review Report................ 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 11
Part II. Other Information
Item 1. Legal Proceedings..................................... 23
Item 4. Submission of Matters to a Vote of Security Holders... 23
Item 5. Other Information..................................... 23
Item 6. Exhibits and Reports on Form 8-K...................... 24
Signatures.............................................................. 25
Exhibit Index .......................................................... 26
</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, the Year 2000 issue, and with
respect to certain other issues. 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>
June 30 December 31 June 30
1999 1998 1998
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
ASSETS
Cash and due from banks................. $ 556,646 $ 619,599 $ 577,138
Federal funds sold and securities
purchased under agreements to resell... 19,050 5,609 11,850
Trading securities...................... 6,071 4,144 2,370
Available-for-sale securities........... 3,474,272 3,029,372 3,337,235
Held-to-maturity securities (market
value of $2,179,937, $2,162,102 and
$2,562,259, respectively).............. 2,215,267 2,147,044 2,544,386
Mortgage loans held for sale............ 100,928 148,461 83,176
Other interest-earning assets........... 15,745 29,276 34,318
Loans................................... 13,220,747 12,977,467 12,535,316
Less: Allowance for loan losses......... 177,082 176,075 174,079
Unearned income....................... 136,402 107,604 98,781
----------- ----------- -----------
Net loans............................ 12,907,263 12,693,788 12,262,456
Premises and equipment, net............. 334,475 336,772 321,563
Customers' acceptance liability......... 1,899 3,947 1,806
Accrued interest receivable and other
assets................................. 960,402 883,667 805,846
----------- ----------- -----------
$20,592,018 $19,901,679 $19,982,144
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits and interest-bearing
liabilities:
Deposits:
Noninterest-bearing demand............. $ 2,305,271 $ 2,215,887 $ 2,063,417
Interest-bearing demand................ 4,400,267 4,559,470 3,979,689
Savings................................ 935,484 980,829 1,014,260
Time................................... 4,510,245 4,553,666 4,815,941
Certificates of deposit of $100,000 or
more.................................. 925,240 973,952 1,084,947
----------- ----------- -----------
Total deposits....................... 13,076,507 13,283,804 12,958,254
Federal funds purchased and securities
sold under agreements to repurchase... 1,587,206 1,482,100 1,125,065
Other borrowed funds................... 388,149 88,873 988,472
Long-term Federal Home Loan Bank
advances.............................. 2,925,084 2,500,117 2,406,279
Other long-term debt................... 788,866 739,642 739,899
----------- ----------- -----------
Total deposits and interest-bearing
liabilities......................... 18,765,812 18,094,536 18,217,969
Acceptances outstanding................. 1,899 3,947 1,806
Accrued expenses and other liabilities.. 400,054 375,567 341,380
----------- ----------- -----------
Total liabilities.................... 19,167,765 18,474,050 18,561,155
=========== =========== ===========
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--350,000,000 shares;
Issued--202,414,808, 202,425,450 and
202,659,021 shares, respectively..... 202,415 202,425 202,659
Capital surplus........................ 454,520 448,620 448,484
Retained earnings...................... 1,215,090 1,133,046 1,058,941
Cost of common stock in treasury--
26,248,342, 25,048,731 and 22,543,743
shares, respectively.................. (405,071) (367,286) (304,840)
Deferred compensation on restricted
stock................................. (11,867) (8,272) (9,788)
Accumulated other comprehensive (loss)
income................................ (30,834) 19,096 25,533
----------- ----------- -----------
Total shareholders' equity........... 1,424,253 1,427,629 1,420,989
----------- ----------- -----------
$20,592,018 $19,901,679 $19,982,144
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30 Ended June 30
----------------- -----------------
1999 1998 1999 1998
-------- -------- -------- --------
(In thousands except per share
data)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans..................................... $550,797 $534,677 $280,012 $269,944
Available-for-sale securities............. 101,932 103,307 52,916 54,860
Held-to-maturity securities............... 66,448 82,705 32,908 41,654
Trading securities........................ 85 48 38 31
Mortgage loans held for sale.............. 2,497 2,503 1,260 1,436
Federal funds sold and securities
purchased under agreements to resell..... 281 404 208 237
Other interest-earning assets............. 536 121 139 121
-------- -------- -------- --------
Total interest income.................... 722,576 723,765 367,481 368,283
-------- -------- -------- --------
INTEREST EXPENSE
Interest-bearing demand deposits.......... 67,208 68,638 33,828 35,003
Savings deposits.......................... 9,534 14,945 4,668 7,528
Time deposits............................. 119,606 136,417 59,478 67,964
Certificates of deposit of $100,000 or
more..................................... 24,022 28,294 11,819 14,702
Federal funds purchased and securities
sold under agreements to repurchase...... 37,020 34,080 20,170 16,484
Other borrowed funds...................... 4,044 18,359 2,443 9,962
Long-term Federal Home Loan Bank advanc-
es....................................... 66,147 53,392 33,780 29,354
Other long-term debt...................... 24,920 23,351 12,332 12,664
-------- -------- -------- --------
Total interest expense................... 352,501 377,476 178,518 193,661
-------- -------- -------- --------
NET INTEREST INCOME 370,075 346,289 188,963 174,622
Provision for loan losses................. 17,000 37,834 7,500 23,434
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 353,075 308,455 181,463 151,188
-------- -------- -------- --------
NONINTEREST REVENUES
Service charges on deposit accounts....... 52,813 51,947 26,062 25,888
Trust income.............................. 34,504 35,132 17,349 18,153
Consumer investment services income....... 21,897 15,286 12,252 8,055
Mortgage income........................... 12,696 8,590 5,900 4,653
Portfolio income.......................... 7,761 3,831 3,295 1,535
Bank owned life insurance policies
(BOLI)................................... 9,330 9,922 4,846 5,886
Net gain on sale of businesses............ 0 27,974 0 27,974
Other noninterest revenues................ 38,193 31,495 18,429 16,228
-------- -------- -------- --------
Total noninterest revenues............... 177,194 184,177 88,133 108,372
-------- -------- -------- --------
NONINTEREST EXPENSES
Salaries and employee benefits............ 158,389 144,631 79,805 76,914
Net occupancy expense..................... 28,767 28,086 14,354 14,211
Equipment expense......................... 31,797 32,066 16,329 16,876
Marketing expense......................... 10,764 10,036 5,403 5,028
Postage and office supplies............... 12,245 11,961 5,916 6,502
Communications expense.................... 11,727 11,479 5,876 5,804
Amortization expense...................... 8,365 8,722 4,193 4,196
Other noninterest expenses................ 44,689 48,147 22,886 28,683
-------- -------- -------- --------
Total noninterest expenses............... 306,743 295,128 154,762 158,214
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 223,526 197,504 114,834 101,346
Income taxes.............................. 78,947 70,011 40,586 35,876
-------- -------- -------- --------
<CAPTION>
NET INCOME............................... $144,579 $127,493 $ 74,248 $ 65,470
<S> <C> <C> <C> <C>
======== ======== ======== ========
Average common shares outstanding......... 175,611 180,252 175,155 179,052
Earnings per common share................. $ 0.82 $ 0.71 $ 0.42 $ 0.37
Diluted average common shares outstand-
ing...................................... 178,361 183,264 177,840 183,231
Diluted earnings per common share......... $ 0.81 $ 0.70 $ 0.42 $ 0.36
Cash dividends declared................... $ 0.34 $ 0.27 $ 0.17 $ 0.13
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Deferred Accumulated
Compensation Other
Common Capital Retained Treasury on Restricted Comprehensive
Stock Surplus Earnings Stock Stock Income (Loss) Total
-------- -------- ---------- --------- ------------- ------------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1,
1999................... $134,950 $516,095 $1,133,046 $(367,286) $ (8,272) $ 19,096 $1,427,629
Adjustment for the ef-
fect of 3-for-2 common
stock split............ 67,475 (67,475) -0- -0- -0- -0- -0-
-------- -------- ---------- --------- -------- -------- ----------
BALANCE AT JANUARY 1,
1999, RESTATED......... 202,425 448,620 1,133,046 (367,286) (8,272) 19,096 1,427,629
Comprehensive income:
Net income............. -0- -0- 144,579 -0- -0- -0- 144,579
Other comprehensive in-
come, net of tax:
Unrealized losses on
available-for-sale
securities, net of
reclassification
adjustment............ -0- -0- -0- -0- -0- (49,930) (49,930)
----------
Comprehensive income.... 94,649
Cash dividends declared
($0.34 per common
share)................. -0- -0- (58,233) -0- -0- -0- (58,233)
Common stock transac-
tions:
Purchase of common
stock................. -0- -0- -0- (61,646) -0- -0- (61,646)
Benefit stock plans.... (10) 5,793 (4,302) 21,092 (3,595) -0- 18,978
Dividend reinvestment
plan.................. -0- 107 -0- 2,769 -0- -0- 2,876
-------- -------- ---------- --------- -------- -------- ----------
BALANCE AT JUNE 30,
1999................... $202,415 $454,520 $1,215,090 $(405,071) $(11,867) $(30,834) $1,424,253
======== ======== ========== ========= ======== ======== ==========
Disclosure of
reclassification
amount:
Unrealized holding
losses on available-
for-sale securities
arising during the
period................. $(45,877)
Less: Reclassification
adjustment for gains
realized in net
income................. 4,053
--------
Net unrealized losses on
available-for-sale
securities, net of
tax.................... $(49,930)
========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30
------------------------
1999 1998
----------- -----------
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income.......................................... $ 144,579 $ 127,493
Adjustments to reconcile net income to net cash pro-
vided by operating activities:
Provision for loan losses......................... 17,000 37,834
Depreciation and amortization of premises and
equipment........................................ 22,606 18,650
Amortization of premiums and discounts on held-to-
maturity securities and available-for-sale
securities....................................... 1,973 (1,662)
Net decrease (increase) in mortgage loans held for
sale............................................. 47,533 (2,356)
Net increase in trading securities................ (1,927) (964)
Net gains on sales of available-for-sale securi-
ties............................................. (6,495) (2,458)
Net increase in accrued interest receivable and
other assets..................................... (23,077) (111,594)
Net increase in accrued expenses and other liabil-
ities............................................ 71,286 67,084
Provision for deferred income taxes............... 34,393 16,155
Amortization of intangible assets................. 8,177 8,246
Other operating activities, net................... (1,260) 4,838
----------- -----------
Net cash provided by operating activities........ 314,788 161,266
----------- -----------
INVESTING ACTIVITIES
Proceeds from maturities and prepayments of avail-
able-for-sale securities........................... 487,177 345,019
Proceeds from sales of available-for-sale securi-
ties............................................... 331,665 298,285
Purchases of available-for-sale securities.......... (1,426,919) (1,420,939)
Proceeds from maturities, prepayments and calls of
held-to-maturity securities........................ 443,457 432,874
Purchases of held-to-maturity securities............ (524,321) (671,744)
Net (increase) decrease in federal funds sold and
securities purchased under agreements to resell.... (13,441) 7,150
Net decrease (increase) in other interest-earning
assets............................................. 13,531 (34,318)
Net increase in loans............................... (233,466) (298,823)
Net purchases of premises and equipment............. (20,309) (26,013)
----------- -----------
Net cash used by investing activities............. (942,626) (1,368,509)
----------- -----------
FINANCING ACTIVITIES
Net (decrease) increase in demand deposits and sav-
ings accounts...................................... (115,164) 5,935
Net (decrease) increase in time deposits............ (92,050) 7,256
Net increase (decrease) in federal funds purchased
and securities sold under agreements to
repurchase......................................... 105,106 (310,860)
Net increase in other borrowed funds................ 299,276 2,554
Issuance of long-term Federal Home Loan Bank
advances and other long-term debt.................. 724,231 1,719,973
Payments for maturing long-term debt................ (249,937) (206,942)
Cash dividends paid................................. (58,233) (48,201)
Cash payment for special rights and warrants on com-
mon stock.......................................... -0- (355)
Proceeds from benefit and dividend reinvestment
plans.............................................. 13,302 13,451
Purchase of common stock............................ (61,646) (56,930)
----------- -----------
Net cash provided by financing activities......... 564,885 1,125,881
----------- -----------
Decrease in cash and cash equivalents............... (62,953) (81,362)
Cash and cash equivalents at beginning of period.... 619,599 658,500
----------- -----------
Cash and cash equivalents at end of period.......... $ 556,646 $ 577,138
=========== ===========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
AMSOUTH BANCORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements
(Unaudited)
Six Months Ended June 30, 1999 and 1998
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 1999
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 May 24, 1999. The notes included herein
should be read in conjunction with the notes to consolidated financial
statements included in AmSouth Bancorporation's (AmSouth) 1998 annual report
on Form 10-K.
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 (FASB). Statement
133 provides a comprehensive and consistent standard for the recognition and
measurement of 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 was originally
effective for fiscal years beginning after June 15, 1999. In June 1999, FASB
issued Statement of Financial Accounting Standard No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date
of FASB Statement No. 133" (Statement 137), which defers the effective date of
Statement 133 to fiscal years beginning after June 15, 2000. The impact of
adopting Statement 133 on AmSouth's financial condition or results of
operations has not been determined at this time.
Cash Flows--For the six months ended June 30, 1999 and 1998, AmSouth paid
interest of $355,219,000 and $358,526,000, respectively, and income taxes of
$52,894,000 and $29,787,000, respectively. Noncash transfers from loans to
foreclosed properties for the six months ended June 30, 1999 and 1998, were
$6,947,000 and $4,872,000, respectively, and noncash transfers from foreclosed
properties to loans were $155,000 and $278,000, respectively. For the six
months ended June 30, 1999, noncash transfers from loans to available-for-sale
securities and to other assets of approximately $5,572,000 and $6,230,000,
respectively, were made in connection with the participation of mortgages to
third-party conduits. For the six months ended June 30, 1998, noncash
transfers from loans to available-for-sale securities of approximately
$49,183,000 were made in connection with mortgage loan securitizations.
Comprehensive Income--Total comprehensive income was $36,755,000 and
$94,649,000 for the three and six months ended June 30, 1999 and $67,421,000
and $126,433,000 for the three and six months ended June 30, 1998. Total
comprehensive income consists of net income and the change in the unrealized
gain or loss on the Corporation's available-for-sale securities portfolio
arising during the period.
7
<PAGE>
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
Ended Six Months Ended
June 30 June 30
----------------- -----------------
1999 1998 1999 1998
-------- -------- -------- --------
(In thousands except per share
data)
<S> <C> <C> <C> <C>
Earnings per common share computation:
Numerator:
Net income.............................. $ 74,248 $ 65,470 $144,579 $127,493
Denominator:
Average common shares outstanding....... 175,155 179,052 175,611 180,252
Earnings per common share................. $ .42 $ .37 $ .82 $ .71
Diluted earnings per common share
computation:
Numerator:
Net income.............................. $ 74,248 $ 65,470 $144,579 $127,493
Denominator:
Average common shares outstanding....... 175,155 179,052 175,611 180,252
Dilutive shares contingently issuable... 2,685 4,179 2,750 3,012
-------- -------- -------- --------
Average diluted common shares
outstanding........................... 177,840 183,231 178,361 183,264
Diluted earnings per common share......... $ .42 $ .36 $ .81 $ .70
</TABLE>
Pending Acquisition--On May 31, 1999, the Corporation entered into a
definitive agreement providing for the acquisition of First American
Corporation ("First American") by the Corporation. Terms of the agreement
provide for First American shareholders to receive 1.871 shares of the
Corporation's common stock for each outstanding share of First American common
stock in a transaction to be accounted for as a pooling-of-interests. First
American is a financial services holding company headquartered in Nashville,
Tennessee. At June 30, 1999, First American had total assets of $21.5 billion
and total shareholders' equity of $1.8 billion. First American had 375 banking
offices in Tennessee, Mississippi, Louisiana, Virginia, Georgia, Kentucky, and
Arkansas at June 30, 1999. The transaction is expected to be completed during
the fourth quarter of 1999. In order to have sufficient shares to complete the
transaction, AmSouth shareholders are being asked to approve an amendment to
the AmSouth certificate of incorporation to increase the number of authorized
shares of AmSouth common stock from 350 million to 750 million shares.
Shareholders' Equity--On March 20, 1997, AmSouth's Board of Directors
approved the repurchase by AmSouth of up to 13,500,000 shares of its common
stock for the purpose of funding employee benefit and dividend reinvestment
plans and for general corporate purposes. AmSouth purchased 5,859,000 shares
at a cost of $110,267,000 during 1997, 5,297,000 shares at a cost of
$136,514,000 during 1998 and 1,352,000 shares at a cost of $41,247,000 during
the first three months of 1999 under this authorization. The authorization for
the remaining 992,000 shares expired in March 1999.
On April 15, 1999, AmSouth's shareholders approved an increase in the
common stock authorized to be issued by AmSouth to 350,000,000 shares.
On April 15, 1999, a three-for-two common stock split in the form of a 50
percent common stock dividend was announced. The stock dividend was paid May
24 to shareholders of record as of April 30.
On April 15, 1999, AmSouth's Board of Directors approved the repurchase of
approximately 13,100,000 shares of the Company's outstanding common stock for
the purpose of funding employee benefit and dividend reinvestment plans and
for general corporate purposes. From April 15, 1999 to May 30, 1999, AmSouth
purchased 655,200 shares at a cost of $20,398,000. The authorization was
rescinded by the Board of Directors on May 31, 1999.
8
<PAGE>
Business Segment Information--AmSouth has three reportable segments:
Consumer Banking, Commercial Banking, and Capital Management. Treasury & Other
is comprised of balance sheet management activities that include the
investment portfolio, nondeposit funding and off-balance sheet financial
instruments. Treasury & Other also includes BOLI income and corporate expenses
such as corporate overhead and goodwill amortization. All revenues and
expenses related to the bond administration and stock transfer businesses,
sold in 1998, are included in Treasury & Other for 1998. The following is a
summary of the segment performance for the three months and six months ended
June 30, 1999 and 1998:
<TABLE>
<CAPTION>
Consumer Commercial Capital Treasury &
Banking Banking Management Other Total
-------- ---------- ---------- ---------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Three Months Ended June 30,
1999
Net interest income from
external customers........ $ 68,698 $ 94,495 $ (180) $25,950 $188,963
Internal funding........... 55,396 (36,372) 433 (19,457) -0-
-------- -------- ------- ------- --------
Net interest income........ 124,094 58,123 253 6,493 188,963
Noninterest revenues....... 38,655 11,572 29,605 8,301 88,133
-------- -------- ------- ------- --------
Total revenues............. 162,749 69,695 29,858 14,794 277,096
Provision for loan losses.. 6,005 1,008 -0- 487 7,500
Noninterest expenses....... 89,684 25,009 20,496 19,573 154,762
-------- -------- ------- ------- --------
Income before income
taxes..................... 67,060 43,678 9,362 (5,266) 114,834
Income taxes............... 25,226 16,358 3,502 (4,500) 40,586
-------- -------- ------- ------- --------
Segment net income......... $ 41,834 $ 27,320 $ 5,860 $ (766) $ 74,248
======== ======== ======= ======= ========
Three Months Ended June 30,
1998
Net interest income from
external customers........ $ 48,404 $ 91,428 $ (654) $35,444 $174,622
Internal funding........... 60,643 (38,178) 1,420 (23,885) -0-
-------- -------- ------- ------- --------
Net interest income........ 109,047 53,250 766 11,559 174,622
Noninterest revenues....... 37,999 7,767 24,657 37,949 108,372
-------- -------- ------- ------- --------
Total revenues............. 147,046 61,017 25,423 49,508 282,994
Provision for loan losses.. 11,164 2,639 -0- 9,631 23,434
Noninterest expenses....... 86,653 24,236 17,836 29,489 158,214
-------- -------- ------- ------- --------
Income before income
taxes..................... 49,229 34,142 7,587 10,388 101,346
Income taxes............... 18,494 12,828 2,335 2,219 35,876
-------- -------- ------- ------- --------
Segment net income......... $ 30,735 $ 21,314 $ 5,252 $ 8,169 $ 65,470
======== ======== ======= ======= ========
Six Months Ended June 30,
1999
Net interest income from
external customers........ $128,556 $188,248 $ (439) $53,710 $370,075
Internal funding........... 114,708 (73,666) 1,010 (42,052) -0-
-------- -------- ------- ------- --------
Net interest income........ 243,264 114,582 571 11,658 370,075
Noninterest revenues....... 78,109 23,849 56,409 18,827 177,194
-------- -------- ------- ------- --------
Total revenues............. 321,373 138,431 56,980 30,485 547,269
Provision for loan losses.. 14,801 1,192 -0- 1,007 17,000
Noninterest expenses....... 178,195 50,564 38,984 39,000 306,743
-------- -------- ------- ------- --------
Income before income
taxes..................... 128,377 86,675 17,996 (9,522) 223,526
Income taxes............... 48,300 32,414 6,739 (8,506) 78,947
-------- -------- ------- ------- --------
Segment net income......... $ 80,077 $ 54,261 $11,257 $(1,016) $144,579
======== ======== ======= ======= ========
Six Months Ended June 30,
1998
Net interest income from
external customers........ $ 98,427 $185,954 $(1,620) $63,528 $346,289
Internal funding........... 117,894 (81,213) 3,015 (39,696) -0-
-------- -------- ------- ------- --------
Net interest income........ 216,321 104,741 1,395 23,832 346,289
Noninterest revenues....... 74,139 16,072 47,632 46,334 184,177
-------- -------- ------- ------- --------
Total revenues............. 290,460 120,813 49,027 70,166 530,466
Provision for loan losses.. 24,101 3,951 -0- 9,782 37,834
Noninterest expenses....... 167,029 47,854 33,525 46,720 295,128
-------- -------- ------- ------- --------
Income before income
taxes..................... 99,330 69,008 15,502 13,664 197,504
Income taxes............... 37,312 25,923 5,422 1,354 70,011
-------- -------- ------- ------- --------
Segment net income......... $ 62,018 $ 43,085 $10,080 $12,310 $127,493
======== ======== ======= ======= ========
</TABLE>
9
<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 June 30, 1999 and 1998, and the
related consolidated statements of earnings for the three-month and six-month
periods ended June 30, 1999 and 1998, and consolidated statements of cash
flows for the six-month periods ended June 30, 1999 and 1998, and the
consolidated statement of shareholders' equity for the six-month period ended
June 30, 1999. 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, 1998, and the related consolidated
statements of earnings, shareholders' equity, and cash flows for the year then
ended (not presented herein) and in our report dated January 29, 1999, except
for Note 22 as to which the date is March 1, 1999, 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, 1998 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
August 10, 1999
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
AmSouth reported net income of $144.6 million for the six months ended June
30, 1999, a 13.4% increase over net income of $127.5 million for the same
period of 1998. Diluted earnings per common share were $.81 and $.70 for the
six month periods ended June 30, 1999 and June 30, 1998, respectively.
AmSouth's year-to-date earnings resulted in an annualized return on average
assets (ROA) of 1.45% and an annualized return on average equity (ROE) of
20.47% for 1999 compared to 1.34% and 18.22%, respectively, for the first six
months of 1998.
Net income for the second quarter of 1999 was $74.2 million compared to
$65.5 million for the same period of 1998. Diluted earnings per common share
were $.42 and $.36, respectively. ROA and ROE for the second quarter of 1999
were 1.46% and 20.87%, respectively, compared to 1.34% and 18.48%,
respectively, for the second quarter of 1998.
Total assets were $20.6 billion at quarter end, compared to 1998's quarter-
end assets of $20.0 billion. The increase was primarily the result of
continued loan growth over the past year. Loans net of unearned income at
June 30, 1999, increased $.6 billion from June 30, 1998, to $13.1 billion. On
a managed basis, which includes commercial and residential loans participated
to third-party conduits, loans increased $2.3 billion to $15.4 billion at
quarter end. The increases in the managed loan portfolio occurred primarily in
commercial and industrial, commercial real estate, home equity, and indirect
lending.
On the funding side of the balance sheet, total deposits at June 30, 1999
increased slightly, with decreases in time deposits offsetting a 6.8% and
11.7% increase in lower cost deposits and noninterest-bearing demand deposits,
respectively. AmSouth continued to increase its use of Federal Home Loan Bank
(FHLB) advances as a funding source. FHLB advances increased to $2.9 billion
at June 30, 1999, a 21.6% increase over 1998 second-quarter end.
Net Interest Income
Net interest income on a fully taxable equivalent basis for the six months
ended June 30, 1999, was $373.0 million, a 6.8% increase over the same period
of 1998. The increase can be attributed to lower funding costs and a shift in
the mix of AmSouth's earning assets from investment securities to higher
yielding loans. This resulted in a widening of the net interest margin to
4.09% from 3.98% for the six months ended June 30, 1998. Lower borrowing and
deposit rates across all categories of deposits contributed to the lower
funding costs. The improvement was further enhanced by a shift in the deposit
mix from higher cost consumer CDs to noninterest-bearing demand and lower cost
interest checking and money market deposit accounts.
Net interest income on a fully taxable equivalent basis for the three months
ended June 30, 1999 was $190.5 million, an 8.3% increase over the same period
of 1998. The net interest margin and the net interest spread increased 18 and
24 basis points, respectively, from the prior year. The reasons for the
increases were primarily the same as those discussed in the year-to-date
analysis.
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.
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
11
<PAGE>
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 June 30, 1999, AmSouth
would expect NII to decrease $14.9 million and increase $9.0 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. Based on June 30, 1998,
simulation model results, AmSouth would have expected decreases of $2.8
million and $1.8 million if interest rates had gradually increased or
decreased from the rates in effect at the time by 100 basis points over a 12-
month period.
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 1999, AmSouth entered into additional interest rate swaps in
the notional amount of $1.1 billion. There have been $15.0 million in
maturities or terminations of interest rate swaps in 1999. Interest rate swaps
in the notional amount of $435.0 million were called during the first six
months of 1999. At June 30, 1999, AmSouth had interest rate swaps, all of
which receive fixed rates, totaling a notional amount of $1.6 billion. The
swaps added in 1999 as hedges were designated to certain deposits, commercial
loans and indebtedness of AmSouth Bank. At June 30, 1999, 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 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 presented to and subsequently approved
by senior management and reviewed by 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 June 30, 1999, the allowance for loan losses was $177.1 million, or 1.35%
of loans net of unearned income, compared to $174.1 million, or 1.40%, for the
prior year. The coverage ratio of the allowance for loan losses to
nonperforming loans decreased from 230.57% at June 30, 1998, to 215.08% at
June 30, 1999. Over the same period, the level of nonperforming loans
increased $6.8 million.
Net charge-offs for the quarter ended June 30, 1999, were $7.0 million, a
decrease of $6.8 million or 49.2% from $13.8 million a year earlier. For the
six months ended June 30, 1999, net charge-offs were $16.0 million, a decrease
of $12.1 million, or 43.0%, from $28.1 million for the same period of 1998.
Annualized net charge-offs to average loans net of unearned income were 0.21%
and 0.24%, respectively, for the three months and six months ended June 30,
1999, compared to 0.45% and 0.46% for the same periods of the prior year. The
decrease in net charge-offs occurred primarily in AmSouth's revolving credit
portfolio, which decreased $5.5 million and $10.8 million for the three months
and six months versus the same periods of 1998. The decline in revolving
credit net charge-offs reflects the sale of approximately $169.5 million of
under performing credit card loans in the second quarter of 1998. In addition,
net charge-offs for the direct consumer lending portfolio decreased $722.0
thousand and $1.7 million for the three months and six months versus the same
periods of the prior year. This decrease was offset by a $1.3 million and $2.4
million increase in net charge-offs in AmSouth's indirect lending portfolio
for the three and six month period ended June 30, 1999 versus the same periods
of 1998. Annualized net charge-offs for the consumer loan portfolio fell to
0.32% and 0.42% of average consumer loans for the three months and six months
ended June 30, 1999, compared to 0.72% and 0.80% for the prior year. The
12
<PAGE>
provision for loan losses for the second quarter was $7.5 million and $17.0
million for the first six months of 1999 compared to $23.4 million and $37.8
million for the year-earlier periods. The 1999 provision reflects loan loss
exposure related to the overall growth in the loan portfolio and the change in
the mix of the loan portfolio.
Table 7 presents a five-quarter comparison of the components of
nonperforming assets. At June 30, 1999, nonperforming assets as a percentage
of loans net of unearned income, foreclosed properties and repossessions,
increased four basis points to 0.72% compared to June 30, 1998. The level of
nonperforming assets decreased $10.1 million during the same period.
Included in nonperforming assets at June 30, 1999 and 1998, was $30.1
million and $46.2 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 June 30, 1999 and
1998, there was $12.3 million and $4.5 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 June 30, 1999 and 1998,
was $20.6 million and $50.6 million, respectively, and $29.3 million and $49.9
million, respectively, for the six months ended June 30, 1999 and 1998.
AmSouth recorded no material interest income on its impaired loans during the
three months and six months ended June 30, 1999.
Noninterest Revenues and Noninterest Expenses
Year-to-date noninterest revenues totaled $177.2 million at June 30, 1999,
compared to $184.2 million for the prior-year period. Included in noninterest
revenues for 1998 was a $28.0 million 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 the effects of this
one-time gain, noninterest revenues rose $21.0 million or 13.4% compared to
the same period a year earlier. Growth occurred in most major categories,
including consumer investment services income, mortgage income and portfolio
income. Consumer investment services income increased $6.6 million primarily
as a result of a higher sales volume of annuity products. Mortgage income
increased $4.1 million primarily as a result of gains on the sale of
residential mortgage loans to third-party conduits partially offset by a
decrease in gains on sale of servicing. Other noninterest revenues increased
$6.7 million primarily due to an increase in income from commercial loan
conduit activity. Noninterest revenues for the second quarter of 1999 were
$88.1 million. Excluding the one-time gain in the second quarter of 1998,
noninterest revenues for the quarter increased 9.6%. Changes for the quarter
were primarily for the same reasons discussed in the year-to-date analysis.
Year-to-date noninterest expenses increased 3.9% to $306.7 million at June
30, 1999, compared to $295.1 million for the prior year. Salaries and employee
benefits increased $13.8 million when compared to the same period a year ago.
The increase is primarily due to an increased number of employees associated
with new revenue initiatives, annual merit increases and incentives associated
with AmSouth's stronger financial performance. Other noninterest expenses
decreased 7.2% to $44.7 million at June 30, 1999, primarily due to the initial
funding of AmSouth's charitable foundation in the second quarter of 1998.
Changes for the quarter were primarily for the same reasons discussed in the
year-to-date analysis.
Capital Adequacy
At June 30, 1999, shareholders' equity totaled $1.4 billion or 6.92% of
total assets. Since December 31, 1998, shareholders' equity decreased $3.4
million as dividends of $58.2 million and the purchase of 2,007,000 shares of
AmSouth common stock for $61.6 million offset the increase from net income of
$144.6 million.
Table 10 presents the capital amounts and risk-adjusted capital ratios for
AmSouth and AmSouth Bank at June 30, 1999 and 1998. At June 30, 1999, 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 June 30, 1999.
13
<PAGE>
Year 2000 Project
The following information that 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 the Year 2000 issue 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 in 1997 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 included
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 that have the greatest
impact on the operations of AmSouth were designated as mission critical
systems. The remediation, testing and implementation phases for all internal
mission critical systems are 100% complete, with all phases meeting relevant
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 all completed
their testing by March 31, 1999, as required by federal banking regulations.
Further, AmSouth is now utilizing the Year 2000 compliant versions of all
third-party mission critical systems, as was required by June 30, 1999,
according to federal banking regulations.
While AmSouth's greatest focus and efforts to date have been on preparing
mission critical systems for the Year 2000, substantially all noncritical
systems have been remediated, tested and implemented.
In addition, AmSouth is continuing the process of assessing the Year 2000
readiness of its significant customers, suppliers and counterparties. In the
fourth quarter of 1997, AmSouth began researching the issue of Year 2000 and
the possible impact of Year 2000 on its loan customers' liquidity and their
ability to repay their loans. Early last year, AmSouth 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 risk of Year 2000 problems as well as their understanding and
progress toward 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 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
were reviewed before the end of 1998, all with satisfactory results.
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.
14
<PAGE>
The potential impact of the Year 2000 issue on AmSouth's responsibilities
when it acts in a fiduciary capacity is also being considered. Assets under
fiduciary management are being reviewed to assess the possible impact of the
Year 2000 issue on their value. The extent of analysis of particular assets is
based on an assessment of their risk characteristics. 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, the majority of which has already been expensed.
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.
While AmSouth has no reason to conclude that a failure will occur, the most
likely worst-case Year 2000 scenarios entail those items over which AmSouth
has no control, including (1) unpredictable actions resulting from irrational
public demand even if the Year 2000 issue actually presents no problems and
(2) a scenario where a disruption or failure of AmSouth's power suppliers or
voice and data transmission suppliers impacts AmSouth, its customers, vendors,
and the public infrastructure. If such public reaction or a failure were to
occur, AmSouth would implement a contingency plan. While it is impossible to
quantify the impact of such scenarios, the most reasonably likely worst-case
scenario would entail liquidity issues related to increased customer
withdrawals or the diminishment of service levels, resulting in customer
inconvenience, and additional costs associated with the implementation of
contingency plans.
AmSouth has comprehensive contingency plans in place to address these
scenarios and other possible system and service failures that could occur
outside of AmSouth's control in an effort to minimize the impact on AmSouth of
other organizations' failures to properly remediate their systems. These plans
include having back-up power and telecommunication sources and sufficient
resources to deal with possible increased liquidity demands. Additionally,
AmSouth is finalizing its event plans and outlining responsibilities for the
days immediately preceding and including the date change.
15
<PAGE>
Table 1--Financial Summary
<TABLE>
<CAPTION>
June 30
------------------------ %
1999 1998 Change
----------- ----------- ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance sheet summary
End-of-period balances:
Loans net of unearned
income................ $13,084,345 $12,436,535 5.2%
Total assets........... 20,592,018 19,982,144 3.1
Total deposits......... 13,076,507 12,958,254 0.9
Shareholders' equity... 1,424,253 1,420,989 0.2
Year-to-date average
balances:
Loans net of unearned
income................ $13,242,777 $12,250,765 8.1%
Total assets........... 20,093,638 19,220,863 4.5
Total deposits......... 13,063,187 12,834,029 1.8
Shareholders' equity... 1,424,225 1,410,787 1.0
<CAPTION>
Six Months Three Months
Ended June 30 Ended June 30
------------------------ % ----------------- %
1999 1998 Change 1999 1998 Change
----------- ----------- ------ ------- -------- ------
(In thousands except per share data)
<S> <C> <C> <C> <C> <C> <C>
Earnings summary
Net income............. $ 144,579 $ 127,493 13.4% $74,248 $ 65,470 13.4%
Per common share*...... 0.82 0.71 15.5 0.42 0.37 13.5
Per common share--
diluted*.............. 0.81 0.70 15.7 0.42 0.36 16.7
Selected ratios
Return on average
assets (annualized)... 1.45% 1.34% 1.46% 1.34%
Return on average
equity (annualized)... 20.47 18.22 20.87 18.48
Average equity to
assets................ 7.09 7.34 7.00 7.27
End-of-period equity to
assets................ 6.92 7.11 6.92 7.11
End-of-period tangible
equity to assets...... 5.88 5.97 5.88 5.97
Allowance for loan
losses to loans net of
unearned income....... 1.35 1.40 1.35 1.40
Efficiency ratio....... 55.76 55.33 55.55 55.65
Common stock data*
Cash dividends
declared.............. $ 0.34 $ 0.27 $ 0.17 $ 0.13
Book value at end of
period................ 8.08 7.89 8.08 7.89
Market value at end of
period................ 23.19 26.20 23.19 26.20
Average common shares
outstanding........... 175,611 180,252 175,155 179,052
Average common shares
outstanding--diluted.. 178,361 183,264 177,840 183,231
</TABLE>
- --------
* Restated for three-for-two common stock split in May 1999.
16
<PAGE>
Table 2--Year-to-Date Yields Earned on Average Interest-Earning Assets
and Rates Paid on Average Interest-Bearing Liabilities
<TABLE>
<CAPTION>
1999 1998
---------------------------- ----------------------------
Six Months Six Months
Ended June 30 Ended June 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
Interest-earning assets:
Loans net of unearned
income................ $13,242,777 $551,681 8.40% $12,250,765 $535,501 8.81%
Available-for-sale se-
curities.............. 2,996,522 101,932 6.86 2,899,223 103,307 7.19
Held-to-maturity secu-
rities:
Taxable............... 1,890,157 62,494 6.67 2,339,091 78,488 6.77
Tax-free.............. 137,973 5,959 8.71 108,565 6,284 11.67
----------- -------- ----------- --------
Total held-to-maturity
securities........... 2,028,130 68,453 6.81 2,447,656 84,772 6.98
----------- -------- ----------- --------
Total investment se-
curities............ 5,024,652 170,385 6.84 5,346,879 188,079 7.09
Other interest-earning
assets................ 137,158 3,399 5.00 108,285 3,076 5.73
----------- -------- ----------- --------
Total interest-earning
assets............... 18,404,587 725,465 7.95 17,705,929 726,656 8.28
Cash and other assets... 1,851,495 1,650,114
Allowance for loan loss-
es..................... (177,721) (176,070)
Market valuation on
available-for-sale se-
curities............... 15,277 40,890
----------- -----------
$20,093,638 $19,220,863
=========== ===========
Liabilities and Share-
holders' Equity
Interest-bearing liabil-
ities:
Interest-bearing demand
deposits.............. $ 4,449,901 67,208 3.05 $ 3,930,887 68,638 3.52
Savings deposits....... 964,132 9,534 1.99 1,034,660 14,945 2.91
Time deposits.......... 4,540,942 119,606 5.31 4,897,154 136,417 5.62
Certificates of deposit
of $100,000 or more 938,477 24,022 5.16 1,003,291 28,294 5.69
Federal funds purchased
and securities sold
under
agreements to repur-
chase................. 1,670,137 37,020 4.47 1,306,164 34,080 5.26
Other interest-bearing
liabilities........... 3,596,657 95,111 5.33 3,383,078 95,102 5.67
----------- -------- ----------- --------
Total interest-bearing
liabilities.......... 16,160,246 352,501 4.40 15,555,234 377,476 4.89
-------- ---- -------- -----
Net interest spread..... 3.55% 3.39%
==== =====
Noninterest-bearing de-
mand deposits.......... 2,169,735 1,968,037
Other liabilities....... 339,432 286,805
Shareholders' equity.... 1,424,225 1,410,787
----------- -----------
$20,093,638 $19,220,863
=========== ===========
Net interest
income/margin on a tax-
able equivalent basis.. 372,964 4.09% 349,180 3.98%
==== =====
Taxable equivalent ad-
justment:
Loans.................. 884 824
Securities............. 2,005 2,067
-------- --------
Total taxable equiva-
lent adjustment...... 2,889 2,891
-------- --------
Net interest income.. $370,075 $346,289
======== ========
</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 3--Quarterly Yields Earned on Average Interest-Earning Assets and Rates
Paid on Average Interest-Bearing Liabilities
<TABLE>
<CAPTION>
1999 1998
--------------------------------------------------------- --------------------------------------------------
Second Quarter First Quarter Fourth Quarter Third Quarter
---------------------------- ---------------------------- ---------------------------- ---------------------
Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/
Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense
----------- -------- ------ ----------- -------- ------ ----------- -------- ------ ----------- --------
(Taxable equivalent basis--dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning
assets:
Loans net of
unearned income.. $13,418,941 $280,477 8.38% $13,064,656 $271,204 8.42% $12,787,915 $276,196 8.57% $12,605,379 $275,905
Available-for-
sale securities.. 3,126,831 52,916 6.79 2,864,766 49,016 6.94 3,044,713 52,318 6.82 3,271,460 56,958
Held-to-maturity
securities:
Taxable.......... 1,866,778 30,850 6.63 1,913,794 31,644 6.71 2,079,172 34,403 6.56 2,217,506 37,154
Tax-free......... 148,369 3,102 8.39 127,462 2,857 9.09 114,211 2,672 9.28 113,616 2,834
----------- -------- ----------- -------- ----------- -------- ----------- --------
Total held-to-
maturity
securities....... 2,015,147 33,952 6.76 2,041,256 34,501 6.85 2,193,383 37,075 6.71 2,331,122 39,988
----------- -------- ----------- -------- ----------- -------- ----------- --------
Total investment
securities...... 5,141,978 86,868 6.78 4,906,022 83,517 6.90 5,238,096 89,393 6.77 5,602,582 96,946
Other interest-
earning assets... 124,037 1,645 5.32 150,425 1,754 4.73 138,838 1,615 4.61 122,408 1,470
----------- -------- ----------- -------- ----------- -------- ----------- --------
Total interest-
earning assets... 18,684,956 368,990 7.92 18,121,103 356,475 7.98 18,164,849 367,204 8.02 18,330,369 374,321
Cash and other
assets............ 1,867,225 1,835,590 1,768,281 1,653,319
Allowance for loan
losses............ (178,875) (176,554) (176,519) (175,160)
Market valuation
on available-for-
sale securities... 5,930 24,728 39,685 40,383
----------- ----------- ----------- -----------
$20,379,236 $19,804,867 $19,796,296 $19,848,911
=========== =========== =========== ===========
Liabilities and
Shareholders'
Equity
Interest-bearing
liabilities:
Interest-bearing
demand deposits.. $ 4,453,899 33,828 3.05 $ 4,445,859 33,380 3.04 $ 4,340,072 36,582 3.34 $ 4,132,755 37,924
Savings
deposits......... 954,475 4,668 1.96 973,896 4,866 2.03 981,293 6,107 2.47 1,002,891 7,343
Time deposits.... 4,560,415 59,478 5.23 4,521,253 60,128 5.39 4,641,398 64,825 5.54 4,787,203 67,869
Certificates of
deposit of
$100,000 or
more............. 938,094 11,819 5.05 938,864 12,203 5.27 1,021,557 14,126 5.49 1,111,031 15,969
Federal funds
purchased and
securities sold
under agreements
to repurchase.... 1,803,325 20,170 4.49 1,535,469 16,850 4.45 1,478,217 17,693 4.75 1,520,284 20,048
Other interest-
bearing
liabilities...... 3,698,198 48,555 5.27 3,493,989 46,556 5.40 3,436,194 47,407 5.47 3,577,479 50,202
----------- -------- ----------- -------- ----------- -------- ----------- --------
Total interest-
bearing
liabilities...... 16,408,406 178,518 4.36 15,909,330 173,983 4.44 15,898,731 186,740 4.66 16,131,643 199,355
-------- ---- -------- ---- -------- ---- --------
Net interest
spread............ 3.56% 3.54% 3.36%
==== ==== ====
Noninterest-
bearing demand
deposits.......... 2,207,191 2,131,862 2,143,062 1,969,029
Other
liabilities....... 336,898 341,994 335,663 326,336
Shareholders'
equity............ 1,426,741 1,421,681 1,418,840 1,421,903
----------- ----------- ----------- -----------
$20,379,236 $19,804,867 $19,796,296 $19,848,911
=========== =========== =========== ===========
Net interest
income/margin on a
taxable equivalent
basis............. 190,472 4.09% 182,492 4.08% 180,464 3.94% 174,966
==== ==== ====
Taxable equivalent
adjustment:
Loans............ 465 419 410 522
Securities....... 1,044 961 887 930
-------- -------- -------- --------
Total taxable
equivalent
adjustment....... 1,509 1,380 1,297 1,452
-------- -------- -------- --------
Net interest
income.......... $188,963 $181,112 $179,167 $173,514
======== ======== ======== ========
<CAPTION>
Second Quarter
-----------------------------
Yield/ Average Revenue/ Yield/
Rate Balance Expense Rate
------ ------------ -------- -------
<S> <C> <C> <C> <C>
Assets
Interest-earning
assets:
Loans net of
unearned income.. 8.68% $12,303,518 $270,372 8.81%
Available-for-
sale securities.. 6.91 3,101,694 54,860 7.09
Held-to-maturity
securities:
Taxable.......... 6.65 2,391,211 39,829 6.68
Tax-free......... 9.90 102,976 2,712 10.56
------------ --------
Total held-to-
maturity
securities....... 6.81 2,494,187 42,541 6.84
------------ --------
Total investment
securities...... 6.87 5,595,881 97,401 6.98
Other interest-
earning assets... 4.76 126,453 1,825 5.79
------------ --------
Total interest-
earning assets... 8.10 18,025,852 369,598 8.22
Cash and other
assets............ 1,665,235
Allowance for loan
losses............ (172,135)
Market valuation
on available-for-
sale securities... 37,000
------------
$19,555,952
============
Liabilities and
Shareholders'
Equity
Interest-bearing
liabilities:
Interest-bearing
demand deposits.. 3.64 $ 3,955,644 35,003 3.55
Savings
deposits......... 2.90 1,034,423 7,528 2.92
Time deposits.... 5.62 4,848,525 67,964 5.62
Certificates of
deposit of
$100,000 or
more............. 5.70 1,037,385 14,702 5.68
Federal funds
purchased and
securities sold
under agreements
to repurchase.... 5.23 1,261,245 16,484 5.24
Other interest-
bearing
liabilities...... 5.57 3,702,694 51,980 5.63
------------ --------
Total interest-
bearing
liabilities...... 4.90 15,839,916 193,661 4.90
------ -------- -------
Net interest
spread............ 3.20% 3.32%
====== =======
Noninterest-
bearing demand
deposits.......... 2,000,507
Other
liabilities....... 294,212
Shareholders'
equity............ 1,421,317
------------
$19,555,952
============
Net interest
income/margin on a
taxable equivalent
basis............. 3.79% 175,937 3.91%
====== =======
Taxable equivalent
adjustment:
Loans............ 428
Securities....... 887
--------
Total taxable
equivalent
adjustment....... 1,315
--------
Net interest
income.......... $174,622
========
</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.
18
<PAGE>
Table 4--Maturities and Interest Rates Exchanged on Swaps
<TABLE>
<CAPTION>
Mature During
------------------------------------------------
1999 2000 2001 2003 2008 2009 Total
----- ----- ----- ----- ----- ----- ------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Receive fixed swaps:
Notional amount............. $ 250 $ 904 $ 84 $ 15 $ 175 $ 150 $1,578
Receive rate................ 6.33% 6.27% 5.46% 5.42% 6.27% 6.17% 6.22%
Pay rate.................... 4.97% 4.99% 5.04% 5.14% 4.97% 4.94% 4.98%
</TABLE>
- --------
NOTE: The interest rates exchanged are calculated assuming that interest rates
remain unchanged from June 30, 1999 rates and using call dates of swaps
where applicable. The information presented could change as future
interest rates increase or decrease.
Table 5--Loans and Credit Quality
<TABLE>
<CAPTION>
Net Charge-offs
Six Months
Loans* Nonperforming Loans** Ended
June 30 June 30 June 30
----------------------- --------------------- ---------------
1999 1998 1999 1998 1999 1988
----------- ----------- ---------- ---------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial:
Commercial & industri-
al................... $ 3,599,034 $ 3,710,708 $ 28,706 $ 18,885 $ 2,955 $ 4,825
Commercial loan--
secured by real
estate............... 581,734 687,135 5,680 9,583 285 70
----------- ----------- ---------- ---------- ------- -------
Total commercial..... 4,180,768 4,397,843 34,386 28,468 3,240 4,895
----------- ----------- ---------- ---------- ------- -------
Commercial real estate:
Commercial real estate
mortgages............ 1,386,972 1,092,078 10,630 13,989 12 (49)
Real estate construc-
tion................. 1,291,764 1,168,734 9,516 1,972 3 10
----------- ----------- ---------- ---------- ------- -------
Total commercial real
estate.............. 2,678,736 2,260,812 20,146 15,961 15 (39)
----------- ----------- ---------- ---------- ------- -------
Consumer:
Residential first
mortgages............ 1,221,862 2,078,567 17,693 24,086 553 703
Other residential
mortgages............ 1,997,841 1,639,964 9,856 5,259 945 1,198
Dealer indirect....... 2,301,978 1,347,032 118 987 5,622 3,195
Revolving credit...... 261,927 248,534 -0- -0- 4,159 14,918
Other consumer........ 441,233 463,783 135 740 1,459 3,182
----------- ----------- ---------- ---------- ------- -------
Total consumer....... 6,224,841 5,777,880 27,802 31,072 12,738 23,196
----------- ----------- ---------- ---------- ------- -------
$13,084,345 $12,436,535 $ 82,334 $ 75,501 $15,993 $28,052
=========== =========== ========== ========== ======= =======
</TABLE>
- --------
*Net of unearned income.
**Exclusive of accruing loans 90 days past due.
19
<PAGE>
Table 6--Allowance for Loan Losses
<TABLE>
<CAPTION>
1999 1998
----------------------- -----------------------------------
2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter
----------- ----------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of
period................. $176,595 $176,075 $175,046 $174,079 $179,347
Loans charged off....... (11,703) (13,939) (16,553) (12,584) (19,248)
Recoveries of loans
previously charged
off.................... 4,690 4,959 5,282 5,551 5,446
-------- -------- -------- -------- --------
Net charge-offs......... (7,013) (8,980) (11,271) (7,033) (13,802)
Addition to allowance
charged to expense..... 7,500 9,500 12,300 8,000 23,434
Allowance sold.......... -0- -0- -0- -0- (14,900)
-------- -------- -------- -------- --------
Balance at end of peri-
od..................... $177,082 $176,595 $176,075 $175,046 $174,079
======== ======== ======== ======== ========
Allowance for loan
losses to loans net of
unearned income........ 1.35% 1.34% 1.37% 1.40% 1.40%
Allowance for loan
losses to nonperforming
loans.................. 215.08% 265.24% 266.49% 236.10% 230.57%
Allowance for loan
losses to nonperforming
assets................. 187.54% 227.85% 228.26% 207.57% 206.51%
Net charge-offs to
average loans net of
unearned income
(annualized)........... 0.21% 0.28% 0.35% 0.22% 0.45%
</TABLE>
Table 7--Nonperforming Assets
<TABLE>
<CAPTION>
1999 1998
----------------- --------------------------------
June 30 March 31 December 31 September 30 June 30
------- -------- ----------- ------------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans........... $82,334 $66,580 $66,072 $74,141 $75,501
Foreclosed properties...... 10,389 10,020 10,237 9,225 8,035
Repossessions.............. 1,701 904 828 967 761
------- ------- ------- ------- -------
Total nonperforming as-
sets*.................... $94,424 $77,504 $77,137 $84,333 $84,297
======= ======= ======= ======= =======
Nonperforming assets* to
loans net of unearned
income, foreclosed
properties and
repossessions............. 0.72% 0.59% 0.60% 0.67% 0.68%
Accruing loans 90 days past
due....................... $24,133 $26,077 $23,832 $29,586 $25,701
</TABLE>
- --------
* Exclusive of accruing loans 90 days past due.
20
<PAGE>
Table 8--Investment Securities
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
--------------------- ---------------------
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....................... $1,855,118 $1,827,116 $2,189,913 $2,205,037
State, county and municipal
securities....................... 174,750 170,715 119,667 122,535
Other securities.................. 185,399 182,106 234,806 234,687
---------- ---------- ---------- ----------
$2,215,267 $2,179,937 $2,544,386 $2,562,259
========== ========== ========== ==========
Available-for-sale:
U.S. Treasury and federal agency
securities....................... $3,075,077 $3,103,633
Other securities.................. 399,195 233,602
---------- ----------
$3,474,272 $3,337,235
========== ==========
</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 June 30, 1999, were approximately 6.0 years and 6.79%,
respectively. Included in the combined portfolios was $4.4 billion of
mortgage-backed securities, $508 million of which were variable rate. The
weighted-average remaining life and the weighted-average yield of mortgage-
backed securities at June 30, 1999, were approximately 5.7 years and 6.75%
respectively. The duration of the combined portfolios, which considers the
repricing frequency of variable rate securities, is approximately 3.7
years.
2. The available-for-sale portfolio included net unrealized (losses)/gains of
$(50.0) million and $41.2 million at June 30, 1999 and 1998, respectively.
21
<PAGE>
Table 9--Other Interest-Bearing Liabilities
<TABLE>
<CAPTION>
June 30
-----------------
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Other borrowed funds:
Treasury, tax and loan notes................................ $316,341 $775,000
Short-term bank notes....................................... 50,000 175,000
Other short-term debt....................................... 21,808 38,472
-------- --------
Total other borrowed funds................................. $388,149 $988,472
======== ========
Other long-term debt:
6.75% Subordinated Debentures Due 2025...................... $149,889 $149,871
6.45% Subordinated Notes Due 2018........................... 304,269 304,798
6.125% Subordinated Notes Due 2009.......................... 174,279 -0-
7.75% Subordinated Notes Due 2004........................... 149,549 149,458
Subordinated Capital Notes Due 1999......................... -0- 99,892
Long-term notes payable..................................... 10,880 35,880
-------- --------
Total other long-term debt................................. $788,866 $739,899
======== ========
</TABLE>
Table 10--Capital Amounts and Ratios
<TABLE>
<CAPTION>
June 30
-----------------------------------
1999 1998
----------------- -----------------
Amount Ratio Amount Ratio
---------- ------ ---------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Tier 1 capital:
AmSouth................................... $1,227,950 6.62% $1,151,949 6.83%
AmSouth Bank.............................. 1,516,635 8.20 1,496,248 9.02
Total capital:
AmSouth................................... $2,021,371 10.90% $1,902,003 11.27%
AmSouth Bank.............................. 1,993,717 10.78 1,970,327 11.88
Leverage:
AmSouth................................... $1,227,950 6.09% $1,151,949 5.96%
AmSouth Bank.............................. 1,516,635 7.55 1,496,248 7.74
</TABLE>
22
<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 was recently enacted in Alabama that is designed to
limit the potential amount of punitive damages that can be recovered in
individual cases in the future. However, AmSouth cannot predict the exact
effect of the legislation at this time.
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 4. Submission of Matters to a Vote of Security Holders
The regular Annual Meeting of Shareholders of AmSouth was held on April 15,
1999, at which meeting the shareholders (i) elected four nominees as
directors, and (ii) approved an amendment to AmSouth's Restated Certificate of
Incorporation to increase the number of shares of authorized common stock. The
following is a tabulation of the voting on this matter.
ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
Votes Broker
Names Votes For Withheld Abstentions Nonvotes
- ----- ---------- -------- ----------- --------
<S> <C> <C> <C> <C>
J. Harold Chandler..................... 93,941,427 832,650 N/A 0
James E. Dalton, Jr.................... 93,883,912 890,120 N/A 0
Elmer B. Harris........................ 93,871,119 902,913 N/A 0
James R. Malone........................ 93,844,571 929,461 N/A 0
</TABLE>
AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION
<TABLE>
<CAPTION>
Votes Broker
Votes For Against Abstentions Nonvotes
--------- ------- ----------- --------
<S> <C> <C> <C>
90,787,911 4,768,147 318,897 0
</TABLE>
Item 5. Other Information
On May 31, 1999, AmSouth entered into an Agreement and Plan of Merger with
First American Corporation pursuant to which each outstanding share of common
stock of First American Corporation would be
23
<PAGE>
converted into 1.871 shares of AmSouth's common stock. More information
concerning the terms of the proposed merger may be found in AmSouth's reports
on Form 8-K filed June 2, 1999 and June 8, 1999, which are referred to in Item
6(b) of this Form 10-Q, and the Notes to Financial Statements that are part of
this Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K
Item 6(a)--Exhibits
The exhibits listed in the Exhibit Index at page 26 of this Form 10-Q are
filed herewith or are incorporated by reference herein.
Item 6(b)--Reports on Form 8-K
Three reports on Form 8-K were filed by AmSouth during the period April 1,
1999 to June 30, 1999:
(a) A report was filed on April 23, 1999, to report that AmSouth's
Board of Directors had approved (i) a three-for-two stock split with
respect to the AmSouth's common stock with a record date of April 30, 1999,
and a payable date of May 24, 1999, and (ii) the repurchase up to a
specified number of shares of AmSouth's common stock.
(b) A report was filed on June 2, 1999, to report that AmSouth had
entered into a merger agreement with First American Corporation and to
provide certain information regarding the merger and related matters,
including the recision by AmSouth of the repurchase program mentioned in
the immediately preceding paragraph (a).
(c) A report was filed on June 8, 1999, that included the Agreement and
Plan of Merger between AmSouth and First American Corporation and related
documents.
24
<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
August 11, 1999 By: _________________________________
C. Dowd Ritter
Chairman of the Board, President and
Chief Executive Officer
August 11, 1999 /s/ Robert R. Windelspecht
By: _________________________________
Robert R. Windelspecht
Executive Vice President and
Controller
25
<PAGE>
EXHIBIT INDEX
The following is a list of exhibits including items incorporated by
reference.
2 Agreement and Plan of Merger, dated May 31, 1999 (1)
3-a Restated Certificate of Incorporation of AmSouth Bancorporation (2)
3-b By-Laws of AmSouth Bancorporation (3)
10 Stock Option Agreements dated June 1, 1999 (4)
15 Letter Re: Unaudited Interim Financial Information
27 Financial Data Schedule
NOTES TO EXHIBITS
(1) Filed as Exhibit 2.1 to AmSouth's Report on Form 8-K filed June 8, 1999,
incorporated herein by reference.
(2) Filed as Exhibit 3-a to AmSouth's Form 10-Q Quarterly Report for the
quarter ended March 31, 1999, incorporated herein by reference.
(3) Filed as Exhibit 3-b to AmSouth's Form 10-Q Quarterly Report for the
quarter ended June 30, 1997, incorporated herein by reference.
(4) Filed as Exhibits 10.1 and 10.2 to AmSouth's Report on Form 8-K filed June
8, 1999, incorporated herein by reference.
26
<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 August 10,
1999, relating to the unaudited consolidated interim financial statements of
AmSouth Bancorporation and subsidiaries which are included in its Form 10-Q
for the quarter ended June 30, 1999:
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. 33-2927 (as amended) pertaining to the Employee Stock Purchase
Plan;
Form S-3 No. 33-35280 pertaining to the Dividend Reinvestment and Common
Stock Purchase 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;
Form S-3 No. 333-44263 pertaining to the AmSouth Bancorporation Shelf
Registration Statement; and
Form S-8 No. 333-76283 pertaining to the Stock Option Plan for Outside
Directors.
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
August 10, 1999
<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 I AND TABLES 2, 6, AND 7
OF ITEM 2 OF PART I OF THE AMSOUTH BANCORPORTION FORM 10-Q FOR THE SIX MONTHS
ENDED JUNE 30, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 556,646
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 19,050
<TRADING-ASSETS> 6,071
<INVESTMENTS-HELD-FOR-SALE> 3,474,272
<INVESTMENTS-CARRYING> 2,215,267
<INVESTMENTS-MARKET> 2,179,937
<LOANS> 13,084,345
<ALLOWANCE> 177,082
<TOTAL-ASSETS> 20,592,018
<DEPOSITS> 13,076,507
<SHORT-TERM> 1,975,355
<LIABILITIES-OTHER> 401,953
<LONG-TERM> 3,713,950
0
0
<COMMON> 202,415
<OTHER-SE> 1,221,838
<TOTAL-LIABILITIES-AND-EQUITY> 20,592,018
<INTEREST-LOAN> 550,797
<INTEREST-INVEST> 168,380
<INTEREST-OTHER> 3,399
<INTEREST-TOTAL> 722,576
<INTEREST-DEPOSIT> 220,370
<INTEREST-EXPENSE> 352,501
<INTEREST-INCOME-NET> 370,075
<LOAN-LOSSES> 17,000
<SECURITIES-GAINS> 6,495
<EXPENSE-OTHER> 306,743
<INCOME-PRETAX> 223,526
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144,579
<EPS-BASIC> .82
<EPS-DILUTED> .81
<YIELD-ACTUAL> 4.09
<LOANS-NON> 82,334
<LOANS-PAST> 24,133
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 176,075
<CHARGE-OFFS> 25,642
<RECOVERIES> 9,649
<ALLOWANCE-CLOSE> 177,082
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
