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Securities and Exchange Commission
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File Number 1-7476
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AmSouth Bancorporation
(Exact Name of registrant as specified in its charter)
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Delaware 63-0591257
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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AmSouth-Sonat Tower, 1900 Fifth Avenue North, Birmingham, Alabama 35203
(Address of principal executive offices) (Zip Code)
(205) 320-7151
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class Name of each exchange on which registered
Common Stock, par value $1.00 per share New York Stock Exchange
Stock Purchase Rights New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [_]
The aggregate market value of the common equity held by nonaffiliates of the
registrant as of February 22, 2000 was $5,811,682,933. (Note 1)
As of February 29, 2000, AmSouth Bancorporation had 391,984,527 shares of
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference herein:
Annual Report to Shareholders for the year ended December 31, 1999: Part I,
Part II
Proxy Statement for Annual Meeting to be held April 20, 2000: Part III
Note 1: In calculating the market value of the common equity held by
nonaffiliates of AmSouth as disclosed on the cover page of this Form 10-K,
AmSouth has treated as common equity held by affiliates only voting stock
owned as of February 22, 2000 by its directors and principal executive
officers and voting stock held by AmSouth's employee benefit plans; AmSouth
has not treated for purposes of this response stock held by any of AmSouth's
subsidiaries as pledgee or in a fiduciary capacity as stock held by affiliates
of AmSouth. AmSouth had no nonvoting common equity outstanding at February 22,
2000. AmSouth's response to this item is not intended to be an admission that
any person is an affiliate of AmSouth for any purpose other than this
response.
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AMSOUTH BANCORPORATION
Form 10-K
INDEX
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PAGE
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PART I
Item 1. Business........................................................ 3
Item 2. Properties...................................................... 9
Item 3. Legal Proceedings............................................... 9
Item 4. Submission of Matters to a Vote of Security Holders............. 9
Executive Officers of the Registrant..................................... 10
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters................................................................. 11
Item 6. Selected Financial Data......................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 13
Item 7A. Quantitative and Qualitative Disclosures about Market Risk...... 13
Item 8. Financial Statements and Supplementary Data..................... 13
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................... 13
PART III
Item 10. Directors and Executive Officers of the Registrant.............. 14
Item 11. Executive Compensation.......................................... 14
Item 12. Security Ownership of Certain Beneficial Owners and Management.. 14
Item 13. Certain Relationships and Related Transactions.................. 14
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-
K....................................................................... 15
SIGNATURES............................................................... 16
EXHIBIT INDEX............................................................ 18
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PART I
ITEM 1. BUSINESS
General
AmSouth Bancorporation (AmSouth) is a bank holding company, which was
organized in 1970 as a corporation under the laws of Delaware and commenced
doing business in 1972. At December 31, 1999, AmSouth had total consolidated
assets of approximately $43.4 billion. AmSouth offers a broad range of bank
and bank-related services through its subsidiaries. AmSouth's principal
subsidiary is AmSouth Bank (the Bank).
The Bank is a banking corporation organized under the laws of the State of
Alabama and is a wholly owned subsidiary of AmSouth. As of December 31, 1999,
the Bank had total consolidated assets of approximately $43.2 billion and
total consolidated deposits of approximately $27.9 billion. As of December 31,
1999, the assets of the Bank constituted virtually all of the assets of
AmSouth.
In October 1999, AmSouth acquired First American Corporation (First
American), a bank holding company headquartered in Nashville, Tennessee, and
caused First American to be merged into AmSouth in a transaction accounted for
as a pooling-of-interests. As of September 30, 1999, First American had total
consolidated assets of $22.2 billion and total deposits of $14.5 billion. For
more information regarding the acquisition of First American, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", which is incorporated herein by reference pursuant to Item 7 of
this Form 10-K, and the "Notes to Consolidated Financial Statements", which
are incorporated herein by reference pursuant to Item 8 of this Form 10-K.
AmSouth has three reportable segments: Consumer Banking, Commercial Banking
and Capital Management. Consumer Banking delivers a full range of financial
services to individuals and small businesses. Services include loan products
such as residential mortgages, equity lending, credit cards, and loans for
automobile and other personal financing needs, and various products designed
to meet the credit needs of small businesses. In addition, Consumer Banking
offers various deposit products that meet customers' savings and transaction
needs. Commercial Banking meets corporate and middle market customers' needs
with a comprehensive array of credit, treasury management, international, and
capital markets services. Included among these are several specialty services
such as real estate finance, asset based lending, commercial leasing, and
healthcare banking. Capital Management is comprised of client fiduciary
services and broker/dealer services, and provides primarily fee based income.
This area includes not only traditional trust services, but also a substantial
selection of investment management services including AmSouth's proprietary
mutual fund family. The services and products of all three of AmSouth's
segments are offered to businesses and individuals through approximately 640
banking offices located in Alabama, Florida, Tennessee, Mississippi,
Louisiana, Arkansas, Kentucky, Virginia and Georgia. In addition to its
banking offices, the Bank operates a network of over 1,340 automated teller
machines that are linked with shared automated tellers in all 50 states.
Further segment information is included in Note 22 of Notes to Consolidated
Financial Statements, which is incorporated herein by reference pursuant to
Item 8, of this Form 10-K.
As of February 29, 2000, AmSouth and its subsidiaries had 13,882 employees.
Competition
AmSouth's subsidiaries compete aggressively with banks located in Alabama,
Florida, Tennessee, Mississippi, Louisiana, Arkansas, Kentucky, Virginia and
Georgia, as well as large banks in major financial centers, and with other
financial institutions, such as savings and loan associations, credit unions,
consumer finance companies, brokerage firms, insurance companies, investment
companies, mortgage companies, and financial service operations of major
retailers. Competition is based on a number of factors, including prices,
interest rates, services, and availability of products. AmSouth also competes
with other bank holding companies headquartered in the United States and
abroad for the acquisition of financial institutions. At December 31, 1999,
AmSouth was the 19th largest bank holding company headquartered in the United
States in terms of total assets.
Various regulatory developments and existing laws have allowed financial
institutions to conduct significant activities on an interstate basis for a
number of years. During recent years, a number of financial institutions
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expanded their out-of-state activities, and various states enacted legislation
intended to allow certain interstate banking combinations which otherwise
would have been prohibited by federal law. For a number of years, the Bank
Holding Company Act of 1956, as amended (the BHCA), generally provided that no
company which owned or controlled a commercial bank in the United States could
acquire ownership or control of a commercial bank in a state other than the
state in which the company's banking subsidiaries were principally located
unless the acquisition was specifically authorized by the laws of the state in
which the bank being acquired was located.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
IBBEA) authorized interstate acquisitions of banks and bank holding companies
without geographic limitation beginning September 29, 1995. In addition,
beginning June 1, 1997, the IBBEA authorizes a bank to merge with a bank in
another state as long as neither of the states has opted out of interstate
branching by May 31, 1997. A bank may establish and operate a de novo branch
in a state in which the bank does not maintain a branch if that state
expressly permits de novo branching. Once a bank has established branches in a
state through an interstate merger transaction, the bank may establish and
acquire additional branches at any location in the state where any bank
involved in the interstate merger transaction could have established or
acquired branches under applicable federal or state law. A bank that has
established a branch in a state through de novo branching may establish and
acquire additional branches in such state in the same manner and to the same
extent as a bank having a branch in such state as a result of an interstate
merger. If a state opted out of interstate branching within the specified time
period, no bank in any other state may establish a branch in the opting out
state, whether through an acquisition or de novo. None of the states in which
AmSouth had subsidiary banks on June 1, 1997 "opted out" of the provisions of
the IBBEA permitting interstate branching by acquisition. Although the
management of AmSouth cannot predict with certainty the full effect of the
IBBEA on AmSouth, management believes the IBBEA resulted in greater
consolidation within the banking industry and such consolidation is likely to
continue.
The Gramm-Leach-Bliley Act
In November 1999, President Clinton signed into law the Gramm-Leach-Bliley
Act. The Gramm-Leach-Bliley Act significantly revises the laws regulating
banks and bank holding companies and other providers of financial services.
The Gramm-Leach-Bliley Act (i) repeals the restrictions, formerly contained in
the Glass-Steagall Act, on banks affiliating with securities firms, (ii)
permits a company to form a "financial holding company," which may own insured
depository institutions and engage through non-bank affiliates in a broader
range of financial activities than previously had been allowed, including
underwriting securities, insurance underwriting, merchant banking and
insurance company investments, so long as the depository institution
subsidiaries are well capitalized, well managed and receive at least a
satisfactory Community Reinvestment Act rating on their most recent
examination, (iii) permits the Board of Governors of the Federal Reserve
System (Federal Reserve Board) and the Department of the Treasury to determine
that other activities are also permissible for financial holding companies,
(iv) provides that the Federal Reserve will be responsible for "umbrella"
supervision and examination of financial holding companies, and that other
federal and state regulators will regulate, supervise and examine
"functionally regulated subsidiaries" such as insurance companies and broker-
dealers, (v) allows national banks that meet certain requirements to engage in
new financial activities (other than insurance underwriting, merchant banking,
insurance company investments and real estate development) in subsidiaries of
such banks, and (vi) establishes certain restrictions on the transfer and use
by financial institutions of nonpublic personal information of their
customers. The enactment of the Gramm-Leach-Bliley Act is expected to
intensify competition in, and the consolidation of, the financial services
industry. However, the management of AmSouth cannot currently predict the full
impact of the enactment of the Gramm-Leach-Bliley Act on AmSouth.
Business Combinations
AmSouth continually evaluates business combination opportunities and
sometimes conducts due diligence activities in connection with them. As a
result, business combination discussions and, in some cases, negotiations
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take place, and transactions involving cash, debt or equity securities can be
expected. Any future business combination or series of business combinations
that AmSouth might undertake may be material, in terms of assets acquired or
liabilities assumed, to AmSouth's financial condition. Recent business
combinations in the banking industry have typically involved the payment of a
premium over book and market values. This practice may result in dilution of
book value and net income per share for the acquirers.
Supervision and Regulation
The following discussion addresses the regulatory framework applicable to
bank holding companies and their subsidiaries, and provides certain specific
information relevant to AmSouth. Regulation of financial institutions such as
AmSouth and its subsidiaries is intended primarily for the protection of
depositors, the deposit insurance funds of the Federal Deposit Insurance
Corporation (the FDIC) and the banking system as a whole, and generally is not
intended for the protection of stockholders or other investors.
The following is a summary of certain statutes and regulations that apply to
the operation of banking institutions. Changes in the applicable laws, and in
their application by regulatory agencies, cannot necessarily be predicted, but
they may have a material effect on the business and results of banking
organizations, including AmSouth.
General
As a bank holding company, AmSouth is subject to the regulation and
supervision of the Federal Reserve Board under the BHCA. Historically, under
the BHCA, bank holding companies could not, in general, directly or indirectly
acquire the ownership or control of more than 5 percent of the voting shares
or substantially all of the assets of any company, including a bank, without
the prior approval of the Federal Reserve Board. In addition, bank holding
companies were generally prohibited under the BHCA from engaging in nonbanking
activities, subject to certain exceptions. The activities permissible for bank
holding companies were significantly expanded by the Gramm-Leach-Bliley Act. For
a summary of its provisions, see "The Gramm-Leach-Bliley Act" above. AmSouth
cannot predict at this time to what extent, if any, it will engage in any of
these expanded activities.
The Bank is a state bank, chartered under the laws of Alabama, and is a
member of the Federal Reserve System. It is generally subject to regulation
and supervision by both the Federal Reserve Board and the Office of the
Superintendent of Banking of the State of Alabama. The Bank is also an insured
depository institution, and, therefore, also subject to regulation by the
FDIC. The Bank is also subject to various requirements and restrictions under
federal and state law, including requirements to maintain reserves against
deposits, restrictions on the types and amounts of loans that may be granted
and the interest that may be charged thereon, and limitations on the types of
investments that may be made and the types of services that may be offered.
Various consumer laws and regulations also affect the operations of the Bank.
In addition to the impact of regulation, commercial banks are affected
significantly by the actions of the Federal Reserve Board as it attempts to
control the money supply and credit availability in order to influence the
economy.
Payment of Dividends
AmSouth is a legal entity separate and distinct from its banking and other
subsidiaries. The principal source of cash flow for AmSouth, including cash
flow to pay dividends on AmSouth's capital stock and to pay interest and
principal on any debt of AmSouth, is dividends from the Bank. There are
statutory and regulatory limitations on the payment of dividends by the Bank
to AmSouth as well as by AmSouth to its shareholders. The payment of dividends
by AmSouth and the Bank also may be affected by other factors, such as the
requirement to maintain capital at or above regulatory guidelines. See
"Capital Adequacy and Related Matters" below.
Under Alabama law, a bank may not pay a dividend in excess of 90 percent of
its net earnings until the bank's surplus is equal to at least 20 percent of
capital. The Bank is also required by Alabama law to obtain the prior approval
of the Superintendent of the State Banking Department of Alabama for the
payment of dividends
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if the total of all dividends declared by the Bank in any calendar year will
exceed the total of (a) the Bank's net earnings (as defined by statute) for
that year plus (b) its retained net earnings for the preceding two years, less
any required transfers to surplus. Also, no dividends may be paid from the
Bank's surplus without the prior written approval of the Superintendent.
In addition, as a member of the Federal Reserve System, the Bank is required
by federal law to obtain regulatory approval for the payment of dividends if
the total of all dividends declared by the Board of Directors of such bank in
any year could exceed the total of (a) the Bank's net income (as reportable in
its Reports of Condition and Income) for that year, plus (b) the Bank's
retained net income (as defined and interpreted by regulation) for the
preceding two years, less any net losses incurred in the current or prior two
years and any required transfers to surplus or a fund for the retirement of
preferred stock.
Furthermore, if, in the opinion of the applicable federal bank regulatory
authority, a bank under its jurisdiction is engaged in or is about to engage
in an unsafe or unsound practice (which, depending on the financial condition
of the bank, could include the payment of dividends), such authority may
require, after notice and a hearing, that such bank cease and desist from such
practice. The Federal Reserve Board has indicated that paying dividends that
deplete a bank's capital base to an inadequate level would be an unsafe and
unsound banking practice. In addition, the Federal Deposit Insurance Act (the
FDI Act) imposes additional restrictions on the payments of dividends by the
Bank, as described under "Capital Adequacy and Related Matters-Prompt
Corrective Action" below. Moreover, the Federal Reserve Board has issued a
policy statement that provides that bank holding companies and state member
banks should generally pay dividends only out of current operating earnings.
Under dividend restrictions imposed under federal and Alabama law, including
those described above, the Bank, without obtaining government approvals, could
declare aggregate dividends in 2000 of approximately $227.2 million, plus an
additional amount equal to its net income for 2000.
Capital Adequacy and Related Matters
Capital Guidelines
The Federal Reserve Board has adopted risk-based capital guidelines for bank
holding companies. The minimum guideline for the ratio of total regulatory
capital (Total Capital) to risk-weighted assets (including certain off-
balance-sheet items, such as standby letters of credit) is 8 percent. At least
half of the Total Capital must be composed of common stockholders' equity,
retained earnings, minority interests in the equity accounts of consolidated
subsidiaries, noncumulative perpetual preferred stock, and a limited amount of
qualifying cumulative perpetual preferred stock, less goodwill and certain
other intangible assets (Tier 1 Capital). The remainder may consist of
subordinated debt, other preferred stock and a limited amount of loan loss
reserves. At December 31, 1999, AmSouth's consolidated Tier 1 Capital and
Total Capital ratios were 7.46 percent and 10.66 percent, respectively.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. The guidelines provide for a
minimum ratio of Tier 1 Capital to average assets, less goodwill and certain
other intangible assets (the Leverage Ratio), of 3 percent for bank holding
companies that meet certain specific criteria, including having the highest
regulatory rating. All other bank holding companies generally are required to
maintain a Leverage Ratio of at least 3 percent, plus an additional cushion of
100 to 200 basis points. AmSouth's Leverage Ratio at December 31, 1999 was
6.22 percent. The guidelines also provide that bank holding companies
experiencing internal growth or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. Furthermore, the
Federal Reserve Board has indicated that it will consider a "Tangible Tier 1
Capital Leverage Ratio" (deducting all intangibles) and other indicators of
capital strength in evaluating proposals for expansion or new activities.
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The Bank is also subject to risk-based and leverage capital requirements,
similar to those described above. The Bank complied with applicable minimum
capital requirements as of December 31, 1999. Neither AmSouth nor the Bank has
been advised by any federal banking agency of any specific minimum Leverage
Ratio requirement applicable to it.
The Federal Reserve Board has adopted modifications to the Tier 1 Capital
and Total Capital ratios applicable to both banks and bank holding companies
that are intended to address "market risk" arising from large trading
portfolios. These modifications are applicable only to banks and bank holding
companies whose trading activities exceed certain thresholds, and to those
that voluntarily comply with the market risk capital requirement. AmSouth is
not subject to, nor has voluntarily adopted, these new requirements.
Bank regulators have the authority generally to raise capital requirements
applicable to banking organizations beyond their current levels. However, the
management of AmSouth is unable to predict whether and when higher capital
requirements would be imposed, and, if so, at what levels and on what
schedule.
Prompt Corrective Action
The FDI Act requires the federal banking regulators to take prompt
corrective action in respect of FDIC-insured depository institutions that do
not meet minimum capital requirements. The FDI Act establishes five capital
tiers: "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," and "critically undercapitalized." Under
applicable regulations, a state member bank is defined to be well capitalized
if it maintains a Leverage Ratio of at least 5 percent, a risk-adjusted Tier 1
Capital Ratio of at least 6 percent, and a Total Capital Ratio of at least 10
percent and is not subject to any order or written directive to maintain any
specific capital level. A state member bank is defined to be adequately
capitalized if it maintains a Leverage Ratio of at least 4 percent, a risk-
adjusted Tier 1 Capital Ratio of at least 4 percent, and a Total Capital Ratio
of at least 8 percent. In addition, a state member bank will be considered:
(a) undercapitalized if it fails to meet any minimum required measure; (b)
significantly undercapitalized if it is significantly below such measure; and
(c) critically undercapitalized if it fails to maintain a level of tangible
equity equal to not less than 2 percent of total assets. A state member bank
may be deemed to be in a capitalization category that is lower than is
indicated by its actual capital position if it is operating in an unsafe or
unsound manner or receives an unsatisfactory examination rating. AmSouth
believes that at December 31, 1999, the Bank had capital ratios sufficient to
qualify as "well capitalized".
The capital-based prompt corrective action provisions of the FDI Act and the
implementing regulations apply to FDIC-insured depository institutions such as
the Bank, and are not directly applicable to holding companies, like AmSouth,
that control such institutions. However, the Federal Reserve Board has
indicated that, in regulating bank holding companies, it will take appropriate
action at the holding company level based on an assessment of the
effectiveness of supervisory actions imposed upon subsidiary depository
institutions pursuant to such provisions and regulations. Although the capital
categories defined under the prompt corrective action regulations are not
directly applicable to AmSouth under existing law and regulations, if AmSouth
were placed in a capital category it would qualify as well-capitalized as of
December 31, 1999.
The FDI Act generally prohibits an FDIC-insured depository institution from
making any capital distribution (including payment of dividends) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized insured depository
institutions are subject to restrictions on borrowing from the Federal Reserve
System. In addition, undercapitalized depository institutions are subject to
growth limitations and are required to submit capital restoration plans. An
insured depository institution's holding company must guarantee the capital
plan, up to an amount equal to the lesser of 5 percent of the depository
institution's assets at the time it becomes undercapitalized or the amount of
the capital deficiency when the institution fails to comply with the plan. The
federal banking agencies may not accept a capital plan without determining,
among other things, that the plan is based on realistic assumptions and is
likely to succeed in restoring the depository institution's capital. If an
insured depository institution fails to submit an acceptable plan, it is
treated as if it is significantly undercapitalized.
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Significantly undercapitalized insured depository institutions may be
subject to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to
reduce total assets and cessation of receipt of deposits from correspondent
banks. Critically undercapitalized insured depository institutions are subject
to appointment of a receiver or conservator.
Brokered Deposits and Pass-Through Insurance
The FDIC has adopted regulations under the FDI Act governing the receipt of
brokered deposits. Under the regulations, an FDIC-insured depository
institution cannot accept, roll over or renew brokered deposits unless (a) it
is well capitalized or (b) it is adequately capitalized and receives a waiver
from the FDIC. A depository institution that cannot receive brokered deposits
also cannot offer "pass-through" insurance on certain employee benefit
accounts. Whether or not it has obtained such a waiver, an adequately
capitalized depository institution may not pay an interest rate on any
deposits in excess of 75 basis points over certain prevailing market rates
specified by regulation. There are no such restrictions on a depository
institution that is well capitalized. Because the Bank was well capitalized as
of December 31, 1999, AmSouth believes the brokered deposits regulation will
have no material effect on the funding or liquidity of the Bank.
Holding Company Structure
There are various legal restrictions on the extent to which AmSouth and its
nonbank subsidiaries may borrow or otherwise obtain funding from the Bank. The
Bank (and its subsidiaries) is limited in engaging in borrowing and other
"covered transactions" with nonbank and nonsavings bank affiliates to the
following amounts: (a) in the case of any single such affiliate, the aggregate
amount of covered transactions of the Bank and its subsidiaries may not exceed
10 percent of the capital stock and surplus of the Bank; and (b) in the case
of all affiliates, the aggregate amount of covered transactions of the Bank
and its subsidiaries may not exceed 20 percent of the capital stock and
surplus of the Bank. Covered transactions also are subject to certain
collateralization requirements. "Covered transactions" are defined by statute
to include a loan or extension of credit, as well as a purchase of securities
issued by an affiliate, a purchase of assets (unless otherwise exempted by the
Federal Reserve Board) from the affiliate, the acceptance of securities issued
by the affiliate as collateral for a loan, and the issuance of a guarantee,
acceptance, or letter of credit on behalf of an affiliate.
Under Federal Reserve Board policy, AmSouth is expected to act as a source
of financial strength to, and to commit resources to support, the Bank. This
support may be required at times when, absent such Federal Reserve Board
policy, AmSouth may not be inclined to provide it. In addition, any capital
loans by a bank holding company to a subsidiary bank are subordinate in right
of payment to deposits and to certain other indebtedness of such subsidiary
bank. In the event of a bank holding company's bankruptcy, any commitment by
the bank holding company to a federal bank regulatory agency to maintain the
capital of a subsidiary bank will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
The FDI Act provides that, in the event of the "liquidation or other
resolution" of an insured depository institution, the claims of depositors of
such institution (including claims by the FDIC as subrogee of insured
depositors) and certain claims for administrative expenses of the FDIC as
receiver would be afforded a priority over other general unsecured claims
against the institution including any claims of the bank's holding company as
a creditor. If an insured depository institution fails, insured and uninsured
depositors, along with the FDIC, will be placed ahead of unsecured, nondeposit
creditors, including a parent holding company such as AmSouth, in its capacity
as creditor, in order of priority of payment.
FDIC Deposit Insurance Assessments
The Bank is subject to FDIC deposit insurance assessments pursuant to two
separate assessment schedules, one applicable to those deposits insured by the
Bank Insurance Fund (BIF) and another applicable to those deposits insured by
the Savings Association Insurance Fund (SAIF).
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The FDIC's current risk-based system places a bank in one of nine risk
categories, principally on the basis of its capital level and an evaluation of
the bank's risk to the fund, and bases premiums on the probability of loss to
the FDIC with respect to each individual bank. Currently, the FDIC's risk-
based system provides that the highest and lowest annual assessments per $100
of deposits insured by the BIF or SAIF are $.27 and $0. The assessment rate
schedule is subject to change by the FDIC and accordingly assessment rates
could increase in the future. The Bank's total FDIC assessments were $5.4
million pretax in 1999.
Liability for Affiliate Insured Depository Institutions
Under the FDI Act, an insured depository institution, such as the Bank, can
be held liable for any loss incurred by, or reasonably expected to be incurred
by, the FDIC in connection with (a) the default of a commonly controlled FDIC-
insured depository institution or (b) any assistance provided by the FDIC to
any commonly controlled FDIC-insured depository institution "in danger of
default." "Default" is defined generally as the appointment of a conservator
or receiver and "in danger of default" is defined generally as the existence
of certain conditions indicating that a default is likely to occur in the
absence of regulatory assistance. AmSouth currently has only one small
depository institution subsidiary other than the Bank, but that subsidiary
will be merged into the Bank on March 31, 2000. It is possible, however, that
AmSouth will have other depository institution subsidiaries in the future.
ITEM 2. PROPERTIES
The executive offices of AmSouth are located in the AmSouth-Sonat Tower in
downtown Birmingham, Alabama. An undivided one-half interest in this building
is owned by the Bank through an unincorporated joint venture. The Bank is a
principal tenant of this building. The Bank is also a principal tenant of
other multi-story office buildings in Birmingham, Alabama and Nashville,
Tennessee. The Bank also has other banking and operational offices located in
its nine-state market area.
At December 31, 1999, AmSouth and its subsidiaries had 774 offices
(principally bank buildings) of which 513 were owned and 261 were either
leased or subject to a ground lease.
ITEM 3. LEGAL PROCEEDINGS
Several of AmSouth's subsidiaries are defendants in legal proceedings
arising in the ordinary course of business. Some of these proceedings seek
relief or damages that are substantial. The actions relate to AmSouth's
lending, collections, loan servicing, deposit taking, investment, trust and
other activities.
Among the actions which are pending against AmSouth subsidiaries are actions
filed as class actions. The actions are similar to others that have been
brought in recent years against financial institutions in that they seek
punitive damage awards in transactions involving relatively small amounts of
actual damages. 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 any wrongdoing but with payment of some compensation to purported
class members and large attorney's fees to plaintiff class counsel.
Nonetheless, based upon the advice of legal counsel, AmSouth's management is
of the opinion that the ultimate resolution of these legal proceedings will
not have a material adverse effect on AmSouth's financial condition or results
of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters brought to a vote of security holders during the
fourth quarter of 1999.
9
<PAGE>
Executive Officers of the Registrant
The executive officers of AmSouth, their ages, the positions held by them
with AmSouth and certain of its subsidiaries, and their principal occupations
for the last five years are as follows:
<TABLE>
<C> <C> <S>
C. Dowd Ritter 52 President and Chief Executive Officer (January 1996
to date) of AmSouth, Chairman (September 1996 to
date) and President and Chief Executive Officer
(January 1996 to date) of AmSouth Bank; Director of
AmSouth and AmSouth Bank. Formerly, Chairman of the
Board (September 1996 to October 1999) of AmSouth
and President and Chief Operating Officer, AmSouth
and AmSouth Bank of Alabama (August 1994 to December
1995).
Thomas E. Hoaglin 50 Vice Chairman and a director (February 2000 to date)
of AmSouth and AmSouth Bank. Formerly, Chairman and
Chief Executive Officer (1997 to 1999) of Bank One
Services Corp., Chairman (1996 to 1997) of Project
One at Bank One Corporation and Chairman and Chief
Executive Officer (1992 to 1995) of Banc One Ohio
Corporation.
Michael C. Baker 52 Senior Executive Vice President and Capital
Management Group Head of AmSouth and AmSouth Bank
(October 1995 to date). Formerly, President and
Chief Executive Officer of Barnett Banks Trust Co.,
N.A. (1989 to July 1995).
Candice W. Bagby 50 Senior Executive Vice President and Consumer Banking
Group Head of AmSouth and AmSouth Bank (August 1995
to date). Formerly, Executive Vice President and
Director of Marketing of AmSouth and AmSouth Bank of
Alabama (July 1994 to August 1995).
Sloan D. Gibson, IV 46 Senior Executive Vice President (1994 to date) of
AmSouth and AmSouth Bank and
Tennessee/Mississippi/Louisiana Banking Group Head
(1999 to date) of AmSouth Bank. Formerly, President
and Chief Executive Officer (October 1999 to
December 1999) of First American National Bank,
Chief Financial Officer (October 1997 to October
1999) and Finance, Commercial and Credit Group Head
(October 1994 to October 1999) of AmSouth and
AmSouth Bank.
W. Charles Mayer, III 45 Senior Executive Vice President (October 1994 to
date) of AmSouth and AmSouth Bank and Alabama
Banking Group Head (October 1999 to date) of AmSouth
Bank. Formerly, Alabama/Tennessee/Georgia Banking
Group Head (November 1997 to October 1999),
Birmingham City President (May 1995 to December
1998) of AmSouth Bank, Alabama Banking Group Head of
AmSouth (May 1995 to October 1997), and President
and Chief Executive Officer of AmSouth Bank of
Tennessee (January 1993 to April 1995).
E. W. Stephenson, Jr. 53 Senior Executive Vice President of AmSouth (July
1993 to date) and Senior Executive Vice President of
AmSouth Bank and Florida Banking Group Head (July
1997 to date). Formerly, Chairman of the Board and
Chief Executive Officer of AmSouth Bank of Florida
(July 1993 to June 1997).
Claire W. Tucker 46 Senior Executive Vice President, Commercial Banking
Group (October 1999 to date) of AmSouth and AmSouth
Bank. Formerly, President of Corporate Bank (1997 to
October 1999), Manager, Specialized Lending Group
(1995 to 1997), and Manager of Healthcare Division
(1991 to 1995), all of First American National Bank.
David B. Edmonds 46 Executive Vice President and Human Resources
Director of AmSouth and AmSouth Bank (October 1994
to date).
</TABLE>
10
<PAGE>
<TABLE>
<C> <C> <S>
Grayson Hall 42 Executive Vice President (June 1994 to date) and
Operations and Technology Division Head (January 1993
to date) of AmSouth and AmSouth Bank.
Samuel M. Tortorici 34 Executive Vice President and Chief Financial Officer
(October 1999 to date) of AmSouth and AmSouth Bank.
Formerly, Central Alabama Area Executive and
Montgomery City President (August 1997 to October
1999) and Senior Vice President for Regional Banking
(1995 to August 1997), all of AmSouth Bank.
Stephen A. Yoder 46 Executive Vice President, General Counsel and
Corporate Secretary of AmSouth and AmSouth Bank (1995
to date). Formerly, Assistant General Counsel (1992 to
1995) of Mellon Bank Corporation.
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
AmSouth's common stock, par value $1.00 per share, is listed for trading on
the New York Stock Exchange under the symbol ASO. Quarterly high and low sales
prices of, and cash dividends declared on, AmSouth common stock are set forth
in Note 24 of the Notes to Consolidated Financial Statements, which are
incorporated herein by reference pursuant to Item 8 of this Form 10-K. As of
February 22, 2000, there were approximately 27,992 holders of record of
AmSouth's common stock (including participants in the Dividend Reinvestment
and Common Stock Purchase Plan).
Restrictions on the ability of the Bank to transfer funds to AmSouth at
December 31, 1999, are set forth in Note 18 of the Notes to Consolidated
Financial Statements, which are incorporated herein by reference pursuant to
Item 8 of this Form 10-K. A discussion of certain limitations on the ability
of the Bank to pay dividends to AmSouth, and the ability of AmSouth to pay
dividends on its common stock, is set forth in Part I under the headings
"Supervision and Regulation--Payment of Dividends" and "Supervision and
Regulation--Capital Adequacy and Related Matters."
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the last five
years. All amounts have been restated to reflect the merger with First
American.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Earnings summary as
reported
Net interest income..... $ 1,507,946 $1,444,284 $ 1,384,729 $ 1,279,138 $ 1,160,543
Provision for loan
losses................. 165,626 99,067 83,508 71,608 43,000
----------- ----------- ----------- ----------- -----------
Net interest income
after provision for
loan losses............ 1,342,320 1,345,217 1,301,221 1,207,530 1,117,543
Noninterest revenues.... 847,557 799,854 658,724 542,289 438,812
Merger-related costs.... 301,415 121,725 0 0 7,269
Noninterest expenses
excluding merger-
related costs.......... 1,347,091 1,284,547 1,221,675 1,129,509 988,488
----------- ----------- ----------- ----------- -----------
Income before income
taxes.................. 541,371 738,799 738,270 620,310 560,598
Income taxes............ 200,903 264,725 264,589 223,455 202,861
----------- ----------- ----------- ----------- -----------
Net income............. $ 340,468 $ 474,074 $ 473,681 $ 396,855 $ 357,737
=========== =========== =========== =========== ===========
Earnings per common
share*................. $ 0.87 $ 1.22 $ 1.20 $ 1.00 $ 0.90
Diluted earnings per
common share*.......... 0.86 1.20 1.18 0.98 0.88
Cash dividends
declared*.............. 0.71 0.57 0.51 0.48 0.46
Return on average
assets................. 0.81% 1.22% 1.32% 1.14% 1.13%
Return on average
equity................. 10.69 15.33 16.00 13.92 13.53
Operating efficiency.... 69.24 61.97 59.20 61.25 61.35
Earnings summary
excluding merger-
related and
other special charges**
Net interest income..... $ 1,507,946 $ 1,444,284 $ 1,384,729 $ 1,279,138 $ 1,160,543
Provision for loan
losses................. 91,626 99,067 83,508 71,608 43,000
----------- ----------- ----------- ----------- -----------
Net interest income
after provision for
loan losses............ 1,416,320 1,345,217 1,301,221 1,207,530 1,117,543
Noninterest revenues.... 856,398 799,854 658,724 542,289 438,812
Noninterest expenses
excluding merger-
related costs.......... 1,343,288 1,284,547 1,221,675 1,097,213 988,488
----------- ----------- ----------- ----------- -----------
Income before income
taxes.................. 929,430 860,524 738,270 652,606 567,867
Income taxes............ 324,698 305,182 264,589 235,308 205,478
----------- ----------- ----------- ----------- -----------
Net income............. $ 604,732 $ 555,342 $ 473,681 $ 417,298 $ 362,389
=========== =========== =========== =========== ===========
Earnings per common
share*................. $ 1.55 $ 1.43 $ 1.20 $ 1.05 $ 0.91
Diluted earnings per
common share*.......... 1.53 1.40 1.18 1.03 0.90
Return on average
assets................. 1.45% 1.43% 1.32% 1.19% 1.14%
Return on average
equity................. 18.99 17.96 16.00 14.63 13.71
Operating efficiency.... 56.21 56.60 59.20 59.50 60.90
Selected year end
balances
Loans net of unearned
income................. $26,266,759 $24,445,296 $24,415,004 $23,124,651 $22,041,920
Assets.................. 43,406,554 40,635,831 37,380,079 36,070,557 34,247,835
Deposits................ 27,912,443 28,533,760 27,045,700 26,003,593 26,258,269
Long-term debt.......... 5,603,486 4,392,825 2,247,442 1,876,237 862,690
Shareholders' equity.... 2,959,205 3,207,424 3,029,138 2,939,725 2,805,685
Selected average
balances
Loans net of unearned
income................. $25,471,295 $24,027,839 $23,753,817 $22,318,990 $20,849,737
Assets.................. 41,811,328 38,840,235 35,917,828 34,929,393 31,782,150
Deposits................ 27,718,029 27,150,710 26,260,410 25,762,126 24,908,017
Long-term debt.......... 5,292,217 3,791,953 1,869,577 1,369,292 645,400
Shareholders' equity.... 3,185,084 3,091,737 2,960,023 2,851,421 2,643,459
Selected ratios
Net interest margin..... 4.02% 4.14% 4.27% 4.07% 4.05%
Allowance for loan
losses to loans net of
unearned income........ 1.38 1.53 1.50 1.60 1.70
Nonperforming assets to
loans net of unearned
income, foreclosed
properties and
repossessions.......... 0.61 0.54 0.53 0.61 0.79
Ending equity to ending
assets................. 6.82 7.89 8.10 8.15 8.19
Average equity to
average assets......... 7.62 7.96 8.24 8.16 8.32
</TABLE>
- --------
* Restated for common stock splits
** See page 23 of the Annual Report for description of special charges for
1999. 1996 special charges relate to the one-time SAIF assessment.
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of AmSouth's 1999 Annual Report to
Shareholders is hereby incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is included on pages 41 and 42 of
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", which is hereby incorporated herein by reference pursuant to Item
7, above.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of AmSouth and Subsidiaries, the
accompanying Notes to Consolidated Financial Statements, Management's
Statement on Responsibility for Financial Reporting, and the Report of
Independent Auditors contained in AmSouth's 1999 Annual Report to Shareholders
are hereby incorporated herein by reference.
The Report of Independent Auditors, KPMG LLP, for First American Corporation
for the years ended December 31, 1998 and 1997 is included herein as follows:
Independent Auditors' Report
The Board of Directors
AmSouth Bancorporation:
We have audited the consolidated balance sheets of First American
Corporation and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated income statements, changes in shareholders' equity, and cash
flows for each of the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
American Corporation and subsidiaries as of December 31, 1998 and 1997, and
the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
January 21, 1999
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the directors and director nominees of AmSouth included at
pages 6, 8 and 10 of AmSouth's Proxy Statement for the Annual Meeting of
Shareholders to be held on April 20, 2000 (the Proxy Statement) and the
information incorporated by reference pursuant to Item 13 below is hereby
incorporated herein by reference. Information on AmSouth's executive officers
is included in Part I of this report.
Information regarding late filings under Section 16(a) of the Securities
Exchange Act of 1934 included at page 12 of the Proxy Statement under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance" is hereby
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding compensation of directors and executive officers
included at pages 13 through 22 of the Proxy Statement is hereby incorporated
herein by reference. However, the information provided in the Proxy Statement
under the headings "Executive Compensation Committee Report on Executive
Compensation" and "Performance Graph" shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission, or
subject to Regulation 14A or 14C, other than as provided in Item 402 of
Regulation S-K, or to liabilities of Section 18 of the Securities Exchange Act
of 1934.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Voting Securities and Principal
Holders Thereof " at pages 1 through 5 of the Proxy Statement is hereby
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth in the Proxy Statement under the caption "Certain
Relationships, Related Transactions and Legal Proceedings" at page 13 thereof
is hereby incorporated herein by reference.
14
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules
Financial Statements
The following management's statement on responsibility for financial
reporting, report of independent auditors and consolidated financial
statements of AmSouth and its subsidiaries included in AmSouth's 1999 Annual
Report to Shareholders are incorporated herein by reference pursuant to Item
8.
Management's Statement on Responsibility for Financial Reporting
Report of Ernst & Young LLP, Independent Auditors
Consolidated Statement of Condition--December 31, 1999 and 1998
Consolidated Statement of Earnings--Years ended December 31, 1999, 1998 and
1997
Consolidated Statement of Shareholders' Equity--Years ended December 31,
1999, 1998 and 1997
Consolidated Statement of Cash Flows--Years ended December 31, 1999, 1998
and 1997
Notes to Consolidated Financial Statements
The Report of Independent Auditors, KPMG LLP, is included herein under Item
8.
Financial Statement Schedules
All schedules to the consolidated financial statements required by Article 9
of Regulation S-X and all other schedules to the financial statements of
AmSouth required by Article 5 of Regulation S-X are not required under the
related instructions or are inapplicable and, therefore, have been omitted, or
the required information is contained in the Consolidated Financial Statements
or the notes thereto, which are incorporated herein by reference pursuant to
Item 8, Financial Statements and Supplementary Data.
(b) Reports on Form 8-K
Two reports on Form 8-K were filed by AmSouth during the period October 1,
1999 to December 31, 1999:
(a) A report was filed on October 15, 1999 regarding the acquisition of
First American and an increase in AmSouth's authorized shares of common
stock.
(b) A report was filed on December 30, 1999 reporting the election of
Thomas E. Hoaglin as Vice Chairman of AmSouth.
(c) Exhibits
The exhibits listed in the Exhibit Index at page 18 of this Form 10-K are
filed herewith or are incorporated herein by reference.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
AmSouth Bancorporation
/s/ C. Dowd Ritter
By: _________________________________
C. Dowd Ritter
President and Chief Executive
Officer
Date: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ C. Dowd Ritter President and March 30, 2000
By: __________________________________ Chief Executive Officer
C. Dowd Ritter (Principal Executive
Officer)
/s/ Samuel M. Tortorici Executive Vice President March 30, 2000
By: __________________________________ Chief Financial Officer
Samuel M. Tortorici (Principal Financial
Officer)
/s/ Robert R. Windelspecht Executive Vice President March 30, 2000
By: __________________________________ Controller
Robert R. Windelspecht (Principal Accounting
Officer)
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and March 30, 2000
By: __________________________________ Director
Dennis C. Bottorff
</TABLE>
<TABLE>
<S> <C> <C>
* A Director March 30, 2000
By: __________________________________
J. Harold Chandler
* A Director March 30, 2000
By: __________________________________
James E. Dalton, Jr.
A Director March 30, 2000
By: __________________________________
Earnest W. Deavenport, Jr.
* A Director March 30, 2000
By: __________________________________
Rodney C. Gilbert
A Director March 30, 2000
By: __________________________________
Elmer B. Harris
* A Director March 30, 2000
By: __________________________________
James A. Haslam II
* Vice Chairman and Director March 30, 2000
By: __________________________________
Thomas E. Hoaglin
* A Director March 30, 2000
By: __________________________________
Martha R. Ingram
* A Director March 30, 2000
By: __________________________________
Victoria B. Jackson
* A Director March 30, 2000
By: __________________________________
Ronald J. Kuehn, Jr.
* A Director March 30, 2000
By: __________________________________
James R. Malone
* A Director March 30, 2000
By: __________________________________
Francis A. Newman
A Director March 30, 2000
By: __________________________________
Claude B. Nielsen
* A Director March 30, 2000
By: __________________________________
John N. Palmer
A Director March 30, 2000
By: __________________________________
Benjamin F. Payton, Ph.D.
* A Director March 30, 2000
By: __________________________________
Herbert A. Sklenar
</TABLE>
- --------
* Carl L. Gorday, by signing his name hereto, does sign this document on
behalf of each of the persons indicated above pursuant to powers of
attorney executed by such persons and filed with the Securities and
Exchange Commission.
/s/ Carl L. Gorday
By: _________________________________
Carl L. Gorday
Attorney in Fact
17
<PAGE>
EXHIBIT INDEX
The following is a list of exhibits including items incorporated by
reference. Compensatory plans and arrangements are identified by an asterisk.
<TABLE>
<C> <S>
2 Agreement and Plan of Merger, dated May 31, 1999 (1)
3-a Restated Certificate of Incorporation of AmSouth Bancorporation (2)
3-b Bylaws of AmSouth Bancorporation (3)
4-a Instruments defining the rights of security holders (4)
4-b Stockholder Protection Rights Agreement dated as of December 18, 1997,
including as Exhibit A the forms of Rights Certificate and of Election
to Exercise and as Exhibit B the form of Certificate of Designation and
Terms of Series A Preferred Stock (5)
*10-a AmSouth Bancorporation Executive Incentive Plan (6)
*10-b AmSouth Bancorporation Relocation Policy for Executive Officers (7)
*10-c AmSouth Bancorporation Supplemental Retirement Plan (8)
*10-d 1989 AmSouth Bancorporation Long Term Incentive Compensation Plan (9)
*10-e Amendment No. 1 to the 1989 AmSouth Bancorporation Long Term Incentive
Compensation Plan (10)
*10-f Amendment No. 2 to the 1989 AmSouth Bancorporation Long Term Incentive
Compensation Plan (11)
*10-g Director Restricted Stock Plan (12)
*10-h 1997 Performance Incentive Plan (13)
*10-i 1996 Long Term Incentive Compensation Plan (14)
*10-j Amended and Restated Deferred Compensation Plan for Directors of AmSouth
Bancorporation (15)
*10-k AmSouth Bancorporation Supplemental Thrift Plan (16)
*10-l Amendment Number One to the AmSouth Bancorporation Supplemental Thrift
Plan (17)
*10-m Employment Agreement for C. Dowd Ritter
*10-n Form of Change-in-Control Agreement for certain Executive Officers (18)
*10-o AmSouth Bancorporation Deferred Compensation Plan (19)
*10-p Stock Option Plan for Outside Directors (20)
*10-q Life Insurance Agreement (21)
*10-r Supplemental Long-Term Disability Plan (22)
*10-s Employment Agreement with Dennis C. Bottorff (23)
*10-t First American Corporation 1991 Employee Stock Incentive Plan (24)
*10-u 1993 Non-Employee Director Stock Option Plan (25)
*10-v First American Corporation Directors' Deferred Compensation Plan as
amended October 18, 1996 (26)
*10-w First American Corporation Supplemental Executive Retirement Program
dated as of January 1, 1989 (27)
13 AmSouth Bancorporation's 1999 Annual Report to Shareholders, excluding
the portions thereof not incorporated by reference in this Form 10-K
21 List of Subsidiaries of AmSouth Bancorporation
23-a Consent of Ernst & Young LLP, Independent Auditors
23-b Consent of KPMG LLP, Independent Auditors
24 Powers of Attorney
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
</TABLE>
18
<PAGE>
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 3.1 to AmSouth's Report on Form 8-K filed October 15,
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) Instruments defining the rights of holders of long-term debt of AmSouth
are not filed herewith pursuant to Item 601(b)(4)(iii) of Regulation S-K,
and AmSouth hereby agrees to furnish a copy of said instruments to the
SEC upon request
(5) Filed as Exhibit 4.1 to AmSouth's Report on Form 8-K filed on December
18, 1997, incorporated herein by reference
(6) Filed as Exhibit 10-a to AmSouth's Form 10-K Annual Report for the year
ended December 31, 1997, incorporated herein by reference
(7) Filed as Exhibit 10-b to AmSouth's Form 10-K Annual Report for the year
ended December 31, 1996, incorporated herein by reference
(8) Filed as Exhibit 10-c to AmSouth's Form 10-K Annual Report for the year
ended December 31, 1995, incorporated herein by reference
(9) Filed as Exhibit 10 to AmSouth's Form 10-Q Quarterly Report for the
quarter ended March 31, 1993, incorporated herein by reference (filed
with the Securities and Exchange Commission in Washington, D.C., SEC File
No. 1-7476, former File No. 0-6907)
(10) Filed as Exhibit 10-k to AmSouth's Form 10-K Annual Report for the year
ended December 31, 1994, incorporated herein by reference (filed with the
Securities and Exchange Commission in Washington, D.C., SEC File No. 1-
7476, former File No. 0-6907)
(11) Filed as Exhibit 10-a to AmSouth's Form 10-Q Quarterly Report for the
quarter ended September 30, 1995, incorporated herein by reference
(12) Filed as Exhibit 4.1 to AmSouth's Registration Statement on Form S-8
(Registration No. 33-58777), incorporated herein by reference
(13) Filed as Appendix A to AmSouth's Proxy Statement, dated March 10, 1997,
for the Annual Meeting of Shareholders on April 17, 1997, incorporated
herein by reference
(14) Filed as Exhibit 10-p to AmSouth's Form 10-K Annual Report for the year
ended December 31, 1996, incorporated herein by reference
(15) Filed as Exhibit 10-q to AmSouth's Form 10-K Annual Report for the year
ended December 31, 1997, incorporated herein by reference
(16) Filed as Exhibit 10-q to AmSouth's Form 10-K Annual Report for the year
ended December 31, 1995, incorporated herein by reference
(17) Filed as Exhibit 10-r to AmSouth's Form 10-K Annual Report for the year
ended December 31, 1995, incorporated herein by reference
(18) Agreements in this form have been entered into with the following
Executive Officers: Michael C. Baker, David B. Edmonds, Sloan D. Gibson,
IV, Grayson Hall, Thomas E. Hoaglin, W. Charles Mayer, III, Candice W.
Bagby, E. W. Stephenson, Jr., Samuel M. Tortorici, Claire W. Tucker, and
Stephen A. Yoder
(19) Filed as Exhibit 10-v to AmSouth's Form 10-K Annual Report for the year
ended December 31, 1997, incorporated herein by reference
(20) Filed as Exhibit 10-w to AmSouth's Form 10-K Annual Report for the year
ended December 31, 1998, incorporated herein by reference
(21) Filed as Exhibit 10-a to AmSouth's Form 10-Q Quarterly Report for the
quarter ended March 31, 1998, incorporated herein by reference
(22) Filed as Exhibit 10-b to AmSouth's Form 10-Q Quarterly Report for the
quarter ended March 31, 1998, incorporated herein by reference
19
<PAGE>
(23) Filed as Exhibit 10.1 to AmSouth's Registration Statement on Form S-4
(Registration No. 333-85239), incorporated herein by reference
(24) Filed as part of First American's Proxy Statement dated March 18, 1991
for the Annual Meeting of Shareholders held April 19, 1991 with
amendments filed as part of the Proxy Statements for the Annual Meetings
held on April 21, 1994 and April 17, 1997, incorporated herein by
reference (filed with the Securities and Exchange Commission in
Washington, D.C., SEC File No. 0-6198)
(25) Filed as part of First American's Proxy Statement dated March 18, 1993
for the Annual Meeting of Shareholders on April 15, 1993, incorporated
herein by reference (filed with the Securities and Exchange Commission in
Washington, D.C., SEC File No. 0-6198)
(26) Filed as Exhibit 10.3(e) to First American's Annual Report on Form 10-K
for the year ended December 31, 1996, incorporated herein by reference
(filed with the Securities and Exchange Commission in Washington, D.C.,
SEC File No. 0-6198)
(27) Filed as Exhibit 19.2 to First American's Annual Report on Form 10-K for
the year ended December 31, 1992, incorporated herein by reference (filed
with the Securities and Exchange Commission in Washington, D.C., SEC File
No. 0-6198).
20
<PAGE>
Exhibit 10-m
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between AmSouth Bancorporation, a Delaware corporation
(the "Company") and C. Dowd Ritter (the "Executive") dated as of the 4th day of
October, 1999.
The Company has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the continued
dedication of the Executive. Therefore, in order to accomplish this objective,
the Board of Directors of the Company has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean the date hereof, and
--------------
the Executive's Employment Agreement dated December 18, 1997 (the "Prior
Agreement"), is hereby superseded and is void, except as provided in Section
3(b)(i) below.
2. Employment Period. The Company hereby agrees to employ the Executive,
-----------------
and the Executive hereby agrees to enter into the employ of the Company subject
to the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the fifth anniversary thereof (the "Employment
Period"); provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Employment Period shall be automatically
extended so as to terminate on the earlier of (x) five years from such Renewal
Date and (y) the Executive's 62nd birthday, unless at least 60 days prior to the
Renewal Date the Company shall give notice to the Executive that the Employment
Period shall not be so extended.
3. Terms of Employment. (a) Position and Duties. (i) (A) During the
------------------- -------------------
Employment Period, the Executive shall serve as Chief Executive Officer and
President of the Company with such authority, duties and responsibilities as are
commensurate with such position and as may be consistent with such position and
(B) the Executive's services shall be performed in Birmingham, Alabama. Upon
the earlier of (x) January 2, 2001, or (y) Dennis C. Bottorff ceasing to be
Chairman of the Company, the Executive shall be elected Chairman of the
Company's Board of Directors for the remainder of the Employment Period. The
Executive shall serve on the Company's Board of Directors during the entire
Employment Period.
(ii) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote substantially all of his attention and time during normal business hours
to the business and affairs of the Company and,
<PAGE>
to the extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall thereafter be deemed not to interfere with the performance
of the Executive's responsibilities to the Company.
(b) Compensation.
------------
(i) Base Salary. Effective October 16, 1999, and during the
-----------
Employment Period, the Executive shall receive an annual base salary ("Annual
Base Salary") of no less than $900,000. From the Effective Date through October
15, 1999, the Executive's Annual Base Salary shall be the same as was in effect
immediately prior to the Effective Date. The Annual Base Salary shall be
reviewed no less frequently than annually, and, if increased, the term "Annual
Base Salary" shall refer to such increased amount.
(ii) Annual Bonus. During the Employment Period, the Executive shall
------------
be eligible to receive an annual cash bonus under the Company's Executive
Incentive Plan or any successor thereto ("Annual Bonus") based on performance
criteria determined by the Compensation Committee of the Company's Board of
Directors that provides the Executive with a target bonus of 100% of his Annual
Base Salary and with an opportunity to earn up to 200% of his Annual Base
Salary.
(iii) Incentive Awards. On the Effective Date, the Company shall
----------------
grant the Executive 100,000 shares of restricted stock of the Company (the
"Restricted Stock") pursuant to the terms of the Company's stock incentive plan.
The Executive shall be granted stock options to acquire 400,000 shares of the
Company's common stock (the "Stock Options") with a strike price equal to the
fair market value of the stock subject thereto on the date of grant, as provided
in the Company's stock incentive plan.
The Restricted Stock and Stock Options will vest according to the following
schedule:
Restricted Stock
----------------
33,333 Third anniversary hereof
33,333 Fourth anniversary hereof
33,334 Fifth anniversary hereof
-2-
<PAGE>
Stock Options
-------------
133,333 Third anniversary hereof
133,333 Fourth anniversary hereof
133,334 Fifth anniversary hereof
(iv) Retirement Benefits. So long as the Executive continues to
-------------------
serve as the chief executive officer of the Company until at least his 55th
birthday, he shall accrue an increasing total annual retirement benefit assuming
retirement at age 62 as set forth in the chart below (the "Total Retirement
Benefit"). "Final Average Pay" means the average of the sum of his highest
Annual Base Salary and Annual Bonuses for three of the five years prior to his
retirement.
<TABLE>
<CAPTION>
Age at Which Accrual Factor for Early Payment Total Retirement
Retirement Benefits Replacement % of Reduction Factor Benefit
Begin Final Average Pay
Assuming
Retirement at Age 62
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
55 years old 53% 79% 41.87% of Final
Average Pay
- --------------------------------------------------------------------------------------------------
56 years old 54% 82% 44.28% of Final
Average Pay
- --------------------------------------------------------------------------------------------------
57 years old 55% 85% 46.75% of Final
Average Pay
- --------------------------------------------------------------------------------------------------
58 years old 56% 88% 49.28% of Final
Average Pay
- --------------------------------------------------------------------------------------------------
59 years old 57% 91% 51.87% of Final
Average Pay
- --------------------------------------------------------------------------------------------------
60 years old 58% 94% 54.52% of Final
Average Pay
- --------------------------------------------------------------------------------------------------
61 years old 59% 97% 57.23% of Final
Average Pay
- --------------------------------------------------------------------------------------------------
62 years old 60% 100% 60% of Final
Average Pay
- --------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
The Total Retirement Benefit shall equal the total of the amounts payable to the
Executive under the Company's qualified and non-qualified defined benefit
pension plans (the "Pension Plans") plus the additional amount necessary in
order to achieve the percentages of Final Average Pay specified above. The fact
that the Executive is receiving the portion of the Total Retirement Benefit
called for by this agreement shall not reduce or otherwise affect his existing
participation in the Pension Plans. Upon the Executive's death, his current
spouse, should she survive the Executive, shall be paid, for life, an annual
benefit of 50% of the Total Retirement Benefit which would otherwise be payable
to the Executive.
(v) Other Employee Benefit Plans. During the Employment Period,
----------------------------
except as otherwise expressly provided herein, the Executive shall be entitled
to participate in all employee benefit, welfare and other plans, practices,
policies and programs generally applicable to senior executives of the Company
on a basis no less favorable than his participation immediately prior to the
Effective Date as set forth in the Prior Agreement provided that upon the
Executive's termination of employment for any reason, the Company shall continue
to provide him and his current spouse with medical and dental benefits for the
remainder of their lives on a basis no less favorable than those benefits were
provided to them immediately prior to such termination.
(vi) Expenses. During the Employment Period, the Executive shall
--------
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the Company's policies.
(vii) Vacation. During the Employment Period, the Executive shall
--------
be entitled to paid vacation in accordance with the plans, policies, programs
and practices of the Company and its affiliated companies as in effect with
respect to the senior executives of the Company.
(viii) The Company shall provide the Executive with a Supplemental
Life Insurance Policy which will replace the group term life insurance beyond
$50,000 provided by the Company and will take into account the maximum coverage
amounts allowed under the group term policy. This Supplemental Life Insurance
will be provided in the form of a survivorship policy which will be funded on
the basis of a split dollar endorsement method. The Company will meet its
obligation to pay its portion of premiums and meet all other commitments to the
Executive under the policy.
4. Termination of Employment. (a) Death or Disability. The Executive's
------------------------- -------------------
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give
-4-
<PAGE>
to the Executive written notice in accordance with Section 12(b) of this
Agreement of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective on
the 30th day after receipt of such notice by the Executive (the "Disability
Effective Date"), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean the absence of
the Executive from the Executive's duties with the Company on a full-time basis
for 180 consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its affiliates
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Executive by the Board which specifically identifies the manner in which the
Board believes that the Executive has not substantially performed the
Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company,
or
(iii) conviction of a felony or guilty or nolo contendere plea by
the Executive with respect thereto.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be for Cause unless and until
there shall have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
-----------
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean in the absence of a written consent of the Executive a material breach by
the Company of a material term
-5-
<PAGE>
of this Agreement, after the Company has been given notice thereof and a
reasonable opportunity to cure such breach.
(d) Notice of Termination. Any termination by the Company for Cause,
---------------------
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than
thirty days after the giving of such notice). The failure by the Executive or
the Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or circumstance
in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein within 30 days of such notice, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
5. Obligations of the Company upon Termination. (a) Good Reason;
------------------------------------------- ------------
Other Than for Cause, Death or Disability. If, during the Employment Period,
- -----------------------------------------
the Company shall terminate the Executive's employment other than for Cause or
Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the
product of (x) the highest annual bonus paid to the Executive for any
of the three years prior to the Date of Termination (the "Recent
Annual Bonus") and (y) a fraction, the numerator of which is the
number of days that have elapsed in the fiscal year in which the Date
of Termination occurs as of the Date of Termination, and the
denominator of which is 365, and (3) any compensation previously
deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case
-6-
<PAGE>
to the extent not theretofore paid (the sum of the amounts described
in clauses (1), (2) and (3) shall be hereinafter referred to as the
"Accrued Obligations"); and
B. the amount equal to the product of (1) three and (2) the sum
of (x) the Executive's Annual Base Salary, (y) the Recent Annual Bonus
and (z) the value determined by an executive compensation consulting
firm with a national reputation to be a competitive annual long term
incentive grant (defined as a size-adjusted, 50th percentile grant as
of the date of determination as compared to the Company's peer group);
and
C. An amount equal to the Total Retirement Benefit Value less
the Pension Plan Benefit Value, where:
"Total Retirement Value" equals the lump sum actuarial
equivalent, utilizing actuarial assumptions no less favorable to
the Executive than those in effect under the Company's qualified
defined benefit pension plan immediately prior to the Effective
Date (the "Lump Sum Value"), of the Total Retirement Benefit
provided under subsection 3(b)(iv) hereof, assuming (x) that the
Executive is three years older than his actual age on the Date of
Termination, (y) there shall be no deduction for early payment
and (z) that for purposes of determining "Final Average Pay"
under the benefit calculation the Executive's actual pay history
as of the Date of Termination shall be used. By way of
illustration, if the Executive were age 58 on the Date of
Termination, then the Total Retirement Benefit Value would be the
Lump Sum Value of an annual retirement benefit equal to 59% of
the Executive's actual Final Average Pay as of the Date of
Termination.
"Pension Plan Benefit Value" equals the Lump Sum Value on the
Date of Termination of the Executive's benefit under the
Company's qualified defined benefit pension plan.
The payment provided under this subsection 5(a)(i)(C) shall be made in
lieu of, and shall completely supersede and replace the Total
Retirement Benefit otherwise payable under subsection 3(b)(iv) hereof,
other than the portion thereof payable under the Company's qualified
defined benefit pension plan.
D. An amount equal to the aggregate benefits accrued by the
Executive as of the effective date of termination under the terms of
the Supplemental Thrift Plan. The payment provided under this
Subsection 5(a)(i)(D) shall be made in lieu
-7-
<PAGE>
of, and shall completely supersede and replace, the Executive's
benefits payable under the AmSouth Bancorporation Supplemental Thrift
Plan.
(ii) the Restricted Stock and the Stock Options and any other
stock-based incentives awarded to the Executive shall vest immediately;
(iii) The amount of the Executive's annual club dues bonus in
the year of termination, multiplied by three;
(vi) For a thirty-six-month period following the date of the
termination or until the Executive shall have obtained employment, comparable to
his position with the Company on the date of termination, whichever is earlier,
out-placement services, the scope and provider of which shall be selected by the
Executive in the Executive's sole discretion, shall be provided at the expense
of the Company, but not to exceed a reasonable cost;
(v) the Company shall transfer (or cause to be transferred) to
the Executive title to the Executive's Company car, without cost to the
Executive, and shall pay to the Executive a lump sum cash payment in an amount
necessary to fully gross-up the income tax effect of said transfer; and
(vi) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies through the Date of Termination (such other
amounts and benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of
-----
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. In addition, the Restricted
Stock and Stock Options shall vest immediately. Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 5(b)
shall include death benefits as in effect on the date of the Executive's death
with respect to senior executives of the Company and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason
----------
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
In addition, the Restricted Stock and Stock Options shall vest immediately.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 5(c) shall
include, and the Executive shall be entitled after the
-8-
<PAGE>
Disability Effective Date to receive, disability and other benefits as in effect
at any time thereafter generally with respect to senior executives of the
Company.
(d) Cause; Other than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated for Cause or the Executive terminates his employment without
Good Reason during the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to pay to the
Executive (w) his Annual Base Salary through the Date of Termination, (x)
payment of the Retirement Benefit, and (y) Other Benefits, in each case to the
extent theretofore unpaid.
6. Non-exclusivity of Rights. Except as specifically provided,
-------------------------
nothing in this Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of or any contract or agreement with the Company or
any of its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program or
contract or agreement except as explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
8. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 8) (a "Payment") would be subject to the excise tax
imposed
-9-
<PAGE>
by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 8(a), if it shall be determined that the Executive is
entitled to a Gross-Up Payment, but that the Payments do not exceed 110% of the
greatest amount (the "Reduced Amount") that could be paid to the Executive such
that the receipt of Payments would not give rise to any Excise Tax, then no
Gross-Up Payment shall be made to the Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by the Company's
independent certified public accounting firm or such other certified public
accounting firm reasonably acceptable to the Company as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 8(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
-10-
<PAGE>
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 8(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the
-11-
<PAGE>
Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Confidential Information; Noncompetition. (a) The Executive
----------------------------------------
shall hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it.
(b) Without the prior written consent of the Company, during the
Employment Period, and for twenty-four (24) months following the expiration of
this Agreement, the Executive shall not, as an employee or an officer, engage
directly or indirectly in any business or enterprise which is "in competition"
with the Company or its successors or assigns. For purposes of this Agreement,
a business or enterprise will be deemed to be "in competition" if it is a
banking institution, the headquarters of which is within one hundred (100) miles
from the location of the Executive's principal job location or office at the
time of termination of employment. However, the Executive shall be allowed to
purchase and hold for investment less than three percent (3%) of the shares of
any corporation whose shares are regularly traded on a national securities
exchange or in the over-the-counter market.
(c) In the event of a breach or threatened breach of this Section 9,
the Executive agrees that the Company shall be entitled to injunctive relief in
a court of appropriate jurisdiction to remedy any such breach or threatened
breach, the Executive acknowledges that damages would be inadequate and
insufficient.
(d) Any termination of the Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 9. In no event
shall an asserted violation of the provisions of this Section 9 constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
10. Successors. (a) This Agreement is personal to the Executive and
----------
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
-12-
<PAGE>
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
11. Dispute Resolution. The Executive shall have the right and
------------------
option to elect to have any good faith dispute or controversy arising under or
in connection with this agreement settled by litigation or by arbitration. If
arbitration is selected, such proceeding shall be conducted before a panel of
three (3) arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of his principal place of employment, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the award of the arbitrators in any court
having competent jurisdiction. All expenses of such litigation or arbitration,
including the reasonable fees and expenses of the legal representative for the
Executive, and necessary costs and disbursements incurred as a result of such
dispute or legal proceeding, and any prejudgment interest, shall be borne by the
Company.
12. Miscellaneous. (a) This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) Any notices, requests, demands, or other communications provided
for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he has filed
in writing with the Company or, in the case of the Company, to the General
Counsel of the Company, at the Company's principal offices. Notice and
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company
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<PAGE>
may have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason of this Agreement, shall not be deemed to
be a waiver of such provision or right or any other provision or right of this
Agreement.
(f) From and after the Effective Date this Agreement shall supersede
any other employment, severance or change of control agreement between the
parties with respect to the subject matter hereof including the Prior Agreement,
except as expressly provided herein.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
-----------------------------------
C. DOWD RITTER
AMSOUTH BANCORPORATION
By --------------------------------
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<PAGE>
Exhibit 10-n
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between AmSouth Bancorporation, a Delaware corporation
(the "Company") and ________________ (the "Executive"), dated as of the 4th day
of October, 1999.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean the
-------------------
first date during the Change of Control Period (as defined in Section 1(b)) on
which a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change
-----------------
of Control" shall mean:
<PAGE>
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the
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<PAGE>
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period; Prior Agreements. (a) The Company hereby agrees
-----------------------------------
to continue the Executive in its employ, and the Executive hereby agrees to
remain in the employ of the Company subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
second anniversary of such date (the "Employment Period"). This Agreement
completely replaces and supersedes that certain Executive Severance Agreement
between the Executive and the Company dated ________________.
(b) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date, in which case
the Executive shall have no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any other agreement between
the parties with respect to the subject matter hereof.
4. Terms of Employment. (a) Position and Duties. (i) During the
------------------- -------------------
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 35 miles from
such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall
thereafter be deemed not to interfere with the performance of the Executive's
responsibilities to the Company.
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<PAGE>
(b) Compensation. (i) Base Salary. During the Employment Period,
------------ -----------
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
------------
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's highest bonus under the Company's Executive Incentive Plan, or any
comparable bonus under any predecessor or successor plan, or otherwise, for the
last three full fiscal years prior to the Effective Date (annualized in the
event that the Executive was not employed by the Company for the whole of such
fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid
no later than the end of the third month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
---------------------------------------
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its
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<PAGE>
affiliated companies, but in no event shall such plans, practices, policies and
programs provide the Executive with benefits which are less favorable, in the
aggregate, than the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall
--------
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the
---------------
Executive shall be entitled to fringe benefits, including, without limitation,
tax and financial planning services, payment of club dues, and, if applicable,
use of an automobile and payment of related expenses, in accordance with the
most favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period,
------------------------
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall
--------
be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The
------------------------- -------------------
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 13(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the
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<PAGE>
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the manner in
which the Board or Chief Executive Officer believes that the Executive has
not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the Executive
is guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
-----------
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or any other action
-6-
<PAGE>
by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any office
or location other than as provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause,
---------------------
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 13(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such
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<PAGE>
termination and (iii) if the Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Executive or the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Good Reason;
------------------------------------------- ------------
Other Than for Cause, Death or Disability. If, during the Employment Period, the
- -----------------------------------------
Company shall terminate the Executive's employment other than for Cause or
Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash within
30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the product
of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual
Bonus paid or payable, including any bonus or portion thereof which has
been earned but deferred (and annualized for any fiscal year consisting
of less than twelve full months or during which the Executive was
employed for less than twelve full months), for the most recently
completed fiscal year during the Employment Period, if any (such higher
amount being referred to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the denominator of
which is 365 and (3) any compensation previously deferred by the
Executive (together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) _______ and (2) the
sum of (x) the Executive's Annual Base Salary, (y) the Highest Annual
Bonus and (z) the value determined by an executive compensation
consulting firm with a national reputation to be a competitive annual
long term incentive grant (defined as a size-adjusted, 50th percentile
grant as of the date of determination as compared to the Company's peer
group); and
C. An amount equal to the actuarial present value equivalent of
the aggregate benefits accrued by the Executive as of the date of
termination under the terms of the Supplemental Retirement Plan. For
this purpose, the Executive's interest under the Supplemental
Retirement Plan shall be fully vested and such benefits shall be
calculated under the assumption that the Executive's employment
continued following the date of termination for the number of years
remaining in the term of this Agreement (i.e., additional years of
service credits shall be added); provided, however, that, for the
purposes of determining "final average pay" under the benefit
calculation, the Executive's actual pay history as of the date of
termination shall be used. Further,
-8-
<PAGE>
the payment provided under this Subsection 6(a)(i)(C) shall be made in
lieu of, and shall completely supersede and replace the Executive's
benefits payable under the AmSouth Bancorporation Supplemental
Retirement Plan; and
D. An amount equal to the aggregate benefits accrued by the
Executive as of the effective date of termination under the terms of
the Supplemental Thrift Plan. The payment provided under this
Subsection 6(a)(i)(D) shall be made in lieu of, and shall completely
supersede and replace, the Executive's benefits payable under the
AmSouth Bancorporation Supplemental Thrift Plan; and
E. An amount equal to _______ times the sum of: (i) the
Executive's annual club dues bonus (if applicable); plus (ii) the
Executive's annual automobile allowance (if applicable) for the year in
which the Executive's Date of Termination occurs.
(ii) for _____ years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs, practices
and policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare
benefits under another employer provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided under such
other plan during such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of benefits) of
the Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have remained
employed until ______ years after the Date of Termination and to have
retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall
be selected by the Executive in his sole discretion;
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or agreement
of the Company and its affiliated companies (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits"); and
(v) the Company shall pay or provide, as the case may be, relocation
benefits under the relocation policy of the Company as are available to
other peer executives of the Company and
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<PAGE>
its affiliated companies (A) which have been accrued by the Executive as of
the Date of Termination and (B) which are requested by the Executive in
connection with the Executive's relocation of his or her primary residence
within two years following the Date of Termination to such new reasonable
location specified by the Executive which is more than 35 miles from the
location provided in Section 4(a)(i)(B) hereof.
(b) Death. If the Executive's employment is terminated by reason of
-----
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 6(b)
shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and affiliated companies to the
estates and beneficiaries of peer executives of the Company and such affiliated
companies under such plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason
----------
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of those generally provided by the Company and its affiliated companies to
disabled executives and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the
Employment Period, excluding a termination
-10-
<PAGE>
for Good Reason, this Agreement shall terminate without further obligations to
the Executive, other than for Accrued Obligations and the timely payment or
provision of Other Benefits. In such case, all Accrued Obligations shall be paid
to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
-------------------------
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
13(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract
or agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company or its affiliates to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 9) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including,
-11-
<PAGE>
without limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 9(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Payments do not exceed 110% of the greatest
amount (the "Reduced Amount") that could be paid to the Executive such that the
receipt of Payments would not give rise to any Excise Tax, then no Gross-Up
Payment shall be made to the Executive and the Payments, in the aggregate, shall
be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by the Company's
independent certified public accounting firm or such other certified public
accounting firm as may be designated by the Executive (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
-12-
<PAGE>
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration
-13-
<PAGE>
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary
------------------------
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
----------
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Arbitration. The Executive shall have the right and option to
-----------
elect (in lieu of litigation) to have any dispute or controversy arising under
or in connection with this Agreement settled by arbitration, conducted before a
panel of three (3) arbitrators sitting in a location selected by the Executive
within fifty (50) miles from the location of his or her job with the Company, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the award of the arbitrator in any court
having proper jurisdiction. All expenses of such arbitration, including the
fees and expenses of the counsel for the Executive, shall be borne by the
Company.
-14-
<PAGE>
13. Miscellaneous. (a) This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) Any notices, requests, demands and other communications provided
for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he had filed
in writing with the Company or, in the case of the Company, to the General
Counsel of the Company, at the Company's principal offices. Notice and
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
-15-
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
-------------------------------------
[Name]
AMSOUTH BANCORPORATION
By
---------------------------------
Its:
----------------------------
-16-
<PAGE>
EXHIBIT 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Summary Overview
Corporate Overview On October 1, 1999, AmSouth Bancorporation (AmSouth) acquired
First American Corporation (First American) in a tax-free stock exchange (the
Merger) that was accounted for as a pooling-of-interests. Under the terms of the
agreement, First American shareholders received 1.871 shares of AmSouth common
stock for each share of First American common stock owned. The combined company
is a $43.4 billion regional bank holding company headquartered in Birmingham,
Alabama, with more than 600 branch offices serving over two million households
in nine Southeastern states. Refer to Note 2 in the Notes to Consolidated
Financial Statements for a more detailed discussion of the Merger.
All prior period financial information has been restated as if the Merger
had been in effect for all periods presented. Certain amounts in the financial
review for prior years have been reclassified to conform with the current
financial statement presentation.
This section of the annual report provides a narrative discussion and
analysis of AmSouth's financial condition and results of operations for the
previous three years. All tables, graphs and financial statements included in
this report should be considered an integral part of this analysis.
Forward Looking Statements The discussion that follows contains certain
forward-looking statements (as defined in the Private Securities Litigation
Reform Act of 1995) based on current management expectations. AmSouth's actual
results could differ materially from those management expectations. Factors that
could cause future results to vary from current management expectations include,
but are not limited to, the integration of the former First American franchise,
general economic conditions, changes in interest rates, deposit flows, the cost
of funds, cost of federal deposit insurance premiums, demand for loan products,
demand for financial services, competition, changes in the quality or
composition of AmSouth's loan and investment portfolios, changes in accounting
principles, policies or guidelines and other economic, competitive,
governmental, regulatory, and technical factors affecting AmSouth's operations,
products, services, and prices. Other factors may be specified in the text that
includes the forward looking statements.
Earnings Overview AmSouth reported diluted operating earnings per common share
of $1.53 in 1999 compared to $1.40 in 1998 and $1.18 in 1997. Operating earnings
totaled $604.7 million in 1999, $555.3 million in 1998 and $473.7 million in
1997.
[BAR GRAPH APPEARS HERE]
22
--
<PAGE>
- --------------------------------------------------------------------------------
COMPOSITION OF INTEREST-EARNING ASSETS (Table 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollars in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------
Average Percent Average Percent Average Percent
Balance of Total Balance of Total Balance of Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans net of unearned income $25,471,295 66.7% $24,027,839 67.7% $23,753,817 72.1%
Held-to-maturity securities 4,899,856 12.8 3,594,397 10.1 3,376,881 10.3
Available-for-sale securities 7,369,119 19.3 7,365,385 20.8 5,418,687 16.5
Other interest-earning assets 422,907 1.2 513,290 1.4 372,362 1.1
------------------------------------------------------------------------------------
$38,163,177 100.0% $35,500,911 100.0% $32,921,747 100.0%
====================================================================================================================
</TABLE>
Note: Available-for-sale securities excludes adjustment for market valuation and
certain noninterest-earning marketable equity securities.
Taking into account merger-related and other special charges, earnings in
1999 were $340.5 million compared to $474.1 million in 1998 and $473.7 million
in 1997. Diluted earnings per share was $0.86 in 1999, $1.20 in 1998 and $1.18
in 1997.
Operating earnings benefited in 1999 from continued growth in net interest
income and noninterest revenues. The growth in revenues was somewhat offset by
increases in noninterest expenses and higher credit costs.
The improvement in operating earnings for 1998 resulted from strong growth
in net interest income and noninterest revenues. These improvements, however,
were partially offset by higher noninterest expenses.
Operating earnings represent earnings before merger-related and other
special charges. 1999 operating earnings excluded pretax charges of $258.3
million resulting from the merger with First American. In addition, $43.1
million was incurred in connection with First American's 1998 mergers with
Deposit Guaranty Corporation (Deposit Guaranty), Pioneer Bancshares, Inc.,
Middle Tennessee Bank, Peoples Bank, Victory Bancshares, Inc., and CSB Financial
Corporation. Operating earnings also exclude pretax charges of $7.6 million to
conform First American's accounting policies to AmSouth's policies, an $8.0
million impairment loss on a portfolio investment and $71.0 million in loan
impairment charges associated with certain healthcare related loans transferred
to assets held for accelerated disposition (AHAD). These merger-related and
other special charges, on an after-tax basis, totaled $264.3 million in 1999. In
1998, AmSouth incurred pretax merger-related charges of $121.7 million,
primarily in connection with First American's 1998 acquisitions. On an after-tax
basis, the charges were $81.3 million. Refer to Note 3 in the Notes to
Consolidated Financial Statements for a more detailed discussion of merger and
other related charges.
Two key measures of profitability in the banking industry are return on
average equity (ROE) and return on average assets (ROA). Operating ROE was 18.99
percent in 1999 versus 17.96 percent in 1998 and 16.00 percent in 1997.
Operating ROA was 1.45 percent in 1999 compared to 1.43 percent in 1998 and 1.32
percent in 1997. Based on reported earnings, ROE was 10.69 percent in 1999
compared to 15.33 percent in 1998 and 16.00 percent in 1997. On the same basis,
ROA was 0.81 percent in 1999, 1.22 percent in 1998 and 1.32 percent in 1997. See
graphs on the previous page.
Earnings Analysis
Net Interest Income Net interest income (NII), defined as the amount of revenue
generated by interest-earning assets less the interest cost of funding those
assets, is the principal source of earnings for AmSouth, constituting 64.4
percent of total net revenues in 1999, 64.8 percent in 1998 and 68.1 percent in
1997. For purposes of this earnings analysis, NII has been adjusted to a fully
taxable equivalent basis for certain tax-exempt loans and investment securities
included in interest-earning assets.
The level of NII is determined primarily by variations in the volume and
mix of interest-earning assets and
23
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<PAGE>
Yields Earned on Average Interest-Earning Assets
and Rates Paid on Average Interest-Bearing Liabilities (Table 2)
<TABLE>
<CAPTION>
------------------------------------------------------
(Taxable equivalent basis - dollars in thousands) 1999
AVERAGE REVENUE/ YIELD/
BALANCE EXPENSE RATE
------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans net of unearned income ...................................... $25,471,295 $ 2,132,985 8.37%
Available-for-sale securities:
Taxable ......................................................... 7,123,385 459,571 6.45
Tax-free ........................................................ 245,734 16,339 6.65
----------- -----------
Total available-for-sale securities .......................... 7,369,119 475,910 6.46
Held-to-maturity securities:
Taxable ......................................................... 4,667,059 308,136 6.60
Tax-free ........................................................ 232,797 18,808 8.08
----------- -----------
Total held-to-maturity securities ............................ 4,899,856 326,944 6.67
----------- -----------
Total investment securities ................................ 12,268,975 802,854 6.54
Trading securities ................................................ 67,333 4,203 6.24
Federal funds sold and securities purchased
under agreements to resell ...................................... 124,381 5,694 4.58
Loans held for sale ............................................... 179,276 10,148 5.66
Other interest-earning assets ..................................... 51,917 2,343 4.51
----------- -----------
Total interest-earning assets ................................... 38,163,177 2,958,227 7.75
Cash and other assets ................................................ 4,076,897
Allowance for loan losses ............................................ (368,322)
Market valuation on available-for-sale securities .................... (60,424)
-----------
$41,811,328
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits .................................. $ 9,269,643 266,155 2.87
Savings deposits .................................................. 2,191,546 53,933 2.46
Time deposits ..................................................... 7,821,761 402,576 5.15
Foreign time deposits ............................................. 703,421 34,262 4.87
Certificates of deposit of $100,000 or more ....................... 2,837,027 146,422 5.16
Federal funds purchased and securities sold
under agreements to repurchase .................................. 4,051,451 187,946 4.64
Other borrowed funds .............................................. 939,831 47,894 5.10
Long-term Federal Home Loan Bank advances ......................... 4,290,904 222,036 5.17
Subordinated debt ................................................. 881,207 55,321 6.28
Senior notes ...................................................... 101,120 7,458 7.38
Other long-term debt .............................................. 18,986 801 4.22
----------- -----------
Total interest-bearing liabilities .............................. 33,106,897 1,424,804 4.30
----------- -----
Net interest spread 3.45%
=====
Noninterest-bearing demand deposits .................................. 4,894,631
Other liabilities .................................................... 624,716
Shareholders' equity ................................................. 3,185,084
-----------
$41,811,328
===========
Net interest income/margin on a taxable equivalent basis ..... 1,533,423 4.02%
=====
Taxable equivalent adjustment:
Loans ............................................................. 4,838
Available-for-sale securities ..................................... 8,411
Held-to-maturity securities ....................................... 12,076
Trading securities ................................................ 152
-----------
Total taxable equivalent adjustment ............................. 25,477
-----------
Net interest income .......................................... $ 1,507,946
===========
</TABLE>
Note: The taxable equivalent adjustment has been computed based on the statutory
federal income tax rate, adjusted for applicable state income taxes net of the
related federal tax benefit.
Loans net of unearned income includes nonaccrual loans for all years presented.
Certain noninterest-earning marketable equity securities are not included in
available-for-sale securities.
24
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<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
1998 1997
AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$24,027,839 $ 2,085,546 8.68% $23,753,817 $ 2,063,690 8.69%
7,073,480 486,927 6.88 5,181,805 363,376 7.01
291,905 22,000 7.54 236,882 20,898 8.82
----------- ------------ ----------- ------------
7,365,385 508,927 6.91 5,418,687 384,274 7.09
3,441,212 227,945 6.62 3,194,435 217,347 6.80
153,185 15,063 9.83 182,446 18,711 10.26
----------- ------------ ----------- ------------
3,594,397 243,008 6.76 3,376,881 236,058 6.99
----------- ------------ ----------- ------------
10,959,782 751,935 6.86 8,795,568 620,332 7.05
61,368 4,303 7.01 64,426 4,280 6.64
145,554 7,650 5.26 144,202 7,961 5.52
278,506 16,457 5.91 153,107 9,475 6.19
27,862 1,204 4.32 10,627 744 7.00
----------- ------------ ----------- ------------
35,500,911 2,867,095 8.08 32,921,747 2,706,482 8.22
3,665,989 3,338,066
(367,810) (374,170)
41,145 32,185
----------- -----------
$38,840,235 $35,917,828
=========== ===========
$ 9,201,511 302,208 3.28 $ 8,565,399 289,735 3.38
1,968,461 51,354 2.61 2,034,236 55,162 2.71
8,823,928 475,426 5.39 8,989,551 504,954 5.62
203,084 10,048 4.95 209,764 11,180 5.33
2,246,605 131,231 5.84 2,118,059 101,414 4.79
3,359,865 168,435 5.01 2,966,088 151,288 5.10
837,742 43,287 5.17 1,374,671 73,606 5.35
2,882,891 153,122 5.31 1,239,839 68,233 5.50
769,107 52,999 6.89 497,406 36,679 7.37
101,305 7,471 7.37 100,401 7,405 7.38
38,650 2,042 5.28 31,931 2,063 6.46
----------- ------------ ----------- ------------
30,433,149 1,397,623 4.59 28,127,345 1,301,719 4.63
------------ ----- ------------ -----
3.49% 3.59%
===== =====
4,707,121 4,343,401
608,228 487,059
3,091,737 2,960,023
----------- -----------
$38,840,235 $35,917,828
=========== ===========
1,469,472 4.14% 1,404,763 4.27%
===== =====
5,481 6,741
12,055 6,947
7,527 6,224
125 122
------------ ------------
25,188 20,034
------------ ------------
$ 1,444,284 $ 1,384,729
============ ============
</TABLE>
25
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<PAGE>
Volume and Yield/Rate Variances (Table 3)
<TABLE>
<CAPTION>
1999 COMPARED TO 1998 1998 COMPARED TO 1997
CHANGE DUE TO CHANGE DUE TO
---------------------------------------------------------------------------------------
(Taxable equivalent basis - in thousands) YIELD/ YIELD/
VOLUME RATE NET VOLUME RATE NET
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Loans net of unearned income ............ $ 122,501 $ (75,062) $ 47,439 $ 23,782 $ (1,926) $ 21,856
Available-for-sale securities:
Taxable ............................... 3,413 (30,769) (27,356) 130,337 (6,786) 123,551
Tax-free .............................. (3,245) (2,416) (5,661) 4,420 (3,318) 1,102
--------------------------------------- ---------------------------------------
Total available-for-sale securities ..... 168 (33,185) (33,017) 134,757 (10,104) 124,653
--------------------------------------- ---------------------------------------
Held-to-maturity securities:
Taxable ............................... 80,936 (745) 80,191 16,458 (5,860) 10,598
Tax-free .............................. 6,789 (3,044) 3,745 (2,902) (746) (3,648)
--------------------------------------- ---------------------------------------
Total held-to-maturity securities ....... 87,725 (3,789) 83,936 13,556 (6,606) 6,950
--------------------------------------- ---------------------------------------
Total investment securities ............. 87,893 (36,974) 50,919 148,313 (16,710) 131,603
Trading securities ...................... 396 (496) (100) (208) 231 23
Federal funds sold and securities
purchased under agreements to resell... (1,037) (919) (1,956) 74 (385) (311)
Loans held for sale ..................... (5,643) (666) (6,309) 7,428 (446) 6,982
Other interest-earning assets ........... 1,084 55 1,139 833 (373) 460
--------------------------------------- ---------------------------------------
Total interest-earning assets ........... 205,194 (114,062) 91,132 180,222 (19,609) 160,613
--------------------------------------- ---------------------------------------
INTEREST PAID ON:
Interest-bearing demand deposits ........ 2,222 (38,275) (36,053) 21,069 (8,596) 12,473
Savings deposits ........................ 5,599 (3,020) 2,579 (1,752) (2,056) (3,808)
Time deposits ........................... (52,266) (20,584) (72,850) (9,185) (20,343) (29,528)
Foreign time deposits ................... 24,372 (158) 24,214 (348) (784) (1,132)
Certificates of deposit
of $100,000 or more ................... 31,705 (16,514) 15,191 6,448 23,369 29,817
Federal funds purchased and securities
sold under agreements to repurchase.... 32,769 (13,258) 19,511 19,781 (2,634) 17,147
Other borrowed funds .................... 5,210 (603) 4,607 (27,827) (2,492) (30,319)
Long-term Federal Home
Loan Bank advances .................... 72,955 (4,041) 68,914 87,350 (2,461) 84,889
Subordinated debt ....................... 7,298 (4,976) 2,322 18,864 (2,544) 16,320
Senior notes ............................ (14) 1 (13) 68 (2) 66
Other long-term debt .................... (889) (352) (1,241) 392 (413) (21)
--------------------------------------- ---------------------------------------
Total interest-bearing liabilities ...... 128,961 (101,780) 27,181 114,860 (18,956) 95,904
--------------------------------------- ---------------------------------------
Net interest income on a
taxable equivalent basis .............. $ 76,233 $ (12,282) 63,951 $ 65,362 $ (653) 64,709
======================== ========================
Add taxable equivalent adjustment ....... (289) (5,154)
--------- ---------
Net interest income ..................... $ 63,662 $ 59,555
========= =========
</TABLE>
Notes:
1. The change in interest not due solely to volume or yield/rate has been
allocated to the volume column and yield/rate column in proportion to the
relationship of the absolute dollar amounts of the change in each.
2. The computation of the taxable equivalent adjustment is based on the
statutory federal income tax rate, adjusted for applicable state income taxes
net of the related federal tax benefit.
26
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<PAGE>
interest-bearing liabilities and changes in their related yields and interest
rates paid.
Net interest income grew $64.0 million in 1999 to over $1.5 billion, an
increase of 4.4 percent. The growth was attributable to a higher level of
average interest-earning assets, partially offset by a decrease in the net
interest margin. Average interest-earning assets were $38.2 billion in 1999
compared to $35.5 billion in 1998, an increase of $2.7 billion. The growth in
average interest-earning assets occurred in both loans and investment
securities.
Average loans net of unearned income (net loans) grew $1.4 billion in 1999
to $25.5 billion and represented 54.2 percent of the growth in average
interest-earning assets. The growth occurred primarily in commercial real
estate, home equity and dealer indirect lending. See further discussion of loans
in the Balance Sheet Analysis.
Growth in investment securities accounted for the remainder of the increase
in average interest-earning assets. Average investment securities in 1999 were
$12.3 billion compared to $11.0 billion in 1998. The increase in the investment
portfolio was the result of a planned expansion during the second half of 1999
in connection with the Merger. The increase was primarily in the
held-to-maturity category which increased $1.3 billion to $4.9 billion in 1999.
The available-for-sale category was flat compared to 1998 at $7.4 billion.
The increase in average interest-earning assets was funded by a $567.3
million increase in deposits and a $2.3 billion increase in borrowings. Primary
sources for the increase in borrowed funds were short-term federal funds
purchased and securities sold under agreements to repurchase, long-term Federal
Home Loan Bank (FHLB) advances and subordinated debt. The borrowings extended
current maturities while enhancing NII growth and creating a better match of
maturities with the increased level of investment securities and loans.
The effects of the growth in average interest-earning assets on NII were
partially offset by a 12-basis-point decline in the net interest margin (NIM)
from 4.14 percent in 1998 to 4.02 percent in 1999. The NIM is computed by
dividing fully taxable equivalent NII by average interest-earning assets and
measures how effectively the bank utilizes its interest-earning assets in
relationship to the interest cost of funding them. The decline in the NIM was
primarily the result of a decrease in the net interest spread or the difference
between the average yield earned on interest-earning assets on a fully taxable
equivalent basis and average rate paid for interest-bearing liabilities. In
1999, the net interest spread was 3.45 percent compared to 3.49 percent in 1998,
a decrease of four basis points. The decrease was the result of a 33-basis-point
decline in the yield on interest-earning assets due, primarily, to the higher
level of investment securities and a decline in the yield on loans during the
year. The decrease was partially offset by a 29-basis-point decrease in rates
paid for interest-bearing liabilities.
Growth in NII during 1999 was further reduced by the use of off-balance
sheet loan funding vehicles. In an effort to reduce the amount of lower yielding
commercial loans maintained on the balance sheet while retaining the customer
relationships, AmSouth, in mid-1997, began selling loans to third-party
commercial loan conduits. In 1998, AmSouth began selling residential first
mortgages to third-party conduits as well. Conduits have the effect of reducing
the amount of loans on the balance sheet and accordingly the interest revenue
associated with those loans. However, because the loans that are sold to the
conduits typically have lower yields, the net interest margin widens, allowing
AmSouth to retain higher yielding assets on the balance sheet, while AmSouth's
funding capacity expands.
In 1998, NII increased $64.7 million, an increase of 4.6 percent over 1997.
The increase was attributable to a higher level of average interest-earning
assets in 1998 offset by a decrease in the NIM. Average interest-earning assets
in 1998 were $35.5 billion compared to $32.9 billion in 1997, an increase of
$2.6 billion or 7.8 percent. Investment securities and loans were the primary
areas of growth in interest-earning assets. Average investment securities
increased 24.6 percent to $11.0 billion in 1998 as compared to $8.8 billion in
1997. The available-for-sale portfolio increased $1.9 billion to $7.4 billion in
1998, while the held-to-maturity portfolio increased $217.5 million to $3.6
billion. The increase in the investment portfolio was primarily the result of a
planned expansion of the investment securities portfolio early in the year as
well as
27
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<PAGE>
the securitization of $1.3 billion of mortgage loans which were retained in the
investment portfolio. Growth in net loans of $274.0 million to $24.0 billion was
responsible for the remainder of the growth in interest-earning assets. The
growth in loans occurred primarily in commercial real estate and dealer
indirect.
Funding for the increase in interest-earning assets was supplied by an
$890.3 million increase in deposits and a $1.8 billion increase in borrowings.
Primary sources for the increase in borrowed funds were short-term Federal funds
purchased and securities sold under agreements to repurchase, long-term FHLB
advances and long-term subordinated notes.
Partially offsetting the effects of the growth in average interest-earning
assets on NII was a decline in the NIM of 13 basis points to 4.14 percent in
1998. The downward pressure on the NIM in 1998 resulted from the narrowing of
the net interest spread. The net interest spread in 1998 was 3.49 percent versus
3.59 percent in 1997, a decrease of ten basis points. The decrease was primarily
the result of a 14-basis-point decline in the yield on average interest-earning
assets to 8.08 percent, resulting from the higher level of investment securities
and the general decline in interest rates in 1998. Deposit pricing actions were
also impacted by the general market decline in interest rates in 1998 resulting
in a decline in the average rate paid on interest-bearing deposits. Partially
offsetting the decrease in rates paid on deposits was a change in the funding
mix to include more long-term borrowed funds resulting in only a
four-basis-point decrease in the rate paid on total interest-bearing liabilities
to 4.59 percent. Further constraining growth in net interest income and
interest-earning assets in 1998 was the increase in the use of conduits,
discussed earlier.
Management anticipates a stable to modestly narrowing NIM in 2000 provided
the economy continues a course of modest growth, interest rates do not fluctuate
materially, AmSouth's strategy to shift the mix of earning assets from lower
yielding investment securities to higher yielding loans meets with success, and
core deposits continue to grow. An integral part of this strategy will be
AmSouth's ability to successfully integrate its lending and deposit programs in
the former First American franchise. However, competitive pressures adversely
affecting AmSouth's ability to set deposit rates and price loans as well as
deterioration in the overall economy may result in compression of the NIM.
Provision for Loan Losses The provision for loan losses is the charge to
operating earnings necessary to maintain the allowance for loan losses at an
adequate level to absorb losses inherent in the loan portfolio. In 1999, AmSouth
recorded a provision for loan losses totaling $165.6 million, compared to $99.1
million reported in 1998 and $83.5 million recorded in 1997.
The federal government's legislation to reduce Medicare reimbursements to
healthcare providers had a material adverse financial impact on certain
companies in this sector which are heavily reliant on such reimbursements. Both
AmSouth and First American have been lenders to the health-care industry. The
increase in the 1999 provision was primarily the result of management's decision
to exit the Medicare dependent long-term care segment of the healthcare loan
portfolio by transferring to AHAD $149 million in loans, net of a $71.0 million
valuation allowance. Loan impairment charges associated with these loans of
$71.0 million were included in the loan loss provision for 1999. See the
sections
[BAR GRAPH APPEARS HERE]
28
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<PAGE>
[BAR GRAPH APPEARS HERE]
entitled "Loans" and "Allowance for Loan Losses" for further discussion. Another
unusual item in the loan loss provision for 1999 was a $3.0 million charge to
bring First American's accounting policies in line with AmSouth's. Excluding the
effects of these charges, the provision would have been $91.6 million, a
decrease of $7.4 million versus 1998.
Net charge-offs in 1999 were $102.9 million versus $83.7 million in 1998
and $94.7 million in 1997. The increase in 1999 was primarily the result of
higher charge-offs in the commercial and consumer loan categories.
The decrease in net charge-offs in 1998 occurred primarily in the consumer
loan portfolio reflecting improvement in several consumer loan segments
including direct consumer, dealer indirect and revolving credit. This was the
result of enhancements in all aspects of the consumer lending programs, from
underwriting to collections, during the preceding three years. The improvement
also reflected the sale of approximately $169.5 million of underperforming
credit card loans. The 1998 decline in consumer loan net charge-offs was offset
somewhat by an increase in commercial and commercial real estate loan net
charge-offs.
Measured as a percentage of average net loans, net charge-offs followed the
same pattern as the absolute level of losses during the past three years. In
1999, net charge-offs were .40 percent of average net loans versus .35 percent
in 1998 and .40 percent in 1997. Management expects net charge-offs to increase
in 2000 while the net charge-off ratio should be in the .40 to .45 percent
range.
For additional details on net charge-offs, see Tables 16 and 17. Also,
additional discussion of asset quality trends may be found in the section of
this report entitled Credit Risk Management Process and Loan Quality.
Noninterest Revenues Noninterest revenues grew to represent 35.6 percent of
total tax equivalent net revenues in 1999, up from 35.2 percent in 1998 and 31.9
percent in 1997. Total noninterest revenues increased 6.0 percent to $847.6
million in 1999, compared to $799.9 million in 1998 and $658.7 million in 1997.
Leading growth categories in 1999 included consumer investment services
income and other noninterest revenues, which include interchange fees, mortgage
income and income from bank owned life insurance (BOLI). Partially offsetting
the growth in these categories were decreases in service charges on deposit
accounts and trust income.
Consumer investment services income was the leading growth category among
noninterest revenues and is now the second largest category of noninterest
revenues with $213.3 million in revenue for 1999 compared to $183.8 million in
1998, a 16.0 percent increase. The growth was attributable to strong sales
across all categories of investment products and services. Within consumer
investment services, sales of annuities and mutual fund products were leading
growth areas. As part of the strategic initiative to generate $50 million in
revenues from new sources, AmSouth now has over 1,100 trained and licensed
personnel selling annuity products across the franchise. Adding to the growth in
consumer investment services income was growth in mutual fund sales. Mutual fund
assets under management grew $800 million in 1999 to $7.2 billion. Also
contributing to the increase in consumer investment services income in 1999 was
an increase in commissions from higher brokerage sales and higher sales volume
in IFC Holdings, Inc., (IFC) a subsidiary third-party marketer of investment and
insurance products through banks and other financial services providers that was
acquired as part of the Merger.
29
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<PAGE>
Other noninterest revenues grew $20.3 million in 1999 to $292.0 million.
The growth reflects increases in interchange income, BOLI, mortgage income, and
other noninterest revenues. Fees from interchange services, which are derived
from debit cards and automated teller machine (ATM) transactions, increased
$10.1 million to $46.5 million in 1999, a 27.8 percent increase. The growth
reflects the continued success of AmSouth's initiative to double the
contribution from Consumer Banking through increased access to banking services
anytime, anywhere, anyway. As part of this initiative, AmSouth has grown its ATM
network to over 1,300 machines and its debit cards outstanding to over 900,000.
Income from BOLI increased in 1999 as a result of normal increases in cash
surrender value on policies purchased in prior years by AmSouth and new policies
purchased in 1999. Additional premiums totalling $400 million were paid in 1999.
In 1999, income from BOLI was $31.2 million compared to $17.4 million in 1998,
an increase of $13.8 million or 79.2 percent. The total cash surrender value of
BOLI at the end of 1999 was $756.2 million compared to $301 million at the end
of 1998.
Mortgage income was another area of growth among noninterest revenues in
1999. The growth was the result of a very favorable residential mortgage
environment during the first half of 1999 and the continued benefit from the
expansion of the mortgage lending program in 1998. Expansion of the mortgage
lending program was another key element of the strategic initiative to double
the contribution from Consumer Banking. Mortgage income consists of income from
the sale of mortgage loans and related servicing rights and income from the sale
of third-party mortgage servicing rights. In 1999, mortgage income was $45.0
million versus $39.7 million in 1998, an increase of 13.5 percent.
Other noninterest revenues also included an $8.6 million pretax gain on the
sale of First American's third-party mortgage servicing business and a $13.3
million pretax gain associated with the outsourcing of the merchant card
processing operation. The remainder of the increase in other noninterest
revenues was primarily from an increase in fees from commercial loan conduit
activity.
The growth among these categories was partially offset by a $1.8 million
decrease in service charges on deposit accounts, primarily due to increased
sales of free consumer checking products and a $230,000 decrease in trust
income.
Growth in 1998 occurred in all major revenue categories. Service charges on
commercial and consumer deposit accounts grew 8.7 percent to $234.8 million in
1998, an increase of $18.8 million. The increase in service charges, which
represent the single largest category of non-interest revenues, was primarily
due to increases in corporate analysis fees and higher service fee income from
consumer checking accounts.
Trust income of $109.5 million represents an increase of $6.9 million or
6.8 percent over 1997. The increase was due to revenue from new employee benefit
plan administration and personal trust accounts, fee increases and strength in
financial markets during most of 1998. Partially offsetting these items was a
reduction in fees due to the sale of the bond administration and stock transfer
businesses in 1998.
Consumer investment services income was a leading growth area in
noninterest revenues increasing $34.6 million to $183.8 million in 1998 from
$149.2 million in 1997. This represents an increase of 23.2 percent. The
increase was the result of higher sales volume of mutual funds and annuity
products as well as increased retail brokerage commissions from IFC. In
addition, in 1998, AmSouth added three proprietary mutual funds to its
investment products offered, bringing the number of AmSouth's proprietary funds
to 18, and the former First American merged its AmeriStar mutual funds with the
former Deposit Guaranty's Investor series funds to form 14 individual mutual
funds. Total mutual funds under management were $6.4 billion, an increase of
$2.3 billion over 1997.
The increase in other noninterest revenues reflects increases in
interchange income, BOLI, mortgage income,
30
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<PAGE>
- --------------------------------------------------------------------------------
NONINTEREST REVENUES AND NONINTEREST EXPENSES (Table 4)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31
(Dollars in thousands) 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NONINTEREST REVENUES:
Service charges on deposit accounts $ 233,043 $ 234,849 $ 216,085 $ 191,430 $ 168,868
Consumer investment services income 213,292 183,831 149,205 86,300 23,143
Trust income 109,223 109,453 102,506 93,229 82,817
Other noninterest revenues 291,999 271,721 190,928 171,330 163,984
------------------------------------------------------------------------
$ 847,557 $ 799,854 $ 658,724 $ 542,289 $ 438,812
===================================================================================================================
NONINTEREST EXPENSES:
Salaries and employee benefits $ 635,450 $ 615,195 $ 584,812 $ 537,762 $ 488,532
Equipment expense 135,590 123,480 113,716 102,544 90,158
Net occupancy expense 111,431 106,497 103,698 97,512 90,531
Subscribers' commissions 99,588 89,918 70,785 35,075 -0-
FDIC premiums 5,446 5,344 4,423 10,202 33,195
SAIF assessment -0- -0- -0- 32,296 -0-
Merger-related costs 301,415 121,725 -0- -0- 7,269
Other noninterest expenses 359,586 344,113 344,241 314,118 286,072
------------------------------------------------------------------------
$1,648,506 $1,406,272 $1,221,675 $1,129,509 $ 995,757
===================================================================================================================
</TABLE>
and gains on the sale of businesses. Fees from interchange services increased
26.1 percent to $36.4 million in 1998, an increase of $7.5 million over 1997.
Income from BOLI experienced substantial growth in 1998, up $7.3 million,
or 72.9 percent, to $17.4 million. The increase was due primarily to new
policies purchased in the latter half of 1997 and early 1998. The total cash
surrender value of BOLI at the end of 1998 was $301 million compared to $200
million at year-end 1997.
Mortgage income represented another area of significant growth for
noninterest revenues in 1998. Contributing to the growth were higher origination
volume and an increase in income from the sale of mortgage loans and related
servicing rights in the secondary market. In addition, AmSouth expanded its
Florida mortgage staff by over 40 professionals and doubled the overall
production of mortgage loan originations over 1997. Mortgage income for the year
was $39.7 million versus $15.8 million for 1997, an increase of 151.1 percent.
Also included in other noninterest revenues was a $32.7 million net gain on
the sale of certain nonstrategic assets. During 1998, AmSouth sold its bond
administration and stock transfer businesses and underperforming credit card
assets. The former First American also sold the corporate trust business of the
former Deposit Guaranty, $3.5 million of assets of First Mortgage Corporation
and McAfee Mortgage, a $22.8 million asset mortgage banking subsidiary of the
former Deposit Guaranty. The remainder of the increase in other noninterest
revenues was primarily the result of higher portfolio income of $6.9 million
resulting primarily from gains on sales of available-for-sale securities, gains
generated from the sale of branches and various miscellaneous assets and an
increase in the fees from the commercial loan conduit.
Management expects, excluding nonrecurring items, total noninterest
revenues in 2000 to exceed the levels reported in 1999, provided the economy
remains stable and AmSouth's revenue growth initiatives are successfully
implemented across the expanded franchise. Performance of the stock and bond
markets will also influence management's ability to achieve its noninterest
revenue goals, especially with respect to consumer investment services and trust
revenues.
31
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<PAGE>
Each of the major categories of noninterest revenues for 1995 through 1999
is shown in Table 4.
Noninterest Expenses Excluding the effects of merger-related and other special
charges, noninterest expenses were $1.3 billion in 1999, an increase of $58.7
million compared to 1998. Including merger and other special charges,
noninterest expenses were $1.6 billion in 1999, an increase of $242.2 million
over 1998. Increases occurred across most major categories with the primary
increases occurring in salary and employee benefits expense, subscribers'
commissions, net occupancy expense, and equipment expense.
Salaries and employee benefits expense, the largest category of noninterest
expense, was $635.5 million in 1999, representing a 3.3 percent increase over
1998 expense of $615.2 million. The increase was primarily the result of merit
increases, higher performance-based compensation and an increase in the number
of employees. As part of AmSouth's strategic initiatives, performance-based
incentive compensation programs have been put in place at all levels of the
company. The increase in performance-based compensation correlates directly with
improvement in operating earnings and revenues.
[BAR GRAPH APPEARS HERE]
Subscribers' commissions are fees paid on sales of investment products
marketed through IFC and are paid to subscribing (client) institutions. In 1999,
subscribers' commissions were $99.6 million, an increase of $9.7 million or 10.8
percent over 1998, reflecting higher investment sales volume in 1999.
Net occupancy expense increased $4.9 million in 1999 to $111.4 million,
representing a 4.6 percent increase over 1998. The increase was due to branch
expansion in Florida, higher net rent expense and depreciation expense on
leasehold improvements.
Investments in technology supporting the consumer, commercial and capital
management lines of business resulted in higher equipment expense in 1999.
Equipment expense increased $12.1 million to $135.6 million in 1999 compared to
$123.5 million in 1998.
Other noninterest expenses, which includes deposit insurance premiums, were
$365.0 million in 1999 versus $349.5 million in 1998, an increase of $15.6
million. The increase was due to higher marketing expenses, associated with
increased promotions and direct marketing projects, and costs for other
professional and outsourced services.
Noninterest expenses were $1.4 billion in 1998, representing a $184.6
million increase over 1997 noninterest expenses of $1.2 billion. Excluding
merger-related costs, noninterest expenses increased $62.9 million or 5.1
percent. Increases occurred across all major categories of expenses, but the
primary increase occurred in salaries and employee benefits expense.
Salaries and employee benefits expense increased $30.4 million to $615.2
million, an increase of 5.2 percent over 1997 expense of $584.8 million. The
increase in 1998 was primarily due to merit increases and higher
performance-based incentive compensation.
In 1998, subscribers' commissions increased $19.1 million to $89.9 million,
a 27 percent increase over 1997. The increase was primarily attributable to the
increase in retail commissions earned through IFC.
32
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<PAGE>
Net occupancy expense was $106.5 million in 1998 compared to 1997 expense
of $103.7 million, an increase of $2.8 million or 2.7 percent. The modest
increase was due to increases in net rent expense and depreciation expense on
leasehold improvements.
Equipment expense increased $9.8 million in 1998 to $123.5 million versus
expense of $113.7 million in 1997. The increase was attributable to increased
depreciation on technology investments in the consumer and commercial lines of
business, increased rental of computers as well as expenses related to the Year
2000 project.
Other noninterest expenses were $349.5 million in 1998 versus $348.7
million in 1997, an increase of less than $1.0 million. Within this expense
category, marketing expense increased $1.1 million due to increased promotions
and direct marketing projects in 1998, and communications expense increased $4.4
million due to expenses associated with network technology to support the
consumer and commercial lines of business. These increases were mostly offset by
a $5.2 million net gain on sales of foreclosed properties.
Each of the major categories of noninterest expenses for 1995 through 1999
is shown in Table 4.
Operating Efficiency Productivity in the banking industry is commonly measured
by the operating efficiency ratio. It measures the amount of expense dollars
utilized to generate a dollar of revenue. The ratio is calculated by dividing
total noninterest expenses by the sum of NII, on a taxable equivalent basis, and
total noninterest revenues. Excluding merger-related and other special charges,
the efficiency ratio was 56.2 in 1999 compared to 56.6 in 1998 and 59.2 in 1997.
Including the charges, AmSouth's operating efficiency ratio was 69.2 percent in
1999 compared to 62.0 percent in 1998 and 59.2 percent in 1997.
Management's ability to improve operating efficiency during 2000 will
depend upon its ability to continue strong top-line revenue growth while
maintaining control across all noninterest expense categories and achieving
targeted cost savings and revenue enhancements from the Merger.
[PIE CHARTS APPEAR HERE]
Income Taxes AmSouth's income tax expense was $200.9 million in 1999, $264.7
million in 1998 and $264.6 million in 1997. The decrease in 1999 was the result
of lower pretax income due to the merger-related and other special charges. The
increase in 1998 was due primarily to an increase in pretax income. The
effective tax rate for 1999 was 37.1 percent compared to 35.8 percent in 1998
and 1997. The increase in effective tax rate for 1999 is primarily due to
certain non-deductible merger costs. Details of the deferred tax assets and
liabilities are included in Note 20 of the Notes to Consolidated Financial
Statements.
Year 2000 Project The following information constitutes a Year 2000 Readiness
Disclosure, pursuant to the Year 2000 Information and Readiness Disclosure Act.
During 1999, management completed the process of preparing for the Year
2000 date change. This process involved identifying and remediating date
recognition problems in computer systems, software and other operating
33
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<PAGE>
SECURITIES (Table 5)
December 31
(In millions) 1999 1998 1997
- --------------------------------------------------------------------------------
Trading securities $ 52 $ 48 $ 56
Available-for-sale securities:
U.S. Treasury and federal agency securities 5,135 5,975 5,205
Other securities 756 1,170 610
State, county and municipal securities 74 380 245
-------------------------------
5,965 7,525 6,060
-------------------------------
Held-to-maturity securities:
U.S. Treasury and federal agency securities 5,284 2,459 2,438
Other securities 1,390 1,197 428
State, county and municipal securities 377 222 170
-------------------------------
7,051 3,878 3,036
-------------------------------
$13,068 $11,451 $ 9,152
================================================================================
equipment; working with third parties to address their Year 2000 issues; and
developing contingency plans to address potential risks in the event of Year
2000 failures. To date, AmSouth has successfully managed the transition.
Although considered unlikely, unanticipated problems in AmSouth's core
business processes, including problems associated with non-compliant third
parties and disruptions to the economy in general, could still occur despite
efforts to date to remediate affected systems and develop contingency plans.
Management will continue to monitor all business processes, including
interaction with AmSouth's customers, vendors and other third parties,
throughout 2000 to address any issues and ensure all processes continue to
function properly.
In addition to specific Year 2000-related activities, in recent years,
AmSouth and First American invested heavily in new technology to improve service
and competitiveness. The total combined incremental cost of Year 2000
compliance, which excludes the cost to upgrade and replace systems in the
ordinary course of business, was approximately $15.0 million.
Balance Sheet Analysis
AmSouth has generated substantial asset growth through its strong lending
programs and successful investment and capital management initiatives. At
December 31, 1999, AmSouth reported total assets of $43.4 billion compared to
$40.6 billion at the end of 1998. Average total assets were $41.8 billion in
1999, an increase of $3.0 billion compared to 1998.
Interest-Earning Assets In banking, the predominant interest-earning assets are
loans and investment securities. The proportion of interest-earning assets to
total assets measures the effectiveness of management's effort to invest
available funds into the most efficient and profitable uses. In 1999, interest-
earning assets were 91.3 percent of total average assets compared to 91.4
percent in 1998. The categories which comprise interest-earning assets are shown
in Table 1.
Securities AmSouth classifies its debt and equity securities as either held-to-
maturity, available-for-sale or trading securities. Securities are classified as
held-to-maturity and carried at amortized cost only if AmSouth has the positive
intent and ability to hold those securities to maturity. If not classified as
held-to-maturity, such securities are classified as trading securities or
available-for-sale securities. Trading securities are carried at market value
with unrealized gains and losses included in other noninterest revenues.
Available-for-sale securities are also carried at market value with unrealized
gains and losses, net of deferred taxes, reported in accumulated other
comprehensive income within shareholders' equity.
34
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<PAGE>
At December 31, 1999, available-for-sale securities totaled $6.0 billion
and represented 45.8 percent of the total portfolio compared to $7.5 billion or
66.0 percent in available-for-sale securities at the end of 1998. These
securities at year-end 1999 consisted of U.S. Treasury securities, variable and
fixed rate mortgage-backed securities, other private asset-backed securities,
and equities. The average life of the portfolio is estimated to be 6.8 years
with a duration of approximately 4.0 years. Total net realized gains of $11.4
million from the sale of available-for-sale securities were included in other
noninterest revenues for 1999, compared to $16.1 million of realized gains in
1998. Unrealized losses on the available-for-sale portfolio of $248.8 million,
net of deferred taxes, were included in accumulated other comprehensive income
within shareholders' equity at December 31, 1999.
Held-to-maturity securities were $7.1 billion at the end of 1999 compared
to $3.9 billion at year-end 1998. Securities classified as held-to-maturity at
the end of 1999 consisted primarily of collateralized mortgage obligations,
federal agency securities, mortgage-backed securities and state, county and
municipal obligations. The average life of these securities is estimated to be
8.3 years with a duration of 4.3 years. At December 31, 1999, the
held-to-maturity portfolio had unrealized losses, before taxes, of $201.2
million.
During 1999, $3.0 billion of investment securities were reclassified from
available-for-sale to the held-to-maturity category. Also during 1999, $516.8
million of investment securities were reclassified from held-to-maturity to the
available-for-sale category. The reclassifications were the result of balance
sheet restructuring following the Merger.
AmSouth's policy requires all securities purchased for the securities
portfolio, except state, county and local municipal obligations, to be rated
investment grade or better. Securities backed by the U.S. Government and its
agencies, both on a
AVAILABLE-FOR-SALE SECURITIES AND HELD-TO-MATURITY SECURITIES
RELATIVE CONTRACTUAL MATURITIES AND WEIGHTED AVERAGE YIELDS (Table 6)
<TABLE>
<CAPTION>
Due Within Due After One but Due After Five but Due After
(Taxable equivalent basis - dollars in thousands) One Year Within Five Years Within Ten Years Ten Years
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES:
U.S. Treasury and federal agency securities $ 2,558 6.30% $132,313 4.92% $ 349,720 6.58% $4,818,091 6.72%
State, county and municipal obligations 9,879 9.21 18,811 7.05 20,931 7.87 24,598 7.64
Other securities 26,513 4.66 10,095 0.06 10,776 6.31 324,544 6.81
---------------------------------------------------------------------------
$38,950 5.92% $161,219 4.87% $ 381,427 6.64% $5,167,233 6.73%
====================================================================================================================================
Taxable equivalent adjustment for calculation of yield $ 312 $ 447 $ 556 $ 488
- ------------------------------------------------------------------------------------------------------------------------------------
HELD-TO-MATURITY SECURITIES:
U.S. Treasury and federal agency securities $35,025 6.48% $ 98,216 6.38% $ 956,965 6.69% 4,193,748 6.51%
State, county and municipal obligations 9,777 10.97 18,250 8.90 24,750 7.60 324,114 6.75
Other securities 25 7.49 23,171 6.56 19,447 7.12 1,347,074 6.64
---------------------------------------------------------------------------
$44,827 7.46% $139,637 6.74% $1,001,162 6.72% $5,864,936 6.55%
====================================================================================================================================
Taxable equivalent adjustment for calculation of yield $ 392 $ 588 $ 628 $ 6,511
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
1. The weighted average yields were computed by dividing the taxable
equivalent interest income by the amortized cost of the appropriate
securities. The taxable equivalent interest income has been computed based
on the statutory federal income tax rate and does not give effect to the
disallowance of interest expense, for federal income tax purposes, related
to certain tax-free assets.
2. The amount of available-for-sale securities indicated as maturing after
five but within ten years includes $246 million of mortgage-backed
securities, and those indicated as maturing after ten years includes $5.0
billion of mortgage-backed securities. Although these securities have
stated long-term final maturities, according to mortgage industry
standards, the estimated weighted average remaining life of these
securities held in AmSouth's investment portfolio is approximately 6.7
years.
3. The amount of held-to-maturity securities indicated as maturing after five
but within ten years includes $520 million of mortgage-backed securities
and those indicated as maturing after ten years includes $5.5 billion of
mortgage-backed securities. Although these securities have stated long-term
final maturities, according to mortgage industry standards, the estimated
weighted average remaining life of these securities held in AmSouth's
investment portfolio is approximately 8.0 years.
4. Federal Reserve Bank stock, Federal Home Loan Bank stock, and equity stock
of other corporations held by AmSouth are not included in the above table.
35
--
<PAGE>
direct and indirect basis, represented approximately 83 percent of the portfolio
at December 31, 1999. Approximately 95 percent of state, county and local
municipal securities at year-end 1999 were rated either single A or above by the
rating agencies or were escrowed in U.S. Treasury obligations.
Management anticipates, in 2000, a gradual reduction in the investment
portfolio as normal sales and maturities of investment securities are used to
fund loan growth.
Loans Loans are the single largest category of interest-earning assets for
AmSouth and produce the highest level of revenues. At December 31, 1999, loans,
net of unearned income, totaled $26.3 billion, an increase of 7.5 percent from
the $24.4 billion reported at the end of 1998.
Growth in the loan portfolio reflects management initiatives to grow wider
spread consumer, commercial and commercial real estate loan categories while
reducing the proportion of residential first mortgages held in the loan
portfolio and selling participations in certain narrow spread commercial loans.
The residential mortgage portfolio continued to decline in 1999 as the
result of management's decision in 1998 to reduce the amount of these loans on
the balance sheet. This was accomplished through normal runoff, selling a
portion of new originations into the secondary market and participating loans
into third-party conduits. During the year, $1.4 billion of mortgage loans were
sold to conduits. As a result of these actions, the residential mortgage
portfolio declined by 28.5 percent from year-end 1998 to year-end 1999.
[BAR GRAPH APPEARS HERE]
Though most of the loans are subsequently sold, AmSouth continues to focus
on growing mortgage origination volume, a part of its initiative to double the
Consumer Banking business. In 1999, origination volume was $2.3 billion.
During 1999, AmSouth continued to reduce the amount of low-yield commercial
loans on the balance sheet through the use of commercial loan conduits. AmSouth
began using conduits in mid-year 1997. At the end of 1999 and 1998, there were
approximately $1.5 billion of commercial loans sold to conduits.
AmSouth also sold approximately $27.4 million of credit card loans in 1999
and $169.5 million in 1998. The sale in 1999 represented an underperforming
portion of the credit card portfolio owned by the former First American in
markets outside of AmSouth's franchise. The 1998 sale also represented an
underperforming portion of the total credit card portfolio which had been
acquired through direct mail solicitations in markets outside of AmSouth's
franchise and through a previous portfolio purchase.
At the end of 1999, total managed loans net of unearned income, which
include loans contained in the conduits, grew 11.7 percent compared to year-end
1998.
The loan portfolio at AmSouth is comprised of four main components:
commercial loans, commercial real estate loans, consumer loans, and, within the
consumer loan category, residential first mortgage loans. At the end of 1999,
commercial loans represented 38.1 percent of the total portfolio, commercial
real estate loans were 17.9 percent, while consumer loans, excluding residential
first mortgages, were 35.1 percent and residential first mortgages represented
8.9 percent. This compared with 40.0 percent, 16.4 percent, 30.2 percent, and
13.4 percent at the end of 1998 for commercial loans, commercial real estate
loans, consumer loans, and residential first mortgages, respectively.
The level of commercial loans at the end of 1999 was $10.0 billion and
remained relatively unchanged from
36
--
<PAGE>
MAJOR LOAN CATEGORIES (Table 7)
<TABLE>
<CAPTION>
December 31
(In millions) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial:
Commercial and industrial $ 7,967 $ 7,943 $ 7,653 $ 7,014 $ 6,210
Commercial loans secured by real estate 2,036 1,833 2,496 2,407 2,297
---------------------------------------------------
Total commercial 10,003 9,776 10,149 9,421 8,507
---------------------------------------------------
Commercial real estate:
Commercial real estate mortgages 2,295 2,221 1,465 1,337 1,206
Real estate construction 2,417 1,800 1,321 1,091 852
---------------------------------------------------
Total commercial real estate 4,712 4,021 2,786 2,428 2,058
---------------------------------------------------
Consumer:
Residential first mortgages 2,338 3,270 4,497 4,771 5,499
Other residential mortgages 3,232 2,380 2,363 2,092 1,815
Dealer indirect 4,149 2,909 1,883 1,834 1,754
Revolving credit 489 477 682 688 620
Other consumer 1,344 1,612 2,055 1,891 1,789
---------------------------------------------------
Total consumer 11,552 10,648 11,480 11,276 11,477
---------------------------------------------------
Total loans net of unearned income $26,267 $24,445 $24,415 $23,125 $22,042
===================================================================================================
</TABLE>
year-end 1998. Including the loans in the conduit at year-end 1999, commercial
loans grew 1.8 percent year over year.
One area of emphasis within the commercial segment continues to be
commercial lease financing, which expanded significantly in 1999, increasing
$310 million to over $1.0 billion during the year. The increases in lease
financing were centered in the transportation, communication and utilities
industry groups with most counterparties rated investment grade.
AmSouth's asset-based lending segment also continued to deliver strong
growth through 1999. In 1996, AmSouth, as a part of its three-year strategic
plan, established an initiative to generate $50 million in revenues from new
sources by the Year 2000. One of the programs within that initiative was the
creation of AmSouth Capital Corporation in 1998. AmSouth Capital Corporation was
created to facilitate the development of a national asset-based lending program.
Through the efforts of AmSouth Capital Corporation, AmSouth added outstanding
asset-based loans of over $460.0 million in 1999 and unfunded commitments of
approximately $327.0 million. Finally, increases also occurred in manufacturing
and trade industries during 1999 and 1998.
Partially offsetting this growth was a decline in loans in the healthcare
segment of the commercial portfolio. The decline was the result of management's
decision to reduce exposure to the healthcare industry and aggressively manage
problem loans in the Medicare dependent healthcare segment. The decision was
primarily based on the adverse effects of the implementation by the United
States government of the Prospective Payment System for the Medicare system.
This and other changes in the Medicare program resulted in significantly lower
Medicare revenues for healthcare service providers. As a result, $149 million of
loans to Medicare dependent long-term care providers were reclassified to AHAD
along with $71 million of reserves to appropriately recognize the assets' net
value of $78 million. AHAD are included in loans held for sale on the balance
sheet. See the section entitled "Allowance for Loan Losses" for further
discussion.
Management expects further growth in commercial loans in 2000 due to new
business development, expansion of the business banking program, continued
growth of commercial lease financing and asset-based lending, and further
application of its relationship banking concept in its existing and new markets.
For this growth to occur, the economy
37
--
<PAGE>
SELECTED LOAN MATURITIES AND SENSITIVITY TO CHANGE IN INTEREST RATES (Table 8)
<TABLE>
<CAPTION>
Due in One Due After One
(In millions) Year or Less but Within Five Years Due After Five Years
- --------------------------------------------------------------------------------------------------------------------------
Fixed Variable Fixed Variable
Rate Rate Total Rate Rate Total Total
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and industrial $ 2,699 $ 1,536 $ 1,419 $ 2,955 $ 2,459 $ 1,890 $ 4,349 $10,003
Commercial real estate mortgages 146 478 49 527 729 893 1,622 2,295
Real estate construction 384 182 221 403 483 1,147 1,630 2,417
--------------------------------------------------------------------------------------
Total $ 3,229 $ 2,196 $ 1,689 $ 3,885 $ 3,671 $ 3,930 $ 7,601 $14,715
==========================================================================================================================
</TABLE>
must remain stable or improve throughout the year for loan demand to be
sufficient to meet the company's goals. A key to management's success will be
its ability to meet its goals with respect to the Merger. In addition,
management must be able to provide satisfactory sales and service quality and
develop new products in the commercial lending area.
Commercial real estate loans are comprised of two primary categories:
commercial real estate mortgages and real estate construction loans. In 1999,
commercial real estate mortgage loans increased $74.1 million or 3.3 percent to
$2.3 billion. Real estate construction loans also increased in 1999 to $2.4
billion from the $1.8 billion reported at the end of 1998, an increase of $616.5
million or 34.2 percent. The increases reflected the strength of the real estate
markets in AmSouth's southeastern markets, particularly Florida. The increase
was also indicative of AmSouth's efforts to systematically grow the real estate
portfolio while improving loan quality. Substantially all of AmSouth's real
estate growth was made up of loans to finance local home builders within
AmSouth's markets; loans for construction projects that have been presold,
preleased or otherwise have secured permanent financing; and loans to real
estate companies who have significant equity invested in each project and offer
substantive and meaningful guarantees.
[PIE CHARTS APPEAR HERE]
Management anticipates all categories of commercial real estate loans to
grow during 2000, provided the economy and AmSouth's real estate markets remain
strong, sales goals are met and credit quality is maintained.
Consumer loans primarily include dealer indirect loans, home equity loans
and lines of credit, revolving credit, and other direct consumer loans but
exclude residential first mortgage loans. AmSouth's consumer lending programs
produced strong growth in 1999 while maintaining solid credit quality. Dealer
indirect loans were $4.1 billion at the end of 1999, versus $2.9 billion at the
end of 1998, an increase of $1.2 billion. These loans consisted primarily of
loans made to individuals to finance the purchase of new and used automobiles.
Dealer indirect lending was one of the critical drivers of the successful
strategic initiative to create $50 million in revenues from new sources. New
loan production in this area was almost $3.0 billion in 1999 with a strong
outlook for growth in 2000 and beyond assuming a stable economy and continued
strong loan demand.
38
--
<PAGE>
Home equity loans and lines of credit experienced strong growth in all of
AmSouth's markets during 1999. This represents the fourth consecutive year of
strong double-digit growth in this loan category and reflects the program's
continuing success as a key contributor to the strategic initiative to double
the Consumer Banking business. Home equity loans totaled $3.2 billion at the end
of 1999, an increase from the prior year-end of $851.8 million or 35.8 percent.
The increase was primarily the result of new customers acquired in 1999 from
direct mail marketing promotions and the selling of home equity loans and lines
of credit in the branches.
Revolving credit, which consists primarily of bankcard outstandings,
increased 2.6 percent to $489.2 million above the level reported at year-end
1998. Growth in the consumer revolving credit portfolio was limited by normal
portfolio runoff and more emphasis on promoting home equity loans and lines of
credit as well as the sale of $27.4 million of under-performing credit card
loans during 1999.
Management anticipates that in 2000 consumer loans will continue steady
growth, provided the economy remains stable and consumer borrowing patterns
remain substantially unchanged and AmSouth's consumer lending programs meet with
success in its new markets.
Deposits Deposits are AmSouth's primary source of funding, and their cost is the
largest category of interest expense. Average total deposits were $27.7 billion
in 1999, representing an increase of $567.3 million or 2.1 percent from total
average deposits in 1998 of $27.2 billion. There are five principal categories
of deposits: noninterest-bearing demand, interest-bearing demand, savings, time,
and certificates of deposit of $100,000 or more. See Table 9 for the detailed
amounts.
One element of the strategic initiative to double the Consumer Banking
business is a plan to grow transaction account households and consumer checking
accounts. This, in turn, provides a higher level of low-cost deposits which
represent AmSouth's least expensive source of funds. Through the promotion of
free checking accounts and the offer of a market-rate competitive money market
account, AmSouth continued to meet its goal of growing transaction account
households while shifting its deposits to a more favorable mix. These programs
contributed to 11.3 percent growth in average savings deposits and a 4.0 percent
increase in average noninterest-bearing demand deposits.
During 1999, average time deposits, measured as a percentage of total
average deposits, decreased to 30.8 percent compared to 33.2 percent in 1998.
Average noninterest-bearing demand deposits increased to 17.7 percent of total
average deposits, up from 17.3 percent in 1998. Average interest-bearing demand
deposits decreased to 33.4 percent
AVERAGE DEPOSITS (Table 9)
<TABLE>
<CAPTION>
December 31
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Noninterest-bearing demand $ 4,894,631 $ 4,707,121 $ 4,343,401
Interest-bearing demand 9,269,643 9,201,511 8,565,399
Savings 2,191,546 1,968,461 2,034,236
Time:
Retail 6,203,375 7,142,064 7,227,315
Individual retirement accounts 1,541,838 1,581,439 1,662,101
Foreign 703,421 203,084 209,764
Other 76,548 100,425 100,135
-------------------------------------------
Total time 8,525,182 9,027,012 9,199,315
-------------------------------------------
Certificates of deposit of $100,000 or more 2,837,027 2,246,605 2,118,059
-------------------------------------------
$27,718,029 $27,150,710 $26,260,410
==========================================================================================
</TABLE>
39
--
<PAGE>
MATURITY OF DOMESTIC TIME DEPOSITS OF $100,000 OR MORE (Table 10)
December 31
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Three months or less $1,275,158 $1,312,931 $ 975,003
Over three through six months 480,586 550,072 439,719
Over six through twelve months 526,563 666,806 498,178
Over twelve months 557,608 391,098 359,689
--------------------------------------------
$2,839,915 $2,920,907 $2,272,589
================================================================================
from 33.9 percent and average savings deposits in 1999 increased to 7.9 percent
of total average deposits from 7.3 percent the prior year.
Certificates of deposit of $100,000 or more represented 10.2 percent of
total average deposits in 1999 versus 8.3 percent in 1998. The average balance
of these deposits increased during the year to $2.8 billion, an increase of
$590.4 million. These deposits, for the most part, are competitively bid and
fluctuate based on the average level of interest rates and management's
determination of the need for such deposits from time to time. Table 10 provides
a maturity schedule for domestic time deposits of $100,000 or more at December
31, 1999.
Other Interest-Bearing Liabilities Other interest-bearing liabilities include
all interest-bearing liabilities except deposits. Short-term liabilities
included in this category consist of federal funds purchased and securities sold
under agreements to repurchase (repurchase agreements) and other borrowed funds.
Average other borrowed funds, which include master notes, short-term FHLB
advances, bank notes, and treasury, tax and loan notes, increased in 1999 to
$939.8 million versus $837.7 million in 1998, an increase of 12.2 percent. These
sources were utilized in 1999 to fund growth in earning assets and provide
additional liquidity for potential problems related to the Year 2000 issue.
Average federal funds purchased and repurchase agreements were $4.1 billion
in 1999, a 20.6 percent increase from $3.4 billion in 1998. At December 31,
1999, 1998 and 1997, federal funds purchased and repurchase agreements totaled
$4.1 billion, $3.5 billion and $3.0 billion, respectively, with weighted-average
interest rates of 4.57 percent, 4.37 percent and 5.03 percent, respectively. The
maximum amount outstanding at any month end during each of the last three years
was $4.8 billion, $3.8 billion and $3.5 billion, respectively. The average daily
balance and average interest rates for each year are presented in Table 2.
Long-term debt consists of long-term FHLB advances, subordinated notes and
debentures, and various long-term notes payable. The most significant increase
during the year occurred in FHLB advances as average long-term FHLB advances
grew by $1.4 billion. The result was average long-term borrowings in 1999 of
$5.3 billion, an increase of $1.5 billion or 39.6 percent over 1998. These funds
were utilized in 1999 because of their relatively low cost and the ability to
match their maturities with those of the assets being funded. In addition,
average subordinated debt increased by $112.1 million as a result of AmSouth
Bank's issuance of $175 million of 6.125% subordinated notes due February 1,
2009, partially offset by the maturity of $100 million of subordinated capital
notes. Both events occurred in the first half of 1999.
Shareholders' Equity At December 31, 1999, shareholders' equity totaled $3.0
billion, versus $3.2 billion at the end of 1998. The sources of growth in
shareholders' equity during 1999 were the retention of net income and issuances
of common stock under the various stock-based employee benefit plans and the
dividend reinvestment plan. Offsetting the increases were cash dividends
declared of $257.7 million, a $260.9 million decrease in unrealized losses on
available-for-sale securities and the purchase of 3.9 million shares of AmSouth
common stock for $166.5 million to provide shares
40
--
<PAGE>
for employee benefit plans, dividend reinvestment and other corporate purposes.
Information on prior years may be found in the Consolidated Statement of
Shareholders' Equity.
AmSouth maintains a capital and dividend policy based on industry
standards, regulatory requirements, perceived risk of the various lines of
business, and future growth opportunities. At least annually, management
reevaluates the policy and presents its findings to the Board of Directors to
ensure that the policy continues to support corporate objectives, the regulatory
environment and changes in market conditions.
At December 31, 1999, AmSouth met or exceeded all of the minimum capital
standards for the parent company and its banking subsidiary as established by
regulatory requirements and the Company's capital and dividend policy. Refer to
Table 11 and Notes 15 and 18 of the Notes to Consolidated Financial Statements
for specific information.
Risk Management
Risk identification and management are key elements in the overall management of
AmSouth. Management believes the primary risk exposures are interest rate,
liquidity and credit risk. Interest rate risk is the risk to NII represented by
the impact of higher or lower interest rates. Liquidity risk is the possibility
that the Company will not be able to fund present and future obligations, and
credit risk represents the possibility that borrowers may not be able to repay
loans. External factors beyond management's control may from time to time result
in losses notwithstanding risk management efforts. Some of the more significant
processes used to manage and control these risks are described in the following
paragraphs.
Asset and Liability Management AmSouth maintains a formal asset and liability
management process to quantify, monitor and control interest rate risk and to
assist management in maintaining stability in the NIM under varying interest
rate environments. This is accomplished through the development and
implementation of lending, funding, pricing, and hedging strategies designed to
maximize net interest income performance under varying interest rate
environments subject to specific liquidity and interest rate risk guidelines.
Interest Rate Risk A number of measures are used to monitor and manage interest
rate risk. An earnings simulation model is the primary tool used to assess the
direction and magnitude
CAPITAL RATIOS (Table 11)
<TABLE>
<CAPTION>
December 31
(Dollars in thousands) 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RISK-BASED CAPITAL:
Shareholders' equity $ 2,959,205 $ 3,207,424
Unrealized losses/(gains) on available-for-sale securities (net of deferred taxes) 248,849 (12,030)
Less certain intangible assets and other adjustments (438,397) (472,425)
------------------------------
Tier I capital 2,769,657 2,722,969
Adjusted allowance for loan losses 363,476 373,756
Qualifying long-term debt 823,570 798,864
------------------------------
Tier II capital 1,187,046 1,172,620
------------------------------
Total capital $ 3,956,703 $ 3,895,589
==========================================================================================================================
Risk-adjusted assets $ 37,119,733 $ 33,063,349
==========================================================================================================================
CAPITAL RATIOS:
Tier I capital to total risk-adjusted assets 7.46% 8.24%
Total capital to total risk-adjusted assets 10.66 11.78
Leverage 6.22 6.86
Ending equity to assets 6.82 7.89
Ending tangible equity to assets 5.90 6.83
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
--
<PAGE>
INTEREST RATE SWAPS, CAPS AND FLOORS (Table 12)
<TABLE>
<CAPTION>
Receive Fixed Pay Fixed Forward Swaps Caps &
(In millions) Rate Swaps Rate Swaps Basis Swaps Pay Fixed Floors Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $ 670 $ 322 $ -0- $ 500 $ 1,477 $ 2,969
Additions 1,515 135 50 1,300 -0- 3,000
Maturities -0- (1) -0- -0- (177) (178)
Calls (140) -0- -0- -0- -0- (140)
Terminations (375) (200) -0- (450) (1,000) (2,025)
---------------------------------------------------------------------------------
Balance at December 31, 1997 1,670 256 50 1,350 300 3,626
Additions 469 300 -0- 1,300 -0- 2,069
Maturities (130) (1) -0- (150) -0- (281)
Calls (255) -0- -0- -0- -0- (255)
Terminations (250) (50) (50) (450) (300) (1,100)
---------------------------------------------------------------------------------
Balance at December 31, 1998 1,504 505 -0- 2,050 -0- 4,059
Additions 2,389 -0- -0- 800 -0- 3,189
Maturities (125) (1) -0- -0- -0- (126)
Calls (450) -0- -0- -0- -0- (450)
Terminations -0- (504) -0- (2,850) -0- (3,354)
---------------------------------------------------------------------------------
Balance at December 31, 1999 $3,318 $ -0- $ -0- $ -0- $ -0- $ 3,318
================================================================================================================
</TABLE>
of changes in NII resulting from changes in interest rates. Key assumptions in
the model include prepayment speeds on mortgage-related assets; cash flows and
maturities of derivatives and other financial instruments held for purposes
other than trading; changes in market conditions, loan volumes and pricing;
deposit sensitivity; customer preferences; and management's financial and
capital plans. These assumptions are inherently uncertain and, as a result, the
model cannot precisely estimate NII or precisely predict the impact of higher or
lower interest rates on NII but it can indicate the likely direction of change.
Actual results will differ from simulated results due to timing, magnitude and
frequency of interest rate changes and changes in market conditions and
management's strategies, among other factors.
Based on the results of the simulation model as of December 31, 1999, NII
would decrease $38.4 million or 2.3 percent and increase $25.3 million or 1.5
percent, if interest rates gradually increased or decreased, 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. Prior to the Merger,
market risk exposure was managed by each of the previously separate companies.
Separate risk management models and assumptions were used in accordance with
each company's unique market profile. Accordingly, prior period amounts have not
been presented as such amounts were based on the risk profiles of the previously
separate entities and are not comparable to current period amounts.
MATURITIES AND INTEREST RATES EXCHANGED ON SWAPS (Table 13)
<TABLE>
<CAPTION>
(Dollars in millions) Mature During
- -----------------------------------------------------------------------------------------------------------
2000 2001 2002 2003 2005 2008 2009 Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RECEIVE FIXED SWAPS:
Notional amount $1,469 $ 469 $ 765 $ 115 $ 150 $ 175 $ 175 $3,318
Receive rate 6.46% 6.39% 6.45% 6.31% 6.25% 6.13% 6.22% 6.40%
Pay rate 6.45% 5.96% 6.29% 6.48% 6.48% 6.32% 6.48% 6.34%
</TABLE>
42
--
<PAGE>
Various off-balance sheet financial instruments are used by AmSouth to
assist in managing interest rate risk. AmSouth had interest rate swaps as of
December 31, 1999, in the notional amount of $3.3 billion. Of these swaps, $1.6
billion of notional value were used as asset hedges to convert variable rate
securities and commercial loans to fixed rates. The remaining $1.7 billion of
notional value of swaps were used as liability hedges to convert fixed rate
consumer certificates of deposit, corporate and bank debt and wholesale
certificates of deposit to variable rates.
As of December 31, 1999, AmSouth held other off-balance sheet instruments
as hedges as well as futures and forward contracts to provide customers and
AmSouth a means of managing the risks of changing interest and foreign exchange
rates. These other off-balance sheet instruments are immaterial in amount.
Table 12 summarizes the activity, by notional amount, of off-balance sheet
financial instruments utilized in the asset and liability management process at
AmSouth for the years 1999, 1998 and 1997.
Table 13 summarizes the expected maturities on all of AmSouth's off-balance
sheet positions at December 31, 1999, and interest rates exchanged on swaps.
Both the timing of the maturities and the variable interest payments and
receipts vary as certain interest rates change. The maturities and interest
rates exchanged are calculated assuming that interest rates remain unchanged
from average December 1999 rates. The information presented could change as
future interest rates increase or decrease. See Note 13 of the Notes to
Consolidated Financial Statements.
Liquidity AmSouth's goal in liquidity management is to satisfy the cash flow
requirements of depositors and borrowers while at the same time meeting the cash
flow needs of the Company. This is accomplished through the active management of
both the asset and liability sides of the balance sheet. The liquidity position
of AmSouth is monitored on a daily basis by AmSouth's Treasury Division. In
addition, the Asset/Liability Committee, which consists of members of AmSouth's
senior management team, reviews liquidity on a regular basis and approves any
changes in strategy that are necessary as a result of balance sheet or
anticipated cash flow changes. Management also compares on a monthly basis the
Company's liquidity position to established corporate liquidity guidelines. At
December 31, 1999, AmSouth was within all of the guidelines which have been
established. The primary sources of liquidity on the asset side of the balance
sheet are maturities and cash flows from both loans and investments as well as
the ability to securitize or sell certain loans and investments. Liquidity on
the liability side is generated primarily through growth in core deposits and
the ability to obtain economical wholesale funding in national and regional
markets through a variety of sources. AmSouth's most commonly used sources of
wholesale funding are (1) federal funds (i.e., the excess reserves of other
CREDIT RATINGS (Table 14)
Standard &
Moody's Poor's BankWatch
- --------------------------------------------------------------------------------
6.875% Subordinated Notes Due 2003 A3 BBB+ A
7.75% Subordinated Notes Due 2004 A3 BBB+ A
6.625% Subordinated Notes Due 2005 A3 BBB+ A
6.125% Subordinated Notes Due 2009 A3 BBB+ A
6.45% Subordinated Notes Due 2018 Aa3* A-* -
6.75% Subordinated Debentures Due 2025 A3 BBB+ A
7.25% Senior Notes Due 2006 A2 A- -
Commercial paper P-1 A-2 TBW-1
Certificates of deposit Aa3* A* -
Short-term counterparty P-1* A-1* -
Long-term counterparty Aa3* A* -
- --------------------------------------------------------------------------------
* AmSouth Bank
43
--
<PAGE>
NONPERFORMING ASSETS (Table 15)
<TABLE>
<CAPTION>
December 31
(Dollars in thousands) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $141,134 $113,985 $109,488 $112,509 $138,521
Restructured loans -0- -0- -0- 694 -0-
-------------------------------------------------------------------------
Nonperforming loans 141,134 113,985 109,488 113,203 138,521
-------------------------------------------------------------------------
Foreclosed properties 17,767 17,322 19,143 26,844 33,154
Repossessions 2,644 828 632 1,822 3,114
-------------------------------------------------------------------------
Total nonperforming assets* $161,545 $132,135 $129,263 $141,869 $174,789
============================================================================================================
Nonperforming assets* to loans net of
unearned income, foreclosed properties
and repossessions 0.61% 0.54% 0.53% 0.61% 0.79%
============================================================================================================
Accruing loans 90 days past due $61,050 $62,528 $66,792 $58,943 $50,891
============================================================================================================
</TABLE>
* Exclusive of accruing loans 90 days past due and $38.1 million of
nonperforming assets classified as assets held for accelerated disposition at
December 31, 1999.
financial institutions); (2) repurchase agreements, whereby U.S. government and
government agency securities are pledged as collateral for short-term
borrowings; and (3) pledges of acceptable assets as collateral for public
deposits and certain tax collection monies.
In addition to these sources, AmSouth can access other wholesale funding
sources such as Eurodollar deposits and certificates of deposit. AmSouth Bank
also has the ability to borrow from the FHLB. FHLB advances are competitively
priced and are a reliable source of funds. Also, AmSouth Bank maintains a short
and medium-term note issuance program with a borrowing capacity of $3.0 billion.
There was $300 million outstanding under the issuance program at December 31,
1999.
Maintaining adequate credit ratings on debt issues is critical to liquidity
because it affects the ability of AmSouth to attract funds from various sources
on a cost competitive basis. Table 14 summarizes AmSouth's credit ratings at
December 31, 1999.
Credit Risk Management Process and Loan Quality The loan portfolio at AmSouth
holds the highest degree of risk for the Company. AmSouth manages and controls
risk in the loan portfolio through adherence to consistent standards established
by senior management, combined with a commitment to producing quality assets,
developing profitable relationships and meeting strategic growth targets.
AmSouth has written credit policies which establish underwriting standards,
place limits on exposure and set other limits or standards as deemed necessary
and prudent. Also included in the policy, primarily determined by the amount and
type of loan, are various approval levels, ranging from the branch or department
level to those which are more centralized. AmSouth maintains a diversified
portfolio intended to spread its risk and reduce its exposure to economic
downturns, which may occur in different segments of the economy or in particular
industries. Industry and loan type diversification is reviewed quarterly.
Commercial real estate loans are categorized by the type of collateral.
Owner occupied properties include mortgages where the borrower is a primary
tenant, such as factory or warehouse loans. Nonowner occupied lending represents
those loans where the primary method of repayment is anticipated to come from
the rental income and generally has inherently more risk than owner occupied
lending.
Each commercial loan recorded at AmSouth is assigned a risk rating on a
13-point numerical scale by the loan officer using established credit policy
guidelines. Consumer loan portfolios are assigned risk ratings based on a
nine-point scale and are based on the type of loan and its performance. All risk
ratings are subject to review by an independent Credit Review Department. In
addition, regular reports are made to senior management and the Board of
Directors regarding the credit quality of the loan portfolio as well as trends
in the portfolio.
44
--
<PAGE>
The Credit Administration function includes designated credit officers,
some of whom are industry specialists and all of which are organizationally
independent of the production areas. They oversee the loan approval process,
ensure adherence to credit policies and monitor efforts to reduce nonperforming
and classified assets. Additionally, a centralized special assets function
handles the resolution and disposition of certain problem loans. Risk in the
consumer loan portfolio is further managed through utilization of computerized
credit scoring, in-depth analysis of portfolio components and specific account
selection, management and collection techniques. In addition, the consumer
collection function is centralized and automated to ensure timely collection of
accounts and consistent management of risk associated with delinquent accounts.
Finally, AmSouth's Credit Review Department performs ongoing independent
reviews of the risk management process, adequacy of loan documentation and the
risk ratings or specific loan loss reserves for outstanding loans. This
department is geographically centralized and independent of the lending
function. The results of its examinations are reported to the Audit and
Community Responsibility Committee of the Board of Directors.
Nonperforming Assets Management closely monitors loans and other assets which
are classified as nonperforming assets. Nonperforming assets include nonaccrual
loans, restructured loans, foreclosed properties, and repossessions. Loans are
generally placed on nonaccrual if full collection of principal and interest
becomes unlikely (even if all payments are current) or if the loan is delinquent
in principal or interest payments for 90 days or more, unless the loan is well
secured and in the process of collection. Special assets manages collection of
commercial nonperforming loans while consumer collections manages the consumer
nonperforming loan portfolio.
Nonperforming assets, excluding accruing loans 90 days past due, increased
$29.4 million, or 22.3 percent, during 1999. The graph entitled Asset Quality
Trends and Table 15 provide trend information and detailed components of
nonperforming assets for each of the last five years.
NONPERFORMING LOANS AND NET CHARGE-OFFS (RECOVERIES) (Table 16)
<TABLE>
<CAPTION>
(Dollars in thousands) Nonperforming Loans*
- ---------------------------------------------------------------------------------------------------
% of % of
December 31, Average December 31, Average
1999 Loans** per 1998 Loans** per
Category Category
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial:
Commercial and industrial $ 39,474 0.49% $ 41,352 0.48%
Commercial loans secured by real estate 35,554 1.73 19,720 1.25
-------------------------------------------------------
Total commercial 75,028 0.74 61,072 0.60
-------------------------------------------------------
Commercial real estate:
Commercial real estate mortgages 15,530 0.70 17,712 1.08
Real estate construction 13,356 0.65 2,913 0.18
-------------------------------------------------------
Total commercial real estate 28,886 0.68 20,625 0.64
-------------------------------------------------------
Consumer:
Residential first mortgages 22,343 0.80 25,068 0.73
Other residential mortgages 13,308 0.48 5,801 0.25
Dealer indirect 562 0.02 407 0.02
Revolving credit 164 0.03 -0- --
Other consumer 843 0.06 1,012 0.05
-------------------------------------------------------
Total consumer 37,220 0.33 32,288 0.31
-------------------------------------------------------
$141,134 0.55% $113,985 0.47%
===================================================================================================
<CAPTION>
Net Charge-offs (Recoveries)
- ---------------------------------------------------------------------------------------------------
% of % of
December 31, Average December 31, Average
1999 Loans** per 1998 Loans** per
Category Category
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial:
Commercial and industrial $ 32,219 0.40% $ 23,672 0.27%
Commercial loans secured by real estate 2,174 0.11 1,311 0.08
-------------------------------------------------------
Total commercial 34,393 0.34 24,983 0.24
-------------------------------------------------------
Commercial real estate:
Commercial real estate mortgages 2,066 0.09 (39) --
Real estate construction 1,140 0.06 715 0.04
-------------------------------------------------------
Total commercial real estate 3,206 0.08 676 0.02
-------------------------------------------------------
Consumer:
Residential first mortgages 3,841 0.14 2,783 0.08
Other residential mortgages 4,632 0.17 2,627 0.11
Dealer indirect 29,331 0.82 11,973 0.53
Revolving credit 15,953 3.30 25,193 4.63
Other consumer 11,550 0.78 15,417 0.77
-------------------------------------------------------
Total consumer 65,307 0.59 57,993 0.55
-------------------------------------------------------
$102,906 0.40% $ 83,652 0.35%
===================================================================================================
</TABLE>
* Exclusive of accruing loans 90 days past due and $38.1 million of
nonperforming assets classified as held for accelerated disposition at
December 31, 1999.
** Net of unearned income
45
--
<PAGE>
ALLOWANCE FOR LOAN LOSSES (Table 17)
<TABLE>
<CAPTION>
(Dollars in thousands) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Balance at January 1 ...................... $ 373,756 $ 367,077 $ 370,277 $ 375,457 $ 361,831
Loans charged off:
Commercial and industrial ............... (43,213) (35,420) (25,768) (19,355) (12,606)
Commercial loans secured by real estate . (2,539) (1,865) (3,859) (1,361) (301)
------------ ---------------------------------------------------------------
Total commercial ..................... (45,752) (37,285) (29,627) (20,716) (12,907)
Commercial real estate mortgages ........ (2,627) (4,911) (2,788) (4,088) (5,091)
Commercial real estate construction ..... (1,907) (995) (698) (257) (1,188)
------------ ---------------------------------------------------------------
Total commercial real estate ......... (4,534) (5,906) (3,486) (4,345) (6,279)
Residential first mortgages ............. (4,346) (3,877) (4,033) (5,068) (1,045)
Other residential mortgages ............. (5,137) (2,906) (2,784) (1,100) (571)
Dealer indirect ......................... (48,504) (27,219) (28,817) (32,010) (19,457)
Revolving credit ........................ (19,715) (31,038) (43,951) (36,835) (18,849)
Other consumer .......................... (20,299) (26,007) (37,679) (31,553) (19,775)
------------ ---------------------------------------------------------------
Total charge-offs .................... (148,287) (134,238) (150,377) (131,627) (78,883)
------------ ---------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial and industrial ............... 10,994 11,748 10,697 17,577 10,914
Commercial loans secured by real estate . 365 554 2,320 785 262
------------ ---------------------------------------------------------------
Total commercial ..................... 11,359 12,302 13,017 18,362 11,176
Commercial real estate mortgages ........ 561 4,950 1,526 4,831 4,044
Commercial real estate construction ..... 767 280 3,328 881 1,119
------------ ---------------------------------------------------------------
Total commercial real estate ......... 1,328 5,230 4,854 5,712 5,163
Residential first mortgages ............. 505 1,094 1,269 1,181 262
Other residential mortgages ............. 505 279 560 542 766
Dealer indirect ......................... 19,173 15,246 16,340 12,955 8,338
Revolving credit ........................ 3,762 5,845 5,724 3,427 2,225
Other consumer .......................... 8,749 10,590 13,905 8,472 8,601
------------ ---------------------------------------------------------------
Total recoveries ..................... 45,381 50,586 55,669 50,651 36,531
------------ ---------------------------------------------------------------
Net charge-offs ........................... (102,906) (83,652) (94,708) (80,976) (42,352)
------------ ---------------------------------------------------------------
Addition to allowance charged to expense .. 165,626 99,067 83,508 71,608 43,000
Allowance sold ............................ (2,000) (14,900) (252) -0- -0-
Allowance transferred/acquired in
bank purchases/other .................... (71,000) 6,164 8,252 4,188 12,978
------------ ---------------------------------------------------------------
Balance at December 31 .................... $ 363,476 $ 373,756 $ 367,077 $ 370,277 $ 375,457
============ ===============================================================
Loans net of unearned income,
outstanding at end of period ............ $ 26,266,759 $ 24,445,296 $ 24,415,004 $ 23,124,651 $ 22,041,920
Average loans net of unearned income,
outstanding for the period .............. $ 25,471,295 $ 24,027,839 $ 23,753,817 $ 22,318,990 $ 20,849,737
Ratios:
Allowance at end of period to
loans net of unearned income ......... 1.38% 1.53% 1.50% 1.60% 1.70%
Allowance at end of period to
average loans net of unearned income . 1.43 1.56 1.55 1.66 1.80
Allowance at end of period to
nonperforming loans* ................. 257.54 327.90 335.27 327.09 271.05
Allowance at end of period to
nonperforming assets* ................ 225.00 282.86 283.98 261.00 214.81
Net charge-offs to average loans
net of unearned income ............... 0.40 0.35 0.40 0.36 0.20
Net charge-offs to allowance
at end of period ..................... 28.31 22.38 25.80 21.87 11.28
Recoveries to prior year charge-offs .... 33.81 33.64 42.29 64.21 47.04
</TABLE>
* Exclusive of accruing loans 90 days past due and $38.1 million of
nonperforming assets classified as held for accelerated disposition at
December 31, 1999.
46
--
<PAGE>
The increase in nonperforming assets in 1999 compared to 1998 was primarily
the result of a higher level of nonperforming loans in the commercial loans
secured by real estate, real estate construction and home equity loan segments.
The increase in the commercial loans secured by real estate category was
primarily due to one loan, secured by owner-occupied properties, that was on
nonperforming status at year-end, while the increase in the real estate
construction category resulted from several residential real estate
developments. Nonperforming loans totaled $141.1 million at the end of 1999
compared to $114.0 million in 1998, an increase of $27.1 million.
Additionally, the majority of consumer nonaccrual loans are secured by
residential real estate. Excluding the effects of first and second residential
mortgages, which typically experience very low loss rates, nonperforming loans
were only $105.5 million at the end of 1999.
The balance in foreclosed properties was relatively flat in 1999 compared
to 1998 at $17.8 million. More than half of these properties were secured by
residential real estate at December 31, 1999.
Table 16 presents nonperforming loans and net charge-offs and each as a
percentage of average net loans by category for December 31, 1999 and 1998.
Allowance for Loan Losses AmSouth maintains an allowance for loan losses which
it believes is adequate to absorb losses inherent in the loan portfolio. A
formal review is prepared quarterly to assess the risk in the portfolio and to
determine the adequacy of the allowance for loan losses. Elements of the review
include analysis of historical performance, the level of nonperforming and
adversely rated loans, specific analysis 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.
For purposes of the quarterly review, the consumer portfolios are treated
as homogenous pools. Specific consumer pools include: direct, bankcard, other
revolving, indirect,
[BAR CHART APPEARS HERE]
residential first mortgages, and home equity lending. In accordance with
regulatory guidelines, the allowance for loan losses is allocated to the
consumer pools based on historical net charge-off rates adjusted for any current
changes in these trends. The commercial, commercial real estate and business
banking portfolios are evaluated separately. Within this group, every
nonperforming loan in excess of $500,000 is reviewed by AmSouth's Special Assets
Department for a specific allocation. For all other loans in the commercial
portfolio, the allowance is allocated based on a combination of historical loss
rates, adjusted for those elements discussed in the preceding paragraph, and
regulatory guidelines.
In determining the appropriate level for the allowance, management ensures
that the overall allowance appropriately reflects a margin for the imprecision
inherent in most estimates of expected credit losses. This additional allowance
is reflected in the unallocated portion of the allowance.
At December 31, 1999, the allowance for loan losses was $363.5 million
versus $373.8 million at year-end 1998, a decrease of $10.3 million. At December
31, 1999, AmSouth elected to exit that portion of the healthcare business
previously described as Medicare dependent long-term care. As a result, $149
million in loans were transferred from the loan
47
--
<PAGE>
portfolio to AHAD. Concurrently, reserves totaling $71.0 million were also
transferred from the allowance for loan losses to AHAD representing the
aggregate amount needed to reflect each asset at its net realizable value.
Included in AHAD are nonperforming loans of $38.1 million. Additionally, the
allowance was reduced approximately $2.0 million due to the sale of AmSouth's
out-of-market credit card portfolio during 1999.
Within specific categories, the allowance allocated to commercial loans
increased $7.3 million to $126.6 million at the end of 1999. The increase was
primarily the result of growth in the commercial loan portfolio during the year
and a higher level of nonperforming commercial loans at the end of 1999.
The allowance for loan losses allocated to commercial real estate was $56.0
million at the end of 1999, an increase of $17.3 million over 1998. The increase
reflects the growth in commercial real estate loans and a higher level of
nonperforming loans in the category at year end. The allocation to the consumer
loan portfolio was $91.4 million at the end of 1999 reflecting a $5.9 million
increase versus the 1998 balance of $85.5 million. The majority of the increase
was the result of growth in dealer indirect and home equity lending in 1999. The
allowance allocated to unfunded commitments increased $2.1 million in 1999 to
$26.7 million which, consistent with the growth in commercial real estate
lending, reflects growth in unfunded commitments in 1999.
At December 31, 1999, the allowance for loan losses to net loans was 1.38
percent while coverage of nonperforming loans was 257.5 percent. This compares
with an allowance for loan losses to net loans at the end of 1998 of 1.53
percent and to nonperforming loans for the same period of 327.9 percent. At the
end of 1999, the allowance represented 4.5 times average net charge-offs over
the last five years compared to 5.6 times at the end of 1998.
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES (Table 18)
<TABLE>
<CAPTION>
(Dollars in thousands) December 31, 1999 December 31, 1998 December 31, 1997
- -------------------------------------------------------------------------------------------------------------------------------
Percentage of Percentage of Percentage of
Loans* in Each Loans* in Each Loans* in Each
Allowance Category to Allowance Category to Allowance Category to
Allocation Total Loans* Allocation Total Loans* Allocation Total Loans*
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial:
Commercial and industrial $102,410 30.3% $ 99,077 32.5% $ 73,485 31.4%
Commercial secured by real estate 24,180 7.8 20,253 7.5 25,995 10.2
-----------------------------------------------------------------------------------------
Total commercial 126,590 38.1 119,330 40.0 99,480 41.6
-----------------------------------------------------------------------------------------
Commercial real estate:
Commercial real estate mortgages 27,256 8.7 21,539 9.1 14,501 6.0
Real estate construction 28,705 9.2 17,086 7.3 13,239 5.4
-----------------------------------------------------------------------------------------
Total commercial real estate 55,961 17.9 38,625 16.4 27,740 11.4
-----------------------------------------------------------------------------------------
Consumer:
Residential first mortgages 4,282 8.9 7,179 13.4 13,641 18.4
Other residential mortgages 9,696 12.3 4,654 9.7 7,603 9.7
Dealer indirect 44,916 15.8 29,912 11.9 24,249 7.7
Revolving credit 17,123 1.9 21,847 2.0 40,147 2.8
Other consumer 15,344 5.1 21,868 6.6 25,790 8.4
-----------------------------------------------------------------------------------------
Total consumer 91,361 44.0 85,460 43.6 111,430 47.0
-----------------------------------------------------------------------------------------
Unfunded commitments 26,659 -- 24,598 -- 21,010 --
Standby letters of credit 5,862 -- 3,222 -- 2,696 --
Unallocated 57,043 -- 102,521 -- 104,721 --
-----------------------------------------------------------------------------------------
$363,476 100.0% $373,756 100.0% $367,077 100.0%
===============================================================================================================================
<CAPTION>
(Dollars in thousands) December 31, 1996 December 31, 1995
- --------------------------------------------------------------------------------------------------
Percentage of Percentage of
Loans* in Each Loans* in Each
Allowance Category to Allowance Category to
Allocation Total Loans* Allocation Total Loans*
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial:
Commercial and industrial $ 69,262 30.3% $ 71,837 28.2%
Commercial secured by real estate 28,240 10.4 31,968 10.4
-----------------------------------------------------------
Total commercial 97,502 40.7 103,805 38.6
-----------------------------------------------------------
Commercial real estate:
Commercial real estate mortgages 16,792 5.8 21,075 5.5
Real estate construction 13,202 4.7 9,229 3.9
-----------------------------------------------------------
Total commercial real estate 29,994 10.5 30,304 9.4
-----------------------------------------------------------
Consumer:
Residential first mortgages 14,323 20.6 27,813 24.9
Other residential mortgages 7,076 9.1 8,596 8.2
Dealer indirect 22,865 7.9 22,059 8.0
Revolving credit 50,255 3.0 26,756 2.8
Other consumer 26,526 8.2 27,433 8.1
-----------------------------------------------------------
Total consumer 121,045 48.8 112,657 52.0
-----------------------------------------------------------
Unfunded commitments 17,144 -- 16,685 --
Standby letters of credit 1,963 -- 3,880 --
Unallocated 102,629 -- 108,126 --
-----------------------------------------------------------
$370,277 100.0% $375,457 100.0%
==================================================================================================
</TABLE>
* Net of unearned income
48
--
<PAGE>
AmSouth Bancorporation and Subsidiaries
Supplemental Financial Statements
CONSOLIDATED STATEMENT OF CONDITION
December 31, 1995-1999
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks ...................... $ 1,563,335 $ 1,802,814 $ 1,691,936 $ 1,699,804 $ 1,575,880
Temporary investments ........................ 6,342,637 8,609,960 6,561,329 6,154,337 6,063,045
Held-to-maturity securities .................. 7,050,562 3,877,504 3,035,577 3,673,912 3,315,166
Loans net of unearned income ................. 26,266,759 24,445,296 24,415,004 23,124,651 22,041,920
Less: Allowance for loan losses .............. 363,476 373,756 367,077 370,277 375,457
----------- --------------------------------------------------------------
Net loans ................................. 25,903,283 24,071,540 24,047,927 22,754,374 21,666,463
Premises and equipment ....................... 678,442 773,563 710,417 639,180 572,637
Other assets ................................. 1,868,295 1,500,450 1,332,893 1,148,950 1,054,644
----------- --------------------------------------------------------------
Total assets .............................. $43,406,554 $40,635,831 $37,380,079 $36,070,557 $34,247,835
=========== ==============================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits ..................................... $27,912,443 $28,533,759 $27,045,700 $26,003,593 $26,258,269
Federal funds purchased and
repurchase agreements ..................... 4,095,747 3,470,262 2,981,295 3,407,902 3,258,436
Other interest-bearing liabilities ........... 7,739,206 4,743,837 3,774,606 3,133,698 1,530,456
----------- --------------------------------------------------------------
Total deposits and
interest-bearing liabilities ............ 39,747,396 36,747,858 33,801,601 32,545,193 31,047,161
Accrued expenses and other liabilities ....... 699,953 680,549 549,340 585,639 394,989
----------- --------------------------------------------------------------
Total liabilities ......................... 40,447,349 37,428,407 34,350,941 33,130,832 31,442,150
Shareholders' equity ......................... 2,959,205 3,207,424 3,029,138 2,939,725 2,805,685
----------- --------------------------------------------------------------
Total liabilities and shareholders' equity $43,406,554 $40,635,831 $37,380,079 $36,070,557 $34,247,835
=========== ==============================================================
</TABLE>
CONSOLIDATED STATEMENT OF EARNINGS
Years ended December 31, 1995-1999
<TABLE>
<CAPTION>
(In thousands except per share data) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net interest income .......................... $ 1,507,946 $ 1,444,284 $ 1,384,729 $ 1,279,138 $ 1,160,543
Provision for loan losses .................... 165,626 99,067 83,508 71,608 43,000
----------- --------------------------------------------------------------
Net interest income after
provision for loan losses ................. 1,342,320 1,345,217 1,301,221 1,207,530 1,117,543
Noninterest revenues ......................... 847,557 799,854 658,724 542,289 438,812
Merger-related costs ......................... 301,415 121,725 0 0 7,269
Noninterest expenses excluding
merger-related costs ...................... 1,347,091 1,284,547 1,221,675 1,129,509 988,488
----------- --------------------------------------------------------------
Income before income taxes ................... 541,371 738,799 738,270 620,310 560,598
Income taxes ................................. 200,903 264,725 264,589 223,455 202,861
----------- --------------------------------------------------------------
Net income ................................ $ 340,468 $ 474,074 $ 473,681 $ 396,855 $ 357,737
=========== ==============================================================
Average common shares outstanding ............ 391,136 389,595 395,837 398,213 398,293
Diluted average common shares outstanding .... 396,515 396,491 401,811 403,233 404,291
Earnings per common share .................... $0.87 $1.22 $1.20 $1.00 $0.90
Diluted earnings per common share ............ 0.86 1.20 1.18 0.98 0.88
Cash dividends declared per common share ..... 0.71 0.57 0.51 0.48 0.46
</TABLE>
49
--
<PAGE>
Management's Statement on
Responsibility for Financial Reporting
The management of AmSouth is responsible for the content and integrity of the
financial statements and all other financial information included in this annual
report. Management believes that the financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis to reflect, in all material respects, the substance of events and
transactions that should be included, and that the other financial information
in the annual report is consistent with those financial statements. The
financial statements necessarily include amounts that are based on management's
best estimates and judgements.
Management maintains and depends upon AmSouth's accounting systems and
related systems of internal controls. The internal control systems are designed
to ensure that transactions are properly authorized and recorded in the
corporation's financial records and to safeguard the corporation's assets from
material loss or misuse. The corporation maintains an internal audit staff which
monitors compliance with the corporation's systems of internal controls and
reports to management and to the Audit and Community Responsibility Committee of
the Board of Directors.
The Audit and Community Responsibility Committee of the Board of Directors,
composed solely of outside directors, has responsibility for recommending to the
Board of Directors the appointment of the independent auditors for AmSouth. The
Committee meets periodically with the internal auditors and the independent
auditors to review the scope and findings of their respective audits. The
internal auditors, independent auditors and management each have full and free
access to meet privately as well as together with the Committee to discuss
internal controls, accounting, auditing, or other financial reporting matters.
The consolidated financial statements of AmSouth have been audited by Ernst
& Young LLP, independent auditors, who were engaged to express an opinion as to
the fairness of presentation of such financial statements.
/s/ C. Dowd Ritter /s/ Samuel M. Tortorici
C. Dowd Ritter Samuel M. Tortorici
President Executive Vice President
Chief Executive Officer Chief Financial Officer
50
--
<PAGE>
Report of Ernst & Young LLP,
Independent Auditors
Board of Directors
AmSouth Bancorporation
We have audited the accompanying consolidated statement of condition of AmSouth
Bancorporation and subsidiaries (AmSouth) as of December 31, 1999 and 1998, and
the related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated financial statements give retroactive effect to the
merger of AmSouth and First American Corporation and subsidiaries (First
American) on October 1, 1999, which has been accounted for using the pooling of
interests method as described in Note 2 to the Consolidated Financial
Statements. We did not audit the consolidated financial statements of First
American for the years ended December 31, 1998 and 1997, which statements
reflect total assets of 51% in 1998 and net interest income of 52% in 1998 and
51% in 1997 of the related AmSouth consolidated totals. Those First American
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to data included for First American, is
based solely on the report of other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of AmSouth Bancorporation and subsidiaries
at December 31, 1999 and 1998, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States.
/s/ Ernst & Young LLP
Birmingham, Alabama
February 11, 2000
51
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<PAGE>
AmSouth Bancorporation and Subsidiaries
CONSOLIDATED STATEMENT OF CONDITION
<TABLE>
<CAPTION>
December 31
(Dollars in thousands) 1999 1998
<S> <C> <C>
ASSETS
Cash and due from banks ............................................................. $ 1,563,335 $ 1,802,814
Time deposits in other banks ........................................................ 2,474 292,763
------------ ------------
Total cash and cash equivalents .................................................. 1,565,809 2,095,577
Federal funds sold and securities purchased under agreements to resell .............. 132,683 357,910
Trading securities .................................................................. 51,972 47,818
Available-for-sale securities ....................................................... 5,964,703 7,524,532
Held-to-maturity securities (market value of $6,849,344 and $3,901,954, respectively) 7,050,562 3,877,504
Loans held for sale ................................................................. 172,941 357,661
Loans ............................................................................... 26,436,359 24,587,902
Less: Allowance for loan losses .................................................... 363,476 373,756
Unearned income .............................................................. 169,600 142,606
------------ ------------
Net loans .................................................................... 25,903,283 24,071,540
Other interest-earning assets ....................................................... 17,864 29,276
Premises and equipment, net ......................................................... 678,442 773,563
Customers' acceptance liability ..................................................... 8,617 24,260
Accrued interest receivable and other assets ........................................ 1,859,678 1,476,190
------------ ------------
$ 43,406,554 $ 40,635,831
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits and interest-bearing liabilities:
Deposits:
Noninterest-bearing demand ..................................................... $ 4,739,077 $ 5,241,739
Interest-bearing demand ........................................................ 9,227,907 9,894,402
Savings ........................................................................ 2,349,793 1,995,722
Time ........................................................................... 7,574,119 8,158,265
Foreign time ................................................................... 1,293,522 428,097
Certificates of deposit of $100,000 or more .................................... 2,728,025 2,815,535
------------ ------------
Total deposits .............................................................. 27,912,443 28,533,760
Federal funds purchased and securities sold under agreements to repurchase ....... 4,095,747 3,470,262
Other borrowed funds ............................................................. 2,135,720 351,012
Long-term Federal Home Loan Bank advances ........................................ 4,612,686 3,450,864
Other long-term debt ............................................................. 990,800 941,960
------------ ------------
Total deposits and interest-bearing liabilities ................................ 39,747,396 36,747,858
Acceptances outstanding ............................................................. 8,617 24,260
Accrued expenses and other liabilities .............................................. 691,336 656,289
------------ ------------
Total liabilities ................................................................ 40,447,349 37,428,407
------------ ------------
Shareholders' equity:
Preferred stock -- no par value:
Authorized -- 2,000,000 shares; Issued and outstanding -- none ................. -0- -0-
Common stock -- par value $1 a share:
Authorized -- 750,000,000 shares
Issued -- 416,948,890 and 420,057,801 shares, respectively ..................... 416,949 420,058
Capital surplus .................................................................. 690,820 763,117
Retained earnings ................................................................ 2,482,477 2,419,558
Cost of common stock in treasury -- 25,574,778 and 25,048,731 shares, respectively (376,354) (367,286)
Deferred compensation on restricted stock ........................................ (5,838) (40,053)
Accumulated other comprehensive (loss) income .................................... (248,849) 12,030
------------ ------------
Total shareholders' equity ..................................................... 2,959,205 3,207,424
------------ ------------
$ 43,406,554 $ 40,635,831
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
52
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<PAGE>
AmSouth Bancorporation and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
(In thousands except per share data) 1999 1998 1997
<S> <C> <C> <C>
INTEREST INCOME
Loans .................................................................... $2,128,147 $2,080,065 $2,056,949
Available-for-sale securities ............................................ 467,499 496,872 377,327
Held-to-maturity securities .............................................. 314,868 235,481 229,834
Trading securities ....................................................... 4,051 4,178 4,158
Loans held for sale ...................................................... 10,148 16,457 9,475
Federal funds sold and securities purchased under agreements to resell ... 5,694 7,650 7,961
Other interest-earning assets ............................................ 2,343 1,204 744
---------- --------------------------
Total interest income ................................................. 2,932,750 2,841,907 2,686,448
---------- --------------------------
INTEREST EXPENSE
Interest-bearing demand deposits ......................................... 266,155 302,208 289,735
Savings deposits ......................................................... 53,933 51,354 55,162
Time deposits ............................................................ 402,576 475,426 504,954
Foreign time deposits .................................................... 34,262 10,048 11,180
Certificates of deposit of $100,000 or more .............................. 146,422 131,231 101,414
Federal funds purchased and securities sold under agreements to repurchase 187,946 168,435 151,288
Other borrowed funds ..................................................... 47,894 43,287 73,606
Long-term Federal Home Loan Bank advances ................................ 222,036 153,122 68,233
Other long-term debt ..................................................... 63,580 62,512 46,147
---------- --------------------------
Total interest expense ................................................ 1,424,804 1,397,623 1,301,719
---------- --------------------------
NET INTEREST INCOME ...................................................... 1,507,946 1,444,284 1,384,729
Provision for loan losses ................................................ 165,626 99,067 83,508
---------- --------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES ...................... 1,342,320 1,345,217 1,301,221
---------- --------------------------
NONINTEREST REVENUES
Service charges on deposit accounts ...................................... 233,043 234,849 216,085
Consumer investment services income ...................................... 213,292 183,831 149,205
Trust income ............................................................. 109,223 109,453 102,506
Other noninterest revenues ............................................... 291,999 271,721 190,928
---------- --------------------------
Total noninterest revenues ............................................ 847,557 799,854 658,724
---------- --------------------------
NONINTEREST EXPENSES
Salaries and employee benefits ........................................... 635,450 615,195 584,812
Equipment expense ........................................................ 135,590 123,480 113,716
Net occupancy expense .................................................... 111,431 106,497 103,698
Subscribers' commissions ................................................. 99,588 89,918 70,785
Merger-related costs ..................................................... 301,415 121,725 -0-
Other noninterest expenses ............................................... 365,032 349,457 348,664
---------- --------------------------
Total noninterest expenses ............................................ 1,648,506 1,406,272 1,221,675
---------- --------------------------
INCOME BEFORE INCOME TAXES ............................................... 541,371 738,799 738,270
Income taxes ............................................................. 200,903 264,725 264,589
---------- --------------------------
NET INCOME ............................................................... $ 340,468 $ 474,074 $ 473,681
========== ==========================
Average common shares outstanding ........................................ 391,136 389,595 395,837
Earnings per common share ................................................ $ .87 $ 1.22 $ 1.20
Diluted average common shares outstanding ................................ 396,515 396,491 401,811
Diluted earnings per common share ........................................ $ .86 $ 1.20 $ 1.18
Cash dividends per common share .......................................... .71 .57 .51
</TABLE>
See Notes to Consolidated Financial Statements.
53
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<PAGE>
AmSouth Bancorporation and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(In thousands) COMMON CAPITAL RETAINED TREASURY
STOCK SURPLUS EARNINGS STOCK
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 .................................... $ 410,797 $ 808,034 $ 1,840,162 $(128,889)
Comprehensive income:
Net income ................................................. -0- -0- 473,681 -0-
Other comprehensive income, net of tax:
Unrealized gains on available-for-sale securities, net of
reclassification adjustment (net $5,009 tax expense) .. -0- -0- -0- -0-
Comprehensive income ..........................................
Cash dividends declared ($.51 per common share) ............... -0- -0- (93,307) -0-
Cash dividends declared by pooled companies ................... -0- -0- (81,410) -0-
Common stock transactions:
Employee stock plans ....................................... 3,169 39,877 (7,679) 26,421
Dividend reinvestment plan ................................. -0- 231 (139) 5,059
Purchase of common stock ................................... (11,827) (185,866) -0- (170,610)
Acquisitions ............................................... 10,311 70,386 13,940 -0-
---------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 .................................. 412,450 732,662 2,145,248 (268,019)
Comprehensive income:
Net income ................................................. -0- -0- 474,074 -0-
Other comprehensive income, net of tax:
Unrealized losses on available-for-sale securities, net of
reclassification adjustment (net $18,086 tax benefit) . -0- -0- -0- -0-
Comprehensive income ..........................................
Cash dividends declared ($.57 per common share) ............... -0- -0- (101,563) -0-
Cash dividends declared by pooled companies ................... -0- -0- (93,997) -0-
Common stock transactions:
Special rights and warrants ................................ -0- (355) -0- -0-
Employee stock plans ....................................... 2,598 44,915 (11,409) 32,603
Dividend reinvestment plan ................................. -0- 631 (66) 4,644
Purchase of common stock ................................... (2,266) (63,109) (9) (136,514)
Acquisitions ............................................... 7,276 48,373 7,280 -0-
---------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 .................................. 420,058 763,117 2,419,558 (367,286)
Comprehensive income:
Net income ................................................. -0- -0- 340,468 -0-
Other comprehensive income, net of tax:
Unrealized losses on available-for-sale securities, net of
reclassification adjustment (net $74,014 tax benefit) . -0- -0- -0- -0-
Comprehensive income ..........................................
Cash dividends declared ($.71 per common share) ............... -0- -0- (163,395) -0-
Cash dividends declared by pooled companies ................... -0- -0- (94,305) -0-
Common stock transactions:
Employee stock plans ....................................... 808 10,998 (18,647) 63,081
Dividend reinvestment plan ................................. -0- 107 (1,202) 7,007
Purchase of common stock ................................... (3,917) (83,402) -0- (79,156)
---------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999 .................................. $ 416,949 $ 690,820 $ 2,482,477 $(376,354)
===============================================================
Disclosure of 1999 reclassification amount:
Unrealized holding losses on available-for-sale
securities arising during the period .......................
Less: Reclassification adjustment for gains
realized in net income .....................................
Net unrealized losses on available-for-sale
securities, net of tax .....................................
<PAGE>
<CAPTION>
DEFERRED ACCUMULATED
COMPENSATION OTHER
ON RESTRICTED COMPREHENSIVE
STOCK INCOME (LOSS) TOTAL
<S> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 .................................... $ (12,466) $ 22,087 $ 2,939,725
Comprehensive income:
Net income ................................................. -0- -0- 473,681
Other comprehensive income, net of tax:
Unrealized gains on available-for-sale securities, net of
reclassification adjustment (net $5,009 tax expense) .. -0- 7,247 7,247
-----------
Comprehensive income .......................................... 480,928
Cash dividends declared ($.51 per common share) ............... -0- -0- (93,307)
Cash dividends declared by pooled companies ................... -0- -0- (81,410)
Common stock transactions:
Employee stock plans ....................................... (10,071) -0- 51,717
Dividend reinvestment plan ................................. -0- -0- 5,151
Purchase of common stock ................................... -0- -0- (368,303)
Acquisitions ............................................... -0- -0- 94,637
--------------------------------------------
BALANCE AT DECEMBER 31, 1997 .................................. (22,537) 29,334 3,029,138
Comprehensive income:
Net income ................................................. -0- -0- 474,074
Other comprehensive income, net of tax:
Unrealized losses on available-for-sale securities, net of
reclassification adjustment (net $18,086 tax benefit) . -0- (17,322) (17,322)
-----------
Comprehensive income .......................................... 456,752
Cash dividends declared ($.57 per common share) ............... -0- -0- (101,563)
Cash dividends declared by pooled companies ................... -0- -0- (93,997)
Common stock transactions:
Special rights and warrants ................................ -0- -0- (355)
Employee stock plans ....................................... (17,516) -0- 51,191
Dividend reinvestment plan ................................. -0- -0- 5,209
Purchase of common stock ................................... -0- -0- (201,898)
Acquisitions ............................................... -0- 18 62,947
--------------------------------------------
BALANCE AT DECEMBER 31, 1998 .................................. (40,053) 12,030 3,207,424
Comprehensive income:
Net income ................................................. -0- -0- 340,468
Other comprehensive income, net of tax:
Unrealized losses on available-for-sale securities, net of
reclassification adjustment (net $74,014 tax benefit) . -0- (260,879) (260,879)
-----------
Comprehensive income .......................................... 79,589
Cash dividends declared ($.71 per common share) ............... -0- -0- (163,395)
Cash dividends declared by pooled companies ................... -0- -0- (94,305)
Common stock transactions:
Employee stock plans ....................................... 34,215 -0- 90,455
Dividend reinvestment plan ................................. -0- -0- 5,912
Purchase of common stock ................................... -0- -0- (166,475)
--------------------------------------------
BALANCE AT DECEMBER 31, 1999 .................................. $ (5,838) $ (248,849) $ 2,959,205
============================================
Disclosure of 1999 reclassification amount:
Unrealized holding losses on available-for-sale
securities arising during the period ....................... $ (253,748)
Less: Reclassification adjustment for gains
realized in net income ..................................... 7,131
----------
Net unrealized losses on available-for-sale
securities, net of tax ..................................... $ (260,879)
==========
</TABLE>
See Notes to Consolidated Financial Statements.
54
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<PAGE>
AmSouth Bancorporation and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
(In thousands) 1999 1998 1997
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ........................................................................ $ 340,468 $ 474,074 $ 473,681
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses ...................................................... 165,626 99,067 83,508
Depreciation and amortization of premises and equipment ........................ 97,731 82,622 74,923
Amortization of premiums and discounts on held-to-maturity securities
and available-for-sale securities ............................................ (3,004) (9,445) (8,517)
Noncash portion of merger-related costs ........................................ 98,595 5,900 -0-
Net decrease (increase) in loans held for sale ................................. 106,372 (162,028) (21,786)
Net (increase) decrease in trading securities .................................. (4,154) 7,781 1,007
Net gains on sales of available-for-sale securities ............................ (11,392) (16,099) (12,411)
Net increase in accrued interest receivable and other assets ................... (551,855) (211,009) (198,924)
Net (decrease) increase in accrued expenses and other liabilities .............. (32,371) 11,275 (45,804)
Provision for deferred income taxes ............................................ 56,834 65,807 71,919
Amortization of intangible assets .............................................. 40,306 40,211 39,907
Other operating activities, net ................................................ 42,054 28,924 9,411
----------- ---------------------------
Net cash provided by operating activities .................................... 345,210 417,080 466,914
----------- ---------------------------
INVESTING ACTIVITIES
Proceeds from maturities and prepayments of available-for-sale securities ......... 1,904,594 2,771,295 914,931
Proceeds from sales of available-for-sale securities .............................. 2,292,108 2,837,590 3,845,967
Purchases of available-for-sale securities ........................................ (5,319,935) (6,764,648) (4,643,363)
Proceeds from maturities, prepayments and calls of held-to-maturity securities .... 1,430,693 1,808,077 1,041,442
Purchases of held-to-maturity securities .......................................... (2,275,882) (1,451,233) (416,393)
Net decrease (increase) in federal funds sold and securities purchased under
agreements to resell ........................................................... 225,227 (93,256) (1,708)
Net decrease (increase) in other interest-earning assets .......................... 11,412 (29,276) -0-
Net increase in loans ............................................................. (1,948,264) (1,101,824) (1,351,213)
Net purchases of premises and equipment ........................................... (2,415) (133,432) (123,945)
Net cash provided by acquisitions ................................................. -0- 63,855 76,697
Net cash from sales of branches, business operations, subsidiaries and other assets 98,102 8,204 1,099
----------- ---------------------------
Net cash used by investing activities .......................................... (3,584,360) (2,084,648) (656,486)
----------- ---------------------------
FINANCING ACTIVITIES
Net (decrease) increase in deposits ............................................... (615,042) 961,708 443,364
Net increase (decrease) in federal funds purchased and securities sold under
agreements to repurchase ....................................................... 625,485 488,967 (426,607)
Net increase (decrease) in other borrowed funds ................................... 1,787,483 (1,177,511) 61,675
Issuance of long-term Federal Home Loan Bank advances and
other long-term debt ........................................................... 2,735,384 2,528,473 1,470,841
Payments for maturing long-term debt .............................................. (1,527,169) (391,487) (917,960)
Cash dividends paid ............................................................... (183,848) (195,560) (173,484)
Proceeds from employee stock plans and dividend reinvestment plan ................. 53,564 45,943 49,583
Purchases of common stock ......................................................... (166,475) (201,898) (368,303)
----------- ---------------------------
Net cash provided by financing activities ...................................... 2,709,382 2,058,635 139,109
----------- ---------------------------
(Decrease) increase in cash and cash equivalents .................................. (529,768) 391,067 (50,463)
Cash and cash equivalents at beginning of period .................................. 2,095,577 1,704,510 1,754,973
----------- ---------------------------
Cash and cash equivalents at end of period ........................................ $ 1,565,809 $ 2,095,577 $ 1,704,510
=========== ===========================
</TABLE>
See Notes to Consolidated Financial Statements.
55
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<PAGE>
AmSouth Bancorporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
AmSouth Bancorporation (AmSouth), through its subsidiaries, provides a broad
array of financial products and services through banking offices located in nine
Southeastern states with leading market positions in Tennessee, Florida,
Alabama, and Mississippi. In addition, AmSouth provides select financial
services outside of its banking markets through non-bank subsidiaries. AmSouth's
principal activities include consumer and commercial banking and capital
management. The accounting policies of AmSouth and the methods of applying those
policies that materially affect the accompanying financial statements are
presented below.
Basis of Presentation
The consolidated financial statements include the accounts of AmSouth and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated. Certain amounts in the prior years' financial statements have been
reclassified to conform to the 1999 presentation. These reclassifications are
immaterial and had no effect on net income.
Use of Estimates
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash Flows
Cash and due from banks and time deposits in other banks are considered cash and
cash equivalents. For the years ended December 31, 1999, 1998 and 1997, AmSouth
paid interest of $1,420,238,000, $1,383,089,000 and $1,290,677,000,
respectively. For the years ended December 31, 1999, 1998 and 1997, noncash
transfers from loans to foreclosed properties were $25,467,000, $20,692,000 and
$23,189,000, respectively. Noncash transfers from foreclosed properties to loans
for the years ended December 31, 1999, 1998 and 1997 were $711,000, $496,000 and
$2,399,000, respectively. For the years ended December 31, 1998 and 1997,
noncash transfers from loans to available-for-sale securities of approximately
$99,107,000 and $351,946,000, respectively, were made in connection with
mortgage loan securitizations. For the year ended December 31, 1998, noncash
transfers from loans to held-to-maturity securities of approximately
$1,176,394,000 were made in connection with mortgage loan securitizations. In
addition, for the years ended December 31, 1998 and 1997, $719,000 and
$2,657,000, respectively, of noncash transfers were made from loans to other
assets in connection with mortgage loan securitizations. For the years ended
December 31, 1999 and 1998, noncash transfers from loans to available-for-sale
securities of approximately $9,838,000 and $4,038,000, respectively, were made
in connection with the participation of mortgages to third-party conduits. For
the years ended December 31, 1999 and 1998, noncash transfers from loans to
other assets of approximately $16,225,000 and $3,567,000, respectively, were
made in connection with the participation of mortgages to third-party conduits.
During 1999, AmSouth had noncash transfers from available-for-sale securities to
held-to-maturity securities in the amount of $3,010,249,000. Also during 1999,
AmSouth had
56
--
<PAGE>
noncash transfers from held-to-maturity securities to available-for-sale
securities in the amount of $516,759,000. The transfers between categories of
securities were the result of portfolio restructurings in connection with the
acquisition of First American Corporation (First American). During 1999 AmSouth
also had noncash transfers from loans and the allowance for loan losses to loans
held for sale of $149,253,000 and $71,000,000, respectively, associated with a
decision to exit a portion of its healthcare loan business.
Securities
Securities are classified as either held-to-maturity, available-for-sale or
trading. AmSouth defines held-to-maturity securities as debt securities which
management has the positive intent and ability to hold to maturity.
Held-to-maturity securities are stated at cost, adjusted for amortization of
premiums and accretion of discounts on the constant effective yield method.
Trading securities are carried at market. Market adjustments and realized gains
or losses on the sale of trading securities are reported as other noninterest
revenues. Available-for-sale securities are defined as equity securities and
debt securities not classified as trading securities or held-to-maturity
securities. Available-for-sale securities are carried at fair value. Unrealized
holding gains or losses, net of deferred taxes, on available-for-sale securities
are excluded from earnings and reported in accumulated other comprehensive
income (loss) within shareholders' equity. AmSouth determines the appropriate
classification of debt securities at the time of purchase. Gains and losses from
sales of available-for-sale securities are computed using the specific
identification method.
Loans Held for Sale
Loans held for sale include mortgage loans held for sale and at December 31,
1999, $78,253,000 of healthcare-related loans held for accelerated disposition.
Loans held for sale are carried at the lower of aggregate cost or market value.
Market adjustments and realized gains and losses are classified as other
noninterest revenues.
Securities Purchased Under Agreements to Resell and Securities Sold Under
Agreements to Repurchase
Securities purchased under agreements to resell and securities sold under
agreements to repurchase are generally treated as collateralized financing
transactions and are recorded at the amount at which the securities were
acquired or sold plus accrued interest. It is AmSouth's policy to take
possession of securities purchased under resale agreements. The market value of
the collateral is monitored and additional collateral obtained when deemed
appropriate. Securities sold under repurchase agreements are delivered to either
broker-dealers or to custodian accounts for customers. The broker-dealers may
sell, loan or otherwise dispose of such securities to other parties in the
normal course of their operations but have agreed to resell to AmSouth identical
securities at the maturity of the agreements.
Interest Rate Contracts and Other Off-Balance Sheet Financial Instruments
AmSouth has from time to time utilized various off-balance sheet instruments
such as interest rate swaps, forward interest rate swaps, interest rate caps,
floors and futures contracts that are designated to hedge imbalances in
sensitivity to fluctuating interest rates for designated assets and liabilities.
Interest rate impacts of derivative instruments are correlated with interest
rate movements of underlying assets or liabilities. The earnings impact of a
derivative is accrued over the life of the agreement based on expected
settlement payments and is recorded as an adjustment to interest income or
expense in the period in which it accrues and in the category appropriate to the
related assets or liabilities. The related amount receivable from or payable to
the derivative counterparty is included in other assets or liabilities in the
consolidated statement of condition. Realized and unrealized gains and losses on
futures contracts which are designated as hedges of interest rate exposure
arising out of nontrading assets and liabilities are deferred and recognized as
interest income or interest expense, in the category appropriate to the related
assets or liabilities, over the covered periods or lives of the hedged assets or
liabilities. Gains or losses on early
57
--
<PAGE>
terminations of derivative financial instruments that relate to specific assets
or liabilities are deferred and amortized as an adjustment to the yield or rate
of the related assets or liabilities over the remaining covered period. At such
time that there is no longer correlation of interest rate movements between the
derivative instrument and the underlying assets or liabilities, or if the
underlying assets or liabilities specifically related to a derivative instrument
mature, are sold or are terminated, then the related derivative instrument would
be closed out or marked to market as an element of noninterest income on an
ongoing basis.
Interest rate derivatives used in connection with the securities
available-for-sale portfolio are carried at fair value with gains and losses,
net of applicable deferred income taxes, reported in shareholders' equity in
other comprehensive income (loss), consistent with the reporting of unrealized
gains and losses on such securities. Premiums paid for interest rate floors
qualifying for hedge accounting are deferred and classified with the assets and
liabilities hedged and are amortized into interest income or expense over the
life of the instrument.
On a limited basis, AmSouth also enters into interest rate swap agreements,
as well as interest rate cap and floor agreements, with customers desiring
protection from possible adverse future fluctuations in interest rates. As an
intermediary, AmSouth generally maintains a portfolio of matched offsetting
interest rate contract agreements. At the inception of such agreements, the
portion of the compensation related to credit risk and ongoing servicing, if
any, is deferred and taken into income over the term of the agreements.
Loans
Interest income on commercial and real estate loans is accrued daily based upon
the outstanding principal amounts except for those classified as nonaccrual
loans. Interest income on certain consumer loans is accrued monthly based upon
the outstanding principal amounts except for those classified as nonaccrual
loans. Interest accrual is discontinued when it appears that future collection
of principal or interest according to the contractual terms may be doubtful.
Interest collections on nonaccrual loans for which the ultimate collectibility
of principal is uncertain are applied as principal reductions. Otherwise, such
collections are credited to income when received.
Impaired loans are specifically reviewed loans for which it is probable
that the creditor will be unable to collect all amounts due according to the
terms of the loan agreement. Impairment of a loan is measured by comparing the
recorded investment in the loan with the present value of expected future cash
flows discounted at the loan's effective interest rate, the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent. A valuation allowance is provided to the extent that the measure of
the impaired loan is less than the recorded investment. A loan is not considered
impaired during a period of delay in payment if the ultimate collectibility of
all amounts due is expected. Larger groups of homogeneous loans such as consumer
installment, bankcard and residential real estate mortgage loans are
collectively evaluated for impairment. Impaired loans are, therefore, primarily
commercial and commercial real estate loans. Payments received on impaired loans
for which the ultimate collectibility of principal is uncertain are generally
applied first as principal reductions.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level which is considered to be
adequate to reflect estimated credit losses for specifically identified loans as
well as estimated probable credit losses inherent in the remainder of the loan
portfolio at the balance sheet date. A formal review of the allowance for loan
losses is prepared quarterly to assess the risk in the portfolio and to
determine the adequacy of the allowance for loan losses. For purposes of the
quarterly review, the consumer loan portfolios are separated by loan type, and
each loan type is treated as a homogeneous pool. In accordance with the
Interagency Policy Statement on the Allowance for Loan and Lease Losses issued
by the Office of the Comptroller of the Currency, Federal Deposit Insurance
Corporation, Federal Reserve Board, and Office of Thrift
58
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<PAGE>
Supervision, the allowance allocated to each of these pools is based upon trends
in quarterly annualized charge-off rates for each pool, adjusted for changes in
these pools which include current information on the payment performance of each
pool of loans. Every commercial and commercial real estate loan is assigned a
risk rating on a thirteen-point numerical scale by loan officers using
established credit policy guidelines. These risk ratings are periodically
reviewed, and all risk ratings are subject to review by an independent Credit
Review Department. Each risk rating is assigned an allocation percentage which,
when multiplied times the dollar value of loans in that risk category, results
in the amount of the allowance for loan losses allocated to these loans. The
allocation of allowance for loans with grades of pass and criticized is based
upon historical loss rates adjusted for current conditions that include current
economic developments. The allocation for loans with a classified grade is based
upon regulatory guidance. Every nonperforming loan in excess of $500,000,
however, is reviewed quarterly by AmSouth's Special Assets Department to
determine the level of loan losses required to be specifically allocated to
these impaired loans. The allocation for unfunded commitments is based on the
type of unfunded commitment and historical loss information updated to reflect
current conditions and information. The allowance allocated to standby letters
of credit is determined by historical loss information associated with these
off-balance sheet items. Management reviews its allocation of the allowance for
loan losses versus actual performance of each of its portfolios and adjusts
allocation rates to reflect the recent performance of the portfolio as well as
current underwriting standards and other factors which might impact the
estimated losses in the portfolio.
In determining the appropriate level for the allowance, management ensures
that the overall allowance appropriately reflects the current microeconomic
conditions, industry exposure and a margin for the imprecision inherent in most
estimates of expected credit losses. This additional allowance is reflected in
the unallocated portion of the allowance. Based on management's periodic
evaluation of the allowance for loan losses, a provision for loan losses is
charged to operations if additions to the allowance are required.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. The provisions for depreciation and amortization are computed
generally by the straight-line method over the estimated useful lives of the
assets or terms of the leases, as applicable. The annual provisions for
depreciation and amortization have been computed principally using estimated
lives of five to 40 years for premises and three to 12 years for furniture and
equipment.
Intangible Assets
Intangible assets, primarily goodwill, are included in other assets. Goodwill is
amortized on a straight-line basis primarily over ten to 25 years. Other
identified intangibles, primarily core deposit rights, are amortized over a
period no greater than 15 years. As events or changes in circumstances warrant,
AmSouth reviews the carrying value of goodwill and other identified intangibles
to determine if any impairment has occurred or if the period of recoverability
has changed. If this review indicates that goodwill or deposit intangibles will
not be recoverable, as determined based on the undiscounted cash flows of the
entity acquired over the remaining amortization period, their carrying value
will be reduced by the estimated shortfall of such cash flows. At December 31,
1999, 1998 and 1997, goodwill, net of amortization, totaled $391,221,000,
$426,225,000 and $456,328,000, respectively, and deposit and other intangibles
equaled $32,252,000, $38,808,000 and $46,031,000, respectively.
Income Taxes
The consolidated financial statements have been prepared on the accrual basis.
When income and expenses are recognized in different periods for financial
reporting purposes and for purposes of computing income taxes currently payable,
deferred taxes are provided on such temporary differences. Deferred tax assets
and liabilities are recorded for
59
--
<PAGE>
the expected future tax consequences of events that have been recognized in the
financial statements or tax returns. Deferred tax assets and liabilities are
measured using the enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be realized or
settled.
Stock-Based Compensation
AmSouth adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
(Statement 123) which allows an entity to continue to measure compensation cost
for those plans using the intrinsic value based method of accounting prescribed
by APB Opinion No. 25, "Accounting for Stock Issued to Employees" (Opinion 25).
AmSouth has elected to follow Opinion 25 and related interpretations in
accounting for its employee stock options. Compensation cost for fixed and
variable stock-based awards is measured by the excess, if any, of the fair
market price of the underlying stock over the amount the individual is required
to pay. Compensation cost for fixed awards is measured at the grant date, while
compensation cost for variable awards is estimated until both the number of
shares an individual is entitled to receive and the exercise or purchase price
are known (measurement date). See Note 17 for a further description of the
assumptions used for preparing the pro forma disclosures as prescribed by
Statement 123.
Earnings Per Common Share
Earnings per common share is obtained by dividing net income available to common
stockholders by the weighted average outstanding shares of common stock. The
diluted calculation of earnings per common share is obtained by dividing net
income by the weighted average outstanding shares of common stock adjusted for
effects of stock options and restricted stock outstanding. See Note 16 for the
reconciliation of the numerators and denominators of the basic and diluted
earnings per share computations.
All common stock and per common share data included in the consolidated
financial statements and in the Notes to Consolidated Financial Statements have
been retroactively adjusted to reflect common stock splits.
Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and for Hedging Activities," as amended by Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133,"
requires derivative instruments be carried at fair value on the balance sheet.
The statement continues to allow derivative instruments to be used to hedge
various risks and sets forth specific criteria to be used to determine when
hedge accounting can be used. The statement also provides for offsetting changes
in fair value or cash flows of both the derivative and the hedged asset or
liability to be recognized in earnings in the same period; however, any changes
in fair value or cash flow that represent the ineffective portion of a hedge are
required to be recognized in earnings and cannot be deferred. For derivative
instruments not accounted for as hedges, changes in fair value are required to
be recognized in earnings.
AmSouth plans to adopt the provisions of this statement, as amended, for
its quarterly and annual reporting beginning January 1, 2001, the statement's
effective date. The impact of adopting the provisions of this statement on
AmSouth's financial position, results of operations and cash flow subsequent to
the effective date is not currently estimable and will depend on the financial
position of AmSouth and the nature and purpose of the derivative instruments in
use at that time.
60
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<PAGE>
NOTE 2 -- MERGERS AND ACQUISITIONS
- --------------------------------------------------------------------------------
On October 1, 1999, AmSouth issued 214.5 million common shares to acquire First
American. AmSouth exchanged 1.871 shares of its common stock for each share of
First American common stock. First American was a $22.2 billion asset financial
service holding company headquartered in Nashville, Tennessee, with banking
offices in Tennessee, Mississippi, Louisiana, Arkansas, Virginia, and Kentucky.
The transaction was accounted for as a pooling-of-interests, and, accordingly,
the consolidated financial statements have been restated to include the results
of First American for all periods presented. Other business combinations
completed by AmSouth during the three years ended December 31, 1999, are
presented in the following table (in millions):
<TABLE>
<CAPTION>
Common
Shares Cash Accounting
Acquiree Location Date Assets Issued Paid Treatment
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jefferson Guaranty Bancorp, Inc. LA Jan. 1997 $ 299 3.9 $10 Purchase
Hartsville Bancshares, Inc. TN Jan. 1997 90 0.7 -- Purchase
First Capital Bancorp, Inc. LA Mar. 1997 186 3.4 -- Pooling
NBC Financial Corporation LA July 1997 69 0.9 -- Purchase
Citisave Financial Corporation LA Aug. 1997 75 -- 19 Purchase
Victory Bancshares, Inc. TN Mar. 1998 131 1.6 -- Pooling
Deposit Guaranty Corporation MS May 1998 7,151 91.2 -- Pooling
Peoples Bank (Peoples) TN Oct. 1998 142 1.7 -- Pooling
The Middle Tennessee Bank (MTB) TN Oct. 1998 225 2.2 -- Pooling
CSB Financial Corporation (CSB) TN Oct. 1998 148 1.7 -- Pooling
Pioneer Bancshares, Inc. (Pioneer) TN Nov. 1998 990 11.5 -- Pooling
</TABLE>
For the acquisitions of Deposit Guaranty Corporation (Deposit Guaranty) and
Pioneer, accounted for as poolings-of-interests, the consolidated financial
statements were restated to include the results of both companies for all
periods presented. For all other acquisitions accounted for as
poolings-of-interests in the above table, the results of operations have been
included in the consolidated financial statements from the date of the
acquisition, as pre-acquisition amounts were not material. Accordingly, prior
period financial statements have not been restated because the changes to prior
years would have been immaterial. For acquisitions accounted for as purchases,
the results of operations have been included in the consolidated financial
statements from the respective dates of acquisition. The purchase price in
excess of the net assets acquired has been recorded as goodwill and is being
amortized on a straight-line basis over 15 years. The pro forma effect on prior
financial statements of these acquisitions is not significant.
61
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<PAGE>
Net interest income, noninterest revenues and net income as previously
reported individually by AmSouth and First American and the combined company,
reflecting certain reclassifications to conform to the current presentation, for
the nine months ended September 30, 1999, and the years ended December 31, 1998
and 1997, are presented in the table below:
Nine Months Ended Years Ended December 31
(In thousands) September 30, 1999 1998 1997
- --------------------------------------------------------------------------------
AmSouth
Net interest income $ 565,815 $ 698,970 $ 676,277
Noninterest revenues 266,174 346,626 266,004
Net income 222,004 262,712 226,167
First American
Net interest income 571,203 733,612 699,160
Noninterest revenues 365,136 477,612 405,633
Net income 181,018 211,362 247,514
Combined
Net interest income 1,126,684 1,444,284 1,384,729
Noninterest revenues 631,745 799,854 658,724
Net income 403,022 474,074 473,681
- --------------------------------------------------------------------------------
On December 16, 1998, AmSouth through its subsidiary IFC Holdings, Inc.
(IFC), purchased the assets of the Specialized Investment Division of Financial
Service Corporation, a subsidiary of Sun America Inc., which provides investment
products to customers of community banks and credit unions that do not have
their own broker/dealer capabilities. The $9 million purchase price was
primarily for goodwill and other intangible assets. The goodwill is being
amortized on a straight-line basis over ten years.
NOTE 3 -- MERGER-RELATED COSTS
- --------------------------------------------------------------------------------
AmSouth recorded merger and integration charges of $268.8 million and $103.4
million in 1999 and 1998, respectively. In addition, AmSouth recorded other
merger-related charges of $32.6 million and $18.3 million in 1999 and 1998,
respectively. Merger-related charges in 1999 were primarily associated with the
acquisition of First American as well as conversion costs related to the Deposit
Guaranty and Pioneer mergers. Merger-related
62
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<PAGE>
charges of $121.7 million recorded in 1998 were associated with the acquisitions
of Deposit Guaranty, Pioneer, MTB, CSB, and Peoples. The components of the
charges are shown below:
Years Ended December 31
(In millions) 1999 1998
- --------------------------------------------------------------------------------
Merger and integration costs:
Severance and personnel-related costs $130.1 $ 25.8
Investment banking and other transaction costs 53.8 29.1
Occupancy and equipment writedowns 59.2 2.7
Systems and operations conversions 25.7 45.8
-----------------------------
Total merger and integration costs 268.8 103.4
-----------------------------
Other merger-related charges:
System and process reconciliation provision 17.5 -0-
Other merger-related charges 15.1 18.3
-----------------------------
Total other merger-related charges 32.6 18.3
-----------------------------
Total merger-related charges $301.4 $121.7
================================================================================
Severance and personnel-related costs include the cost of severance,
retention, change-in-control, outplacement, and other benefits associated with
the termination of employees primarily in corporate support and data processing
functions. For the First American merger, approximately 1,400 positions are
estimated to be eliminated, of which approximately 400 positions are expected to
be eliminated through attrition. Through December 31, 1999, approximately 345
associates have entered the severance process. Occupancy and equipment
writedowns represents lease termination costs and impairment of assets for
redundant office space, equipment and branches that will be vacated and disposed
of as part of the integration plan. Systems and operations conversion costs
result from the conversions and integration of the acquired branches and
operations and include incremental costs such as special contract labor and
incentives, consulting fees, and mailing and preparation costs for customer
communications related to the conversion of customer accounts. The system and
process reconciliation provision establishes an allowance to absorb losses
resulting from systems conversions and process integration related to mergers
occurring prior to the First American merger. The provision covers dishonored
return items, unidentified customer debits, unmatched or unlocated items, and
other similar losses. Other merger-related costs also includes printing and
distribution of conversion-related instructional materials and manuals,
relocation expenses, and in 1998, charitable foundation costs related to the
funding of a charitable foundation for the Deposit Guaranty market. The
following table presents a summary of activity with respect to the Company's
merger and integration accrual:
(In millions) 1999 1998
- --------------------------------------------------------------------------------
Balance at the beginning of the year $ 18.8 $ -0-
Provision charged to operating expense 301.4 121.7
Cash outlays (150.9) (97.0)
Noncash writedowns and charges (98.6) (5.9)
-----------------------------
Balance at the end of the year $ 70.7 $ 18.8
================================================================================
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<PAGE>
The components of the merger and integration accrual at December 31 were as
follows:
(In millions) 1999 1998
- --------------------------------------------------------------------------------
Severance and personnel-related costs $ 68.2 $ 10.9
Occupancy and equipment writedowns 0.9 2.4
Systems and operations conversions 0.1 3.9
Other merger-related costs 1.5 1.6
----------------------------------------
Total $ 70.7 $ 18.8
================================================================================
In addition to the above costs, AmSouth also recorded, during 1999, the
following charges related to the First American acquisition: an $8.0 million
impairment charge on a portfolio investment and $7.6 million of charges related
to conforming accounting adjustments. The impairment charge and $0.8 million of
the conforming accounting adjustments were recorded as reductions to other
noninterest revenues. $3.0 million of the conforming accounting charges were
recorded in the provision for loan losses. The remaining $3.8 million of
conforming accounting adjustments were recorded in various categories of
noninterest expense.
NOTE 4 -- CASH AND DUE FROM BANKS
- --------------------------------------------------------------------------------
AmSouth's banking subsidiary is required to maintain reserve balances with the
Federal Reserve Bank based on a percentage of deposits reduced by its cash on
hand. The average amount of those reserves was approximately $45,200,000 and
$58,500,000 for the years ended December 31, 1999 and 1998, respectively.
NOTE 5 -- AVAILABLE-FOR-SALE SECURITIES
- --------------------------------------------------------------------------------
The following is a summary of available-for-sale securities at December 31:
<TABLE>
<CAPTION>
1999 1998
Gross Gross Gross Gross
Amortized Unrealized Unrealized Carrying Amortized Unrealized Unrealized Carrying
(In thousands) Cost Gains Losses Amount Cost Gains Losses Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
federal agency
securities $ 328,318 $ 456 $ 11,703 $ 317,071 $ 487,828 $ 4,006 $ 3,775 $ 488,059
Mortgage-backed
securities 5,239,298 4,926 140,668 5,103,556 6,316,838 48,093 38,640 6,326,291
State, county and
municipal securities 74,219 702 1,206 73,715 375,100 7,577 3,330 379,347
Other debt securities 106,994 -0- 5,378 101,616 19,145 82 572 18,655
Equity securities 397,541 58 28,854 368,745 305,467 6,915 202 312,180
--------------------------------------------------------------------------------------------------------------
$6,146,370 $ 6,142 $ 187,809 $5,964,703 $7,504,378 $ 66,673 $ 46,519 $7,524,532
====================================================================================================================================
</TABLE>
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<PAGE>
The carrying amount and amortized cost of available-for-sale securities by
maturity at December 31, 1999, are as follows:
Amortized Carrying
(In thousands) Cost Amount
- --------------------------------------------------------------------------------
Due within 1 year $ 37,194 $ 37,219
Due after 1 year through 5 years 153,033 146,756
Due after 5 years through 10 years 135,449 131,561
Due after 10 years 183,855 176,866
Mortgage-backed securities 5,239,298 5,103,556
Equity securities 397,541 368,745
-------------------------------------------
$6,146,370 $5,964,703
================================================================================
In 1999, 1998 and 1997, AmSouth realized gross gains of $32,672,000,
$20,529,000 and $24,229,000, respectively, and gross losses of $21,280,000,
$4,430,000 and $11,818,000, respectively, on sales of available-for-sale
securities.
NOTE 6 -- HELD-TO-MATURITY SECURITIES
- --------------------------------------------------------------------------------
The amounts at which held-to-maturity securities are carried and their
approximate fair market values at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
Gross Gross Gross Gross
Carrying Unrealized Unrealized Market Carrying Unrealized Unrealized Market
(In thousands) Amount Gains Losses Value Amount Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
federal agency
securities $ 562,696 $ -0- $ 18,432 $ 544,264 $ 174,227 $ 1,964 $ 169 $ 176,022
State, county and
municipal securities 376,891 621 13,443 364,069 222,316 7,479 268 229,527
Mortgage-backed
securities 5,992,397 3,777 172,857 5,823,317 3,367,658 24,004 10,964 3,380,698
Other securities 118,578 183 1,067 117,694 113,303 2,475 71 115,707
--------------------------------------------------------------------------------------------------------------
$7,050,562 $ 4,581 $ 205,799 $6,849,344 $3,877,504 $ 35,922 $ 11,472 $3,901,954
====================================================================================================================================
</TABLE>
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<PAGE>
The carrying amount and approximate market value of held-to-maturity
securities by maturity at December 31, 1999, are as follows:
Carrying Market
(In thousands) Amount Value
- --------------------------------------------------------------------------------
Due within 1 year $ 43,874 $ 37,151
Due after 1 year through 5 years 89,634 88,497
Due after 5 years through 10 years 484,288 476,018
Due after 10 years 440,369 424,361
Mortgage-backed securities 5,992,397 5,823,317
-------------------------------------------
$7,050,562 $6,849,344
================================================================================
During 1999, certain held-to-maturity securities with a total amortized
cost of $516,759,000 were transferred to available-for-sale. The unrealized loss
at the date of transfer was $7,018,000. The transfer resulted from portfolio
restructurings in connection with the acquisition of First American. There were
no sales of held-to-maturity securities during 1999, 1998 and 1997. Held-to-
maturity and available-for-sale securities with a carrying amount of
$11,406,179,000 and $9,437,093,000 at December 31, 1999 and 1998, respectively,
were pledged to secure short-term and long-term borrowings, public deposits,
trust funds, and for other purposes as required or permitted by law.
NOTE 7 -- LOANS
- --------------------------------------------------------------------------------
The major categories of loans net of unearned income at December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1999 1998
(Dollars in thousands) Amount Percent Amount Percent
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial:
Commercial and industrial $ 7,967,190 30.3% $ 7,942,846 32.5%
Commercial loans secured by real estate 2,036,120 7.8 1,832,663 7.5
-----------------------------------------------------------------
Total commercial 10,003,310 38.1 9,775,509 40.0
Commercial real estate:
Commercial real estate mortgages 2,295,157 8.7 2,221,086 9.1
Real estate construction 2,416,849 9.2 1,800,399 7.3
-----------------------------------------------------------------
Total commercial real estate 4,712,006 17.9 4,021,485 16.4
Consumer:
Residential first mortgages 2,337,365 8.9 3,270,378 13.4
Other residential mortgages 3,231,939 12.3 2,380,093 9.7
Dealer indirect 4,148,747 15.8 2,908,822 11.9
Revolving credit 489,238 1.9 477,024 2.0
Other consumer 1,344,154 5.1 1,611,985 6.6
-----------------------------------------------------------------
Total consumer 11,551,443 44.0 10,648,302 43.6
-----------------------------------------------------------------
$26,266,759 100.0% $24,445,296 100.0%
==============================================================================================================
</TABLE>
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<PAGE>
At December 31, 1999 and 1998, nonaccrual loans totaled $141,134,000 and
$113,985,000, respectively. The amount of interest income actually recognized on
these loans during 1999 and 1998 was approximately $4,350,000 and $1,792,000,
respectively. The additional amount of interest income that would have been
recorded during 1999 and 1998 if these loans had been current in accordance with
their original terms was approximately $11,386,000 and $8,047,000, respectively.
At December 31, 1999 and 1998, the recorded investment in loans that were
considered to be impaired was $56,923,000 and $87,859,000, respectively
(primarily all of which were on a nonaccrual basis). Collateral dependent loans,
which were measured at the fair value of the collateral, constituted
approximately all of impaired loans at December 31, 1999 and 1998. There was
approximately $18,419,000 and $17,357,000 at December 31, 1999 and 1998,
respectively, in the allowance for loan losses specifically allocated to
$49,860,000 and $45,219,000 of impaired loans. No specific reserve was required
for $7,063,000 and $42,640,000 of impaired loans at December 31, 1999 and 1998,
respectively. The average recorded investment in impaired loans for the years
ended December 31, 1999, 1998 and 1997 was approximately $61,880,000,
$87,305,000 and $76,828,000, respectively. No material amount of interest income
was recognized on impaired loans for the years ended December 31, 1999, 1998 and
1997. At December 31, 1999, $38,095,000 of impaired loans were held for
accelerated disposition and included in loans held for sale on the balance
sheet. Accordingly, these loans held for sale have not been included in the
information presented above.
Certain executive officers and directors of AmSouth and their associates
were loan customers of AmSouth during 1999 and 1998. Such loans are made in the
ordinary course of business at normal credit terms, including interest rates and
collateral, and do not represent more than a normal risk of collection. Total
loans to these persons at December 31, 1999 and 1998, amounted to approximately
$156,487,000 and $273,813,000, respectively. Activity during 1999 in loans to
related parties included loans of approximately $1,973,398,000 and payments of
approximately $2,031,671,000. Reductions of $63,378,000 were made for directors
that are no longer related, and net adjustments of $4,325,000 were made
representing other changes.
NOTE 8 -- ALLOWANCE FOR LOAN LOSSES
- --------------------------------------------------------------------------------
A summary of changes in the allowance for loan losses is shown below:
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Balance at January 1 $ 373,756 $ 367,077 $ 370,277
Loans charged off (148,287) (134,238) (150,377)
Recoveries of loans previously charged off 45,381 50,586 55,669
-------------------------------------
Net charge-offs (102,906) (83,652) (94,708)
Addition to allowance charged to expense 165,626 99,067 83,508
Additions due to business combinations -0- 6,164 8,252
Allowance transferred (71,000) -0- -0-
Allowance sold (2,000) (14,900) (252)
-------------------------------------
Balance at December 31 $ 363,476 $ 373,756 $ 367,077
================================================================================
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NOTE 9 -- PREMISES AND EQUIPMENT
- --------------------------------------------------------------------------------
Premises and equipment at December 31 are summarized as follows:
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Land $ 112,265 $ 117,666
Buildings 407,576 471,551
Furniture and fixtures 661,107 659,361
Leasehold improvements 136,069 145,414
----------------------------
1,317,017 1,393,992
Less: Allowances for depreciation and amortization 638,575 620,429
----------------------------
$ 678,442 $ 773,563
================================================================================
NOTE 10 -- DEPOSITS
- --------------------------------------------------------------------------------
The aggregate amount of time deposits of $100,000 or more, excluding
certificates of deposit of $100,000 or more, in domestic bank offices was
$111,890,000 and $105,371,000 at December 31, 1999 and 1998, respectively. In
addition, a majority of foreign time deposits were in amounts in excess of
$100,000.
At December 31, 1999, the aggregate maturities, in thousands, of time
deposits are summarized as follows:
- --------------------------------------------------------------------------------
2000 $ 8,577,446
2001 1,416,773
2002 1,206,376
2003 217,079
2004 and thereafter 177,992
-----------------------------------
$11,595,666
================================================================================
NOTE 11 -- OTHER BORROWED FUNDS
- --------------------------------------------------------------------------------
Other borrowed funds at December 31 are summarized as follows:
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Treasury, tax and loan notes $1,109,951 $ 109,089
Short-term Federal Home Loan Bank advances 150,000 148,223
Term federal funds purchased 515,000 -0-
Short-term bank notes 300,000 -0-
Commercial paper 8,749 10,039
Floating Rate Notes due 1999 -0- 6,389
Other short-term debt 52,020 77,272
-----------------------------------
$2,135,720 $ 351,012
================================================================================
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<PAGE>
At December 31, 1999, AmSouth had a line of credit arrangement for
short-term debt enabling it to borrow up to $25,000,000, subject to such terms
as AmSouth and the lender may mutually agree. The arrangement is reviewed
annually for renewal of the credit line. The line is available solely to support
commercial paper borrowings and was not in use at December 31, 1999.
The interest rate on the treasury, tax and loan notes at December 31, 1999
was 5.00 percent. All other borrowed funds at December 31, 1999, had interest
rates ranging from 3.15 percent to 6.51 percent.
NOTE 12 -- LONG-TERM DEBT
- --------------------------------------------------------------------------------
Long-term debt at December 31 is summarized as follows:
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Long-term Federal Home Loan Bank advances $4,612,686 $3,450,864
------------------------------------
Other long-term debt:
6.45% Subordinated Notes Due 2018 304,020 304,517
6.125% Subordinated Notes Due 2009 174,351 -0-
6.75% Subordinated Debentures Due 2025 149,898 149,880
7.75% Subordinated Notes Due 2004 149,595 149,504
7.25% Senior Notes Due 2006 101,028 101,212
6.875% Subordinated Notes Due 2003 49,895 49,863
6.625% Subordinated Notes Due 2005 49,709 49,660
Subordinated Capital Notes Due 1999 -0- 99,957
Long-term notes payable 11,170 36,088
Capitalized lease obligations 1,134 1,280
------------------------------------
Total other long-term debt 990,800 941,961
------------------------------------
$5,603,486 $4,392,825
================================================================================
Advances from the Federal Home Loan Bank (FHLB) had maturities ranging from
2000 to 2020 and interest rates ranging from 0.50 percent to 8.10 percent. Of
the balances outstanding at December 31, 1999, $2,915,000,000 is callable by the
FHLB during the first quarter of 2000. Under the Blanket Agreement for Advances
and Security Agreement with the FHLB, residential mortgage loans and
mortgage-backed securities are pledged as collateral for the FHLB advances
outstanding.
The 6.45% Subordinated Notes Due 2018 were issued February 1, 1998, by
AmSouth's bank subsidiary at a price of 101.702 percent. The net proceeds to
AmSouth's bank subsidiary after commissions totaled $303,156,000. The notes will
mature February 1, 2018, and were issued with embedded put and call options that
could require AmSouth's bank subsidiary to repurchase the notes at face value on
February 1, 2008. If the bank does not repurchase the debt, the interest rate on
the notes will be reset on February 1, 2008, based on a set formula. AmSouth
purchased interest rate swaps in the notional amount of $300,000,000 to hedge
these notes. These swaps require AmSouth to pay variable rates based on the
30-day and 90-day London Interbank Offered Rate (LIBOR) on notional amounts of
$200,000,000 and $100,000,000, respectively. These swaps effectively convert the
fixed-rate debt to floating rate.
The 6.125% Subordinated Notes Due 2009 were issued March 1, 1999, at a
discounted price of 99.175 percent. The net proceeds to AmSouth after
commissions totaled $172,419,000. The notes will mature March 1, 2009, and
AmSouth may redeem some, or all, of the notes prior to March 1, 2009, at the
greater of 100 percent of the principal amount or an amount based on a preset
formula. AmSouth purchased interest rate swaps in the notional amount of
$175,000,000 to hedge these notes. These
69
--
<PAGE>
swaps require AmSouth to pay variable interest rates based on the 30-day LIBOR
on notional amounts of $175,000,000, effectively converting the fixed-rate debt
to floating rate.
The 6.75% Subordinated Debentures Due November 1, 2025, were issued
November 6, 1995, at a discounted price of 99.883 percent. The net proceeds to
AmSouth after commissions totaled $148,900,000. The debentures will mature on
November 1, 2025, and may be redeemed on November 1, 2005, at the option of the
registered holders thereof. AmSouth purchased interest rate swaps in the
notional amount of $150,000,000 to hedge these debentures. These swaps require
AmSouth to pay a variable rate based on the 30-day LIBOR while receiving a fixed
rate. These swaps effectively convert the fixed-rate debt to floating rate.
The 7.75% Subordinated Notes Due 2004 were issued May 19, 1994, at a
discounted price of 99.389 percent. The net proceeds to AmSouth after
commissions totaled $148,100,000. The notes will mature on May 15, 2004, and are
not redeemable prior to maturity.
The 7.25% Senior Notes Due May 1, 2006, were issued April 26, 1996, at a
discounted price of 99.381 percent. The net proceeds to AmSouth after
commissions totaled $98,731,000. The notes will mature May 1, 2006, and are not
redeemable prior to maturity.
The 6.875% Subordinated Notes Due 2003 were issued April 22, 1993, at a
discounted price of 99.36 percent. The net proceeds to AmSouth after commissions
totaled $49,355,000. The notes will mature April 15, 2003, and are not
redeemable prior to maturity.
The 6.625% Subordinated Notes Due 2005 were issued December 18, 1995, at a
discounted price of 99.675 percent. The net proceeds to AmSouth after
commissions totaled $49,512,500. The notes will mature December 18, 2005, and
are not redeemable prior to maturity.
The Subordinated Capital Notes Due 1999 were issued in 1987 at a discounted
price of 99.125 percent. The net proceeds to AmSouth after commissions totaled
$98,450,000 for an effective rate to maturity of 9.60 percent. The notes matured
on May 1, 1999.
Long-term notes payable at December 31, 1999, included notes maturing from
2000 to 2012 with interest rates ranging from 3.55 percent to 8.00 percent.
The aggregate stated maturities, in thousands, of long-term debt
outstanding at December 31, 1999, are summarized as follows:
2000 $ 753,473
2001 250,453
2002 81,653
2003 382,343
2004 238,074
Thereafter 3,897,490
------------------------------------
$5,603,486
================================================================================
70
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<PAGE>
NOTE 13 -- OFF-BALANCE SHEET FINANCIAL AGREEMENTS
- --------------------------------------------------------------------------------
AmSouth enters into a variety of financial instrument agreements to help
customers manage their exposure to interest rate and foreign currency
fluctuations and to finance international activities. AmSouth also uses similar
instruments to manage its exposure to changes in interest and foreign exchange
rates.
Futures and forward contracts provide customers and AmSouth a means of
managing the risks of changing interest and foreign exchange rates. These
contracts represent commitments either to purchase or sell securities, other
money market instruments or foreign currency at a future date and at a specified
price. AmSouth is subject to the market risk associated with changes in the
value of the underlying financial instrument as well as the risk that another
party will fail to perform. The gross contract amount of futures and forward
contracts represents the extent of AmSouth's involvement. However, those amounts
significantly exceed the future cash requirements as AmSouth intends to close
out open trading positions prior to settlement and thus is subject only to the
change in value of the instruments. The gross amount of contracts represents
AmSouth's maximum exposure to credit risk.
Interest rate swaps are agreements to exchange interest payments computed
on notional amounts. Swaps subject AmSouth to market risk associated with
changes in interest rates as well as the risk that another party will fail to
perform. Interest rate caps and floors are contracts in which a counterparty
pays or receives a cash payment from another counterparty if a floating rate
index rises above or falls below a predetermined level. The present value of
purchased caps and floors in a gain position represents the potential credit
risk to AmSouth.
Market risk resulting from a position in a particular off-balance sheet
financial instrument may be offset by other on or off-balance sheet
transactions. AmSouth monitors overall sensitivity to interest rate changes by
analyzing the net effect of potential changes in interest rates on the market
value of both on and off-balance sheet financial instruments and the related
future cash flow streams. AmSouth manages the credit risk of counterparty
defaults in these transactions by limiting the total amount of arrangements
outstanding, both by individual counterparty and in the aggregate and by
monitoring the size and maturity structure of the off-balance sheet portfolio.
AmSouth requires collateralization by a counterparty on credit exposure above a
specified credit limit. Trading and dealer activities in the aggregate are not
material to AmSouth and are not separately disclosed.
The following table identifies the gross contract or notional amounts of
off-balance sheet financial instruments at December 31:
(In millions) 1999 1998
- --------------------------------------------------------------------------------
Forward contracts -- commitments to sell $ 84.2 $ 123.9
Forward contracts -- commitments to purchase 17.1 53.7
Notional amount of interest rate swaps:
Receive fixed rate 3,503.8 1,675.3
Receive variable rate 185.8 2,726.5
Notional amount of interest rate caps and floors 89.4 113.4
Forward foreign exchange contracts:
Commitments to purchase 54.7 77.4
Commitments to sell 54.6 80.6
Written options sold 100.0 95.0
Written options purchased 2.0 19.5
- --------------------------------------------------------------------------------
71
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<PAGE>
The notional amounts of interest rate contracts used by AmSouth to hedge
statement of condition items at December 31 are shown below:
(In millions) 1999 1998
- --------------------------------------------------------------------------------
Loans $1,515 $ 940
Securities 110 2,030
Deposits 918 679
Long-term debt 775 410
------------------------------------
$3,318 $4,059
================================================================================
The table below presents the net deferred gains related to terminated
financial instruments at December 31, 1999 and 1998, and their locations within
the consolidated statement of condition. All of the net deferred gains are
related to interest rate swaps.
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Deferred gains included in other liabilities $21,263 $20,828
Deferred losses included in other assets (4,365) (6,163)
------------------------------------
Total net deferred gains $16,898 (1) $14,665 (2)
================================================================================
(1) $5.6 million of net deferred gains to be recognized during 2000 and $11.3
million to be recognized during 2001 through 2007.
(2) $2.5 million of net deferred gains recognized during 1999 and $12.2 million
to be recognized during 2000 through 2006.
NOTE 14 -- COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
AmSouth and its subsidiaries lease land, premises and equipment under cancelable
and noncancelable leases, some of which contain renewal options under various
terms. The leased properties are used primarily for banking purposes.
The total rental expense on operating leases for the years ended
December 31, 1999, 1998 and 1997 was $72,984,000, $73,493,000 and $67,814,000,
respectively. Rental income on bank premises for 1999, 1998 and 1997 was
$14,102,000, $14,424,000 and $13,879,000, respectively. There were no material
contingent rental expenses for 1999, 1998 or 1997.
Future minimum payments, in thousands, by year and in the aggregate, for
noncancelable operating leases with initial or remaining terms of one year or
more consisted of the following at December 31, 1999:
2000 $ 65,661
2001 60,853
2002 49,046
2003 42,375
2004 35,019
Thereafter 229,025
------------------------------------
$481,979
================================================================================
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<PAGE>
AmSouth and its subsidiaries are contingently liable with respect to
various loan commitments and other contingent liabilities in the normal course
of business. AmSouth's maximum exposure to credit risk for loan commitments
(unfunded loans and unused lines of credit) and standby letters of credit at
December 31, 1999, was as follows (in millions):
Commitments to extend credit $14,396.5
Standby letters of credit 1,637.1
- --------------------------------------------------------------------------------
The credit risk associated with loan commitments and standby letters of
credit is essentially the same as that involved in extending loans to customers
and is subject to AmSouth's credit policies. Collateral is obtained based on
management's assessment of the customer.
Various legal proceedings are pending against AmSouth and its subsidiaries.
Some of these proceedings seek relief or allege damages that are substantial.
The actions arise in the ordinary course of AmSouth's business and include
actions relating to its imposition of certain fees, lending, collections, loan
servicing, deposit taking, investment, trust, and other activities. Because some
of these actions are complex and for other reasons, it may take a number of
years to finally resolve them. Based upon legal counsel's opinion, management
considers that any liability resulting from the proceedings would not have a
material impact on the financial condition or results of operations of AmSouth.
NOTE 15 -- SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
AmSouth offers a Dividend Reinvestment and Common Stock Purchase Plan, whereby
shareholders can reinvest dividends to acquire shares of common stock.
Shareholders may also invest additional cash up to $5,000 per quarter with no
brokerage commissions or fees charged.
On December 18, 1997, AmSouth's Board of Directors (Board) approved a
Stockholder Protection Rights Agreement that replaced the existing plan
effective March 13, 1998. Each Right entitles its registered holder, upon
occurrence of certain events, to purchase from AmSouth one one-hundredth of a
share of Series A Preferred Stock, without par value, for $88.89, subject to
adjustment for certain events. The Rights will be exercisable only if a person
or group acquires 15 percent or more of AmSouth's common stock or commences a
tender offer that will result in such person or group owning 15 percent or more
of AmSouth's common stock. The Rights may be redeemed by action of the Board for
$.0045 per Right.
On March 20, 1997, AmSouth's Board approved the repurchase by AmSouth of up
to 13,500,000 shares of its common stock. During 1997, 1998 and 1999, AmSouth
purchased 5,859,000, 5,297,000 and 1,352,000 shares, respectively, at a cost of
$110,267,000, $136,514,000 and $41,247,000, respectively, under this plan. The
authorization expired in March 1999.
On April 15, 1999, AmSouth's Board approved the repurchase by AmSouth of
approximately 13,100,000 shares of its common stock. From April 15, 1999, to
May 30, 1999, AmSouth purchased 655,000 shares at a cost of $20,398,000 under
this plan. The authorization was rescinded by the Board on May 31, 1999.
On March 19, 1998, AmSouth's Board approved a three-for-two common stock
split in the form of a 50 percent stock dividend. The stock dividend was paid
April 30, 1998, to shareholders of record as of April 3, 1998. On April 15,
1999, AmSouth's Board approved a three-for-two common stock split in the form of
a 50 percent stock dividend. The stock dividend was paid May 24, 1999, to
shareholders of record as of April 30, 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
September 16, 1999,
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<PAGE>
in an action related to the Merger, AmSouth's shareholders approved an increase
in the common stock authorized to be issued by AmSouth from 350,000,000 to
750,000,000 shares.
At December 31, 1999, there were 5,092,449 shares reserved for issuance
under the Dividend Reinvestment and Common Stock Purchase Plan, 33,395,333
shares reserved for issuance under stock compensation plans (13,998,595 shares
represent stock options outstanding) and 1,238,378 shares reserved for issuance
under the employee stock purchase plan for a total of 39,726,160 shares.
NOTE 16 -- EARNINGS PER COMMON SHARE
- --------------------------------------------------------------------------------
The following table sets forth the computation of earnings per common share and
diluted earnings per common share:
<TABLE>
<CAPTION>
(Dollars in thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------
Earnings per common share computation:
<S> <C> <C> <C>
Numerator:
Net income $340,468 $474,074 $473,681
Denominator:
Average common shares outstanding 391,136 389,595 395,837
Earnings per common share $.87 $1.22 $1.20
Diluted earnings per common share computation:
Numerator:
Net income $340,468 $474,074 $473,681
Denominator:
Average common shares outstanding 391,136 389,595 395,837
Dilutive shares contingently issuable 5,379 6,896 5,974
----------------------------------------------
Average diluted common shares outstanding 396,515 396,491 401,811
Diluted earnings per common share $.86 $1.20 $1.18
- ------------------------------------------------------------------------------------------
</TABLE>
The effect from assumed exercise of 6.1 million and .9 million of stock
options was not included in the computation of diluted earnings per common share
for 1999 and 1998, respectively, because such shares would have had an
antidilutive effect on earnings.
74
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<PAGE>
NOTE 17 -- LONG-TERM INCENTIVE COMPENSATION PLANS
- --------------------------------------------------------------------------------
AmSouth has long-term incentive compensation plans which permit the granting of
incentive awards in the form of stock options, restricted stock awards and stock
appreciation rights. Generally, the terms of these plans stipulate that the
exercise price of options may not be less than the fair market value of
AmSouth's common stock at the date the options are granted. Options granted
generally vest one year from the date of the grant. Options granted generally
expire not later than ten years from the date of the grant.
In connection with the Merger on October 1, 1999, outstanding First
American stock options were converted into options to purchase AmSouth's common
stock based on the Merger exchange ratio. First American had stock-based
compensation plans for certain officers and other key employees. The plans
provided for restricted stock incentives based on the attainment of annual and
long-term performance goals. Stock-based compensation plans also included stock
option programs, which provided for the granting of statutory incentive stock
options and nonstatutory options to key employees. First American also had a
broad-based employee stock option plan which provided for the granting of stock
options to substantially all other employees. Additionally, First American had a
stock option plan for nonemployee directors. Since 1991, First American has
issued restricted common stock to certain executive officers. Most of the
restrictions lapse within 10 years of issuance; however, if certain performance
criteria are met, restrictions will lapse earlier. On October 1, 1999, as a
result of the Merger, substantially all outstanding stock options and
substantially all restricted stock vested in accordance with change-in-control
provisions.
On October 1, 1999, as a result of the shareholder approval of the Merger,
all outstanding AmSouth stock options and substantially all AmSouth restricted
stock vested in accordance with change-in-control provisions.
FASB Statement 123 requires pro forma information regarding net income and
earnings per share. This pro forma information has been determined as if AmSouth
had accounted for its employee stock options under the fair value method of that
statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1999, 1998 and 1997, respectively: a risk-free interest rate of
5.29 percent, 5.62 percent and 6.46 percent, a dividend yield of 2.61 percent,
2.36 percent and 3.36 percent, a volatility factor of 19.24 percent, 18.04
percent and 19.31 percent, and a weighted-average expected life of the options
of 6.4 years for all three years. The weighted-average fair value of options
granted during 1999, 1998 and 1997 was $8.82, $5.47 and $3.09, respectively.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. AmSouth's pro
forma information follows (in thousands except for earnings per share
information):
1999 1998 1997
- --------------------------------------------------------------------------------
Net income:
As reported $340,468 $474,074 $473,681
Pro forma 315,232 465,272 468,314
Earnings per common share:
As reported $.87 $1.22 $1.20
Pro forma .81 1.19 1.18
Diluted earnings per common share:
As reported $.86 $1.20 $1.18
Pro forma .80 1.17 1.17
- --------------------------------------------------------------------------------
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<PAGE>
The following table summarizes AmSouth's stock option activity and related
information during 1997, 1998 and 1999:
Number Option Price Weighted-Average
of Shares per Share Exercise Price
- --------------------------------------------------------------------------------
Balance at January 1, 1997 12,165,580 $ 1.46 -$14.11 $ 8.54
Options exercised (2,515,002) 2.06 - 12.43 7.46
Options forfeited (319,791) 6.81 - 15.80 12.87
Options granted 2,494,910 14.16 - 25.52 15.50
----------------------------------------------
Balance at December 31, 1997 11,825,697 2.47 - 25.52 10.13
Options exercised (2,227,431) 4.67 - 27.43 18.89
Options forfeited (407,883) 4.67 - 27.49 16.85
Options granted 2,062,817 19.07 - 27.49 24.97
----------------------------------------------
Balance at December 31, 1998 11,253,200 2.47 - 27.49 12.83
Options exercised (1,964,123) 2.47 - 24.52 20.88
Options forfeited (866,531) 3.69 - 37.69 17.18
Options granted 5,576,049 22.08 - 32.92 23.31
----------------------------------------------
Balance at December 31, 1999 13,998,595 $ 2.91 -$37.69 $16.93
================================================================================
Of the options outstanding at December 31, 1999, those granted since
October 1, 1999, have a three-year restriction period from the date of grant.
All other options outstanding were exercisable. At December 31, 1999 and 1998,
options exercisable totaled 12,677,731 and 6,877,730, respectively, and had a
weighted-average option price per share of $16.18 and $9.51, respectively.
The following table presents the weighted-average remaining life as of
December 31, 1999, for options outstanding within the stated exercise price
ranges.
<TABLE>
<CAPTION>
Outstanding Exercisable
Exercise Price Number of Weighted-Average Weighted-Average Number of Weighted-Average
Range Per Share Options Exercise Price Remaining Life Options Exercise Price
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.91 - $ 4.31 560,916 $ 3.96 1.88 years 560,916 $ 3.96
4.67 - 6.82 722,533 5.94 2.83 years 722,533 5.94
7.41 - 10.85 2,668,913 8.87 4.49 years 2,668,913 8.87
11.42 - 17.10 3,229,829 13.70 6.62 years 3,168,217 13.70
17.84 - 26.49 5,829,493 22.97 9.04 years 4,570,241 22.51
26.96 - 37.69 986,911 29.06 9.01 years 986,911 29.06
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
AmSouth also has issued common stock as restricted stock awards to key
officers with the restriction that they remain employed with AmSouth for periods
of three years or longer. The following table summarizes AmSouth's restricted
stock grants and the weighted-average fair values at grant date:
1999 1998 1997
- --------------------------------------------------------------------------------
Granted 797,012 1,312,636 1,040,566
Weighted average fair value of
restricted stock granted during the year $24.97 $24.33 $18.08
- --------------------------------------------------------------------------------
At December 31, 1999, there were no stock appreciation rights outstanding.
In addition, effective January 1, 1997, AmSouth adopted the 1997
Performance Incentive Plan (PI Plan). The PI Plan permits the granting of
cash-based, long-term incentive opportunities. The amounts that may be earned
depend on the extent to which predetermined performance goals are achieved. To
date, there have been two sets of grants under the plan.
NOTE 18 -- REGULATORY CAPITAL REQUIREMENTS AND RESTRICTIONS
- --------------------------------------------------------------------------------
Capital is the primary tool used by regulators to monitor the financial health
of insured banks and savings institutions. The Federal Reserve Board and the
Federal Deposit Insurance Corporation have historically had similar capital
adequacy guidelines involving minimum leverage capital and risk-based capital
requirements. Under the capital adequacy guidelines and the regulatory framework
for prompt corrective action, AmSouth and its banking subsidiary must meet
specific capital guidelines that involve quantitative measures of their assets,
liabilities and certain off-balance sheet items as calculated under regulatory
accounting practices. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors. Based on the risk-based capital rules and definitions prescribed
by the banking regulators, should an institution's capital ratios decline below
predetermined levels, it would become subject to a series of increasingly
restrictive regulatory actions. AmSouth and its subsidiary bank are required to
have core capital (Tier 1) of at least 4 percent of risk-weighted assets, total
capital of 8 percent of risk-weighted assets and a leverage ratio of 3 percent
of adjusted quarterly average assets. Tier 1 capital consists principally of
shareholders' equity, excluding unrealized gains and losses on securities
available-for-sale, less goodwill and certain other intangibles. Total capital
consists of Tier 1 capital plus certain debt instruments and the reserve for
credit losses, subject to limitation. The regulations also define well
capitalized levels of Tier 1 capital, total capital and leverage as ratios of 6
percent, 10 percent and 5 percent, respectively, for banking
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<PAGE>
entities. AmSouth's banking subsidiaries had Tier 1 capital, total capital and
leverage ratios above the well-capitalized levels at December 31, 1999 and 1998.
Management believes that no changes in conditions or events have occurred since
December 31, 1999, which would result in changes that would cause the bank to
fall below the well-capitalized level. The actual capital ratios and amounts for
AmSouth and AmSouth Bank are as follows:
1999 1998
(Dollars in thousands) Amount Ratio Amount Ratio
- --------------------------------------------------------------------------------
Tier 1 capital:
AmSouth $2,769,657 7.46% $2,722,969 8.24%
AmSouth Bank 3,312,497 8.98 3,159,291 9.60
----------------------------------------------------
Total capital:
AmSouth $3,956,703 10.66% $3,895,589 11.78%
AmSouth Bank 3,973,696 10.77 3,828,693 11.63
----------------------------------------------------
Leverage:
AmSouth $2,769,657 6.22% $2,722,969 6.86%
AmSouth Bank 3,312,497 7.66 3,159,291 8.22
- --------------------------------------------------------------------------------
Certain restrictions exist regarding the ability of banking subsidiaries to
transfer funds to the parent company as loans, advances or dividends. The
subsidiary bank can initiate dividend payments in 2000, without prior regulatory
approval, of approximately $227,200,000 plus an additional amount equal to its
net profits for 2000, as defined by statute. Substantially all of the parent
company's retained earnings at December 31, 1999 and 1998, represented
undistributed earnings of its banking subsidiary.
NOTE 19 -- PENSION AND OTHER EMPLOYEE BENEFIT PLANS
- --------------------------------------------------------------------------------
AmSouth sponsors noncontributory defined benefit pension plans, covering
substantially all regular full-time employees (except the employees of IFC).
Benefits are generally based on years of service and the employee's compensation
during the last 120 months of employment or average monthly earnings of the
participant for the 60 consecutive months that produce the highest average
earnings. Actuarially determined pension costs are charged to current operations
using the projected unit credit method. AmSouth's funding policy is to
contribute an amount that meets the minimum funding requirements set forth in
the Employee Retirement Income Security Act of 1974, plus such additional
amounts as the corporation determines to be appropriate.
In addition to pension benefits, AmSouth provides postretirement medical
plans to all current employees and provides certain retired and grandfathered
retired participants with postretirement healthcare benefits. Postretirement
life insurance is also provided to a grandfathered group of employees and
retirees. Costs associated with these postretirement benefit plans
78
--
<PAGE>
are charged to operations based on actuarial calculations. The following table
summarizes the change in benefit obligation and plan assets and the funded
status of the pension and other postretirement plans at December 31, 1999 and
1998:
<TABLE>
<CAPTION>
Retirement Plans Other Postretirement Benefits
(Dollars in thousands) 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at January 1 $ 488,284 $ 439,456 $ 23,993 $ 29,671
Service cost 15,688 16,342 1,176 780
Interest cost 34,560 31,266 2,283 2,124
Acquisitions -0- -0- 3,206 -0-
Curtailments (842) (7,924) -0- -0-
Special termination benefits 5,461 -0- -0- -0-
Amendments 3,943 1,445 -0- (7,505)
Actuarial (gain)/loss (42,087) 30,961 2,621 1,601
Benefits and expenses paid (27,127) (23,262) (2,290) (2,678)
-----------------------------------------------------------
Benefit obligation at December 31 477,880 488,284 30,989 23,993
-----------------------------------------------------------
Change in plan assets:
Fair value of plan assets at January 1 616,432 545,083 3,577 3,456
Actual return on plan assets 51,623 91,446 109 294
Company contribution 11,276 3,165 -0- -0-
Benefits and expenses paid (27,127) (23,262) (177) (173)
-----------------------------------------------------------
Fair value of plan assets at December 31 652,204 616,432 3,509 3,577
-----------------------------------------------------------
Funded status of the plan 174,324 128,148 (27,480) (20,416)
Unrecognized actuarial (gain)/loss (124,696) (88,147) 5,087 2,433
Unamortized prior service cost/(credit) 7,077 6,275 (1,140) (5,436)
Unrecognized net transition obligation 1,357 726 2,988 3,266
-----------------------------------------------------------
Prepaid/(accrued) benefit cost $ 58,062 $ 47,002 $ (20,545) $ (20,153)
===============================================================================================================
Amounts recognized in the statement of condition:
Prepaid benefit cost $ 75,748 $ 53,484 $ 698 $ 533
Accrued benefit liability (20,557) (11,118) (21,243) (20,686)
Intangible assets 2,871 4,636 -0- -0-
-----------------------------------------------------------
Net amount recognized $ 58,062 $ 47,002 $ (20,545) $ (20,153)
===============================================================================================================
Assumptions:
Discount rate 7.75% 7.00% 7.75% 7.00%
Expected return on plan assets 9.50 9.25 6.50 6.50
Rate of compensation increase 5.50 5.50 -- --
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
79
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<PAGE>
Net periodic benefit cost/(credit) includes the following components for
the years ended December 31:
<TABLE>
<CAPTION>
Retirement Plans Other Postretirement Benefits
(In thousands) 1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 15,688 $ 16,342 $ 14,397 $ 1,176 $ 780 $ 711
Interest cost 34,560 31,266 29,388 2,283 2,124 2,184
Expected return on plan assets (56,283) (47,054) (40,251) (227) (218) (214)
Amortization of prior service cost/(credit) 1,569 1,115 1,154 (1,091) (1,327) 93
Amortization of transitional (asset)/obligation (700) (700) (1,858) 278 278 278
Recognized actuarial (gain)/loss (2,982) (2,501) (149) 262 77 27
------------------------------------------------------------------------------
Net periodic benefit cost/(credit) $ (8,148) $ (1,532) $ 2,681 $ 2,681 $ 1,714 $ 3,079
===============================================================================================================================
Additional (gain)/loss recognized due to:
Curtailment $ 1,738 $ (7,402) $ -0- $ -0- $ (1,237) $ -0-
Settlement 1,165 -0- -0- -0- -0- -0-
Special termination benefits 5,461 -0- -0- -0- -0- -0-
===============================================================================================================================
</TABLE>
During 1999, AmSouth experienced a net curtailment loss of $1.7 million, a
net settlement loss of $1.2 million and costs of special termination benefits of
$5.5 million in its retirement plans. These losses were primarily the net result
of employee terminations and change of control provisions associated with the
First American merger. These losses were recorded as merger and integration
costs. During 1998, AmSouth experienced a $7.4 million curtailment gain in its
retirement plans due to the estimated effect of significant employee
terminations associated with the Deposit Guaranty merger. The curtailment gain
was recorded as a reduction of merger and integration costs. Also, during 1998,
AmSouth terminated and settled its postretirement death benefits plan, resulting
in a curtailment gain of $1.2 million.
For measurement purposes, the increase in the per capita cost of covered
healthcare benefits varies by medical benefit and date of retirement. For
retirements after December 31, 1992, AmSouth's subsidies for all medical
benefits will be capped at a level dollar amount in approximately five years.
For retirements before January 1, 1993, the rates are graded, starting at 8.4
percent in 1999 and dropping to an ultimate rate of 5.0 percent in six years.
Assumed healthcare cost trend rates have an insignificant effect on the costs
and the liabilities reported for the health-care plan. A one-percentage point
change in assumed healthcare cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-Percentage 1-Percentage
(In thousands) Point Increase Point Decrease
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service cost and interest cost components $ 113 $ (114)
Effect on postretirement benefit obligation 1,090 (1,069)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
80
--
<PAGE>
The Qualified Retirement Plans have a portion of their investments in
AmSouth common stock. The number of shares and the market value of the common
stock were 1,080,307 and $20,864,000, respectively, as of December 31, 1999.
Dividends paid on the AmSouth common stock totaled $520,000 during 1999.
AmSouth also maintains a thrift plan and an employee stock purchase plan
that cover substantially all regular full-time employees. AmSouth matches pretax
contributions dollar for dollar on the first 6 percent of base pay that each
employee contributes to the thrift plan. After-tax contributions to the thrift
plan are matched at 50 cents for every dollar contributed by an employee through
the first 6 percent of base pay. Employees may make both pretax and after-tax
contributions, but no matching contributions are made on any employee
contributions above 6 percent, with pretax contributions being matched first.
All company-matching contributions are allocated to the AmSouth common stock
investment option. First American had a combination savings, thrift and
profit-sharing plan (FIRST Plan) available to all employees (except the
employees of IFC and hourly paid and special exempt-salaried employees). The
FIRST Plan has been terminated, and the employees are participating in AmSouth's
thrift plan. The cost of the thrift plans for the years ended December 31, 1999,
1998 and 1997 was $10.2 million, $15.3 million and $14.4 million, respectively.
Under the employee stock purchase plan, an employee may invest up to $2,000 each
calendar year in purchases of AmSouth common stock, and AmSouth will contribute
a matching 25 percent toward the purchase. Additional purchases of up to $8,000
may be made on an unmatched basis with no administrative or brokerage fees
charged. Under the employee stock purchase plan, 113,885 and 130,083 shares of
AmSouth common stock were purchased during 1999 and 1998, respectively, with
weighted-average fair values of $27.37 and $25.85, respectively.
First American sponsored various employee benefit plans. Such plans,
including the 401(k) plans, employee stock ownership plans and deferred
compensation plans, are in the process of being terminated or frozen, and their
employees are participating or will be participating in AmSouth's retirement and
other benefit plans. The liabilities, if any, for such terminations have been
recorded as of December 31, 1999.
NOTE 20 -- INCOME TAXES
- --------------------------------------------------------------------------------
The provisions for income taxes charged to earnings are summarized as follows:
Years Ended December 31
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Current tax expense:
Federal $140,910 $187,641 $173,759
State 3,159 11,277 18,911
----------------------------------------------------
144,069 198,918 192,670
----------------------------------------------------
Deferred tax expense:
Federal 50,421 58,975 64,112
State 6,413 6,832 7,807
----------------------------------------------------
56,834 65,807 71,919
----------------------------------------------------
$200,903 $264,725 $264,589
================================================================================
81
--
<PAGE>
The differences between the actual income tax expense and the amount
computed by applying the statutory federal income tax rate to income before
income taxes are as follows:
<TABLE>
<CAPTION>
Years Ended December 31
(In thousands) 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax at federal income tax rate $ 189,480 $ 258,580 $ 258,254
State and local income taxes, net of federal benefits 6,222 11,772 17,433
Acquisition cost 19,505 6,301 (12)
Goodwill amortization 11,426 11,428 11,199
Tax exempt interest (10,289) (10,932) (12,148)
Bank-owned life insurance (13,166) (8,306) (5,652)
Other (2,275) (4,118) (4,485)
----------------------------------------------------
$ 200,903 $ 264,725 $ 264,589
=============================================================================================================
</TABLE>
The significant temporary differences that created deferred tax assets and
liabilities at December 31 are as follows:
Years Ended December 31
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Deferred tax assets:
Loan loss reserves $ 162,175 $ 138,219
Employee benefits 13,933 16,631
Acquisition cost 41,879 2,957
Statement 115 equity adjustment 50,789 (6,758)
Other 18,434 8,400
--------------------------------------
287,210 159,449
--------------------------------------
Deferred tax liabilities:
Leasing activities (370,237) (223,566)
Depreciation (23,000) (26,168)
Mortgage servicing rights 1,700 (19,777)
Purchase accounting (17,680) (12,426)
Deferred loan fees (9,281) (6,186)
Other (14,243) (23,111)
--------------------------------------
(432,741) (311,234)
--------------------------------------
Net deferred tax liability $(145,531) $(151,785)
================================================================================
Income taxes paid were $187,887,000, $135,324,000 and $175,971,000 for the
years ended December 31, 1999, 1998 and 1997, respectively. Applicable income
tax expense of $4,283,000, $6,053,000 and $4,616,000 on securities gains and
losses for the years ended December 31, 1999, 1998 and 1997, respectively, is
included in the provision for income taxes.
82
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<PAGE>
NOTE 21 -- OTHER NONINTEREST REVENUES AND OTHER NONINTEREST EXPENSES
- --------------------------------------------------------------------------------
The components of other noninterest revenues and other noninterest expenses are
as follows:
<TABLE>
<CAPTION>
Years Ended December 31
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Other noninterest revenues:
Interchange income $ 46,526 $ 36,411 $ 28,867
Mortgage income 45,027 39,667 15,798
Bank-owned life insurance policies 31,161 17,385 10,055
Gains on sales of available-for-sale securities 11,392 16,099 12,411
Other portfolio income 9,956 10,217 7,038
Gains on sales of businesses 8,624 32,687 4,492
Other 139,313 119,255 112,267
------------------------------------------------
$291,999 $271,721 $190,928
=========================================================================================================
Other noninterest expenses:
Postage and office supplies $ 47,960 $ 48,299 $ 49,265
Marketing 42,420 39,905 38,817
Amortization of intangibles 40,306 40,211 39,907
Communications 36,691 37,720 33,307
Other 197,655 183,322 187,368
------------------------------------------------
$365,032 $349,457 $348,664
=========================================================================================================
</TABLE>
NOTE 22 -- BUSINESS SEGMENT INFORMATION
- --------------------------------------------------------------------------------
AmSouth has three reportable segments: Consumer Banking, Commercial Banking and
Capital Management. Consumer Banking delivers a full range of financial services
to individuals and small businesses. Services include loan products such as
residential mortgages, equity lending, credit cards, and loans for automobile
and other personal financing needs and various products designed to meet the
credit needs of small businesses. In addition, Consumer Banking offers various
deposit products that meet customers' savings and transaction needs. Commercial
Banking meets corporate and middle market customers' needs with a comprehensive
array of credit, treasury management, international, and capital markets
services. Included among these are several specialty services such as real
estate finance, asset based lending, commercial leasing, and healthcare banking.
Capital Management is comprised of client fiduciary services and broker/dealer
services and provides primarily fee-based income. This area includes not only
traditional trust services, but also a substantial selection of investment
management services including AmSouth's proprietary mutual fund family. 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 corporate expenses such as corporate
overhead and goodwill amortization. BOLI income is included in Treasury & Other
for 1999, 1998 and 1997. In addition, Treasury & Other includes gains on sales
of businesses for all years presented.
Measurement of Segment Profit or Loss and Segment Assets
The bank evaluates performance and allocates resources based on profit or loss
from operations. The accounting policies of the reportable segments are the same
as those described in Note 1 except that AmSouth uses matched maturity transfer
pricing to fairly and consistently assign funds costs to assets and earnings
credits to liabilities with a corresponding offset in Treasury & Other. AmSouth
allocates noninterest expenses based on various activity statistics. AmSouth is
disclosing net interest income in lieu of interest income. Performance is
assessed primarily on net interest
83
--
<PAGE>
income by the chief operating decision makers. Excluding the internal funding,
AmSouth does not have intracompany revenues or expenses. Noninterest expenses
are allocated to match revenues. The provision for loan losses for each segment
reflects the net charge-offs in each segment. The difference between net
charge-offs and the provision is included in Treasury & Other. Additionally,
segment income tax expense is calculated using the marginal tax rate. The
difference between the marginal and effective tax rate is included in Treasury &
Other. Management reviews average assets by segment.
AmSouth's segments are not necessarily comparable with similar information
for any other financial institution.
<TABLE>
<CAPTION>
Consumer Commercial Capital Treasury &
(In thousands) Banking Banking Management Other Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999
Net interest income from external customers $ 357,541 $ 841,185 $ (807) $ 310,027 $ 1,507,946
Internal funding 617,449 (361,112) 1,407 (257,744) -0-
-------------------------------------------------------------------------------------
Net interest income 974,990 480,073 600 52,283 1,507,946
Noninterest revenues 334,055 90,481 329,838 93,183 847,557
-------------------------------------------------------------------------------------
Total revenues 1,309,045 570,554 330,438 145,466 2,355,503
Provision for loan losses 81,524 21,382 -0- 62,720 165,626
Noninterest expenses 759,736 189,539 266,684 432,547 1,648,506
-------------------------------------------------------------------------------------
Income before income taxes 467,785 359,633 63,754 (349,801) 541,371
Income taxes 176,002 134,995 23,923 (134,017) 200,903
-------------------------------------------------------------------------------------
Segment net income $ 291,783 $ 224,638 $ 39,831 $ (215,784) $ 340,468
====================================================================================================================================
Average assets $ 15,011,516 $ 12,608,328 $ 49,512 $ 14,141,972 $ 41,811,328
- ------------------------------------------------------------------------------------------------------------------------------------
1998
Net interest income from external customers $ 236,757 $ 867,240 $ (2,498) $ 342,785 $ 1,444,284
Internal funding 677,915 (390,990) 4,619 (291,544) -0-
-------------------------------------------------------------------------------------
Net interest income 914,672 476,250 2,121 51,241 1,444,284
Noninterest revenues 321,544 81,392 295,439 101,479 799,854
-------------------------------------------------------------------------------------
Total revenues 1,236,216 557,642 297,560 152,720 2,244,138
Provision for loan losses 59,240 24,399 -0- 15,428 99,067
Noninterest expenses 735,661 184,752 237,346 248,513 1,406,272
-------------------------------------------------------------------------------------
Income before income taxes 441,315 348,491 60,214 (111,221) 738,799
Income taxes 165,934 131,033 22,640 (54,882) 264,725
-------------------------------------------------------------------------------------
Segment net income $ 275,381 $ 217,458 $ 37,574 $ (56,339) $ 474,074
====================================================================================================================================
Average assets $ 14,062,287 $ 11,978,548 $ 40,366 $ 12,759,034 $ 38,840,235
- ------------------------------------------------------------------------------------------------------------------------------------
1997
Net interest income from external customers $ 248,628 $ 836,132 $ (2,023) $ 301,992 $ 1,384,729
Internal funding 649,627 (390,339) 4,525 (263,813) -0-
-------------------------------------------------------------------------------------
Net interest income 898,255 445,793 2,502 38,179 1,384,729
Noninterest revenues 276,878 70,069 252,153 59,624 658,724
-------------------------------------------------------------------------------------
Total revenues 1,175,133 515,862 254,655 97,803 2,043,453
Provision for loan losses 76,717 16,428 -0- (9,637) 83,508
Noninterest expenses 725,568 177,201 203,037 115,869 1,221,675
-------------------------------------------------------------------------------------
Income before income taxes 372,848 322,233 51,618 (8,429) 738,270
Income taxes 140,190 121,160 19,409 (16,170) 264,589
-------------------------------------------------------------------------------------
Segment net income $ 232,658 $ 201,073 $ 32,209 $ 7,741 $ 473,681
====================================================================================================================================
Average assets $ 14,130,013 $ 11,355,744 $ 38,619 $ 10,393,452 $ 35,917,828
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
84
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<PAGE>
NOTE 23 -- CONDENSED PARENT COMPANY INFORMATION
- --------------------------------------------------------------------------------
STATEMENT OF CONDITION
<TABLE>
<CAPTION>
December 31
(In thousands) 1999 1998
- ----------------------------------------------------------------------------------------------------
ASSETS
Investment in subsidiaries $3,553,778 $3,681,996
Investment in Eurodollars 159,664 -0-
Securities purchased from bank subsidiary under agreements to resell -0- 99,477
Available-for-sale securities 58,824 45,683
Other assets 27,418 40,806
------------------------------
$3,799,684 $3,867,962
====================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper $ 8,749 $ 10,039
Subordinated debt 572,996 498,864
Other borrowed funds 100,000 107,601
Accrued interest payable and other liabilities 158,734 44,034
------------------------------
Total liabilities 840,479 660,538
Shareholders' equity 2,959,205 3,207,424
------------------------------
$3,799,684 $3,867,962
====================================================================================================
<CAPTION>
STATEMENT OF EARNINGS
Years Ended December 31
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Dividend from subsidiaries $ 308,691 $ 421,856 $ 513,259
Interest and other 18,893 18,004 52,118
------------------------------------------
327,584 439,860 565,377
------------------------------------------
EXPENSES
Interest 46,548 45,066 45,967
Other 66,947 62,004 57,883
------------------------------------------
113,495 107,070 103,850
------------------------------------------
Income before income taxes and equity in
undistributed earnings of subsidiaries 214,089 332,790 461,527
Income tax credit 17,669 29,534 20,664
------------------------------------------
Income before equity in earnings of subsidiaries 231,758 362,324 482,191
Equity in undistributed earnings of subsidiaries 108,710 111,750 (8,510)
------------------------------------------
NET INCOME $ 340,468 $ 474,074 $ 473,681
============================================================================================
</TABLE>
85
--
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
Years Ended December 31
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 340,468 $ 474,074 $ 473,681
Adjustments to reconcile net income to
net cash provided by operating activities:
Net gains on sales of available-for-sale securities (6,303) (4) -0-
Amortization of goodwill 2,406 2,386 2,386
Other amortization and depreciation 953 9,002 3,911
Net decrease (increase) in accrued interest
receivable and other assets 80,259 (26,563) (5,774)
Net increase (decrease) in accrued
expenses and other liabilities 52,513 (17,170) 2,121
(Undistributed income) dividends in excess
of income of subsidiaries (108,710) (111,750) 8,510
Provision for deferred income taxes 707 2,277 113
Other operating activities, net (294) (355) (2,258)
-------------------------------------------
Net cash provided by operating activities 361,999 331,897 482,690
-------------------------------------------
INVESTING ACTIVITIES
Net increase in available-for-sale securities (34,230) (38,342) -0-
Net increase in other interest-earning assets (159,664) -0- -0-
Net sales (purchases) of premises and equipment -0- 5,751 (4,255)
Sales of other assets -0- -0- 2,830
Net decrease (increase) in loans 390 (227) 280
Net decrease in securities
purchased under agreements to resell 61,315 30,359 10,440
Net cash provided by (used for) acquisitions,
liquidations and funding of subsidiaries -0- 8,268 (37,587)
-------------------------------------------
Net cash (used) provided by investing activities (132,189) 5,809 (28,292)
-------------------------------------------
FINANCING ACTIVITIES
Net (decrease) increase in commercial paper (1,290) 1,653 1,586
Net decrease in other borrowed funds (6,389) (230) (300)
Issuance of long-term debt 174,231 -0- -0-
Payments for maturing long-term debt (100,000) -0- -0-
Proceeds from early termination of swap contract -0- -0- 2,038
Cash dividends paid (183,848) (195,560) (173,484)
Proceeds from employee stock plans and
dividend reinvestment plan 53,564 45,943 49,583
Purchases of common stock (166,475) (201,898) (368,303)
-------------------------------------------
Net cash used by financing activities (230,207) (350,092) (488,880)
-------------------------------------------
Decrease in cash (397) (12,386) (34,482)
Cash at beginning of year 1,019 13,405 47,887
-------------------------------------------
Cash at end of year $ 622 $ 1,019 $ 13,405
======================================================================================================
</TABLE>
86
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<PAGE>
NOTE 24 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
Selected quarterly results of operations for the four quarters ended December 31
are as follows:
<TABLE>
<CAPTION>
1999 1998
(In thousands Fourth Third Second First Fourth Third Second First
except per share data) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 775,341 $ 749,009 $ 714,438 $ 693,962 $ 716,152 $ 721,226 $ 711,809 $ 692,719
Interest expense 394,079 368,662 336,889 325,173 346,089 363,465 350,648 337,420
Net interest income 381,262 380,347 377,549 368,789 370,063 357,761 361,161 355,299
Provision for loan losses 97,700 30,604 18,589 18,734 31,354 16,604 29,771 21,338
Net gain (loss) on sales of
available-for-sale
securities 5,704 (5,345) 4,879 6,154 5,365 5,281 2,103 3,350
Income (loss) before
income taxes (81,042) 205,768 204,570 212,076 208,821 192,592 140,239 197,146
Net income (loss) (62,554) 134,645 131,581 136,796 136,206 124,342 87,158 126,369
Earnings (loss)
per common share (.16) .35 .34 .35 .35 .32 .22 .32
Diluted earnings (loss)
per common share (.16) .34 .33 .34 .34 .32 .22 .32
Cash dividends declared
per common share .20 .17 .17 .17 .17 .13 .13 .13
Market price range:
High 25.81 23.88 32.33 33.92 30.42 27.92 27.92 27.11
Low 18.94 21.31 21.88 27.92 21.42 22.50 25.05 22.00
- -----------------------------------------------------------------------------------------------------------------------------------
Note: Quarterly amounts may not add to year-to-date amounts due to rounding.
</TABLE>
87
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<PAGE>
NOTE 25 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
For purposes of this disclosure, the estimated fair value of financial
instruments with immediate and shorter-term maturities (generally 90 days or
less) is assumed to be the same as the recorded book value. These instruments
include the consolidated statement of condition lines captioned cash and due
from banks, time deposits in other banks, federal funds sold and securities
purchased under agreements to resell, other interest-earning assets, customers'
acceptance liability, federal funds purchased and securities sold under
agreements to repurchase, other borrowed funds, and acceptances outstanding.
The carrying amount and estimated fair value of other financial instruments
at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
Carrying Estimated Carrying Estimated
(In thousands) Amount Fair Value Amount Fair Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Net loans $ 25,903,283 $ 25,910,795 $ 24,071,540 $ 24,123,008
Loans held for sale 172,941 172,941 357,661 357,661
Financial liabilities:
Deposits 27,912,443 27,955,939 28,533,760 28,632,973
Long-term FHLB advances 4,612,686 4,593,037 3,450,864 3,639,769
Other long-term debt 990,800 933,339 941,960 985,500
Off-balance sheet:
Off-balance sheet financial instruments
(net receivable position) -- (36,407) -- 4,451
Commitments to extend credit and
standby letters of credit -- (6,153) -- (1,968)
- --------------------------------------------------------------------------------------------------------
</TABLE>
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" (Statement 107), requires the disclosure of
estimated fair values for all financial instruments, both assets and liabilities
on and off-balance sheet, for which it is practicable to estimate their value
along with pertinent information on those financial instruments for which such
values are not available.
Fair value estimates are made at a specific point in time and are based on
relevant market information which is continuously changing. Because no quoted
market prices exist for a significant portion of AmSouth's financial
instruments, fair values for such instruments are based on management's
assumptions with respect to future economic conditions, estimated discount
rates, estimates of the amount and timing of future cash flows, expected loss
experience, and other factors. These estimates are subjective in nature
involving uncertainties and matters of significant judgment; therefore, they
cannot be determined with precision. Changes in the assumptions could
significantly affect the estimates.
Statement 107 fair value estimates include certain on and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. For example, AmSouth has a substantial trust department
that contributes net fee income annually. The trust department is not considered
a financial instrument, and its value has not been incorporated into the fair
value estimates. Other significant assets and liabilities that are not
considered financial assets or liabilities include the mortgage banking
operation, brokerage network, premises and equipment, core deposit intangibles,
and goodwill. In addition, the tax ramifications related to the realization of
the unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates. As a result, the
Statement 107 fair value
88
--
<PAGE>
disclosures should not be considered an indication of the fair value of the
company taken as a whole.
The following methods and assumptions were used by AmSouth in estimating
its fair value disclosures for financial instruments:
Loans The fair values of variable rate loans that reprice frequently and
have no significant change in credit risk are assumed to approximate carrying
amounts. For credit card loans and equity lines of credit, the carrying value
reduced by an estimate of credit losses inherent in the portfolio is a
reasonable estimate of fair value. The fair values for other loans (e.g.,
commercial and industrial, commercial real estate, certain mortgage loans, and
consumer loans) are estimated using discounted cash flow analyses, using
interest rates currently being offered for loans with similar terms to borrowers
of similar credit quality and estimates of maturity based on AmSouth's
historical experience. The carrying amount of accrued interest receivable
approximates its fair value.
Securities and Loans Held for Sale Fair values for securities and loans
held for sale are based on quoted market prices, where available. Where quoted
market prices are not available, fair values are based on quoted market prices
of similar instruments, adjusted for any significant differences between the
quoted instruments and the instruments being valued.
Commitments to Extend Credit and Standby Letters of Credit The fair value
of commitments to extend credit is estimated based on the amount of unamortized
deferred loan commitment fees. The fair value of letters of credit is based on
the amount of unearned fees plus the estimated cost to terminate the letters of
credit.
Off-balance Sheet Instruments The fair value of interest rate swaps,
financial futures and interest rate caps and floors are obtained from dealer
quotes. These values represent the estimated amount the company would receive or
pay to terminate the contracts or agreements, taking into account current
interest rates and, when appropriate, the current creditworthiness of the
counterparties.
Deposit Liabilities The fair value of deposits with no stated maturity,
such as noninterest-bearing demand deposits, savings accounts and money market
and interest-bearing checking accounts is, by definition, equal to the amount
payable on demand (carrying amount). The fair values for variable rate
fixed-term money market accounts and certificates of deposit approximate their
carrying amounts. Fair values for fixed rate certificates of deposit are
estimated using a discounted cash flow calculation that applies interest rates
currently being offered on certificates of deposit to a schedule of aggregated
expected monthly maturities on time deposits.
Long-term Borrowings The fair values of long-term borrowings (other than
deposits) are estimated using discounted cash flow analyses, based on AmSouth's
current incremental borrowing rates for similar types of borrowing arrangements.
89
--
<PAGE>
EXHIBIT 21
AMSOUTH BANCORPORATION
LIST OF SUBSIDIARIES
AT DECEMBER 31, 1999
The following is a list of all subsidiaries of AmSouth Bancorporation and the
jurisdiction in which they were organized. Each subsidiary does business under
its own name.
Name Jurisdiction Where Organized
---- ----------------------------
CENTRALSOUTH FINANCIAL SERVICES, LLC Mississippi
FIRST AMERICAN BUSINESS CAPITAL, INC. Tennessee
FIRST AMERICAN ENTERPRISES, INC. Tennessee
FIRST AMERICAN FEDERAL SAVINGS BANK U.S.A.
AMSOUTH BANK Alabama
AmSouth Capital Corporation Delaware
AmSouth Finance Corporation Alabama
AmSouth Leasing Corporation Alabama
A-F Leasing, Ltd. Alabama
AmSouth Leasing, Ltd. Alabama
A-F Leasing, LLC Alabama
AmSouth Insurance Agency, Inc. Florida
AmSouth Investment Services, Inc. Alabama
AmSouth Retirement Services, Inc. Florida
AmSouth Riverchase, Inc. Alabama
Cahaba Holdings, Inc. Delaware
Cahaba Corporation Delaware
Commercial National Investment Services, Inc. Louisiana
Fifth Avenue Realty Company (unincorporated joint
venture)
First American Network, Inc. Tennessee
First AmTenn Life Insurance Company Mississippi
FirstGulf Insurance Agency, Inc. Alabama
Five Points Capital Advisors, Inc. Alabama
FMLS, Inc. Tennessee
Fortune Mortgage Corporation Florida
GTC Title, Inc. Alabama
MCC Holdings, Inc. Alabama
Meriwether Capital Corporation Virginia
Highland Rim Title Company Tennessee
IFC Insurance Agency, Inc. Tennessee
<PAGE>
IFC Holdings, Inc. Delaware
(d/b/a INVEST Financial Corporation)
INVEST Financial Corporation Delaware
Insurance Agency, Inc. of Delaware
INVEST Financial Corporation Alabama
Insurance Agency, Inc. of Alabama
INVEST Financial Corporation Connecticut
Insurance Agency, Inc. of Connecticut
INVEST Financial Corporation Georgia
Insurance Agency, Inc. of Georgia
INVEST Financial Corporation Illinois
Insurance Agency, Inc. of Illinois
INVEST Financial Corporation Maryland
Insurance Agency, Inc. of Maryland
INVEST Financial Corporation Massachusetts
Insurance Agency, Inc. of Massachusetts
INVEST Financial Corporation Mississippi
Insurance Agency P.A. of Mississippi
INVEST Financial Corporation Montana
Insurance Agency, Inc. of Montana
INVEST Financial Corporation Nevada
Insurance Agency, Inc. of Nevada
INVEST Financial Corporation New Mexico
Insurance Agency, Inc. of New Mexico
INVEST Financial Corporation Ohio
Insurance Agency, Inc. of Ohio
INVEST Financial Corporation Oklahoma
Insurance Agency, Inc. of Oklahoma
INVEST Financial Corporation South Carolina
Insurance Agency, Inc. of South Carolina
INVEST Financial Corporation Texas
Insurance Agency, Inc. of Texas
<PAGE>
INVEST Financial Corporation Wyoming
Insurance Agency, Inc. of Wyoming
Investment Centers of America, Inc. North Dakota
Trust Center of America North Dakota
First Dakota, Inc. North Dakota
Lewis & Clark Securities, Inc. North Dakota
(f/k/a Farwest Securities, Inc.)
First Dakota of Montana, Inc. Montana
First Dakota of Texas, Inc. Texas
First Dakota of New Mexico, Inc. New Mexico
First Dakota of Wyoming, Inc. Wyoming
National Properties and Mining Company, Inc. Delaware
OakBrook Investments, LLC Delaware
Pioneer Securities, Inc. Tennessee
Rockhaven Asset Management, LLC Delaware
Sawgrass Asset Management, LLC Delaware
Service Mortgage and Insurance Agency, Inc. Florida
The SSI Group, Inc. Florida
NON-PROFIT CORPORATIONS
Name Jurisdiction Where Organized
- ---- ----------------------------
AmSouth Community Development Corporation Tennessee
AmSouth/First American Foundation Tennessee
AmSouth Bancorporation Foundation Alabama
<PAGE>
Exhibit 23-a - Consent of Independent Auditors
We consent to the incorporation by reference in the following Registration
Statements of AmSouth Bancorporation and in the related Prospectuses of our
report dated February 11, 2000, with respect to the consolidated financial
statements and schedules of AmSouth Bancorporation and subsidiaries incorporated
by reference in this Annual Report (Form 10-K) for the year ended December 31,
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;
Form S-8 No. 333-76283 pertaining to the Stock Option Plan for Outside
Directors;
Form S-8 No. 333-89451 pertaining to the First American Corporation 1993 Non-
Employee Director Stock Option Plan;
Form S-8 No. 333-89455 pertaining to the First American Corporation 1999
Broad-Based Employee Stock Option Plan;
Form S-8 No. 333-89457 pertaining to the First American Corporation Star Award
Plan;
<PAGE>
Form S-8 No. 333-89459 pertaining to the Deposit Guaranty Corporation Long
Term Incentive Plans;
Form S-8 No. 333-89461 pertaining to the First American Corporation 1991
Employee Stock Incentive Plan;
Form S-8 No. 333-89463 pertaining to the Heritage Federal Bankshares, Inc.
1994 Stock Option Plan for Non-Employee Directors and 1992 Stock Option
Plan and Incentive Compensation Plan for Non-Employee Directors; and
Form S-8 No. 333-89633 pertaining to the First American Corporation First
Incentives Reward Savings Thrift Plan.
/s/ ERNST & YOUNG LLP
Birmingham, Alabama
March 24, 2000
<PAGE>
EXHIBIT 23-b
The Board of Directors
AmSouth Bancorporation:
We consent to incorporation by reference in the following registration
statements of AmSouth Bancorporation of our report dated January 21, 1999,
relating to the consolidated balance sheets of First American Corporation and
subsidiaries as of December 31, 1998 and 1997, and the related consolidated
income statements, changes in shareholders' equity, and cash flows for each of
the years in the two-year period ended December 31, 1998, and all related
schedules, which report appears in the December 31, 1999, annual report on Form
10-K of AmSouth Bancorporation.
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;
Form S-8 No. 333-76283 pertaining to the Stock Option Plan for Outside
Directors;
Form S-8 No. 333-89451 pertaining to the First American Corporation 1993 Non-
Employee
<PAGE>
Page 2
Director Stock Option Plan;
Form S-8 No. 333-89455 pertaining to the First American Corporation 1999 Broad-
Based Employee Stock Option Plan;
Form S-8 No. 333-89457 pertaining to the First American Corporation Star Award
Plan;
Form S-8 No. 333-89459 pertaining to the Deposit Guaranty Corporation Long Term
Incentive Plans;
Form S-8 No. 333-89461 pertaining to the First American Corporation 1991
Employee Stock Incentive Plan;
Form S-8 No. 333-89463 pertaining to the Heritage Federal Bankshares, Inc. 1994
Stock Option Plan for Non-Employee Directors and 1992 Stock Option Plan and
Incentive Compensation Plan for Non-Employee Directors; and
Form S-8 No. 333-89633 pertaining to the First American Corporation First
Incentives Reward Savings Thrift Plan.
/s/ KPMG LLP
- ------------------
KPMG LLP
Nashville, Tennessee
March 29, 2000
<PAGE>
Exhibit 24
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, to execute
and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to
be filed by the Company with the Securities and Exchange Commission, and,
further, to execute and sign any and all amendments to such Form 10-K and any
and all other documents in connection therewith, and to cause any and all such
documents to be filed with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said
attorney-in-fact and agent which he may lawfully do in the premises or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day
of March 2000.
/s/ J. HAROLD CHANDLER
----------------------
J. Harold Chandler
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, to execute
and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to
be filed by the Company with the Securities and Exchange Commission, and,
further, to execute and sign any and all amendments to such Form 10-K and any
and all other documents in connection therewith, and to cause any and all such
documents to be filed with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said
attorney-in-fact and agent which he may lawfully do in the premises or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day
of March 2000.
/s/ JAMES E. DALTON, JR.
------------------------
James E. Dalton, Jr.
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, to execute
and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to
be filed by the Company with the Securities and Exchange Commission, and,
further, to execute and sign any and all amendments to such Form 10-K and any
and all other documents in connection therewith, and to cause any and all such
documents to be filed with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day
of March 2000.
/s/ RODNEY C. GILBERT
---------------------
Rodney C. Gilbert
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, to execute
and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to
be filed by the Company with the Securities and Exchange Commission, and,
further, to execute and sign any and all amendments to such Form 10-K and any
and all other documents in connection therewith, and to cause any and all such
documents to be filed with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day
of March 2000.
/s/ JAMES A. HASLAM II
----------------------
James A. Haslam II
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, to execute
and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to
be filed by the Company with the Securities and Exchange Commission, and,
further, to execute and sign any and all amendments to such Form 10-K and any
and all other documents in connection therewith, and to cause any and all such
documents to be filed with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day
of March 2000.
/s/ THOMAS E. HOAGLIN
---------------------
Thomas E. Hoaglin
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, to execute
and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to
be filed by the Company with the Securities and Exchange Commission, and,
further, to execute and sign any and all amendments to such Form 10-K and any
and all other documents in connection therewith, and to cause any and all such
documents to be filed with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day
of March 2000.
/s/ MARTHA R. INGRAM
--------------------
Martha R. Ingram
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, to execute
and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to
be filed by the Company with the Securities and Exchange Commission, and,
further, to execute and sign any and all amendments to such Form 10-K and any
and all other documents in connection therewith, and to cause any and all such
documents to be filed with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day
of March 2000.
/s/ VICTORIA B. JACKSON
-----------------------
Victoria B. Jackson
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, to execute
and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to
be filed by the Company with the Securities and Exchange Commission, and,
further, to execute and sign any and all amendments to such Form 10-K and any
and all other documents in connection therewith, and to cause any and all such
documents to be filed with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day
of March 2000.
/s/ RONALD L. KUEHN, JR.
------------------------
Ronald L. Kuehn, Jr.
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, to execute
and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to
be filed by the Company with the Securities and Exchange Commission, and,
further, to execute and sign any and all amendments to such Form 10-K and any
and all other documents in connection therewith, and to cause any and all such
documents to be filed with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day
of March 2000.
/s/ JAMES R. MALONE
-------------------
James R. Malone
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, to execute
and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to
be filed by the Company with the Securities and Exchange Commission, and,
further, to execute and sign any and all amendments to such Form 10-K and any
and all other documents in connection therewith, and to cause any and all such
documents to be filed with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day
of March 2000.
/s/ JOHN N. PALMER
------------------
John N. Palmer
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, to execute
and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to
be filed by the Company with the Securities and Exchange Commission, and,
further, to execute and sign any and all amendments to such Form 10-K and any
and all other documents in connection therewith, and to cause any and all such
documents to be filed with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day
of March 2000.
/s/ DENNIS C. BOTTORFF
-------------------------
Dennis C Bottorff
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, to execute
and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to
be filed by the Company with the Securities and Exchange Commission, and,
further, to execute and sign any and all amendments to such Form 10-K and any
and all other documents in connection therewith, and to cause any and all such
documents to be filed with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day
of March 2000.
/s/ HERBERT A. SKLENAR
----------------------
Herbert A. Sklenar
<PAGE>
DIRECTOR'S
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth
Bancorporation, a Delaware corporation ("Company"), by his execution hereof or
upon an identical counterpart hereof, does hereby constitute and appoint Stephen
A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, to execute
and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to
be filed by the Company with the Securities and Exchange Commission, and,
further, to execute and sign any and all amendments to such Form 10-K and any
and all other documents in connection therewith, and to cause any and all such
documents to be filed with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all the acts of said attorney-in-
fact and agent which he may lawfully do in the premises or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 27th day
of March 2000.
/s/ FRANCIS A. NEWMAN
-------------------------
Francis A. Newman
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,563,335
<INT-BEARING-DEPOSITS> 2,474
<FED-FUNDS-SOLD> 132,683
<TRADING-ASSETS> 51,972
<INVESTMENTS-HELD-FOR-SALE> 5,964,703
<INVESTMENTS-CARRYING> 7,050,562
<INVESTMENTS-MARKET> 6,849,344
<LOANS> 26,266,759
<ALLOWANCE> 363,476
<TOTAL-ASSETS> 43,406,554
<DEPOSITS> 27,912,443
<SHORT-TERM> 6,231,467
<LIABILITIES-OTHER> 699,953
<LONG-TERM> 5,603,486
0
0
<COMMON> 416,949
<OTHER-SE> 2,542,256
<TOTAL-LIABILITIES-AND-EQUITY> 43,406,554
<INTEREST-LOAN> 2,128,147
<INTEREST-INVEST> 782,367
<INTEREST-OTHER> 22,236
<INTEREST-TOTAL> 2,932,750
<INTEREST-DEPOSIT> 903,348
<INTEREST-EXPENSE> 1,424,804
<INTEREST-INCOME-NET> 1,507,946
<LOAN-LOSSES> 165,626
<SECURITIES-GAINS> 11,392
<EXPENSE-OTHER> 1,648,506
<INCOME-PRETAX> 541,371
<INCOME-PRE-EXTRAORDINARY> 541,371
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 340,468
<EPS-BASIC> .87
<EPS-DILUTED> .86
<YIELD-ACTUAL> 4.02
<LOANS-NON> 141,134
<LOANS-PAST> 61,050
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 373,756
<CHARGE-OFFS> 148,287
<RECOVERIES> 45,381
<ALLOWANCE-CLOSE> 363,476
<ALLOWANCE-DOMESTIC> 363,476
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 57,043
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,802,814
<INT-BEARING-DEPOSITS> 292,763
<FED-FUNDS-SOLD> 357,910
<TRADING-ASSETS> 47,818
<INVESTMENTS-HELD-FOR-SALE> 7,524,532
<INVESTMENTS-CARRYING> 3,877,504
<INVESTMENTS-MARKET> 3,901,954
<LOANS> 24,445,296
<ALLOWANCE> 373,756
<TOTAL-ASSETS> 40,635,831
<DEPOSITS> 28,533,760
<SHORT-TERM> 3,821,274
<LIABILITIES-OTHER> 680,549
<LONG-TERM> 4,392,824
0
0
<COMMON> 420,058
<OTHER-SE> 2,787,366
<TOTAL-LIABILITIES-AND-EQUITY> 40,635,831
<INTEREST-LOAN> 2,080,065
<INTEREST-INVEST> 732,353
<INTEREST-OTHER> 29,489
<INTEREST-TOTAL> 2,841,907
<INTEREST-DEPOSIT> 970,267
<INTEREST-EXPENSE> 1,397,623
<INTEREST-INCOME-NET> 1,444,284
<LOAN-LOSSES> 99,067
<SECURITIES-GAINS> 16,099
<EXPENSE-OTHER> 1,406,272
<INCOME-PRETAX> 738,799
<INCOME-PRE-EXTRAORDINARY> 738,799
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 474,074
<EPS-BASIC> 1.22
<EPS-DILUTED> 1.20
<YIELD-ACTUAL> 4.14
<LOANS-NON> 113,985
<LOANS-PAST> 62,528
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 367,077
<CHARGE-OFFS> 134,238
<RECOVERIES> 50,586
<ALLOWANCE-CLOSE> 373,756
<ALLOWANCE-DOMESTIC> 373,756
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 102,521
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,691,936
<INT-BEARING-DEPOSITS> 12,574
<FED-FUNDS-SOLD> 237,648
<TRADING-ASSETS> 55,599
<INVESTMENTS-HELD-FOR-SALE> 6,059,875
<INVESTMENTS-CARRYING> 3,035,577
<INVESTMENTS-MARKET> 3,058,819
<LOANS> 24,415,004
<ALLOWANCE> 367,077
<TOTAL-ASSETS> 37,380,079
<DEPOSITS> 27,045,700
<SHORT-TERM> 4,508,459
<LIABILITIES-OTHER> 549,340
<LONG-TERM> 2,247,442
0
0
<COMMON> 412,450
<OTHER-SE> 2,616,688
<TOTAL-LIABILITIES-AND-EQUITY> 37,380,079
<INTEREST-LOAN> 2,056,949
<INTEREST-INVEST> 607,161
<INTEREST-OTHER> 22,338
<INTEREST-TOTAL> 2,686,448
<INTEREST-DEPOSIT> 962,445
<INTEREST-EXPENSE> 1,301,719
<INTEREST-INCOME-NET> 1,384,729
<LOAN-LOSSES> 83,508
<SECURITIES-GAINS> 12,411
<EXPENSE-OTHER> 1,221,675
<INCOME-PRETAX> 738,270
<INCOME-PRE-EXTRAORDINARY> 738,270
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 473,681
<EPS-BASIC> 1.20
<EPS-DILUTED> 1.18
<YIELD-ACTUAL> 4.27
<LOANS-NON> 109,488
<LOANS-PAST> 66,792
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 370,277
<CHARGE-OFFS> 150,377
<RECOVERIES> 55,669
<ALLOWANCE-CLOSE> 367,077
<ALLOWANCE-DOMESTIC> 367,077
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 104,721
</TABLE>
