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EXHIBIT 99.1
PRESENTATION OF OCTOBER 23, 2000
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AmSouth Bancorporation
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UBS Warburg
Regional Banks Conference
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October 23, 2000
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AmSouth Bancorporation
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Safe Harbor
Statement
This presentation may contain forward-looking statements that are
subject to risks and uncertainties. Actual results may differ from
those projected in the forward-looking statements. Additional
information that could cause actual results to differ materially
from those in the forward-looking statements is contained in
AmSouth's Securities and Exchange Commission filings, copies of
which will be made available upon request. AmSouth undertakes no
duty to update the contents of this presentation.
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Today's Agenda
The AmSouth Franchise
Comprehensive Financial Restructuring
Third Quarter Financial Performance
Catalysts for Future Earnings Growth
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. Our presentation today is in four main parts:
. A brief profile of the AmSouth Franchise. . . .
. A recap of our recently completed financial restructuring. . . .
. A look at third quarter results and finally. . . .
. A discussion of the catalysts that will restore earnings momentum.
. Let's begin. . .
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The AmSouth Franchise
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High Growth Southeast Markets
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[MAP]
AmSouth's Deposits by State
Tennessee -- 34%
Alabama -- 31%
Florida -- 19%
Mississippi -- 11%
Louisiana -- 5%
Georgia -- less than 1%
. Assets = $39 Billion
. 600 Banking Offices and 1,300 ATMs
. Serving Over 2 Million Households with
Leading Market Positions in Tennessee,
Alabama, Florida and Mississippi
. AmSouth is a $39 billion regional bank holding company headquartered in
Birmingham, Alabama.
. We have 600 banking offices and 1,300 ATMs over a six state region.
. We serve over 2 million households with leading market positions in
Tennessee, Alabama, Florida and Mississippi.
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Leading Share in Key Markets
AmSouth Deposit Market Share Rank
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AmSouth Ranks First or Second
in 8 of 10 Leading SE Markets...
MAP
Nashville -- #1
Chattanooga -- #1
Pensacola -- #1
Tri-Cities -- #2
Knoxville -- #2
Huntsville - #2
Mobile -- #2
Jackson -- #2
Birmingham -- #3
Tampa/St. Pete/Clearwater -- #4
Growth Rates Personal
1999-2004 Income Households
United States 22.7% 5.4%
Southeast 24.7% 6.6%
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AmSouth 24.3% 6.7%
Source: Sheshunoff Data Services
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. The AmSouth franchise covers the majority of the Southeast, the fastest
growing region in the country.
. Growth rates within our markets outpace the United States and are comparable
to those of the Southeast.
. Within our franchise we have a leading share in key markets.
. In eight of the top ten MSAs in our franchise, we rank either 1 or 2 in
deposit market share.
. The five-year projected household growth rates for most of these markets
exceed both the U.S. and the Southeast rates.
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Among the Leaders in the Southeast
Rank Among Southeast Regional Banks
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#1 Annuity Sales
Small Business Lending
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#2 ATM Network
Bank-Owned
Leasing Companies
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Mutual Fund Assets
#3 Consumer Lending
Managed Trust Assets
e-Banking Customers
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Sources: American Banker; Kehrer Associates; Lease Finance
Monitor; Donaldson, Lufkin & Jenrette
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. We are among the leaders in the Southeast in several business lines,
including:
. Annuity Sales
. Small Business Lending
. ATM Network
. Large Equipment Lease Financing
. Mutual Fund Management
. Consumer Lending AND
. Trust Assets Under Management
. We had over 120,000 customers using our electronic banking services at year-
end.
. That number has grown to over 278,000.
. Now, let's turn to our recently announced financial restructuring. . . . .
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Comprehensive Financial Restructuring
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Comprehensive Financial Restructuring
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. Sale of Low Yielding Loans and Investments
. Significant Shrinking of the Balance Sheet
. Address Emerging Syndicated Loan Quality Issues
. $259.7 Million of Pre-Tax Charges
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. AmSouth recently completed a comprehensive financial restructuring designed
to mitigate the effects of rising interest rates and address emerging loan
quality issues in the syndicated loan portfolio.
. The restructuring primarily involved:
. Reducing low yielding loans and investments and, as a result,
significant shrinking of the balance sheet; and
. Addressing emerging syndicated loan quality issues in the syndicated
loan portfolio through loan sales and additional loan loss reserves
for certain syndicated loans
. The restructuring resulted in pre-tax charges of $259.7 million.
. Let's take a look at the specifics of the plan. . . .
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Financial Restructuring Results
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Balance Sheet Charges
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. Sold $4.0 Billion of Low Yield Securities,
Reduce Wholesale Borrowings $106MM
. Recognized Impairment Loss on Mortgage
Conduit Related Assets 24.8
. Securitized $1 Billion of Lower Yielding
Auto Loans 18.9
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. Pre-Tax Charges $149.7MM
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. Revise Interest Rate Risk Management Policy
and Practices
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. We sold about $4.0 billion of low yielding securities in the investment
portfolio. We are using the proceeds to reduce floating rate purchased
funds and other short-term borrowings. The charge of $106 million was
"shareholders' equity neutral" because these investments are in the
available-for-sale category.
. We wrote down assets related to $2.5 billion of mortgage loans sold into
our residential mortgage conduit over the last two years to reflect funding
cost assumptions consistent with today's rate environment. The $24.8
million charge included the write-down of I/O strips and mortgage servicing
rights while eliminating negative carry in future quarters.
. Because we decided to securitize our lowest yielding auto loans, we
recorded a loss of $18.9 million.
. The total charges for these steps was $149.7 million.
. We expect that interest rate risks will be cut by more than half from
current levels as a result of these actions.
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. Future interest rate risk tolerance has been established at levels at or
below the new levels that resulted from the restructuring.
. We conducted a comprehensive review of our practices and policies with
appropriate external experts, which has further strengthened our interest
rate risk management process. As a part of this process, we will expand our
interest rate sensitivity modeling for different and more extreme scenarios
such as those seen over the last year. This will ensure better management
of interest rate risk and prepare us for a wider range of scenarios in the
future.
. Turning now to our credit quality strategy. . . .
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Financial Restructuring Plan
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Credit Quality
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. Addressed Issues in 29 Credits Totaling $350 Million of
Syndicated Loans and Assets Held for Accelerated
Disposition
. $200 Million Loan Sale - $83 Million Loss
(Included Remaining $47 Million of Assets Held for Accelerated
Disposition)
. $27 Million Special Provision for Additional Reserves on $150
Million in Loans
. Pre-Tax Charges of $110 Million
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. ....as most of you are aware, the syndicated lending area has come under
pressure in recent quarters due to rising rates and the slowing economy.
. We believed the best way to address the emerging credit issues in our
syndicated portfolio was to pursue a plan of accelerated resolution.
. Our plan, which resulted in charges or losses of $110 million, addressed
credit issues in 29 credits totaling $350 million. That represents 98 percent
of our total classified syndicated loans.
. $200 million of those loans were sold at a loss of $83 million. That includes
the remaining $47 million balance in assets held for accelerated disposition.
. The plan also provided an additional $27 million in reserves for syndicated
loans totaling $150 million, bringing our total loan loss reserve position on
those loans to 25 percent of outstandings.
. We believe these represent timely actions to address emerging conditions
which could negatively impact the syndicated loan portfolio in the future.
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Benefits of the Restructuring
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. Reduces Interest Rate Risk by More Than Half
. Sensitivity to 200 BPS Rising Environment Reduced from
-5.1% to -2.3%
. Widens the Net Interest Margin Over 40 BPS
. Expected Net Interest Margin Improvement from 3.57%
to 4.0%
. Improves Capital Ratios from 6.63% to Approximately 7.50%
. Creates Balance Sheet Capacity for More Profitable Loan
Growth
. Eliminates Substantial Credit Uncertainty
. Reduces Earnings Volatility
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. The balance sheet restructuring reduced rate sensitivity by more than one-
half from a negative impact on net interest income prior to the restructuring
of (-5.1) percent with a 200 basis point rise in rates to only (-2.3) percent
today.
. Restructuring the balance sheet improves the net interest margin by over 40
basis points from third quarter levels.
. The pro forma average equity to assets ratio would improve from 6.63 percent
in the third quarter to approximately 7.50 percent.
. The restructuring also creates substantial capacity for growth on the balance
sheet to support more profitable loan growth in the future.
. These steps reduce credit uncertainty in the future and accelerate our
planned exit from non-relationship, syndicated loans.
. Finally, the steps reduce earnings volatility in future quarters.
. Now let's address our third quarter results. . .
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Third Quarter Financial Performance
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Third Quarter Operating Earnings Analysis
2Q00 Earnings Per Share $ 0.41
Margin Compression /
Lower Earning Assets -0.04
Lease Transaction and
Conduit Gains -0.03
Higher Net Charge-offs -0.02
Cost Savings +0.01
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3Q00 Earnings Per Share $ 0.33
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Return on Equity 18.0%
Efficiency Ratio 57.9%
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. We have anticipated a question today that I am sure is on your minds:
. "How did operating earnings go from 41 cents in the second quarter to 33
cents in the third quarter?"
. This brief reconciliation should provide some insight.
. Additional margin compression and lower volume of earning assets in the third
quarter removed four cents of earnings from third quarter results. The
compression primarily resulted from the full effect of the last 50 basis
point rate increase in May.
. Second quarter income from leasing and conduit transactions resulted in a
three cent decline between quarters.
. The third quarter included charge-offs that were two cents higher than second
quarter.
. Finally, cost savings of one cent per share partially offset the negative
items resulting in third quarter earnings of 33 cents per share.
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Asset Quality
Actual Proforma *
3Q 00 3Q 00
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Allowance / Ending Loans 1.54% 1.38%
Annualized Net Charge-offs / Average Loans 0.55% 0.39%
NPAs / Ending Loans + OREO 0.66% 0.44%
Allowance / Non-Performing Loans 258% 369%
* Excludes impact of classified syndicated loans.
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. Here's an overview of where credit quality stood at the end of the quarter
but let's take a minute to look at the impact of the restructuring in more
depth.
. While NPA's for the third quarter stand at 66 basis points, removing
syndicated credits reduces the total to 44 basis points.
. Also, charge-offs for the third quarter were 55 basis points, excluding the
syndicated credits, net charge-offs would have been 39 basis points.
. These points provide evidence that the credit problems are primarily isolated
to syndicated loans.
. Now let's look more closely at where the syndicated loan portfolio stands
today. . . .
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Remaining Syndicated Loan Portfolio
Syndicated Loan Portfolio $1.4 Billion
Percentage of Total Managed Loans 4.5 %
Average Loan Size $7.7 Million
No Industry Concentrations
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. $1.4 billion remains in syndicated loans. We will remain in an exit-mode over
the next several years as we focus on our core customer base.
. The average loan size is $7.7 million - an indication of the level of
granularity within the remaining portfolio.
. There are no significant industry concentrations within the syndicated loan
group and...
. Turning for a moment now to the merger.....
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Targeted Cost Saves Achieved
Original Targets Current
2000 2001 Results
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Cost Saves $100 MM $133 MM $143 MM +
Branch Consolidation 24 60 Complete
Headcount Reductions 1,400 1,650 as of 3Q00
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. The current run rate of noninterest expenses in the third quarter reflect the
full achievement of our original cost save estimates.
. We have consolidated more than twice as many branches as originally projected
and eliminated nearly 18 percent more positions.
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Sharpened Focus on Core Businesses
Divestitures Completed or in Process: 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00
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<S> <C> <C> <C> <C> <C> <C>
3rd Party Mortgage Servicing ----
Merchant Card Processing ----
Out-of-Market Credit Card ----
Bond Sales & Processing
for Correspondent Banks ----
Dayton, TN Branch ----
Arkansas Branches ----
Out-of-Market Dealer
Loan Originations ----
IFC Holdings, Inc. ----
Kentucky Branches ----
Virginia Branches ----
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. To further sharpen our focus on growth in the expanded franchise in our core
businesses, we have sold or are in the process of selling a number of
businesses.
. These businesses generated nominal net income. Further, they were slow-
growing, non-core in nature, and had above-average risk profiles.
. The sale of these businesses has freed-up capital and other resources to
support our on-going strategic initiatives.
. We will also. . .
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Continued Balance Sheet Transition
[X] Shift Mix of Earning Assets to Substantially Higher
Proportion of Loans
[X] Investment Portfolio Run Off
[X] Loan Pricing Discipline
[X] Deposit Growth Initiatives
[X] Securitizations
[X] Share Repurchases
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. . . . continue to more aggressively manage our balance sheet for greater
profitability through a more favorable mix of earning assets and funding
sources, including:
. Shifting the mix of earning assets to include a substantially higher
proportion of loans and allowing investments to run-off,
. Heightened loan pricing discipline that ensures optimization of capital
and funding sources,
. Initiatives to stimulate deposit growth,
. Use of securitizations and
. Continued use of share repurchases as a capital management tool.
. With the merger complete and the financial restructuring behind us, what is
the earnings outlook. . . . .
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Looking Ahead
4Q00 $0.35 - $0.36
2001 Annual Earnings Range $1.45 to $1.55 per share
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. Based on the fourth quarter earnings per share run rate of $0.35 to $0.36 per
share, we would expect annual earnings in 2001 to be in the $1.45 to $1.55
per share range.
. These earnings reflect an earning asset base that is $5 billion lower and a
significantly lower interest rate risk position following the financial
restructuring.
. It goes without saying that we are disappointed with the results just
discussed but, it is also important to recognize that our plans are designed
to bring resolution to the issues, and restore AmSouth's earnings per share
growth momentum.
. What then do we see as the catalysts for that growth?
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Catalysts for Future Earnings Growth
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Catalysts for Future Earnings Growth
. Double Contribution of Wealth Management
. Aggressively Grow Consumer Banking
. Leverage Internet Across Business Segments
. Maximize High Growth Florida Markets
. Double Contribution Business Banking
. Increase Sales Productivity and Improve Service Quality
[PICTURES GO HERE]
. Our Plan is to focus on the execution of a small number of very powerful
strategic initiatives where we have a high level of confidence in our success.
Our earnings growth in the future will come from revenue growth in these core
customer businesses.
. Our goal is to double the contribution of Wealth Management, which includes
Trust, Private Banking, and investment services. These customers typically use
more of our products and services than other customer groups, creating
excellent cross-sell opportunities.
. Our goal is to double the contribution from fast growing Business Banking.
With 600,000 small businesses across our franchise, the opportunities to
growth this very profitable business are enormous.
. We will continue to aggressively grow consumer banking, generating solid core
deposit growth, while again, under our plan doubling the home equity lending
portfolio using the power of our expanded franchise.
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. We will continue to maximize the potential of our high growth Florida markets.
Florida remains the number one market in the country for financial services
and we are experiencing exceptional growth there.
. We will increase sales productivity while continuing to provide excellent
service quality. There is a tremendous opportunity across our franchise to
raise the level of sales productivity. In fact, the revenue growth potential
is huge if we could just raise production levels in the bottom half of
performers today up to average production levels across the franchise.
. And finally, during the next two years, we plan to triple both the number of
products sold and the number of households banking with us over the internet.
. Let's look more specifically at each of these and how they will impact our
business. . . .
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Double the Contribution From Wealth Management
Wealth Management
. Trust
$100 Million Incremental
. Investment Services Contribution Over the
Next Three Years
. Private Banking
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. Our wealth management initiative includes our plans for trust, investment
services and private banking.
. The goal is to increase, incrementally, the pre-tax contribution from these
three areas combined, by $100 million over the next three years.
. The foundation for driving performance in all of these areas is formed from
high levels of service quality and investment performance that consistently
ranks among the best.
. We have strong momentum today in investment services, with growth in revenues
year-over-year of 23 percent.
. Our private banking initiative pre-dates our merger with First American where
we have excellent momentum from the last 18 months. Over that period, our
private banking balances have grown by 50 percent, from $3.0 billion to $4.5
billion in our traditional markets.
. Finally, we will add resources in terms of people and technology to ensure our
levels of service continue to improve in these extremely profitable customer
segments. One example is private banking, where we will add 75 private bankers
to our team.
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Double the Contribution of Business Banking
Highly Profitable
. 9.0% Average Loan Yield
. 2.5% Average Cost of Funds
. .50% Loss Ratio
. $130 in Deposits for Every $100 of Loans
Growth Potential
. 600,000 Small Businesses in AmSouth's Markets
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. The second initiative is a plan to double the contribution from AmSouth's
Business Banking segment (i.e., small businesses) over the next three years.
. The segment is one of our most profitable areas of the bank because it is an
excellent source of low cost funds, basically self-funding. While the loan
loss ratio averages only about 50 basis points annually.
. The potential for growth is enormous. Only one in four of the 600,000 small
businesses in our markets currently banks with AmSouth . . .
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Double the Contribution of Business Banking
Solid Existing
Momentum
Goals: $100+ Million
Deposits +30% Incremental Enhanced Sales
Loans +25% Pre-Tax Process and Products
Contribution
Adding Resources
Leveraging Branches
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. . . . . we already have a solid business banking program across our
franchise that has strong momentum as we begin this initiative. Growth rates
over the last year have been in excess of 20 percent for both loans and
deposits.
. We want to capitalize on that momentum and an enhanced combination of sales
processes and products to significantly grow business banking market share.
. We are adding business bankers in key growth markets. In 2001, we are adding
24 business bankers, improving our business banker branch coverage ratio to
four branches per business banker.
. We are leveraging our branch network through increased emphasis on training to
maximize service levels for all of our small business customers.
. We are creating additional dedicated business banking options on our web site
www.AmSouth.com.
. Finally, we expect this plan to produce growth in business banking deposits of
30 percent annually and growth in loans of 25 percent annually while
increasing the incremental pre-tax contribution from business banking by over
$100 million during the next three years.
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Aggressively Grow Consumer Banking
Key Strategic Targets
. Increase Home Equity Portfolio 20% Annually
. Continue Strong Emphasis on Low Cost Core Deposit Growth
. Grow Households 5% Annually
. Improve Cross-Sell Ratio to 5
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. Another initiative is to continue to aggressively grow consumer banking. .
. One of our top goals is to grow home equity loans by 20 percent annually. We
have doubled the home equity portfolio over the last three years and we
believe we can double it again.
. We will place a strong emphasis on low cost core deposit growth through
campaigns, and incentive programs as well as added emphasis on household
growth and improving the cross-sell ratio to five.
. Household growth and improved cross-sell efforts will be key to our efforts to
aggressively grow consumer banking.
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High Growth Florida Markets
[MAP]
5 Year Growth Rates
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Personal Median HH
Population Income Households Income
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Jacksonville 8.2% 26.8% 9.2% 16.2%
Tampa 5.6 24.7 6.2 17.4
Naples 9.7 32.1 10.5 19.6
Orlando 10.5 29.9 11.3 16.7
AmSouth 5.4% 24.3% 6.7% 16.4%
Southeast 5.3% 24.7% 6.6% 16.9%
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. In the fourth quarter of 1999, we began focusing on four key Florida
markets that present extraordinary growth opportunities but where AmSouth
has relatively low market share.
. As you can see, we selected these markets because of their attractive
demographics and AmSouth's relatively low market share within them. In
almost every case, growth rates in these markets substantially exceed those
of AmSouth's overall franchise and the Southeast.
. These Florida markets have consistently grown at 50 percent growth rates
over the last three to five years leading the company in terms of loans,
deposit and revenue growth.
. As the markets begin to mature and we focus on growing substantially higher
market share, we see this as a continuation of our emphasis on the state of
Florida.
. Through our early growth, we have added over 200 revenue producing bankers
and dozens of new branches. This initiative will add additional resources
in the Florida markets so we continue to build on our growth there.
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High Growth Florida Markets
[MAP]
. Strategic Goal
. More Than Double the Contribution from
High Growth Florida Markets
. Key Strategies
. Leadership - Market Builders
. Aggressive Marketing / Advertising
. Expedite Branch / ATM Plan
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. The goal is to more than double the contribution from these markets by the
end of 2002. That will represent a compound annual growth rate of over 36
percent over these markets 1999 pre-tax income contribution
. We have made additional investments of capital and resources in Florida
that will help us substantially grow our market share. Over the last year,
we have hired an additional 35 bankers in these markets and opened one new
branch, with ten new branches slated to open in the first half of 2001.
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<TABLE>
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Sales Improvement Potential
3Q Per Branch Production: Traditional Markets New Markets Growth Potential
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<S> <C> <C> <C>
Consumer & Equity Loans $1.5 Million $1.0 Million 50%
Convenience Services 357 Services 212 Services 69
Consumer Checking Accounts 137 Accounts 88 Accounts 56
Consumer Savings and
Money Market Accounts 89 Accounts 68 Accounts 31
Teller Referrals 314 Referrals 212 Referrals 48
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. In regards to sales growth, there is a significant opportunity to further
improve production levels in our new markets.
. You can see here, there is still a significant gap in productivity levels
between the new markets and the traditional markets presenting excellent
growth opportunities.
. As an example, lets look at the potential impact from consumer and home
equity loans. There are 300 branches in our new markets. If we can improve
the per branch production in those markets to our traditional levels - a
$500,000 per branch improvement - that would mean an additional $150
million in new loans per quarter. With potential like this you can see why
sales improvement will receive strong emphasis over the coming quarters.
. One of the highlights from the third quarter sales results in the new
markets, was the fact that, on a per-branch basis, the new markets actually
out-performed the traditional markets in platform annuity sales and
business banking loan production.
. We are very encouraged by these early results.
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Leverage Internet Across All Business Lines
Key Strategic Goals
. Triple the Number of Households
Banking Over the Internet
. Triple the Number of Products Sold
Over the Internet
Primary Reasons [Picture]
. High Retention Rates
. Attractive Customer Profile
. Lowest Cost Delivery Channel
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. Another key strategic initiative for us is to leverage the internet across
all of our lines of business.
. During the next two years we plan to triple both the number of products
sold and the number of households banking with us over the internet.
. The primary reasons for our emphasis on the internet are. . . .
. Internet customers have high retention rates
. The internet customer is very attractive versus the typical retail
customer. For example, our internet customers use 6 products on average
compared to 3 products for typical retail customers. They also keep deposit
balances that are, on average, 46 percent higher than the typical retail
customer.
. Finally, of our four principal delivery channels, the internet is, by far,
our lowest cost
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Summary
. Focus on Execution of a Small Number of
Initiatives With High Confidence of Success
. Earnings Growth Internally Generated from Strong
Revenue Growth in Core Customer Businesses
. Target High Quality Earnings With Low Volatility
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. To summarize . . . .
. We are narrowing our focus on a few strategic initiatives that we are
highly confident can be successful drivers of revenue growth.
. Our focus will be on core customers within our primary southeast markets
and . . .
. We will target high quality earnings with clear visibility and low
volatility.
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AmSouth Bancorporation
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UBS Warburg
Regional Banks Conference
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October 23, 2000
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