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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1993
COMMISSION FILE NUMBER 0-6159
FIRST ALABAMA BANCSHARES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 63-0589368
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
417 North 20th Street, Birmingham, Alabama 35202-0247
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 832-8450
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK - PAR VALUE $.625
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K /X/.
State the aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 9, 1994.
Common Stock, $.625 Par Value--$1,245,152,851*
*Excludes as shares held by affiliates only shares held by the registrant's
Employee Stock Purchase Plan, Employees' Stock Ownership Plan, Directors' Stock
Investment Plan and executive officers who are directors without prejudice to a
determination of control.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of March 9, 1994.
Common Stock, $.625 Par Value--42,538,040 shares issued and 41,063,461 shares
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual proxy statement dated March 16, 1994 are incorporated
by reference into Part III.
Portions of the annual report to stockholders for the year ended December 31,
1993, are incorporated by reference into Parts I and II.
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PART I
ITEM 1. Business
(a) The Registrant, First Alabama Bancshares, Inc. (hereinafter
called Registrant or First Alabama), is a bank holding company, incorporated
under the laws of the state of Delaware and with its principal office located
in Birmingham, Alabama. The Registrant became operational as a bank holding
company when the exchange offer for the stock of its original banks in
Montgomery, Birmingham and Huntsville became effective on July 13, 1971.
Subsequently, the Registrant acquired 29 additional banks located in Alabama.
From 1985 through 1988, Registrant merged these affiliate banks into First
Alabama Bank, the Registrant's lead bank. In 1990, Registrant purchased
certain assets and assumed the deposit liabilities of Baldwin County Federal
Savings Bank and City Federal Savings and Loan Association in transactions with
the Resolution Trust Corporation. These acquisitions added approximately $599
million in deposits at the acquisition dates. In 1992, Registrant acquired
certain assets and assumed the deposit liabilities of seven offices formerly of
Jefferson Federal Savings and Loan Association in a transaction with the
Resolution Trust Corporation. This acquisition added approximately $49 million
in deposits to First Alabama Bank. First Alabama Bank operates from 166 full-
service offices located throughout Alabama.
In 1987 Registrant made its first interstate bank acquisition by
acquiring Santa Rosa State Bank in Milton and Pensacola, Florida.
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Registrant expanded its northwest Florida operation in early 1988 through the
acquisition of Sunshine Bank of Fort Walton Beach. In November 1988,
Registrant's two Florida banks were merged into one bank and renamed Sunshine
Bank. In 1991, Registrant purchased five offices with deposits of $146 million
in Pensacola, Florida from Great Western Bank and merged these offices into
Sunshine Bank. In the fourth quarter of 1993, Registrant acquired First
Federal Savings Bank of DeFuniak Springs, Florida and First Federal Savings
Bank of Marianna, Florida. These thrifts, with eight offices and $190 million
in assets were merged into First Alabama's Florida bank, newly renamed Regions
Bank of Florida. Regions Bank of Florida operates from 23 full-service offices
in northwest Florida.
Registrant's Georgia bank, First Alabama Bank of Columbus, began
operations in July 1991, with the purchase from the Resolution Trust
Corporation of three banking offices, formerly of Fulton Federal Savings and
Loan Association, with deposits of $107 million. On March 14, 1994, this bank
was renamed Regions Bank of Georgia.
In December 1992, Registrant entered the Tennessee banking market for
the first time through the acquisition of Security Federal Savings and Loan
Association (Security Federal), a mutual association headquartered in
Nashville, Tennessee. Security Federal, with assets of $383 million,
subsequently converted to a Tennessee chartered state bank, First Security Bank
of Tennessee. In June 1993, Registrant acquired Franklin County Bank, of
Winchester, Tennessee adding four offices and $68 million in assets.
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These banks serve the middle Tennessee market from 24 full-service offices.
In December 1993, First Alabama purchased Secor Bank, Federal Savings
Bank, headquartered in Birmingham, Alabama, adding $1.8 billion in assets. With
the exception of one office in Centre, Alabama, which is expected to be sold,
Secor's 23 Alabama offices were merged into First Alabama Bank in January 1994
resulting in the addition of four Alabama offices after the consolidation of
18. Secor's three Florida offices, with deposits of approximately $183
million, are expected to be sold in 1994. Secor's 15 Louisiana offices, which
have $789 million in deposits, provide First Alabama with a retail banking
franchise in New Orleans and northern Louisiana.
In 1993, Registrant announced plans to change its name to Regions
Financial Corporation in 1994, subject to approval from stockholders. Some
subsidiaries of the Registrant have already been renamed to reflect the
Registrant's proposed name change.
All of Registrant's banking offices are engaged in the commercial
banking business with certain offices providing trust services. Information on
Registrant's bank and thrift subsidiaries as of December 31, 1993, is provided
as follows:
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<TABLE>
<CAPTION>
Total Loans
Total (Net of Un- Total
Deposits earned Income) Assets
---------- -------------- ----------
(in thousands)
<S> <C> <C> <C>
First Alabama Bank $6,470,696 $5,426,701 $7,587,231
Regions Bank of Florida 445,040 316,994 492,541
Regions Bank of Georgia 97,770 25,170 107,215
First Security
Bank of Tennessee 336,867 315,983 386,661
Franklin County Bank 61,152 38,277 69,127
Secor Bank, FSB 1,400,083 1,012,992 1,831,937
</TABLE>
Registrant, as of December 31, 1993, had three (3) operating
bank-related subsidiaries. FAB Agency, Inc. acts as an insurance agent or
broker with respect to credit life and accident and health insurance and other
types of insurance which are related to extensions of credit by affiliate banks
or bank-related subsidiaries. First Alabama Life Insurance Company, renamed
Regions Life Insurance Company in January 1994, acts as a reinsurer of credit
life and accident and health insurance connected with the activities of certain
affiliates of Registrant. Regions Financial Building Corporation holds and
operates properties for use by the Registrant and its affiliates.
Regions Corporation, organized in 1993 as a subsidiary of the
registrant, acts as a second tier holding company for Secor Bank, FSB, and its
five subsidiaries - First Insurance Corporation, Secor Realty and Investment
Corporation, Secor Insurance Agency, Inc. Alabama, Secor
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Insurance Agency, Inc. Louisiana and Secor Credit Corporation. All of Secor's
subsidiaries are scheduled to be dissolved or disposed of within the next two
years.
Registrant's lead bank, First Alabama Bank, had three (3) operating
wholly-owned subsidiaries as of December 31, 1993. Real Estate Financing,
Inc., headquartered in Montgomery, Alabama, is engaged in mortgage banking with
its primary business and source of income being the origination and servicing
of mortgage loans for long-term investors. Real Estate Financing, Inc., at
December 31, 1993, serviced approximately $8.5 billion in real estate mortgages
and operates loan production offices in Alabama, Florida, Georgia, Mississippi,
Tennessee and South Carolina. Regions Title Company, a subsidiary of Real
Estate Financing, Inc., was acquired in connection with the acquisition of
Security Federal and acts as an agent with respect to issuance of title
insurance policies related to the extension of credit by an affiliate bank or
bank-related subsidiary. First Alabama Investments, Inc., which began
operation in 1986, engages in securities underwriting and brokerage activities.
Regions Agency, Inc., which was organized in 1985 and which is currently
inactive, is authorized to act as an insurance agent for sales of various types
of insurance policies. Regions Financial Leasing, Inc., which began operations
in January 1992, holds and services certain lease contracts.
Reference is made to pages 24 through 47 and 70 through 73 of the annual
report to stockholders for the year ended December 31, 1993,
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submitted as Exhibit 13 hereto, for certain statistical (Guide 3) and other
information.
(b) The primary business conducted by Registrant's banking
affiliates is banking, which includes provision of commercial and retail
banking services and, in some cases, trust services. Registrant's bank-related
subsidiaries perform services incidental to the field of banking.
Consequently, Registrant's only industry segment is the business of banking and
the information required for industry segments is not applicable.
Reference is made to pages 24 through 47 of the annual report to
stockholders for the year ended December 31, 1993, included as Exhibit 13
hereto, for information required by this item.
(c)(1) General. The Registrant is a bank holding company, registered
with the Board of Governors of the Federal Reserve System ("Federal Reserve")
under the Bank Holding Company Act of 1956, as amended ("BHC Act"). As such,
the Registrant and its subsidiaries are subject to the supervision,
examination, and reporting requirements of the BHC Act and the regulations of
the Federal Reserve.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or
control more than 5% of the voting shares of the bank, (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all
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of the assets of the bank, or (iii) it may merge or consolidate with any other
bank holding company.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business
of banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to
consider the financial and managerial resources and future prospects of the
bank holding companies and banks concerned and the convenience and needs of the
community to be served. Consideration of financial resources generally focuses
on capital adequacy and consideration of convenience and needs issues includes
the parties' performance under the Community Reinvestment Act of 1977 (the
"CRA"), both of which are discussed below.
The BHC Act prohibits the Federal Reserve from approving a bank holding
company's application to acquire a bank or bank holding company located outside
the state in which the deposits of its banking subsidiaries were greatest on
the date the company became a bank holding company (Alabama in the case of the
Registrant), unless such acquisition is specifically
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authorized by statute of the state in which the bank or bank holding company to
be acquired is located. Alabama has adopted reciprocal interstate banking
legislation permitting Alabama-based bank holding companies to acquire banks
and bank holding companies in other states and allowing bank holding companies
located in Arkansas, the District of Columbia, Florida, Georgia, Kentucky,
Louisiana, Maryland, Mississippi, North Carolina, South Carolina, Tennessee,
Texas, Virginia, and West Virginia to acquire Alabama banks and bank holding
companies.
The BHC Act generally prohibits the Registrant from engaging in activities
other than banking or managing or controlling banks or other permissible
subsidiaries and from acquiring or retaining direct or indirect control of any
company engaged in any activities other than those activities determined by the
Federal Reserve to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. In determining whether a particular
activity is permissible, the Federal Reserve must consider whether the
performance of such an activity reasonably can be expected to produce benefits
to the public, such as greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest, or
unsound banking practices. For example, factoring accounts receivable,
acquiring or servicing loans, leasing personal property, conducting discount
securities brokerage activities, performing certain data
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processing services, acting as agent or broker in selling credit life insurance
and certain other types of insurance in connection with credit transactions,
and performing certain insurance underwriting activities all have been
determined by the Federal Reserve to be permissible activities of bank holding
companies. The BHC Act does not place territorial limitations on permissible
bank-related activities of bank holding companies. Despite prior approval,
the Federal Reserve has the power to order a holding company or its
subsidiaries to terminate any activity or to terminate its ownership or control
of any subsidiary when it has reasonable cause to believe that continuation of
such activity or such ownership or control constitutes a serious risk to the
financial safety, soundness, or stability of any bank subsidiary of that bank
holding company.
Each of the subsidiary banks and the one subsidiary savings bank
(collectively the "subsidiary institutions") of the Registrant is a member of
the Federal Deposit Insurance Corporation ("FDIC"), and as such, their deposits
are insured by the FDIC to the extent provided by law. Each subsidiary
institution is also subject to numerous state and federal statutes and
regulations that affect its business, activities, and operations, and each is
supervised and examined by one or more state or federal bank regulatory
agencies.
Because each of the Registrant's subsidiary banks is a state-chartered
bank that is not a member of the Federal Reserve System, such banks are subject
to supervision and examination by the FDIC. The Registrant's
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subsidiary savings bank is a federally-chartered savings bank that is a member
of the Federal Home Loan Bank System and is subject to supervision and
examination by the Office of Thrift Supervision ("OTS") and to the back-up
supervisory authority of the FDIC. Such agencies regularly examine the
operations of the subsidiary institutions and are given authority to approve or
disapprove mergers, consolidations, the establishment of branches, and similar
corporate actions. Such agencies also have the power to prevent the
continuance or development of unsafe or unsound banking practices or other
violations of law.
The subsidiary institutions are subject to the provisions of the CRA.
Under the terms of the CRA, the appropriate federal bank regulatory agency is
required, in connection with its examination of a subsidiary institution, to
assess such institution's record in meeting the credit needs of the community
served by that institution, including low and moderate-income neighborhoods.
The regulatory agency's assessment of the institution's record is made
available to the public. Further, such assessment is required of any
institution which has applied to (i) charter a national bank, (ii) obtain
deposit insurance coverage for a newly chartered institution, (iii) establish a
new branch office that will accept deposits, (iv) relocate an office, or (v)
merge or consolidate with, or acquire the assets or assume the liabilities of,
a federally regulated financial institution. In the case of a bank holding
company applying for approval to acquire a bank or other bank holding company,
the Federal
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Reserve will assess the records of each subsidiary institution of the applicant
bank holding company, and such records may be the basis for denying the
application.
In December 1993, the federal banking agencies proposed to revise their
CRA regulations in order to provide clearer guidance to depository institutions
on the nature and extent of their CRA obligations and the methods by which
those obligations will be assessed and enforced. The proposed regulations
substitute for the current process-based CRA assessment factors a new
evaluation system that would rate institutions based on their actual
performance in meeting community credit needs. Under the proposal, all
depository institutions would be subject to three CRA-related tests: a lending
test; an investment test; and a service test. The lending test, which would be
the primary test for all institutions other than wholesale and limited-purpose
banks, would evaluate an institution's lending activities by comparing the
institution's share of housing, small business, and consumer loans in low- and
moderate-income areas in its service area with its share of such loans in the
other parts of its service area. The agencies would also evaluate the
institution's performance independent of other lenders by examining the ratio
of such loans made by the institution to low- and moderate-income areas to all
such loans made by the institution. At the election of an institution, the
agencies would also consider "indirect" loans made by affiliates and
subsidiaries of the institution as well as lending consortia and other
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lenders in which the institution had made lawful investments.
The focus of the investment test, under which wholesale and
limited-purpose institutions would normally be evaluated, would be the amount
of assets (compared to its risk-based capital) that an institution has devoted
to "qualified investments" that benefit low- and moderate-income individuals
and areas in the institution's service area. The service test would evaluate
an institution based on the percentage of its branch offices that are located
in or are readily accessible to low- and moderate-income areas. Smaller
institutions, those having total assets of less than $250 million, would be
evaluated under more streamlined criteria.
The joint agency CRA proposal provides that an institution evaluated under
a given test would receive one of five ratings for that test: outstanding; high
satisfactory; low satisfactory; needs to improve; or substantial
non-compliance. The ratings for each test would then be combined to produce an
overall composite rating of either outstanding, satisfactory (including both
high and low satisfactory), needs to improve, or substantial non-compliance.
In the case of a retail-oriented institution, its lending test rating would
form the basis for its composite rating. That rating would then be increased
by up to two levels in the case of outstanding or high satisfactory investment
performance, increased by one level in the case of outstanding service, and
decreased by one level in the case of substantial non-compliance in service.
An institution found to have engaged in illegal lending discrimination would be
rebuttably
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presumed to have a less-than-satisfactory composite CRA rating.
Under the proposal, an institution's CRA rating will continue to be taken
into account by a regulator in considering various types of applications. In
addition, an institution receiving a rating of "substantial non-compliance"
would be subject to civil money penalties or a cease and desist order under
Section 8 of the Federal Deposit Insurance Act (the "FDIA").
It is uncertain at this time whether or when the CRA proposal will
ultimately be adopted by the federal banking agencies in its current form.
Payment of Dividends. The Registrant is a legal entity separate and
distinct from its banking and other subsidiaries. The principal source of cash
flow of the Registrant, including cash flow to pay dividends to its
shareholders, is dividends from the subsidiary institutions. There are
statutory and regulatory limitations on the payment of dividends by the
subsidiary institution to the Registrant as well as the Registrant to its
shareholders.
As state nonmember banks, the subsidiary banks are subject to the
respective laws and regulations of the States of Alabama, Florida, Georgia, and
Tennessee and to the regulations of the FDIC as to the payment of dividends.
The subsidiary savings bank is subject to the regulations of the OTS and the
FDIC as to payment of dividends.
If, in the opinion of a federal regulatory agency, an institution under
its jurisdiction is engaged in or is about to engage in an unsafe or
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unsound practice (which, depending on the financial condition of the
institution, could include the payment of dividends), such authority may
require, after notice and hearing, that such institution cease and desist from
such practice. The Federal Reserve, the FDIC, and the OTS have indicated that
paying dividends that deplete an institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), an insured
institution may not pay any dividend if payment would cause it to become
undercapitalized or once it is undercapitalized. See "Prompt Corrective
Action." Moreover, the Federal Reserve and the FDIC have issued policy
statements which provide that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings.
At December 31, 1993, under dividend restrictions imposed under federal
and state laws, the subsidiary institutions, without obtaining governmental
approvals, could declare aggregate dividends to the Registrant of approximately
$172 million.
The payment of dividends by the Registrant and the subsidiary institutions
may also be affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines.
Transactions With Affiliates. There are various restrictions on the
extent to which the Registrant and its nonbank subsidiaries can borrow or
otherwise obtain credit from the subsidiary institutions. Each subsidiary
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institution (and its subsidiaries) is limited in engaging in borrowing and
other "covered transactions" with nonbank or non-savings bank affiliates to the
following amounts: (i) in the case of any such affiliate, the aggregate amount
of covered transactions of the subsidiary institution and its subsidiaries may
not exceed 10% of the capital stock and surplus of such subsidiary institution;
and (ii) in the case of all affiliates, the aggregate amount of covered
transactions of the subsidiary institution and its subsidiaries may not exceed
20% of the capital stock and surplus of such subsidiary institution. "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), the acceptance of
securities issued by the affiliate as collateral for a loan and the issuance of
a guarantee, and the issuance of a guarantee, acceptance, or letter of credit
on behalf of an affiliate. Covered transactions are also subject to certain
collateralization requirements. Further, a bank holding company and its
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, lease, or sale of property or
furnishing of services.
Capital Adequacy. The Registrant and the subsidiary institutions are
required to comply with the capital adequacy standards established by the
Federal Reserve in the case of the Registrant, the FDIC in the case of the
subsidiary banks, and the OTS in the case of the subsidiary savings bank.
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There are two basic measures of capital adequacy for bank holding companies
that have been promulgated by the Federal Reserve: a risk-based measure and a
leverage measure. All applicable capital standards must be satisfied for a
bank holding company to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance sheet items
are assigned to broad risk categories, each with appropriate weights. The
resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance sheet items.
The minimum guideline for the ratio of total capital ("Total Capital") to
risk-weighted assets (including certain off-balance-sheet items, such as
standby letters of credit) is 8.0%. At least half of the Total Capital must be
composed of common equity, undivided profits, minority interests in the equity
accounts of consolidated subsidiaries, noncumulative perpetual preferred stock,
and a limited amount of cumulative perpetual preferred stock, less goodwill and
certain other intangible assets ("Tier 1 Capital"). The remainder may consist
of qualifying subordinated debt, other preferred stock, and a limited amount of
the allowance for loan losses. At December 31, 1993, the Registrant's
consolidated Tier 1 Capital and Total Capital ratios were 11.13% and 13.48%,
respectively.
In addition, the Federal Reserve has established minimum leverage ratio
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guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets (the "Leverage ratio"), of 3.0% for bank holding companies
that meet certain specified criteria, including having the highest regulatory
rating. All other bank holding companies generally are required to maintain a
Leverage ratio of at least 3.0% plus an additional cushion of 100 to 200 basis
points. The Registrant's Leverage ratio at December 31, 1993 was 10.11%. 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
has indicated that it will consider a "tangible Tier 1 Capital leverage ratio"
(deducting all intangibles) and other indicia of capital strength in evaluating
proposals for expansion or new activities.
Each of the Registrant's subsidiary banks is subject to risk-based and
leverage capital requirements adopted by the FDIC and the Registrant's
subsidiary savings bank is subject to tangible, risk-based, and core capital
requirements adopted by the OTS. Each of the Registrant's subsidiary
institutions was in compliance with applicable minimum capital requirements as
of December 31, 1993. Neither the Registrant nor any of the subsidiary
institutions has been advised by any federal banking agency of any specific
minimum capital ratio requirement applicable to it.
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Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business. See "Prompt Corrective
Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve, the FDIC, and the OTS have,
pursuant to FDICIA, proposed an amendment to the risk-based capital standards
which would calculate the change in an institution's net economic value
attributable to increases and decreases in market interest rates and would
require banks with excessive interest rate risk exposure to hold additional
amounts of capital against such exposures.
Support of Subsidiary Institutions. Under Federal Reserve policy, the
Registrant is expected to act as a source of financial strength to, and to
commit resources to support, each of the subsidiary institutions. This support
may be required at times when, absent such Federal Reserve policy, the
Registrant may not be inclined to provide it. In addition, any capital loans
by a bank holding company to any of the subsidiary institutions are subordinate
in right of payment to deposits and to certain other indebtedness of such
subsidiary institution. 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 institution will be assumed by the
bankruptcy trustee and entitled to a
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priority of payment.
Under the FDIA, a depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC after August 9, 1989 in connection with (i) the default of a commonly
controlled FDIC-insured depository institution or (ii) 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.
Prompt Corrective Action. FDICIA establishes a system of prompt
corrective action to resolve the problems of undercapitalized institutions.
Under this system, which became effective on December 19, 1992, the federal
banking regulators are required to establish five capital categories
("well-capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," and "critically undercapitalized") and to
take certain mandatory supervisory actions, and are authorized to take other
discretionary actions, with respect to institutions in the three
undercapitalized categories, the severity of which will depend upon the capital
category in which the institution is placed. Generally, subject to a narrow
exception, the FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically
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undercapitalized. The federal banking agencies have specified by regulation
the relevant capital level for each category.
Under the final agency rule implementing the prompt corrective action
provisions, an institution that (i) has a Total Capital ratio of 10.0% or
greater, a Tier I Capital ratio of 6.0% or greater, and a Leverage ratio of
5.0% or greater, and (ii) is not subject to any written agreement, order,
capital directive, or prompt corrective action directive issued by the
appropriate federal banking agency, is deemed to be "well-capitalized." An
institution with a Total Capital ratio of 8.0% or greater, a Tier I Capital
ratio of 4.0% or greater, and a Leverage ratio of 4.0% or greater is considered
to be "adequately capitalized." A depository institution that has a Total
Capital ratio of less than 8.0% or a Tier I Capital ratio of less than 4.0% or
a Leverage ratio that is less than 4.0% is considered to be "undercapitalized."
A depository institution that has a Total Capital ratio of less than 6.0%, a
Tier I Capital ratio of less than 3%, or a Leverage ratio that is less than
3.0% is considered to be "significantly undercapitalized" and an institution
that has a tangible equity capital to assets ratio equal to or less than 2.0%
is deemed to be "critically undercapitalized." For purposes of the regulation,
the term "tangible equity" includes core capital elements counted as Tier I
capital for purposes of the risk-based capital standards plus the amount of
outstanding cumulative perpetual preferred stock (including related surplus),
minus all intangible assets with certain exceptions. A depository institution
may be
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deemed to be in a capitalization category that is lower than is indicated by
its actual capital position if it receives an unsatisfactory examination
rating.
In the case of an institution that is categorized as undercapitalized,
significantly undercapitalized, or critically undercapitalized, the institution
is required to submit an acceptable capital restoration plan to its appropriate
federal banking agency. Under FDICIA, a bank holding company must guarantee
that a subsidiary depository institution meet its capital restoration plan,
subject to certain limitations. The obligation of a controlling bank holding
company under FDICIA to fund a capital restoration plan is limited to the
lesser of 5.0% of an undercapitalized subsidiary's assets or the amount
required to meet regulatory capital requirements. An undercapitalized
institution is also generally prohibited from increasing its average total
assets, making acquisitions, establishing any branches, or engaging in any new
line of business except in accordance with an accepted capital restoration plan
or with the approval of the FDIC. In addition, the appropriate federal banking
agency is given authority with respect to any undercapitalized depository
institution to take any of the designated actions it is required to or may take
with respect to a significantly undercapitalized institution if it determines
"that those actions are necessary to carry out the purpose" of FDICIA.
At December 31,1993, all of the Registrant's subsidiary institutions had
the requisite capital levels to qualify as well capitalized.
21
<PAGE> 23
Brokered Deposits. The FDIC has adopted regulations governing the receipt
of brokered deposits. Under the regulations, a depository institution cannot
accept, rollover, or renew brokered deposits unless (i) it is well capitalized
or (ii) 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 all
of the subsidiary institutions of the Registrant had at December 31,1993, the
requisite capital levels to qualify as well capitalized, the Registrant
believes the brokered deposits regulation will have no material effect on the
funding or liquidity of any of the subsidiary institutions.
FDIC Insurance Assessments. In July 1993, the FDIC adopted a new
risk-based assessment system for insured depository institutions that takes
into account the risks attributable to different categories and concentrations
of assets and liabilities. The new system, which went into effect on January
1, 1994 and replaces a transitional system that the FDIC had utilized for the
1993 calendar year, assigns an institution to one of three capital categories:
(i) well capitalized; (ii) adequately capitalized; and (iii) undercapitalized.
These three categories are substantially similar
22
<PAGE> 24
to the prompt corrective action categories described above, with the
"undercapitalized" category including institutions that are undercapitalized,
significantly undercapitalized, and critically undercapitalized for prompt
corrective action purposes. An institution is also assigned by the FDIC to one
of three supervisory subgroups within each capital group. The supervisory
subgroup to which an institution is assigned is based on a supervisory
evaluation provided to the FDIC by the institution's primary federal regulator
and information which the FDIC determines to be relevant to the institution's
financial condition and the risk posed to the deposit insurance funds (which
may include, if applicable, information provided by the institution's state
supervisor). An institution's insurance assessment rate is then determined
based on the capital category and supervisory category to which it is assigned.
Under the final risk-based assessment system, as well as the prior transitional
system, there are nine assessment risk classifications (i.e., combinations of
capital groups and supervisory subgroups) to which different assessment rates
are applied. Assessment rates for 1994, as they had during 1993, will range
from .23% of deposits for an institution in the highest category (i.e.,
"well-capitalized" and "healthy" to .31% of deposits for an institution in the
lowest category (i.e., "undercapitalized" and "substantial supervisory
concern").
The FDIC is authorized to raise insurance premiums in certain
circumstances. Any increase in premiums would have an adverse effect on
23
<PAGE> 25
the Registrant.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC.
New Safety and Soundness Standards. In November 1993, federal banking
agencies issued for comment proposed safety and soundness standards relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation, fees, and benefits. With respect to internal controls,
information systems, and internal audit systems, the standards describe the
functions that adequate internal controls and information systems must be able
to perform, including (i) monitoring adherence to prescribed policies, (ii)
effective risk management, (iii) timely and accurate financial, operational,
and regulatory reporting, (iv) safeguarding and managing assets, and (v)
compliance with applicable laws and regulations. The standards also include
requirements that (i) those performing internal audits be qualified and
independent, (ii) internal controls and information systems be tested and
reviewed, (iii) corrective actions be adequately documented, and (iv) that
results of an audit be made available for review of management actions.
As in the case of internal controls and information systems, the
24
<PAGE> 26
proposal establishes general principles and standards, rather than specific
requirements, that must be followed in other areas. For example, loan
documentation and credit underwriting practices must be such that they enable
the institution to make an informed lending decision and assess credit risk on
an ongoing basis. Similarly, an institution must manage interest rate risk "in
a manner that is appropriate to the size of (the institution) and the
complexity of its assets and liabilities" and must conduct any asset growth in
accordance with a plan that has taken a variety of factors such as deposit
volatility, capital, and interest rate risk into account. The proposal also
prohibits "excessive compensation," which is defined as amounts paid that are
unreasonable or disproportionate to the services performed by an officer,
employee, director, or principal shareholder in light of all circumstances. In
order to help alert institutions and their regulators to deteriorating
financial conditions, the proposed rule also would impose a maximum ratio of
classified assets to total capital of 1.0 and, in the case of an institution
that had incurred a net loss over the last four quarters, would require that
institution to have sufficient capital to absorb a similar loss over the next
four quarters and still remain in compliance with its minimum capital
requirements.
Depositor Preference. Legislation recently enacted by Congress
establishes a nationwide depositor preference rule in the event of a bank
failure. Under this arrangement, all deposits and certain other claims
25
<PAGE> 27
against a bank, including the claim of the FDIC as subrogee of insured
depositors, would receive payment in full before any general creditor of the
bank would be entitled to any payment in the event of an insolvency or
liquidation of the bank.
Other. Because of concerns relating to the competitiveness and the safety
and soundness of the industry, the Congress is considering, even after the
enactment of FIRREA and FDICIA, a number of wide-ranging proposals for altering
the structure, regulation, and competitive relationships of the nation's
financial institutions. Among such bills are proposals to prohibit depository
institutions and bank holding companies from conducting certain types of
activities, to subject depository institutions to increased disclosure and
reporting requirements, to eliminate the present restriction on interstate
branching by banks, to eliminate the present restriction on the purchase of
banks and bank holding companies by banks and bank holding companies located in
other states, to alter the statutory separation of commercial and investment
banking and to further expand the powers of depository institutions, bank
holding companies, and competitors of depository institutions. It cannot be
predicted whether or in what form any of these proposals will be adopted or the
extent to which the business of First Alabama may be affected thereby.
Registrant's broker/dealer subsidiary is subject to regulation by the
Securities and Exchange Commission, the National Association of Securities
Dealers, and certain state securities commissions.
26
<PAGE> 28
(i) The following chart shows for the last three years the
percentage of total operating income contributed by each of the major
categories of income.
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- ------
<S> <C> <C> <C>
Interest and fees on loans 61.3% 59.1% 63.0%
Interest on investment securities 16.9 19.6 19.1
Interest on mortgage loans held for sale 2.3 2.1 1.6
Interest on federal funds sold 0.2 1.0 0.8
Other interest income 0.1 0.0 0.1
Trust department income 2.7 2.6 2.2
Service charges on deposit accounts 6.2 6.4 5.9
Mortgage servicing and origination fees 6.4 5.7 4.3
Other non-interest income 3.9 3.5 3.0
------ ------ ------
Total Operating Income 100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
(ii) There has been no public announcement, and no information
otherwise has become public, about a material new product or line of business.
(iii) The monetary policies of the Board of Governors of the Federal
Reserve affect the operations of Registrant's subsidiary institutions. Through
changes in the reserve requirements against bank and thrift deposits, open
market operations in U.S. Government securities and changes in the discount
rate on borrowings, the Federal Reserve influences the cost and availability of
funds obtained for lending and investing.
The monetary policies of the Federal Reserve have had a significant
effect on the operating results of financial institutions in the past and are
expected to do so in the future. The impact of such policies on the
27
<PAGE> 29
future business and earnings of the Registrant cannot be predicted.
(iv) The Registrant does not have any material patents, trademarks,
licenses, franchises, or concessions.
(v) No material portion of the Registrant's business is of a
seasonal nature.
(vi) The primary sources of funds for the subsidiary institutions
are deposits and borrowed funds. The Registrant's primary sources of operating
funds are service fees, dividends, and interest which it receives from bank and
bank-related subsidiaries.
(vii) No material part of the business of the Registrant is dependent
upon a single customer or a few customers. No single customer or affiliated
group of customers accounts for 10% or more of Registrant's consolidated
revenues.
(viii) Information concerning backlog orders is not relevant to an
understanding of the business of the Registrant.
(ix) No material portion of the business of the Registrant is
subject to renegotiation of profits or termination of contracts or subcontracts
by the Government.
(x) All aspects of the Registrant's business are highly
competitive. The Registrant's subsidiaries compete with other financial
institutions located in Alabama; Columbus, Georgia; northwest Florida,
Louisiana, Tennessee, and other adjoining states, as well as large banks in
major financial centers and other financial intermediaries, such as savings
28
<PAGE> 30
and loan associations, credit unions, consumer finance companies, brokerage
firms, insurance companies, investment companies, mutual funds, other mortgage
companies and financial service operations of major commercial and retail
corporations.
As of December 31, 1993, the Registrant was the third largest bank
holding company headquartered in Alabama based on both deposits and assets.
The Registrant has offices with deposits in excess of $800 million in each of
the three largest metropolitan areas in Alabama. The Registrant's banking
offices are located in markets primarily within the state of Alabama. In
addition, the Registrant operates 23 banking offices in northwest Florida with
approximately $445 million in deposits, three banking offices in Columbus,
Georgia, with approximately $98 million in deposits, 15 banking offices in
Louisiana with $789 million in deposits, and 24 banking offices in middle
Tennessee, with approximately $398 million in deposits.
Customers for banking services are generally influenced by
convenience, quality of service, personal contacts, price of services, and
availability of products. Although the ranking of Registrant's position varies
in different markets, Registrant believes that its affiliates effectively
compete with other banks and thrifts in their relevant market areas.
29
<PAGE> 31
On July 1, 1987, Alabama's regional reciprocal interstate banking
statute became effective. The statute provides for an interstate banking
region that includes Alabama, Arkansas, the District of Columbia, Florida,
Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, South
Carolina, Tennessee, Texas, Virginia, and West Virginia. All of these states
have passed some form of interstate banking legislation which is reciprocal
with Alabama. Institutions from outside this region could also enter Alabama
through the purchase of failed institutions from the Resolution Trust
Corporation or the FDIC. If other bank holding companies enter Alabama through
acquisition or otherwise, competition for banking services in Alabama could
increase. To date, there have been several relatively small acquisitions by
out-of-state firms, however the effect on Registrant has been insignificant.
Congress is considering legislation to eliminate the present
restrictions on interstate branching by banks and the present restrictions on
the purchase of banks and bank holding companies by banks and bank holding
companies located in other states. In addition, several states included in
Alabama's regional reciprocal interstate banking statue have passed or are
considering some form of legislation that would enable banks or bank holding
companies located in any other state in the nation to purchase banks or bank
holding companies in that state. Alternatively, the legislation would enable
banks or bank holding companies located in that state to purchase banks or bank
holding companies located in any other
30
<PAGE> 32
state in the nation. Although Alabama is not currently considering interstate
banking legislation, the enactment of some form of interstate banking by the
Congress or by other states in the Registrant's market areas, could further
intensify competition in the Registrant's business.
(xi) There were no material expenditures during the last three
fiscal years on research and development activities by the Registrant.
(xii) Regulations of any governmental authority concerning the
discharge of materials into the environment are expected to have no material
effect on the Registrant or any of its subsidiaries.
(xiii) As of December 31, 1993, Registrant, its affiliate banks and
other subsidiaries had a total of 5,439 full-time-equivalent employees.
(d) Registrant neither engages in foreign operations nor derives a
significant portion of its business from customers in foreign countries.
31
<PAGE> 33
ITEM 2. Properties
The corporate headquarters of the Registrant occupy several floors of the
downtown Birmingham main banking office facility. Certain administrative
offices of the Registrant are located in downtown Montgomery, in the First
Alabama Bancshares Building, a modern, eight-story building owned by Regions
Financial Building Corporation, a wholly-owned subsidiary of Registrant, and a
six story building owned by First Alabama Bank, also a wholly-owned subsidiary
of Registrant.
Registrant's largest banking offices, all of which are owned by
wholly-owned subsidiaries of the Registrant, are located in Birmingham, Mobile,
Montgomery and Huntsville, Alabama. The Birmingham offices are in a modern, 18
story office building in downtown Birmingham and an operations center outside
the downtown area. The Mobile offices operate from an 18 story office building
with an eight-story annex. The Montgomery offices are in a modernized and
enlarged, 12 story building, also owned by Regions Financial Building
Corporation. The Huntsville offices are in a historic main office building in
downtown Huntsville. Portions of the Birmingham, Mobile and Montgomery main
office buildings are leased to other tenants. In addition to the four main
offices, a total of 77 full-service branches were maintained at December 31,
1993, within the respective cities or counties in the four markets.
Registrant's other 85 Alabama banking offices at December 31, 1993,
operated in these Alabama counties: Autauga, Baldwin, Blount, Calhoun,
32
<PAGE> 34
Cherokee, Chilton, Choctaw, Clarke, Coffee, Conecuh, Covington, Cullman,
Dallas, Etowah, Houston, Lauderdale, Lee, Limestone, Macon, Marengo, Marshall,
Monroe, Morgan, Pike, Russell, Shelby, Sumter, Talladega, Tallapoosa,
Tuscaloosa and Walker. Registrant's 23 Florida banking offices operate in the
Florida counties of Calhoun, Escambia, Holmes, Jackson, Okaloosa, Santa Rosa,
Walton and Washington. Registrant operates three Georgia banking offices in
Muskogee County, Georgia, and 24 Tennessee banking offices in the counties of
Coffee, Cheatham, Davidson, Franklin, Macon, Montgomery, Overton, Putnam,
Robertson, Rutherford, Sumner and Williamson. Registrant's Louisiana affiliate
operates 15 offices located in the parishes of Clairborne, Jefferson,
Lafourche, Orleans, Ouachita, St. Bernard, St. Tammany and Webster.
Registrant's subsidiary, Real Estate Financing, Inc. has its main offices
located in Montgomery. As of December 31, 1993, it maintained 23 loan
production offices, located in Birmingham, Huntsville, Daphne, Dothan, Decatur,
Enterprise, Foley, Guntersville, Mobile, Montgomery, Prattville, Thomasville
and Tuscaloosa, Alabama; Destin, Pensacola and Tallahassee, Florida; Columbus,
Georgia; Jackson, Mississippi; Columbia and Greenville, South Carolina; and
Knoxville and Memphis, Tennessee.
Regions Life Insurance Company and FAB Agency, Inc. conduct business from
offices located in Montgomery. FAB Agency, Inc. is also authorized to do
business at the offices of Real Estate Financing, Inc. and at the offices of
bank affiliates.
33
<PAGE> 35
First Alabama Investments, Inc. has its main office located in Birmingham.
As of December 31, 1993, it maintained four other offices located in
Huntsville, Mobile and Montgomery, Alabama, and Pensacola, Florida.
The subsidiary depository institutions operated a total of 231
full-service offices at December 31, 1993. Of the 231 total full-service
offices, 67 are subject to a building or ground lease and 164 are wholly owned
by subsidiaries of the Registrant. For offices in leased premises, annual
rentals totaled approximately $3,686,000 as of December 31, 1993. During 1993,
banking affiliates received approximately $3,589,000 in rentals for space
leased to others. At December 31, 1993, encumbrances on the offices, equipment
and other operational facilities owned by the affiliates totaled approximately
$5,543,000 with a weighted average interest rate of 8.8%.
ITEM 3. Legal Proceedings
"Note L. Commitments and Contingencies" on page 62 of the annual report
to stockholders for the year ended December 31, 1993, is incorporated herein by
reference.
ITEM 4. Submission of Matters to a Vote of Security Holders
Registrant did not submit any matters to a vote of security holders during the
fourth quarter of 1993.
34
<PAGE> 36
PART II
ITEM 5. Market for the Registrant's Common Stock
and Related Security Holder Matters
"Common Stock Market Prices and Dividends" on page 47 of the annual report
to stockholders for the year ended December 31, 1993, is incorporated herein by
reference.
ITEM 6. Selected Financial Data
"Historical Financial Summary" on pages 70 through 73 of the annual report
to stockholders for the year ended December 31, 1993, is incorporated herein by
reference.
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" on pages 24 through 47 of the annual report to stockholders for
the year ended December 31, 1993, is incorporated herein by reference.
ITEM 8. Financial Statements and Supplementary Data
The report of independent auditors and the consolidated financial
statements of the Registrant and its subsidiaries, included in the annual
report to stockholders for the year ended December 31, 1993, are incorporated
herein by reference.
"Summary of Quarterly Results of Operations" on page 47 and "Effects of
Inflation" on page 46 of the annual report to stockholders for the year
35
<PAGE> 37
ended December 31, 1993, are incorporated herein by reference.
ITEM 9. Changes in and Disagreements with Accountants
On Accounting and Financial Disclosure
There have been no disagreements on accounting and financial disclosure
between Registrant and Ernst & Young.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
"Information on Directors" from pages 3 through 6 and "Section 16
Transactions" on page 6 of the Registrant's proxy statement dated March 16,
1994, are incorporated herein by reference.
Executive officers of the Registrant as of December 31, 1993, are as
follows:
36
<PAGE> 38
<TABLE>
<CAPTION>
Position and
Offices Held with Officer
Executive Officer Age Registrant and Subsidiaries Since
- -------------------- --- ---------------------------- -------
<S> <C> <C> <C>
J. Stanley Mackin 61 Chairman, Director and Chief Executive Officer, 1983*
Registrant and First Alabama Bank; Director,
Secor Bank, FSB, Real Estate Financing, Inc., FAB
Agency, Inc., Regions Agency, and Regions Life
Insurance Company.
Richard D. Horsley 51 Vice Chairman, Director and Executive Financial 1972
Officer, Registrant and First Alabama Bank;
Director and Vice President, Regions Agency,
Inc.; Director, FAB Agency, Inc., Secor Bank,
FSB, Regions Life Insurance Company, Regions
Financial Building Corp. and Real Estate
Financing, Inc.
Sam P. Faucett 59 President/Western Region and Florida Region; 1983*
Chairman and Chief Executive Officer, First
Alabama Bank - Tuscaloosa; Director, Regions Bank
of Florida and Real Estate Financing, Inc.
Joe M. Hinds, Jr. 56 President/Northern Region and Tennessee Region; 1983*
Chairman and Chief Executive Officer, First
Alabama Bank - Huntsville.
Wilbur B. Hufham 56 President/Southeastern Region; Chairman, 1983*
President and Chief Executive Officer, First
Alabama Bank - Montgomery.
</TABLE>
37
<PAGE> 39
<TABLE>
<CAPTION>
Position and
Offices Held with Officer
Executive Officer Age Registrant and Subsidiaries Since
- -------------------- --- ---------------------------- -------
<S> <C> <C> <C>
Carl E. Jones, Jr. 53 President/Southern Region and Louisiana Region; 1983*
Chairman and Chief Executive Officer, First
Alabama Bank - Mobile.
William E. Jordan 59 President/Central Region; Chairman and Chief 1990*
Executive Officer, First Alabama Bank -
Birmingham.
William E. Askew 44 Executive Vice President - Retail Banking 1987
Division, Registrant and First Alabama Bank.
Delmar F. Epton 60 Executive Vice President - Operations Group, 1986*
Registrant and First Alabama Bank.
Robert P. Houston 49 Executive Vice President and Comptroller, 1974
Registrant and First Alabama Bank; Director and
Treasurer, Regions Financial Building Corp.;
Director, Secretary and Treasurer, FAB Agency,
Inc., Regions Life Insurance Company and Regions
Agency, Inc.; Director, Secor Bank, FSB.
Charles S. 57 Senior Vice President - Investments, Registrant 1993
Northen, III and First Alabama Bank; Director, First Alabama
Investments, Inc.
E. Cris Stone 51 Executive Vice President - Corporate Banking, 1988
Registrant and First Alabama Bank; Director and
Vice President, Regions Financial Leasing, Inc.
</TABLE>
38
<PAGE> 40
<TABLE>
<CAPTION>
Position and
Offices Held with Officer
Executive Officer Age Registrant and Subsidiaries Since
- -------------------- --- ---------------------------- -------
<S> <C> <C> <C>
Richard E. Wambsganss 53 Executive Vice President - Trust Group, 1987
Registrant and First Alabama Bank.
L. Burton Barnes, III 45 General Counsel and Corporate Secretary, 1985
Registrant and First Alabama Bank; Director and
Secretary, Regions Financial Building Corp. and
First Alabama Investments, Inc.; Director, Secor
Bank, FSB, FAB Agency, Inc., Regions Agency and
Regions Life Insurance Company.
</TABLE>
*The years indicated are those in which the individual was first deemed to be
an executive officer of Registrant, although in every case the individual had
been an executive officer of a subsidiary of Registrant for a number of years.
ITEM 11. Executive Compensation
"Executive Compensation and Other Transactions" on pages 7 through 9
and "Personnel Committee Interlocks and Insider Participation" on page 11 of
the Registrant's proxy statement dated March 16, 1994, are incorporated herein
by reference. All information on page 10 and all information on page 11,
except for the information under the sub-heading "Personnel Committee
Interlocks and Insider Participation," of the Registrant's proxy statement
dated March 16, 1994, are specifically not incorporated by reference herein.
39
<PAGE> 41
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
"Voting Securities and Principal Holders Thereof" on page 2 and
"Information on Directors" on pages 3 through 5 of the Registrant's proxy
statement dated March 16, 1994, are incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions
"Other Transactions," on page 12 of the Registrant's proxy statement
dated March 16, 1994, are incorporated herein by reference.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K
14(a)(1) and (2) The lists called for by this portion of Item 14 are
submitted as a separate part of this report.
14(a)(3) Listing of Exhibits:
<TABLE>
<CAPTION>
SEC Assigned
Exhibit Number Description of Exhibit
- -------------- ----------------------
<S> <C>
3. Bylaws as last amended on April 28, 1993, incorporated herein by reference from the Exhibits to the
Registration Statement filed with the Commission and assigned file number 33-50577.
Certificate of Incorporation as last amended on May 9, 1988, incorporated herein by reference from
the Exhibits to the Registration Statement filed with the Commission and assigned file number 33-
50577.
4. a. Debenture Purchase Agreement dated October 15, 1973, incorporated by reference from the Exhibits
to the Registration Statement filed with the Commission and assigned file number 2-49702.
</TABLE>
40
<PAGE> 42
<TABLE>
<S> <C>
b. Subordinated Notes Indenture Agreement dated December 3, 1992, incorporated by reference from
the Exhibits to the Registration Statement filed with the Commission and assigned registration
number 33-45714.
10. a. Amended and Restated Agreement and Plan of Reorganization related to the acquisition of Secor
Bank, FSB, incorporated by reference from the Exhibits to the Registration Statement filed with
the Commission and assigned file number 33-69612.
*b. First Alabama Bancshares 1991 Long-Term Incentive Plan incorporated by reference from the
Exhibit to the Registrant's proxy statement filed with the Commission and dated March 22, 1991.
13. Annual Report to Stockholders for the year ended December 31, 1993.
21. List of Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
99. a. Form 11-K, Annual Report of Employee Stock Purchase Plan of First Alabama Bancshares, Inc. for
the year ended December 31, 1993.
b. Form 11-K, Annual Report of Directors' Stock Investment Plan of First Alabama Bancshares, Inc.
for the year ended December 31, 1993.
*- Represents a compensatory plan agreement that is required to be filed under this item.
14(b) Reports on Form 8-K filed in the fourth quarter of 1993:
In a report filed on Form 8-K, under item 5, dated November 19, 1993, the Registrant reported the Office of
Thrift Supervision approved the acquisition of Secor Bank, FSB.
In a report filed on Form 8-K, under items 2 and 7, dated December 31, 1993, the Registrant reported the
consummation of the acquisition of Secor Bank, FSB,
</TABLE>
41
<PAGE> 43
<TABLE>
<S> <C>
headquartered in Birmingham, Alabama. The following financial statements were filed under item 7:
a)Financial Statements of the business acquired. The Consolidated Statements of Condition at December
31, 1992 and 1991, Consolidated Statements of Operations, Consolidated Statements of Stockholders' Equity,
Consolidated Statements of Cash Flows, and Notes to Consolidated Statements for the years ended December 31,
1992, 1991, and 1990 of Secor Bank, FSB.
The unaudited Consolidated Statements of Financial Condition at September 30, 1993, unaudited
Consolidated Statements of Operations, unaudited Statements of Cash Flows, and unaudited Notes to
Consolidated Statements for the nine months ended September 30, 1993 and 1992, of Secor Bank, FSB.
b)Pro Forma Financial Information. The pro forma combined condensed Statement of Condition
(unaudited) at September 30, 1993, and the pro forma combined condensed Statements of Income (unaudited) for
the nine months ended September 30, 1993 and for the year ended December 31, 1992.
14(c) The Exhibits not incorporated herein by reference are submitted as a separate part of this report.
NOTE: Copies of the aforementioned exhibits are available to stockholders upon request to:
Stockholder Assistance
44 First Alabama Plaza
P. O. Box 1448
Montgomery, Alabama 36102-1448
14(d) Financial statement schedules: None.
</TABLE>
42
<PAGE> 44
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.
FIRST ALABAMA BANCSHARES, INC.
/s/ L. Burton Barnes, III 3/16/94
----------------------------------
L. Burton Barnes, III Date
General Counsel
and Corporate Secretary
/s/Robert P. Houston 3/16/94
----------------------------------
Robert P. Houston Date
Executive Vice President
and Comptroller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ J. Stanley Mackin 3/16/94 /s/ Albert P. Brewer 3/16/94
- ------------------------------------ ----------------------------------
J. Stanley Mackin Date Albert P. Brewer Date
Chairman, Chief Executive Director
Officer and Director
/s/ Richard D. Horsley 3/16/94 /s/ James S. M. French 3/16/94
- ------------------------------------ ----------------------------------
Richard D. Horsley Date James S. M. French Date
Vice Chairman, Executive Director
Financial Officer and Director
/s/ Sheila S. Blair 3/16/94 /s/ Catesby ap C. Jones 3/16/94
- ------------------------------------ ----------------------------------
Sheila S. Blair Date Catesby ap C. Jones Date
Director Director
/s/ James B. Boone, Jr. 3/16/94 /s/ Olin B. King 3/16/94
- ------------------------------------ ----------------------------------
James B. Boone, Jr. Date Olin B. King Date
Director Director
43
<PAGE> 45
/s/ Norman F. McGowin, Jr. 3/16/94 /s/ Henry E. Simpson 3/16/94
- ------------------------------------ ----------------------------------
Norman F. McGowin, Jr. Date Henry E. Simpson Date
Director Director
/s/ H. M. McPhillips, Jr. 3/16/94 /s/ Robert E. Steiner, III 3/16/94
- ------------------------------------ ----------------------------------
H. Manning McPhillips, Jr. Date Robert E. Steiner, III Date
Director Director
/s/ W. Wyatt Shorter 3/16/94 /s/ Lee J. Styslinger, Jr. 3/16/94
- ------------------------------------ ----------------------------------
W. Wyatt Shorter Date Lee J. Styslinger, Jr. Date
Director Director
44
<PAGE> 46
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) AND (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1993
FIRST ALABAMA BANCSHARES, INC.
BIRMINGHAM, ALABAMA
<PAGE> 47
FORM 10-K - ITEM 14(a)(1) AND (2)
FIRST ALABAMA BANCSHARES, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and report of
independent auditors of First Alabama Bancshares, Inc. and subsidiaries,
included in the annual report of the registrant to its stockholders for the
year ended December 31, 1993, are incorporated by reference in Item 8:
Report of Independent Auditors
Consolidated Statement of Condition - December 31, 1993 and
1992
Consolidated Statement of Income - Years ended December 31,
1993, 1992 and 1991
Consolidated Statement of Cash Flows - Years ended December
31, 1993, 1992 and 1991
Consolidated Statement of Changes in Stockholders' Equity -
Years ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements - December 31,
1993
Schedules to the consolidated financial statements required by Article
9 of Regulation S-X are not required under the related instructions or are
inapplicable, and therefore have been omitted.
<PAGE> 48
ANNUAL REPORT ON FORM 10-K
ITEM 14(c)
EXHIBITS
<PAGE> 49
EXHIBITS INDEX
<TABLE>
<CAPTION>
SEC Assigned
Exhibit Number Description of Exhibit
- -------------- ----------------------
<S> <C>
3. Bylaws as last amended on April 28, 1993, incorporated herein by reference from the Exhibits to the
Registration Statement filed with the Commission and assigned file number 33-50577.
Certificate of Incorporation as last amended on May 9, 1988, incorporated herein by reference from the
Exhibits to the Registration Statement filed with the Commission and assigned file number 33-50577.
4. a. Debenture Purchase Agreement dated October 15, 1973, incorporated by reference from the Exhibits
to the Registration Statement filed with the Commission and assigned file number 2-49702.
b. Subordinated Notes Indenture Agreement dated December 3, 1992, incorporated by reference from the
Exhibits to the Registration Statement filed with the Commission and assigned registration number
33-45714.
10. a. Amended and Restated Agreement and Plan of Reorganization related to the acquisition of Secor
Bank, FSB, incorporated by reference from the Exhibits to the Registration Statement filed with
the Commission and assigned file number 33-69612.
b. First Alabama Bancshares 1991 Long-Term Incentive Plan incorporated by reference from the Exhibit
to the Registrant's proxy statement filed with the Commission and dated March 22, 1991.
13. Annual Report to Stockholders for the year ended December 31, 1993.
21. List of Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
99. a. Form 11-K, Annual Report of Employee Stock Purchase Plan of First Alabama Bancshares, Inc. for the
year ended December 31, 1993.
b. Form 11-K, Annual Report of Directors' Stock Investment Plan of First Alabama Bancshares, Inc. for
the year ended December 31, 1993.
</TABLE>
<PAGE> 1
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION EXHIBIT 13
& OPERATING RESULTS
INTRODUCTION
The following discussion and financial information is presented to aid in
understanding First Alabama's current financial position and results of
operations. The emphasis of this discussion will be on the years 1991, 1992 and
1993; however, financial information for prior years will also be presented
when appropriate. This discussion supplements the historical financial summary
on pages 70 to 73 and should be read in conjunction therewith.
First Alabama's primary business is banking. In 1993, First Alabama's
affiliate banks contributed approximately $108 million to consolidated net
income. First Alabama Bank, the Company's principal banking subsidiary,
operates 166 full-service banking offices throughout Alabama. The Company's two
Tennessee banks, First Security Bank of Tennessee and Franklin County Bank,
operate 24 full-service offices in middle Tennessee. Regions Bank of Florida
operates 23 full-service banking offices in northwest Florida and First Alabama
Bank of Columbus operates 3 full-service banking offices in Columbus, Georgia.
On December 31, 1993, the Company purchased Secor Bank, Federal Savings
Bank, headquartered in Birmingham, Alabama. Secor currently operates one
Alabama branch, which is expected to be sold in 1994, four Florida offices,
which are expected to be sold in 1994, and 15 banking offices in Louisiana.
Supplementing the Company's bank operations are a mortgage banking company,
credit life insurance related companies and a registered broker-dealer firm.
First Alabama has no foreign operations, although it has an International
Department to assist customers with their foreign transactions. The mortgage
banking subsidiary has become more important in recent years due to excellent
growth. It now services approximately $8.5 billion in mortgage loans and in
1993 contributed approximately $5 million to net income.
The Company's principal market areas are the State of Alabama; middle
Tennessee; northwest Florida; New Orleans and north Louisiana; and Columbus,
Georgia. In addition, real estate mortgage loan origination offices are located
in other areas of Georgia, Florida and Tennessee, and in the states of
Mississippi and South Carolina.
Through acquisitions during the last three years, First Alabama has
expanded into new markets and strengthened its presence in several existing
markets. During 1991, the acquisition of former thrift offices in Columbus,
Georgia added three banking offices with deposits of $107 million and resulted
in the creation of First Alabama Bank of Columbus. Also in 1991, five former
thrift offices with deposits of $146 million were acquired in Pensacola,
Florida, adding to First Alabama's Florida bank. In 1992, First Alabama
acquired $49 million in deposits and five former thrift offices in Alabama.
This acquisition expanded banking services to five markets not previously
served by First Alabama and strengthened First Alabama's market presence in
two north Alabama markets. Also in 1992, First Alabama entered the Tennessee
banking market for the first time through the acquisition of Security Federal
Savings and Loan Association, which was converted to First Security Bank of
Tennessee. This bank, with assets of $383 million, now serves the middle
Tennessee market with 20 offices. In June 1993, Franklin County Bank, of
Winchester, Tennessee, added another 4 offices and $68 million in assets to
First Alabama's middle Tennessee operations.
In the fourth quarter of 1993, First Alabama acquired First Federal Savings
Bank of DeFuniak Springs, Florida and First Federal Savings Bank of Marianna,
Florida. These two thrifts in northwest Florida, with 8 offices and $190
million in assets, were merged into First Alabama's Florida bank, newly renamed
Regions Bank of Florida.
The December 31, 1993, purchase of Secor Bank added $1.8 billion in assets.
With the exception of one office in Centre, Alabama, which is expected to be
sold, Secor's 23 Alabama offices were merged into First Alabama Bank in
January, 1994 resulting in a net addition of four Alabama offices after the
consolidation of 18. Secor's four south Florida offices are expected to be sold
in 1994. Secor's 15 offices in Louisiana, which have $789 million in deposits,
provide First Alabama with a retail banking franchise in New Orleans and
northern Louisiana.
FINANCIAL CONDITION
First Alabama's financial condition depends primarily on the quality and
nature of its assets, its liability and capital structure, the market and
economic conditions, and the quality of its personnel.
LOANS AND ALLOWANCE FOR LOSSES
As a financial institution, First Alabama's primary investment is loans.
At December 31, 1993, loans represented 71% of First Alabama's earning assets.
Over the last four years loans increased a total of $3.3 billion, a
compound growth rate of 18%. Acquisition of banks accounted for under purchase
accounting rules and the purchase of loans from the thrifts acquired in 1991,
1992 and 1993 contributed $1.5 billion of this growth. The most significant
growth in the loan portfolio occurred in 1992 and 1993 with loans increasing
$868 million and $1.7 billion,
24
<PAGE> 2
respectively. Approximately $289 million of the 1992 growth resulted from the
acquisition of Security Federal, including $234 million in single family
residential mortgage loans. The acquisition of Secor, Franklin County Bank and
the two Florida thrifts added $1.2 billion in 1993 loans. The growth of $183
million, or 4%, in 1991 was below the other years due primarily to weaker
economic conditions and little loan growth from acquisitions.
All major categories of loans shared in this growth. Over the last four
years, commercial, financial and agricultural loans increased $326 million or
28%. Real estate construction loans increased $39 million in 1991, $62 million
in 1992 and $7 million in 1993. Real estate mortgage loans increased $2.1
billion or 183% and consumer loans increased $718 million or 68% over the last
four years.
First Alabama's real estate mortgage portfolio includes $745 million of
mortgage loans secured by single family residences that were originated by
First Alabama's mortgage company. The majority of these loans are secured by
homes in Alabama, Georgia and Florida. These loans increased approximately $44
million in 1991, $100 million in 1992 and $214 million in 1993, which accounts
for approximately 24%, 12% and 13%, respectively, of the growth in total loans
in 1991, 1992 and 1993. Eighty-nine percent of the overall balance is comprised
of adjustable-rate mortgages (ARM's) that have rates approximately 275 basis
points above one of several money market indices when fully priced.
First Alabama's real estate portfolio also includes $750 million of single
family mortgage loans obtained in the Secor acquisition. Fixed-rate single
family mortgages with original terms greater than 15 years comprise 39% of the
overall balance of these loans. Fixed-rate single family mortgages with
original terms of 15 years or less comprise 33% of the overall balance of these
loans. Adjustable-rate single family mortgages (ARM's) that have rates
approximately 265 basis points above one of several money market indices when
fully priced comprise the remaining 28% of the overall balance of these loans.
A sound credit policy and careful, consistent credit review are vital to a
successful lending program. All affiliates of First Alabama operate under
written loan policies which attempt to maintain a consistent lending
philosophy, provide sound traditional credit decisions, provide an adequate
return and render service to the communities in which the banks are located.
First Alabama's lending policy generally confines loans to local customers or
to national and international firms doing business locally. Credit review and
loan examinations help confirm that affiliates are adhering to these loan
policies.
Every loan carries some degree of risk. This risk is reflected in the
consolidated financial statements by the size of the allowance for loan losses,
the amount of loans charged off and the provision for loan losses charged to
operating expense. It is First Alabama's policy that when a loss is identified,
it is charged against the loan allowance in the current period. The policy
regarding recognition of losses requires immediate recognition of a loss if
significant doubt exists as to principal repayment. In addition, consumer
installment credit is generally recognized as a loss when it becomes 90 days or
more past due, unless the underlying security or the customer's financial
position makes a loss improbable.
First Alabama's provision for loan losses is a reflection of actual losses
experienced during the year and management's judgment as to the adequacy of the
allowance for loan losses to absorb future losses. Some of the factors
considered by management in determining the amount of the provision and
resulting allowance include: (1) credit reviews of individual loans; (2) gross
and net loan charge-offs in the current year; (3) growth in the loan portfolio;
(4) the current level of the allowance in relation to total loans and to
historical loss levels; (5) past due and non-accruing loans; (6) collateral
values of properties securing loans; (7) the composition of the loan portfolio
(types of loans); and (8) management's estimate of future economic conditions
and the resulting impact on First Alabama.
- --------------------------------------------------------------------------------
Lending at First Alabama is generally organized along three functional lines:
commercial loans (including industrial and agricultural), real estate loans,
and consumer loans. The composition of the portfolio by these major categories
is presented below (with real estate loans further broken down between
construction and mortgage loans):
<TABLE>
<CAPTION>
(in thousands, net of unearned income) December 31
- -------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $1,491,165 $1,437,036 $1,319,424 $1,368,476 $1,164,869
- -------------------------------------------------------------------------------------------------------------------------
Real estate-construction 262,918 255,923 194,306 154,964 163,915
- -------------------------------------------------------------------------------------------------------------------------
Real estate-mortgage 3,308,528 2,028,279 1,533,086 1,383,962 1,170,242
- -------------------------------------------------------------------------------------------------------------------------
Consumer 1,770,635 1,421,293 1,228,142 1,184,860 1,053,056
- -------------------------------------------------------------------------------------------------------------------------
TOTAL $6,833,246 $5,142,531 $4,274,958 $4,092,262 $3,552,082
=========================================================================================================================
</TABLE>
25
<PAGE> 3
The amounts of total gross loans (excluding residential mortgages on 1-4 family
residences and consumer loans) outstanding at December 31, 1993, based on
remaining scheduled repayments of principal, due in (1) one year or less, (2)
more than one year but less than five years and (3) more than five years, are
shown in the following table. The amounts due after one year are classified
according to sensitivity to changes in interest rates.
<TABLE>
<CAPTION>
(in thousands) Loans Maturing
- --------------------------------------------------------------------------------------------------------------------------
Within After One But After
One Year Within Five Years Five Years Total
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 814,520 $429,577 $253,405 $1,497,502
- --------------------------------------------------------------------------------------------------------------------------
Real estate-construction 200,703 25,472 36,743 262,918
- --------------------------------------------------------------------------------------------------------------------------
Real estate-mortgage 220,333 390,106 488,918 1,099,357
- --------------------------------------------------------------------------------------------------------------------------
TOTAL $ 1,235,556 $845,155 $779,066 $2,859,777
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(in thousands) Sensitivity to Changes In Interest Rates
- ----------------------------------------------------------------------------------------------------------------------------
Predetermined Variable
Rate Rate
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due after one year but within five years $384,395 $ 460,760
- ----------------------------------------------------------------------------------------------------------------------------
Due after five years 183,066 596,000
- ----------------------------------------------------------------------------------------------------------------------------
$567,461 $1,056,760
============================================================================================================================
</TABLE>
A coordinated effort is undertaken to identify risks in the loan portfolio
for management purposes and to establish the loan loss provision and resulting
allowance for accounting purposes. A regular, formal and ongoing loan review is
conducted to identify loans with unusual risks or possible losses. The primary
responsibility for this review rests with the management of the individual
banking offices. Their work is supplemented with reviews by First Alabama's
internal audit staff and corporate loan examiners. Bank regulatory agencies and
the Company's independent auditors provide additional levels of review. This
process provides information which helps in assessing the quality of the
portfolio, assists in the prompt identification of problems and potential
problems and aids in deciding if a loan represents a probable loss which
should be recognized or a risk for which an allowance should be maintained.
The commercial, real estate and consumer loan portfolios are highly
diversified in terms of industry concentrations. The following table shows the
largest concentrations in terms of the customer's Standard Industrial
Classification Code (SIC) at December 31, 1993, 1992 and 1991:
(See next page)
26
<PAGE> 4
<TABLE>
<CAPTION>
(dollar amounts in millions) December 31
- --------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------
% OF % NON- % of % Non- % of % Non-
SIC CLASSIFICATION AMOUNT TOTAL ACCRUAL Amount Total Accrual Amount Total Accrual
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Individuals $3,936.4 57.4% 0.5% $2,506.6 48.2% 0.4% $1,999.4 45.8% 0.7%
- --------------------------------------------------------------------------------------------------------------------------
Services:
Physicians 55.7 0.8 0.0 47.7 0.9 0.0 53.6 1.2 0.0
- --------------------------------------------------------------------------------------------------------------------------
Business services 48.0 0.7 0.0 53.1 1.0 0.0 74.5 1.7 0.0
- --------------------------------------------------------------------------------------------------------------------------
Religious organizations 78.5 1.1 0.0 78.5 1.5 0.0 70.4 1.6 0.0
- --------------------------------------------------------------------------------------------------------------------------
Legal services 32.6 0.5 0.0 32.9 0.6 0.1 34.4 0.8 0.4
- --------------------------------------------------------------------------------------------------------------------------
All other services 330.6 4.8 0.6 351.4 6.8 0.9 289.2 6.6 1.2
- --------------------------------------------------------------------------------------------------------------------------
Total services 545.4 7.9 0.7 563.6 10.8 0.7 522.1 11.9 0.7
- --------------------------------------------------------------------------------------------------------------------------
Manufacturing:
Electrical equipment 29.5 0.4 0.0 34.5 0.7 0.0 14.1 0.3 0.0
- --------------------------------------------------------------------------------------------------------------------------
Food and kindred products 14.5 0.2 0.0 19.8 0.4 0.0 23.7 0.6 3.9
- --------------------------------------------------------------------------------------------------------------------------
Rubber and plastic products 16.9 0.2 0.0 17.0 0.3 0.0 13.9 0.3 0.0
- --------------------------------------------------------------------------------------------------------------------------
Lumber and wood products 48.4 0.7 0.0 22.5 0.4 0.0 23.2 0.6 0.0
- --------------------------------------------------------------------------------------------------------------------------
Fabricated metal products 60.9 0.9 0.0 69.4 1.3 0.1 44.3 1.0 0.0
- --------------------------------------------------------------------------------------------------------------------------
All other manufacturing 201.4 2.9 0.0 192.2 3.7 0.1 180.6 4.1 0.2
- --------------------------------------------------------------------------------------------------------------------------
Total manufacturing 371.6 5.3 0.0 355.4 6.8 0.2 299.8 6.9 0.4
- --------------------------------------------------------------------------------------------------------------------------
Wholesale trade 181.8 2.6 0.1 186.9 3.6 0.1 178.5 4.1 0.3
- --------------------------------------------------------------------------------------------------------------------------
Finance, insurance and real
estate:
Real estate 454.2 6.6 1.9 317.5 6.1 0.3 241.2 5.5 0.3
- --------------------------------------------------------------------------------------------------------------------------
Banks and credit agencies 81.8 1.2 0.0 65.1 1.3 0.0 54.7 1.3 0.0
- --------------------------------------------------------------------------------------------------------------------------
All other finance, insurance
and real estate 87.1 1.3 0.0 89.0 1.7 0.0 60.2 1.4 0.4
- --------------------------------------------------------------------------------------------------------------------------
Total finance, insurance
and real estate 623.1 9.1 1.9 471.6 9.1 0.3 356.1 8.2 0.3
- --------------------------------------------------------------------------------------------------------------------------
Construction:
Residential building
construction 76.1 1.1 0.1 57.3 1.1 0.2 49.9 1.1 0.7
- --------------------------------------------------------------------------------------------------------------------------
General contractors and
builders 54.0 0.8 0.0 41.3 0.8 0.2 51.1 1.2 2.7
- --------------------------------------------------------------------------------------------------------------------------
All other construction 86.5 1.3 0.1 92.5 1.8 0.8 77.3 1.8 0.3
- --------------------------------------------------------------------------------------------------------------------------
Total construction 216.6 3.2 0.2 191.1 3.7 1.2 178.3 4.1 1.1
- --------------------------------------------------------------------------------------------------------------------------
Retail trade:
Automobile dealers 144.9 2.1 0.0 102.7 2.0 0.0 40.8 0.9 1.0
- --------------------------------------------------------------------------------------------------------------------------
All other retail trade 155.6 2.3 0.3 167.1 3.2 0.3 166.3 3.8 0.8
- --------------------------------------------------------------------------------------------------------------------------
Total retail trade 300.5 4.4 0.3 269.8 5.2 0.3 207.1 4.7 0.9
- --------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry and
fishing 111.8 1.6 0.4 109.1 2.1 0.8 105.2 2.4 0.8
- --------------------------------------------------------------------------------------------------------------------------
Transportation, communication,
electrical, gas and sanitary 161.4 2.4 1.0 145.7 2.8 0.2 163.8 3.8 0.1
- --------------------------------------------------------------------------------------------------------------------------
Mining (including oil & gas
extraction) 9.1 0.1 0.0 10.5 0.2 0.0 14.3 0.3 0.0
- --------------------------------------------------------------------------------------------------------------------------
Public administration 15.2 0.2 0.0 9.0 0.2 0.0 12.6 0.3 0.0
- --------------------------------------------------------------------------------------------------------------------------
Revolving credit loans 338.1 4.9 0.0 276.4 5.3 0.0 248.5 5.7 0.0
- --------------------------------------------------------------------------------------------------------------------------
Other 58.5 0.9 0.0 104.6 2.0 0.0 79.1 1.8 0.0
- --------------------------------------------------------------------------------------------------------------------------
TOTAL $6,869.5 100.0% 0.6% $5,200.3 100.0% 0.4% $4,364.8 100.0% 0.6%
==========================================================================================================================
</TABLE>
27
<PAGE> 5
If, as a result of First Alabama's loan review and evaluation procedures, it
is determined that payment of interest on a commercial or real estate loan is
questionable, it is First Alabama's policy to reverse interest previously
accrued on the loan against interest income. Interest on such loans is
thereafter recorded on a "cash basis" and is included in earnings only when
actually received in cash and when full payment of principal is no longer
doubtful.
Although it is First Alabama's policy to immediately charge off as loss all
loan amounts judged to be uncollectible, historical experience indicates that
certain losses exist in the loan portfolio which have not been specifically
identified. To anticipate and provide for these unidentifiable losses, the
allowance for loan losses is established by charging the provision for loan
losses expense against current earnings. No portion of the resulting allowance
is in any way allocated or restricted to any individual loan or group of loans.
The entire allowance is available to absorb losses from any and all loans.
The year-end allowance for loan losses as a percentage of loans ranged from
a low of 1.05% in 1989 to a high of 1.47% in 1993. This ratio was increased
over this period due to concerns about the economy. The ratio of non-performing
assets (including loans past due ninety days or more and other real estate) to
loans and other real estate increased to 1.12% in 1990, then declined to 1.01%
in 1991, and to 0.81% in 1992. This ratio increased to 1.03% in 1993 due to the
non-performing assets added by the thrift acquisitions in 1993.
The allowance for loan losses as a percentage of non-performing loans
(including loans past due ninety days or more) was 178% at December 31, 1993,
compared to 244% at December 31, 1992. Management considers the current level
of the allowance for loan losses adequate to absorb possible losses from loans
in the portfolio. Management's determination of the adequacy of the allowance
for loan losses, which is based on the factors and risk identification
procedures previously discussed, requires the use of judgments and estimations
that may change in the future. Unfavorable changes in the factors used by
management to determine the adequacy of the reserve, or the availability of new
information, could cause the allowance for loan losses to be increased or
decreased in future periods. In addition, bank regulatory agencies, as part of
their examination process, may require that additions be made to the allowance
for loan losses based on their judgments and estimates.
The analysis of loan loss experience on page 31 shows that net loan losses
ranged from a high of $16.4 million in 1990 to a low of $10.4 million in 1993.
Net losses in 1993 declined as a result of improved loss experience in
commercial and consumer loans and increased recoveries of all categories of
COMPOSITION OF LOANS
(Graph)
($ in Billions)
1989 1990 1991 1992 1993
Commercial 1.2 1.4 1.3 1.4 1.5
Real Estate Mortgage 1.2 1.4 1.6 2.0 3.3
Real Estate Construction .2 .1 .2 .3 .3
Consumer 1.0 1.2 1.2 1.4 1.8
------------------------------------
Total 3.6 4.1 4.3 5.1 6.9
====================================
loans. Over the last five years net loan losses averaged 0.34% of average loans
and were 0.19% in 1993. First Alabama's relatively low level of net loan losses
is due to more favorable economic conditions relative to some other sections of
the country, quality control efforts in the underwriting and monitoring of
loans, and a substantial amount of recoveries of previously charged-off loans.
In order to assess the risk characteristics of the loan portfolio at
December 31, 1993, it is appropriate to consider the three major categories of
loans -- commercial, real estate and consumer.
First Alabama's commercial loan portfolio is highly diversified within the
markets served by the Company. Geographically, the largest concentration is
the 30% of the portfolio held by banking offices in the Birmingham MSA
(metropolitan statistical area). Approximately 18% is held within the Mobile
MSA, 8% within the Montgomery MSA, 6% within the Tuscaloosa MSA and 5% within
the Huntsville MSA. The remaining 33% of the portfolio is geographically
dispersed among the other offices. A small portion of these loans to local
customers is secured by properties outside First Alabama's banking market
areas.
The Birmingham MSA, with civilian employment of approximately 454,000, is
Alabama's largest metropolitan area.
28
<PAGE> 6
Service industries, such as health care and finance, and retail trade play a
key role in the local economy. Steel, coal and manufacturing are still
important to the Birmingham economy, but service industries have diversified
the city's economic base.
The Mobile MSA, with civilian employment of approximately 231,000, is
diversified in heavy industry, forest products, shipbuilding, tourism, oil and
gas production, agriculture and international trade.
The Montgomery MSA, with civilian employment of approximately 145,000, is
stabilized by government and military payrolls. The business community in
Montgomery is very diversified and consists mainly of light industry and
facilities specializing in transportation and distribution. The city is a
retail trade center for central and south Alabama and agriculture also plays an
important role in the economy.
The Tuscaloosa MSA, with civilian employment of approximately 75,000, is
diversified among education, health care and mining activities. Stability in
the Tuscaloosa market is provided by the large employment base of a state
university and two state hospitals, which are not as susceptible to economic
downturns as other industries. The planned construction of a Mercedes-Benz
automobile manufacturing facility between Birmingham and Tuscaloosa is expected
to have a very favorable impact on the economies of both areas.
The Huntsville MSA, with civilian employment of approximately 140,000, has a
large number of high technology companies. Government and military payrolls
related to the space program are also important. During the last several years,
this area has been the fastest growing part of the state.
At December 31, 1993, First Alabama had only one loan, with a balance of
$3.3 million, which met the bank regulatory definition of a highly leveraged
transaction. The loan is currently performing under the terms of the loan
agreement and management does not anticipate it becoming a problem. First
Alabama has not participated in any of the nationally syndicated leveraged
buy-out transactions. The Company's exposure to highly leveraged transactions
is not considered significant.
During the last five years, net losses on commercial loans ranged from a low
of 0.26% in 1993 to a high of 0.51% in 1990. Future losses are a function of
many variables, general economic conditions being the most important. If
economic conditions weaken in 1994, net commercial loan losses will likely
exceed the 1993 level. A continuation of moderate economic growth during 1994
in First Alabama's market areas could result in 1994 net commercial loan losses
near the 1993 level.
First Alabama's real estate loan portfolio is comprised of
LOANS AS A PERCENTAGE OF AVERAGE ASSETS
(Graph)
1989 1990 1991 1992 1993
63.2 66.2 64.2 63.4 67.4
NON-PERFORMING ASSETS AS A PERCENTAGE
OF LOANS AND OTHER REAL ESTATE
(Graph)
1989 1990 1991 1992 1993
.94 1.12 1.01 .81 1.03
construction and land development loans, loans to businesses for long-term
financing of land and buildings, loans on one-to-four family residential
properties, loans to mortgage banking companies (which are secured primarily by
loans on one-to-four family residential properties and are known as warehoused
mortgage loans) and various other loans secured by real estate.
Real estate construction loans increased $7 million in 1993 to $263 million.
At December 31, 1993, these loans represented 3.8% of First Alabama's total
loan portfolio, compared to 4.6% at the end of 1989. Most of the construction
loans relate to shopping centers, apartment complexes, commercial buildings
and residential property development. These loans are normally secured by land
and buildings and are generally backed by commitments for long-term financing
from other financial institutions. Real estate construction loans are closely
monitored by management, since these loans are generally considered riskier
than other types of loans and are particularly vulnerable in economic
downturns or in periods of high interest rates. First Alabama has not been an
active lender to speculative real estate developers or to developers outside
its market areas.
The loans to businesses for long-term financing of land and buildings are
primarily to commercial customers within First
29
<PAGE> 7
NET LOAN LOSSES AS A PERCENTAGE OF AVERAGE LOANS
(Graph)
1989 1990 1991 1992 1993
.42 .44 .35 .28 .19
ALLOWANCE FOR LOAN LOSSES AS A PERCENTAGE OF LOANS
(Graph)
1989 1990 1991 1992 1993
1.05 1.10 1.28 1.43 1.47
Alabama's markets. Total loans secured by non-farm, nonresidential properties
totaled $818 million at December 31, 1993. Although some risk is inherent in
this type of lending, the Company attempts to minimize this risk by generally
making such loans only on owner-occupied properties, and by requiring
collateral values which exceed the loan amount, adequate cash flow to service
the debt, and in most cases, the personal guaranties of the borrowers.
Generally, First Alabama's market areas have not experienced rapid increases
in real estate property values or significant overbuilding. Therefore, in
management's opinion, real estate loan collateral values in First Alabama's
market areas should not be as vulnerable to significant deterioration, as
would other market areas which have experienced rapidly increasing property
values and significant overbuilding. However, collateral values are difficult
to estimate and are subject to change depending on economic conditions, the
supply of and demand for properties, and other factors. First Alabama
attempts to mitigate the risky nature of real estate lending by adhering to
standard loan underwriting guidelines and by diversifying the portfolio both
geographically within its market area and within industry groups.
Loans on one-to-four family residential properties, which total
approximately 67% of First Alabama's real estate mortgage portfolio, compared
to approximately 47% in 1991, are principally on single-family residences.
These loans are geographically dispersed throughout the southeastern states
and some are guaranteed by government agencies or private mortgage insurers.
Historically, this category of loans has not produced sizable loan losses;
however, it is subject to some of the same risks as other real estate lending.
Warehoused mortgage loans, since they are secured primarily by loans on
one-to-four family residential properties, are similar to these loans in terms
of risk.
During the past five years, real estate loan net losses ranged from a high
of 0.29% of real estate loans in 1989 to a low of 0.08% of real estate loans
in 1991. In 1993, net losses were 0.09% of real estate loans. These losses
depend, to a large degree, on the level of interest rates, economic conditions
and collateral values, and thus are very difficult to predict. Management's
current estimate of 1994 net real estate loan losses is near the middle of
this range.
First Alabama's consumer loan portfolio consists of $1.4 billion of
installment loans, $249 million in personal lines of credit (including home
equity loans) and $89 million in credit card loans. Consumer loans are
primarily borrowings of individuals for home improvements, automobiles and
other personal and household purposes. Periods of economic recession tend to
increase consumer loan losses. During the past five years, the ratio of
consumer loan net losses to consumer loans ranged from the current low of
0.29% in 1993 to a high of 0.74% in 1990. Management expects net consumer
loan losses in 1994 to be near the low end of this range.
30
<PAGE> 8
The following analysis presents a five-year history of the allowance for loan
losses and loan loss data:
<TABLE>
<CAPTION>
(dollar amounts in thousands) 1993 1992 1991 1990 1989
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for loan losses
Balance at beginning of year $ 73,619 $ 54,769 $ 44,984 $ 37,136 $ 35,090
- -------------------------------------------------------------------------------------------------------------------------
Loans charged off:
Commercial 7,980 8,425 8,197 8,158 6,913
- -------------------------------------------------------------------------------------------------------------------------
Real estate 4,404 2,655 2,437 2,656 4,460
- -------------------------------------------------------------------------------------------------------------------------
Consumer 7,684 8,528 10,177 11,132 8,877
- -------------------------------------------------------------------------------------------------------------------------
Total 20,068 19,608 20,811 21,946 20,250
- -------------------------------------------------------------------------------------------------------------------------
Recoveries:
Commercial 4,346 3,160 2,713 2,180 2,982
- -------------------------------------------------------------------------------------------------------------------------
Real estate 2,195 986 1,162 623 770
- -------------------------------------------------------------------------------------------------------------------------
Consumer 3,138 2,878 2,716 2,783 2,744
- -------------------------------------------------------------------------------------------------------------------------
Total 9,679 7,024 6,591 5,586 6,496
- -------------------------------------------------------------------------------------------------------------------------
Net loans charged off:
Commercial 3,634 5,265 5,484 5,978 3,931
- -------------------------------------------------------------------------------------------------------------------------
Real estate 2,209 1,669 1,275 2,033 3,690
- -------------------------------------------------------------------------------------------------------------------------
Consumer 4,546 5,650 7,461 8,349 6,133
- -------------------------------------------------------------------------------------------------------------------------
Total 10,389 12,584 14,220 16,360 13,754
- -------------------------------------------------------------------------------------------------------------------------
Allowance of acquired institutions 15,999 4,362 -0- -0- -0-
- -------------------------------------------------------------------------------------------------------------------------
Provisions charged to expense 21,533 27,072 24,005 24,208 15,800
- -------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 100,762 $ 73,619 $ 54,769 $ 44,984 $ 37,136
=========================================================================================================================
Average loans outstanding:
Commercial $1,409,945 $1,339,788 $1,292,634 $1,178,601 $1,053,062
- -------------------------------------------------------------------------------------------------------------------------
Real estate 2,418,740 1,842,422 1,587,833 1,399,010 1,251,681
- -------------------------------------------------------------------------------------------------------------------------
Consumer 1,547,823 1,306,429 1,199,019 1,125,147 988,547
- -------------------------------------------------------------------------------------------------------------------------
Total $5,376,508 $4,488,639 $4,079,486 $3,702,758 $3,293,290
- -------------------------------------------------------------------------------------------------------------------------
Net charge-offs as percent of average
loans outstanding:
- -------------------------------------------------------------------------------------------------------------------------
Commercial .26% .39% .42% .51% .37%
- -------------------------------------------------------------------------------------------------------------------------
Real estate .09 .09 .08 .15 .29
- -------------------------------------------------------------------------------------------------------------------------
Consumer .29 .43 .62 .74 .62
- -------------------------------------------------------------------------------------------------------------------------
Total .19 .28 .35 .44 .42
- -------------------------------------------------------------------------------------------------------------------------
Net charge-offs as percent of:
Provision for loan losses 48.2% 46.5% 59.2% 67.6% 87.1%
- --------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses 10.3 17.1 26.0 36.4 37.0
- --------------------------------------------------------------------------------------------------------------------------
Allowance as percent of:
5-year moving average of net charge-offs 583% 446% 346% 306% 316%
- --------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income 1.47 1.43 1.28 1.10 1.05
- --------------------------------------------------------------------------------------------------------------------------
Provision for loan losses (net of tax effect)
as percent of net income 12.0% 17.9% 19.3% 22.1% 15.9%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 9
At December 31, 1993, non-accrual loans totaled $39.5 million or 0.58% of
loans, compared to $21.8 million or 0.42% of loans at December 31, 1992.
Commercial loans comprised $8.5 million of the 1993 total, with real estate
loans accounting for $28.9 million and consumer loans $2.1 million. The
increase in non-accrual loans in 1993 occurred primarily in real estate loans
as a result of the Secor acquisition. Exclusive of the loans added by
acquisitions, non-accrual loans would have declined in 1993. The table on page
27 provides additional information on non-accruing loans based on the
customer's Standard Industrial Classification Code.
Loans contractually past due 90 days or more were 0.19% of total loans at
December 31, 1993, compared to 0.11% of total loans at December 31, 1992. Loans
past due 90 days or more at December 31, 1993, consisted of $9.8 million in
commercial and real estate loans, $2.7 million in installment loans and $0.5
million in personal lines of credit and credit card loans. The increase in past
due loans in 1993 was primarily due to the Secor acquisition.
Renegotiated loans increased to $4.2 million (0.06% of loans) at December
31, 1993, primarily as a result of $2.5 million in renegotiated loans added by
the Secor acquisition.
Other real estate totaled $13.7 million at December 31, 1993, compared to
$11.7 million at December 31, 1992. Included in the 1993 total is $5.5 million
of foreclosed real estate, acquired in connection with the acquisition of
Secor. During 1993, $13.2 million was added to other real estate, sales totaled
$10.7 million and write-downs were $0.5 million. Excluding the other real
estate acquired in the 1993 acquisitions, other real estate decreased $5.0
million in 1993. Other real estate is recorded at the lower of (1) the
recorded investment in the loan or (2) the estimated net realizable value of
the collateral. Although First Alabama does not anticipate material loss upon
disposition of other real estate, sustained periods of adverse economic
conditions, substantial declines in real estate values in First Alabama's
markets, actions by bank regulatory agencies or other factors, could result in
additional loss from other real estate.
The amount of interest income earned in 1993 on the $39.5 million of
non-accruing loans outstanding at year-end was approximately $727,000. If these
loans had been current in accordance with their original terms, approximately
$2.3 million would have been earned on these loans in 1993. Approximately
$144,000 in interest income would have been earned in 1993 under the original
terms of the $4.2 million in renegotiated loans outstanding at December 31,
1993. Approximately $90,000 in interest income was actually earned in 1993 on
these loans.
In the normal course of business, First Alabama makes commitments under
various terms to lend funds to its customers. These commitments include (among
others) revolving credit agreements, term loan agreements and short-term
borrowing arrangements, which are usually for working capital needs. Letters of
credit are also issued, which under certain conditions could result in loans.
See Note L to the consolidated financial statements for additional information
on commitments.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
The following table presents information on non-performing loans and other real estate:
NON-PERFORMING ASSETS
(dollar amounts in thousands) December 31
- ---------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-performing loans:
Loans accounted for on a non-accrual basis $39,519 $21,771 $25,013 $31,288 $17,376
- ---------------------------------------------------------------------------------------------------------------------------
Loans contractually past due ninety days
or more as to principal or interest payments
(exclusive of non-accrual loans) 13,028 5,622 5,036 5,648 7,768
- ---------------------------------------------------------------------------------------------------------------------------
Loans whose terms have been renegotiated
to provide a reduction or deferral of interest
or principal because of a deterioration in the
financial position of the borrower
(exclusive of non-accrual loans and loans past
due ninety days or more) 4,169 2,777 1,396 1,225 1,611
- --------------------------------------------------------------------------------------------------------------------------
Real estate acquired in settlement of loans
("other real estate") 13,720 11,678 11,911 7,657 6,788
- --------------------------------------------------------------------------------------------------------------------------
TOTAL $70,436 $41,848 $43,356 $45,818 $33,543
==========================================================================================================================
Non-performing assets as a percentage of loans
and other real estate 1.03% 0.81% 1.01% 1.12% 0.94%
==========================================================================================================================
</TABLE>
32
<PAGE> 10
INTEREST BEARING DEPOSITS IN OTHER BANKS
Interest-bearing deposits in other banks are used primarily
as temporary investments. These assets generally have short-term maturities.
This category of earning assets declined from $31.1 million at December 31,
1991, to $342,000 at December 31, 1992, and then increased to $11.0 million at
December 31, 1993.
INVESTMENT SECURITIES
Investment securities increased $94.4 million or 6% in 1992. U.S. Treasury and
Federal agency securities decreased $23.8 million or 3%. Mortgage-backed
securities increased $94.6 million or 22%. The amount of obligations of states
and political subdivisions remained relatively constant in 1992. Other
securities increased $0.5 million or 2% and equity securities increased $23.4
million as a result of First Alabama Bank joining the Federal Home Loan Bank
system.
In 1993, investment securities increased $698.2 million or 42% principally
as a result of the Secor acquisition, which added $639.7 million in investment
securities. U.S. Treasury and Federal agency securities increased $33.3 million
or 4%. Mortgage-backed securities increased $578.4 million or 111% as a result
of the Secor acquisition. Obligations of states and political subdivisions
increased by $53.3 million or 31% in 1993. Other securities increased $6.1
million or 23%. Equity securities increased $27.1 million or 116% as a result
of Federal Home Loan Bank stock acquired in acquisitions during 1993. See Note
C to the consolidated financial statements for additional information on
investment securities at December 31, 1993.
Investment portfolio policy stresses quality and liquidity. At December 31,
1993, the average maturity of U.S. Treasury and Federal agency securities was
2.9 years and that of obligations of states and political subdivisions was 7.1
years. The average maturity of mortgage-backed securities was 12.2 years and
other securities had an average maturity of 16.8 years. Overall, the average
maturity of the portfolio was 7.9 years using contractual maturities and 3.0
years using expected maturities. Expected maturities differ from contractual
maturities because borrowers have the right to call or prepay obligations with
or without call or prepayment penalties. Securities purchased during the last
several years have primarily short to intermediate term maturities.
The estimated fair market value of First Alabama's investment portfolio at
December 31, 1993, was 4% ($89.5 million) above the amount carried on First
Alabama's books. Gross unrealized gains totaled $91.8 million and gross
unrealized losses totaled $2.2 million. Market values vary significantly as
interest rates change; however, management expects normal maturities in the
portfolio to meet liquidity needs.
Of the tax-free securities rated by Moody's Investors Service, Inc., 99% are
rated "A" or better. Fourteen percent of the tax-free bond portfolio is
non-rated. These non-rated securities are principally issued by various
political subdivisions within the State of Alabama. The portfolio is carefully
monitored to assure that there is no unreasonable concentration of securities
in the obligations of a single debtor and current credit reviews are conducted
on each security holding.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
The following table shows the maturities of investment securities, excluding Federal Home Loan Bank stock, at December 31,
1993, the weighted average yields of such securities and the taxable equivalent adjustment used in calculating the yields:
(in thousands) Securities Maturing
- ----------------------------------------------------------------------------------------------------------------------------
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years
- ----------------------------------------------------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
Federal agency
securities $185,632 7.05% $631,920 7.45% $145,539 9.13% $ 307 9.61%
- ----------------------------------------------------------------------------------------------------------------------------
Mortgage-backed
securities 5,213 5.62 193,992 4.66 181,464 5.28 717,266 5.97
- ----------------------------------------------------------------------------------------------------------------------------
States and political
subdivisions 16,413 7.97 46,209 9.58 97,357 9.59 63,694 10.23
- ----------------------------------------------------------------------------------------------------------------------------
Other securities 3,249 23.44 300 6.40 26,312 4.06 3,022 4.85
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL $210,507 7.34% $872,421 6.95% $450,672 7.41% $784,289 6.33%
============================================================================================================================
Taxable equivalent
adjustment for
calculation of yield $ 439 $ 1,478 $ 3,156 $ 2,214
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 11
LIQUIDITY
Liquidity is an important factor in the financial condition of First Alabama
and affects First Alabama's ability to meet the borrowing needs and deposit
withdrawal requirements of its customers. Assets, consisting principally of
loans and investment securities, are funded by customer deposits, purchased
funds and borrowed funds.
The investment portfolio is one of First Alabama's primary sources of
liquidity. Maturities of securities provide a constant flow of funds which are
available for cash needs (see table on Securities Maturing on page 33).
Maturities in the loan portfolio also provide a steady flow of funds (see table
on Loans Maturing on page 26). At December 31, 1993, commercial loans, real
estate construction loans and commercial mortgage loans with an aggregate
balance of $1.2 billion, as well as securities of $210 million, were due to
mature in one year or less. Additional funds are provided from payments on
consumer loans and one-to-four family residential mortgage loans. A
historically high level of net operating earnings also contributes to cash
flow. In addition, liquidity needs can be met by the purchase of funds in state
and national money markets. First Alabama's liquidity also continues to be
enhanced by a relatively stable deposit base. At December 31, 1993, the loan to
deposit ratio was 78% and the ratio of loans to core deposits (excluding
certificates of deposit of $100,000 or more) was 83%.
As shown in the Statement of Cash Flows on page 53, operating activities
provided significant levels of funds in all three years. Investing activities,
primarily in loans and investment securities, were a net user of funds in all
three years. Investing activities required less funds in 1991 due to slower
growth in loans and investment securities. Increased internal loan growth and
the loans and investment securities added by the Security Federal and Secor
acquisitions required increased funds for investing activities in 1992 and
1993. Funds needed for investing activities were provided primarily by
deposits, purchased funds, borrowings and equity. Financing activities provided
less funds in 1991 due to a decrease in short-term borrowings. The deposits
added by acquisitions over the last three years, as well as internal growth in
deposits and increased use of short-term borrowings in 1992, has enabled the
Company to fund the growth in investment activities. In 1992 increased
long-term borrowings also helped to support the growth in investing activities,
as did the issuance of stock for acquisitions in 1993.
First Alabama Bank's short-term certificates of deposit are rated "A-1+" by
Standard & Poor's Corporation. This is the highest rating available for any
company. First Alabama Bank's long-term certificates of deposit are rated
"AA-", which is higher than any other Alabama bank and among the highest rated
banks in the Southeast.
Moody's Investors Service has also given similar quality ratings to First
Alabama Bank's short-term and long-term debt and certificates of deposit.
Short-term debt and certificates of deposit are rated "P-1" and long-term debt
and certificates of deposit are rated "Aa2."
In addition, First Alabama Bank received the highest issuer rating available
("A") from the internationally recognized bank rating organization, Thomson
BankWatch. This organization also assigned its highest short-term rating of
"TBW-1" to First Alabama Bank's certificates of deposit.
First Alabama Bancshares' (the parent company) commercial paper has been
assigned a rating of "A-1" by Standard and Poor's Corporation and "TBW-1" by
Thomson BankWatch. First Alabama Bancshares, Inc. also has been assigned
Thomson BankWatch's highest issuer rating of "A."
The $75 million subordinated debt issued by First Alabama in December 1992
is rated "A" by Standard & Poor's Corporation, "A2" by Moody's Investors
Service, and "AA-" by Thomson BankWatch.
These high quality ratings enhance the Company's ability to raise funds in
national money markets. The high ratings also help to attract both loan and
deposit customers in local markets.
Historically, First Alabama has found short and intermediate term credit
readily available on reasonable terms from money center or regional banks.
First Alabama's management places constant emphasis on the maintenance of
adequate liquidity to meet conditions which might reasonably be expected to
occur.
34
<PAGE> 12
DEPOSITS
Deposits are First Alabama's primary funding source. Deposits accounted for 96%
of the funding for earning assets in 1992 and 94% of the funding for earning
assets in 1993. Over the last three years, as market interest rates dropped to
historically low levels, a significant shift in the composition of First
Alabama's deposit base has taken place. As market interest rates dropped and
pricing spreads (the difference between rates paid on different deposit
products) narrowed, customers began moving funds out of term deposits, such as
certificates of deposit, and into more liquid types of deposits. This trend can
be seen by comparing the relatively high growth rates of non-interest-bearing
deposits, savings accounts and money market accounts to the relatively low
growth rate of other interest-bearing deposits. This trend may continue as long
as market interest rates remain low and pricing spreads remain narrow. However,
management expects a reversal of this trend when market interest rates begin to
rise or pricing spreads begin to expand.
During the last four years, average total deposits grew at a compound annual
rate of 12%. Average deposits grew $452 million or 10% in 1990, $728 million or
15% in 1991, $637 million or 11% in 1992 and $686 million or 11% in 1993.
Acquisitions accounted for as purchases contributed average deposit balance
growth of $183 million in 1990, $384 million in 1991, $216 million in 1992 and
$392 million in 1993.
Savings accounts continue to be one of First Alabama's fastest growing
deposit products. Savings accounts increased 25% in 1992 and 26% in 1993. Since
1989 this category of deposits increased $290 million, at a compound annual
growth rate of 18%. As mentioned above, this growth occurred as market interest
rates fell making the rates paid on these accounts more attractive relative to
other investment alternatives. In 1993, savings accounts accounted for 9% of
average total deposits compared to 8% of average total deposits in 1992.
Interest-bearing transaction accounts have been a steady source of new funds
for First Alabama. Interest-bearing transaction accounts increased 16% in 1992
and 11% in 1993. Since 1989 this category of deposits increased $522 million,
at a compound annual growth rate of 17%. Interest-bearing transaction accounts
are also a significant funding source for First Alabama, accounting for 16% of
average total deposits in both 1992 and 1993.
Money market savings products have been First Alabama's fastest growing
deposit products, increasing at a compound annual rate of 32% since 1989. As
market interest rates declined during 1991, 1992 and 1993, customers began
moving from certificates of deposit to money market savings accounts, resulting
in increases in average balances of 36% in 1992 and 19% in 1993. Money market
savings products are also a significant funding source for First Alabama,
accounting for 16% of average total deposits in 1992 and 17% of average total
deposits in 1993.
Certificates of deposit of $100,000 or more were allowed to decline 17% in
1992 and less than 1% in 1993, due to the use of alternative funding sources.
Since 1989, certificates of deposit of $100,000 or more declined at a compound
annual rate of 11%, and in 1993 accounted for only 6% of average total
deposits, down from a five year high of 16% in 1989.
Other interest-bearing deposits (certificates of deposit of less than
$100,000 and time open accounts) grew 22% in 1991, 4% in 1992 and 5% in 1993.
Although this category of deposits continues to be First Alabama's primary
funding source, it accounted for 36% of average total deposits in 1993,
compared to 39% of average total deposits in 1992. This trend may continue as
long as the rates paid on other deposit products remain attractive relative to
the rates paid on this category of deposits.
As market interest rates fell over the last three years, First Alabama's
deposit structure tended to be sensitive to those changes. This sensitivity can
be seen in First Alabama's average interest rate paid on interest-bearing
deposits over the past five years (see table on Rates Paid on page 36). Market
interest rates generally increased during the first quarter of 1989. Beginning
in the second quarter of 1989 and continuing through 1993, market interest
rates generally declined. First Alabama's average interest rate paid on
interest-bearing deposits reflects this trend. This rate decreased from 7.37%
in 1989 to 6.95% in 1990 to 5.88% in 1991 to 4.06% in 1992 and to 3.40% in
1993. All categories of interest-bearing deposits (including those accounts
that do not reprice on a contractual basis) showed a decline in the average
interest rate paid in 1993.
A detail of interest-bearing deposit balances at December 31, 1993 and 1992,
and the interest expense on these deposits for the three years ended December
31, 1993, is presented in Note H to the consolidated financial statements.
35
<PAGE> 13
The following table presents the detail of interest-bearing deposits and
maturities of the larger time deposits:
<TABLE>
<CAPTION>
(in thousands) December 31
- ----------------------------------------------------------------------
1993 1992
- ----------------------------------------------------------------------
<S> <C> <C>
Interest-bearing deposits
of less than $100,000 $6,570,014 $4,805,616
- ----------------------------------------------------------------------
Time certificates of deposit
of $100,000 or more, maturing in:
3 months or less 150,274 174,026
- ----------------------------------------------------------------------
over 3 through 6 months 84,208 87,435
- ----------------------------------------------------------------------
over 6 through 12 months 109,107 72,387
- ----------------------------------------------------------------------
over 12 months 230,903 96,549
- ----------------------------------------------------------------------
574,492 430,397
- ----------------------------------------------------------------------
Other time deposits of
$100,000 or more
maturing in 3 months or less 429,503 423,142
- ----------------------------------------------------------------------
TOTAL $7,574,009 $5,659,155
======================================================================
</TABLE>
BORROWED FUNDS
Purchased funds can be used to satisfy daily funding needs and, when
advantageous, for arbitrage. Federal funds purchased and securities sold under
agreements to repurchase decreased from $232.0 million at December 31, 1992 to
$184.6 at December 31, 1993 . Balances in these accounts fluctuate
significantly on a day-to-day basis. The average daily balance of federal funds
purchased and securities sold under agreements to repurchase decreased $14.9
million in 1992 and increased $27.5 million in 1993.
At December 31, 1993, $17.2 million in commercial paper was outstanding,
compared to $19.3 million at December 31, 1992. The Company issues commercial
paper through its private placement commercial paper program. The Company's
regular, or retail, commercial paper program was discontinued in 1993 since the
private placement program was meeting the Company's needs at a lower cost.
Company policy limits total commercial paper outstanding, at any time, to $75
million.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
The following table presents the average amounts of deposits outstanding by category for the five years ended
December 31, 1993:
(in thousands) Average Amounts Outstanding
- --------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-interest-bearing demand deposits $1,053,111 $ 896,847 $ 786,243 $ 764,945 $ 765,398
- --------------------------------------------------------------------------------------------------------------------------
Interest-bearing transaction accounts 1,120,768 1,007,570 844,295 699,956 598,597
- --------------------------------------------------------------------------------------------------------------------------
Savings accounts 603,012 477,880 382,736 324,329 312,686
- --------------------------------------------------------------------------------------------------------------------------
Money market savings accounts 1,159,824 977,881 718,518 519,162 376,964
- --------------------------------------------------------------------------------------------------------------------------
Certificates of deposit of $100,000 or
more 438,039 439,815 531,378 640,798 692,506
- --------------------------------------------------------------------------------------------------------------------------
Other interest-bearing deposits 2,505,565 2,394,547 2,294,559 1,880,380 1,631,271
- --------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 5,827,208 5,297,693 4,771,486 4,064,625 3,612,024
- --------------------------------------------------------------------------------------------------------------------------
Total deposits $6,880,319 $ 6,194,540 $5,557,729 $ 4,829,570 $4,377,422
==========================================================================================================================
</TABLE>
The following table presents the average rates paid on deposits by
category for the five years ended December 31, 1993:
<TABLE>
<CAPTION>
Rates Paid
- --------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest-bearing transaction accounts 2.53% 2.86% 4.51% 5.66% 5.78%
- --------------------------------------------------------------------------------------------------------------------------
Savings accounts 2.96 3.47 4.87 4.98 4.96
- --------------------------------------------------------------------------------------------------------------------------
Money market savings accounts 2.82 3.30 4.86 5.81 5.29
- --------------------------------------------------------------------------------------------------------------------------
Certificates of deposit of $100,000 or more 4.34 4.98 6.70 8.01 8.96
- --------------------------------------------------------------------------------------------------------------------------
Other interest-bearing deposits 4.01 4.83 6.69 7.73 8.22
- --------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 3.40% 4.06% 5.88% 6.95% 7.37%
==========================================================================================================================
</TABLE>
36
<PAGE> 14
The level of commercial paper outstanding depends on the funding requirements
of the Company and the cost of commercial paper compared to alternative
borrowing sources.
Other short-term borrowings increased only $84,000 from the prior year end.
In 1992 and 1993 other short-term borrowings consisted of a short sale
liability at First Alabama's broker/dealer subsidiary. Short sales are
frequently used by the broker/dealer subsidiary to offset other market risks
which are undertaken in the normal course of business.
Year-end 1992 long-term borrowings increased $118.2 million from year-end
1991. In December 1992, the Company issued $75 million in ten-year subordinated
notes at a coupon rate of 7.80%. The notes qualify as Tier II capital under
Federal Reserve guidelines. Issuance of these notes improved the Company's
total capital ratios and provided additional flexibility for financing future
growth. An additional $25 million in unsecured notes, debentures, bonds or
other evidences of indebtedness could be issued under a registration statement
filed with the Securities and Exchange Commission in early 1992. The Company
also borrowed $45 million during 1992 in intermediate-term, fixed rate funds
from the Federal Home Loan Bank of Atlanta. Membership in the Federal Home Loan
Bank system provides access to an additional source of lower-cost funds. These
borrowings can be used to partially hedge against the effects of future
interest rate changes, as they may affect the Company's real estate mortgage
portfolio.
In 1993, long-term borrowings increased $325.9 million. Secor's $294.6
million in borrowings from the Federal Home Loan Bank and the addition of $27
million in medium-term notes issued by Secor, accounted for most of the
increase. Prior to the Secor acquisition, the Company had also increased its
borrowings from the Federal Home Loan Bank by $5 million.
STOCKHOLDERS' EQUITY
Although First Alabama's equity to assets ratio has declined over the past
three years due to acquisitions, the Company maintains a ratio of stockholders'
equity to total assets that is above industry standards. Based on FDIC
statistics, the average ratio of stockholders' equity to total assets for all
FDIC insured commercial banks in the United States was 7.95% through the first
three quarters of 1993, 7.52% in 1992, and 6.75% in 1991. First Alabama's ratio
of stockholders' equity to total assets was 8.12% at December 31, 1993,
compared to 8.33% at December 31, 1992 and 8.49% at December 31, 1991.
Stockholders' equity increased at a compound annual growth rate of 13.3% over
the past five years. First Alabama's high level of equity capital, relative to
its peers, is a source of strength and provides flexibility for future growth.
Over the last three years stockholders' equity grew from $524 million at the
beginning of 1991 to $851 million at year-end 1993. Internally generated
retained earnings contributed $182 million of this growth, equity issued in
connection with acquisitions accounted for $127 million, and $18 million was
attributable to the exercise of stock options and the issuance of stock to
employees under the incentive plan. The internal capital generation rate (net
income less dividends as a percentage of average stockholders' equity) was
10.6% in 1993, up from 10.2% in 1992.
First Alabama and its subsidiaries are required to comply with capital
adequacy standards established by banking regulatory agencies. Currently, there
are two basic measures of capital adequacy: a risk-based measure and a leverage
measure.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and
bank holding companies, to account for off-balance sheet exposure and to
minimize disincentives for holding liquid assets. Assets and off-balance sheet
items are assigned to broad risk categories, each with specified risk-weighting
factors. The resulting capital ratios represent capital as a percentage of
total risk-weighted assets and off-balance sheet items. The banking regulatory
agencies plan to start considering interest rate risk in computing risk-based
capital ratios.
The minimum standard for the ratio of total capital to risk-weighted assets
is 8%. At least 50% of that capital level must consist of common equity,
undivided profits and non-cumulative perpetual preferred stock, less goodwill
and certain other intangibles ("Tier I capital"). The remainder ("Tier II
capital") may consist of a limited amount of other preferred stock, mandatory
convertible securities, subordinated debt and a limited amount of the allowance
for loan losses. The sum of Tier I capital and Tier II capital is "total
risk-based capital."
The banking regulatory agencies also have adopted regulations which
supplement the risk-based guidelines to include a minimum leverage ratio of 3%
of Tier I capital to total assets less goodwill (the "leverage ratio").
Depending upon the risk profile of the institution and other factors, the
regulatory agencies may require a leverage ratio of 1% to 2% above the minimum
3% level.
37
<PAGE> 15
The following chart summarizes the applicable bank regulatory capital
requirements. First Alabama's capital ratios at December 31, 1993,
substantially exceeded all regulatory requirements.
<TABLE>
<CAPTION>
BANK REGULATORY CAPITAL REQUIREMENTS
Minimum
Regulatory FIRST ALABAMA AT
Requirement DECEMBER 31, 1993
- -----------------------------------------------------------
<S> <C> <C>
Tier I capital to risk-
adjusted assets 4.00% 11.13%
- -----------------------------------------------------------
Total risk-based capital to
risk-adjusted assets 8.00% 13.48%
- -----------------------------------------------------------
Tier I leverage ratio 3.00% 10.11%
- -----------------------------------------------------------
</TABLE>
Total capital at the affiliate banks also has an important effect on the
amount of FDIC insurance premiums paid. Lower capital ratios can cause the
rates paid for FDIC insurance to increase. First Alabama plans to maintain the
capital necessary to keep FDIC insurance rates relatively low.
First Alabama attempts to balance the return to stockholders through the
payment of dividends, with the need to maintain strong capital levels for
future growth opportunities. In 1993, First Alabama returned 35% of earnings to
its stockholders in the form of dividends. Total dividends declared were $38.8
million or $1.04 per share, after adjusting for the 10% stock dividend
distributed in April 1993.
In January 1994, the Board of Directors declared an increase in the
quarterly cash dividend from $.26 to $.30 per share, a 15.4% increase. This is
the twenty-second consecutive year that First Alabama has increased cash
dividends.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
The following table shows the percentage distribution of First Alabama's consolidated average balances of assets,
liabilities and stockholders' equity for the five years ended December 31, 1993:
1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C>
Earning assets:
Taxable securities 18.1% 20.7% 20.8% 17.6% 19.7%
- --------------------------------------------------------------------------------------------------------------------------
Non-taxable securities 2.4 2.3 2.7 3.0 3.2
- --------------------------------------------------------------------------------------------------------------------------
Federal funds sold 0.7 2.5 1.5 0.9 1.4
- --------------------------------------------------------------------------------------------------------------------------
Loans (net of unearned income):
Commercial 17.7 19.0 20.3 21.1 20.2
- --------------------------------------------------------------------------------------------------------------------------
Real estate 30.3 26.0 25.0 25.0 24.0
- --------------------------------------------------------------------------------------------------------------------------
Installment 19.4 18.5 18.9 20.1 19.0
- --------------------------------------------------------------------------------------------------------------------------
Total loans 67.4 63.5 64.2 66.2 63.2
- --------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses (1.1) (0.9) (0.8) (0.7) (0.7)
- --------------------------------------------------------------------------------------------------------------------------
Net loans 66.3 62.6 63.4 65.5 62.5
- --------------------------------------------------------------------------------------------------------------------------
Other earning assets 3.1 2.6 2.1 2.5 3.0
- --------------------------------------------------------------------------------------------------------------------------
Total earning assets 90.6 90.7 90.5 89.5 89.8
- --------------------------------------------------------------------------------------------------------------------------
Cash and due from banks 4.9 4.6 4.6 5.7 5.7
- --------------------------------------------------------------------------------------------------------------------------
Other non-earning assets 4.5 4.7 4.9 4.8 4.5
- --------------------------------------------------------------------------------------------------------------------------
Total assets 100.0% 100.0% 100.0% 100.0% 100.0%
==========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing 13.2% 12.7% 12.4% 13.7% 14.7%
- --------------------------------------------------------------------------------------------------------------------------
Interest-bearing 73.0 74.8 75.1 72.7 69.3
- --------------------------------------------------------------------------------------------------------------------------
Total deposits 86.2 87.5 87.5 86.4 84.0
- --------------------------------------------------------------------------------------------------------------------------
Borrowed funds:
Short-term 1.8 1.8 2.3 2.9 4.8
- --------------------------------------------------------------------------------------------------------------------------
Long-term 1.8 0.7 0.3 0.4 0.8
- --------------------------------------------------------------------------------------------------------------------------
Total borrowed funds 3.6 2.5 2.6 3.3 5.6
- --------------------------------------------------------------------------------------------------------------------------
Other liabilities 1.5 1.4 1.3 1.3 1.3
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 91.3 91.4 91.4 91.0 90.9
- --------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 8.7 8.6 8.6 9.0 9.1
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity 100.0% 100.0% 100.0% 100.0% 100.0%
==========================================================================================================================
</TABLE>
38
<PAGE> 16
OPERATING RESULTS
Net income increased 18% in 1993 and 21% in 1992. The accompanying table
presents the dollar amount and percentage change in the important components of
income that occurred in 1993 and 1992.
SUMMARY OF CHANGES IN OPERATING RESULTS
<TABLE>
<CAPTION>
(dollar amounts in thousands) Increase (Decrease)
- -----------------------------------------------------------
1993 COMPARED 1992 Compared
TO 1992 to 1991
- -----------------------------------------------------------
AMOUNT % Amount %
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
NET INTEREST INCOME $29,374 9% $47,875 18%
- -----------------------------------------------------------
Provision for loan losses (5,539) (20) 3,067 13
- -----------------------------------------------------------
Net interest income after
provision for loan
losses 34,913 12 44,808 19
- -----------------------------------------------------------
Non-interest income:
Trust department income 1,579 9 2,277 16
- -----------------------------------------------------------
Service charges on
deposit accounts 838 2 3,364 9
- -----------------------------------------------------------
Mortgage servicing
and origination fees 7,031 19 8,798 31
- -----------------------------------------------------------
Securities transactions 131 NM 454 90
- -----------------------------------------------------------
Other 3,371 15 2,727 13
- -----------------------------------------------------------
Total non-interest
income 12,950 11 17,620 17
- -----------------------------------------------------------
NON-INTEREST EXPENSE:
Salaries and
employee benefits 16,239 12 19,240 16
- -----------------------------------------------------------
Net occupancy expense 1,118 8 654 5
- -----------------------------------------------------------
Furniture and equipment
expense 920 5 345 2
- -----------------------------------------------------------
FDIC insurance expense 479 3 2,302 20
- -----------------------------------------------------------
Other 3,611 4 11,778 17
- -----------------------------------------------------------
Total non-interest
expense 22,367 8 34,319 15
- -----------------------------------------------------------
Income before
income taxes 25,496 18 28,109 25
- -----------------------------------------------------------
Applicable income taxes 8,499 19 11,317 34
- -----------------------------------------------------------
NET INCOME $16,997 18% $16,792 21%
===========================================================
</TABLE>
NET INTEREST INCOME
Net interest income (interest income less interest expense) is First Alabama's
principal source of income. Net interest income increased 9% in 1993 and 18% in
1992. On a taxable equivalent basis, net interest income increased 9% in 1993
and 17% in 1992. The table on page 43 analyzes the changes in net interest
income.
Changes in the volume of interest-earning assets and interest-bearing
liabilities contributed to growth in net interest income in 1993. However,
growth in net interest income due to volume changes was partially offset by
unfavorable changes in yields earned and rates paid on those assets and
liabilities. Changes in the volume of interest-earning assets and
interest-bearing liabilities, as well as changes in yields earned and rates
paid on those assets and liabilities, contributed to growth in net interest
income in 1992. Increased net interest income attributable to volume changes
resulted from increases in average earning assets of 13% in 1993 and 12% in
1992, partially offset by volume increases in interest-bearing liabilities of
12% in 1993 and 11% in 1992. Volume changes of equal amounts in earning assets
and interest-bearing liabilities typically increase net interest income because
of the spread between the yield earned on earning assets and the rate paid on
interest-bearing liabilities.
First Alabama measures its ability to produce net interest income with a
ratio called the interest margin. The interest margin is net interest income
(on a taxable equivalent basis) as a percentage of earning assets. The interest
margin increased from 4.78% in 1991, to 4.98% in 1992 and then decreased to
4.82% in 1993. Changes in the interest margin occur primarily due to four
factors: (1) the interest rate spread (taxable equivalent yield on earning
assets less the rate on interest-bearing liabilities), (2) the percentage of
earning assets funded by interest-bearing liabilities, (3) changes in market
interest rates and (4) changes in the statutory federal income tax rate.
The first factor affecting First Alabama's interest margin is the interest
rate spread. First Alabama's average interest rate spread expanded from 3.91%
in 1991 to 4.35% in 1992 and then contracted to 4.25% in 1993. The interest
rate spread contracted in 1993 because the weighted average yield on earning
assets declined 10 basis points more than did the weighted average rate paid on
interest-bearing liabilities. During 1993, interest rates declined on virtually
all categories of earning assets and interest-bearing liabilities. However,
because First Alabama was generally "asset sensitive" during 1993, earning
assets repriced slightly faster than did interest-bearing liabilities. Loans,
which are typically First Alabama's highest yielding earning asset, expanded as
a percentage of earning assets -- partially mitigating the effects of
contracting spreads in 1993. Average loans as a percentage of earning assets
contracted from 70% in 1991, to 69% in 1992 and expanded to 74% in 1993. Due to
the effect of recent acquisitions, the interest rate spread is expected to
contract further in 1994.
The second factor affecting interest margin is the percentage of earning
assets funded by interest-bearing liabilities. Funding for First Alabama's
earning assets comes from interest-bearing
39
<PAGE> 17
liabilities, non-interest-bearing liabilities and stockholders' equity.
The net return on earning assets funded by non-interest-bearing liabilities and
stockholders' equity is better than the net return on earning assets funded by
interest-bearing liabilities. The percentage of earning assets funded by
interest-bearing liabilities dropped from 85% in 1991, to 84% in both 1992 and
1993. The changes in the percentage of earning assets funded by
interest-bearing liabilities had no effect on net interest income in 1993, but
had a favorable effect on net interest income in 1992.
The third factor affecting interest margin is changes in market interest
rates. Market interest rates, both the level of rates and the slope of the
yield curve (the spread between short-term rates and longer-term rates),
strongly influence the pricing on most categories of First Alabama's earning
assets and interest-bearing liabilities. The level of market interest rates
increased in 1989, resulting in higher yields on earning assets as well as
higher rates on interest-bearing liabilities. The level of market interest
rates generally declined in 1990, 1991, 1992 and 1993. In addition, the slope
of the yield curve became steeper during 1990, 1991 and 1992 as short-term
rates declined faster than long-term rates. These two factors combined to
reduce yields on earning assets as well as reduce rates on interest-bearing
liabilities. One particularly important aspect of the steeper yield curve is
the impact it had on the pricing of interest-bearing transaction accounts,
money market savings accounts and regular savings accounts. Historically, the
rates paid on these products proved to be relatively insensitive to changes in
market interest rates, and thus provided a relatively fixed rate source of
funding for earning assets. However, as the yield curve became steeper and
short-term rates dropped to historical low levels, the rates paid on these
products were reduced. As a result of reducing the rates paid on these
products, the rate on interest-bearing liabilities declined significantly
faster than did the yield on earning assets during the period from 1990 through
1992. Market interest rates stablized slightly during 1993, with short-term
rates remaining relatively constant and longer-term rates declining. This
resulted in a flatter yield curve. Consequently, although the yields on earning
assets and the rates on interest-bearing liabilities both declined, the yield
on earning assets declined faster than did the rate on interest-bearing
liabilities.
The last factor, changes in the statutory federal income tax rate, affected
the interest margin in 1993. The marginal federal tax rate was constant at 34%
from 1988 through 1992, but was increased to 35% in 1993. The 1994 rate will be
35% unless changed by legislation. Comparisons of the interest margin to years
prior to 1993 are affected by the change in this rate. The higher tax rate in
1993 increased the taxable equivalent value of interest income on tax-free
loans and securities and thus increased the interest margin by 1 basis point in
1993. This increase is "artificial" since it reflects increased tax expense
resulting from the tax rate change.
INTEREST RATE SENSITIVITY
The primary objective of Asset/Liability Management at First Alabama is to
achieve reasonable stability in net interest income throughout interest rate
cycles. This is achieved by maintaining the proper balance of rate sensitive
earning assets, rate sensitive liabilities and off-balance sheet interest rate
hedges. The relationship of rate sensitive earning assets to rate sensitive
interest-bearing liabilities, adjusted for the effect of off-balance sheet
hedges, (interest rate sensitivity) is the principal factor in determining the
effect that fluctuating interest rates will have on future net interest income.
Rate sensitive earning assets and interest-bearing liabilities are those which
can be repriced to current market rates within a relatively short time period.
Management monitors the rate sensitivity of earning assets and interest-bearing
liabilities over periods of up to ten years, but places particular emphasis on
the first year. At December 31,
<TABLE>
<CAPTION>
NET INTEREST INCOME IN THOUSANDS INTEREST RATE SPREAD
(TAXABLE EQUIVALENT) (TAXABLE EQUIVALENT)
(Graph) (Graph)
1989 1990 1991 1992 1993 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
Interest Average Interest
Income 511,906 533,174 569,117 547,007 566,162 Rate Earned 10.9 10.6 9.8 8.4 7.7
Interest Average Interest
Expense 292,687 297,613 292,017 224,068 213,614 Rate Paid 7.5 7.0 5.9 4.1 3.5
-------------------------------------------------- ----------------------------------
Interest Rate
Net Interest Income 219,219 235,561 277,100 322,939 352,548 Spread 3.4 3.6 3.9 4.3 4.2
================================================== ==================================
</TABLE>
40
<PAGE> 18
1993, approximately 53% of earning assets and 68% of the funding for these
earning assets was scheduled to be repriced to current market rates at least
once during 1994.
The accompanying table shows First Alabama's rate sensitive position at
December 31, 1993, as measured by gap analysis (the difference between the
earning asset and interest-bearing liability amounts scheduled to be repriced
to current market rates in subsequent periods). Over the next twelve months
approximately $1.5 billion more interest-bearing liabilities than earning
assets can be repriced to current market rates at least once. As a result, the
one-year cumulative gap ratio (ratio of rate sensitive assets to rate sensitive
liabilities) at December 31, 1993, was 0.77, indicating a "liability sensitive"
position.
First Alabama obtained interest rate swap agreements with a notional value
of $77.9 million in the Secor acquisition. Secor used these swap agreements to
control its interest sensitivity position. A portion of these swaps receive a
variable rate of interest based on either the three or six-month London
Inter-Bank Offered Rate (LIBOR) and pay a fixed rate of interest. The remaining
portion of these swaps receive a variable rate of interest based on the
ten-year Treasury note rate and pay a variable rate of interest based on either
the three or six-month LIBOR. As part of the purchase accounting treatment of
the Secor acquisition, the swaps were "marked-to-market" and a liability was
recorded on the balance sheet. This liability will be amortized in future
periods to offset the net interest expense generated by these swaps.
Historically, First Alabama has not experienced the level of volatility in
net interest income indicated by the cumulative one-year gap ratio. One reason
for this is that First Alabama has a relatively large base of deposit products
that do not reprice on a contractual basis. These deposit products are
primarily regular savings, a portion of money market savings and
interest-bearing transaction accounts. Balances for these accounts are reported
in the one to three month repricing category and comprise 33% of
interest-bearing deposits. The rates paid on these accounts are typically
sensitive to changes in market interest rates only under certain conditions,
such as those prevailing in the last two quarters of 1991 and continuing
through 1993, when market interest rates fell to historically low levels.
Another reason for the lack of volatility in net interest income is that
First Alabama's loan and security portfolios contain fixed rate
mortgage-related products, including whole loans, mortgage-backed securities
(MBS's) and collateralized mortgage obligations (CMO's) having maturity and
cash flow characteristics that vary with the level of market interest rates.
These earning assets are generally reported in the non-sensitive category, when
in fact a significant portion of these balances may be subject to repricing
within one year or less, because the actual cash flows from these instruments
will vary from the contractual maturities of these instruments, due principally
to refinancing activity. If fixed rate mortgage-related products, regular
savings and a portion of interest-bearing demand accounts were redistributed
based on expected cash flows and probable repricing intervals, First Alabama's
one-year cumulative gap ratio would be 1.24--indicating an "asset sensitive"
position.
In addition to gap analysis, First Alabama also uses a technique called
simulation analysis to monitor interest rate sensitivity. Simulation analysis
is the primary method of estimating future earnings streams under varying
interest rate conditions. Simulation analysis is used to test the sensitivity
of First Alabama's net interest income to both the level of interest rates and
the slope of the yield curve. Simulation analysis uses the information shown in
the table on page 42 and then adjusts for the expected timing and magnitude of
earning asset and interest-bearing liability cash flows, as well as the
expected timing and magnitude of repricings of deposits that do not reprice on
a contractual basis. In addition, simulation analysis includes adjustments for
the lag between movements in market interest rates and the movement of
administered rates on prime rate loans, interest-bearing transaction accounts,
regular savings and money market savings accounts. These adjustments are made
to reflect more accurately possible future cash flows, repricing behavior and
ultimately net interest income. Simulation analysis indicates that First
Alabama is slightly "asset sensitive."
41
<PAGE> 19
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY ANALYSIS
December 31, 1993
- -------------------------------------------------------------------------------------------------------------------------
(dollar amounts in millions) Rate Sensitive Period
- -------------------------------------------------------------------------------------------------------------------------
1-3 4-6 7-12 Over 1 Year or
Months Months Months Total Non-Sensitive Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans, net of unearned income $ 2,960.4 $ 404.5 $ 599.4 $ 3,964.3 $2,869.0 $ 6,833.3
- -------------------------------------------------------------------------------------------------------------------------
Taxable investment securities 385.4 163.8 98.1 647.3 1,499.8 2,147.1
- -------------------------------------------------------------------------------------------------------------------------
Non-taxable investment securities 5.8 7.6 7.5 20.9 200.4 221.3
- -------------------------------------------------------------------------------------------------------------------------
Interest bearing deposits in
other banks 10.8 -- -- 10.8 .2 11.0
- -------------------------------------------------------------------------------------------------------------------------
Federal funds sold and securities
purchased under agreements to
resell 106.7 -- -- 106.7 -- 106.7
- -------------------------------------------------------------------------------------------------------------------------
Mortgage loans held for sale 285.7 -- -- 285.7 -- 285.7
- -------------------------------------------------------------------------------------------------------------------------
Trading account assets 20.4 -- -- 20.4 -- 20.4
- -------------------------------------------------------------------------------------------------------------------------
Total earning assets $ 3,775.2 $ 575.9 $ 705.0 $ 5,056.1 $4,569.4 $ 9,625.5
- -------------------------------------------------------------------------------------------------------------------------
Percent of total earning assets 39.2% 6.0% 7.3% 52.5% 47.5% 100.0%
- -------------------------------------------------------------------------------------------------------------------------
FUNDING SOURCES:
Non-interest-bearing demand
deposits -- -- -- -- $1,196.7 $ 1,196.7
- -------------------------------------------------------------------------------------------------------------------------
Savings deposits $ 751.9 -- -- $ 751.9 -- 751.9
- -------------------------------------------------------------------------------------------------------------------------
Other time deposits 4,095.0 $ 696.7 $ 712.3 5,504.0 1,318.1 6,822.1
- -------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 198.2 5.3 0.2 203.7 -- 203.7
- -------------------------------------------------------------------------------------------------------------------------
Long-term borrowings 52.7 12.4 53.1 118.2 344.7 462.9
- -------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 5,097.8 714.4 765.6 6,577.8 1,662.8 8,240.6
- -------------------------------------------------------------------------------------------------------------------------
Stockholders' equity -- -- -- -- 188.2 188.2
- -------------------------------------------------------------------------------------------------------------------------
Total funding sources $ 5,097.8 $ 714.4 $ 765.6 $ 6,577.8 $3,047.7 $ 9,625.5
- -------------------------------------------------------------------------------------------------------------------------
Percent of total funding
sources 53.0% 7.4% 7.9% 68.3% 31.7% 100.0%
- -------------------------------------------------------------------------------------------------------------------------
Interest sensitive gap $(1,322.6) $ (138.5) $ (60.6) $(1,521.7) $1,521.7 --
- -------------------------------------------------------------------------------------------------------------------------
Cumulative interest sensitive gap $(1,322.6) $(1,461.1) $(1,521.7) $(1,521.7) -- --
- -------------------------------------------------------------------------------------------------------------------------
As percent of total earning assets (13.7)% (15.2)% (15.9)% (15.8)% -- --
- -------------------------------------------------------------------------------------------------------------------------
Ratio of earning assets to funding
sources 0.74 0.81 0.92 0.77 1.50 1.00
- -------------------------------------------------------------------------------------------------------------------------
Cumulative ratio 0.74 0.75 0.77 0.77 1.00 1.00
=========================================================================================================================
</TABLE>
42
<PAGE> 20
<TABLE>
<CAPTION>
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(in thousands) Year Ended December 31
- --------------------------------------------------------------------------------------------------------------------------
1993 OVER 1992 1992 over 1991
- --------------------------------------------------------------------------------------------------------------------------
VOLUME YIELD/RATE TOTAL Volume Yield/Rate Total
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN:
Interest income on:
Loans $ 71,862 $(37,874) $ 33,988 $ 39,104 $(66,355) $(27,251)
- --------------------------------------------------------------------------------------------------------------------------
Federal funds sold (4,147) (1,005) (5,152) 3,532 (1,933) 1,599
- --------------------------------------------------------------------------------------------------------------------------
Taxable securities (1,355) (11,459) (12,814) 11,753 (7,901) 3,852
- --------------------------------------------------------------------------------------------------------------------------
Non-taxable securities 1,736 (682) 1,054 (595) (554) (1,149)
- --------------------------------------------------------------------------------------------------------------------------
Other earning assets 4,359 (2,515) 1,844 4,344 (1,469) 2,875
- --------------------------------------------------------------------------------------------------------------------------
Total 72,455 (53,535) 18,920 58,138 (78,212) (20,074)
- --------------------------------------------------------------------------------------------------------------------------
Interest expense on:
Savings deposits 3,935 (2,664) 1,271 4,014 (6,050) (2,036)
- --------------------------------------------------------------------------------------------------------------------------
Other interest-bearing deposits 15,748 (33,998) (18,250) 23,824 (87,240) (63,416)
- --------------------------------------------------------------------------------------------------------------------------
Borrowed funds 5,830 695 6,525 627 (3,124) (2,497)
- --------------------------------------------------------------------------------------------------------------------------
Total 25,513 (35,967) (10,454) 28,465 (96,414) (67,949)
- --------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET INTEREST INCOME $ 46,942 $(17,568) $ 29,374 $ 29,673 $ 18,202 $ 47,875
==========================================================================================================================
</TABLE>
Note: The change in interest due to both rate and volume has been allocated
to change due to volume and change due to rate in proportion to the
absolute dollar amounts of the change in each.
PROVISION FOR LOAN LOSSES
This expense is used to fund the allowance for loan losses. Actual loan losses,
net of recoveries, are charged directly to the allowance. The expense recorded
each year is a reflection of actual losses experienced during the year and
management's judgment as to the adequacy of the allowance to absorb future
losses. For an analysis and discussion of the loan allowance, refer to the
section on page 24 entitled "Loans and Allowance for Loan Losses." In 1991, the
provision for loan losses remained at approximately the same level as in 1990
due to modest loan growth, a significant reduction in loan charge-offs and
decreased levels of non-performing loans. In 1992, the provision for loan
losses was increased primarily because of growth in the loan portfolio. Due
primarily to improving economic conditions, the loan loss provision was reduced
to $21.5 million in 1993, compared to $27.1 million in 1992.
TRUST INCOME
Trust income increased 7% in 1991, 16% in 1992, and 9% in 1993. An aggressive
sales program has been the primary means of increasing trust revenue, assisted
by the strength of the securities markets, since most trust fees are calculated
as a percentage of trust asset value. A significant focus has been placed on
cross-selling trust services to existing customers and employee incentive
programs have been used to give consistency to sales efforts. A trust sales
staff has been active in assisting regional trust offices in achieving their
sales goals.
SERVICE CHARGES ON DEPOSIT ACCOUNTS
Service charge income increased 18% in 1991, 9% in 1992, and 2% in 1993 due to
increases in the number of deposit accounts and changes in the pricing of
certain deposit accounts and related services.
MORTGAGE SERVICING AND ORIGINATION FEES
The source of this income is First Alabama's mortgage banking affiliate-Real
Estate Financing, Inc. (REF). The primary business and source of income for REF
is the origination and servicing of mortgage loans for long-term investors.
Mortgage servicing and origination fees increased 19% in 1993. Servicing
fees, which comprised approximately 71% of total mortgage servicing and
origination fees in 1993, increased 14% due to a 36% increase in the dollar
volume of loans serviced and a 24% increase in the number of loans serviced.
In connection with the Secor acquisition, REF added approximately $1.4 billion
in servicing volume, in addition to retaining servicing on most loans
originated in-house and purchasing servicing rights to mortgages originated by
other companies. At December 31, 1993, REF's servicing portfolio totaled $8.5
billion and included approximately 152,000 loans. At December 31, 1992, the
servicing portfolio totaled $6.3 billion, compared to $5.7 billion at December
31, 1991.
Purchased mortgage servicing rights, which are included in other assets in
the consolidated statement of condition, represent the amounts paid, less
accumulated amortization and
43
<PAGE> 21
valuation adjustments, for the right to service mortgage loans that are owned
by other investors. An increase in prepayments of these mortgages resulted in
increased valuation adjustments in 1993. Continued acceleration of prepayments
of mortgages in the servicing portfolio could result in additional valuation
adjustments in the future. An analysis of purchased mortgage servicing rights
is summarized as follows:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- ---------------------------------------------------------
<S> <C> <C>
Balance at beginning of year $37,847 $39,498
- ---------------------------------------------------------
Additions 26,783 6,630
- ---------------------------------------------------------
Amortization (7,080) (6,740)
- ---------------------------------------------------------
Valuation adjustments (6,969) (1,541)
- ---------------------------------------------------------
Balances at end of year $50,581 $37,847
=========================================================
</TABLE>
Origination fees increased 35% in 1993 due to increases in the number and
dollar amount of loans closed. Lower mortgage interest rates in 1993 resulted
in record amounts of new loan closings and refinancings.
In 1992, mortgage servicing and origination fees increased 31%. Servicing
fees increased 18% due to a 9% increase in the dollar volume of loans serviced
and a 3% increase in the number of loans serviced. These increases resulted
from growth in the servicing portfolio due to the retention of servicing on
most mortgages originated in-house and the purchase of servicing rights to
mortgages originated by other companies. Origination fees increased 92% in 1992
due to increases in the number and dollar amount of loans closed. Lower
interest rates in 1992 resulted in increased volumes for new loan closings and
refinancings.
In 1991, mortgage servicing and origination fees increased 37%. Servicing
fees increased 40% due to a 21% increase in the dollar volume of loans serviced
and a 13% increase in the number of loans serviced. Origination fees increased
24% in 1991 due to increases in the number and dollar amount of loans closed.
REF, through its retail and wholesale operations, produced mortgage loans
totaling $1.9 billion, $1.4 billion, and $819 million in 1993, 1992 and 1991,
respectively. REF produces loans from 23 branch offices in Alabama, Georgia,
Florida, Mississippi, Tennessee and South Carolina, and from other
correspondent offices located primarily in the Southeast.
SECURITIES GAINS (LOSSES)
Net losses from the sale of investment securities totaled $507,000 in 1991.
These losses resulted primarily from the sale of approximately $25 million of
U. S. Treasury securities in the second quarter of 1991. The proceeds of these
sales were reinvested in Federal agency securities which yielded approximately
100 basis points more than the securities which were sold.
In 1992, net losses from the sale of securities were only $53,000. These
sales resulted primarily from credit quality concerns of two securities.
In 1993, net gains from the sale of investment securities were $78,000,
resulting from sales of several securities due to credit quality and regulatory
concerns.
The book value of securities sold was only 0.10% of the average balance of
investment securities in 1993, compared to 0.05% in 1992 and 1.79% in 1991.
OTHER INCOME
Refer to Note O to the consolidated financial statements for an analysis of the
significant components of other income. Increases in fee and commission income
over the last three years resulted primarily from revisions in charges for
certain services, an increased emphasis on charging customers for services
performed and an increased customer base due to growth and acquisitions.
Increases in safe deposit fees, international department income, automated
teller machine fees and other customer charges accounted for growth in fees and
commissions over the last three years.
Insurance premium and commission income increased in 1993, after declining
during the previous two years. This income originates primarily from the sale
of credit life and accident and health insurance to consumer loan customers.
Increased consumer loan volume, combined with employee incentives, resulted in
increased income in 1993. The decline in insurance income in 1992 and 1991
resulted from declining volumes of credit life insurance written for customers,
coupled with lower premium rates for a portion of 1991 and all of 1992.
Trading account income grew steadily over the last three years, primarily
because of additional volume, increased fees from the underwriting of public
finance obligations, and larger profits from trading in the portfolio.
SALARIES AND EMPLOYEE BENEFITS
Total salaries and benefits increased 16% in 1991 and 1992, and 12% in 1993.
These increases resulted from normal merit and promotional adjustments,
increased incentive payments tied to performance, the effect of inflation on
benefits expense, and increases in the number of employees due to increased
business activity and acquisitions.
At December 31, 1993, First Alabama had 5,439 full-time equivalent
employees. Of these, 4,704 are employed by either a banking affiliate, the
investment subsidiary or the parent company. The remaining 735 are employed by
the mortgage banking company. Due primarily to growth in mortgage servicing and
origination activity, 247 employees have been added over the last three years
at the mortgage banking company. Since the beginning of 1991, the number of
banking, investment
44
<PAGE> 22
DEPOSITS PER EMPLOYEE
(Graph)
($ in millions)
1989 1990 1991 1992 1993
1.319 1.398 1.513 1.639 1.865
subsidiary and parent company employees has increased by 876 employees, due
primarily to employees added by acquisitions.
Salaries, excluding benefits, totaled $85.7 million in 1991, compared to
$92.5 million in 1992 and $101.9 million in 1993. These increases resulted
from increased employment levels, due to acquisitions and increased business
activity, and normal merit and promotional adjustments.
First Alabama provides all employees who meet established employment
requirements with a benefits package which includes pension, profit sharing,
stock purchase, and medical and life insurance plans. The total cost to First
Alabama for fringe benefits, including payroll taxes, equals approximately 27%
of salaries.
The contributions to the profit sharing plan increased in each of the last
three years and was equal to approximately 10% of after-tax income in each
year.
The contribution to the employee stock ownership plan (ESOP) equaled
approximately 1% of after-tax income in 1992 and 1993. The ESOP was approved
by the Board of Directors in 1991, and the 1992 contribution commenced
operation of the plan.
Commissions and incentives expense increased from $13.3 million in 1991, to
$21.8 million in 1982, compared to $25.3 milion in 1993. Incentives are being
used increasingly to reward employees for selling products and services, for
productivity improvements and for achievement of other corporate goals. One
factor contributing to the increased commissions and incentives expense over
the last three years was implementations of the long-term incentive plan
approved by stockholders in May 1991. This plan provides for the granting of
stock options, stock appreciation rights, restricted stock and performance
shares. The incentive plan is intended to assist the Company in attracting,
retaining, motivating and rewarding employees who make a significant
contribution to the Company's long-term success, and to encourage employees to
acquire and maintain an equity interest in the Company. Other
performance-related incentive plans resulted in increased commissions and
incentive expense due to the favorable performance of the Company over the last
three years.
Payroll taxes increased 10% in 1991, 9% in 1992 and 12% in 1993. Increases
in the Social Security tax rate and tax base, combined with increased salary
levels and additional employees due to growth and acquisitions, were the
primary reasons for increased payroll taxes.
Group insurance expense increased 12% in 1991, 11% in 1992 and 7% in 1993
because of increases in medical claims due to increased employment levels and
continued rising health care costs. First Alabama has implemented programs and
procedures to try to mitigate rapidly increasing group insurance costs.
Results of these programs indicate modest success, as shown by the reduced
rate of increase in this expense.
In 1993, First Alabama adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." See Note J to the consolidated financial statements for additional
information.
NET OCCUPANCY EXPENSE
Net occupancy expense includes rents, depreciation and amortization,
utilities, maintenance, insurance, taxes and other expenses of premises
occupied by First Alabama and its affiliates. First Alabama affiliates operate
offices throughout Alabama and parts of Florida, Georgia, Tennessee,
Mississippi and South Carolina. At year-end 1993, 15 Secor offices in Louisiana
were added.
Net occupancy expense increased 4% in 1991, 5% in 1992, and 8% in 1993 due
to new and acquired branch offices, rising price levels, and increased business
activity.
FURNITURE AND EQUIPMENT EXPENSE
Furniture and equipment expense increased 7% in 1991, 2% in 1992, and 5% in
1993. These increases resulted from rising price levels, expenses related to
equipment for new branch offices, and increased depreciation and service
contract expenses associated with branch automation equipment and other
computer equipment.
FDIC INSURANCE EXPENSE
FDIC insurance expense increased 109% in 1991, 20% in 1992, and 3% in 1993 as a
result of increased deposits from acquisitions and growth, combined with
increased premium
45
<PAGE> 23
rates in 1992 and 1991. The FDIC premium rate increased from $.12 per $100 of
insured deposits in 1990, to $.195 effective January 1, 1991, and then to $.23
effective July 1, 1991. The FDIC implemented a risk-based deposit insurance
assessment schedule in 1993, which did not result in a significant increase in
First Alabama's FDIC insurance expense.
OTHER EXPENSES
Refer to Note O to the consolidated financial statements for an analysis of the
significant components of other expense. Increases in this category of expense
generally result from expanded programs, increased business activity,
acquisitions and rising price levels.
Reductions in write-downs in the carrying values of foreclosed properties
and associated costs of these properties, contributed to the lower non-credit
losses in 1993, compared to the two previous years.
Expansion of mortgage servicing activities, including additional purchased
servicing rights, and accelerated prepayments of mortgages in the servicing
portfolio in 1993, resulted in increased amortization of mortgage servicing
rights over the last three years.
Gains or losses on sales of mortgages by the affiliate mortgage company
result from changes in the fair market value of mortgages held in inventory
while awaiting sale to long-term investors. Purchased commitments covering the
sale of mortgages held in inventory are used to mitigate market losses.
Increases in excess purchase price amortization, contributions and other
general expenses accounted for the increase in miscellaneous expenses in 1992.
APPLICABLE INCOME TAX
First Alabama's provision for income taxes increased 18.9% in 1993. This
increase was caused primarily by an 18.2% increase in net income before taxes
and the increase in the maximum federal corporate income tax rate to 35%. Also
contributing to the larger provision for income taxes was a decline in First
Alabama's tax exempt income, as a percentage of total income. For 1991, 1992
and 1993, the Company's tax exempt income as a percentage of income before
income taxes was 23.3%, 15.5% and 12.9%, respectively. Management expects this
trend to continue. Federal income tax laws that limit banks' deductions of
interest expense related to carrying tax exempt assets acquired after 1982
adversely affect yields on new tax exempt assets and are the primary reason for
the relative decline in First Alabama's tax exempt income. Note P to the
consolidated financial statements provides more information about the provision
for income taxes.
Federal income tax laws require corporations to pay a minimum level of
income tax on their economic income. Corporations must pay the greater of their
normal federal income tax or alternative minimum tax. Alternative minimum tax
is 20% of alternative minimum taxable income. Alternative minimum taxable
income is calculated by adding to taxable income certain tax preference items
which were deducted in calculating taxable income. First Alabama's regular
income taxes exceeded its alternative minimum taxes by $8.7, $15.4 and $20.1
million in 1991, 1992 and 1993, respectively.
EFFECTS OF INFLATION
The majority of assets and liabilities of a financial institution are monetary
in nature; therefore, a financial institution differs greatly from most
commercial and industrial companies which have significant investments in fixed
assets or inventories. However, inflation does have an important impact on the
growth of total assets in the banking industry and the resulting need to
increase equity capital at higher than normal rates in order to maintain an
appropriate equity to assets ratio. Inflation also effects other expenses which
tend to rise during periods of general inflation.
Management believes the most significant impact of inflation on financial
results is the Company's ability to react to changes in interest rates. As
discussed previously, management is attempting to maintain an essentially
balanced position between rate sensitive assets and liabilities in order to
protect net interest income from being affected by wide interest rate
fluctuations.
CATEGORIES OF NON-INTEREST EXPENSE
(Graph)
($ in thousands)
1989 1990 1991 1992 1993
Salaries and Employee Benefits 93,327 102,407 119,115 138,355 154,594
Net occupancy expense 11,857 12,612 13,105 13,759 14,877
Furniture and equipment expense 15,664 16,214 17,339 17,684 18,604
FDIC insurance 3,501 5,647 11,803 14,105 14,584
Other 52,358 58,731 68,978 80,756 84,367
--------------------------------------------
176,707 195,611 230,340 264,659 287,026
============================================
46
<PAGE> 24
<TABLE>
<CAPTION>
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS, COMMON STOCK MARKET PRICES AND DIVIDENDS
(in thousands, except per share amounts) THREE MONTHS ENDED
- ------------------------------------------------------------------------------------------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31
- ------------------------------------------------------------------------------------------------------------------------
1993
<S> <C> <C> <C> <C>
Total interest income $135,719 $137,871 $139,853 $142,224
- ------------------------------------------------------------------------------------------------------------------------
Total interest expense 51,875 52,896 53,748 55,095
- ------------------------------------------------------------------------------------------------------------------------
Net interest income 83,844 84,975 86,105 87,129
- ------------------------------------------------------------------------------------------------------------------------
Provision for loan losses 7,300 6,000 4,101 4,132
- ------------------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 76,544 78,975 82,004 82,997
- ------------------------------------------------------------------------------------------------------------------------
Total non-interest income, excluding
securities gains (losses) 30,582 32,573 33,810 34,984
- ------------------------------------------------------------------------------------------------------------------------
Securities gains (losses) 47 (5) 34 2
- ------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 66,091 69,005 74,536 77,394
- ------------------------------------------------------------------------------------------------------------------------
Income taxes 13,656 14,601 12,689 12,530
- ------------------------------------------------------------------------------------------------------------------------
Net income $ 27,426 $ 27,937 $ 28,623 $ 28,059
========================================================================================================================
Per share:
Net income $ .74 $ .75 $ .77 $ .75
- ------------------------------------------------------------------------------------------------------------------------
Cash dividends declared .26 .26 .26 .26
- ------------------------------------------------------------------------------------------------------------------------
Market price:
Low 31 1/4 30 1/4 31 1/4 29 5/8
- ------------------------------------------------------------------------------------------------------------------------
High 38 3/8 38 1/4 35 1/4 35
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(in thousands, except per share amounts) Three Months Ended
- ------------------------------------------------------------------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1992
Total interest income $134,507 $134,580 $133,980 $133,680
- ------------------------------------------------------------------------------------------------------------------------
Total interest expense 60,900 57,993 53,621 51,554
- ------------------------------------------------------------------------------------------------------------------------
Net interest income 73,607 76,587 80,359 82,126
- ------------------------------------------------------------------------------------------------------------------------
Provision for loan losses 6,050 6,950 7,100 6,972
- ------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 67,557 69,637 73,259 75,154
- ------------------------------------------------------------------------------------------------------------------------
Total non-interest income, excluding
securities gains (losses) 28,999 28,613 30,212 31,306
- ------------------------------------------------------------------------------------------------------------------------
Securities gains (losses) (57) 2 38 (36)
- ------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 63,980 63,806 66,115 70,758
- ------------------------------------------------------------------------------------------------------------------------
Income taxes 10,423 11,366 12,190 10,998
- ------------------------------------------------------------------------------------------------------------------------
Net income $ 22,096 $ 23,080 $ 25,204 $ 24,668
========================================================================================================================
Per share:
Net income $ .61 $ .63 $ .69 $ .67
- ------------------------------------------------------------------------------------------------------------------------
Cash dividends declared .2275 .2275 .2275 .2275
- ------------------------------------------------------------------------------------------------------------------------
Market price:
Low 23 3/4 25 1/8 27 1/2 28 3/8
- ------------------------------------------------------------------------------------------------------------------------
High 28 1/8 30 30 3/4 33 7/8
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Common Stock of First Alabama is traded on the NASDAQ National Market
System. The NASDAQ stock quotation symbol is FABC. Market prices shown
represent sales prices as reported in the NASD Monthly Statistical Report,
after adjusting for a 10% stock dividend paid on April 1, 1993. At December 31,
1993, there were 16,532 shareholders of record of First Alabama Bancshares,
Inc. Common Stock.
47
<PAGE> 25
(THIS PAGE INTENTIONALLY LEFT BLANK)
48
<PAGE> 26
FINANCIAL
STATEMENTS
& NOTES
49
<PAGE> 27
(THIS PAGE INTENTIONALLY LEFT BLANK)
50
<PAGE> 28
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CONDITION
First Alabama Bancshares, Inc. & Subsidiaries
(dollar amounts in thousands) December 31
- -----------------------------------------------------------------------------------------------------------------------
ASSETS 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 462,032 $ 496,546
- -----------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits in other banks 11,031 342
- -----------------------------------------------------------------------------------------------------------------------
Investment securities (aggregate estimated market value of $2,457,987 in 1993
and $1,761,195 in 1992) 2,368,445 1,670,170
- -----------------------------------------------------------------------------------------------------------------------
Trading account assets 20,368 12,089
- -----------------------------------------------------------------------------------------------------------------------
Mortgage loans held for sale 285,665 207,612
- -----------------------------------------------------------------------------------------------------------------------
Federal funds sold and securities purchased under agreements to resell 106,724 72,295
- -----------------------------------------------------------------------------------------------------------------------
Loans 6,869,497 5,200,273
- -----------------------------------------------------------------------------------------------------------------------
Unearned income (36,251) (57,742)
- -----------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income 6,833,246 5,142,531
- -----------------------------------------------------------------------------------------------------------------------
Allowance for loan losses (100,762) (73,619)
- -----------------------------------------------------------------------------------------------------------------------
Net loans 6,732,484 5,068,912
- -----------------------------------------------------------------------------------------------------------------------
Premises and equipment 140,206 115,871
- -----------------------------------------------------------------------------------------------------------------------
Interest receivable 67,488 53,120
- -----------------------------------------------------------------------------------------------------------------------
Due from customers on acceptances 75,913 27,178
- -----------------------------------------------------------------------------------------------------------------------
Other assets 205,992 156,891
- -----------------------------------------------------------------------------------------------------------------------
$10,476,348 $7,881,026
=======================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------
Deposits:
Non-interest-bearing $ 1,196,685 $1,041,987
- -----------------------------------------------------------------------------------------------------------------------
Interest-bearing 7,574,009 5,659,155
- -----------------------------------------------------------------------------------------------------------------------
Total deposits 8,770,694 6,701,142
- -----------------------------------------------------------------------------------------------------------------------
Borrowed funds:
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase 184,566 231,960
- -----------------------------------------------------------------------------------------------------------------------
Commercial paper 17,201 19,289
- -----------------------------------------------------------------------------------------------------------------------
Other short-term borrowings 1,994 1,910
- -----------------------------------------------------------------------------------------------------------------------
Total short-term borrowings 203,761 253,159
- -----------------------------------------------------------------------------------------------------------------------
Long-term borrowings 462,862 136,990
- -----------------------------------------------------------------------------------------------------------------------
Total borrowed funds 666,623 390,149
- -----------------------------------------------------------------------------------------------------------------------
Bank acceptances outstanding 75,913 27,178
- -----------------------------------------------------------------------------------------------------------------------
Other liabilities 112,153 105,902
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 9,625,383 7,224,371
- -----------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, par value $.625 a share:
Authorized 60,000,000 shares. Issued--42,520,025 shares in 1993 and 35,220,342 shares
in 1992 26,575 22,013
- -----------------------------------------------------------------------------------------------------------------------
Surplus 375,983 133,943
- -----------------------------------------------------------------------------------------------------------------------
Undivided profits 462,280 516,148
- -----------------------------------------------------------------------------------------------------------------------
Treasury stock, at cost--1,470,700 shares in 1993 and 1,337,000 shares in 1992 (12,320) (12,320)
- -----------------------------------------------------------------------------------------------------------------------
Unearned restricted stock (1,553) (3,129)
- -----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 850,965 656,655
- -----------------------------------------------------------------------------------------------------------------------
$10,476,348 $7,881,026
=======================================================================================================================
</TABLE>
See notes to consolidated financial statements.
( ) Indicates deduction.
51
<PAGE> 29
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
First Alabama Bancshares, Inc. & Subsidiaries
(amounts in thousands, except per share data) Year Ended December 31
- -----------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $421,616 $387,628 $414,879
- -----------------------------------------------------------------------------------------------------------------------------------
Interest on investment securities:
Taxable interest income 104,744 117,558 113,706
- -----------------------------------------------------------------------------------------------------------------------------------
Tax-exempt interest income 11,708 10,654 11,803
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest on investment securities 116,452 128,212 125,509
- -----------------------------------------------------------------------------------------------------------------------------------
Interest on mortgage loans held for sale 15,767 13,976 10,439
- -----------------------------------------------------------------------------------------------------------------------------------
Income on federal funds sold and securities purchased under
agreements to resell 1,491 6,643 5,044
- -----------------------------------------------------------------------------------------------------------------------------------
Interest on time deposits in other banks 197 148 372
- -----------------------------------------------------------------------------------------------------------------------------------
Interest on trading account assets 144 140 578
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest income 555,667 536,747 556,821
- -----------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 198,301 215,280 280,732
- -----------------------------------------------------------------------------------------------------------------------------------
Interest on short-term borrowings 4,554 4,679 9,202
- -----------------------------------------------------------------------------------------------------------------------------------
Interest on long-term borrowings 10,759 4,109 2,083
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 213,614 224,068 292,017
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income 342,053 312,679 264,804
- -----------------------------------------------------------------------------------------------------------------------------------
Provision for loan losses 21,533 27,072 24,005
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 320,520 285,607 240,799
- -----------------------------------------------------------------------------------------------------------------------------------
Non-interest income:
Trust department income 18,299 16,720 14,443
- -----------------------------------------------------------------------------------------------------------------------------------
Service charges on deposit accounts 42,955 42,117 38,753
- -----------------------------------------------------------------------------------------------------------------------------------
Mortgage servicing and origination fees 44,079 37,048 28,250
- -----------------------------------------------------------------------------------------------------------------------------------
Securities gains (losses) 78 (53) (507)
- -----------------------------------------------------------------------------------------------------------------------------------
Other 26,616 23,245 20,518
- -----------------------------------------------------------------------------------------------------------------------------------
Total non-interest income 132,027 119,077 101,457
- -----------------------------------------------------------------------------------------------------------------------------------
Non-interest expense:
Salaries and employee benefits 154,594 138,355 119,115
- -----------------------------------------------------------------------------------------------------------------------------------
Net occupancy expense 14,877 13,759 13,105
- -----------------------------------------------------------------------------------------------------------------------------------
Furniture and equipment expense 18,604 17,684 17,339
- -----------------------------------------------------------------------------------------------------------------------------------
FDIC insurance expense 14,584 14,105 11,803
- -----------------------------------------------------------------------------------------------------------------------------------
Other 84,367 80,756 68,978
- -----------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 287,026 264,659 230,340
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 165,521 140,025 111,916
- -----------------------------------------------------------------------------------------------------------------------------------
Applicable income taxes 53,476 44,977 33,660
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $112,045 $ 95,048 $ 78,256
===================================================================================================================================
Average number of shares outstanding 37,205 36,532 36,191
- -----------------------------------------------------------------------------------------------------------------------------------
Per share:
Net income $ 3.01 $ 2.60 $ 2.16
- -----------------------------------------------------------------------------------------------------------------------------------
Cash dividends declared 1.04 .91 .87
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
52
<PAGE> 30
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
First Alabama Bancshares, Inc. & Subsidiaries
(amounts in thousands) Year Ended December 31
- -----------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $112,045 $ 95,048 $ 78,256
- -----------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net cash provided by operating activities:
Depreciation and amortization of premises and equipment 14,547 14,218 13,865
- -----------------------------------------------------------------------------------------------------------------------------
Provision for loan losses 21,533 27,072 24,005
- -----------------------------------------------------------------------------------------------------------------------------
Net (accretion) of investment securities (479) (268) (705)
- -----------------------------------------------------------------------------------------------------------------------------
Amortization of other assets 19,043 13,455 10,034
- -----------------------------------------------------------------------------------------------------------------------------
Provision for losses on other real estate 531 3,710 3,571
- -----------------------------------------------------------------------------------------------------------------------------
Deferred income taxes (2,004) (10,387) (4,888)
- -----------------------------------------------------------------------------------------------------------------------------
(Gain) loss on sale of premises and equipment (133) 80 (123)
- -----------------------------------------------------------------------------------------------------------------------------
Realized investment security (gains) losses (78) 53 507
- -----------------------------------------------------------------------------------------------------------------------------
(Increase) decrease in trading account assets (8,279) (7,517) 9,163
- -----------------------------------------------------------------------------------------------------------------------------
(Increase) in mortgages held for sale (78,053) (86,769) (17,961)
- -----------------------------------------------------------------------------------------------------------------------------
(Increase) decrease in interest receivable (3,040) 3,875 5,722
- -----------------------------------------------------------------------------------------------------------------------------
(Increase) in other assets (22,057) (28,981) (40,749)
- -----------------------------------------------------------------------------------------------------------------------------
Increase in other liabilities 228 36,273 7,821
- -----------------------------------------------------------------------------------------------------------------------------
Stock issued to employees under incentive plan 5,675 4,384 -0-
- -----------------------------------------------------------------------------------------------------------------------------
Other 1,750 1,975 773
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 61,229 66,221 89,291
- -----------------------------------------------------------------------------------------------------------------------------
Investing activities:
Net (increase) in loans (512,835) (868,143) (196,916)
- -----------------------------------------------------------------------------------------------------------------------------
Proceeds from sale of investment securities 1,646 769 26,151
- -----------------------------------------------------------------------------------------------------------------------------
Proceeds from maturity of investment securities 528,624 423,737 286,069
- -----------------------------------------------------------------------------------------------------------------------------
Purchase of investment securities (534,192) (518,736) (398,547)
- -----------------------------------------------------------------------------------------------------------------------------
Net (increase) decrease in interest-bearing deposits in other banks (10,689) 30,788 29,204
- -----------------------------------------------------------------------------------------------------------------------------
Proceeds from sale of premises and equipment 222 764 615
- -----------------------------------------------------------------------------------------------------------------------------
Purchase of premises and equipment (17,273) (19,246) (15,872)
- -----------------------------------------------------------------------------------------------------------------------------
Net (increase) in customers' acceptance liability (48,735) (4,349) (14,827)
- -----------------------------------------------------------------------------------------------------------------------------
Acquisitions, net of cash acquired 15,354 -0- -0-
- -----------------------------------------------------------------------------------------------------------------------------
Net cash (used) by investing activities (577,878) (954,416) (284,123)
- -----------------------------------------------------------------------------------------------------------------------------
Financing activities:
Net increase in deposits 439,775 784,114 563,817
- -----------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in short-term borrowings (49,398) 119,732 (228,844)
- -----------------------------------------------------------------------------------------------------------------------------
Proceeds from long-term borrowings 5,521 121,691 2,642
- -----------------------------------------------------------------------------------------------------------------------------
Payments on long-term borrowings (2,907) (3,483) (3,914)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase in bank acceptance liability 48,735 4,349 14,827
- -----------------------------------------------------------------------------------------------------------------------------
Proceeds from stock issue -0- 14,367 -0-
- -----------------------------------------------------------------------------------------------------------------------------
Issuance of stock for acquisitions 129,050 -0- -0-
- -----------------------------------------------------------------------------------------------------------------------------
Cash dividends (38,792) (33,253) (31,602)
- -----------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (16,393) -0- -0-
- -----------------------------------------------------------------------------------------------------------------------------
Proceeds from exercise of stock options 973 1,163 1,759
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 516,564 1,008,680 318,685
- -----------------------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents (85) 120,485 123,853
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 568,841 448,356 324,503
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $568,756 $ 568,841 $ 448,356
=============================================================================================================================
</TABLE>
See notes to consolidated financial statements.
53
<PAGE> 31
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
First Alabama Bancshares, Inc. & Subsidiaries
Treasury Unearned
Common Undivided Stock, Restricted
(amounts in thousands, except per share data) Stock Surplus Profits At Cost Stock
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1991 $21,318 $107,435 $407,699 $(12,320)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income for the year 78,256
- ------------------------------------------------------------------------------------------------------------------------------------
Cash dividends declared-
$.87 per share (31,602)
- ------------------------------------------------------------------------------------------------------------------------------------
Stock options exercised 102 1,657
- ------------------------------------------------------------------------------------------------------------------------------------
Stock issued to employees under incentive plan 70 2,058 $(2,128)
- ------------------------------------------------------------------------------------------------------------------------------------
Amortization of unearned restricted stock 426
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1991 21,490 111,150 454,353 (12,320) (1,702)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income for the year 95,048
- ------------------------------------------------------------------------------------------------------------------------------------
Cash dividends declared--
$.91 per share (33,253)
- ------------------------------------------------------------------------------------------------------------------------------------
Stock issued for acquisition 277 14,090
- ------------------------------------------------------------------------------------------------------------------------------------
Stock issued to employees under incentive
plan 151 7,635 (3,402)
- ------------------------------------------------------------------------------------------------------------------------------------
Stock options exercised 95 1,068
- ------------------------------------------------------------------------------------------------------------------------------------
Amortization of unearned restricted stock 1,975
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 22,013 133,943 516,148 (12,320) (3,129)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income for the year 112,045
- ------------------------------------------------------------------------------------------------------------------------------------
Cash dividends declared--
$1.04 per share (38,792)
- ------------------------------------------------------------------------------------------------------------------------------------
Stock dividend 2,203 126,022 (128,225)
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (16,393)
- ------------------------------------------------------------------------------------------------------------------------------------
Stock issued for acquisitions 2,210 110,447 16,393
- ------------------------------------------------------------------------------------------------------------------------------------
Stock issued to employees
under incentive plan 99 4,648 1,104 (176)
- ------------------------------------------------------------------------------------------------------------------------------------
Stock options exercised 50 923
- ------------------------------------------------------------------------------------------------------------------------------------
Amortization of unearned restricted stock 1,752
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 $26,575 $375,983 $462,280 $(12,320) $(1,553)
====================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
( ) Indicates deduction.
54
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of First Alabama Bancshares, Inc. (First
Alabama or Company), conform with generally accepted accounting principles and
with general financial service industry practices. First Alabama provides a
full range of banking and bank-related services to individual and corporate
customers through its subsidiaries and branch offices located primarily in
Alabama, Florida, Georgia, Louisiana and Tennessee. The Company is subject to
intense competition from other financial institutions and is also subject to
the regulations of certain government agencies and undergoes periodic
examinations by those regulatory authorities.
BASIS OF PRESENTATION
AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of First Alabama and
its subsidiaries. Significant intercompany balances and transactions have been
eliminated. Comparisons with the prior year are affected by the acquisition in
December 1993 of Secor Bank, Federal Savings Bank (Secor), with assets of
approximately $1.8 billion. This acquisition was accounted for as a purchase.
See Note Q for additional information.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the balance sheet dates and revenues and expenses for the
periods shown. Actual results could differ from the estimates and assumptions
used in the consolidated financial statements.
Certain amounts in prior year financial statements have been reclassified to
conform to the current year presentation.
SECURITIES
Investment securities, which are held on a long-term basis, are carried at
cost, adjusted for amortization of premiums and accretion of discounts using
the effective yield method. The adjusted cost of the specific security sold is
used to compute gains or losses.
Trading account securities, which are held for the purpose of selling at a
profit, are carried at estimated market value. Gains or losses on trading
account securities are reported in other income.
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are carried at the lower of aggregate cost or
estimated market value. Gains and losses on mortgages held for sale are
included in other expense.
LOANS
Interest on loans is accrued based upon the principal amount outstanding except
for interest on discounted installment loans and leases, which is generally
credited to income based upon the sum-of-the-digits method and generally
approximates the interest method of income recognition.
Through provisions charged directly to operating expense, First Alabama has
established an allowance for loan losses. This allowance is reduced by actual
loan losses and increased by subsequent recoveries, if any.
The allowance for loan losses is maintained at a level believed adequate by
management to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio, past loan loss experience, current economic conditions, collateral
values of properties securing loans, volume, growth, quality and composition of
the loan portfolio and other relevant factors. Unfavorable changes in any of
these, or other factors, or the availability of new information, could require
that the allowance for loan losses be increased in future periods.
PREMISES AND EQUIPMENT
Premises and equipment and leasehold improvements are stated at cost, less
accumulated depreciation and amortization. The provision for depreciation is
computed using the straight-line and declining-balance methods over the
estimated useful lives of the assets. Leasehold improvements are amortized
using the straight-line method over the estimated useful lives of the
improvements (or the terms of the leases if shorter).
Estimated useful lives generally are as follows:
Premises and leasehold improvements 10-40 years
Furniture and equipment 3-12 years
PENSION, PROFIT-SHARING AND EMPLOYEE STOCK
OWNERSHIP PLANS
First Alabama has pension, profit-sharing and employee stock ownership plans
covering substantially all employees. Pension expense is computed using the
projected unit credit (service prorate) actuarial cost method and the plan is
funded using the aggregate actuarial cost method. Annual contributions to the
plans do not exceed the maximum amounts allowable for federal income tax
purposes.
INCOME TAXES
First Alabama and its subsidiaries file a consolidated federal income tax
return. The consolidated financial statements (including the provision for
income taxes) are prepared on the
55
<PAGE> 33
accrual basis. Temporary differences occur 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 as a result of such temporary differences.
PER SHARE AMOUNTS
Earnings per share computations are based upon the weighted average number of
shares outstanding during the periods. The dilutive effect of shares issuable
under stock options and stock performance awards granted by the Company is
immaterial.
Average shares and per share amounts for all periods presented give effect
to the 10% stock dividend paid on April 1, 1993.
INSURANCE SUBSIDIARIES
Insurance premium and commission income and acquisition costs are recognized
over the terms of the related policies. Losses are recognized as incurred.
STATEMENT OF CASH FLOWS
Cash equivalents include cash and due from banks and federal funds sold and
securities purchased under agreements to resell. First Alabama paid
$207,301,000 in 1993, $228,797,000 in 1992, and $299,156,000 in 1991 for
interest on deposits and borrowings. Income tax payments totaled $61,170,000
for 1993, $52,126,000 for 1992, and $35,215,000 for 1991. Loans transferred to
other real estate totaled $6,179,000 in 1993, $6,860,000 in 1992, and
$15,552,000 in 1991.
NOTE B. RESTRICTIONS ON
CASH AND DUE FROM BANKS
First Alabama's subsidiary banks are required to maintain reserve balances with
the Federal Reserve Bank. The average amount of the reserve balances maintained
for the year ended December 31, 1993, was approximately $110,732,000.
NOTE C. INVESTMENT SECURITIES
The amortized cost and estimated market value of investment securities at
December 31, 1993, are as follows:
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31, 1993
- --------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury
and Federal
agency securities $ 963,398 $71,939 $ (123) $1,035,214
- --------------------------------------------------------------------
Obligations
of states
and political
subdivisions 223,673 15,000 (393) 238,280
- --------------------------------------------------------------------
Mortgage-backed
securities 1,097,935 4,712 (1,717) 1,100,930
- --------------------------------------------------------------------
Other securities 32,883 117 -0- 33,000
- --------------------------------------------------------------------
Equity securities 50,556 7 -0- 50,563
- --------------------------------------------------------------------
TOTAL $2,368,445 $91,775 $(2,233) $2,457,987
====================================================================
</TABLE>
The amortized cost and estimated market value of investment securities at
December 31, 1993, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31, 1993
- -----------------------------------------------------------------
ESTIMATED
AMORTIZED MARKET
COST VALUE
- -----------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 205,294 $ 208,168
- -----------------------------------------------------------------
Due after one year through five years 678,429 727,134
- -----------------------------------------------------------------
Due after five years through ten years 269,208 302,413
- -----------------------------------------------------------------
Due after ten years 67,023 68,779
- -----------------------------------------------------------------
Mortgage-backed securities 1,097,935 1,100,930
- -----------------------------------------------------------------
Equity securities 50,556 50,563
- -----------------------------------------------------------------
TOTAL $2,368,445 $2,457,987
=================================================================
</TABLE>
Proceeds from sales of investment securities in 1993, 1992 and 1991, were
$1,646,000, $769,000 and $26,151,000, respectively.
56
<PAGE> 34
The amortized cost and estimated market value of invest-
ment securities at December 31, 1992, are as follows:
<TABLE>
<CAPTION>
(in thousands) December 31, 1992
- ---------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury
and Federal
agency
securities $ 930,094 $72,855 $ -0- $1,002,949
- ---------------------------------------------------------------------
Obligations of states
and political
subdivisions 170,302 10,512 (127) 180,687
- ---------------------------------------------------------------------
Mortgage-backed
securities 519,553 8,950 (1,203) 527,300
- ---------------------------------------------------------------------
Other securities 26,794 38 -0- 26,832
- ---------------------------------------------------------------------
Equity securities 23,427 -0- -0- 23,427
- ---------------------------------------------------------------------
TOTAL $1,670,170 $92,355 $(1,330) $1,761,195
=====================================================================
</TABLE>
Investment securities with book values of $1,171,676,000 and $913,057,000 at
December 31, 1993 and 1992, respectively, were pledged to secure public funds,
trust deposits and certain borrowing arrangements.
In May 1993 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," effective for fiscal years beginning after
December 31, 1993. Under the new rules, debt securities that the Company has
both the positive intent and ability to hold to maturity are carried at
amortized cost. Debt securities that the Company does not have the positive
intent and ability to hold to maturity and all marketable equity securities are
classified as available-for-sale or trading and carried at fair value.
Unrealized holding gains and losses on securities classified as
available-for-sale are carried as a separate component of stockholders' equity.
Unrealized holding gains and losses on securities classified as trading are
reported in earnings.
Presently, the Company classifies most debt securities as
held-for-investment and carries them at amortized cost. Securities classified
as trading are carried at fair value, with unrealized holding gains and losses
reported in earnings. The Company will apply the new rules starting in the
first quarter of 1994. Application of the new rules is not expected to have a
material effect on the consolidated financial statements.
NOTE D. LOANS
The loan portfolio at December 31, 1993 and 1992 consisted of the following:
<TABLE>
<CAPTION>
(in thousands) December 31
- -----------------------------------------------------------------
1993 1992
- -----------------------------------------------------------------
<S> <C> <C>
Commercial $1,497,502 $1,442,265
- -----------------------------------------------------------------
Real estate-construction 262,918 255,924
- -----------------------------------------------------------------
Real estate-mortgage 3,315,843 2,034,844
- -----------------------------------------------------------------
Consumer 1,793,234 1,467,240
- -----------------------------------------------------------------
6,869,497 5,200,273
- -----------------------------------------------------------------
Unearned income (36,251) (57,742)
- -----------------------------------------------------------------
TOTAL $6,833,246 $5,142,531
=================================================================
</TABLE>
Directors and executive officers of First Alabama and its principal
subsidiaries, including the directors' and officers' families and affiliated
companies, are loan and deposit customers and have other transactions with
First Alabama in the ordinary course of business. Total loans to these persons
(excluding loans which in the aggregate do not exceed $60,000 to any such
person) at December 31, 1993 and 1992, were approximately $77,000,000 and
$82,000,000, respectively. During 1993, $357,000,000 of new loans were made,
repayments totaled $359,000,000 and reductions for changes in the composition
of related parties totaled $3,000,000. These loans were made in the ordinary
course of business and on substantially the same terms, including interest
rates and collateral, as those prevailing at the same time for comparable
transactions with other persons and involve no unusual risk of collectibility.
At December 31, 1993 and 1992, Industrial Development Board Revenue Bonds of
approximately $170 million and $198 million, respectively, were included in
commercial and real estate loans.
Loans sold with recourse totaled $19.6 million and $5.7 million at December
31, 1993 and 1992, respectively. The loan portfolio is diversified
geographically, primarily within Alabama, northwest Florida, middle Tennessee
and the New Orleans, Louisiana area.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" (SFAS No. 114). SFAS No. 114 requires that, beginning in fiscal
1995, impaired loans be measured at the present value of expected future cash
flows discounted at the loan's original effective interest rate or at the
loan's observable market price, or
57
<PAGE> 35
the fair value of the collateral if the loan is collateral dependent.
Currently, impaired loans are measured based on expected, undiscounted future
cash flows, or the fair value of the collateral if the loan is collateral
dependent. Management believes that the adoption of SFAS No. 114 will not have
a material impact on the Company's financial statements.
NOTE E. ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses follows:
<TABLE>
<CAPTION>
(in thousands)
- -------------------------------------------------------------------
1993 1992 1991
- -------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 73,619 $ 54,769 $ 44,984
- -------------------------------------------------------------------
Allowance of purchased
institutions at acquisition
date 15,999 4,362 -0-
- -------------------------------------------------------------------
Provision charged to
operating expense 21,533 27,072 24,005
- -------------------------------------------------------------------
Loan losses:
Charge-offs (20,068) (19,608) (20,811)
- -------------------------------------------------------------------
Recoveries 9,679 7,024 6,591
- -------------------------------------------------------------------
Net loan losses (10,389) (12,584) (14,220)
- -------------------------------------------------------------------
BALANCE AT END OF YEAR $100,762 $ 73,619 $ 54,769
===================================================================
</TABLE>
NOTE F. PREMISES AND EQUIPMENT
A summary of premises and equipment follows:
<TABLE>
<CAPTION>
(in thousands) December 31
- -------------------------------------------------------------------
1993 1992
- -------------------------------------------------------------------
<S> <C> <C>
Land $ 29,393 $ 22,250
- -------------------------------------------------------------------
Premises 139,418 114,094
- -------------------------------------------------------------------
Furniture and equipment 115,612 89,807
- -------------------------------------------------------------------
Leasehold improvements 23,590 16,062
- -------------------------------------------------------------------
308,013 242,213
- -------------------------------------------------------------------
Allowances for depreciation
and amortization (167,807) (126,342)
- -------------------------------------------------------------------
TOTAL $ 140,206 $ 115,871
===================================================================
</TABLE>
Net occupancy expense is summarized as follows:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- -------------------------------------------------------------------
1993 1992 1991
- -------------------------------------------------------------------
<S> <C> <C> <C>
Gross occupancy expense $ 18,466 $ 16,591 $ 15,847
- -------------------------------------------------------------------
Less rental income 3,589 2,832 2,742
- -------------------------------------------------------------------
Net occupancy expense $ 14,877 $ 13,759 $ 13,105
- -------------------------------------------------------------------
</TABLE>
NOTE G. OTHER REAL ESTATE
Other real estate acquired in satisfaction of indebtedness ("foreclosure") is
carried in other assets at the lower of the recorded investment in the loan or
the estimated net realizable value of the collateral. Other real estate totaled
$13,720,000 at December 31, 1993, and $11,678,000 at December 31, 1992. Gain or
loss on the sale of other real estate is included in other expense.
NOTE H. DEPOSITS
The following schedule presents the detail of interest-bearing deposits:
<TABLE>
<CAPTION>
(in thousands) December 31
- ------------------------------------------------------------------
1993 1992
- ------------------------------------------------------------------
<S> <C> <C>
Interest-bearing transaction
accounts $1,326,469 $1,111,370
- ------------------------------------------------------------------
Savings accounts 751,862 573,946
- ------------------------------------------------------------------
Money market savings accounts 1,426,048 1,048,428
- ------------------------------------------------------------------
Certificates of deposit
($100,000 or more) 574,492 430,397
- ------------------------------------------------------------------
Time deposits
($100,000 or more) 429,503 423,142
- ------------------------------------------------------------------
Other interest-bearing deposits 3,065,635 2,071,872
- ------------------------------------------------------------------
TOTAL $7,574,009 $5,659,155
==================================================================
</TABLE>
The following schedule details interest expense on deposits:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- ------------------------------------------------------------------
1993 1992 1991
- ------------------------------------------------------------------
<S> <C> <C> <C>
Interest-bearing
transaction accounts $ 28,336 $ 28,862 $ 38,044
- ------------------------------------------------------------------
Savings accounts 17,861 16,590 18,626
- ------------------------------------------------------------------
Money market savings
accounts 32,673 32,296 34,930
- ------------------------------------------------------------------
Certificates of deposit
($100,000 or more) 19,011 21,898 35,576
- ------------------------------------------------------------------
Other interest-bearing deposits 100,420 115,634 153,556
- ------------------------------------------------------------------
TOTAL $198,301 $ 215,280 $ 280,732
==================================================================
</TABLE>
58
<PAGE> 36
NOTE I. BORROWED FUNDS
Following is a summary of short-term borrowings:
<TABLE>
<CAPTION>
(in thousands) December 31
- -----------------------------------------------------------------------
1993 1992 1991
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Federal funds purchased $125,615 $156,015 $31,285
- -----------------------------------------------------------------------
Securities sold
under agreements
to repurchase 58,951 75,945 77,197
- -----------------------------------------------------------------------
Commercial paper 17,201 19,289 19,046
- -----------------------------------------------------------------------
Notes payable to an
unaffiliated bank -0- -0- 5,000
- -----------------------------------------------------------------------
Short sale liability 1,994 1,910 899
- -----------------------------------------------------------------------
TOTAL $203,761 $253,159 $133,427
=======================================================================
<CAPTION>
(in thousands) December 31
- -----------------------------------------------------------------------
1993 1992 1991
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Maximum amount
outstanding at any
month-end:
Federal funds purchased
and securities sold
under agreements
to repurchase $232,682 $271,332 $259,304
- -----------------------------------------------------------------------
Aggregate short-
term borrowings 252,577 294,266 295,359
- -----------------------------------------------------------------------
Average amount
outstanding (based
on average of daily balances) 778 123,622 147,418
- -----------------------------------------------------------------------
Weighted average
interest rate at year end 3.1% 3.1% 7.0%
- -----------------------------------------------------------------------
Weighted average interest
rate on amounts
outstanding during
the year (based on
average of daily balances) 3.1% 3.7% 6.2%
- -----------------------------------------------------------------------
</TABLE>
Federal funds purchased had weighted average maturities of two, four and two
days, respectively, at December 31, 1993, 1992 and 1991. Weighted average rates
on these dates were 3.1%, 3.0% and 4.1%, respectively.
Securities sold under agreements to repurchase had weighted average
maturities of 9, 35 and 14 days, respectively, at December 31, 1993, 1992 and
1991. Weighted average rates on these dates were 2.8%, 3.2% and 8.7%,
respectively.
Commercial paper maturities ranged from 4 to 167 days at December 31, 1993,
from 4 to 183 days at December 31, 1992 and from 2 to 232 days at December 31,
1991. Weighted average maturities were 101, 96 and 107 days, respectively, at
December 31, 1993, 1992 and 1991. The weighted average interest rates on these
dates were 3.5%, 3.6% and 5.2%, respectively.
The short-term notes payable to an unaffiliated bank represent unsecured
borrowings under a credit agreement that provides for maximum borrowings of $25
million. There were no borrowings outstanding under this agreement at December
31, 1993 or 1992. At December 31, 1991, $5 million was borrowed on this
agreement at a rate of 5.8% with a remaining maturity of three days. No
compensating balances or commitment fees are required by this agreement.
The short-sale liability represents First Alabama's trading obligation to
deliver certain government securities at a predetermined date and price. These
securities had weighted average interest rates of 4.0%, 3.6% and 6.4%,
respectively, at December 31, 1993, 1992 and 1991.
Long-term borrowings consist of the following:
<TABLE>
<CAPTION>
(in thousands) December 31
- --------------------------------------------------------------------
1993 1992
- --------------------------------------------------------------------
<S> <C> <C>
7.80% subordinated notes $ 75,000 $ 75,000
- --------------------------------------------------------------------
8.75% debentures 5,600 6,000
- --------------------------------------------------------------------
Federal Home Loan Bank notes 346,457 45,000
- --------------------------------------------------------------------
Mortgage notes payable 5,543 6,011
- --------------------------------------------------------------------
Medium term notes 27,031 -0-
- --------------------------------------------------------------------
Other notes payable 3,231 4,979
- --------------------------------------------------------------------
TOTAL $462,862 $136,990
====================================================================
</TABLE>
In December 1992, First Alabama issued $75 million in 7.80% subordinated
notes, due December 1, 2002. The notes are subordinated and subject in right of
payment of principal and interest to the prior payment in full of all senior
indebtedness of the Company, generally defined as all indebtedness and other
obligations of the Company to its creditors, except subordinated indebtedness.
Payment of the principal of the notes may be accelerated only in the case of
certain events involving bankruptcy, insolvency proceedings or reorganization
of the Company. The notes qualify as "Tier II capital" under Federal Reserve
guidelines.
The 8.75% debentures are due as follows (principal amount only): $400,000 in
each of the years 1994-1997 and $4,000,000 in 1998.
Federal Home Loan Bank notes represent borrowings from Federal Home Loan
Banks. Interest on these borrowings is at fixed rates ranging from 4.4% to
12.4% with maturities of one to fourteen years. These borrowings are secured
by Federal Home Loan Bank stock (carried at $50.5 million) and by all first
mortgage loans on one-to-four family dwellings held by First Alabama Bank and
other first mortgage loans on one-to-four family dwellings held by certain
other subsidiaries
59
<PAGE> 37
(approximately $1,585.9 million at December 31, 1993). The maximum amount
that could be borrowed from Federal Home Loan Banks under the current borrowing
agreement and without further investment in Federal Home Loan Bank stock is
approximately $448 million.
The mortgage notes payable at December 31, 1993, had a weighted average
interest rate of 8.8% and were collateralized by premises and equipment carried
at $9,738,000.
The medium term notes were issued by Secor, prior to acquisition by First
Alabama. The notes are scheduled to mature within two years and had an interest
rate of 9.47% at December 31, 1993.
Other notes payable at December 31, 1993, carried a weighted average
interest rate of 7.5% and had a weighted average maturity of 7.6 years.
The aggregate amount of maturities of all long-term debt in each of the next
five years is as follows: 1994-$76,553,000; 1995-$78,980,000; 1996-$72,318,000;
1997-$34,962,000; 1998-$50,692,000.
The debenture agreement contains certain restrictions on indebtedness,
disposition of affiliate banks, creation of liens on property, sales of assets,
maintenance of capital levels, and the payment of dividends. Under the most
restrictive covenant, approximately $724 million was available for the payment
of dividends at December 31, 1993.
Substantially all of the consolidated net assets are owned by the
subsidiaries and dividends paid by First Alabama are substantially provided by
dividends from the subsidiaries. Statutory limits are placed on the amount of
dividends the subsidiaries can pay without prior regulatory approval. In
addition, regulatory authorities require the maintenance of minimum capital to
asset ratios at bank and thrift subsidiaries. At December 31, 1993, the bank
and thrift subsidiaries could pay approximately $172 million in dividends
without prior approval.
Management believes that none of these dividend restrictions will materially
affect First Alabama's dividend policy. In addition to dividend restrictions,
federal statutes also prohibit unsecured loans from bank and thrift
subsidiaries to the parent company. Because of these limitations,
substantially all of the net assets of First Alabama's subsidiaries are
restricted, except for the amount which can be paid to the parent in the form
of dividends.
NOTE J. EMPLOYEE BENEFIT PLANS
First Alabama has a defined benefit pension plan covering substantially all
employees. The benefits are based on years of service and the employee's
highest five years of compensation during the last ten years of employment.
First Alabama's funding policy is to contribute annually the maximum amount
that can be deducted for federal income tax purposes, which was zero for 1993,
1992 and 1991. Contributions are intended to provide not only for benefits
attributed to service to date, but also for those expected to be earned in the
future.
The following table sets forth the plan's funded status and amounts
recognized in the consolidated statement of condition:
<TABLE>
<CAPTION>
(in thousands) December 31
- ----------------------------------------------------------------------------
1993 1992
- ----------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation,
including vested benefits
of $58,472 in 1993 and
$44,885 in 1992 $(59,429) $(45,473)
- ----------------------------------------------------------------------------
Projected benefit obligation for
service rendered to date $(73,502) $(58,695)
Plan assets at fair value, primarily
listed stocks and bonds, and U.S.
Treasury and agency obligations 90,403 83,240
- ----------------------------------------------------------------------------
Plan assets in excess of projected
benefit obligation 16,901 24,545
- ----------------------------------------------------------------------------
Unrecognized net loss (gain) from
past experience different
from that assumed 2,671 (5,783)
- ----------------------------------------------------------------------------
Unrecognized prior service cost (338) 1,024
- ----------------------------------------------------------------------------
Unrecognized net asset (5,909) (7,879)
- ----------------------------------------------------------------------------
Prepaid pension cost
included in other assets $ 13,325 $ 11,907
============================================================================
</TABLE>
Net pension cost included the following components:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- ------------------------------------------------------------------
1993 1992 1991
- ------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during the period $ 2,832 $ 2,609 $ 2,305
- ------------------------------------------------------------------
Interest cost on projected
benefit obligation 4,966 4,496 4,110
- ------------------------------------------------------------------
Actual return on
plan assets (5,602) (5,474) (12,654)
- ------------------------------------------------------------------
Net amortization and
deferral (3,615) (3,494) 4,589
- ------------------------------------------------------------------
Net periodic pension income $(1,419) $ (1,863) $(1,650)
- ------------------------------------------------------------------
</TABLE>
The weighted average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.5% and 4.5%, respectively, at December 31,
1993, and 8.5% and 5.5%, respectively, at December 31, 1992 and 1991. The
60
<PAGE> 38
expected long-term rate of return on plan assets was 9% in all years.
The Company also sponsors a supplemental executive retirement program,
which is a non-qualified plan that provides certain senior executive officers
defined pension benefits in relation to their compensation, as is provided to
other employees by the qualified pension plan. The projected benefit obligation
for this plan totaled $3,048,000 at December 31, 1993, and $2,190,000 at
December 31, 1992. The accumulated benefit obligation, all of which was vested
and accrued at December 31, 1993 and 1992, totaled $2,294,000 and $1,455,000,
respectively. Pension expense for this plan totaled $20,000 in 1993, $1,000,000
in 1992, and $986,000 in 1991. The reduced expense in 1993 resulted primarily
from changes in future funding of the projected plan obligations.
Contributions to the employee profit sharing plan totaled $11,100,000,
$9,473,000 and $7,852,000 for 1993, 1992 and 1991, respectively.
The 1993 contribution to the employee stock ownership plan totaled
$1,120,000, compared to $951,000 in 1992, the first year a contribution was
made to the plan. Contributions are used to purchase First Alabama common
stock for the benefit of participating employees.
Contributions to the employee stock purchase plan in 1993, 1992 and
1991 were $905,000, $733,000 and $519,000, respectively.
First Alabama sponsors a defined benefit postretirement health care
plan that covers certain retired employees. Currently the Company pays a
portion of the costs of certain health care benefits for all eligible employees
that retired before January 1, 1989. No health care benefits are provided for
employees retiring at normal retirement age after December 31, 1988. For
employees retiring before normal retirement age, the Company currently pays a
portion (based upon length of active service at the time of retirement) of the
costs of certain health care benefits until the retired employee becomes
eligible for Medicare. The plan is contributory and contains other cost-sharing
features such as deductibles and co-pays. Retiree health care benefits, as well
as similar benefits for active employees, are provided through a group
insurance program in which premiums are based on the amount of benefits paid.
The Company's policy is to fund the Company's share of the cost of health care
benefits in amounts determined at the discretion of management.
In 1993, First Alabama adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions." The effect of adopting the new rules increased 1993 net
periodic postretirement benefit cost by $1,413,000. The new method is not
expected to have a material effect on the Company's future financial
statements. Postretirement benefit cost for 1992, which was recorded on a cash
basis, has not been restated.
The following table sets forth the plan's funded status and amounts
recognized in the consolidated statement of condition:
<TABLE>
<CAPTION>
(in thousands) December 31,
- --------------------------------------------------------------------
1993
- --------------------------------------------------------------------
<S> <C>
Accumulated benefit obligation,
including retiree benefits of $4,579 $(11,784)
- --------------------------------------------------------------------
Unrecognized transition obligation 9,226
- --------------------------------------------------------------------
Unrecognized net loss from
past experience different
from that assumed 1,145
- --------------------------------------------------------------------
Accrued postretirement benefit cost $ (1,413)
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Net periodic postretirement benefit cost included the following components:
(in thousands) Year Ended December 31
- -----------------------------------------------------------------
1993
- -----------------------------------------------------------------
<S> <C>
Service cost-benefits earned during
the period $ 511
- -----------------------------------------------------------------
Interest cost on benefit obligation 810
- -----------------------------------------------------------------
Net amortization and deferral 485
- -----------------------------------------------------------------
Net periodic postretirement benefit cost $1,806
- -----------------------------------------------------------------
</TABLE>
The assumed health care cost trend rate was 13% for 1994 and is assumed to
decrease gradually to 6% by 2007 and remain at that level thereafter.
Increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation at
December 31, 1993 by $1,520,000 and the aggregate of the service and interest
cost components of net periodic postretirement benefit cost for 1993 by
$286,000. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.5% at December 31, 1993.
NOTE K. LEASES
Rental expense for all leases amounted to approximately $4,233,000, $3,322,000
and $3,280,000 for 1993, 1992 and 1991, respectively. The approximate future
minimum rental commitments as of December 31, 1993, for all noncancelable
leases with initial or remaining terms of one year or more are shown in the
following table. Included in these amounts are all renewal options reasonably
assured of being exercised.
61
<PAGE> 39
<TABLE>
<CAPTION>
(in thousands)
- -------------------------------------------------------------
Equipment Premises Total
- -------------------------------------------------------------
<S> <C> <C> <C>
1994 $118 $ 3,810 $ 3,928
- -------------------------------------------------------------
1995 47 3,493 3,540
- -------------------------------------------------------------
1996 30 3,032 3,062
- -------------------------------------------------------------
1997 14 2,448 2,462
- -------------------------------------------------------------
1998 1 1,892 1,893
- -------------------------------------------------------------
1999-2003 -0- 5,430 5,430
- -------------------------------------------------------------
2004-2008 -0- 2,805 2,805
- -------------------------------------------------------------
2009-2013 -0- 1,345 1,345
- -------------------------------------------------------------
TOTAL $210 $24,255 $24,465
=============================================================
</TABLE>
NOTE L. COMMITMENTS AND CONTINGENCIES
To accommodate the financial needs of its customers, First Alabama makes
commitments under various terms to lend funds to consumers, businesses and
other entities. These commitments include (among others) revolving credit
agreements, term loan commitments and short-term borrowing agreements. Many of
these loan commitments have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of these commitments are expected
to expire without being funded, the total commitment amounts do not necessarily
represent future liquidity requirements. Standby letters of credit are also
issued, which commit First Alabama to make payments on behalf of customers if
certain specified future events occur. Historically, a large percentage of
standby letters of credit also expire without being funded.
Both loan commitments and standby letters of credit have credit risk
essentially the same as that involved in extending loans to customers and are
subject to normal credit approval procedures and policies. Collateral is
obtained based on management's assessment of the customer's credit.
Loan commitments totaled $1.8 billion at December 31, 1993 and $1.3 billion
at December 31, 1992. Standby letters of credit were $331.4 million at December
31, 1993 and $245.4 million at December 31, 1992. Commitments under commercial
letters of credit used to facilitate customers' trade transactions were $15.9
million at December 31, 1993 and $21.1 million at December 31, 1992.
The Company and its affiliates are defendants in litigation and claims
arising from the normal course of business. Based on consultation with legal
counsel, management is of the opinion that the outcome of litigation will not
have a material effect on First Alabama's consolidated financial statements.
NOTE M. OFF-BALANCE SHEET
FINANCIAL INSTRUMENTS
First Alabama has entered into several types of financial instrument agreements
to help manage its exposure to interest rate fluctuations.
Forward contracts represent commitments to sell money market instruments at
a future date and at a specified price or yield. The Company is subject to the
market risk associated with changes in the value of the underlying financial
instrument as well as the risk that the other party will fail to perform. The
gross contract amount of forward contracts, which totaled $266.5 million and
$195.0 million at December 31, 1993 and 1992, respectively, represents the
extent of First Alabama's involvement. However, those amounts significantly
exceed the future cash requirements, as the Company intends to close out open
positions prior to settlement, and thus is subject only to the change in the
value of the instruments. The gross amount of contracts represents the
Company's maximum exposure to credit risk.
Written call options represent agreements to sell, at the option of the
buyer, certain money market instruments at a specified price within a specified
period of time. Written call options expose the Company to market risk
associated with changes in the value of the underlying financial instrument,
but do not expose the Company to credit risk. The gross contract amount of
written call options sold to other parties totaled $7 million and $10 million
at December 31, 1993 and 1992, respectively.
Interest rate swap agreements, which were entered into by Secor prior to its
acquisition by First Alabama, totaled $77.9 million in notional principal
amount at December 31, 1993. Interest rate swap transactions, which Secor used
to assist in managing interest rate exposure, generally involve the exchange of
fixed and floating rate interest payment obligations without the exchange of
the underlying notional principal amounts. Interest rate swap agreements
subject the Company to market risk associated with changes in interest rates,
as well as the risk that another party will fail to perform. Notional principal
amounts often are used to express the volume of these transactions, but the
amounts potentially subject to credit risk are substantially less.
First Alabama operates a broker-dealer subsidiary, which in the normal
course of trading inventory and clearing customers' securities transactions, is
a party to certain financial instruments with off-balance-sheet risk. The
aggregate off-balance-sheet risk from these financial instruments is not
material to the consolidated financial statements.
62
<PAGE> 40
NOTE N. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments.
Cash and cash equivalents: The carrying amount reported in the
consolidated statement of cash flows approximates the estimated fair value.
Interest-bearing deposits in other banks: The carrying amount reported in
the consolidated statement of condition approximates the estimated fair value.
Investment securities: Estimated fair values are based on quoted market
prices, where available. If quoted market prices are not available, estimated
fair values are based on quoted market prices of comparable instruments.
Trading account assets: Estimated fair values, which are the amounts
recognized in the consolidated statement of condition, are based on quoted
market prices, where available. If quoted market prices are not available,
estimated fair values are based on quoted market prices of comparable
instruments.
Mortgage loans held for sale: Estimated fair values, which are the amounts
recognized in the consolidated statement of condition, are based on quoted
market prices of comparable instruments.
Loans: Estimated fair values for variable rate loans, which reprice
frequently and have no significant credit risk, are based on carrying value.
Estimated fair values for all other loans are estimated using discounted cash
flow analyses, based on interest rates currently offered on loans with similar
terms to borrowers of similar credit quality. The carrying amount of accrued
interest reported in the consolidated statement of condition approximates the
fair value.
Deposit liabilities: The fair value of non-interest bearing demand accounts,
interest-bearing transaction accounts, savings accounts, money market accounts
and certain other time open accounts is the amount payable on demand at the
reporting date (i.e., the carrying amount). Fair values for certificates of
deposit are estimated by using discounted cash flow analyses, using the
interest rates currently offered for deposits of similar maturities.
Short-term borrowings: The carrying amount reported in the consolidated
statement of condition approximates the estimated fair value.
Long-term borrowings: Fair values are estimated using discounted cash flow
analyses, based on the current rates offered for similar borrowing
arrangements.
Loan commitments, standby and commercial letters of credit: Estimated fair
values for these off-balance-sheet instruments are based on standard fees
currently charged to enter into similar agreements.
Forward contracts, call options and interest rate swaps: Estimated fair
values are based on dealer quotes. These values represent the estimated amount
the Company would pay to terminate the agreements. The estimated fair values of
the Company's financial instruments are as follows:
<TABLE>
<CAPTION>
(in thousands) December 31
- ----------------------------------------------------------------------------
1993 1992
- ----------------------------------------------------------------------------
ESTIMATED Estimated
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash
equivalents $ 568,756 $ 568,756 $ 568,841 $ 568,841
- ----------------------------------------------------------------------------
Interest-bearing
deposits
in other banks 11,031 11,031 342 342
- ----------------------------------------------------------------------------
Investment
securities 2,368,445 2,457,987 1,670,170 1,761,195
- ----------------------------------------------------------------------------
Trading account
assets 20,368 20,368 12,089 12,089
- ----------------------------------------------------------------------------
Mortgage loans
held for sale 285,665 285,665 207,612 207,612
- ----------------------------------------------------------------------------
Loans (excluding
leases) 6,645,592 6,724,651 4,995,944 4,987,460
- ----------------------------------------------------------------------------
Financial liabilities:
Deposits 8,770,694 8,773,196 6,701,142 6,709,817
- ----------------------------------------------------------------------------
Short-term
borrowings 203,761 203,761 253,159 253,159
- ----------------------------------------------------------------------------
Long-term
borrowings 462,862 468,761 136,990 144,639
- ----------------------------------------------------------------------------
Off-balance-sheet instruments:
Loan
commitments -0- (15,206) -0- (10,955)
- ----------------------------------------------------------------------------
Standby letters
of credit -0- (4,971) -0- (3,680)
- ----------------------------------------------------------------------------
Commercial letters
of credit -0- (40) -0- (53)
- ----------------------------------------------------------------------------
Forward contracts,
call options and
interest rate swaps (2,405) (2,405) -0- -0-
- ----------------------------------------------------------------------------
</TABLE>
63
<PAGE> 41
NOTE O. OTHER INCOME AND EXPENSE
Other income consists of the following:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- -------------------------------------------------------------
1993 1992 1991
- -------------------------------------------------------------
<S> <C> <C> <C>
Fees and commissions $10,257 $10,029 $ 8,962
- -------------------------------------------------------------
Insurance premiums
and commissions 4,797 4,660 4,952
- -------------------------------------------------------------
Trading account income 7,344 6,848 4,538
- -------------------------------------------------------------
Other miscellaneous income 4,218 1,708 2,066
- -------------------------------------------------------------
TOTAL $26,616 $23,245 $20,518
=============================================================
</TABLE>
Other expense consists of the following:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- -------------------------------------------------------------
1993 1992 1991
- -------------------------------------------------------------
<S> <C> <C> <C>
Stationery, printing
and supplies $ 5,354 $ 4,638 $ 5,073
- -------------------------------------------------------------
Advertising and business
development 6,155 5,240 4,752
- -------------------------------------------------------------
Postage and freight 6,294 5,983 5,597
- -------------------------------------------------------------
Telephone 5,508 5,087 4,907
- -------------------------------------------------------------
Legal and other professional fees 4,416 3,896 3,569
- -------------------------------------------------------------
Other non-credit losses 6,188 10,075 9,596
- -------------------------------------------------------------
Outside computer services 4,856 4,330 4,808
- -------------------------------------------------------------
Amortization of mortgage
servicing rights 14,049 8,281 6,270
- -------------------------------------------------------------
(Gain) loss on sale of
mortgages by affiliate
mortgage company (476) 729 275
- -------------------------------------------------------------
Other miscellaneous expenses 32,023 32,497 24,131
- -------------------------------------------------------------
TOTAL $84,367 $80,756 $68,978
=============================================================
</TABLE>
NOTE P. INCOME TAXES
Effective January 1, 1993, First Alabama changed its method of accounting for
income taxes from the deferred method to the liability method as required by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." The cumulative effect of adopting Statement 109 did not have a
significant impact on First Alabama's provision for income taxes. As permitted
under the new rules, prior years financial statements have not been restated.
At December 31, 1993, First Alabama had net operating loss carryforwards of
$71.5 million that expire in years 2002 through 2005. Those carryforwards
resulted from the Company's acquisition of Secor in December 1993 and Security
Federal Savings and Loan Association in December 1992. For financial reporting
purposes, a valuation allowance of approximately $14.0 million has been
recognized to offset a portion of the deferred tax assets related to those
carryforwards.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of First Alabama's deferred tax liabilities and assets as of December 31, 1993
are listed below.
<TABLE>
<CAPTION>
(in thousands) December 31
- -------------------------------------------------------------------
1993
- -------------------------------------------------------------------
<S> <C>
Deferred tax liabilities:
Tax over book depreciation $ 2,224
- -------------------------------------------------------------------
Accretion of bond discount 3,938
- -------------------------------------------------------------------
Direct lease financing 11,061
- -------------------------------------------------------------------
Pension 5,044
- -------------------------------------------------------------------
Other 28,197
- -------------------------------------------------------------------
Total deferred tax liabilities 50,464
- -------------------------------------------------------------------
Deferred tax assets:
Loan loss provision (40,615)
- -------------------------------------------------------------------
Net operating loss carryforward (26,120)
- -------------------------------------------------------------------
Other (38,224)
- -------------------------------------------------------------------
Total deferred tax assets (104,959)
- -------------------------------------------------------------------
Net deferred tax asset before
valuation allowance (54,495)
- -------------------------------------------------------------------
Valuation allowance 26,310
- -------------------------------------------------------------------
Net deferred tax asset $ (28,185)
- -------------------------------------------------------------------
</TABLE>
Applicable income taxes for financial reporting purposes differs from
the amount computed by applying the statutory federal income tax rate of 35% for
1993, and 34% for 1992 and 1991, for the reasons noted below:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- -------------------------------------------------------------------
1993 1992 1991
- -------------------------------------------------------------------
LIABILITY Deferred Deferred
METHOD Method Method
- -------------------------------------------------------------------
<S> <C> <C> <C>
Tax computed at statutory
federal income tax rate $57,932 $47,609 $38,051
- -------------------------------------------------------------------
Increases (decreases) in
taxes resulting from:
Obligations of states and
political subdivisions:
Tax exempt income (7,448) (7,422) (8,885)
- -------------------------------------------------------------------
Tax on preference item 878 961 1,204
- -------------------------------------------------------------------
State income tax,
net of federal tax
benefit 3,309 3,153 2,565
- -------------------------------------------------------------------
Subsidiary purchase
accounting adjustments (50) (76) (193)
- -------------------------------------------------------------------
Other, net (1,145) 752 918
- -------------------------------------------------------------------
TOTAL $53,476 $44,977 $33,660
===================================================================
Effective Tax Rate 32.3% 32.1% 30.1%
- -------------------------------------------------------------------
</TABLE>
64
<PAGE> 42
The provisions for income taxes included in the consolidated statement of
income are summarized below. Included in these amounts are income taxes of
$27,000, $(18,000) and $(172,000), in 1993, 1992 and 1991, respectively,
related to securities transactions.
<TABLE>
<CAPTION>
(in thousands) Current Deferred Total
- --------------------------------------------------------------------
<S> <C> <C> <C>
1993 (Liability method)
Federal $50,272 $ (1,886) $48,386
- --------------------------------------------------------------------
State 5,208 $ (118) 5,090
- --------------------------------------------------------------------
TOTAL $55,480 $ (2,004) $53,476
====================================================================
1992 (Deferred method)
Federal $49,389 $ (9,190) $40,199
- --------------------------------------------------------------------
State 5,975 (1,197) 4,778
- --------------------------------------------------------------------
Total $55,364 $(10,387) $44,977
====================================================================
1991 (Deferred method)
Federal $34,140 $ (4,367) $29,773
- --------------------------------------------------------------------
State 4,408 (521) 3,887
- --------------------------------------------------------------------
Total $38,548 $ (4,888) $33,660
====================================================================
</TABLE>
Following is a listing of the estimated amounts of deferred taxes for the
years ended December 31, 1992 and 1991. These result from items of income or
expense being reported for tax purposes in different years than they are
reflected in the financial statements.
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- ---------------------------------------------------------
1992 1991
- ---------------------------------------------------------
<S> <C> <C>
Tax effect of timing
differences related to:
Depreciation $ (700) $ (789)
- ---------------------------------------------------------
Provision for loan losses (5,042) (3,486)
- ---------------------------------------------------------
Direct lease financing (2,725) 1,126
- ---------------------------------------------------------
Pension contribution 683 605
- ---------------------------------------------------------
Other (2,603) (2,344)
- ---------------------------------------------------------
TOTAL $(10,387) $(4,888)
=========================================================
</TABLE>
NOTE Q. ACQUISITIONS
During 1993 First Alabama completed the following acquisitions:
<TABLE>
<CAPTION>
Date Company Acquired Headquarters Total Assets
Location (in thousands)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
June Franklin County Bank Winchester, $ 68,034
Tennessee
October First Federal Savings Defuniak Springs, 89,295
Bank of DeFuniak Springs Florida
December First Federal Savings Marianna, 101,084
Bank of Marianna Florida Florida
December Secor Bank, Federal Birmingham, 1,831,937
Savings Bank Alabama
</TABLE>
All of the 1993 acquisitions were accounted for as purchases. The total
consideration paid was approximately $10.3 million in cash and 4,027,450 shares
of First Alabama common stock (including options assumed and treasury stock
reissued) valued at $129.2 million. Total intangible assets recorded in
connection with these transactions totaled approximately $27.8 million.
Because the 1993 acquisitions were accounted for as purchases, First
Alabama's consolidated financial statements include the results of operations
of the acquired companies only from their respective dates of acquisition. The
following unaudited summary information presents the consolidated results of
operations of First Alabama on a pro forma basis, as if all the above companies
had been acquired on January 1, 1992. The pro forma summary information does
not necessarily reflect the results of operations as they actually would have
been, if the acquisitions had occurred at the beginning of the periods
presented.
<TABLE>
<CAPTION>
(in thousands, except per share data) Year Ended December 31
- ----------------------------------------------------------------------------
1993 1992
- ----------------------------------------------------------------------------
<S> <C> <C>
Interest income $704,426 $703,449
- ----------------------------------------------------------------------------
Interest expense 306,422 338,231
- ----------------------------------------------------------------------------
Net interest income 398,004 365,218
- ----------------------------------------------------------------------------
Provision for loan losses 25,403 32,182
- ----------------------------------------------------------------------------
Non-interest income 141,792 140,864
- ----------------------------------------------------------------------------
Non-interest expense 339,978 324,731
- ----------------------------------------------------------------------------
Income before income taxes 174,415 149,169
- ----------------------------------------------------------------------------
Applicable income taxes 57,023 48,463
- ----------------------------------------------------------------------------
Net income $117,392 $100,706
- ----------------------------------------------------------------------------
Net income per share $ 2.85 $ 2.49
- ----------------------------------------------------------------------------
</TABLE>
In December 1992, First Alabama acquired Security Federal Savings and Loan
Association, (Security Federal), a mutual association headquartered in
Nashville, Tennessee. Security Federal, with assets of $383 million,
subsequently converted to a Tennessee chartered state bank, First Security Bank
of Tennessee. In connection with this transaction, First Alabama issued 442,574
shares of its common stock for gross proceeds of $16 million. This transaction
was accounted for as a purchase.
In March 1992, First Alabama acquired certain assets and assumed $49 million
of the deposit liabilities of seven Jefferson Federal Savings and Loan
Association offices in Alabama. This institution had been operated in
conservatorship by the Resolution Trust Corporation.
The following chart summarizes the assets acquired and liabilities assumed
in connection with acquisitions in 1993 and 1992. Approximately $49 million of
the 1992 "Cash and due from banks" amount, represent funds received from the
Resolution Trust Corporation.
65
<PAGE> 43
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 46,701 $ 50,199
- ------------------------------------------------------------
Federal funds sold 109,163 25,903
- ------------------------------------------------------------
Investment securities 693,796 55,941
- ------------------------------------------------------------
Loans, net 1,172,896 281,676
- ------------------------------------------------------------
Other assets 67,794 12,908
- ------------------------------------------------------------
Deposits 1,629,777 403,719
- ------------------------------------------------------------
Borrowings 323,259 -0-
- ------------------------------------------------------------
Other liabilities 24,366 6,997
- ------------------------------------------------------------
</TABLE>
First Alabama has entered into an agreement to acquire Guaranty Bank and
Trust Company of Baton Rouge, Louisiana, a subsidiary of Guaranty Bancorp,
Inc., in exchange for approximately 883,536 shares of First Alabama common
stock. The 883,536 shares of First Alabama common stock is subject to
adjustment in the event that the average trading price of First Alabama's
common stock during a specified period is not within the range of $31 to $36
per share. This transaction is subject to approval by the stockholders of
Guaranty Bancorp, Inc. and by various regulatory authorities. At December 31,
1993, Guaranty Bank and Trust Company had assets of approximately $181 million
and operated six banking offices.
First Alabama also has entered into an agreement to acquire for cash First
Bank of Fayette, Alabama, a subsidiary of First Fayette Bancshares, Inc. First
Bank of Fayette would be merged into First Alabama's existing Alabama bank
subsidiary, First Alabama Bank. This transaction is subject to approval by the
stockholders of First Fayette Bancshares, Inc. and by various regulatory
authorities. At December 31, 1993, First Bank of Fayette had assets of
approximately $74 million and operated three banking offices.
Included in other assets on the consolidated statement of condition are
amounts representing the excess of cost over fair value of net assets acquired.
At December 31, 1993 and 1992, these amounts totaled approximately $48,891,000
and $21,347,000, respectively. These amounts are generally being amortized over
periods of 12 to 25 years, principally using the straight-line method of
amortization.
NOTE R. STOCK OPTION AND LONG-TERM INCENTIVE PLANS
First Alabama has stock option plans for certain key employees that
provide for the granting of options to purchase up to 2,860,000 shares of First
Alabama common stock at the fair market value at the time the options are
granted. The terms of options granted are determined by the personnel committee
of the Board of Directors; however, no options may be granted after ten years
from the plans' adoption and no options may be exercised beyond ten years from
the date granted. The plans also permit the granting of stock appreciation
rights to holders of stock options. Stock appreciation rights were attached to
331,755; 378,873 and 538,610 of the shares under option at December 31, 1993,
1992 and 1991, respectively.
Activity in the plans is summarized as follows:
<TABLE>
<CAPTION>
Shares Under Option Price
Option Per Share
- ----------------------------------------------------------
<S> <C> <C>
Balance at
January 1, 1991 1,304,032 $12.33 - $19.83
- ----------------------------------------------------------
Granted 267,080 16.03
- ----------------------------------------------------------
Exercised (369,899) 12.33 - 19.49
- ----------------------------------------------------------
Canceled (102,328) 12.33 - 19.83
- ----------------------------------------------------------
Returned to plans (32,495) 15.00 - 17.67
- ----------------------------------------------------------
Outstanding at
December 31, 1991 1,066,390 12.33 - 19.83
- ----------------------------------------------------------
Granted 233,750 26.31
- ----------------------------------------------------------
Exercised (262,580) 12.33 - 19.83
- ----------------------------------------------------------
Canceled (42,898) 12.33 - 19.49
- ----------------------------------------------------------
Outstanding at
December 31, 1992 994,662 12.33 - 26.31
- ----------------------------------------------------------
Granted 302,229 32.31 - 35.44
- ----------------------------------------------------------
Exercised (101,193) 14.38 - 26.31
- ----------------------------------------------------------
Canceled (11,047) 12.33 - 19.49
- ----------------------------------------------------------
Outstanding at
December 31, 1993 1,184,651 12.33 - 35.44
==========================================================
Exercisable at
December 31, 1993 882,422 12.33 - 26.31
==========================================================
</TABLE>
In 1991, stockholders approved the First Alabama Bancshares 1991 Long-Term
Incentive Plan. This plan provides for the granting of up to 2,750,000 shares
of common stock in the form of stock options, stock appreciation rights,
performance awards or restricted stock awards. A maximum of 825,000 shares of
restricted stock and 1,375,000 shares of performance awards, may be granted.
During 1993, 1992 and 1991, First Alabama granted 5,500; 129,294 and 124,850
shares, respectively, as restricted stock and 187,750; 249,948 and 418,990
shares, respectively, as performance awards. Grantees of restricted stock must
remain employed with First Alabama for certain periods from the date of the
grant at the same or a higher level in order for the shares to be released.
However, during this period the grantee is eligible to receive dividends and
exercise voting privileges on such restricted shares. In 1993 and 1992, 75,034
and 54,789 restricted shares, respectively, were released. Issuance of
performance shares is
66
<PAGE> 44
dependent upon achievement of certain performance criteria and is, therefore,
deferred until the end of the performance period. In 1993 and 1992, 196,743
and 136,824 performance shares, respectively, were issued. Total expense for
restricted stock was $1,752,000 in 1993, $1,975,000 in 1992, and $426,000 in
1991. Total expense for performance shares was $9,908,000 in 1993, $7,825,000
in 1992 and $3,648,000 in 1991.
NOTE S. PARENT COMPANY ONLY FINANCIAL STATEMENTS
Presented below are condensed financial statements of First Alabama Bancshares,
Inc.:
<TABLE>
<CAPTION>
STATEMENT OF CONDITION
(in thousands) December 31
- -----------------------------------------------------------------------------------
1993 1992
- -----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- -----------------------------------------------------------------------------------
Cash due from bank $ 2,552 $ 40
- -----------------------------------------------------------------------------------
Securities purchased under
agreements to resell 29,834 92,879
- -----------------------------------------------------------------------------------
Dividends receivable from
subsidiaries 11,200 9,500
- -----------------------------------------------------------------------------------
Loans to subsidiaries 2,920 3,339
- -----------------------------------------------------------------------------------
Investment securities 5,181 2,105
- -----------------------------------------------------------------------------------
Premises and equipment 888 993
- -----------------------------------------------------------------------------------
Investment in subsidiaries:
Banks 773,145 659,183
- -----------------------------------------------------------------------------------
Non-banks 168,131 5,929
- -----------------------------------------------------------------------------------
941,276 665,112
- -----------------------------------------------------------------------------------
Other assets 10,592 10,356
- -----------------------------------------------------------------------------------
$1,004,443 $ 784,324
===================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------
Commercial paper $ 17,201 $ 19,289
- -----------------------------------------------------------------------------------
Long-term borrowings 82,249 83,554
- -----------------------------------------------------------------------------------
Other liabilities 54,028 24,826
- -----------------------------------------------------------------------------------
Total liabilities 153,478 127,669
- -----------------------------------------------------------------------------------
Stockholders' Equity:
Common stock 26,575 22,013
- -----------------------------------------------------------------------------------
Surplus 375,983 133,943
- -----------------------------------------------------------------------------------
Undivided profits 462,280 516,148
- -----------------------------------------------------------------------------------
Treasury stock (12,320) (12,320)
- -----------------------------------------------------------------------------------
Unearned restricted stock (1,553) (3,129)
- -----------------------------------------------------------------------------------
Total stockholders' equity 850,965 656,655
- -----------------------------------------------------------------------------------
$ 1,004,443 $ 784,324
===================================================================================
</TABLE>
Aggregate maturities of long-term borrowings (excluding demand notes to
affiliates of $1,649,000) in each of the next five years for the parent company
only are as follows: $400,000 due in each of the years 1994-1997 and $4,000,000
due in 1998. Standby letters of credit issued by the parent company totaled
$13.8 million at December 31, 1993. This amount is included in total standby
letters of credit disclosed in Note L.
<TABLE>
<CAPTION>
STATEMENT OF INCOME
(in thousands) Year Ended December 31
- ------------------------------------------------------------------------------
1993 1992 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends received
from subsidiaries:
Banks $ 44,800 $39,500 $53,000
- ------------------------------------------------------------------------------
Non-banks 400 1,350 1,250
- ------------------------------------------------------------------------------
45,200 40,850 54,250
- ------------------------------------------------------------------------------
Service fees from subsidiaries 20,869 20,772 14,383
- ------------------------------------------------------------------------------
Interest from subsidiaries 2,680 1,417 1,274
- ------------------------------------------------------------------------------
Other 273 243 249
- ------------------------------------------------------------------------------
69,022 63,282 70,156
- ------------------------------------------------------------------------------
Expenses:
Salaries and employee
benefits 16,225 15,662 10,498
- ------------------------------------------------------------------------------
Interest 7,284 2,178 2,996
- ------------------------------------------------------------------------------
Net occupancy expense 536 544 508
- ------------------------------------------------------------------------------
Furniture and equipment
expense 303 314 240
- ------------------------------------------------------------------------------
Legal and other
professional fees 1,474 808 714
- ------------------------------------------------------------------------------
Amortization of excess
purchase price 2,759 2,888 2,676
- ------------------------------------------------------------------------------
Other expenses 2,508 5,813 3,975
- ------------------------------------------------------------------------------
31,089 28,207 21,607
- ------------------------------------------------------------------------------
Income before income
taxes and equity in
undistributed earnings
of subsidiaries 37,933 35,075 48,549
- ------------------------------------------------------------------------------
Applicable income taxes
(credit) (1,726) (984) (690)
- ------------------------------------------------------------------------------
Income before equity
in undistributed earnings
of subsidiaries 39,659 36,059 49,239
- ------------------------------------------------------------------------------
Equity in undistributed
earnings of subsidiaries:
Banks 70,659 58,167 28,280
- ------------------------------------------------------------------------------
Non-banks 1,727 822 737
- ------------------------------------------------------------------------------
72,386 58,989 29,017
- ------------------------------------------------------------------------------
NET INCOME $112,045 $95,048 $78,256
==============================================================================
</TABLE>
67
<PAGE> 45
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- ----------------------------------------------------------------------------------
1993 1992 1991
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $112,045 $ 95,048 $ 78,256
- ----------------------------------------------------------------------------------
Adjustments to reconcile
net cash provided by
operating activities:
Equity in undistributed
earnings of subsidiaries (72,386) (58,989) (29,017)
- ----------------------------------------------------------------------------------
Provision for depreciation
and amortization 4,473 5,579 3,810
- ----------------------------------------------------------------------------------
Increase in other liabilities 29,729 6,717 6,014
- ----------------------------------------------------------------------------------
(Increase) in dividends
receivable from subsidiaries (1,700) -0- (500)
- ----------------------------------------------------------------------------------
(Increase) in other assets (504) (4,683) (2,048)
- ----------------------------------------------------------------------------------
Stock issued to employees
under incentive plan 5,674 4,384 -0-
- ----------------------------------------------------------------------------------
Net cash provided by
operating activities 77,331 48,056 56,515
- ----------------------------------------------------------------------------------
Investing activities:
Investment in subsidiaries (206,528) (25,603) (10,005)
- ----------------------------------------------------------------------------------
Principal payments on
loans to subsidiaries 419 424 3,751
- ----------------------------------------------------------------------------------
Purchases and sales of
premises and equipment (118) (257) (254)
- ----------------------------------------------------------------------------------
Purchase of investment
securities (3,082) -0- (716)
- ----------------------------------------------------------------------------------
Net cash (used) by
investing activities (209,309) (25,436) (7,224)
- ----------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF CASH FLOWS (CONTINUED)
(in thousands) Year Ended December 31
- ----------------------------------------------------------------------------------
1993 1992 1991
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Financing activities:
Increase (decrease) in
commercial paper borrowings (2,088) 243 (4,647)
- ----------------------------------------------------------------------------------
Cash dividends (38,792) (33,253) (31,602)
- ----------------------------------------------------------------------------------
Purchase of treasury stock (16,393) -0- -0-
- ----------------------------------------------------------------------------------
Proceeds from long-term
borrowings 2,167 76,117 2,102
- ----------------------------------------------------------------------------------
Principal payments on
long-term borrowings (3,472) (3,336) (1,767)
- ----------------------------------------------------------------------------------
Net (decrease)
in short-term borrowings -0- (5,000) (3,000)
- ----------------------------------------------------------------------------------
Issuance of stock for
acquisitions 112,657 14,367 -0-
- ----------------------------------------------------------------------------------
Issuance of treasury stock 16,393 -0- -0-
- ----------------------------------------------------------------------------------
Proceeds from exercise of
stock options 973 1,163 1,759
- ----------------------------------------------------------------------------------
Net cash provided (used) by
financing activities 71,445 50,301 (37,155)
- ----------------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents (60,533) 72,921 12,136
- ----------------------------------------------------------------------------------
Cash and cash equivalents at
beginning of year 92,919 19,998 7,862
- ----------------------------------------------------------------------------------
Cash and cash equivalents
at end of year $ 32,386 $ 92,919 $ 19,998
==================================================================================
</TABLE>
68
<PAGE> 46
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
Board of Directors
First Alabama Bancshares, Inc.
We have audited the accompanying consolidated statement of condition of
First Alabama Bancshares, Inc. and subsidiaries as of December 31, 1993 and
1992, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1993. 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of First Alabama
Bancshares, Inc. and subsidiaries at December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young
-------------------
Birmingham, Alabama
February 4, 1994
69
<PAGE> 47
HISTORICAL FINANCIAL SUMMARY
First Alabama Bancshares, Inc. & Subsidiaries
<TABLE>
<CAPTION>
(in thousands--except ratios, yields, and per share amounts)
- ----------------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATING RESULTS 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $421,616 $387,628 $414,879 $407,596 $379,292
- ----------------------------------------------------------------------------------------------------------------------
Income on federal funds sold 1,491 6,643 5,044 4,159 6,816
- ----------------------------------------------------------------------------------------------------------------------
Taxable interest on investments 104,744 117,558 113,706 83,366 84,050
- ----------------------------------------------------------------------------------------------------------------------
Tax-free interest on investments 11,708 10,654 11,803 11,641 11,658
- ----------------------------------------------------------------------------------------------------------------------
Other interest income 16,108 14,264 11,389 12,991 14,576
- ----------------------------------------------------------------------------------------------------------------------
Total interest income 555,667 536,747 556,821 519,753 496,392
- ----------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 198,301 215,280 280,732 282,572 266,162
- ----------------------------------------------------------------------------------------------------------------------
Interest on short-term borrowings 4,554 4,679 9,202 12,754 22,470
- ----------------------------------------------------------------------------------------------------------------------
Interest on long-term borrowings 10,759 4,109 2,083 2,287 4,055
- ----------------------------------------------------------------------------------------------------------------------
Total interest expense 213,614 224,068 292,017 297,613 292,687
- ----------------------------------------------------------------------------------------------------------------------
Net interest income 342,053 312,679 264,804 222,140 203,705
- ----------------------------------------------------------------------------------------------------------------------
Provision for loan losses 21,533 27,072 24,005 24,208 15,800
- ----------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 320,520 285,607 240,799 197,932 187,905
- ----------------------------------------------------------------------------------------------------------------------
Non-interest income:
Trust department income 18,299 16,720 14,443 13,502 12,701
- ----------------------------------------------------------------------------------------------------------------------
Service charges on deposit accounts 42,955 42,117 38,753 32,918 26,041
- ----------------------------------------------------------------------------------------------------------------------
Mortgage servicing and origination fees 44,079 37,048 28,250 20,595 16,029
- ----------------------------------------------------------------------------------------------------------------------
Securities gains (losses) 78 (53) (507) (982) 506
- ----------------------------------------------------------------------------------------------------------------------
Other 26,616 23,245 20,518 27,715 17,205
- ----------------------------------------------------------------------------------------------------------------------
Total non-interest income 132,027 119,077 101,457 93,748 72,482
- ----------------------------------------------------------------------------------------------------------------------
Non-interest expense:
Salaries and employee benefits 154,594 138,355 119,115 102,407 93,327
- ----------------------------------------------------------------------------------------------------------------------
Net occupancy expense 14,877 13,759 13,105 12,612 11,857
- ----------------------------------------------------------------------------------------------------------------------
Furniture and equipment expense 18,604 17,684 17,339 16,214 15,664
- ----------------------------------------------------------------------------------------------------------------------
Other 98,951 94,861 80,781 64,378 55,859
- ----------------------------------------------------------------------------------------------------------------------
Total non-interest expense 287,026 264,659 230,340 195,611 176,707
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes 165,521 140,025 111,916 96,069 83,680
- ----------------------------------------------------------------------------------------------------------------------
Applicable income taxes 53,476 44,977 33,660 27,175 21,046
- ----------------------------------------------------------------------------------------------------------------------
Net income $112,045 $ 95,048 $ 78,256 $ 68,894 $ 62,634
======================================================================================================================
Average number of shares outstanding 37,205 36,532 36,191 36,097 36,331
- ----------------------------------------------------------------------------------------------------------------------
Per share:
Net income $ 3.01 $ 2.60 $ 2.16 $ 1.91 $ 1.72
- ----------------------------------------------------------------------------------------------------------------------
Cash dividends declared 1.04 .91 .87 .84 .76
- ----------------------------------------------------------------------------------------------------------------------
YIELDS AND COSTS (TAXABLE EQUIVALENT BASIS)
Earning assets:
Taxable securities 7.25% 8.05% 8.64% 8.53% 8.26%
- ----------------------------------------------------------------------------------------------------------------------
Tax-free securities 9.17 9.60 9.97 9.99 9.49
- ----------------------------------------------------------------------------------------------------------------------
Federal funds sold 3.04 3.69 5.36 8.06 9.32
- ----------------------------------------------------------------------------------------------------------------------
Loans (net of unearned income) 7.92 8.75 10.33 11.21 11.83
- ----------------------------------------------------------------------------------------------------------------------
Other earning assets 6.44 7.66 8.73 9.21 9.41
- ----------------------------------------------------------------------------------------------------------------------
Total earning assets 7.74 8.44 9.82 10.56 10.85
- ----------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Interest-bearing deposits 3.40 4.06 5.88 6.95 7.37
- ----------------------------------------------------------------------------------------------------------------------
Short-term borrowings 3.12 3.78 6.24 7.98 8.90
- ----------------------------------------------------------------------------------------------------------------------
Long-term borrowings 7.67 7.80 10.88 9.63 9.63
- ----------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 3.49 4.09 5.91 7.01 7.49
- ----------------------------------------------------------------------------------------------------------------------
Net yield on interest earning assets 4.82 4.98 4.78 4.67 4.65
- ----------------------------------------------------------------------------------------------------------------------
RATIOS
- ----------------------------------------------------------------------------------------------------------------------
Net income to:
Average stockholders' equity 16.14% 15.64% 14.27% 13.64% 13.25%
- ----------------------------------------------------------------------------------------------------------------------
Average total assets 1.40 1.34 1.23 1.23 1.20
- ----------------------------------------------------------------------------------------------------------------------
Dividend payout 34.55 35.00 40.28 43.98 44.19
- ----------------------------------------------------------------------------------------------------------------------
Average loans to average deposits 78.14 72.46 73.40 76.67 75.23
- ----------------------------------------------------------------------------------------------------------------------
Average stockholders' equity to average
total assets 8.70 8.59 8.63 9.03 9.06
- ----------------------------------------------------------------------------------------------------------------------
Average interest-bearing deposits to
average total deposits 84.69 85.52 85.85 84.16 82.51
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
70
<PAGE> 48
<TABLE>
<CAPTION>
Ten Year
Annual Compound
Change Growth Rate
1992-1993 1983-1993
- -----------------------------------------------------------------------------------------------------------------------
1988 1987 1986 1985 1984 1983
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$299,200 $248,500 $234,194 $232,139 $216,279 $194,432 8.77% 8.05%
- -----------------------------------------------------------------------------------------------------------------------
11,990 7,893 18,573 20,196 25,550 21,906 -77.56 -23.57
- -----------------------------------------------------------------------------------------------------------------------
73,447 69,563 64,090 71,723 77,441 71,837 -10.90 3.84
- -----------------------------------------------------------------------------------------------------------------------
13,074 16,933 20,395 21,903 23,274 23,498 9.89 -6.73
- -----------------------------------------------------------------------------------------------------------------------
6,914 5,096 6,241 3,679 3,213 4,423 12.93 13.80
- -----------------------------------------------------------------------------------------------------------------------
404,625 347,985 343,493 349,640 345,757 316,096 3.52 5.80
- -----------------------------------------------------------------------------------------------------------------------
202,592 161,636 161,566 163,758 181,258 156,625 -7.89 2.39
- -----------------------------------------------------------------------------------------------------------------------
12,624 13,512 14,462 17,086 18,448 16,614 -2.67 -12.14
- -----------------------------------------------------------------------------------------------------------------------
4,726 3,091 3,160 3,533 3,262 3,790 161.84 11.00
- -----------------------------------------------------------------------------------------------------------------------
219,942 178,239 179,188 184,377 202,968 177,029 -4.67 1.90
- -----------------------------------------------------------------------------------------------------------------------
184,683 169,746 164,305 165,263 142,789 139,067 9.39 9.42
- -----------------------------------------------------------------------------------------------------------------------
10,790 8,605 9,361 10,029 7,616 12,015 -20.46 6.01
- -----------------------------------------------------------------------------------------------------------------------
173,893 161,141 154,944 155,234 135,173 127,052 12.22 9.70
- -----------------------------------------------------------------------------------------------------------------------
12,134 11,515 11,153 10,199 8,801 8,237 9.44 8.31
- -----------------------------------------------------------------------------------------------------------------------
25,188 24,838 24,007 22,382 19,895 19,842 1.99 8.03
- -----------------------------------------------------------------------------------------------------------------------
14,178 12,037 11,209 8,780 9,241 9,221 18.98 16.94
- -----------------------------------------------------------------------------------------------------------------------
48 700 2,852 812 66 701 N/A -19.71
- -----------------------------------------------------------------------------------------------------------------------
19,021 17,972 15,482 14,342 12,008 10,640 14.50 9.60
- -----------------------------------------------------------------------------------------------------------------------
70,569 67,062 64,703 56,515 50,011 48,641 10.88 10.50
- -----------------------------------------------------------------------------------------------------------------------
87,267 80,869 78,924 76,159 69,226 67,100 11.74 8.70
- -----------------------------------------------------------------------------------------------------------------------
11,078 10,298 9,974 9,658 10,340 9,928 8.13 4.13
- -----------------------------------------------------------------------------------------------------------------------
14,494 12,982 13,957 13,362 13,304 12,181 5.20 4.33
- -----------------------------------------------------------------------------------------------------------------------
55,817 50,778 47,720 46,631 38,345 39,129 4.31 9.72
- -----------------------------------------------------------------------------------------------------------------------
168,656 154,927 150,575 145,810 131,215 128,338 8.45 8.38
- -----------------------------------------------------------------------------------------------------------------------
75,806 73,276 69,072 65,939 53,969 47,355 18.21 13.33
- -----------------------------------------------------------------------------------------------------------------------
17,571 17,070 14,161 12,184 7,797 5,563 18.90 25.40
- -----------------------------------------------------------------------------------------------------------------------
$ 58,235 $ 56,206 $ 54,911 $ 53,755 $ 46,172 $ 41,792 17.88% 10.36%
=======================================================================================================================
36,281 36,243 36,163 36,010 35,993 35,993 1.84% 0.33%
- -----------------------------------------------------------------------------------------------------------------------
$1.61 $1.55 $1.52 $1.49 $1.28 $1.16 15.75% 10.00%
- -----------------------------------------------------------------------------------------------------------------------
.73 .69 .58 .51 .45 .41 14.40 9.78
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
7.82% 7.66% 8.93% 10.81% 10.99% 11.37%
- -----------------------------------------------------------------------------------------------------------------------
9.83 10.91 12.24 12.22 12.83 13.04
- -----------------------------------------------------------------------------------------------------------------------
7.54 6.73 6.86 8.06 10.46 9.12
- -----------------------------------------------------------------------------------------------------------------------
10.92 10.41 11.13 12.68 13.78 13.36
- -----------------------------------------------------------------------------------------------------------------------
8.93 8.61 9.69 11.33 11.07 12.44
- -----------------------------------------------------------------------------------------------------------------------
10.01 9.65 10.44 11.88 12.71 12.49
- -----------------------------------------------------------------------------------------------------------------------
6.38 5.83 6.39 7.44 8.86 8.33
- -----------------------------------------------------------------------------------------------------------------------
7.34 6.35 6.55 7.92 9.92 8.85
- -----------------------------------------------------------------------------------------------------------------------
8.67 9.77 10.05 10.56 10.50 10.46
- -----------------------------------------------------------------------------------------------------------------------
6.46 5.91 6.44 7.53 8.97 8.41
- -----------------------------------------------------------------------------------------------------------------------
4.79 5.01 5.47 6.16 5.89 6.12
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
13.29% 13.81% 14.63% 15.77% 14.99% 14.85%
- -----------------------------------------------------------------------------------------------------------------------
1.24 1.31 1.36 1.47 1.37 1.33
- -----------------------------------------------------------------------------------------------------------------------
45.34 44.52 38.16 34.23 35.16 35.34
- -----------------------------------------------------------------------------------------------------------------------
71.33 69.98 67.49 65.03 59.77 59.23
- -----------------------------------------------------------------------------------------------------------------------
9.31 9.48 9.31 9.32 9.16 8.93
- -----------------------------------------------------------------------------------------------------------------------
79.84 77.36 75.68 73.15 73.49 72.42
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
71
<PAGE> 49
HISTORICAL FINANCIAL SUMMARY -- CONTINUED
First Alabama Bancshares, Inc. & Subsidiaries
<TABLE>
<CAPTION>
(average daily balances)
- ----------------------------------------------------------------------------------------------------------------------
ASSETS 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earning assets:
Taxable securities $ 1,444,288 $1,461,313 $1,319,108 $ 982,952 $1,028,177
- ----------------------------------------------------------------------------------------------------------------------
Tax-exempt securities 192,720 164,630 173,601 170,222 168,690
- ----------------------------------------------------------------------------------------------------------------------
Federal funds sold 49,036 179,940 94,133 51,591 73,140
- ----------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income 5,376,508 4,488,639 4,079,486 3,702,758 3,293,290
- ----------------------------------------------------------------------------------------------------------------------
Other earning assets 251,048 186,957 131,642 141,871 155,618
- ----------------------------------------------------------------------------------------------------------------------
Total earning assets 7,313,600 6,481,479 5,797,970 5,049,394 4,718,915
- ----------------------------------------------------------------------------------------------------------------------
Allowance for loan losses (83,504) (63,012) (49,732) (40,182) (37,188)
- ----------------------------------------------------------------------------------------------------------------------
Cash and due from banks 389,657 325,085 294,795 316,158 298,334
- ----------------------------------------------------------------------------------------------------------------------
Other non-earning assets 363,681 334,447 311,178 267,909 234,654
- ----------------------------------------------------------------------------------------------------------------------
Total assets $ 7,983,434 $7,077,999 $6,354,211 $5,593,279 $5,214,715
======================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------
Deposits:
Non-interest-bearing $ 1,053,111 $ 896,847 $ 786,243 $ 764,945 $ 765,398
- ----------------------------------------------------------------------------------------------------------------------
Interest-bearing 5,827,208 5,297,693 4,771,486 4,064,625 3,612,024
- ----------------------------------------------------------------------------------------------------------------------
Total deposits 6,880,319 6,194,540 5,557,729 4,829,570 4,377,422
- ----------------------------------------------------------------------------------------------------------------------
Borrowed funds:
Short-term 145,778 123,622 147,418 159,873 252,475
- ----------------------------------------------------------------------------------------------------------------------
Long-term 140,196 52,661 19,142 23,742 42,119
- ----------------------------------------------------------------------------------------------------------------------
Total borrowed funds 285,974 176,283 166,560 183,615 294,594
- ----------------------------------------------------------------------------------------------------------------------
Other liabilities 122,949 99,295 81,663 74,927 69,988
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities 7,289,242 6,470,118 5,805,952 5,088,112 4,742,004
- ----------------------------------------------------------------------------------------------------------------------
Stockholders' equity 694,192 607,881 548,259 505,167 472,711
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $ 7,983,434 $7,077,999 $6,354,211 $5,593,279 $5,214,715
======================================================================================================================
YEAR-END BALANCES
- ----------------------------------------------------------------------------------------------------------------------
Assets $10,476,348 $7,881,026 $6,745,053 $6,344,406 $5,549,612
- ----------------------------------------------------------------------------------------------------------------------
U.S. Treasury and agency securities 2,063,509 1,440,550 1,347,785 1,246,913 929,212
- ----------------------------------------------------------------------------------------------------------------------
Obligations of states and political
subdivisions 221,328 170,302 170,497 173,074 171,813
- ----------------------------------------------------------------------------------------------------------------------
Other securities 83,608 59,318 57,443 69,213 32,062
- ----------------------------------------------------------------------------------------------------------------------
Total investment securities 2,368,445 1,670,170 1,575,725 1,489,200 1,133,087
- ----------------------------------------------------------------------------------------------------------------------
Loans 6,833,246 5,142,531 4,274,958 4,092,262 3,552,082
- ----------------------------------------------------------------------------------------------------------------------
Non-interest-bearing deposits 1,196,685 1,041,987 874,671 851,870 836,270
- ----------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits 7,574,009 5,659,155 5,042,357 4,501,341 3,908,094
- ----------------------------------------------------------------------------------------------------------------------
Total deposits 8,770,694 6,701,142 5,917,028 5,353,211 4,744,364
- ----------------------------------------------------------------------------------------------------------------------
Stockholders' equity 850,965 656,655 572,971 524,132 489,441
- ----------------------------------------------------------------------------------------------------------------------
Stockholders' equity per share 20.73 17.62 15.76 14.54 13.48
- ----------------------------------------------------------------------------------------------------------------------
Market price per share of common stock 32.38 32.63 26.89 15.98 15.64
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes to Historical Financial Summary:
(1) For those acquisitions that were accounted for as poolings of
interests, all financial information has been restated to present all years
on a comparable basis.
(2) All per share amounts give retroactive recognition to the effect of
stock dividends and stock splits.
(3) Non-accruing loans, of an immaterial amount, are included in earning
assets. No adjustment has been made for these loans in the calculation
of yields.
(4) Fees in the amount of $14,530,000;$15,967,000; $11,923,000;
$11,161,000; $11,054,000; $9,250,000; $8,962,000; $8,858,000; $6,697,000;
$6,134,000; and $5,407,000 are included in interest and fees on loans in the
years 1993, 1992, 1991, 1990, 1989, 1988, 1987, 1986, 1985, 1984, and
1983,respectively.
(5) Yields are computed on a taxable equivalent basis, net of interest
disallowance, using marginal federal income tax rates of 35% for 1993, 34%
for 1992-1988, 40% for 1987 and 46% for 1986-1983.
(6) This summary should be read in conjunction with the related financial
statements and notes thereto on pages 51 to 68.
72
<PAGE> 50
<TABLE>
<CAPTION>
Ten Year
Annual Compound
Change Growth Rate
1992-1993 1983-1993
- ------------------------------------------------------------------------------------------------------------------------
1988 1987 1986 1985 1984 1983
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 942,729 $ 908,140 $ 717,585 $ 663,689 $ 704,793 $ 631,583 -1.17% 8.62%
- ------------------------------------------------------------------------------------------------------------------------
191,499 247,528 297,603 321,595 332,535 333,812 17.06 -5.35
- ------------------------------------------------------------------------------------------------------------------------
159,093 117,229 270,933 250,570 244,202 240,245 -72.75 -14.69
- ------------------------------------------------------------------------------------------------------------------------
2,837,856 2,508,591 2,256,053 1,956,351 1,664,062 1,537,569 19.78 13.34
- ------------------------------------------------------------------------------------------------------------------------
78,557 59,358 64,770 32,779 29,156 35,607 34.28 21.57
- ------------------------------------------------------------------------------------------------------------------------
4,209,734 3,840,846 3,606,944 3,224,984 2,974,748 2,778,816 12.84 10.16
- ------------------------------------------------------------------------------------------------------------------------
(35,307) (34,614) (33,201) (29,419) (26,085) (26,187) 32.52 12.30
- ------------------------------------------------------------------------------------------------------------------------
305,586 286,249 263,529 272,917 238,900 231,461 19.86 5.35
- ------------------------------------------------------------------------------------------------------------------------
225,464 203,770 191,332 189,938 174,751 166,457 8.74 8.13
- ------------------------------------------------------------------------------------------------------------------------
$4,705,477 $ 4,296,251 $ 4,028,604 $ 3,658,420 $ 3,362,314 $ 3,150,547 12.79% 9.74%
========================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------
$ 802,286 $ 811,573 $ 813,135 $ 807,723 $ 737,956 $ 715,916 17.42% 3.93%
- ------------------------------------------------------------------------------------------------------------------------
3,176,418 2,773,207 2,529,762 2,200,470 2,046,090 1,880,142 10.00 11.98
- ------------------------------------------------------------------------------------------------------------------------
3,978,704 3,584,780 3,342,897 3,008,193 2,784,046 2,596,058 11.07 10.24
- ------------------------------------------------------------------------------------------------------------------------
171,975 212,627 220,875 215,643 185,927 187,824 17.92 -2.50
- ------------------------------------------------------------------------------------------------------------------------
54,518 31,637 31,433 33,445 31,069 36,224 166.22 14.49
- ------------------------------------------------------------------------------------------------------------------------
226,493 244,264 252,308 249,088 216,996 224,048 62.22 2.47
- ------------------------------------------------------------------------------------------------------------------------
61,997 60,119 58,150 60,309 53,165 49,023 23.82 9.63
- ------------------------------------------------------------------------------------------------------------------------
4,267,194 3,889,163 3,653,355 3,317,590 3,054,207 2,869,129 12.66 9.77
- ------------------------------------------------------------------------------------------------------------------------
438,283 407,088 375,249 340,830 308,107 281,418 14.20 9.45
- ------------------------------------------------------------------------------------------------------------------------
$4,705,477 $ 4,296,251 $ 4,028,604 $ 3,658,420 $ 3,362,314 $ 3,150,547 12.79% 9.74%
========================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------
$5,173,609 $ 4,390,861 $ 4,456,557 $ 3,919,682 $ 3,711,750 $ 3,386,759 32.93% 11.95%
- ------------------------------------------------------------------------------------------------------------------------
996,902 855,990 804,012 649,569 695,341 675,044 43.31 11.82
- ------------------------------------------------------------------------------------------------------------------------
175,796 216,033 287,863 308,724 335,626 323,002 29.96 -3.71
- ------------------------------------------------------------------------------------------------------------------------
49,670 5,535 11,638 2,051 3,203 3,492 39.34 37.38
- ------------------------------------------------------------------------------------------------------------------------
1,222,368 1,077,558 1,103,513 960,344 1,034,170 1,001,538 41.81 8.99
- ------------------------------------------------------------------------------------------------------------------------
3,123,331 2,675,240 2,486,039 2,166,810 1,863,314 1,577,164 32.88 15.79
- ------------------------------------------------------------------------------------------------------------------------
840,277 891,538 973,267 879,829 847,699 785,077 14.85 4.31
- ------------------------------------------------------------------------------------------------------------------------
3,491,438 2,837,062 2,803,829 2,357,376 2,188,003 1,921,644 33.84 14.70
- ------------------------------------------------------------------------------------------------------------------------
4,331,715 3,728,600 3,777,096 3,237,205 3,035,702 2,706,721 30.88 12.48
- ------------------------------------------------------------------------------------------------------------------------
455,595 417,814 392,679 356,857 320,916 293,279 29.59 11.24
- ------------------------------------------------------------------------------------------------------------------------
12.54 11.64 10.83 9.90 8.92 8.15 17.67 9.79
- ------------------------------------------------------------------------------------------------------------------------
13.84 12.38 19.47 14.63 9.79 8.33 -0.77 14.54
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
73
<PAGE> 1
Exhibit 21
List of Subsidiaries at December 31, 1993:
First Alabama Bank (1)
Regions Bank of Florida(2)
First Alabama Bank of Columbus (3)
First Security Bank of Tennessee (4)
Franklin County Bank (4)
FAB Agency, Inc. (5)
Regions Financial Leasing, Inc. (5)
Regions Agency, Inc. (5)
Regions Financial Building Corporation (5)
First Alabama Investments, Inc. (5)
Real Estate Financing, Inc. (5)
First Alabama Life Insurance Company (6)
The Georgia Company (7)
Regions Title Company (8)
Regions Corporation (9)
Secor Bank, Federal Savings Bank (11)
First Insurance Corporation (10)
Secor Realty and Investment (5)
Secor Insurance Agency, Inc. Alabama(5)
Secor Insurance Agency, Inc. Louisiana(10)
Secor Credit Corporation (5)
(1) Affiliate state bank in Alabama chartered under the banking laws of
Alabama.
(2) Affiliate state bank in Florida chartered under the banking laws of
Florida.
(3) Affiliate state bank in Georgia chartered under the banking laws of
Georgia. (Name changed to Regions Bank of Georgia, March 14, 1994)
(4) Affiliate state bank in Tennessee chartered under the banking laws of
Tennessee
(5) Bank-related subsidiary organized under the Business Corporation Act
of the state of Alabama.
(6) Bank-related subsidiary incorporated under the laws of the state of
Arizona and doing business principally in the state of Alabama. (Name
changed to Regions Life Insurance Company, January 27, 1994)
(7) Bank-related subsidiary (inactive) incorporated under the laws of the
state of Georgia.
<PAGE> 2
(8) Bank-related subsidiary incorporated under the laws of the state of
Tennessee.
(9) Second tier holding company incorporated in the state of Delaware.
(10) Bank-related subsidiary incorporated under the laws of the state of
Louisiana.
(11) Thrift incorporated under the laws of the United States.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of First Alabama Bancshares, Inc. and subsidiaries of our report dated February
4, 1994, included in the 1993 Annual Report to Stockholders of First Alabama
Bancshares, Inc.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-36936) pertaining to the Employee Stock Purchase Plan of First
Alabama Bancshares, Inc., in the Registration Statement (Form S-8 No. 33-41784)
pertaining to the Directors' Stock Investment Plan of First Alabama Bancshares,
Inc., in Post Effective Amendment No. 1 to the Registration Statement (Form S-8
No. 2-95291) pertaining to the 1993 Stock Option Plan, in the Registration
Statement (Form S-8 No. 33-24370) pertaining to the 1988 Stock Option Plan, in
the Registration Statement (Form S-8 No. 33-40728) pertaining to the 1991
Long-Term Incentive Plan and in the Registration Statement (Form S-3 No.
33-45714), and their related Prospectuses of our report dated February 4, 1994,
with respect to the consolidated financial statements of First Alabama
Bancshares, Inc. and subsidiaries incorporated by reference in the Annual
Report (Form 10-K) for the year ended December 31, 1993.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 no. 33-36936) pertaining to the Employee Stock Purchase Plan of First
Alabama Bancshares, Inc. and in the related Prospectus of our report dated
March 11, 1994, with respect to the financial statements of the First Alabama
Bancshares Employee Stock Purchase Plan included in the Annual Report (Form
11-K), filed as an exhibit to Form 10-K, for the year ended December 31, 1993.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-41784) pertaining to the Directors' Stock Investment Plan of
First Alabama Bancshares, Inc. and in the related Prospectus of our report
dated March 11, 1994, with respect to the financial statements of the First
Alabama Bancshares Directors' Stock Investment Plan included in the Annual
Report (Form 11-K), filed as an exhibit to Form 10-K, for the year ended
December 31, 1993.
/s/ Ernst & Young
Birmingham, Alabama
March 25, 1994
<PAGE> 1
EXHIBIT 99 a.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
COMMISSION FILE NUMBER 33-36936
A. Full title of the plan and address, if different from that of the
issuer named below:
EMPLOYEE STOCK PURCHASE PLAN
OF
FIRST ALABAMA BANCSHARES, INC.
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
FIRST ALABAMA BANCSHARES, INC.
P. O. BOX 10247
BIRMINGHAM, ALABAMA 35202
<PAGE> 2
EMPLOYEE STOCK PURCHASE PLAN OF
FIRST ALABAMA BANCSHARES, INC.
The following report of independent auditors and financial statements of the
registrant are submitted herewith:
<TABLE>
<CAPTION>
Page Number
------------
<S> <C>
Report of Independent Auditors 1
Statements of Financial Condition - December 31, 1993 and 1992 2
Statements of Income and Changes in Plan Equity for the years
ended December 31, 1993, 1992, and 1991 3
Notes to Financial Statements 4
</TABLE>
All schedules (Nos. I, II and III) for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
inapplicable or the required disclosures have been made elsewhere in the
financial statements and notes thereto. These schedules have therefore been
omitted.
i
<PAGE> 3
Report of Independent Auditors
Benefits Committee
Employee Stock Purchase Plan of
First Alabama Bancshares, Inc.
We have audited the accompanying statements of financial condition of the
Employee Stock Purchase Plan of First Alabama Bancshares, Inc. as of December
31, 1993 and 1992, and the related statements of income and changes in plan
equity for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Employee Stock Purchase
Plan of First Alabama Bancshares, Inc. at December 31, 1993 and 1992, and the
income and changes in plan equity for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles.
/s/ Ernst & Young
Birmingham, Alabama
March 11, 1994
-1-
<PAGE> 4
STATEMENTS OF FINANCIAL CONDITION
EMPLOYEE STOCK PURCHASE PLAN OF
FIRST ALABAMA BANCSHARES, INC.
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
1993 1992
-------- --------
<S> <C> <C>
ASSETS
Assets held by First Alabama Bank
as trustee and custodian:
Common Stock of First Alabama
Bancshares, Inc.
at market value - 349,039 shares
in 1993 and 329,599 shares
in 1992 (cost $8,357,050
in 1993 and $6,720,554 in 1992) $ 11,300,157 $ 10,861,769
Cash 111 200
Dividends receivable 89,907 74,254
------------ ------------
Total Assets $ 11,390,175 $ 10,936,223
============ ============
LIABILITIES AND PLAN EQUITY
Payable to participants for $ 0 $ 1,192
withdrawals
Plan equity (2,822 and 2,588
participants in 1993
and 1992, respectively) 11,390,175 10,935,031
------------ ------------
Total Liabilities and Plan Equity $ 11,390,175 $ 10,936,223
============ ============
</TABLE>
See notes to financial statements.
2
<PAGE> 5
STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
EMPLOYEEE STOCK PURCHASE PLAN OF
FIRST ALABAMA BANCSHARES, INC.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Dividend income $ 343,797 $ 282,840 $ 276,348
Gain recognized on distribution of common
stock of First Alabama Bancshares,
Inc. to participants upon withdrawal 995,345 801,873 1,030,277
Unrealized (depreciation) appreciation
of Common Stock of First Alabama
Bancshares, Inc (1,198,108) 1,001,764 2,620,055
Contributions received:
From participants 2,450,959 1,969,476 1,554,277
From participating companies 901,966 731,658 517,001
Withdrawals by participants (3,038,815) (2,371,471) (3,572,620)
----------- ----------- -----------
Income and changes in plan equity 455,144 2,416,140 2,425,338
Plan equity at beginning of period 10,935,031 8,518,891 6,093,553
----------- ----------- -----------
PLAN EQUITY AT DECEMBER 31 $11,390,175 $10,935,031 $ 8,518,891
=========== =========== ===========
</TABLE>
( ) Indicates deduction
See notes to financial statements.
3
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
EMPLOYEE STOCK PURCHASE PLAN OF
FIRST ALABAMA BANCSHARES, INC.
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Formation of the Plan: First Alabama Bancshares, Inc. (the Company) formed the
Employee Stock Purchase Plan of First Alabama Bancshares, Inc. (the Plan)
effective September 1, 1978.
Investments: The investment in Common Stock of the Company is stated at market
value. The market price of First Alabama Bancshares, Inc. Common Stock was
$32.375 per share at December 31, 1993 and $32.955 per share at December 31,
1992 (after adjusting for the 10% stock dividend paid on April 1, 1993). The
average cost of the shares distributed is used to compute gain or loss.
Income: Dividend income is accrued on the ex-dividend date.
Contributions: Contributions of participants and participating companies (see
Notes B and C) as well as withdrawals are accounted for on the accrual basis.
Income Taxes: The Plan is not subject to income tax. Participants must treat
as ordinary income their pro rata share of contributions to the Plan by the
participating companies. Cash dividends paid on stock purchased under the Plan
will be taxed to the participants on a pro rata basis for federal and state
income tax purposes.
Expenses of the Plan: All expenses incurred in the administration of the Plan,
other than brokerage fees, are paid by the participating companies. Brokerage
fees are included in the price of shares purchased.
Adjustment for Stock Dividend: All share amounts have been adjusted for the
10% stock dividend paid on April 1, 1993.
NOTE B - PROVISIONS OF THE PLAN
The Plan is a voluntary contribution plan to which First Alabama Bancshares,
Inc. and subsidiaries (First Alabama or the Company) contribute monthly from
25% to 50% of the employees' monthly contributions. For a one year period,
from July 1, 1992 to June 30, 1993, the employers' contribution was increased
to 30% to 55% of the employees' monthly contributions. Participating employees
may contribute a maximum of 6% of their monthly salary with a minimum monthly
contribution of $5.00. Participation in the Plan is open to those employees at
least 21 years of age who have been employed by the Company at least one year.
Employees are immediately vested upon contribution to the Plan to the extent of
the employee's and the employer's contribution to date. In the event the Plan
terminates, or the employee terminates either his or her employment with the
Company or participation in the Plan, the employee will receive a certificate
for all whole shares owned in the Plan, cash for any additional fractional
shares owned, and cash for any remaining balance in such participant's cash
account.
4
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED
Contributions by participating companies or divisions of First Alabama and
participants' contributions are as follows:
<TABLE>
<CAPTION>
Contributions Received
-------------------------------------------
Participating Company or Division Company Employee Total
- --------------------------------- --------- ---------- ----------
<S> <C> <C> <C>
Year ended December 31, 1993:
First Alabama Bancshares, Inc. $ 42,411 $ 104,656 $ 147,067
First Alabama Bank, Montgomery 83,406 217,520 300,926
First Alabama Bank, Birmingham 126,793 332,553 459,346
First Alabama Bank, Huntsville 53,045 129,362 182,407
First Alabama Bank, Tuscaloosa 28,968 76,053 105,021
First Alabama Bank, Lee County 4,512 13,835 18,347
First Alabama Bank, Dothan 26,806 65,981 92,787
First Alabama Bank, Selma 4,199 11,204 15,403
First Alabama Bank, Gadsden 9,086 22,602 31,688
First Alabama Bank, Athens 14,523 36,732 51,255
First Alabama Bank, Baldwin County 6,469 17,765 24,234
First Alabama Bank, Phenix City 3,421 10,299 13,720
First Alabama Bank, Cullman 6,043 16,461 22,504
First Alabama Bank, Mobile 94,982 260,302 355,284
First Alabama Bank, Sumter County 4,864 13,622 18,486
First Alabama Bank, Talladega County 7,765 20,881 28,646
First Alabama Bank, Chilton County 5,324 16,419 21,743
First Alabama Bank, Troy 7,727 21,294 29,021
First Alabama Bank, Anniston 14,382 42,986 57,368
First Alabama Bank, South Baldwin 11,684 35,087 46,771
First Alabama Bank, Centre 3,846 11,640 15,486
First Alabama Bank, Covington County 7,820 23,221 31,041
First Alabama Bank, Shelby County 5,568 17,690 23,258
First Alabama Bank, Decatur 17,575 52,667 70,242
First Alabama Bank, Oneonta 5,745 18,409 24,154
First Alabama Bank, Enterprise 4,094 12,011 16,105
First Alabama Bank, Albertville 7,047 19,795 26,842
First Alabama Bank, Choctaw 4,781 14,897 19,678
Regions Bank of Florida 15,346 50,087 65,433
First Alabama Bank, Columbus, Georgia 4,087 13,163 17,250
Real Estate Financing, Inc. 80,902 238,590 319,492
First Security Bank of Tennessee 41,806 103,878 145,684
Franklin County Bank 2,176 8,703 10,879
First Alabama Investments, Inc. 19,342 59,345 78,687
Corporate 125,421 341,249 466,670
--------- ---------- ----------
TOTALS $ 901,966 $2,450,959 $3,352,925
========= ========== ==========
</TABLE>
5
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
-------------------------------------------
Participating Company or Division Company Employee Total
- --------------------------------- --------- ---------- ----------
<S> <C> <C> <C>
Year ended December 31, 1992:
First Alabama Bancshares, Inc. $ 36,469 $ 89,626 $ 126,095
First Alabama Bank, Montgomery 73,609 188,557 262,166
First Alabama Bank, Birmingham 103,791 270,164 373,955
First Alabama Bank, Huntsville 50,891 121,913 172,804
First Alabama Bank, Tuscaloosa 25,472 65,920 91,392
First Alabama Bank, Lee County 3,978 11,621 15,599
First Alabama Bank, Dothan 20,649 51,674 72,323
First Alabama Bank, Selma 4,707 11,637 16,344
First Alabama Bank, Gadsden 7,114 17,609 24,723
First Alabama Bank, Athens 13,099 32,546 45,645
First Alabama Bank, Baldwin County 6,796 18,181 24,977
First Alabama Bank, Phenix City 2,441 7,122 9,563
First Alabama Bank, Cullman 4,622 13,794 18,416
First Alabama Bank, Mobile 87,160 235,638 322,798
First Alabama Bank, Sumter County 3,570 9,980 13,550
First Alabama Bank, Talladega County 8,260 22,022 30,282
First Alabama Bank, Chilton County 3,730 10,681 14,411
First Alabama Bank, Troy 6,811 20,284 27,095
First Alabama Bank, Anniston 10,953 34,674 45,627
First Alabama Bank, South Baldwin 8,306 25,248 33,554
First Alabama Bank, Centre 3,206 9,422 12,628
First Alabama Bank, Covington County 6,542 18,710 25,252
First Alabama Bank, Shelby County 5,116 16,032 21,148
First Alabama Bank, Decatur 15,982 47,115 63,097
First Alabama Bank, Oneonta 3,947 12,381 16,328
First Alabama Bank, Enterprise 3,215 9,616 12,831
First Alabama Bank, Albertville 5,206 15,307 20,513
First Alabama Bank, Choctaw 3,752 11,890 15,642
Sunshine Bank 11,029 35,413 46,442
First Alabama Bank, Columbus, Georgia 2,202 6,124 8,326
Real Estate Financing, Inc. 62,439 180,022 242,461
First Alabama Investments, Inc. 16,319 50,355 66,674
Corporate 110,275 298,198 408,473
--------- ---------- ----------
TOTALS $ 731,658 $1,969,476 $2,701,134
========= ========== ==========
</TABLE>
6
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
-------------------------------------------
Participating Company or Division Company Employee Total
- --------------------------------- --------- ---------- ----------
<S> <C> <C> <C>
Year ended December 31, 1991:
First Alabama Bancshares, Inc. $ 23,732 $ 68,526 $ 92,258
First Alabama Bank, Montgomery 51,805 146,577 198,382
First Alabama Bank, Birmingham 74,989 212,919 287,908
First Alabama Bank, Huntsville 39,620 106,228 145,848
First Alabama Bank, Tuscaloosa 20,820 57,424 78,244
First Alabama Bank, Lee County 2,461 7,926 10,387
First Alabama Bank, Dothan 15,927 43,013 58,940
First Alabama Bank, Selma 3,317 8,495 11,812
First Alabama Bank, Gadsden 4,328 11,871 16,199
First Alabama Bank, Athens 9,022 23,782 32,804
First Alabama Bank, Baldwin County 5,086 14,645 19,731
First Alabama Bank, Phenix City 3,183 9,889 13,072
First Alabama Bank, Cullman 3,216 10,265 13,481
First Alabama Bank, Mobile 53,242 176,004 229,246
First Alabama Bank, Sumter County 2,058 7,092 9,150
First Alabama Bank, Talladega County 6,748 19,767 26,515
First Alabama Bank, Chilton County 3,701 10,738 14,439
First Alabama Bank, Troy 5,470 17,965 23,435
First Alabama Bank, Anniston 9,521 33,588 43,109
First Alabama Bank, South Baldwin 4,302 14,577 18,879
First Alabama Bank, Centre 2,118 6,930 9,048
First Alabama Bank, Covington County 5,002 15,588 20,590
First Alabama Bank, Shelby County 4,083 13,589 17,672
First Alabama Bank, Decatur 11,895 39,898 51,793
First Alabama Bank, Oneonta 2,181 8,724 10,905
First Alabama Bank, Enterprise 2,301 7,989 10,290
First Alabama Bank, Albertville 3,696 12,483 16,179
First Alabama Bank, Choctaw 2,371 9,484 11,855
Sunshine Bank 6,167 22,168 28,335
First Alabama Bank, Columbus, Georgia 157 605 762
Real Estate Financing, Inc. 39,086 122,604 161,690
First Alabama Investments, Inc. 11,527 39,686 51,213
Corporate 83,869 253,238 337,107
--------- ---------- ----------
TOTALS $ 517,001 $1,554,277 $2,071,278
========= ========== ==========
</TABLE>
7
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - UNREALIZED APPRECIATION OF COMMON STOCK OF FIRST ALABAMA
BANCSHARES, INC.
The unrealized appreciation of Common Stock of First Alabama Bancshares, Inc.
is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------- --------- ----------
<S> <C> <C> <C>
Unrealized appreciation at beginning
of year $ 4,141,215 $ 3,139,451 $ 519,396
Unrealized appreciation at end of year 2,943,107 4,141,215 3,139,451
------------ ------------ ------------
(DECREASE) INCREASE IN UNREALIZED
APPRECIATION $ (1,198,108) $ 1,001,764 $ 2,620,055
============ ============ ============
</TABLE>
NOTE E - GAIN REALIZED ON DISTRIBUTION OF COMMON STOCK OF FIRST ALABAMA
BANCSHARES, INC. TO PARTICIPANTS UPON WITHDRAWAL
<TABLE>
<CAPTION>
1993 1992 1991
---------- --------- ----------
<S> <C> <C> <C>
Market value of shares distributed $ 3,029,892 $ 2,365,464 $ 3,567,521
Cost of shares distributed 2,034,547 1,563,591 2,537,244
------------ ------------ ------------
TOTAL REALIZED GAIN $ 995,345 $ 801,873 $ 1,030,277
============ ============ ============
</TABLE>
8
<PAGE> 11
ITEM 9b. Exhibits
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Employee Stock Purchase Plan Benefits Committee has duly caused the annual
report to be signed by the undersigned thereunto duly authorized.
EMPLOYEE STOCK PURCHASE PLAN
FIRST ALABAMA BANCSHARES, INC.
Date: March 11, 1993 By: /s/ Douglas W. Graham
-------------- ---------------------
Douglas W. Graham
Senior Vice President - Personnel
First Alabama Bancshares, Inc.
9
<PAGE> 1
EXHIBIT 99 b.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
COMMISSION FILE NUMBER 33-41784
A. Full title of the plan and address, if different from that of the issuer
named below:
DIRECTORS' STOCK INVESTMENT PLAN
OF
FIRST ALABAMA BANCSHARES, INC.
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
FIRST ALABAMA BANCSHARES, INC.
P. O. BOX 10247
BIRMINGHAM, ALABAMA 35202
<PAGE> 2
DIRECTORS' STOCK INVESTMENT PLAN OF
FIRST ALABAMA BANCSHARES, INC.
The following report of independent auditors and financial statements of the
registrant are submitted herewith:
Page Number
-----------
Report of Independent Auditors 1
Statements of Financial Condition - December 31, 1993 and 1992 2
Statements of Income and Changes in Plan Equity for the years
ended December 31, 1993, 1992, and 1991 3
Notes to Financial Statements 4
All schedules (Nos. I, II and III) for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
inapplicable or the required disclosures have been made elsewhere in the
financial statements and notes thereto. These schedules have therefore been
omitted.
i
<PAGE> 3
REPORT OF INDEPENDENT AUDITORS
Benefits Committee
Directors' Stock Investment Plan of
First Alabama Bancshares, Inc.
We have audited the accompanying statements of financial condition of the
Directors' Stock Investment Plan of First Alabama Bancshares, Inc. as of
December 31, 1993 and 1992, and the related statements of income and changes in
plan equity for each of the three years in the period ended December 31, 1993.
These financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Directors' Stock
Investment Plan of First Alabama Bancshares, Inc. at December 31, 1993 and
1992, and the income and changes in plan equity for each of the three years in
the period ended December 31, 1993 in conformity with generally accepted
accounting principles.
/s/ Ernst & Young
Birmingham, Alabama
March 11, 1994
-1-
<PAGE> 4
STATEMENTS OF FINANCIAL CONDITION
DIRECTORS' STOCK INVESTMENT PLAN OF
FIRST ALABAMA BANCSHARES, INC.
DECEMBER 31
--------------------
1993 1992
---- ----
ASSETS
Assets held by First Alabama Bank as
trustee and custodian:
Common Stock of First Alabama
Bancshares, Inc. at market value
303,229 shares in 1993 and
307,019 shares in 1992 (cost
$6,242,718 in 1993 and $5,695,688
in 1992) $9,817,013 $10,117,222
Cash 72 107
Dividends receivable 77,955 68,854
---------- -----------
Total Assets $9,895,040 $10,186,183
========== ===========
LIABILITIES AND PLAN EQUITY
Payable to participants for withdrawals $ 713 $ 0
Plan equity (266 and 257 participants
in 1993 and 1992,
respectively) 9,894,327 10,186,183
---------- -----------
Total Liabilities and Plan Equity $9,895,040 $10,186,183
========== ===========
See notes to financial statements.
2
<PAGE> 5
STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
DIRECTORS' STOCK INVESTMENT PLAN OF
FIRST ALABAMA BANCSHARES, INC.
YEAR ENDED DECEMBER 31
-------------------------------------
1993 1992 1991
------ ------ ------
Dividend income $314,999 $261,773 $221,235
Gain recognized on distribution of
Common Stock of First Alabama
Bancshares, Inc. to
participants upon
withdrawal 692,983 191,613 210,541
Unrealized (depreciation) appreciation
of Common Stock of First Alabama
Bancshares, Inc. (847,239) 1,542,304 2,573,461
Contributions received:
From participants 970,438 993,040 888,097
From participating companies 242,609 248,260 222,025
Withdrawals by participants (1,665,646) (497,341) (670,018)
---------- ---------- ----------
Income and changes in plan equity (291,856) 2,739,649 3,445,341
Plan equity at beginning of period 10,186,183 7,446,534 4,001,193
---------- ---------- ----------
PLAN EQUITY AT DECEMBER 31 $9,894,327 $10,186,183 $7,446,534
========== =========== ==========
( ) Indicates deduction
See notes to financial statements.
3
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
DIRECTORS' STOCK INVESTMENT PLAN OF
FIRST ALABAMA BANCSHARES, INC.
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Formation of the Plan: First Alabama Bancshares, Inc. (the Company) formed the
Directors' Stock Investment Plan of First Alabama Bancshares, Inc. (the Plan)
effective May 1, 1984.
Investments: The investment in Common Stock of the Company is stated at market
value. The market price of First Alabama Bancshares, Inc. Common Stock was
$32.375 per share at December 31, 1993 and $32.955 per share at December 31,
1992 (after adjusting for the 10% stock dividend paid on April 1, 1993). The
average cost of the shares distributed is used to compute gain or loss.
Income: Dividend income is accrued on the ex-dividend date.
Contributions: Contributions of participants and participating companies (see
Notes B and C) as well as withdrawals are accounted for on the accrual basis.
Income Taxes: The Plan is not subject to income tax. Participants must treat as
ordinary income their pro rata share of contributions to the Plan by the
participating companies. Cash dividends paid on stock purchased under the plan
will be taxed to the participants on a pro rata basis for federal and state
income tax purposes.
Expenses of the Plan: All expenses incurred in the administration of the Plan
are paid by the Company. Any expenses incurred directly from the purchase of the
stock, such as broker's fees, commissions, postage or other transaction costs,
are included in the price of the stock purchased.
Adjustment for Stock Dividend: All share amounts have been adjusted for the 10%
stock dividend paid on April 1, 1993.
NOTE B - PROVISIONS OF THE PLAN
The Plan is a voluntary contribution plan to which the Company contributes 25%
of actual contributions made by the participants. Participating directors may
contribute all or any part of their directors' fees. Participation in the Plan
is open to any person who is a director of First Alabama Bancshares, Inc., any
subsidiary or any body designated as a local division's Board of Directors who
is not an employee of First Alabama Bancshares, Inc., any subsidiary or local
division. Directors are immediately vested upon contribution to the Plan to the
extent of the director's and the Company's contribution to date. In the event
the Plan terminates, or the director terminates either his or her position with
the Company or participation in the Plan, the director will receive a
certificate for all whole shares owned in the Plan, cash for any additional
fractional shares owned, and cash for any remaining balance in such
participant's cash account.
4
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED
Contributions by participating companies or divisions of First Alabama and
participants' contributions are as follows:
<TABLE>
<CAPTION>
Contributions Received
-------------------------------
Participating Company or Division Company Director Total
- --------------------------------- ------- -------- -------
<S> <C> <C> <C>
Year ended December 31, 1993:
First Alabama Bancshares, Inc. $53,671 $214,700 $268,371
First Alabama Bank, Montgomery 9,125 36,500 45,625
First Alabama Bank, Birmingham 20,405 81,620 102,025
First Alabama Bank, Huntsville 13,244 52,975 66,219
First Alabama Bank, Tuscaloosa 10,938 43,750 54,688
First Alabama Bank, Dothan 7,900 31,600 39,500
First Alabama Bank, Selma 5,250 21,000 26,250
First Alabama Bank, Gadsden 6,000 24,000 30,000
First Alabama Bank, Athens 2,625 10,500 13,125
First Alabama Bank, Baldwin County 3,628 14,513 18,141
First Alabama Bank, Guntersville 3,050 12,200 15,250
First Alabama Bank, Phenix City 3,356 13,425 16,781
First Alabama Bank, Mobile 24,575 98,300 122,875
First Alabama Bank, Lee County 3,000 12,000 15,000
First Alabama Bank, Cullman 4,550 18,200 22,750
First Alabama Bank, Lauderdale County 2,063 8,250 10,313
First Alabama Bank, Conecuh County 1,875 7,500 9,375
First Alabama Bank, Sumter County 1,950 7,800 9,750
First Alabama Bank, Talladega County 7,556 30,225 37,781
First Alabama Bank, Chilton County 1,463 5,850 7,313
First Alabama Bank, Troy 4,000 16,000 20,000
First Alabama Bank, Anniston 10,513 42,050 52,563
First Alabama Bank, South Baldwin 2,938 11,750 14,688
First Alabama Bank, Centre 1,925 7,700 9,625
First Alabama Bank, Covington County 3,250 13,000 16,250
First Alabama Bank, Shelby County 3,500 14,000 17,500
First Alabama Bank, Decatur 4,363 17,450 21,813
First Alabama Bank, Oneonta 5,438 21,750 27,188
First Alabama Bank, Enterprise 3,625 14,500 18,125
First Alabama Bank, Butler 700 2,800 3,500
First Alabama Bank, Albertville 2,750 11,000 13,750
Regions Bank, Santa Rosa 788 3,150 3,938
Regions Bank, Okaloosa 2,063 8,250 10,313
Regions Bank, Defuniak Springs 1,050 4,200 5,250
First Alabama Bank, Columbus 2,569 10,275 12,844
</TABLE>
5
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED
Contributions by participating companies or divisions of First Alabama and
participants' contributions are as follows:
<TABLE>
<CAPTION>
Contributions Received
------------------------------------------
Participating Company or Division Company Director Total
- --------------------------------- ------- -------- -----
<S> <C> <C> <C>
Year ended December 31, 1993 continued:
First Security Bank of Tennessee 4,868 19,475 24,343
Franklin County Bank 1,920 7,680 9,600
Real Estate Financing, Inc. 125 500 625
-------- -------- ----------
TOTALS $242,609 $970,438 $1,213,047
======== ======== ==========
</TABLE>
6
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
----------------------------------------
Participating Company or Division Company Director Total
- --------------------------------- ------- -------- -----
<S> <C> <C> <C>
Year ended December 31, 1992:
First Alabama Bancshares, Inc. $ 56,194 $224,775 $ 280,969
First Alabama Bank, Montgomery 11,650 46,600 58,250
First Alabama Bank, Birmingham 17,435 69,740 87,175
First Alabama Bank, Huntsville 12,012 48,050 60,062
First Alabama Bank, Conecuh County 2,188 8,750 10,938
First Alabama Bank, Tuscaloosa 11,425 45,700 57,125
First Alabama Bank, Lee County 4,500 18,000 22,500
First Alabama Bank, Dothan 9,562 38,250 47,812
First Alabama Bank, Selma 6,219 24,875 31,094
First Alabama Bank, Gadsden 5,969 23,875 29,844
First Alabama Bank, Athens 3,937 15,750 19,687
First Alabama Bank, Baldwin County 3,531 14,125 17,656
First Alabama Bank, Lauderdale County 2,188 8,750 10,938
First Alabama Bank, Guntersville 2,700 10,800 13,500
First Alabama Bank, Phenix City 6,300 25,200 31,500
First Alabama Bank, Cullman 4,775 19,100 23,875
First Alabama Bank, Mobile 27,950 111,800 139,750
First Alabama Bank, Sumter County 1,350 5,400 6,750
First Alabama Bank, Talladega County 8,700 34,800 43,500
First Alabama Bank, Chilton County 2,175 8,700 10,875
First Alabama Bank, Troy 3,088 12,350 15,438
First Alabama Bank, Anniston 12,425 49,700 62,125
First Alabama Bank, South Baldwin 3,000 12,000 15,000
First Alabama Bank, Centre 1,250 5,000 6,250
First Alabama Bank, Covington County 3,250 13,000 16,250
First Alabama Bank, Shelby County 2,500 10,000 12,500
First Alabama Bank, Decatur 5,487 21,950 27,437
First Alabama Bank, Oneonta 6,112 24,450 30,562
First Alabama Bank, Enterprise 3,750 15,000 18,750
First Alabama Bank, Butler 850 3,400 4,250
First Alabama Bank, Albertville 2,550 10,200 12,750
Sunshine Bank, Santa Rosa 750 3,000 3,750
Sunshine Bank, Okaloosa 2,263 9,050 11,313
Real Estate Financing, Inc. 225 900 1,125
-------- -------- ----------
TOTALS $248,260 $993,040 $1,241,300
======== ======== ==========
</TABLE>
7
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED (CONTINUED)
Contributions Received
--------------------------------------
Participating Company or Division Company Director Total
- --------------------------------- ------- -------- -----
Year ended December 31, 1991:
First Alabama Bancshares, Inc. $ 43,248 $172,990 $ 216,238
First Alabama Bank, Montgomery 9,975 39,900 49,875
First Alabama Bank, Birmingham 18,440 73,760 92,200
First Alabama Bank, Huntsville 11,981 47,925 59,906
First Alabama Bank, Conecuh County 2,031 8,125 10,156
First Alabama Bank, Tuscaloosa 10,300 41,200 51,500
First Alabama Bank, Lee County 2,700 10,800 13,500
First Alamaba Bank, Dothan 7,875 31,500 39,375
First Alabama Bank, Selma 4,344 17,375 21,719
First Alabama Bank, Gadsden 5,759 23,035 28,794
First Alabama Bank, Athens 4,262 17,050 21,312
First Alabama Bank, Baldwin County 3,647 14,587 18,234
First Alabama Bank, Lauderdale County 2,156 8,625 10,781
First Alabama Bank, Guntersville 2,650 10,600 13,250
First Alabama Bank, Phenix City 4,500 18,000 22,500
First Alabama Bank, Cullman 4,975 19,900 24,875
First Alabama Bank, Mobile 30,575 122,300 152,875
First Alabama Bank, Sumter County 1,425 5,700 7,125
First Alabama Bank, Talladega County 5,219 20,875 26,094
First Alabama Bank, Chilton County 1,763 7,050 8,813
First Alabama Bank, Troy 3,675 14,700 18,375
First Alabama Bank, Anniston 11,219 44,875 56,094
First Alabama Bank, Walker County 1,050 4,200 5,250
First Alabama Bank, South Baldwin 3,312 13,250 16,562
First Alabama Bank, Centre 2,125 8,500 10,625
First Alabama Bank, Covington County 625 2,500 3,125
First Alabama Bank, Shelby County 2,150 8,600 10,750
First Alabama Bank, Decatur 5,744 22,975 28,719
First Alabama Bank, Oneonta 4,637 18,550 23,187
First Alabama Bank, Enterprise 3,625 14,500 18,125
First Alabama Bank, Butler 800 3,200 4,000
First Alabama Bank, Albertville 2,500 10,000 12,500
Sunshine Bank, Santa Rosa 825 3,300 4,125
Sunshine Bank, Okaloosa 1,688 6,750 8,438
Real Estate Financing, Inc. 225 900 1,125
-------- -------- ----------
TOTALS $222,025 $888,097 $1,110,122
======== ======== ==========
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NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - UNREALIZED APPRECIATION OF COMMON STOCK OF FIRST ALABAMA BANCSHARES,
INC.
The unrealized appreciation of Common Stock of First Alabama Bancshares, Inc.
is as follows:
1993 1992 1991
---------- ---------- ----------
Unrealized appreciation at beginning
of year $4,421,534 $2,879,230 $ 305,769
Unrealized appreciation at end of year 3,574,295 4,421,534 2,879,230
---------- ---------- ----------
(DECREASE) INCREASE IN UNREALIZED
APPRECIATION $ (847,239) $1,542,304 $2,573,461
========== ========== ==========
NOTE E - GAIN REALIZED ON DISTRIBUTION OF COMMON STOCK OF FIRST ALABAMA
BANCSHARES, INC. TO PARTICIPANTS UPON WITHDRAWAL
1993 1992 1991
---------- -------- --------
Market value of shares distributed $1,658,765 $497,106 $667,405
Cost of shares distributed 965,782 305,493 456,864
---------- -------- --------
TOTAL REALIZED GAIN $ 692,983 $191,613 $210,541
========== ======== ========
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<PAGE> 12
ITEM 9b Exhibits
--------
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Directors' Stock Investment Plan Benefits Committee has duly caused the annual
report to be signed by the undersigned thereunto duly authorized.
DIRECTORS' STOCK INVESTMENT PLAN
FIRST ALABAMA BANCSHARES, INC.
Date: March 11, 1993 By: /s/ Douglas W. Graham
--------------- ----------------------
Douglas W. Graham
Senior Vice President - Personnel
First Alabama Bancshares, Inc.
10
