SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 31, 1999
FIRST AMERICAN CORPORATION
(Exact Name of Registrant as Specified in
Charter)
Tennessee 0-6198 62-0799975
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification No.)
Incorporation)
First American Center, 37237-0700
Nashville, Tennessee (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including
area code: (615) 748--2000
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
First American Corporation ("First American"), AmSouth
Bancorporation ("AmSouth") and a wholly owned subsidiary of AmSouth ("Merger
Sub") entered into an Agreement and Plan of Merger, dated as of May 31, 1999
(the "Merger Agreement"), pursuant to which Merger Sub will merge with and
into First American and each share of common stock, par value $2.50 per share,
of First American ("First American Common Stock") outstanding immediately prior
thereto will be converted into the right to receive 1.871 shares of common
stock, par value $1.00 per share, of AmSouth ("AmSouth Common Stock"), with cash
in lieu of fractional shares of AmSouth Common Stock, in a transaction expected
to be treated as a "reorganization" under Section 368(a) of the Internal Revenue
Code of 1986, as amended.
In connection with the Merger Agreement, First American entered into
an agreement with AmSouth, dated as of June 1, 1999, granting AmSouth an option
to purchase 23,250,165 shares of First American Common Stock (approximately
19.9% of those shares outstanding) at a price of $40.1625 per share, exercisable
only under certain circumstances as set forth in such agreement, and AmSouth
entered into a substantially identical agreement with First American, dated as
of June 1, 1999, granting First American an option to purchase up to 35,025,240
shares of AmSouth Common Stock (approximately 19.9% of those shares outstanding)
at a price of $28.5983 per share.
A copy of the press release dated June 1, 1999 and a copy of the
analyst presentation materials dated June 1, 1999, each regarding the
proposed Merger, are attached as Exhibits 99.1 and 99.2 hereto, respectively,
and are hereby incorporated herein by reference.
In connection with and immediately prior to entering into the Merger
Agreement and the stock option agreements, First American and First Chicago
Trust Company of New York, as Rights Agent ("First Chicago Trust Company"),
entered into an amendment to the Rights Agreement, dated as of July 16, 1998, by
and between First American and First Chicago Trust Company. A copy of the
amendment to the Rights Agreement is attached as Exhibit 4.1 hereto and is
hereby incorporated herein by reference.
This current report on Form 8-K and Exhibit 99.1 hereto contain
forward looking statements with respect to the financial condition, results of
operations and business of AmSouth and First American and assuming the
consummation of the Merger, a combined AmSouth and First American, including
statements relating to: the synergies (including cost savings) and accretion to
reported earnings expected to be realized from the Merger; business
opportunities and strategies potentially available to the combined company; and
the restructuring charges expected to be incurred in connection with the Merger.
These forward looking statements involve certain risks and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by such forward looking statements include, among other things, the
following possibilities: expected cost savings from the Merger cannot be fully
realized or realized within the expected time; revenues following the Merger are
lower than expected; competitive pressure among depository institutions
increases significantly; costs or difficulties related to the integration of the
businesses of AmSouth and First American are greater than expected; changes in
the interest rate environment reduce interest margins; general economic
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conditions, either nationally or in the states in which the combined company
will be doing business, are less favorable than expected; legislation or
regulatory requirements or changes adversely affect the business in which the
combined company will be engaged; and changes may occur in the securities
market. Such forward-looking statements speak only as of the date on which such
statements were made, and neither First American nor AmSouth undertakes any
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which any such statement is made to reflect the
occurrence of unanticipated events.
Item 7. Financial Statements and Exhibits.
(c) The following exhibits are filed with this report:
Exhibit Number Description
4.1 Amendment, dated as of May 31, 1999, to Rights Agreement,
dated as of July 16, 1998, by and between First American
Bancorporation Inc. and First Chicago Trust Company of New
York, as Rights Agent.
99.1 Press Release issued June 1, 1999.
99.2 Analyst Presentation Materials dated June 1, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST AMERICAN CORPORATION
Dated: June 2, 1999 /s/ Dennis C. Bottorff
---------------------------------
Name: Dennis C. Bottorff
Title: Chairman, Chief Executive
Officer and President
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EXHIBIT INDEX
Exhibit Number Description
4.1 Amendment, dated as of May 31, 1999, to Rights Agreement,
dated as of July 16, 1998, by and between First American
Bancorporation Inc. and First Chicago Trust Company of New
York, as Rights Agent.
99.1 Press Release issued June 1, 1999.
99.2 Analyst Presentation Materials dated June 1, 1999.
EXHIBIT 4.1
AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT (the "Amendment"), dated as of May 31, 1999, to the
Rights Agreement, dated as of July 16, 1998 (the "Rights Agreement"),
between FIRST AMERICAN CORPORATION, a Tennessee corporation (the
"Company"), and FIRST CHICAGO TRUST COMPANY OF NEW YORK, as Rights Agent
(the "Rights Agent").
RECITALS
WHEREAS, the Company and the Rights Agent have heretofore
executed and entered into the Rights Agreement.
WHEREAS, AmSouth Bancorporation, a Delaware corporation
("AmSouth") and the Company contemplate entering into an Agreement and
Plan of Merger (the "Merger Agreement") pursuant to which a wholly-owned
subsidiary of AmSouth will merge with and into the Company (the "Merger").
The Board of Directors of the Company has approved the Merger Agreement.
WHEREAS, in connection with the Merger Agreement, AmSouth and
the Company contemplate entering into a stock option agreement (the "Stock
Option Agreement") pursuant to which the Company will grant to AmSouth an
option to purchase shares of the Company's common stock, par value $2.50
per share, on the terms and subject to the conditions set forth in the
Stock Option Agreement. The Board of Directors of the Company has approved
the Stock Option Agreement.
WHEREAS, pursuant to Section 26 of the Rights Agreement, the
Company and the Rights Agent may from time to time supplement and amend
the Rights Agreement.
WHEREAS, the Board of Directors of the Company has determined
that an amendment to the Rights Agreement as set forth herein is necessary
and desirable in connection with the foregoing and the Company and the
Rights Agent desire to evidence such amendment in writing.
WHEREAS, all acts and things necessary to make this Amendment
a valid agreement, enforceable according to its terms have been done and
performed, and the execution and delivery of this Amendment by the Company
and the Rights Agent have been in all respects duly authorized by the
Company and the Rights Agent.
Accordingly, the parties agree as follows:
A. Amendment of Section 1.1. Section 1 of the Rights Agreement
is supplemented to add the following definitions in the appropriate
locations:
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"AmSouth" shall mean AmSouth Bancorporation, a Delaware
corporation.
"Merger" shall have the meaning set forth in the Merger
Agreement.
"Merger Agreement" shall mean the Agreement and Plan of
Merger, dated as of May 31, 1999, by and among AmSouth, First
American and a wholly-owned subsidiary of AmSouth, as it may be
amended from time to time.
"Stock Option Agreement" shall mean the First American Stock
Option Agreement, as such term is defined in the Merger Agreement.
B. Amendment of the definitions of "Acquiring Person" and
"Adverse Person". The definition of "Acquiring Person" in Section 1 of the
Rights Agreement is amended by adding the following sentence at the end
thereof:
"Notwithstanding anything in this Rights Agreement to the
contrary, neither AmSouth nor Merger Sub shall be deemed to be an
Acquiring Person by virtue of (i) the execution of the Merger
Agreement or the Stock Option Agreement, (ii) the consummation of
the Merger or (iii) the consummation of any other transaction
contemplated in the Merger Agreement or the Stock Option Agreement."
The definition of "Adverse Person" in Section 1 of the Rights
Agreement is amended by adding the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the
contrary, neither AmSouth nor Merger Sub shall be deemed to be an
Adverse Person by virtue of (i) the execution of the Merger
Agreement or the Stock Option Agreement, (ii) the consummation of
the Merger or (iii) the consummation of any other transaction
contemplated in the Merger Agreement or the Stock Option Agreement."
C. Amendment of the definition of "Stock Acquisition Date".
The definition of "Stock Acquisition Date" in Section 1 of the Rights
Agreement is amended by adding the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the
contrary, a Stock Acquisition Date shall not be deemed to have
occurred as the result of (i) the execution of the Merger Agreement
or the Stock Option Agreement, (ii) the
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consummation of the Merger, or (iii) the consummation of any other
transaction contemplated in the Merger Agreement or the Stock Option
Agreement."
D. Amendment of definition of "Final Expiration Date". The
definition of "Final Expiration Date" in Section 1 of the Rights Agreement
is amended and restated to read in its entirety as follows:
"Final Expiration Date" shall mean the earlier of (i) the
close of business on December 31, 2008, unless extended by the Board
of Directors of the Company as provided in Section 7 hereof and (ii)
immediately prior to the consummation of the Merger.
E. Amendment of definition of "Section 11(a)(ii) Event". The
definition of "Section 11(a)(ii) Event" in Section 1 of the Rights
Agreement is amended by adding the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the
contrary, none of (i) the execution of the Merger Agreement and the
Stock Option Agreement, (ii) the consummation of the Merger or (iii)
the consummation of any other transaction contemplated in the Merger
Agreement or the Stock Option Agreement shall be deemed to be an
event of the type described in clause (A) or (B) of Section 11(a)(ii)
and shall not cause the Rights to be adjusted or exercisable in
accordance with Section 11."
F. Amendment of Section 3(a). Section 3(a) of the Rights
Agreement is amended to add the following sentence at the end thereof:
"Nothing in this Rights Agreement shall be construed to give
any holder of Rights or any other Person any legal or equitable
rights, remedies or claims under this Rights Agreement by virtue of
the execution of the Merger Agreement or the Stock Option Agreement
or by virtue of any of the transactions contemplated by the Merger
Agreement or the Stock Option Agreement."
G. Effectiveness. This Amendment shall be deemed effective as
of the date first written above, as if executed on such date. Except as
amended hereby, the Rights Agreement shall remain in full force and effect
and shall be otherwise unaffected hereby.
H. Miscellaneous. This Amendment shall be deemed to be a
contract made under the laws of the State of Tennessee and for all
purposes shall be governed by and construed in accordance with the laws of
such state applicable to contracts to be made
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and performed entirely within such state. This Amendment may be executed
in any number of counterparts, each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument. If any provision,
covenant or restriction of this Amendment is held by a court of competent
jurisdiction or other authority to be invalid, illegal or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Amendment shall remain in full force and effect and shall in no way be
effected, impaired or invalidated.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and attested, all as of the date and year first above
written.
Attest: FIRST AMERICAN
By: /s/ Pamela R. Welch By: /s/ Dennis C. Bottorff
---------------------------- -----------------------------
Name: Pamela R. Welch Name: Dennis C. Bottorff
Title: Assistant Secretary Title: Chairman, Chief
Executive Officer and
President
Attest: FIRST CHICAGO TRUST COMPANY
OF NEW YORK
By: /s/ Thomas A. Ferrari By: /s/ John G. Herr
---------------------------- -----------------------------
Name: Thomas A. Ferrari Name: John G. Herr
Title: Vice President Title: Assistant Vice
President
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EXHIBIT 99.1
FIRST AMERICAN CORPORATION (TICKER: FAM, EXCHANGE: THE NEW YORK STOCK EXCHANGE)
NEWS RELEASE - TUESDAY, JUNE 01, 1999
Contact
For AmSouth For First American
List Underwood (investment community) Carroll Kimball (investment community)
(205) 801-0265 (615) 736-6267
Jim Underwood (news media) Vicki Kessler (news media)
(205) 326-5184 (615) 320-7532
AMSOUTH TO ACQUIRE FIRST AMERICAN
IN $6.3 BILLION STOCK MERGER,
CREATING PREMIER SOUTHEAST FINANCIAL SERVICES FRANCHISE
BIRMINGHAM, ALABAMA, and NASHVILLE, TENNESSEE, June 1, 1999 --- AmSouth
Bancorporation (NYSE:ASO) and First American Corporation (NYSE: FAM) today
jointly announced that AmSouth will acquire First American in a tax-free stock
merger. The transaction will create a premier Southeast financial services
franchise serving 2 million households in nine states, with $40 billion in
assets and a market capitalization of more than $11 billion.
Under the terms of the definitive merger agreement, unanimously
approved by the Boards of Directors of both companies, First American
shareholders will receive 1.871 shares of AmSouth common stock for each First
American common share. Based on AmSouth's closing stock price on Friday, May 28,
the transaction is currently valued at approximately $6.3 billion, or $53.09 per
First American share. This price represents a multiple of 17.6 times consensus
analyst estimates of First American's 2000 earnings per share.
The combined company, which will be called AmSouth Bancorporation, will
have 680 branches in nine Southeastern states with leading market positions in
Tennessee, Florida, Alabama, and Mississippi. The company also will have a
presence in Georgia, Louisiana, Arkansas, Kentucky and Virginia, and the largest
ATM network in the Southeast with 1,350 ATMs. The corporate headquarters for the
combined companies will be in Birmingham, and
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Nashville will be headquarters for AmSouth's Tennessee banking operations. In
addition, AmSouth and First American will be exploring over the next several
months additional opportunities to leverage the benefits of having a strong
presence in the Nashville metropolitan area.
AmSouth's extensive fee-based business will be significantly enhanced
by the addition of IFC Holdings (INVEST and Investment Centers of America), the
country's largest third-party marketer of investment and insurance products with
$7 billion in product sales anticipated in 1999, and by First American's $3
billion in mutual fund assets under management. These assets will nearly double
AmSouth's mutual fund assets and make it one of the Southeast's largest bank
mutual fund managers.
AmSouth expects the acquisition to be immediately and substantially
accretive to earnings per share. Based on a conservative estimate of synergies,
AmSouth anticipates accretion of approximately 2.5 percent in 2000 and 9 percent
in 2001. The transaction will be accounted for as a pooling of interests and is
expected to be completed in the fourth quarter of 1999, subject to shareholder
approval and customary regulatory approvals. Due diligence is completed, and
19.9 percent cross options are in place.
"This outstanding combination of two complementary and compatible
banking organizations offers compelling strategic and financial benefits," said
C. Dowd Ritter, AmSouth chairman and CEO. "Strategically, it creates a premier
Southeast financial services franchise with increased scale, leading positions
in attractive markets through the mid-South and Florida's west coast, and
increased fee-based revenues. The transaction will push AmSouth's already strong
return on equity even higher, ranking it among the top tier of banks in the
country. The combination also will enhance economies of scale which will allow
us to achieve a lower efficiency ratio while continuing to deliver superior
customer service."
"This is an ideal partnership that brings together both companies'
strong positions in contiguous markets," said Dennis C. Bottorff, chairman and
CEO of First American. "By joining forces with AmSouth, we will create immediate
value as well as long-term upside for our shareholders, provide significant
benefits to our customers and new opportunities for our talented and dedicated
employees."
Ritter will be president and CEO of the combined company. Bottorff will
serve as chairman and be available to assist Ritter until Jan. 1, 2001, to
ensure a smooth transition, after which Ritter will become chairman. In addition
to Bottorff, four other First American directors will join the AmSouth Board,
increasing its size from 12 to 17 members. In conjunction with the transaction,
the AmSouth Board has rescinded its previously approved stock repurchase
program.
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AmSouth's financial advisor on the transaction is Donaldson, Lufkin and
Jenrette and its legal advisor is Sullivan & Cromwell. First American's
financial advisor is Merrill Lynch and its legal advisor is Wachtell, Lipton,
Rosen & Katz.
First American Corporation is a $20 billion Nashville, Tennessee, based
financial services holding company with approximately 390 banking offices and
700 ATMs in Arkansas, Georgia, Kentucky, Louisiana, Mississippi, Tennessee and
Virginia. The corporation is the parent company of First American National Bank,
First American Federal Savings Bank and First American Enterprises Inc. and owns
98.75 percent of IFC Holdings Inc. and 49 percent of The SSI Group, Inc., a
healthcare payments processor. Additional information about First American can
be accessed through the company's website at www.fanb.com
Headquartered in Birmingham, Alabama, AmSouth Bancorporation is a
regional bank holding company with assets of $20 billion. AmSouth operates
approximately 290 banking offices and 650 ATMs in Alabama, Florida, Tennessee
and Georgia. AmSouth and its subsidiaries provide a full line of traditional and
nontraditional financial services, including consumer and commercial banking,
mortgages, trust services and investment management. For more information visit
AmSouth's website at www.amsouth.com.
# # # #
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EXHIBIT 99.2
Enhancing Shareholder Value through
Creation of a Premier Southeast
Financial Services Franchise
[AmSouth Logo]
Merges with
[First American Logo]
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Forward Looking Statement
This presentation contains forward looking statements with respect to the
financial condition, results of operations and business of AmSouth
Bancorporation and, assuming the consummation of the merger, a combined AmSouth
Bancorporation/First American Corporation including statements relating to: (a)
the cost savings and accretion to reported earnings that will be realized from
the merger; (b) the impact on revenues of the merger; and (c) the restructuring
charges expected to be incurred in connection with the merger. These forward
looking statements involve certain risks and uncertainties. Factors that may
cause actual results to differ materially from those contemplated by such
forward looking statements include, among others, the following possibilities:
(1) expected cost savings from the merger cannot be fully realized or realized
within the expected time frame; (2) revenues following the merger are lower than
expected; (3) competitive pressure among depository institutions increases
significantly; (4) costs or difficulties related to the integration of the
businesses of AmSouth Bancorporation and First American Corporation are greater
than expected; (5) changes in the interest rate environment reduce interest
margins; (6) general economic conditions, either nationally or in the states in
which the combined company will be doing business, are less favorable than
expected; or (7) legislation or regulatory changes adversely affect the business
in which the combined company would be engaged.
[AmSouth and First American Logos]
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AmSouth Merges With First American
Terms of the Transaction
Strategic Rationale
Pro Forma Financial Impact
AmSouth's Record of Performance
Summary
Appendix
[AmSouth and First American Logos]
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Terms of the Transaction
[AmSouth and First American Logos]
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Transaction Summary
Fixed Exchange Ratio: 1.871 AmSouth shares per First
American share
Price Per First American Share(1) $53.09
Structure: Merger; Pooling of interests;
Tax-free exchange; 19.9% cross
options in place
Transaction Value: $6.3 Billion
Expected Closing: Fourth quarter 1999
Due Diligence: Completed, including Y2K review
Systems Conversion: Second quarter 2000
(1) Based on AmSouth's price per share of $28.375 as of May 28, 1999.
[AmSouth and First American Logos]
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Transaction Summary
Management: C. Dowd Ritter - President and CEO
Dennis C. Bottorff - Chairman
Sloan Gibson - CFO and head of
integration team
Board of Directors: 17 members
AmSouth 12
First American 5
Ownership: 44% AmSouth / 56% First American
Name: AmSouth Bancorporation
Headquarters: Birmingham, Alabama
[AmSouth and First American Logos]
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Compelling Economics
- -- Substantially Accretive to EPS
- 2000 Accretion = 2.7%
- 2001 Accretion = 9.1%
- -- Internal Rate of Return Significantly Exceeds AmSouth's Cost of Equity
- IRR = 15.5%
Note: 2000 EPS accretion assumes cost saves 75% phased-in; revenue
enhancements 50% phased-in; and leveraging of excess capital 60% phased-in.
[AmSouth and First American Logos]
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Principal Benefits
- -- Enhances Shareholder Value
- Accelerated earnings growth
- Strong and sustainable ROE
- Improved operating efficiency
- Increase in noninterest income as a percentage of total revenues
- -- Further Diversifies Revenue and Earnings Mix
- More balanced loan portfolio
- Addition of high return fee generating businesses
- Expanded regional footprint
- -- Creates a Premier Southeast Financial Services Franchise
- Leading positions in key markets
- Enhanced scale across all products and services
[AmSouth and First American Logos]
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Manageable Execution Risk
- -- Conservative Assumptions for Revenue and Expense Synergies
- -- Natural Extension of Franchise to Complementary and Contiguous Markets
- -- Due Diligence is Complete, Including Y2K and Credit
- -- Common Platforms
- -- Common Systems Facilitate Ease of Transition
- Deposit system
- Commercial loan system
- Consumer loan system
- Trust system
- Treasury services
[AmSouth and First American Logos]
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Strategic Rationale
[AmSouth and First American Logos]
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Premier Southeast Financial Services
Franchise
- -- $40B in Assets; $28B in Deposits
- -- $11 +B Market Cap
- -- Over 2 Million Households
- -- 680 Branches in 9 States
- -- #1 ATM Network in the Southeast (1,350 ATM's)
- -- #3 Small Business Lender HQ'd in the Southeast
- -- #3 Bank-owned Leasing Company in the Southeast
Combined Company's Deposits by State
[Geographical Chart showing the following:
AmSouth
- Florida - 18.2%
- Alabama - 24.6%
AmSouth and First American
- Tennessee - 35.0%
- Georgia - 1.0%
First American
- Virginia - 0.6%
- Kentucky - 0.8%
- Mississippi - 13.6%
- Louisiana - 5.4%
- Arkansas - 0.8%]
Source: Sheshunoff Database.
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[AmSouth and First American Logos]
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Attractive Market Demographics
Personal Median HH
Growth Rates 1998 - 2003 Population Income Households Income
---------- ------ ---------- ------
United States 4.2% 21.6% 5.3% 15.4%
Southeast 5.3% 23.5% 6.5% 15.9%
- ----------------------------------------------------------------------------
The New AmSouth 5.9% 24.3% 7.1% 16.0%
- ----------------------------------------------------------------------------
Source: Woods & Poole Economics
[AmSouth and First American Logos]
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Leading Share in Key Markets
($ in billions)
Deposit
Market Share Total Branch
Top Ten MSA's Rank Deposits Offices
- ------------- ---- -------- -------
Nashville, TN 1 $3.7 65
Birmingham, AL 2 2.7 40
Tampa - St. Petersburg - Clearwater, FL 4 2.1 44
Jackson, MS 2 1.7 30
Knoxville, TN 2 1.3 27
Chattanooga, TN 1 1.2 35
Mobile, AL 2 1.1 22
Tri-Cities, TN 1 0.9 18
Pensacola, FL 1 0.6 14
Montgomery, AL 3 0.5 10
Source: Sheshunoff Data Services
[AmSouth and First American Logos]
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Strengthened Investment
Services Platform
- -- Largest Third-party Marketer of Investment and Insurance Products in
the United States (IFC Holdings, Inc.)
- Over $5 billion of products sold in 1998
- 400 financial institution clients in 44 states
- 2,500 registered reps
- -- Substantial Mutual Fund and Asset Management Capabilities
- $6.5 billion of assets under management
- 37 proprietary mutual funds
- -- Largest Bank Platform Annuity Sales Force in the Southeast and Among
the Largest in the Country With Over 1,400 Licensed Employees
- -- 168 Full Service Brokers
[AmSouth and First American Logos]
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Enhanced Noninterest Income Contribution
AMSOUTH ($319MM)
[Pie Chart]
Services Charges $105M 32%
Trust $67M 21%
Investment Services $31M 10%
Mortgage $18M 6%
Other $98M 31%
FIRST AMERICAN ($471M)
[Pie Chart]
Services Charges $132M 28%
Trust $43M 9%
Investment Services $151M 33%
Mortgage $49M 10%
Other $96M 20%
PRO FORMA COMBINED ($790M)
[Pie Chart]
Services Charges $237M 30%
Trust $110M 14%
Investment Services $182M 23%
Mortgage $67M 8%
Other $194M 25%
NONINTEREST INCOME TO TOTAL REVENUES
AMSOUTH: 31% FIRST AMERICAN: 39% PRO FORMA COMBINED: 35%
Note: Financial data for the twelve months ended December 31, 1998.
Excludes nonrecurring items.
[AmSouth and First American Logos]
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Pro Forma Financial
Impact
[AmSouth and First American Logos]
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Immediate and Substantial
EPS Accretion
($ in millions, except per share data) 2000 2000 Fully 2001
Projected PhasedIn Projected
--------- ---------- ---------
Projected Net Income
AmSouth $ 327 $ 327 $ 362
First American 353 353 388
----- ----- -----
Pro Forma Combined $ 680 $ 680 $ 750
----- ----- -----
Adjustments (After-Tax)
Cost Savings $ 62 $ 82 $ 89
Incremental Revenue 7 14 16
Leverage of Excess Equity 6 13 35
----- ----- -----
Pro Forma Earnings $ 755 $ 789 $ 890
Pro Forma EPS $1.88 $1.96 $2.21
AmSouth's EPS Estimates $1.83 $1.83 $2.03
EPS Accretion $0.05 $0.13 $0.18
EPS % Accretion 2.7% 7.1% 9.1%
Note: Earnings estimates based on First Call as of May 20, 1999; 2000
phase-ins reflect 50% revenue enhancements, 75% cost savings and 60%
leveraging excess capital; Excludes merger related charges.
[AmSouth and First American Logos]
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Transaction Accelerates AmSouth's EPS
Growth Rate
[Graph showing following:
Am South Stand Alone EPS:
1995A $0.88/33%
1996A $1.03/17%
1997A $1.21/17%
1998A $1.45/20%
1999E $1.63/12%
2000E $1.83
2001E $2.03
Pro Forma EPS:
2000E $1.88/15% (showing accretion = 2.7%) -- $1.96(1)
2001E $2.21/18% (showing accretion = 9.1%)
Note: 1995-1998 as reported for AmSouth. Estimates 1999 - 2000 based upon
First Call consensus estimates as of May 20, 1999. (1) Pro forma EPS
including fully phased in synergies.]
[AmSouth and First American Logos]
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Enhanced Profitability
2000 Pro 2001 Pro
ASO 1Q99 Forma(1) Forma
-------- -------- --------
ROE 20.1% 21.5% 22.5%
ROA 1.4 1.5 1.6
Efficiency 56.0 50.1 47.2
NIR to Total Revenue 32.8 36.0 37.0
(1) 2000 phase-in reflects 50% of target revenue enhancements, 75% of target
cost savings and 60% of target leveraging of excess capital.
Excludes merger related charges.
[AmSouth and First American Logos]
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Transaction Synergies
- -- Cost Savings - $133 Million Pre-tax (18% of First American's NIE)
- -- Revenue Enhancements - $23 Million Pre-tax (5% of First American's NIR)
- -- Leverage of Excess Equity - $30 Million Pre-tax
[AmSouth and First American Logos]
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Conservative Cost Savings
($ in millions)
Pre-tax Cost Savings
Operations / Systems $50
Staff / Support Areas 41
Branch Consolidation 12
Facilities / Purchasing / Contracts 30
----
Total $133
18% of First American's Total Noninterest Expenses
[AmSouth and First American Logos]
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Revenue Enhancements
- -- Revenue Enhancements are a Modest 5% of FAM's Noninterest Revenue Base
= $23 Million Pre-tax
- -- Specific Items Include:
- Platform annuity improvements = $15 - 19 million
- Consumer lending = $8 - 15 million
- Growth in home equity lending
- Risk based pricing
- -- Additional Opportunities Include:
- Market by market deposit pricing
- Mutual fund sales through INVEST
- Bank owned life insurance
- Improved indirect lending performance profile
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<PAGE>
Merger & Integration Charges
($ in millions)
Pre-tax Charges:
Employee Related $146
Branch / ATM / Marketing 31
Operations & Data Processing 64
Transaction Related Costs 55
----
Total $296
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<PAGE>
Comparable Transaction Pricing
Price to
Forward EPS Price Premium to Cost
Acquiror Target Estimate to Book Market Savings(1)
- -------- ------ -------- ------- ------ ----------
AmSouth First American 18.9x 3.4x 30% 18%
Firstar Mercantile 21.0x 3.4x 29% 20%
SunTrust Crestar 25.8 4.3 31 17
Star Firstar 22.1 4.1 27 19
Regions First Commercial 23.3 3.8 3 22
First American Deposit Guaranty 25.8 4.2 22 22
National City First of America 22.9 3.8 36 27
First Bank System US Bancorp 17.4 3.4 22 28
Mean 22.6x 3.8x 24% 22%
Median 22.9 3.8 27 22
(1) Announced cost savings and revenue enhancement ratios based upon target
LTM financials
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<PAGE>
Comparable Transaction Pricing
Forward P/E % of Acquiror P/E
----------- -----------------
Trans- Trans-
action action
Trans- with Trans- with
Acquiror Target Acquiror action Synergies action Synergies
- -------- ------ -------- ---------------- ------ ---------
AmSouth First American 16.6x 18.9x 14.0x 114% 84%
Firstar Mercantile 26.1 x 21.0x 17.3x 81% 66%
SunTrust Crestar 23.6 25.8 17.8 109 75
Star Banc Firstar 22.0 22.1 16.3 101 74
Regions First 16.9 23.3 16.1 138 95
Commercial
First American Deposit 20.6 25.8 16.5 125 80
Guaranty
National City First of 16.9 22.9 14.1 136 84
America
First Bank US Bancorp 14.5 17.4 11.6 120 80
System
Mean 20.1 x 22.6x 15.7x 116% 79%
Median 20.6 22.9 16.3 120 80
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<PAGE>
AmSouth's Record of
Performance
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<PAGE>
Goals Set / Goals Met
EPS Growth ROE
---------- ---
12 - 15%
Strategic Goals For 1999 and Beyond Annually 20 - 22%
- -----------------------------------
First Quarter 1999 Results 15.7% 20.1%
Three Year Goals 1997 - 1999 18% CAGR 18%+
- ----------------------------
1998 Results 19.2% 18.6%
1997 Results 18.2% 16.5%
One Year Goal 1996 - 1997 10% Per Annum 15%+
- -------------------------
First Quarter 1997 18.1% 15.9%
1996 Results 16.7% 14.3%
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<PAGE>
Superior EPS Growth
[GRAPH showing the following:
$ Per Share
1Q95 -- $0.20
2Q95
3Q95
4Q95
1Q96 -- $0.26
2Q96
3Q96
4Q96
1Q97 -- $0.29
2Q97
3Q97
4Q97
1Q98 -- $0.34
2Q98
3Q98
4Q98
1Q99 -- $0.39
* 3Q96 excludes one-time SAIF assessment]
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<PAGE>
Consistently Improving ROE's
[GRAPH showing the following:
1Q95 - 12.3
2Q95 - 12.2
3Q95 - 13.4
4Q95 - 13.7
1Q96 - 13.8
2Q96 - 14.3
3Q96 - 14.4
4Q96 - 14.8
1Q97 - 15.9
2Q97 - 16.3
3Q97 - 16.6
4Q97 - 17.2
1Q98 - 18.0
2Q98 - 18.5
3Q98 - 18.7
4Q98 - 19.1
1Q99 - 20.1
* 3Q96 excludes one-time SAIF assessment]
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<PAGE>
Working For The Shareholder
AmSouth Market Capitalization
($'s in Billions)
[GRAPH with $4.0 Billion Increase]
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<PAGE>
Summary
- -- Financially compelling
- Immediately and substantially accretive
- Strong, sustainable ROE
- IRR significantly exceeds cost of equity
- -- Leading southeastern franchise
- 2 million households in key markets
- High growth demographic profile
- -- Enhances strategic position
- Broadens product line and revenue sources
- Improved operating efficiency creates competitive advantage
- -- Manageable execution risk
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<PAGE>
Appendix
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<PAGE>
Combined Balance Sheet
($ in millions, as of March 31, 1999)
ASO FAM Combined
--- --- --------
Loans $ 13,194 $ 11,469 $ 24,663
Securities 5,119 6,859 11,978
Other Earning Assets 123 201 324
---- ---- ----
Total Earning Assets 18,436 18,529 36,965
Loan Loss Allowance (177) (190) (367)
Other Assets 1,825 1,987 3,812
----- ------- -----
Total Assets $ 20,084 $ 20,326 $ 40,410
======== ======== ========
Total Deposits $ 12,945 $ 14,435 $ 27,380
Purchased Funding 5,308 3,760 9,068
Other Liabilities 403 313 716
Stockholders' Equity 1,428 1,818 3,246
------ ------ -----
Total Liabilities & Equity $ 20,084 $ 20,326 $ 40,410
======== ======== ========
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<PAGE>
Balanced Loan Mix
($ in millions, as of March 31, 1999)
ASO FAM Combined
-------------- --------------- ---------------
Balances Mix Balances Mix Balances Mix
-------- --- -------- --- -------- ---
Commercial Real Estate $ 3,587 27% $ 1,460 13% $ 5,047 20%
Commercial Loans & Leases 3,622 28 5,568 49 9,190 37
Residential First Mortgages 1,419 11 1,421 12 2,840 12
Home Equity 1,850 14 391 4 2,241 9
Consumer 2,716 20 2,639 22 5,355 22
------ -- ------- -- -------- --
Total $ 13,194 100% $11,479 100% $ 24,673 100%
======== === ======= === ======== ===
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<PAGE>
Favorable Deposit Mix
($ in millions, as of March 31, 1999)
ASO FAM Combined
-------------- -------------- ---------------
Balances Mix Balances Mix Balances Mix
-------- --- -------- --- -------- ---
Noninterest-Bearing Demand $ 2,159 17% $ 2,820 19% $ 4,979 18%
Interest-Bearing Demand 4,483 35 5,373 37 9,856 36
Savings 969 7 1,046 7 2,015 7
Time 4,396 34 3,693 25 8,089 29
CD's > $100,000 938 7 1,670 12 2,608 10
---- -- ------- -- ------- ---
Total $12,945 100% $14,602 100% $ 27,547 100%
======= === ======= === ======== ===
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<PAGE>
Net Interest Margin
(For the quarter ended March 31, 1999)
ASO FAM Combined
--- --- --------
Yields
- ------
Loan Yield 8.42% 8.29% 8.36%
Investment Yield 6.90 6.55 6.70
Earning Assets 7.98 7.57 7.77
Rates Paid
- ----------
Interest-Bearing Deposits 4.12% 3.74% 3.93%
Interest-Bearing Liabilities 5.11 4.83 5.00
Spreads
- -------
Incremental Interest Spread 3.54% 3.57% 3.55%
Net Interest Margin 4.08 4.23 4.15
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<PAGE>
Strong Asset Quality
(As of March 31, 1999)
ASO FAM Combined
--- --- --------
Allowance/Loans 1.34% 1.65% 1.49%
Annualized Net Charge-offs/ 0.28% 0.33%(1) 0.30%
Average Loans
NPAs / Loans + OREO 0.59% 0.47% 0.53%
Allowance / Non-Performing 265% 415% 326%
Loans
(1) Net charge-offs for 1Q99 exclude a $7.9 million charge-off on a single
loan to a sub-prime lender.
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<PAGE>
Capital Ratios
($ in millions, as of March 31, 1999)
ASO FAM Combined
--- --- --------
Average Equity $1,421 $1,805 $3,226
Equity to Assets Ratio 7.18% 8.90% 8.05%
Total Capital Ratio 10.78% 12.58% 11.61%
Leverage Ratio 6.07% 7.99% 7.04%
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