<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
---------------------
<TABLE>
<S> <S>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED,
EFFECTIVE OCTOBER 7, 1996.]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>
COMMISSION FILE NUMBER 0-3613
SOUTHTRUST CORPORATION
(Exact name of registrant specified in its charter)
<TABLE>
<S> <C>
DELAWARE 63-574085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
420 NORTH 20TH STREET,
BIRMINGHAM, ALABAMA 35203
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrants telephone number, including area code: (205) 254-5509
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 $2.50 PER SHARE
(Title of Class)
Indicate by a check mark whether 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, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by a 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 the 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 February 28, 1997.
Common Stock, par value $2.50 per share -- $3,675,600,000
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of February 28, 1997.
Common Stock, par value $2.50 per share -- 98,912,668 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual proxy statement for the annual meeting of
stockholders on April 16, 1997 are incorporated by reference into Part III.
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<PAGE> 2
PART I
ITEM 1 BUSINESS
SouthTrust Corporation ("SouthTrust" or the "Company") is a registered bank
holding company incorporated under the laws of Delaware in 1968. At December 31,
1996 SouthTrust had ten bank subsidiaries and eight bank-related subsidiaries.
Of the ten bank subsidiaries, two are located in Alabama, two are located in
Florida, two are located in Georgia, one is located in North Carolina, one is
located in South Carolina, one is located in Tennessee, and one is located in
Mississippi. At December 31, 1996, SouthTrust had consolidated total assets of
$26.2 billion, which ranked it as the largest bank holding company headquartered
in Alabama and one of the twenty-nine largest bank holding companies in the
United States. SouthTrust's total assets at December 31, 1996 were located
approximately $13.2 billion in Alabama, approximately $5.4 billion in Florida
and approximately $5.5 billion in Georgia. SouthTrust has no significant foreign
operations.
The Company employs approximately 9,100 persons and considers that its
relations with these employees are good.
BANKING SERVICES
Commercial banking is SouthTrust's predominant business and its subsidiary
banks contribute substantially all of the Company's total operating revenues and
total consolidated assets.
The subsidiary banks offer a broad range of banking services, either
directly or through other affiliated bank related subsidiaries. Services to
business customers include providing checking and time deposit accounts, cash
management services, various types of lending and credit services, corporate and
other trust services and data processing. Through loan participation, each of
the subsidiary banks is able to offer credit to businesses in its area up to the
maximum limit available to the combined subsidiary banks. Services provided to
individual customers directly or through other affiliated banks or corporations
include checking accounts, money market investment and money market checking
accounts, personal money management accounts, passbook savings accounts and
various other time deposit savings programs, loans (including business,
personal, automobile, mortgage, home improvement and educational loans),
discount brokerage services, investment services and a variety of trust
services. Most of the subsidiary banks offer Visa and/or Master Card
multi-purpose nationally recognized credit card services.
SUBSIDIARY BANKS
At December 31, 1996, SouthTrust had ten subsidiary banks with 511 banking
offices. Since 1987, when interstate banking was first permitted in Alabama, the
Company has expanded into 6 other southeastern states within its permitted
operating region. The Company's largest operation outside of Alabama is
SouthTrust Bank of Georgia, N.A., which had approximately $5.5 billion in
assets, $3.8 billion in deposits and operated 115 banking offices in the greater
metropolitan Atlanta, Georgia area at December 31, 1996. At December 31, 1996
approximately 50% of the Company's bank assets were in Alabama, 21% were in
Georgia, 21% were in Florida, 4% were in North Carolina; and the remainder were
in South Carolina, Tennessee and Mississippi.
BANK-RELATED SUBSIDIARIES
The bank-related subsidiaries of SouthTrust are SouthTrust Mortgage
Corporation, a mortgage banking company servicing approximately $6.0 billion in
mortgage loans for long-term investors; SouthTrust Data Services, Inc., a
computer service company; SouthTrust Life Insurance Company, a credit life
insurance company; SouthTrust Insurance Agency, an insurance agency; SouthTrust
Securities, Inc., an investment services company; SouthTrust Asset Management
Company of Florida, N.A., a trust company located in Florida; SouthTrust Asset
Management Company of Georgia, N.A., a trust company located in Georgia; and
SouthTrust Asset Management Company of the Carolinas, Inc., a trust company.
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BUSINESS COMBINATIONS
In the normal course of business, the Company regularly investigates
acquisition opportunities. These acquisitions are used to augment the Company's
strong internal growth. All potential acquisitions must meet specific internal
criteria designed to protect and enhance shareholder value.
During 1996, the Company completed ten acquisitions, adding $1,744.9
million in total assets, $1,358.5 million in loans, and $1,417.9 in deposits.
Additional information relating to business combinations can be found in
Note B to the Consolidated Financial Statements.
SUPERVISION AND REGULATION
SouthTrust is a bank holding company within the meaning of the Bank Holding
Company Act of 1956, as amended (the "Holding Company Act"), and is registered
with the Federal Reserve Board. SouthTrust's banking subsidiaries are subject to
restrictions under federal law which limit the transfer of funds by the
subsidiary banks to their respective holding companies and nonbanking
subsidiaries, whether in the form of loans, extensions of credit, investments or
asset purchases. Such transfers by any subsidiary bank to its holding company or
any non-banking subsidiary are limited in amount to 10% of the subsidiary bank's
capital and surplus and, with respect to SouthTrust and all such non-banking
subsidiaries, to an aggregate of 20% of such bank's capital and surplus.
Furthermore, such loans and extensions of credit are required to be secured in
specified amounts. The Holding Company Act also prohibits, subject to certain
exceptions, a bank holding company from engaging in or acquiring direct or
indirect control of more than 5% of the voting stock of any company engaged in
non-banking activities. An exception to this prohibition is for activities
expressly found by the Federal Reserve Board to be so closely related to banking
or managing or controlling banks as to be a proper incident thereto.
As a bank holding company, SouthTrust is required to file with the Federal
Reserve Board quarterly reports and such additional information as the Federal
Reserve Board may require. The Federal Reserve Board may also make examinations
of SouthTrust and each of its subsidiaries.
According to Federal Reserve Board policy, bank holding companies are
expected to act as a source of financial strength to each subsidiary bank and to
commit resources to support each such subsidiary. This support may be required
at times which a bank holding company may not be able to provide such support.
Furthermore, in the event of a loss suffered or anticipated by the
FDIC -- either as a result of default of a banking or thrift subsidiary of
SouthTrust or related FDIC assistance provided to a subsidiary in danger of
default -- the other banking subsidiaries of SouthTrust may be assessed for the
FDIC's loss, subject to certain exceptions.
Various federal and state statutory provisions limit the amount of
dividends the subsidiary banks can pay to their holding companies without
regulatory approval. The approval of the OCC is required for any dividend by a
national bank to its holding company if the total of all dividends declared by
such bank in any calendar year would exceed the total of its net profits, as
defined by the OCC, for that year combined with its retained net profits for the
preceding two years less any required transfers to surplus for a fund for the
retirement of any preferred stock. Comparable prohibitions on the declaration of
dividends are imposed by the Alabama Banking Code, the Florida Financial
Institutions Code, the North Carolina Banking Code, the South Carolina Banking
Code, the Tennessee Banking code, the Financial Institutions Code of Georgia,
and the Mississippi Code of 1972. In addition, a national bank may not pay a
dividend in an amount greater than its net profits then on hand after deducting
its loan losses and bad debts. For this purpose, bad debts are defined to
include, generally, the principal amount of loans which are in arrears with
respect to interest by six months or more or are past due as to payment of
principal (in each case to the extent that such debts are in excess of the
reserve for possible credit losses). Under the foregoing laws and regulations,
at December 31, 1996, approximately $412.6 million was available for payment of
dividends to SouthTrust by its bank subsidiaries. The payment of dividends by
any bank also may be affected by other factors, such as the maintenance of
adequate capital for such subsidiary bank. In addition to the foregoing
restrictions, the Federal Reserve Board has the power to
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prohibit dividends by bank holding companies if their actions constitute unsafe
or unsound practices. The Federal Reserve Board has issued a policy statement on
the payment of cash dividends by bank holding companies, which expresses the
Federal Reserve Board's view that a bank holding company experiencing earnings
weaknesses should not pay cash dividends that exceed its net income or that
could only be funded in ways that would weaken the bank holding company's
financial health, such as by borrowing. Furthermore, the OCC also has authority
to prohibit the payment of dividends by a national bank when it determines such
payment to be an unsafe and unsound banking practice.
CAPITAL ADEQUACY
The Company is subject to risk-based capital guidelines that measure
capital relative to risk-weighted assets and off-balance sheet financial
instruments. Capital guidelines issued by the Federal Reserve Board require bank
holding companies to have a minimum total risk-based capital ratio of 8%, with
at least half of total capital in the form of Tier 1 capital.
SouthTrust exceeded these guidelines on December 31, 1996, with a Tier 1
capital ratio of 7.33% and a total risk-based capital ratio of 11.79%.
In addition, a leverage ratio is used in connection with the risk-based
capital standards. The minimum leverage ratio under the standard is 4% for the
highest-rated bank holding companies not under significant expansion programs.
On December 31, 1996, SouthTrust's leverage ratio was 6.21%, down 14 basis
points from the 1995 level of 6.35%.
THE FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT
In December 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA") became law. FDICIA substantially revised the depository
institution regulatory and funding provisions of the Federal Deposit Insurance
Act and made revisions to several other federal banking statutes.
Among other things, FDICIA requires the federal banking regulators to take
prompt corrective action in respect of depository institutions that do not meet
minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." A depository institution is
well capitalized if it significantly exceeds the minimum level required by
regulation for each relevant capital measure, adequately capitalized if it meets
each such measure, undercapitalized if it fails to meet any such measure,
significantly undercapitalized if it is significantly below such measure and the
critically undercapitalized level occurs where tangible equity is less than 2%
of total tangible assets or less than 65% of the minimum leverage ratio to be
prescribed by regulation (except to the extent that 2% would be higher than such
65% level). A depository institution may be 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.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions also became subject
to restrictions on borrowing from the Federal Reserve System, effective December
19, 1993. In addition, undercapitalized depository institutions are subject to
growth limitations and are required to submit capital restoration plans. A
depository institution's holding company must guarantee the capital plan, up to
an amount equal to the lesser of 5% of the depository institution's assets at
the time it becomes undercapitalized or the amount of the capital deficiency
when the institution fails to comply with the plan. The federal banking agencies
may not accept a capital plan without determining, among other things, that the
plan is based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital. If a depository institution fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including ordered to sell sufficient
voting stock to become adequately capitalized, requirements to
3
<PAGE> 5
reduce total assets and cessation of receipt of deposits from correspondent
banks. Critically undercapitalized depository institutions are subject to
appointment of a receiver or conservator.
Banking legislation was enacted September 30, 1996 to eliminate the premium
differential between SAIF-insured institutions and BIF-insured institutions. The
FDIC Board of Directors met October 8, 1996 and approved a rule that, except for
the possible impact of certain exemptions for de novo and "weak" institutions,
established the special assessment necessary to recapitalize the SAIF at 65.7
basis points of SAIF assessable deposits held by affected institutions as of
March 31, 1995. The legislation provides that all SAIF member institutions pay a
special one-time assessment to recapitalize the SAIF, which in the aggregate is
sufficient to bring the reserve ratio in the SAIF to 1.25% of insured deposits.
The legislation also provides for the merger of the BIF and the SAIF, with such
merger being conditioned upon the prior elimination of the thrift charter.
Based upon its level of SAIF deposits as of March 31, 1995, the Company
paid and expensed approximately $14.0 million in the year ended December 31,
1996.
THE RIEGLE-NEAL INTERSTATE BANKING AND BRANCHING EFFICIENCY ACT
In September 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking Act") became law. The Interstate
Banking Act has two major provisions regarding the merger, acquisition and
operation of banks across state lines. First, it provides that effective
September 29, 1995, adequately capitalized and managed bank holding companies
will be permitted to acquire banks in any state. State laws prohibiting
interstate banking or discriminating against out-of-state banks will be
preempted as of the effective date. States cannot enact laws opting out of this
provision; however, states may adopt a minimum age restriction requiring that
target banks located within the state be in existence for a period of years, up
to a maximum of five years, before such bank may be subject to the Interstate
Banking Act. The Interstate Banking Act established deposit caps which prohibit
acquisitions that would result in the acquirer controlling 30% or more of the
deposits of insured banks and thrifts held in the state in which the acquisition
or merger is occurring or in any state in which the target maintains a branch or
10% or more of the deposits nationwide. State-level deposit caps are not
preempted as long as they do not discriminate against out-of-state acquirers,
and the federal deposit caps apply only to initial entry acquisitions.
In addition to the foregoing, the Interstate Banking Act provided that as
of June 1, 1997, adequately capitalized and managed banks will be able to engage
in interstate branching by merging banks in different states. However, unlike
the interstate banking provision, states may opt out of the application of this
provision by enacting specific legislation before June 1, 1997. If a state does
opt out, banks will be required to comply with the such state's provisions with
respect to branching across state lines. Pursuant to this provision, the Company
is planning to merge all of its subsidiary banks from all states into one bank
after the legislation takes effect.
COMPETITION
The commercial banking business is highly competitive and SouthTrust's
subsidiary banks compete actively with national and state banks for deposits,
loans and trust accounts, and with savings and loan associations and credit
unions for deposits and loans. In addition, SouthTrust's subsidiary banks
compete with other financial institutions, including securities brokers and
dealers, personal loan companies, insurance companies, finance companies,
leasing companies and certain governmental agencies, all of which actively
engage in marketing various types of loans, deposit accounts and other services.
At December 31, 1996, of the bank holding companies headquartered in
Alabama, SouthTrust was the largest in terms of assets, equity capital, and net
income. In other geographic areas, the company's market share is significantly
smaller than it's competitor's.
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DEPOSIT INSURANCE
The Subsidiary Banks are subject to deposit insurance assessments from both
the FDIC and the Savings Association Insurance Fund (SAIF). On September 30,
1996, legislation was enacted that reduced the assessment rate on SAIF insured
deposits to 6.44 basis points from the previous rate of 23 basis points. This
legislation, which became effective on October 1, 1996, also included a special
one time assessment on SAIF insured deposits that, for SouthTrust, amounted to
approximately $14.0 million, reducing after tax earnings by $8.6 million. Also,
the rate charged on Bank Insurance Fund (BIF) insured deposits will increase to
1.29 basis points through 1999 from its previous rate of zero. At the level of
insured deposits outstanding at the date of the enacted legislation, the Company
estimated that it would realize approximately $4.2 million in annual savings as
compared to the rates in effect prior to recent legislation.
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER OF THE
COMPANY
NAME AND AGE POSITIONS HELD WITH THE COMPANY SINCE
- ------------ ------------------------------- --------------
<S> <C> <C>
Wallace D. Malone, Jr. (60)............. Chairman, President and Chief Executive 1972
Officer
Frederick W. Murray, Jr. (58)........... Executive Vice President 1980
James W. Rainer, Jr. (54)............... Executive Vice President 1982
William R. Cranford (51)................ Executive Vice President 1992(1)
Aubrey D. Barnard (60).................. Secretary, Treasurer and Controller 1968
Julian Banton (56)...................... Chairman, President and 1982
Chief Executive Officer
SouthTrust Bank of Alabama, N.A.
J. Michael Battle (52).................. Executive Vice President 1992(2)
SouthTrust Bank of Alabama, N.A.
Fred C. Crum (52)....................... Executive Vice President 1986
SouthTrust Bank of Alabama, N.A.
R. Glenn Eubanks (48)................... Executive Vice President 1990
SouthTrust Bank of Alabama, N.A.
William C. Patterson (54)............... Executive Vice President 1979
SouthTrust Bank of Alabama, N.A.
William E. Pearson (47)................. Executive Vice President 1991
SouthTrust Bank of Alabama, N.A.
C. Perry Relfe (54)..................... Executive Vice President 1981
SouthTrust Bank of Alabama, N.A.
E. Frank Schmidt (55)................... Executive Vice President 1995(3)
SouthTrust Bank of Alabama, N.A.
Richard S. White, Jr. (62).............. Executive Vice President 1997(4)
SouthTrust Bank of Alabama, N.A.
Thomas H. Coley (54).................... Chairman and Chief Executive Officer 1989
SouthTrust Bank of Georgia, N.A.
</TABLE>
- ---------------
(1) Mr. Cranford was elected Executive Vice President in December 1992. For the
five years prior to December 1992 Mr. Cranford served as Chairman and Chief
Executive Officer of SouthTrust Bank of Etowah County, N.A.
(2) Mr. Battle was elected Executive Vice President in 1992. From July 1990 to
January 1992, Mr. Battle worked for Pacific Southwest Bank, F.S.B., serving
as President from September 1991 to January 1992, and Executive Vice
President before September 1991. From March 1989 to July 1990, Mr. Battle
was Chief Executive Officer of 7 bank subsidiaries of First Interstate
Bank -- Texas.
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(3) Mr. Schmidt was elected to Executive Vice President effective January 1995.
Prior to that time Mr. Schmidt held the position of Chairman and Chief
Executive Officer of SouthTrust Bank of Mobile.
(4) Mr. White was elected Executive Vice President in February 1997. Prior to
that time Mr. White served as an Executive Vice President at Cole Taylor
Bank from January 1995 to February 1997. Before that time he was a Senior
Executive at Premier Bank from 1988 through 1994.
Officers of the Company are re-elected annually at the Board of Directors
meeting immediately following the annual stockholders' meeting held the third
Wednesday in April of each year.
There is no family relationship between any of the above named officers.
ITEM 2 PROPERTIES
The Company's subsidiary banks and companies occupy various offices
throughout Alabama, Florida, Tennessee, Georgia, North Carolina, South Carolina,
and Mississippi. Most of these are owned. Leased properties constitute primarily
land and buildings under long-term leases in which subsidiary banks maintain
offices.
ITEM 3 LEGAL PROCEEDINGS
Certain of the Company's subsidiaries are defendants in various legal
proceedings arising in the normal course of business. These claims relate to the
lending and investment advisory services provided by the Company and include
alleged compensatory and punitive damages.
In addition, subsidiaries of the Company have been named as defendants in
suits that allege fraudulent, deceptive or collusive practices in connection
with certain financing activities. These suits are typical of complaints that
have been filed in recent years challenging financial transactions between
plaintiffs and various financial institutions. The complaints in such cases
frequently seek punitive damages in transactions involving fairly small amounts
of actual damages, and in recent years, have resulted in large punitive damage
awards to plaintiffs.
Although it is not possible to determine, with any certainty, the potential
exposure related to punitive damages in connection with these suits, Management,
based upon consultation with legal counsel, believes that the ultimate
resolution of these proceedings will not have a material adverse effect on the
Company's financial statements.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER
None
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PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
SouthTrust Corporation common stock is traded on the NASDAQ stock market
under the symbol SOTR. The following table details certain common stock data for
the last five years.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Market price range:
High........................................... $36.125 $27.250 $22.125 $22.125 $18.125
Low............................................ 25.250 18.000 17.000 16.625 14.125
Market value at year end......................... 34.875 25.625 18.000 19.000 16.833
Book value per share............................. 18.05 16.28 13.94 13.25 11.55
Price earnings ratio............................. 11.09 x 9.96 x 9.04 x 9.86 x 9.73 x
Cash dividends declared.......................... 0.88 0.80 0.68 0.60 0.52
Dividend yield at year end....................... 2.52 % 3.12 % 3.78 % 3.16 % 3.09 %
Dividend payout ratio............................ 32.74 33.74 31.45 30.70 31.29
Shares outstanding (in thousands):
Average........................................ 94,769 84,401 80,628 77,772 68,948
End of the year................................ 96,139 87,904 81,426 79,401 74,477
</TABLE>
Quarterly high and low sale prices of and cash dividends declared on
SouthTrust common stock are included in table 13, included on page 27 of this
report.
As of February 28, 1997, the company had approximately 14,800 shareholders
of record.
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ITEM 6 SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Earnings Summary:
Interest income............... $ 1,804,220 $ 1,484,623 $ 1,108,612 $ 927,551 $ 828,080
Interest expense.............. 938,194 791,423 501,067 397,743 382,930
----------- ----------- ----------- ----------- -----------
Gross interest margin......... 866,026 693,200 607,545 529,808 445,150
Provision for loan losses..... 90,027 61,286 44,984 45,032 43,305
----------- ----------- ----------- ----------- -----------
Net interest margin........... 775,999 631,914 562,561 484,776 401,845
Non-interest income (excluding
securities transactions)... 253,400 208,471 184,448 174,099 136,049
Securities transactions....... 1,409 193 330 603 634
Non-interest expense.......... 643,298 536,534 485,999 434,951 373,636
----------- ----------- ----------- ----------- -----------
Income before taxes........... 387,510 304,044 261,340 224,527 164,892
Income taxes.................. 132,807 105,039 88,338 73,992 50,646
----------- ----------- ----------- ----------- -----------
Net income.................... $ 254,703 $ 199,005 $ 173,002 $ 150,535 $ 114,246
=========== =========== =========== =========== ===========
Per common share:
Net income.................... $2.69 $2.36 $2.15 $1.94 $1.66
Cash dividends declared....... 0.88 0.80 0.68 0.60 0.52
Ending balances:
Assets........................ $26,223,193 $20,787,024 $17,632,059 $14,707,964 $12,714,397
Deposits...................... 17,305,493 14,575,077 12,801,239 11,515,311 10,082,241
Loans, net of unearned
income..................... 19,331,132 14,655,162 12,121,907 9,448,319 7,546,619
Long-term debt................ 983,243 535,431 388,829 324,136 237,493
Shareholders' equity.......... 1,734,892 1,430,870 1,135,268 1,051,766 860,352
Common shares (thousands)..... 96,139 87,904 81,426 79,401 74,477
Average balances:
Assets........................ 23,283,988 18,983,869 15,934,917 13,653,047 11,028,174
Deposits...................... 15,878,025 13,612,151 11,902,013 10,772,638 8,996,060
Loans, net of unearned
income..................... 16,885,469 13,326,127 10,606,579 8,421,996 6,466,689
Earning assets................ 21,774,828 17,616,243 14,733,733 12,576,173 10,090,074
Shareholders' equity.......... 1,599,615 1,260,719 1,091,133 950,434 729,649
Primary shares (thousands).... 94,769 84,401 80,628 77,772 68,948
Selected ratios:
Return on average total
assets..................... 1.09% 1.05% 1.09% 1.10% 1.04.%
Return on average
shareholders' equity....... 15.92 15.79 15.86 15.84 15.66
Average equity to average
assets..................... 6.87 6.64 6.85 6.96 6.62
Non-interest expense as a
percent of average total
assets..................... 2.76 2.83 3.05 3.19 3.39
Efficiency ratio.............. 56.86 58.57 60.15 60.28 62.19
</TABLE>
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ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
EARNINGS SUMMARY
THREE YEARS ENDED DECEMBER 31, 1996
SouthTrust Corporation ("SouthTrust") reported net income of $254.7 million
or $2.69 per share for the year ended December 31, 1996, compared to net income
of $199.0 million or $2.36 per share for the year ended December 31, 1995. Net
income in 1994 was $173.0 million or $2.15 per share.
The increase in net income in 1996 over 1995 was primarily attributable to
the 24% growth in average earning assets. This increase was partially the result
of the change in the taxable equivalent net interest margin, which increased to
4.03% in 1996 from 4.01% in 1995.
Net earnings in 1996 resulted in a return on average assets of 1.09%
compared to 1.05% during 1995, and a return on average stockholders' equity of
15.92% compared to 15.79% during 1995.
NET INTEREST INCOME
Net interest income is affected by changes in the volume of and rates
earned/paid on interest-earning assets and interest-bearing liabilities and is
the major component of net income of the Company. For purposes of this
discussion, income that is either exempt from federal income taxes or taxed at a
preferential rate has been adjusted to fully taxable equivalent amounts, using a
statutory federal tax rate of 35%.
Net interest income increased 24% to $877.9 million from $707.5 million in
1995 and $623.6 million in 1994. The taxable equivalent net interest margins for
the three years ended December 31, 1996 were 4.03%, 4.01% and 4.23%,
respectively. The net interest spread between interest-earning assets and
interest-bearing liabilities increased 4 basis points to 3.40% in 1996 from
3.36% in 1995. The net interest spread in 1994 was 3.70%. The net interest
spread is affected by competitive pressures, Federal Reserve Bank (the "Fed")
monetary policies and the composition of interest-earning assets and
interest-bearing liabilities.
Interest income increased $317.2 million to $1,816.1 million from $1,498.9
million in 1995. Interest income in 1994 totalled $1,124.7 million. The increase
in interest income during 1996 was attributable to an increase in the volume of
average interest-earning assets of 24% to $21.8 billion. Partially offsetting
this increase was a decrease in the yield on average interest-earning assets of
16 basis points to 8.33% in 1996 from 8.49% in 1995. An increase in the volume
of interest-earning assets of 20% was also responsible for the $374.3 million
increase in interest income from 1994 to 1995. The effect of the increased
earning assets was augmented by an increase in the yield on those assets of 87
basis points from 7.62% in 1994 to 8.49% in 1995.
The mix of interest-earning assets shifted during 1996. Increased loan
demand and in-market acquisitions of banks pushed loans to approximately 78% of
average earning assets in 1996 compared to approximately 76% in 1995. The
increase of loans relative to other interest-earning assets had the effect of
increasing total interest income due to the higher yields on loans as compared
to other interest-earning assets. During 1996, average loans increased 27% to
$16.9 billion from $13.3 billion in 1995. The effect on interest income from
this loan growth was somewhat offset by a decrease in the average yield on loans
to 8.80% during 1996 from 9.09% during 1995. Interest income on loans increased
23% to $1,486.7 million in 1996.
Total securities, including investment securities and securities available
for sale, which together accounted for approximately 23% of average earning
assets in 1995, fell to approximately 21% of average earning assets during 1996.
Their average yield of 6.74% in 1996 compared to 6.71% in 1995. Interest income
on securities increased $35.1 million to $306.6 million. The net increase in
securities income was primarily the result of the change in the volume of
securities which increased 12% from 1995 to $4.5 billion. Although securities
volume did increase during the year, strong loan demand in 1996 enabled the
Company to invest a higher portion of earning assets in loans, which generally
offer a higher yield than securities.
9
<PAGE> 11
Short-term investments were approximately 2% of average earning assets in
1996 and produced an average yield of 6.66%. During 1995 short-term investments
accounted for approximately 1% of average earning assets and produced an average
yield of 6.41%. Interest income on short-term investments increased $7.2 million
to $22.8 million in 1996.
Interest expense increased $146.8 million or 19% to $938.2 million in 1996.
This compares to an increase of $290.4 million or 58% to $791.4 million in 1995
from $501.1 million in 1994. The average rate paid on interest-bearing
liabilities declined in 1996, decreasing 20 basis points to 4.93% from 5.13% in
1995, due to decreasing market interest rates as a result of the Fed's monetary
policy. The average rate paid on interest-bearing liabilities in 1994 was 3.92%.
Additionally, the increase in interest expense was attributable to continued
growth in the average volume of interest-bearing liabilities. During 1996, the
volume of average interest-bearing liabilities increased $3.6 billion or 23% to
$19.0 billion. Approximately $950.8 million of this increase was due to
acquisitions. This compared to 1995 growth in volume of $2.6 billion or 21%.
AVERAGE BALANCES AND INTEREST RATES, INTEREST YIELD/RATES
ON FULLY TAXABLE EQUIVALENT BASIS (TABLE 1)
The following table details average balances of interest-earning assets and
interest-bearing liabilities, the fully taxable equivalent amount of interest
earned/paid thereon, and the fully taxable equivalent yield/rate for the three
years ended December 31, 1996. The loan averages include loans on which the
accrual of interest has been discontinued. Income on certain non-accrual loans
is recognized on a cash basis.
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------- ------------------------------- -------------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
--------- ---------- ------ --------- ---------- ------ --------- ---------- ------
(AVERAGE IN MILLIONS; INTEREST IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, net of unearned
income.................... $16,885.4 $1,486,719 8.80% $13,326.1 $1,211,927 9.09% $10,606.6 $ 871,831 8.22%
Investment securities:
Taxable................... 1,491.8 101,862 6.83 1,558.8 100,831 6.47 1,224.4 75,721 6.18
Non-taxable............... 230.1 24,499 10.64 279.5 30,839 11.03 340.6 35,743 10.49
Securities available for
sale...................... 2,825.5 180,261 6.33* 2,209.4 139,813 6.22* 2,339.6 130,772 5.55*
Short-term investments...... 342.0 22,760 6.66 242.4 15,528 6.41 222.5 10,583 4.76
--------- ---------- ----- --------- ---------- ----- --------- ---------- -----
Total
interest-earning
assets............ 21,774.8 1,816,101 8.33* 17,616.2 1,498,938 8.49* 14,733.7 1,124,650 7.62*
Allowance for loan losses... (239.3) (187.1) (154.1)
Other assets................ 1,748.5 1,554.8 1,355.3
--------- --------- ---------
Total assets........ $23,284.0 $18,983.9 $15,934.9
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings deposits............ $ 1,015.3 $ 27,519 2.71% $ 806.9 $ 21,520 2.67% $ 779.8 $ 18,903 2.42%
Interest-bearing demand
deposits.................. 567.8 22,256 3.92 1,556.7 41,437 2.66 1,467.5 31,122 2.12
Time deposits............... 12,024.4 594,838 4.95 9,225.3 501,107 5.43 7,805.5 327,618 4.20
Short-term borrowings....... 3,636.7 194,159 5.34 2,995.9 174,330 5.82 2,259.9 98,189 4.34
Federal Home Loan Bank
advances.................. 1,088.3 57,387 5.27 351.1 20,511 5.84 104.0 4,628 4.45
Long-term debt.............. 696.6 42,035 6.03 486.0 32,518 6.69 359.2 20,607 5.74
--------- ---------- ----- --------- ---------- ----- --------- ---------- -----
Total
interest-bearing
liabilities....... 19,029.1 938,194 4.93 15,421.9 791,423 5.13 12,775.9 501,067 3.92
Demand deposits,
non-interest bearing...... 2,270.5 2,023.3 1,849.2
Other liabilities........... 384.8 277.9 218.6
--------- --------- ---------
Total liabilities... 21,684.4 17,723.1 14,843.7
Stockholders' equity........ 1,599.6 1,260.8 1,091.2
--------- --------- ---------
Total liabilities
and stockholders'
equity............ $23,284.0 $18,983.9 $15,934.9
========= ---------- ========= ---------- ========= ----------
Net interest income......... $ 877,907 $ 707,515 $ 623,583
========== ========== ==========
Net interest margin......... 4.03%* 4.01%* 4.23%*
Net interest spread......... 3.40* 3.36* 3.70*
</TABLE>
- ---------------
* Yields were calculated using average amortized cost of securities available
for sale.
10
<PAGE> 12
TAXABLE EQUIVALENT ADJUSTMENT ANALYSIS
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------- ------------------------------------- ----------
TAXABLE INTEREST TAXABLE INTEREST
INTEREST EQUIVALENT INCOME INTEREST EQUIVALENT INCOME INTEREST
INCOME ADJUSTMENTS (FTE) INCOME ADJUSTMENTS (FTE) INCOME
---------- ----------- ---------- ---------- ----------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Loans................ $1,483,706 $ 3,013 $1,486,719 $1,208,209 $ 3,718 $1,211,927 $ 868,461
Investment
securities:
Taxable............ 101,862 0 101,862 100,831 0 100,831 75,721
Non-taxable........ 15,972 8,527 24,499 20,604 10,235 30,839 23,377
Securities available
for sale........... 179,920 341 180,261 139,451 362 139,813 130,470
Short-term
investments........ 22,760 0 22,760 15,528 0 15,528 10,583
---------- ------- ---------- ---------- ------- ---------- ----------
Totals....... $1,804,220 $11,881 $1,816,101 $1,484,623 $14,315 $1,498,938 $1,108,612
========== ======= ========== ========== ======= ========== ==========
<CAPTION>
1994
------------------------
TAXABLE INTEREST
EQUIVALENT INCOME
ADJUSTMENTS (FTE)
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Loans................ $ 3,370 $ 871,831
Investment
securities:
Taxable............ 0 75,721
Non-taxable........ 12,366 35,743
Securities available
for sale........... 302 130,772
Short-term
investments........ 0 10,583
------- ----------
Totals....... $16,038 $1,124,650
======= ==========
</TABLE>
VOLUME-RATE ANALYSIS (TABLE 2)
The following table shows a summary of the changes in interest income and
interest expense on a fully taxable equivalent basis resulting from changes in
volume and changes in rates for each category of interest-earning assets and
interest-bearing liabilities for 1996/1995 and 1995/1994. Changes not solely
attributable to a change in rate or volume are allocated proportionately
relative to the absolute change of rate and volume.
<TABLE>
<CAPTION>
1996 VERSUS 1995 1995 VERSUS 1994
INCREASE (DECREASE) DUE TO CHANGE IN: INCREASE (DECREASE) DUE TO CHANGE IN:
-------------------------------------- --------------------------------------
VOLUME YIELD/ VOLUME YIELD/
OUTSTANDING RATE TOTAL OUTSTANDING RATE TOTAL
------------ --------- --------- ------------ --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest income on:
Loans.................................... $314,489 $(39,696) $274,793 $240,349 $ 99,746 $340,095
Investment securities
Taxable................................ 35,279 6,199 41,478 12,267 21,886 34,153
Non-taxable............................ (4,325) (2,015) (6,340) (6,671) 1,767 (4,904)
Short-term investments................... 6,604 628 7,232 1,011 3,933 4,944
-------- -------- -------- -------- -------- --------
Total interest income.............. 352,047 (34,884) 317,163 246,956 127,332 374,288
Interest expense on:
Interest-bearing deposits................ 95,975 (15,426) 80,549 63,519 122,902 186,421
Short-term borrowings.................... 35,066 (15,238) 19,828 37,290 38,851 76,141
Federal Home Loan Bank advances.......... 39,057 (2,181) 36,876 14,040 1,842 15,882
Long-term debt........................... 12,961 (3,443) 9,518 8,090 3,822 11,912
-------- -------- -------- -------- -------- --------
Total interest expense............. 183,059 (36,288) 146,771 122,939 167,417 290,356
-------- -------- -------- -------- -------- --------
Net interest income................ $168,988 $ 1,404 $170,392 $124,017 $(40,085) $ 83,932
======== ======== ======== ======== ======== ========
</TABLE>
PROVISION FOR LOAN LOSSES
The provision for loan losses in 1996 was $90.0 million, compared to $61.3
million in 1995 and $45.0 million in 1994. Table 8, Allowance for Loan Losses,
summarizes information concerning the allowance for loan losses for each of the
five years in the period ended December 31, 1996.
The increase in the provision for loan losses during 1996 was in response
to the overall growth in the loan portfolio, and to a lesser extent, the
increased level of non-performing loans and potential problem loans. During 1996
net charge-offs remained relatively low in comparison to historical averages and
totaled $47.7 million, or .28% of average loans; an increase of $18.2 million
from $29.5 million or .22% of average loans in 1995. Net charge-offs during 1994
were $19.8 million or .19% of average loans. At December 31, 1996, total
non-performing loans increased to $84.9 million, and consisted of loans on
non-accrual status of $82.8 million and restructured loans of $2.1 million.
Total non-performing loans at December 31, 1995 and 1994 were $76.0 million and
$52.9 million, respectively. For 1996, total non-performing loans consisted of
construction loans of
11
<PAGE> 13
$4.3 million, 1-4 family residential mortgage loans of $16.7 million, commercial
real estate mortgage loans of $11.4 million, commercial, financial and
agricultural loans of $46.1 million and loans to individuals of $6.4 million.
Accruing loans 90 days or more past due increased $4.1 million to $40.4 million
in 1996 from $36.3 million in 1995. Accruing loans 90 days or more past due were
$16.6 million in 1994. The increase in loans 90 days or more past due and
accruing at December 31, 1996 includes a mixture of types of loans. Management
believes that the majority of these loans are past due for reasons that are
likely curable by the borrowers and should result in the loans returning to
current status rather than the loans being placed on non-accrual status or being
restructured. Management considers portfolio growth and mix, the volume of
non-performing loans, potential problem loans and delinquencies, as well as
current economic conditions in determining the provision for loan losses.
NON-INTEREST INCOME
Total non-interest income increased $46.1 million or 22% to $254.8 million
in 1996. Other fee income accounted for the largest portion of the increase in
non-interest income, increasing $7.1 million or 14% to $59.6 million. Other fee
income in 1996 included Bank Card fees of $22.7 million, investment fees of
$12.2 million, international department fees of $8.5 million and other fee
income of $16.2 million.
Service charges on deposit accounts increased $15.9 million or 17% to
$109.2 million. This increase is attributable to an increased number of deposit
accounts and increases in certain service charge rates.
Income from mortgage banking operations, including servicing fees,
increased $10.4 million or 33% to $42.1 million. During 1996, mortgage
origination fees were approximately $22.2 million, a 63% increase from $13.6
million in 1995. Mortgage origination fees are highly sensitive to interest
rates on mortgage loans and other economic conditions as well as consumer
outlook. The increases in originations during 1996 reflect the reduction in
mortgage interest rates in 1996 relative to 1995. Most mortgage origination fees
are realized during the period the loans are originated since the majority of
such loans are sold to third-party investors. Loan servicing income increased
$1.8 million to $19.9 million during 1996, as total mortgage loans serviced
increased to $6.0 billion on approximately 82,000 loans in 1996 from $4.8
billion on 68,500 loans in 1995.
Trust fees increased $3.0 million or 16% to $21.9 million. Securities gains
were $1.4 million in 1996 and $0.2 million in 1995. Other non-interest income
increased $8.5 million or 70% to $20.6 million. Included in this increase was
$7.1 million in gains on sales of loans.
For the year ended December 31, 1995, total non-interest income increased
$23.9 million or 13% over the 1994 level of $184.8 million, primarily as a
result of increases in service charges on deposit accounts of $7.0 million and
increased income from mortgage banking operations, which increased $3.9 million
due to higher levels of loan originations in 1995 than in 1994. Other than the
gains on the sales of the loans in 1996, there were no significant non-recurring
non-interest income items recorded during 1996, 1995 or 1994.
12
<PAGE> 14
NON-INTEREST INCOME (TABLE 3)
The following table presents an analysis of non-interest income for 1996,
1995 and 1994 together with the amount and percent change from the prior year
for 1996 and 1995:
<TABLE>
<CAPTION>
CHANGES FROM PRIOR YEAR
--------------------------------
YEAR ENDED DECEMBER 31, 1996 1995
------------------------ -------------- --------------
1996 1995 1994 AMOUNT % AMOUNT %
------ ------ ------ ------ ----- ------ -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts.... $109.2 $ 93.3 $ 86.3 $15.9 17.1% $ 7.0 8.1%
Mortgage banking operations............ 42.1 31.7 27.8 10.4 32.8 3.9 14.0
Trust fees............................. 21.9 18.9 16.9 3.0 17.0 2.0 12.3
Securities gains....................... 1.4 0.2 0.3 1.2 628.8 (0.1) (41.5)
Bank card fees......................... 22.7 18.7 15.8 4.0 20.0 2.9 18.0
Investment fees........................ 12.2 9.3 10.0 2.9 30.9 (0.7) (7.1)
International fees..................... 8.5 8.2 6.1 0.3 3.2 2.1 35.5
Safe deposit fees...................... 3.6 3.6 3.2 0.0 0.8 0.4 11.0
Collection fees........................ 4.9 3.9 2.7 1.0 26.1 1.2 43.5
Business services...................... 4.2 4.7 1.9 (0.5) (10.4) 2.8 158.1
Other fees............................. 3.5 4.1 3.6 (0.6) (14.4) 0.5 12.0
Other.................................. 20.6 12.1 10.2 8.5 70.7 1.9 18.6
------ ------ ------ ----- ----- ----- -----
Totals..................... $254.8 $208.7 $184.8 $46.1 22.1% $23.9 12.9%
====== ====== ====== ===== ===== ===== =====
</TABLE>
NON-INTEREST EXPENSE
Total non-interest expense increased $106.8 million or 20% to $643.3
million from $536.5 million in 1995. The 1996 ratio of non-interest expense to
average total assets of 2.76% compared favorably to the 1995 level of 2.83%.
This result is attributable to Management's commitment to continuously improve
the Company's overall operating efficiency. The operating efficiency ratio
improved to 56.86% in 1996 from 58.57% in 1995.
Salaries and employee benefits accounted for the largest portion of
non-interest expense and the largest portion of the increase during all three
years. During 1996, salaries and employee benefits were $331.6 million, an
increase of $50.1 million or 18% over 1995. This was primarily reflective of the
increase in the number of full-time equivalent employees by 17% to approximately
9,100 employees at December 31, 1996. These additional employees were added in
response to the growth experienced by the Company during the year, including the
acquisition of other financial institutions. Net occupancy expense increased
$6.0 million or 14% to $49.4 million as the number of branches increased 14% to
511 at December 31, 1996 from 447 at December 31, 1995. Equipment expense
increased $6.3 million or 21% to $37.3 million in 1996 as a result of an
increase of banking offices and personnel.
During 1996, deposit insurance expense increased $3.6 million or 21% to
$20.5 million as a result of a one-time assessment by the Savings Association
Insurance Fund (SAIF). This legislation, which was passed on September 30, 1996,
required the assessment to be calculated based on deposits insured by the SAIF.
The assessment amounted to approximately $14.0 million and reduced after-tax
earnings by $8.6 million. As a part of the SAIF legislation, the deposit
insurance rate on SAIF insured deposits will decrease from 23 basis points to
6.44 basis points beginning October 1, 1996. Also, the insurance rate charged on
Bank Insurance Fund (BIF) insured deposits will increase to 1.29 basis points
through 1999. At the level of insured deposits outstanding at the time of the
enacted legislation, September 30, 1996, of $16.4 billion, of which $13.1
billion were BIF insured and $3.3 billion were SAIF insured, this would result
in a combined decrease of approximately $4.2 million annually as compared to
rates in effect prior to the recently enacted legislation.
All other non-interest expense items increased $40.8 million or 25% to
$204.5 million for 1996, primarily as a result of growth in the general level of
business throughout the Company. From 1994 to 1995, non-interest expense
increased $50.5 million or 10% primarily as a result of increased salaries and
benefits, and other operating expenses, reflecting the growth experienced by the
Company during 1995. Other than the SAIF assessment in 1996, there were no other
significant non-recurring non-interest expense items recorded during any of the
three years in the period ended December 31, 1996.
13
<PAGE> 15
NON-INTEREST EXPENSE (TABLE 4)
The following table presents an analysis of non-interest expense for 1996,
1995 and 1994 together with the amount and percent change from the prior year
for 1996 and 1995:
<TABLE>
<CAPTION>
CHANGE FROM PRIOR YEAR
-------------------------------
YEAR ENDED DECEMBER 31, 1996 1995
------------------------ ------------- --------------
1996 1995 1994 AMOUNT % AMOUNT %
------ ------ ------ ------ ---- ------ -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and employee benefits........ $331.6 $281.5 $257.6 $ 50.1 17.8% $23.9 9.3%
Net occupancy expense................. 49.4 43.4 40.3 6.0 13.7 3.1 7.8
Equipment expense..................... 37.3 31.0 27.9 6.3 20.7 3.1 10.9
Professional services................. 45.6 34.8 27.2 10.8 31.1 7.6 27.7
Deposit insurance..................... 20.5 16.9 25.7 3.6 21.1 (8.8) (34.4)
Communications........................ 30.8 25.2 22.1 5.6 22.4 3.1 13.7
Business development.................. 23.2 21.2 16.1 2.0 9.3 5.1 31.9
Supplies.............................. 17.2 12.0 10.2 5.2 43.1 1.8 17.6
Other insurance....................... 15.2 11.8 10.2 3.4 28.6 1.6 15.6
Data processing....................... 7.7 6.3 6.9 1.4 21.9 (0.6) (8.2)
Other................................. 64.8 52.4 41.8 12.4 23.2 10.6 25.4
------ ------ ------ ------ ---- ----- -----
Totals...................... $643.3 $536.5 $486.0 $106.8 19.9% $50.5 10.4%
====== ====== ====== ====== ==== ===== =====
</TABLE>
INCOME TAXES
Income tax expense increased $27.8 million or 26% to $132.8 million for the
year ended December 31, 1996, resulting in an effective tax rate of 34% compared
to 35% and 34% in 1995 and 1994, respectively. The statutory federal tax rate
was 35% during all three years.
A reconciliation of the differences between income tax expense and income
taxes calculated by applying the applicable statutory federal tax rates is
provided in Note M of the Consolidated Financial Statements. The largest
component of this difference during all three years is attributable to
tax-exempt interest income.
BALANCE SHEET SUMMARY
Total assets at December 31, 1996, were $26.2 billion, representing an
increase of 26% over the 1995 level of $20.8 billion. Of the total asset growth
in 1996, 68% was internally generated. Average total assets increased 23% to
$23.3 billion during 1996 from $19.0 billion in 1995. As of December 31, 1996,
the five-year compound growth rate in total assets was 21%.
During 1996, the Company consummated ten business combinations in which the
Company acquired additional assets of $1,744.9 million, including loans of
$1,358.5 million and deposits assumed of $1,417.9 million. During 1995, the
Company acquired $713.0 million in assets, including $181.5 million in loans and
deposits assumed of $674.9 million. Note B, "Business Combinations," of the
Consolidated Financial Statements, included elsewhere in this report, provides
additional information regarding business combinations. In the normal course of
business, the Company regularly investigates acquisition and expansion
opportunities, and expects this process will continue.
Average earning assets during 1996 were $21.8 billion up $4.2 billion or
24% from 1995. Average earning assets were 93.5% and 92.8% of average total
assets in 1996 and 1995, respectively.
Average interest-bearing liabilities were $19.0 billion in 1996 and $15.4
billion in 1995, and accounted for 81.7% and 81.2% of average liabilities and
stockholders' equity in 1996 and 1995, respectively.
Table 1, Average Balances and Interest Rates, includes average balances of
assets and liabilities and stockholders' equity, and the rates earned/paid on
major categories of earning assets and interest-bearing liabilities for each of
the three years in the period ended December 31, 1996.
14
<PAGE> 16
LOANS
Loans comprise the major portion of earning assets of the Company,
accounting for 78% and 76% of average earning assets in 1996 and 1995,
respectively. At December 31, 1996, loans, net of unearned income, totaled
$19,331.1 million, up 32% from the December 31, 1995 level of $14,655.1 million.
Of the total increase of $4,676.0 million from 1995 to 1996, $1,358.5 million
represent loans obtained in acquisitions. This represents an internal growth
rate for loans of 23% for 1996.
Demand for all types of loans was strong during 1996. The largest portion
of the increase in total loans was attributable to an increase in commercial,
financial and agricultural loans, which increased $881.6 million, $79.5 million
of which was acquired, to $6,847.5 million or 35.2% of total loans at December
31, 1996.
Commercial real estate mortgage loans increased $744.2 million or 33% to
$3,008.9 million or 15.5% of total loans at December 31, 1996. Of the $744.2
million increase, $250.5 million was acquired and the remaining $493.7 million
was internally generated growth. Commercial real estate loans represent the
Company's largest credit concentration.
Real estate construction loans increased $684.8 million or 55% to $1,930.6
million or 9.9% of total loans at December 31, 1996, from $1,245.8 million or
8.4% of total loans at December 31, 1995. This increase included $69.9 million
of acquired real estate construction loans. At December 31, 1996 construction
loans included approximately $741.3 million in loans on residential properties,
loans on income producing commercial real estate totaling $767.8 million, and
$421.5 million of loans secured by owner occupied real estate.
Residential real estate mortgage loans increased $1,466.2 million or 46% to
$4,687.5 million or 24.0% of total loans in 1996 compared to $3,221.3 million or
21.8% of loans in 1995. Approximately 56% of the total increase in these loans
during 1996 was obtained through acquisitions.
Loans to individuals at December 31, 1996 were $2,992.1 million, up $932.8
million from December 31, 1995. Loans to individuals accounted for 15.4% and
14.0% of total loans at year-end 1996 and 1995, respectively.
Unearned income at December 31, 1996 was $135.5 million, up $33.6 million
from the December 31, 1995 level of $101.9 million.
LOAN PORTFOLIO (TABLE 5)
The following table presents loans by type and percent of total at the end
of each of the last five years.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
----------------- ----------------- ----------------- ---------------- ----------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %
--------- ----- --------- ----- --------- ----- -------- ----- -------- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural................ $ 6,847.5 35.2% $ 5,965.9 40.4% $ 5,058.4 41.4% $4,094.4 43.0% $3,475.9 45.6%
Real estate construction...... 1,930.6 9.9 1,245.8 8.4 675.2 5.5 448.6 4.7 332.5 4.4
Commercial real estate
mortgage.................... 3,008.9 15.5 2,264.7 15.4 1,776.1 14.6 1,314.2 13.8 928.7 12.2
Residential real estate
mortgage.................... 4,687.5 24.0 3,221.3 21.8 2,960.0 24.2 2,322.1 24.4 1,736.6 22.8
Loans to individuals.......... 2,992.1 15.4 2,059.3 14.0 1,745.9 14.3 1,347.7 14.1 1,151.2 15.0
--------- ----- --------- ----- --------- ----- -------- ----- -------- -----
19,466.6 100.0 14,757.0 100.0 12,215.6 100.0 9,527.0 100.0 7,624.9 100.0
===== ===== ===== ===== =====
Unearned income............. (135.5) (101.9) (93.7) (78.7) (78.3)
--------- --------- --------- -------- --------
Loans, net of unearned
income...................... 19,331.1 14,655.1 12,121.9 9,448.3 7,546.6
Allowance for loan losses... (269.9) (206.6) (171.7) (135.2) (103.8)
--------- --------- --------- -------- --------
Net Loans............. $19,061.2 $14,448.5 $11,950.2 $9,313.1 $7,442.8
========= ========= ========= ======== ========
</TABLE>
15
<PAGE> 17
As of December 31, 1996, contractual maturities of loans in the indicated
classifications and sensitivity to changes in interest rates on certain of these
loans were as follows:
<TABLE>
<CAPTION>
LOANS MATURING AFTER
ONE YEAR
MATURITIES --------------------------
---------------------------------------------- PREDETERMINED ADJUSTABLE
ONE YEAR ONE TO OVER INTEREST INTEREST
OR LESS FIVE YEARS FIVE YEARS TOTALS RATE RATE
-------- ---------- ---------- --------- ------------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Real estate -- construction.................... $1,058.3 $ 579.8 $ 292.5 $ 1,930.6 $ 342.1 $ 530.2
Real estate -- commercial mortgage............. 1,252.3 1,141.7 614.9 3,008.9 928.2 828.4
Real estate -- residential mortgage............ 1,075.6 579.2 3,032.7 4,687.5 1,500.9 2,111.0
Loans to individuals........................... 314.6 1,892.4 785.1 2,992.1 2,635.1 42.4
Lease financing................................ 50.2 8.9 55.1 114.2 64.0 0.0
Commercial, financial, agricultural and
other........................................ 3,116.4 2,403.6 1,213.3 6,733.3 1,840.2 1,776.7
-------- -------- -------- --------- -------- --------
Total loans............................ $6,867.4 $6,605.6 $5,993.6 $19,466.6 $7,310.5 $5,288.7
======== ======== ======== ========= ======== ========
Unearned income................................ 135.5
---------
Loans net of unearned income................... $19,331.1
=========
</TABLE>
NON-PERFORMING ASSETS
Non-performing assets at December 31, 1996 were $139.0 million or .72% of
net loans, plus other real estate owned ("OREO"). This represents an increase of
$16.9 million from the December 31, 1995 level of $122.1 million or .83% of net
loans, plus OREO. At December 31, 1996, total non-performing assets included
$82.8 million in loans on non-accrual status, $2.1 million in restructured
loans, $43.9 million in OREO, and $10.2 million of other repossessed assets.
During 1996, the total OREO obtained through acquisitions was $5.1 million.
Total non-performing loans, consisting of loans on non-accrual status and
restructured loans, included real estate construction loans of $4.3 million,
commercial real estate mortgage loans of $11.4 million, residential real estate
mortgage loans of $16.7 million, commercial, financial and agricultural loans of
$46.1 million, and loans to individuals of $6.4 million. Combined non-performing
real estate loans and properties taken in foreclosure of real estate loans
totaled $64.0 million at December 31, 1996. This represented 46% of total
non-performing assets as compared to $75.7 million or 62% at December 31, 1995.
Loans 90 days past due and accruing were $40.4 million at December 31,
1996, compared to $36.3 million at December 31, 1995.
In the opinion of Management, the increases in non-performing assets and
loans 90 days or more past due and accruing during 1996 is not the result of
trends in economic conditions that are likely to affect overall credit quality
or loan charge-offs over the foreseeable future.
In addition to loans on non-performing status at December 31, 1996, the
Company had loans of approximately $35.1 million for which Management has
serious doubts as to the ability of the borrowers to comply with the present
repayment terms, which may result in the loan repayment terms being
restructured, and/or the loans going on non-performing status. Such loans are
continuously reviewed by Management, and their classification may be changed if
conditions warrant. At December 31, 1995, potential problem loans totaled $32.2
million.
16
<PAGE> 18
NON-PERFORMING ASSETS (TABLE 6)
The following table summarizes the Company's non-performing assets and
accruing loans 90 days or more past due as of December 31 for the last five
years.
<TABLE>
<CAPTION>
1996 1995 1994 1993
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
(IN MILLIONS)
Non-accrual loans................... $ 82.8 $ 73.1 $ 50.8 $ 58.6
Restructured loans.................. 2.1 2.9 2.1 8.8
------- ------- ------- -------
Total non-performing
loans................... 84.9 76.0 52.9 67.4
Other real estate owned............. 54.1 46.1 49.8 45.7
------- ------- ------- -------
Total non-performing
assets.................. 139.0 122.1 102.7 113.1
Accruing loans 90 days or more past
due............................... $ 40.4 $ 36.3 $ 16.6 $ 13.2
------- ------- ------- -------
Total non-performing
assets and accruing
loans 90 days or more
past due................ $ 179.4 $ 158.4 $ 119.3 $ 126.3
======= ======= ======= =======
Provision for loan losses........... $ 90.0 $ 61.3 $ 45.0 $ 45.0
Net charge-offs..................... 47.7 29.5 19.8 24.6
Ratios:
For the Period Ended:
Net charge-offs as a % of average
net loans...................... 0.28% 0.22% 0.19% 0.29%
Provision for loan losses as a %
of net charge-offs............. 188.89 207.95 227.46 182.95
Period End:
Allowance as a % of net loans..... 1.40 1.41 1.42 1.43
Allowance as a % of non-performing
loans.......................... 317.57 271.88 324.55 200.70
Allowance as a % of non-performing
assets......................... 194.06 169.27 167.17 119.59
Allowance as a % of non-performing
assets and accruing loans 90
days or more past due.......... 150.39 130.43 143.89 107.06
Non-performing loans as a % of net
loans.......................... 0.44 0.52 0.44 0.71
Non-performing assets as a % of
loans net of unearned income
plus OREO...................... 0.72 0.83 0.84 1.19
Non-performing assets and accruing
loans 90 days or more past due
as a % of loans net of unearned
income plus OREO............... 0.93 1.08 0.98 1.33
<CAPTION>
1992
---------------
<S> <C>
Non-accrual loans................... $ 71.6
Restructured loans.................. 0.7
-------
Total non-performing
loans................... 72.3
Other real estate owned............. 56.5
-------
Total non-performing
assets.................. 128.8
Accruing loans 90 days or more past
due............................... $ 11.1
-------
Total non-performing
assets and accruing
loans 90 days or more
past due................ $ 139.9
=======
Provision for loan losses........... $ 43.3
Net charge-offs..................... 31.5
Ratios:
For the Period Ended:
Net charge-offs as a % of average
net loans...................... 0.49%
Provision for loan losses as a %
of net charge-offs............. 137.31
Period End:
Allowance as a % of net loans..... 1.38
Allowance as a % of non-performing
loans.......................... 143.35
Allowance as a % of non-performing
assets......................... 80.54
Allowance as a % of non-performing
assets and accruing loans 90
days or more past due.......... 74.14
Non-performing loans as a % of net
loans.......................... 0.96
Non-performing assets as a % of
loans net of unearned income
plus OREO...................... 1.69
Non-performing assets and accruing
loans 90 days or more past due
as a % of loans net of unearned
income plus OREO............... 1.84
</TABLE>
17
<PAGE> 19
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses increased $63.3 million to $269.9 million at
December 31, 1996. As a percentage of net loans, the Company maintained the
allowance for loan losses at 1.40%, virtually consistent with the previous year
allowance of $206.6 million or 1.41% of net loans. At year-end 1996, the
allowance for loan losses was 318% of total non-performing loans compared to
272% at the end of 1995. During 1996, the provision for loan losses added $90.0
million to the allowance for loan losses and net charge-offs reduced the
allowance for loan losses by $47.6 million. Existing allowances for loan losses
of acquired institutions totaled $20.9 million and also augmented the total
allowance. The allowance for loan losses is established to cover losses inherent
in the portfolio. As asset quality and economic conditions change, the allowance
for loan losses will be increased or decreased accordingly.
Net charge-offs during 1996 totaled $47.6 million or .28% of average net
loans, an increase of $18.1 million from $29.5 million or .22% of net loans
during 1995. During 1996, total loans charged-off were $61.3 million and total
recoveries of previously charged-off loans were $13.7 million. Net charge-offs
by major category during 1996 were commercial, financial and agricultural loans
of $24.1 million, commercial real estate mortgage loans of $0.9 million, loans
to individuals of $21.3 million, and residential real estate mortgage loans of
$1.3 million. In maintaining the allowance level, Management has taken into
consideration present economic trends and conditions, portfolio growth, the
level of risk in the portfolio, the level of potential problem loans, and
delinquencies. While the allowance is established to cover losses inherent in
the portfolio as a whole, the Company allocates its allowance to the individual
loan classifications to assist in the analysis of the allowance. This allocation
is presented in Table 7. Management considers the allowance for loan losses to
be adequate.
18
<PAGE> 20
ALLOWANCE FOR LOAN LOSSES (TABLE 7)
The following table summarizes information concerning the allowance for
loan losses:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Loans outstanding at year end, net of
unearned income....................... $19,331.1 $14,655.1 $12,121.9 $9,448.3 $7,546.6
========= ========= ========= ======== ========
Average loans outstanding, net of
unearned income....................... $16,885.4 $13,326.1 $10,606.6 $8,422.0 $6,466.7
========= ========= ========= ======== ========
(In Thousands)
Balance beginning of year............... $ 206,638 $ 171,692 $ 135,233 $103,770 $ 80,393
Loans charged-off:
Commercial, financial and
agricultural....................... 27,600 10,753 9,773 14,830 15,902
Real estate construction.............. 38 160 582 657 603
Commercial real estate mortgage....... 2,234 4,543 2,256 884 1,212
Residential real estate mortgage...... 1,598 2,351 1,581 2,545 1,402
Loans to individuals.................. 29,871 23,328 15,594 17,704 20,943
--------- --------- --------- -------- --------
Total charge-offs............. 61,341 41,135 29,786 36,620 40,062
--------- --------- --------- -------- --------
Recoveries of loans previously
charged-off:
Commercial, financial and
agricultural....................... 3,502 3,176 2,617 4,317 3,025
Real estate construction.............. 39 10 70 260 22
Commercial real estate mortgage....... 1,326 2,584 517 278 92
Residential real estate mortgage...... 270 332 446 367 235
Loans to individuals.................. 8,544 5,561 6,360 6,783 5,150
--------- --------- --------- -------- --------
Total recoveries.............. 13,681 11,663 10,010 12,005 8,524
--------- --------- --------- -------- --------
Net loans charged-off................... 47,660 29,472 19,776 24,615 31,538
Additions to allowance charged to
expense............................... 90,027 61,286 44,984 45,032 43,305
Subsidiaries allowance at date of
purchase.............................. 20,858 3,132 11,251 11,046 11,610
--------- --------- --------- -------- --------
Allowance for loan losses, end of year:
Commercial, financial and
agricultural....................... 90,258 67,206 58,186 56,515 32,281
Real estate construction.............. 24,844 15,883 11,405 4,786 12,062
Commercial real estate mortgage....... 26,925 24,874 44,065 24,551 7,664
Residential real estate mortgage...... 47,057 24,071 20,010 14,032 12,972
Loans to individuals.................. 50,667 45,200 26,240 15,565 29,071
Unallocated portion of reserve........ 30,112 29,404 11,786 19,784 9,720
--------- --------- --------- -------- --------
Balance end of year........... $ 269,863 $ 206,638 $ 171,692 $135,233 $103,770
========= ========= ========= ======== ========
Ratios:
End-of-year allowance to net loans
outstanding........................ 1.40% 1.41% 1.42% 1.43% 1.38%
Net loans charged-off to net average
loans.............................. 0.28 0.22 0.19 0.29 0.49
Provision for loan losses to net
charge-offs........................ 188.89 207.95 227.46 182.95 137.31
Provision for loan losses to net
average loans...................... 0.53 0.46 0.42 0.53 0.67
End-of-year allowance to net average
loans.............................. 1.60 1.55 1.62 1.61 1.60
</TABLE>
See Note A to Consolidated Financial Statements for discussion of the
determination of the provision for loan losses.
19
<PAGE> 21
INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE
At December 31, 1996, total securities were $4,815.6 million. Investment
securities amounted to $1,956.6 million and securities classified as available
for sale amounted to $2,859.0 million.
Investment securities increased 23% from the year-end 1995 level to
$1,956.6 million, and included U.S. Treasury securities of $5.8 million, U.S.
Government agency securities of $1,237.7 million, Collateralized mortgage
obligations ("CMO's") and mortgage backed securities of $444.3 million, State,
obligations of states and political subdivisions of $211.7 million and other
securities of $57.1 million.
Securities available for sale included U.S. Treasury securities of $301.9
million, U.S. Government agency securities of $834.5 million, CMO's and mortgage
backed securities of $1,525.1 million, obligations of states and political
subdivisions $5.3 million and other securities of $192.2 million.
At December 31, 1996, the Company's investment portfolio included
approximately 1,969.4 million in CMO's and other mortgage backed securities.
Approximately 68% of this amount were securities with floating interest rates,
and 32% were fixed interest rate securities. CMO's and mortgage backed
securities present some degree of risk that the mortgages collateralizing the
securities can prepay, thereby affecting the yield of the securities and their
carrying amounts. Such an occurrence is most likely in periods of low interest
rates when many borrowers refinance their mortgages, creating prepayments on
their existing mortgages.
The Company's investment in structured notes and derivative investment
securities is nominal and would not have a significant effect on the Company's
net interest margin.
At December 31, 1996, the fair value of investment securities exceeded the
amortized cost by $22.5 million, compared to an unrealized gain of $33.5 million
at December 31, 1995. For securities available for sale, the amortized cost
exceeded the fair value by $12.0 million, resulting in an after-tax adjustment
to stockholders' equity of $7.5 million. This unrealized loss, which management
believes is temporary, compares to a net of tax unrealized loss of $9.6 million
at December 31, 1995. The increase in fair values relative to amortized cost is
attributable to decreasing interest rates in the bond market from the prevailing
rates in the previous year.
At December 31, 1996, the gross unrealized gains for the entire securities
portfolio were $46.8 million and gross unrealized losses were $36.3 million.
During 1996, proceeds from sales of securities available for sale were $345.2
million and resulted in gross gains of $2.0 million and gross losses of $0.6
million. The gross unrealized gains and losses in the securities portfolio are
not expected to have a material impact on future income, liquidity or capital
resource trends.
20
<PAGE> 22
INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE (TABLE 8)
The following table provides an analysis of amortized cost and estimated
fair value of investment securities and securities available for sale as well as
their maturities and year-end yields at December 31, 1996.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------------------------------------
INVESTMENT SECURITIES SECURITIES AVAILABLE FOR SALE
------------------------------- -------------------------------
AMORTIZED FAIR YEAR-END AMORTIZED FAIR YEAR-END
COST VALUE YIELD COST VALUE YIELD
--------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
U.S. Treasury:
Within one year............................. $ 5.0 $ 5.0 5.27% $ 149.9 $ 150.4 6.29%
One to five years........................... 0.8 0.7 4.98 151.5 151.5 5.97
Five to 10 years............................ 0.0 0.0 0.00 0.0 0.0 0.00
More than 10 years.......................... 0.0 0.0 0.00 0.0 0.0 0.00
-------- -------- ----- -------- -------- -----
Totals............................... 5.8 5.7 5.23 301.4 301.9 6.13
-------- -------- ----- -------- -------- -----
U.S. Government agencies:
Within one year............................. 2.8 2.8 5.01 25.0 25.1 6.70
One to five years........................... 459.6 460.3 6.10 664.3 663.8 6.43
Five to 10 years............................ 774.8 774.7 6.91 146.0 145.6 6.86
More than 10 years.......................... 0.5 0.4 3.57 0.0 0.0 0.00
-------- -------- ----- -------- -------- -----
Totals............................... 1,237.7 1,238.2 6.60 835.3 834.5 6.51
-------- -------- ----- -------- -------- -----
Collateralized Mortgage Obligations and
Mortgage backed securities:
Within one year............................. 3.7 3.8 8.51 8.2 8.1 6.21
One to five years........................... 118.9 121.6 7.57 217.9 218.4 6.65
Five to 10 years............................ 175.3 179.0 7.55 442.5 436.9 6.26
More than 10 years.......................... 146.4 149.9 7.66 869.7 861.7 6.24
-------- -------- ----- -------- -------- -----
Totals............................... 444.3 454.3 7.60 1,538.3 1,525.1 6.30
-------- -------- ----- -------- -------- -----
States and political subdivisions:
Within one year............................. 37.9 38.7 11.35 1.2 1.2 9.90
One to five years........................... 66.1 68.9 10.65 2.4 2.5 8.89
Five to 10 years............................ 45.2 46.9 10.32 1.5 1.5 8.24
More than 10 years.......................... 62.5 67.7 11.29 0.1 0.1 --
-------- -------- ----- -------- -------- -----
Totals............................... 211.7 222.2 10.89 5.2 5.3 7.64
-------- -------- ----- -------- -------- -----
Other securities:
Within one year............................. 25.9 25.9 5.55 16.2 18.9 7.99
One to five years........................... 25.4 25.5 5.89 0.8 0.8 5.15
Five to 10 years............................ 5.8 7.3 11.12 0.5 0.6 11.30
More than 10 years.......................... 0.0 0.0 0.00 173.3 171.9 7.16
-------- -------- ----- -------- -------- -----
Totals............................... 57.1 58.7 6.31 190.8 192.2 7.24
-------- -------- ----- -------- -------- -----
Total:
Within one year............................. 75.3 76.2 8.58 200.5 203.7 6.52
One to five years........................... 670.8 677.0 6.80 1,036.9 1,037.0 6.41
Five to 10 years............................ 1,001.1 1,007.9 7.20 590.5 584.6 6.42
More than 10 years.......................... 209.4 218.0 8.73 1,043.1 1,033.7 6.39
-------- -------- ----- -------- -------- -----
Totals............................... $1,956.6 $1,979.1 7.28% $2,871.0 $2,859.0 6.41%
======== ======== ===== ======== ======== =====
</TABLE>
SHORT-TERM INVESTMENTS
At December 31, 1996, total short-term investments were $225.5 million; a
decrease of $130.6 million from the $356.1 million level at year-end 1995. At
year-end 1996, short-term investments included $12.0 million in federal funds
sold, $0.2 million in securities purchased under agreements to resell, $4.2
million in interest-bearing deposits with other banks, and assets held for sale
of $209.1 million. Assets held for sale consisted of $191.3 million in mortgage
loans in the process of being securitized and sold to third party investors, and
the remainder are investment securities held for trading purposes which
primarily represented inventory at the Company's brokerage subsidiary. Mortgage
loans held for sale are carried at the lower of cost or fair value. Trading
account securities are carried at fair value.
21
<PAGE> 23
The Company's Asset/Liability Management Committee monitors current and
future expected economic conditions, as well as the Company's liquidity
position, in determining desired balances of short-term investments and
alternative uses of such funds.
FUNDING
The Company's funding sources can be divided into four broad categories:
deposits, short-term borrowings, Federal Home Loan Bank advances and long-term
borrowings.
Total borrowed funds at December 31, 1996 were $24.1 billion, up 27% from
the 1995 level of $19.0 billion.
Deposits are the Company's primary source of funding. At December 31, 1996,
total deposits were $17,305.5 million, up $2,730.4 million or 19% from the 1995
level of $14,575.1 million. During 1996, the Company acquired deposits of
financial institutions totaling approximately $1,417.9 million.
The largest portion of the increase in total deposits was an increase in
consumer time and savings deposits of $2,044.7 million or 20% to $12,373.9
million. Other time deposits, consisting of time deposits of $100,000 and over,
increased $377.3 million or 19% to $2,351.2 million. Non-interest-bearing demand
deposits increased $308.4 million or 14% to $2,580.4 million.
Non-interest-bearing demand deposits accounted for 14.9% and 15.6% of total
deposits at December 31, 1996 and 1995, respectively.
Core deposits are defined as demand deposits and time deposits less than
$100,000. At December 31, 1996, core deposits totaled $14,954.3 million or 86.4%
of total deposits, compared to $12,601.2 million or 86.5% of total deposits at
December 31, 1995.
DEPOSITS (TABLE 9)
The average daily balance of deposits and rates paid on such deposits are
summarized for the periods indicated in the following table.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------
1996 1995 1994
---------------- ---------------- ----------------
AMOUNT RATE AMOUNT RATE AMOUNT RATE
--------- ---- --------- ---- --------- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits:
Non-interest-bearing....................... $ 2,270.5 $ 2,023.3 $ 1,849.2
Interest-bearing........................... 567.8 3.92% 1,556.7 2.66% 1,467.5 2.12%
Savings deposits............................. 1,015.3 2.71 806.9 2.67 779.8 2.42
Time deposits................................ 12,024.4 4.95 9,225.3 5.43 7,805.5 4.20
--------- --------- ---------
Totals............................. $15,878.0 $13,612.2 $11,902.0
========= ========= =========
</TABLE>
Maturities of time certificates of deposit and other time deposits of
$100,000 or more outstanding at December 31, 1996, are summarized as follows:
<TABLE>
<CAPTION>
TIME OTHER
CERTIFICATES TIME
OF DEPOSIT DEPOSITS TOTAL
------------ -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Within three months...................................... $1,034.5 $ 52.1 $1,086.6
After three through six months........................... 337.8 88.8 426.6
After six through 12 months.............................. 298.4 0 298.4
After 12 months.......................................... 539.6 0 539.6
-------- ------ --------
Totals................................................. $2,210.3 $140.9 $2,351.2
======== ====== ========
</TABLE>
Short-term borrowings consist of federal funds purchased, securities sold
under agreements to repurchase, and miscellaneous other borrowed funds.
Short-term borrowings have become an increasingly used funding source by
the Company. Access to alternative short-term funding sources allows the Company
to meet its liquidity needs without relying solely on increasing deposits on a
short-term basis, which could have the effect of increasing deposit rates on a
22
<PAGE> 24
substantial portion of the deposit base to obtain an incremental level of
funding. Total short-term borrowings increased $863.6 million, or 27%, to
$4,071.0 million at December 31, 1996 from $3,207.4 million at December 31,
1995. At December 31, 1996, total short-term borrowings included federal funds
purchased of $2,262.8 million, securities sold under agreements to repurchase of
$943.1 million, and other borrowed funds of $865.1 million, including $690.0
million in short-term bank notes payable, $20.2 million in short-term Federal
Home Loan Bank advances, and other short-term borrowings of $154.9 million.
At year-end 1996, total short-term borrowings were 16.9% of total funding
compared to 16.9% at December 31, 1995.
Note I, to the consolidated financial statements includes additional
information relating to outstanding balances and rates of short-term borrowings.
The Company uses Federal Home Loan Bank (FHLB) advances as an alternative
to increasing its liability in certificates of deposits or other deposit
programs with similar maturities.
FHLB advances totaled $1,744.2 million at December 31, 1996, up $1,092.3
million from last years level of $651.9 million. Of the 1,744.2 million
outstanding at year-end 1996, $1,518.9 million have remaining maturities of less
than five years, substantially all of the remaining $225.3 million have
remaining maturities through 2006. Note I to the Consolidated Financial
Statements includes additional information relating to outstanding balances and
rates of short-term borrowings.
Long-term debt is used to provide funds to finance long-term assets, and is
an integral element of the Company's supplemental regulatory capital. Long-term
debts consists primarily of subordinated notes and debentures. Long-term debt at
December 31, 1996 totaled 983.2 million compared to $535.4 million at December
31, 1995. During 1996, the Company increased long-term borrowings by $450.1
million, including $200.0 million of subordinated notes which mature in 2008,
$250.0 million of Bank Notes which mature $150.0 million in 1998 and $100.0 in
2006, and $0.1 million of other debt that matures in 2001. Long-term debt
obtained through acquisitions totaled $1.7 million. Repayments of long-term debt
during 1996 totaled $4.0 million. Note J -- Long-term Debt, of the Consolidated
Financial Statements, included elsewhere in this report, provides details of
long-term debt issues, scheduled maturities, and other terms of the debt
agreements.
At December 31, 1996, the Company's long-term debt to equity ratio was
43.5% compared to 38.5% at December 31, 1995.
Scheduled maturities of long-term debt are not expected to have a
significant impact on the Company's liquidity. There are no plans at present to
repay any significant amounts of outstanding indebtedness prior to the scheduled
maturity.
LIQUIDITY
Liquidity refers to the ability of the Company to meet its cash-flow
requirements in the normal course of business. The Company may achieve its
desired liquidity objectives from management of assets and liabilities and
through funds provided by operations. Funds invested in short-term marketable
instruments, the continuous maturing of other earning assets, the possible sale
of securities available for sale and the ability to securitize certain types of
loans, provide sources of liquidity from the asset perspective. The liability
base provides sources of liquidity through deposits, the maturity structure of
liabilities, and the accessibility to market sources of funds.
Net cash provided through operating activities during 1996 of $321.2
million included net income of $254.7 million, adjusted for the provision for
loan losses of $90.0 million and other non-cash charges to income, primarily
depreciation of fixed assets and amortization of intangible assets. The
Consolidated Statements of Cash Flows included elsewhere in this report provide
an analysis of cash from operating, investing, and financing activities for each
of the three years in the period ended December 31, 1996.
Table 5, Loan Portfolio, included elsewhere in this report, shows scheduled
loan maturities as of December 31, 1996. Approximately 35% of total loans mature
within one year. Of the $12,599.2 million maturing after one year, $5,288.7
million or 42% had adjustable interest rates. Repayments of loans and scheduled
loan maturities represent a substantial source of liquidity.
23
<PAGE> 25
The Company has $2,859.0 million in securities designated as available for
sale. Though management has no present plans to dispose of the securities
available for sale, such securities do represent saleable assets to meet
liquidity needs. Table 8, Investment Securities and Securities Available for
Sale, included elsewhere in this report, shows the maturity distribution of the
Corporation's securities portfolio by major category. At December 31, 1996,
securities classified as investment securities included $75.3 million or 4% of
the portfolio which had maturities of one year or less, and $670.8 million or
34% that mature within one to five years. Note D of the Consolidated Financial
statements includes an analysis of the amortized cost and fair values of the
securities portfolio by contractual maturity, and an analysis of gross
unrealized gains and gross unrealized losses in the securities portfolio at
December 31, 1996 by major category. For investment securities, gross unrealized
gains at December 31, 1996 were $31.1 million and gross unrealized losses were
$8.6 million.
Core deposits, defined as total deposits less time deposits of $100,000 and
over, constitute the Company's primary source of funding. Significant growth in
core deposits, $2,353.1 million or 19% in 1996, provides a great deal of
liquidity. Table 9, Deposits, included elsewhere in the report, details average
balances of deposits by type, the weighted average rate paid by type, and a
maturity distribution of deposits of $100,000 or more.
Short-term funds secured from external sources include federal funds
purchased, securities sold under agreements to repurchase, and other borrowed
funds. Average short-term borrowings during 1996 were $3,636.7 million, and
average short-term investments were $342.0 million, resulting in an average
short-term borrowing position of $3,294.7 million in 1996.
The primary source of funds available to SouthTrust Corporation, the parent
Company, is payment of dividends from its subsidiaries. Banking laws and other
regulations limit the amount of dividends a bank subsidiary may pay without
prior regulatory approval. At December 31, 1996, $412.6 million of the net
assets of subsidiaries were available for payment as dividends without prior
regulatory approval. Substantially all other net assets were restricted as to
payments to the Parent Company.
No trends in the sources or uses of cash by the Company are expected to
have an impact on the Company's liquidity position. The Company believes that
the level of liquidity is sufficient to meet current and future liquidity
requirements.
INTEREST RATE RISK MANAGEMENT
SouthTrust's asset/liability strategies are designed to optimize net
interest income while minimizing fluctuations caused by changes in the interest
rate environment. To achieve this, the Company uses various modeling techniques
to simulate interest rate stress on interest earning assets and interest-bearing
liabilities that will reprice during the next year. Important elements of these
modeling techniques include -- the mix of floating versus fixed rate assets and
liabilities, and the scheduled, as well as expected, repricing and maturing
volumes and rates of the existing balance sheet. Table 12 presents the balance
sheet structure at December 31, 1996.
In conjunction with the Company's asset liability management strategies,
the Company utilizes interest rate swap agreements ("Swaps") to hedge certain
longer-term liabilities, converting the effective rate paid on the hedged
liabilities to a floating rate from a fixed rate. All Swaps employed by the
Company represent end-user activities designed as hedges and, accordingly,
fluctuations in the fair values of such contracts are not included in the
results of operations.
During 1996, the average notional amount of Swaps outstanding was $790.4
million; the average rate received under the contracts was 6.68% and the average
rate paid was 5.56% resulting in a reduction in interest expense of $8.9
million. During 1995, the average notional outstanding amount was $697.4 million
and the average rates received and paid were 6.60% and 6.03%, respectively and
reduced interest expense by $4.0 million.
The Company has also terminated one Swap agreement prior to the contractual
maturity. Since the Swap was designed as a hedge, the gain realized on the
termination of this contract has been deferred and is amortized to reduce
interest expense over the remaining life of the hedged liabilities. At December
31, 1996 and 1995 the remaining deferred gain related to such termination was
$0.6 million and $2.2 million, respectively. The effect of amortization of the
remaining deferred gain reduces interest expense by approximately $0.6 million
in 1997.
24
<PAGE> 26
From time to time, the Company utilizes interest rate options to hedge
mortgage loans held for sale. During 1996 the effect on net income from use of
options was insignificant. At December 31, 1996, there were no option contracts
outstanding.
The Company received a $4.6 million payment during 1996 from a Swap
counterparty in consideration of modifying the fixed rate paid on the Swap.
Recognition of this payment as a reduction of interest expense has been deferred
over the remaining life of the Swap. Interest expense was reduced by $0.1
million in 1996 and will be reduced by approximately $0.6 million in each year
through 2003 and $0.3 million in 2004.
At December 31, 1996, the contractual maturities of Swaps were as follows:
INTEREST RATE SENSITIVITY ANALYSIS (TABLE 10)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------------------------------------------------------
0-30 31-90 91-180 181-365 OVER 1 NONINTEREST
DAYS DAYS DAYS DAYS YEAR SENSITIVE TOTAL
--------- --------- --------- --------- --------- ----------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Variable-rate commercial and
real estate loans......... $ 6,013.7 $ 638.7 $ 308.7 $ 621.1 $ 744.9 $ 0.0 $ 8,327.1
Fixed-rate commercial and
real estate loans......... 443.9 320.4 467.3 715.1 5,253.9 0.0 7,200.6
Loans to individuals........ 1,115.4 172.0 258.0 516.0 1,735.2 0.0 3,796.6
--------- --------- --------- --------- --------- -------- ---------
Total Loans........ 7,573.0 1,131.1 1,034.0 1,852.2 7,734.0 0.0 19,324.3
Securities.................. 1,201.0 592.1 149.3 372.3 2,502.1 0.0 4,816.8
Other earning assets........ 104.2 127.1 0.0 0.0 0.0 0.0 231.3
--------- --------- --------- --------- --------- -------- ---------
Total earning
assets........... 8,878.2 1,850.3 1,183.3 2,224.5 10,236.1 0.0 24,372.4
Other assets................ 0.0 0.0 0.0 0.0 0.0 2,120.7 2,120.7
Less: Allowance for loan
losses.................... 0.0 0.0 0.0 0.0 0.0 (269.9) (269.9)
--------- --------- --------- --------- --------- -------- ---------
Total Assets....... $ 8,878.2 $ 1,850.3 $ 1,183.3 $ 2,224.5 $10,236.1 $1,850.8 $26,223.2
========= ========= ========= ========= ========= ======== =========
Non-interest-bearing demand
deposits.................. $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $2,580.1 $ 2,580.1
Interest-bearing demand
deposits.................. 605.4 0.0 0.0 0.0 0.0 0.0 605.4
Money market deposits....... 3,724.2 0.0 0.0 0.0 0.0 0.0 3,724.2
Savings deposits............ 1,140.4 0.0 0.0 0.0 0.0 0.0 1,140.4
Time deposits under
$100,000.................. 675.7 1,487.0 1,436.0 1,418.5 1,885.8 0.0 6,903.0
Other time deposits......... 585.0 514.9 443.0 285.9 521.6 0.0 2,350.4
--------- --------- --------- --------- --------- -------- ---------
Total deposits..... 6,730.7 2,001.9 1,879.0 1,704.4 2,407.4 2,580.1 17,303.5
Short-term borrowings....... 3,481.8 440.9 135.0 0.0 0.0 0.0 4,057.7
Federal Home Loan Bank
advances.................. 210.0 437.0 380.0 190.2 527.0 0.0 1,744.2
Long-term debt.............. 0.0 50.0 0.0 0.0 933.2 0.0 983.2
Other liabilities........... 0.0 0.0 0.0 0.0 399.7 0.0 399.7
Stockholders' equity........ 0.0 0.0 0.0 0.0 1,734.9 0.0 1,734.9
--------- --------- --------- --------- --------- -------- ---------
Total liabilities
and stockholders'
equity........... $10,422.5 $ 2,929.8 $ 2,394.0 $ 1,894.6 $ 6,002.2 $2,580.1 $26,223.2
========= ========= ========= ========= ========= ======== =========
Interest rate gap........... $(1,544.3) $(1,079.5) $(1,210.7) $ 329.9 $ 4,233.9 $ (729.3)
Effect of interest rate
swaps..................... (75.0) (470.0) (375.0) 0.0 920.0
--------- --------- --------- --------- ---------
Cumulative interest rate
gap....................... $(1,619.3) $(3,168.8) $(4,754.5) $(4,424.6) $ 729.3
========= ========= ========= ========= =========
Cumulative gap as a
percentage of earning
assets --
December 31,1996.......... (6.64)% (13.00)% (19.51)% (18.15)% 2.99%
December 31, 1995......... (6.45)% (9.68)% (10.55)% (10.17)% 3.63%
</TABLE>
Significant assumptions:
(1) Allocations to specific interest sensitivity periods are based on the
earlier of the repricing or maturity dates. These allocations have not been
adjusted for any estimated early principal payoffs with the exception of
trading and held for sale assets. Since trading and held for sale assets are
expected to be sold in the short-term, they have been classified in "0-30"
or "31-90" based on anticipated future sales.
(2) Since interest-bearing demand, money market and savings deposit accounts can
theoretically be repriced at any time, all such balances have been included
in 0-30 days. If these amounts were spread based upon expected repricing
characteristics, the cumulative gap would have been significantly reduced.
(3) Non-accrual loans are included in their respective loan categories and are
classified in the "Over 1 year" repricing period.
25
<PAGE> 27
CAPITAL
The assessment of capital adequacy is dependent on several factors
including asset quality, earning trends, liquidity, and economic conditions. The
Company continually monitors current and projected capital adequacy positions of
both the Company and its subsidiaries. Maintaining adequate capital levels is
integral to provide stability to the Company, resources to achieve the Company's
growth objectives, and to provide a return to the stockholders in the form of
dividends.
Stockholders' equity at December 31, 1996 was $1,734.9 million or 6.62% of
year-end assets compared to $1,430.9 million or 6.88% in 1995. During 1996, net
income added $254.7 million to stockholders' equity and dividends declared
totaled $82.5 million, resulting in an internal common equity generation rate of
10.8% in 1996 compared to 10.5% in 1995.
During 1996, sales of common stock through the dividend reinvestment plan,
the employee stock purchase plan, the stock option plans, and the conversion of
debentures totaling 450,106 shares added $8.6 million to equity. During 1996
shares issued in business combinations totaled 7,934,810 shares and added $125.3
million to equity. The net unrealized gain after tax on securities available for
sale was $2.1 million at December 31, 1996, compared to an unrealized net loss
of $37.3 million at December 31, 1995. Treasury stock purchases for 149,793
shares reduced equity by $4.1 million.
The annual dividend rate during 1996 was $0.88 per share, representing a
10% increase over 1995. For 1997 the indicated annual dividend rate is $1.00 per
share, marking the twenty-seventh consecutive year in which SouthTrust has
increased its dividend. The dividend pay-out ratio during 1996 was 32.3%. Item
5, Market for the Registrant's Common Equity and Related Stockholder
Information, includes a six-year history of the dividend pay-out ratio.
The Federal Reserve Board, which is the regulatory agency governing bank
holding companies, sets guidelines for determining ratios to aid in the analysis
and determination of capital levels required to support a company's operations.
Likewise, the Office of the Comptroller of the Currency and the Federal Deposit
Insurance Corporation prescribe various minimum levels of capital which must be
held by the Company's subsidiary banks. The Federal Reserve Board and each
bank's primary regulator have adopted risk-based capital guidelines that
incorporate factors weighing the relative credit risk of assets and items with
off-balance sheet exposure. The guidelines also define regulatory capital,
placing strong emphasis on the equity components of regulatory capital.
The rules require a risk-based capital ratio of 8%, at least one-half of
which must be made up of Core or Tier I capital elements. Tier I capital
generally consists of common stock, capital surplus and retained earnings less
treasury stock and goodwill. Total risk-based capital includes Tier I capital,
and supplemental capital elements which consist of certain subordinated debt and
the allowance for loan losses subject to certain limitations. The guidelines
also impose a leverage requirement, defined as the ratio of Tier I capital to
average assets subject to certain adjustments. The leverage ratio generally must
exceed 4% and is driven by evaluation and discretion of the regulators. At
December 1996, SouthTrust had a total risk-based capital ratio of 11.79%
consisting of Tier I capital elements of 7.33% and supplemental capital elements
of 4.46%, and a leverage ratio of 6.21%. The Federal Deposit Insurance
Corporation Improvement Act of 1995 provided further guidance as to capital
levels to be maintained by insured depository institutions and corresponding
supervisory treatments. Under these guidelines the capital levels at all of
SouthTrust's bank subsidiaries are considered "well capitalized," the highest of
the five supervisory groupings.
Table 11, Capital Position, presents relevant capital ratios for 1996 and
1995.
CAPITAL POSITION (TABLE 11)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1995
----- -----
<S> <C> <C>
Tier I capital ratio........................................ 7.33% 7.76%
Supplemental capital element................................ 4.46 4.45
----- -----
Total risk-based capital ratio.................... 11.79% 12.21%
===== =====
Leverage ratio.............................................. 6.21% 6.35%
===== =====
</TABLE>
26
<PAGE> 28
QUARTERLY INCOME INFORMATION (TABLE 12)
The Company's unaudited consolidated operating results for each quarter of
1996 and 1995 are summarized in the table below.
<TABLE>
<CAPTION>
1996
---------------------------------------------------------------------
THREE MONTHS ENDED
---------------------------------------------------------------------
DEC. 31 SEPT. 30 JUNE 30 MAR. 31
--------------- --------------- --------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Interest income........... $491,884 $467,583 $440,645 $404,108
Interest expense.......... 255,859 242,133 227,656 212,546
Net interest income....... 236,025 225,450 212,989 191,562
Securities gains (losses),
net..................... 1,267 86 (6) 62
Provision for loan
losses.................. 27,197 21,905 20,467 20,458
Income before income
taxes................... 106,493 94,802 97,600 88,615
Net income................ 68,418 65,721 63,123 57,441
Net income per share...... 0.71 0.68 0.66 0.64
Dividends declared per
share................... 0.22 0.22 0.22 0.22
<CAPTION>
1995
---------------------------------------------------------------------
THREE MONTHS ENDED
---------------------------------------------------------------------
DEC. 31 SEPT. 30 JUNE 30 MAR. 31
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Interest income........... $399,788 $382,821 $362,412 $339,602
Interest expense.......... 212,554 206,744 195,117 177,008
Net interest income....... 187,234 176,077 167,295 162,594
Securities gains (losses),
net..................... 31 22 45 95
Provision for loan
losses.................. 21,797 13,392 13,555 12,542
Income before income
taxes................... 82,346 77,702 72,957 71,039
Net income................ 53,589 50,547 48,029 46,840
Net income per share...... 0.61 0.60 0.58 0.57
Dividends declared per
share................... 0.20 0.20 0.20 0.20
</TABLE>
CAPITAL STOCK (TABLE 13)
SouthTrust Common Stock is traded in the over-the-counter market and quoted
on the NASDAQ national market system under the symbol SOTR. As of February 28,
1997, approximately 14,800 shareholders of record owned Company stock. The
following table summarizes the historical book value per share and dividends per
share for each quarter of the past two years. Also included are the stock market
price ranges of SouthTrust shares, as reported by NASDAQ's national market
system.
<TABLE>
<CAPTION>
STOCK MARKET
BOOK VALUE PRICE RANGE
PER SHARE AT ------------- DIVIDENDS
DIVIDENDS END OF PERIOD LOW HIGH PER SHARE
--------- ------------- ---- ----- ---------
<S> <C> <C> <C> <C>
1996
First Quarter........................................ $16.60 $25 1/4 $28 3/4 $0.22
Second Quarter....................................... 16.92 26 5/8 28 1/2 0.22
Third Quarter........................................ 17.47 26 1/2 31 7/8 0.22
Fourth Quarter....................................... 18.05 30 1/2 36 1/8 0.22
Year......................................... 18.05 25 1/4 36 1/8 0.88
1995
First Quarter........................................ $14.47 $18 $21 3/8 $0.20
Second Quarter....................................... 15.07 20 5/8 23 3/8 0.20
Third Quarter........................................ 15.83 23 27 1/4 0.20
Fourth Quarter....................................... 16.28 24 3/8 26 0.20
Year......................................... 16.28 18 27 1/4 0.80
</TABLE>
27
<PAGE> 29
SIX-YEAR CONDENSED STATEMENTS OF CONDITION (TABLE 14)
<TABLE>
<CAPTION>
GROWTH RATE
------------------
ONE FIVE-YEAR
1996 1995 1994 1993 1992 1991 YEAR COMPOUND
--------- --------- --------- --------- --------- --------- ------ ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE BALANCES:
Loans, net of unearned income....... $16,885.4 $13,326.1 $10,606.6 $ 8,422.0 $ 6,466.7 $ 5,718.0 26.71% 24.18%
Investment securities:
Taxable........................... 1,491.8 1,558.8 1,224.4 3,498.8 2,969.9 2,245.3 (4.30) (7.85)
Non-taxable....................... 230.1 279.5 340.6 376.3 402.8 434.7 (17.67) (11.95)
--------- --------- --------- --------- --------- --------- ------ ------
Total investment
securities................ 1,721.9 1,838.3 1,565.0 3,875.1 3,372.7 2,680.0 (6.33) (8.47)
Securities available for sale....... 2,825.5 2,209.4 2,339.6 0 0 0 27.89 0.00
Short-term investments:
Federal funds sold and securities
purchased under resale
agreements...................... 66.5 29.6 21.3 54.5 57.3 48.0 124.66 6.74
Interest-bearing deposits in other
banks........................... 17.5 16.8 12.6 19.4 46.3 57.9 4.17 (21.28)
Assets held for sale.............. 258.0 196.0 188.6 205.2 147.1 96.1 31.63 21.84
--------- --------- --------- --------- --------- --------- ------ ------
Total short-term
investments............... 342.0 242.4 222.5 279.1 250.7 202.0 41.09 11.11
--------- --------- --------- --------- --------- --------- ------ ------
Total earning assets........ 21,774.8 17,616.2 14,733.7 12,576.2 10,090.1 8,600.0 23.61 20.42
Allowance for loan losses........... (239.3) (187.1) (154.1) (118.1) (90.7) (75.5) 27.90 25.95
Other assets........................ 1,748.5 1,554.8 1,355.3 1,194.9 1,028.8 887.2 12.46 14.53
--------- --------- --------- --------- --------- --------- ------ ------
Total assets................ $23,284.0 $18,983.9 $15,934.9 $13,653.0 $11,028.2 $ 9,411.7 22.65% 19.86%
========= ========= ========= ========= ========= ========= ====== ======
DEPOSITS:
Interest-bearing.................. $13,607.5 $11,588.9 $10,052.8 $ 9,166.6 $ 7,703.0 $ 6,648.8 17.42% 15.40%
Other............................. 2,270.5 2,023.3 1,849.2 1,606.0 1,293.1 997.6 12.22 17.88
--------- --------- --------- --------- --------- --------- ------ ------
Total deposits.............. 15,878.0 13,612.2 11,902.0 10,772.6 8,996.1 7,646.4 16.65 15.74
Federal funds purchased and other
short-term borrowed funds......... 3,636.7 2,995.9 2,259.9 1,340.0 925.5 868.7 21.39 33.16
Federal Home Loan Bank advances..... 1,088.3 351.1 104.0 114.5 3.8 0.0 209.97 0.00
Long-term debt...................... 696.6 486.0 359.2 300.7 203.1 142.9 43.33 37.27
Other liabilities................... 384.8 277.9 218.6 174.8 170.1 161.9 38.47 18.90
Stockholders' equity................ 1,599.6 1,260.8 1,091.2 950.4 729.6 591.8 26.87 22.00
--------- --------- --------- --------- --------- --------- ------ ------
Total liabilities and
stockholders' equity...... $23,284.0 $18,983.9 $15,934.9 $13,653.0 $11,028.2 $ 9,411.7 22.65% 19.86%
========= ========= ========= ========= ========= ========= ====== ======
BALANCES AT YEAR END:
Loans, net of unearned income....... $19,331.1 $14,655.1 $12,121.9 $ 9,448.3 $ 7,546.6 $ 5,965.0 31.91% 26.51%
Investment securities:
Taxable........................... 1,744.9 1,330.9 1,364.6 921.6 3,366.2 2,681.0 31.11 (8.23)
Non-taxable....................... 211.7 254.7 307.1 356.4 390.0 423.3 (16.88) (12.94)
--------- --------- --------- --------- --------- --------- ------ ------
Total investment
securities................ 1,956.6 1,585.6 1,671.7 1,278.0 3,756.2 3,104.3 23.40 (8.82)
Securities available for sale....... 2,859.0 2,614.8 2,280.8 2,454.8 0 0 9.34 0.00
Short-term investments:
Federal funds sold and securities
purchased under resale
agreements...................... 12.2 100.3 22.6 2.0 49.1 20.5 (87.84) (9.86)
Interest-bearing deposits in other
banks........................... 4.2 18.7 13.9 47.6 50.5 38.2 (77.54) (35.70)
Assets held for sale.............. 209.1 237.1 164.6 258.5 198.8 105.3 (11.81) 14.71
--------- --------- --------- --------- --------- --------- ------ ------
Total short-term
investments............... 225.5 356.1 201.1 308.1 298.4 164.0 (36.68) 6.58
--------- --------- --------- --------- --------- --------- ------ ------
Total earning assets........ 24,372.2 19,211.6 16,275.5 13,489.2 11,601.2 9,233.3 26.86 21.42
Allowance for loan losses........... (269.9) (206.6) (171.7) (135.2) (103.8) (80.4) 30.64 27.41
Other assets........................ 2,120.9 1,782.0 1,528.3 1,354.0 1,217.0 1,005.2 19.02 16.11
--------- --------- --------- --------- --------- --------- ------ ------
Total assets................ $26,223.2 $20,787.0 $17,632.1 $14,708.0 $12,714.4 $10,158.1 26.15% 20.89%
========= ========= ========= ========= ========= ========= ====== ======
DEPOSITS:
Interest-bearing.................. $14,725.1 $12,303.1 $10,761.5 $ 9,732.5 $ 8,484.5 $ 7,171.6 19.69% 15.48%
Other............................. 2,580.4 2,272.0 2,039.7 1,782.9 1,597.8 1,105.6 13.57 18.47
--------- --------- --------- --------- --------- --------- ------ ------
Total deposits.............. 17,305.5 14,575.1 12,801.2 11,515.4 10,082.3 8,277.2 18.73 15.89
Federal funds purchased and other
short-term borrowed funds......... 4,071.0 3,207.4 2,828.0 1,456.4 1,331.1 902.9 26.93 35.15
Federal Home Loan Bank advances..... 1,744.2 651.9 251.9 145.8 20.7 0.0 167.56 0.00
Long-term debt...................... 983.2 535.4 388.8 324.2 237.5 140.2 83.64 47.63
Other liabilities................... 384.4 386.3 226.9 214.4 182.4 175.8 (0.49) 16.94
Stockholders' equity................ 1,734.9 1,430.9 1,135.3 1,051.8 860.4 662.0 21.25 21.25
--------- --------- --------- --------- --------- --------- ------ ------
Total liabilities and
stockholders' equity...... $26,223.2 $20,787.0 $17,632.1 $14,708.0 $12,714.4 $10,158.1 26.15% 20.89%
========= ========= ========= ========= ========= ========= ====== ======
</TABLE>
28
<PAGE> 30
SIX-YEAR SUMMARY OF EARNINGS (TABLE 15)
<TABLE>
<CAPTION>
GROWTH RATES
------------------
ONE FIVE-YEAR
1996 1995 1994 1993 1992 1991 YEAR COMPOUND
---------- ---------- -------- -------- -------- -------- ------ ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans........ $1,483,705 $1,208,209 $868,461 $669,495 $561,757 $581,839 22.80% 20.59%
Interest on investment securities:
Taxable......................... 101,861 100,831 75,721 217,555 221,692 193,297 1.02 (12.03)
Non-taxable..................... 15,974 20,604 23,377 26,435 30,246 33,654 (22.47) (13.85)
---------- ---------- -------- -------- -------- -------- ------ ------
Total interest on investment
securities................ 117,835 121,435 99,098 243,990 251,938 226,951 (2.96) (12.29)
Interest on securities available for
sale.............................. 179,920 139,451 130,470 0 0 0 29.02 0.00
Interest on federal funds sold and
securities purchased under resale
agreements........................ 3,582 1,743 875 1,637 2,056 2,862 105.51 4.59
Interest on time deposits in other
banks............................. 1,015 1,079 539 890 2,001 3,760 (5.93) (23.04)
Interest on assets held for sale.... 18,163 12,706 9,169 11,539 10,328 8,313 42.95 16.92
---------- ---------- -------- -------- -------- -------- ------ ------
Total interest income....... 1,804,220 1,484,623 1,108,612 927,551 828,080 823,725 21.53 16.98
INTEREST EXPENSE:
Deposits.......................... 644,613 564,064 377,643 335,708 337,878 413,880 14.28 9.27
Short-term borrowings............. 194,159 174,330 98,189 39,340 31,418 49,133 11.37 31.63
Federal Home Loan Bank advances... 57,387 20,511 4,628 5,103 173 0 179.79 0.00
Long-term debt.................... 42,035 32,518 20,607 17,592 13,461 11,440 29.27 29.73
---------- ---------- -------- -------- -------- -------- ------ ------
Total interest expense...... 938,194 791,423 501,067 397,743 382,930 474,453 18.55 14.61
---------- ---------- -------- -------- -------- -------- ------ ------
Net interest income......... 866,026 693,200 607,545 529,808 445,150 349,272 24.93 19.91
Provision for loan losses........... 90,027 61,286 44,984 45,032 43,305 38,042 46.90 18.80
---------- ---------- -------- -------- -------- -------- ------ ------
Net interest income after
provision for loan
losses.................... 775,999 631,914 562,561 484,776 401,845 311,230 22.80 20.05
NON-INTEREST INCOME:
Service charges on deposit
accounts........................ 109,213 93,276 86,304 76,716 63,894 49,379 17.09 17.21
Mortgage banking operations....... 42,096 31,712 27,760 33,771 22,794 17,427 32.74 19.29
Bank card fees.................... 22,727 18,699 15,847 12,574 9,667 4,239 21.54 39.91
Trust fees........................ 21,886 18,936 16,863 15,224 11,938 9,819 15.58 17.39
Other fee income.................. 36,845 33,758 27,466 25,075 19,526 14,592 9.14 20.35
Securities gains, net............. 1,409 193 330 603 634 680 630.05 15.69
Other............................. 20,633 12,090 10,208 10,739 8,230 12,745 70.66 10.11
---------- ---------- -------- -------- -------- -------- ------ ------
Total non-interest income... 254,809 208,664 184,778 174,702 136,683 108,881 22.11 18.54
NON-INTEREST EXPENSE:
Salaries and employee benefits.... 331,600 281,546 257,637 227,017 184,921 149,521 17.78 17.27
Net occupancy expense............. 49,361 43,423 40,273 36,775 32,254 25,273 13.67 14.33
Equipment expense................. 37,336 30,932 27,899 25,353 20,687 16,819 20.70 17.29
Other............................. 225,001 180,633 160,190 145,806 135,774 105,183 24.56 16.43
---------- ---------- -------- -------- -------- -------- ------ ------
Total non-interest
expense................... 643,298 536,534 485,999 434,951 373,636 296,796 19.90 16.73
---------- ---------- -------- -------- -------- -------- ------ ------
Income before income
taxes..................... 387,510 304,044 261,340 224,527 164,892 123,315 27.45 25.73
Income tax expense.................. 132,807 105,039 88,338 73,992 50,646 33,309 26.44 31.87
---------- ---------- -------- -------- -------- -------- ------ ------
Net income.................. $ 254,703 $ 199,005 $173,002 $150,535 $114,246 $ 90,006 27.99% 23.13%
========== ========== ======== ======== ======== ======== ====== ======
Average number of shares outstanding
(000's)........................... 94,769 84,401 80,628 77,772 68,948 63,255
Net income per share................ $ 2.69 $ 2.36 $ 2.15 $ 1.94 $ 1.66 $ 1.42
Dividends declared per share........ 0.88 0.80 0.68 0.60 0.52 0.48
</TABLE>
29
<PAGE> 31
SOUTHTRUST CORPORATION
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO SOUTHTRUST CORPORATION:
We have audited the accompanying consolidated statements of condition of
SouthTrust Corporation (a Delaware corporation) and subsidiaries as of December
31, 1996 and 1995, 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, 1996. 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
Management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the Consolidated Financial Statements referred to above
present fairly, in all material respects, the consolidated financial position of
SouthTrust Corporation and subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Birmingham, Alabama ARTHUR ANDERSEN LLP
February 7, 1997
30
<PAGE> 32
SOUTHTRUST CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 903,134 $ 773,656
Short-term investments:
Federal funds sold and securities purchased under resale
agreements............................................. 12,180 100,273
Interest-bearing deposits in other banks.................. 4,185 18,715
Assets held for sale...................................... 209,159 237,139
----------- -----------
Total short-term investments...................... 225,524 356,127
Securities available for sale............................... 2,859,012 2,614,803
Investment securities (Fair Value of $1,979,094 and
$1,619,050 in 1996 and 1995, respectively)................ 1,956,596 1,585,562
Loans....................................................... 19,466,650 14,757,093
Less --
Unearned income........................................... 135,518 101,931
Allowance for loan losses................................. 269,863 206,638
----------- -----------
Net loans......................................... 19,061,269 14,448,524
Premises and equipment, net................................. 510,043 433,527
Due from customers on acceptances........................... 26,599 13,244
Other assets................................................ 681,016 561,581
----------- -----------
Total Assets...................................... $26,223,193 $20,787,024
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Interest-bearing.......................................... $14,725,077 $12,303,089
Other..................................................... 2,580,416 2,271,988
----------- -----------
Total deposits.................................... 17,305,493 14,575,077
Federal funds purchased and securities sold under agreements
to repurchase............................................. 3,205,948 2,635,556
Other short-term borrowings................................. 865,053 571,871
Bank acceptances outstanding................................ 26,599 13,244
Other liabilities........................................... 357,806 373,094
Federal Home Loan Bank advances............................. 1,744,159 651,881
Long-term debt.............................................. 983,243 535,431
----------- -----------
Total liabilities................................. 24,488,301 19,356,154
Stockholders' equity:
Preferred Stock, par value $1.00 a share: 5,000,000 shares
authorized; issued and outstanding -- none............. 0 0
Common Stock, par value $2.50 a share: 300,000,000 shares
authorized in 1996 and 200,000,000 shares authorized in
1995; 96,783,114 shares issued in 1996 and 88,398,198
in 1995................................................ 241,958 220,996
Capital surplus........................................... 410,642 340,608
Retained earnings......................................... 1,100,170 885,129
Unrealized loss on securities available for sale, net..... (7,520) (9,635)
Treasury stock at cost (644,308 shares in 1996 and 494,515
shares in 1995)........................................ (10,358) (6,228)
----------- -----------
Total stockholders' equity........................ 1,734,892 1,430,870
----------- -----------
Total Liabilities and Stockholders' Equity........ $26,223,193 $20,787,024
=========== ===========
</TABLE>
See notes to Consolidated Financial Statements.
31
<PAGE> 33
SOUTHTRUST CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Interest Income
Interest and fees on loans................................ $1,483,705 $1,208,209 $ 868,461
Interest on investment securities:
Taxable................................................ 101,861 100,831 75,721
Non-taxable............................................ 15,974 20,604 23,377
---------- ---------- ---------
Total interest on investment securities........... 117,835 121,435 99,098
Interest on securities available for sale................. 179,920 139,451 130,470
Interest on short-term investments........................ 22,760 15,528 10,583
---------- ---------- ---------
Total interest income............................. 1,804,220 1,484,623 1,108,612
---------- ---------- ---------
Interest Expense
Interest on deposits...................................... 644,613 564,064 377,643
Interest on short-term borrowings......................... 194,159 174,330 98,189
Interest on Federal Home Loan Bank advances............... 57,387 20,511 4,628
Interest on long-term debt................................ 42,035 32,518 20,607
---------- ---------- ---------
Total interest expense............................ 938,194 791,423 501,067
---------- ---------- ---------
Net interest income......................................... 866,026 693,200 607,545
Provision for loan losses................................... 90,027 61,286 44,984
---------- ---------- ---------
Net interest income after provision for loan losses......... 775,999 631,914 562,561
Non-Interest Income
Service charges on deposit accounts....................... 109,213 93,276 86,304
Mortgage banking operations............................... 42,096 31,712 27,760
Bank card fees............................................ 22,727 18,699 15,847
Trust fees................................................ 21,886 18,936 16,863
Other fee income.......................................... 36,845 33,758 27,466
Securities gains, net..................................... 1,409 193 330
Other..................................................... 20,633 12,090 10,208
---------- ---------- ---------
Total non-interest income......................... 254,809 208,664 184,778
---------- ---------- ---------
Non-Interest Expense
Salaries and employee benefits............................ 331,600 281,546 257,637
Net occupancy expense..................................... 49,361 43,423 40,273
Equipment expense......................................... 37,336 30,932 27,899
Other..................................................... 225,001 180,633 160,190
---------- ---------- ---------
Total non-interest expense........................ 643,298 536,534 485,999
---------- ---------- ---------
Income before income taxes.................................. 387,510 304,044 261,340
Income tax expense.......................................... 132,807 105,039 88,338
---------- ---------- ---------
NET INCOME.................................................. $ 254,703 $ 199,005 $ 173,002
========== ========== =========
Average number of shares outstanding (000's)................ 94,769 84,401 80,628
Net income per share........................................ $ 2.69 $ 2.36 $ 2.15
Dividends declared per share................................ 0.88 0.80 0.68
</TABLE>
See notes to Consolidated Financial Statements.
32
<PAGE> 34
SOUTHTRUST CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
COMMON CAPITAL RETAINED GAIN/(LOSS), TREASURY
STOCK SURPLUS EARNINGS NET STOCK TOTAL
-------- -------- ---------- ------------ -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993...................... $199,339 $215,113 $ 630,240 $ 10,218 $ (3,144) $1,051,766
Net income...................................... 0 0 173,002 0 0 173,002
Dividends declared ($.68 per share)............. 0 0 (54,402) 0 0 (54,402)
Issuance of 390,381 shares of Common Stock for
stock options exercised....................... 976 1,704 0 0 0 2,680
Issuance of 155,963 shares of Common Stock under
dividend reinvestment and stock purchase
plans......................................... 390 2,635 0 0 0 3,025
Issuance of 37,244 shares of Common Stock under
employee discounted stock purchase plan....... 93 486 0 0 0 579
Issuance of 1,290,675 shares of Common Stock for
acquisitions accounted for as
pooling-of-interests.......................... 3,227 9,746 1,756 (246) 0 14,483
Issuance of 294,530 shares of Common Stock for
acquisition of subsidiaries................... 736 2,291 103 0 0 3,130
Increase in unrealized loss, net, on securities
available for sale............................ 0 0 0 (56,276) 0 (56,276)
Purchase of 143,916 shares of treasury stock.... 0 0 0 0 (2,719) (2,719)
-------- -------- ---------- -------- -------- ----------
BALANCE AT DECEMBER 31, 1994...................... 204,761 231,975 750,699 (46,304) (5,863) 1,135,268
Net income...................................... 0 0 199,005 0 0 199,005
Dividends declared ($.80 per share)............. 0 0 (67,153) 0 0 (67,153)
Issuance of 255,968 shares of Common Stock for
stock options exercised....................... 640 2,201 0 0 0 2,841
Issuance of 182,328 shares of Common Stock under
dividend reinvestment and stock purchase
plans......................................... 456 3,573 0 0 0 4,029
Issuance of 36,266 shares of Common Stock under
employee discounted stock purchase plan....... 91 509 0 0 0 600
Issuance of 86,187 shares of Common Stock for
conversion of debentures...................... 215 254 0 0 0 469
Issuance of 2,157,993 shares of Common Stock for
acquisitions accounted for as
pooling-of-interests.......................... 5,395 21,065 2,578 (644) 0 28,394
Issuance of 3,775,000 shares of Common Stock in
secondary offering............................ 9,438 81,031 0 0 0 90,469
Decrease in unrealized loss, net, on securities
available for sale............................ 0 0 0 37,313 0 37,313
Purchase of 15,619 shares of treasury stock..... 0 0 0 0 (365) (365)
-------- -------- ---------- -------- -------- ----------
BALANCE AT DECEMBER 31, 1995...................... 220,996 340,608 885,129 (9,635) (6,228) 1,430,870
Net income...................................... 0 0 254,703 0 0 254,703
Dividends declared ($.88 per share)............. 0 0 (82,546) 0 0 (82,546)
Issuance of 221,166 shares of Common Stock for
stock options exercised....................... 553 1,870 0 0 0 2,423
Issuance of 191,319 shares of Common Stock under
dividend reinvestment and stock purchase
plans......................................... 478 4,946 0 0 0 5,424
Issuance of 33,028 shares of Common Stock under
employee discounted stock purchase plan....... 83 625 0 0 0 708
Issuance of 7,627,472 shares of Common Stock for
acquisitions accounted for as
pooling-of-interests.......................... 19,069 55,710 42,884 0 0 117,663
Issuance of 307,338 shares of Common Stock for
acquisitions accounted for as purchases....... 768 6,869 0 0 0 7,637
Issuance of 4,593 shares of Common Stock for
conversion of debentures...................... 11 14 0 0 0 25
Decrease in unrealized loss, net, on securities
available for sale............................ 0 0 0 2,115 0 2,115
Purchase of 149,793 shares of treasury stock.... 0 0 0 0 (4,130) (4,130)
-------- -------- ---------- -------- -------- ----------
BALANCE AT DECEMBER 31, 1996...................... $241,958 $410,642 $1,100,170 $ (7,520) $(10,358) $1,734,892
======== ======== ========== ======== ======== ==========
</TABLE>
See notes to Consolidated Financial Statements.
33
<PAGE> 35
SOUTHTRUST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 254,703 $ 199,005 $ 173,002
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision (credit) for:
Loan losses........................................... 90,027 61,286 44,984
Depreciation of premises and equipment................ 33,058 26,965 24,438
Amortization of intangibles........................... 22,251 20,493 16,178
Amortization of security premium...................... 2,056 1,396 3,124
Accretion of security discount........................ (3,456) (5,430) (4,539)
Deferred income taxes................................. (1,391) 1,595 5,397
Net gain on assets held for sale.......................... (17,943) (6,314) (8,061)
Net securities gains...................................... (1,409) (193) (330)
Origination and purchase of loans held for sale........... (1,626,529) (1,106,881) (501,571)
Proceeds from sales of loans held for sale................ 1,665,589 1,033,481 598,719
Net decrease in trading securities........................ 6,863 7,103 4,891
Net increase in other assets.............................. (47,724) (20,615) (32,577)
Net increase (decrease) in other liabilities.............. (54,898) 155,956 9,149
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES................. 321,197 367,847 332,804
INVESTING ACTIVITIES
Proceeds from maturities of:
Investment securities................................... 971,392 731,581 238,174
Securities available for sale........................... 196,935 729,901 670,729
Proceeds from sales of:
Investment securities................................... 0 4,710 0
Securities available for sale........................... 345,233 108,621 223,723
Purchases of:
Investment securities................................... (1,149,999) (593,125) (543,173)
Securities available for sale........................... (775,205) (1,103,104) (775,635)
Premises and equipment.................................. (85,786) (88,962) (55,400)
Net (increase) decrease in:
Short-term investments.................................. 141,131 (54,691) 21,253
Loans................................................... (3,372,110) (2,376,266) (2,277,259)
Purchases of subsidiaries, net of cash acquired........... 28,165 346,926 111,155
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES..................... (3,700,244) (2,294,409) (2,386,433)
FINANCING ACTIVITIES
Proceeds from issuance of:
Common Stock............................................ 8,584 98,408 6,284
Federal Home Loan Bank advances......................... 1,313,259 466,022 150,000
Long-term debt.......................................... 450,124 150,000 100,000
Payments for:
Federal Home Loan Bank advances......................... (311,009) (66,028) (43,962)
Long-term debt.......................................... (4,029) (3,398) (30,345)
Repurchase of Common Stock.............................. (4,130) (365) (2,719)
Cash Dividends.......................................... (75,446) (69,817) (55,239)
Net increase in:
Deposits................................................ 1,312,514 1,098,961 620,684
Short-term borrowings................................... 818,658 376,002 1,351,528
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES................. 3,508,525 2,049,785 2,096,231
----------- ----------- -----------
INCREASE IN CASH AND DUE FROM BANKS....................... 129,478 123,223 42,602
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR................ 773,656 650,433 607,831
----------- ----------- -----------
CASH AND DUE FROM BANKS AT END OF YEAR...................... $ 903,134 $ 773,656 $ 650,433
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
34
<PAGE> 36
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- ACCOUNTING POLICIES
The significant accounting policies followed by SouthTrust Corporation and
its subsidiaries ("the Company") and the method of applying those policies are
summarized below:
NATURE OF OPERATIONS
The Company is a regional multi-bank holding company which operates more
than 511 banking offices with locations in Alabama, Georgia, Florida, North
Carolina, South Carolina, Tennessee and Mississippi. SouthTrust is engaged in a
full range of banking services and, through its bank-related subsidiaries, also
offers a range of other services, including; trust, mortgage banking, data
processing, leasing and investment and brokerage services.
PRESENTATION
The Consolidated Financial Statements include accounts of the Company and
its subsidiaries. All significant inter-company transactions have been
eliminated in preparing the Consolidated Financial Statements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires Management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain amounts in the 1994 and 1995 financial statements have been
reclassified to conform to the 1996 presentation. Such reclassification had no
effect on net income or total assets.
ASSETS HELD FOR SALE
Assets held for sale consist primarily of mortgage loans in the process of
being sold to third-party investors and are carried at the lower of cost or fair
value. Also included in this caption are trading securities carried at fair
value. Trading securities primarily represent the inventory of securities held
in the Company's brokerage subsidiary.
SECURITIES
The Company classifies securities as either trading, available for sale or
investment based on Management's intention at the time of purchase.
Securities classified as trading are intended to be sold in the near term.
Trading securities are carried at fair value and unrealized gains and losses are
included in earnings. Securities classified as investments are carried at
amortized cost, as the Company has the ability and positive intent to hold these
securities to maturity. All securities not considered investments or part of the
trading portfolio have been designated as available for sale and are carried at
fair value. Unrealized gains and losses on securities available for sale are
excluded from earnings and are reported net of deferred taxes as a component of
stockholders' equity. This caption includes securities that Management intends
to use as part of its asset/liability management strategy or that may be sold in
response to changes in interest rates, changes in prepayment risk, liquidity
needs, or for other purposes.
Amortization of premiums and accretion of discounts are computed under the
interest method. The adjusted cost of the specific certificate sold is used to
compute gain or loss on the sale of securities.
LOANS
Interest is credited to income using the interest method. The net amount of
non-refundable loan origination fees and direct costs associated with the
lending process, including commitment fees, are deferred and amortized to
interest income over the lives of the loans using a method that approximates the
level-yield method. If loan commitments expire, income is recognized upon
expiration of the commitment. Interest accrual on loans is generally stopped if
principal or interest payments become 90 days past due or
35
<PAGE> 37
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Management considers the collectibility of principal or interest to be in
question. When a loan is placed on non-accrual status, uncollected interest
accrued in the current year is reversed by a charge to income.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level that Management
considers to be adequate to absorb losses inherent in the loan portfolio.
Changes in the allowance can result from changes in economic events or changes
in the credit worthiness of the borrowers. The effect of these changes is
reflected when known. Management's estimation of the amount of the allowance is
based on a continuing evaluation of the loan portfolio and includes such factors
as economic conditions, analysis of individual loans, and overall portfolio
characteristics and delinquencies. This evaluation also considers the balance of
impaired loans (which are generally considered to be nonperforming loans,
excluding residential mortgages and other homogeneous loans). The amount of the
allowance is maintained through the provision for loan losses. Specific
allowances for impaired loans are based on comparisons of the recorded carrying
values of the loans to the present value of these loans' estimated cash flows at
each loan's effective interest rate, the fair value of the collateral, or the
loans' observable market prices.
LONG-LIVED ASSETS
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed principally on the
straight-line method over the estimated useful lives of the assets.
Goodwill is amortized on a straight-line basis, primarily over 20-25 years.
Total goodwill was $109,091,000 and $80,661,000 at December 31, 1996 and 1995,
respectively. Intangible assets attributable to core deposits purchased are
amortized over the estimated life of the deposit base, not to exceed 10 years,
on a straight-line basis. Core deposit intangibles totaled $74,323,000 and
$82,613,000 at December 31, 1996 and 1995, respectively.
The Company continually evaluates whether events and circumstances have
occurred that indicate that such long-lived assets have been impaired.
Measurement of any impairment of such long-lived assets is based on those
assets' fair values and is recognized through a valuation allowance with the
resulting charge recorded as a loss. There were no significant impairment losses
recorded during 1996.
Total other real estate and other repossessed assets, included in other
assets, amounted to $54,087,000 and $46,073,000 at December 31, 1996 and 1995,
respectively. Such properties are carried at the lower of the recorded
investment in the loan or fair value of the properties less estimated selling
costs. Any excess of the recorded investment over the fair value of the property
received at the time of foreclosure, less estimated selling costs, is charged to
the allowance for loan losses. Any subsequent valuation adjustments are recorded
in other non-interest expenses. Revenues and expenses associated with operating
or disposing of foreclosed properties are recorded in non-interest expense
during the period in which they are incurred.
MORTGAGE SERVICING RIGHTS
The Company records, as separate assets, rights to service mortgage loans
for others whether the loans were acquired through the purchase or origination
of the loans and measures impairment of the mortgage servicing assets based on
the fair values of groups of such assets with common risk characteristics. The
cost of mortgage servicing rights is being amortized in proportion to and over
the period of estimated net servicing income. The realization of these assets is
periodically evaluated in relation to net servicing revenues using a discounted
cash flow analysis, and is adjusted appropriately for any impairment of the
underlying assets.
At December 31, 1996 and 1995, mortgage servicing rights were approximately
$32,825,000 and $30,577,000, respectively, net of accumulated amortization of
approximately $25,881,000 and $19,580,000, respectively.
Fair value of mortgage servicing rights is estimated based on the estimated
future cash flows of the servicing rights discounted at a market rate. At
December 31, 1996 and 1995, fair value was $46,046,000 and $33,783,000,
respectively.
36
<PAGE> 38
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
Because some income and expense items are recognized in different periods
for financial reporting purposes and for purposes of computing currently payable
income taxes, a provision or credit for deferred income taxes is made for such
temporary differences at currently enacted income tax rates applicable to the
period in which realization or settlement is expected. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses interest rate swap contracts ("Swaps") to manage interest
rate risk arising from certain of the Company's fixed-rate funding sources, such
as long-term debt and certain deposit liabilities. All Swaps employed by the
Company represent end-user activities designed as hedges and therefore changes
in fair values of such derivatives are not included in the results of
operations. Interest receivable or payable from such contracts is accrued and
recognized as an adjustment to interest expense related to the specific
liability being hedged.
EARNINGS PER SHARE AND DIVIDENDS
Earnings per share are based on the weighted-average number of shares of
Common Stock outstanding, excluding treasury stock. Total dividends declared
during the year are based on shares outstanding, excluding treasury shares.
STATEMENTS OF CASH FLOWS
The Company includes cash, due from banks, and certain cash items, as cash
equivalents in preparing the Statement of Cash Flows.
The following is supplemental disclosure to the statements of cash flows
for the three years ended December 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid during the period for:
Interest............................................. $ 902,303 $722,180 $484,733
Income taxes......................................... 128,594 99,231 94,150
Non-cash transactions:
Assets acquired in business combinations............. 1,744,929 713,022 709,276
Liabilities assumed in business combinations......... 1,600,427 684,512 684,375
Loans transferred to Other Real Estate............... 30,928 11,575 34,217
Loans securitized into mortgage-backed securities.... 567,136 396,476 400,503
Financed sales of foreclosed property................ 24,320 21,673 21,733
</TABLE>
PENDING ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
SFAS No. 125 provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. This statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and is to be applied prospectively. Earlier
or retroactive application is not permitted. The Company will adopt the
provisions of the Standard on January 1, 1997. Based on the Company's current
37
<PAGE> 39
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
operating activities, management does not believe that the adoption of this
statement will have a material impact on the Company's financial condition or
results of operations.
NOTE B -- BUSINESS COMBINATIONS
During 1996 the Company completed the following acquisitions:
<TABLE>
<CAPTION>
DATE INSTITUTION ASSETS LOANS DEPOSITS LOCATIONS
- ------------ ----------- -------- -------- -------- --------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
March 15 Bankers First Corporation
("Bankers")................... $1,023.9 $ 859.1 $ 780.4 Augusta, GA
March 21 Citizens Bank of Macclenny
("Macclenny")................. 87.3 54.9 73.8 Macclenny, FL
March 29 FFE Financial Corporation
("FFE")....................... 131.7 94.8 124.2 Englewood, FL
April 10 Realty Rental Company, Inc.
("Realty").................... 3.0 0.0 0.0 Birmingham, AL
June 20 First State Bank.............. 76.0 57.0 71.8 Deltona, FL
June 28 Lake State Bank ("Lake")...... 28.8 17.8 24.8 Lutz, FL
June 28 Prime Bank.................... 83.4 60.4 76.6 Boynton Beach, FL
September 30 Heritage Bancshares, Inc
("HBI")....................... 91.5 68.4 78.9 Ft. Myers, FL
November 22 Preferred Bank................ 95.0 62.6 73.7 Palmetto, FL
December 31 FirstMerit Bank............... 124.3 83.5 113.7 Clearwater, FL
-------- -------- --------
Totals.............................. $1,744.9 $1,358.5 $1,417.9
======== ======== ========
</TABLE>
The acquisitions of FFE, First State Bank, HBI, Preferred Bank, and
FirstMerit Bank were all accounted for as purchases. Under purchase accounting,
the results of operations, subsequent to the respective acquisition dates, are
included in the Consolidated Financial Statements.
The acquisitions of Bankers, Macclenny, Realty, Prime Bank, and Lake were
accounted for as pooling-of-interests; however, the Company's previously
reported consolidated financial results have not been restated to include the
effect of the acquisitions prior to their respective acquisition dates, because
the effect is not material.
Consideration for all acquisitions during 1996 aggregated approximately
$54.7 million in cash and 7,934,810 shares of SouthTrust Corporation common
stock with a total market value at the time of issuance of approximately $217.9
million. Total intangibles recognized in these transactions were approximately
$33.3 million.
During 1995, the Company completed seven acquisitions with aggregate total
assets of $713.0 million, loans of $181.5 million, and deposits of $674.9
million.
Assuming the 1996 acquisitions of Bankers, Macclenny, FFE, Realty, First
State Bank, Lake, Prime Bank, HBI, Preferred Bank, and FirstMerit Bank and the
1995 acquisitions of Plant State Bank, CNB Capital Corporation, Southern Bank
Group, First Commercial Financial Corporation and FBC Holding Company, Inc. had
occurred on January 1, 1995, the consolidated results of operations on a pro
forma basis for 1996 and 1995 would have been approximately as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
Net interest income......................................... $891,437 $765,156
Net income.................................................. 242,200 207,788
Net income per share........................................ 2.51 2.23
</TABLE>
At December 31, 1996, the Company had entered into two separate definitive
agreements to acquire financial institutions with aggregate total assets of
approximately $308.3 million. These pending acquisitions
38
<PAGE> 40
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are subject to shareholder and various regulatory approvals among other
conditions and are expected to close in the first quarter of 1997. The aggregate
purchase price of these pending acquisitions is approximately 1.2 million
SouthTrust shares. The Company also entered into one definitive agreement after
year-end 1996. This acquisition is expected to close by mid-year 1997 and has an
approximate purchase price of $48 million in cash.
NOTE C -- REGULATORY REQUIREMENTS AND RESTRICTIONS ON CERTAIN ASSETS
The Company's banking subsidiaries are required either by law or regulation
to maintain cash reserves with the Federal Reserve Bank or in accounts with
other banks. The average amount of reserve balances for the year ended December
31, 1996, was approximately $190,198,000.
At December 31, 1996 and 1995, securities with a par value of
$2,766,343,000 and $2,499,855,000, respectively, were pledged to secure public
deposits, securities sold under agreements to repurchase, and for other
purposes.
The primary source of funds available to the Company is payment of
dividends from the Company's subsidiaries. Banking laws and other regulations
limit the amount of dividends a bank subsidiary may pay without prior regulatory
approval. At December 31, 1996, $412,570,633 of the net assets of subsidiaries
was available for payment without prior regulatory approval. Substantially all
other net assets of the Company's subsidiaries were restricted as to payments to
the Company.
The Company is subject to various regulatory capital requirements that
prescribe quantitative measures of the Company's assets, liabilities, and
certain off-balance sheet items. The Company's regulators have also imposed
qualitative guidelines for capital amounts and classifications such as risk
weightings, capital components, and other details. The quantitative measures to
ensure capital adequacy require that the Company maintain amounts and ratios, as
set forth in the schedule below, of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined) and of Tier 1 capital to
average total assets (as defined). Failure to meet minimum capital requirements
can initiate certain actions by regulators that, if undertaken, could have a
direct material effect on the Company's financial statements. Management
believes, as of December 31, 1996, that the Company meets all capital adequacy
requirements imposed by its regulators.
As of December 31, 1996, the most recent notification from the Office of
the Comptroller of the Currency categorized the Banks as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as well
capitalized the Banks must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table. There have been no
conditions or events since that notification that Management believes have
changed the institutions' category.
39
<PAGE> 41
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Actual capital amounts as well as required and well capitalized Tier 1,
total, and Tier 1 leverage ratios as of December 31 for the Company and its
significant bank subsidiaries are as follows:
<TABLE>
<CAPTION>
1996
---------------------------------------------------------------
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
------------------- ------------------ ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
---------- ----- ---------- ----- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tier 1 Capital:
SouthTrust Corporation.......... $1,550,310 7.33% $ 846,148 4.00% N/A
SouthTrust Bank of Alabama,
N.A.......................... 842,572 7.32 460,444 4.00 $ 690,666 6.00%
SouthTrust Bank of Georgia,
N.A.......................... 348,643 8.29 168,216 4.00 252,324 6.00
SouthTrust Bank of Florida,
N.A.......................... 324,419 9.13 142,154 4.00 213,232 6.00
Total Capital:
SouthTrust Corporation.......... $2,494,799 11.79% $1,692,297 8.00% N/A
SouthTrust Bank of Alabama,
N.A.......................... 1,274,283 11.07 920,888 8.00 $1,151,110 10.00%
SouthTrust Bank of Georgia,
N.A.......................... 451,324 10.73 336,432 8.00 420,540 10.00
SouthTrust Bank of Florida,
N.A.......................... 373,524 10.51 284,309 8.00 355,386 10.00
Tier 1 Leverage:
SouthTrust Corporation.......... $1,550,310 6.21% $ 999,603 4.00% N/A
SouthTrust Bank of Alabama,
N.A.......................... 842,572 6.59 511,216 4.00 $ 639,020 5.00%
SouthTrust Bank of Georgia,
N.A.......................... 348,643 6.70 208,068 4.00 260,085 5.00
SouthTrust Bank of Florida,
N.A.......................... 324,419 7.24 179,131 4.00 223,914 5.00
</TABLE>
<TABLE>
<CAPTION>
1995
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tier 1 Capital:
SouthTrust Corporation.......... $1,275,106 7.76% $ 657,305 4.00% N/A
SouthTrust Bank of Alabama,
N.A.......................... 762,782 8.16 374,090 4.00 $ 561,134 6.00%
SouthTrust Bank of Georgia,
N.A.......................... 196,199 6.80 115,459 4.00 173,189 6.00
SouthTrust Bank of Florida,
N.A.......................... 228,785 8.82 103,786 4.00 155,679 6.00
Total Capital:
SouthTrust Corporation.......... $2,005,554 12.21% $1,314,609 8.00% N/A
SouthTrust Bank of Alabama,
N.A.......................... 972,373 10.40 748,179 8.00 $ 935,224 10.00%
SouthTrust Bank of Georgia,
N.A.......................... 312,347 10.82 230,918 8.00 288,648 10.00
SouthTrust Bank of Florida,
N.A.......................... 265,854 10.25 207,573 8.00 259,466 10.00
Tier 1 Leverage:
SouthTrust Corporation.......... $1,275,106 6.35% $ 803,283 4.00% N/A
SouthTrust Bank of Alabama,
N.A.......................... 762,782 6.94 439,680 4.00 $ 549,599 5.00%
SouthTrust Bank of Georgia,
N.A.......................... 196,199 5.34 146,976 4.00 183,720 5.00
SouthTrust Bank of Florida,
N.A.......................... 228,785 7.13 128,432 4.00 160,540 5.00
</TABLE>
40
<PAGE> 42
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE
The amortized costs, gross gains and losses, and approximate fair values at
December are as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES
---------------------------------------------------------------------------------------------------------
1996 1995
--------------------------------------------------- ---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED FAIR
COST GROSS GAIN GROSS LOSS VALUE COST GROSS GAIN GROSS LOSS VALUE
---------- ----------- ----------- ---------- ---------- ----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
securities......... $ 5,779 $ 3 $ 18 $ 5,764 $ 9,580 $ 3 $ 0 $ 9,583
U.S. Government
agency
securities......... 1,237,641 4,141 3,703 $1,238,079 1,005,889 7,241 582 1,012,548
Collateralized
mortgage
obligations and
mortgage backed
securities......... 444,263 11,026 983 454,306 252,314 6,580 1,705 257,189
Obligations of states
and political
subdivisions....... 211,740 14,348 3,900 222,188 254,633 19,837 10 274,460
Other securities..... 57,173 1,584 0 58,757 63,146 2,124 0 65,270
---------- ------- ------ ---------- ---------- ------- ------- ----------
Totals....... $1,956,596 $31,102 $8,604 $1,979,094 $1,585,562 $35,785 $ 2,297 $1,619,050
========== ======= ====== ========== ========== ======= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE
---------------------------------------------------------------------------------------------------------
1996 1995
--------------------------------------------------- ---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED FAIR
COST GROSS GAIN GROSS LOSS VALUE COST GROSS GAIN GROSS LOSS VALUE
---------- ----------- ----------- ---------- ---------- ----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
securities......... $ 301,417 $ 812 $ 356 $ 301,873 $ 237,519 $ 2,912 $ 61 $ 240,370
U.S. Government
agency
securities......... 835,309 1,544 2,323 834,530 958,483 5,182 876 962,789
Collateralized
mortgage
obligations and
mortgage backed
securities......... 1,538,245 10,120 23,161 1,525,204 1,275,559 4,030 26,358 1,253,231
Obligations of states
and political
subdivisions....... 5,162 172 49 5,285 5,842 9 0 5,851
Other securities..... 190,841 3,058 1,779 192,120 153,040 3,079 3,557 152,562
---------- ------- ------- ---------- ---------- ------- ------- ----------
Totals....... $2,870,974 $15,706 $27,668 $2,859,012 $2,630,443 $15,212 $30,852 $2,614,803
========== ======= ======= ========== ========== ======= ======= ==========
</TABLE>
The amortized costs and approximate fair values of securities at December
31, 1996, by contractually scheduled maturities, are shown below:
<TABLE>
<CAPTION>
INVESTMENT AVAILABLE FOR SALE
----------------------- -----------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less............... $ 75,327 $ 76,118 $ 200,420 $ 203,651
Due after one year through five
years............................... 670,713 677,159 1,037,030 1,037,080
Due after five years through 10
years............................... 1,001,068 1,007,875 590,391 584,634
Due after 10 years.................... 209,488 217,942 1,043,133 1,033,647
---------- ---------- ---------- ----------
Totals...................... $1,956,596 $1,979,094 $2,870,974 $2,859,012
========== ========== ========== ==========
</TABLE>
Proceeds from sales of securities were $345,233,000, $113,331,000 and
$223,723,000 in 1996, 1995 and 1994, respectively. Gross gains of $1,986,000,
$267,000 and $514,000 and gross losses of $577,000, $74,000 and $184,000 were
realized on those sales.
The Company sold $4,710,000 in securities classified as Available for Sale
during 1995 and realized a gain of $53,000. The sales of such investments were
prompted by the deterioration of the issuer.
41
<PAGE> 43
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE E -- LOANS
The classifications of loans at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Commercial, financial and agricultural.................. $ 6,847,496 $ 5,965,949
Real estate construction................................ 1,930,685 1,245,828
Commercial real estate mortgage......................... 3,008,866 2,264,675
Residential real estate mortgage........................ 4,687,495 3,221,322
Loans to individuals.................................... 2,992,108 2,059,319
----------- -----------
19,466,650 14,757,093
Unearned income......................................... (135,518) (101,931)
Allowance for loan losses............................... (269,863) (206,638)
----------- -----------
Net Loans..................................... $19,061,269 $14,448,524
=========== ===========
</TABLE>
In the normal course of business, loans are made to directors and executive
officers of the Company and its subsidiaries and their associates. These loans
are made on substantially the same terms, including interest rates and
collateral, as those prevailing for comparable transactions with others. Such
loans do not involve more than normal risk of collectibility nor do they present
other unfavorable features. As of December 31, 1996 and 1995, respectively,
$122,491,000 and $160,793,000 of these loans were outstanding. During 1996,
$181,402,000 of new loans were made and repayments totaled $219,704,000.
The Company's largest credit concentration is commercial, financial and
agricultural loans, which totaled $6,847.5 million or 35.2% of total loans at
December 31, 1996 and $5,965.9 million or 40.4% of total loans at December 31,
1995. There were no significant industry concentrations within the loan
portfolio and the Company's geographic loan distribution is concentrated in the
Southeast markets served by the Company at December 31, 1996 and 1995.
In 1996, interest income of $6,195,000 and $35,000 was recorded on
non-accrual and restructured loans, respectively. Had income on these loans been
recorded under original terms, $16,048,000 of interest on non-accrual loans and
$35,000 of interest on restructured loans would have been recorded.
NOTE F -- ALLOWANCE FOR LOAN LOSSES
The following is an analysis of changes in the allowance for loan losses
for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year....................... $206,638 $171,692 $135,233
Additions:
Provision charged to operations.................. 90,027 61,286 44,984
Recoveries on loans previously charged-off....... 13,681 11,663 10,010
Loans charged off................................ (61,341) (41,135) (29,786)
Allowances of purchased subsidiaries............. 20,858 3,132 11,251
-------- -------- --------
Balance at End of Year............................. $269,863 $206,638 $171,692
======== ======== ========
</TABLE>
The recorded investment in impaired loans at December 31, 1996 was $85.0
million and at December 31, 1995 was $76.0 million, of which $23.0 million and
$29.9 million had respective specific allowance for loan loss allocations of
$21.4 million and $21.0 million, respectively. The remaining impaired loans did
not have any allowance specifically allocated because they were adequately
collateralized or written down to fair value. The average investment in these
loans for the years ended December 31, 1996 and 1995 amounted to $89.6 million
and $61.3 million, respectively.
42
<PAGE> 44
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE G -- PREMISES AND EQUIPMENT
The following is a summary of premises and equipment at December 31:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $126,897 $110,466
Buildings and improvements.................................. 348,952 291,767
Equipment................................................... 254,255 202,904
-------- --------
730,104 605,137
Less accumulated depreciation............................... 220,061 171,610
-------- --------
Totals............................................ $510,043 $433,527
======== ========
</TABLE>
NOTE H -- SHORT-TERM BORROWINGS
The following presents the federal funds purchased, securities sold under
agreements to repurchase, and other borrowed funds; the weighted-average
interest rate at December 31, 1996 and 1995; the average outstanding borrowings;
the daily weighted-average interest rate for each year; and the maximum
outstanding balance of federal funds purchased, and securities sold under
agreements to repurchase, and other borrowed funds at any month end during each
year. Such short-term borrowings are issued on normal banking terms.
<TABLE>
<CAPTION>
FEDERAL FUNDS
PURCHASED AND SECURITIES OTHER
SOLD UNDER AGREEMENTS SHORT-TERM
TO REPURCHASE BORROWINGS
------------------------ ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Year Ended December 31:
1996...................................................... $3,205.9 $ 865.1
1995...................................................... 2,635.6 571.9
Weighted-average interest rate at year end:
1996...................................................... 5.31% 5.50%
1995...................................................... 5.65 5.75
Maximum amount outstanding at any month end:
1996...................................................... $3,205.9 $1,115.0
1995...................................................... 2,661.9 766.7
Average amount outstanding during the year:
1996...................................................... $2,745.9 $ 890.8
1995...................................................... 2,333.7 662.2
Weighted-average interest rate during the year:
1996...................................................... 5.29% 5.49%
1995...................................................... 5.80 5.88
</TABLE>
NOTE I -- FEDERAL HOME LOAN BANK ADVANCES
The Company uses Federal Home Loan Bank advances as an alternative to
funding sources with similar maturities such as certificates of deposits or
other deposit programs. These advances generally offer more attractive rates
when compared to other mid-term financing options. They are also flexible,
allowing the Company to quickly obtain the necessary maturities and rates that
best suit its overall asset/liability strategy.
43
<PAGE> 45
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following summarizes information concerning Federal Home Bank Loan
advances:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995
---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Average balance............................................ $ 1,088.3 $ 351.1
Maximum month end balance during year...................... $ 1,744.2 $ 651.9
Average rate paid.......................................... 5.27% 5.84%
Weighted average remaining maturity........................ 4.83 years 3.51 years
</TABLE>
Scheduled maturities of Federal Home Loan Bank advances in 1997 are
approximately 236.8 million. Maturities during 1998, 1999, 2000, and 2001 are
approximately $102.0 million, $275.0 million, $205.0 million, and $450.1
million, respectively.
NOTE J -- LONG-TERM DEBT
A summary of long-term debt at December 31 follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Subordinated:
8 5/8% Subordinated Notes, due May 15, 2004............... $ 100,000 $ 100,000
7% Debentures, due May 15, 2003........................... 100,000 100,000
7 5/8% Subordinated Notes, due May 1, 2004................ 100,000 100,000
9.95% Subordinated Capital Notes, due June 1, 1999........ 75,000 75,000
7.74% Subordinated Notes, due May 15, 2025................ 50,000 50,000
7.69% Subordinated Notes, due May 15, 2025................ 100,000 100,000
7.00% Subordinated Notes, due November 15, 2008........... 200,000 0
Bank Notes................................................ 250,000 0
Other..................................................... 8,243 10,431
---------- ----------
Total long-term debt.............................. $ 983,243 $ 535,431
========== ==========
</TABLE>
During 1996 the Company issued $200.0 million in 7.00% Subordinated Capital
Notes due in 2008, $250.0 million of Bank Notes which mature $150.0 million in
1998 and $100.0 million in 2006, and $0.1 million of other debt that matures in
2006. All of the Subordinated Notes, along with the 7% Debentures, and the Bank
Notes, are not callable prior to maturity and no sinking fund is required. All
of the Subordinated Notes and debentures qualify as supplemental capital under
the Capital Adequacy Guidelines of the Federal Reserve Board.
The 9.95% Subordinated Capital Notes will be redeemed, at the Company's
option, in cash from the proceeds of the sale of capital securities, or
exchanged for qualifying capital securities, having a market value equal to the
principal amount of the notes. These notes are unsecured and subordinated to all
present and future senior indebtedness of the Company. These notes may not be
redeemed prior to maturity, except upon the occurrence of certain events
relating to the federal income tax treatment of the notes by the Company.
There are no scheduled maturities of long-term debt in 1997. Maturities
during 1998, 1999, 2000, and 2001 are approximately $150.0 million, $75.0
million, none and $0.1 million, respectively.
NOTE K -- COMMITMENTS AND CONTINGENCIES
LITIGATION
Certain of the Company's subsidiaries are defendants in various proceedings
arising in the normal course of business. These claims relate to the lending and
investment advisory services provided by the Company and include alleged
compensatory and punitive damages.
In addition, subsidiaries of the Company have been named as defendants in
suits that allege fraudulent, deceptive or collusive practices in connection
with certain financing activities. These suits are typical of
44
<PAGE> 46
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
complaints that have been filed in recent years challenging financial
transactions between plaintiffs and various financial institutions. The
complaints in such cases frequently seek punitive damages in transactions
involving fairly small amounts of actual damages, and in recent years, have
resulted in large punitive damage awards to plaintiffs.
Although it is not possible to determine, with any certainty at this point
in time, the potential exposure related to punitive damages in connection with
these suits, Management based upon consultation with legal counsel, believes
that the ultimate resolutions of these proceedings will not have a material
adverse effect on the Company's financial statements.
LEASES
At December 31, 1996, the Company was obligated under various cancelable
and non-cancelable leases for premises and equipment. Certain leases contain
various renewal options that are priced at market rates. Total rental expense
for the years ended December 31, 1996, 1995 and 1994 was $21,497,000,
$18,579,000 and $16,776,000. Future minimum rental commitments as of December
31, 1996 for all non-cancelable leases with initial or remaining terms of more
than one year are as follows:
<TABLE>
<CAPTION>
PREMISES EQUIPMENT TOTAL
-------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
1997................................................... $ 19,095 $248 $ 19,343
1998................................................... 17,109 227 17,336
1999................................................... 14,509 156 14,665
2000................................................... 12,353 58 12,411
2001................................................... 11,265 6 11,271
After 2001............................................. 44,884 0 44,884
-------- ---- --------
Totals....................................... $119,215 $695 $119,910
======== ==== ========
</TABLE>
STANDBY LETTERS OF CREDIT AND COMMITMENTS
The Company's subsidiary banks had standby letters of credit outstanding of
approximately $595,053,000 at December 31, 1996 and 608,830,000 at December 31,
1995.
The Company's subsidiary banks had outstanding commitments to extend credit
of approximately $6,319,860,000 at December 31, 1996 and 4,715,933,000 at
December 31, 1995. Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements.
The Company's policies as to collateral and assumption of credit risk for
off-balance-sheet commitments are essentially the same as those for extension of
credit to its customers.
ASSETS SOLD WITH RECOURSE
The Company's subsidiaries regularly originate and sell loans, consisting
primarily of mortgages subject to various recourse provisions to the seller.
Losses historically realized through the repurchase or other satisfaction of
these recourse provisions are insignificant. The total amount of loans
outstanding subject to such recourse was $1,163.6 million at December 31, 1996
and $1,209.0 million at December 31, 1995. Under terms of the recourse
agreements, the Company would be required to repurchase certain loans if they
become non-performing. All such loans sold had a loan-to-collateral ratio of 80%
or less, or mortgage insurance to cover losses up to 80% of the collateral
value, at the times the various loans were originated. The underlying collateral
to these mortgages are generally 1-4 family residential properties. Potential
losses under these recourse agreements are affected by changes in the collateral
value of the particular loans involved. Estimates of losses are recognized when
the mortgages are sold and are adjusted subsequently when estimated losses
change.
45
<PAGE> 47
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INTEREST RATE SWAPS
The Company has entered into interest rate swap agreements ("Swaps"), which
provide for the Company to pay interest based on the Floating London Interbank
Offered Rate while receiving payments on a fixed rate. The average notional face
amount of these agreements was $790.4 million in 1996 and $697 million in 1995.
The effective notional amounts outstanding at December 31, 1996 and 1995 were
$970 million and $650 million, respectively. During 1996, the average rate paid
under the agreements was 5.56% and the average rate earned was 6.68%. For 1995,
the average rate paid was 6.03% and the average rate earned was 6.60%.
Credit risk represents the potential loss of the net accrued receivable
that may occur due to the nonperformance by a party to a contract. The Company
controls credit risk for interest rate swap contracts by applying uniform credit
standards maintained for other activities with credit risk. The Company monitors
transactions under credit risk limits previously approved as a result of the
credit review and also enters into collateralization agreements with each
counterparty. At December 31, 1996 the net accrued receivable was $26.5 million.
At December 31, 1996, the effective notional amounts and contractual
maturities of Swaps are as follows:
<TABLE>
<CAPTION>
EFFECTIVE LIABILITIES
NOTIONAL AMOUNT EXPIRATION HEDGED
- --------------- ---------- -------------------
(IN MILLIONS)
<C> <C> <S>
$ 50 1997 Deposit liabilities
25 1998 Deposit liabilities
100 2001 Long-term debt
100 2003 Long-term debt
45 2003 Deposit liabilities
200 2004 Long-term debt
150 2005 Long-term debt
50 2006 Deposit liabilities
200 2008 Long-term debt
50 2008 Deposit liabilities
----
$970
====
</TABLE>
From time to time, the Company utilizes interest rate options to hedge
mortgage loans held for sale. During 1996 the effect on net income from use of
options was insignificant. At December 31, 1996 there were no option contracts
outstanding.
NOTE L -- EMPLOYEE BENEFITS
DEFINED BENEFIT AND DEFINED CONTRIBUTION PLANS
The Company has a trusteed defined benefit pension plan for the benefit of
substantially all employees of the Company and its subsidiaries, the "Trusteed
Plan." The Company also maintains a supplemental defined benefit plan, the
"Supplemental Plan," a deferred compensation plan, the "Deferred Plan," and an
incentive pay plan, the "Incentive Plan," for certain key executives. The
Company's funding policy with respect to the Trusteed Plan is to contribute
amounts to the plan sufficient to meet minimum funding requirements as set by
law. The other plans are unfunded.
The weighted-average discount rate and rate used in determining the
actuarial present value of the projected benefit obligations for all defined
benefit plans was 8.0% in 1996, 7.5% in 1995 and 8.5% in 1994. The rate of
increase in future compensation levels for all defined benefit plans was 5.50%
in 1996, 1995 and 1994. The rate of expected return on plan assets for the
Trusteed Plan in 1996, 1995 and 1994 was 9.25%. Prior service costs for all
defined benefit plans are being amortized on a straight-line basis.
46
<PAGE> 48
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company also maintains a defined contribution deferred profit sharing
plan that meets the requirements of section 401(k) of the Internal Revenue Code.
Company contributions to the deferred profit sharing plan are based on a
pre-determined formula of up to 15% of participants' salaries, which is the
maximum amount deductible for federal income tax purposes.
Provisions for contributions to the deferred profit sharing plan were
approximately $12.4 million in 1996, $11.7 million in 1995 and $11.2 million in
1994.
As of December 31, 1996, the Trusteed Plan and the profit sharing plan
owned 485,295 and 1,824,450 shares of the Company's common stock, and received
dividends on those shares of $370,296 and $1,528,666, respectively.
TRUSTEED PLAN
The following table sets forth the plan's funded status and amounts
recognized in the Company's Consolidated Financial Statements at December 31,
1996 and 1995 and for each of the three years in the period ended December 31,
1996:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $55,281 in 1996 and $49,594 in 1995................. $(63,929) $(56,940)
======== ========
Projected benefit obligation for service rendered to date... (78,189) $(70,090)
Plan assets at fair value, primarily listed stocks and U.S.
Government securities..................................... 82,010 65,028
-------- --------
Plan assets over (under) projected benefit obligation....... 3,821 (5,062)
Unrecognized net (gain) loss from past experience different
from that assumed and effects of changes in assumptions... (3,804) 6,451
Prior service cost not yet recognized in net periodic
pension cost.............................................. 36 42
Unrecognized net asset at January 1, 1996 and 1995.......... (3,119) (3,640)
-------- --------
Accrued pension cost included in other liabilities.......... $ (3,066) $ (2,209)
======== ========
</TABLE>
Net pension cost for 1996, 1995 and 1994 includes the following components:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost-benefits earned during the period.......... $ 5,108 $ 3,155 $ 3,837
Interest cost on projected benefit obligation........... 5,252 4,191 3,835
Actual return on plan assets............................ (9,690) (15,126) 1,948
Net amortization and deferral........................... 3,145 9,919 (7,388)
------- ------- -------
Net periodic pension cost............................... $ 3,815 $ 2,139 $ 2,232
======= ======= =======
</TABLE>
47
<PAGE> 49
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL, DEFERRED AND INCENTIVE PLANS
The following table sets forth the plans' funded status and amounts
recognized in the Company's Consolidated Financial Statements at December 31,
1996 and 1995 and for each of the three years ended December 31, 1996:
<TABLE>
<CAPTION>
1996 1995
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $9,010 in 1996 and $7,412 in 1995................... $ (9,205) $(7,754)
======== =======
Projected benefit obligation for service rendered to date... $(10,865) $(9,510)
Plan assets at fair value................................... 0 0
-------- -------
Excess of projected benefit obligation over plan assets..... (10,865) (9,510)
Unrecognized net (gain) loss from past experience different
from that assumed and effects of changes in assumptions... $ 1,810 $ 1,677
Prior service cost not yet recognized in net periodic
pension cost.............................................. 2,365 2,563
Unrecognized net liability at January 1, 1996 and 1995...... 69 138
Additional periodic liability............................... (2,584) (2,622)
-------- -------
Accrued pension cost included in other liabilities.......... $ (9,205) $(7,754)
======== =======
</TABLE>
Net pension cost for 1996, 1995 and 1994 includes the following components:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Service cost-benefits earned during the period.............. $ 622 $ 544 $ 516
Interest cost on projected benefit obligation............... 761 588 465
Net amortization and deferral............................... 397 268 272
------ ------ ------
Net periodic pension cost................................... $1,780 $1,400 $1,253
====== ====== ======
</TABLE>
POSTRETIREMENT BENEFITS
The Company sponsors an unfunded defined benefit postretirement health care
plan. All employees who retire under the plan at age 55 or later with 10 or more
years of service are eligible to receive certain limited postretirement health
care benefits until age 65. The plan is identical to the specific medical plan
covering the employee prior to retirement. The plan is contributory, with
retiree contributions adjusted annually.
Net postretirement health care cost for 1996, 1995 and 1994 includes the
following components:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost -- benefits attributed to service during the
period.................................................... $353 $265 $234
Interest cost on accumulated postretirement benefit
obligation................................................ 277 233 233
Amortization of transition obligation over 20 years......... 107 88 106
---- ---- ----
Net periodic postretirement benefit costs......... $737 $586 $573
==== ==== ====
</TABLE>
For measurement purposes, a 10%, 10% and 15% annual rate of increase in the
per capita cost of covered health care claims was assumed for 1996, 1995 and
1994, respectively; the rate is assumed to decrease to 7% for years thereafter.
Increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation as of
December 31, 1996, by $1,105,000 and the aggregate of the components of net
periodic postretirement benefit cost for the year then ended by $111,000. The
weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 8.0% in 1996, 7.5% in 1995 and 8.5% in
1994.
48
<PAGE> 50
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has elected to amortize the unfunded transition obligation over
a 20-year period as permitted.
The plan's accumulated postretirement benefit obligation was $3,987,000 at
December 31, 1996, with $633,000 related to retirees and $3,354,000 for other
active employees. The plan had an unrecognized transition obligation of
$2,112,000, resulting in an accrued liability of $2,869,000.
LONG-TERM INCENTIVE PLAN
The Company maintains an incentive compensation plan, known as the
Long-Term Incentive Plan (the "Plan"), that permits the grant of either stock
options, stock appreciation rights, restricted stock, performance shares, or
performance units to certain key employees. This plan replaces the Amended and
Restated 1984 Stock Option Plan (the "1984 Plan") and the 1993 Stock Option Plan
(the "1993 Plan") described elsewhere in this footnote. The option awards
outstanding under those plans were not affected. The Company has reserved
4,200,000 shares for issuance under the Plan.
STOCK OPTION PLAN
Under the 1984 Plan and the 1993 Plan the Company could grant options for
up to 3,465,000 and 1,700,000 shares respectively. The Company has granted
options on approximately 2.3 million and 0.9 million shares, respectively,
through December 31, 1996. Effective January 1, 1996, these two plans were
replaced by the Long-Term Incentive Plan discussed elsewhere in this footnote,
and no further grants will be made under these plans. Under the plans, the
option exercise price equals the stock's market price on the date of grant. The
Plans' options vest after one year, and expire after ten years.
A summary of the status of the Company's Stock Option Plans at December 31,
1996, 1995, and 1994 and changes during the years then ended is presented in the
table and narrative below:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE
(000) PRICE (000) PRICE (000) PRICE
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year...................... 1,246,305 $14.66 1,201,699 $12.94 1,179,339 $11.01
Granted..................... 386,200 25.25 305,915 19.13 231,098 18.63
Issued in business
combinations.............. 74,501 10.75 46,106 13.70 41,259 9.68
Exercised................... (221,166) 10.35 (255,923) 9.11 (234,995) 7.20
Forfeited................... (11,550) 24.22 (51,492) 18.50 (15,002) 18.27
Expired..................... -- -- -- -- -- --
--------- --------- ---------
Outstanding at end of
year...................... 1,474,290 17.70 1,246,305 14.66 1,201,699 12.94
--------- --------- ---------
Exercisable at end of
year...................... 1,088,090 15.11 940,390 13.25 970,601 11.59
Weighted average fair value
of options granted........ $3.87 $3.71 N/A
</TABLE>
299,500 of the 1,474,290 options outstanding at December 31, 1996 have
exercise prices between $4.88 and $9.83, with a weighted average exercise price
of $7.07 and a weighted average remaining contractual life of 3.0 years. All of
these options are exercisable. The remaining 1,174,790 options have exercise
prices between $9.83 and $25.25, with a weighted average exercise price of
$20.41 and a weighted average remaining contractual life of 7.5 years. 798,194
of these options are exercisable; their weighted average exercise price is
$18.12.
In accordance with the provisions of SFAS No. 123, Accounting for
Stock-Based Compensation, the Company has elected to continue to apply APB
Opinion 25 and related Interpretations in accounting for its
49
<PAGE> 51
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
stock option plans and, accordingly, does not recognize compensation cost for
options granted at market value. If the Company had elected to recognize
compensation cost for options granted in 1995 and 1996, based on the fair value
of the options granted at grant date as permitted by SFAS No. 123, net income
and earnings per share would have been reduced to the pro forma amounts
indicated below (in thousands except per share amounts):
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net income -- as reported................................... $ 254,703 $ 199,005
========== ==========
Net income -- pro forma..................................... 253,690 198,215
========== ==========
Earnings per share -- as reported........................... 2.69 2.36
========== ==========
Earnings per share -- pro forma............................. 2.67 2.35
========== ==========
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro-forma compensation
cost may not be representative of that to be expected in future years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Expected dividend yield..................................... 3.17% 3.56%
Expected stock price volatility............................. 17% 18%
Risk-free interest rate..................................... 5.26% 7.74%
Expected life of options.................................... 4 years 4 years
</TABLE>
PERFORMANCE SHARES
During 1996, the Company granted 127,425 performance shares. Actual shares
awarded are determined by certain performance criteria, which may result in the
issuance of either more or fewer shares than initially granted. Payment of the
earned performance shares will be made 50% in cash and 50% in shares. Sale or
other transfer of the shares is restricted for three years from the end of the
performance period. The performance period is generally three years.
Compensation for performance shares under the Plan is charged to earnings over
the performance period based on the fair value of the Company's Stock at the
award date, and amounted to $4.1 million in 1996.
EMPLOYEE STOCK PURCHASE PLAN
The 1990 Discounted Stock Plan (the "Discounted Plan") was established in
order to give all employees an opportunity to acquire equity interest in the
Company at a discount (17.5%) to the market value as of the acceptance date.
Awards are made to all employees (including executive officers) who have
completed five years of full time service to the Company and its subsidiaries.
Employees have two opportunities to accept all or a portion of the award.
Transfer, sale or other disposition of the shares is restricted for three years
after the date of purchase. If an employee leaves, the Company has the right to
repurchase the shares at the purchase price. Total shares purchased under the
Discounted Plan in 1996 were 33,028. A total of 1,125,000 shares of Common Stock
of the Company is reserved for issuance under the Discounted Plan, and the
aggregate purchase price of shares of Common Stock awarded to each employee may
not exceed 10% of the annual salary of each employee.
50
<PAGE> 52
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE M -- INCOME TAXES
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
Current:
Federal............................................... $119,424 $ 91,290 $84,394
State................................................. 14,774 12,154 9,221
-------- -------- -------
134,198 103,444 93,615
-------- -------- -------
Deferred (Prepaid):
Federal............................................... (726) 2,124 (5,314)
State................................................. (665) (529) 37
-------- -------- -------
(1,391) 1,595 (5,277)
-------- -------- -------
Totals........................................ $132,807 $105,039 $88,338
======== ======== =======
</TABLE>
The differences between the provision for income taxes and the amount
computed by applying the statutory federal income tax rate to income before
taxes were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Pre-tax income at statutory rates...... $135,602 35% $106,415 35% $ 91,469 35%
Add (deduct):
State income tax, net of federal tax
benefit........................... 9,170 2 7,556 3 6,017 2
Tax-exempt interest income........... (7,790) (2) (9,581) (3) (10,317) (4)
Other................................ (4,175) (1) 649 0 1,169 1
-------- -- -------- --- -------- ---
Totals....................... $132,807 34% $105,039 35% $ 88,338 34%
======== == ======== === ======== ===
</TABLE>
The components of net deferred tax assets as of December 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
Deferred Tax Assets:
Allowance for loan losses................................. $ 93,295 $ 73,826
Net unrealized losses on securities....................... 4,442 6,005
Other..................................................... 29,159 32,911
-------- --------
Total deferred tax assets......................... 126,896 112,742
-------- --------
Deferred Tax Liabilities:
Depreciation.............................................. (12,737) (8,067)
Leasing................................................... (62,864) (57,685)
Other..................................................... (7,203) (7,017)
-------- --------
Total deferred tax liabilities.................... (82,804) (72,769)
-------- --------
Net Deferred Tax Asset............................ $ 44,092 $ 39,973
======== ========
</TABLE>
The deferred tax asset above is net of an insignificant valuation
allowance. The Company has sufficient refundable taxes paid in available
carryback years to realize its recorded deferred tax asset. The Company's
federal and state income tax returns are subject to routine examination by
governmental authorities. Various examinations are now in progress covering
certain returns and, in the opinion of Management, any adjustments which may
result from such examinations will not have a material effect on the Company's
consolidated financial statements.
51
<PAGE> 53
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE N -- SUPPLEMENTAL INCOME STATEMENT INFORMATION
The following provides further analysis of other non-interest expense for
the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Other expense:
Communications....................................... $ 30,791 $ 25,157 $ 22,136
Professional services................................ 45,596 34,785 27,242
Business development................................. 23,199 21,221 16,090
Other................................................ 125,415 99,470 94,722
-------- -------- --------
Totals....................................... $225,001 $180,633 $160,190
======== ======== ========
</TABLE>
NOTE O -- FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of financial instruments in
accordance with the requirements of SFAS No. 107 at December 31, 1996 and 1995
are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------- -------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Assets:
Cash and due from banks................... $ 903,134 $ 903,134 $ 773,656 $ 773,656
Federal funds sold and other short-term
investments............................ 16,365 16,365 118,988 118,988
Assets held for sale...................... 209,159 209,159 237,139 237,139
Securities available for sale............. 2,859,012 2,859,012 2,614,803 2,614,803
Investment securities..................... 1,956,596 1,979,094 1,585,562 1,619,050
Loans, net of leases...................... 18,849,650 18,294,649 13,986,409 13,808,821
Interest receivable and other assets...... 316,040 316,040 217,328 217,328
Liabilities:
Deposits.................................. 17,305,493 17,217,548 14,575,077 14,476,393
Federal funds purchased and other
short-term borrowings.................. 4,071,001 4,071,001 3,207,427 3,207,427
Interest payable and other liabilities.... 384,405 384,405 327,265 327,265
Federal Home Loan Bank advances........... 1,744,159 1,681,920 651,881 624,598
Long-term debt............................ 983,243 893,716 535,431 516,908
Off-balance sheet instruments asset
(liability):
Interest rate swaps in a net receivable
position............................... 26,513 33,528 11,865 56,201
Commitments to extend credit.............. (17,336) (40,001) (13,459) (32,622)
Standby letters of credit................. (555) (555) (693) (693)
</TABLE>
In cases where quoted market prices are not available, fair values have
been estimated using present value or other valuation techniques. These methods
are highly sensitive to the assumptions used, such as those concerning
appropriate discount rates and estimates of future cash flows. In that regard,
estimates presented herein are not necessarily indicative of the amounts the
Company could realize in a current settlement of the underlying financial
instruments, and they are not intended to represent a measure of the underlying
value of the Company.
52
<PAGE> 54
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following methods and assumptions were used by the Company in
estimating the fair values provided above:
CASH AND DUE FROM BANKS, FEDERAL FUNDS SOLD AND OTHER SHORT-TERM INVESTMENTS
The carrying values of highly liquid instruments, such as cash on hand,
interest and noninterest bearing deposits in financial institutions, and federal
funds sold and other short-term investments are considered to approximate their
fair values.
ASSETS HELD FOR SALE AND SECURITIES
Substantially all of the Company's securities held for investment and
assets held for sale, consisting primarily of loans held for sale to third-party
investors, have a readily determinable fair value. Fair values for these
securities are based on quoted market prices, where available. If not available,
fair values are based on market prices of comparable instruments. The carrying
amount of accrued interest on securities approximates its fair value.
LOANS, NET OF LEASES
For loans with rates that are repriced in coordination with movements in
market rates and with no significant change in credit risk, fair value estimates
are based on carrying values. The fair values for other types of loans are
estimated by discounting future cash flows using current rates at which loans
with similar terms would be made to borrowers of similar credit ratings. The
carrying amount of accrued interest on loans approximates its fair value.
DEPOSITS
The fair values of deposit liabilities with no stated maturity are
considered to be the amounts payable on demand at the reporting date (i.e., at
their carrying or book value). The fair values of fixed maturity deposits are
estimated using a discounted cash flow calculation that applies rates currently
offered for time deposits of similar remaining maturities. The carrying amount
of accrued interest payable on deposits approximates its fair value.
The economic value attributable to the long-term relationship with
depositors who provide low-cost funds to the Company is considered to be a
separate intangible asset and is excluded from the presentation above.
FEDERAL FUNDS PURCHASED AND OTHER SHORT-TERM BORROWINGS
The carrying amounts of federal funds purchased, borrowings under
repurchase agreements, and other short-term borrowings approximate their fair
values.
FEDERAL HOME LOAN BANK ADVANCES AND LONG-TERM DEBT
The fair values of the Company's long-term debt are based on quoted market
prices of similar instruments or estimates using the Company's incremental
borrowing rates for similar types of instruments.
OFF-BALANCE-SHEET INSTRUMENTS
Off-balance-sheet financial instruments include commitments to extend
credit, standby letters of credit, interest rate swaps, and similar instruments.
The fair value of such instruments is estimated using current settlement values
or based on fees currently charged for similar arrangements in the market place,
adjusted for changes in terms and credit risk as appropriate.
53
<PAGE> 55
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE P -- CONDENSED PARENT COMPANY FINANCIAL STATEMENTS
SouthTrust Corporation Parent Company
STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash*....................................................... $ 1,216 $ 1,400
Interest-bearing time deposits*............................. 80,913 45,634
Investment securities....................................... 12,269 10,585
Securities available for sale............................... 16,235 153,937
Loans....................................................... 121,726 153,040
Loans to subsidiaries*...................................... 65,977 73,604
Investment in subsidiaries*:
Banks and bank holding companies.......................... 1,850,614 1,496,174
Non-banks................................................. 12,899 14,456
Other assets................................................ 60,160 54,202
---------- ----------
Total Assets....................................... $2,222,009 $2,003,032
---------- ----------
LIABILITIES
Short-term borrowings....................................... $ 21,162 $ 121,381
Other liabilities........................................... 90,955 75,781
Long-term debt.............................................. 375,000 375,000
---------- ----------
Total Liabilities.................................. 487,117 572,162
Stockholders' Equity........................................ 1,734,892 1,430,870
---------- ----------
Total Liabilities and Stockholders' Equity......... $2,222,009 $2,003,032
========== ==========
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Income:
From subsidiaries*:
Dividends
Banks................................................ $ 84,762 $ 73,267 $ 87,094
Non-banks............................................ 0 7,047 9,134
Interest................................................ 10,989 12,721 8,290
Service fees............................................ 51,863 48,115 42,669
Other..................................................... 14,515 7,040 3,025
-------- -------- --------
Total Income....................................... 162,129 148,190 150,212
-------- -------- --------
Expense:
Salaries and employee benefits............................ 21,379 20,541 20,574
Interest.................................................. 26,416 26,589 21,142
Other..................................................... 28,739 28,259 22,604
-------- -------- --------
Total Expense...................................... 76,534 75,389 64,320
-------- -------- --------
Income before income taxes and equity in undistributed net
income of subsidiaries.................................... 85,595 72,801 85,892
Income taxes (credit)....................................... 335 (3,293) (4,834)
-------- -------- --------
Income Before Equity in Undistributed Net Income of
Subsidiaries......................................... 85,260 76,094 90,726
Equity in undistributed net income of subsidiaries*:
Banks and bank holding companies.......................... 168,451 122,732 80,964
Non-banks................................................. 992 179 1,312
-------- -------- --------
Net Income......................................... $254,703 $199,005 $173,002
======== ======== ========
</TABLE>
- ---------------
* Eliminated in consolidation.
54
<PAGE> 56
SOUTHTRUST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating Activities
Net Income................................................ $ 254,703 $ 199,005 $ 173,002
Less equity in undistributed net income of subsidiaries... (169,443) (122,911) (82,276)
--------- --------- ---------
Income before equity in undistributed net income of
subsidiaries............................................ 85,260 76,094 90,726
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision (credit) for:
Depreciation of premises and equipment................ 1,333 1,197 1,131
Amortization of intangibles........................... 1,177 2,583 2,487
Deferred income tax (benefit) expense................. 592 (3,551) (4,491)
Realized net (gain) loss on sales of securities........... (118) 9 (48)
Net increase in other assets.............................. (4,826) (9,588) (7,478)
Net increase in other liabilities......................... 7,692 10,390 7,606
--------- --------- ---------
Net Cash Provided by Operating Activities.......... 91,110 77,134 89,933
Investing Activities
Proceeds from maturities of:
Investment securities................................... 61 0 142
Securities available for sale........................... 564 58,344 10,956
Proceeds from sales of:
Investment securities................................... 0 0 0
Securities available for sale........................... 135,524 24,964 70,968
Purchases of:
Investment securities................................... (405) (108) 0
Securities available for sale........................... 0 (147,603) (108,819)
Capital contributions..................................... (55,684) (37,644) (47,419)
Net (increase) decrease in:
Short-term investments.................................. (35,279) (23,524) 37,843
Loans to subsidiaries................................... 7,626 87,054 (87,852)
Loans................................................... 31,314 (150,966) 412
Premises and equipment.................................. (3,804) (2,707) (1,193)
--------- --------- ---------
Net Cash Used by Investing Activities.............. 79,917 (192,190) (124,962)
Financing Activities
Proceeds from issuance of:
Common Stock............................................ 8,584 96,568 6,284
Long-term debt.......................................... 0 0 100,000
Payments for:
Long-term debt.......................................... (100,219) 0 (20,000)
Repurchase of common stock.............................. (4,130) (365) (2,719)
Cash dividends.......................................... (75,446) (69,817) (55,239)
Net increase (decrease) in short-term borrowings.......... 0 86,965 8,499
--------- --------- ---------
Net Cash Provided by Financing Activities................... (171,211) 113,351 36,825
--------- --------- ---------
Increase (Decrease) in Cash and Due from Banks.............. (184) (1,705) 1,796
--------- --------- ---------
Cash and Due from Banks at Beginning of Year................ 1,400 3,105 1,309
--------- --------- ---------
Cash and Due from Banks at End of Year...................... $ 1,216 $ 1,400 $ 3,105
========= ========= =========
Supplemental Disclosure of Cash Flow Information; Cash Paid
During the Period for Interest............................ $ 32,872 $ 31,790 $ 26,955
</TABLE>
55
<PAGE> 57
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Company's directors is contained on pages 2
through 5, inclusive, of the Company's proxy statement for the annual meeting of
stockholders, April 16, 1997 and is incorporated herein by reference.
Information concerning the Company's executive officers is contained herein
in response to Item I of Part I.
ITEM 11 EXECUTIVE COMPENSATION
Information relating to executive compensation is contained on pages 6
through 14, inclusive, of the Company's proxy statement for the annual meeting
of stockholders, April 16, 1997 and is incorporated herein by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is contained on pages 2 through 5,
inclusive, of the Company's proxy statement for the annual meeting of
stockholders, April 16, 1997, and is incorporated herein by reference.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to this item is contained on page 14 of the Company's
proxy statement for the annual meeting of stockholders, April 16, 1997, and is
incorporated herein by reference.
56
<PAGE> 58
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1 -- Financial Statements:
The following consolidated financial statements of SouthTrust Corporation
and subsidiaries, included in the annual report of the Company to its
stockholders for the year ended December 31, 1996 are:
Report of Independent Public Accountants
Consolidated Statements of Condition -- December 31, 1996 and December
31, 1995
Consolidated Statements of Income -- Years ended December 31, 1996,
1995, and 1994
Consolidated Statements of Shareholders' Equity -- December 31, 1996,
1995, and 1994
Consolidated Statements of Cash Flows -- Years ended December 31,
1996, 1995, and 1994
Notes to Consolidated Financial Statements -- Three years ended
December 31, 1996
(a) 2 -- Financial Statement Schedules:
All schedules to the Consolidated Financial Statements required by Article
9 of Regulation S-X are omitted since they are either not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.
(a) 3 -- Exhibits:
No. (3) Restated Certificate of Incorporation and Restated By-Laws
(incorporated herein by reference to Exhibits 4(a) and 4(b) of Registration
Statement No. 2-84167).
No. (4) SouthTrust Corporation Shareholders' Rights Agreement.
(Incorporated herein by reference from Registration Statement No. 1-3613).
No. (11) Statement of Computation of Earnings Per Share.
No. (12) Statement of Computation of Ratios.
No. (13) Annual Report to Stockholders for the year ended December 31,
1996 (incorporated within Form 10-K).
No. (21) Subsidiaries of the Registrant.
No. (23) Consents of Experts and Counsel.
No. (24) Powers of Attorney.
No. (27) Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K filed in the fourth quarter of 1996: None. The
Company filed a current report on Form 8-K on January 22, 1997 disclosing the
unaudited results of operations and statement of financial condition for the
year ended December 31, 1996.
(c) Exhibits -- The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) Financial Statements Schedules: None
57
<PAGE> 59
SIGNATURES
Pursuant to the requirements of Section 13 and 13(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.
SOUTHTRUST CORPORATION
/s/ WALLACE D. MALONE, JR.
--------------------------------------
Wallace D. Malone, Jr.
Date: March 11, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
/s/ WALLACE D. MALONE, JR. Chairman, Chief Executive March 11, 1997
- ----------------------------------------------------- Officer, Director
Wallace D. Malone, Jr.
/s/ AUBREY D. BARNARD Secretary, Treasurer and March 11, 1997
- ----------------------------------------------------- Controller (Principal
Aubrey D. Barnard Accounting and Financial
Officer)
* Director March 11, 1997
- -----------------------------------------------------
Van L. Richey
* Director March 11, 1997
- -----------------------------------------------------
F. Crowder Falls
* Director March 11, 1997
- -----------------------------------------------------
Rex J. Lysinger
* Director March 11, 1997
- -----------------------------------------------------
William C. Hulsey
* Director March 11, 1997
- -----------------------------------------------------
John M. Bradford
* Director March 11, 1997
- -----------------------------------------------------
Wm. Kendrick Upchurch, Jr.
* Director March 11, 1997
- -----------------------------------------------------
Carl F. Bailey
* Director March 11, 1997
- -----------------------------------------------------
Allen J. Keesler, Jr.
* Director March 11, 1997
- -----------------------------------------------------
H. Allen Franklin
/s/ WILLIAM L. PRATER
- -----------------------------------------------------
William L. Prater
Attorney-in-fact
</TABLE>
58
<PAGE> 1
EXHIBIT NO. 11
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-------------------
EARNINGS
SHARES PER SHARE
------ ---------
(IN THOUSANDS)
<S> <C> <C>
Weighted average shares outstanding......................... 94,122 $2.71
====== =====
Primary
Average shares outstanding................................ 94,122
Common stock equivalents.................................. 647
------
97,769 2.69
====== =====
Fully Diluted
Average shares outstanding................................ 94,122
Common stock equivalents.................................. 678
------
94,800 2.69
====== =====
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-------------------
EARNINGS
SHARES PER SHARE
------ ---------
(IN THOUSANDS)
<S> <C> <C>
Weighted average shares outstanding......................... 83,892 $2.37
====== =====
Primary
Average shares outstanding................................ 83,892
Common stock equivalents.................................. 509
------
84,401 2.36
====== =====
Fully Diluted
Average shares outstanding................................ 83,892
Common stock equivalents.................................. 593
------
84,485 2.36
====== =====
</TABLE>
59
<PAGE> 1
EXHIBIT NO. 12
STATEMENT OF COMPUTATION OF RATIOS
EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Earnings:
Income before income taxes............ $ 387,510 $ 304,044 $ 261,340 $ 224,527 $ 164,892
Plus:
Fixed charges....................... 948,497 800,986 507,940 404,360 388,901
Less:
Capitalized interest................ (785) (2,056) (599) (82) (201)
---------- ---------- --------- --------- ---------
Earnings, including interest on
deposits(A)......................... 1,335,222 1,102,974 768,681 628,805 553,592
Less:
Interest on deposits................ (644,613) (564,064) (377,643) (335,708) (337,878)
---------- ---------- --------- --------- ---------
Earnings, excluding interest on
deposits(B)......................... $ 690,609 $ 538,910 $ 391,038 $ 293,097 $ 215,714
---------- ---------- --------- --------- ---------
Fixed Charges:
Interest expense.................... $ 938,194 $ 791,423 $ 501,067 $ 397,743 $ 382,930
Capitalized interest................ 785 2,056 599 82 201
Amortization of debt expense........ 132 190 215 195 63
Interest portion of rent expense.... 9,386 7,317 6,059 6,340 5,707
---------- ---------- --------- --------- ---------
Total Fixed Charges(C)...... $ 948,497 $ 800,986 $ 507,940 $ 404,360 $ 388,901
Less:
Interest on deposits................ (644,613) (564,064) (377,643) (335,708) (337,878)
---------- ---------- --------- --------- ---------
Total Fixed Charges
excluding interest expense
on deposits(D)............ $ 303,884 $ 236,922 $ 130,297 $ 68,652 $ 51,023
========== ========== ========= ========= =========
Earnings to fixed charges:
Including interest on
deposits(A/C).................... 1.41x 1.38x 1.51x 1.56x 1.42x
========== ========== ========= ========= =========
Excluding interest on
deposits(B/D).................... 2.27 2.27 3.00 4.27 4.23
========== ========== ========= ========= =========
</TABLE>
60
<PAGE> 1
EXHIBIT NO. 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OF
INCORPORATION
-------------
<S> <C>
SouthTrust Corporation...................................... Not Applicable
SouthTrust Bank of Alabama, N.A........................... (1)
SouthTrust Mortgage Corporation......................... Delaware
SC Realty, Inc.......................................... Delaware
Jackson, Incorporated................................... Delaware
Magic City, Inc......................................... Delaware
Magic City Three, Inc................................. Delaware
SouthTrust Data Services, Inc........................... Alabama
SouthTrust Technology, Inc............................ Alabama
SouthTrust Capital Funding Corporation.................. Delaware
SouthTrust Investment Services, Inc..................... Delaware
SouthTrust Fiduciary Services, Inc...................... Delaware
SouthTrust Mobile Services Funding Corporation.......... Alabama
SouthTrust Bank of Russell County......................... Alabama
Wind Creek Insurance Agency, Inc........................ Alabama
SouthTrust Bank of Columbus, N.A.......................... (1)
SouthTrust of Florida, Inc................................ Florida
SouthTrust Bank of Florida, N.A......................... (1)
SouthTrust Asset Management Company of Florida,
N.A.................................................. (1)
Gator, Inc............................................ Florida
Central Pinellas Homes................................ Florida
Reef Resorts, Incorporated............................ Florida
SouthTrust Bank of Northwest Florida.................... Florida
Holmes Capital Corporation............................ Florida
SouthTrust of South Carolina, Inc......................... South Carolina
SouthTrust Bank of South Carolina, N.A.................. (1)
SouthTrust of Tennessee, Inc.............................. Tennessee
SouthTrust Bank of Tennessee, N.A....................... (1)
SouthTrust of Georgia, Inc................................ Georgia
SouthTrust Bank of Georgia, N.A......................... (1)
SouthTrust Asset Management Company of Georgia,
N.A.................................................. (1)
Olympic City, Inc..................................... Delaware
Dekalb Finance Subsidiary, Inc........................ Georgia
Consumer Financial Services, Inc...................... Georgia
SEM, Inc.............................................. Georgia
Minority Business Development Corporation............. Georgia
Bankers First Community Development................... Georgia
SouthTrust of North Carolina, Inc......................... North Carolina
SouthTrust Bank North Carolina............................ North Carolina
Friendly Financial Center, Inc.......................... North Carolina
First State Service Corporation......................... North Carolina
SouthTrust Capital Management, Inc...................... North Carolina
SouthTrust Asset Management Company of the Carolinas,
Inc.................................................... North Carolina
SouthTrust Financial Services, Inc........................ Alabama
SouthTrust Life Insurance Company......................... Arizona
SouthTrust Insurance Agency, Inc.......................... Alabama
SouthTrust Leasing, Inc................................... Delaware
Southern Financial Advisors, Inc.......................... Alabama
SouthTrust Securities, Inc................................ Delaware
SouthTrust Community Reinvestment Corporation............. Alabama
Finance South, Inc........................................ Alabama
SouthTrust of Mississippi, Inc............................ Mississippi
SouthTrust Bank of South Mississippi.................... Mississippi
First Jefferson Mortgage Corporation.................... Mississippi
First Jefferson Financial Services, Inc................. Mississippi
</TABLE>
- ---------------
(1) National Banks are chartered under the laws of the United States.
<PAGE> 1
EXHIBIT NO. 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K, into the Company's previously filed
Registration Statements File Nos. 33-25513, 33-33187, 33-46804, 33-55069,
33-55746, 33-61407, 33-61823, 33-55543, 33-55287, 333-02203, and 333-11079.
Birmingham, Alabama ARTHUR ANDERSEN LLP
March 7, 1997
<PAGE> 1
EXHIBIT 24
STATE OF ALABAMA }
COUNTY OF JEFFERSON }
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT:
The undersigned director of SouthTrust Corporation, a Delaware corporation
(the "Company") hereby constitutes and appoints William L. Prater and Aubrey D.
Barnard, and each of them (with full power of each of them to act alone), his
true and lawful attorney-in-fact and agent for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and affix his
seal thereto and file with the United States Securities and Exchange Commission
and any other regulatory authority, the annual report of the Company for the
year ended December 31, 1996 on Form 10-K under the Securities Exchange Act of
1934, as amended, including any amendment or amendments thereto, and any and all
documents required to be filed with respect thereto, granting unto said
attorneys and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully and to all intents and purposes as he
himself might or could do if personally present, hereby ratifying and confirming
all the said attorneys-in-fact and agents, or any of them may lawfully do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director has hereunto set his hand and
seal this 3rd day of March, 1997.
/s/ ALLEN J. KEESLER, JR. (L.S.)
---------------------------------
Allen J. Keesler, Jr.
<PAGE> 2
EXHIBIT NO. 24
STATE OF ALABAMA }
COUNTY OF JEFFERSON }
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT:
The undersigned director of SouthTrust Corporation, a Delaware corporation
(the "Company") hereby constitutes and appoints William L. Prater and Aubrey D.
Barnard, and each of them (with full power of each of them to act alone), his
true and lawful attorney-in-fact and agent for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and affix his
seal thereto and file with the United States Securities and Exchange Commission
and any other regulatory authority, the annual report of the Company for the
year ended December 31, 1996 on Form 10-K under the Securities Exchange Act of
1934, as amended, including any amendment or amendments thereto, and any and all
documents required to be filed with respect thereto, granting unto said
attorneys and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully and to all intents and purposes as he
himself might or could do if personally present, hereby ratifying and confirming
all the said attorneys-in-fact and agents, or any of them may lawfully do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director has hereunto set his hand and
seal this 3rd day of March, 1997.
/s/ H. ALLEN FRANKLIN (L.S.)
---------------------------------
H. Allen Franklin
<PAGE> 3
EXHIBIT NO. 24
STATE OF ALABAMA }
COUNTY OF JEFFERSON }
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT:
The undersigned director of SouthTrust Corporation, a Delaware corporation
(the "Company") hereby constitutes and appoints William L. Prater and Aubrey D.
Barnard, and each of them (with full power of each of them to act alone), his
true and lawful attorney-in-fact and agent for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and affix his
seal thereto and file with the United States Securities and Exchange Commission
and any other regulatory authority, the annual report of the Company for the
year ended December 31, 1996 on Form 10-K under the Securities Exchange Act of
1934, as amended, including any amendment or amendments thereto, and any and all
documents required to be filed with respect thereto, granting unto said
attorneys and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully and to all intents and purposes as he
himself might or could do if personally present, hereby ratifying and confirming
all the said attorneys-in-fact and agents, or any of them may lawfully do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director has hereunto set his hand and
seal this 3rd day of March, 1997.
/s/ WILLIAM C. HULSEY (L.S.)
---------------------------------
William C. Hulsey
<PAGE> 4
EXHIBIT NO. 24
STATE OF ALABAMA }
COUNTY OF JEFFERSON }
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT:
The undersigned director of SouthTrust Corporation, a Delaware corporation
(the "Company") hereby constitutes and appoints William L. Prater and Aubrey D.
Barnard, and each of them (with full power of each of them to act alone), his
true and lawful attorney-in-fact and agent for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and affix his
seal thereto and file with the United States Securities and Exchange Commission
and any other regulatory authority, the annual report of the Company for the
year ended December 31, 1996 on Form 10-K under the Securities Exchange Act of
1934, as amended, including any amendment or amendments thereto, and any and all
documents required to be filed with respect thereto, granting unto said
attorneys and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully and to all intents and purposes as he
himself might or could do if personally present, hereby ratifying and confirming
all the said attorneys-in-fact and agents, or any of them may lawfully do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director has hereunto set his hand and
seal this 3rd day of March, 1997.
/s/ CARL F. BAILEY (L.S.)
---------------------------------
Carl F. Bailey
<PAGE> 5
EXHIBIT NO. 24
STATE OF ALABAMA }
COUNTY OF JEFFERSON }
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT:
The undersigned director of SouthTrust Corporation, a Delaware corporation
(the "Company") hereby constitutes and appoints William L. Prater and Aubrey D.
Barnard, and each of them (with full power of each of them to act alone), his
true and lawful attorney-in-fact and agent for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and affix his
seal thereto and file with the United States Securities and Exchange Commission
and any other regulatory authority, the annual report of the Company for the
year ended December 31, 1996 on Form 10-K under the Securities Exchange Act of
1934, as amended, including any amendment or amendments thereto, and any and all
documents required to be filed with respect thereto, granting unto said
attorneys and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully and to all intents and purposes as he
himself might or could do if personally present, hereby ratifying and confirming
all the said attorneys-in-fact and agents, or any of them may lawfully do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director has hereunto set his hand and
seal this 3rd day of March, 1997.
/s/ REX J. LYSINGER (L.S.)
---------------------------------
Rex J. Lysinger
<PAGE> 6
EXHIBIT NO. 24
STATE OF ALABAMA }
COUNTY OF JEFFERSON }
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT:
The undersigned director of SouthTrust Corporation, a Delaware corporation
(the "Company") hereby constitutes and appoints William L. Prater and Aubrey D.
Barnard, and each of them (with full power of each of them to act alone), his
true and lawful attorney-in-fact and agent for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and affix his
seal thereto and file with the United States Securities and Exchange Commission
and any other regulatory authority, the annual report of the Company for the
year ended December 31, 1996 on Form 10-K under the Securities Exchange Act of
1934, as amended, including any amendment or amendments thereto, and any and all
documents required to be filed with respect thereto, granting unto said
attorneys and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully and to all intents and purposes as he
himself might or could do if personally present, hereby ratifying and confirming
all the said attorneys-in-fact and agents, or any of them may lawfully do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director has hereunto set his hand and
seal this 3rd day of March, 1997.
/s/ JOHN M. BRADFORD (L.S.)
---------------------------------
John M. Bradford
<PAGE> 7
EXHIBIT NO. 24
STATE OF ALABAMA }
COUNTY OF JEFFERSON }
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT:
The undersigned director of SouthTrust Corporation, a Delaware corporation
(the "Company") hereby constitutes and appoints William L. Prater and Aubrey D.
Barnard, and each of them (with full power of each of them to act alone), his
true and lawful attorney-in-fact and agent for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and affix his
seal thereto and file with the United States Securities and Exchange Commission
and any other regulatory authority, the annual report of the Company for the
year ended December 31, 1996 on Form 10-K under the Securities Exchange Act of
1934, as amended, including any amendment or amendments thereto, and any and all
documents required to be filed with respect thereto, granting unto said
attorneys and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully and to all intents and purposes as he
himself might or could do if personally present, hereby ratifying and confirming
all the said attorneys-in-fact and agents, or any of them may lawfully do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director has hereunto set his hand and
seal this 3rd day of March, 1997.
/s/ W. K. UPCHURCH, JR. (L.S.)
---------------------------------
W. K. UpChurch, Jr.
<PAGE> 8
EXHIBIT NO. 24
STATE OF ALABAMA }
COUNTY OF JEFFERSON }
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT:
The undersigned director of SouthTrust Corporation, a Delaware corporation
(the "Company") hereby constitutes and appoints William L. Prater and Aubrey D.
Barnard, and each of them (with full power of each of them to act alone), his
true and lawful attorney-in-fact and agent for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and affix his
seal thereto and file with the United States Securities and Exchange Commission
and any other regulatory authority, the annual report of the Company for the
year ended December 31, 1996 on Form 10-K under the Securities Exchange Act of
1934, as amended, including any amendment or amendments thereto, and any and all
documents required to be filed with respect thereto, granting unto said
attorneys and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully and to all intents and purposes as he
himself might or could do if personally present, hereby ratifying and confirming
all the said attorneys-in-fact and agents, or any of them may lawfully do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director has hereunto set his hand and
seal this 3rd day of March, 1997.
/s/ F. CROWDER FALLS (L.S.)
---------------------------------
F. Crowder Falls
<PAGE> 9
EXHIBIT NO. 24
STATE OF ALABAMA }
COUNTY OF JEFFERSON }
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT:
The undersigned director of SouthTrust Corporation, a Delaware corporation
(the "Company") hereby constitutes and appoints William L. Prater and Aubrey D.
Barnard, and each of them (with full power of each of them to act alone), his
true and lawful attorney-in-fact and agent for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and affix his
seal thereto and file with the United States Securities and Exchange Commission
and any other regulatory authority, the annual report of the Company for the
year ended December 31, 1996 on Form 10-K under the Securities Exchange Act of
1934, as amended, including any amendment or amendments thereto, and any and all
documents required to be filed with respect thereto, granting unto said
attorneys and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully and to all intents and purposes as he
himself might or could do if personally present, hereby ratifying and confirming
all the said attorneys-in-fact and agents, or any of them may lawfully do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director has hereunto set his hand and
seal this 3rd day of March, 1997.
/s/ VAN L. RICHEY (L.S.)
---------------------------------
Van L. Richey
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SOUTHTRUST CORPORATION FOR THE YEAR ENDED DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 903,134
<INT-BEARING-DEPOSITS> 4,185
<FED-FUNDS-SOLD> 12,180
<TRADING-ASSETS> 209,159
<INVESTMENTS-HELD-FOR-SALE> 2,859,012
<INVESTMENTS-CARRYING> 1,956,596
<INVESTMENTS-MARKET> 1,979,094
<LOANS> 19,331,132
<ALLOWANCE> 269,863
<TOTAL-ASSETS> 26,223,193
<DEPOSITS> 17,305,493
<SHORT-TERM> 4,071,001
<LIABILITIES-OTHER> 384,405
<LONG-TERM> 983,243
0
0
<COMMON> 241,958
<OTHER-SE> 1,492,934
<TOTAL-LIABILITIES-AND-EQUITY> 26,223,193
<INTEREST-LOAN> 1,483,705
<INTEREST-INVEST> 297,755
<INTEREST-OTHER> 22,760
<INTEREST-TOTAL> 1,804,220
<INTEREST-DEPOSIT> 644,613
<INTEREST-EXPENSE> 938,194
<INTEREST-INCOME-NET> 866,026
<LOAN-LOSSES> 90,027
<SECURITIES-GAINS> 1,409
<EXPENSE-OTHER> 643,298
<INCOME-PRETAX> 387,510
<INCOME-PRE-EXTRAORDINARY> 387,510
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 254,703
<EPS-PRIMARY> 2.69
<EPS-DILUTED> 2.69
<YIELD-ACTUAL> 8.33
<LOANS-NON> 82,800
<LOANS-PAST> 40,400
<LOANS-TROUBLED> 2,100
<LOANS-PROBLEM> 35,100
<ALLOWANCE-OPEN> 206,638
<CHARGE-OFFS> 61,341
<RECOVERIES> 13,681
<ALLOWANCE-CLOSE> 269,863
<ALLOWANCE-DOMESTIC> 269,863
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
