<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: MARCH 31, 1997 Commission file number 0-3613
----------------- -----------------------------
SOUTHTRUST CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-0574085
- ------------------------------------ ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
420 North 20th Street, Birmingham, Alabama 35203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (205) 254-5509
------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No x
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of March 31,1997.
--------------
<TABLE>
<CAPTION>
Number of Shares
Title of Class Outstanding
-------------- -----------
<S> <C>
$2.50 par 99,619,101
</TABLE>
<PAGE> 2
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note A - Basis of Presentation
The Consolidated Condensed Financial Statements were prepared by the
Company without an audit, but in the opinion of management, reflect all
adjustments necessary for the fair presentation of the Company's financial
position and results of operations for the three month periods ended March
31, 1997 and 1996. Results of operations for the interim 1997 period are not
necessarily indicative of results expected for the full year. While certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission, the Company believes that the disclosures herein are
adequate to make the information presented not misleading. These condensed
financial statements should be read in conjunction with the Consolidated
Financial Statements and the notes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1996. The accounting
policies employed are the same as those shown in Note A to the Consolidated
Financial Statements on Form 10-K.
Note B - Statement of Financial Accounting Standards (SFAS) No. 125, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities.
In June 1996, the Financial Accounting Standards Board (FASB) issued 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 it applies prospectively.
Earlier or retroactive application is not permitted. The Company adopted the
provisions of the Standard on January 1, 1997. Based on the Company's current
operating activities, management does not believe that the adoption of this
statement has had a material impact on the Company's financial position or
results of operations.
Note C - SFAS No.128, Earnings per Share
In February 1997 the FASB issued SFAS No.128, Earnings per Share. This
statement is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods; earlier adoption is not permitted.
This statement requires restatement for all prior-period earnings
<PAGE> 3
per share (EPS) data presented.
SFAS No.128 simplifies the standards for computing EPS previously found
in APB Opinion No.15, Earnings per Share, and makes them comparable to inter-
national EPS standards. It replaces the presentation of primary EPS with the
presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computatuion to the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income
available to common shareholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to Opinion 15.
EPS as calculated under Opinion 15, and as shown in the following
Management's Discussion and Analysis, for the three-month periods ended March
31, 1997 and March 31, 1996 was $0.72 and $0.64, respectively. The restated
basic EPS amounts for those same periods in 1997 and 1996, had SFAS No.128 been
in effect, would have been $0.73 and $0.64, respectively. The restated diluted
EPS amounts for those same periods in 1997 and 1996, has SFAS No. 128 been in
effect, would have been $0.72 and $0.64, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED March 31,1997
(Unaudited)
EARNINGS SUMMARY
Net income for the first quarter of 1997 was $70.9 million, an increase of
$13.5 million or 23% from the first quarter 1996 net income of $57.4 million.
Net income per share for the first quarter was $0.72 in 1997 and $0.64 in 1996,
an increase of 13%. Net income for the first three months of 1997 resulted in
returns on average total assets and average stockholders' equity of 1.09% and
15.97%, respectively.
NET INTEREST INCOME
Net interest income is the difference between interest income and interest
expense 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 is
taxed at a preferential rate has been adjusted to fully taxable equivalent
amounts using a statutory federal tax rate of 35% in both 1997 and 1996.
Interest yields, net interest margins and net interest spreads are
calculated using the underlying earning assets cost basis.
Net interest income in the first quarter of 1997 was $247.2 million, up
$52.4 million or 27% from the 1996 first quarter level of $194.8 million. The
fully taxable equivalent net interest margin was 4.04% for the quarter compared
to 3.99% for the quarter ended March 31, 1996. Total interest income increased
to $513.2 million for the quarter, as the average level of interest earning
assets increased 26% to $24,801.9 million, and the fully taxable
<PAGE> 4
equivalent yield on earning assets increased 6 basis points to 8.39% from the
1996 yield of 8.33%.
Total interest expense increased $53.5 million or 25% to $266.1 million
over the first quarter of 1996. The increase reflects an increase in the level
of average interest-bearing liabilities of 28% to $21,869.0 million for the
quarter. The average rate paid on interest-bearing liabilities decreased 8 basis
points to 4.93% for the first quarter from 5.01% in the first quarter of 1996.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the first quarter of 1997 was $22.4
million, reflecting an increase of $1.9 million from the 1996 first quarter
level of $20.5 million. For the quarter, net charge-offs were $11.6 million or
.24% of average net loans on an annualized basis. For the year ended December
31, 1996 net charge-offs were $47.7 million or .28% of net loans.
NON-INTEREST INCOME
Total non-interest income decreased $1.8 million or 3% to $62.0 million
for the first quarter of 1997. Service charges on deposit accounts increased
$6.7 million or 28% to $30.7 million for the quarter. These increases were due
primarily to an increase in the number of deposit accounts during the periods.
Mortgage banking fees decreased $4.5 million or 42% to $6.2 million for the
quarter. Bank card fees increased $0.3 million or 5% to $5.6 million for the
quarter. Trust fees increased $0.6 million or 12% to $5.8 million for the first
quarter of 1997. Other fee income increased $0.7 million or 8% to $10.3 million
for the three months ended March 31, 1997. Net securities transactions were a
gain of $94,000 for the first quarter compared to securities gains of $62,000
the first quarter 1996. All other non-interest income decreased $5.7 million to
$3.2 million for the first quarter of 1997. Included in other non-interest
income during the first quarter of 1996 were gains from the sale of certain
commercial and commercial real estate loans totaling $5.6 million. These loans
were sold in response to a decision by management to limit concentrations of
certain types of loans within the loan portfolio. There were no other
significant non-recurring non-interest income items recorded in 1996 or 1997.
NON-INTEREST EXPENSE
Total non-interest expense for the quarter was $174.0 million, reflecting
an increase of $27.7 million or 19% from the first quarter 1996 level.
The ratio of non-interest expense to average total assets was 2.67% for
the first quarter of 1997 and 2.79% for the three month period ended March 31,
1996.
Salaries and employee benefits accounted for the largest portion of total
non-interest expense in both periods as well as the largest portion of the
increase. Salaries and employee benefits expense increased $16.9 million or 22%
to $95.0 million for the first quarter 1997. Contributing to this increase was
the increase in the number of full time equivalent employees which increased
approximately 19% from March 31, 1996 to approximately 9,400
<PAGE> 5
at March 31, 1997. Net occupancy expense increased $2.2 million or 18% to $14.2
million for the quarter primarily as a result of the growth in the number of
banking offices to 514 at March 31, 1997 from 479 at March 31, 1996. Equipment
expense increased $2.1 million or 25% to $10.5 million for the quarter. Other
non-interest expense totaled $54.4 million, an increase of 14% or $6.5 million
over the comparable period in 1996.
Banking legislation was enacted September 30, 1996 to eliminate the
premium differential between Savings Association Insurance Fund (SAIF)insured
institutions and Bank Insurance Fund (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 quarter ended March 31,
1996.
There were no other significant non-recurring non-interest expense
items recorded in 1996 or 1997.
Income tax expense for the first quarter of 1997 was $39.2 million for an
effective tax rate of 35.6% compared to $31.2 million or an effective rate of
35.2% in the first quarter of 1996. The statutory federal income tax rate was
35% in 1996 and 1997.
SUMMARY OF FINANCIAL CONDITION
Total assets at March 31, 1997 were $27.4 billion, representing an
increase of $4.7 billion or 21% from March 31, 1996. At December 31, 1996, total
assets were $26.2 billion. Average total assets for the first three months of
1997 were $26.5 billion compared to $21.1 billion for the three month period in
1996.
Average earning assets for the first quarter of 1997 were $24.8 billion,
representing and increase of 26% over the 1996 first quarter level of $19.7
billion. Average interest-bearing liabilities through March 31, 1997 were $21.9
billion, up 28% over the 1996 first quarter level of $17.1 billion.
LOANS
Loans, net of unearned income at March 31, 1997 totaled $20,145.5 million
compared to $19,331.1 million at December 31, 1996, an increase of $814.4
million or 4%. Of the total increase, $271.1 million were obtained in the
acquisitions of other financial institutions consummated during the first three
months of 1997.
Commercial real estate mortgage loans increased $246.2 million from
December 31, 1996 to $3,255.1 million, or 16.0% of total loans. During the first
three months of 1997 commercial real estate mortgage loans totaling
<PAGE> 6
$36.5 million were obtained through acquisitions. This category represents the
Company's largest credit concentration. Residential real estate mortgage loans
at March 31, 1997 were $5,016.2 million or 24.7% of total loans compared to
$4,687.5 million or 24.0% at December 31, 1996. Of the total increase of $328.7
million during the three month period, $195.1 million was the result of
acquisitions. Real estate construction loans were $2,123.4 million or 10.5% of
total loans, up from $1,930.6 million at December 31, 1996 when such loans
accounted for 9.9% of total loans. Real estate construction loans obtained
through acquisitions during the quarter amounted to $25.9 million.
Commercial, financial and agricultural loans at March 31, 1997 were
$6,833.3 million or 33.7% of total loans, compared to $6,847.5 million or 35.2%
of total loans at December 31, 1996. The decrease during the quarter was offset
by $11.6 million in loans obtained through acquisitions. This segment is widely
diversified and there were no significant industry concentrations.
Loans to individuals at March 31, 1997 totaled $3,074.6 million or 15.1%
of total loans, compared to $2,992.1 million or 15.4% of total loans at December
31, 1996. Loans to individuals obtained through acquisitions during the quarter
were $2.0 million.
Total unearned income at March 31, 1997 was $157.1 million compared to
$135.5 million at December 31, 1996.
NON-PERFORMING ASSETS
Non-performing assets at March 31, 1997 were $165.2 million or 0.82% of
net loans and other real estate owned, representing an increase of $26.2 million
from the December 31, 1996 level of $139.0 million. Non-performing assets
obtained through acquisitions during the quarter totaled $6.1 million. Included
in non-performing assets at March 31, 1997 were $108.0 million of loans on
non-accrual status, other real estate owned totaling $46.5 million, other
repossessed assets of $10.1 million, and $0.6 million of restructured loans.
Loans 90 days past due and accruing were $36.9 million at March 31, 1997
compared to $40.4 million at December 31, 1996.
As of March 31, 1997, the Company had loans of approximately $14.5 million
for which management has serious doubts as to the ability of the borrowers to
comply with the present repayment terms, and may result in the loans' 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.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses at March 31, 1997 was $284.5 million or
1.41% of net loans compared to $269.9 million or 1.40% at December 31, 1996.
While deterioration of the economy or rising interest rates could have a
near-term effect on the Company's earnings, Management has taken into
consideration present and expected economic conditions, the level of risk in the
portfolio, the level of non-performing assets, potential problem loans, and
delinquencies in assessing the allowance for loan losses and considers the
allowance for loan losses to be adequate.
Net charge-offs during the three months ended March 31, 1997 totaled
<PAGE> 7
$11.6 million or 0.24% of average net loans on an annualized basis. The
provision for loan losses during the quarter added $22.4 million to the
allowance for loan losses. The allowance for loan losses at acquisition date on
acquired financial institutions totaled $3.9 million.
INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE
At March 31, 1997, total securities were $5,173.8 million. Investment
securities amounted to $2,072.7 million and securities classified as available
for sale amounted to $3,101.1 million. Investment securities are carried at
amortized cost and securities available for sale are carried at fair value.
Investment securities increased 6% from the year-end 1996 level to
$2,072.7 million; and included U.S. Treasury securities of $5.5 million, U.S.
Government agency securities of $1,332.7 million, Collateralized Mortgage
Obligations("CMOs") and other mortgage-backed securities ("MBS") of $476.6,
State, County and Municipal securities of $199.9 million and other securities of
$58.0 million.
Securities available for sale included U.S. Treasury securities of $313.7
million, U.S. Government agency securities of $934.2 million, CMOs and other MBS
of $1,649.6 million, State, County and Municipal securities of $5.3 million and
other securities of $198.3 million.
At March 31, 1997, the Company's investment portfolio included $975.7
million in CMOs. CMOs 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 declining 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 March 31, 1997, the fair value of investment securities exceeded the
book value by $3.1 million. This compares to an unrealized gain of $22.5 million
at December 31, 1996. For securities available for sale, the amortized cost
exceeded the fair value by $27.1 million, resulting in an after-tax adjustment
decreasing stockholders' equity by $17.2 million. This unrealized loss, which
Management believes is temporary, compares to a net of tax unrealized loss of
$7.5 million at December 31, 1996.
SHORT-TERM INVESTMENTS
Short-term investments at March 31, 1997 totaled $242.3 million,
reflecting an increase of $16.8 million from the December 31, 1996 level of
$225.5 million. At March 31, 1997, short-term investments consisted of $9.4
million in federal funds sold, $9.1 million in securities purchased under resale
agreements, $17.5 million in time deposits with other banks, and $206.3 million
in assets held for sale. Assets held for sale consisted of $197.8 million in
mortgage loans in the process of being securitized and sold to second party
investors and $8.5 million in securities held for trading purposes. Mortgage
loans held for sale are carried at the lower of cost or fair value. Trading
account securities are carried at fair value with unrealized gains and losses
recognized in net income.
<PAGE> 8
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.
OTHER ASSETS
Other assets at March 31, 1997 were $1,250.3 million compared to $1,217.7
million at December 31, 1996. At March 31, 1997, other assets included $527.4
million in premises and equipment, due from customers on acceptances of $26.0
million, accrued interest receivable of $207.4 million, other accounts
receivable of $74.2 million, other real estate owned and other repossessed
assets totaling $56.6 million, mortgage servicing rights of $34.5 million, other
intangible assets of $187.3 million and other non-earning assets of $136.9
million.
Cash and due from banks was $822.7 million at March 31, 1997, a decrease
of $80.4 million from $903.1 million at December 31, 1996.
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.
DEPOSITS
Deposits are the Company's primary source of funding. Total deposits at
March 31, 1997 were $17,593.6 million up $288.1 million or 2% from the December
31, 1996 level of $17,305.5 million. During the first three months of 1997,
acquisitions of other financial institutions added $284.3 million of deposits.
At March 31, 1997, total deposits included interest-bearing deposits of
$15,089.2 million and other deposits of $2,504.4 million.
Core deposits, defined as demand deposits and time deposits less than
$100,000, totaled $15,182.5 million or 86.3% of total deposits at March 31,
1997. This compares to core deposits of $14,954.3 million or 86.4% at December
31, 1996.
SHORT-TERM BORROWINGS
Short-term borrowings at March 31, 1997 were $4,812.1 million and included
federal funds purchased of $2,849.8 million, securities sold under agreements to
repurchase of $888.2 million and other borrowed funds of $1,074.1 million. At
March 31, 1997, total short-term borrowings were 17.6% of total liabilities and
stockholders' equity. This compares to total short-term borrowings of $4,071.0
million or 15.5% of total liabilities and stockholders' equity at December 31,
1996.
FEDERAL HOME LOAN BANK ADVANCES
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. These advances generally offer
<PAGE> 9
more attractive rates when compared to other mid-term financing options.
FHLB advances totaled $1,653.4 million at March 31, 1997. The current
quarter end balance is down $90.8 million or 5% from level outstanding at
December 31, 1996.
LONG-TERM DEBT
At March 31, 1997, total long-term debt was $982.8 million representing a
decrease of $0.4 million, resulting from repayments, from the December 31, 1996
level of $983.2 million. The Company issued no additional long-term debt during
the first three months on 1997. Also, acquisitions completed during the quarter
had no effect on long-term debt outstanding.
CAPITAL
At March 31, 1997, total stockholders' equity was $1,870.5 million, or
6.84% of total assets compared to $1,734.9 million or 6.62% at December 31,
1996. During the quarter net income added $70.9 million to capital. Sales of
common stock through the Dividend Reinvestment Plan, the employee stock purchase
and stock option plans for $2.5 million represented the issuance of 110,572
shares. A stock offering for 2,023,012 shares increased equity by $72.1 million.
Equity added in business combinations increased equity by $23.4 million or
1,297,031 shares. 57,653 shares were issued under the Long- Term Incentive Plan
and amounted to an increase in equity of $1.4 million. Treasury stock purchases
for 7,973 shares reduced equity by $0.3 million. Dividends declared during the
period totaled $24.8 million, and the net unrealized loss on securities
available for sale increased $9.6 million from the December 31, 1996 level to
$17.2 million at March 31, 1997.
The Company is subject to the capital adequacy guidelines adopted by the
Federal Reserve Board, which is the regulatory agency that governs bank holding
companies. The Company's capital ratios and those of subsidiary banks are in
excess of these regulatory requirements and Management expects that these ratios
will continue to be maintained above the minimum levels required by the
regulators.
At March 31, 1997, the Company had a risk-based capital ratio of 11.97%
connsisting of a Tier I capital ratio of 7.66% and supplemental capital elements
of 4.31%. The leverage ratio was 6.47%.
COMMITMENTS
The Company's subsidiary banks had standby letters of credit outstanding
of approximately $617.1 million at March 31, 1997 and $595.1 million at December
31, 1996.
The Company's subsidiary banks had outstanding commitments to extend
credit of approximately $7,009.0 million at March 31, 1997 and $6,319.9 million
at December 31, 1996.
The Company's policies as to collateral and assumption of credit risk for
off-balance sheet commitments is essentially the same as those for extension of
credit to its customers.
Presently the Company has no commitments for significant capital
expenditures.
The Company's subsidiaries regularly originate and sell loans,
<PAGE> 10
consisting primarily of mortgage loans sold to third party investors, which
contain 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 recourse was
$1,195.1 million at March 31, 1997 and $1,163.6 million at December 31, 1996.
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 the collateral value of the particular loans involved. Losses
are recognized when the mortgage is repurchased or the obligation is otherwise
satisfied.
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.
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.
At March 31, 1997, the contractual maturities of Swaps were as follows:
<TABLE>
<CAPTION>
Notional
In Millions Amount Expiration Liabilities Hedged
- ----------- ------ ---------- ------------------
<S> <C> <C>
25 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
----
$945
</TABLE>
<PAGE> 11
CONTINGENCIES
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 resolutions of these proceedings will not have a material adverse
effect on the Company's financial statements.
<PAGE> 12
SOUTHTRUST CORPORATION
Consolidated Statements of Condition
(Unaudited)
<TABLE>
<CAPTION>
March 31 December 31
-------------------------------------------------
(In Thousands) 1997 1996 1996
-------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 822,666 $ 658,638 $ 903,134
Short-term investments:
Federal funds sold and securities purchased
under resale agreements 18,481 56,559 12,180
Interest-bearing deposits in other banks 17,505 4,831 4,185
Assets held for sale 206,300 233,349 209,159
------------ ------------ ------------
Total short-term investments 242,286 294,739 225,524
Securities available for sale 3,101,080 2,853,766 2,859,012
Securities held for investment
(Fair value of $2,075,849 at
March 31, 1997 and $1,720,002
and $1,979,094 at
March 31, 1996 and December 31,
1996, respectivley) 2,072,713 1,747,220 1,956,596
Loans 20,302,594 16,303,459 19,466,650
Less:
Unearned income 157,090 103,303 135,518
Allowance for loan losses 284,532 230,913 269,863
------------ ------------ ------------
Net loans 19,860,972 15,969,243 19,061,269
Premises and equipment, net 527,398 457,161 510,043
Due from customers on acceptances 25,954 13,528 26,599
Other assets 696,983 630,865 681,016
------------ ------------ ------------
TOTAL ASSETS $ 27,350,052 $ 22,625,160 $ 26,223,193
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Interest-bearing $ 15,089,183 $ 13,579,680 $ 14,725,077
Other 2,504,402 2,284,413 2,580,416
------------ ------------ ------------
Total deposits 17,593,585 15,864,093 17,305,493
Federal funds purchased
and securities sold
under agreements to repurchase 3,737,956 2,543,889 3,205,948
Other short-term borrowings 1,074,131 863,455 865,053
Bank acceptances outstanding 25,954 13,528 26,599
Other liabilities 411,748 357,816 357,806
Federal home loan bank advances 1,653,367 768,881 1,744,159
Long-term debt 982,855 636,530 983,243
------------ ------------ ------------
Total liabilities 25,479,596 21,048,192 24,488,301
Stockholders' equity:
Preferred Stock, par value $1.00 a share:
5,000,000 shares authorized; issued
and outstanding - none 0 0 0
Common Stock, par value $2.50 a share:
300,000,000 shares authorized;
100,271,382 shares issued
at March 31, 1997 and 95,486,470
and 96,783,114 at
March 31, 1996 and December
31, 1996, respectively 250,678 238,716 241,958
Capital surplus 487,043 392,973 410,642
Retained earnings 1,160,560 965,591 1,100,170
Unrealized loss on securities
available for sale (17,164) (13,516) (7,520)
Treasury stock at cost:
652,281 shares at March 31, 1997
and 516,461 and 644,308
shares at March 31, 1996 and December
31, 1996, respectively (10,661) (6,796) (10,358)
------------ ------------ ------------
Total stockholders' equity 1,870,456 1,576,968 1,734,892
------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 27,350,052 $ 22,625,160 $ 26,223,193
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 13
SOUTHTRUST CORPORATION
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------------
(In thousands, except per share data) 1997 1996
-----------------------
INTEREST INCOME
<S> <C> <C>
Interest and fees on loans $423,670 $331,193
Interest on securities:
Taxable 30,877 22,108
Non-taxable 3,466 4,544
-------- --------
Total interest on investment securities 34,343 26,652
Interest on securities available for sale 48,044 40,808
Interest on short-term investments 4,593 5,455
-------- --------
Total interest income 510,650 404,108
-------- --------
INTEREST EXPENSE
Interest on deposits 171,041 149,780
Interest on short-term borrowings 59,053 44,294
21,514 9,109
Interest on long-term debt 14,486 9,363
-------- --------
Total interest expense 266,094 212,546
-------- --------
Net interest income 244,556 191,562
PROVISION FOR LOAN LOSSES 22,375 20,458
-------- --------
Net interest income after
provision for loan losses 222,181 171,104
NON-INTEREST INCOME
Service charges on deposit accounts 30,704 24,029
Mortgage banking operations 6,222 10,680
Bank card fees 5,649 5,370
Trust fees 5,821 5,188
Other fees 10,314 9,583
Securities gains, net 94 62
Other 3,174 8,904
-------- --------
Total non-interest income 61,978 63,816
-------- --------
NON-INTEREST EXPENSE
Salaries and employee benefits 94,976 78,084
Net occupancy 14,161 11,960
Equipment 10,462 8,361
Other 54,442 47,900
-------- --------
Total non-interest expense 174,041 146,305
-------- --------
Income before income taxes 110,118 88,615
INCOME TAX EXPENSE 39,218 31,174
-------- --------
NET INCOME $ 70,900 $ 57,441
======== ========
Average number of shares outstanding (000's) 98,493 89,754
Net income per share $ 0.72 $ 0.64
Dividends declared per share 0.25 0.22
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 14
SOUTHTRUST CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------------
(In Thousands) 1997 1996
-----------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 70,900 $ 57,441
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision (credit) for:
Loan losses 22,375 20,458
Depreciation of premises and equipment 8,944 7,479
Amortization of intangibles 6,317 5,717
Amortization of security premium 163 710
Accretion of security discount (669) (985)
Deferred income tax 432 3,386
Net realized and unrealized gain on assets held for sale (3,588) (9,101)
Net securities (gains) and losses (94) (62)
Origination and purchase of loans held for sale (384,684) (356,858)
Proceeds of loans held for sale 379,472 380,335
Net (increase) decrease in trading securities 11,658 7,057
Net (increase) decrease in other assets (18,899) (41,817)
Net increase (decrease) in other liabilities 33,111 (38,023)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 125,438 35,737
INVESTING ACTIVITIES
Proceeds from maturities of:
Investment securities 339,236 352,606
Securities available for sale 109,173 3,484
Proceeds from sales of:
Investment securities 0 0
Securities available for sale 3,441 2,328
Purchases of:
Investment securities (440,379) (377,501)
Securities available for sale (363,913) (248,834)
Premises and equipment (25,143) (13,852)
Net increase (decrease) in:
Short-term investments (425) 72,881
Loans (553,750) (547,307)
Purchase of subsidiaries, net of cash acquired 5,181 25,824
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (926,579) (730,371)
FINANCING ACTIVITIES
Proceeds from issuance of:
Common Stock 75,970 2,804
Federal Home Loan Bank advances 651,750 77,000
Long-term debt 0 99,973
Payments for:
Federal Home Loan Bank advances (743,542) (27,000)
Long-term debt (388) (23,619)
Repurchase of Common Stock (302) (568)
Cash Dividends (7,163) (19,432)
Net increase (decrease) in:
Deposits 3,820 310,604
Short-term borrowings 740,528 159,854
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 720,673 579,616
-------- --------
DECREASE IN CASH AND DUE FROM BANKS (80,468) (115,018)
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 903,134 773,656
-------- --------
CASH AND DUE FROM BANKS AT END OF YEAR $822,666 $658,638
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $259,059 $210,148
Income taxes 60 3,200
Non-cash transactions:
Assets acquired in business combinations 311,905 1,244,367
Liabilities acquired in business combinations 288,380 1,133,313
Loans transferred to Other Real Estate 6,949 1,681
Loans securitized into mortgage-backed securities 143,267 171,138
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 15
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
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. (27) Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
During the three months ended March 31, 1997 the Company filed
a Form 8-K current report dated January 22, 1997 with the
Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTHTRUST CORPORATION
Date: May 14, 1997 /s/ Wallace D. Malone, Jr.
-------------------- ---------------------------
Wallace D. Malone, Jr.
Chairman and Chief
Executive Officer
Date: May 14, 1997 /s/ Aubrey D. Barnard
-------------------- ----------------------
Aubrey D. Barnard
Secretary, Treasurer and
Controller
<PAGE> 1
EXHIBIT NO. 11
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------
March 31, 1997 March 31, 1996
---------------------------------------
(in thousands) Shares EPS Shares EPS
---------------- ----------------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Average shares outstanding 97,681 89,183
Common Stock equivalents 812 571
---------------- ----------------
Primary shares/EPS 98,492 $0.72 89,754 $0.64
================ ================
FULLY DILUTED EARNINGS PER SHARE
Average shares outstanding 97,681 89,183
Common Stock equivalents 812 616
---------------- ----------------
Fully diluted shares/EPS 98,492 $0.72 89,799 $0.64
================ ================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SOUTHTRUST CORPORATION FOR THE THREE MONTHS ENDED MARCH
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 822,666
<INT-BEARING-DEPOSITS> 17,505
<FED-FUNDS-SOLD> 18,481
<TRADING-ASSETS> 206,300
<INVESTMENTS-HELD-FOR-SALE> 3,101,080
<INVESTMENTS-CARRYING> 2,072,713
<INVESTMENTS-MARKET> 2,075,849
<LOANS> 20,145,504
<ALLOWANCE> 284,532
<TOTAL-ASSETS> 27,350,052
<DEPOSITS> 17,593,585
<SHORT-TERM> 4,812,087
<LIABILITIES-OTHER> 411,748
<LONG-TERM> 982,855
0
0
<COMMON> 250,678
<OTHER-SE> 1,619,778
<TOTAL-LIABILITIES-AND-EQUITY> 27,350,052
<INTEREST-LOAN> 423,670
<INTEREST-INVEST> 82,387
<INTEREST-OTHER> 4,593
<INTEREST-TOTAL> 510,650
<INTEREST-DEPOSIT> 171,041
<INTEREST-EXPENSE> 266,094
<INTEREST-INCOME-NET> 244,556
<LOAN-LOSSES> 22,375
<SECURITIES-GAINS> 94
<EXPENSE-OTHER> 174,041
<INCOME-PRETAX> 110,118
<INCOME-PRE-EXTRAORDINARY> 110,118
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,900
<EPS-PRIMARY> 0.72
<EPS-DILUTED> 0.72
<YIELD-ACTUAL> 8.39
<LOANS-NON> 108,022
<LOANS-PAST> 36,919
<LOANS-TROUBLED> 623
<LOANS-PROBLEM> 14,509
<ALLOWANCE-OPEN> 269,863
<CHARGE-OFFS> 13,966
<RECOVERIES> 2,381
<ALLOWANCE-CLOSE> 284,532
<ALLOWANCE-DOMESTIC> 284,532
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
