<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
PROSPECTUS SUPPLEMENT Registration No. 333-41823
- ------------------------------------
(TO PROSPECTUS DATED DECEMBER 18, 1997)
4,000,000 SHARES
(SOUTHTRUST CORPORATION LOGO)
COMMON STOCK
(PAR VALUE $2.50 PER SHARE)
---------------------
Of the 4,000,000 shares of Common Stock, par value $2.50 per share, offered
hereby by SouthTrust Corporation (the "Corporation"), 800,000 shares are being
offered initially outside the United States by the International Underwriter and
3,200,000 shares are being offered initially in a concurrent offering in the
United States by the U.S. Underwriters, subject to transfers between the U.S.
Underwriters and the International Underwriter (collectively, the
"Underwriters"). Such offerings are collectively referred to as the "Offering."
The price to public and underwriting discount per share will be identical for
both offerings. See "Underwriting."
The Common Stock of the Corporation is quoted on the Nasdaq National Market
("Nasdaq") under the symbol SOTR. On January 22, 1998, the last reported sale
price of the Common Stock of the Corporation on Nasdaq was $55 1/8 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-----------------------------------------------------
THE SECURITIES ARE NOT SAVINGS ACCOUNTS OR BANK DEPOSITS, ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANKING OR NONBANKING AFFILIATE OF SOUTHTRUST CORPORATION,
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY AND INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
<TABLE>
<CAPTION>
===================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC DISCOUNT(1) CORPORATION(2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share..................................... $54.75 $1.23 $53.52
- -------------------------------------------------------------------------------------------------------------------
Total(3)...................................... $219,000,000 $4,920,000 $214,080,000
===================================================================================================================
</TABLE>
(1) The Corporation has agreed to indemnify the Underwriters against certain
civil liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting."
(2) Before deducting expenses payable by the Corporation estimated at $250,000.
(3) The Corporation has granted the U.S. Underwriters and the International
Underwriter options to purchase up to an aggregate additional 600,000
shares of Common Stock to cover over-allotments. If all of such shares are
purchased, the total Price to Public, Underwriting Discount and Proceeds to
the Corporation will be $251,850,000, $5,658,000 and $246,192,000,
respectively. See "Underwriting."
---------------------
The shares of Common Stock are offered by the International Underwriter,
subject to prior sale, when, as and if issued to and accepted by it, and subject
to certain other conditions. The International Underwriter reserves the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that delivery of the shares of Common Stock will be made in New
York, New York on or about January 28, 1998.
---------------------
MERRILL LYNCH INTERNATIONAL
---------------------
The date of this Prospectus Supplement is January 22, 1998.
<PAGE> 2
The following map sets forth the banking offices of the Corporation as of
September 30, 1997:
[MAP OF STATES AND BANKING OFFICES]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING THE PURCHASE OF SHARES OF COMMON STOCK TO
COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
THIS PROSPECTUS SUPPLEMENT AND THE RELATED PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THE COMMON STOCK IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. THE COMMON STOCK
MAY NOT BE OFFERED OR SOLD IN THE UNITED KINGDOM OTHER THAN TO PERSONS WHOSE
ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF
INVESTMENTS, WHETHER AS PRINCIPAL OR AGENT, FOR THE PURPOSES OF THEIR BUSINESSES
OR OTHERWISE IN CIRCUMSTANCES THAT DO NOT CONSTITUTE AN OFFER TO THE PUBLIC IN
THE UNITED KINGDOM WITHIN THE MEANING OF THE PUBLIC OFFERS OF SECURITIES
REGULATIONS 1995. THIS PROSPECTUS SUPPLEMENT AND THE RELATED PROSPECTUS MAY ONLY
BE ISSUED OR PASSED ON TO ANY PERSON IN THE UNITED KINGDOM IF THAT PERSON IS OF
A KIND DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL SERVICES ACT 1986 (INVESTMENT
ADVERTISEMENTS) (EXEMPTIONS) ORDER 1996 OR A PERSON TO WHOM THIS PROSPECTUS
SUPPLEMENT AND THE RELATED PROSPECTUS MAY OTHERWISE LAWFULLY BE PASSED ON.
NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE RELATED PROSPECTUS MAY BE COPIED OR
DISTRIBUTED OR OTHERWISE MADE AVAILABLE BY ANY RECIPIENT IN THE UNITED KINGDOM
WITHOUT THE PRIOR EXPRESS CONSENT OF MERRILL LYNCH INTERNATIONAL.
CERTAIN INFORMATION CONTAINED IN THIS PROSPECTUS AND THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH CAN BE
IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL,"
"SHOULD," "EXPECT," "ANTICIPATE," "ESTIMATE," "INTEND," "CONTINUE," OR
"BELIEVES" OR THE NEGATIVES THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE
TERMINOLOGY.
S-2
<PAGE> 3
SOUTHTRUST CORPORATION
SouthTrust Corporation (the "Corporation"), a bank holding company
headquartered in Birmingham, Alabama, engages in a full range of banking
services from over 530 banking locations in Alabama, Florida, Georgia,
Mississippi, North Carolina, South Carolina and Tennessee. The Corporation also
offers a range of other services, including mortgage banking services, fiduciary
and trust services and securities brokerage services. As of September 30, 1997,
the Corporation had consolidated total assets of $29.8 billion, which ranked it
as the largest bank holding company headquartered in Alabama.
Effective June 2, 1997, the Corporation, pursuant to the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Banking
Act"), consolidated all of its banking subsidiaries, located in the states of
Alabama, Florida, Georgia, North Carolina, Mississippi, Tennessee and South
Carolina into its largest banking subsidiary, SouthTrust Bank of Alabama,
National Association, and changed its name to SouthTrust Bank, National
Association ("SouthTrust Bank"). The bank consolidation was undertaken by the
Corporation in order to obtain the benefits of the Interstate Banking Act,
which, subject to certain limitations, after June 1, 1997, permits qualifying
bank holding companies to engage in interstate mergers and allows banks to
maintain and operate branches in states other than the states where they
maintain their principal place of business.
The Corporation has pursued a strategy of acquiring banks and financial
institutions throughout the major growth areas of Florida, Georgia, Mississippi,
North Carolina, South Carolina and Tennessee. The purpose of this expansion is
to give the Corporation business development opportunities in metropolitan
markets with favorable prospects for population and per capita income growth.
As a routine part of its business, the Corporation evaluates opportunities
to acquire bank holding companies, banks and other financial institutions. In
addition, in the normal course of its business, the Corporation seeks out and
receives inquiries from financial institutions regarding the possible
acquisition of such institutions. The Corporation routinely evaluates these
opportunities. Thus, at any point in time, the number of acquisition
opportunities that may be available to the Corporation, as well as the stage of
development of such activity, are subject to change.
Since January 1, 1997 through the date hereof, the Corporation or one of
its affiliates has acquired, or executed agreements to acquire, six financial
institutions (or certain of their assets and/or assume certain of their
liabilities) having total assets of approximately $5.9 billion, total loans of
approximately $1.2 billion and total deposits of approximately $5.6 billion. The
aggregate consideration paid or payable by the Corporation or its affiliates in
these six transactions aggregates approximately 1.3 million shares of the
Corporation's Common Stock with a market value at the time of issuance of
approximately $49.3 million, and approximately $515.9 million of cash. These six
transactions serve to further the Corporation's strategy of expanding and
diversifying its customer base in selected markets with favorable prospects for
growth. Four of these transactions have been consummated as of the date of this
Prospectus Supplement, and as discussed below, two of these transactions are
scheduled to be consummated during the first two quarters of 1998 and are
subject to certain closing conditions and regulatory approvals.
On October 15, 1997, the Corporation executed an agreement with Barnett
Banks, Inc. to acquire First of America Bank-Florida, FSB for a purchase price
of $160 million payable in cash, recognizing related goodwill of approximately
$70 million which will be amortized over a twenty-year period on a straight-line
basis. Through this acquisition, the Corporation expects to add total assets,
loans and deposits of approximately $1.1 billion, $0.8 billion and $0.9 billion,
respectively, and 58 branches, primarily on the West Coast of Florida.
On December 3, 1997, the Corporation, through its subsidiary, SouthTrust
Bank, entered into an agreement to assume deposits and acquire certain assets
associated with 27 branches of Home Savings of America, FSB, a subsidiary of
H.F. Ahmanson & Company, for a deposit premium of approximately $300 million
payable in cash. This premium, which is tax deductible, will be amortized over a
ten-year period on a straight-line basis. The branches to be acquired are
located in various cities and metropolitan areas on the East Coast of Florida,
including Boca Raton, Coral Gables, Fort Lauderdale, Hollywood, Miami Beach and
South Miami Beach. In connection with the transaction, SouthTrust Bank will
assume approximately $3.4 billion in
S-3
<PAGE> 4
deposits and will acquire cash, the banking premises associated with such
branches and a limited amount of loans associated with the deposits. SouthTrust
Bank will receive approximately $3.3 billion in cash at closing. This cash may
be used to purchase investment securities or short-term investments, reduce
short-term borrowings, or increase loans; subject to demand for new loans and
depending on prevailing market interest rates for earning assets and
interest-bearing liabilities at that time.
The Corporation's headquarters are located at 420 North 20th Street,
Birmingham, Alabama 35203 and its telephone number is (205) 254-5000.
RECENT FINANCIAL RESULTS
The Corporation announced its results of operations and financial condition
for the year ended December 31, 1997 in a press release dated January 12, 1998.
This press release was filed as an exhibit to the Corporation's Current Report
on Form 8-K dated January 12, 1998, and is incorporated herein by reference. The
following numbers are currently unaudited.
Net income for 1997 totaled $306.7 million, an increase of 20% over the
$254.7 million reported for the year ended December 31, 1996, resulting in
returns on average assets and average stockholders' equity of 1.08% and 15.72%,
respectively. Diluted net income per share for the year ended December 31, 1997
was $3.05 versus $2.69 for the year ended December 31, 1996, an increase of 13%.
The taxable equivalent net interest margin was 3.94% for the year ended December
31, 1997 compared to 4.03% for the comparable period in 1996.
Total assets increased 18%, reaching a level of $30.9 billion as of
December 31, 1997, compared to the December 31, 1996 level of $26.2 billion.
Loans, net of unearned income at December 31, 1997 totaled $22.5 billion, an
increase of 16% over the 1996 year-end total. Deposits were $19.6 billion at
year-end 1997, an increase of $2.3 billion or 13% from the 1996 year-end level
of $17.3 billion. Stockholders' equity increased to $2.2 billion as of December
31, 1997, reflecting a 26% increase over the December 31, 1996 total of $1.7
billion.
Non-performing assets at December 31, 1997 were $180.4 million or 0.80% of
net loans and other real estate owned, compared to $139.0 million and 0.72%,
respectively, at December 31, 1996. The allowance for loan losses increased
$45.6 million or 17% during 1997 to $315.5 million at December 31, 1997. The
allowance as a percentage of year-end net loans remained unchanged at 1.40% for
both the 1996 and 1997 year-end periods.
USE OF PROCEEDS
The Corporation intends to use the net proceeds from the sale of the shares
of Common Stock offered hereby primarily for general corporate and working
capital purposes, including funding investments in, or extensions of credit to,
its banking and nonbanking subsidiaries. In addition, some portion of the net
proceeds of the Offering may be used to fund the pending acquisitions discussed
above. Depending on market conditions, the type of acquisition opportunities
presented to the Corporation and other factors, some portion of such net
proceeds may be used to fund the acquisition of other financial institutions.
Pending such use, the Corporation may temporarily invest the net proceeds in
investment grade securities. The precise amounts and the timing of the
application of proceeds will depend upon the funding requirements of the
Corporation and its subsidiaries as well as the availability of other funds.
S-4
<PAGE> 5
CAPITALIZATION
The following table sets forth the actual consolidated capitalization of
the Corporation and its subsidiaries as of September 30, 1997 and as adjusted at
that date to give effect to the issuance by the Corporation of 2,593,800 shares
of Common Stock pursuant to the Corporation's Prospectus Supplement dated
October 9, 1997. Such shares of Common Stock were offered to the public at a
price of $51.00 per share and the Corporation received net proceeds from the
offering of $49.35 per share, or a total of $128,004,030. The as adjusted column
also reflects the issuance by the Corporation of the 4,000,000 shares of Common
Stock offered hereby and the related expenses.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------
ACTUAL AS ADJUSTED
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(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT
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............ 200,000 200,000
---------- ----------
Total subordinated........................................ 725,000 725,000
Other:
Bank Notes................................................ 250,000 250,000
Other..................................................... 6,893 6,893
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Total other............................................... 256,893 256,893
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Total long-term debt.............................. 981,893 981,893
---------- ----------
STOCKHOLDERS' EQUITY
Common Stock, par value $2.50 per share; 300,000,000
shares authorized; 100,451,728 shares issued and
107,045,528 shares issued as adjusted.................. 251,129 267,614
Capital surplus........................................... 491,986 817,085
Retained earnings......................................... 1,264,581 1,264,581
Unrealized gain on securities available for sale.......... 18,288 18,288
Treasury stock at cost (658,115 shares)................... (10,905) (10,905)
---------- ----------
Total stockholders' equity........................ 2,015,079 2,356,663
---------- ----------
Total long-term debt and stockholders' equity..... $2,996,972 $3,338,556
========== ==========
</TABLE>
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<PAGE> 6
MARKET PRICE AND DIVIDENDS
The Common Stock of the Corporation is quoted on Nasdaq under the symbol
SOTR. As of January 21, 1998, the Corporation had approximately 14,999 holders
of record of its Common Stock. The following table sets forth the high and low
closing price per share of the Common Stock as reported by Nasdaq and the per
share dividends declared by the Corporation for the quarters indicated. On
January 22, 1998, the last reported sale price of the Common Stock as reported
by Nasdaq was $55 1/8.
<TABLE>
<CAPTION>
PRICE* PER SHARE
------------------- DIVIDENDS
HIGH LOW DECLARED
-------- ------- ---------
<S> <C> <C> <C> <C> <C>
1996:
First Quarter....................................... 27 7/8 25 1/4 0.22
Second Quarter...................................... 28 1/2 26 7/8 0.22
Third Quarter....................................... 31 3/4 26 1/2 0.22
Fourth Quarter...................................... 36 1/8 30 7/8 0.22
1997:
First Quarter....................................... 41 5/8 34 1/2 0.25
Second Quarter...................................... 42 35 7/8 0.25
Third Quarter....................................... 50 15/16 39 3/8 0.25
Fourth Quarter...................................... 63 7/16 47 1/2 0.25
1998:
First Quarter (through January 22, 1998)............ 63 1/4 55 1/8 --
</TABLE>
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* The information listed above was obtained from the National Association of
Securities Dealers, Inc., and reflects interdealer prices, without retail
markup, markdown or commissions, and may not represent actual transactions.
Dividends paid by the Corporation on its Common Stock are at the discretion
of the Board of Directors and are affected by certain legal restrictions on the
payment of dividends as described below, the Corporation's earnings and
financial condition and other relevant factors. The Corporation has increased
the dividend paid on its Common Stock for 27 consecutive years. The current
policy of the Corporation is to pay dividends on a quarterly basis. Subject to
an evaluation of its earnings and financial condition and other factors,
including the legal restrictions on the payment of dividends as described below,
the Corporation anticipates that it will continue to pay regular quarterly
dividends with respect to the Common Stock.
There are certain limitations on the payment of dividends to the
Corporation by its bank subsidiary. As a national banking association, the
amount of dividends that the Corporation's subsidiary bank may declare in one
year, without approval of the Office of the Comptroller of the Currency (the
"Comptroller"), is the sum of the bank's net profits for that year and its
retained net profits for the preceding two years. Under rules promulgated by the
Comptroller, the calculation of net profits is more restrictive under certain
circumstances. Under the foregoing laws and regulations, at September 30, 1997,
approximately $403.9 million was available for payment of dividends to the
Corporation by its bank subsidiary.
S-6
<PAGE> 7
SELECTED FINANCIAL DATA
The following selected financial data are derived from the consolidated
financial statements of the Corporation. This information should be read in
conjunction with, and is qualified by reference to, the more detailed
information contained in the Consolidated Financial Statements of the
Corporation and Notes thereto included in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1996 and the Quarterly Report on Form
10-Q for the quarter ended September 30, 1997, which are incorporated herein by
reference. The results of operations for the nine months ended September 30,
1997 and 1996 are not audited but, in the opinion of management, include all
adjustments necessary for a fair presentation of the results of operations for
such periods. The results for the nine months ended September 30, 1997,
including net interest margin and rate of return ratios which are stated on an
annualized basis, are not necessarily indicative of the results that may be
expected for the full year or any other interim period.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARIZED INCOME STATEMENT (IN
THOUSANDS):
Net interest income.................... $772,375 $630,001 $866,026 $693,200 $607,545 $529,808 $445,150
Provision for loan losses.............. 68,879 62,830 90,027 61,286 44,984 45,032 43,305
Non-interest income.................... 195,820 185,578 254,809 208,664 184,778 174,702 136,683
Non-interest expense................... 549,186 471,732 643,298 536,534 485,999 434,951 373,636
Income tax expense..................... 125,375 94,732 132,807 105,039 88,338 73,992 50,646
Net income............................. 224,755 186,285 254,703 199,005 173,002 150,535 114,246
PER SHARE DATA:
Net income............................. $ 2.25 $ 1.98 $ 2.69 $ 2.36 $ 2.15 $ 1.94 $ 1.66
Cash dividends declared................ 0.75 0.66 0.88 0.80 0.68 0.60 0.52
Stockholders' equity at period end..... 20.19 17.47 18.05 16.28 13.94 13.25 11.55
END OF PERIOD TOTALS (IN MILLIONS):
Loans, net of unearned income.......... $ 21,668 $ 18,058 $ 19,331 $ 14,655 $ 12,122 $ 9,448 $ 7,547
Total securities....................... 5,769 4,604 4,816 4,200 3,953 3,733 3,756
Total assets........................... 29,764 24,776 26,223 20,787 17,632 14,708 12,714
Deposits............................... 19,011 16,625 17,306 14,575 12,801 11,515 10,082
Long-term debt......................... 982 784 983 535 389 324 238
Stockholders' equity................... 2,015 1,678 1,735 1,431 1,135 1,052 860
Common shares outstanding (in
thousands)........................... 99,794 96,052 96,139 87,904 81,426 79,401 74,477
SELECTED FINANCIAL RATIOS(1):
Return on average total assets......... 1.07% 1.10% 1.09% 1.05% 1.09% 1.10% 1.04%
Return on average stockholders'
equity............................... 15.91 15.89 15.92 15.79 15.86 15.84 15.66
Net interest margin -- taxable
equivalent........................... 3.96 4.03 4.03 4.01 4.23 4.35 4.61
Efficiency ratio....................... 56.36 57.21 56.86 58.57 60.15 60.28 62.19
Non-interest expense as % of average
total assets......................... 2.62 2.78 2.76 2.83 3.05 3.19 3.39
Nonperforming assets as % of net loans
and other real estate owned.......... 0.81 0.79 0.72 0.83 0.84 1.19 1.69
Nonperforming loans as % of net
loans................................ 0.53 0.55 0.44 0.52 0.44 0.71 0.96
Allowance for loan losses as % of net
loans................................ 1.43 1.40 1.40 1.41 1.42 1.43 1.38
Allowance for loan losses as % of
nonperforming loans.................. 268.38 256.17 317.57 271.88 324.55 200.70 143.35
Net charge-offs as % of average net
loans................................ 0.23 0.29 0.28 0.22 0.19 0.29 0.49
Stockholders' equity to assets......... 6.77 6.77 6.62 6.88 6.44 7.15 6.77
REGULATORY CAPITAL RATIOS(2):
Tier I risk-based capital.............. 7.37% 7.57% 7.34% 7.76% 7.68% 8.55% 8.67%
Total risk-based capital............... 11.38 11.23 11.81 12.21 11.71 12.39 12.18
Leverage ratio......................... 6.14 6.37 6.21 6.35 6.10 6.51 6.48
</TABLE>
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(1) Interim period ratios are annualized where appropriate.
(2) Calculated under the risk-based and leverage capital guidelines of the
Federal Reserve Board applicable to bank holding companies. Under these
guidelines, regulatory required minimums are 4% and 8% for Tier I and Total
Capital ratios, respectively. The leverage ratio must be maintained at a
level generally considered to be in excess of 4% to 5%.
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<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the financial statements
and the detailed financial information, including the related management's
discussion and analysis, contained in the Corporation's Annual Report on Form
10-K for the year ended December 31, 1996 and the Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997 which are incorporated by reference in
this Prospectus Supplement.
EARNINGS SUMMARY
For the nine months ended September 30, 1997, net income was $224.8 million
or $2.25 per share, compared to $186.3 million or $1.98 per share for the nine
months ended September 30, 1996. Net income for the nine months ended September
30, 1997 resulted in returns on average total assets and average stockholders'
equity of 1.07% and 15.91%, 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 Corporation. 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%.
Interest yields, net interest margins and net interest spreads are
calculated using the underlying earning assets' cost basis.
Net interest income for the nine months ended September 30, 1997 was $780.0
million, an increase of $140.9 million or 22% from $639.1 million for the nine
months ended September 30, 1996. During the year, total interest income
increased $329.3 million or 25% to $1,650.7 million in the nine months ended
September 30, 1997 compared to the comparable period in 1996. These increases
are primarily attributable to an increase in loans, net of unearned income, of
approximately $3.6 billion at September 30, 1997, compared to September 30,
1996.
Total interest expense increased $188.4 million or 28% for the nine months
ended September 30, 1997 to $870.7 million. This increase reflects an increase
in the level of average interest-bearing liabilities of 28% to $23,559.3 million
as of September 30, 1997. The average rate paid on interest-bearing liabilities
increased one basis point to 4.94% for the nine months ended September 30, 1997
compared to the comparable period in 1996.
The taxable equivalent net interest margin was 3.96% for the first nine
months of 1997 compared to 4.03% for the first nine months of 1996. The taxable
equivalent net interest spreads for the first nine months in 1997 and 1996 were
3.44% and 3.40%, respectively. The net interest spread is affected by
competitive pressures, Federal Reserve Bank monetary policies and the
composition of interest-earning assets and interest-bearing liabilities,
including the interest component of the Corporation's funding activity.
Provision For Loan Losses. The provision for loan losses for the nine
months ended September 30, 1997 was $68.9 million, an increase of $6.1 million
over the level of $62.8 million during the first nine months of 1996. This
increase was the result of overall growth in the loan portfolio. For the first
nine months of 1997, net charge-offs totaled $34.8 million or 0.23% of average
net loans. During the first nine months of 1996, net charge-offs were $35.2
million or 0.29% of average net loans.
Non-Interest Income. For the nine months ended September 30, 1997, total
non-interest income increased $10.2 million or 6% to $195.8 million. During the
period, service charges on deposit accounts increased $14.8 million or 19% to
$94.3 million. Mortgage banking fees were $20.0 million, a decrease of $10.8
million or 35% from 1996. Trust fees increased 13% to $17.9 million, bank card
fees increased $0.7 million or 5% to $17.1 million, other fee income increased
$4.4 million or 16% to $31.4 million, and other non-interest income decreased
15% to $13.6 million. Included in other non-interest income during the first
nine months of 1996 were gains from the sale of certain commercial and
commercial real estate loans totaling $5.6 million.
There were no other significant non-recurring non-interest income items
during the nine month periods ended September 30, 1997 and September 30, 1996.
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<PAGE> 9
Non-Interest Expense. Total non-interest expense for the nine months ended
September 30, 1997 was $549.2 million, an increase of $77.5 million or 16% over
the first nine months of 1996. The ratio of non-interest expense to average
total assets for the first nine months of 1997 was 2.62% compared to 2.78% in
the first nine months of 1996.
Salaries and employee benefits accounted for the largest portion of total
non-interest expense as well as the largest portion of the increase. Salaries
and employee benefits expense increased $56.5 million or 23% to $298.1 million
for 1997. The number of full time equivalent employees increased approximately
14% from September 30, 1996 to approximately 10,000 at September 30, 1997. Net
occupancy expense increased $6.3 million or 17% for the year, primarily as a
result of the growth in the number of banking offices to over 530 at September
30, 1997 from 505 at September 30, 1996. Equipment expense increased $6.3
million or 24% to $33.0 million for the nine month period ended September 30,
1997. All other non-interest expense items totaled $174.5 million for the nine
month period ended September 30, 1997, reflecting an increase of 5% over the
comparable period in 1996. Included in other expenses during the 1996 nine month
period were deposit insurance expenses totaling $20.5 million, which included a
special assessment of $14.0 million related to recapitalization of the Savings
Association Insurance Fund. There were no other significant non-recurring
non-interest expense items recorded in the nine month periods ended September
30, 1997 or September 30, 1996.
Income tax expense for the 1997 nine month period was $125.4 million for an
effective rate of 35.8% compared to $94.7 million or an effective rate of 33.7%
in the 1996 nine month period. The statutory federal income tax rate was 35% in
1997 and 1996. The 1996 effective tax rate was lower than the 1997 rate
primarily due to the reversal of approximately $4.5 million of accrued tax that
will not be paid as a result of legislation enacted during the third quarter of
1996 which rescinded a previous law requiring the recapture of certain bad debt
deductions previously deducted by thrift institutions upon their conversion from
a thrift charter to a bank charter.
SUMMARY OF FINANCIAL CONDITION
Total assets at September 30, 1997 were $29.8 billion, representing an
increase of $5.0 billion or 20% from September 30, 1996. At December 31, 1996,
total assets were $26.2 billion. During the nine month period ended September
30, 1997, $1.5 billion in assets were added through the acquisition of four
financial institutions. The remaining increase in total assets resulted from
internally generated growth. Average total assets for the first nine months of
1997 were $28.0 billion compared to $22.7 billion for the comparable period in
1996.
Year-to-date average earning assets at September 30, 1997 were $26.3
billion, representing an increase of 24% over the September 30, 1996 level of
$21.2 billion. Average interest-bearing liabilities through September 30, 1997
were $25.7 billion, up 24% over the September 30, 1996 level of $20.7 billion.
Loans. Loans, net of unearned income at September 30, 1997 totaled
$21,667.8 million compared to $19,331.1 million at December 31, 1996.
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The following table presents loans by type and percent of total at the end
of the periods presented.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
------------------- ----------------- -----------------
AMOUNT % AMOUNT % AMOUNT %
---------- ------ --------- ----- --------- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural.................. $ 6,971.4 32.0% $ 6,847.5 35.2% $ 5,965.9 40.4%
Real estate construction........ 2,539.6 11.6 1,930.6 9.9 1,245.8 8.4
Commercial real estate
mortgage...................... 3,516.3 16.1 3,008.9 15.5 2,264.7 15.4
Residential real estate
mortgage...................... 5,593.2 25.6 4,687.5 24.0 3,221.4 21.8
--------- ----- --------- ----- --------- -----
Total real estate loans....... 11,649.1 53.3 9,627.0 49.4 6,731.9 45.6
Loans to individuals............ 3,196.2 14.7 2,992.1 15.4 2,059.3 14.0
--------- --------- ---------
21,816.7 100.0 19,466.6 100.0 14,757.1 100.0
----- ----- -----
Unearned income................. (148.9) (135.5) (101.9)
--------- --------- ---------
Loans, net of unearned income... 21,667.8 19,331.1 14,655.2
Allowance for loan losses..... (310.7) (269.9) (206.6)
--------- --------- ---------
Net loans..................... $21,357.1 $19,061.2 $14,448.6
========= ========= =========
</TABLE>
Non-Performing Assets. Non-performing assets at September 30, 1997 were
$175.9 million or 0.81% of net loans and other real estate owned, representing
an increase of $36.9 million from the December 31, 1996 level of $139.0 million.
Included in non-performing assets at September 30, 1997 were $115.2 million of
loans on non-accrual status, $60.1 million of other real estate owned and other
repossessed assets, and $0.6 million of restructured loans. Loans 90 days past
due and accruing were $50.9 million at September 30, 1997 compared to $40.4
million at December 31, 1996.
Allowance for Loan Losses. The allowance for loan losses at September 30,
1997 was $310.7 million or 1.43% 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 Corporation'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.
Held-to-maturity and Available-for-sale Securities. At September 30, 1997,
total securities were $5,768.9 million. Held-to-maturity securities amounted to
$2,419.1 million and securities classified as available-for-sale amounted to
$3,349.8 million.
Held-to-maturity securities increased 24% from the year-end 1996 level to
$2,419.1 million, and included U.S. Treasury securities of $1.5 million, U.S.
Government agency securities of $1,680.2 million, collateralized mortgage
obligations (CMOs) and other mortgage-backed securities of $521.7 million,
state, county and municipal securities of $180.0 million and other securities of
$35.7 million.
Available-for-sale securities included U.S. Treasury securities of $217.8
million, U.S. Government agency securities of $809.3 million, CMOs and other
mortgage backed securities of $2,000.7 million, state, county and municipal
securities of $4.4 million and other securities of $317.6 million.
At September 30, 1997, the Corporation's investment portfolio included
$879.7 million in CMOs. CMOs present some degree of risk that the mortgages
collateralizing them may be prepaid, 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.
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<PAGE> 11
The amortized cost and approximate fair value of the Corporation's
held-to-maturity and available-for-sale securities at September 30, 1997 and
September 30, 1996 are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------- ----------------------------------------------
1997 1996 1995
--------------------- --------------------- ---------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE
--------- -------- --------- -------- --------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Held-to-maturity
securities............... $2,419.1 $2,452.0 $1,956.6 $1,979.1 $1,585.6 $1,619.1
Available-for-sale
securities............... 3,320.8 3,349.8 2,871.0 2,859.0 2,630.4 2,614.8
-------- -------- -------- -------- -------- --------
Total.................... $5,739.9 $5,801.8 $4,827.6 $4,838.1 $4,216.0 $4,233.9
======== ======== ======== ======== ======== ========
</TABLE>
Short-Term Investments. Short-term investments at September 30, 1997
totaled $461.7 million, reflecting an increase of $236.2 million from the
December 31, 1996 level of $225.5 million. At September 30, 1997, short-term
investments consisted of $72.1 million in federal funds sold and securities
purchased under resale agreements, $19.6 million in time deposits with other
banks and $370.1 million in assets held for sale. Assets held for sale consisted
of $333.7 million in mortgage loans in the process of being securitized and sold
to third party investors and $36.3 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.
The Corporation's Asset/Liability Management Committee monitors current and
future expected economic conditions, as well as the Corporation's liquidity
position in determining desired balances of short-term investments and
alternative uses of such funds.
Other Assets. Other assets at September 30, 1997 were $1,339.9 million
compared to $1,217.7 million at December 31, 1996. At September 30, 1997, other
assets included premises and equipment of $575.0 million, due from customers on
acceptances of $9.3 million, other real estate owned and other repossessed
assets of $60.1 million, mortgage servicing rights of $35.6 million, other
intangible assets of $234.0 million and other non-earning assets of $425.9
million.
Cash and due from banks was $836.7 million at September 30, 1997, a
decrease of $66.4 million from $903.1 million at December 31, 1996.
FUNDING
The Corporation's funding sources can be divided into four broad
categories: deposits, short-term borrowings, Federal Home Loan Bank advances and
long-term debt.
Deposits. Deposits are the Corporation's primary source of funding. Total
deposits at September 30, 1997 were $19,010.9 million, up 10% from the December
31, 1996 level of $17,305.5 million. At September 30, 1997, total deposits
included interest-bearing deposits of $16,890.2 million and other deposits of
$2,120.7 million.
Core deposits, defined as demand deposits and time deposits less than
$100,000, totaled $16,345.1 million or 86.0% of total deposits at September 30,
1997. This compares to core deposits of $14,954.3 million or 86.4% of total
deposits at December 31, 1996.
Short-Term Borrowings. Short-term borrowings at September 30, 1997 were
$4,779.1 million and included federal funds purchased of $2,233.9 million,
securities sold under agreements to repurchase of $1,399.4 million and other
borrowed funds of $1,145.8 million. At September 30, 1997, total short-term
borrow.ings were 16.1% 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 more attractive rates when compared to other mid-term financing
options. FHLB advances totaled $2,532.4 million at September 30, 1997. The
current quarter end balance increased $788.2 million or 45% from the level
outstanding at December 31, 1996.
Long-Term Debt. At September 30, 1997, total long-term debt was $981.9
million representing a decrease of $1.3 million, resulting from repayments, from
the December 31, 1996 level of $983.2 million.
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<PAGE> 12
During the first nine months of 1997, the Corporation and its subsidiary bank
issued no additional long-term debt.
CAPITAL
At September 30, 1997, total stockholders' equity was $2,015.1 million or
6.8% of total assets compared to $1,734.9 million or 6.6% at December 31, 1996.
During the first nine months net income added $224.8 million to capital. Sales
of Common Stock through the Corporation's Dividend Reinvestment Plan and various
stock purchase and stock option plans of the Corporation for an aggregate
issuance price of $7.9 million resulted in the issuance of 317,918 additional
shares. The Corporation issued 57,653 shares through its Long-Term Incentive
Plan, adding $1.4 million to equity. An offering of 2,023,012 shares of Common
Stock increased equity by $72.1 million. Equity added in business combinations
increased equity by $23.4 million or 1,270,031 shares of Common Stock. Treasury
stock purchases for 13,807 shares of Common Stock reduced equity by $0.5
million. Dividends declared during the period were $0.75 per share and
aggregated $74.6 million. The net unrealized gain on securities available for
sale increased $25.8 million from the $7.5 million unrealized loss at December
31, 1996 to $18.3 million at September 30, 1997.
Pursuant to a Prospectus Supplement dated October 9, 1997, the Corporation
completed an offering of 2,593,800 shares of Common Stock, increasing equity by
$128.0 million in the fourth quarter of 1997.
The Corporation is subject to the capital adequacy guidelines adopted by
the Federal Reserve Board, which is the regulatory agency that governs bank
holding companies. The Corporation's capital ratios and those of the subsidiary
bank are in excess of these regulatory requirements and management expects that
these ratios will continue to be maintained well above the minimum levels
required by the regulators.
At September 30, 1997 the Corporation had a total risk-based capital ratio
of 11.38%, consisting of a Tier I capital ratio of 7.37% and supplemental
capital elements of 4.01%. The leverage ratio was 6.14%.
COMMITMENTS
The Corporation's subsidiary bank had standby letters of credit outstanding
of approximately $605.6 million at September 30, 1997 and $595.1 million at
December 31, 1996. The Corporation's subsidiary bank had outstanding commitments
to extend credit of approximately $6,748.3 million at September 30, 1997 and
$6,319.9 million at December 31, 1996. The Corporation'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.
Presently the Corporation has no commitments for significant capital
expenditures.
The Corporation's subsidiaries regularly originate and sell loans,
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
$1,152.3 million at September 30, 1997 and $1,163.6 million at December 31,
1996. Under terms of the recourse agreements, the Corporation 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
one-to-four family residential properties. Potential losses under these recourse
agreements are affected by the collateral value of the particular loans
involved. Estimates of losses are recognized when the mortgages are sold.
INTEREST RATE RISK MANAGEMENT
The Corporation'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 Corporation 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 Corporation's asset/liability management
strategies, the Corporation utilizes interest rate swap agreements ("Swaps") to
hedge certain longer-term liabilities, converting the effective rate
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<PAGE> 13
paid on the hedged liabilities to a floating rate from a fixed rate. All Swaps
employed by the Corporation 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 September 30, 1997, the contractual
maturities of Swaps ranged from September 1998 to June 2009 with aggregated
notional amounts of $945.0 million.
CONTINGENCIES
Certain of the Corporation'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 Corporation and include
alleged compensatory and punitive damages.
In addition, subsidiaries of the Corporation have been named as defendants
in suits that allege fraudulent, deceptive or collusive practices in connection
with certain financing activities. Some of these suits are filed as class
actions. 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 at this point
in time, the potential exposure related to punitive damages in connection with
these suits, the Corporation, in the opinion of management, and based upon
consultation with legal counsel, believes that the ultimate resolutions of these
proceedings will not have a material adverse effect on the Corporation's
financial statements.
S-13
<PAGE> 14
TAXATION OF NON-U.S. STOCKHOLDERS
The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and certain other
foreign stockholders (collectively, "Non-U.S. stockholders") are extensive and
complex. Set forth below is a summary of only some of the salient provisions of
such rules. PROSPECTIVE NON-U.S. STOCKHOLDERS ARE ADVISED TO CONSULT WITH THEIR
OWN TAX ADVISORS TO DETERMINE THE IMPACT OF FEDERAL, STATE, FOREIGN AND LOCAL
INCOME TAX LAWS WITH REGARD TO AN INVESTMENT IN THE COMMON STOCK, INCLUDING ANY
REPORTING REQUIREMENTS.
Distributions to Non-U.S. stockholders with respect to the Common Stock
will be treated as dividends to the extent that they are made out of current or
accumulated earnings and profits of the Corporation. Such distributions
ordinarily will be subject to a withholding tax equal to 30% of the gross amount
of the distribution unless an applicable tax treaty reduces that tax. However,
if income from the investment in the Common Stock is treated as effectively
connected with the Non-U.S. stockholder's conduct of a U.S. trade or business,
the Non-U.S. stockholder generally will be subject to U.S. federal income tax at
graduated rates in the same manner as U.S. stockholders are taxed with respect
to such distributions (and also may be subject to the 30% branch profits tax in
the case of a Non-U.S. stockholder that is a non-U.S. corporation). The
Corporation expects to withhold U.S. federal income tax at the rate of 30% on
the gross amount of any such distributions made to a Non-U.S. stockholder unless
(i) a lower treaty rate applies and any required form evidencing eligibility for
that reduced rate is filed with the Corporation or (ii) the Non-U.S. stockholder
files an IRS Form 4224 with the Corporation claiming that the distribution is
effectively connected income. The United States Treasury Department has issued
regulations regarding the withholding rules as applied to Non-U.S. stockholders
that unify current certification procedures and forms and unify reliance
standards but generally do not substantially alter the current system of
withholding compliance. These regulations will be generally effective with
respect to distributions made after December 31, 1998, subject to certain
transition rules.
Distributions in excess of current and accumulated earnings and profits of
the Corporation will not be taxable to a Non-U.S. stockholder to the extent that
such distributions do not exceed the adjusted basis of the stockholder's Common
Stock, but rather will reduce the adjusted basis of such shares. To the extent
that distributions in excess of current and accumulated earnings and profits
exceed the adjusted basis of a Non-U.S. stockholder's Common Stock, such
distributions will give rise to U.S. federal income tax liability if the
Non-U.S. stockholder would otherwise be subject to U.S. federal income tax on
any gain from the sale or disposition of the Common Stock. Because it generally
cannot be determined at the time a distribution is made whether or not such
distribution will be in excess of current and accumulated earnings and profits,
the entire amount of any distribution normally will be subject to withholding at
the same rate as a dividend. Amounts so withheld are refundable to the extent it
is determined subsequently that such distribution was, in fact, in excess of
current and accumulated earnings and profits of the Corporation.
Gain realized by a Non-U.S. stockholder on the sale, exchange, redemption
or other disposition of Common Stock is not subject to U.S. federal income tax
unless (1) the gain is effectively connected with a United States trade or
business of the Non-U.S. stockholder, in which case the gain is generally
subject to graduated U.S. federal income tax, (2) in the case of a Non-U.S.
stockholder who is a non-resident alien individual, the individual is present in
the United States for 183 days or more during the year of disposition and either
has a United States tax home or the gain is attributable to an office or other
fixed place of business maintained by the individual within the United States,
in which case the gain is subject to 30% U.S. federal income tax, or (3)(a) the
Corporation is or has been during certain periods preceding the disposition a
"U.S. real property holding corporation" for U.S. federal income tax purposes
(which the Corporation does not believe it is or is likely to become) and, (b)
assuming that the Common Stock will be "regularly traded on an established
securities market" for tax purposes, the Non-U.S. stockholder held, directly or
indirectly, at any time during the five-year period ending on the date of
disposition, more than 5% of the outstanding Common Stock of the Corporation.
On October 6, 1997, the Internal Revenue Service issued final regulations
relating to withholding, information reporting and backup withholding that unify
current certification procedures and forms and clarify
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<PAGE> 15
reliance standards (the "Final Regulations"). The Final Regulations generally
will be effective with respect to payments made after December 31, 1998. Except
as provided below, this section describes rules applicable to payments made on
or before December 31, 1998.
United States backup withholding tax generally will not apply to dividends
paid on Common Stock to a Non-U.S. stockholder at an address outside the United
States. The Corporation must report annually to the Internal Revenue Service and
to each Non-U.S. stockholder the amount of dividends paid to, and the tax
withheld with respect to, such holder, regardless of whether any tax was
actually withheld. This information may also be made available to the tax
authorities in the Non-U.S. stockholder's country of residence.
Upon the sale or other taxable disposition of Common Stock by a Non-U.S.
stockholder to or through a United States office of a broker, the broker must
backup withhold at a rate of 31% and report the sale to the Internal Revenue
Service, unless the holder certifies its Non-U.S. status under penalties of
perjury or otherwise establishes an exemption. Upon the sale or other taxable
disposition of Common Stock by a Non-U.S. stockholder to or through the foreign
office of a United States broker, or a foreign broker with certain types of
relationships to the United States, the broker must report the sale to the
Internal Revenue Service (but not backup withhold), unless the broker has
documentary evidence in its files that the seller is a Non-U.S. stockholder
and/or certain other conditions are met, or the holder otherwise establishes an
exemption.
Amounts withheld under the backup withholding rules generally are allowable
as a credit against such Non-U.S. stockholder's U.S. federal income tax
liability (if any), which may entitle such Non-U.S. stockholder to a refund,
provided that the required information is furnished to the Internal Revenue
Service.
The Final Regulations eliminate the general prior legal presumption that
dividends paid to an address in a foreign country are paid to a resident of that
country. In addition, the Final Regulations impose certain certification and
documentation requirements on Non-U.S. stockholders claiming the benefit of a
reduced withholding rate with respect to dividends under a tax treaty or
otherwise claiming a reduction of, or exemption from, the withholding obligation
described above.
PROSPECTIVE PURCHASERS OF THE COMMON STOCK ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS AS TO THE EFFECT, IF ANY, OF THE FINAL REGULATIONS ON THEIR
PURCHASE, OWNERSHIP AND DISPOSITION OF THE COMMON STOCK.
Common Stock owned or treated as owned by an individual Non-U.S.
stockholder who is not a citizen or resident (as specially defined for U.S.
federal estate tax purposes) of the United States at the time of death will be
included in such individual's gross estate for the U.S. federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
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<PAGE> 16
UNDERWRITING
Subject to the terms and conditions set forth in the International
Underwriting Agreement, the Corporation has agreed to sell to Merrill Lynch
International (the "International Underwriter"), and the International
Underwriter has agreed to purchase from the Corporation, 800,000 shares of
Common Stock.
The Common Stock will be offered simultaneously in the United States by the
U.S. Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated
is acting as representative (the "Representative"), and abroad by the
International Underwriter subject to the terms and conditions set forth in the
International Underwriting Agreement between the International Underwriter and
the Corporation as described herein. The U.S. Underwriting Agreement and the
International Underwriting Agreement are collectively referred to as the
"Underwriting Agreements."
The Corporation has been informed that the Underwriters have entered into
an agreement (the "Intersyndicate Agreement") providing for the coordination of
their activities. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and the International Underwriter are permitted to sell shares of
Common Stock to each other for purposes of resale.
The Underwriters are committed to purchase all of the 4,000,000 shares of
Common Stock offered hereby if any are purchased; provided that the Corporation
is not obligated to sell, and the International Underwriter is not obligated to
purchase, any of the 800,000 shares being sold pursuant to the International
Underwriting Agreement unless all of the 3,200,000 shares being sold pursuant to
the U.S. Underwriting Agreement are contemporaneously purchased by the U.S.
Underwriters. Under certain circumstances the commitments of nondefaulting
Underwriters may be increased as set forth in the Underwriting Agreements.
The Corporation has granted the Underwriters an option, exercisable for
thirty days after the date of this Prospectus Supplement, to purchase up to an
aggregate of 600,000 additional shares of Common Stock to cover over-allotments,
if any, at the public offering price less the underwriting discount. If the
Underwriters exercise this option, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase approximately the same
percentage thereof which the number of shares of Common Stock purchased by it in
the Offering is of the 4,000,000 shares of Common Stock initially offered
hereby. The Underwriters may exercise such option only to cover over-allotments
in connection with the sale of the 4,000,000 shares offered hereby.
The Underwriters propose initially to offer the shares to the public at the
public offering price set forth on the cover page of this Prospectus Supplement
and to certain dealers at such price less a concession not in excess of $.70 per
share. The Underwriters may allow, and such dealers may reallow, a discount not
in excess of $.10 per share on sales to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
Certain of the Underwriters, including the Representative, have from time
to time performed investment banking services for the Corporation for which they
received customary fees.
The Corporation has agreed that it will not, with certain exceptions,
offer, sell or otherwise dispose of any shares of Common Stock, or any
securities convertible into, or exchangeable for, Common Stock, for 90 days from
the date of this Prospectus Supplement without the prior written consent of the
Representative. This prohibition does not apply to shares issued by the
Corporation in connection with conversion rights in effect as of the date of the
Underwriting Agreement, employee benefit or shareholder plans of the Corporation
existing on the date of the Underwriting Agreement, or acquisitions by the
Corporation.
Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters to bid for and purchase the
Common Stock. As an exception to these rules, the Underwriters are permitted to
engage in certain transactions that stabilize the price of the Common Stock.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the offering (i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus Supplement),
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<PAGE> 17
they may reduce that short position by purchasing Common Stock in the open
market. The Underwriters may also elect to reduce any short position through the
exercise of all or part of the over-allotment options described above.
The Representative may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representative purchases
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, it may reclaim the
amount of the selling concession from the Underwriters and selling group members
who sold those shares as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Corporation nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Common Stock. In
addition, neither the Corporation nor any of the Underwriters makes any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
In connection with this Offering, the Underwriters or their respective
affiliates and selling group members (if any) who are qualified market makers on
Nasdaq may engage in "passive market making" in the Common Stock on Nasdaq in
accordance with Rule 103 of Regulation M under the Exchange Act. Rule 103
permits, upon the satisfaction of certain conditions, underwriters and selling
group members participating in a distribution that are also Nasdaq market makers
in the security being distributed (or a related security) to engage in limited
market making transactions during the period when Regulation M under the
Exchange Act would otherwise prohibit such activity. Rule 103 prohibits
underwriters and selling group members engaged in passive market making
generally from entering a bid or effecting a purchase at a price that exceeds
the highest bid for those securities displayed on Nasdaq by a market maker that
is not participating in the distribution. Under Rule 103, each underwriter or
selling group member engaged in passive market making is subject to a daily net
purchase limitation equal to 30% of such entity's average daily trading volume
during the two full consecutive calendar months immediately preceding the date
of the filing of the registration statement under the Securities Act pertaining
to the security to be distributed (or such related security).
Merrill Lynch International has represented and agreed that (a) it has not
offered or sold and, prior to the expiry of six months from the offering, will
not offer or sell in the United Kingdom any Common Stock to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (whether as principal
or agent) for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities Regulation
1995 or the Financial Services Act 1986 (the "1986 Act"), (b) it has complied
and will comply with all applicable provisions of the 1986 Act with respect to
anything done by it in relation to the Common Stock in, from or otherwise
involving the United Kingdom, and (c) it has only issued or passed on, and will
only issue or pass on, in the United Kingdom, any document received by it in
connection with the issue of the Common Stock, other than any document which
consists of or any part of listing particulars, supplementary listing
particulars or any other document required or permitted to be published by
listing rules under Part IV or the 1986 Act, to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom the document may
otherwise lawfully be issued or passed on.
The Corporation has agreed to indemnify the Underwriters against certain
civil liabilities, including liabilities under the Securities Act, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
S-17
<PAGE> 18
LEGAL OPINIONS
The legality of the shares offered hereby will be passed upon for the
Corporation by Bradley Arant Rose & White LLP and for the Underwriters by
Stroock & Stroock & Lavan LLP. As of December 31, 1997, the partners and
associates of Bradley Arant Rose & White LLP beneficially owned approximately
2,035,000 shares of Common Stock of the Corporation.
S-18
<PAGE> 19
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR THE UNDERWRITERS. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION SINCE THE DATE
HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER
OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
SouthTrust Corporation................ S-3
Recent Financial Results.............. S-4
Use of Proceeds....................... S-4
Capitalization........................ S-5
Market Price and Dividends............ S-6
Selected Financial Data............... S-7
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... S-8
Taxation of Non-U.S. Stockholders..... S-14
Underwriting.......................... S-16
Legal Opinions........................ S-18
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
SouthTrust Corporation................ 3
Use of Proceeds....................... 4
Regulatory Matters.................... 5
Description of Debt Securities........ 7
Description of Capital Stock.......... 17
Book-Entry Only Issuance of Offered
Securities.......................... 21
Limitations on Issuance of Bearer
Securities.......................... 24
Plan of Distribution.................. 25
Legal Opinions........................ 26
Experts............................... 26
</TABLE>
======================================================
======================================================
4,000,000 SHARES
(SOUTHTRUST CORPORATION LOGO)
COMMON STOCK
(PAR VALUE $2.50 PER SHARE)
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
MERRILL LYNCH INTERNATIONAL
January 22, 1998
======================================================
