<PAGE> 1
================================================================================
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
---------------------------------------------
Commission File Number 0-3613
SOUTHTRUST CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 63-0574085
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
420 North 20th Street, Birmingham, Alabama 35203
(Address of principal executive officers) (Zip Code)
(205) 254-5530
(Registrant's telephone number, including area code)
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 proceeding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
At March 31, 1999, 167,324,797 shares of the Registrant's Common Stock, $2.50
par value were outstanding.
================================================================================
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Statement Description Page No.
- --------------------------------------------------------------------------------
Consolidated Condensed Balance Sheets
March 31, 1999, December 31, 1998,
and March 31, 1998 3
Consolidated Condensed Statements of Income
Three months ended March 31, 1999 and 1998 4
Consolidated Condensed Statements of Stockholders' Equity
Three months ended March 31, 1999 and 1998 5
Consolidated Condensed Statements of Cash Flows
Three months ended March 31, 1999 and 1998 6
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,
1999 and 1998. Results of operations for the interim 1999 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, 1998. The accounting
policies employed are the same as those shown in Note A to the Consolidated
Financial Statements on Form 10-K.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Management's Discussion and Analysis of the registrant is included on Pages
13-31.
2
<PAGE> 3
SOUTHTRUST CORPORATION
Consolidated Condensed Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31 December 31 March 31
(Dollars in thousands) 1999 1998 1998
ASSETS
<S> <C> <C> <C>
Cash and due from banks $ 926,834 $ 970,778 $ 801,532
Short-term investments:
Federal funds sold and securities purchased
under resale agreements 64,725 76,275 28,700
Interest-bearing deposits in other banks 600 506 246
Trading securities 130,934 73,215 52,661
Loans held for sale 560,190 707,586 620,399
------------- ------------- -------------
Total short-term investments 756,449 857,582 702,006
Available-for-sale securities 4,024,734 3,802,718 3,206,710
Held-to-maturity securities (1) 2,851,907 2,988,428 2,765,401
Loans 28,477,502 27,526,597 23,705,494
Less:
Unearned income 215,638 209,091 156,647
Allowance for loan losses 394,135 377,525 335,995
------------- ------------- -------------
Net loans 27,867,729 26,939,981 23,212,852
Premises and equipment, net 691,449 690,852 632,112
Due from customers on acceptances 24,900 28,965 6,988
Goodwill and core deposit intangibles 555,071 549,689 278,904
Mortgage servicing rights and related intangibles 68,582 61,601 47,724
Bank owned life insurance 726,109 715,175 515,159
Other assets 522,354 528,005 528,216
------------- ------------- -------------
Total assets $ 39,016,118 $ 38,133,774 $ 32,697,604
============= ============= =============
LIABILITIES
Deposits:
Interest-bearing $ 21,908,435 $ 22,065,653 $ 18,269,229
Other 2,644,029 2,774,239 2,263,687
------------- ------------- -------------
Total deposits 24,552,464 24,839,892 20,532,916
Federal funds purchased and securities sold
under agreements to repurchase 5,855,026 5,200,026 4,028,343
Other short-term borrowings 1,315,251 913,002 1,097,097
Bank acceptances outstanding 24,900 28,965 6,988
Federal Home Loan Bank advances 2,830,335 2,780,340 2,777,351
Long-term debt 1,150,435 1,154,937 1,205,933
Other liabilities 490,317 478,346 563,169
------------- ------------- -------------
Total liabilities 36,218,728 35,395,508 30,211,797
STOCKHOLDERS' EQUITY
Common stock, par value $2.50 a share (2) 420,858 420,569 403,606
Capital surplus 736,533 733,577 706,927
Retained earnings 1,658,272 1,590,686 1,377,563
Accumulated other non-owner changes in equity (6,081) 5,530 9,341
Treasury stock, at cost (3) (12,192) (12,096) (11,630)
------------- ------------- -------------
Total stockholders' equity 2,797,390 2,738,266 2,485,807
------------- ------------- -------------
Total liabilities and stockholders' equity $ 39,016,118 $ 38,133,774 $ 32,697,604
============= ============= =============
(1) Held-to-maturity securities-fair value $ 2,863,981 $ 3,021,199 $ 2,798,172
(2) Common shares authorized 500,000,000 500,000,000 300,000,000
Common shares issued 168,343,401 168,227,453 161,442,467
(3) Treasury shares of common stock 1,018,604 1,016,159 1,004,910
</TABLE>
3
<PAGE> 4
SOUTHTRUST CORPORATION
Consolidated Condensed Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------------
(In thousands, except per share data) 1999 1998
-----------------------
<S> <C> <C>
Interest income
Interest and fees on loans $ 553,168 $ 492,715
Interest on available-for-sale securities 58,364 48,409
Interest on held-to-maturity securities 48,367 46,041
Interest on short-term investments 10,868 10,297
-----------------------
Total interest income 670,767 597,462
-----------------------
Interest expense
Interest on deposits 221,147 204,211
Interest on short-term borrowings 79,696 63,107
Interest on Federal Home Loan Bank advances 35,594 36,643
Interest on long-term debt 17,826 20,151
-----------------------
Total interest expense 354,263 324,112
-----------------------
Net interest income 316,504 273,350
Provision for loan losses 30,362 17,855
-----------------------
Net interest income after
provision for loan losses 286,142 255,495
Non-interest income
Service charges on deposit accounts 46,491 36,522
Mortgage banking operations 15,219 8,924
Bank card fees 7,619 6,216
Trust fees 7,551 6,855
Other fees 12,126 8,601
Bank owned life insurance 9,596 6,882
Gains on trading securities, net 5,280 3,638
Gains on loans held-for-sale, net 4,452 6,934
Gains on available-for-sale securities, net 534 2,152
Other 2,196 1,394
-----------------------
Total non-interest income 111,064 88,118
-----------------------
Non-interest expense
Salaries and employee benefits 134,254 116,623
Net occupancy 19,592 15,809
Equipment 15,498 13,552
Professional services 15,079 12,833
Communications 12,222 10,865
Business development 7,619 8,092
Supplies 6,288 7,141
Other 32,091 27,591
-----------------------
Total non-interest expense 242,643 212,506
-----------------------
Income before income taxes 154,563 131,107
Income tax expense 50,039 44,655
-----------------------
Net income $ 104,524 $ 86,452
=======================
Average shares outstanding - basic (in thousands) 167,270 158,374
Average shares outstanding - diluted (in thousands) 168,587 159,998
Net income per share - basic $ 0.62 $ 0.55
Net income per share - diluted 0.62 0.54
Dividends declared per share 0.22 0.19
</TABLE>
4
<PAGE> 5
SOUTHTRUST CORPORATION
Consolidated Condensed Statements of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other Non-
Common Capital Retained Owner Changes
(Dollars in thousands) Stock Surplus Earnings In Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1998 $ 386,626 $ 486,166 $ 1,321,586 $ 11,176
Net Income 0 0 86,452 0
Unrealized loss on available-for-sale
securities, net of tax of $650* 0 0 0 (1,835)
Comprehensive Income
Dividends Declared ($.19 per share) 0 0 (30,475) 0
Issuance of 185,974 shares of Common Stock
for stock options exercised 465 1,774 0 0
Issuance of 32,459 shares of Common Stock
for dividend reinvestment and stock purchase plan 81 1,287 0 0
Issuance of 25,787 shares of Common Stock
under employee discounted stock purchase plan 65 713 0 0
Issuance of 6,547,500 shares of Common Stock
in secondary offering 16,369 216,987 0 0
Purchase of 17,970 shares of treasury stock
for exercises of stock options 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1998 $ 403,606 $ 706,927 $ 1,377,563 $ 9,341
====================================================================================================================================
Balance at January 1, 1999 $ 420,569 $ 733,577 $ 1,590,686 $ 5,530
Net Income 0 0 104,524 0
Unrealized loss on available-for-sale
securities, net of tax of $2,458* 0 0 0 (11,611)
Comprehensive Income
Dividends Declared ($.22 per share) 0 0 (36,938) 0
Issuance of 48,473 shares of Common Stock
for stock options exercised 121 874 0 0
Issuance of 41,606 shares of Common Stock
for dividend reinvestment and stock
purchase plan 104 1,363 0 0
Issuance of 25,869 shares of Common Stock
under employee discounted stock
purchase plan 64 719 0 0
Purchase of 2,445 shares of treasury stock
for excercises of stock options 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at March 31,1999 $ 420,858 $ 736,533 $ 1,658,272 $ (6,081)
====================================================================================================================================
<CAPTION>
Treasury
(Dollars in thousands) Stock Total
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at January 1, 1998 $ (10,913) $ 2,194,641
Net Income 0 86,452
Unrealized loss on available-for-sale
securities, net of tax of $650* 0 (1,835)
---------------
Comprehensive Income 84,617
===============
Dividends Declared ($.19 per share) 0 (30,475)
Issuance of 185,974 shares of Common Stock
for stock options exercised 0 2,239
Issuance of 32,459 shares of Common Stock
for dividend reinvestment and stock purchase plan 0 1,368
Issuance of 25,787 shares of Common Stock
under employee discounted stock purchase plan 0 778
Issuance of 6,547,500 shares of Common Stock
in secondary offering 0 233,356
Purchase of 17,970 shares of treasury stock
for excercises of stock options (717) (717)
- -----------------------------------------------------------------------------------------------
Balance at March 31, 1998 $ (11,630) $ 2,485,807
===============================================================================================
Balance at January 1, 1999 $ (12,096) $ 2,738,266
Net Income 0 104,524
Unrealized loss on available-for-sale
securities, net of tax of $2,458* 0 (11,611)
---------------
Comprehensive Income 92,913
===============
Dividends Declared ($.22 per share) 0 (36,938)
Issuance of 48,473 shares of Common Stock
for stock options exercised 0 995
Issuance of 41,606 shares of Common Stock
for dividend reinvestment and stock
purchase plan 0 1,467
Issuance of 25,869 shares of Common Stock
under employee discounted stock
purchase plan 0 783
Purchase of 2,445 shares of treasury stock
for excercises of stock options (96) (96)
- -----------------------------------------------------------------------------------------------
Balance at March 31,1999 $ (12,192) $ 2,797,390
===============================================================================================
</TABLE>
*See disclosure of reclassification amount in Notes to Consolidated Financial
Statements
5
<PAGE> 6
SOUTHTRUST CORPORATION
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------------
In thousands) 1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 104,524 $ 86,452
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision (credit) for:
Loan losses 30,362 17,855
Depreciation of premises and equipment 13,613 11,221
Amortization of intangibles 11,286 8,676
Amortization of security premium 541 387
Accretion of security discount (1,548) (1,571)
Deferred income tax (benefit) (3,611) 2,386
Increase in value of bank owned life insurance (9,596) (6,882)
Net gain on trading securities (5,280) (3,638)
Net gain on loans held for sale (4,452) (6,934)
Net gain on available-for-sale securities (534) (2,152)
Origination and purchase of loans held for sale (818,103) (921,453)
Proceeds from loans held for sale 836,723 711,826
Net (increase) decrease in trading securities (52,439) 9,726
Net decrease in other assets 2,412 37,155
Net increase in other liabilities 1,501 78,019
----------- -----------
Net cash provided by operating activities 105,399 21,073
INVESTING ACTIVITIES
Proceeds from maturities of:
Held-to-maturity securities 715,330 686,739
Available-for-sale securities 294,131 43,610
Proceeds from sales of:
Available-for-sale securities 170,117 27,913
Purchases of:
Held-to-maturity securities (577,793) (646,487)
Available-for-sale securities (669,205) (360,610)
Premises and equipment (12,450) (27,338)
Net (increase) decrease in:
Short-term investments 14,646 20,457
Loans (728,002) (356,489)
Purchase of subsidiaries, net of cash acquired (19,807) (202,627)
----------- -----------
Net cash used in investing activities (813,033) (814,832)
FINANCING ACTIVITIES
Proceeds from issuance of:
Common Stock 3,245 237,741
Federal Home Loan Bank advances 50,004 150,000
Long-term debt 0 200,000
Payments for:
Repurchase of Common Stock (96) (717)
Federal Home Loan Bank advances (8) (155,004)
Long-term debt (4,502) (100,510)
Cash dividends (31,550) (26,002)
Net increase (decrease) in:
Deposits (410,651) 96,837
Short-term borrowings 1,057,248 315,061
----------- -----------
Net cash provided by financing activities 663,690 717,406
----------- -----------
DECREASE IN CASH AND DUE FROM BANKS (43,944) (76,353)
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 970,778 877,885
----------- -----------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 926,834 $ 801,532
=========== ===========
</TABLE>
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note A - Recent Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This
Statement establishes accounting and reporting standards for derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Under certain conditions,
a derivative may be specifically designated as a hedge. Accounting for the
changes in fair values of derivatives will depend on their designation. This
Statement is effective as of the beginning of fiscal years ending after June 15,
1999.
SFAS No. 134, Accounting for Mortgage-Backed Securities Retained After the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise
In October 1998, the FASB issued SFAS No. 134, Accounting for
Mortgage-Backed Securities Retained After the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise. This Statement, an amendment to
SFAS No. 65, requires that after the securitization of mortgage loans held for
sale, an entity engaged in mortgage banking activities classify the resulting
mortgage-backed securities or other retained interests based on its ability to
sell or hold those investments. The Company adopted the provisions of this
Statement on January 1, 1999.
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<PAGE> 8
Note B- Earnings per Share Reconciliation
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing income available to common shareholders by 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
are exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the Company.
A reconciliation of the numerator and denominator of the basic EPS
computation to the diluted EPS computation is as follows:
<TABLE>
<CAPTION>
Three months ended March 31, 1999 Three months ended March 31, 1998
------------------------------------- -------------------------------------
(In thousands, except per share data) (In thousands, except per share data)
Dilutive Effect Dilutive Effect
of Options of Options
Basic Issued Diluted Basic Issued Diluted
-------- ------ -------- -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net Income $104,524 -- $104,524 $ 86,452 -- $ 86,452
Shares available to common
shareholders 167,270 1,317 168,587 158,374 1,624 159,998
-------- ------ -------- -------- ------ --------
Earnings per share $ 0.62 -- $ 0.62 $ 0.55 -- $ 0.54
======== ====== ======== ======== ====== ========
</TABLE>
Note C- Supplemental Cash Flow Information
The following is supplemental disclosure to the Consolidated Condensed
Statements of Cash Flows for the three months ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended
March 31
1999 1998
---------- ----------
(In thousands)
<S> <C> <C>
Cash paid during period for:
Interest $ 363,155 $ 309,519
Income taxes 10,662 3,623
Noncash transactions:
Assets acquired in business combinations 132,520 1,067,655
Liabilities acquired in business combinations 124,239 911,117
Loans transferred to other real estate 4,213 8,786
Loans securitized into mortgage-backed securities 428,184 460,862
Financed sales of foreclosed property 5,590 8,786
</TABLE>
8
<PAGE> 9
Note D- Comprehensive Income
Comprehensive income is the total of net income and all other non-owner
changes in equity. Comprehensive income is displayed in the Consolidated
Condensed Statements of Stockholders' Equity.
In the calculation of comprehensive income, certain reclassification
adjustments are made to avoid double counting items that are displayed as part
of net income for a period that also had been displayed as part of other
comprehensive income in that period or earlier periods. Comprehensive income for
the three months ended March 31, 1999 and 1998 is as follows:
(In thousands)
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Net income $ 104,524 $ 86,452
Unrealized holding gains (losses) arising
during the period , net of tax (11,280) 335
Less: reclassification adjustment for
gains included in net income,
net of tax 331 2,170
--------------- ---------------
Unrealized loss on available-for-sale
securities, net of tax* (11,611) (1,835)
--------------- ---------------
Comprehensive income $ 92,913 $ 84,617
=============== ===============
* Tax effect $ 2,458 $ 650
</TABLE>
Note E- Business Segments
SFAS No.131, Disclosures about Segments of an Enterprise and Related
Information, requires disclosure of certain information about the reportable
operating segments of the Company. The Company segregates financial information
for use in assessing its performance which is ultimately used for allocating
resources to its operating segments. The Company has four reportable operating
segments which are primarily separated along customer base or asset/liability
management lines. Each segment is managed by one or more of the Company's
executives who, in conjunction with the Chief Executive Officer, make strategic
business decisions regarding that segment.
The four reportable operating segments are Commercial Banking, Regional
Banking, Funds Management, and Other. Commercial Banking derives its revenues
from commercial, industrial and commercial real estate customers throughout all
geographic areas covered by the Company. This reportable segment also provides
cash management, international and commercial leasing services. Regional Banking
generates its revenues from retail lending and depository services, and regional
commercial lending not underwritten by the Commercial Banking division. Branch
administration costs are also included in Regional Banking. The Funds Management
group is responsible for management of the Company's securities portfolio as
well as its wholesale and long-term funding requirements. The category named
Other encompasses operating segments that qualify for
9
<PAGE> 10
aggregation as provided by SFAS No. 131 such as the Company's non-bank
subsidiaries which provide various services such as securities brokerage and
asset management to either external or internal customers. The remaining Company
divisions included within the Reconciliation grouping are divisions that have no
operating revenue. They contain costs not directly associated with the other
reportable segments such as executive administration, finance, internal
auditing, and risk management.
The Company's management accounting policies generally follow those for
the Company described in Note A to the Consolidated Financial Statements on Form
10-K for the year ended December 31, 1998, except for the following items. The
Company uses a transfer pricing process to aid in assessing operating segment
performance. This process involves matched rate transfer pricing of assets and
liabilities to determine a contribution to the net interest margin on a segment
basis. The provision for loan losses is charged to each operating segment
primarily based on net charge-offs. Data processing costs are charged in
accordance with the relative operational cost of each segment.
The following table presents the Company's business segment information
for the period ended March 31, 1999:
<TABLE>
<CAPTION>
Commercial Regional Funds Reconciling Total
Banking Banking Management Other Items Company
----------- --------- ---------- --------- --------- ---------
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Net Interest Margin (FTE)....................$ 57.2 $ 253.5 $ 23.5 $ 3.1 $ (17.0) $ 320.3
Provision for Loan Losses 2.7 10.0 0.0 0.0 17.7 30.4
Non-Interest Income 4.2 81.3 0.1 14.3 11.2 111.1
Non-Interest Expense 12.0 182.2 0.5 12.6 35.3 242.6
----------- --------- --------- --------- --------- ---------
Income before income
taxes.................................$ 46.7 142.6 23.1 4.8 (58.8) 158.4
Income tax expense (FTE) 0.0 0.0 0.0 0.0 53.9 53.9
----------- --------- --------- --------- --------- ---------
Net Income..............................$ 46.7 $ 142.6 $ 23.1 $ 4.8 $ (112.7) $ 104.5
=========== ========= ========= ========= ========= =========
Ending Assets................................$ 9,026.5 $21,084.0 $ 5,819.7 $ 1,408.4 $ 1,677.5 $39,016.1
=========== ========= ========= ========= ========= =========
</TABLE>
10
<PAGE> 11
Following are reconciliations of reportable segment totals to the
consolidated Company totals:
Net interest margin for reportable segments totaled $337.3 million. The
$17.0 million necessary to reconcile that total to the consolidated net
interested margin of $320.3 million are amounts attributable to transfer
pricing.
<TABLE>
<S> <C>
Non-Interest Income:
Total Non-Interest Income for reportable segments ........................ $ 99.9
Bank owned life insurance ................................................ 9.6
Affiliate service fees ................................................... 3.2
Securities gains ......................................................... 0.5
Other..................................................................... 3.4
Eliminations ............................................................. (5.5)
---------
Consolidated Non-Interest Income ......................................... $ 111.1
=========
Non-Interest Expense:
Total Non-Interest Expense for reportable segments ....................... $ 207.3
Salaries and benefits .................................................... 31.4
Premises and equipment ................................................... 5.6
Communications ........................................................... 6.3
Professional services .................................................... 6.6
Intangible amortization .................................................. 11.3
Allocated data processing ................................................ (27.2)
Other .................................................................... 6.9
Eliminations ............................................................. (5.6)
---------
Consolidated Non-Interest Expense ........................................ $ 242.6
=========
Total Assets:
Total Assets for reportable segments ..................................... $37,338.6
Goodwill and core deposit intangibles .................................... 555.1
Bank owned life insurance ................................................ 726.1
Loans .................................................................... 813.4
Other .................................................................... 417.3
Eliminations ............................................................. (834.4)
---------
Consolidated Total Assets ................................................ $39,016.1
=========
</TABLE>
Comparable information related to the period ended March 31, 1998 is
not presented because it is not available.
11
<PAGE> 12
Note F- Business Combinations
During the first three months of 1999, the Company completed the
following acquisition:
<TABLE>
<CAPTION>
(In millions)
Date Institution Assets Loans Deposits Location
- --------------- ---------------------------------- ------------ ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
March 12 LCNB Bancorporation, Inc. ("LCNB") $ 132.6 $ 94.9 $ 123.2 Houston, Texas
</TABLE>
Consideration for this acquisition was approximately $24.5 million in
cash. Under purchase accounting, the results of operations, subsequent to the
acquisition date, are included in the Consolidated Condensed Financial
Statements.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
BUSINESS
SouthTrust Corporation is a registered bank holding company
incorporated under the laws of Delaware in 1968. The Company is headquartered in
Birmingham, Alabama, engaging in a full range of banking services from 611
banking locations in Alabama, Florida, Georgia, Mississippi, North Carolina,
South Carolina, Tennessee and Texas. As of March 31, 1999, the Company had
consolidated total assets of $39.0 billion which ranked it as the largest bank
holding company headquartered in Alabama, and one of the twenty-one largest bank
holding companies in the United States.
Commercial banking is SouthTrust's predominant business and SouthTrust
Bank, N.A., its subsidiary bank, contributes substantially all of the Company's
total operating revenues and total consolidated assets.
SouthTrust Bank, N.A. offers a broad range of banking services, either
directly or through other affiliated bank related subsidiaries. Services to
business customers include providing checking and time deposit accounts, cash
management services, various types of lending and credit services, and corporate
and other trust services. Services provided to individual customers directly or
through other affiliated corporations include checking accounts, money market
investment and money market checking accounts, personal money management
accounts, passbook savings accounts and various other time deposit savings
programs, loans (including business, personal, automobile, mortgage, home
improvement and educational loans), brokerage services, investment services and
a variety of trust services. SouthTrust Bank, N.A. also offers Visa and/or
MasterCard multi-purpose nationally recognized credit card services.
FORWARD-LOOKING STATEMENTS
In this report and in documents incorporated herein by reference, the
Company may communicate statements relating to the future results of the Company
that may be considered "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. The Company's actual results
may differ materially from those included in the forward- looking statements.
Forward-looking statements are typically identified by the words "believe,
expect, anticipate, intend, estimate" and similar expressions. These statements
may relate to, among other things, Year 2000 readiness and unforeseen or
unanticipated costs associated with Year 2000 compliance, loan loss reserve
adequacy, simulation of changes in interest rates and litigation results. Actual
results may differ materially from those expressed or implied as a result of
certain rate fluctuations, competitive product and pricing pressures within the
Company's markets, equity and fixed income market fluctuations, personal and
corporate customers' bankruptcies, inflation, acquisitions and integrations of
acquired businesses, technological change, changes in law, changes in fiscal,
monetary, regulatory and tax policies, monetary fluctuations, success in gaining
regulatory approvals when required as well as other risks and uncertainties.
13
<PAGE> 14
SELECTED QUARTERLY FINANCIAL DATA TABLE 1
(Dollars in millions except per share data)
<TABLE>
<CAPTION>
Quarters Ended
-------------------------------------------------------------------------
1999 1998
------------ ----------------------------------------------------------
Mar 31 Dec 31 Sept 30 Jun 30 Mar 31
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
EARNINGS SUMMARY:
Interest income $ 670.8 $ 668.0 $ 656.0 $ 635.9 $ 597.5
Interest expense 354.3 357.1 359.2 345.8 324.1
------------ ------------ ------------ ------------ ------------
Net interest income 316.5 310.9 296.8 290.1 273.4
Provision for loan losses 30.4 29.4 22.0 25.5 17.9
------------ ------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 286.1 281.5 274.8 264.6 255.5
Non-interest income (excluding
securities transactions) 100.8 96.0 92.4 82.9 75.4
Gains on trading securities, net 5.3 4.4 4.1 4.3 3.6
Gains on loans held for sale, net 4.5 3.3 3.3 4.9 6.9
Gains on available-for-sale securities, net 0.5 1.5 (0.4) 1.0 2.2
Non-interest expense 242.6 242.2 236.8 222.9 212.5
------------ ------------ ------------ ------------ ------------
Income before income taxes 154.6 144.5 137.4 134.8 131.1
Income taxes 50.1 46.5 42.7 45.3 44.6
------------ ------------ ------------ ------------ ------------
Net income $ 104.5 $ 98.0 $ 94.7 $ 89.5 $ 86.5
============ ============ ============ ============ ============
PER COMMON SHARE:
Net income - basic $ 0.62 $ 0.59 $ 0.57 $ 0.56 $ 0.55
Net income- diluted 0.62 0.59 0.57 0.55 0.54
Cash dividends declared 0.22 0.19 0.19 0.19 0.19
Book value 16.72 16.38 16.10 15.65 15.49
Market value-high 42.375 39.000 45.375 45.000 45.125
Market value-low 35.375 24.875 30.688 39.250 35.750
ENDING BALANCES:
Loans, net of unearned income $ 28,261.8 $ 27,317.5 $ 25,657.3 $ 24,654.1 $ 23,548.9
Total assets 39,016.1 38,133.8 35,545.2 34,667.9 32,697.6
Deposits 24,552.5 24,839.9 24,207.8 21,150.8 20,532.9
Federal Home Loan Bank advances 2,830.3 2,780.3 2,787.3 2,742.3 2,777.4
Long-term debt 1,150.4 1,154.9 1,155.0 1,205.4 1,205.9
Stockholders' equity 2,797.4 2,738.3 2,660.1 2,576.8 2,485.8
Common shares - basic (in thousands) 167,325 167,211 165,246 164,676 160,438
AVERAGE BALANCES:
Loans, net of unearned income $ 27,762.0 $ 26,346.5 $ 25,001.3 $ 23,972.0 $ 23,075.8
Earning assets 35,051.4 33,310.8 31,984.1 31,053.7 29,230.3
Total assets 38,116.8 36,364.2 34,879.0 33,493.3 31,618.9
Deposits 24,139.9 24,244.6 23,457.8 20,532.2 19,991.9
Stockholders' equity 2,753.4 2,688.4 2,606.6 2,507.7 2,382.1
Common shares - basic (in thousands) 167,270 166,248 165,016 161,180 158,374
Common shares - diluted (in thousands) 168,587 167,409 166,366 162,712 159,998
SELECTED RATIOS:
Return on average total assets 1.11% 1.07% 1.08% 1.07% 1.11%
Return on average stockholders' equity 15.40 14.46 14.41 14.31 14.72
Net interest margin (FTE) 3.71 3.74 3.71 3.78 3.82
Average equity to average assets 7.22 7.39 7.47 7.49 7.53
Non-interest expense as a percent
of average total assets 2.58 2.64 2.69 2.67 2.73
Efficiency ratio 56.32 58.02 59.39 57.99 58.79
</TABLE>
14
<PAGE> 15
AVERAGE BALANCES, INTEREST INCOME AND EXPENSE AND
AVERAGE YIELDS EARNED AND RATES PAID
(DOLLARS IN MILLIONS; YIELDS ON TAXABLE EQUIVALENT BASIS)
<TABLE>
<CAPTION>
Quarters Ended
----------------------------------------------------------------------------
March 31, 1999 December 31, 1998
--------------------------------------- ---------------------------------
(1) (1)
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
--------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, net of unearned
income (2) $ 27,762.0 $ 553.8 8.09% $ 26,346.5 $ 555.2 8.36%
Available-for-sale securities:
Taxable 3,506.7 54.6 6.30 3,251.6 51.1 6.25
Non-taxable 316.1 5.9 7.72 268.7 3.2 4.85
Held-to-maturity securities:
Taxable 2,685.8 46.2 6.98 2,521.2 43.7 6.88
Non-taxable 116.8 3.2 11.01 131.5 3.7 11.11
Short-term investments 664.0 10.8 6.64 791.3 14.0 7.00
--------------------------------------- ---------------------------------
Total interest-earning assets 35,051.4 $ 674.5 7.80 33,310.8 $ 670.9 7.99
Allowance for loan losses (378.1) (369.3)
Other assets 3,443.5 3,422.7
--------------------------------------- ---------------------------------
Total assets $ 38,116.8 $ 36,364.2
======================================= =================================
LIABILITIES
Interest-bearing deposits $ 21,515.2 $ 221.1 4.17% $ 21,703.6 $ 241.3 4.41%
Short-term borrowings 6,775.9 79.7 4.77 4,964.4 60.7 4.85
Federal Home Loan Bank advances 2,783.7 35.6 5.19 2,781.1 36.8 5.25
Long-term debt 1,158.9 17.8 6.24 1,154.9 18.3 6.29
--------------------------------------- ---------------------------------
Total interest-bearing liabilities 32,233.7 354.2 4.46 30,604.0 357.1 4.63
Demand deposits non-interest bearing 2,624.7 2,541.1
Other liabilities 505.0 530.7
Total liabilities 35,363.4 33,675.8
STOCKHOLDERS' EQUITY 2,753.4 2,688.4
--------------------------------------- ---------------------------------
Total liabilities and stockholders' equity $ 38,116.8 $ 36,364.2
======================================= =================================
Net interest income $ 320.3 $ 313.8
======================================= =================================
Net interest margin 3.71% 3.74%
======================================= =================================
Net interest spread 3.34% 3.36%
======================================= =================================
</TABLE>
(1) Yields were calculated using the average amortized cost of the
underlying assets. All yields and rates are presented on an annualized
basis.
(2) Included in interest are net loan fees of $16.4 million, $18.9 million,
$15.9 million, $16.6 million, and $12.6 million for the quarters ended
March 31, 1999, December 31, 1998, September 30, 1998, June 30, 1998,
and March 31, 1998, respectively. The averages include loans on which
the accrual of interest has been discontinued. Income on certain
non-accrual loans is recognized on a cash-basis.
15
<PAGE> 16
Table 2
<TABLE>
<CAPTION>
Quarters Ended
- ----------------------------------------------------------------------------------------------------------
September 30, 1998 June 30, 1998 March 31, 1998
- ------------------------------ ------------------------------ ----------------------------------
(1) (1) (1)
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
- ------------------------------ ------------------------------ ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$25,001.3 $539.2 8.56% $23,972.0 $517.4 8.66% $23,075.8 $493.3 8.67%
3,245.1 52.0 6.39 3,347.9 54.1 6.51 3,001.2 47.9 6.51
122.3 1.6 5.30 63.9 0.8 5.77 53.6 0.7 6.01
2,654.1 46.4 6.93 2,780.5 48.6 7.01 2,393.7 43.3 7.34
148.3 4.0 10.74 153.4 3.9 10.36 157.9 4.1 10.64
813.0 15.0 7.30 736.0 13.3 7.25 548.1 10.3 7.62
- ------------------------------ ------------------------------ ----------------------------------
31,984.1 $658.2 8.17 31,053.7 $638.1 8.25 29,230.3 $599.6 8.31
(359.8) (342.8) (327.7)
3,254.7 2,782.4 2,716.3
- ------------------------------ ------------------------------ ----------------------------------
$34,879.0 $33,493.3 $31,618.9
============================== ============================== ==================================
$21,058.1 $244.2 4.60% $18,296.5 $208.2 4.56% $17,882.1 $204.2 4.63%
4,310.1 59.2 5.45 5,950.6 82.0 5.53 4,683.7 63.1 5.46
2,748.9 36.7 5.30 2,759.7 36.5 5.31 2,780.7 36.6 5.34
1,197.5 19.1 6.33 1,205.7 19.1 6.35 1,259.5 20.2 6.49
- ------------------------------ ------------------------------ ----------------------------------
29,314.6 359.2 4.86 28,212.5 345.8 4.92 26,606.0 324.1 4.94
2,399.7 2,235.7 2,109.8
558.1 537.4 521.0
32,272.4 30,985.6 29,236.8
2,606.6 2,507.7 2,382.1
- ------------------------------ ------------------------------ ----------------------------------
$34,879.0 $33,493.3 $31,618.9
============================== ============================== ==================================
$299.0 $292.3 $275.5
============================== ============================== ==================================
3.71% 3.78% 3.82%
============================== ============================== ==================================
3.31% 3.33% 3.37%
============================== ============================== ==================================
</TABLE>
16
<PAGE> 17
NET INTEREST INCOME/MARGIN.
The Company's net interest margin decreased 11 basis points from the
first quarter of 1998 to 3.71% for the 1999 first quarter period. This decrease
is reflective of the increase in the ratio of interest-bearing funds to earning
assets, which was 92% at March 31, 1999, up from the March 31, 1998 ratio of
91%.
In addition, the Company's funding of bank owned life insurance
("BOLI") as of March 31, 1999 increased $175 million over the March 31, 1998
period. Since this investment was made as an alternative to investing in
interest-earning assets, the resulting net margin effect of the BOLI for the
quarter ended March 31, 1999 was a decrease of approximately $2.1 million or 2
basis points.
The quarter over quarter trend was also affected by the loan mix. The
Company is continuing to place emphasis on growing its commercial loan
portfolio. These loans are competitively priced in the marketplace, generally
having thinner margins than other lending opportunities. However, these loans
have shorter maturities than other loan types, reducing the Company's exposure
to interest rate and liquidity risk. Since historical net credit losses on
commercial loans have been lower than those on loans to individuals, the Company
considers the yield available on commercial loans acceptable in comparison to
other types of lending with higher projected credit risk. See Table 2 for
detailed information concerning quarterly average volumes, interest, yields
earned and rates paid.
PROVISION FOR LOAN LOSSES.
During the first quarter of 1999, the Company recorded a $30.4 million
provision for loan losses. This compares to a provision of $17.9 million for the
quarter ended March 31, 1998. Provisions for loan losses are charged to income
to bring our allowance to a level deemed appropriate by management based on the
factors as described in "Allowance for Loan Losses" later in Management's
Discussion and Analysis of Financial Condition and Results of Operations
Earnings Summary.
NON-INTEREST INCOME.
Total non-interest income for the quarter ended March 31, 1999 was
$111.1 million, an increase of $23.0 million or 26.0% over the same period in
1998. Service charges on deposit accounts, which represent the largest portion
of non-interest income, increased in the first quarter of 1999 by $10.0 million
or 27.3% from the comparable year-ago period. This reflects the overall growth
in the number of deposit accounts through both internal growth and acquisitions.
Mortgage banking operations income, which includes loan origination and
servicing fee income, increased $6.3 million or 70.5% from the 1998 first
quarter. Mortgage interest rates have remained favorable to borrowers and loan
production and related income have increased accordingly. Fee income related to
Bank Card and Trust operations has also increased, 22.6% and 10.2%,
respectively, over the year ago quarter. Both were related to higher volume and
various rate increases. Other fee income, which includes investment,
international, safe deposit, collection and miscellaneous other fees, rose by
$3.5 million or 41.0% compared to the quarter ended March 31, 1998. Income from
bank owned life insurance for the first quarter of 1999 increased $2.7 million
or 39.4% from the first quarter of 1998.
17
<PAGE> 18
Gains on trading securities totaled $5.3 million for the quarter ended
March 31, 1999. Sales of loans during the quarter ended March 31, 1999 resulted
in gains of approximately $4.5 million. Gains on available-for-sale securities
were $0.5 million in the first quarter of 1999.
There were no other significant non-recurring non-interest income items
recorded in 1999 or 1998.
NON-INTEREST INCOME TABLE 3
(In millions)
<TABLE>
<CAPTION>
Quarters Ended
-------------------------------------------
1999 1998
------- ----------------------------------
Mar 31 Dec 31 Sept 30 Jun 30 Mar 31
------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts $ 46.5 $ 47.0 $ 44.5 $ 39.7 $ 36.5
Mortgage banking operations 15.2 10.7 11.0 11.0 8.9
Bank card fees 7.6 7.4 7.4 6.8 6.2
Trust fees 7.6 7.0 6.9 6.9 6.9
Other fees 12.1 10.3 9.5 8.9 8.6
Bank owned life insurance 9.6 8.8 10.1 7.0 6.9
Gains on trading securities, net 5.3 4.4 4.1 4.3 3.6
Gains on loans held-for-sale, net 4.5 3.3 3.3 4.9 6.9
Gains (losses) on available-for-sale securities, net 0.5 1.5 (0.4) 1.0 2.2
Other 2.2 4.8 3.0 2.6 1.4
------ ------ ------ ------ ------
Total $111.1 $105.2 $ 99.4 $ 93.1 $ 88.1
====== ====== ====== ====== ======
</TABLE>
NON-INTEREST EXPENSE.
Total non-interest expense increased 14.2% to $242.6 million in the
first quarter of 1999 as compared to the same period in 1998. This increase is
reflective of the overall growth the Company has experienced. Salaries and
employee benefits expense is the largest component of non-interest expense,
accounting for $134.2 million or 55.3% of all non-interest expense for the
quarter ended March 31, 1999. The March 31, 1999 quarter over March 31, 1998
quarter increase in salary and employee benefits expense was $17.6 million or
15.1%. Occupancy and equipment expenses were also up in the first quarter of
1999. Both of these items are affected by the number of banking offices which
increased from the March 31, 1998 level of 589 to 611 at March 31, 1999. The
efficiency ratio, a measure of non-interest expense to net interest income plus
non-interest income, was 56.32% for the first quarter ended March 31, 1999, down
from the year ago ratio of 58.79%
18
<PAGE> 19
NON-INTEREST EXPENSE TABLE 4
(In millions)
<TABLE>
<CAPTION>
Quarters Ended
-------------------------------------------
1999 1998
------ ----------------------------------
Mar 31 Dec 31 Sept 30 Jun 30 Mar 31
------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits $134.2 $129.5 $128.2 $121.5 $116.6
Net occupancy 19.6 19.6 19.2 17.9 15.8
Equipment 15.5 17.1 15.5 14.8 13.6
Professional services 15.1 14.7 15.0 15.0 12.8
Communications 12.2 12.3 12.4 11.5 10.9
Business development 7.6 4.6 8.6 9.0 8.1
Supplies 6.3 7.3 7.1 7.6 7.1
Other 32.1 37.1 30.8 25.6 27.6
------- ------ ------- ------- -------
Total $242.6 $242.2 $236.8 $222.9 $212.5
====== ====== ====== ====== ======
</TABLE>
YEAR 2000
The Company uses a wide range of software and related technologies
throughout its business that will be affected by the date change in the year
2000. This date change requires modification of portions of the Company's
software so that its computer systems will properly recognize dates beyond
December 31, 1999. The Company believes that with the current and planned
upgrades or modifications to existing software and conversions to new software,
the impact of the Year 2000 issue can be mitigated.
The Company established a Year 2000 Program Office in 1996 staffed by
six full-time employees and headed by a member of senior management. In
addition, there are 20 full-time equivalent employees from within the Company
and 12 full-time equivalent employees from outside sources working on the
project. SouthTrust also has a related management committee dedicated to Year
2000 issues. The Program Office has helped to establish and actively
participates in several peer groups that work together on the Year 2000 issue
and its resolution. The Year 2000 Program Office reports on the status of year
2000 readiness to the SouthTrust Corporation and SouthTrust Bank Boards of
Directors quarterly.
SouthTrust has established a four-phase methodology for use in
assessing the project's state of readiness. The first phase is Awareness. In
this phase both upper and executive management are made aware of the issues and
executive sponsorship is obtained. The second phase is Assessment and Inventory,
during which the extent of problems is assessed and inventory is taken of
systems and applications. The third phase, Remediation, includes correcting of
the code and unit testing of those corrections. The fourth phase is
Certification Testing and Implementation.
The majority of the Year 2000 issues facing the Company are information
technology ("IT") in nature. All IT systems, which include mainframe and
midrange computer systems, are complete in the four phases. All of the Company's
computerized systems that process checking accounts, savings accounts, CDs,
IRAs, payrolls, direct deposits, debit cards, credit cards, ATMs, installment
loans, commercial loans, and general ledger are ready for the Year 2000 and have
been in daily use since December 31, 1998. Non-IT systems, which include
embedded technology such as micro controllers, are also being considered. These
systems are currently in the fourth phase and are
19
<PAGE> 20
expected to have completed the fourth and final phase by the middle of this
year. SouthTrust's overall readiness testing plan calls for three complete
parallels of the century rollover. All mainframe systems will experience these
three tests before December 31, 1999.
The Company has established an extensive contingency plan for the
period of time that the Company is going through the century change and is
exposed to the Year 2000 issue. This plan is designed to address the most likely
risks facing the Company during that period. Some of these risks include
application system failures, power outages, security systems, and environmental
systems. As part of the contingency plan, the Company has completed a business
impact analysis for all of its core business units and has tested the
contingency plan related to each unit.
The Company relies on several third party service providers who are
also affected by the Year 2000 issue. The Company has worked closely with these
providers to monitor, to the extent possible, the progress of their Year 2000
efforts. The Program Office has interviewed or conducted on-site visits with
most of its critical service providers and in many cases has obtained written or
verbal verification of their status. Although the Company has obtained and
continues to obtain these verifications, there can be no assurance that the
potential impact of a major interruption or failure in the services provided by
these companies would not have a material adverse effect on the Company's
financial condition or results of operations.
The total Year 2000 project cost is expected to total approximately $15
million. For the three months ended March 31, 1999, the Company has expensed
$0.8 million. For the years ended December 31, 1998 and 1997, the Company
expensed $6.2 million and $5.8 million, respectively.
There were no other significant non-recurring non-interest expense
items recorded in 1999 or 1998.
INCOME TAX EXPENSE.
Income tax expense for the first quarter of 1999 was $50.1 million for
an effective tax rate of 32.4% compared to $44.6 million or an effective rate of
34.1% in the first quarter of 1998. The statutory federal income tax rate was
35% in 1999 and 1998.
20
<PAGE> 21
LOANS.
Loans, net of unearned income at March 31, 1999 were $28,261.8 million,
an increase of $944.3 million or 3.5% over the December 31, 1998 level. Of the
total loan increase, $94.9 million was obtained in the acquisition of another
financial institution consummated during the first three months of 1999.
Internal growth accounted for the remaining $849.4 million of the increase.
The Company has participated in loan securitizations, which allow the
Company to actively manage its loan portfolio. Specifically, securitizations
allow the Company to manage credit concentrations, while continuing to extend
credit to customers. Loans securitized and sold, consisting mainly of 1-4 family
mortgages, amounted to approximately $428.2 million during the three month
period ended March 31, 1999.
LOAN PORTFOLIO TABLE 5
(In millions)
<TABLE>
<CAPTION>
Quarters Ended
-------------------------------------------------------------
1999 1998
--------- -----------------------------------------------
Mar 31 Dec 31 Sept 30 Jun 30 Mar 31
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $10,102.5 $ 9,760.4 $ 8,829.5 $ 8,371.3 $ 7,700.1
Real estate construction 3,744.3 3,526.4 3,379.1 3,150.0 2,966.4
Commercial real estate mortgage 5,157.5 4,900.2 4,407.2 4,173.4 4,005.7
Residential real estate mortgage 6,279.0 6,243.7 6,116.6 5,977.2 5,769.7
Loans to individuals 3,194.2 3,095.9 3,106.9 3,153.1 3,263.6
--------- --------- --------- --------- ---------
28,477.5 27,526.6 25,839.3 24,825.0 23,705.5
Unearned income (215.7) (209.1) (182.0) (170.9) (156.6)
--------- --------- --------- --------- ---------
Loans, net of unearned income 28,261.8 27,317.5 25,657.3 24,654.1 23,548.9
Allowance for loan losses (394.1) (377.5) (364.4) (354.1) (336.0)
--------- --------- --------- --------- ---------
Net loans $27,867.7 $26,940.0 $25,292.9 $24,300.0 $23,212.9
========= ========= ========= ========= =========
</TABLE>
21
<PAGE> 22
ALLOWANCE FOR LOAN LOSSES
The Company maintains an allowance for loan losses to absorb losses
inherent in the loan portfolio. The allowance is based upon management's
estimated range of those losses. Actual losses for these loans can vary
significantly from this estimate. The Company's subsidiary bank is regulated by
the Office of the Comptroller of the Currency ("OCC"). Management also considers
recommendations from the OCC in concluding on the adequacy of the allowance for
loan losses. The methodology and assumptions used to calculate the allowance are
continually reviewed as to their appropriateness given the most recent
estimation of probable losses realized and other factors that influence the
estimation process. The model and resulting allowance level is adjusted
accordingly as these factors change. The historical and migration loss rates
described below which are used in determining the allowance also provide a
self-correcting feature to the methodology.
Loans are separated by internal risk ratings into two categories for
assessment of their estimated allowance level needs; Non-problem and Problem.
The allowance for Non-problem loans is calculated by applying historical
Non-problem loss factors to outstanding Non-problem loans within each loan type.
The loss factors represent either the average of the last four years' losses or,
in some cases, the most recent years' loss experience if in management's
judgement that loss rate is more representative of current trends in a
particular loan type. Problem loans include any loans that have an internal
credit review or regulatory rating of less than "good". The allowance associated
with Problem loans is calculated by applying loss factors determined either
through a migration analysis or an average of the last four years' loss
experience, both of which are specific to Problem loans. The migration analysis
is performed periodically and measures losses in relation to the internal risk
ratings assigned to loans. Additionally, certain Problem loans (generally large
commercial credits) are specifically reviewed. This specific review considers
estimates of future cash flows, fair values of collateral and other indicators
of the borrowers' ability to repay the loan.
In addition to the above, the Company considers other risk elements in
establishing its reserve for both Non-problem and Problem loans. These risk
elements are based on management's evaluation of various conditions that affect
inherent losses which are not directly measured by applying the historical or
migration loss rates. Also, in most cases, the impact of these risk elements has
not yet been reflected in the level of non-performing loans or in the internal
risk grading process. Evaluation of these elements involves a higher degree of
uncertainty since they are not directly associated with specific problem
credits. These elements are discussed below.
The Company's loan portfolio has experienced recent growth rates in
excess of our peers. While the Company strives to use prudent underwriting and
credit management standards, such growth and related underwriting risks could
lead to increased losses. Additionally, loans acquired through the various
business combinations carry additional credit risk due to uncertainties
associated with the underwriting process and deviations from the Company's
credit underwriting standards at the acquired institutions. The Company is also
subject to risk associated with certain industry concentrations. Commercial real
estate mortgage loans represent the Company's largest concentration and although
this segment of the portfolio has performed well in recent years, management
considers the associated risk within the commercial real estate portfolio as
part of the other risk elements. Due to the Company's predominant amount of
variable rate loans, the Company has exposure to credit risk associated with
rising interest rates. When such an environment exists, the Company considers
this with the other risk factors above in establishing the allowance for loan
22
<PAGE> 23
losses. The Company has established a sound credit policy which guides the
manner in which loans are underwritten. Exceptions from this policy may be
necessary to facilitate the lending process. The associated exception risk has
also been considered in computing the allowance.
The allowance allocated to Problem loans at March 31, 1999 totaled
$156.2 million and represented an allowance percentage of 7.95% of Problem
loans. The allowance allocated to Non- problem loans totaled $238.0 million or
0.90% of Non-problem loans. The allocation of the allowance on Non-problem loans
is based on estimates of losses inherent in this portfolio which have not yet
been specifically identified in the Company's problem loan rating process.
Based on the methodology outlined above, the total allowance for loan
losses was $394.1 at March 31, 1999 and $336.0 at March 31, 1998. As a
percentage of outstanding loans, the allowance for loan losses was 1.39%, down
from the March 31, 1998 level of 1.43%. Net charge-offs during the first quarter
of 1999 totaled $15.4 million, an increase of $2.3 million from the 1998 first
quarter level.
ALLOWANCE FOR LOAN LOSSES TABLE 6
(In thousands)
<TABLE>
<CAPTION>
Quarters Ended
-------------------------------------------------------------------
1999 1998
--------- ----------------------------------------------------
Mar 31 Dec 31 Sept 30 Jun 30 Mar 31
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance beginning of quarter $ 377,525 $ 364,362 $ 354,076 $ 335,995 $ 315,471
Loans charged-off:
Commercial, financial and agricultural 5,176 3,659 4,020 6,333 4,119
Real estate construction 30 13 0 5 0
Commercial real estate mortgage 100 671 49 152 22
Residential real estate mortgage 637 1,242 886 464 918
Loans to individuals 13,306 16,661 11,066 10,754 11,263
--------- --------- --------- --------- ---------
Total charge-offs 19,249 22,246 16,021 17,708 16,322
========= ========= ========= ========= =========
Recoveries of loans previously charged-off:
Commercial, financial and agricultural 1,390 1,543 1,090 1,170 1,133
Real estate construction 0 0 0 34 7
Commercial real estate mortgage 3 16 15 (8) 27
Residential real estate mortgage 63 20 68 162 78
Loans to individuals 2,354 1,881 2,118 2,666 2,008
--------- --------- --------- --------- ---------
Total recoveries 3,810 3,460 3,291 4,024 3,253
========= ========= ========= ========= =========
Net loans charged-off 15,439 18,786 12,730 13,684 13,069
Additions to allowance charged to expense 30,362 29,420 22,040 25,481 17,855
Subsidiaries' allowance at date of purchase 1,687 2,529 976 6,284 15,738
--------- --------- --------- --------- ---------
Balance at end of quarter $ 394,135 $ 377,525 $ 364,362 $ 354,076 $ 335,995
========= ========= ========= ========= =========
(In millions)
Loans outstanding at quarter end,
net of unearned income $28,261.8 $27,317.5 $25,657.3 $ 24,654.1 $23,548.9
Average loans outstanding,
net of unearned income $27,762.0 $26,346.5 $25,001.3 $ 23,972.0 $23,075.8
Ratios:
End-of-quarter allowance to net loans outstanding 1.39% 1.38% 1.42% 1.44% 1.43%
Net loans charged off to net average loans 0.23 0.28 0.20 0.23 0.23
Provision for loan losses to net charge-offs 196.66 156.61 173.13 186.21 136.62
Provision for loan losses to net average loans 0.44 0.44 0.35 0.43 0.31
</TABLE>
23
<PAGE> 24
NON-PERFORMING ASSETS.
Non-performing assets, which include non-accrual and restructured
loans, other real estate owned and other repossessed assets were $192.9 million
at March 31, 1999, a increase of $29.0 million from December 31, 1998. The ratio
of non-performing assets to total loans plus other non- performing assets was
0.68 % at March 31, 1999, while the allowance for loan losses to non- performing
loans ratio was 300.99% for the same period.
In addition to loans on non-performing status at March 31, 1999, the
Company had loans of approximately $58.5 million for which management had
serious doubts as to the ability of the borrowers to comply with the present
repayment terms, which may result in the loans' repayment terms being
restructured and/or the loans being placed on non-performing status. These
potential problem loans are current with respect to principal and interest
payments and are not presently on non-accrual status; however, they are
continuously reviewed by management and their classification may be changed if
conditions warrant. At December 31, 1998, potential problem loans totaled $59.7
million.
NON-PERFORMING ASSETS TABLE 7
(Dollars in millions)
<TABLE>
<CAPTION>
Quarters Ended
-----------------------------------------------------------
1999 1998
------- ----------------------------------------------
Mar 31 Dec 31 Sept 30 Jun 30 Mar 31
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Non-performing loans
Commercial, financial, and agricultural $ 72.5 $ 49.6 $ 47.1 $ 54.0 $ 70.2
Real estate construction 9.8 7.5 7.2 7.1 4.9
Commercial real estate mortgage 23.9 13.8 11.4 6.0 16.4
Residential real estate mortgage 21.5 23.5 27.4 32.9 33.7
Loans to individuals 3.2 3.9 4.1 5.5 7.2
------- ------- ------- ------- -------
Total non-performing loans 130.9 98.3 97.2 105.5 132.4
------- ------- ------- ------- -------
Other real estate owned 44.6 46.5 47.7 44.0 41.2
Other repossessed assets 17.4 19.1 22.9 22.9 22.0
------- ------- ------- ------- -------
Total non-performing assets $ 192.9 $ 163.9 $ 167.8 $ 172.4 $ 195.6
======= ======= ======= ======= =======
Accruing loans past due 90 days or more $ 70.3 $ 80.9 $ 71.2 $ 65.4 $ 54.1
Ratios:
Non-performing loans to total loans 0.46% 0.36% 0.38% 0.43% 0.56%
Non-performing assets to total loans
plus other non-performing assets 0.68 0.60 0.65 0.70 0.83
Non-performing assets and accruing loans
90 days or more past due to total loans
plus other non-performing assets 0.93 0.89 0.93 0.96 1.06
Allowance for loan losses to non-performing loans 300.99 383.98 375.05 335.61 253.74
</TABLE>
24
<PAGE> 25
HELD-TO-MATURITY AND AVAILABLE-FOR-SALE SECURITIES.
The investment portfolio is managed to maximize yield over an entire
interest rate cycle while providing liquidity and minimizing risk. Securities
classified as held-to-maturity are carried at amortized cost, as the Company has
the ability and management has the positive intent to hold these securities to
maturity. All securities not considered held-to-maturity or part of the trading
portfolio have been designated as available-for-sale and are carried at fair
value. Unrealized gains and losses on available-for-sale securities are excluded
from earnings and are reported net of deferred taxes as a component of
stockholders' equity. This caption includes securities that management intends
to use as part of its asset / liability management strategy or that may be sold
in response to changes in interest rates, changes in prepayment risk, liquidity
needs, or for other purposes.
Total securities, including those designated as held-to-maturity and
available-for-sale, have increased $85.5 million since December 31, 1998. The
increase includes $28.1 million in securities that were obtained through the
acquisition of another financial institution during the first quarter of 1999.
The Company's investment in collateralized mortgage obligations
presents 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 doesn't consider this risk to be
significant. The Company's investment in structured notes and other derivative
investment securities is nominal and would not have a significant effect on the
Company's net interest margin.
25
<PAGE> 26
AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES TABLE 8
<TABLE>
<CAPTION>
Available-for-Sale Securities
--------------------------------------------------
March 31, 1999 December 31, 1998
---------------------- ----------------------
Amortized Fair Amortized Fair
(Dollars in millions) Cost Value Cost Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 44.0 $ 44.3 $ 170.2 $ 171.0
U.S. Government agency securities 1,742.9 1,735.8 1,402.9 1,404.8
Collateralized mortgage obligations
and mortgage backed securities 1,584.3 1,590.7 1,732.3 1,735.2
Obligations of states and political
subdivisions 284.1 283.7 249.2 253.6
Other securities 374.7 370.2 239.4 238.1
-------- -------- -------- --------
Total $4,030.0 $4,024.7 $3,794.0 $3,802.7
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Held-to-Maturity Securities
--------------------------------------------------
March 31, 1999 December 31, 1998
---------------------- ----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 12.7 $ 12.8 $ 3.9 $ 4.0
U.S. Government agency securities 2,333.6 2,329.9 2,129.2 2,138.6
Collateralized mortgage obligations
and mortgage backed securities 335.3 343.2 374.4 384.2
Obligations of states and political
subdivisions 112.5 119.7 124.9 135.9
Other securities 57.8 58.4 356.0 358.5
-------- -------- -------- --------
Total $2,851.9 $2,864.0 $2,988.4 $3,021.2
======== ======== ======== ========
</TABLE>
26
<PAGE> 27
SHORT-TERM INVESTMENTS.
Short-term investments at March 31, 1999 totaled $756.4 million,
reflecting a decrease of $101.2 million from the December 31, 1998 level of
$857.6 million. At March 31, 1999, short-term investments consisted of $64.7
million in federal funds sold and securities purchased under resale agreements,
$0.6 million in time deposits with other banks, $560.2 million in mortgage loans
in the process of being securitized and sold to third party investors and $130.9
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 Company's Treasury Management Committee monitors current and future
expected economic conditions, as well as the Company's liquidity position, in
determining desired balances of short-term investments and alternative uses of
such funds.
FUNDING.
The Company's overall funding level is governed by current and expected
asset demand and capital needs. Funding sources can be divided into four broad
categories: deposits, short-term borrowings, Federal Home Loan Bank ("FHLB")
advances, and long-term debt. The mixture of these funding types depends upon
the Company's maturity and liquidity needs, the current rate environment, and
the availability of such funds.
The Company monitors certain ratios and liability concentrations to
ensure funding levels are maintained within established policies. These policies
include a maximum short-term liability to total asset ratio of 40% and a limit
on funding concentrations from any one source as a percent of total assets of
20%. Various maturity limits have also been established.
Deposits are the Company's primary source of funding. Total deposits at
March 31, 1999 were $24,552.5 million, down $287.4 million or 1.2% from the
December 31, 1998 level of $24,839.9 million. At March 31, 1999, total deposits
included interest-bearing deposits of $21,908.5 million and other deposits of
$2,644.0 million. Core deposits, defined as demand deposits and time deposits
less than $100,000, totaled $20,283.8 million or 82.6% of total deposits at
March 31, 1999. This compares to core deposits of $21,320.0 million or 85.8% at
December 31, 1998.
Short-term borrowings at March 31, 1999 were $7,170.3 million and
included federal funds purchased of $4,429.2 million, securities sold under
agreements to repurchase of $1,425.8 million and other borrowed funds of
$1,315.3 million. At March 31, 1999, total short-term borrowings were 18.4% of
total liabilities and stockholders' equity. This compares to total short-term
borrowings of $6,113.0 million or 17.5% of total liabilities and stockholders'
equity at December 31, 1998.
FHLB advances totaled $2,830.3 million at March 31, 1999. The current
quarter end balance is up $50.0 million from the level outstanding at December
31, 1998. The Company uses FHLB advances as an alternative to wholesale
certificates of deposit or other deposit programs with similar maturities. These
advances generally offer more attractive rates when compared to other mid-term
financing options. They are also flexible, allowing the Company to quickly
obtain the necessary maturities and rates that best suit its overall asset /
liability management strategy.
At March 31, 1999, total long-term debt was $1,150.4 million,
representing a net decrease of $4.5 million from the December 31, 1998 level of
$1,154.9 million. Acquisitions completed during the first three months of 1999
had no effect on long-term debt outstanding.
27
<PAGE> 28
CAPITAL.
The Company continually monitors current and projected capital adequacy
positions of both the Company and its subsidiary bank. Maintaining adequate
capital levels is integral to providing stability to the Company, resources to
achieve the Company's growth objectives, and a return to stockholders in the
form of dividends.
The Company is subject to various regulatory capital requirements that
prescribe quantitative measures of the Company's assets, liabilities, and
certain off-balance sheet items. The Company's regulators have also imposed
qualitative guidelines for capital amounts and classifications such as risk
weighting, capital components, and other details. The quantitative measures to
ensure capital adequacy require that the Company maintain Tier 1 and Total
capital to risk-weighted assets of 4% and 8%, respectively, and Tier 1 capital
to adjusted quarter average total assets of 4%. Failure to meet minimum capital
requirements can initiate certain actions by regulators that, if undertaken,
could have a direct material effect on the Company's financial statements. As of
the periods ended below, the Company meets all capital adequacy requirements
imposed by its regulators.
The March 31, 1999 Tier 1 and Total capital to risk weighted assets
were 6.67% and 10.67%, respectively, compared to the December 31, 1998 ratios
of 6.58% and 10.60%.
CAPITAL RATIOS TABLE 9
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1999 1998
----------- ---------------------------------------------------
Mar 31 Dec 31 Sept 30 Jun 30 Mar 31
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Tier 1 capital:
Stockholders' equity $ 2,797.4 $ 2,738.3 $ 2,660.1 $ 2,576.8 $ 2,485.8
Intangible assets other than (555.1)
servicing rights (549.7) (557.0) (268.7) (278.9)
Unrealized (gain)/loss on
available-for-sale securities 6.1 (5.5) (17.0) (6.9) (9.3)
----------- ----------- ---------- ---------- ----------
Total Tier 1 capital 2,248.4 2,183.1 2,086.1 2,301.2 2,197.6
----------- ----------- ---------- ---------- ----------
Tier 2 capital:
Allowable reserve for loan losses 394.1 377.5 364.4 354.1 336.0
Allowable long-term debt 955.0 955.0 955.0 990.0 990.0
----------- ----------- ---------- ---------- ----------
Total Tier 2 capital 1,349.1 1,332.5 1,319.4 1,344.1 1,326.0
----------- ----------- ---------- ---------- ----------
Total risk-based capital $ 3,597.5 $ 3,515.6 $ 3,405.5 $ 3,645.3 $ 3,523.6
=========== =========== ========== ========== ==========
Risk-weighted assets $ 33,722.3 $ 33,157.7 $30,785.1 $ 29,165.4 $ 26,978.3
Risk-based ratios:
Tier 1 capital 6.67 % 6.58 % 6.78 % 7.89 % 8.15 %
Total capital 10.67 10.60 11.06 12.50 13.06
Leverage ratio 5.99 6.10 6.08 6.93 7.01
</TABLE>
28
<PAGE> 29
COMMITMENTS.
The Company's subsidiary bank had standby letters of credit outstanding
of approximately $764.8 million at March 31, 1999 and $724.7 million at December
31, 1998.
The Company's subsidiary bank had outstanding commitments to extend
credit of approximately $10,433.6 million at March 31, 1999 and $10,897.0
million at December 31, 1998. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.
The Company's mortgage banking subsidiary had outstanding commitments
to sell mortgage loans and mortgage-backed securities of approximately $463.7
million at March 31, 1999 and $400.2 million at December 31, 1998.
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 Company has no commitments for significant capital
expenditures.
29
<PAGE> 30
INTEREST RATE RISK MANAGEMENT.
The Company's primary market risk is its exposure to interest rate
changes. This risk has not changed materially since December 31, 1998. Interest
rate risk management strategies are designed to optimize net interest income
while minimizing fluctuations caused by changes in the interest rate
environment. It is through these strategies that the Company seeks to manage the
maturity and repricing characteristics of its balance sheet.
The modeling techniques used by SouthTrust simulate net interest income
and impact on fair values under various rate scenarios. Important elements of
these 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.
The Company uses derivatives in the form of interest rate swap
contracts ("Swaps") to manage interest rate risk arising from certain of the
Company's fixed-rate funding sources, such as long-term debt and certain deposit
liabilities. Swaps employed by the Company must be effective at reducing the
risk associated with the exposure being hedged. All Swaps represent end-user
activities that are designed and designated at their inception as hedges, and
therefore, changes in fair values of such derivatives are not included in the
results of operations. Interest receivable or payable from such contracts is
accrued and recognized as an adjustment to the interest expense related to the
specific liability being hedged. Upon settlement or termination, the cumulative
change in the market value of such derivatives is recorded as an adjustment to
the carrying value of the underlying liability and is recognized in net interest
income over the expected remaining life of the related liability. In instances
where the underlying instrument is sold or otherwise settled, the cumulative
change in the value of the associated derivative is recognized immediately in
the component of earnings relating to the underlying instrument.
INTEREST RATE SWAPS TABLE 10
March 31, 1999
(Dollars in millions)
<TABLE>
<CAPTION>
Average
Maturity In Average Rate Average Rate
Notional Value Fair Value Months Paid Received
-------------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Gain position $900.0 $ 43.5 75.8 5.17% 6.81%
Loss position -- -- -- -- --
------ ------
Total $900.0 $ 43.5
====== ======
</TABLE>
In addition, the Company uses forward contracts to hedge commercial
mortgage loans held for sale. Changes in fair value of these forward contracts
are not included in the results of operations until the underlying instrument is
sold. There were no forward contracts outstanding at March 31, 1999.
30
<PAGE> 31
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 and deposit-taking activities, including suits 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, 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.
31
<PAGE> 32
PART II-OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Pursuant to Rule 14a-4(c) of the Securities Exchange Act of 1934, as
amended, if a stockholder who intends to present a proposal at the 2000 annual
meeting of stockholders does not notify the Company of such proposal on or prior
to January 29, 2000, then the Board of Directors' proxies would be allowed to
use their discretionary voting authority to vote on the proposal when the
proposal is raised at the annual meeting, even though there is no discussion of
the proposal in the 2000 proxy statement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Exhibits
<S> <C> <C>
* 3(a)- Composite Restated Certificate of Incorporation of SouthTrust
Corporation which was filed as Exhibit 3 to SouthTrust Corporation's
Registration Statement on Form S-3 (Registration No. 333-34947).
* 3(b) Composite Restated Bylaws of SouthTrust Corporation which was
filed as Exhibit 4(e) to the Registration Statement on Form S-4 of
SouthTrust Corporation (Registration No. 33-61557).
* 4(a)- Articles FOURTH, SIXTH, SEVENTH, and ELEVENTH of the
Restated Certificate of Incorporation of SouthTrust Corporation
(included at Exhibit 3)
* 4(b)- Certificate of Designation on Preferences and Rights of Series
1999 Junior Participating Preferred Stock, adopted December 16,
1998, which was filed as Exhibit A to Exhibit 1 to SouthTrust
Corporation's Registration Statement on Form 8-A
(File No.1-3613)
* 4(c)- Stockholders' Rights Agreement, dated as of January 12, 1999 and
effective as of the close of business on February 22, 1999, between
SouthTrust Corporation and Chase Mellon Shareholder Services,
L.L.C., Rights Agent, which was filed as Exhibit 1 to SouthTrust
Corporation's Registration Statement on Form 8-A
(File No. 1-3613).
* 4(d)- Indenture, dated as of May 1, 1987, between SouthTrust Corporation
and National Westminster Bank USA, which was filed as Exhibit 4(a)
to SouthTrust Corporation's Registration Statement on Form S-3
(Registration No. 33-13637).
</TABLE>
32
<PAGE> 33
<TABLE>
<S> <C> <C>
* 4(e)- Subordinated Indenture, dated as of May 1, 1992, between
SouthTrust Corporation and Chemical Bank, which was filed as
Exhibit 4(b)(ii) to the Registration Statement on Form S-3 of
SouthTrust Corporation (Registration No. 33-52717).
* 4(f)- Composite Restated Bylaws of SouthTrust Corporation which was
filed as Exhibit 4(e) to the Registration Statement on Form S-4 of
SouthTrust Corporation (Registration No. 33-61557).
* 4(g)(i)- Form of Senior Indenture which was filed as Exhibit 4(b)(i) to
the Registration Statement on Form S-3 of SouthTrust Corporation
(Registration No. 33-44857).
* 4(g)(ii)- Form of Subordinated Indenture which was filed as Exhibit 4(b)(ii)
to the Registration Statement on Form S-3 of SouthTrust Corporation
(Registration No. 33-52717).
27- Financial Data Schedule (for SEC use only)
* Incorporated herein by reference
(b) Reports on Form 8-K filed in the first quarter of 1999: None.
</TABLE>
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 12, 1999 /s/ WALLACE D. MALONE, JR.
--------------------------- -----------------------------------
Wallace D. Malone, Jr.
Chairman and Chief
Executive Officer
Date: May 12, 1999 /s/ ALTON E. YOTHER
--------------------------- -----------------------------------
Alton E. Yother
Secretary, Treasurer and
Controller
33
<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
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 926,834
<INT-BEARING-DEPOSITS> 600
<FED-FUNDS-SOLD> 64,725
<TRADING-ASSETS> 691,124
<INVESTMENTS-HELD-FOR-SALE> 4,024,734
<INVESTMENTS-CARRYING> 2,851,907
<INVESTMENTS-MARKET> 2,863,981
<LOANS> 28,261,864
<ALLOWANCE> 394,135
<TOTAL-ASSETS> 39,016,118
<DEPOSITS> 24,552,464
<SHORT-TERM> 7,170,277
<LIABILITIES-OTHER> 490,317
<LONG-TERM> 1,150,435
0
0
<COMMON> 420,858
<OTHER-SE> 2,376,532
<TOTAL-LIABILITIES-AND-EQUITY> 39,016,118
<INTEREST-LOAN> 553,168
<INTEREST-INVEST> 106,731
<INTEREST-OTHER> 10,868
<INTEREST-TOTAL> 670,767
<INTEREST-DEPOSIT> 221,147
<INTEREST-EXPENSE> 354,263
<INTEREST-INCOME-NET> 316,504
<LOAN-LOSSES> 30,362
<SECURITIES-GAINS> 534
<EXPENSE-OTHER> 242,643
<INCOME-PRETAX> 154,563
<INCOME-PRE-EXTRAORDINARY> 154,563
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 104,524
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0.62
<YIELD-ACTUAL> 7.80
<LOANS-NON> 130,900
<LOANS-PAST> 70,300
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 58,500
<ALLOWANCE-OPEN> 377,525
<CHARGE-OFFS> 19,249
<RECOVERIES> 3,810
<ALLOWANCE-CLOSE> 394,135
<ALLOWANCE-DOMESTIC> 394,135
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
