-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I5R2SE3oPzdNSZEkce/AL+CoFpqhxSMC5M/ah2kGQRZJigsdTocmUlfg4/gbVGnX 4YXrIRls6ZlZFrCaURoXzg== 0000931763-96-000955.txt : 19961118 0000931763-96-000955.hdr.sgml : 19961118 ACCESSION NUMBER: 0000931763-96-000955 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMSOUTH BANCORPORATION CENTRAL INDEX KEY: 0000003133 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 630591257 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07476 FILM NUMBER: 96663155 BUSINESS ADDRESS: STREET 1: 1400 AMSOUTH SONAT TOWER CITY: BIRMINGHAM STATE: AL ZIP: 35203 BUSINESS PHONE: 2053207151 MAIL ADDRESS: STREET 1: 1400 AMSOUTH SONAT TOWER CITY: BRIMINGHAM STATE: AL ZIP: 35288 FORMER COMPANY: FORMER CONFORMED NAME: ALABAMA BANCORPORATION DATE OF NAME CHANGE: 19810527 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BIRMINGHAM CORP DATE OF NAME CHANGE: 19741107 10-Q 1 FORM 10-Q - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 COMMISSION FILE NUMBER 1-7476 AMSOUTH BANCORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 63-0591257 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.) OFINCORPORATION OR ORGANIZATION) AMSOUTH--SONAT TOWER 35203 1900 5TH AVENUE NORTH (ZIP CODE) BIRMINGHAM, ALABAMA (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (205) 320-7151 (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 PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO AS OF NOVEMBER 8, 1996 AMSOUTH BANCORPORATION HAD 56,134,774 SHARES OF COMMON STOCK OUTSTANDING. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- AMSOUTH BANCORPORATION FORM 10-Q INDEX
PAGE ---- Part I. Financial Information Item 1. Financial Statements (Unaudited) Consolidated Statement of Condition--September 30, 1996, December 31, 1995, and September 30, 1995.................................................... 3 Consolidated Statement of Earnings --Nine months and three months ended September 30, 1996 and 1995............................................... 4 Consolidated Statement of Shareholders' Equity--Nine months ended September 30, 1996........................................................ 5 Consolidated Statement of Cash Flows--Nine months ended September 30, 1996 and 1995.................................................................. 6 Notes to Consolidated Financial Statements................................. 7 Independent Accountants' Review Report..................................... 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................... 10 Part II. Other Information Item 1. Legal Proceedings.......................................................... 21 Item 6. Exhibits and Reports on Form 8-K........................................... 21 Signatures................................................................................... 22 Exhibit Index................................................................................ 23
2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) AMSOUTH BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CONDITION (UNAUDITED)
SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30 1996 1995 1995 ------------ ----------- ------------ (IN THOUSANDS) ASSETS Cash and due from banks................. $ 632,117 $ 651,641 $ 594,064 Federal funds sold and securities pur- chased under agreements to resell...... 26,400 1,775 7,250 Trading securities...................... 4,238 2,978 11,128 Available-for-sale securities........... 2,712,197 2,479,813 522,805 Held-to-maturity securities (market value of $2,703,451, $2,193,421 and $3,273,713, respectively).............. 2,722,661 2,167,009 3,258,715 Mortgage loans held for sale............ 49,547 62,017 70,841 Loans................................... 11,918,492 11,819,809 12,001,811 Less: Allowance for loan losses......... 179,350 178,451 179,550 Unearned income....................... 85,855 76,536 79,355 ----------- ----------- ----------- Net loans............................ 11,653,287 11,564,822 11,742,906 Premises and equipment, net............. 293,967 276,426 275,845 Customers' acceptance liability......... 1,627 2,007 1,631 Accrued interest receivable and other assets................................. 519,039 530,307 519,050 ----------- ----------- ----------- $18,615,080 $17,738,795 $17,004,235 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits and interest-bearing liabili- ties: Deposits: Noninterest-bearing demand............ $ 1,867,463 $ 1,834,853 $ 1,768,953 Interest-bearing demand............... 3,544,414 3,912,506 3,784,405 Savings............................... 1,050,745 1,005,099 995,434 Time.................................. 5,218,366 5,672,586 5,743,774 Certificates of deposit of $100,000 or more................................. 775,231 995,243 885,362 ----------- ----------- ----------- Total deposits....................... 12,456,219 13,420,287 13,177,928 Federal funds purchased and securities sold under agreements to repurchase... 1,258,905 1,861,090 1,317,393 Other borrowed funds................... 1,952,071 478,736 534,881 Long-term Federal Home Loan Bank ad- vances................................ 883,883 15,014 29,947 Other long-term debt................... 421,687 425,885 276,351 ----------- ----------- ----------- Total deposits and interest-bearing liabilities......................... 16,972,765 16,201,012 15,336,500 Acceptances outstanding................. 1,627 2,007 1,631 Accrued expenses and other liabilities.. 242,222 152,301 278,885 ----------- ----------- ----------- Total liabilities.................... 17,216,614 16,355,320 15,617,016 ----------- ----------- ----------- Shareholders' equity: Preferred stock -- no par value: Authorized -- 2,000,000 shares; Issued and outstanding -- none.............. -0- -0- -0- Common stock -- par value $1 a share: Authorized -- 200,000,000 shares; Issued -- 60,024,582, 60,030,242 and 59,980,078 shares, respectively...... 60,025 60,030 59,980 Capital surplus........................ 589,065 590,882 589,582 Retained earnings...................... 835,552 788,170 763,688 Cost of common stock in treasury-- 3,370,512, 2,765,000, and 1,500,000 shares, respectively.................. (97,188) (73,192) (24,173) Deferred compensation on restricted stock................................. (3,950) (4,120) (4,467) Unrealized gains on available-for-sale securities, net of deferred taxes..... 14,962 21,705 2,609 ----------- ----------- ----------- Total shareholders' equity........... 1,398,466 1,383,475 1,387,219 ----------- ----------- ----------- $18,615,080 $17,738,795 $17,004,235 =========== =========== ===========
See notes to consolidated financial statements. 3 AMSOUTH BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
NINE MONTHS THREE MONTHS ENDED SEPTEMBER 30 ENDED SEPTEMBER 30 ------------------ ------------------- 1996 1995 1996 1995 --------- -------- --------- --------- (IN THOUSANDS EXCEPT PER SHARE DATA) REVENUE FROM EARNING ASSETS Loans................................ $ 750,958 $754,034 $ 252,423 $ 256,133 Securities: Trading securities.................. 134 280 45 27 Available-for-sale securities....... 122,392 27,407 43,008 8,900 Held-to-maturity securities......... 132,083 160,018 46,586 52,706 --------- -------- --------- --------- Total securities................... 254,609 187,705 89,639 61,633 Mortgage loans held for sale......... 4,631 4,265 1,218 1,192 Federal funds sold and securities purchased under agreements to re- sell................................ 1,046 998 315 13 --------- -------- --------- --------- Total revenue from earning assets.. 1,011,244 947,002 343,595 318,971 --------- -------- --------- --------- INTEREST EXPENSE Interest-bearing demand deposits..... 87,712 108,098 28,305 33,139 Savings deposits..................... 20,875 20,690 7,294 6,805 Time deposits........................ 245,685 244,298 79,029 85,978 Certificates of deposit of $100,000 or more............................. 38,246 39,159 12,296 14,018 Federal funds purchased and securi- ties sold under agreements to repur- chase............................... 68,642 47,853 24,365 14,966 Other borrowed funds................. 29,820 26,370 10,806 8,522 Long-term Federal Home Loan Bank ad- vances.............................. 13,560 3,276 8,680 673 Other long-term debt................. 23,789 16,921 7,765 5,605 --------- -------- --------- --------- Total interest expense............. 528,329 506,665 178,540 169,706 --------- -------- --------- --------- NET INTEREST INCOME.................. 482,915 440,337 165,055 149,265 Provision for loan losses............ 46,674 30,049 17,505 9,398 --------- -------- --------- --------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES..................... 436,241 410,288 147,550 139,867 --------- -------- --------- --------- NONINTEREST REVENUES Service charges on deposit accounts.. 70,826 63,137 23,819 21,940 Trust income......................... 42,465 36,811 14,566 12,339 Credit card income................... 10,723 9,710 3,821 3,617 Investment services income........... 12,613 4,946 4,802 2,074 Mortgage income...................... 2,409 36,620 578 430 Interchange income................... 6,308 4,007 2,305 1,543 Letters of credit income............. 5,840 4,926 1,886 1,504 Portfolio income..................... 6,763 4,087 2,715 638 Other operating revenues............. 16,828 15,714 5,685 4,342 --------- -------- --------- --------- Total noninterest revenues......... 174,775 179,958 60,177 48,427 --------- -------- --------- --------- NONINTEREST EXPENSES Salaries and employee benefits....... 173,275 173,661 58,921 52,832 Net occupancy expense................ 40,202 41,896 13,903 12,168 Equipment expense.................... 39,257 39,090 13,191 11,213 Marketing expense.................... 13,387 12,662 4,522 4,087 Postage and office supplies.......... 17,465 17,576 5,794 5,684 Telephone expense.................... 11,691 9,669 4,046 3,342 Professional fees.................... 8,249 8,698 2,649 2,671 FDIC premiums........................ 7,875 16,835 2,637 2,109 SAIF assessment...................... 24,196 -0- 24,196 -0- Foreclosed properties expense........ 1,054 (415) 178 (2) Amortization......................... 13,073 16,568 4,471 4,229 Other operating expenses............. 53,536 53,867 17,561 16,656 --------- -------- --------- --------- Total noninterest expenses......... 403,260 390,107 152,069 114,989 --------- -------- --------- --------- INCOME BEFORE INCOME TAXES........... 207,756 200,139 55,658 73,305 Income taxes......................... 76,695 73,076 20,465 27,210 --------- -------- --------- --------- NET INCOME......................... $ 131,061 $127,063 $ 35,193 $ 46,095 ========= ======== ========= ========= Average common shares outstanding.... 56,717 58,273 56,623 58,418 Earnings per common share............ $ 2.31 $ 2.18 $ 0.62 $ 0.79
See notes to consolidated financial statements. 4 AMSOUTH BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
UNREALIZED COMMON CAPITAL RETAINED TREASURY DEFERRED GAINS/(LOSSES) STOCK SURPLUS EARNINGS STOCK COMPENSATION ON SECURITIES TOTAL ------- -------- -------- -------- ------------ -------------- ---------- (IN THOUSANDS) Balance at January 1, 1996................... $60,030 $590,882 $788,170 $(73,192) $(4,120) $21,705 $1,383,475 Net income.............. -0- -0- 131,061 -0- -0- -0- 131,061 Cash dividends declared ($1.20 per common share)................. -0- -0- (67,850) -0- -0- -0- (67,850) Common stock transac- tions: Purchase of common stock................. -0- -0- -0- (61,354) -0- -0- (61,354) Employee stock plans... (5) (1,803) (3,486) 16,866 170 -0- 11,742 Dividend reinvestment.. -0- (14) (106) 4,124 -0- -0- 4,004 Retirement of debt..... -0- -0- (12,237) 16,368 -0- -0- 4,131 Unrealized losses on available-for-sale securities, net of deferred taxes......... -0- -0- -0- -0- -0- (6,743) (6,743) ------- -------- -------- -------- ------- ------- ---------- Balance at September 30, 1996................... $60,025 $589,065 $835,552 $(97,188) $(3,950) $14,962 $1,398,466 ======= ======== ======== ======== ======= ======= ==========
See notes to consolidated financial satatements. 5 AMSOUTH BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30 -------------------- 1996 1995 ---------- -------- (IN THOUSANDS) OPERATING ACTIVITIES Net income.......................................... $ 131,061 $127,063 Adjustments to reconcile net income to net cash pro- vided by operating activities: Provision for loan losses.......................... 46,674 30,049 Foreclosed property provision (recoveries)......... 301 (322) Depreciation and amortization of premises and equipment......................................... 20,698 20,768 Amortization of premiums and discounts on held-to- maturity securities and available-for-sale securities........................................ (2,398) (3,950) Net decrease in mortgage loans held for sale....... 12,470 59,382 Net increase in trading securities................. (1,260) (2,748) Net gains on sales of available-for-sale securi- ties.............................................. (4,936) (3,170) Net gains on calls of held-to-maturity securities.. (288) (481) Net decrease in accrued interest receivable and other assets...................................... 18,167 83,274 Net increase in accrued expenses and other liabili- ties.............................................. 40,937 74,399 Provision for deferred income taxes................ 27,408 10,782 Amortization of intangible assets.................. 12,858 17,219 Other.............................................. 2,558 802 ---------- -------- Net cash provided by operating activities......... 304,250 413,067 ---------- -------- INVESTING ACTIVITIES Proceeds from maturities and prepayments of avail- able-for-sale securities........................... 433,504 22,309 Proceeds from sales of available-for-sale securi- ties............................................... 1,174,447 219,606 Purchases of available-for-sale securities.......... (1,114,678) (336,671) Proceeds from maturities, prepayments and calls of held-to-maturity securities........................ 308,565 237,658 Purchases of held-to-maturity securities............ (863,501) (157,421) Net (increase) decrease in federal funds sold and securities purchased under agreements to resell.... (24,625) 145,275 Net increase in loans............................... (860,412) (426,072) Net purchases of premises and equipment............. (38,239) (12,835) Net cash used for acquisitions...................... -0- (13,221) ---------- -------- Net cash used by investing activities............. (984,939) (321,372) ---------- -------- FINANCING ACTIVITIES Net decrease in demand deposits and savings ac- counts............................................. (289,836) (354,579) Net (decrease) increase in time deposits............ (667,815) 379,582 Net (decrease) increase in federal funds purchased and securities sold under agreements to repurchase. (602,185) 104,670 Net (decrease) increase in other borrowed funds..... 1,467,942 (133,330) Issuance of long-term Federal Home Loan Bank ad- vances and other long-term debt.................... 1,045,000 765 Payments for maturing long-term Federal Home Loan Bank advances and other long-term debt............................... (176,861) (74,757) Cash dividends paid................................. (67,850) (44,278) Proceeds from employee stock plans.................. 14,124 7,657 Purchase of common stock............................ (61,354) -0- ---------- -------- Net cash provided by financing activities......... 661,165 (114,270) ---------- -------- (Decrease) increase in cash and cash equivalents.... (19,524) (22,575) Cash and cash equivalents at beginning of period.... 651,641 616,639 ---------- -------- --- Cash and cash equivalents at end of period.......... $ 632,117 $594,064 ========== ========
See notes to consolidated financial statements. 6 AMSOUTH BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 General--The consolidated financial statements conform to generally accepted accounting principles and to general industry practices. The accompanying interim financial statements are unaudited; however, in the opinion of management, all adjustments necessary for the fair presentation of the consolidated financial statements have been included. All such adjustments are of a normal recurring nature. Certain amounts in the prior year's financial statements have been reclassified to conform with the 1996 presentation. These reclassifications had no effect on net income. The notes included herein should be read in conjunction with the notes to consolidated financial statements included in AmSouth Bancorporation's (AmSouth) 1995 annual report on Form 10-K. Effective January 1, 1996, AmSouth adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," (Statement 121). The statement requires that long-lived assets and certain identifiable intangibles to be held and used by the entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment loss is recognized when the sum of the future cash flows (undiscounted and without interest charges expected from the use of the asset and its eventual disposition) is less than the carrying amount of the asset. The adoption of Statement 121 resulted in no material impact on AmSouth's financial condition or results of operations. Statement of Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights, an amendment of FASB Statement No. 65" (Statement 122) was adopted by AmSouth effective January 1, 1996. In accordance with Statement 122, the cost of mortgage loans purchased or originated with a definitive plan to sell the loans and retain the mortgage servicing rights is allocated between the loans and the servicing rights based on their estimated fair values at the purchase or origination date. The adoption of Statement 122 resulted in no material impact on AmSouth's financial condition or results of operations. In June 1996, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," (Statement 125). Statement 125 provides accounting and reporting standards for transfers and servicing of financial assets and extinguishment of liabilities based on consistent application of a "financial-components approach" that focuses on control. Under that approach, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and the liabilities it has incurred, derecognizes financial assets when control has been surrendered and derecognizes liabilities when extinguished. Statement 125 provides standards for consistently distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The impact of Statement 125, when adopted on January 1, 1997, on AmSouth's financial condition or results of operations has not been determined at this time. Cash Flows--For the nine months ended September 30, 1996 and 1995, AmSouth paid interest of $522,674,000 and $497,491,000, respectively, and income taxes of $59,442,000 and $43,691,000, respectively. Noncash transfers from loans to foreclosed properties for the nine months ended September 30, 1996 and 1995 were $15,333,000 and $11,050,000, respectively, and noncash transfers from foreclosed properties to loans were $942,000 and $2,914,000, respectively. For the nine months ended September 30, 1996, noncash transfers from loans to available-for-sale securities of approximately $706,525,000 and noncash transfers from loans to other assets of approximately $5,309,000 were made in connection with mortgage loan securitizations. For the nine months ended September 30, 1996, a $4,131,000 transfer from long-term debt to shareholders' equity was made due to the redemption of convertible debt. Shareholders' Equity--On March 1, 1996, AmSouth purchased 1,000,000 shares of its common stock at a cost of $40,506,000 for the purpose of satisfying requirements of employee benefit and dividend reinvestment 7 plans. This repurchase was part of a plan approved in October 1995 and all authorized shares have been repurchased. On July 18, 1996, AmSouth's Board of Directors authorized a new plan to repurchase up to five percent of AmSouth's outstanding shares of common stock as of June 30, 1996, or approximately 2.8 million shares, from time to time. The shares will be used to fund stock issued under AmSouth's dividend reinvestment and employee benefit plans or for general corporate purposes. During the third quarter of 1996, AmSouth purchased 550,000 shares of its common stock at a cost of $20,848,000. 8 INDEPENDENT ACCOUNTANTS' REVIEW REPORT The Board of Directors AmSouth Bancorporation We have reviewed the accompanying consolidated statement of condition of AmSouth Bancorporation and subsidiaries as of September 30, 1996 and 1995, and the related consolidated statement of earnings for the three-month and nine- month periods ended September 30, 1996 and 1995, and the consolidated statement of cash flows for the nine-month periods ended September 30, 1996 and 1995. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with the standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated statement of condition of AmSouth Bancorporation and subsidiaries as of December 31, 1995, and the related consolidated statements of earnings, shareholders' equity, and cash flows for the year then ended (not presented herein) and in our report dated January 31, 1996, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of condition as of December 31, 1995, is fairly stated, in all material respects, in relation to the consolidated statement of condition from which it has been derived. /s/ ERNST & YOUNG LLP November 12, 1996 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AmSouth's reported net income for the nine months ended September 30, 1996 was $131.1 million, a 3.1% increase over net income of $127.1 million for the same period of 1995. On a per common share basis, earnings were $2.31 and $2.18, respectively. Included in year-to-date net income for 1996 was a one- time, pre-tax charge of $24.2 million, or $.27 per share net of tax, required under recently passed federal legislation to recapitalize the Savings Association Insurance Fund (SAIF). Year-to-date net income for 1995 included a pre-tax gain of $25.0 million from the sale of AmSouth's third-party mortgage servicing portfolio. Also included in 1995 year-to-date net income was $22.2 million in nonrecurring expenses primarily associated with productivity initiatives and a refund from the Federal Deposit Insurance Corporation (FDIC) of approximately $5.0 million. Year-to-date earnings for 1996 resulted in an annualized return on average assets (ROA) of .97% and an annualized return on average equity (ROE) of 12.74% compared to 1.01% and 12.62%, respectively, for the first nine months of 1995. Exclusive of the one-time SAIF assessment, ROA and ROE for 1996 was 1.09% and 14.14%, respectively. AmSouth's 1996 year-to- date operating efficiency ratio improved to 60.65% compared to 62.03% for the prior year. Exclusive of the one-time SAIF assessment, 1996 year-to-date operating efficiency ratio was 57.01%. Net income for the third quarter of 1996 was $35.2 million, or $.62 per common share, compared to $46.1 million, or $.79 per common share, for the same period of 1995. Exclusive of the one time SAIF assessment, 1996 third quarter net income was $50.4 million, or $.89 per common share. ROA and ROE for the third quarter of 1996 were .77% and 10.08%, respectively, compared to 1.09% and 13.38% for the third quarter of 1995. Third quarter 1996 ROA and ROE were 1.10% and 14.42%, respectively, exclusive of the one-time SAIF assessment. Net Interest Income Net interest income on a fully taxable equivalent basis for the nine months ended September 30, 1996 was $490.1 million, an 8.9% increase over the same period of 1995. The improvement in net interest income was primarily the result of a $1.2 billion increase in year-to-date average earning asset balances. The net interest margin increased four basis points to 3.90% . The increase in year-to-date average earning assets was primarily due to an increase in average securities. Average securities increased $1.3 billion as a result of the securitization of approximately $1.0 billion of variable rate residential first mortgages during the previous twelve months and additional purchases of securities. Average loans net of unearned income decreased $68.9 million. Exclusive of residential first mortgages, average loans net of unearned income increased $880.1 million, or 11.9%, primarily in commercial, dealer indirect and consumer revolving credit loans. The year-to-date average balance of interest-bearing liabilities increased $1.0 billion, funding 85.9% of the growth in average earning assets. An increase of $690.5 million in average Federal funds purchased and securities sold under agreements to repurchase was the primary reason for the increase. Other significant increases included a $303.9 million increase in treasury, tax and loan notes, a $149.8 million increase in parent company subordinated long-term debt, related to the issuance of 6.75% debentures in the fourth quarter of 1995, and a $193.9 million increase in Federal Home Loan Bank advances. These increases were partially offset by a $214.1 million decrease in interest-bearing deposits. The remaining growth in average earning assets was funded by decreases in noninterest-earning assets and increases in noninterest-bearing liabilities and shareholders' equity. Asset/Liability Management AmSouth maintains a formal asset and liability management process to quantify, monitor and control interest rate risk and to assist management in maintaining stability in the net interest margin under varying interest rate environments. This is accomplished through the development and implementation of lending, funding and pricing strategies designed to maximize net interest income performance under varying interest rate environments subject to specific liquidity and interest rate risk guidelines. 10 The primary tool used by AmSouth to measure interest rate risk is an earnings simulation model which evaluates the impact of different interest rate scenarios on the corporation's projected business plan over a 12 to 24 month horizon. Management feels that a more traditional interest sensitivity gap analysis does not provide a complete picture of the corporation's exposure to interest rate changes since static gap models are a point-in-time measurement and, therefore, do not incorporate the effects of future balance sheet trends, changes in the relationship between yields earned and rates paid, patterns of rate movements in general or changes in prepayment speeds due to changes in rates. AmSouth's earnings simulation model incorporates the effect of these factors in addition to the impact of certain embedded interest rate caps and floors on certain assets and liabilities while also reflecting management's anticipated action under varying interest rate environments. Interest rate scenarios are simulated on a regular basis to determine the range of interest rate risk. Net interest income performance is measured under scenarios ranging from plus or minus 100 basis points to plus or minus 300 basis points over 12 months compared to a stable interest rate environment. The net interest income differential is expressed as a percent of net interest income over twelve months if interest rates are unchanged. As of September 30, 1996, the earnings simulation model results indicated that the corporation was in a relatively neutral interest rate risk position with net interest income in a plus or minus 200 basis point scenario being less than 2% of projected net interest income in a stable interest rate scenario. This level of interest rate risk is well within the corporation's policy guidelines. A very important factor in determining this interest rate risk position is the extent to which pricing on administered rate deposit products, including interest checking, savings, and money market accounts would be affected under varying interest rate scenarios. At AmSouth, pricing for these products is assumed to be more variable in rising rate scenarios than in declining rate scenarios. While these assumptions are somewhat subjective, management reviews the anticipated pricing for these products on a regular basis and alters these assumptions whenever trends or market conditions dictate. Over the last few years, AmSouth has, from time to time, utilized various off-balance sheet instruments such as interest rate swaps, caps and floors to assist in managing interest rate risk. At September 30, 1996, AmSouth had $1.0 billion notional amount of caps outstanding, consisting of $500.0 million of caps sold and $500.0 million of caps purchased, as hedges on $500.0 million of prime rate loans. This transaction effectively locked in the historically wide 300 basis points spread between Federal funds and the prime rate in a rising rate environment. Additionally, $110.0 million notional amount of caps outstanding hedge the cost of designated liabilities. In addition to the caps, AmSouth had interest rate swaps in the aggregate notional amount of $150.0 million which were purchased to hedge the cost of $150.0 million of 6.75% subordinated debentures issued in the fourth quarter of 1995. These swaps effectively converted the fixed rate applicable to these debentures to a floating rate tied to the one-month LIBOR rate. AmSouth also had $220.0 million notional amount of interest rate swaps to hedge designated securities and deposits. At September 30, 1996, AmSouth also held other off-balance sheet instruments to provide customers and AmSouth a means of managing the risks of changing interest and foreign exchange rates. These other off-balance sheet instruments were immaterial. At September 30, 1996, no off-balance sheet instruments were held for trading purposes. Credit Quality AmSouth maintains an allowance for loan losses which it believes is adequate to absorb losses inherent in the loan portfolio. A formal review is prepared quarterly to assess the risk in the portfolio and to determine the adequacy of the allowance for loan losses. The review includes analyses of historical performance, the level of nonperforming and adversely rated loans, specific analyses of certain problem loans, loan activity since the previous quarter, reports prepared by the Loan Review Department, consideration of current economic conditions, and other pertinent information. The level of allowance to net loans outstanding will vary depending on the overall results of this quarterly review. The review is then presented to and subsequently approved by senior management and the Audit and Community Responsibility Committee of the Board of Directors. Table 7 presents a five quarter analysis of the allowance for loan losses. At September 30, 1996, the allowance for loan losses was $179.4 million, or 1.52% of loans net of unearned income, compared to $179.6 million, or 1.51%, for the prior year. The coverage ratio of the allowance for loan losses to nonperforming loans 11 increased from 200.94% at September 30, 1995 to 221.40% for the same period in 1996 as the level of nonperforming loans decreased $8.3 million. For the three months ended September 30, 1996, net charge-offs were $16.9 million, an increase of $8.0 million compared to the same period of 1995. Year-to-date net charge-offs were $45.8 million compared to $23.4 million for the prior year. Increases for both periods were primarily in the consumer revolving credit and dealer indirect loan portfolios which grew 25.6% and 14.3%, respectively, from September 30, 1995 to September 30, 1996. However, these portfolios comprised only 4.2% and 10.0%, respectively, of the total loan portfolio. Declining trends in credit quality in the consumer sector of the economy also contributed to the increase in net charge-offs. Annualized net charge-offs to average loans net of unearned income for the three months ended September 30, 1996 was .57% compared to .30% for the same period of the prior year. Year to date, the ratio was .52% compared to .27% for the prior year. The increased level of net charge-offs, combined with the growth in the consumer loan portfolio, which traditionally has a higher risk of loss, resulted in a provision for loan losses for the three months and nine months ended September 30, 1996, of $17.5 million and $46.7 million, respectively. Net charge-offs of impaired loans for the nine months ended September 30, 1996 were $2.3 million. Table 8 presents a five quarter comparison of the components of nonperforming assets. As a percentage of loans net of unearned income, foreclosed properties and repossessions, nonperforming assets decreased from .88% at September 30, 1995 to .82% at September 30, 1996. The level of nonperforming assets decreased $6.9 million during the same period. Included in nonperforming assets at September 30, 1996 and 1995, were $47.4 million and $52.7 million, respectively, in loans that were considered to be impaired, substantially all of which were on a nonaccrual basis. Collateral dependent loans, which were measured at the fair value of the collateral, constituted approximately all of these impaired loans. There was $2.9 million in the allowance for loan losses specifically allocated to these impaired loans. The average balance of impaired loans for the three months ended September 30, 1996 and 1995 was $44.3 million and $56.9 million, respectively, and $50.0 million and $58.8 million, respectively, for the nine months ended September 30, 1996 and 1995. AmSouth recorded no material interest income on its impaired loans during the three months and nine months ended September 30, 1996. Noninterest Revenues and Noninterest Expenses Year-to-date noninterest revenues totaled $174.8 million at September 30, 1996 compared to $180.0 million for the same period of the prior year. Included in mortgage income for the prior year is a $25.0 million gain from AmSouth's sale of its third-party mortgage servicing portfolio in the second quarter of 1995. Exclusive of the gain, year-to-date noninterest revenues increased 12.8% over the prior year. Compared to the prior year, service charges on deposit accounts increased $7.7 million, or 12.2%. This increase is attributable to a revenue enhancement initiative that was implemented in the second quarter of 1995 to automate the payment of certain demand deposit account service fees. Trust income increased 15.4% to $42.5 million primarily from new employee benefit plan administration accounts, increased personal trust accounts and higher fees. Investment services income increased $7.7 million primarily as a result of a higher sales volume of annuity products. The introduction of the AmSouth CheckCardSM in 1995 and the expansion of AmSouth's ATM network were the primary reasons for a 57.4% increase in interchange income. Credit card income increased 10.4% reflecting a higher level of customer activity and an increased number of cardholder accounts. Noninterest revenues for the third quarter of 1996 were $60.2 million, a 24.3% increase over the same period of the prior year. Changes were primarily for the same reasons discussed in the year-to-date analysis. Year-to-date noninterest expenses totaled $403.3 million at September 30, 1996 compared to $390.1 million for the same period of the prior year. Exclusive of the one-time SAIF assessment in 1996 and the $22.2 million in nonrecurring productivity initiative expenses and the approximately $5.0 million FDIC refund in 1995, noninterest expenses increased 1.7%. Salaries and employee benefits, net of $6.7 million of expenses related to business and branch consolidations in 1995, increased $6.3 million primarily due to a higher company match of 12 employee thrift plan contributions and enhancements to employee life insurance benefits. Net occupancy expense increased $3.8 million, net of costs of $5.5 million for branch consolidations in 1995. This increase is primarily related to a lease in a new office complex. Adjusted for $4.7 million for development costs of new financial systems and the write-off of various leases in 1995, equipment expense increased $4.9 million primarily due to investments in technology for the consumer and commercial lines of business. Telephone expense increased $2.0 million as the network was established for the consumer and commercial technology projects. Exclusive of the one-time SAIF assessment in 1996 and a refund from the Federal Deposit Insurance Corporation (FDIC) in the third quarter of 1995, FDIC premiums decreased $14.0 million. FDIC premiums are lower as a result of the FDIC reducing the premium rate on deposits insured by the Bank Insurance Fund (BIF) to zero beginning in 1996. After the one-time assessment, AmSouth's cost for deposit insurance will be lowered by approximately $7.0 million per year primarily due to the reduction in SAIF deposit premium rates. Amortization expense decreased $3.5 million due to the elimination of purchased mortgage servicing rights when AmSouth's third-party mortgage servicing portfolio was sold in June 1995. Noninterest expenses for the third quarter of 1996 totaled $152.1 million. Net of the effects of the SAIF assessment and the FDIC refund, noninterest expenses increased $7.9 million , or 6.6% over the third quarter of 1995. Changes for the quarter were primarily for the same reasons discussed in the year-to-date analysis. Capital Adequacy At September 30, 1996, shareholders' equity totaled $1.4 billion or 7.51% of total assets. Since December 31, 1995, shareholders' equity has increased $15.0 million due to net income of $131.1 million, reduced by dividends of $67.9 million and partially offset by the purchase of 1,550,000 shares of AmSouth common stock for $61.4 million. The purchase of 1,000,000 shares in March 1996 completed a program approved by the Board of Directors in 1995 to repurchase 2,265,000 shares to provide shares for AmSouth's employee benefit and dividend reinvestment plans and other corporate purposes. In July 1996, the Board of Directors approved an additional program to repurchase from time to time up to five percent of AmSouth's outstanding shares of common stock as of June 30, 1996 or approximately 2.8 million shares. The shares will be used for the same purposes as the previous program. In August 1996, 550,000 shares were purchased under this program. Table 11 presents the calculation of the risk-adjusted capital ratios for AmSouth at September 30, 1996 and 1995. At September 30, 1996, AmSouth remained above the regulatory minimum required risk-adjusted Tier 1 Capital Ratio of 4.00% and the regulatory required risk-adjusted Total Capital Ratio of 8.00%. In addition, the risk-adjusted capital ratios for AmSouth's banking subsidiaries were above the regulatory minimum and each subsidiary was well- capitalized at September 30, 1996. 13 TABLE 1--FINANCIAL SUMMARY
SEPTEMBER 30 ------------------------------ % 1996 1995 CHANGE -------------- -------------- ------------- (IN THOUSANDS EXCEPT PER SHARE DATA) BALANCE SHEET SUMMARY End-of-period balances: Loans net of unearned income................. $ 11,832,637 $ 11,922,456 (0.8)% Total securities........ 5,415,847* 3,788,449* 43.0 Total assets............ 18,615,080 17,004,235 9.5 Total deposits.......... 12,456,219 13,177,928 (5.5) Shareholders' equity.... 1,398,466 1,387,219 0.8 Year-to-date average bal- ances: Loans net of unearned income................. $ 11,658,708 $ 11,727,594 (0.6)% Total securities........ 5,017,533* 3,746,248* 33.9 Total assets............ 17,969,164 16,869,446 6.5 Total deposits.......... 13,074,206 13,294,728 (1.7) Shareholders' equity.... 1,374,003 1,346,145 2.1
NINE MONTHS THREE MONTHS ENDED SEPTEMBER 30 ENDED SEPTEMBER 30 -------------------- % -------------------- % 1996 1995 CHANGE 1996 1995 CHANGE --------- --------- ------ --------- --------- ------ EARNINGS SUMMARY Net income............. $ 131,061 $ 127,063 3.1% $ 35,193 $ 46,095 (23.7)% Per common share....... 2.31 2.18 6.0 0.62 0.79 (21.5) SELECTED RATIOS Return on average assets (annualized)... 0.97% 1.01% 0.77% 1.09% Return on average equity (annualized)... 12.74 12.62 10.08 13.38 Average equity to average assets........ 7.65 7.98 7.62 8.13 Allowance for loan losses to loans net of unearned income....... 1.52 1.51 1.52 1.51 Efficiency ratio....... 60.65 62.03 66.86 57.40 COMMON STOCK DATA Cash dividends declared.............. $ 1.20 $ 1.14 $ 0.40 $ 0.38 Book value at end of period................ 24.68 23.72 24.68 23.72 Market value at end of period................ 44.50 38.00 44.50 38.00 Average common shares outstanding........... 56,717 58,273 56,623 58,418 WITHOUT SAIF ASSESSMENT Net income............. $ 146,280 $ 127,063 15.1% $ 50,412 $ 46,095 9.4% Per common share....... 2.58 2.18 18.3 0.89 0.79 12.7 Return on average assets (annualized)... 1.09% 1.01% 1.10% 1.09% Return on average equity (annualized)... 14.14 12.62 14.42 13.38 Efficiency ratio....... 57.01 62.03 56.22 57.40
- -------- * Excludes adjustment for market valuation on available-for-sale securities. 14 TABLE 2--YEAR-TO-DATE YIELDS EARNED ON AVERAGE EARNING ASSETS AND RATES PAID ON AVERAGE INTEREST-BEARING LIABILITIES
1996 1995 ------------------------------ ---------------------------- NINE MONTHS NINE MONTHS ENDED SEPTEMBER 30 ENDED SEPTEMBER 30 ------------------------------ ---------------------------- AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/ BALANCE EXPENSE RATE BALANCE EXPENSE RATE ----------- ---------- ------ ----------- -------- ------ (TAXABLE EQUIVALENT BASIS-DOLLARS IN THOUSANDS) ASSETS Earning assets: Loans net of unearned income................ $11,658,708 $ 752,662 8.62% $11,727,594 $756,320 8.62% Trading securities..... 3,986 134 4.49 6,745 290 5.75 Available-for-sale securities............ 2,414,356 122,392 6.77 502,981 27,407 7.29 Held-to-maturity securities: Taxable............... 2,396,223 120,952 6.74 2,965,488 145,192 6.558 Tax-free.............. 202,968 16,612 10.93 271,034 22,126 10.91 ----------- ---------- ----------- -------- Total held-to-maturity securities........... 2,599,191 137,564 7.07 3,236,522 167,318 6.91 ----------- ---------- ----------- -------- Total securities.... 5,017,533 260,090 6.92 3,746,248 195,015 6.96 Other earning assets... 119,147 5,677 6.36 103,019 5,263 6.83 ----------- ---------- ----------- -------- Total earning assets.. 16,795,388 1,018,429 8.10 15,576,861 956,598 8.21 Cash and other assets.. 1,330,009 1,467,199 Allowance for loan losses................ (178,548) (175,936) Market valuation on available-for-sale securities............ 22,315 1,322 ----------- ----------- $17,969,164 $16,869,446 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Interest-bearing demand deposits.............. $ 3,711,128 87,712 3.16 $ 3,917,453 108,098 3.69 Savings deposits....... 1,028,268 20,875 2.71 946,992 20,690 2.92 Time deposits.......... 5,692,628 245,685 5.76 5,769,648 244,298 5.66 Certificates of deposit of $100,000 or more... 887,055 38,246 5.76 899,062 39,159 5.82 Federal funds purchased and securities sold under agreements to repurchase............ 1,771,159 68,642 5.18 1,080,661 47,853 5.92 Other interest-bearing liabilities........... 1,528,263 67,169 5.87 958,309 46,567 6.50 ----------- ---------- ----------- -------- Total interest-bearing liabilities.......... 14,618,501 528,329 4.83 13,572,125 506,665 4.99 ----------- ---------- ----- ----------- -------- ----- Incremental interest spread................ 3.27% 3.22% ===== ===== Noninterest-bearing demand deposits....... 1,755,127 1,761,573 Other liabilities...... 221,533 189,603 Shareholders' equity... 1,374,003 1,346,145 ----------- ----------- $17,969,164 $16,869,446 =========== =========== Net interest income/margin on a taxable equivalent basis.................. 490,100 3.90% 449,933 3.86% ===== ===== Taxable equivalent adjustment: Loans.................. 1,704 2,286 Securities............. 5,481 7,310 ---------- -------- Total taxable equivalent adjustment........... 7,185 9,596 ---------- -------- Net interest income.. $ 482,915 $440,337 ========== ========
- -------- Note: The taxable equivalent adjustment has been computed based on a 35% federal income tax rate. 15 TABLE 3--QUARTERLY YIELDS EARNED ON AVERAGE EARNING ASSETS AND RATES PAID ON AVERAGE INTEREST-BEARING LIABILITIES
1996 ---------------------------------------------------------------------------------------- THIRD QUARTER SECOND QUARTER FIRST QUARTER ---------------------------- ---------------------------- ---------------------------- AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/ BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE ----------- -------- ------ ----------- -------- ------ ----------- -------- ------ (TAXABLE EQUIVALENT BASIS-DOLLARS IN THOUSANDS) ASSETS Earning assets: Loans net of unearned income.. $11,726,594 $252,951 8.58% $11,575,473 $248,233 8.63% $11,673,313 $251,472 8.66% Trading securities....... 3,816 45 4.69 4,366 48 4.42 3,778 41 4.36 Available-for- sale securities.. 2,468,474 43,008 6.93 2,419,311 40,912 6.80 2,354,687 38,472 6.57 Held-to-maturity securities: Taxable.......... 2,566,379 43,162 6.69 2,477,564 41,531 6.74 2,142,855 36,259 6.81 Tax-free......... 191,680 5,106 10.60 201,702 5,594 11.15 215,647 5,912 11.03 ----------- -------- ----------- -------- ----------- -------- Total held-to- maturity securities...... 2,758,059 48,268 6.96 2,679,266 47,125 7.07 2,358,502 42,171 7.19 ----------- -------- ----------- -------- ----------- -------- Total securities..... 5,230,349 91,321 6.95 5,102,943 88,085 6.94 4,716,967 80,684 6.88 Other earning assets........... 98,454 1,533 6.19 152,586 2,390 6.30 106,629 1,760 6.64 ----------- -------- ----------- -------- ----------- -------- Total earning assets.......... 17,055,397 345,805 8.07 16,831,002 338,708 8.09 16,496,909 333,916 8.14 Cash and other assets........... 1,332,692 1,324,032 1,333,274 Allowance for loan losses...... (178,764) (178,475) (178,402) Market valuation on available- for-sale securities....... 13,767 21,508 31,764 ----------- ----------- ----------- $18,223,092 $17,998,067 $17,683,545 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Interest-bearing demand deposits.. $ 3,587,581 28,305 3.14 $ 3,700,373 29,051 3.16 $ 3,846,787 30,356 3.17 Savings deposits.. 1,044,721 7,294 2.78 1,025,627 6,899 2.71 1,014,277 6,682 2.65 Time deposits..... 5,586,176 79,029 5.63 5,771,320 83,283 5.80 5,721,558 83,372 5.86 Certificates of deposit of $100,000 or more............. 853,058 12,296 5.73 880,157 12,602 5.76 928,322 13,348 5.78 Federal funds purchased and securities sold under agreements to repurchase...... 1,870,288 24,365 5.18 1,767,378 22,473 5.11 1,674,720 21,805 5.24 Other interest- bearing liabilities...... 1,894,780 27,251 5.72 1,492,290 21,822 5.88 1,193,692 18,096 6.10 ----------- -------- ----------- -------- ----------- -------- Total interest- bearing liabilities...... 14,836,604 178,540 4.79 14,637,145 176,130 4.84 14,379,356 173,659 4.86 -------- ----- -------- ----- -------- ----- Incremental interest spread.. 3.28% 3.25% 3.28% ===== ===== ===== Noninterest- bearing demand deposits......... 1,781,474 1,767,696 1,715,922 Other liabilities. 216,683 219,469 211,581 Shareholders' equity........... 1,388,331 1,373,757 1,376,686 ----------- ----------- ----------- $18,223,092 $17,998,067 $17,683,545 =========== =========== =========== Net interest income/margin on a taxable equivalent basis. 167,265 3.90% 162,578 3.89% 160,257 3.91% ===== ===== ===== Taxable equivalent adjustment: Loans............. 528 574 602 Securities........ 1,682 1,849 1,950 -------- -------- -------- Total taxable equivalent adjustment...... 2,210 2,423 2,552 -------- -------- -------- Net interest income......... $165,055 $160,155 $157,705 ======== ======== ========
1995 ---------------------------------------------------------- FOURTH QUARTER THIRD QUARTER ---------------------------- ---------------------------- AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/ BALANCE EXPENSE RATE BALANCE EXPENSE RATE ----------- -------- ------ ----------- -------- ------ ASSETS Earning assets: Loans net of unearned income.. $11,806,113 $257,968 8.67% $11,816,908 $256,878 8.62% Trading securities....... 5,348 29 2.15 2,797 27 3.83 Available-for- sale securities.. 642,444 10,627 6.56 496,588 8,900 7.11 Held-to-maturity securities: Taxable.......... 3,158,591 52,453 6.59 2,908,333 48,044 6.55 Tax-free......... 232,750 6,315 10.76 255,893 6,957 10.79 ----------- -------- ----------- -------- Total held-to- maturity securities...... 3,391,341 58,768 6.88 3,164,226 55,001 6.90 ----------- -------- ----------- -------- Total securities..... 4,039,133 69,424 6.82 3,663,611 63,928 6.92 Other earning assets........... 73,533 1,310 7.07 87,315 1,205 5.48 ----------- -------- ----------- -------- Total earning assets.......... 15,918,779 328,702 8.19 15,567,834 322,011 8.21 Cash and other assets........... 1,413,087 1,404,025 Allowance for loan losses...... (178,948) (179,588) Market valuation on available- for-sale securities....... 5,761 4,324 ----------- ----------- $17,158,679 $16,796,595 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Interest-bearing demand deposits.. $ 3,823,303 31,756 3.30 $ 3,830,799 33,139 3.43 Savings deposits.. 1,002,444 6,810 2.70 986,486 6,805 2.74 Time deposits..... 5,770,288 85,680 5.89 5,800,011 85,978 5.88 Certificates of deposit of $100,000 or more............. 997,469 15,120 6.01 919,357 14,018 6.05 Federal funds purchased and securities sold under agreements to repurchase...... 1,388,274 19,329 5.52 1,044,177 14,966 5.69 Other interest- bearing liabilities...... 833,555 14,036 6.68 905,252 14,800 6.49 ----------- -------- ----------- -------- Total interest- bearing liabilities...... 13,815,333 172,731 4.96 13,486,082 169,706 4.99 -------- ----- -------- ----- Incremental interest spread.. 3.23% 3.22% ===== ===== Noninterest- bearing demand deposits......... 1,738,426 1,730,937 Other liabilities. 221,993 213,217 Shareholders' equity........... 1,382,927 1,366,359 ----------- ----------- $17,158,679 $16,796,595 =========== =========== Net interest income/margin on a taxable equivalent basis. 155,971 3.89% 152,305 3.88% ===== ===== Taxable equivalent adjustment: Loans............. 682 745 Securities........ 2,083 2,195 -------- -------- Total taxable equivalent adjustment...... 2,765 3,040 -------- -------- Net interest income......... $153,206 $149,265 ======== ========
- ---- Note: The taxable equivalent adjustment has been computed based on a 35% federal income tax rate. 16 TABLE 4--INTEREST RATE SWAPS, CAPS AND FLOORS
SWAPS ------------------------- RECEIVE PAY CAPS FIXED FIXED BASIS OTHER & FLOORS TOTAL ------- ----- ----- ----- -------- ------ (IN MILLIONS) Balance at January 1, 1996........... $150 $-0- $-0- $-0- $1,110 $1,260 Additions........................... 220 -0- -0- -0- -0- 220 Maturities.......................... -0- -0- -0- -0- -0- -0- Calls............................... -0- -0- -0- -0- -0- -0- Terminations........................ -0- -0- -0- -0- -0- -0- ---- ---- ---- ---- ------ ------ Balance at September 30, 1996........ $370 $-0- $-0- $-0- $1,110 $1,480 ==== ==== ==== ==== ====== ======
TABLE 5--MATURITIES ON CAPS AND INTEREST RATES EXCHANGED ON SWAPS
MATURE DURING --------------------------------- 1996 1997 1998 1999 2000 TOTAL ----- ---- ----- ----- ------ ------ (DOLLARS IN MILLIONS) Receive fixed swaps: Notional amount..................... $ 150 $ 65 $ 115 $ 40 $ -0- $ 370 Receive rate........................ 6.28% 6.89% 6.66% 6.70% 0.00% 6.55% Pay rate............................ 5.50% 5.55% 5.55% 5.66% 0.00% 5.54% Caps: Notional amount..................... $ 33 $ 77 $ -0- $ -0- $1,000 $1,110
- -------- Note: The maturities and interest rates exchanged are calculated assuming that interest rates remain unchanged from average September 1996 rates. The information presented could change as future interest rates increase or decrease. TABLE 6--LOANS AND CREDIT QUALITY
NET CHARGE-OFFS LOANS NONPERFORMING LOANS* NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 ----------------------- ----------------------- ------------------ 1996 1995 1996 1995 1996 1995 ----------- ----------- -------------- -------- -------- -------- (IN THOUSANDS) Commercial.............. $ 3,505,912 $ 3,033,409 $ 17,410 $ 11,554 $ 2,331 $ 2,971 Commercial real estate: Commercial real estate mortgages............. 1,619,213 1,476,494 26,361 27,138 (75) 1,393 Real estate construc- tion.................. 688,892 496,067 1,930 11,843 (274) 229 ----------- ----------- -------- -------- -------- -------- Total commercial real estate.............. 2,308,105 1,972,561 28,291 38,981 (349) 1,622 ----------- ----------- -------- -------- -------- -------- Consumer: Residential first mort- gages................. 2,961,250 4,272,370 27,637 30,922 2,045 612 Other residential mort- gages................. 811,945 665,629 1,061 1,106 301 (193) Dealer indirect........ 1,190,890 1,041,744 4,647 4,525 10,922 5,012 Revolving credit....... 502,272 399,981 -0- -0- 20,924 10,274 Other consumer......... 638,118 616,117 1,961 2,267 9,601 3,121 ----------- ----------- -------- -------- -------- -------- Total consumer........ 6,104,475 6,995,841 35,306 38,820 43,793 18,826 ----------- ----------- -------- -------- -------- -------- $11,918,492 $12,001,811 $ 81,007 $ 89,355 $ 45,775 $ 23,419 =========== =========== ======== ======== ======== ========
- -------- * Exclusive of accruing loans 90 days past due. 17 TABLE 7--ALLOWANCE FOR LOAN LOSSES
1996 1995 ----------------------------------- ----------------------- 3RD QUARTER 2ND QUARTER 1ST QUARTER 4TH QUARTER 3RD QUARTER ----------- ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS) Balance at beginning of period................. $ 178,724 $ 177,930 $ 178,451 $ 179,550 $ 179,002 Loans charged off....... (21,202) (18,442) (20,626) (13,998) (12,290) Recoveries of loans pre- viously charged off.... 4,323 5,187 4,985 2,809 3,440 --------- --------- --------- --------- --------- Net charge-offs......... (16,879) (13,255) (15,641) (11,189) (8,850) Addition to allowance charged to expense..... 17,505 14,049 15,120 10,090 9,398 --------- --------- --------- --------- --------- Balance at end of peri- od..................... $ 179,350 $ 178,724 $ 177,930 $ 178,451 $ 179,550 ========= ========= ========= ========= ========= Allowance for loan losses to loans net of unearned income........ 1.52% 1.55% 1.55% 1.52% 1.51% Allowance for loan losses to nonperforming loans.................. 221.40% 213.83% 195.70% 185.41% 200.94% Allowance for loan losses to nonperforming assets................. 183.67% 182.29% 163.06% 154.49% 171.73% Net charge-offs to aver- age loans net of un- earned income (annualized)........... 0.57% 0.46% 0.54% 0.38% 0.30%
TABLE 8--NONPERFORMING ASSETS
1996 1995 ------------------------------ ------------------------ SEPTEMBER 30 JUNE 30 MARCH 31 DECEMBER 31 SEPTEMBER 30 ------------ ------- -------- ----------- ------------ (DOLLARS IN THOUSANDS) Nonaccrual loans........ $81,007 $83,583 $ 90,919 $ 96,246 $ 89,355 Foreclosed properties... 13,874 12,845 14,764 16,150 13,144 Repossessions........... 2,769 1,614 3,439 3,114 2,052 ------- ------- -------- -------- -------- Total nonperforming as- sets*................. $97,650 $98,042 $109,122 $115,510 $104,551 ======= ======= ======== ======== ======== Nonperforming assets* to loans net of unearned income, foreclosed properties and repossessions.......... 0.82% 0.85% 0.95% 0.98% 0.88% Accruing loans 90 days past due............... $39,535 $39,944 $ 40,110 $ 39,618 $ 45,548
- -------- * Exclusive of accruing loans 90 days past due. 18 TABLE 9--SECURITIES
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 ---------------------- ---------------------- CARRYING MARKET CARRYING MARKET AMOUNT VALUE AMOUNT VALUE ----------- ---------- ----------- ---------- (IN THOUSANDS) Held-to-maturity: U.S. Treasury and federal agency securities..................... $ 2,267,306 $2,243,054 $ 3,004,790 $3,007,257 State, county and municipal se- curities....................... 191,773 199,774 247,375 259,991 Other securities................ 263,582 260,623 6,550 6,465 ----------- ---------- ----------- ---------- $ 2,722,661 $2,703,451 $ 3,258,715 $3,273,713 =========== ========== =========== ========== Available-for-sale: U.S. Treasury and federal agency securities..................... $ 2,431,074 $ 333,090 Other securities................ 281,123 189,715 ----------- ----------- $ 2,712,197 $ 522,805 =========== ===========
- -------- Notes: 1. The weighted average remaining life, which reflects the amortization on mortgage related and other asset-backed securities, and the weighted average yield on the combined held-to-maturity and available-for-sale portfolios at September 30, 1996 were approximately 4.5 years and 6.95%, respectively. Included in the balance was $4.1 billion of mortgage-backed securities, $1.2 billion of which were variable rate. The weighted average remaining life and the weighted average yield of mortgage-backed securities at September 30, 1996 were approximately 4.8 years and 7.00%, respectively. The duration of the combined portfolios, which considers the repricing frequency of variable rate securities, is approximately 2.6 years. 2. The available-for-sale portfolio included a net unrealized gain of $23.2 million and $4.2 million at September 30, 1996 and 1995, respectively. TABLE 10--OTHER INTEREST-BEARING LIABILITIES
SEPTEMBER 30 ------------------- 1996 1995 ---------- -------- (IN THOUSANDS) Other borrowed funds: Treasury, tax, and loan notes............................. $1,779,946 $275,482 Federal Home Loan Bank advances........................... 155,000 161,950 Term federal funds purchased.............................. -0- 82,030 Floating Rate Notes Due 1999.............................. 6,769 6,899 Other..................................................... 10,356 8,520 ---------- -------- Total other borrowed funds.............................. $1,952,071 $534,881 ========== ======== Other long-term debt: 6.75% Subordinated Debentures Due 2025.................... $ 149,841 $ -0- 7.75% Subordinated Notes Due 2004......................... 149,297 149,206 Subordinated Capital Notes Due 1999....................... 99,666 99,537 7.50% Convertible Subordinated Debentures................. -0- 3,986 Other..................................................... 22,883 23,622 ---------- -------- Total other long-term debt.............................. $ 421,687 $276,351 ========== ========
19 TABLE 11--CAPITAL RATIOS
SEPTEMBER 30 ------------------------ 1996 1995 ----------- ----------- (DOLLARS IN THOUSANDS) Risk-adjusted capital ratios: Total assets........................................ $18,615,080 $17,004,235 Adjusted allowance for loan losses.................. 170,669 162,136 Adjustment for risk-weighting of balance sheet items.............................................. (6,413,442) (5,912,037) Adjustment for off-balance sheet items.............. 1,568,075 1,994,340 Unrealized gains on available-for-sale securities... (23,644) (4,184) Less certain intangible assets...................... (272,271) (288,866) ----------- ----------- Total risk-adjusted assets......................... $13,644,467 $12,955,624 =========== =========== Shareholders' equity................................ $ 1,398,466 $ 1,387,219 Unrealized gains on available-for-sale securities (net of deferred taxes)............................ (14,962) (2,609) Less certain intangible assets...................... (272,271) (288,866) ----------- ----------- Tier I capital...................................... 1,111,233 1,095,744 ----------- ----------- Adjusted allowance for loan losses.................. 171,465 162,136 Qualifying long-term debt........................... 339,003 208,928 ----------- ----------- Tier II capital..................................... 509,672 371,064 ----------- ----------- Total capital...................................... $ 1,620,905 $ 1,466,808 =========== =========== Tier I capital to total risk-adjusted assets........ 8.14% 8.46% Total capital to risk-adjusted assets............... 11.88% 11.32% Other capital ratios: Leverage............................................ 6.19% 6.64% Equity to assets.................................... 7.51% 8.16% Tangible equity to assets........................... 6.14% 6.57%
20 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Several of AmSouth's subsidiaries are defendants in legal proceedings arising in the ordinary course of business. Some of these proceedings seek relief or damages that are substantial. The actions relate to AmSouth's lending, collections, servicing, investment, trust and other activities. Among the actions which are pending against AmSouth subsidiaries are actions filed as class actions in the State of Alabama. The actions are similar to others that have been brought in recent years in Alabama against financial institutions in that they seek punitive damage awards in transactions involving relatively small amounts of actual damages. In recent years, juries in Alabama state courts have made large punitive damage awards in such cases. Legislation which would limit these lawsuits has been proposed from time to time in the Alabama legislature but has not been enacted into law. AmSouth cannot predict whether any such legislation will be enacted. It may take a number of years to finally resolve some of these legal proceedings pending against AmSouth subsidiaries, due to their complexity and for other reasons. It is not possible to determine with any certainty at this time the corporation's potential exposure from the proceedings. However, based upon the advice of legal counsel, AmSouth's management is of the opinion that the ultimate resolution of these legal proceedings will not have a material adverse effect on AmSouth's financial condition or results of operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ITEM 6(A)--EXHIBITS The exhibits listed in the Exhibit Index at page 23 of this Form 10-Q are filed herewith or are incorporated by reference herein. ITEM 6(B)--REPORTS ON FORM 8-K No report on Form 8-K was filed by AmSouth during the period June 30, 1996 to September 30, 1996. 21 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AMSOUTH HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. /s/ C. Dowd Ritter November 13, 1996 By: _________________________________ C. Dowd Ritter Chairman of the Board, President and Chief Executive Officer /s/ Dennis J. Dill November 13, 1996 By: _________________________________ Dennis J. Dill Executive Vice President and Chief Accounting Officer 22 EXHIBIT INDEX The following is a list of exhibits including items incorporated by reference. 3-a Restated Certificate of Incorporation of AmSouth Bancorporation (1) 3-b By-Laws of AmSouth Bancorporation (2) 11 Statement Re: Computation of Earnings per Common Share 15 Letter Re: Unaudited Interim Financial Information 21 AmSouth Bancorporation List of Subsidiaries 27 Financial Data Schedule NOTES TO EXHIBITS (1) Filed as Exhibit 3-b to AmSouth's Form 10-Q Quarterly Report for the quarter ended March 31, 1993, incorporated herein by reference. (2) Filed as Exhibit 3-b to AmSouth's Form 10-Q Quarterly Report for the quarter ended March 31, 1996, incorporated herein by reference. 23 EX-11 2 STATEMENT REGARDING COMPUTATION EXHIBIT 11 AMSOUTH BANCORPORATION STATEMENT REGARDING COMPUTATION OF EARNINGS PER COMMON SHARE
NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ----------------- ------------------- 1996 1995 1996 1995 -------- -------- --------- --------- (IN THOUSANDS EXCEPT PER SHARE DATA) Net income............................... $131,061 $127,063 $ 35,193 $ 46,095 ======== ======== ========= ========= Average shares of common stock outstanding............................. 56,717 58,273 56,623 58,418 ======== ======== ========= ========= Earnings per common share................ $ 2.31 $ 2.18 $ 0.62 $ 0.79 ======== ======== ========= =========
EX-15 3 LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION EXHIBIT 15 Exhibit 15--Letter Re: Unaudited Interim Financial Information Board of Directors AmSouth Bancorporation We are aware of the incorporation by reference in the following Registration Statements and in their related Prospectuses, of our report dated November 12, 1996 relating to the unaudited consolidated financial statements of AmSouth Bancorporation and subsidiaries which are included in its Form 10-Q for the quarter ended September 30, 1996: Form S-3 No. 33-55683 pertaining to the Dividend Reinvestment and Common Stock Purchase Plan; Form S-8 No. 33-52243 pertaining to the assumption by AmSouth Bancorporation of FloridaBank Stock Option Plan and FloridaBank Stock Option Plan-1993; Form S-8 No. 33-52113 pertaining to the 1989 Long Term Incentive Compensation Plan; Form S-8 No. 33-35218 pertaining to the 1989 Long Term Incentive Compensation Plan; Form S-8 No. 33-37905 pertaining to the AmSouth Bancorporation Thrift Plan; Form S-8 No. 33-9368 pertaining to the Long Term Incentive Compensation Plan; Form S-8 No. 33-2927 (as amended) pertaining to the Employee Stock Purchase Plan; Form S-8 No. 2-97464 pertaining to the Long Term Incentive Compensation Plan; Form S-3 No. 33-35280 pertaining to the Dividend Reinvestment and Common Stock Purchase Plan; Form S-8 No. 33-19016 pertaining to the Long Term Incentive Compensation Plan; Form S-8 No. 33-18653 pertaining to the 1987 Substitute Stock Option Plan; Form S-8 No. 33-58777 pertaining to the Director Restricted Stock Plan; Form S-8 No. 333-02099 pertaining to the AmSouth Bancorporation Thrift Plan; Form S-3 No. 333-06641 pertaining to the AmSouth Bancorporation 7 1/2% Convertible Subordinated Debentures; and Form S-8 No. 333-05631 pertaining to the AmSouth Bancorporation 1996 Long Term Incentive Compensation Plan. Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not a part of the registration statements prepared or certified by accountants within the meaning of Sections 7 or 11 of the Securities Act of 1933. /s/ Ernst & Young LLP November 12, 1996 EX-21 4 AMSOUTH BANCORPORATION LIST OF SUBSIDIARIES EXHIBIT 21 AMSOUTH BANCORPORATION LIST OF SUBSIDIARIES The following is a list of all subsidiaries of AmSouth Bancorporation and the jurisdiction in which they were organized. Each subsidiary does business under its own name. Name Jurisdiction Where Organized ---- ---------------------------- AmSouth Bank of Alabama Alabama AmSouth Leasing Corporation Alabama AmSouth Investment Services, Inc. Alabama AmSouth Riverchase, Inc. Alabama Fifth Avenue Realty Company (unincorporated joint venture) First Gulf Insurance Agency, Inc. Alabama Five Points Capital Advisors, Inc. Alabama National Properties and Mining Company, Inc. Delaware AmSouth of Louisiana, Inc. Louisiana Alabanc Properties, Inc. Delaware AmSouth Bank of Florida Florida AmSouth Insurance Agency, Inc. Florida AmSouth Retirement Services, Inc. Florida Fortune Mortgage Corporation Florida Service Mortgage and Insurance Agency, Inc. Florida AmSouth Bank of Georgia Georgia Amsouth Bank of Tennessee Tennessee FMLS, Inc. Tennessee AmSouth Bank of Walker County Alabama Trivest Enterprises, Inc. Florida Fortune Equity Corporation Florida First Clearwater Corporation Florida EX-27 5 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF CONDITION, THE CONSOLIDATED STATEMENT OF EARNINGS, AND TABLES 3, 7 AND 8 OF ITEM 2 OF THE AMSOUTH BANCORPORATION FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1996 JAN-31-1996 SEP-30-1996 632,117 0 26,400 4,238 2,712,197 2,722,661 2,703,451 11,918,492 179,350 18,615,080 12,456,219 1,952,071 243,849 1,305,570 0 0 60,025 1,338,441 18,615,080 750,958 254,609 5,677 1,011,244 392,518 528,329 482,915 46,674 5,224 403,260 207,756 207,756 0 0 131,061 2.31 2.31 3.90 81,007 39,535 0 0 178,451 60,270 14,495 179,350 0 0 0
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