-----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, IMHIZnskIrCRdLNnFUQB6rsrYjyMSU21LijimEHqkirq+ZNiRxiZ15/8DxFEoyUX zKh/sbrSxQZhAotOnsfGnw== 0000931763-00-000762.txt : 20000331 0000931763-00-000762.hdr.sgml : 20000331 ACCESSION NUMBER: 0000931763-00-000762 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 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-K SEC ACT: SEC FILE NUMBER: 001-07476 FILM NUMBER: 587414 BUSINESS ADDRESS: STREET 1: 1900 FIFTH AVENUE NORTH STREET 2: AMSOUTH SONAT TOWER CITY: BIRMINGHAM STATE: AL ZIP: 35203 BUSINESS PHONE: 2053207151 MAIL ADDRESS: STREET 1: 1900 FIFTH AVENUE NAMSOUTH SONAT TOWER CITY: BRIMINGHAM STATE: AL ZIP: 35203 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-K 1 FORM 10-K FOR FISCAL YEAR ENDED 12-31-99 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Securities and Exchange Commission Washington, D.C. 20549 ---------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 Commission File Number 1-7476 ---------------- AmSouth Bancorporation (Exact Name of registrant as specified in its charter) Delaware 63-0591257 (State or other jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.)
AmSouth-Sonat Tower, 1900 Fifth Avenue North, Birmingham, Alabama 35203 (Address of principal executive offices) (Zip Code) (205) 320-7151 (Registrant's telephone number, including area code) ---------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value $1.00 per share New York Stock Exchange Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None ---------------- 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of the common equity held by nonaffiliates of the registrant as of February 22, 2000 was $5,811,682,933. (Note 1) As of February 29, 2000, AmSouth Bancorporation had 391,984,527 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents are incorporated by reference herein: Annual Report to Shareholders for the year ended December 31, 1999: Part I, Part II Proxy Statement for Annual Meeting to be held April 20, 2000: Part III Note 1: In calculating the market value of the common equity held by nonaffiliates of AmSouth as disclosed on the cover page of this Form 10-K, AmSouth has treated as common equity held by affiliates only voting stock owned as of February 22, 2000 by its directors and principal executive officers and voting stock held by AmSouth's employee benefit plans; AmSouth has not treated for purposes of this response stock held by any of AmSouth's subsidiaries as pledgee or in a fiduciary capacity as stock held by affiliates of AmSouth. AmSouth had no nonvoting common equity outstanding at February 22, 2000. AmSouth's response to this item is not intended to be an admission that any person is an affiliate of AmSouth for any purpose other than this response. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- AMSOUTH BANCORPORATION Form 10-K INDEX
PAGE ---- PART I Item 1. Business........................................................ 3 Item 2. Properties...................................................... 9 Item 3. Legal Proceedings............................................... 9 Item 4. Submission of Matters to a Vote of Security Holders............. 9 Executive Officers of the Registrant..................................... 10 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................................................................. 11 Item 6. Selected Financial Data......................................... 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................... 13 Item 7A. Quantitative and Qualitative Disclosures about Market Risk...... 13 Item 8. Financial Statements and Supplementary Data..................... 13 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................................... 13 PART III Item 10. Directors and Executive Officers of the Registrant.............. 14 Item 11. Executive Compensation.......................................... 14 Item 12. Security Ownership of Certain Beneficial Owners and Management.. 14 Item 13. Certain Relationships and Related Transactions.................. 14 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8- K....................................................................... 15 SIGNATURES............................................................... 16 EXHIBIT INDEX............................................................ 18
2 PART I ITEM 1. BUSINESS General AmSouth Bancorporation (AmSouth) is a bank holding company, which was organized in 1970 as a corporation under the laws of Delaware and commenced doing business in 1972. At December 31, 1999, AmSouth had total consolidated assets of approximately $43.4 billion. AmSouth offers a broad range of bank and bank-related services through its subsidiaries. AmSouth's principal subsidiary is AmSouth Bank (the Bank). The Bank is a banking corporation organized under the laws of the State of Alabama and is a wholly owned subsidiary of AmSouth. As of December 31, 1999, the Bank had total consolidated assets of approximately $43.2 billion and total consolidated deposits of approximately $27.9 billion. As of December 31, 1999, the assets of the Bank constituted virtually all of the assets of AmSouth. In October 1999, AmSouth acquired First American Corporation (First American), a bank holding company headquartered in Nashville, Tennessee, and caused First American to be merged into AmSouth in a transaction accounted for as a pooling-of-interests. As of September 30, 1999, First American had total consolidated assets of $22.2 billion and total deposits of $14.5 billion. For more information regarding the acquisition of First American, see "Management's Discussion and Analysis of Financial Condition and Results of Operations", which is incorporated herein by reference pursuant to Item 7 of this Form 10-K, and the "Notes to Consolidated Financial Statements", which are incorporated herein by reference pursuant to Item 8 of this Form 10-K. AmSouth has three reportable segments: Consumer Banking, Commercial Banking and Capital Management. Consumer Banking delivers a full range of financial services to individuals and small businesses. Services include loan products such as residential mortgages, equity lending, credit cards, and loans for automobile and other personal financing needs, and various products designed to meet the credit needs of small businesses. In addition, Consumer Banking offers various deposit products that meet customers' savings and transaction needs. Commercial Banking meets corporate and middle market customers' needs with a comprehensive array of credit, treasury management, international, and capital markets services. Included among these are several specialty services such as real estate finance, asset based lending, commercial leasing, and healthcare banking. Capital Management is comprised of client fiduciary services and broker/dealer services, and provides primarily fee based income. This area includes not only traditional trust services, but also a substantial selection of investment management services including AmSouth's proprietary mutual fund family. The services and products of all three of AmSouth's segments are offered to businesses and individuals through approximately 640 banking offices located in Alabama, Florida, Tennessee, Mississippi, Louisiana, Arkansas, Kentucky, Virginia and Georgia. In addition to its banking offices, the Bank operates a network of over 1,340 automated teller machines that are linked with shared automated tellers in all 50 states. Further segment information is included in Note 22 of Notes to Consolidated Financial Statements, which is incorporated herein by reference pursuant to Item 8, of this Form 10-K. As of February 29, 2000, AmSouth and its subsidiaries had 13,882 employees. Competition AmSouth's subsidiaries compete aggressively with banks located in Alabama, Florida, Tennessee, Mississippi, Louisiana, Arkansas, Kentucky, Virginia and Georgia, as well as large banks in major financial centers, and with other financial institutions, such as savings and loan associations, credit unions, consumer finance companies, brokerage firms, insurance companies, investment companies, mortgage companies, and financial service operations of major retailers. Competition is based on a number of factors, including prices, interest rates, services, and availability of products. AmSouth also competes with other bank holding companies headquartered in the United States and abroad for the acquisition of financial institutions. At December 31, 1999, AmSouth was the 19th largest bank holding company headquartered in the United States in terms of total assets. Various regulatory developments and existing laws have allowed financial institutions to conduct significant activities on an interstate basis for a number of years. During recent years, a number of financial institutions 3 expanded their out-of-state activities, and various states enacted legislation intended to allow certain interstate banking combinations which otherwise would have been prohibited by federal law. For a number of years, the Bank Holding Company Act of 1956, as amended (the BHCA), generally provided that no company which owned or controlled a commercial bank in the United States could acquire ownership or control of a commercial bank in a state other than the state in which the company's banking subsidiaries were principally located unless the acquisition was specifically authorized by the laws of the state in which the bank being acquired was located. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the IBBEA) authorized interstate acquisitions of banks and bank holding companies without geographic limitation beginning September 29, 1995. In addition, beginning June 1, 1997, the IBBEA authorizes a bank to merge with a bank in another state as long as neither of the states has opted out of interstate branching by May 31, 1997. A bank may establish and operate a de novo branch in a state in which the bank does not maintain a branch if that state expressly permits de novo branching. Once a bank has established branches in a state through an interstate merger transaction, the bank may establish and acquire additional branches at any location in the state where any bank involved in the interstate merger transaction could have established or acquired branches under applicable federal or state law. A bank that has established a branch in a state through de novo branching may establish and acquire additional branches in such state in the same manner and to the same extent as a bank having a branch in such state as a result of an interstate merger. If a state opted out of interstate branching within the specified time period, no bank in any other state may establish a branch in the opting out state, whether through an acquisition or de novo. None of the states in which AmSouth had subsidiary banks on June 1, 1997 "opted out" of the provisions of the IBBEA permitting interstate branching by acquisition. Although the management of AmSouth cannot predict with certainty the full effect of the IBBEA on AmSouth, management believes the IBBEA resulted in greater consolidation within the banking industry and such consolidation is likely to continue. The Gramm-Leach-Bliley Act In November 1999, President Clinton signed into law the Gramm-Leach-Bliley Act. The Gramm-Leach-Bliley Act significantly revises the laws regulating banks and bank holding companies and other providers of financial services. The Gramm-Leach-Bliley Act (i) repeals the restrictions, formerly contained in the Glass-Steagall Act, on banks affiliating with securities firms, (ii) permits a company to form a "financial holding company," which may own insured depository institutions and engage through non-bank affiliates in a broader range of financial activities than previously had been allowed, including underwriting securities, insurance underwriting, merchant banking and insurance company investments, so long as the depository institution subsidiaries are well capitalized, well managed and receive at least a satisfactory Community Reinvestment Act rating on their most recent examination, (iii) permits the Board of Governors of the Federal Reserve System (Federal Reserve Board) and the Department of the Treasury to determine that other activities are also permissible for financial holding companies, (iv) provides that the Federal Reserve will be responsible for "umbrella" supervision and examination of financial holding companies, and that other federal and state regulators will regulate, supervise and examine "functionally regulated subsidiaries" such as insurance companies and broker- dealers, (v) allows national banks that meet certain requirements to engage in new financial activities (other than insurance underwriting, merchant banking, insurance company investments and real estate development) in subsidiaries of such banks, and (vi) establishes certain restrictions on the transfer and use by financial institutions of nonpublic personal information of their customers. The enactment of the Gramm-Leach-Bliley Act is expected to intensify competition in, and the consolidation of, the financial services industry. However, the management of AmSouth cannot currently predict the full impact of the enactment of the Gramm-Leach-Bliley Act on AmSouth. Business Combinations AmSouth continually evaluates business combination opportunities and sometimes conducts due diligence activities in connection with them. As a result, business combination discussions and, in some cases, negotiations 4 take place, and transactions involving cash, debt or equity securities can be expected. Any future business combination or series of business combinations that AmSouth might undertake may be material, in terms of assets acquired or liabilities assumed, to AmSouth's financial condition. Recent business combinations in the banking industry have typically involved the payment of a premium over book and market values. This practice may result in dilution of book value and net income per share for the acquirers. Supervision and Regulation The following discussion addresses the regulatory framework applicable to bank holding companies and their subsidiaries, and provides certain specific information relevant to AmSouth. Regulation of financial institutions such as AmSouth and its subsidiaries is intended primarily for the protection of depositors, the deposit insurance funds of the Federal Deposit Insurance Corporation (the FDIC) and the banking system as a whole, and generally is not intended for the protection of stockholders or other investors. The following is a summary of certain statutes and regulations that apply to the operation of banking institutions. Changes in the applicable laws, and in their application by regulatory agencies, cannot necessarily be predicted, but they may have a material effect on the business and results of banking organizations, including AmSouth. General As a bank holding company, AmSouth is subject to the regulation and supervision of the Federal Reserve Board under the BHCA. Historically, under the BHCA, bank holding companies could not, in general, directly or indirectly acquire the ownership or control of more than 5 percent of the voting shares or substantially all of the assets of any company, including a bank, without the prior approval of the Federal Reserve Board. In addition, bank holding companies were generally prohibited under the BHCA from engaging in nonbanking activities, subject to certain exceptions. The activities permissible for bank holding companies were significantly expanded by the Gramm-Leach-Bliley Act. For a summary of its provisions, see "The Gramm-Leach-Bliley Act" above. AmSouth cannot predict at this time to what extent, if any, it will engage in any of these expanded activities. The Bank is a state bank, chartered under the laws of Alabama, and is a member of the Federal Reserve System. It is generally subject to regulation and supervision by both the Federal Reserve Board and the Office of the Superintendent of Banking of the State of Alabama. The Bank is also an insured depository institution, and, therefore, also subject to regulation by the FDIC. The Bank is also subject to various requirements and restrictions under federal and state law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be granted and the interest that may be charged thereon, and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of the Bank. In addition to the impact of regulation, commercial banks are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to influence the economy. Payment of Dividends AmSouth is a legal entity separate and distinct from its banking and other subsidiaries. The principal source of cash flow for AmSouth, including cash flow to pay dividends on AmSouth's capital stock and to pay interest and principal on any debt of AmSouth, is dividends from the Bank. There are statutory and regulatory limitations on the payment of dividends by the Bank to AmSouth as well as by AmSouth to its shareholders. The payment of dividends by AmSouth and the Bank also may be affected by other factors, such as the requirement to maintain capital at or above regulatory guidelines. See "Capital Adequacy and Related Matters" below. Under Alabama law, a bank may not pay a dividend in excess of 90 percent of its net earnings until the bank's surplus is equal to at least 20 percent of capital. The Bank is also required by Alabama law to obtain the prior approval of the Superintendent of the State Banking Department of Alabama for the payment of dividends 5 if the total of all dividends declared by the Bank in any calendar year will exceed the total of (a) the Bank's net earnings (as defined by statute) for that year plus (b) its retained net earnings for the preceding two years, less any required transfers to surplus. Also, no dividends may be paid from the Bank's surplus without the prior written approval of the Superintendent. In addition, as a member of the Federal Reserve System, the Bank is required by federal law to obtain regulatory approval for the payment of dividends if the total of all dividends declared by the Board of Directors of such bank in any year could exceed the total of (a) the Bank's net income (as reportable in its Reports of Condition and Income) for that year, plus (b) the Bank's retained net income (as defined and interpreted by regulation) for the preceding two years, less any net losses incurred in the current or prior two years and any required transfers to surplus or a fund for the retirement of preferred stock. Furthermore, if, in the opinion of the applicable federal bank regulatory authority, a bank under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice (which, depending on the financial condition of the bank, could include the payment of dividends), such authority may require, after notice and a hearing, that such bank cease and desist from such practice. The Federal Reserve Board has indicated that paying dividends that deplete a bank's capital base to an inadequate level would be an unsafe and unsound banking practice. In addition, the Federal Deposit Insurance Act (the FDI Act) imposes additional restrictions on the payments of dividends by the Bank, as described under "Capital Adequacy and Related Matters-Prompt Corrective Action" below. Moreover, the Federal Reserve Board has issued a policy statement that provides that bank holding companies and state member banks should generally pay dividends only out of current operating earnings. Under dividend restrictions imposed under federal and Alabama law, including those described above, the Bank, without obtaining government approvals, could declare aggregate dividends in 2000 of approximately $227.2 million, plus an additional amount equal to its net income for 2000. Capital Adequacy and Related Matters Capital Guidelines The Federal Reserve Board has adopted risk-based capital guidelines for bank holding companies. The minimum guideline for the ratio of total regulatory capital (Total Capital) to risk-weighted assets (including certain off- balance-sheet items, such as standby letters of credit) is 8 percent. At least half of the Total Capital must be composed of common stockholders' equity, retained earnings, minority interests in the equity accounts of consolidated subsidiaries, noncumulative perpetual preferred stock, and a limited amount of qualifying cumulative perpetual preferred stock, less goodwill and certain other intangible assets (Tier 1 Capital). The remainder may consist of subordinated debt, other preferred stock and a limited amount of loan loss reserves. At December 31, 1999, AmSouth's consolidated Tier 1 Capital and Total Capital ratios were 7.46 percent and 10.66 percent, respectively. In addition, the Federal Reserve Board has established minimum leverage ratio guidelines for bank holding companies. The guidelines provide for a minimum ratio of Tier 1 Capital to average assets, less goodwill and certain other intangible assets (the Leverage Ratio), of 3 percent for bank holding companies that meet certain specific criteria, including having the highest regulatory rating. All other bank holding companies generally are required to maintain a Leverage Ratio of at least 3 percent, plus an additional cushion of 100 to 200 basis points. AmSouth's Leverage Ratio at December 31, 1999 was 6.22 percent. The guidelines also provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Furthermore, the Federal Reserve Board has indicated that it will consider a "Tangible Tier 1 Capital Leverage Ratio" (deducting all intangibles) and other indicators of capital strength in evaluating proposals for expansion or new activities. 6 The Bank is also subject to risk-based and leverage capital requirements, similar to those described above. The Bank complied with applicable minimum capital requirements as of December 31, 1999. Neither AmSouth nor the Bank has been advised by any federal banking agency of any specific minimum Leverage Ratio requirement applicable to it. The Federal Reserve Board has adopted modifications to the Tier 1 Capital and Total Capital ratios applicable to both banks and bank holding companies that are intended to address "market risk" arising from large trading portfolios. These modifications are applicable only to banks and bank holding companies whose trading activities exceed certain thresholds, and to those that voluntarily comply with the market risk capital requirement. AmSouth is not subject to, nor has voluntarily adopted, these new requirements. Bank regulators have the authority generally to raise capital requirements applicable to banking organizations beyond their current levels. However, the management of AmSouth is unable to predict whether and when higher capital requirements would be imposed, and, if so, at what levels and on what schedule. Prompt Corrective Action The FDI Act requires the federal banking regulators to take prompt corrective action in respect of FDIC-insured depository institutions that do not meet minimum capital requirements. The FDI Act establishes five capital tiers: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized." Under applicable regulations, a state member bank is defined to be well capitalized if it maintains a Leverage Ratio of at least 5 percent, a risk-adjusted Tier 1 Capital Ratio of at least 6 percent, and a Total Capital Ratio of at least 10 percent and is not subject to any order or written directive to maintain any specific capital level. A state member bank is defined to be adequately capitalized if it maintains a Leverage Ratio of at least 4 percent, a risk- adjusted Tier 1 Capital Ratio of at least 4 percent, and a Total Capital Ratio of at least 8 percent. In addition, a state member bank will be considered: (a) undercapitalized if it fails to meet any minimum required measure; (b) significantly undercapitalized if it is significantly below such measure; and (c) critically undercapitalized if it fails to maintain a level of tangible equity equal to not less than 2 percent of total assets. A state member bank may be deemed to be in a capitalization category that is lower than is indicated by its actual capital position if it is operating in an unsafe or unsound manner or receives an unsatisfactory examination rating. AmSouth believes that at December 31, 1999, the Bank had capital ratios sufficient to qualify as "well capitalized". The capital-based prompt corrective action provisions of the FDI Act and the implementing regulations apply to FDIC-insured depository institutions such as the Bank, and are not directly applicable to holding companies, like AmSouth, that control such institutions. However, the Federal Reserve Board has indicated that, in regulating bank holding companies, it will take appropriate action at the holding company level based on an assessment of the effectiveness of supervisory actions imposed upon subsidiary depository institutions pursuant to such provisions and regulations. Although the capital categories defined under the prompt corrective action regulations are not directly applicable to AmSouth under existing law and regulations, if AmSouth were placed in a capital category it would qualify as well-capitalized as of December 31, 1999. The FDI Act generally prohibits an FDIC-insured depository institution from making any capital distribution (including payment of dividends) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. Undercapitalized insured depository institutions are subject to restrictions on borrowing from the Federal Reserve System. In addition, undercapitalized depository institutions are subject to growth limitations and are required to submit capital restoration plans. An insured depository institution's holding company must guarantee the capital plan, up to an amount equal to the lesser of 5 percent of the depository institution's assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan. The federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. If an insured depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized. 7 Significantly undercapitalized insured depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. Critically undercapitalized insured depository institutions are subject to appointment of a receiver or conservator. Brokered Deposits and Pass-Through Insurance The FDIC has adopted regulations under the FDI Act governing the receipt of brokered deposits. Under the regulations, an FDIC-insured depository institution cannot accept, roll over or renew brokered deposits unless (a) it is well capitalized or (b) it is adequately capitalized and receives a waiver from the FDIC. A depository institution that cannot receive brokered deposits also cannot offer "pass-through" insurance on certain employee benefit accounts. Whether or not it has obtained such a waiver, an adequately capitalized depository institution may not pay an interest rate on any deposits in excess of 75 basis points over certain prevailing market rates specified by regulation. There are no such restrictions on a depository institution that is well capitalized. Because the Bank was well capitalized as of December 31, 1999, AmSouth believes the brokered deposits regulation will have no material effect on the funding or liquidity of the Bank. Holding Company Structure There are various legal restrictions on the extent to which AmSouth and its nonbank subsidiaries may borrow or otherwise obtain funding from the Bank. The Bank (and its subsidiaries) is limited in engaging in borrowing and other "covered transactions" with nonbank and nonsavings bank affiliates to the following amounts: (a) in the case of any single such affiliate, the aggregate amount of covered transactions of the Bank and its subsidiaries may not exceed 10 percent of the capital stock and surplus of the Bank; and (b) in the case of all affiliates, the aggregate amount of covered transactions of the Bank and its subsidiaries may not exceed 20 percent of the capital stock and surplus of the Bank. Covered transactions also are subject to certain collateralization requirements. "Covered transactions" are defined by statute to include a loan or extension of credit, as well as a purchase of securities issued by an affiliate, a purchase of assets (unless otherwise exempted by the Federal Reserve Board) from the affiliate, the acceptance of securities issued by the affiliate as collateral for a loan, and the issuance of a guarantee, acceptance, or letter of credit on behalf of an affiliate. Under Federal Reserve Board policy, AmSouth is expected to act as a source of financial strength to, and to commit resources to support, the Bank. This support may be required at times when, absent such Federal Reserve Board policy, AmSouth may not be inclined to provide it. In addition, any capital loans by a bank holding company to a subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment. The FDI Act provides that, in the event of the "liquidation or other resolution" of an insured depository institution, the claims of depositors of such institution (including claims by the FDIC as subrogee of insured depositors) and certain claims for administrative expenses of the FDIC as receiver would be afforded a priority over other general unsecured claims against the institution including any claims of the bank's holding company as a creditor. If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will be placed ahead of unsecured, nondeposit creditors, including a parent holding company such as AmSouth, in its capacity as creditor, in order of priority of payment. FDIC Deposit Insurance Assessments The Bank is subject to FDIC deposit insurance assessments pursuant to two separate assessment schedules, one applicable to those deposits insured by the Bank Insurance Fund (BIF) and another applicable to those deposits insured by the Savings Association Insurance Fund (SAIF). 8 The FDIC's current risk-based system places a bank in one of nine risk categories, principally on the basis of its capital level and an evaluation of the bank's risk to the fund, and bases premiums on the probability of loss to the FDIC with respect to each individual bank. Currently, the FDIC's risk- based system provides that the highest and lowest annual assessments per $100 of deposits insured by the BIF or SAIF are $.27 and $0. The assessment rate schedule is subject to change by the FDIC and accordingly assessment rates could increase in the future. The Bank's total FDIC assessments were $5.4 million pretax in 1999. Liability for Affiliate Insured Depository Institutions Under the FDI Act, an insured depository institution, such as the Bank, can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC in connection with (a) the default of a commonly controlled FDIC- insured depository institution or (b) any assistance provided by the FDIC to any commonly controlled FDIC-insured depository institution "in danger of default." "Default" is defined generally as the appointment of a conservator or receiver and "in danger of default" is defined generally as the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance. AmSouth currently has only one small depository institution subsidiary other than the Bank, but that subsidiary will be merged into the Bank on March 31, 2000. It is possible, however, that AmSouth will have other depository institution subsidiaries in the future. ITEM 2. PROPERTIES The executive offices of AmSouth are located in the AmSouth-Sonat Tower in downtown Birmingham, Alabama. An undivided one-half interest in this building is owned by the Bank through an unincorporated joint venture. The Bank is a principal tenant of this building. The Bank is also a principal tenant of other multi-story office buildings in Birmingham, Alabama and Nashville, Tennessee. The Bank also has other banking and operational offices located in its nine-state market area. At December 31, 1999, AmSouth and its subsidiaries had 774 offices (principally bank buildings) of which 513 were owned and 261 were either leased or subject to a ground lease. ITEM 3. 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, loan servicing, deposit taking, investment, trust and other activities. Among the actions which are pending against AmSouth subsidiaries are actions filed as class actions. The actions are similar to others that have been brought in recent years against financial institutions in that they seek punitive damage awards in transactions involving relatively small amounts of actual damages. Legislation was recently enacted in Alabama that is designed to limit the potential amount of punitive damages that can be recovered in individual cases in the future. However, AmSouth cannot predict the exact effect of the legislation at this time. 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. At times, class actions are settled by defendants without admission or even an actual finding of any wrongdoing but with payment of some compensation to purported class members and large attorney's fees to plaintiff class counsel. Nonetheless, 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters brought to a vote of security holders during the fourth quarter of 1999. 9 Executive Officers of the Registrant The executive officers of AmSouth, their ages, the positions held by them with AmSouth and certain of its subsidiaries, and their principal occupations for the last five years are as follows: C. Dowd Ritter 52 President and Chief Executive Officer (January 1996 to date) of AmSouth, Chairman (September 1996 to date) and President and Chief Executive Officer (January 1996 to date) of AmSouth Bank; Director of AmSouth and AmSouth Bank. Formerly, Chairman of the Board (September 1996 to October 1999) of AmSouth and President and Chief Operating Officer, AmSouth and AmSouth Bank of Alabama (August 1994 to December 1995). Thomas E. Hoaglin 50 Vice Chairman and a director (February 2000 to date) of AmSouth and AmSouth Bank. Formerly, Chairman and Chief Executive Officer (1997 to 1999) of Bank One Services Corp., Chairman (1996 to 1997) of Project One at Bank One Corporation and Chairman and Chief Executive Officer (1992 to 1995) of Banc One Ohio Corporation. Michael C. Baker 52 Senior Executive Vice President and Capital Management Group Head of AmSouth and AmSouth Bank (October 1995 to date). Formerly, President and Chief Executive Officer of Barnett Banks Trust Co., N.A. (1989 to July 1995). Candice W. Bagby 50 Senior Executive Vice President and Consumer Banking Group Head of AmSouth and AmSouth Bank (August 1995 to date). Formerly, Executive Vice President and Director of Marketing of AmSouth and AmSouth Bank of Alabama (July 1994 to August 1995). Sloan D. Gibson, IV 46 Senior Executive Vice President (1994 to date) of AmSouth and AmSouth Bank and Tennessee/Mississippi/Louisiana Banking Group Head (1999 to date) of AmSouth Bank. Formerly, President and Chief Executive Officer (October 1999 to December 1999) of First American National Bank, Chief Financial Officer (October 1997 to October 1999) and Finance, Commercial and Credit Group Head (October 1994 to October 1999) of AmSouth and AmSouth Bank. W. Charles Mayer, III 45 Senior Executive Vice President (October 1994 to date) of AmSouth and AmSouth Bank and Alabama Banking Group Head (October 1999 to date) of AmSouth Bank. Formerly, Alabama/Tennessee/Georgia Banking Group Head (November 1997 to October 1999), Birmingham City President (May 1995 to December 1998) of AmSouth Bank, Alabama Banking Group Head of AmSouth (May 1995 to October 1997), and President and Chief Executive Officer of AmSouth Bank of Tennessee (January 1993 to April 1995). E. W. Stephenson, Jr. 53 Senior Executive Vice President of AmSouth (July 1993 to date) and Senior Executive Vice President of AmSouth Bank and Florida Banking Group Head (July 1997 to date). Formerly, Chairman of the Board and Chief Executive Officer of AmSouth Bank of Florida (July 1993 to June 1997). Claire W. Tucker 46 Senior Executive Vice President, Commercial Banking Group (October 1999 to date) of AmSouth and AmSouth Bank. Formerly, President of Corporate Bank (1997 to October 1999), Manager, Specialized Lending Group (1995 to 1997), and Manager of Healthcare Division (1991 to 1995), all of First American National Bank. David B. Edmonds 46 Executive Vice President and Human Resources Director of AmSouth and AmSouth Bank (October 1994 to date).
10 Grayson Hall 42 Executive Vice President (June 1994 to date) and Operations and Technology Division Head (January 1993 to date) of AmSouth and AmSouth Bank. Samuel M. Tortorici 34 Executive Vice President and Chief Financial Officer (October 1999 to date) of AmSouth and AmSouth Bank. Formerly, Central Alabama Area Executive and Montgomery City President (August 1997 to October 1999) and Senior Vice President for Regional Banking (1995 to August 1997), all of AmSouth Bank. Stephen A. Yoder 46 Executive Vice President, General Counsel and Corporate Secretary of AmSouth and AmSouth Bank (1995 to date). Formerly, Assistant General Counsel (1992 to 1995) of Mellon Bank Corporation.
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AmSouth's common stock, par value $1.00 per share, is listed for trading on the New York Stock Exchange under the symbol ASO. Quarterly high and low sales prices of, and cash dividends declared on, AmSouth common stock are set forth in Note 24 of the Notes to Consolidated Financial Statements, which are incorporated herein by reference pursuant to Item 8 of this Form 10-K. As of February 22, 2000, there were approximately 27,992 holders of record of AmSouth's common stock (including participants in the Dividend Reinvestment and Common Stock Purchase Plan). Restrictions on the ability of the Bank to transfer funds to AmSouth at December 31, 1999, are set forth in Note 18 of the Notes to Consolidated Financial Statements, which are incorporated herein by reference pursuant to Item 8 of this Form 10-K. A discussion of certain limitations on the ability of the Bank to pay dividends to AmSouth, and the ability of AmSouth to pay dividends on its common stock, is set forth in Part I under the headings "Supervision and Regulation--Payment of Dividends" and "Supervision and Regulation--Capital Adequacy and Related Matters." 11 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial data for the last five years. All amounts have been restated to reflect the merger with First American.
1999 1998 1997 1996 1995 ----------- ----------- ----------- ----------- ----------- (Dollars in thousands except per share data) Earnings summary as reported Net interest income..... $ 1,507,946 $1,444,284 $ 1,384,729 $ 1,279,138 $ 1,160,543 Provision for loan losses................. 165,626 99,067 83,508 71,608 43,000 ----------- ----------- ----------- ----------- ----------- Net interest income after provision for loan losses............ 1,342,320 1,345,217 1,301,221 1,207,530 1,117,543 Noninterest revenues.... 847,557 799,854 658,724 542,289 438,812 Merger-related costs.... 301,415 121,725 0 0 7,269 Noninterest expenses excluding merger- related costs.......... 1,347,091 1,284,547 1,221,675 1,129,509 988,488 ----------- ----------- ----------- ----------- ----------- Income before income taxes.................. 541,371 738,799 738,270 620,310 560,598 Income taxes............ 200,903 264,725 264,589 223,455 202,861 ----------- ----------- ----------- ----------- ----------- Net income............. $ 340,468 $ 474,074 $ 473,681 $ 396,855 $ 357,737 =========== =========== =========== =========== =========== Earnings per common share*................. $ 0.87 $ 1.22 $ 1.20 $ 1.00 $ 0.90 Diluted earnings per common share*.......... 0.86 1.20 1.18 0.98 0.88 Cash dividends declared*.............. 0.71 0.57 0.51 0.48 0.46 Return on average assets................. 0.81% 1.22% 1.32% 1.14% 1.13% Return on average equity................. 10.69 15.33 16.00 13.92 13.53 Operating efficiency.... 69.24 61.97 59.20 61.25 61.35 Earnings summary excluding merger- related and other special charges** Net interest income..... $ 1,507,946 $ 1,444,284 $ 1,384,729 $ 1,279,138 $ 1,160,543 Provision for loan losses................. 91,626 99,067 83,508 71,608 43,000 ----------- ----------- ----------- ----------- ----------- Net interest income after provision for loan losses............ 1,416,320 1,345,217 1,301,221 1,207,530 1,117,543 Noninterest revenues.... 856,398 799,854 658,724 542,289 438,812 Noninterest expenses excluding merger- related costs.......... 1,343,288 1,284,547 1,221,675 1,097,213 988,488 ----------- ----------- ----------- ----------- ----------- Income before income taxes.................. 929,430 860,524 738,270 652,606 567,867 Income taxes............ 324,698 305,182 264,589 235,308 205,478 ----------- ----------- ----------- ----------- ----------- Net income............. $ 604,732 $ 555,342 $ 473,681 $ 417,298 $ 362,389 =========== =========== =========== =========== =========== Earnings per common share*................. $ 1.55 $ 1.43 $ 1.20 $ 1.05 $ 0.91 Diluted earnings per common share*.......... 1.53 1.40 1.18 1.03 0.90 Return on average assets................. 1.45% 1.43% 1.32% 1.19% 1.14% Return on average equity................. 18.99 17.96 16.00 14.63 13.71 Operating efficiency.... 56.21 56.60 59.20 59.50 60.90 Selected year end balances Loans net of unearned income................. $26,266,759 $24,445,296 $24,415,004 $23,124,651 $22,041,920 Assets.................. 43,406,554 40,635,831 37,380,079 36,070,557 34,247,835 Deposits................ 27,912,443 28,533,760 27,045,700 26,003,593 26,258,269 Long-term debt.......... 5,603,486 4,392,825 2,247,442 1,876,237 862,690 Shareholders' equity.... 2,959,205 3,207,424 3,029,138 2,939,725 2,805,685 Selected average balances Loans net of unearned income................. $25,471,295 $24,027,839 $23,753,817 $22,318,990 $20,849,737 Assets.................. 41,811,328 38,840,235 35,917,828 34,929,393 31,782,150 Deposits................ 27,718,029 27,150,710 26,260,410 25,762,126 24,908,017 Long-term debt.......... 5,292,217 3,791,953 1,869,577 1,369,292 645,400 Shareholders' equity.... 3,185,084 3,091,737 2,960,023 2,851,421 2,643,459 Selected ratios Net interest margin..... 4.02% 4.14% 4.27% 4.07% 4.05% Allowance for loan losses to loans net of unearned income........ 1.38 1.53 1.50 1.60 1.70 Nonperforming assets to loans net of unearned income, foreclosed properties and repossessions.......... 0.61 0.54 0.53 0.61 0.79 Ending equity to ending assets................. 6.82 7.89 8.10 8.15 8.19 Average equity to average assets......... 7.62 7.96 8.24 8.16 8.32
- -------- * Restated for common stock splits ** See page 23 of the Annual Report for description of special charges for 1999. 1996 special charges relate to the one-time SAIF assessment. 12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" of AmSouth's 1999 Annual Report to Shareholders is hereby incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this item is included on pages 41 and 42 of "Management's Discussion and Analysis of Financial Condition and Results of Operations", which is hereby incorporated herein by reference pursuant to Item 7, above. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements of AmSouth and Subsidiaries, the accompanying Notes to Consolidated Financial Statements, Management's Statement on Responsibility for Financial Reporting, and the Report of Independent Auditors contained in AmSouth's 1999 Annual Report to Shareholders are hereby incorporated herein by reference. The Report of Independent Auditors, KPMG LLP, for First American Corporation for the years ended December 31, 1998 and 1997 is included herein as follows: Independent Auditors' Report The Board of Directors AmSouth Bancorporation: We have audited the consolidated balance sheets of First American Corporation and subsidiaries as of December 31, 1998 and 1997, and the related consolidated income statements, changes in shareholders' equity, and cash flows for each of the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First American Corporation and subsidiaries as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ KPMG LLP January 21, 1999 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 13 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information on the directors and director nominees of AmSouth included at pages 6, 8 and 10 of AmSouth's Proxy Statement for the Annual Meeting of Shareholders to be held on April 20, 2000 (the Proxy Statement) and the information incorporated by reference pursuant to Item 13 below is hereby incorporated herein by reference. Information on AmSouth's executive officers is included in Part I of this report. Information regarding late filings under Section 16(a) of the Securities Exchange Act of 1934 included at page 12 of the Proxy Statement under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" is hereby incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Information regarding compensation of directors and executive officers included at pages 13 through 22 of the Proxy Statement is hereby incorporated herein by reference. However, the information provided in the Proxy Statement under the headings "Executive Compensation Committee Report on Executive Compensation" and "Performance Graph" shall not be deemed to be "soliciting material" or to be "filed" with the Securities and Exchange Commission, or subject to Regulation 14A or 14C, other than as provided in Item 402 of Regulation S-K, or to liabilities of Section 18 of the Securities Exchange Act of 1934. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under the caption "Voting Securities and Principal Holders Thereof " at pages 1 through 5 of the Proxy Statement is hereby incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth in the Proxy Statement under the caption "Certain Relationships, Related Transactions and Legal Proceedings" at page 13 thereof is hereby incorporated herein by reference. 14 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Financial Statements and Financial Statement Schedules Financial Statements The following management's statement on responsibility for financial reporting, report of independent auditors and consolidated financial statements of AmSouth and its subsidiaries included in AmSouth's 1999 Annual Report to Shareholders are incorporated herein by reference pursuant to Item 8. Management's Statement on Responsibility for Financial Reporting Report of Ernst & Young LLP, Independent Auditors Consolidated Statement of Condition--December 31, 1999 and 1998 Consolidated Statement of Earnings--Years ended December 31, 1999, 1998 and 1997 Consolidated Statement of Shareholders' Equity--Years ended December 31, 1999, 1998 and 1997 Consolidated Statement of Cash Flows--Years ended December 31, 1999, 1998 and 1997 Notes to Consolidated Financial Statements The Report of Independent Auditors, KPMG LLP, is included herein under Item 8. Financial Statement Schedules All schedules to the consolidated financial statements required by Article 9 of Regulation S-X and all other schedules to the financial statements of AmSouth required by Article 5 of Regulation S-X are not required under the related instructions or are inapplicable and, therefore, have been omitted, or the required information is contained in the Consolidated Financial Statements or the notes thereto, which are incorporated herein by reference pursuant to Item 8, Financial Statements and Supplementary Data. (b) Reports on Form 8-K Two reports on Form 8-K were filed by AmSouth during the period October 1, 1999 to December 31, 1999: (a) A report was filed on October 15, 1999 regarding the acquisition of First American and an increase in AmSouth's authorized shares of common stock. (b) A report was filed on December 30, 1999 reporting the election of Thomas E. Hoaglin as Vice Chairman of AmSouth. (c) Exhibits The exhibits listed in the Exhibit Index at page 18 of this Form 10-K are filed herewith or are incorporated herein by reference. 15 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AmSouth Bancorporation /s/ C. Dowd Ritter By: _________________________________ C. Dowd Ritter President and Chief Executive Officer Date: March 30, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ C. Dowd Ritter President and March 30, 2000 By: __________________________________ Chief Executive Officer C. Dowd Ritter (Principal Executive Officer) /s/ Samuel M. Tortorici Executive Vice President March 30, 2000 By: __________________________________ Chief Financial Officer Samuel M. Tortorici (Principal Financial Officer) /s/ Robert R. Windelspecht Executive Vice President March 30, 2000 By: __________________________________ Controller Robert R. Windelspecht (Principal Accounting Officer)
16
Signature Title Date --------- ----- ---- * Chairman of the Board and March 30, 2000 By: __________________________________ Director Dennis C. Bottorff
* A Director March 30, 2000 By: __________________________________ J. Harold Chandler * A Director March 30, 2000 By: __________________________________ James E. Dalton, Jr. A Director March 30, 2000 By: __________________________________ Earnest W. Deavenport, Jr. * A Director March 30, 2000 By: __________________________________ Rodney C. Gilbert A Director March 30, 2000 By: __________________________________ Elmer B. Harris * A Director March 30, 2000 By: __________________________________ James A. Haslam II * Vice Chairman and Director March 30, 2000 By: __________________________________ Thomas E. Hoaglin * A Director March 30, 2000 By: __________________________________ Martha R. Ingram * A Director March 30, 2000 By: __________________________________ Victoria B. Jackson * A Director March 30, 2000 By: __________________________________ Ronald J. Kuehn, Jr. * A Director March 30, 2000 By: __________________________________ James R. Malone * A Director March 30, 2000 By: __________________________________ Francis A. Newman A Director March 30, 2000 By: __________________________________ Claude B. Nielsen * A Director March 30, 2000 By: __________________________________ John N. Palmer A Director March 30, 2000 By: __________________________________ Benjamin F. Payton, Ph.D. * A Director March 30, 2000 By: __________________________________ Herbert A. Sklenar
- -------- * Carl L. Gorday, by signing his name hereto, does sign this document on behalf of each of the persons indicated above pursuant to powers of attorney executed by such persons and filed with the Securities and Exchange Commission. /s/ Carl L. Gorday By: _________________________________ Carl L. Gorday Attorney in Fact 17 EXHIBIT INDEX The following is a list of exhibits including items incorporated by reference. Compensatory plans and arrangements are identified by an asterisk. 2 Agreement and Plan of Merger, dated May 31, 1999 (1) 3-a Restated Certificate of Incorporation of AmSouth Bancorporation (2) 3-b Bylaws of AmSouth Bancorporation (3) 4-a Instruments defining the rights of security holders (4) 4-b Stockholder Protection Rights Agreement dated as of December 18, 1997, including as Exhibit A the forms of Rights Certificate and of Election to Exercise and as Exhibit B the form of Certificate of Designation and Terms of Series A Preferred Stock (5) *10-a AmSouth Bancorporation Executive Incentive Plan (6) *10-b AmSouth Bancorporation Relocation Policy for Executive Officers (7) *10-c AmSouth Bancorporation Supplemental Retirement Plan (8) *10-d 1989 AmSouth Bancorporation Long Term Incentive Compensation Plan (9) *10-e Amendment No. 1 to the 1989 AmSouth Bancorporation Long Term Incentive Compensation Plan (10) *10-f Amendment No. 2 to the 1989 AmSouth Bancorporation Long Term Incentive Compensation Plan (11) *10-g Director Restricted Stock Plan (12) *10-h 1997 Performance Incentive Plan (13) *10-i 1996 Long Term Incentive Compensation Plan (14) *10-j Amended and Restated Deferred Compensation Plan for Directors of AmSouth Bancorporation (15) *10-k AmSouth Bancorporation Supplemental Thrift Plan (16) *10-l Amendment Number One to the AmSouth Bancorporation Supplemental Thrift Plan (17) *10-m Employment Agreement for C. Dowd Ritter *10-n Form of Change-in-Control Agreement for certain Executive Officers (18) *10-o AmSouth Bancorporation Deferred Compensation Plan (19) *10-p Stock Option Plan for Outside Directors (20) *10-q Life Insurance Agreement (21) *10-r Supplemental Long-Term Disability Plan (22) *10-s Employment Agreement with Dennis C. Bottorff (23) *10-t First American Corporation 1991 Employee Stock Incentive Plan (24) *10-u 1993 Non-Employee Director Stock Option Plan (25) *10-v First American Corporation Directors' Deferred Compensation Plan as amended October 18, 1996 (26) *10-w First American Corporation Supplemental Executive Retirement Program dated as of January 1, 1989 (27) 13 AmSouth Bancorporation's 1999 Annual Report to Shareholders, excluding the portions thereof not incorporated by reference in this Form 10-K 21 List of Subsidiaries of AmSouth Bancorporation 23-a Consent of Ernst & Young LLP, Independent Auditors 23-b Consent of KPMG LLP, Independent Auditors 24 Powers of Attorney 27.1 Financial Data Schedule 27.2 Financial Data Schedule 27.3 Financial Data Schedule
18 NOTES TO EXHIBITS (1) Filed as Exhibit 2.1 to AmSouth's Report on Form 8-K filed June 8, 1999, incorporated herein by reference (2) Filed as Exhibit 3.1 to AmSouth's Report on Form 8-K filed October 15, 1999, incorporated herein by reference (3) Filed as Exhibit 3-b to AmSouth's Form 10-Q Quarterly Report for the quarter ended June 30, 1997, incorporated herein by reference (4) Instruments defining the rights of holders of long-term debt of AmSouth are not filed herewith pursuant to Item 601(b)(4)(iii) of Regulation S-K, and AmSouth hereby agrees to furnish a copy of said instruments to the SEC upon request (5) Filed as Exhibit 4.1 to AmSouth's Report on Form 8-K filed on December 18, 1997, incorporated herein by reference (6) Filed as Exhibit 10-a to AmSouth's Form 10-K Annual Report for the year ended December 31, 1997, incorporated herein by reference (7) Filed as Exhibit 10-b to AmSouth's Form 10-K Annual Report for the year ended December 31, 1996, incorporated herein by reference (8) Filed as Exhibit 10-c to AmSouth's Form 10-K Annual Report for the year ended December 31, 1995, incorporated herein by reference (9) Filed as Exhibit 10 to AmSouth's Form 10-Q Quarterly Report for the quarter ended March 31, 1993, incorporated herein by reference (filed with the Securities and Exchange Commission in Washington, D.C., SEC File No. 1-7476, former File No. 0-6907) (10) Filed as Exhibit 10-k to AmSouth's Form 10-K Annual Report for the year ended December 31, 1994, incorporated herein by reference (filed with the Securities and Exchange Commission in Washington, D.C., SEC File No. 1- 7476, former File No. 0-6907) (11) Filed as Exhibit 10-a to AmSouth's Form 10-Q Quarterly Report for the quarter ended September 30, 1995, incorporated herein by reference (12) Filed as Exhibit 4.1 to AmSouth's Registration Statement on Form S-8 (Registration No. 33-58777), incorporated herein by reference (13) Filed as Appendix A to AmSouth's Proxy Statement, dated March 10, 1997, for the Annual Meeting of Shareholders on April 17, 1997, incorporated herein by reference (14) Filed as Exhibit 10-p to AmSouth's Form 10-K Annual Report for the year ended December 31, 1996, incorporated herein by reference (15) Filed as Exhibit 10-q to AmSouth's Form 10-K Annual Report for the year ended December 31, 1997, incorporated herein by reference (16) Filed as Exhibit 10-q to AmSouth's Form 10-K Annual Report for the year ended December 31, 1995, incorporated herein by reference (17) Filed as Exhibit 10-r to AmSouth's Form 10-K Annual Report for the year ended December 31, 1995, incorporated herein by reference (18) Agreements in this form have been entered into with the following Executive Officers: Michael C. Baker, David B. Edmonds, Sloan D. Gibson, IV, Grayson Hall, Thomas E. Hoaglin, W. Charles Mayer, III, Candice W. Bagby, E. W. Stephenson, Jr., Samuel M. Tortorici, Claire W. Tucker, and Stephen A. Yoder (19) Filed as Exhibit 10-v to AmSouth's Form 10-K Annual Report for the year ended December 31, 1997, incorporated herein by reference (20) Filed as Exhibit 10-w to AmSouth's Form 10-K Annual Report for the year ended December 31, 1998, incorporated herein by reference (21) Filed as Exhibit 10-a to AmSouth's Form 10-Q Quarterly Report for the quarter ended March 31, 1998, incorporated herein by reference (22) Filed as Exhibit 10-b to AmSouth's Form 10-Q Quarterly Report for the quarter ended March 31, 1998, incorporated herein by reference 19 (23) Filed as Exhibit 10.1 to AmSouth's Registration Statement on Form S-4 (Registration No. 333-85239), incorporated herein by reference (24) Filed as part of First American's Proxy Statement dated March 18, 1991 for the Annual Meeting of Shareholders held April 19, 1991 with amendments filed as part of the Proxy Statements for the Annual Meetings held on April 21, 1994 and April 17, 1997, incorporated herein by reference (filed with the Securities and Exchange Commission in Washington, D.C., SEC File No. 0-6198) (25) Filed as part of First American's Proxy Statement dated March 18, 1993 for the Annual Meeting of Shareholders on April 15, 1993, incorporated herein by reference (filed with the Securities and Exchange Commission in Washington, D.C., SEC File No. 0-6198) (26) Filed as Exhibit 10.3(e) to First American's Annual Report on Form 10-K for the year ended December 31, 1996, incorporated herein by reference (filed with the Securities and Exchange Commission in Washington, D.C., SEC File No. 0-6198) (27) Filed as Exhibit 19.2 to First American's Annual Report on Form 10-K for the year ended December 31, 1992, incorporated herein by reference (filed with the Securities and Exchange Commission in Washington, D.C., SEC File No. 0-6198). 20 EX-10.M 2 EMPLOYMENT AGREEMENT Exhibit 10-m EMPLOYMENT AGREEMENT -------------------- AGREEMENT by and between AmSouth Bancorporation, a Delaware corporation (the "Company") and C. Dowd Ritter (the "Executive") dated as of the 4th day of October, 1999. The Company has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive. Therefore, in order to accomplish this objective, the Board of Directors of the Company has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Effective Date. The "Effective Date" shall mean the date hereof, and -------------- the Executive's Employment Agreement dated December 18, 1997 (the "Prior Agreement"), is hereby superseded and is void, except as provided in Section 3(b)(i) below. 2. Employment Period. The Company hereby agrees to employ the Executive, ----------------- and the Executive hereby agrees to enter into the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the fifth anniversary thereof (the "Employment Period"); provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Employment Period shall be automatically extended so as to terminate on the earlier of (x) five years from such Renewal Date and (y) the Executive's 62nd birthday, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Employment Period shall not be so extended. 3. Terms of Employment. (a) Position and Duties. (i) (A) During the ------------------- ------------------- Employment Period, the Executive shall serve as Chief Executive Officer and President of the Company with such authority, duties and responsibilities as are commensurate with such position and as may be consistent with such position and (B) the Executive's services shall be performed in Birmingham, Alabama. Upon the earlier of (x) January 2, 2001, or (y) Dennis C. Bottorff ceasing to be Chairman of the Company, the Executive shall be elected Chairman of the Company's Board of Directors for the remainder of the Employment Period. The Executive shall serve on the Company's Board of Directors during the entire Employment Period. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote substantially all of his attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall thereafter be deemed not to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. ------------ (i) Base Salary. Effective October 16, 1999, and during the ----------- Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary") of no less than $900,000. From the Effective Date through October 15, 1999, the Executive's Annual Base Salary shall be the same as was in effect immediately prior to the Effective Date. The Annual Base Salary shall be reviewed no less frequently than annually, and, if increased, the term "Annual Base Salary" shall refer to such increased amount. (ii) Annual Bonus. During the Employment Period, the Executive shall ------------ be eligible to receive an annual cash bonus under the Company's Executive Incentive Plan or any successor thereto ("Annual Bonus") based on performance criteria determined by the Compensation Committee of the Company's Board of Directors that provides the Executive with a target bonus of 100% of his Annual Base Salary and with an opportunity to earn up to 200% of his Annual Base Salary. (iii) Incentive Awards. On the Effective Date, the Company shall ---------------- grant the Executive 100,000 shares of restricted stock of the Company (the "Restricted Stock") pursuant to the terms of the Company's stock incentive plan. The Executive shall be granted stock options to acquire 400,000 shares of the Company's common stock (the "Stock Options") with a strike price equal to the fair market value of the stock subject thereto on the date of grant, as provided in the Company's stock incentive plan. The Restricted Stock and Stock Options will vest according to the following schedule: Restricted Stock ---------------- 33,333 Third anniversary hereof 33,333 Fourth anniversary hereof 33,334 Fifth anniversary hereof -2- Stock Options ------------- 133,333 Third anniversary hereof 133,333 Fourth anniversary hereof 133,334 Fifth anniversary hereof (iv) Retirement Benefits. So long as the Executive continues to ------------------- serve as the chief executive officer of the Company until at least his 55th birthday, he shall accrue an increasing total annual retirement benefit assuming retirement at age 62 as set forth in the chart below (the "Total Retirement Benefit"). "Final Average Pay" means the average of the sum of his highest Annual Base Salary and Annual Bonuses for three of the five years prior to his retirement.
Age at Which Accrual Factor for Early Payment Total Retirement Retirement Benefits Replacement % of Reduction Factor Benefit Begin Final Average Pay Assuming Retirement at Age 62 - -------------------------------------------------------------------------------------------------- 55 years old 53% 79% 41.87% of Final Average Pay - -------------------------------------------------------------------------------------------------- 56 years old 54% 82% 44.28% of Final Average Pay - -------------------------------------------------------------------------------------------------- 57 years old 55% 85% 46.75% of Final Average Pay - -------------------------------------------------------------------------------------------------- 58 years old 56% 88% 49.28% of Final Average Pay - -------------------------------------------------------------------------------------------------- 59 years old 57% 91% 51.87% of Final Average Pay - -------------------------------------------------------------------------------------------------- 60 years old 58% 94% 54.52% of Final Average Pay - -------------------------------------------------------------------------------------------------- 61 years old 59% 97% 57.23% of Final Average Pay - -------------------------------------------------------------------------------------------------- 62 years old 60% 100% 60% of Final Average Pay - --------------------------------------------------------------------------------------------------
-3- The Total Retirement Benefit shall equal the total of the amounts payable to the Executive under the Company's qualified and non-qualified defined benefit pension plans (the "Pension Plans") plus the additional amount necessary in order to achieve the percentages of Final Average Pay specified above. The fact that the Executive is receiving the portion of the Total Retirement Benefit called for by this agreement shall not reduce or otherwise affect his existing participation in the Pension Plans. Upon the Executive's death, his current spouse, should she survive the Executive, shall be paid, for life, an annual benefit of 50% of the Total Retirement Benefit which would otherwise be payable to the Executive. (v) Other Employee Benefit Plans. During the Employment Period, ---------------------------- except as otherwise expressly provided herein, the Executive shall be entitled to participate in all employee benefit, welfare and other plans, practices, policies and programs generally applicable to senior executives of the Company on a basis no less favorable than his participation immediately prior to the Effective Date as set forth in the Prior Agreement provided that upon the Executive's termination of employment for any reason, the Company shall continue to provide him and his current spouse with medical and dental benefits for the remainder of their lives on a basis no less favorable than those benefits were provided to them immediately prior to such termination. (vi) Expenses. During the Employment Period, the Executive shall -------- be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the Company's policies. (vii) Vacation. During the Employment Period, the Executive shall -------- be entitled to paid vacation in accordance with the plans, policies, programs and practices of the Company and its affiliated companies as in effect with respect to the senior executives of the Company. (viii) The Company shall provide the Executive with a Supplemental Life Insurance Policy which will replace the group term life insurance beyond $50,000 provided by the Company and will take into account the maximum coverage amounts allowed under the group term policy. This Supplemental Life Insurance will be provided in the form of a survivorship policy which will be funded on the basis of a split dollar endorsement method. The Company will meet its obligation to pay its portion of premiums and meet all other commitments to the Executive under the policy. 4. Termination of Employment. (a) Death or Disability. The Executive's ------------------------- ------------------- employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give -4- to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) Cause. The Company may terminate the Executive's employment ----- during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board which specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company, or (iii) conviction of a felony or guilty or nolo contendere plea by the Executive with respect thereto. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. The Executive's employment may be terminated by the ----------- Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean in the absence of a written consent of the Executive a material breach by the Company of a material term -5- of this Agreement, after the Company has been given notice thereof and a reasonable opportunity to cure such breach. (d) Notice of Termination. Any termination by the Company for Cause, --------------------- or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the ------------------- Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein within 30 days of such notice, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 5. Obligations of the Company upon Termination. (a) Good Reason; ------------------------------------------- ------------ Other Than for Cause, Death or Disability. If, during the Employment Period, - ----------------------------------------- the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the highest annual bonus paid to the Executive for any of the three years prior to the Date of Termination (the "Recent Annual Bonus") and (y) a fraction, the numerator of which is the number of days that have elapsed in the fiscal year in which the Date of Termination occurs as of the Date of Termination, and the denominator of which is 365, and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case -6- to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to the product of (1) three and (2) the sum of (x) the Executive's Annual Base Salary, (y) the Recent Annual Bonus and (z) the value determined by an executive compensation consulting firm with a national reputation to be a competitive annual long term incentive grant (defined as a size-adjusted, 50th percentile grant as of the date of determination as compared to the Company's peer group); and C. An amount equal to the Total Retirement Benefit Value less the Pension Plan Benefit Value, where: "Total Retirement Value" equals the lump sum actuarial equivalent, utilizing actuarial assumptions no less favorable to the Executive than those in effect under the Company's qualified defined benefit pension plan immediately prior to the Effective Date (the "Lump Sum Value"), of the Total Retirement Benefit provided under subsection 3(b)(iv) hereof, assuming (x) that the Executive is three years older than his actual age on the Date of Termination, (y) there shall be no deduction for early payment and (z) that for purposes of determining "Final Average Pay" under the benefit calculation the Executive's actual pay history as of the Date of Termination shall be used. By way of illustration, if the Executive were age 58 on the Date of Termination, then the Total Retirement Benefit Value would be the Lump Sum Value of an annual retirement benefit equal to 59% of the Executive's actual Final Average Pay as of the Date of Termination. "Pension Plan Benefit Value" equals the Lump Sum Value on the Date of Termination of the Executive's benefit under the Company's qualified defined benefit pension plan. The payment provided under this subsection 5(a)(i)(C) shall be made in lieu of, and shall completely supersede and replace the Total Retirement Benefit otherwise payable under subsection 3(b)(iv) hereof, other than the portion thereof payable under the Company's qualified defined benefit pension plan. D. An amount equal to the aggregate benefits accrued by the Executive as of the effective date of termination under the terms of the Supplemental Thrift Plan. The payment provided under this Subsection 5(a)(i)(D) shall be made in lieu -7- of, and shall completely supersede and replace, the Executive's benefits payable under the AmSouth Bancorporation Supplemental Thrift Plan. (ii) the Restricted Stock and the Stock Options and any other stock-based incentives awarded to the Executive shall vest immediately; (iii) The amount of the Executive's annual club dues bonus in the year of termination, multiplied by three; (vi) For a thirty-six-month period following the date of the termination or until the Executive shall have obtained employment, comparable to his position with the Company on the date of termination, whichever is earlier, out-placement services, the scope and provider of which shall be selected by the Executive in the Executive's sole discretion, shall be provided at the expense of the Company, but not to exceed a reasonable cost; (v) the Company shall transfer (or cause to be transferred) to the Executive title to the Executive's Company car, without cost to the Executive, and shall pay to the Executive a lump sum cash payment in an amount necessary to fully gross-up the income tax effect of said transfer; and (vi) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies through the Date of Termination (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If the Executive's employment is terminated by reason of ----- the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. In addition, the Restricted Stock and Stock Options shall vest immediately. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(b) shall include death benefits as in effect on the date of the Executive's death with respect to senior executives of the Company and their beneficiaries. (c) Disability. If the Executive's employment is terminated by reason ---------- of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. In addition, the Restricted Stock and Stock Options shall vest immediately. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the -8- Disability Effective Date to receive, disability and other benefits as in effect at any time thereafter generally with respect to senior executives of the Company. (d) Cause; Other than for Good Reason. If the Executive's employment --------------------------------- shall be terminated for Cause or the Executive terminates his employment without Good Reason during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (w) his Annual Base Salary through the Date of Termination, (x) payment of the Retirement Benefit, and (y) Other Benefits, in each case to the extent theretofore unpaid. 6. Non-exclusivity of Rights. Except as specifically provided, ------------------------- nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 7. Full Settlement. The Company's obligation to make the payments --------------- provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). 8. Certain Additional Payments by the Company. ------------------------------------------ (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 8) (a "Payment") would be subject to the excise tax imposed -9- by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 8(a), if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that could be paid to the Executive such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. (b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's independent certified public accounting firm or such other certified public accounting firm reasonably acceptable to the Company as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: -10- (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 8(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 8(c), a determination is made that the -11- Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 9. Confidential Information; Noncompetition. (a) The Executive ---------------------------------------- shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. (b) Without the prior written consent of the Company, during the Employment Period, and for twenty-four (24) months following the expiration of this Agreement, the Executive shall not, as an employee or an officer, engage directly or indirectly in any business or enterprise which is "in competition" with the Company or its successors or assigns. For purposes of this Agreement, a business or enterprise will be deemed to be "in competition" if it is a banking institution, the headquarters of which is within one hundred (100) miles from the location of the Executive's principal job location or office at the time of termination of employment. However, the Executive shall be allowed to purchase and hold for investment less than three percent (3%) of the shares of any corporation whose shares are regularly traded on a national securities exchange or in the over-the-counter market. (c) In the event of a breach or threatened breach of this Section 9, the Executive agrees that the Company shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Executive acknowledges that damages would be inadequate and insufficient. (d) Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 9. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 10. Successors. (a) This Agreement is personal to the Executive and ---------- without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. -12- (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 11. Dispute Resolution. The Executive shall have the right and ------------------ option to elect to have any good faith dispute or controversy arising under or in connection with this agreement settled by litigation or by arbitration. If arbitration is selected, such proceeding shall be conducted before a panel of three (3) arbitrators sitting in a location selected by the Executive within fifty (50) miles from the location of his principal place of employment, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrators in any court having competent jurisdiction. All expenses of such litigation or arbitration, including the reasonable fees and expenses of the legal representative for the Executive, and necessary costs and disbursements incurred as a result of such dispute or legal proceeding, and any prejudgment interest, shall be borne by the Company. 12. Miscellaneous. (a) This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) Any notices, requests, demands, or other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at the last address he has filed in writing with the Company or, in the case of the Company, to the General Counsel of the Company, at the Company's principal offices. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company -13- may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) From and after the Effective Date this Agreement shall supersede any other employment, severance or change of control agreement between the parties with respect to the subject matter hereof including the Prior Agreement, except as expressly provided herein. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ----------------------------------- C. DOWD RITTER AMSOUTH BANCORPORATION By -------------------------------- -14- EX-10.N 3 EMPLOYMENT AGREEMENT Exhibit 10-n EMPLOYMENT AGREEMENT -------------------- AGREEMENT by and between AmSouth Bancorporation, a Delaware corporation (the "Company") and ________________ (the "Executive"), dated as of the 4th day of October, 1999. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the ------------------- first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. 2. Change of Control. For the purpose of this Agreement, a "Change ----------------- of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the -2- Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 3. Employment Period; Prior Agreements. (a) The Company hereby agrees ----------------------------------- to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the second anniversary of such date (the "Employment Period"). This Agreement completely replaces and supersedes that certain Executive Severance Agreement between the Executive and the Company dated ________________. (b) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. 4. Terms of Employment. (a) Position and Duties. (i) During the ------------------- ------------------- Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall thereafter be deemed not to interfere with the performance of the Executive's responsibilities to the Company. -3- (b) Compensation. (i) Base Salary. During the Employment Period, ------------ ----------- the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the ------------ Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's highest bonus under the Company's Executive Incentive Plan, or any comparable bonus under any predecessor or successor plan, or otherwise, for the last three full fiscal years prior to the Effective Date (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Incentive, Savings and Retirement Plans. During the --------------------------------------- Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (iv) Welfare Benefit Plans. During the Employment Period, the --------------------- Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its -4- affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (v) Expenses. During the Employment Period, the Executive shall -------- be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vi) Fringe Benefits. During the Employment Period, the --------------- Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Office and Support Staff. During the Employment Period, ------------------------ the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) Vacation. During the Employment Period, the Executive shall -------- be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. Termination of Employment. (a) Death or Disability. The ------------------------- ------------------- Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 13(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the -5- Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) Cause. The Company may terminate the Executive's employment ----- during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. The Executive's employment may be terminated by the ----------- Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action -6- by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. (d) Notice of Termination. Any termination by the Company for Cause, --------------------- or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 13(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the ------------------- Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such -7- termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligations of the Company upon Termination. (a) Good Reason; ------------------------------------------- ------------ Other Than for Cause, Death or Disability. If, during the Employment Period, the - ----------------------------------------- Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof which has been earned but deferred (and annualized for any fiscal year consisting of less than twelve full months or during which the Executive was employed for less than twelve full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount being referred to as the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to the product of (1) _______ and (2) the sum of (x) the Executive's Annual Base Salary, (y) the Highest Annual Bonus and (z) the value determined by an executive compensation consulting firm with a national reputation to be a competitive annual long term incentive grant (defined as a size-adjusted, 50th percentile grant as of the date of determination as compared to the Company's peer group); and C. An amount equal to the actuarial present value equivalent of the aggregate benefits accrued by the Executive as of the date of termination under the terms of the Supplemental Retirement Plan. For this purpose, the Executive's interest under the Supplemental Retirement Plan shall be fully vested and such benefits shall be calculated under the assumption that the Executive's employment continued following the date of termination for the number of years remaining in the term of this Agreement (i.e., additional years of service credits shall be added); provided, however, that, for the purposes of determining "final average pay" under the benefit calculation, the Executive's actual pay history as of the date of termination shall be used. Further, -8- the payment provided under this Subsection 6(a)(i)(C) shall be made in lieu of, and shall completely supersede and replace the Executive's benefits payable under the AmSouth Bancorporation Supplemental Retirement Plan; and D. An amount equal to the aggregate benefits accrued by the Executive as of the effective date of termination under the terms of the Supplemental Thrift Plan. The payment provided under this Subsection 6(a)(i)(D) shall be made in lieu of, and shall completely supersede and replace, the Executive's benefits payable under the AmSouth Bancorporation Supplemental Thrift Plan; and E. An amount equal to _______ times the sum of: (i) the Executive's annual club dues bonus (if applicable); plus (ii) the Executive's annual automobile allowance (if applicable) for the year in which the Executive's Date of Termination occurs. (ii) for _____ years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until ______ years after the Date of Termination and to have retired on the last day of such period; (iii) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in his sole discretion; (iv) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"); and (v) the Company shall pay or provide, as the case may be, relocation benefits under the relocation policy of the Company as are available to other peer executives of the Company and -9- its affiliated companies (A) which have been accrued by the Executive as of the Date of Termination and (B) which are requested by the Executive in connection with the Executive's relocation of his or her primary residence within two years following the Date of Termination to such new reasonable location specified by the Executive which is more than 35 miles from the location provided in Section 4(a)(i)(B) hereof. (b) Death. If the Executive's employment is terminated by reason of ----- the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries. (c) Disability. If the Executive's employment is terminated by reason ---------- of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. (d) Cause; Other than for Good Reason. If the Executive's employment --------------------------------- shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination -10- for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent ------------------------- or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 13(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 8. Full Settlement. The Company's obligation to make the payments --------------- provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). 9. Certain Additional Payments by the Company. ------------------------------------------ (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or its affiliates to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, -11- without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 9(a), if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that could be paid to the Executive such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's independent certified public accounting firm or such other certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: -12- (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration -13- of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information. The Executive shall hold in a fiduciary ------------------------ capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. Successors. (a) This Agreement is personal to the Executive and ---------- without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Arbitration. The Executive shall have the right and option to ----------- elect (in lieu of litigation) to have any dispute or controversy arising under or in connection with this Agreement settled by arbitration, conducted before a panel of three (3) arbitrators sitting in a location selected by the Executive within fifty (50) miles from the location of his or her job with the Company, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. All expenses of such arbitration, including the fees and expenses of the counsel for the Executive, shall be borne by the Company. -14- 13. Miscellaneous. (a) This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at the last address he had filed in writing with the Company or, in the case of the Company, to the General Counsel of the Company, at the Company's principal offices. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. -15- IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ------------------------------------- [Name] AMSOUTH BANCORPORATION By --------------------------------- Its: ---------------------------- -16- EX-13 4 1999 AMSOUTH ANNUAL REPORT EXHIBIT 13 Management's Discussion and Analysis of Financial Condition and Results of Operations Summary Overview Corporate Overview On October 1, 1999, AmSouth Bancorporation (AmSouth) acquired First American Corporation (First American) in a tax-free stock exchange (the Merger) that was accounted for as a pooling-of-interests. Under the terms of the agreement, First American shareholders received 1.871 shares of AmSouth common stock for each share of First American common stock owned. The combined company is a $43.4 billion regional bank holding company headquartered in Birmingham, Alabama, with more than 600 branch offices serving over two million households in nine Southeastern states. Refer to Note 2 in the Notes to Consolidated Financial Statements for a more detailed discussion of the Merger. All prior period financial information has been restated as if the Merger had been in effect for all periods presented. Certain amounts in the financial review for prior years have been reclassified to conform with the current financial statement presentation. This section of the annual report provides a narrative discussion and analysis of AmSouth's financial condition and results of operations for the previous three years. All tables, graphs and financial statements included in this report should be considered an integral part of this analysis. Forward Looking Statements The discussion that follows contains certain forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995) based on current management expectations. AmSouth's actual results could differ materially from those management expectations. Factors that could cause future results to vary from current management expectations include, but are not limited to, the integration of the former First American franchise, general economic conditions, changes in interest rates, deposit flows, the cost of funds, cost of federal deposit insurance premiums, demand for loan products, demand for financial services, competition, changes in the quality or composition of AmSouth's loan and investment portfolios, changes in accounting principles, policies or guidelines and other economic, competitive, governmental, regulatory, and technical factors affecting AmSouth's operations, products, services, and prices. Other factors may be specified in the text that includes the forward looking statements. Earnings Overview AmSouth reported diluted operating earnings per common share of $1.53 in 1999 compared to $1.40 in 1998 and $1.18 in 1997. Operating earnings totaled $604.7 million in 1999, $555.3 million in 1998 and $473.7 million in 1997. [BAR GRAPH APPEARS HERE] 22 -- - -------------------------------------------------------------------------------- COMPOSITION OF INTEREST-EARNING ASSETS (Table 1) - --------------------------------------------------------------------------------
(Dollars in thousands) 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------- Average Percent Average Percent Average Percent Balance of Total Balance of Total Balance of Total - -------------------------------------------------------------------------------------------------------------------- Loans net of unearned income $25,471,295 66.7% $24,027,839 67.7% $23,753,817 72.1% Held-to-maturity securities 4,899,856 12.8 3,594,397 10.1 3,376,881 10.3 Available-for-sale securities 7,369,119 19.3 7,365,385 20.8 5,418,687 16.5 Other interest-earning assets 422,907 1.2 513,290 1.4 372,362 1.1 ------------------------------------------------------------------------------------ $38,163,177 100.0% $35,500,911 100.0% $32,921,747 100.0% ====================================================================================================================
Note: Available-for-sale securities excludes adjustment for market valuation and certain noninterest-earning marketable equity securities. Taking into account merger-related and other special charges, earnings in 1999 were $340.5 million compared to $474.1 million in 1998 and $473.7 million in 1997. Diluted earnings per share was $0.86 in 1999, $1.20 in 1998 and $1.18 in 1997. Operating earnings benefited in 1999 from continued growth in net interest income and noninterest revenues. The growth in revenues was somewhat offset by increases in noninterest expenses and higher credit costs. The improvement in operating earnings for 1998 resulted from strong growth in net interest income and noninterest revenues. These improvements, however, were partially offset by higher noninterest expenses. Operating earnings represent earnings before merger-related and other special charges. 1999 operating earnings excluded pretax charges of $258.3 million resulting from the merger with First American. In addition, $43.1 million was incurred in connection with First American's 1998 mergers with Deposit Guaranty Corporation (Deposit Guaranty), Pioneer Bancshares, Inc., Middle Tennessee Bank, Peoples Bank, Victory Bancshares, Inc., and CSB Financial Corporation. Operating earnings also exclude pretax charges of $7.6 million to conform First American's accounting policies to AmSouth's policies, an $8.0 million impairment loss on a portfolio investment and $71.0 million in loan impairment charges associated with certain healthcare related loans transferred to assets held for accelerated disposition (AHAD). These merger-related and other special charges, on an after-tax basis, totaled $264.3 million in 1999. In 1998, AmSouth incurred pretax merger-related charges of $121.7 million, primarily in connection with First American's 1998 acquisitions. On an after-tax basis, the charges were $81.3 million. Refer to Note 3 in the Notes to Consolidated Financial Statements for a more detailed discussion of merger and other related charges. Two key measures of profitability in the banking industry are return on average equity (ROE) and return on average assets (ROA). Operating ROE was 18.99 percent in 1999 versus 17.96 percent in 1998 and 16.00 percent in 1997. Operating ROA was 1.45 percent in 1999 compared to 1.43 percent in 1998 and 1.32 percent in 1997. Based on reported earnings, ROE was 10.69 percent in 1999 compared to 15.33 percent in 1998 and 16.00 percent in 1997. On the same basis, ROA was 0.81 percent in 1999, 1.22 percent in 1998 and 1.32 percent in 1997. See graphs on the previous page. Earnings Analysis Net Interest Income Net interest income (NII), defined as the amount of revenue generated by interest-earning assets less the interest cost of funding those assets, is the principal source of earnings for AmSouth, constituting 64.4 percent of total net revenues in 1999, 64.8 percent in 1998 and 68.1 percent in 1997. For purposes of this earnings analysis, NII has been adjusted to a fully taxable equivalent basis for certain tax-exempt loans and investment securities included in interest-earning assets. The level of NII is determined primarily by variations in the volume and mix of interest-earning assets and 23 -- Yields Earned on Average Interest-Earning Assets and Rates Paid on Average Interest-Bearing Liabilities (Table 2)
------------------------------------------------------ (Taxable equivalent basis - dollars in thousands) 1999 AVERAGE REVENUE/ YIELD/ BALANCE EXPENSE RATE ------------------------------------------------------ ASSETS Interest-earning assets: Loans net of unearned income ...................................... $25,471,295 $ 2,132,985 8.37% Available-for-sale securities: Taxable ......................................................... 7,123,385 459,571 6.45 Tax-free ........................................................ 245,734 16,339 6.65 ----------- ----------- Total available-for-sale securities .......................... 7,369,119 475,910 6.46 Held-to-maturity securities: Taxable ......................................................... 4,667,059 308,136 6.60 Tax-free ........................................................ 232,797 18,808 8.08 ----------- ----------- Total held-to-maturity securities ............................ 4,899,856 326,944 6.67 ----------- ----------- Total investment securities ................................ 12,268,975 802,854 6.54 Trading securities ................................................ 67,333 4,203 6.24 Federal funds sold and securities purchased under agreements to resell ...................................... 124,381 5,694 4.58 Loans held for sale ............................................... 179,276 10,148 5.66 Other interest-earning assets ..................................... 51,917 2,343 4.51 ----------- ----------- Total interest-earning assets ................................... 38,163,177 2,958,227 7.75 Cash and other assets ................................................ 4,076,897 Allowance for loan losses ............................................ (368,322) Market valuation on available-for-sale securities .................... (60,424) ----------- $41,811,328 =========== LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Interest-bearing demand deposits .................................. $ 9,269,643 266,155 2.87 Savings deposits .................................................. 2,191,546 53,933 2.46 Time deposits ..................................................... 7,821,761 402,576 5.15 Foreign time deposits ............................................. 703,421 34,262 4.87 Certificates of deposit of $100,000 or more ....................... 2,837,027 146,422 5.16 Federal funds purchased and securities sold under agreements to repurchase .................................. 4,051,451 187,946 4.64 Other borrowed funds .............................................. 939,831 47,894 5.10 Long-term Federal Home Loan Bank advances ......................... 4,290,904 222,036 5.17 Subordinated debt ................................................. 881,207 55,321 6.28 Senior notes ...................................................... 101,120 7,458 7.38 Other long-term debt .............................................. 18,986 801 4.22 ----------- ----------- Total interest-bearing liabilities .............................. 33,106,897 1,424,804 4.30 ----------- ----- Net interest spread 3.45% ===== Noninterest-bearing demand deposits .................................. 4,894,631 Other liabilities .................................................... 624,716 Shareholders' equity ................................................. 3,185,084 ----------- $41,811,328 =========== Net interest income/margin on a taxable equivalent basis ..... 1,533,423 4.02% ===== Taxable equivalent adjustment: Loans ............................................................. 4,838 Available-for-sale securities ..................................... 8,411 Held-to-maturity securities ....................................... 12,076 Trading securities ................................................ 152 ----------- Total taxable equivalent adjustment ............................. 25,477 ----------- Net interest income .......................................... $ 1,507,946 ===========
Note: The taxable equivalent adjustment has been computed based on the statutory federal income tax rate, adjusted for applicable state income taxes net of the related federal tax benefit. Loans net of unearned income includes nonaccrual loans for all years presented. Certain noninterest-earning marketable equity securities are not included in available-for-sale securities. 24 --
- -------------------------------------------------------------------------------------------------- 1998 1997 AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/ BALANCE EXPENSE RATE BALANCE EXPENSE RATE - -------------------------------------------------------------------------------------------------- $24,027,839 $ 2,085,546 8.68% $23,753,817 $ 2,063,690 8.69% 7,073,480 486,927 6.88 5,181,805 363,376 7.01 291,905 22,000 7.54 236,882 20,898 8.82 ----------- ------------ ----------- ------------ 7,365,385 508,927 6.91 5,418,687 384,274 7.09 3,441,212 227,945 6.62 3,194,435 217,347 6.80 153,185 15,063 9.83 182,446 18,711 10.26 ----------- ------------ ----------- ------------ 3,594,397 243,008 6.76 3,376,881 236,058 6.99 ----------- ------------ ----------- ------------ 10,959,782 751,935 6.86 8,795,568 620,332 7.05 61,368 4,303 7.01 64,426 4,280 6.64 145,554 7,650 5.26 144,202 7,961 5.52 278,506 16,457 5.91 153,107 9,475 6.19 27,862 1,204 4.32 10,627 744 7.00 ----------- ------------ ----------- ------------ 35,500,911 2,867,095 8.08 32,921,747 2,706,482 8.22 3,665,989 3,338,066 (367,810) (374,170) 41,145 32,185 ----------- ----------- $38,840,235 $35,917,828 =========== =========== $ 9,201,511 302,208 3.28 $ 8,565,399 289,735 3.38 1,968,461 51,354 2.61 2,034,236 55,162 2.71 8,823,928 475,426 5.39 8,989,551 504,954 5.62 203,084 10,048 4.95 209,764 11,180 5.33 2,246,605 131,231 5.84 2,118,059 101,414 4.79 3,359,865 168,435 5.01 2,966,088 151,288 5.10 837,742 43,287 5.17 1,374,671 73,606 5.35 2,882,891 153,122 5.31 1,239,839 68,233 5.50 769,107 52,999 6.89 497,406 36,679 7.37 101,305 7,471 7.37 100,401 7,405 7.38 38,650 2,042 5.28 31,931 2,063 6.46 ----------- ------------ ----------- ------------ 30,433,149 1,397,623 4.59 28,127,345 1,301,719 4.63 ------------ ----- ------------ ----- 3.49% 3.59% ===== ===== 4,707,121 4,343,401 608,228 487,059 3,091,737 2,960,023 ----------- ----------- $38,840,235 $35,917,828 =========== =========== 1,469,472 4.14% 1,404,763 4.27% ===== ===== 5,481 6,741 12,055 6,947 7,527 6,224 125 122 ------------ ------------ 25,188 20,034 ------------ ------------ $ 1,444,284 $ 1,384,729 ============ ============
25 -- Volume and Yield/Rate Variances (Table 3)
1999 COMPARED TO 1998 1998 COMPARED TO 1997 CHANGE DUE TO CHANGE DUE TO --------------------------------------------------------------------------------------- (Taxable equivalent basis - in thousands) YIELD/ YIELD/ VOLUME RATE NET VOLUME RATE NET --------------------------------------------------------------------------------------- INTEREST EARNED ON: Loans net of unearned income ............ $ 122,501 $ (75,062) $ 47,439 $ 23,782 $ (1,926) $ 21,856 Available-for-sale securities: Taxable ............................... 3,413 (30,769) (27,356) 130,337 (6,786) 123,551 Tax-free .............................. (3,245) (2,416) (5,661) 4,420 (3,318) 1,102 --------------------------------------- --------------------------------------- Total available-for-sale securities ..... 168 (33,185) (33,017) 134,757 (10,104) 124,653 --------------------------------------- --------------------------------------- Held-to-maturity securities: Taxable ............................... 80,936 (745) 80,191 16,458 (5,860) 10,598 Tax-free .............................. 6,789 (3,044) 3,745 (2,902) (746) (3,648) --------------------------------------- --------------------------------------- Total held-to-maturity securities ....... 87,725 (3,789) 83,936 13,556 (6,606) 6,950 --------------------------------------- --------------------------------------- Total investment securities ............. 87,893 (36,974) 50,919 148,313 (16,710) 131,603 Trading securities ...................... 396 (496) (100) (208) 231 23 Federal funds sold and securities purchased under agreements to resell... (1,037) (919) (1,956) 74 (385) (311) Loans held for sale ..................... (5,643) (666) (6,309) 7,428 (446) 6,982 Other interest-earning assets ........... 1,084 55 1,139 833 (373) 460 --------------------------------------- --------------------------------------- Total interest-earning assets ........... 205,194 (114,062) 91,132 180,222 (19,609) 160,613 --------------------------------------- --------------------------------------- INTEREST PAID ON: Interest-bearing demand deposits ........ 2,222 (38,275) (36,053) 21,069 (8,596) 12,473 Savings deposits ........................ 5,599 (3,020) 2,579 (1,752) (2,056) (3,808) Time deposits ........................... (52,266) (20,584) (72,850) (9,185) (20,343) (29,528) Foreign time deposits ................... 24,372 (158) 24,214 (348) (784) (1,132) Certificates of deposit of $100,000 or more ................... 31,705 (16,514) 15,191 6,448 23,369 29,817 Federal funds purchased and securities sold under agreements to repurchase.... 32,769 (13,258) 19,511 19,781 (2,634) 17,147 Other borrowed funds .................... 5,210 (603) 4,607 (27,827) (2,492) (30,319) Long-term Federal Home Loan Bank advances .................... 72,955 (4,041) 68,914 87,350 (2,461) 84,889 Subordinated debt ....................... 7,298 (4,976) 2,322 18,864 (2,544) 16,320 Senior notes ............................ (14) 1 (13) 68 (2) 66 Other long-term debt .................... (889) (352) (1,241) 392 (413) (21) --------------------------------------- --------------------------------------- Total interest-bearing liabilities ...... 128,961 (101,780) 27,181 114,860 (18,956) 95,904 --------------------------------------- --------------------------------------- Net interest income on a taxable equivalent basis .............. $ 76,233 $ (12,282) 63,951 $ 65,362 $ (653) 64,709 ======================== ======================== Add taxable equivalent adjustment ....... (289) (5,154) --------- --------- Net interest income ..................... $ 63,662 $ 59,555 ========= =========
Notes: 1. The change in interest not due solely to volume or yield/rate has been allocated to the volume column and yield/rate column in proportion to the relationship of the absolute dollar amounts of the change in each. 2. The computation of the taxable equivalent adjustment is based on the statutory federal income tax rate, adjusted for applicable state income taxes net of the related federal tax benefit. 26 -- interest-bearing liabilities and changes in their related yields and interest rates paid. Net interest income grew $64.0 million in 1999 to over $1.5 billion, an increase of 4.4 percent. The growth was attributable to a higher level of average interest-earning assets, partially offset by a decrease in the net interest margin. Average interest-earning assets were $38.2 billion in 1999 compared to $35.5 billion in 1998, an increase of $2.7 billion. The growth in average interest-earning assets occurred in both loans and investment securities. Average loans net of unearned income (net loans) grew $1.4 billion in 1999 to $25.5 billion and represented 54.2 percent of the growth in average interest-earning assets. The growth occurred primarily in commercial real estate, home equity and dealer indirect lending. See further discussion of loans in the Balance Sheet Analysis. Growth in investment securities accounted for the remainder of the increase in average interest-earning assets. Average investment securities in 1999 were $12.3 billion compared to $11.0 billion in 1998. The increase in the investment portfolio was the result of a planned expansion during the second half of 1999 in connection with the Merger. The increase was primarily in the held-to-maturity category which increased $1.3 billion to $4.9 billion in 1999. The available-for-sale category was flat compared to 1998 at $7.4 billion. The increase in average interest-earning assets was funded by a $567.3 million increase in deposits and a $2.3 billion increase in borrowings. Primary sources for the increase in borrowed funds were short-term federal funds purchased and securities sold under agreements to repurchase, long-term Federal Home Loan Bank (FHLB) advances and subordinated debt. The borrowings extended current maturities while enhancing NII growth and creating a better match of maturities with the increased level of investment securities and loans. The effects of the growth in average interest-earning assets on NII were partially offset by a 12-basis-point decline in the net interest margin (NIM) from 4.14 percent in 1998 to 4.02 percent in 1999. The NIM is computed by dividing fully taxable equivalent NII by average interest-earning assets and measures how effectively the bank utilizes its interest-earning assets in relationship to the interest cost of funding them. The decline in the NIM was primarily the result of a decrease in the net interest spread or the difference between the average yield earned on interest-earning assets on a fully taxable equivalent basis and average rate paid for interest-bearing liabilities. In 1999, the net interest spread was 3.45 percent compared to 3.49 percent in 1998, a decrease of four basis points. The decrease was the result of a 33-basis-point decline in the yield on interest-earning assets due, primarily, to the higher level of investment securities and a decline in the yield on loans during the year. The decrease was partially offset by a 29-basis-point decrease in rates paid for interest-bearing liabilities. Growth in NII during 1999 was further reduced by the use of off-balance sheet loan funding vehicles. In an effort to reduce the amount of lower yielding commercial loans maintained on the balance sheet while retaining the customer relationships, AmSouth, in mid-1997, began selling loans to third-party commercial loan conduits. In 1998, AmSouth began selling residential first mortgages to third-party conduits as well. Conduits have the effect of reducing the amount of loans on the balance sheet and accordingly the interest revenue associated with those loans. However, because the loans that are sold to the conduits typically have lower yields, the net interest margin widens, allowing AmSouth to retain higher yielding assets on the balance sheet, while AmSouth's funding capacity expands. In 1998, NII increased $64.7 million, an increase of 4.6 percent over 1997. The increase was attributable to a higher level of average interest-earning assets in 1998 offset by a decrease in the NIM. Average interest-earning assets in 1998 were $35.5 billion compared to $32.9 billion in 1997, an increase of $2.6 billion or 7.8 percent. Investment securities and loans were the primary areas of growth in interest-earning assets. Average investment securities increased 24.6 percent to $11.0 billion in 1998 as compared to $8.8 billion in 1997. The available-for-sale portfolio increased $1.9 billion to $7.4 billion in 1998, while the held-to-maturity portfolio increased $217.5 million to $3.6 billion. The increase in the investment portfolio was primarily the result of a planned expansion of the investment securities portfolio early in the year as well as 27 -- the securitization of $1.3 billion of mortgage loans which were retained in the investment portfolio. Growth in net loans of $274.0 million to $24.0 billion was responsible for the remainder of the growth in interest-earning assets. The growth in loans occurred primarily in commercial real estate and dealer indirect. Funding for the increase in interest-earning assets was supplied by an $890.3 million increase in deposits and a $1.8 billion increase in borrowings. Primary sources for the increase in borrowed funds were short-term Federal funds purchased and securities sold under agreements to repurchase, long-term FHLB advances and long-term subordinated notes. Partially offsetting the effects of the growth in average interest-earning assets on NII was a decline in the NIM of 13 basis points to 4.14 percent in 1998. The downward pressure on the NIM in 1998 resulted from the narrowing of the net interest spread. The net interest spread in 1998 was 3.49 percent versus 3.59 percent in 1997, a decrease of ten basis points. The decrease was primarily the result of a 14-basis-point decline in the yield on average interest-earning assets to 8.08 percent, resulting from the higher level of investment securities and the general decline in interest rates in 1998. Deposit pricing actions were also impacted by the general market decline in interest rates in 1998 resulting in a decline in the average rate paid on interest-bearing deposits. Partially offsetting the decrease in rates paid on deposits was a change in the funding mix to include more long-term borrowed funds resulting in only a four-basis-point decrease in the rate paid on total interest-bearing liabilities to 4.59 percent. Further constraining growth in net interest income and interest-earning assets in 1998 was the increase in the use of conduits, discussed earlier. Management anticipates a stable to modestly narrowing NIM in 2000 provided the economy continues a course of modest growth, interest rates do not fluctuate materially, AmSouth's strategy to shift the mix of earning assets from lower yielding investment securities to higher yielding loans meets with success, and core deposits continue to grow. An integral part of this strategy will be AmSouth's ability to successfully integrate its lending and deposit programs in the former First American franchise. However, competitive pressures adversely affecting AmSouth's ability to set deposit rates and price loans as well as deterioration in the overall economy may result in compression of the NIM. Provision for Loan Losses The provision for loan losses is the charge to operating earnings necessary to maintain the allowance for loan losses at an adequate level to absorb losses inherent in the loan portfolio. In 1999, AmSouth recorded a provision for loan losses totaling $165.6 million, compared to $99.1 million reported in 1998 and $83.5 million recorded in 1997. The federal government's legislation to reduce Medicare reimbursements to healthcare providers had a material adverse financial impact on certain companies in this sector which are heavily reliant on such reimbursements. Both AmSouth and First American have been lenders to the health-care industry. The increase in the 1999 provision was primarily the result of management's decision to exit the Medicare dependent long-term care segment of the healthcare loan portfolio by transferring to AHAD $149 million in loans, net of a $71.0 million valuation allowance. Loan impairment charges associated with these loans of $71.0 million were included in the loan loss provision for 1999. See the sections [BAR GRAPH APPEARS HERE] 28 -- [BAR GRAPH APPEARS HERE] entitled "Loans" and "Allowance for Loan Losses" for further discussion. Another unusual item in the loan loss provision for 1999 was a $3.0 million charge to bring First American's accounting policies in line with AmSouth's. Excluding the effects of these charges, the provision would have been $91.6 million, a decrease of $7.4 million versus 1998. Net charge-offs in 1999 were $102.9 million versus $83.7 million in 1998 and $94.7 million in 1997. The increase in 1999 was primarily the result of higher charge-offs in the commercial and consumer loan categories. The decrease in net charge-offs in 1998 occurred primarily in the consumer loan portfolio reflecting improvement in several consumer loan segments including direct consumer, dealer indirect and revolving credit. This was the result of enhancements in all aspects of the consumer lending programs, from underwriting to collections, during the preceding three years. The improvement also reflected the sale of approximately $169.5 million of underperforming credit card loans. The 1998 decline in consumer loan net charge-offs was offset somewhat by an increase in commercial and commercial real estate loan net charge-offs. Measured as a percentage of average net loans, net charge-offs followed the same pattern as the absolute level of losses during the past three years. In 1999, net charge-offs were .40 percent of average net loans versus .35 percent in 1998 and .40 percent in 1997. Management expects net charge-offs to increase in 2000 while the net charge-off ratio should be in the .40 to .45 percent range. For additional details on net charge-offs, see Tables 16 and 17. Also, additional discussion of asset quality trends may be found in the section of this report entitled Credit Risk Management Process and Loan Quality. Noninterest Revenues Noninterest revenues grew to represent 35.6 percent of total tax equivalent net revenues in 1999, up from 35.2 percent in 1998 and 31.9 percent in 1997. Total noninterest revenues increased 6.0 percent to $847.6 million in 1999, compared to $799.9 million in 1998 and $658.7 million in 1997. Leading growth categories in 1999 included consumer investment services income and other noninterest revenues, which include interchange fees, mortgage income and income from bank owned life insurance (BOLI). Partially offsetting the growth in these categories were decreases in service charges on deposit accounts and trust income. Consumer investment services income was the leading growth category among noninterest revenues and is now the second largest category of noninterest revenues with $213.3 million in revenue for 1999 compared to $183.8 million in 1998, a 16.0 percent increase. The growth was attributable to strong sales across all categories of investment products and services. Within consumer investment services, sales of annuities and mutual fund products were leading growth areas. As part of the strategic initiative to generate $50 million in revenues from new sources, AmSouth now has over 1,100 trained and licensed personnel selling annuity products across the franchise. Adding to the growth in consumer investment services income was growth in mutual fund sales. Mutual fund assets under management grew $800 million in 1999 to $7.2 billion. Also contributing to the increase in consumer investment services income in 1999 was an increase in commissions from higher brokerage sales and higher sales volume in IFC Holdings, Inc., (IFC) a subsidiary third-party marketer of investment and insurance products through banks and other financial services providers that was acquired as part of the Merger. 29 -- Other noninterest revenues grew $20.3 million in 1999 to $292.0 million. The growth reflects increases in interchange income, BOLI, mortgage income, and other noninterest revenues. Fees from interchange services, which are derived from debit cards and automated teller machine (ATM) transactions, increased $10.1 million to $46.5 million in 1999, a 27.8 percent increase. The growth reflects the continued success of AmSouth's initiative to double the contribution from Consumer Banking through increased access to banking services anytime, anywhere, anyway. As part of this initiative, AmSouth has grown its ATM network to over 1,300 machines and its debit cards outstanding to over 900,000. Income from BOLI increased in 1999 as a result of normal increases in cash surrender value on policies purchased in prior years by AmSouth and new policies purchased in 1999. Additional premiums totalling $400 million were paid in 1999. In 1999, income from BOLI was $31.2 million compared to $17.4 million in 1998, an increase of $13.8 million or 79.2 percent. The total cash surrender value of BOLI at the end of 1999 was $756.2 million compared to $301 million at the end of 1998. Mortgage income was another area of growth among noninterest revenues in 1999. The growth was the result of a very favorable residential mortgage environment during the first half of 1999 and the continued benefit from the expansion of the mortgage lending program in 1998. Expansion of the mortgage lending program was another key element of the strategic initiative to double the contribution from Consumer Banking. Mortgage income consists of income from the sale of mortgage loans and related servicing rights and income from the sale of third-party mortgage servicing rights. In 1999, mortgage income was $45.0 million versus $39.7 million in 1998, an increase of 13.5 percent. Other noninterest revenues also included an $8.6 million pretax gain on the sale of First American's third-party mortgage servicing business and a $13.3 million pretax gain associated with the outsourcing of the merchant card processing operation. The remainder of the increase in other noninterest revenues was primarily from an increase in fees from commercial loan conduit activity. The growth among these categories was partially offset by a $1.8 million decrease in service charges on deposit accounts, primarily due to increased sales of free consumer checking products and a $230,000 decrease in trust income. Growth in 1998 occurred in all major revenue categories. Service charges on commercial and consumer deposit accounts grew 8.7 percent to $234.8 million in 1998, an increase of $18.8 million. The increase in service charges, which represent the single largest category of non-interest revenues, was primarily due to increases in corporate analysis fees and higher service fee income from consumer checking accounts. Trust income of $109.5 million represents an increase of $6.9 million or 6.8 percent over 1997. The increase was due to revenue from new employee benefit plan administration and personal trust accounts, fee increases and strength in financial markets during most of 1998. Partially offsetting these items was a reduction in fees due to the sale of the bond administration and stock transfer businesses in 1998. Consumer investment services income was a leading growth area in noninterest revenues increasing $34.6 million to $183.8 million in 1998 from $149.2 million in 1997. This represents an increase of 23.2 percent. The increase was the result of higher sales volume of mutual funds and annuity products as well as increased retail brokerage commissions from IFC. In addition, in 1998, AmSouth added three proprietary mutual funds to its investment products offered, bringing the number of AmSouth's proprietary funds to 18, and the former First American merged its AmeriStar mutual funds with the former Deposit Guaranty's Investor series funds to form 14 individual mutual funds. Total mutual funds under management were $6.4 billion, an increase of $2.3 billion over 1997. The increase in other noninterest revenues reflects increases in interchange income, BOLI, mortgage income, 30 -- - -------------------------------------------------------------------------------- NONINTEREST REVENUES AND NONINTEREST EXPENSES (Table 4) - --------------------------------------------------------------------------------
Years Ended December 31 (Dollars in thousands) 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------- NONINTEREST REVENUES: Service charges on deposit accounts $ 233,043 $ 234,849 $ 216,085 $ 191,430 $ 168,868 Consumer investment services income 213,292 183,831 149,205 86,300 23,143 Trust income 109,223 109,453 102,506 93,229 82,817 Other noninterest revenues 291,999 271,721 190,928 171,330 163,984 ------------------------------------------------------------------------ $ 847,557 $ 799,854 $ 658,724 $ 542,289 $ 438,812 =================================================================================================================== NONINTEREST EXPENSES: Salaries and employee benefits $ 635,450 $ 615,195 $ 584,812 $ 537,762 $ 488,532 Equipment expense 135,590 123,480 113,716 102,544 90,158 Net occupancy expense 111,431 106,497 103,698 97,512 90,531 Subscribers' commissions 99,588 89,918 70,785 35,075 -0- FDIC premiums 5,446 5,344 4,423 10,202 33,195 SAIF assessment -0- -0- -0- 32,296 -0- Merger-related costs 301,415 121,725 -0- -0- 7,269 Other noninterest expenses 359,586 344,113 344,241 314,118 286,072 ------------------------------------------------------------------------ $1,648,506 $1,406,272 $1,221,675 $1,129,509 $ 995,757 ===================================================================================================================
and gains on the sale of businesses. Fees from interchange services increased 26.1 percent to $36.4 million in 1998, an increase of $7.5 million over 1997. Income from BOLI experienced substantial growth in 1998, up $7.3 million, or 72.9 percent, to $17.4 million. The increase was due primarily to new policies purchased in the latter half of 1997 and early 1998. The total cash surrender value of BOLI at the end of 1998 was $301 million compared to $200 million at year-end 1997. Mortgage income represented another area of significant growth for noninterest revenues in 1998. Contributing to the growth were higher origination volume and an increase in income from the sale of mortgage loans and related servicing rights in the secondary market. In addition, AmSouth expanded its Florida mortgage staff by over 40 professionals and doubled the overall production of mortgage loan originations over 1997. Mortgage income for the year was $39.7 million versus $15.8 million for 1997, an increase of 151.1 percent. Also included in other noninterest revenues was a $32.7 million net gain on the sale of certain nonstrategic assets. During 1998, AmSouth sold its bond administration and stock transfer businesses and underperforming credit card assets. The former First American also sold the corporate trust business of the former Deposit Guaranty, $3.5 million of assets of First Mortgage Corporation and McAfee Mortgage, a $22.8 million asset mortgage banking subsidiary of the former Deposit Guaranty. The remainder of the increase in other noninterest revenues was primarily the result of higher portfolio income of $6.9 million resulting primarily from gains on sales of available-for-sale securities, gains generated from the sale of branches and various miscellaneous assets and an increase in the fees from the commercial loan conduit. Management expects, excluding nonrecurring items, total noninterest revenues in 2000 to exceed the levels reported in 1999, provided the economy remains stable and AmSouth's revenue growth initiatives are successfully implemented across the expanded franchise. Performance of the stock and bond markets will also influence management's ability to achieve its noninterest revenue goals, especially with respect to consumer investment services and trust revenues. 31 -- Each of the major categories of noninterest revenues for 1995 through 1999 is shown in Table 4. Noninterest Expenses Excluding the effects of merger-related and other special charges, noninterest expenses were $1.3 billion in 1999, an increase of $58.7 million compared to 1998. Including merger and other special charges, noninterest expenses were $1.6 billion in 1999, an increase of $242.2 million over 1998. Increases occurred across most major categories with the primary increases occurring in salary and employee benefits expense, subscribers' commissions, net occupancy expense, and equipment expense. Salaries and employee benefits expense, the largest category of noninterest expense, was $635.5 million in 1999, representing a 3.3 percent increase over 1998 expense of $615.2 million. The increase was primarily the result of merit increases, higher performance-based compensation and an increase in the number of employees. As part of AmSouth's strategic initiatives, performance-based incentive compensation programs have been put in place at all levels of the company. The increase in performance-based compensation correlates directly with improvement in operating earnings and revenues. [BAR GRAPH APPEARS HERE] Subscribers' commissions are fees paid on sales of investment products marketed through IFC and are paid to subscribing (client) institutions. In 1999, subscribers' commissions were $99.6 million, an increase of $9.7 million or 10.8 percent over 1998, reflecting higher investment sales volume in 1999. Net occupancy expense increased $4.9 million in 1999 to $111.4 million, representing a 4.6 percent increase over 1998. The increase was due to branch expansion in Florida, higher net rent expense and depreciation expense on leasehold improvements. Investments in technology supporting the consumer, commercial and capital management lines of business resulted in higher equipment expense in 1999. Equipment expense increased $12.1 million to $135.6 million in 1999 compared to $123.5 million in 1998. Other noninterest expenses, which includes deposit insurance premiums, were $365.0 million in 1999 versus $349.5 million in 1998, an increase of $15.6 million. The increase was due to higher marketing expenses, associated with increased promotions and direct marketing projects, and costs for other professional and outsourced services. Noninterest expenses were $1.4 billion in 1998, representing a $184.6 million increase over 1997 noninterest expenses of $1.2 billion. Excluding merger-related costs, noninterest expenses increased $62.9 million or 5.1 percent. Increases occurred across all major categories of expenses, but the primary increase occurred in salaries and employee benefits expense. Salaries and employee benefits expense increased $30.4 million to $615.2 million, an increase of 5.2 percent over 1997 expense of $584.8 million. The increase in 1998 was primarily due to merit increases and higher performance-based incentive compensation. In 1998, subscribers' commissions increased $19.1 million to $89.9 million, a 27 percent increase over 1997. The increase was primarily attributable to the increase in retail commissions earned through IFC. 32 -- Net occupancy expense was $106.5 million in 1998 compared to 1997 expense of $103.7 million, an increase of $2.8 million or 2.7 percent. The modest increase was due to increases in net rent expense and depreciation expense on leasehold improvements. Equipment expense increased $9.8 million in 1998 to $123.5 million versus expense of $113.7 million in 1997. The increase was attributable to increased depreciation on technology investments in the consumer and commercial lines of business, increased rental of computers as well as expenses related to the Year 2000 project. Other noninterest expenses were $349.5 million in 1998 versus $348.7 million in 1997, an increase of less than $1.0 million. Within this expense category, marketing expense increased $1.1 million due to increased promotions and direct marketing projects in 1998, and communications expense increased $4.4 million due to expenses associated with network technology to support the consumer and commercial lines of business. These increases were mostly offset by a $5.2 million net gain on sales of foreclosed properties. Each of the major categories of noninterest expenses for 1995 through 1999 is shown in Table 4. Operating Efficiency Productivity in the banking industry is commonly measured by the operating efficiency ratio. It measures the amount of expense dollars utilized to generate a dollar of revenue. The ratio is calculated by dividing total noninterest expenses by the sum of NII, on a taxable equivalent basis, and total noninterest revenues. Excluding merger-related and other special charges, the efficiency ratio was 56.2 in 1999 compared to 56.6 in 1998 and 59.2 in 1997. Including the charges, AmSouth's operating efficiency ratio was 69.2 percent in 1999 compared to 62.0 percent in 1998 and 59.2 percent in 1997. Management's ability to improve operating efficiency during 2000 will depend upon its ability to continue strong top-line revenue growth while maintaining control across all noninterest expense categories and achieving targeted cost savings and revenue enhancements from the Merger. [PIE CHARTS APPEAR HERE] Income Taxes AmSouth's income tax expense was $200.9 million in 1999, $264.7 million in 1998 and $264.6 million in 1997. The decrease in 1999 was the result of lower pretax income due to the merger-related and other special charges. The increase in 1998 was due primarily to an increase in pretax income. The effective tax rate for 1999 was 37.1 percent compared to 35.8 percent in 1998 and 1997. The increase in effective tax rate for 1999 is primarily due to certain non-deductible merger costs. Details of the deferred tax assets and liabilities are included in Note 20 of the Notes to Consolidated Financial Statements. Year 2000 Project The following information constitutes a Year 2000 Readiness Disclosure, pursuant to the Year 2000 Information and Readiness Disclosure Act. During 1999, management completed the process of preparing for the Year 2000 date change. This process involved identifying and remediating date recognition problems in computer systems, software and other operating 33 -- SECURITIES (Table 5) December 31 (In millions) 1999 1998 1997 - -------------------------------------------------------------------------------- Trading securities $ 52 $ 48 $ 56 Available-for-sale securities: U.S. Treasury and federal agency securities 5,135 5,975 5,205 Other securities 756 1,170 610 State, county and municipal securities 74 380 245 ------------------------------- 5,965 7,525 6,060 ------------------------------- Held-to-maturity securities: U.S. Treasury and federal agency securities 5,284 2,459 2,438 Other securities 1,390 1,197 428 State, county and municipal securities 377 222 170 ------------------------------- 7,051 3,878 3,036 ------------------------------- $13,068 $11,451 $ 9,152 ================================================================================ equipment; working with third parties to address their Year 2000 issues; and developing contingency plans to address potential risks in the event of Year 2000 failures. To date, AmSouth has successfully managed the transition. Although considered unlikely, unanticipated problems in AmSouth's core business processes, including problems associated with non-compliant third parties and disruptions to the economy in general, could still occur despite efforts to date to remediate affected systems and develop contingency plans. Management will continue to monitor all business processes, including interaction with AmSouth's customers, vendors and other third parties, throughout 2000 to address any issues and ensure all processes continue to function properly. In addition to specific Year 2000-related activities, in recent years, AmSouth and First American invested heavily in new technology to improve service and competitiveness. The total combined incremental cost of Year 2000 compliance, which excludes the cost to upgrade and replace systems in the ordinary course of business, was approximately $15.0 million. Balance Sheet Analysis AmSouth has generated substantial asset growth through its strong lending programs and successful investment and capital management initiatives. At December 31, 1999, AmSouth reported total assets of $43.4 billion compared to $40.6 billion at the end of 1998. Average total assets were $41.8 billion in 1999, an increase of $3.0 billion compared to 1998. Interest-Earning Assets In banking, the predominant interest-earning assets are loans and investment securities. The proportion of interest-earning assets to total assets measures the effectiveness of management's effort to invest available funds into the most efficient and profitable uses. In 1999, interest- earning assets were 91.3 percent of total average assets compared to 91.4 percent in 1998. The categories which comprise interest-earning assets are shown in Table 1. Securities AmSouth classifies its debt and equity securities as either held-to- maturity, available-for-sale or trading securities. Securities are classified as held-to-maturity and carried at amortized cost only if AmSouth has the positive intent and ability to hold those securities to maturity. If not classified as held-to-maturity, such securities are classified as trading securities or available-for-sale securities. Trading securities are carried at market value with unrealized gains and losses included in other noninterest revenues. Available-for-sale securities are also carried at market value with unrealized gains and losses, net of deferred taxes, reported in accumulated other comprehensive income within shareholders' equity. 34 -- At December 31, 1999, available-for-sale securities totaled $6.0 billion and represented 45.8 percent of the total portfolio compared to $7.5 billion or 66.0 percent in available-for-sale securities at the end of 1998. These securities at year-end 1999 consisted of U.S. Treasury securities, variable and fixed rate mortgage-backed securities, other private asset-backed securities, and equities. The average life of the portfolio is estimated to be 6.8 years with a duration of approximately 4.0 years. Total net realized gains of $11.4 million from the sale of available-for-sale securities were included in other noninterest revenues for 1999, compared to $16.1 million of realized gains in 1998. Unrealized losses on the available-for-sale portfolio of $248.8 million, net of deferred taxes, were included in accumulated other comprehensive income within shareholders' equity at December 31, 1999. Held-to-maturity securities were $7.1 billion at the end of 1999 compared to $3.9 billion at year-end 1998. Securities classified as held-to-maturity at the end of 1999 consisted primarily of collateralized mortgage obligations, federal agency securities, mortgage-backed securities and state, county and municipal obligations. The average life of these securities is estimated to be 8.3 years with a duration of 4.3 years. At December 31, 1999, the held-to-maturity portfolio had unrealized losses, before taxes, of $201.2 million. During 1999, $3.0 billion of investment securities were reclassified from available-for-sale to the held-to-maturity category. Also during 1999, $516.8 million of investment securities were reclassified from held-to-maturity to the available-for-sale category. The reclassifications were the result of balance sheet restructuring following the Merger. AmSouth's policy requires all securities purchased for the securities portfolio, except state, county and local municipal obligations, to be rated investment grade or better. Securities backed by the U.S. Government and its agencies, both on a AVAILABLE-FOR-SALE SECURITIES AND HELD-TO-MATURITY SECURITIES RELATIVE CONTRACTUAL MATURITIES AND WEIGHTED AVERAGE YIELDS (Table 6)
Due Within Due After One but Due After Five but Due After (Taxable equivalent basis - dollars in thousands) One Year Within Five Years Within Ten Years Ten Years - ------------------------------------------------------------------------------------------------------------------------------------ Amount Yield Amount Yield Amount Yield Amount Yield - ------------------------------------------------------------------------------------------------------------------------------------ AVAILABLE-FOR-SALE SECURITIES: U.S. Treasury and federal agency securities $ 2,558 6.30% $132,313 4.92% $ 349,720 6.58% $4,818,091 6.72% State, county and municipal obligations 9,879 9.21 18,811 7.05 20,931 7.87 24,598 7.64 Other securities 26,513 4.66 10,095 0.06 10,776 6.31 324,544 6.81 --------------------------------------------------------------------------- $38,950 5.92% $161,219 4.87% $ 381,427 6.64% $5,167,233 6.73% ==================================================================================================================================== Taxable equivalent adjustment for calculation of yield $ 312 $ 447 $ 556 $ 488 - ------------------------------------------------------------------------------------------------------------------------------------ HELD-TO-MATURITY SECURITIES: U.S. Treasury and federal agency securities $35,025 6.48% $ 98,216 6.38% $ 956,965 6.69% 4,193,748 6.51% State, county and municipal obligations 9,777 10.97 18,250 8.90 24,750 7.60 324,114 6.75 Other securities 25 7.49 23,171 6.56 19,447 7.12 1,347,074 6.64 --------------------------------------------------------------------------- $44,827 7.46% $139,637 6.74% $1,001,162 6.72% $5,864,936 6.55% ==================================================================================================================================== Taxable equivalent adjustment for calculation of yield $ 392 $ 588 $ 628 $ 6,511 - ------------------------------------------------------------------------------------------------------------------------------------
Notes: 1. The weighted average yields were computed by dividing the taxable equivalent interest income by the amortized cost of the appropriate securities. The taxable equivalent interest income has been computed based on the statutory federal income tax rate and does not give effect to the disallowance of interest expense, for federal income tax purposes, related to certain tax-free assets. 2. The amount of available-for-sale securities indicated as maturing after five but within ten years includes $246 million of mortgage-backed securities, and those indicated as maturing after ten years includes $5.0 billion of mortgage-backed securities. Although these securities have stated long-term final maturities, according to mortgage industry standards, the estimated weighted average remaining life of these securities held in AmSouth's investment portfolio is approximately 6.7 years. 3. The amount of held-to-maturity securities indicated as maturing after five but within ten years includes $520 million of mortgage-backed securities and those indicated as maturing after ten years includes $5.5 billion of mortgage-backed securities. Although these securities have stated long-term final maturities, according to mortgage industry standards, the estimated weighted average remaining life of these securities held in AmSouth's investment portfolio is approximately 8.0 years. 4. Federal Reserve Bank stock, Federal Home Loan Bank stock, and equity stock of other corporations held by AmSouth are not included in the above table. 35 -- direct and indirect basis, represented approximately 83 percent of the portfolio at December 31, 1999. Approximately 95 percent of state, county and local municipal securities at year-end 1999 were rated either single A or above by the rating agencies or were escrowed in U.S. Treasury obligations. Management anticipates, in 2000, a gradual reduction in the investment portfolio as normal sales and maturities of investment securities are used to fund loan growth. Loans Loans are the single largest category of interest-earning assets for AmSouth and produce the highest level of revenues. At December 31, 1999, loans, net of unearned income, totaled $26.3 billion, an increase of 7.5 percent from the $24.4 billion reported at the end of 1998. Growth in the loan portfolio reflects management initiatives to grow wider spread consumer, commercial and commercial real estate loan categories while reducing the proportion of residential first mortgages held in the loan portfolio and selling participations in certain narrow spread commercial loans. The residential mortgage portfolio continued to decline in 1999 as the result of management's decision in 1998 to reduce the amount of these loans on the balance sheet. This was accomplished through normal runoff, selling a portion of new originations into the secondary market and participating loans into third-party conduits. During the year, $1.4 billion of mortgage loans were sold to conduits. As a result of these actions, the residential mortgage portfolio declined by 28.5 percent from year-end 1998 to year-end 1999. [BAR GRAPH APPEARS HERE] Though most of the loans are subsequently sold, AmSouth continues to focus on growing mortgage origination volume, a part of its initiative to double the Consumer Banking business. In 1999, origination volume was $2.3 billion. During 1999, AmSouth continued to reduce the amount of low-yield commercial loans on the balance sheet through the use of commercial loan conduits. AmSouth began using conduits in mid-year 1997. At the end of 1999 and 1998, there were approximately $1.5 billion of commercial loans sold to conduits. AmSouth also sold approximately $27.4 million of credit card loans in 1999 and $169.5 million in 1998. The sale in 1999 represented an underperforming portion of the credit card portfolio owned by the former First American in markets outside of AmSouth's franchise. The 1998 sale also represented an underperforming portion of the total credit card portfolio which had been acquired through direct mail solicitations in markets outside of AmSouth's franchise and through a previous portfolio purchase. At the end of 1999, total managed loans net of unearned income, which include loans contained in the conduits, grew 11.7 percent compared to year-end 1998. The loan portfolio at AmSouth is comprised of four main components: commercial loans, commercial real estate loans, consumer loans, and, within the consumer loan category, residential first mortgage loans. At the end of 1999, commercial loans represented 38.1 percent of the total portfolio, commercial real estate loans were 17.9 percent, while consumer loans, excluding residential first mortgages, were 35.1 percent and residential first mortgages represented 8.9 percent. This compared with 40.0 percent, 16.4 percent, 30.2 percent, and 13.4 percent at the end of 1998 for commercial loans, commercial real estate loans, consumer loans, and residential first mortgages, respectively. The level of commercial loans at the end of 1999 was $10.0 billion and remained relatively unchanged from 36 -- MAJOR LOAN CATEGORIES (Table 7)
December 31 (In millions) 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------- Commercial: Commercial and industrial $ 7,967 $ 7,943 $ 7,653 $ 7,014 $ 6,210 Commercial loans secured by real estate 2,036 1,833 2,496 2,407 2,297 --------------------------------------------------- Total commercial 10,003 9,776 10,149 9,421 8,507 --------------------------------------------------- Commercial real estate: Commercial real estate mortgages 2,295 2,221 1,465 1,337 1,206 Real estate construction 2,417 1,800 1,321 1,091 852 --------------------------------------------------- Total commercial real estate 4,712 4,021 2,786 2,428 2,058 --------------------------------------------------- Consumer: Residential first mortgages 2,338 3,270 4,497 4,771 5,499 Other residential mortgages 3,232 2,380 2,363 2,092 1,815 Dealer indirect 4,149 2,909 1,883 1,834 1,754 Revolving credit 489 477 682 688 620 Other consumer 1,344 1,612 2,055 1,891 1,789 --------------------------------------------------- Total consumer 11,552 10,648 11,480 11,276 11,477 --------------------------------------------------- Total loans net of unearned income $26,267 $24,445 $24,415 $23,125 $22,042 ===================================================================================================
year-end 1998. Including the loans in the conduit at year-end 1999, commercial loans grew 1.8 percent year over year. One area of emphasis within the commercial segment continues to be commercial lease financing, which expanded significantly in 1999, increasing $310 million to over $1.0 billion during the year. The increases in lease financing were centered in the transportation, communication and utilities industry groups with most counterparties rated investment grade. AmSouth's asset-based lending segment also continued to deliver strong growth through 1999. In 1996, AmSouth, as a part of its three-year strategic plan, established an initiative to generate $50 million in revenues from new sources by the Year 2000. One of the programs within that initiative was the creation of AmSouth Capital Corporation in 1998. AmSouth Capital Corporation was created to facilitate the development of a national asset-based lending program. Through the efforts of AmSouth Capital Corporation, AmSouth added outstanding asset-based loans of over $460.0 million in 1999 and unfunded commitments of approximately $327.0 million. Finally, increases also occurred in manufacturing and trade industries during 1999 and 1998. Partially offsetting this growth was a decline in loans in the healthcare segment of the commercial portfolio. The decline was the result of management's decision to reduce exposure to the healthcare industry and aggressively manage problem loans in the Medicare dependent healthcare segment. The decision was primarily based on the adverse effects of the implementation by the United States government of the Prospective Payment System for the Medicare system. This and other changes in the Medicare program resulted in significantly lower Medicare revenues for healthcare service providers. As a result, $149 million of loans to Medicare dependent long-term care providers were reclassified to AHAD along with $71 million of reserves to appropriately recognize the assets' net value of $78 million. AHAD are included in loans held for sale on the balance sheet. See the section entitled "Allowance for Loan Losses" for further discussion. Management expects further growth in commercial loans in 2000 due to new business development, expansion of the business banking program, continued growth of commercial lease financing and asset-based lending, and further application of its relationship banking concept in its existing and new markets. For this growth to occur, the economy 37 -- SELECTED LOAN MATURITIES AND SENSITIVITY TO CHANGE IN INTEREST RATES (Table 8)
Due in One Due After One (In millions) Year or Less but Within Five Years Due After Five Years - -------------------------------------------------------------------------------------------------------------------------- Fixed Variable Fixed Variable Rate Rate Total Rate Rate Total Total - -------------------------------------------------------------------------------------------------------------------------- Commercial and industrial $ 2,699 $ 1,536 $ 1,419 $ 2,955 $ 2,459 $ 1,890 $ 4,349 $10,003 Commercial real estate mortgages 146 478 49 527 729 893 1,622 2,295 Real estate construction 384 182 221 403 483 1,147 1,630 2,417 -------------------------------------------------------------------------------------- Total $ 3,229 $ 2,196 $ 1,689 $ 3,885 $ 3,671 $ 3,930 $ 7,601 $14,715 ==========================================================================================================================
must remain stable or improve throughout the year for loan demand to be sufficient to meet the company's goals. A key to management's success will be its ability to meet its goals with respect to the Merger. In addition, management must be able to provide satisfactory sales and service quality and develop new products in the commercial lending area. Commercial real estate loans are comprised of two primary categories: commercial real estate mortgages and real estate construction loans. In 1999, commercial real estate mortgage loans increased $74.1 million or 3.3 percent to $2.3 billion. Real estate construction loans also increased in 1999 to $2.4 billion from the $1.8 billion reported at the end of 1998, an increase of $616.5 million or 34.2 percent. The increases reflected the strength of the real estate markets in AmSouth's southeastern markets, particularly Florida. The increase was also indicative of AmSouth's efforts to systematically grow the real estate portfolio while improving loan quality. Substantially all of AmSouth's real estate growth was made up of loans to finance local home builders within AmSouth's markets; loans for construction projects that have been presold, preleased or otherwise have secured permanent financing; and loans to real estate companies who have significant equity invested in each project and offer substantive and meaningful guarantees. [PIE CHARTS APPEAR HERE] Management anticipates all categories of commercial real estate loans to grow during 2000, provided the economy and AmSouth's real estate markets remain strong, sales goals are met and credit quality is maintained. Consumer loans primarily include dealer indirect loans, home equity loans and lines of credit, revolving credit, and other direct consumer loans but exclude residential first mortgage loans. AmSouth's consumer lending programs produced strong growth in 1999 while maintaining solid credit quality. Dealer indirect loans were $4.1 billion at the end of 1999, versus $2.9 billion at the end of 1998, an increase of $1.2 billion. These loans consisted primarily of loans made to individuals to finance the purchase of new and used automobiles. Dealer indirect lending was one of the critical drivers of the successful strategic initiative to create $50 million in revenues from new sources. New loan production in this area was almost $3.0 billion in 1999 with a strong outlook for growth in 2000 and beyond assuming a stable economy and continued strong loan demand. 38 -- Home equity loans and lines of credit experienced strong growth in all of AmSouth's markets during 1999. This represents the fourth consecutive year of strong double-digit growth in this loan category and reflects the program's continuing success as a key contributor to the strategic initiative to double the Consumer Banking business. Home equity loans totaled $3.2 billion at the end of 1999, an increase from the prior year-end of $851.8 million or 35.8 percent. The increase was primarily the result of new customers acquired in 1999 from direct mail marketing promotions and the selling of home equity loans and lines of credit in the branches. Revolving credit, which consists primarily of bankcard outstandings, increased 2.6 percent to $489.2 million above the level reported at year-end 1998. Growth in the consumer revolving credit portfolio was limited by normal portfolio runoff and more emphasis on promoting home equity loans and lines of credit as well as the sale of $27.4 million of under-performing credit card loans during 1999. Management anticipates that in 2000 consumer loans will continue steady growth, provided the economy remains stable and consumer borrowing patterns remain substantially unchanged and AmSouth's consumer lending programs meet with success in its new markets. Deposits Deposits are AmSouth's primary source of funding, and their cost is the largest category of interest expense. Average total deposits were $27.7 billion in 1999, representing an increase of $567.3 million or 2.1 percent from total average deposits in 1998 of $27.2 billion. There are five principal categories of deposits: noninterest-bearing demand, interest-bearing demand, savings, time, and certificates of deposit of $100,000 or more. See Table 9 for the detailed amounts. One element of the strategic initiative to double the Consumer Banking business is a plan to grow transaction account households and consumer checking accounts. This, in turn, provides a higher level of low-cost deposits which represent AmSouth's least expensive source of funds. Through the promotion of free checking accounts and the offer of a market-rate competitive money market account, AmSouth continued to meet its goal of growing transaction account households while shifting its deposits to a more favorable mix. These programs contributed to 11.3 percent growth in average savings deposits and a 4.0 percent increase in average noninterest-bearing demand deposits. During 1999, average time deposits, measured as a percentage of total average deposits, decreased to 30.8 percent compared to 33.2 percent in 1998. Average noninterest-bearing demand deposits increased to 17.7 percent of total average deposits, up from 17.3 percent in 1998. Average interest-bearing demand deposits decreased to 33.4 percent AVERAGE DEPOSITS (Table 9)
December 31 (In thousands) 1999 1998 1997 - ------------------------------------------------------------------------------------------ Noninterest-bearing demand $ 4,894,631 $ 4,707,121 $ 4,343,401 Interest-bearing demand 9,269,643 9,201,511 8,565,399 Savings 2,191,546 1,968,461 2,034,236 Time: Retail 6,203,375 7,142,064 7,227,315 Individual retirement accounts 1,541,838 1,581,439 1,662,101 Foreign 703,421 203,084 209,764 Other 76,548 100,425 100,135 ------------------------------------------- Total time 8,525,182 9,027,012 9,199,315 ------------------------------------------- Certificates of deposit of $100,000 or more 2,837,027 2,246,605 2,118,059 ------------------------------------------- $27,718,029 $27,150,710 $26,260,410 ==========================================================================================
39 -- MATURITY OF DOMESTIC TIME DEPOSITS OF $100,000 OR MORE (Table 10) December 31 (In thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- Three months or less $1,275,158 $1,312,931 $ 975,003 Over three through six months 480,586 550,072 439,719 Over six through twelve months 526,563 666,806 498,178 Over twelve months 557,608 391,098 359,689 -------------------------------------------- $2,839,915 $2,920,907 $2,272,589 ================================================================================ from 33.9 percent and average savings deposits in 1999 increased to 7.9 percent of total average deposits from 7.3 percent the prior year. Certificates of deposit of $100,000 or more represented 10.2 percent of total average deposits in 1999 versus 8.3 percent in 1998. The average balance of these deposits increased during the year to $2.8 billion, an increase of $590.4 million. These deposits, for the most part, are competitively bid and fluctuate based on the average level of interest rates and management's determination of the need for such deposits from time to time. Table 10 provides a maturity schedule for domestic time deposits of $100,000 or more at December 31, 1999. Other Interest-Bearing Liabilities Other interest-bearing liabilities include all interest-bearing liabilities except deposits. Short-term liabilities included in this category consist of federal funds purchased and securities sold under agreements to repurchase (repurchase agreements) and other borrowed funds. Average other borrowed funds, which include master notes, short-term FHLB advances, bank notes, and treasury, tax and loan notes, increased in 1999 to $939.8 million versus $837.7 million in 1998, an increase of 12.2 percent. These sources were utilized in 1999 to fund growth in earning assets and provide additional liquidity for potential problems related to the Year 2000 issue. Average federal funds purchased and repurchase agreements were $4.1 billion in 1999, a 20.6 percent increase from $3.4 billion in 1998. At December 31, 1999, 1998 and 1997, federal funds purchased and repurchase agreements totaled $4.1 billion, $3.5 billion and $3.0 billion, respectively, with weighted-average interest rates of 4.57 percent, 4.37 percent and 5.03 percent, respectively. The maximum amount outstanding at any month end during each of the last three years was $4.8 billion, $3.8 billion and $3.5 billion, respectively. The average daily balance and average interest rates for each year are presented in Table 2. Long-term debt consists of long-term FHLB advances, subordinated notes and debentures, and various long-term notes payable. The most significant increase during the year occurred in FHLB advances as average long-term FHLB advances grew by $1.4 billion. The result was average long-term borrowings in 1999 of $5.3 billion, an increase of $1.5 billion or 39.6 percent over 1998. These funds were utilized in 1999 because of their relatively low cost and the ability to match their maturities with those of the assets being funded. In addition, average subordinated debt increased by $112.1 million as a result of AmSouth Bank's issuance of $175 million of 6.125% subordinated notes due February 1, 2009, partially offset by the maturity of $100 million of subordinated capital notes. Both events occurred in the first half of 1999. Shareholders' Equity At December 31, 1999, shareholders' equity totaled $3.0 billion, versus $3.2 billion at the end of 1998. The sources of growth in shareholders' equity during 1999 were the retention of net income and issuances of common stock under the various stock-based employee benefit plans and the dividend reinvestment plan. Offsetting the increases were cash dividends declared of $257.7 million, a $260.9 million decrease in unrealized losses on available-for-sale securities and the purchase of 3.9 million shares of AmSouth common stock for $166.5 million to provide shares 40 -- for employee benefit plans, dividend reinvestment and other corporate purposes. Information on prior years may be found in the Consolidated Statement of Shareholders' Equity. AmSouth maintains a capital and dividend policy based on industry standards, regulatory requirements, perceived risk of the various lines of business, and future growth opportunities. At least annually, management reevaluates the policy and presents its findings to the Board of Directors to ensure that the policy continues to support corporate objectives, the regulatory environment and changes in market conditions. At December 31, 1999, AmSouth met or exceeded all of the minimum capital standards for the parent company and its banking subsidiary as established by regulatory requirements and the Company's capital and dividend policy. Refer to Table 11 and Notes 15 and 18 of the Notes to Consolidated Financial Statements for specific information. Risk Management Risk identification and management are key elements in the overall management of AmSouth. Management believes the primary risk exposures are interest rate, liquidity and credit risk. Interest rate risk is the risk to NII represented by the impact of higher or lower interest rates. Liquidity risk is the possibility that the Company will not be able to fund present and future obligations, and credit risk represents the possibility that borrowers may not be able to repay loans. External factors beyond management's control may from time to time result in losses notwithstanding risk management efforts. Some of the more significant processes used to manage and control these risks are described in the following paragraphs. Asset and 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 NIM under varying interest rate environments. This is accomplished through the development and implementation of lending, funding, pricing, and hedging strategies designed to maximize net interest income performance under varying interest rate environments subject to specific liquidity and interest rate risk guidelines. Interest Rate Risk A number of measures are used to monitor and manage interest rate risk. An earnings simulation model is the primary tool used to assess the direction and magnitude CAPITAL RATIOS (Table 11)
December 31 (Dollars in thousands) 1999 1998 - -------------------------------------------------------------------------------------------------------------------------- RISK-BASED CAPITAL: Shareholders' equity $ 2,959,205 $ 3,207,424 Unrealized losses/(gains) on available-for-sale securities (net of deferred taxes) 248,849 (12,030) Less certain intangible assets and other adjustments (438,397) (472,425) ------------------------------ Tier I capital 2,769,657 2,722,969 Adjusted allowance for loan losses 363,476 373,756 Qualifying long-term debt 823,570 798,864 ------------------------------ Tier II capital 1,187,046 1,172,620 ------------------------------ Total capital $ 3,956,703 $ 3,895,589 ========================================================================================================================== Risk-adjusted assets $ 37,119,733 $ 33,063,349 ========================================================================================================================== CAPITAL RATIOS: Tier I capital to total risk-adjusted assets 7.46% 8.24% Total capital to total risk-adjusted assets 10.66 11.78 Leverage 6.22 6.86 Ending equity to assets 6.82 7.89 Ending tangible equity to assets 5.90 6.83 - --------------------------------------------------------------------------------------------------------------------------
41 -- INTEREST RATE SWAPS, CAPS AND FLOORS (Table 12)
Receive Fixed Pay Fixed Forward Swaps Caps & (In millions) Rate Swaps Rate Swaps Basis Swaps Pay Fixed Floors Total - ---------------------------------------------------------------------------------------------------------------- Balance at January 1, 1997 $ 670 $ 322 $ -0- $ 500 $ 1,477 $ 2,969 Additions 1,515 135 50 1,300 -0- 3,000 Maturities -0- (1) -0- -0- (177) (178) Calls (140) -0- -0- -0- -0- (140) Terminations (375) (200) -0- (450) (1,000) (2,025) --------------------------------------------------------------------------------- Balance at December 31, 1997 1,670 256 50 1,350 300 3,626 Additions 469 300 -0- 1,300 -0- 2,069 Maturities (130) (1) -0- (150) -0- (281) Calls (255) -0- -0- -0- -0- (255) Terminations (250) (50) (50) (450) (300) (1,100) --------------------------------------------------------------------------------- Balance at December 31, 1998 1,504 505 -0- 2,050 -0- 4,059 Additions 2,389 -0- -0- 800 -0- 3,189 Maturities (125) (1) -0- -0- -0- (126) Calls (450) -0- -0- -0- -0- (450) Terminations -0- (504) -0- (2,850) -0- (3,354) --------------------------------------------------------------------------------- Balance at December 31, 1999 $3,318 $ -0- $ -0- $ -0- $ -0- $ 3,318 ================================================================================================================
of changes in NII resulting from changes in interest rates. Key assumptions in the model include prepayment speeds on mortgage-related assets; cash flows and maturities of derivatives and other financial instruments held for purposes other than trading; changes in market conditions, loan volumes and pricing; deposit sensitivity; customer preferences; and management's financial and capital plans. These assumptions are inherently uncertain and, as a result, the model cannot precisely estimate NII or precisely predict the impact of higher or lower interest rates on NII but it can indicate the likely direction of change. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes and changes in market conditions and management's strategies, among other factors. Based on the results of the simulation model as of December 31, 1999, NII would decrease $38.4 million or 2.3 percent and increase $25.3 million or 1.5 percent, if interest rates gradually increased or decreased, respectively, from current rates by 100 basis points over a 12-month period. This level of interest rate risk is well within the company's policy guidelines. Prior to the Merger, market risk exposure was managed by each of the previously separate companies. Separate risk management models and assumptions were used in accordance with each company's unique market profile. Accordingly, prior period amounts have not been presented as such amounts were based on the risk profiles of the previously separate entities and are not comparable to current period amounts. MATURITIES AND INTEREST RATES EXCHANGED ON SWAPS (Table 13)
(Dollars in millions) Mature During - ----------------------------------------------------------------------------------------------------------- 2000 2001 2002 2003 2005 2008 2009 Total - ----------------------------------------------------------------------------------------------------------- RECEIVE FIXED SWAPS: Notional amount $1,469 $ 469 $ 765 $ 115 $ 150 $ 175 $ 175 $3,318 Receive rate 6.46% 6.39% 6.45% 6.31% 6.25% 6.13% 6.22% 6.40% Pay rate 6.45% 5.96% 6.29% 6.48% 6.48% 6.32% 6.48% 6.34%
42 -- Various off-balance sheet financial instruments are used by AmSouth to assist in managing interest rate risk. AmSouth had interest rate swaps as of December 31, 1999, in the notional amount of $3.3 billion. Of these swaps, $1.6 billion of notional value were used as asset hedges to convert variable rate securities and commercial loans to fixed rates. The remaining $1.7 billion of notional value of swaps were used as liability hedges to convert fixed rate consumer certificates of deposit, corporate and bank debt and wholesale certificates of deposit to variable rates. As of December 31, 1999, AmSouth held other off-balance sheet instruments as hedges as well as futures and forward contracts to provide customers and AmSouth a means of managing the risks of changing interest and foreign exchange rates. These other off-balance sheet instruments are immaterial in amount. Table 12 summarizes the activity, by notional amount, of off-balance sheet financial instruments utilized in the asset and liability management process at AmSouth for the years 1999, 1998 and 1997. Table 13 summarizes the expected maturities on all of AmSouth's off-balance sheet positions at December 31, 1999, and interest rates exchanged on swaps. Both the timing of the maturities and the variable interest payments and receipts vary as certain interest rates change. The maturities and interest rates exchanged are calculated assuming that interest rates remain unchanged from average December 1999 rates. The information presented could change as future interest rates increase or decrease. See Note 13 of the Notes to Consolidated Financial Statements. Liquidity AmSouth's goal in liquidity management is to satisfy the cash flow requirements of depositors and borrowers while at the same time meeting the cash flow needs of the Company. This is accomplished through the active management of both the asset and liability sides of the balance sheet. The liquidity position of AmSouth is monitored on a daily basis by AmSouth's Treasury Division. In addition, the Asset/Liability Committee, which consists of members of AmSouth's senior management team, reviews liquidity on a regular basis and approves any changes in strategy that are necessary as a result of balance sheet or anticipated cash flow changes. Management also compares on a monthly basis the Company's liquidity position to established corporate liquidity guidelines. At December 31, 1999, AmSouth was within all of the guidelines which have been established. The primary sources of liquidity on the asset side of the balance sheet are maturities and cash flows from both loans and investments as well as the ability to securitize or sell certain loans and investments. Liquidity on the liability side is generated primarily through growth in core deposits and the ability to obtain economical wholesale funding in national and regional markets through a variety of sources. AmSouth's most commonly used sources of wholesale funding are (1) federal funds (i.e., the excess reserves of other CREDIT RATINGS (Table 14) Standard & Moody's Poor's BankWatch - -------------------------------------------------------------------------------- 6.875% Subordinated Notes Due 2003 A3 BBB+ A 7.75% Subordinated Notes Due 2004 A3 BBB+ A 6.625% Subordinated Notes Due 2005 A3 BBB+ A 6.125% Subordinated Notes Due 2009 A3 BBB+ A 6.45% Subordinated Notes Due 2018 Aa3* A-* - 6.75% Subordinated Debentures Due 2025 A3 BBB+ A 7.25% Senior Notes Due 2006 A2 A- - Commercial paper P-1 A-2 TBW-1 Certificates of deposit Aa3* A* - Short-term counterparty P-1* A-1* - Long-term counterparty Aa3* A* - - -------------------------------------------------------------------------------- * AmSouth Bank 43 -- NONPERFORMING ASSETS (Table 15)
December 31 (Dollars in thousands) 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------ Nonaccrual loans $141,134 $113,985 $109,488 $112,509 $138,521 Restructured loans -0- -0- -0- 694 -0- ------------------------------------------------------------------------- Nonperforming loans 141,134 113,985 109,488 113,203 138,521 ------------------------------------------------------------------------- Foreclosed properties 17,767 17,322 19,143 26,844 33,154 Repossessions 2,644 828 632 1,822 3,114 ------------------------------------------------------------------------- Total nonperforming assets* $161,545 $132,135 $129,263 $141,869 $174,789 ============================================================================================================ Nonperforming assets* to loans net of unearned income, foreclosed properties and repossessions 0.61% 0.54% 0.53% 0.61% 0.79% ============================================================================================================ Accruing loans 90 days past due $61,050 $62,528 $66,792 $58,943 $50,891 ============================================================================================================
* Exclusive of accruing loans 90 days past due and $38.1 million of nonperforming assets classified as assets held for accelerated disposition at December 31, 1999. financial institutions); (2) repurchase agreements, whereby U.S. government and government agency securities are pledged as collateral for short-term borrowings; and (3) pledges of acceptable assets as collateral for public deposits and certain tax collection monies. In addition to these sources, AmSouth can access other wholesale funding sources such as Eurodollar deposits and certificates of deposit. AmSouth Bank also has the ability to borrow from the FHLB. FHLB advances are competitively priced and are a reliable source of funds. Also, AmSouth Bank maintains a short and medium-term note issuance program with a borrowing capacity of $3.0 billion. There was $300 million outstanding under the issuance program at December 31, 1999. Maintaining adequate credit ratings on debt issues is critical to liquidity because it affects the ability of AmSouth to attract funds from various sources on a cost competitive basis. Table 14 summarizes AmSouth's credit ratings at December 31, 1999. Credit Risk Management Process and Loan Quality The loan portfolio at AmSouth holds the highest degree of risk for the Company. AmSouth manages and controls risk in the loan portfolio through adherence to consistent standards established by senior management, combined with a commitment to producing quality assets, developing profitable relationships and meeting strategic growth targets. AmSouth has written credit policies which establish underwriting standards, place limits on exposure and set other limits or standards as deemed necessary and prudent. Also included in the policy, primarily determined by the amount and type of loan, are various approval levels, ranging from the branch or department level to those which are more centralized. AmSouth maintains a diversified portfolio intended to spread its risk and reduce its exposure to economic downturns, which may occur in different segments of the economy or in particular industries. Industry and loan type diversification is reviewed quarterly. Commercial real estate loans are categorized by the type of collateral. Owner occupied properties include mortgages where the borrower is a primary tenant, such as factory or warehouse loans. Nonowner occupied lending represents those loans where the primary method of repayment is anticipated to come from the rental income and generally has inherently more risk than owner occupied lending. Each commercial loan recorded at AmSouth is assigned a risk rating on a 13-point numerical scale by the loan officer using established credit policy guidelines. Consumer loan portfolios are assigned risk ratings based on a nine-point scale and are based on the type of loan and its performance. All risk ratings are subject to review by an independent Credit Review Department. In addition, regular reports are made to senior management and the Board of Directors regarding the credit quality of the loan portfolio as well as trends in the portfolio. 44 -- The Credit Administration function includes designated credit officers, some of whom are industry specialists and all of which are organizationally independent of the production areas. They oversee the loan approval process, ensure adherence to credit policies and monitor efforts to reduce nonperforming and classified assets. Additionally, a centralized special assets function handles the resolution and disposition of certain problem loans. Risk in the consumer loan portfolio is further managed through utilization of computerized credit scoring, in-depth analysis of portfolio components and specific account selection, management and collection techniques. In addition, the consumer collection function is centralized and automated to ensure timely collection of accounts and consistent management of risk associated with delinquent accounts. Finally, AmSouth's Credit Review Department performs ongoing independent reviews of the risk management process, adequacy of loan documentation and the risk ratings or specific loan loss reserves for outstanding loans. This department is geographically centralized and independent of the lending function. The results of its examinations are reported to the Audit and Community Responsibility Committee of the Board of Directors. Nonperforming Assets Management closely monitors loans and other assets which are classified as nonperforming assets. Nonperforming assets include nonaccrual loans, restructured loans, foreclosed properties, and repossessions. Loans are generally placed on nonaccrual if full collection of principal and interest becomes unlikely (even if all payments are current) or if the loan is delinquent in principal or interest payments for 90 days or more, unless the loan is well secured and in the process of collection. Special assets manages collection of commercial nonperforming loans while consumer collections manages the consumer nonperforming loan portfolio. Nonperforming assets, excluding accruing loans 90 days past due, increased $29.4 million, or 22.3 percent, during 1999. The graph entitled Asset Quality Trends and Table 15 provide trend information and detailed components of nonperforming assets for each of the last five years. NONPERFORMING LOANS AND NET CHARGE-OFFS (RECOVERIES) (Table 16)
(Dollars in thousands) Nonperforming Loans* - --------------------------------------------------------------------------------------------------- % of % of December 31, Average December 31, Average 1999 Loans** per 1998 Loans** per Category Category - --------------------------------------------------------------------------------------------------- Commercial: Commercial and industrial $ 39,474 0.49% $ 41,352 0.48% Commercial loans secured by real estate 35,554 1.73 19,720 1.25 ------------------------------------------------------- Total commercial 75,028 0.74 61,072 0.60 ------------------------------------------------------- Commercial real estate: Commercial real estate mortgages 15,530 0.70 17,712 1.08 Real estate construction 13,356 0.65 2,913 0.18 ------------------------------------------------------- Total commercial real estate 28,886 0.68 20,625 0.64 ------------------------------------------------------- Consumer: Residential first mortgages 22,343 0.80 25,068 0.73 Other residential mortgages 13,308 0.48 5,801 0.25 Dealer indirect 562 0.02 407 0.02 Revolving credit 164 0.03 -0- -- Other consumer 843 0.06 1,012 0.05 ------------------------------------------------------- Total consumer 37,220 0.33 32,288 0.31 ------------------------------------------------------- $141,134 0.55% $113,985 0.47% =================================================================================================== Net Charge-offs (Recoveries) - --------------------------------------------------------------------------------------------------- % of % of December 31, Average December 31, Average 1999 Loans** per 1998 Loans** per Category Category - --------------------------------------------------------------------------------------------------- Commercial: Commercial and industrial $ 32,219 0.40% $ 23,672 0.27% Commercial loans secured by real estate 2,174 0.11 1,311 0.08 ------------------------------------------------------- Total commercial 34,393 0.34 24,983 0.24 ------------------------------------------------------- Commercial real estate: Commercial real estate mortgages 2,066 0.09 (39) -- Real estate construction 1,140 0.06 715 0.04 ------------------------------------------------------- Total commercial real estate 3,206 0.08 676 0.02 ------------------------------------------------------- Consumer: Residential first mortgages 3,841 0.14 2,783 0.08 Other residential mortgages 4,632 0.17 2,627 0.11 Dealer indirect 29,331 0.82 11,973 0.53 Revolving credit 15,953 3.30 25,193 4.63 Other consumer 11,550 0.78 15,417 0.77 ------------------------------------------------------- Total consumer 65,307 0.59 57,993 0.55 ------------------------------------------------------- $102,906 0.40% $ 83,652 0.35% ===================================================================================================
* Exclusive of accruing loans 90 days past due and $38.1 million of nonperforming assets classified as held for accelerated disposition at December 31, 1999. ** Net of unearned income 45 -- ALLOWANCE FOR LOAN LOSSES (Table 17)
(Dollars in thousands) 1999 1998 1997 1996 1995 Balance at January 1 ...................... $ 373,756 $ 367,077 $ 370,277 $ 375,457 $ 361,831 Loans charged off: Commercial and industrial ............... (43,213) (35,420) (25,768) (19,355) (12,606) Commercial loans secured by real estate . (2,539) (1,865) (3,859) (1,361) (301) ------------ --------------------------------------------------------------- Total commercial ..................... (45,752) (37,285) (29,627) (20,716) (12,907) Commercial real estate mortgages ........ (2,627) (4,911) (2,788) (4,088) (5,091) Commercial real estate construction ..... (1,907) (995) (698) (257) (1,188) ------------ --------------------------------------------------------------- Total commercial real estate ......... (4,534) (5,906) (3,486) (4,345) (6,279) Residential first mortgages ............. (4,346) (3,877) (4,033) (5,068) (1,045) Other residential mortgages ............. (5,137) (2,906) (2,784) (1,100) (571) Dealer indirect ......................... (48,504) (27,219) (28,817) (32,010) (19,457) Revolving credit ........................ (19,715) (31,038) (43,951) (36,835) (18,849) Other consumer .......................... (20,299) (26,007) (37,679) (31,553) (19,775) ------------ --------------------------------------------------------------- Total charge-offs .................... (148,287) (134,238) (150,377) (131,627) (78,883) ------------ --------------------------------------------------------------- Recoveries of loans previously charged off: Commercial and industrial ............... 10,994 11,748 10,697 17,577 10,914 Commercial loans secured by real estate . 365 554 2,320 785 262 ------------ --------------------------------------------------------------- Total commercial ..................... 11,359 12,302 13,017 18,362 11,176 Commercial real estate mortgages ........ 561 4,950 1,526 4,831 4,044 Commercial real estate construction ..... 767 280 3,328 881 1,119 ------------ --------------------------------------------------------------- Total commercial real estate ......... 1,328 5,230 4,854 5,712 5,163 Residential first mortgages ............. 505 1,094 1,269 1,181 262 Other residential mortgages ............. 505 279 560 542 766 Dealer indirect ......................... 19,173 15,246 16,340 12,955 8,338 Revolving credit ........................ 3,762 5,845 5,724 3,427 2,225 Other consumer .......................... 8,749 10,590 13,905 8,472 8,601 ------------ --------------------------------------------------------------- Total recoveries ..................... 45,381 50,586 55,669 50,651 36,531 ------------ --------------------------------------------------------------- Net charge-offs ........................... (102,906) (83,652) (94,708) (80,976) (42,352) ------------ --------------------------------------------------------------- Addition to allowance charged to expense .. 165,626 99,067 83,508 71,608 43,000 Allowance sold ............................ (2,000) (14,900) (252) -0- -0- Allowance transferred/acquired in bank purchases/other .................... (71,000) 6,164 8,252 4,188 12,978 ------------ --------------------------------------------------------------- Balance at December 31 .................... $ 363,476 $ 373,756 $ 367,077 $ 370,277 $ 375,457 ============ =============================================================== Loans net of unearned income, outstanding at end of period ............ $ 26,266,759 $ 24,445,296 $ 24,415,004 $ 23,124,651 $ 22,041,920 Average loans net of unearned income, outstanding for the period .............. $ 25,471,295 $ 24,027,839 $ 23,753,817 $ 22,318,990 $ 20,849,737 Ratios: Allowance at end of period to loans net of unearned income ......... 1.38% 1.53% 1.50% 1.60% 1.70% Allowance at end of period to average loans net of unearned income . 1.43 1.56 1.55 1.66 1.80 Allowance at end of period to nonperforming loans* ................. 257.54 327.90 335.27 327.09 271.05 Allowance at end of period to nonperforming assets* ................ 225.00 282.86 283.98 261.00 214.81 Net charge-offs to average loans net of unearned income ............... 0.40 0.35 0.40 0.36 0.20 Net charge-offs to allowance at end of period ..................... 28.31 22.38 25.80 21.87 11.28 Recoveries to prior year charge-offs .... 33.81 33.64 42.29 64.21 47.04
* Exclusive of accruing loans 90 days past due and $38.1 million of nonperforming assets classified as held for accelerated disposition at December 31, 1999. 46 -- The increase in nonperforming assets in 1999 compared to 1998 was primarily the result of a higher level of nonperforming loans in the commercial loans secured by real estate, real estate construction and home equity loan segments. The increase in the commercial loans secured by real estate category was primarily due to one loan, secured by owner-occupied properties, that was on nonperforming status at year-end, while the increase in the real estate construction category resulted from several residential real estate developments. Nonperforming loans totaled $141.1 million at the end of 1999 compared to $114.0 million in 1998, an increase of $27.1 million. Additionally, the majority of consumer nonaccrual loans are secured by residential real estate. Excluding the effects of first and second residential mortgages, which typically experience very low loss rates, nonperforming loans were only $105.5 million at the end of 1999. The balance in foreclosed properties was relatively flat in 1999 compared to 1998 at $17.8 million. More than half of these properties were secured by residential real estate at December 31, 1999. Table 16 presents nonperforming loans and net charge-offs and each as a percentage of average net loans by category for December 31, 1999 and 1998. Allowance for Loan Losses 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. Elements of the review include analysis of historical performance, the level of nonperforming and adversely rated loans, specific analysis of certain problem loans, loan activity since the previous quarter, reports prepared by the Credit 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 presented to and subsequently approved by senior management and reviewed by the Audit and Community Responsibility Committee of the Board of Directors. For purposes of the quarterly review, the consumer portfolios are treated as homogenous pools. Specific consumer pools include: direct, bankcard, other revolving, indirect, [BAR CHART APPEARS HERE] residential first mortgages, and home equity lending. In accordance with regulatory guidelines, the allowance for loan losses is allocated to the consumer pools based on historical net charge-off rates adjusted for any current changes in these trends. The commercial, commercial real estate and business banking portfolios are evaluated separately. Within this group, every nonperforming loan in excess of $500,000 is reviewed by AmSouth's Special Assets Department for a specific allocation. For all other loans in the commercial portfolio, the allowance is allocated based on a combination of historical loss rates, adjusted for those elements discussed in the preceding paragraph, and regulatory guidelines. In determining the appropriate level for the allowance, management ensures that the overall allowance appropriately reflects a margin for the imprecision inherent in most estimates of expected credit losses. This additional allowance is reflected in the unallocated portion of the allowance. At December 31, 1999, the allowance for loan losses was $363.5 million versus $373.8 million at year-end 1998, a decrease of $10.3 million. At December 31, 1999, AmSouth elected to exit that portion of the healthcare business previously described as Medicare dependent long-term care. As a result, $149 million in loans were transferred from the loan 47 -- portfolio to AHAD. Concurrently, reserves totaling $71.0 million were also transferred from the allowance for loan losses to AHAD representing the aggregate amount needed to reflect each asset at its net realizable value. Included in AHAD are nonperforming loans of $38.1 million. Additionally, the allowance was reduced approximately $2.0 million due to the sale of AmSouth's out-of-market credit card portfolio during 1999. Within specific categories, the allowance allocated to commercial loans increased $7.3 million to $126.6 million at the end of 1999. The increase was primarily the result of growth in the commercial loan portfolio during the year and a higher level of nonperforming commercial loans at the end of 1999. The allowance for loan losses allocated to commercial real estate was $56.0 million at the end of 1999, an increase of $17.3 million over 1998. The increase reflects the growth in commercial real estate loans and a higher level of nonperforming loans in the category at year end. The allocation to the consumer loan portfolio was $91.4 million at the end of 1999 reflecting a $5.9 million increase versus the 1998 balance of $85.5 million. The majority of the increase was the result of growth in dealer indirect and home equity lending in 1999. The allowance allocated to unfunded commitments increased $2.1 million in 1999 to $26.7 million which, consistent with the growth in commercial real estate lending, reflects growth in unfunded commitments in 1999. At December 31, 1999, the allowance for loan losses to net loans was 1.38 percent while coverage of nonperforming loans was 257.5 percent. This compares with an allowance for loan losses to net loans at the end of 1998 of 1.53 percent and to nonperforming loans for the same period of 327.9 percent. At the end of 1999, the allowance represented 4.5 times average net charge-offs over the last five years compared to 5.6 times at the end of 1998. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES (Table 18)
(Dollars in thousands) December 31, 1999 December 31, 1998 December 31, 1997 - ------------------------------------------------------------------------------------------------------------------------------- Percentage of Percentage of Percentage of Loans* in Each Loans* in Each Loans* in Each Allowance Category to Allowance Category to Allowance Category to Allocation Total Loans* Allocation Total Loans* Allocation Total Loans* - ------------------------------------------------------------------------------------------------------------------------------- Commercial: Commercial and industrial $102,410 30.3% $ 99,077 32.5% $ 73,485 31.4% Commercial secured by real estate 24,180 7.8 20,253 7.5 25,995 10.2 ----------------------------------------------------------------------------------------- Total commercial 126,590 38.1 119,330 40.0 99,480 41.6 ----------------------------------------------------------------------------------------- Commercial real estate: Commercial real estate mortgages 27,256 8.7 21,539 9.1 14,501 6.0 Real estate construction 28,705 9.2 17,086 7.3 13,239 5.4 ----------------------------------------------------------------------------------------- Total commercial real estate 55,961 17.9 38,625 16.4 27,740 11.4 ----------------------------------------------------------------------------------------- Consumer: Residential first mortgages 4,282 8.9 7,179 13.4 13,641 18.4 Other residential mortgages 9,696 12.3 4,654 9.7 7,603 9.7 Dealer indirect 44,916 15.8 29,912 11.9 24,249 7.7 Revolving credit 17,123 1.9 21,847 2.0 40,147 2.8 Other consumer 15,344 5.1 21,868 6.6 25,790 8.4 ----------------------------------------------------------------------------------------- Total consumer 91,361 44.0 85,460 43.6 111,430 47.0 ----------------------------------------------------------------------------------------- Unfunded commitments 26,659 -- 24,598 -- 21,010 -- Standby letters of credit 5,862 -- 3,222 -- 2,696 -- Unallocated 57,043 -- 102,521 -- 104,721 -- ----------------------------------------------------------------------------------------- $363,476 100.0% $373,756 100.0% $367,077 100.0% =============================================================================================================================== (Dollars in thousands) December 31, 1996 December 31, 1995 - -------------------------------------------------------------------------------------------------- Percentage of Percentage of Loans* in Each Loans* in Each Allowance Category to Allowance Category to Allocation Total Loans* Allocation Total Loans* - -------------------------------------------------------------------------------------------------- Commercial: Commercial and industrial $ 69,262 30.3% $ 71,837 28.2% Commercial secured by real estate 28,240 10.4 31,968 10.4 ----------------------------------------------------------- Total commercial 97,502 40.7 103,805 38.6 ----------------------------------------------------------- Commercial real estate: Commercial real estate mortgages 16,792 5.8 21,075 5.5 Real estate construction 13,202 4.7 9,229 3.9 ----------------------------------------------------------- Total commercial real estate 29,994 10.5 30,304 9.4 ----------------------------------------------------------- Consumer: Residential first mortgages 14,323 20.6 27,813 24.9 Other residential mortgages 7,076 9.1 8,596 8.2 Dealer indirect 22,865 7.9 22,059 8.0 Revolving credit 50,255 3.0 26,756 2.8 Other consumer 26,526 8.2 27,433 8.1 ----------------------------------------------------------- Total consumer 121,045 48.8 112,657 52.0 ----------------------------------------------------------- Unfunded commitments 17,144 -- 16,685 -- Standby letters of credit 1,963 -- 3,880 -- Unallocated 102,629 -- 108,126 -- ----------------------------------------------------------- $370,277 100.0% $375,457 100.0% ==================================================================================================
* Net of unearned income 48 -- AmSouth Bancorporation and Subsidiaries Supplemental Financial Statements CONSOLIDATED STATEMENT OF CONDITION December 31, 1995-1999
(In thousands) 1999 1998 1997 1996 1995 ASSETS Cash and due from banks ...................... $ 1,563,335 $ 1,802,814 $ 1,691,936 $ 1,699,804 $ 1,575,880 Temporary investments ........................ 6,342,637 8,609,960 6,561,329 6,154,337 6,063,045 Held-to-maturity securities .................. 7,050,562 3,877,504 3,035,577 3,673,912 3,315,166 Loans net of unearned income ................. 26,266,759 24,445,296 24,415,004 23,124,651 22,041,920 Less: Allowance for loan losses .............. 363,476 373,756 367,077 370,277 375,457 ----------- -------------------------------------------------------------- Net loans ................................. 25,903,283 24,071,540 24,047,927 22,754,374 21,666,463 Premises and equipment ....................... 678,442 773,563 710,417 639,180 572,637 Other assets ................................. 1,868,295 1,500,450 1,332,893 1,148,950 1,054,644 ----------- -------------------------------------------------------------- Total assets .............................. $43,406,554 $40,635,831 $37,380,079 $36,070,557 $34,247,835 =========== ============================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits ..................................... $27,912,443 $28,533,759 $27,045,700 $26,003,593 $26,258,269 Federal funds purchased and repurchase agreements ..................... 4,095,747 3,470,262 2,981,295 3,407,902 3,258,436 Other interest-bearing liabilities ........... 7,739,206 4,743,837 3,774,606 3,133,698 1,530,456 ----------- -------------------------------------------------------------- Total deposits and interest-bearing liabilities ............ 39,747,396 36,747,858 33,801,601 32,545,193 31,047,161 Accrued expenses and other liabilities ....... 699,953 680,549 549,340 585,639 394,989 ----------- -------------------------------------------------------------- Total liabilities ......................... 40,447,349 37,428,407 34,350,941 33,130,832 31,442,150 Shareholders' equity ......................... 2,959,205 3,207,424 3,029,138 2,939,725 2,805,685 ----------- -------------------------------------------------------------- Total liabilities and shareholders' equity $43,406,554 $40,635,831 $37,380,079 $36,070,557 $34,247,835 =========== ==============================================================
CONSOLIDATED STATEMENT OF EARNINGS Years ended December 31, 1995-1999
(In thousands except per share data) 1999 1998 1997 1996 1995 Net interest income .......................... $ 1,507,946 $ 1,444,284 $ 1,384,729 $ 1,279,138 $ 1,160,543 Provision for loan losses .................... 165,626 99,067 83,508 71,608 43,000 ----------- -------------------------------------------------------------- Net interest income after provision for loan losses ................. 1,342,320 1,345,217 1,301,221 1,207,530 1,117,543 Noninterest revenues ......................... 847,557 799,854 658,724 542,289 438,812 Merger-related costs ......................... 301,415 121,725 0 0 7,269 Noninterest expenses excluding merger-related costs ...................... 1,347,091 1,284,547 1,221,675 1,129,509 988,488 ----------- -------------------------------------------------------------- Income before income taxes ................... 541,371 738,799 738,270 620,310 560,598 Income taxes ................................. 200,903 264,725 264,589 223,455 202,861 ----------- -------------------------------------------------------------- Net income ................................ $ 340,468 $ 474,074 $ 473,681 $ 396,855 $ 357,737 =========== ============================================================== Average common shares outstanding ............ 391,136 389,595 395,837 398,213 398,293 Diluted average common shares outstanding .... 396,515 396,491 401,811 403,233 404,291 Earnings per common share .................... $0.87 $1.22 $1.20 $1.00 $0.90 Diluted earnings per common share ............ 0.86 1.20 1.18 0.98 0.88 Cash dividends declared per common share ..... 0.71 0.57 0.51 0.48 0.46
49 -- Management's Statement on Responsibility for Financial Reporting The management of AmSouth is responsible for the content and integrity of the financial statements and all other financial information included in this annual report. Management believes that the financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis to reflect, in all material respects, the substance of events and transactions that should be included, and that the other financial information in the annual report is consistent with those financial statements. The financial statements necessarily include amounts that are based on management's best estimates and judgements. Management maintains and depends upon AmSouth's accounting systems and related systems of internal controls. The internal control systems are designed to ensure that transactions are properly authorized and recorded in the corporation's financial records and to safeguard the corporation's assets from material loss or misuse. The corporation maintains an internal audit staff which monitors compliance with the corporation's systems of internal controls and reports to management and to the Audit and Community Responsibility Committee of the Board of Directors. The Audit and Community Responsibility Committee of the Board of Directors, composed solely of outside directors, has responsibility for recommending to the Board of Directors the appointment of the independent auditors for AmSouth. The Committee meets periodically with the internal auditors and the independent auditors to review the scope and findings of their respective audits. The internal auditors, independent auditors and management each have full and free access to meet privately as well as together with the Committee to discuss internal controls, accounting, auditing, or other financial reporting matters. The consolidated financial statements of AmSouth have been audited by Ernst & Young LLP, independent auditors, who were engaged to express an opinion as to the fairness of presentation of such financial statements. /s/ C. Dowd Ritter /s/ Samuel M. Tortorici C. Dowd Ritter Samuel M. Tortorici President Executive Vice President Chief Executive Officer Chief Financial Officer 50 -- Report of Ernst & Young LLP, Independent Auditors Board of Directors AmSouth Bancorporation We have audited the accompanying consolidated statement of condition of AmSouth Bancorporation and subsidiaries (AmSouth) as of December 31, 1999 and 1998, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated financial statements give retroactive effect to the merger of AmSouth and First American Corporation and subsidiaries (First American) on October 1, 1999, which has been accounted for using the pooling of interests method as described in Note 2 to the Consolidated Financial Statements. We did not audit the consolidated financial statements of First American for the years ended December 31, 1998 and 1997, which statements reflect total assets of 51% in 1998 and net interest income of 52% in 1998 and 51% in 1997 of the related AmSouth consolidated totals. Those First American statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to data included for First American, is based solely on the report of other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AmSouth Bancorporation and subsidiaries at December 31, 1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Birmingham, Alabama February 11, 2000 51 -- AmSouth Bancorporation and Subsidiaries CONSOLIDATED STATEMENT OF CONDITION
December 31 (Dollars in thousands) 1999 1998 ASSETS Cash and due from banks ............................................................. $ 1,563,335 $ 1,802,814 Time deposits in other banks ........................................................ 2,474 292,763 ------------ ------------ Total cash and cash equivalents .................................................. 1,565,809 2,095,577 Federal funds sold and securities purchased under agreements to resell .............. 132,683 357,910 Trading securities .................................................................. 51,972 47,818 Available-for-sale securities ....................................................... 5,964,703 7,524,532 Held-to-maturity securities (market value of $6,849,344 and $3,901,954, respectively) 7,050,562 3,877,504 Loans held for sale ................................................................. 172,941 357,661 Loans ............................................................................... 26,436,359 24,587,902 Less: Allowance for loan losses .................................................... 363,476 373,756 Unearned income .............................................................. 169,600 142,606 ------------ ------------ Net loans .................................................................... 25,903,283 24,071,540 Other interest-earning assets ....................................................... 17,864 29,276 Premises and equipment, net ......................................................... 678,442 773,563 Customers' acceptance liability ..................................................... 8,617 24,260 Accrued interest receivable and other assets ........................................ 1,859,678 1,476,190 ------------ ------------ $ 43,406,554 $ 40,635,831 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits and interest-bearing liabilities: Deposits: Noninterest-bearing demand ..................................................... $ 4,739,077 $ 5,241,739 Interest-bearing demand ........................................................ 9,227,907 9,894,402 Savings ........................................................................ 2,349,793 1,995,722 Time ........................................................................... 7,574,119 8,158,265 Foreign time ................................................................... 1,293,522 428,097 Certificates of deposit of $100,000 or more .................................... 2,728,025 2,815,535 ------------ ------------ Total deposits .............................................................. 27,912,443 28,533,760 Federal funds purchased and securities sold under agreements to repurchase ....... 4,095,747 3,470,262 Other borrowed funds ............................................................. 2,135,720 351,012 Long-term Federal Home Loan Bank advances ........................................ 4,612,686 3,450,864 Other long-term debt ............................................................. 990,800 941,960 ------------ ------------ Total deposits and interest-bearing liabilities ................................ 39,747,396 36,747,858 Acceptances outstanding ............................................................. 8,617 24,260 Accrued expenses and other liabilities .............................................. 691,336 656,289 ------------ ------------ Total liabilities ................................................................ 40,447,349 37,428,407 ------------ ------------ Shareholders' equity: Preferred stock -- no par value: Authorized -- 2,000,000 shares; Issued and outstanding -- none ................. -0- -0- Common stock -- par value $1 a share: Authorized -- 750,000,000 shares Issued -- 416,948,890 and 420,057,801 shares, respectively ..................... 416,949 420,058 Capital surplus .................................................................. 690,820 763,117 Retained earnings ................................................................ 2,482,477 2,419,558 Cost of common stock in treasury -- 25,574,778 and 25,048,731 shares, respectively (376,354) (367,286) Deferred compensation on restricted stock ........................................ (5,838) (40,053) Accumulated other comprehensive (loss) income .................................... (248,849) 12,030 ------------ ------------ Total shareholders' equity ..................................................... 2,959,205 3,207,424 ------------ ------------ $ 43,406,554 $ 40,635,831 ============ ============
See Notes to Consolidated Financial Statements. 52 -- AmSouth Bancorporation and Subsidiaries CONSOLIDATED STATEMENT OF EARNINGS
YEARS ENDED DECEMBER 31 (In thousands except per share data) 1999 1998 1997 INTEREST INCOME Loans .................................................................... $2,128,147 $2,080,065 $2,056,949 Available-for-sale securities ............................................ 467,499 496,872 377,327 Held-to-maturity securities .............................................. 314,868 235,481 229,834 Trading securities ....................................................... 4,051 4,178 4,158 Loans held for sale ...................................................... 10,148 16,457 9,475 Federal funds sold and securities purchased under agreements to resell ... 5,694 7,650 7,961 Other interest-earning assets ............................................ 2,343 1,204 744 ---------- -------------------------- Total interest income ................................................. 2,932,750 2,841,907 2,686,448 ---------- -------------------------- INTEREST EXPENSE Interest-bearing demand deposits ......................................... 266,155 302,208 289,735 Savings deposits ......................................................... 53,933 51,354 55,162 Time deposits ............................................................ 402,576 475,426 504,954 Foreign time deposits .................................................... 34,262 10,048 11,180 Certificates of deposit of $100,000 or more .............................. 146,422 131,231 101,414 Federal funds purchased and securities sold under agreements to repurchase 187,946 168,435 151,288 Other borrowed funds ..................................................... 47,894 43,287 73,606 Long-term Federal Home Loan Bank advances ................................ 222,036 153,122 68,233 Other long-term debt ..................................................... 63,580 62,512 46,147 ---------- -------------------------- Total interest expense ................................................ 1,424,804 1,397,623 1,301,719 ---------- -------------------------- NET INTEREST INCOME ...................................................... 1,507,946 1,444,284 1,384,729 Provision for loan losses ................................................ 165,626 99,067 83,508 ---------- -------------------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES ...................... 1,342,320 1,345,217 1,301,221 ---------- -------------------------- NONINTEREST REVENUES Service charges on deposit accounts ...................................... 233,043 234,849 216,085 Consumer investment services income ...................................... 213,292 183,831 149,205 Trust income ............................................................. 109,223 109,453 102,506 Other noninterest revenues ............................................... 291,999 271,721 190,928 ---------- -------------------------- Total noninterest revenues ............................................ 847,557 799,854 658,724 ---------- -------------------------- NONINTEREST EXPENSES Salaries and employee benefits ........................................... 635,450 615,195 584,812 Equipment expense ........................................................ 135,590 123,480 113,716 Net occupancy expense .................................................... 111,431 106,497 103,698 Subscribers' commissions ................................................. 99,588 89,918 70,785 Merger-related costs ..................................................... 301,415 121,725 -0- Other noninterest expenses ............................................... 365,032 349,457 348,664 ---------- -------------------------- Total noninterest expenses ............................................ 1,648,506 1,406,272 1,221,675 ---------- -------------------------- INCOME BEFORE INCOME TAXES ............................................... 541,371 738,799 738,270 Income taxes ............................................................. 200,903 264,725 264,589 ---------- -------------------------- NET INCOME ............................................................... $ 340,468 $ 474,074 $ 473,681 ========== ========================== Average common shares outstanding ........................................ 391,136 389,595 395,837 Earnings per common share ................................................ $ .87 $ 1.22 $ 1.20 Diluted average common shares outstanding ................................ 396,515 396,491 401,811 Diluted earnings per common share ........................................ $ .86 $ 1.20 $ 1.18 Cash dividends per common share .......................................... .71 .57 .51
See Notes to Consolidated Financial Statements. 53 -- AmSouth Bancorporation and Subsidiaries CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands) COMMON CAPITAL RETAINED TREASURY STOCK SURPLUS EARNINGS STOCK BALANCE AT JANUARY 1, 1997 .................................... $ 410,797 $ 808,034 $ 1,840,162 $(128,889) Comprehensive income: Net income ................................................. -0- -0- 473,681 -0- Other comprehensive income, net of tax: Unrealized gains on available-for-sale securities, net of reclassification adjustment (net $5,009 tax expense) .. -0- -0- -0- -0- Comprehensive income .......................................... Cash dividends declared ($.51 per common share) ............... -0- -0- (93,307) -0- Cash dividends declared by pooled companies ................... -0- -0- (81,410) -0- Common stock transactions: Employee stock plans ....................................... 3,169 39,877 (7,679) 26,421 Dividend reinvestment plan ................................. -0- 231 (139) 5,059 Purchase of common stock ................................... (11,827) (185,866) -0- (170,610) Acquisitions ............................................... 10,311 70,386 13,940 -0- --------------------------------------------------------------- BALANCE AT DECEMBER 31, 1997 .................................. 412,450 732,662 2,145,248 (268,019) Comprehensive income: Net income ................................................. -0- -0- 474,074 -0- Other comprehensive income, net of tax: Unrealized losses on available-for-sale securities, net of reclassification adjustment (net $18,086 tax benefit) . -0- -0- -0- -0- Comprehensive income .......................................... Cash dividends declared ($.57 per common share) ............... -0- -0- (101,563) -0- Cash dividends declared by pooled companies ................... -0- -0- (93,997) -0- Common stock transactions: Special rights and warrants ................................ -0- (355) -0- -0- Employee stock plans ....................................... 2,598 44,915 (11,409) 32,603 Dividend reinvestment plan ................................. -0- 631 (66) 4,644 Purchase of common stock ................................... (2,266) (63,109) (9) (136,514) Acquisitions ............................................... 7,276 48,373 7,280 -0- --------------------------------------------------------------- BALANCE AT DECEMBER 31, 1998 .................................. 420,058 763,117 2,419,558 (367,286) Comprehensive income: Net income ................................................. -0- -0- 340,468 -0- Other comprehensive income, net of tax: Unrealized losses on available-for-sale securities, net of reclassification adjustment (net $74,014 tax benefit) . -0- -0- -0- -0- Comprehensive income .......................................... Cash dividends declared ($.71 per common share) ............... -0- -0- (163,395) -0- Cash dividends declared by pooled companies ................... -0- -0- (94,305) -0- Common stock transactions: Employee stock plans ....................................... 808 10,998 (18,647) 63,081 Dividend reinvestment plan ................................. -0- 107 (1,202) 7,007 Purchase of common stock ................................... (3,917) (83,402) -0- (79,156) --------------------------------------------------------------- BALANCE AT DECEMBER 31, 1999 .................................. $ 416,949 $ 690,820 $ 2,482,477 $(376,354) =============================================================== Disclosure of 1999 reclassification amount: Unrealized holding losses on available-for-sale securities arising during the period ....................... Less: Reclassification adjustment for gains realized in net income ..................................... Net unrealized losses on available-for-sale securities, net of tax ..................................... DEFERRED ACCUMULATED COMPENSATION OTHER ON RESTRICTED COMPREHENSIVE STOCK INCOME (LOSS) TOTAL BALANCE AT JANUARY 1, 1997 .................................... $ (12,466) $ 22,087 $ 2,939,725 Comprehensive income: Net income ................................................. -0- -0- 473,681 Other comprehensive income, net of tax: Unrealized gains on available-for-sale securities, net of reclassification adjustment (net $5,009 tax expense) .. -0- 7,247 7,247 ----------- Comprehensive income .......................................... 480,928 Cash dividends declared ($.51 per common share) ............... -0- -0- (93,307) Cash dividends declared by pooled companies ................... -0- -0- (81,410) Common stock transactions: Employee stock plans ....................................... (10,071) -0- 51,717 Dividend reinvestment plan ................................. -0- -0- 5,151 Purchase of common stock ................................... -0- -0- (368,303) Acquisitions ............................................... -0- -0- 94,637 -------------------------------------------- BALANCE AT DECEMBER 31, 1997 .................................. (22,537) 29,334 3,029,138 Comprehensive income: Net income ................................................. -0- -0- 474,074 Other comprehensive income, net of tax: Unrealized losses on available-for-sale securities, net of reclassification adjustment (net $18,086 tax benefit) . -0- (17,322) (17,322) ----------- Comprehensive income .......................................... 456,752 Cash dividends declared ($.57 per common share) ............... -0- -0- (101,563) Cash dividends declared by pooled companies ................... -0- -0- (93,997) Common stock transactions: Special rights and warrants ................................ -0- -0- (355) Employee stock plans ....................................... (17,516) -0- 51,191 Dividend reinvestment plan ................................. -0- -0- 5,209 Purchase of common stock ................................... -0- -0- (201,898) Acquisitions ............................................... -0- 18 62,947 -------------------------------------------- BALANCE AT DECEMBER 31, 1998 .................................. (40,053) 12,030 3,207,424 Comprehensive income: Net income ................................................. -0- -0- 340,468 Other comprehensive income, net of tax: Unrealized losses on available-for-sale securities, net of reclassification adjustment (net $74,014 tax benefit) . -0- (260,879) (260,879) ----------- Comprehensive income .......................................... 79,589 Cash dividends declared ($.71 per common share) ............... -0- -0- (163,395) Cash dividends declared by pooled companies ................... -0- -0- (94,305) Common stock transactions: Employee stock plans ....................................... 34,215 -0- 90,455 Dividend reinvestment plan ................................. -0- -0- 5,912 Purchase of common stock ................................... -0- -0- (166,475) -------------------------------------------- BALANCE AT DECEMBER 31, 1999 .................................. $ (5,838) $ (248,849) $ 2,959,205 ============================================ Disclosure of 1999 reclassification amount: Unrealized holding losses on available-for-sale securities arising during the period ....................... $ (253,748) Less: Reclassification adjustment for gains realized in net income ..................................... 7,131 ---------- Net unrealized losses on available-for-sale securities, net of tax ..................................... $ (260,879) ==========
See Notes to Consolidated Financial Statements. 54 -- AmSouth Bancorporation and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31 (In thousands) 1999 1998 1997 OPERATING ACTIVITIES Net income ........................................................................ $ 340,468 $ 474,074 $ 473,681 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses ...................................................... 165,626 99,067 83,508 Depreciation and amortization of premises and equipment ........................ 97,731 82,622 74,923 Amortization of premiums and discounts on held-to-maturity securities and available-for-sale securities ............................................ (3,004) (9,445) (8,517) Noncash portion of merger-related costs ........................................ 98,595 5,900 -0- Net decrease (increase) in loans held for sale ................................. 106,372 (162,028) (21,786) Net (increase) decrease in trading securities .................................. (4,154) 7,781 1,007 Net gains on sales of available-for-sale securities ............................ (11,392) (16,099) (12,411) Net increase in accrued interest receivable and other assets ................... (551,855) (211,009) (198,924) Net (decrease) increase in accrued expenses and other liabilities .............. (32,371) 11,275 (45,804) Provision for deferred income taxes ............................................ 56,834 65,807 71,919 Amortization of intangible assets .............................................. 40,306 40,211 39,907 Other operating activities, net ................................................ 42,054 28,924 9,411 ----------- --------------------------- Net cash provided by operating activities .................................... 345,210 417,080 466,914 ----------- --------------------------- INVESTING ACTIVITIES Proceeds from maturities and prepayments of available-for-sale securities ......... 1,904,594 2,771,295 914,931 Proceeds from sales of available-for-sale securities .............................. 2,292,108 2,837,590 3,845,967 Purchases of available-for-sale securities ........................................ (5,319,935) (6,764,648) (4,643,363) Proceeds from maturities, prepayments and calls of held-to-maturity securities .... 1,430,693 1,808,077 1,041,442 Purchases of held-to-maturity securities .......................................... (2,275,882) (1,451,233) (416,393) Net decrease (increase) in federal funds sold and securities purchased under agreements to resell ........................................................... 225,227 (93,256) (1,708) Net decrease (increase) in other interest-earning assets .......................... 11,412 (29,276) -0- Net increase in loans ............................................................. (1,948,264) (1,101,824) (1,351,213) Net purchases of premises and equipment ........................................... (2,415) (133,432) (123,945) Net cash provided by acquisitions ................................................. -0- 63,855 76,697 Net cash from sales of branches, business operations, subsidiaries and other assets 98,102 8,204 1,099 ----------- --------------------------- Net cash used by investing activities .......................................... (3,584,360) (2,084,648) (656,486) ----------- --------------------------- FINANCING ACTIVITIES Net (decrease) increase in deposits ............................................... (615,042) 961,708 443,364 Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase ....................................................... 625,485 488,967 (426,607) Net increase (decrease) in other borrowed funds ................................... 1,787,483 (1,177,511) 61,675 Issuance of long-term Federal Home Loan Bank advances and other long-term debt ........................................................... 2,735,384 2,528,473 1,470,841 Payments for maturing long-term debt .............................................. (1,527,169) (391,487) (917,960) Cash dividends paid ............................................................... (183,848) (195,560) (173,484) Proceeds from employee stock plans and dividend reinvestment plan ................. 53,564 45,943 49,583 Purchases of common stock ......................................................... (166,475) (201,898) (368,303) ----------- --------------------------- Net cash provided by financing activities ...................................... 2,709,382 2,058,635 139,109 ----------- --------------------------- (Decrease) increase in cash and cash equivalents .................................. (529,768) 391,067 (50,463) Cash and cash equivalents at beginning of period .................................. 2,095,577 1,704,510 1,754,973 ----------- --------------------------- Cash and cash equivalents at end of period ........................................ $ 1,565,809 $ 2,095,577 $ 1,704,510 =========== ===========================
See Notes to Consolidated Financial Statements. 55 -- AmSouth Bancorporation and Subsidiaries Notes to Consolidated Financial Statements NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------------------------------------- AmSouth Bancorporation (AmSouth), through its subsidiaries, provides a broad array of financial products and services through banking offices located in nine Southeastern states with leading market positions in Tennessee, Florida, Alabama, and Mississippi. In addition, AmSouth provides select financial services outside of its banking markets through non-bank subsidiaries. AmSouth's principal activities include consumer and commercial banking and capital management. The accounting policies of AmSouth and the methods of applying those policies that materially affect the accompanying financial statements are presented below. Basis of Presentation The consolidated financial statements include the accounts of AmSouth and its subsidiaries. All significant intercompany balances and transactions have been eliminated. Certain amounts in the prior years' financial statements have been reclassified to conform to the 1999 presentation. These reclassifications are immaterial and had no effect on net income. Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash Flows Cash and due from banks and time deposits in other banks are considered cash and cash equivalents. For the years ended December 31, 1999, 1998 and 1997, AmSouth paid interest of $1,420,238,000, $1,383,089,000 and $1,290,677,000, respectively. For the years ended December 31, 1999, 1998 and 1997, noncash transfers from loans to foreclosed properties were $25,467,000, $20,692,000 and $23,189,000, respectively. Noncash transfers from foreclosed properties to loans for the years ended December 31, 1999, 1998 and 1997 were $711,000, $496,000 and $2,399,000, respectively. For the years ended December 31, 1998 and 1997, noncash transfers from loans to available-for-sale securities of approximately $99,107,000 and $351,946,000, respectively, were made in connection with mortgage loan securitizations. For the year ended December 31, 1998, noncash transfers from loans to held-to-maturity securities of approximately $1,176,394,000 were made in connection with mortgage loan securitizations. In addition, for the years ended December 31, 1998 and 1997, $719,000 and $2,657,000, respectively, of noncash transfers were made from loans to other assets in connection with mortgage loan securitizations. For the years ended December 31, 1999 and 1998, noncash transfers from loans to available-for-sale securities of approximately $9,838,000 and $4,038,000, respectively, were made in connection with the participation of mortgages to third-party conduits. For the years ended December 31, 1999 and 1998, noncash transfers from loans to other assets of approximately $16,225,000 and $3,567,000, respectively, were made in connection with the participation of mortgages to third-party conduits. During 1999, AmSouth had noncash transfers from available-for-sale securities to held-to-maturity securities in the amount of $3,010,249,000. Also during 1999, AmSouth had 56 -- noncash transfers from held-to-maturity securities to available-for-sale securities in the amount of $516,759,000. The transfers between categories of securities were the result of portfolio restructurings in connection with the acquisition of First American Corporation (First American). During 1999 AmSouth also had noncash transfers from loans and the allowance for loan losses to loans held for sale of $149,253,000 and $71,000,000, respectively, associated with a decision to exit a portion of its healthcare loan business. Securities Securities are classified as either held-to-maturity, available-for-sale or trading. AmSouth defines held-to-maturity securities as debt securities which management has the positive intent and ability to hold to maturity. Held-to-maturity securities are stated at cost, adjusted for amortization of premiums and accretion of discounts on the constant effective yield method. Trading securities are carried at market. Market adjustments and realized gains or losses on the sale of trading securities are reported as other noninterest revenues. Available-for-sale securities are defined as equity securities and debt securities not classified as trading securities or held-to-maturity securities. Available-for-sale securities are carried at fair value. Unrealized holding gains or losses, net of deferred taxes, on available-for-sale securities are excluded from earnings and reported in accumulated other comprehensive income (loss) within shareholders' equity. AmSouth determines the appropriate classification of debt securities at the time of purchase. Gains and losses from sales of available-for-sale securities are computed using the specific identification method. Loans Held for Sale Loans held for sale include mortgage loans held for sale and at December 31, 1999, $78,253,000 of healthcare-related loans held for accelerated disposition. Loans held for sale are carried at the lower of aggregate cost or market value. Market adjustments and realized gains and losses are classified as other noninterest revenues. Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase Securities purchased under agreements to resell and securities sold under agreements to repurchase are generally treated as collateralized financing transactions and are recorded at the amount at which the securities were acquired or sold plus accrued interest. It is AmSouth's policy to take possession of securities purchased under resale agreements. The market value of the collateral is monitored and additional collateral obtained when deemed appropriate. Securities sold under repurchase agreements are delivered to either broker-dealers or to custodian accounts for customers. The broker-dealers may sell, loan or otherwise dispose of such securities to other parties in the normal course of their operations but have agreed to resell to AmSouth identical securities at the maturity of the agreements. Interest Rate Contracts and Other Off-Balance Sheet Financial Instruments AmSouth has from time to time utilized various off-balance sheet instruments such as interest rate swaps, forward interest rate swaps, interest rate caps, floors and futures contracts that are designated to hedge imbalances in sensitivity to fluctuating interest rates for designated assets and liabilities. Interest rate impacts of derivative instruments are correlated with interest rate movements of underlying assets or liabilities. The earnings impact of a derivative is accrued over the life of the agreement based on expected settlement payments and is recorded as an adjustment to interest income or expense in the period in which it accrues and in the category appropriate to the related assets or liabilities. The related amount receivable from or payable to the derivative counterparty is included in other assets or liabilities in the consolidated statement of condition. Realized and unrealized gains and losses on futures contracts which are designated as hedges of interest rate exposure arising out of nontrading assets and liabilities are deferred and recognized as interest income or interest expense, in the category appropriate to the related assets or liabilities, over the covered periods or lives of the hedged assets or liabilities. Gains or losses on early 57 -- terminations of derivative financial instruments that relate to specific assets or liabilities are deferred and amortized as an adjustment to the yield or rate of the related assets or liabilities over the remaining covered period. At such time that there is no longer correlation of interest rate movements between the derivative instrument and the underlying assets or liabilities, or if the underlying assets or liabilities specifically related to a derivative instrument mature, are sold or are terminated, then the related derivative instrument would be closed out or marked to market as an element of noninterest income on an ongoing basis. Interest rate derivatives used in connection with the securities available-for-sale portfolio are carried at fair value with gains and losses, net of applicable deferred income taxes, reported in shareholders' equity in other comprehensive income (loss), consistent with the reporting of unrealized gains and losses on such securities. Premiums paid for interest rate floors qualifying for hedge accounting are deferred and classified with the assets and liabilities hedged and are amortized into interest income or expense over the life of the instrument. On a limited basis, AmSouth also enters into interest rate swap agreements, as well as interest rate cap and floor agreements, with customers desiring protection from possible adverse future fluctuations in interest rates. As an intermediary, AmSouth generally maintains a portfolio of matched offsetting interest rate contract agreements. At the inception of such agreements, the portion of the compensation related to credit risk and ongoing servicing, if any, is deferred and taken into income over the term of the agreements. Loans Interest income on commercial and real estate loans is accrued daily based upon the outstanding principal amounts except for those classified as nonaccrual loans. Interest income on certain consumer loans is accrued monthly based upon the outstanding principal amounts except for those classified as nonaccrual loans. Interest accrual is discontinued when it appears that future collection of principal or interest according to the contractual terms may be doubtful. Interest collections on nonaccrual loans for which the ultimate collectibility of principal is uncertain are applied as principal reductions. Otherwise, such collections are credited to income when received. Impaired loans are specifically reviewed loans for which it is probable that the creditor will be unable to collect all amounts due according to the terms of the loan agreement. Impairment of a loan is measured by comparing the recorded investment in the loan with the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. A valuation allowance is provided to the extent that the measure of the impaired loan is less than the recorded investment. A loan is not considered impaired during a period of delay in payment if the ultimate collectibility of all amounts due is expected. Larger groups of homogeneous loans such as consumer installment, bankcard and residential real estate mortgage loans are collectively evaluated for impairment. Impaired loans are, therefore, primarily commercial and commercial real estate loans. Payments received on impaired loans for which the ultimate collectibility of principal is uncertain are generally applied first as principal reductions. Allowance for Loan Losses The allowance for loan losses is maintained at a level which is considered to be adequate to reflect estimated credit losses for specifically identified loans as well as estimated probable credit losses inherent in the remainder of the loan portfolio at the balance sheet date. A formal review of the allowance for loan losses is prepared quarterly to assess the risk in the portfolio and to determine the adequacy of the allowance for loan losses. For purposes of the quarterly review, the consumer loan portfolios are separated by loan type, and each loan type is treated as a homogeneous pool. In accordance with the Interagency Policy Statement on the Allowance for Loan and Lease Losses issued by the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Federal Reserve Board, and Office of Thrift 58 -- Supervision, the allowance allocated to each of these pools is based upon trends in quarterly annualized charge-off rates for each pool, adjusted for changes in these pools which include current information on the payment performance of each pool of loans. Every commercial and commercial real estate loan is assigned a risk rating on a thirteen-point numerical scale by loan officers using established credit policy guidelines. These risk ratings are periodically reviewed, and all risk ratings are subject to review by an independent Credit Review Department. Each risk rating is assigned an allocation percentage which, when multiplied times the dollar value of loans in that risk category, results in the amount of the allowance for loan losses allocated to these loans. The allocation of allowance for loans with grades of pass and criticized is based upon historical loss rates adjusted for current conditions that include current economic developments. The allocation for loans with a classified grade is based upon regulatory guidance. Every nonperforming loan in excess of $500,000, however, is reviewed quarterly by AmSouth's Special Assets Department to determine the level of loan losses required to be specifically allocated to these impaired loans. The allocation for unfunded commitments is based on the type of unfunded commitment and historical loss information updated to reflect current conditions and information. The allowance allocated to standby letters of credit is determined by historical loss information associated with these off-balance sheet items. Management reviews its allocation of the allowance for loan losses versus actual performance of each of its portfolios and adjusts allocation rates to reflect the recent performance of the portfolio as well as current underwriting standards and other factors which might impact the estimated losses in the portfolio. In determining the appropriate level for the allowance, management ensures that the overall allowance appropriately reflects the current microeconomic conditions, industry exposure and a margin for the imprecision inherent in most estimates of expected credit losses. This additional allowance is reflected in the unallocated portion of the allowance. Based on management's periodic evaluation of the allowance for loan losses, a provision for loan losses is charged to operations if additions to the allowance are required. Premises and Equipment Premises and equipment are stated at cost, less accumulated depreciation and amortization. The provisions for depreciation and amortization are computed generally by the straight-line method over the estimated useful lives of the assets or terms of the leases, as applicable. The annual provisions for depreciation and amortization have been computed principally using estimated lives of five to 40 years for premises and three to 12 years for furniture and equipment. Intangible Assets Intangible assets, primarily goodwill, are included in other assets. Goodwill is amortized on a straight-line basis primarily over ten to 25 years. Other identified intangibles, primarily core deposit rights, are amortized over a period no greater than 15 years. As events or changes in circumstances warrant, AmSouth reviews the carrying value of goodwill and other identified intangibles to determine if any impairment has occurred or if the period of recoverability has changed. If this review indicates that goodwill or deposit intangibles will not be recoverable, as determined based on the undiscounted cash flows of the entity acquired over the remaining amortization period, their carrying value will be reduced by the estimated shortfall of such cash flows. At December 31, 1999, 1998 and 1997, goodwill, net of amortization, totaled $391,221,000, $426,225,000 and $456,328,000, respectively, and deposit and other intangibles equaled $32,252,000, $38,808,000 and $46,031,000, respectively. Income Taxes The consolidated financial statements have been prepared on the accrual basis. When income and expenses are recognized in different periods for financial reporting purposes and for purposes of computing income taxes currently payable, deferred taxes are provided on such temporary differences. Deferred tax assets and liabilities are recorded for 59 -- the expected future tax consequences of events that have been recognized in the financial statements or tax returns. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. Stock-Based Compensation AmSouth adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (Statement 123) which allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees" (Opinion 25). AmSouth has elected to follow Opinion 25 and related interpretations in accounting for its employee stock options. Compensation cost for fixed and variable stock-based awards is measured by the excess, if any, of the fair market price of the underlying stock over the amount the individual is required to pay. Compensation cost for fixed awards is measured at the grant date, while compensation cost for variable awards is estimated until both the number of shares an individual is entitled to receive and the exercise or purchase price are known (measurement date). See Note 17 for a further description of the assumptions used for preparing the pro forma disclosures as prescribed by Statement 123. Earnings Per Common Share Earnings per common share is obtained by dividing net income available to common stockholders by the weighted average outstanding shares of common stock. The diluted calculation of earnings per common share is obtained by dividing net income by the weighted average outstanding shares of common stock adjusted for effects of stock options and restricted stock outstanding. See Note 16 for the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations. All common stock and per common share data included in the consolidated financial statements and in the Notes to Consolidated Financial Statements have been retroactively adjusted to reflect common stock splits. Recent Accounting Pronouncements Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and for Hedging Activities," as amended by Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133," requires derivative instruments be carried at fair value on the balance sheet. The statement continues to allow derivative instruments to be used to hedge various risks and sets forth specific criteria to be used to determine when hedge accounting can be used. The statement also provides for offsetting changes in fair value or cash flows of both the derivative and the hedged asset or liability to be recognized in earnings in the same period; however, any changes in fair value or cash flow that represent the ineffective portion of a hedge are required to be recognized in earnings and cannot be deferred. For derivative instruments not accounted for as hedges, changes in fair value are required to be recognized in earnings. AmSouth plans to adopt the provisions of this statement, as amended, for its quarterly and annual reporting beginning January 1, 2001, the statement's effective date. The impact of adopting the provisions of this statement on AmSouth's financial position, results of operations and cash flow subsequent to the effective date is not currently estimable and will depend on the financial position of AmSouth and the nature and purpose of the derivative instruments in use at that time. 60 -- NOTE 2 -- MERGERS AND ACQUISITIONS - -------------------------------------------------------------------------------- On October 1, 1999, AmSouth issued 214.5 million common shares to acquire First American. AmSouth exchanged 1.871 shares of its common stock for each share of First American common stock. First American was a $22.2 billion asset financial service holding company headquartered in Nashville, Tennessee, with banking offices in Tennessee, Mississippi, Louisiana, Arkansas, Virginia, and Kentucky. The transaction was accounted for as a pooling-of-interests, and, accordingly, the consolidated financial statements have been restated to include the results of First American for all periods presented. Other business combinations completed by AmSouth during the three years ended December 31, 1999, are presented in the following table (in millions):
Common Shares Cash Accounting Acquiree Location Date Assets Issued Paid Treatment - -------------------------------------------------------------------------------------------------------------- Jefferson Guaranty Bancorp, Inc. LA Jan. 1997 $ 299 3.9 $10 Purchase Hartsville Bancshares, Inc. TN Jan. 1997 90 0.7 -- Purchase First Capital Bancorp, Inc. LA Mar. 1997 186 3.4 -- Pooling NBC Financial Corporation LA July 1997 69 0.9 -- Purchase Citisave Financial Corporation LA Aug. 1997 75 -- 19 Purchase Victory Bancshares, Inc. TN Mar. 1998 131 1.6 -- Pooling Deposit Guaranty Corporation MS May 1998 7,151 91.2 -- Pooling Peoples Bank (Peoples) TN Oct. 1998 142 1.7 -- Pooling The Middle Tennessee Bank (MTB) TN Oct. 1998 225 2.2 -- Pooling CSB Financial Corporation (CSB) TN Oct. 1998 148 1.7 -- Pooling Pioneer Bancshares, Inc. (Pioneer) TN Nov. 1998 990 11.5 -- Pooling
For the acquisitions of Deposit Guaranty Corporation (Deposit Guaranty) and Pioneer, accounted for as poolings-of-interests, the consolidated financial statements were restated to include the results of both companies for all periods presented. For all other acquisitions accounted for as poolings-of-interests in the above table, the results of operations have been included in the consolidated financial statements from the date of the acquisition, as pre-acquisition amounts were not material. Accordingly, prior period financial statements have not been restated because the changes to prior years would have been immaterial. For acquisitions accounted for as purchases, the results of operations have been included in the consolidated financial statements from the respective dates of acquisition. The purchase price in excess of the net assets acquired has been recorded as goodwill and is being amortized on a straight-line basis over 15 years. The pro forma effect on prior financial statements of these acquisitions is not significant. 61 -- Net interest income, noninterest revenues and net income as previously reported individually by AmSouth and First American and the combined company, reflecting certain reclassifications to conform to the current presentation, for the nine months ended September 30, 1999, and the years ended December 31, 1998 and 1997, are presented in the table below: Nine Months Ended Years Ended December 31 (In thousands) September 30, 1999 1998 1997 - -------------------------------------------------------------------------------- AmSouth Net interest income $ 565,815 $ 698,970 $ 676,277 Noninterest revenues 266,174 346,626 266,004 Net income 222,004 262,712 226,167 First American Net interest income 571,203 733,612 699,160 Noninterest revenues 365,136 477,612 405,633 Net income 181,018 211,362 247,514 Combined Net interest income 1,126,684 1,444,284 1,384,729 Noninterest revenues 631,745 799,854 658,724 Net income 403,022 474,074 473,681 - -------------------------------------------------------------------------------- On December 16, 1998, AmSouth through its subsidiary IFC Holdings, Inc. (IFC), purchased the assets of the Specialized Investment Division of Financial Service Corporation, a subsidiary of Sun America Inc., which provides investment products to customers of community banks and credit unions that do not have their own broker/dealer capabilities. The $9 million purchase price was primarily for goodwill and other intangible assets. The goodwill is being amortized on a straight-line basis over ten years. NOTE 3 -- MERGER-RELATED COSTS - -------------------------------------------------------------------------------- AmSouth recorded merger and integration charges of $268.8 million and $103.4 million in 1999 and 1998, respectively. In addition, AmSouth recorded other merger-related charges of $32.6 million and $18.3 million in 1999 and 1998, respectively. Merger-related charges in 1999 were primarily associated with the acquisition of First American as well as conversion costs related to the Deposit Guaranty and Pioneer mergers. Merger-related 62 -- charges of $121.7 million recorded in 1998 were associated with the acquisitions of Deposit Guaranty, Pioneer, MTB, CSB, and Peoples. The components of the charges are shown below: Years Ended December 31 (In millions) 1999 1998 - -------------------------------------------------------------------------------- Merger and integration costs: Severance and personnel-related costs $130.1 $ 25.8 Investment banking and other transaction costs 53.8 29.1 Occupancy and equipment writedowns 59.2 2.7 Systems and operations conversions 25.7 45.8 ----------------------------- Total merger and integration costs 268.8 103.4 ----------------------------- Other merger-related charges: System and process reconciliation provision 17.5 -0- Other merger-related charges 15.1 18.3 ----------------------------- Total other merger-related charges 32.6 18.3 ----------------------------- Total merger-related charges $301.4 $121.7 ================================================================================ Severance and personnel-related costs include the cost of severance, retention, change-in-control, outplacement, and other benefits associated with the termination of employees primarily in corporate support and data processing functions. For the First American merger, approximately 1,400 positions are estimated to be eliminated, of which approximately 400 positions are expected to be eliminated through attrition. Through December 31, 1999, approximately 345 associates have entered the severance process. Occupancy and equipment writedowns represents lease termination costs and impairment of assets for redundant office space, equipment and branches that will be vacated and disposed of as part of the integration plan. Systems and operations conversion costs result from the conversions and integration of the acquired branches and operations and include incremental costs such as special contract labor and incentives, consulting fees, and mailing and preparation costs for customer communications related to the conversion of customer accounts. The system and process reconciliation provision establishes an allowance to absorb losses resulting from systems conversions and process integration related to mergers occurring prior to the First American merger. The provision covers dishonored return items, unidentified customer debits, unmatched or unlocated items, and other similar losses. Other merger-related costs also includes printing and distribution of conversion-related instructional materials and manuals, relocation expenses, and in 1998, charitable foundation costs related to the funding of a charitable foundation for the Deposit Guaranty market. The following table presents a summary of activity with respect to the Company's merger and integration accrual: (In millions) 1999 1998 - -------------------------------------------------------------------------------- Balance at the beginning of the year $ 18.8 $ -0- Provision charged to operating expense 301.4 121.7 Cash outlays (150.9) (97.0) Noncash writedowns and charges (98.6) (5.9) ----------------------------- Balance at the end of the year $ 70.7 $ 18.8 ================================================================================ 63 -- The components of the merger and integration accrual at December 31 were as follows: (In millions) 1999 1998 - -------------------------------------------------------------------------------- Severance and personnel-related costs $ 68.2 $ 10.9 Occupancy and equipment writedowns 0.9 2.4 Systems and operations conversions 0.1 3.9 Other merger-related costs 1.5 1.6 ---------------------------------------- Total $ 70.7 $ 18.8 ================================================================================ In addition to the above costs, AmSouth also recorded, during 1999, the following charges related to the First American acquisition: an $8.0 million impairment charge on a portfolio investment and $7.6 million of charges related to conforming accounting adjustments. The impairment charge and $0.8 million of the conforming accounting adjustments were recorded as reductions to other noninterest revenues. $3.0 million of the conforming accounting charges were recorded in the provision for loan losses. The remaining $3.8 million of conforming accounting adjustments were recorded in various categories of noninterest expense. NOTE 4 -- CASH AND DUE FROM BANKS - -------------------------------------------------------------------------------- AmSouth's banking subsidiary is required to maintain reserve balances with the Federal Reserve Bank based on a percentage of deposits reduced by its cash on hand. The average amount of those reserves was approximately $45,200,000 and $58,500,000 for the years ended December 31, 1999 and 1998, respectively. NOTE 5 -- AVAILABLE-FOR-SALE SECURITIES - -------------------------------------------------------------------------------- The following is a summary of available-for-sale securities at December 31:
1999 1998 Gross Gross Gross Gross Amortized Unrealized Unrealized Carrying Amortized Unrealized Unrealized Carrying (In thousands) Cost Gains Losses Amount Cost Gains Losses Amount - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Treasury and federal agency securities $ 328,318 $ 456 $ 11,703 $ 317,071 $ 487,828 $ 4,006 $ 3,775 $ 488,059 Mortgage-backed securities 5,239,298 4,926 140,668 5,103,556 6,316,838 48,093 38,640 6,326,291 State, county and municipal securities 74,219 702 1,206 73,715 375,100 7,577 3,330 379,347 Other debt securities 106,994 -0- 5,378 101,616 19,145 82 572 18,655 Equity securities 397,541 58 28,854 368,745 305,467 6,915 202 312,180 -------------------------------------------------------------------------------------------------------------- $6,146,370 $ 6,142 $ 187,809 $5,964,703 $7,504,378 $ 66,673 $ 46,519 $7,524,532 ====================================================================================================================================
64 -- The carrying amount and amortized cost of available-for-sale securities by maturity at December 31, 1999, are as follows: Amortized Carrying (In thousands) Cost Amount - -------------------------------------------------------------------------------- Due within 1 year $ 37,194 $ 37,219 Due after 1 year through 5 years 153,033 146,756 Due after 5 years through 10 years 135,449 131,561 Due after 10 years 183,855 176,866 Mortgage-backed securities 5,239,298 5,103,556 Equity securities 397,541 368,745 ------------------------------------------- $6,146,370 $5,964,703 ================================================================================ In 1999, 1998 and 1997, AmSouth realized gross gains of $32,672,000, $20,529,000 and $24,229,000, respectively, and gross losses of $21,280,000, $4,430,000 and $11,818,000, respectively, on sales of available-for-sale securities. NOTE 6 -- HELD-TO-MATURITY SECURITIES - -------------------------------------------------------------------------------- The amounts at which held-to-maturity securities are carried and their approximate fair market values at December 31 are summarized as follows:
1999 1998 Gross Gross Gross Gross Carrying Unrealized Unrealized Market Carrying Unrealized Unrealized Market (In thousands) Amount Gains Losses Value Amount Gains Losses Value - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Treasury and federal agency securities $ 562,696 $ -0- $ 18,432 $ 544,264 $ 174,227 $ 1,964 $ 169 $ 176,022 State, county and municipal securities 376,891 621 13,443 364,069 222,316 7,479 268 229,527 Mortgage-backed securities 5,992,397 3,777 172,857 5,823,317 3,367,658 24,004 10,964 3,380,698 Other securities 118,578 183 1,067 117,694 113,303 2,475 71 115,707 -------------------------------------------------------------------------------------------------------------- $7,050,562 $ 4,581 $ 205,799 $6,849,344 $3,877,504 $ 35,922 $ 11,472 $3,901,954 ====================================================================================================================================
65 -- The carrying amount and approximate market value of held-to-maturity securities by maturity at December 31, 1999, are as follows: Carrying Market (In thousands) Amount Value - -------------------------------------------------------------------------------- Due within 1 year $ 43,874 $ 37,151 Due after 1 year through 5 years 89,634 88,497 Due after 5 years through 10 years 484,288 476,018 Due after 10 years 440,369 424,361 Mortgage-backed securities 5,992,397 5,823,317 ------------------------------------------- $7,050,562 $6,849,344 ================================================================================ During 1999, certain held-to-maturity securities with a total amortized cost of $516,759,000 were transferred to available-for-sale. The unrealized loss at the date of transfer was $7,018,000. The transfer resulted from portfolio restructurings in connection with the acquisition of First American. There were no sales of held-to-maturity securities during 1999, 1998 and 1997. Held-to- maturity and available-for-sale securities with a carrying amount of $11,406,179,000 and $9,437,093,000 at December 31, 1999 and 1998, respectively, were pledged to secure short-term and long-term borrowings, public deposits, trust funds, and for other purposes as required or permitted by law. NOTE 7 -- LOANS - -------------------------------------------------------------------------------- The major categories of loans net of unearned income at December 31 are summarized as follows:
1999 1998 (Dollars in thousands) Amount Percent Amount Percent - -------------------------------------------------------------------------------------------------------------- Commercial: Commercial and industrial $ 7,967,190 30.3% $ 7,942,846 32.5% Commercial loans secured by real estate 2,036,120 7.8 1,832,663 7.5 ----------------------------------------------------------------- Total commercial 10,003,310 38.1 9,775,509 40.0 Commercial real estate: Commercial real estate mortgages 2,295,157 8.7 2,221,086 9.1 Real estate construction 2,416,849 9.2 1,800,399 7.3 ----------------------------------------------------------------- Total commercial real estate 4,712,006 17.9 4,021,485 16.4 Consumer: Residential first mortgages 2,337,365 8.9 3,270,378 13.4 Other residential mortgages 3,231,939 12.3 2,380,093 9.7 Dealer indirect 4,148,747 15.8 2,908,822 11.9 Revolving credit 489,238 1.9 477,024 2.0 Other consumer 1,344,154 5.1 1,611,985 6.6 ----------------------------------------------------------------- Total consumer 11,551,443 44.0 10,648,302 43.6 ----------------------------------------------------------------- $26,266,759 100.0% $24,445,296 100.0% ==============================================================================================================
66 -- At December 31, 1999 and 1998, nonaccrual loans totaled $141,134,000 and $113,985,000, respectively. The amount of interest income actually recognized on these loans during 1999 and 1998 was approximately $4,350,000 and $1,792,000, respectively. The additional amount of interest income that would have been recorded during 1999 and 1998 if these loans had been current in accordance with their original terms was approximately $11,386,000 and $8,047,000, respectively. At December 31, 1999 and 1998, the recorded investment in loans that were considered to be impaired was $56,923,000 and $87,859,000, respectively (primarily 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 impaired loans at December 31, 1999 and 1998. There was approximately $18,419,000 and $17,357,000 at December 31, 1999 and 1998, respectively, in the allowance for loan losses specifically allocated to $49,860,000 and $45,219,000 of impaired loans. No specific reserve was required for $7,063,000 and $42,640,000 of impaired loans at December 31, 1999 and 1998, respectively. The average recorded investment in impaired loans for the years ended December 31, 1999, 1998 and 1997 was approximately $61,880,000, $87,305,000 and $76,828,000, respectively. No material amount of interest income was recognized on impaired loans for the years ended December 31, 1999, 1998 and 1997. At December 31, 1999, $38,095,000 of impaired loans were held for accelerated disposition and included in loans held for sale on the balance sheet. Accordingly, these loans held for sale have not been included in the information presented above. Certain executive officers and directors of AmSouth and their associates were loan customers of AmSouth during 1999 and 1998. Such loans are made in the ordinary course of business at normal credit terms, including interest rates and collateral, and do not represent more than a normal risk of collection. Total loans to these persons at December 31, 1999 and 1998, amounted to approximately $156,487,000 and $273,813,000, respectively. Activity during 1999 in loans to related parties included loans of approximately $1,973,398,000 and payments of approximately $2,031,671,000. Reductions of $63,378,000 were made for directors that are no longer related, and net adjustments of $4,325,000 were made representing other changes. NOTE 8 -- ALLOWANCE FOR LOAN LOSSES - -------------------------------------------------------------------------------- A summary of changes in the allowance for loan losses is shown below: (In thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- Balance at January 1 $ 373,756 $ 367,077 $ 370,277 Loans charged off (148,287) (134,238) (150,377) Recoveries of loans previously charged off 45,381 50,586 55,669 ------------------------------------- Net charge-offs (102,906) (83,652) (94,708) Addition to allowance charged to expense 165,626 99,067 83,508 Additions due to business combinations -0- 6,164 8,252 Allowance transferred (71,000) -0- -0- Allowance sold (2,000) (14,900) (252) ------------------------------------- Balance at December 31 $ 363,476 $ 373,756 $ 367,077 ================================================================================ 67 -- NOTE 9 -- PREMISES AND EQUIPMENT - -------------------------------------------------------------------------------- Premises and equipment at December 31 are summarized as follows: (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Land $ 112,265 $ 117,666 Buildings 407,576 471,551 Furniture and fixtures 661,107 659,361 Leasehold improvements 136,069 145,414 ---------------------------- 1,317,017 1,393,992 Less: Allowances for depreciation and amortization 638,575 620,429 ---------------------------- $ 678,442 $ 773,563 ================================================================================ NOTE 10 -- DEPOSITS - -------------------------------------------------------------------------------- The aggregate amount of time deposits of $100,000 or more, excluding certificates of deposit of $100,000 or more, in domestic bank offices was $111,890,000 and $105,371,000 at December 31, 1999 and 1998, respectively. In addition, a majority of foreign time deposits were in amounts in excess of $100,000. At December 31, 1999, the aggregate maturities, in thousands, of time deposits are summarized as follows: - -------------------------------------------------------------------------------- 2000 $ 8,577,446 2001 1,416,773 2002 1,206,376 2003 217,079 2004 and thereafter 177,992 ----------------------------------- $11,595,666 ================================================================================ NOTE 11 -- OTHER BORROWED FUNDS - -------------------------------------------------------------------------------- Other borrowed funds at December 31 are summarized as follows: (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Treasury, tax and loan notes $1,109,951 $ 109,089 Short-term Federal Home Loan Bank advances 150,000 148,223 Term federal funds purchased 515,000 -0- Short-term bank notes 300,000 -0- Commercial paper 8,749 10,039 Floating Rate Notes due 1999 -0- 6,389 Other short-term debt 52,020 77,272 ----------------------------------- $2,135,720 $ 351,012 ================================================================================ 68 -- At December 31, 1999, AmSouth had a line of credit arrangement for short-term debt enabling it to borrow up to $25,000,000, subject to such terms as AmSouth and the lender may mutually agree. The arrangement is reviewed annually for renewal of the credit line. The line is available solely to support commercial paper borrowings and was not in use at December 31, 1999. The interest rate on the treasury, tax and loan notes at December 31, 1999 was 5.00 percent. All other borrowed funds at December 31, 1999, had interest rates ranging from 3.15 percent to 6.51 percent. NOTE 12 -- LONG-TERM DEBT - -------------------------------------------------------------------------------- Long-term debt at December 31 is summarized as follows: (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Long-term Federal Home Loan Bank advances $4,612,686 $3,450,864 ------------------------------------ Other long-term debt: 6.45% Subordinated Notes Due 2018 304,020 304,517 6.125% Subordinated Notes Due 2009 174,351 -0- 6.75% Subordinated Debentures Due 2025 149,898 149,880 7.75% Subordinated Notes Due 2004 149,595 149,504 7.25% Senior Notes Due 2006 101,028 101,212 6.875% Subordinated Notes Due 2003 49,895 49,863 6.625% Subordinated Notes Due 2005 49,709 49,660 Subordinated Capital Notes Due 1999 -0- 99,957 Long-term notes payable 11,170 36,088 Capitalized lease obligations 1,134 1,280 ------------------------------------ Total other long-term debt 990,800 941,961 ------------------------------------ $5,603,486 $4,392,825 ================================================================================ Advances from the Federal Home Loan Bank (FHLB) had maturities ranging from 2000 to 2020 and interest rates ranging from 0.50 percent to 8.10 percent. Of the balances outstanding at December 31, 1999, $2,915,000,000 is callable by the FHLB during the first quarter of 2000. Under the Blanket Agreement for Advances and Security Agreement with the FHLB, residential mortgage loans and mortgage-backed securities are pledged as collateral for the FHLB advances outstanding. The 6.45% Subordinated Notes Due 2018 were issued February 1, 1998, by AmSouth's bank subsidiary at a price of 101.702 percent. The net proceeds to AmSouth's bank subsidiary after commissions totaled $303,156,000. The notes will mature February 1, 2018, and were issued with embedded put and call options that could require AmSouth's bank subsidiary to repurchase the notes at face value on February 1, 2008. If the bank does not repurchase the debt, the interest rate on the notes will be reset on February 1, 2008, based on a set formula. AmSouth purchased interest rate swaps in the notional amount of $300,000,000 to hedge these notes. These swaps require AmSouth to pay variable rates based on the 30-day and 90-day London Interbank Offered Rate (LIBOR) on notional amounts of $200,000,000 and $100,000,000, respectively. These swaps effectively convert the fixed-rate debt to floating rate. The 6.125% Subordinated Notes Due 2009 were issued March 1, 1999, at a discounted price of 99.175 percent. The net proceeds to AmSouth after commissions totaled $172,419,000. The notes will mature March 1, 2009, and AmSouth may redeem some, or all, of the notes prior to March 1, 2009, at the greater of 100 percent of the principal amount or an amount based on a preset formula. AmSouth purchased interest rate swaps in the notional amount of $175,000,000 to hedge these notes. These 69 -- swaps require AmSouth to pay variable interest rates based on the 30-day LIBOR on notional amounts of $175,000,000, effectively converting the fixed-rate debt to floating rate. The 6.75% Subordinated Debentures Due November 1, 2025, were issued November 6, 1995, at a discounted price of 99.883 percent. The net proceeds to AmSouth after commissions totaled $148,900,000. The debentures will mature on November 1, 2025, and may be redeemed on November 1, 2005, at the option of the registered holders thereof. AmSouth purchased interest rate swaps in the notional amount of $150,000,000 to hedge these debentures. These swaps require AmSouth to pay a variable rate based on the 30-day LIBOR while receiving a fixed rate. These swaps effectively convert the fixed-rate debt to floating rate. The 7.75% Subordinated Notes Due 2004 were issued May 19, 1994, at a discounted price of 99.389 percent. The net proceeds to AmSouth after commissions totaled $148,100,000. The notes will mature on May 15, 2004, and are not redeemable prior to maturity. The 7.25% Senior Notes Due May 1, 2006, were issued April 26, 1996, at a discounted price of 99.381 percent. The net proceeds to AmSouth after commissions totaled $98,731,000. The notes will mature May 1, 2006, and are not redeemable prior to maturity. The 6.875% Subordinated Notes Due 2003 were issued April 22, 1993, at a discounted price of 99.36 percent. The net proceeds to AmSouth after commissions totaled $49,355,000. The notes will mature April 15, 2003, and are not redeemable prior to maturity. The 6.625% Subordinated Notes Due 2005 were issued December 18, 1995, at a discounted price of 99.675 percent. The net proceeds to AmSouth after commissions totaled $49,512,500. The notes will mature December 18, 2005, and are not redeemable prior to maturity. The Subordinated Capital Notes Due 1999 were issued in 1987 at a discounted price of 99.125 percent. The net proceeds to AmSouth after commissions totaled $98,450,000 for an effective rate to maturity of 9.60 percent. The notes matured on May 1, 1999. Long-term notes payable at December 31, 1999, included notes maturing from 2000 to 2012 with interest rates ranging from 3.55 percent to 8.00 percent. The aggregate stated maturities, in thousands, of long-term debt outstanding at December 31, 1999, are summarized as follows: 2000 $ 753,473 2001 250,453 2002 81,653 2003 382,343 2004 238,074 Thereafter 3,897,490 ------------------------------------ $5,603,486 ================================================================================ 70 -- NOTE 13 -- OFF-BALANCE SHEET FINANCIAL AGREEMENTS - -------------------------------------------------------------------------------- AmSouth enters into a variety of financial instrument agreements to help customers manage their exposure to interest rate and foreign currency fluctuations and to finance international activities. AmSouth also uses similar instruments to manage its exposure to changes in interest and foreign exchange rates. Futures and forward contracts provide customers and AmSouth a means of managing the risks of changing interest and foreign exchange rates. These contracts represent commitments either to purchase or sell securities, other money market instruments or foreign currency at a future date and at a specified price. AmSouth is subject to the market risk associated with changes in the value of the underlying financial instrument as well as the risk that another party will fail to perform. The gross contract amount of futures and forward contracts represents the extent of AmSouth's involvement. However, those amounts significantly exceed the future cash requirements as AmSouth intends to close out open trading positions prior to settlement and thus is subject only to the change in value of the instruments. The gross amount of contracts represents AmSouth's maximum exposure to credit risk. Interest rate swaps are agreements to exchange interest payments computed on notional amounts. Swaps subject AmSouth to market risk associated with changes in interest rates as well as the risk that another party will fail to perform. Interest rate caps and floors are contracts in which a counterparty pays or receives a cash payment from another counterparty if a floating rate index rises above or falls below a predetermined level. The present value of purchased caps and floors in a gain position represents the potential credit risk to AmSouth. Market risk resulting from a position in a particular off-balance sheet financial instrument may be offset by other on or off-balance sheet transactions. AmSouth monitors overall sensitivity to interest rate changes by analyzing the net effect of potential changes in interest rates on the market value of both on and off-balance sheet financial instruments and the related future cash flow streams. AmSouth manages the credit risk of counterparty defaults in these transactions by limiting the total amount of arrangements outstanding, both by individual counterparty and in the aggregate and by monitoring the size and maturity structure of the off-balance sheet portfolio. AmSouth requires collateralization by a counterparty on credit exposure above a specified credit limit. Trading and dealer activities in the aggregate are not material to AmSouth and are not separately disclosed. The following table identifies the gross contract or notional amounts of off-balance sheet financial instruments at December 31: (In millions) 1999 1998 - -------------------------------------------------------------------------------- Forward contracts -- commitments to sell $ 84.2 $ 123.9 Forward contracts -- commitments to purchase 17.1 53.7 Notional amount of interest rate swaps: Receive fixed rate 3,503.8 1,675.3 Receive variable rate 185.8 2,726.5 Notional amount of interest rate caps and floors 89.4 113.4 Forward foreign exchange contracts: Commitments to purchase 54.7 77.4 Commitments to sell 54.6 80.6 Written options sold 100.0 95.0 Written options purchased 2.0 19.5 - -------------------------------------------------------------------------------- 71 -- The notional amounts of interest rate contracts used by AmSouth to hedge statement of condition items at December 31 are shown below: (In millions) 1999 1998 - -------------------------------------------------------------------------------- Loans $1,515 $ 940 Securities 110 2,030 Deposits 918 679 Long-term debt 775 410 ------------------------------------ $3,318 $4,059 ================================================================================ The table below presents the net deferred gains related to terminated financial instruments at December 31, 1999 and 1998, and their locations within the consolidated statement of condition. All of the net deferred gains are related to interest rate swaps. (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Deferred gains included in other liabilities $21,263 $20,828 Deferred losses included in other assets (4,365) (6,163) ------------------------------------ Total net deferred gains $16,898 (1) $14,665 (2) ================================================================================ (1) $5.6 million of net deferred gains to be recognized during 2000 and $11.3 million to be recognized during 2001 through 2007. (2) $2.5 million of net deferred gains recognized during 1999 and $12.2 million to be recognized during 2000 through 2006. NOTE 14 -- COMMITMENTS AND CONTINGENCIES - -------------------------------------------------------------------------------- AmSouth and its subsidiaries lease land, premises and equipment under cancelable and noncancelable leases, some of which contain renewal options under various terms. The leased properties are used primarily for banking purposes. The total rental expense on operating leases for the years ended December 31, 1999, 1998 and 1997 was $72,984,000, $73,493,000 and $67,814,000, respectively. Rental income on bank premises for 1999, 1998 and 1997 was $14,102,000, $14,424,000 and $13,879,000, respectively. There were no material contingent rental expenses for 1999, 1998 or 1997. Future minimum payments, in thousands, by year and in the aggregate, for noncancelable operating leases with initial or remaining terms of one year or more consisted of the following at December 31, 1999: 2000 $ 65,661 2001 60,853 2002 49,046 2003 42,375 2004 35,019 Thereafter 229,025 ------------------------------------ $481,979 ================================================================================ 72 -- AmSouth and its subsidiaries are contingently liable with respect to various loan commitments and other contingent liabilities in the normal course of business. AmSouth's maximum exposure to credit risk for loan commitments (unfunded loans and unused lines of credit) and standby letters of credit at December 31, 1999, was as follows (in millions): Commitments to extend credit $14,396.5 Standby letters of credit 1,637.1 - -------------------------------------------------------------------------------- The credit risk associated with loan commitments and standby letters of credit is essentially the same as that involved in extending loans to customers and is subject to AmSouth's credit policies. Collateral is obtained based on management's assessment of the customer. Various legal proceedings are pending against AmSouth and its subsidiaries. Some of these proceedings seek relief or allege damages that are substantial. The actions arise in the ordinary course of AmSouth's business and include actions relating to its imposition of certain fees, lending, collections, loan servicing, deposit taking, investment, trust, and other activities. Because some of these actions are complex and for other reasons, it may take a number of years to finally resolve them. Based upon legal counsel's opinion, management considers that any liability resulting from the proceedings would not have a material impact on the financial condition or results of operations of AmSouth. NOTE 15 -- SHAREHOLDERS' EQUITY - -------------------------------------------------------------------------------- AmSouth offers a Dividend Reinvestment and Common Stock Purchase Plan, whereby shareholders can reinvest dividends to acquire shares of common stock. Shareholders may also invest additional cash up to $5,000 per quarter with no brokerage commissions or fees charged. On December 18, 1997, AmSouth's Board of Directors (Board) approved a Stockholder Protection Rights Agreement that replaced the existing plan effective March 13, 1998. Each Right entitles its registered holder, upon occurrence of certain events, to purchase from AmSouth one one-hundredth of a share of Series A Preferred Stock, without par value, for $88.89, subject to adjustment for certain events. The Rights will be exercisable only if a person or group acquires 15 percent or more of AmSouth's common stock or commences a tender offer that will result in such person or group owning 15 percent or more of AmSouth's common stock. The Rights may be redeemed by action of the Board for $.0045 per Right. On March 20, 1997, AmSouth's Board approved the repurchase by AmSouth of up to 13,500,000 shares of its common stock. During 1997, 1998 and 1999, AmSouth purchased 5,859,000, 5,297,000 and 1,352,000 shares, respectively, at a cost of $110,267,000, $136,514,000 and $41,247,000, respectively, under this plan. The authorization expired in March 1999. On April 15, 1999, AmSouth's Board approved the repurchase by AmSouth of approximately 13,100,000 shares of its common stock. From April 15, 1999, to May 30, 1999, AmSouth purchased 655,000 shares at a cost of $20,398,000 under this plan. The authorization was rescinded by the Board on May 31, 1999. On March 19, 1998, AmSouth's Board approved a three-for-two common stock split in the form of a 50 percent stock dividend. The stock dividend was paid April 30, 1998, to shareholders of record as of April 3, 1998. On April 15, 1999, AmSouth's Board approved a three-for-two common stock split in the form of a 50 percent stock dividend. The stock dividend was paid May 24, 1999, to shareholders of record as of April 30, 1999. On April 15, 1999, AmSouth's shareholders approved an increase in the common stock authorized to be issued by AmSouth to 350,000,000 shares. On September 16, 1999, 73 -- in an action related to the Merger, AmSouth's shareholders approved an increase in the common stock authorized to be issued by AmSouth from 350,000,000 to 750,000,000 shares. At December 31, 1999, there were 5,092,449 shares reserved for issuance under the Dividend Reinvestment and Common Stock Purchase Plan, 33,395,333 shares reserved for issuance under stock compensation plans (13,998,595 shares represent stock options outstanding) and 1,238,378 shares reserved for issuance under the employee stock purchase plan for a total of 39,726,160 shares. NOTE 16 -- EARNINGS PER COMMON SHARE - -------------------------------------------------------------------------------- The following table sets forth the computation of earnings per common share and diluted earnings per common share:
(Dollars in thousands) 1999 1998 1997 - ------------------------------------------------------------------------------------------ Earnings per common share computation: Numerator: Net income $340,468 $474,074 $473,681 Denominator: Average common shares outstanding 391,136 389,595 395,837 Earnings per common share $.87 $1.22 $1.20 Diluted earnings per common share computation: Numerator: Net income $340,468 $474,074 $473,681 Denominator: Average common shares outstanding 391,136 389,595 395,837 Dilutive shares contingently issuable 5,379 6,896 5,974 ---------------------------------------------- Average diluted common shares outstanding 396,515 396,491 401,811 Diluted earnings per common share $.86 $1.20 $1.18 - ------------------------------------------------------------------------------------------
The effect from assumed exercise of 6.1 million and .9 million of stock options was not included in the computation of diluted earnings per common share for 1999 and 1998, respectively, because such shares would have had an antidilutive effect on earnings. 74 -- NOTE 17 -- LONG-TERM INCENTIVE COMPENSATION PLANS - -------------------------------------------------------------------------------- AmSouth has long-term incentive compensation plans which permit the granting of incentive awards in the form of stock options, restricted stock awards and stock appreciation rights. Generally, the terms of these plans stipulate that the exercise price of options may not be less than the fair market value of AmSouth's common stock at the date the options are granted. Options granted generally vest one year from the date of the grant. Options granted generally expire not later than ten years from the date of the grant. In connection with the Merger on October 1, 1999, outstanding First American stock options were converted into options to purchase AmSouth's common stock based on the Merger exchange ratio. First American had stock-based compensation plans for certain officers and other key employees. The plans provided for restricted stock incentives based on the attainment of annual and long-term performance goals. Stock-based compensation plans also included stock option programs, which provided for the granting of statutory incentive stock options and nonstatutory options to key employees. First American also had a broad-based employee stock option plan which provided for the granting of stock options to substantially all other employees. Additionally, First American had a stock option plan for nonemployee directors. Since 1991, First American has issued restricted common stock to certain executive officers. Most of the restrictions lapse within 10 years of issuance; however, if certain performance criteria are met, restrictions will lapse earlier. On October 1, 1999, as a result of the Merger, substantially all outstanding stock options and substantially all restricted stock vested in accordance with change-in-control provisions. On October 1, 1999, as a result of the shareholder approval of the Merger, all outstanding AmSouth stock options and substantially all AmSouth restricted stock vested in accordance with change-in-control provisions. FASB Statement 123 requires pro forma information regarding net income and earnings per share. This pro forma information has been determined as if AmSouth had accounted for its employee stock options under the fair value method of that statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1999, 1998 and 1997, respectively: a risk-free interest rate of 5.29 percent, 5.62 percent and 6.46 percent, a dividend yield of 2.61 percent, 2.36 percent and 3.36 percent, a volatility factor of 19.24 percent, 18.04 percent and 19.31 percent, and a weighted-average expected life of the options of 6.4 years for all three years. The weighted-average fair value of options granted during 1999, 1998 and 1997 was $8.82, $5.47 and $3.09, respectively. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. AmSouth's pro forma information follows (in thousands except for earnings per share information): 1999 1998 1997 - -------------------------------------------------------------------------------- Net income: As reported $340,468 $474,074 $473,681 Pro forma 315,232 465,272 468,314 Earnings per common share: As reported $.87 $1.22 $1.20 Pro forma .81 1.19 1.18 Diluted earnings per common share: As reported $.86 $1.20 $1.18 Pro forma .80 1.17 1.17 - -------------------------------------------------------------------------------- 75 -- The following table summarizes AmSouth's stock option activity and related information during 1997, 1998 and 1999: Number Option Price Weighted-Average of Shares per Share Exercise Price - -------------------------------------------------------------------------------- Balance at January 1, 1997 12,165,580 $ 1.46 -$14.11 $ 8.54 Options exercised (2,515,002) 2.06 - 12.43 7.46 Options forfeited (319,791) 6.81 - 15.80 12.87 Options granted 2,494,910 14.16 - 25.52 15.50 ---------------------------------------------- Balance at December 31, 1997 11,825,697 2.47 - 25.52 10.13 Options exercised (2,227,431) 4.67 - 27.43 18.89 Options forfeited (407,883) 4.67 - 27.49 16.85 Options granted 2,062,817 19.07 - 27.49 24.97 ---------------------------------------------- Balance at December 31, 1998 11,253,200 2.47 - 27.49 12.83 Options exercised (1,964,123) 2.47 - 24.52 20.88 Options forfeited (866,531) 3.69 - 37.69 17.18 Options granted 5,576,049 22.08 - 32.92 23.31 ---------------------------------------------- Balance at December 31, 1999 13,998,595 $ 2.91 -$37.69 $16.93 ================================================================================ Of the options outstanding at December 31, 1999, those granted since October 1, 1999, have a three-year restriction period from the date of grant. All other options outstanding were exercisable. At December 31, 1999 and 1998, options exercisable totaled 12,677,731 and 6,877,730, respectively, and had a weighted-average option price per share of $16.18 and $9.51, respectively. The following table presents the weighted-average remaining life as of December 31, 1999, for options outstanding within the stated exercise price ranges.
Outstanding Exercisable Exercise Price Number of Weighted-Average Weighted-Average Number of Weighted-Average Range Per Share Options Exercise Price Remaining Life Options Exercise Price - ----------------------------------------------------------------------------------------------------------------- $ 2.91 - $ 4.31 560,916 $ 3.96 1.88 years 560,916 $ 3.96 4.67 - 6.82 722,533 5.94 2.83 years 722,533 5.94 7.41 - 10.85 2,668,913 8.87 4.49 years 2,668,913 8.87 11.42 - 17.10 3,229,829 13.70 6.62 years 3,168,217 13.70 17.84 - 26.49 5,829,493 22.97 9.04 years 4,570,241 22.51 26.96 - 37.69 986,911 29.06 9.01 years 986,911 29.06 - -----------------------------------------------------------------------------------------------------------------
76 -- AmSouth also has issued common stock as restricted stock awards to key officers with the restriction that they remain employed with AmSouth for periods of three years or longer. The following table summarizes AmSouth's restricted stock grants and the weighted-average fair values at grant date: 1999 1998 1997 - -------------------------------------------------------------------------------- Granted 797,012 1,312,636 1,040,566 Weighted average fair value of restricted stock granted during the year $24.97 $24.33 $18.08 - -------------------------------------------------------------------------------- At December 31, 1999, there were no stock appreciation rights outstanding. In addition, effective January 1, 1997, AmSouth adopted the 1997 Performance Incentive Plan (PI Plan). The PI Plan permits the granting of cash-based, long-term incentive opportunities. The amounts that may be earned depend on the extent to which predetermined performance goals are achieved. To date, there have been two sets of grants under the plan. NOTE 18 -- REGULATORY CAPITAL REQUIREMENTS AND RESTRICTIONS - -------------------------------------------------------------------------------- Capital is the primary tool used by regulators to monitor the financial health of insured banks and savings institutions. The Federal Reserve Board and the Federal Deposit Insurance Corporation have historically had similar capital adequacy guidelines involving minimum leverage capital and risk-based capital requirements. Under the capital adequacy guidelines and the regulatory framework for prompt corrective action, AmSouth and its banking subsidiary must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Based on the risk-based capital rules and definitions prescribed by the banking regulators, should an institution's capital ratios decline below predetermined levels, it would become subject to a series of increasingly restrictive regulatory actions. AmSouth and its subsidiary bank are required to have core capital (Tier 1) of at least 4 percent of risk-weighted assets, total capital of 8 percent of risk-weighted assets and a leverage ratio of 3 percent of adjusted quarterly average assets. Tier 1 capital consists principally of shareholders' equity, excluding unrealized gains and losses on securities available-for-sale, less goodwill and certain other intangibles. Total capital consists of Tier 1 capital plus certain debt instruments and the reserve for credit losses, subject to limitation. The regulations also define well capitalized levels of Tier 1 capital, total capital and leverage as ratios of 6 percent, 10 percent and 5 percent, respectively, for banking 77 -- entities. AmSouth's banking subsidiaries had Tier 1 capital, total capital and leverage ratios above the well-capitalized levels at December 31, 1999 and 1998. Management believes that no changes in conditions or events have occurred since December 31, 1999, which would result in changes that would cause the bank to fall below the well-capitalized level. The actual capital ratios and amounts for AmSouth and AmSouth Bank are as follows: 1999 1998 (Dollars in thousands) Amount Ratio Amount Ratio - -------------------------------------------------------------------------------- Tier 1 capital: AmSouth $2,769,657 7.46% $2,722,969 8.24% AmSouth Bank 3,312,497 8.98 3,159,291 9.60 ---------------------------------------------------- Total capital: AmSouth $3,956,703 10.66% $3,895,589 11.78% AmSouth Bank 3,973,696 10.77 3,828,693 11.63 ---------------------------------------------------- Leverage: AmSouth $2,769,657 6.22% $2,722,969 6.86% AmSouth Bank 3,312,497 7.66 3,159,291 8.22 - -------------------------------------------------------------------------------- Certain restrictions exist regarding the ability of banking subsidiaries to transfer funds to the parent company as loans, advances or dividends. The subsidiary bank can initiate dividend payments in 2000, without prior regulatory approval, of approximately $227,200,000 plus an additional amount equal to its net profits for 2000, as defined by statute. Substantially all of the parent company's retained earnings at December 31, 1999 and 1998, represented undistributed earnings of its banking subsidiary. NOTE 19 -- PENSION AND OTHER EMPLOYEE BENEFIT PLANS - -------------------------------------------------------------------------------- AmSouth sponsors noncontributory defined benefit pension plans, covering substantially all regular full-time employees (except the employees of IFC). Benefits are generally based on years of service and the employee's compensation during the last 120 months of employment or average monthly earnings of the participant for the 60 consecutive months that produce the highest average earnings. Actuarially determined pension costs are charged to current operations using the projected unit credit method. AmSouth's funding policy is to contribute an amount that meets the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974, plus such additional amounts as the corporation determines to be appropriate. In addition to pension benefits, AmSouth provides postretirement medical plans to all current employees and provides certain retired and grandfathered retired participants with postretirement healthcare benefits. Postretirement life insurance is also provided to a grandfathered group of employees and retirees. Costs associated with these postretirement benefit plans 78 -- are charged to operations based on actuarial calculations. The following table summarizes the change in benefit obligation and plan assets and the funded status of the pension and other postretirement plans at December 31, 1999 and 1998:
Retirement Plans Other Postretirement Benefits (Dollars in thousands) 1999 1998 1999 1998 - --------------------------------------------------------------------------------------------------------------- Change in benefit obligation: Benefit obligation at January 1 $ 488,284 $ 439,456 $ 23,993 $ 29,671 Service cost 15,688 16,342 1,176 780 Interest cost 34,560 31,266 2,283 2,124 Acquisitions -0- -0- 3,206 -0- Curtailments (842) (7,924) -0- -0- Special termination benefits 5,461 -0- -0- -0- Amendments 3,943 1,445 -0- (7,505) Actuarial (gain)/loss (42,087) 30,961 2,621 1,601 Benefits and expenses paid (27,127) (23,262) (2,290) (2,678) ----------------------------------------------------------- Benefit obligation at December 31 477,880 488,284 30,989 23,993 ----------------------------------------------------------- Change in plan assets: Fair value of plan assets at January 1 616,432 545,083 3,577 3,456 Actual return on plan assets 51,623 91,446 109 294 Company contribution 11,276 3,165 -0- -0- Benefits and expenses paid (27,127) (23,262) (177) (173) ----------------------------------------------------------- Fair value of plan assets at December 31 652,204 616,432 3,509 3,577 ----------------------------------------------------------- Funded status of the plan 174,324 128,148 (27,480) (20,416) Unrecognized actuarial (gain)/loss (124,696) (88,147) 5,087 2,433 Unamortized prior service cost/(credit) 7,077 6,275 (1,140) (5,436) Unrecognized net transition obligation 1,357 726 2,988 3,266 ----------------------------------------------------------- Prepaid/(accrued) benefit cost $ 58,062 $ 47,002 $ (20,545) $ (20,153) =============================================================================================================== Amounts recognized in the statement of condition: Prepaid benefit cost $ 75,748 $ 53,484 $ 698 $ 533 Accrued benefit liability (20,557) (11,118) (21,243) (20,686) Intangible assets 2,871 4,636 -0- -0- ----------------------------------------------------------- Net amount recognized $ 58,062 $ 47,002 $ (20,545) $ (20,153) =============================================================================================================== Assumptions: Discount rate 7.75% 7.00% 7.75% 7.00% Expected return on plan assets 9.50 9.25 6.50 6.50 Rate of compensation increase 5.50 5.50 -- -- - ---------------------------------------------------------------------------------------------------------------
79 -- Net periodic benefit cost/(credit) includes the following components for the years ended December 31:
Retirement Plans Other Postretirement Benefits (In thousands) 1999 1998 1997 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------- Service cost $ 15,688 $ 16,342 $ 14,397 $ 1,176 $ 780 $ 711 Interest cost 34,560 31,266 29,388 2,283 2,124 2,184 Expected return on plan assets (56,283) (47,054) (40,251) (227) (218) (214) Amortization of prior service cost/(credit) 1,569 1,115 1,154 (1,091) (1,327) 93 Amortization of transitional (asset)/obligation (700) (700) (1,858) 278 278 278 Recognized actuarial (gain)/loss (2,982) (2,501) (149) 262 77 27 ------------------------------------------------------------------------------ Net periodic benefit cost/(credit) $ (8,148) $ (1,532) $ 2,681 $ 2,681 $ 1,714 $ 3,079 =============================================================================================================================== Additional (gain)/loss recognized due to: Curtailment $ 1,738 $ (7,402) $ -0- $ -0- $ (1,237) $ -0- Settlement 1,165 -0- -0- -0- -0- -0- Special termination benefits 5,461 -0- -0- -0- -0- -0- ===============================================================================================================================
During 1999, AmSouth experienced a net curtailment loss of $1.7 million, a net settlement loss of $1.2 million and costs of special termination benefits of $5.5 million in its retirement plans. These losses were primarily the net result of employee terminations and change of control provisions associated with the First American merger. These losses were recorded as merger and integration costs. During 1998, AmSouth experienced a $7.4 million curtailment gain in its retirement plans due to the estimated effect of significant employee terminations associated with the Deposit Guaranty merger. The curtailment gain was recorded as a reduction of merger and integration costs. Also, during 1998, AmSouth terminated and settled its postretirement death benefits plan, resulting in a curtailment gain of $1.2 million. For measurement purposes, the increase in the per capita cost of covered healthcare benefits varies by medical benefit and date of retirement. For retirements after December 31, 1992, AmSouth's subsidies for all medical benefits will be capped at a level dollar amount in approximately five years. For retirements before January 1, 1993, the rates are graded, starting at 8.4 percent in 1999 and dropping to an ultimate rate of 5.0 percent in six years. Assumed healthcare cost trend rates have an insignificant effect on the costs and the liabilities reported for the health-care plan. A one-percentage point change in assumed healthcare cost trend rates would have the following effects:
1-Percentage 1-Percentage (In thousands) Point Increase Point Decrease - ---------------------------------------------------------------------------------------------------------- Effect on total of service cost and interest cost components $ 113 $ (114) Effect on postretirement benefit obligation 1,090 (1,069) - ----------------------------------------------------------------------------------------------------------
80 -- The Qualified Retirement Plans have a portion of their investments in AmSouth common stock. The number of shares and the market value of the common stock were 1,080,307 and $20,864,000, respectively, as of December 31, 1999. Dividends paid on the AmSouth common stock totaled $520,000 during 1999. AmSouth also maintains a thrift plan and an employee stock purchase plan that cover substantially all regular full-time employees. AmSouth matches pretax contributions dollar for dollar on the first 6 percent of base pay that each employee contributes to the thrift plan. After-tax contributions to the thrift plan are matched at 50 cents for every dollar contributed by an employee through the first 6 percent of base pay. Employees may make both pretax and after-tax contributions, but no matching contributions are made on any employee contributions above 6 percent, with pretax contributions being matched first. All company-matching contributions are allocated to the AmSouth common stock investment option. First American had a combination savings, thrift and profit-sharing plan (FIRST Plan) available to all employees (except the employees of IFC and hourly paid and special exempt-salaried employees). The FIRST Plan has been terminated, and the employees are participating in AmSouth's thrift plan. The cost of the thrift plans for the years ended December 31, 1999, 1998 and 1997 was $10.2 million, $15.3 million and $14.4 million, respectively. Under the employee stock purchase plan, an employee may invest up to $2,000 each calendar year in purchases of AmSouth common stock, and AmSouth will contribute a matching 25 percent toward the purchase. Additional purchases of up to $8,000 may be made on an unmatched basis with no administrative or brokerage fees charged. Under the employee stock purchase plan, 113,885 and 130,083 shares of AmSouth common stock were purchased during 1999 and 1998, respectively, with weighted-average fair values of $27.37 and $25.85, respectively. First American sponsored various employee benefit plans. Such plans, including the 401(k) plans, employee stock ownership plans and deferred compensation plans, are in the process of being terminated or frozen, and their employees are participating or will be participating in AmSouth's retirement and other benefit plans. The liabilities, if any, for such terminations have been recorded as of December 31, 1999. NOTE 20 -- INCOME TAXES - -------------------------------------------------------------------------------- The provisions for income taxes charged to earnings are summarized as follows: Years Ended December 31 (In thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- Current tax expense: Federal $140,910 $187,641 $173,759 State 3,159 11,277 18,911 ---------------------------------------------------- 144,069 198,918 192,670 ---------------------------------------------------- Deferred tax expense: Federal 50,421 58,975 64,112 State 6,413 6,832 7,807 ---------------------------------------------------- 56,834 65,807 71,919 ---------------------------------------------------- $200,903 $264,725 $264,589 ================================================================================ 81 -- The differences between the actual income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes are as follows:
Years Ended December 31 (In thousands) 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------- Tax at federal income tax rate $ 189,480 $ 258,580 $ 258,254 State and local income taxes, net of federal benefits 6,222 11,772 17,433 Acquisition cost 19,505 6,301 (12) Goodwill amortization 11,426 11,428 11,199 Tax exempt interest (10,289) (10,932) (12,148) Bank-owned life insurance (13,166) (8,306) (5,652) Other (2,275) (4,118) (4,485) ---------------------------------------------------- $ 200,903 $ 264,725 $ 264,589 =============================================================================================================
The significant temporary differences that created deferred tax assets and liabilities at December 31 are as follows: Years Ended December 31 (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Deferred tax assets: Loan loss reserves $ 162,175 $ 138,219 Employee benefits 13,933 16,631 Acquisition cost 41,879 2,957 Statement 115 equity adjustment 50,789 (6,758) Other 18,434 8,400 -------------------------------------- 287,210 159,449 -------------------------------------- Deferred tax liabilities: Leasing activities (370,237) (223,566) Depreciation (23,000) (26,168) Mortgage servicing rights 1,700 (19,777) Purchase accounting (17,680) (12,426) Deferred loan fees (9,281) (6,186) Other (14,243) (23,111) -------------------------------------- (432,741) (311,234) -------------------------------------- Net deferred tax liability $(145,531) $(151,785) ================================================================================ Income taxes paid were $187,887,000, $135,324,000 and $175,971,000 for the years ended December 31, 1999, 1998 and 1997, respectively. Applicable income tax expense of $4,283,000, $6,053,000 and $4,616,000 on securities gains and losses for the years ended December 31, 1999, 1998 and 1997, respectively, is included in the provision for income taxes. 82 -- NOTE 21 -- OTHER NONINTEREST REVENUES AND OTHER NONINTEREST EXPENSES - -------------------------------------------------------------------------------- The components of other noninterest revenues and other noninterest expenses are as follows:
Years Ended December 31 (In thousands) 1999 1998 1997 - --------------------------------------------------------------------------------------------------------- Other noninterest revenues: Interchange income $ 46,526 $ 36,411 $ 28,867 Mortgage income 45,027 39,667 15,798 Bank-owned life insurance policies 31,161 17,385 10,055 Gains on sales of available-for-sale securities 11,392 16,099 12,411 Other portfolio income 9,956 10,217 7,038 Gains on sales of businesses 8,624 32,687 4,492 Other 139,313 119,255 112,267 ------------------------------------------------ $291,999 $271,721 $190,928 ========================================================================================================= Other noninterest expenses: Postage and office supplies $ 47,960 $ 48,299 $ 49,265 Marketing 42,420 39,905 38,817 Amortization of intangibles 40,306 40,211 39,907 Communications 36,691 37,720 33,307 Other 197,655 183,322 187,368 ------------------------------------------------ $365,032 $349,457 $348,664 =========================================================================================================
NOTE 22 -- BUSINESS SEGMENT INFORMATION - -------------------------------------------------------------------------------- AmSouth has three reportable segments: Consumer Banking, Commercial Banking and Capital Management. Consumer Banking delivers a full range of financial services to individuals and small businesses. Services include loan products such as residential mortgages, equity lending, credit cards, and loans for automobile and other personal financing needs and various products designed to meet the credit needs of small businesses. In addition, Consumer Banking offers various deposit products that meet customers' savings and transaction needs. Commercial Banking meets corporate and middle market customers' needs with a comprehensive array of credit, treasury management, international, and capital markets services. Included among these are several specialty services such as real estate finance, asset based lending, commercial leasing, and healthcare banking. Capital Management is comprised of client fiduciary services and broker/dealer services and provides primarily fee-based income. This area includes not only traditional trust services, but also a substantial selection of investment management services including AmSouth's proprietary mutual fund family. Treasury & Other is comprised of balance sheet management activities that include the investment portfolio, nondeposit funding and off-balance sheet financial instruments. Treasury & Other also includes corporate expenses such as corporate overhead and goodwill amortization. BOLI income is included in Treasury & Other for 1999, 1998 and 1997. In addition, Treasury & Other includes gains on sales of businesses for all years presented. Measurement of Segment Profit or Loss and Segment Assets The bank evaluates performance and allocates resources based on profit or loss from operations. The accounting policies of the reportable segments are the same as those described in Note 1 except that AmSouth uses matched maturity transfer pricing to fairly and consistently assign funds costs to assets and earnings credits to liabilities with a corresponding offset in Treasury & Other. AmSouth allocates noninterest expenses based on various activity statistics. AmSouth is disclosing net interest income in lieu of interest income. Performance is assessed primarily on net interest 83 -- income by the chief operating decision makers. Excluding the internal funding, AmSouth does not have intracompany revenues or expenses. Noninterest expenses are allocated to match revenues. The provision for loan losses for each segment reflects the net charge-offs in each segment. The difference between net charge-offs and the provision is included in Treasury & Other. Additionally, segment income tax expense is calculated using the marginal tax rate. The difference between the marginal and effective tax rate is included in Treasury & Other. Management reviews average assets by segment. AmSouth's segments are not necessarily comparable with similar information for any other financial institution.
Consumer Commercial Capital Treasury & (In thousands) Banking Banking Management Other Total - ------------------------------------------------------------------------------------------------------------------------------------ 1999 Net interest income from external customers $ 357,541 $ 841,185 $ (807) $ 310,027 $ 1,507,946 Internal funding 617,449 (361,112) 1,407 (257,744) -0- ------------------------------------------------------------------------------------- Net interest income 974,990 480,073 600 52,283 1,507,946 Noninterest revenues 334,055 90,481 329,838 93,183 847,557 ------------------------------------------------------------------------------------- Total revenues 1,309,045 570,554 330,438 145,466 2,355,503 Provision for loan losses 81,524 21,382 -0- 62,720 165,626 Noninterest expenses 759,736 189,539 266,684 432,547 1,648,506 ------------------------------------------------------------------------------------- Income before income taxes 467,785 359,633 63,754 (349,801) 541,371 Income taxes 176,002 134,995 23,923 (134,017) 200,903 ------------------------------------------------------------------------------------- Segment net income $ 291,783 $ 224,638 $ 39,831 $ (215,784) $ 340,468 ==================================================================================================================================== Average assets $ 15,011,516 $ 12,608,328 $ 49,512 $ 14,141,972 $ 41,811,328 - ------------------------------------------------------------------------------------------------------------------------------------ 1998 Net interest income from external customers $ 236,757 $ 867,240 $ (2,498) $ 342,785 $ 1,444,284 Internal funding 677,915 (390,990) 4,619 (291,544) -0- ------------------------------------------------------------------------------------- Net interest income 914,672 476,250 2,121 51,241 1,444,284 Noninterest revenues 321,544 81,392 295,439 101,479 799,854 ------------------------------------------------------------------------------------- Total revenues 1,236,216 557,642 297,560 152,720 2,244,138 Provision for loan losses 59,240 24,399 -0- 15,428 99,067 Noninterest expenses 735,661 184,752 237,346 248,513 1,406,272 ------------------------------------------------------------------------------------- Income before income taxes 441,315 348,491 60,214 (111,221) 738,799 Income taxes 165,934 131,033 22,640 (54,882) 264,725 ------------------------------------------------------------------------------------- Segment net income $ 275,381 $ 217,458 $ 37,574 $ (56,339) $ 474,074 ==================================================================================================================================== Average assets $ 14,062,287 $ 11,978,548 $ 40,366 $ 12,759,034 $ 38,840,235 - ------------------------------------------------------------------------------------------------------------------------------------ 1997 Net interest income from external customers $ 248,628 $ 836,132 $ (2,023) $ 301,992 $ 1,384,729 Internal funding 649,627 (390,339) 4,525 (263,813) -0- ------------------------------------------------------------------------------------- Net interest income 898,255 445,793 2,502 38,179 1,384,729 Noninterest revenues 276,878 70,069 252,153 59,624 658,724 ------------------------------------------------------------------------------------- Total revenues 1,175,133 515,862 254,655 97,803 2,043,453 Provision for loan losses 76,717 16,428 -0- (9,637) 83,508 Noninterest expenses 725,568 177,201 203,037 115,869 1,221,675 ------------------------------------------------------------------------------------- Income before income taxes 372,848 322,233 51,618 (8,429) 738,270 Income taxes 140,190 121,160 19,409 (16,170) 264,589 ------------------------------------------------------------------------------------- Segment net income $ 232,658 $ 201,073 $ 32,209 $ 7,741 $ 473,681 ==================================================================================================================================== Average assets $ 14,130,013 $ 11,355,744 $ 38,619 $ 10,393,452 $ 35,917,828 - ------------------------------------------------------------------------------------------------------------------------------------
84 -- NOTE 23 -- CONDENSED PARENT COMPANY INFORMATION - -------------------------------------------------------------------------------- STATEMENT OF CONDITION
December 31 (In thousands) 1999 1998 - ---------------------------------------------------------------------------------------------------- ASSETS Investment in subsidiaries $3,553,778 $3,681,996 Investment in Eurodollars 159,664 -0- Securities purchased from bank subsidiary under agreements to resell -0- 99,477 Available-for-sale securities 58,824 45,683 Other assets 27,418 40,806 ------------------------------ $3,799,684 $3,867,962 ==================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Commercial paper $ 8,749 $ 10,039 Subordinated debt 572,996 498,864 Other borrowed funds 100,000 107,601 Accrued interest payable and other liabilities 158,734 44,034 ------------------------------ Total liabilities 840,479 660,538 Shareholders' equity 2,959,205 3,207,424 ------------------------------ $3,799,684 $3,867,962 ==================================================================================================== STATEMENT OF EARNINGS Years Ended December 31 (In thousands) 1999 1998 1997 - --------------------------------------------------------------------------------------------- INCOME Dividend from subsidiaries $ 308,691 $ 421,856 $ 513,259 Interest and other 18,893 18,004 52,118 ------------------------------------------ 327,584 439,860 565,377 ------------------------------------------ EXPENSES Interest 46,548 45,066 45,967 Other 66,947 62,004 57,883 ------------------------------------------ 113,495 107,070 103,850 ------------------------------------------ Income before income taxes and equity in undistributed earnings of subsidiaries 214,089 332,790 461,527 Income tax credit 17,669 29,534 20,664 ------------------------------------------ Income before equity in earnings of subsidiaries 231,758 362,324 482,191 Equity in undistributed earnings of subsidiaries 108,710 111,750 (8,510) ------------------------------------------ NET INCOME $ 340,468 $ 474,074 $ 473,681 ============================================================================================
85 --
STATEMENT OF CASH FLOWS Years Ended December 31 (In thousands) 1999 1998 1997 - ------------------------------------------------------------------------------------------------------ OPERATING ACTIVITIES Net income $ 340,468 $ 474,074 $ 473,681 Adjustments to reconcile net income to net cash provided by operating activities: Net gains on sales of available-for-sale securities (6,303) (4) -0- Amortization of goodwill 2,406 2,386 2,386 Other amortization and depreciation 953 9,002 3,911 Net decrease (increase) in accrued interest receivable and other assets 80,259 (26,563) (5,774) Net increase (decrease) in accrued expenses and other liabilities 52,513 (17,170) 2,121 (Undistributed income) dividends in excess of income of subsidiaries (108,710) (111,750) 8,510 Provision for deferred income taxes 707 2,277 113 Other operating activities, net (294) (355) (2,258) ------------------------------------------- Net cash provided by operating activities 361,999 331,897 482,690 ------------------------------------------- INVESTING ACTIVITIES Net increase in available-for-sale securities (34,230) (38,342) -0- Net increase in other interest-earning assets (159,664) -0- -0- Net sales (purchases) of premises and equipment -0- 5,751 (4,255) Sales of other assets -0- -0- 2,830 Net decrease (increase) in loans 390 (227) 280 Net decrease in securities purchased under agreements to resell 61,315 30,359 10,440 Net cash provided by (used for) acquisitions, liquidations and funding of subsidiaries -0- 8,268 (37,587) ------------------------------------------- Net cash (used) provided by investing activities (132,189) 5,809 (28,292) ------------------------------------------- FINANCING ACTIVITIES Net (decrease) increase in commercial paper (1,290) 1,653 1,586 Net decrease in other borrowed funds (6,389) (230) (300) Issuance of long-term debt 174,231 -0- -0- Payments for maturing long-term debt (100,000) -0- -0- Proceeds from early termination of swap contract -0- -0- 2,038 Cash dividends paid (183,848) (195,560) (173,484) Proceeds from employee stock plans and dividend reinvestment plan 53,564 45,943 49,583 Purchases of common stock (166,475) (201,898) (368,303) ------------------------------------------- Net cash used by financing activities (230,207) (350,092) (488,880) ------------------------------------------- Decrease in cash (397) (12,386) (34,482) Cash at beginning of year 1,019 13,405 47,887 ------------------------------------------- Cash at end of year $ 622 $ 1,019 $ 13,405 ======================================================================================================
86 -- NOTE 24 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) - -------------------------------------------------------------------------------- Selected quarterly results of operations for the four quarters ended December 31 are as follows:
1999 1998 (In thousands Fourth Third Second First Fourth Third Second First except per share data) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter - --------------------------------------------------------------------------------------------------------------------------------- Interest income $ 775,341 $ 749,009 $ 714,438 $ 693,962 $ 716,152 $ 721,226 $ 711,809 $ 692,719 Interest expense 394,079 368,662 336,889 325,173 346,089 363,465 350,648 337,420 Net interest income 381,262 380,347 377,549 368,789 370,063 357,761 361,161 355,299 Provision for loan losses 97,700 30,604 18,589 18,734 31,354 16,604 29,771 21,338 Net gain (loss) on sales of available-for-sale securities 5,704 (5,345) 4,879 6,154 5,365 5,281 2,103 3,350 Income (loss) before income taxes (81,042) 205,768 204,570 212,076 208,821 192,592 140,239 197,146 Net income (loss) (62,554) 134,645 131,581 136,796 136,206 124,342 87,158 126,369 Earnings (loss) per common share (.16) .35 .34 .35 .35 .32 .22 .32 Diluted earnings (loss) per common share (.16) .34 .33 .34 .34 .32 .22 .32 Cash dividends declared per common share .20 .17 .17 .17 .17 .13 .13 .13 Market price range: High 25.81 23.88 32.33 33.92 30.42 27.92 27.92 27.11 Low 18.94 21.31 21.88 27.92 21.42 22.50 25.05 22.00 - ----------------------------------------------------------------------------------------------------------------------------------- Note: Quarterly amounts may not add to year-to-date amounts due to rounding.
87 -- NOTE 25 -- FAIR VALUE OF FINANCIAL INSTRUMENTS - -------------------------------------------------------------------------------- For purposes of this disclosure, the estimated fair value of financial instruments with immediate and shorter-term maturities (generally 90 days or less) is assumed to be the same as the recorded book value. These instruments include the consolidated statement of condition lines captioned cash and due from banks, time deposits in other banks, federal funds sold and securities purchased under agreements to resell, other interest-earning assets, customers' acceptance liability, federal funds purchased and securities sold under agreements to repurchase, other borrowed funds, and acceptances outstanding. The carrying amount and estimated fair value of other financial instruments at December 31 are summarized as follows:
1999 1998 Carrying Estimated Carrying Estimated (In thousands) Amount Fair Value Amount Fair Value - -------------------------------------------------------------------------------------------------------- Financial assets: Net loans $ 25,903,283 $ 25,910,795 $ 24,071,540 $ 24,123,008 Loans held for sale 172,941 172,941 357,661 357,661 Financial liabilities: Deposits 27,912,443 27,955,939 28,533,760 28,632,973 Long-term FHLB advances 4,612,686 4,593,037 3,450,864 3,639,769 Other long-term debt 990,800 933,339 941,960 985,500 Off-balance sheet: Off-balance sheet financial instruments (net receivable position) -- (36,407) -- 4,451 Commitments to extend credit and standby letters of credit -- (6,153) -- (1,968) - --------------------------------------------------------------------------------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" (Statement 107), requires the disclosure of estimated fair values for all financial instruments, both assets and liabilities on and off-balance sheet, for which it is practicable to estimate their value along with pertinent information on those financial instruments for which such values are not available. Fair value estimates are made at a specific point in time and are based on relevant market information which is continuously changing. Because no quoted market prices exist for a significant portion of AmSouth's financial instruments, fair values for such instruments are based on management's assumptions with respect to future economic conditions, estimated discount rates, estimates of the amount and timing of future cash flows, expected loss experience, and other factors. These estimates are subjective in nature involving uncertainties and matters of significant judgment; therefore, they cannot be determined with precision. Changes in the assumptions could significantly affect the estimates. Statement 107 fair value estimates include certain on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, AmSouth has a substantial trust department that contributes net fee income annually. The trust department is not considered a financial instrument, and its value has not been incorporated into the fair value estimates. Other significant assets and liabilities that are not considered financial assets or liabilities include the mortgage banking operation, brokerage network, premises and equipment, core deposit intangibles, and goodwill. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. As a result, the Statement 107 fair value 88 -- disclosures should not be considered an indication of the fair value of the company taken as a whole. The following methods and assumptions were used by AmSouth in estimating its fair value disclosures for financial instruments: Loans The fair values of variable rate loans that reprice frequently and have no significant change in credit risk are assumed to approximate carrying amounts. For credit card loans and equity lines of credit, the carrying value reduced by an estimate of credit losses inherent in the portfolio is a reasonable estimate of fair value. The fair values for other loans (e.g., commercial and industrial, commercial real estate, certain mortgage loans, and consumer loans) are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality and estimates of maturity based on AmSouth's historical experience. The carrying amount of accrued interest receivable approximates its fair value. Securities and Loans Held for Sale Fair values for securities and loans held for sale are based on quoted market prices, where available. Where quoted market prices are not available, fair values are based on quoted market prices of similar instruments, adjusted for any significant differences between the quoted instruments and the instruments being valued. Commitments to Extend Credit and Standby Letters of Credit The fair value of commitments to extend credit is estimated based on the amount of unamortized deferred loan commitment fees. The fair value of letters of credit is based on the amount of unearned fees plus the estimated cost to terminate the letters of credit. Off-balance Sheet Instruments The fair value of interest rate swaps, financial futures and interest rate caps and floors are obtained from dealer quotes. These values represent the estimated amount the company would receive or pay to terminate the contracts or agreements, taking into account current interest rates and, when appropriate, the current creditworthiness of the counterparties. Deposit Liabilities The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings accounts and money market and interest-bearing checking accounts is, by definition, equal to the amount payable on demand (carrying amount). The fair values for variable rate fixed-term money market accounts and certificates of deposit approximate their carrying amounts. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates of deposit to a schedule of aggregated expected monthly maturities on time deposits. Long-term Borrowings The fair values of long-term borrowings (other than deposits) are estimated using discounted cash flow analyses, based on AmSouth's current incremental borrowing rates for similar types of borrowing arrangements. 89 -- EX-21 5 LIST OF SUBSIDIARIES EXHIBIT 21 AMSOUTH BANCORPORATION LIST OF SUBSIDIARIES AT DECEMBER 31, 1999 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 ---- ---------------------------- CENTRALSOUTH FINANCIAL SERVICES, LLC Mississippi FIRST AMERICAN BUSINESS CAPITAL, INC. Tennessee FIRST AMERICAN ENTERPRISES, INC. Tennessee FIRST AMERICAN FEDERAL SAVINGS BANK U.S.A. AMSOUTH BANK Alabama AmSouth Capital Corporation Delaware AmSouth Finance Corporation Alabama AmSouth Leasing Corporation Alabama A-F Leasing, Ltd. Alabama AmSouth Leasing, Ltd. Alabama A-F Leasing, LLC Alabama AmSouth Insurance Agency, Inc. Florida AmSouth Investment Services, Inc. Alabama AmSouth Retirement Services, Inc. Florida AmSouth Riverchase, Inc. Alabama Cahaba Holdings, Inc. Delaware Cahaba Corporation Delaware Commercial National Investment Services, Inc. Louisiana Fifth Avenue Realty Company (unincorporated joint venture) First American Network, Inc. Tennessee First AmTenn Life Insurance Company Mississippi FirstGulf Insurance Agency, Inc. Alabama Five Points Capital Advisors, Inc. Alabama FMLS, Inc. Tennessee Fortune Mortgage Corporation Florida GTC Title, Inc. Alabama MCC Holdings, Inc. Alabama Meriwether Capital Corporation Virginia Highland Rim Title Company Tennessee IFC Insurance Agency, Inc. Tennessee IFC Holdings, Inc. Delaware (d/b/a INVEST Financial Corporation) INVEST Financial Corporation Delaware Insurance Agency, Inc. of Delaware INVEST Financial Corporation Alabama Insurance Agency, Inc. of Alabama INVEST Financial Corporation Connecticut Insurance Agency, Inc. of Connecticut INVEST Financial Corporation Georgia Insurance Agency, Inc. of Georgia INVEST Financial Corporation Illinois Insurance Agency, Inc. of Illinois INVEST Financial Corporation Maryland Insurance Agency, Inc. of Maryland INVEST Financial Corporation Massachusetts Insurance Agency, Inc. of Massachusetts INVEST Financial Corporation Mississippi Insurance Agency P.A. of Mississippi INVEST Financial Corporation Montana Insurance Agency, Inc. of Montana INVEST Financial Corporation Nevada Insurance Agency, Inc. of Nevada INVEST Financial Corporation New Mexico Insurance Agency, Inc. of New Mexico INVEST Financial Corporation Ohio Insurance Agency, Inc. of Ohio INVEST Financial Corporation Oklahoma Insurance Agency, Inc. of Oklahoma INVEST Financial Corporation South Carolina Insurance Agency, Inc. of South Carolina INVEST Financial Corporation Texas Insurance Agency, Inc. of Texas INVEST Financial Corporation Wyoming Insurance Agency, Inc. of Wyoming Investment Centers of America, Inc. North Dakota Trust Center of America North Dakota First Dakota, Inc. North Dakota Lewis & Clark Securities, Inc. North Dakota (f/k/a Farwest Securities, Inc.) First Dakota of Montana, Inc. Montana First Dakota of Texas, Inc. Texas First Dakota of New Mexico, Inc. New Mexico First Dakota of Wyoming, Inc. Wyoming National Properties and Mining Company, Inc. Delaware OakBrook Investments, LLC Delaware Pioneer Securities, Inc. Tennessee Rockhaven Asset Management, LLC Delaware Sawgrass Asset Management, LLC Delaware Service Mortgage and Insurance Agency, Inc. Florida The SSI Group, Inc. Florida NON-PROFIT CORPORATIONS Name Jurisdiction Where Organized - ---- ---------------------------- AmSouth Community Development Corporation Tennessee AmSouth/First American Foundation Tennessee AmSouth Bancorporation Foundation Alabama EX-23.(A) 6 CONSENT OF ERNST & YOUNG LLP Exhibit 23-a - Consent of Independent Auditors We consent to the incorporation by reference in the following Registration Statements of AmSouth Bancorporation and in the related Prospectuses of our report dated February 11, 2000, with respect to the consolidated financial statements and schedules of AmSouth Bancorporation and subsidiaries incorporated by reference in this Annual Report (Form 10-K) for the year ended December 31, 1999. 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. 33-2927 (as amended) pertaining to the Employee Stock Purchase Plan; Form S-3 No. 33-35280 pertaining to the Dividend Reinvestment and Common Stock Purchase 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-8 No. 333-05631 pertaining to the AmSouth Bancorporation 1996 Long Term Incentive Compensation Plan; Form S-8 No. 333-27107 pertaining to the AmSouth Bancorporation Employee Stock Purchase Plan; Form S-8 No. 333-41599 pertaining to the AmSouth Bancorporation Deferred Compensation Plan and the Amended and Restated Deferred Compensation Plan for Directors of AmSouth Bancorporation; Form S-3 No. 333-44263 pertaining to the AmSouth Bancorporation Shelf Registration Statement; Form S-8 No. 333-76283 pertaining to the Stock Option Plan for Outside Directors; Form S-8 No. 333-89451 pertaining to the First American Corporation 1993 Non- Employee Director Stock Option Plan; Form S-8 No. 333-89455 pertaining to the First American Corporation 1999 Broad-Based Employee Stock Option Plan; Form S-8 No. 333-89457 pertaining to the First American Corporation Star Award Plan; Form S-8 No. 333-89459 pertaining to the Deposit Guaranty Corporation Long Term Incentive Plans; Form S-8 No. 333-89461 pertaining to the First American Corporation 1991 Employee Stock Incentive Plan; Form S-8 No. 333-89463 pertaining to the Heritage Federal Bankshares, Inc. 1994 Stock Option Plan for Non-Employee Directors and 1992 Stock Option Plan and Incentive Compensation Plan for Non-Employee Directors; and Form S-8 No. 333-89633 pertaining to the First American Corporation First Incentives Reward Savings Thrift Plan. /s/ ERNST & YOUNG LLP Birmingham, Alabama March 24, 2000 EX-23.(B) 7 CONSENT OF KPMG LLP EXHIBIT 23-b The Board of Directors AmSouth Bancorporation: We consent to incorporation by reference in the following registration statements of AmSouth Bancorporation of our report dated January 21, 1999, relating to the consolidated balance sheets of First American Corporation and subsidiaries as of December 31, 1998 and 1997, and the related consolidated income statements, changes in shareholders' equity, and cash flows for each of the years in the two-year period ended December 31, 1998, and all related schedules, which report appears in the December 31, 1999, annual report on Form 10-K of AmSouth Bancorporation. 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. 33-2927 (as amended) pertaining to the Employee Stock Purchase Plan; Form S-3 No. 33-35280 pertaining to the Dividend Reinvestment and Common Stock Purchase 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-8 No. 333-05631 pertaining to the AmSouth Bancorporation 1996 Long Term Incentive Compensation Plan; Form S-8 No. 333-27107 pertaining to the AmSouth Bancorporation Employee Stock Purchase Plan; Form S-8 No. 333-41599 pertaining to the AmSouth Bancorporation Deferred Compensation Plan and the Amended and Restated Deferred Compensation Plan for Directors of AmSouth Bancorporation; Form S-3 No. 333-44263 pertaining to the AmSouth Bancorporation Shelf Registration Statement; Form S-8 No. 333-76283 pertaining to the Stock Option Plan for Outside Directors; Form S-8 No. 333-89451 pertaining to the First American Corporation 1993 Non- Employee Page 2 Director Stock Option Plan; Form S-8 No. 333-89455 pertaining to the First American Corporation 1999 Broad- Based Employee Stock Option Plan; Form S-8 No. 333-89457 pertaining to the First American Corporation Star Award Plan; Form S-8 No. 333-89459 pertaining to the Deposit Guaranty Corporation Long Term Incentive Plans; Form S-8 No. 333-89461 pertaining to the First American Corporation 1991 Employee Stock Incentive Plan; Form S-8 No. 333-89463 pertaining to the Heritage Federal Bankshares, Inc. 1994 Stock Option Plan for Non-Employee Directors and 1992 Stock Option Plan and Incentive Compensation Plan for Non-Employee Directors; and Form S-8 No. 333-89633 pertaining to the First American Corporation First Incentives Reward Savings Thrift Plan. /s/ KPMG LLP - ------------------ KPMG LLP Nashville, Tennessee March 29, 2000 EX-24 8 POWERS OF ATTORNEY Exhibit 24 DIRECTOR'S POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth Bancorporation, a Delaware corporation ("Company"), by his execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint Stephen A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to be filed by the Company with the Securities and Exchange Commission, and, further, to execute and sign any and all amendments to such Form 10-K and any and all other documents in connection therewith, and to cause any and all such documents to be filed with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in-fact and agent which he may lawfully do in the premises or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of March 2000. /s/ J. HAROLD CHANDLER ---------------------- J. Harold Chandler DIRECTOR'S POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth Bancorporation, a Delaware corporation ("Company"), by his execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint Stephen A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to be filed by the Company with the Securities and Exchange Commission, and, further, to execute and sign any and all amendments to such Form 10-K and any and all other documents in connection therewith, and to cause any and all such documents to be filed with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in-fact and agent which he may lawfully do in the premises or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of March 2000. /s/ JAMES E. DALTON, JR. ------------------------ James E. Dalton, Jr. DIRECTOR'S POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth Bancorporation, a Delaware corporation ("Company"), by his execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint Stephen A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to be filed by the Company with the Securities and Exchange Commission, and, further, to execute and sign any and all amendments to such Form 10-K and any and all other documents in connection therewith, and to cause any and all such documents to be filed with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in- fact and agent which he may lawfully do in the premises or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of March 2000. /s/ RODNEY C. GILBERT --------------------- Rodney C. Gilbert DIRECTOR'S POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth Bancorporation, a Delaware corporation ("Company"), by his execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint Stephen A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to be filed by the Company with the Securities and Exchange Commission, and, further, to execute and sign any and all amendments to such Form 10-K and any and all other documents in connection therewith, and to cause any and all such documents to be filed with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in- fact and agent which he may lawfully do in the premises or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of March 2000. /s/ JAMES A. HASLAM II ---------------------- James A. Haslam II DIRECTOR'S POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth Bancorporation, a Delaware corporation ("Company"), by his execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint Stephen A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to be filed by the Company with the Securities and Exchange Commission, and, further, to execute and sign any and all amendments to such Form 10-K and any and all other documents in connection therewith, and to cause any and all such documents to be filed with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in- fact and agent which he may lawfully do in the premises or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of March 2000. /s/ THOMAS E. HOAGLIN --------------------- Thomas E. Hoaglin DIRECTOR'S POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth Bancorporation, a Delaware corporation ("Company"), by his execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint Stephen A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to be filed by the Company with the Securities and Exchange Commission, and, further, to execute and sign any and all amendments to such Form 10-K and any and all other documents in connection therewith, and to cause any and all such documents to be filed with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in- fact and agent which he may lawfully do in the premises or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of March 2000. /s/ MARTHA R. INGRAM -------------------- Martha R. Ingram DIRECTOR'S POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth Bancorporation, a Delaware corporation ("Company"), by his execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint Stephen A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to be filed by the Company with the Securities and Exchange Commission, and, further, to execute and sign any and all amendments to such Form 10-K and any and all other documents in connection therewith, and to cause any and all such documents to be filed with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in- fact and agent which he may lawfully do in the premises or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of March 2000. /s/ VICTORIA B. JACKSON ----------------------- Victoria B. Jackson DIRECTOR'S POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth Bancorporation, a Delaware corporation ("Company"), by his execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint Stephen A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to be filed by the Company with the Securities and Exchange Commission, and, further, to execute and sign any and all amendments to such Form 10-K and any and all other documents in connection therewith, and to cause any and all such documents to be filed with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in- fact and agent which he may lawfully do in the premises or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of March 2000. /s/ RONALD L. KUEHN, JR. ------------------------ Ronald L. Kuehn, Jr. DIRECTOR'S POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth Bancorporation, a Delaware corporation ("Company"), by his execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint Stephen A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to be filed by the Company with the Securities and Exchange Commission, and, further, to execute and sign any and all amendments to such Form 10-K and any and all other documents in connection therewith, and to cause any and all such documents to be filed with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in- fact and agent which he may lawfully do in the premises or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of March 2000. /s/ JAMES R. MALONE ------------------- James R. Malone DIRECTOR'S POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth Bancorporation, a Delaware corporation ("Company"), by his execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint Stephen A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to be filed by the Company with the Securities and Exchange Commission, and, further, to execute and sign any and all amendments to such Form 10-K and any and all other documents in connection therewith, and to cause any and all such documents to be filed with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in- fact and agent which he may lawfully do in the premises or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of March 2000. /s/ JOHN N. PALMER ------------------ John N. Palmer DIRECTOR'S POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth Bancorporation, a Delaware corporation ("Company"), by his execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint Stephen A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to be filed by the Company with the Securities and Exchange Commission, and, further, to execute and sign any and all amendments to such Form 10-K and any and all other documents in connection therewith, and to cause any and all such documents to be filed with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in- fact and agent which he may lawfully do in the premises or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of March 2000. /s/ DENNIS C. BOTTORFF ------------------------- Dennis C Bottorff DIRECTOR'S POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth Bancorporation, a Delaware corporation ("Company"), by his execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint Stephen A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to be filed by the Company with the Securities and Exchange Commission, and, further, to execute and sign any and all amendments to such Form 10-K and any and all other documents in connection therewith, and to cause any and all such documents to be filed with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in- fact and agent which he may lawfully do in the premises or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of March 2000. /s/ HERBERT A. SKLENAR ---------------------- Herbert A. Sklenar DIRECTOR'S POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of AmSouth Bancorporation, a Delaware corporation ("Company"), by his execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint Stephen A. Yoder, T. Kurt Miller or Carl L. Gorday and any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Annual Report on Form 10-K for the year ended December 31, 1999 to be filed by the Company with the Securities and Exchange Commission, and, further, to execute and sign any and all amendments to such Form 10-K and any and all other documents in connection therewith, and to cause any and all such documents to be filed with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in- fact and agent which he may lawfully do in the premises or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 27th day of March 2000. /s/ FRANCIS A. NEWMAN ------------------------- Francis A. Newman EX-27.1 9 ARTICLE 9 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION. 1,000 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 1,563,335 2,474 132,683 51,972 5,964,703 7,050,562 6,849,344 26,266,759 363,476 43,406,554 27,912,443 6,231,467 699,953 5,603,486 0 0 416,949 2,542,256 43,406,554 2,128,147 782,367 22,236 2,932,750 903,348 1,424,804 1,507,946 165,626 11,392 1,648,506 541,371 541,371 0 0 340,468 .87 .86 4.02 141,134 61,050 0 0 373,756 148,287 45,381 363,476 363,476 0 57,043
EX-27.2 10 ARTICLE 9 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION. 1,000 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 1,802,814 292,763 357,910 47,818 7,524,532 3,877,504 3,901,954 24,445,296 373,756 40,635,831 28,533,760 3,821,274 680,549 4,392,824 0 0 420,058 2,787,366 40,635,831 2,080,065 732,353 29,489 2,841,907 970,267 1,397,623 1,444,284 99,067 16,099 1,406,272 738,799 738,799 0 0 474,074 1.22 1.20 4.14 113,985 62,528 0 0 367,077 134,238 50,586 373,756 373,756 0 102,521
EX-27.3 11 ARTICLE 9 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION. 1,000 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 1,691,936 12,574 237,648 55,599 6,059,875 3,035,577 3,058,819 24,415,004 367,077 37,380,079 27,045,700 4,508,459 549,340 2,247,442 0 0 412,450 2,616,688 37,380,079 2,056,949 607,161 22,338 2,686,448 962,445 1,301,719 1,384,729 83,508 12,411 1,221,675 738,270 738,270 0 0 473,681 1.20 1.18 4.27 109,488 66,792 0 0 370,277 150,377 55,669 367,077 367,077 0 104,721
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