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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 COMMISSION FILE NUMBER
DECEMBER 31, 1993 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 IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1400 AMSOUTH-SONAT TOWER 35203
BIRMINGHAM, ALABAMA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(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
FLOATING RATE NOTES DUE 1999 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 voting stock held by nonaffiliates of the
registrant as of March 4, 1994 was $1,517,239,000. (Note 1)
As of March 4, 1994 AmSouth Bancorporation had 51,722,454 shares of common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference herein:
Proxy Statement for Annual Meeting to be held April 21, 1994: Part III
Note 1: In calculating the market value of securities held by nonaffiliates of
AmSouth as disclosed on the cover page of this Form 10-K, AmSouth has treated
as securities held by affiliates only voting stock owned as of March 4, 1994
by its directors and principal executive officers and voting stock held by
AmSouth's employee benefit plans; AmSouth has not treated securities held by
any of AmSouth's subsidiaries as pledgee or in a fiduciary capacity as
securities held by affiliates of AmSouth. 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.
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AMSOUTH BANCORPORATION
FORM 10-K
INDEX
PAGE
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PART I
Item 1. Business.................................................. 1
Item 2. Properties................................................ 8
Item 3. Legal Proceedings......................................... 8
Item 4. Submission of Matters to a Vote of Security Holders ...... 9
Executive Officers of the Registrant................................ 9
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 10
Item 6. Selected Financial Data................................... 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 12
Item 8. Financial Statements and Supplementary Data............... 38
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure....................... 68
PART III
Item 10. Directors and Executive Officers of the Registrant........ 68
Item 11. Executive Compensation.................................... 68
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 68
Item 13. Certain Relationships and Related Transactions............ 68
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.................................................. 68
SIGNATURES.......................................................... 70
EXHIBIT INDEX....................................................... 72
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, 1993, AmSouth had total consolidated
assets of approximately $12.5 billion. AmSouth offers a broad range of bank and
bank-related services through its subsidiaries. AmSouth's principal banking
subsidiaries are AmSouth Bank N.A., AmSouth Bank of Florida, and AmSouth Bank
of Tennessee.
AmSouth Bank N.A. (AmSouth Alabama), headquartered in Birmingham, Alabama, is
the largest subsidiary of AmSouth. As of December 31, 1993, AmSouth Alabama had
total consolidated assets of approximately $8.8 billion and total consolidated
deposits of approximately $6.5 billion. AmSouth Alabama is a full service
national banking association with 147 banking offices located throughout
Alabama at December 31, 1993. Based upon total consolidated assets as of
December 31, 1993, AmSouth Alabama was the largest bank headquartered in
Alabama. It offers complete consumer and commercial banking and trust services
to businesses and individuals. The Commercial Banking Group of AmSouth Alabama
offers a variety of products and services, including commercial lending,
international banking, and cash management sales and operations. The Investment
Services Department offers a range of investment products. Consumer Banking
encompasses a wide variety of transaction, credit, and investment services to
meet the needs of a diverse and growing consumer customer base. AmSouth
Alabama's network of automated teller machines is linked with shared automated
tellers in all 50 states. The Trust Division of AmSouth Alabama is the largest
in Alabama with more assets under management than any other bank in Alabama. It
offers a complete array of trust services including estate and trust planning,
investment management for individuals and corporations, land and natural
resources management, employee benefit administration, and management of debt
and equity issues for corporations.
AmSouth Alabama also provides additional services through several
subsidiaries. AmSouth Mortgage Company, Inc. (AmSouth Mortgage) offers first
mortgage loans through 41 originating offices in nine states. It sells these
loans to investors, generally retaining the right to service the loans for a
fee. AmSouth Leasing Corporation is a specialized lender providing equipment
leasing. Brokerage services and investment sales are provided by AmSouth
Investment Services, Inc., a registered broker-dealer.
On January 21, 1994, AmSouth filed applications to convert AmSouth Alabama
from a national banking association to a state-chartered bank that is a member
of the Federal Reserve System. AmSouth expects to realize certain cost savings
as a result of the conversion.
AmSouth Bank of Florida (AmSouth Florida), is a state-chartered nonmember
bank currently headquartered in Pensacola, Florida. AmSouth Florida is in the
process of moving its headquarters to Tampa, Florida, as a result of the
completed and pending acquisitions that will result in a significant portion of
its assets and deposits being located in west and central Florida. At December
31, 1993, AmSouth Florida had total consolidated assets of approximately $2.6
billion and total consolidated deposits of approximately $2.1 billion. AmSouth
Bank of Tennessee (AmSouth Tennessee) is a state-chartered nonmember bank
headquartered in Chattanooga, Tennessee. At December 31, 1993, AmSouth
Tennessee had total assets of approximately $1.0 billion and total deposits of
approximately $779.3 million. AmSouth Florida and AmSouth Tennessee offer
banking services similar to those of AmSouth Alabama. At December 31, 1993,
AmSouth Florida operated 65 offices in Florida, and AmSouth Tennessee operated
20 offices in Tennessee. AmSouth also owns four other smaller banking
subsidiaries: AmSouth Bank of Walker County, located in Jasper, Alabama;
AmSouth Bank of Georgia, located in Summerville, Georgia; and The Georgia State
Bank of Rome, located in Rome, Georgia. The Georgia State Bank of Rome will
merge into AmSouth Bank of Georgia during the first half of 1994.
During 1993, AmSouth completed five business combinations, which are
reflected, to the extent required, in the Consolidated Financial Statements
contained in this Form 10-K for the year ended December 31, 1993. For further
information concerning these transactions see Note B of the Notes to
Consolidated Financial Statements.
As of February 28, 1994, AmSouth and its subsidiaries had 5,177 full-time
employees and 855 part-time employees.
SUBSEQUENT EVENTS
Since December 31, 1993, AmSouth has completed the following business
combinations:
Effective January 3, 1994, Orange Banking Corporation (Orange), headquartered
in Orlando, Florida, the parent company of Orange Bank, merged with AmSouth.
AmSouth issued approximately 1,332,000 shares of common stock in exchange for
all of the outstanding shares of Orange common stock. This acquisition was
accounted for as a pooling-of-interests under generally accepted accounting
principles (GAAP). At December 31, 1993, Orange had total consolidated assets
of approximately $354.4 million and total consolidated deposits of
approximately $322.5 million.
Effective February 10, 1994, FloridaBank, a Federal Savings Bank
(FloridaBank), headquartered in Jacksonville, Florida, merged with AmSouth
Florida. AmSouth issued approximately 759,000 shares of common stock in
exchange for all of the outstanding shares of FloridaBank common stock. This
transaction was accounted for as a pooling-of-interests under GAAP. At December
31, 1993, FloridaBank had total consolidated assets of approximately $271.5
million and total consolidated deposits of approximately $202.6 million.
In addition, AmSouth is a party to the pending business combinations
described below. Except as noted, consummation of each of these transactions
remains subject to fulfillment of a number of conditions, including shareholder
and regulatory approvals. No assurances can be given that such conditions will
be fulfilled or that such transactions will be consummated.
On July 29, 1993, AmSouth signed an agreement to enter into a business
combination with Parkway Bancorp, Inc. (Parkway), which is headquartered in
Fort Myers, Florida, parent company of Parkway Bank. As of December 31, 1993,
Parkway had total consolidated assets of approximately $126.8 million and total
consolidated deposits of approximately $115.9 million. Under the terms of the
agreement, AmSouth will issue 0.4886 of a share of AmSouth common stock for
each of the outstanding shares of Parkway common stock. At December 31, 1993,
Parkway had 1,002,041 shares of common stock outstanding. Shareholder and
regulatory approvals have been received. This transaction will be accounted for
as a pooling-of-interests under GAAP.
On August 3, 1993, AmSouth signed an agreement to acquire First Federal
Savings Bank, Calhoun, Georgia (Calhoun), headquartered in Calhoun, Georgia. At
December 31, 1993, Calhoun had total assets of approximately $72.2 million and
total deposits of approximately $59.2 million. Under the terms of the
agreement, AmSouth will issue 0.9991 of a share of AmSouth common stock for
each of the outstanding shares of Calhoun common stock, subject to adjustment.
At December 31, 1993, Calhoun had 414,330 shares of common stock outstanding.
This transaction will be accounted for as a pooling-of-interests under GAAP.
The Calhoun shareholder meeting is scheduled for March 18, 1994.
On August 9, 1993, AmSouth signed an agreement to enter into a business
combination with Citizens National Corporation (Citizens), which is
headquartered in Naples, Florida, and its subsidiary, Citizens National Bank of
Naples. At December 31, 1993, Citizens had total consolidated assets of
approximately $300.1 million and total consolidated deposits of approximately
$270.0 million. Under the terms of the agreement, AmSouth will issue 0.3609 of
a share of AmSouth common stock for each of the outstanding shares of Citizens
common stock. At December 31, 1993, Citizens had 4,111,388 shares of common
stock
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outstanding. Shareholder and regulatory approvals have been received. This
transaction will be accounted for as a pooling-of-interests under GAAP.
On September 12, 1993, AmSouth signed an agreement to acquire Fortune
Bancorp, Inc. (Fortune), headquartered in Clearwater, Florida, and its
subsidiary, Fortune Bank, a Savings Bank. Under the terms of the agreement,
Fortune shareholders may make an election to receive either cash or AmSouth
common stock based on a formula which takes into consideration AmSouth's stock
price during a future pricing period. Approximately one-half of Fortune's
shares will be exchanged for cash and one-half for AmSouth common stock
(subject to adjustment based upon the average price per share of AmSouth common
stock), with AmSouth issuing a total of approximately 4,481,000 shares and
approximately $142.5 million in cash. At December 31, 1993, Fortune had total
consolidated assets of approximately $2.7 billion and total consolidated
deposits of approximately $1.8 billion. This transaction will be accounted for
as a purchase under GAAP.
On March 9, 1994, AmSouth signed an agreement to enter into a business
combination with The Tampa Banking Company (Tampa), headquartered in Tampa,
Florida, and its subsidiary, The Bank of Tampa. At December 31, 1993, Tampa had
total consolidated assets of approximately $211.1 million and total
consolidated deposits of approximately $196.0 million. Under the terms of the
agreement, AmSouth will issue 1.5592 shares of AmSouth common stock for each of
the outstanding shares of Tampa common stock, subject to adjustment. At
December 31, 1993, Tampa had approximately 626,000 shares of common stock
outstanding. The transaction will be accounted for using the pooling-of-
interests method of accounting under GAAP.
AmSouth continually evaluates business combination opportunities and
frequently conducts due diligence activities in connection with them. As a
result, business combination discussions and, in some cases, negotiations
frequently 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.
COMPETITION
AmSouth's subsidiaries compete aggressively with banks located in Alabama,
Florida, Tennessee, 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. Areas of competition include prices,
interest rates, services, and availability of products. AmSouth also competes
with the other bank holding companies headquartered in Alabama, Florida,
Tennessee, Georgia, and other Southeastern states for the acquisition of
financial institutions.
At December 31, 1993, of the bank holding companies headquartered in Alabama,
AmSouth was the largest in terms of equity capital and second largest in terms
of assets. However, in several geographic areas AmSouth's market share is
smaller than that of other banks and financial institutions competing in those
areas. Also, AmSouth is significantly smaller than many of the financial
institutions competing in Florida, Tennessee, and Georgia.
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 have
expanded their out-of-state activities, and various states have enacted
legislation intended to allow certain interstate banking combinations which
otherwise would be prohibited by federal law. Under the Bank Holding Company
Act of 1956, as amended (the BHCA), generally no company which owns or controls
a commercial bank in the United States may acquire ownership or control of a
commercial bank in a state other than the state in which the company's banking
subsidiaries are principally located unless the acquisition is specifically
authorized by the laws of the state in which the bank being acquired is
located.
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Congress is currently considering legislation that would generally provide
for nationwide interstate banking, subject to certain limitations, including
the ability of states to opt out of coverage. However, the management of
AmSouth is unable to predict whether or not any such legislation will be
adopted and, if so, what the final form of the legislation will be.
Alabama has a reciprocal interstate banking law that allows banks in several
other states (primarily in the Southeast) and the District of Columbia to
acquire banks in Alabama provided there is reciprocal legislation in the other
jurisdictions. Alabama bank holding companies are thereby permitted to acquire
banks in the jurisdictions specified in the law which have adopted such
reciprocal legislation. These laws have resulted in a significant increase in
competition for banking services in Alabama, Florida, Tennessee, Georgia, and
the other affected areas.
In 1989, the Financial Institutions Reform, Recovery and Enforcement Act of
1989 (FIRREA) was enacted. Among other things, FIRREA amended the Bank Holding
Company Act to give the Federal Reserve Board the authority to approve the
acquisition of savings associations by bank holding companies. A bank holding
company may also consolidate a savings association it has acquired with a bank
subsidiary.
SUPERVISION AND REGULATION
As a bank holding company, AmSouth is subject to the regulation and
supervision of the Board of Governors of the Federal Reserve System (Federal
Reserve Board) under the BHCA. Under the BHCA, bank holding companies may not
in general directly or indirectly acquire the ownership or control of more than
5% 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 are generally prohibited under the BHCA from
engaging in nonbanking activities, subject to certain exceptions.
AmSouth's subsidiary banks (the Subsidiary Banks) are subject to supervision
and examination by applicable federal and state banking agencies. AmSouth
Alabama is a national banking association subject to regulation and supervision
by the Comptroller of the Currency (the Comptroller). All of the other
Subsidiary Banks are state-chartered banks that are not members of the Federal
Reserve System, and therefore are generally subject to the regulations of and
supervision by the Federal Deposit Insurance Corporation (FDIC). The Subsidiary
Banks are 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
Subsidiary Banks. 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 of AmSouth, including cash flow
to pay dividends on AmSouth common stock, is dividends from the Subsidiary
Banks. There are statutory and regulatory limitations on the payment of
dividends by the Subsidiary Banks to AmSouth as well as by AmSouth to its
shareholders.
AmSouth Alabama is required by federal law to obtain the prior approval of
the Comptroller for the payment of dividends if the total of all dividends
declared by the Board of Directors of such bank in any year will exceed the
total of (i) the bank's net profits (as defined and interpreted by regulation)
for that year plus (ii) the retained net profits (as defined and interpreted by
regulation) for the preceding two years, less any required transfers to
surplus. A national bank also can pay dividends only to the extent that
retained net profits (including the portion transferred to surplus) exceed bad
debts (as defined by regulation).
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All of the Subsidiary Banks other than AmSouth Alabama are subject to varying
restrictions on the payment of dividends under applicable state laws. With
respect to AmSouth Florida and AmSouth Tennessee, state law imposes dividend
restrictions substantially similar to those imposed under federal law on
AmSouth Alabama. 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 hearing, that such bank cease and desist from
such practice. The Comptroller and the FDIC have indicated that paying
dividends that deplete a bank's capital base to an inadequate level would be an
unsafe and unsound banking practice. Under the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA), an insured bank may not pay any
dividend if payment would cause it to become undercapitalized or once it is
undercapitalized. See Item 1. Business -- FDICIA. Moreover, the Federal Reserve
Board, the Comptroller, and the FDIC have issued policy statements which
provide that bank holding companies and insured banks should generally only pay
dividends out of current operating earnings.
If AmSouth Alabama converts to a state-chartered bank that is a member of the
Federal Reserve System, its operations, including its capital adequacy and
capacity for the payment of dividends, are not expected to change in any
material respect. As an Alabama-chartered bank, AmSouth Alabama would no longer
be subject to the regulations of the Comptroller with respect to payment of
dividends, but would be subject to similar restrictions under federal and
Alabama state law.
The payment of dividends by AmSouth and the Subsidiary Banks may also be
affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines. At December 31, 1993, under
dividend restrictions imposed under federal and state laws, AmSouth's
subsidiary banks, without obtaining government approvals, could declare
dividends of approximately $150.0 million.
TRANSACTIONS WITH AFFILIATES
There are various legal restrictions on the extent to which AmSouth and its
nonbank subsidiaries can borrow or otherwise obtain credit from its Subsidiary
Banks. Each Subsidiary Bank (and its subsidiaries) is limited in engaging in
borrowing and other "covered transactions" with nonbank or nonsavings bank
affiliates to the following amounts: (i) in the case of any such affiliate, the
aggregate amount of covered transactions of the Subsidiary Bank and its
subsidiaries may not exceed 10% of the capital stock and surplus of such
Subsidiary Bank; and (ii) in the case of all affiliates, the aggregate amount
of covered transactions of the Subsidiary Bank and its subsidiaries may not
exceed 20% of the capital stock and surplus of such Subsidiary 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), 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.
CAPITAL ADEQUACY
The Federal Reserve Board has adopted risk-based capital guidelines for bank
holding companies. The minimum guideline for the ratio of total capital (Total
Capital) to risk-weighted assets (including certain off-balance-sheet items,
such as standby letters of credit) is 8%. At least half of the Total Capital
must be composed of common stock, minority interests in the equity accounts of
consolidated subsidiaries, noncumulative perpetual preferred stock, and a
limited amount of cumulative perpetual preferred stock, less certain goodwill
and 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, 1993, AmSouth's consolidated Tier 1 Capital and Total
Capital ratios were 10.95% and 13.31%, respectively.
In addition, the Federal Reserve Board has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to quarterly average
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assets, less goodwill and certain other intangible assets (the Leverage Ratio),
of 3% 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%, plus an
additional cushion of 100 to 200 basis points. AmSouth's Leverage Ratio at
December 31, 1993 was 8.65%. 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
indicia of capital strength in evaluating proposals for expansion or new
activities.
Each of the Subsidiary Banks is subject to risk-based and leverage capital
requirements, similar to those described above, adopted by the Comptroller or
the FDIC, as the case may be. Each of the Subsidiary Banks was in compliance
with applicable minimum capital requirements as of December 31, 1993. Neither
AmSouth nor any of the Subsidiary Banks has been advised by any federal banking
agency of any specific minimum Leverage Ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business. See Item 1. Business --
FDICIA.
All of the federal banking agencies have made proposals that would add an
additional risk-based capital requirement based upon the amount of an
institution's exposure to interest rate risk. 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.
SUPPORT OF SUBSIDIARY BANKS
Under Federal Reserve Board policy, AmSouth is expected to act as a source of
financial strength to, and to commit resources to support, each of the
Subsidiary Banks. 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 any of its subsidiary
banks 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.
Under the Federal Deposit Insurance Act (the FDI Act), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989 in
connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) 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.
FDICIA
On December 19, 1991, FDICIA was enacted. FDICIA substantially revised the
depository institution regulatory and funding provisions of the FDI Act and
made revisions to several other federal banking statutes. Among other things,
FDICIA requires the federal banking regulators to take prompt corrective action
in respect of FDIC-insured depository institutions that do not meet minimum
capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized." Under applicable
regulations, a FDIC-insured bank is defined to be well capitalized if it
maintains a Leverage Ratio of at least 5%, a risk-adjusted
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Tier 1 Capital Ratio of at least 6%, and a Total Capital Ratio of at least 10%
and is not otherwise in a "troubled condition" as specified by its appropriate
federal regulatory agency. A FDIC-insured depository institution is defined to
be adequately capitalized if it maintains a Leverage Ratio of at least 4%, a
risk-adjusted Tier 1 Capital Ratio of at least 4%, and a Total Capital Ratio of
at least 8%. In addition, a FDIC-insured depository institution will be
considered: (i) undercapitalized if it fails to meet any minimum required
measure; (ii) significantly undercapitalized if it is significantly below such
measure; and (iii) critically undercapitalized if it fails to maintain a level
of tangible equity equal to not less than 2% of total assets. A FDIC-insured
depository institution may be deemed to be in a capitalization category that is
lower than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
The capital-based prompt corrective action provisions of FDICIA and the
implementing regulations apply to FDIC-insured depository institutions and are
not directly applicable to holding companies which control such institutions.
However, the Federal Reserve Board has indicated that, in regulating bank
holding companies, it will take appropriate action at the bank 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, 1993.
FDICIA generally prohibits a 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 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. A depository
institution's holding company must guarantee the capital plan, up to an amount
equal to the lesser of 5% 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 a depository institution fails to submit
an acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized 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 depository institutions are subject to appointment
of a receiver or conservator.
At December 31, 1993, all of the Subsidiary Banks were well capitalized under
the criteria described above.
Various other legislation, including proposals to revise the bank regulatory
system and to limit the investments that a depository institution may make with
insured funds, is from time to time introduced in Congress. AmSouth management
is unable to predict whether and when other legislative changes would be
imposed.
BROKERED DEPOSITS
The FDIC has adopted regulations under FDICIA governing the receipt of
brokered deposits. Under the regulations, a bank cannot accept, rollover, or
renew brokered deposits unless (i) it is well capitalized or (ii) it is
adequately capitalized and receives a waiver from the FDIC. A bank 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 bank 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 bank that is well capitalized.
Because all the Subsidiary Banks were well capitalized as of
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December 31, 1993, AmSouth believes the brokered deposits regulation will have
no material effect on the funding or liquidity of any of the Subsidiary Banks.
FDIC DEPOSIT INSURANCE ASSESSMENTS
The Subsidiary Banks are subject to FDIC deposit insurance assessments. As
required by FDICIA, the FDIC has adopted a new risk-based premium schedule
which has increased the assessment rates for most FDIC-insured depository
institutions. Under the new schedule, the premiums initially range from $.23 to
$.31 for every $100 of deposits. Each insured depository institution is
assigned to one of three capital groups--well capitalized, adequately
capitalized, or undercapitalized--and further assigned to one of three
subgroups within a capital group, on the basis of supervisory evaluations by
the institution's primary federal and, if applicable, state supervisors and
other information relevant to the institution's financial condition and the
risk posed to the applicable insurance fund. The actual assessment rate
applicable to a particular institution will, therefore, depend in part upon the
risk assessment classification so assigned to the institution by the FDIC.
The FDIC is authorized to raise insurance premiums in certain circumstances.
Any increase in premiums would have an adverse effect on AmSouth's earnings.
Under the FDI Act, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by a federal
bank's regulatory agency.
DEPOSITOR PREFERENCE
The recently adopted Omnibus Budget Reconciliation Act of 1993 provides that
deposits and certain claims for administrative expenses and employee
compensation against an insured depository institution would be afforded a
priority over other general unsecured claims against such an institution,
including federal funds and letters of credit, in the "liquidation or other
resolution" of such an institution by any receiver.
ITEM 2. PROPERTIES
The executive offices of AmSouth and AmSouth Alabama are located in the 30-
story AmSouth-Sonat Tower in downtown Birmingham, Alabama. An undivided one-
half interest in this building is owned by AmSouth Alabama through an
unincorporated joint venture. AmSouth Alabama is a principal tenant of this
building. AmSouth Alabama is also a principal tenant of the AmSouth/Harbert
Plaza, a 32-story office building also located in downtown Birmingham, Alabama.
AmSouth Alabama's headquarters and most of its operations are located in the
AmSouth-Sonat Tower and the AmSouth/Harbert Plaza. An additional administrative
and training facility for AmSouth Alabama is currently under construction in
the Birmingham, Alabama area. AmSouth Alabama anticipates occupying the
facility by mid-year 1995. Other bank subsidiaries of AmSouth also have
headquarters, banking, and operational offices located in Alabama, Florida,
Tennessee, and Georgia. AmSouth Mortgage has offices in nine Southeastern
states.
At December 31, 1993, AmSouth and its subsidiaries had 282 offices
(principally bank buildings) of which 168 were owned and 114 were either leased
or subject to a ground lease.
ITEM 3. LEGAL PROCEEDINGS
AmSouth's subsidiaries are routinely involved in litigation incidental to
their business. However, management believes that the ultimate resolution of
these matters will not materially affect the consolidated financial condition
and results of operations of AmSouth.
8
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 1993.
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:
John W. Woods, 62, Chairman and Chief Executive Officer (1972 to date), and
President (August 1993 to date) of AmSouth; Chairman and Chief Executive
Officer (1983 to date), and President (August 1990 to date) of AmSouth
Alabama; Director of AmSouth Mortgage.
C. Stanley Bailey, 44, Vice Chairman of the Board of AmSouth and AmSouth
Alabama (July 1993 to date); Director of AmSouth Bank of Georgia, AmSouth
Mortgage, AmSouth Realty, Inc., and Alabanc Properties, Inc.; formerly
Senior Executive Vice President and Chief Financial Officer of AmSouth and
Senior Executive Vice President and Chief Financial Officer and Financial
Management Group Head of AmSouth Alabama (June 1990 to July 1993) and
Senior Executive Vice President of AmSouth and Senior Executive Vice
President and Operations and Administration Group Head of AmSouth Alabama
(August 1988 to June 1990).
C. Dowd Ritter, 46, Vice Chairman of the Board of AmSouth and AmSouth
Alabama (July 1993 to date); Director of AmSouth Bank of Georgia, AmSouth
Mortgage, and AmSouth Investment Services, Inc.; formerly Senior Executive
Vice President of AmSouth and Senior Executive Vice President and General
Banking Group Head of AmSouth Alabama (May 1991 to July 1993) and Senior
Executive Vice President, Trust Officer and Trust and Financial Services
Group Head of AmSouth Alabama (August 1988 to May 1991).
A. Fox deFuniak, III, 53, Senior Executive Vice President and Birmingham
Banking Group Head of AmSouth Alabama (May 1991 to date); Director of
AmSouth Mortgage; formerly Senior Executive Vice President and Retail
Banking and Marketing Group Head of AmSouth Alabama (November 1989 to May
1991) and Senior Executive Vice President and Regional Executive for the
North Central Region of AmSouth Alabama (August 1988 to November 1989).
W. Michael Graves, 47, Senior Executive Vice President (December 1993 to
date) and Alabama Banking Group Head (July 1993 to date) of AmSouth
Alabama; Director of AmSouth Mortgage; formerly Executive Vice President
and Regional Executive for the Central Region of AmSouth Alabama (May 1991
to July 1993), Executive Vice President in charge of Birmingham and Shelby
County Branch System of AmSouth Alabama (November 1989 to May 1991), and
Executive Vice President and Division Head of the Retail Banking Division
of AmSouth Alabama (August 1988 to November 1989).
E. W. Stephenson, Jr., 47, Chairman of the Board and Chief Executive
Officer of AmSouth Florida and Senior Executive Vice President of AmSouth
(July 1993 to date); Director of AmSouth Florida; formerly Executive Vice
President and Consumer and Marketing Division Head of AmSouth Alabama (May
1991 to July 1993), Executive Vice President and Regional Executive for the
North Central Region of AmSouth Alabama (November 1989 to May 1991) and
Executive Vice President and Regional Executive for the Northern Region of
AmSouth Alabama (1987 to November 1989).
9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
AmSouth's common stock is listed for trading on the New York Stock Exchange
under the symbol ASO. The following table sets forth certain common stock data
for the last five years.
COMMON STOCK DATA 1993 1992 1991 1990 1989
- ----------------- ------- ------- ------ ------ ------
Cash dividends declared.............. $ 1.22 $ 1.07 $ .98 $ .94 $ .89
Book value........................... 22.01 19.10 17.65 16.40 15.32
Market value at year end............. 31 1/4 32 5/8 21 1/2 13 15 7/8
Market price range:
High................................ 35 7/8 32 5/8 22 1/8 17 1/8 19 3/8
Low................................. 27 3/8 21 3/8 12 3/8 11 1/2 15
Total trading volume (In thousands).. 21,059 12,363 8,434 5,150 4,073
Dividend yield at year end........... 4.48% 3.56% 4.84% 7.38% 5.88%
Dividend payout ratio................ 39.35 42.63 47.34 47.72 52.05
Price earnings ratio................. 10.08X 13.00X 10.39X 6.60X 9.28X
Shareholders of record at year end... 12,985 9,343 9,146 9,582 9,735
Average shares outstanding (In
thousands).......................... 47,153 42,993 39,957 38,261 39,400
Quarterly high and low sales prices of and cash dividends declared on AmSouth
common stock are set forth in Note U of the Notes to Consolidated Financial
Statements.
As of March 4, 1994, there were approximately 14,000 holders of record of
AmSouth's common stock.
10
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the last five
years.
1993 1992 1991 1990 1989
----------- ----------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
EARNINGS SUMMARY
Revenue from earning
assets................. $ 776,961 $ 704,516 $ 781,453 $ 812,551 $ 809,102
Interest expense........ 314,884 311,079 446,741 515,026 531,359
----------- ----------- ---------- ---------- ----------
Gross interest margin... 462,077 393,437 334,712 297,525 277,743
Provision for loan
losses................. 18,980 36,555 46,029 41,583 44,766
----------- ----------- ---------- ---------- ----------
Net interest margin..... 443,097 356,882 288,683 255,942 232,977
Noninterest revenues,
excluding investment
securities gains....... 193,145 159,634 150,246 129,808 119,532
Investment securities
gains.................. 1,216 4,615 12,256 435 5,325
Noninterest expenses.... 420,087 370,056 340,748 288,488 275,446
----------- ----------- ---------- ---------- ----------
Income before income
taxes.................. 217,371 151,075 110,437 97,697 82,388
Income taxes............ 71,144 43,026 27,636 22,297 15,185
----------- ----------- ---------- ---------- ----------
Net income............ $ 146,227 $ 108,049 $ 82,801 $ 75,400 $ 67,203
=========== =========== ========== ========== ==========
PER COMMON SHARE
Net income............. $ 3.10 $ 2.51 $ 2.07 $ 1.97 $ 1.71
Cash dividends
declared.............. 1.22 1.07 .98 .94 .89
Average common shares
outstanding............ 47,153 42,993 39,957 38,261 39,400
SELECTED YEAR END
BALANCES
Loans net of unearned
income................. $ 7,930,224 $ 6,138,955 $5,722,831 $5,839,697 $5,831,472
Assets.................. 12,547,871 10,208,606 9,924,891 9,148,383 8,992,781
Deposits................ 9,567,882 7,799,816 7,779,491 7,449,207 7,047,319
Long-term debt.......... 163,142 136,245 138,972 128,715 130,593
Shareholders' equity.... 1,090,009 824,755 753,542 625,199 600,042
SELECTED AVERAGE
BALANCES
Loans net of unearned
income................. 7,043,158 5,757,366 5,631,432 5,734,370 5,596,839
Assets.................. 11,464,442 9,591,147 9,266,471 8,938,682 8,688,212
Deposits................ 8,744,725 7,608,189 7,441,424 7,093,047 6,811,193
Long-term debt.......... 158,777 137,994 134,655 131,477 130,803
Shareholders' equity.... 979,435 790,873 681,853 606,744 587,974
SELECTED RATIOS
Return on average
assets................. 1.28% 1.13% .89% .84% .77%
Return on average
equity................. 14.93 13.66 12.14 12.43 11.43
Gross interest spread... 4.55 4.72 4.24 3.96 3.85
Operating efficiency.... 62.34 64.07 65.56 63.96 64.59
Allowance for loan
losses to loans net of
unearned income........ 1.49 1.51 1.56 1.50 1.60
Nonperforming assets to
loans net of unearned
income, foreclosed
properties and
repossessions.......... .92 1.59 2.74 2.85 2.18
Ending equity to ending
assets................. 8.69 8.08 7.59 6.83 6.67
Average equity to
average assets......... 8.54 8.25 7.36 6.79 6.77
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
For the year ended December 31, 1993, AmSouth reported earnings per share of
$3.10, which includes the effect of business combinations accounted for by the
pooling-of-interests method, versus $2.51 for the year ended 1992 and $2.07 for
the year ended 1991. Net income exceeded $146 million compared to $108 million
for 1992, a 35.3% increase. Balance sheet growth was strong, the gross interest
margin continued at historically wide spreads, credit quality costs were at a
minimum, noninterest revenue growth was solid, and noninterest expense control
was strong.
The return on average assets for 1993 was 1.28% versus 1.13% for the
preceding year. Return on average equity was 14.93% versus 13.66% for 1992. Two
increasingly important ratios are the efficiency ratio and the productivity
ratio. The efficiency ratio is defined as total noninterest expense as a
percent of the sum of the gross interest margin on a fully taxable equivalent
basis plus total noninterest revenues. The efficiency ratio for 1993 was 62.3%,
which was an improvement of 1992's efficiency ratio of 64.1%. Management's goal
is to reduce the efficiency ratio below 60%. The productivity ratio, which is
defined as total noninterest expense as a percentage of total average assets,
was 3.66% for 1993 versus 3.86% for 1992.
EARNING ASSETS
AmSouth's earning assets consist of loans, investment securities, securities
held for sale, and other earning assets. Further discussion of the significant
aspects of each of these earning assets follows. Table 1 illustrates the
composition of average earning assets for the years ended December 31, 1993,
1992, and 1991.
TABLE 1--COMPOSITION OF AVERAGE EARNING ASSETS
1993 1992 1991
-------------------- ------------------- -------------------
AVERAGE PERCENT AVERAGE PERCENT AVERAGE PERCENT
BALANCE OF TOTAL BALANCE OF TOTAL BALANCE OF TOTAL
----------- -------- ---------- -------- ---------- --------
(DOLLARS IN THOUSANDS)
Loans net of unearned
income................. $ 7,043,158 66.8% $5,757,366 65.7% $5,631,432 66.9%
Investment securities... 2,399,460 22.8 2,535,970 29.0 2,476,627 29.4
Securities held for
sale................... 605,558 5.7 81,374 0.9 14,415 0.2
Other earning assets.... 494,948 4.7 381,110 4.4 294,735 3.5
----------- ----- ---------- ----- ---------- -----
$10,543,124 100.0% $8,755,820 100.0% $8,417,209 100.0%
=========== ===== ========== ===== ========== =====
12
LOANS AND LOAN QUALITY
Loans are the predominant earning asset for AmSouth. As expected, loans
provide the highest level of revenues and the highest degree of risk for the
company. When analyzing potential loans, management assesses both interest rate
objectives and credit quality objectives in determining whether to extend a
given loan and the appropriate pricing for that loan. AmSouth maintains a
diversified portfolio in order to spread its risk and reduce its exposure to
economic downturns which may occur in different segments of the economy or in
particular industries.
TABLE 2--COMPOSITION OF LOANS
DECEMBER 31
----------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
(IN MILLIONS)
Commercial.................................. $2,374 $2,290 $2,285 $2,312 $2,366
Commercial real estate:
Commercial real estate mortgage........... 1,057 888 822 928 930
Real estate construction.................. 342 236 238 237 289
------ ------ ------ ------ ------
Total commercial real estate............ 1,399 1,124 1,060 1,165 1,219
Consumer:
Residential first mortgages............... 2,263 1,061 932 931 893
Other residential mortgages............... 488 442 412 345 298
Dealer indirect........................... 599 496 506 589 590
Other consumer............................ 877 794 608 602 575
------ ------ ------ ------ ------
Total consumer.......................... 4,227 2,793 2,458 2,467 2,356
------ ------ ------ ------ ------
8,000 6,207 5,803 5,944 5,941
Less unearned income........................ 70 68 80 104 110
------ ------ ------ ------ ------
$7,930 $6,139 $5,723 $5,840 $5,831
====== ====== ====== ====== ======
The composition of the loan portfolio at AmSouth, as shown in Table 2, has
shifted over the last several years. In 1989, consumer loans represented
approximately 40% of total loans outstanding, while in 1993, consumer loans
represented approximately 53% of total loans outstanding. Residential first
mortgages have increased as a percentage of the total consumer portfolio. In
1989, residential first mortgages represented 38% of total consumer loans
compared to 54% in 1993. Residential first mortgages grew $1.2 billion from
December 31, 1992 to December 31, 1993. Of this total growth, $820.5 million
was related to the acquisitions of First Chattanooga Financial Corporation
(FCFC) and Mid-State Federal Savings Bank (Mid-State). Both of these financial
institutions were thrifts prior to the mergers, and residential first mortgages
represented the majority of loans held in their portfolios. The remaining
$381.5 million was growth in the existing AmSouth portfolio. At December 31,
1993, the residential first mortgages held by AmSouth's subsidiaries were
predominantly adjustable-rate mortgages. The majority of fixed-rate residential
loans maintained by AmSouth on its balance sheet had 15-year final maturities
or shorter. Other residential mortgages primarily consisted of home equity
lines of credit as well as second mortgages on residential property.
13
Table 3 provides the composition of the loan portfolio by industry. Real
estate loans are categorized by the type of collateral. At December 31, 1993,
38% of the total commercial real estate portfolio was represented by owner
occupied properties. Owner occupied properties include mortgages where the
borrower is a primary tenant, such as a factory or warehouse loan. Nonowner
occupied lending represents those loans where the primary method of repayment
is anticipated to come from rental income. The former is considered to have
inherently less credit risk than the latter.
TABLE 3--LOANS BY INDUSTRY
DECEMBER 31
------------- INCREASE
1993 1992 (DECREASE)
------ ------ ----------
(IN MILLIONS)
Commercial:
Manufacturing........................................ $ 415 $ 492 $ (77)
Trade................................................ 346 347 (1)
Transportation, communication and utilities.......... 184 169 15
Health services...................................... 209 126 83
Other services....................................... 314 315 (1)
Construction......................................... 85 89 (4)
Other commercial..................................... 821 752 69
------ ------ ------
Total commercial................................. 2,374 2,290 84
------ ------ ------
Commercial real estate:
Commercial real estate mortgage:
Owner occupied..................................... 402 398 4
Multifamily........................................ 133 110 23
Other nonowner occupied............................ 522 380 142
------ ------ ------
Total commercial real estate mortgages........... 1,057 888 169
------ ------ ------
Real estate construction:
Owner occupied..................................... 130 98 32
Nonowner occupied.................................. 212 138 74
------ ------ ------
Total real estate construction................... 342 236 106
------ ------ ------
Total commercial real estate..................... 1,399 1,124 275
------ ------ ------
Consumer:
Residential first mortgages.......................... 2,263 1,061 1,202
Other residential mortgages.......................... 488 442 46
Revolving credit..................................... 64 68 (4)
Bankcard............................................. 275 295 (20)
Dealer indirect...................................... 599 496 103
Other consumer....................................... 538 431 107
------ ------ ------
Total consumer................................... 4,227 2,793 1,434
------ ------ ------
Total loans outstanding................................ $8,000 $6,207 $1,793
====== ====== ======
Industry and loan type diversification is reviewed quarterly by AmSouth's
management. Exposure limits, where appropriate, for particular industries or
types of loans are established. For example, AmSouth internally monitors loans
which are defined as highly leveraged transactions (HLT) and loans to lesser
developed countries. HLT loans comprised less than 4% of the total commercial
portfolio at December 31, 1993. At December 31, 1993, AmSouth had $1.9 million
in foreign assets of which $816 thousand were loans. AmSouth's foreign assets
and foreign loans at December 31, 1992 were $2.5 million and $1.6 million,
respectively.
14
AmSouth offers loan products to customers with varying maturity schedules.
Table 4 presents the maturities of certain loans at December 31, 1993.
TABLE 4--SELECTED LOAN MATURITIES AND SENSITIVITY TO CHANGE IN INTEREST RATES
DUE AFTER ONE BUT
WITHIN FIVE YEARS DUE AFTER FIVE YEARS
DUE IN ONE -------------------- --------------------
YEAR OR FIXED VARIABLE FIXED VARIABLE
LESS RATE RATE TOTAL RATE RATE TOTAL TOTAL
---------- ----- -------- ----- ----- -------- ----- ------
(IN MILLIONS)
Commercial, financial
and agricultural....... $1,548 $414 $374 $788 $22 $16 $38 $2,374
Real estate construc-
tion................... 260 26 47 73 6 3 9 342
------ ---- ---- ---- --- --- --- ------
Total............. $1,808 $440 $421 $861 $28 $19 $47 $2,716
====== ==== ==== ==== === === === ======
AmSouth has written loan policies which include loan underwriting procedures
and the approval process. Depending primarily on the amount of the loan, there
are various approval levels including the branch or department level, the area
level, and the centralized Corporate Credit Committee. In addition, loans in
excess of $10.0 million are approved by the Executive Committee of the Board of
Directors.
AmSouth has a Loan Review Department which performs ongoing, independent
reviews of specific loans for credit quality and proper documentation and of
the risk management process. This department is centralized and independent of
the lending function. The results of its examinations are reported to the Audit
Committee of the Board of Directors as well as AmSouth's independent auditors.
In addition, regular reports are made to senior management regarding the credit
quality of the loan portfolio as well as trends.
Each commercial loan booked at AmSouth is assigned a risk rating on a
numerical scale from one to eight by the loan officer, subject to review by the
Loan Review Department. Consumer loan portfolios are assigned bulk ratings by
Loan Review on the same scale by type of loan and performance. The risk profile
of the loan portfolio established by these ratings and trends are reported to
management and the Audit Committee. Designated credit officers who are
organizationally independent of the production areas oversee the loan approval
process, review adherence to credit policies and performance of the credit
administration function, and monitor efforts to reduce nonperforming assets and
classified assets.
Management closely monitors loans and other assets which are classified as
nonperforming assets. Nonperforming assets include nonaccrual loans, loans
restructured because of the debtor's financial difficulties, foreclosed
properties, and repossessions. Loans are generally placed on nonaccrual if full
collection of principal and interest becomes doubtful (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.
Table 5 details the components of nonperforming assets at year end for each of
the last five years. Nonperforming assets excluding accruing loans 90 days past
due (nonperforming assets), decreased $25.2 million, or 25.7%, during 1993.
This follows a $61.4 million, or 38.5%, decrease during 1992. The continued
decrease in nonperforming assets during 1993 was the result of management's
proactive efforts to reduce AmSouth's level of nonperforming assets as well as
a favorable economic condition resulting from stabilization of the commercial
real estate market. During 1993, AmSouth incurred net credit related costs
(provision for loan losses and foreclosed properties expense) of $14.7 million.
This included both a $6.3 million recovery of a loan previously charged off as
well as a series of gains on the sale of foreclosed properties. Gains on sales
of foreclosed properties for 1993 totaled $4.7 million. Management does not
expect gains on the sale of foreclosed property to be at this level in future
years.
15
TABLE 5--NONPERFORMING ASSETS
DECEMBER 31
----------------------------------------------
1993 1992 1991 1990 1989
------- ------- -------- -------- --------
(DOLLARS IN THOUSANDS)
Nonaccrual loans............... $45,656 $51,652 $ 62,890 $ 84,734 $ 78,895
Restructured loans............. 2,382 4,924 3,368 86 29
------- ------- -------- -------- --------
Nonperforming loans.......... 48,038 56,576 66,258 84,820 78,924
Foreclosed properties.......... 23,714 40,225 91,174 79,714 45,681
Repossessions.................. 1,041 1,196 1,919 4,182 3,619
------- ------- -------- -------- --------
Total nonperforming assets*.. $72,793 $97,997 $159,351 $168,716 $128,224
======= ======= ======== ======== ========
Nonperforming assets* to loans
net of unearned income, fore-
closed properties and repos-
sessions...................... .92% 1.59% 2.74% 2.85% 2.18%
Accruing loans 90 days past
due........................... $19,960 $16,983 $ 19,337 $ 22,612 $ 24,664
- --------
*Exclusive of accruing loans 90 days past due.
TABLE 6--LOANS AND CREDIT QUALITY
LOANS NONPERFORMING LOANS* NET CHARGE-OFFS
DECEMBER 31 DECEMBER 31 DECEMBER 31
--------------------- --------------------- ----------------
1993 1992 1993 1992 1993 1992
---------- ---------- ---------- ---------- ------- -------
(IN THOUSANDS)
Commercial.............. $2,373,517 $2,290,113 $20,109 $26,186 $ 3,511 $12,356
Commercial real estate:
Commercial real estate
mortgage:
Owner occupied........ 402,375 397,792 901 4,156 (5,596) 959
Nonowner occupied..... 654,377 490,208 17,375 17,922 1,167 11,172
---------- ---------- ---------- ---------- ------- -------
Total commercial
real estate mort-
gage............... 1,056,752 888,000 18,276 22,078 (4,429) 12,131
---------- ---------- ---------- ---------- ------- -------
Real estate construc-
tion:
Owner occupied........ 130,405 98,415 1,785 915 -0- 294
Nonowner occupied..... 212,129 137,808 518 2,743 (41) (3,597)
---------- ---------- ---------- ---------- ------- -------
Total real estate
construction....... 342,534 236,223 2,303 3,658 (41) (3,303)
---------- ---------- ---------- ---------- ------- -------
Total commercial
real estate...... 1,399,286 1,124,223 20,579 25,736 (4,470) 8,828
---------- ---------- ---------- ---------- ------- -------
Consumer:
Residential first
mortgages............ 2,262,669 1,060,889 5,466 2,377 272 861
Other residential
mortgages............ 487,984 442,276 -0- -0- 238 640
Dealer indirect....... 599,031 495,857 47 -0- 1,833 3,040
Other consumer........ 877,438 793,761 1,837 2,277 16,097 7,029
---------- ---------- ---------- ---------- ------- -------
Total consumer.... 4,227,122 2,792,783 7,350 4,654 18,440 11,570
---------- ---------- ---------- ---------- ------- -------
$7,999,925 $6,207,119 $48,038 $56,576 $17,481 $32,754
========== ========== ========== ========== ======= =======
- --------
*Exclusive of accruing loans 90 days past due.
Table 6 compares the balances of loans at December 31, 1993 and 1992 with the
related nonperforming loans, excluding accruing loans 90 days past due. In
addition, the net charge-offs by those categories for 1993 and 1992 are
presented. For the year ended December 31, 1993, net charge-offs as a
percentage of average loans net of unearned income totaled 25 basis points as
compared with 57 basis points for year ended
16
December 31, 1992. Normalizing the net charge-off ratio for the above-
mentioned large recovery of a loan previously charged off, the net charge-offs
to average loans net of unearned income would have been 34 basis points for
1993.
For the year ended December 31, 1993, the level of foreclosed properties
decreased $16.5 million, or 41.0%, compared to 1992, primarily due to the
continued sales of properties. The coverage ratio, which is computed as the
appraised value as a percentage of carrying value, was 143.2% at December 31,
1993, compared to 138.3% at December 31, 1992. Table 7 presents a listing of
foreclosed properties by type of property and their carrying value at December
31, 1993.
TABLE 7--COMPOSITION OF FORECLOSED PROPERTIES
CARRYING VALUE PERCENT OF TOTAL APPRAISED VALUE COVERAGE RATIO
-------------- ---------------- --------------- --------------
(DOLLARS IN THOUSANDS)
Shopping centers........ $ 6,318 23.4%
Apartments.............. 7,393 27.3
Land/lots............... 4,693 17.3
Commercial buildings.... 5,303 19.6
Other................... 3,354 12.4
-------- -----
27,061 100.0%
=====
Allowance for foreclosed
property losses........ (3,347)
--------
$ 23,714 $ 33,951 143.2%
======== ======== =====
Table 8 is a reconcilement of the allowance for foreclosed property losses
for 1993, 1992, and 1991. The balance in this allowance account represents
temporary decreases in the value of AmSouth's foreclosed properties and
reflects the company's intention to sell the majority of these properties in
the near future.
TABLE 8--ALLOWANCE FOR FORECLOSED PROPERTY LOSSES
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
Balance at January 1............................. $ 7,484 $ 6,677 $ -0-
Net write-downs/losses........................... (2,887) (14,701) (22,775)
Addition (reduction) to allowance charged (cred-
ited) to expense................................ (3,773) 15,508 29,452
Allowance acquired in bank purchases............. 2,523 -0- -0-
------- ------- -------
Balance at December 31........................... $ 3,347 $ 7,484 $ 6,677
======= ======= =======
During 1993, 1992, and 1991, the average balance of foreclosed properties
and repossessions totaled $33.3 million, $71.1 million, and $99.5 million,
respectively. The approximate pre-tax cost of carrying these assets, assuming
a cost of funds equal to the average rate paid on interest-bearing liabilities
for the year, was $1.2 million for 1993, $3.0 million for 1992, and $6.0
million for 1991. Due to changing interest rates, these costs may not be an
accurate indicator of the possible impact on future earnings if these assets
were converted into earning assets.
AmSouth recognizes interest income on nonaccrual loans on a cash basis only
when there is no substantial doubt as to the collection of principal. During
1993, $3.6 million in revenue would have been recognized had the loans
included in nonaccrual at year end been on an accrual basis for the entire
year. Revenues included approximately $130 thousand recorded in 1993 for these
loans.
17
Despite AmSouth's high audit standards, internal controls, and continuous
loan review system, the risk inherent in the nature of lending results in
periodic loan charge-offs. AmSouth maintains an allowance for loan losses which
it believes is adequate to absorb losses in the loan portfolio. A formal review
is prepared quarterly to assess the risk in the portfolio in determining the
adequacy of the allowance for loan losses. The review includes analyses of
historical performance, the level of nonperforming and rated loans, specific
analyses of certain problem loans, loan activity since the previous quarter,
reports prepared by the Loan Review Department, consideration of current
economic conditions, and other pertinent information. The review is then
presented to and subsequently approved by management and the Audit Committee of
the Board of Directors. The level of allowance to net loans outstanding will
vary depending on the overall results of this quarterly review.
Over the past several years, as AmSouth's overall credit quality has
improved, management has maintained an allowance for loan losses at the end of
the period to loans net of unearned income approximating 1.50%. At December 31,
1993, the allowance at the end of the period to loans net of unearned income
was 1.49%. This produces a coverage ratio for nonperforming loans of 245.8%.
Management will continue to evaluate the level of the allowance for loan
losses. With the change in mix of the company's portfolio, including the
increase in residential first mortgage loans which inherently have less risk,
management will continue to monitor not only the absolute level of the
allowance but also the coverage ratio of nonperforming loans.
Table 9 is a summary of the allocation of the allowance for loan losses as
determined by internal formulas. Although the table assigns amounts to certain
classifications of loans, the balance of the allowance for loan losses at
December 31, 1993 is considered to be a general allowance and, therefore, is
available for charge-offs of any type of loan which may be necessary in the
future.
TABLE 9--ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
PERCENTAGE OF
LOANS* IN EACH
ALLOWANCE CATEGORY TO
ALLOCATION TOTAL LOANS*
---------- --------------
(DOLLARS IN THOUSANDS)
Commercial..................................... $ 32,611 29.9%
Commercial real estate:
Commercial real estate mortgage.............. 18,416 13.3
Real estate construction..................... 5,082 4.3
--------- -----
Total commercial real estate............. 23,498 17.6
Consumer:
Residential first mortgages.................. 3,510 28.5
Other residential mortgages.................. 619 6.2
Dealer indirect.............................. 5,260 6.7
Other consumer............................... 17,752 11.1
--------- -----
Total consumer........................... 27,141 52.5
Unfunded commitments........................... 5,650 --
Standby letters of credit...................... 1,660 --
Unallocated.................................... 27,529 --
--------- -----
$ 118,089 100.0%
========= =====
- --------
*Net of unearned income.
18
Table 10 summarizes AmSouth's loan loss experience and coverage ratios for
the last five years.
TABLE 10--ALLOWANCE FOR LOAN LOSSES
1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
BALANCE AT JANUARY 1.... $ 92,945 $ 89,144 $ 87,660 $ 93,394 $ 73,945
Loans charged off:
Commercial, financial
and agricultural..... (11,185) (15,538) (17,993) (24,039) (11,437)
Real estate
construction......... (176) (525) (352) (752) (148)
Real estate mortgage.. (3,184) (14,174) (21,366) (13,324) (7,413)
Installment........... (19,302) (14,079) (19,446) (18,519) (12,821)
----------- ----------- ----------- ----------- -----------
Total charge-offs... (33,847) (44,316) (59,157) (56,634) (31,819)
----------- ----------- ----------- ----------- -----------
Recoveries of loans
previously charged off:
Commercial, financial
and agricultural..... 6,081 3,182 10,711 6,451 3,907
Real estate
construction......... 217 3,828 194 1 4
Real estate mortgage.. 7,103 542 372 587 572
Installment........... 2,965 4,010 3,335 2,278 2,019
----------- ----------- ----------- ----------- -----------
Total recoveries.... 16,366 11,562 14,612 9,317 6,502
----------- ----------- ----------- ----------- -----------
Net charge-offs......... (17,481) (32,754) (44,545) (47,317) (25,317)
----------- ----------- ----------- ----------- -----------
Addition to allowance
charged to expense..... 18,980 36,555 46,029 41,583 44,766
Allowance acquired in
bank purchases......... 23,645 -0- -0- -0- -0-
----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31.. $ 118,089 $ 92,945 $ 89,144 $ 87,660 $ 93,394
=========== =========== =========== =========== ===========
Loans net of unearned
income, outstanding at
end of period.......... $ 7,930,224 $ 6,138,955 $ 5,722,831 $ 5,839,697 $ 5,831,472
Average loans net of
unearned income,
outstanding for the
period................. $ 7,043,158 $ 5,757,366 $ 5,631,432 $ 5,734,370 $ 5,596,839
RATIOS
Allowance at end of
period to loans net of
unearned income........ 1.49% 1.51% 1.56% 1.50% 1.60%
Allowance at end of
period to average loans
net of unearned income. 1.68 1.61 1.58 1.53 1.67
Allowance at end of
period to nonperforming
loans*................. 245.82 164.28 134.54 103.35 118.33
Allowance at end of
period to nonperforming
assets*................ 162.23 94.84 55.94 51.96 72.84
Net charge-offs to
average loans net of
unearned income........ .25 .57 .79 .83 .45
Net charge-offs to
allowance at end of
period................. 14.80 35.24 49.97 53.98 27.11
Recoveries to prior year
charge-offs............ 36.93 19.54 25.80 29.28 22.72
- --------
*Exclusive of accruing loans 90 days past due.
19
INVESTMENT SECURITIES AND SECURITIES HELD FOR SALE
The investment securities portfolio consists primarily of U.S. Treasury
obligations, federal agency securities, federally-sponsored mortgage
securities, corporate securities, and state, county, and municipal debt
instruments. Investment securities are purchased with the intent and ability to
be held until maturity. Investment securities are utilized to provide an
alternative investment for available funds and to provide a stable source of
interest income. These securities are also used to pledge as collateral for
certain types of transactions. The 1993 average balance of investment
securities declined $136.5 million, or 5.4%, compared to 1992. Slightly over
half of the decline was due to the maturities and calls of tax-free securities.
At December 31, 1993, a total of 48% of AmSouth's tax-free securities were
rated by leading independent agents with 92% of those securities rated "A" or
above. The remaining tax-free securities were not rated, generally because of
the size of the issue and the expense associated with obtaining a rating. At
December 31, 1993, AmSouth did not have more than 10% of its shareholders'
equity invested in the tax-free obligations of any one issuer where the
securities are payable from the same source of income or taxing authority.
TABLE 11--INVESTMENT SECURITIES AND SECURITIES HELD FOR SALE
DECEMBER 31
-----------------------
1993 1992 1991
------- ------- -------
(IN MILLIONS)
Investment Securities:
U.S. Treasury and federal agency securities............ $ 1,249 $ 1,745 $ 1,870
Other securities....................................... 17 264 317
------- ------- -------
Total taxable...................................... 1,266 2,009 2,187
State, county and municipal securities................. 352 406 476
------- ------- -------
$ 1,618 $ 2,415 $ 2,663
======= ======= =======
Securities Held for Sale:
U.S. Treasury and federal agency securities............ $ 1,250 $ 287 $ 101
Other securities....................................... 39 50 -0-
------- ------- -------
Total taxable...................................... 1,289 337 101
State, county and municipal securities................. -0- -0- -0-
------- ------- -------
$ 1,289 $ 337 $ 101
======= ======= =======
Beginning in 1991, management segregated from its investment portfolio
certain securities which are labeled as held for sale. AmSouth defines
securities held for sale as securities to be held for an indefinite period of
time, including securities that management intends to use as part of its
asset/liability strategy, or that may be sold in response to potential
liquidity needs, changes in interest rates, change in prepayment risk, or other
similar factors. These securities are accounted for at the lower of cost or
market. At December 31, 1993, securities held for sale had a carrying value of
$1.3 billion, which approximated market value, and consisted of U.S. Treasury
and federal agency securities, mortgage-backed securities and other securities.
This compares to December 31, 1992, when the company had $336.7 million in
securities held for sale which also consisted of U.S. Treasury and federal
agency securities, mortgage-backed securities and other securities. During 1993
net gains of $12.9 million were recognized on sales of these securities,
compared to $1.0 million in 1992.
At the end of 1993, the investment securities and securities held for sale
portfolios included $1.9 billion of mortgage-backed securities, consisting of
mortgage-backed pass-throughs and collateralized mortgage obligations (CMO's).
Substantially all of the holdings in the mortgage-backed securities are either
direct issues or collateralized by direct issues of the United States
Government or federally sponsored agencies. Approximately 59% of the mortgage-
backed securities are fixed-rate securities. Fixed-rate mortgage-backed pass-
through securities have maximum final maturities of five to fifteen years and
an expected average life of approximately four years. While the final
maturities on floating-rate mortgage-backed pass-through securities are
20
longer, the average life is estimated to be less than five years and the yields
fluctuate with a variety of short-term indices. The yields on floating-rate CMO
securities fluctuate with LIBOR and other short-term indices and have an
expected average life of less than six years. Fixed-rate CMO securities are
included in the held for sale portfolio and are planned amortization classes or
sequential payment classes. While the final stated maturities on these
securities are seven to thirty years, the expected average life is less than
five years. Table 12 presents maturities of the investment and held for sale
securities portfolios at December 31, 1993.
TABLE 12--INVESTMENT SECURITIES AND SECURITIES HELD FOR SALE
RELATIVE MATURITIES AND WEIGHTED AVERAGE YIELDS
DUE WITHIN DUE AFTER ONE BUT DUE AFTER FIVE BUT DUE AFTER
ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS TEN YEARS
--------------- ----------------------------------------- ----------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
-------- ----- ---------- ------------------- -------- --------- -----
(TAXABLE EQUIVALENT BASIS--DOLLARS IN THOUSANDS)
Investment Securities:
U.S. Treasury and fed-
eral agency securities. $ 8,399 5.80% $ 108,564 6.73% $ 352,358 7.67% $ 779,340 6.73%
State, county and munic-
ipal obligations....... 29,010 10.85 135,220 10.92 101,837 11.39 86,466 11.55
Other securities........ 2,125 7.28 25 6.00 150 4.45 8,959 5.71
-------- ----- ---------- ------ ----------- ------- --------- -----
$ 39,534 9.48 $ 243,809 9.05 $ 454,345 8.50 $ 874,765 7.19
======== ===== ========== ====== =========== ======= ========= =====
Percentage of total
portfolio.............. 2.45% 15.12% 28.18% 54.25%
Taxable equivalent ad-
justment for calcula-
tion of yield.......... $ 1,102 $ 5,169 $ 4,061 $ 3,495
Securities Held for
Sale:
U.S. Treasury and fed-
eral agency securities. $ 52,233 3.10% $ 306,886 4.61% $ 129,207 7.56% $ 761,880 5.47%
Other securities........ -0- -- 998 6.00 1,193 4.03 -0- --
-------- ----- ---------- ------ ----------- ------- --------- -----
$ 52,233 3.10 $ 307,884 4.62 $ 130,400 7.53 $ 761,880 5.47
======== ===== ========== ====== =========== ======= ========= =====
Percentage of total
portfolio.............. 4.17% 24.58% 10.42% 60.83%
- --------
Notes:
1. The weighted average yields were computed by dividing the taxable equivalent
interest income by the book value of the appropriate securities. The taxable
equivalent interest income 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 securities indicated as maturing after five but within ten
years includes $344 million of mortgage-backed securities and those
indicated as maturing after ten years includes $1,450 million of mortgage-
backed securities. Although these securities have long-term maturities,
according to mortgage industry standards, the estimated weighted average
remaining life of these securities held in AmSouth's investment portfolio is
less than five years.
3. Federal Reserve Bank stock, Federal Home Loan Bank stock, and preferred
stock of other corporations held by AmSouth are not included in the above
table.
OTHER EARNING ASSETS
The other earning assets category consists of federal funds sold and
securities purchased under agreements to resell, trading account securities,
and mortgage loans held for sale. These assets generally carry relatively low
balances while serving as short-term investment alternatives, assisting in the
management of AmSouth's asset and liability interest rate sensitivity, and
providing a short-term inventory of assets for sale to customers.
The average balance of other earning assets for 1993 was $495 million
compared to $381 million for 1992. The increase over the 1992 average balance
resulted primarily from the increase in mortgage loans held for sale.
At December 31, 1993, other earning assets included $335.4 million of
mortgage loans held for sale compared to $231.3 million at year end 1992. These
loans are primarily originated through AmSouth Mortgage. For 1993, the loan
production volume totaled $2.0 billion compared to $1.6 billion for 1992. This
21
increase was primarily due to a continued lower interest rate environment and
the maintenance of significant volumes of mortgage refinancing. None of the
loans originated and sold by AmSouth Mortgage are subject to recourse
provisions. Mortgage loans serviced for others are not included in the
consolidated statement of condition. The outstanding principal balances of
these loans were $5.0 billion and $4.0 billion at December 31, 1993 and 1992,
respectively.
DEPOSITS
Table 13 outlines the composition of the average deposits of AmSouth for the
last five years. AmSouth's principal source of funds is its deposits, and
AmSouth is committed to provide its customers with a wide variety of products
with modern technology at competitive interest rates. Management continues to
emphasize quality customer service and a strong sales culture as key to
strengthening AmSouth's deposit base.
TABLE 13--AVERAGE DEPOSITS
DECEMBER 31
------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
Noninterest-bearing de-
mand................... $1,491,647 $1,206,281 $1,055,928 $1,110,832 $1,097,889
Interest-bearing demand. 2,968,613 2,777,200 2,651,538 2,342,095 2,084,864
Savings................. 715,409 524,926 435,384 414,446 427,653
Time:
Retail................ 2,203,604 1,925,291 2,125,452 2,100,575 2,064,913
Individual retirement
accounts............. 608,004 482,131 424,224 374,278 330,127
Other................. 162,479 143,007 159,023 154,303 153,980
---------- ---------- ---------- ---------- ----------
Total time.......... 2,974,087 2,550,429 2,708,699 2,629,156 2,549,020
---------- ---------- ---------- ---------- ----------
Certificates of deposit
of $100,000 or more.... 594,969 549,353 589,875 596,518 651,767
---------- ---------- ---------- ---------- ----------
$8,744,725 $7,608,189 $7,441,424 $7,093,047 $6,811,193
========== ========== ========== ========== ==========
Average noninterest-bearing demand deposits continued to increase during 1993
from 1992. Average noninterest-bearing demand deposits increased $285.4 million
or 23.7% in 1993 over 1992. This increase in noninterest-bearing demand
deposits has primarily been within the commercial deposits base. Average time
deposits increased approximately $423.7 million with 65.7% of the increase from
retail or consumer time deposits and 29.7% increase from individual retirement
accounts. The major contributor to both of these increases was the acquisition
of FCFC, completed February 1, 1993.
Table 14 provides a maturity schedule for time deposits of $100,000 or more
at December 31.
TABLE 14--MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
Three months or less................................ $273,621 $215,599 $402,123
Over three through six months....................... 114,001 92,671 128,831
Over six through twelve months...................... 194,137 149,501 103,704
Over twelve months.................................. 222,256 160,702 130,809
-------- -------- --------
$804,015 $618,473 $765,467
======== ======== ========
22
OTHER INTEREST-BEARING LIABILITIES
Other interest-bearing liabilities includes 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 federal funds
purchased and repurchase agreements, which provide an overnight source of
funds, increased $241.7 million in 1993 as AmSouth funded its earning asset
growth. For 1992, average federal funds purchased and repurchase agreements
decreased $88.3 million as a result of the growth in deposits and sluggish loan
demand. At December 31, 1993, 1992, and 1991, federal funds purchased and
repurchase agreements totaled $791.2 million, $988.6 million, and $569.9
million, respectively, with weighted average interest rates of 2.73%, 2.85%,
and 3.82% respectively. The maximum amount outstanding at any month end during
each of the last three years was $1.2 billion, $988.6 million, and $962.5
million, respectively. The average daily balance and average interest rates for
each year are presented in Table 17 entitled "Yields on Average Earning Assets
and Rates on Average Interest-Bearing Liabilities".
Other borrowed funds include master notes, commercial paper, Eurodollars
purchased, term federal funds purchased, the current portion of long-term debt,
interest-bearing deferred compensation, and a treasury, tax and loan note.
During 1993, the average balance of other borrowed funds increased $276.8
million primarily as the result of an increase in term federal funds purchased
and the treasury, tax and loan note. In 1992, compared to 1991, the average
balance of other borrowed funds increased $109.1 million as a result of a
$104.6 million increase in the average balance of the treasury, tax and loan
note.
At December 31, 1993 and 1992, AmSouth had long-term debt outstanding of
$163.1 million and $136.2 million, respectively. In general, the debt has been
used to fund acquisitions, inject capital into subsidiary banks, provide
capital for nonbanking subsidiaries, and for other general corporate purposes.
Note K of the Notes to Consolidated Financial Statements includes details and
descriptions of the composition of long-term debt.
On December 21, 1993, the Securities and Exchange Commission declared
effective AmSouth's registration statement on Form S-3, pursuant to which
AmSouth may offer from time to time not more than $300.0 million of unsecured
senior debt securities, unsecured subordinated debt securities, and/or warrants
to purchase such debt securities. AmSouth intends to utilize approximately
$142.5 million of the proceeds from the issuance of such securities to fund the
cash portion of the Fortune Bancorp, Inc. purchase price. Additionally, AmSouth
has lines of credit arrangements with two financial institutions enabling it to
borrow up to $21.0 million subject to such terms as AmSouth and the banks
mutually agree.
23
SHAREHOLDERS' EQUITY
AmSouth has always placed great emphasis on maintaining its strong capital
base. At December 31, 1993, shareholders' equity totaled $1.1 billion, or 8.69%
of total assets, compared to $824.8 million, or 8.08% of total assets, at
December 31, 1992. Management is committed to maintaining shareholders' equity
at a level sufficient to assure its shareholders, customers, and regulators
that AmSouth is financially sound, and to enable AmSouth to sustain an
appropriate degree of leverage to provide a desirable level of profitability.
Regulators use a risk-adjusted capital calculation to aid in their assessment
of capital adequacy. This ratio is weighted to reflect the credit risk
associated with an institution's assets, both recorded and unrecorded. At
December 31, 1993, the minimum required risk-adjusted capital ratio for Tier I
capital (shareholders' equity less certain intangibles) was 4.00% and the
minimum required risk-adjusted total capital ratio was 8.00%. Table 15
illustrates the calculation of the risk-adjusted capital ratios for AmSouth at
year end 1993 and 1992.
TABLE 15--CAPITAL RATIOS
DECEMBER 31
--------------------------
1993 1992
------------ ------------
(DOLLARS IN THOUSANDS)
Risk-adjusted capital ratio:
Total assets............................. $ 12,547,871 $ 10,208,606
Adjusted allowance for loan losses....... 116,745 92,944
Adjustment for risk-weighting of balance
sheet items............................. (4,639,365) (3,448,665)
Adjustment for off-balance sheet items... 1,380,106 1,207,427
Less certain intangible assets........... 67,087 77,254
------------ ------------
Total risk-adjusted assets............. $ 9,338,270 $ 7,983,058
============ ============
Shareholders' equity..................... $ 1,090,009 $ 824,755
Less certain intangible assets........... 67,087 77,254
------------ ------------
Tier I capital........................... 1,022,922 747,501
------------ ------------
Adjusted allowance for loan losses....... 116,745 92,945
Qualifying long-term debt................ 102,909 102,559
------------ ------------
Tier II capital.......................... 219,654 195,504
------------ ------------
Total capital.......................... $ 1,242,576 $ 943,005
============ ============
Tier I capital to total risk-adjusted as-
sets.................................... 10.95% 9.36%
Total capital to total risk-adjusted as-
sets.................................... 13.31 11.81
Other capital ratios:
Leverage................................. 8.65 7.73
Equity to assets......................... 8.69 8.08
Tangible equity to assets................ 7.47 7.11
In addition, the total risk-adjusted capital ratios for the company's banking
subsidiaries at December 31, 1993, along with other pertinent measures of
capital adequacy, were well above the minimum regulatory requirements. The
total risk adjusted capital ratio for each of AmSouth's major subsidiaries was:
AmSouth Bank N.A.................................................. 10.96%
AmSouth Bank of Florida........................................... 15.84%
AmSouth Bank of Tennessee......................................... 18.27%
At December 31, 1993, the book value per share for AmSouth's common stock was
$22.01 compared to $19.10 at December 31, 1992. The market value per common
share at December 31, 1993 was $31.25 or 142.0% of book value, compared to
$32.625 or 170.8% of book value at December 31, 1992. Management believes this
decline in the market value to book value ratio generally resulted from a
cyclical move by sector
24
investors out of bank stocks as well as concerns over the banking industry's
ability to sustain 1993 profit levels. Management closely monitors its capital
ratios and the market value of its common stock. At December 31, 1993, total
market capitalization was $1.55 billion compared to $1.41 billion at December
31, 1992.
During 1993, shareholders' equity increased $265 million, of which $162
million relates to the 5.5 million shares issued for the purchases of FCFC and
Mid-State.
Management monitors the level of goodwill and other intangibles on both a
consolidated and parent company basis. At December 31, 1993, AmSouth had $130.1
million of goodwill of which $43.4 million was at the parent company. The
parent company's double leverage ratio at year end 1993 and 1992 was 104.0% and
101.7%, respectively.
AmSouth is generally dependent upon dividends from its subsidiary banks to
fund the dividends to its shareholders, capital injections to subsidiaries, and
certain other costs. During 1993, AmSouth declared dividends of $1.22 per
common share, which totaled $57.6 million, compared to $1.07 per common share
and $44.7 million in 1992. The dividend payout ratio for 1993 was 39.35%,
compared to 42.63% in 1992. Table 16 shows AmSouth's computation of its rate of
internal capital generation for the last five years.
TABLE 16--RATE OF INTERNAL CAPITAL GENERATION
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
Return on average assets..................... 1.28% 1.13% .89% .84% .77%
/
Average equity to average assets............. 8.54 8.25 7.36 6.79 6.77
=
Return on average equity..................... 14.93 13.66 12.14 12.43 11.43
X
Earnings retention ratio..................... 60.65 57.37 52.66 52.28 47.95
=
Internal capital generation ratio............ 9.06 7.84 6.39 6.50 5.48
GROSS INTEREST MARGIN
The gross interest margin is defined as the difference between the revenue
from earning assets, primarily interest income, and interest expense related to
interest-bearing liabilities. The gross interest margin is a function of the
average balances of earning assets and interest-bearing liabilities and the
yields earned and rates paid on those balances.
In managing the gross interest margin, management must maintain a
satisfactory spread between the yields on earning assets and the related cost
of interest-bearing funds. The gross interest spread is determined by comparing
the taxable equivalent gross interest margin to average earning assets before
deducting the allowance for loan losses. This ratio reflects the overall
profitability of earning assets, including both those funded by interest-
bearing sources and those which incur no interest cost (primarily noninterest-
bearing demand deposits). This ratio is most often used when analyzing a
banking institution's overall gross interest margin profitability compared to
that of other financial institutions. The incremental interest spread compares
the difference between the yields on earnings assets and the cost of interest-
bearing funds. This calculation and similar ratios are used to assist in
pricing decisions for interest related products.
25
Table 17 illustrates for each of the last three years by major categories of
assets and liabilities, the average balances, the components of the gross
interest margin (on a taxable equivalent basis), the yield or rate, and the
incremental and gross interest spreads.
TABLE 17--YIELDS ON AVERAGE EARNING ASSETS AND RATES ON AVERAGE INTEREST-
BEARING LIABILITIES
1993 1992 1991
--------------------------- -------------------------- --------------------------
AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
----------- -------- ------ ---------- -------- ------ ---------- -------- ------
(TAXABLE EQUIVALENT BASIS--DOLLARS IN THOUSANDS)
ASSETS
Earning assets:
Loans net of unearned
income................ $ 7,043,158 $566,399 8.04% $5,757,366 $492,434 8.55% $5,631,432 $562,549 9.99%
Investment securities:
Taxable securities..... 2,020,550 131,975 6.53 2,085,164 157,215 7.54 1,993,779 170,244 8.54
Tax-free securities.... 378,910 41,063 10.84 450,806 47,181 10.47 482,848 51,335 10.63
----------- -------- ----- ---------- -------- ----- ---------- -------- -----
Total investment
securities.......... 2,399,460 173,038 7.21 2,535,970 204,396 8.06 2,476,627 221,579 8.94
Federal funds sold and
securities purchased
under agreements to
resell................ 200,479 5,487 2.74 147,878 5,592 3.78 167,102 9,083 5.44
Trading account
securities............ 49,448 2,496 5.05 31,125 1,807 5.81 30,603 2,221 7.26
Securities held for
sale.................. 605,558 32,641 5.39 81,374 5,231 6.43 14,415 1,051 7.29
Mortgage loans held for
sale.................. 245,021 14,338 5.85 202,107 14,910 7.38 97,030 7,503 7.73
----------- -------- ----- ---------- -------- ----- ---------- -------- -----
Total earning assets. 10,543,124 794,399 7.53 8,755,820 724,370 8.27 8,417,209 803,986 9.55
----- ----- -----
Cash and other assets... 1,029,329 925,374 939,899
Less allowance for loan
losses................. 108,011 90,047 90,637
----------- ---------- ----------
$11,464,442 $9,591,147 $9,266,471
=========== ========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing
liabilities:
Interest-bearing demand
deposits.............. $ 2,968,613 79,407 2.67 $2,777,200 87,198 3.14 $2,651,538 134,738 5.08
Savings deposits....... 715,409 19,395 2.71 524,926 16,711 3.18 435,384 20,234 4.65
Time deposits.......... 2,974,087 134,831 4.53 2,550,429 135,096 5.30 2,708,699 188,801 6.97
Certificates of deposit
of $100,000 or more... 594,969 24,998 4.20 549,353 27,757 5.05 589,875 40,879 6.93
Federal funds purchased
and securities sold
under agreements to
repurchase............ 998,286 30,538 3.06 756,600 27,117 3.58 844,937 47,339 5.60
Other borrowed funds... 438,258 13,850 3.16 161,450 5,650 3.50 52,308 2,655 5.08
Subordinated Capital
Notes................. 99,247 9,530 9.60 99,117 9,496 9.58 98,988 9,487 9.58
Federal Home Loan Bank
advances.............. 14,447 838 5.80 -0- -0- -- -0- -0- --
Floating Rate Notes Due
1999.................. 8,172 310 3.79 8,733 449 5.14 9,249 660 7.14
7 1/2% Convertible
Subordinated Notes.... 3,488 404 11.58 3,266 404 12.37 3,046 404 13.26
Long-term notes
payable............... 33,423 783 2.34 26,878 1,201 4.47 23,372 1,544 6.61
----------- -------- ----- ---------- -------- ----- ---------- -------- -----
Total interest-bearing
liabilities........... 8,848,399 314,884 3.56 7,457,952 311,079 4.17 7,417,396 446,741 6.02
-------- ----- -------- ----- -------- -----
INCREMENTAL INTEREST
SPREAD................. 3.97% 4.10% 3.53%
===== ===== =====
Noninterest-bearing
demand deposits........ 1,491,647 1,206,281 1,055,928
Other liabilities....... 144,961 136,041 111,294
Shareholders' equity.... 979,435 790,873 681,853
----------- ---------- ----------
$11,464,442 $9,591,147 $9,266,471
=========== ========== ==========
GROSS INTEREST
MARGIN/SPREAD ON A
TAXABLE EQUIVALENT
BASIS.................. 479,515 4.55% 413,291 4.72% 357,245 4.24%
===== ===== =====
Taxable equivalent
adjustment:
Loans.................. 3,715 4,605 6,354
Investment securities.. 13,650 15,195 16,112
Other earning assets... 73 54 67
-------- -------- --------
Total taxable
equivalent
adjustment.......... 17,438 19,854 22,533
-------- -------- --------
GROSS INTEREST MARGIN... $462,077 $393,437 $334,712
======== ======== ========
- --------
Note: The taxable equivalent adjustment for 1993 has been computed based on a
35% federal income tax rate (34% for 1992 and 1991) and has given effect
to the disallowance of interest expense, for federal income tax purposes,
related to certain tax-free assets. Loans net of unearned income includes
nonaccrual loans for all years presented.
26
For 1993, AmSouth experienced compression in its spread as the gross interest
spread and incremental spread declined 17 and 13 basis points, respectively.
The compression in spreads was not unique to AmSouth as banking institutions
throughout the country experienced the same trend. Another effect on the gross
interest spread of the company was the acquisition of FCFC. FCFC was a thrift
prior to merger and, accordingly, had a gross interest spread which was lower
than AmSouth's prior to the merger. Table 18 outlines the analysis of change in
the gross interest spread.
TABLE 18--ANALYSIS OF CHANGE IN THE GROSS INTEREST SPREAD
1993/ 1992/
1992 1991
----- -----
Gross interest spread for the prior year ended December 31.... 4.72% 4.24%
Effects of:
Change in the incremental interest spread................... (0.11) 0.47
Change in the relative volume of earning assets funded by
noninterest-bearing sources................................ 0.05 0.17
Change in the yield earned on earning assets funded by non-
interest-bearing sources................................... (0.11) (0.16)
----- -----
Gross interest spread for the current year ended December 31.. 4.55% 4.72%
===== =====
Much of the maintenance of the gross interest spread during 1993 is
attributable to lower cost deposits matching the declines in assets repricing.
The spread between the prime rate and the rate on federal funds purchased
(prime to fed funds spread) for the year ended 1993 approximated 300 basis
points. Management does not anticipate the prime to fed funds spread to be
maintained at those levels. Management anticipates that AmSouth's gross
interest spread will reflect the narrowing of the prime to fed funds spread to
more historically consistent levels.
27
Table 19 shows the change from year to year for each component of the taxable
equivalent gross interest margin separated into the amount generated by volume
changes and the amount generated by changes in the yield/rate. The $66.2
million increase in the margin during 1993 was due to increased balances
slightly offset by a lower yield/rate. In 1992, the higher gross interest
margin compared to 1991 resulted both from positive trends in the volume as
well as yield/rate.
TABLE 19--VOLUME AND YIELD/RATE VARIANCES
1993 COMPARED TO 1992 1992 COMPARED TO 1991
CHANGE DUE TO CHANGE DUE TO
---------------------- ------------------------
YIELD/ YIELD/
VOLUME RATE NET VOLUME RATE NET
---------- ---------- -------- ---------- ----------- --------
(TAXABLE EQUIVALENT BASIS--IN THOUSANDS)
REVENUE EARNED ON
Loans net of unearned
income............... $ 104,790 $ (30,825) $ 73,965 $ 12,336 $ (82,451) $(70,115)
Investment securities:
Taxable securities.. (4,749) (20,491) (25,240) 7,546 (20,575) (13,029)
Tax-free securities. (7,743) 1,625 (6,118) (3,364) (790) (4,154)
---------- ---------- -------- ---------- ----------- --------
Total investment
securities....... (12,492) (18,866) (31,358) 4,182 (21,365) (17,183)
Federal funds sold and
securities purchased
under agreements to
resell............... 1,680 (1,785) (105) (958) (2,533) (3,491)
Trading account secu-
rities............... 950 (261) 689 37 (451) (414)
Securities held for
sale................. 28,388 (978) 27,410 4,319 (139) 4,180
Mortgage loans held
for sale............. 2,834 (3,406) (572) 7,767 (360) 7,407
---------- ---------- -------- ---------- ----------- --------
TOTAL EARNING AS-
SETS............. 126,150 (56,121) 70,029 27,683 (107,299) (79,616)
---------- ---------- -------- ---------- ----------- --------
INTEREST PAID ON
Interest-bearing de-
mand deposits........ 5,727 (13,518) (7,791) 6,098 (53,638) (47,540)
Savings deposits...... 5,425 (2,741) 2,684 3,657 (7,180) (3,523)
Time deposits......... 20,710 (20,975) (265) (10,491) (43,214) (53,705)
Certificates of
deposit of $100,000
or more.............. 2,177 (4,936) (2,759) (2,654) (10,468) (13,122)
Federal funds
purchased and
securities sold under
agreements to
repurchase........... 7,793 (4,372) 3,421 (4,553) (15,669) (20,222)
Other borrowed funds.. 8,681 (886) 7,795 4,041 (1,046) 2,995
Subordinated Capital
Notes................ 12 22 34 12 (3) 9
Federal Home Loan Bank
advances............. -0- 838 838 -0- -0- -0-
Floating Rate Notes
Due 1999............. (27) (111) (138) (35) (176) (211)
Long-term notes pay-
able................. 980 (994) (14) 249 (592) (343)
---------- ---------- -------- ---------- ----------- --------
TOTAL INTEREST-
BEARING
LIABILITIES...... 51,478 (47,673) 3,805 (3,676) (131,986) (135,662)
---------- ---------- -------- ---------- ----------- --------
GROSS INTEREST MARGIN ON
A TAXABLE EQUIVALENT
BASIS.................. $ 74,672 $ (8,448) 66,224 $ 31,359 $ 24,687 56,046
========== ========== ========== ===========
Less: taxable equivalent
adjustment............. (2,416) (2,679)
-------- --------
GROSS INTEREST
MARGIN........... $ 68,640 $ 58,725
======== ========
- --------
Notes:
1. The change in interest resulting from both volume and yield/rate has been
allocated to change due to volume and change due to yield/rate in proportion
to the relationship of the absolute dollar amounts of the change in each.
2. The computation of the taxable equivalent adjustment has given effect to the
disallowance of interest expense, for federal income tax purposes, related
to certain tax-free assets.
28
ASSET AND LIABILITY MANAGEMENT AND LIQUIDITY
AmSouth maintains a formal asset and liability management process to control
interest rate risk and assist management in maintaining stability in the gross
interest margin as a result of changes in the level of interest rates and/or
the spread relationships among interest rates.
AmSouth uses an earnings simulation model to evaluate the impact of different
interest rate scenarios on the gross interest margin. Management feels that a
traditional interest sensitivity gap analysis does not provide a complete
picture of a corporation's exposure to interest rate change. Static gap models
are a static point-in-time measurement and do not incorporate the effects of
future balance sheet trends, changes in the relationship between yields earned
and rates paid, patterns of rate movements, and changes in prepayment speeds
due to rate movements. Static gap models also do not fully incorporate the
effects of off-balance sheet alternatives such as interest rate caps and
floors. AmSouth's earnings simulation model incorporates all of these factors
as well as reflecting management's actions based on different interest rate
environments. The model projects the gross interest margin over the next twelve
months under a variety of higher and lower interest rate environments.
Each month, the Asset/Liability Committee reviews the earnings simulation
model output with respect to the estimated impact of various interest rate
scenarios on the gross interest margin and approves any major adjustments in
the company's interest rate sensitivity which are deemed necessary. During
1993, AmSouth's gross interest margin continued to benefit from the wider than
normal interest rate spreads, although management expects interest rate spreads
to compress somewhat in 1994. At December 31, 1993, interest rate exposure was
within the approved AmSouth guidelines, which limit the negative impact
attributable to a 300 basis point change in market interest rates, spread
evenly over a twelve month period, to less than 6% of the projected gross
interest margin under a stable rate environment.
Another tool used to monitor AmSouth's overall interest rate sensitivity is a
gap analysis. Table 20 illustrates the company's position at December 31, 1993.
The analysis indicates that AmSouth is in a slightly positive gap position over
the next six-month and twelve-month time horizons.
29
TABLE 20--INTEREST SENSITIVITY ANALYSIS
OVER ONE
AND LESS
0-30 31-60 61-90 91-180 181-365 THAN FIVE OVER FIVE
DAYS DAYS DAYS DAYS DAYS YEARS YEARS TOTAL
---------- -------- -------- ---------- ---------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS)
ASSETS
Earning assets:
Federal funds sold and
securities purchased
under agreements to
resell................ $ 133,873 $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ 133,873
Trading account
securities............ 94,844 -0- -0- -0- -0- -0- -0- 94,844
Securities held for
sale.................. 499,933 44,228 28,735 71,132 151,449 413,943 79,776 1,289,196
Investment securities.. 102,720 44,520 41,124 100,863 176,728 648,784 503,494 1,618,233
Mortgage loans held for
sale.................. 111,811 111,812 111,812 -0- -0- -0- -0- 335,435
Loans net of unearned
income................ 2,959,300 432,998 418,683 572,942 987,241 1,851,720 707,340 7,930,224
---------- -------- -------- ---------- ---------- ---------- ---------- -----------
Total earning assets. 3,902,481 633,558 600,354 744,937 1,315,418 2,914,447 1,290,610 11,401,805
---------- -------- -------- ---------- ---------- ---------- ---------- -----------
Cash and other assets... -0- -0- -0- -0- -0- -0- 1,264,155 1,264,155
Less allowance for loan
losses................. -0- -0- -0- -0- -0- -0- (118,089) (118,089)
---------- -------- -------- ---------- ---------- ---------- ---------- -----------
$3,902,481 $633,558 $600,354 $ 744,937 $1,315,418 $2,914,447 $2,436,676 $12,547,871
========== ======== ======== ========== ========== ========== ========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing
liabilities:
Interest-bearing demand
deposits.............. $1,760,106 $ -0- $ -0- $ -0- $ -0- $1,409,789 $ 41 $ 3,169,936
Savings deposits....... -0- -0- -0- -0- -0- -0- 809,539 809,539
Time deposits.......... 334,847 186,457 214,473 546,341 646,202 1,263,767 155,459 3,347,546
Certificates of deposit
of $100,00 or more.... 141,409 52,205 63,072 95,086 193,402 77,000 -0- 622,174
Federal funds purchased
and securities sold
under agreements to
repurchase............ 788,255 -0- 2,929 -0- -0- -0- -0- 791,184
Other borrowed funds... 467,058 94,997 45,004 5,009 -0- -0- -0- 612,068
Long-term debt......... 3,649 8,008 57 172 461 17,103 133,692 163,142
---------- -------- -------- ---------- ---------- ---------- ---------- -----------
Total interest-
bearing liabilities. 3,495,324 341,667 325,535 646,608 840,065 2,767,659 1,098,731 9,515,589
---------- -------- -------- ---------- ---------- ---------- ---------- -----------
Noninterest-bearing
demand deposits........ -0- -0- -0- -0- -0- 1,618,687 -0- 1,618,687
Other liabilities....... -0- -0- -0- -0- -0- -0- 323,586 323,586
Shareholders' equity.... -0- -0- -0- -0- -0- -0- 1,090,009 1,090,009
---------- -------- -------- ---------- ---------- ---------- ---------- -----------
$3,495,324 $341,667 $325,535 $ 646,608 $ 840,065 $4,386,346 $2,512,326 $12,547,871
========== ======== ======== ========== ========== ========== ========== ===========
Rate sensitivity gap:
Dollar amount.......... $ 407,157 $291,891 $274,819 $ 98,329 $ 475,353
Percent of total
earning assets........ 3.6% 2.6% 2.4% .9% 4.2%
Cumulative dollar
amount................. $ 407,157 $699,048 $973,867 $1,072,196 $1,547,549
- --------
Note: Based on historical experience, certain deposit accounts, such as
statement savings, NOW accounts, and other similar accounts, reprice
slowly in a changing interest rate environment; therefore such deposits
are included in the Over One and Less Than Five Years category and the
Over Five Years category. If they had been included in the 0--30 Days
category, the rate sensitivity gap as a percent of total earning assets
would have been a negative 15.9% for the category at December 31, 1993.
30
AmSouth's management believes it has adequate flexibility to alter the
overall interest rate sensitivity structure as necessary to minimize exposure
to changes in interest rates. Additional tools and control reports exist beyond
the earnings simulation and gap reports. These include an extensive internal
Treasury transfer pricing system which basically centralizes the management of
interest rate risk as well as the use of such measurements as duration of
equity and the corresponding mark-to-market evaluation of equity which provide
an indication of risk over an extended period of time. In addition, AmSouth
utilizes various off-balance sheet instruments such as interest rate swaps,
caps, and floors to manage interest rate risk. The notional amounts of all off-
balance sheet financial instruments which existed at December 31, 1993 are
disclosed in Table 21.
TABLE 21--INTEREST RATE SWAPS, CAPS, AND FLOORS
SWAPS
----------------------------------- CAPS
RECEIVE FIXED PAY FIXED BASIS OTHER AND FLOORS TOTAL
------------- --------- ----- ----- ---------- ------
(IN MILLIONS)
Balance at December 31,
1990................... $ 300 $ -0- $-0- $-0- $ -0- $ 300
Additions............. -0- -0- -0- -0- 600 600
Maturities............ -0- -0- -0- -0- -0- -0-
Amortization/calls.... -0- -0- -0- -0- -0- -0-
----- ----- ---- ---- ------ ------
Balance at December 31,
1991................... 300 -0- -0- -0- 600 900
Additions............. 65 240 300 300 405 1,310
Maturities............ -0- -0- -0- -0- -0- -0-
Amortization/calls.... (60) -0- -0- -0- -0- (60)
----- ----- ---- ---- ------ ------
Balance at December 31,
1992................... 305 240 300 300 1,005 2,150
Additions............. -0- -0- -0- 300 20 320
Maturities............ -0- -0- -0- -0- -0- -0-
Amortization/calls.... (120) (120) -0- -0- -0- (240)
----- ----- ---- ---- ------ ------
Balance at December 31,
1993................... $ 185 $ 120 $300 $600 $1,025 $2,230
===== ===== ==== ==== ====== ======
31
Table 22 summarizes the expected maturities and interest rates exchanged on
AmSouth's interest rate swaps, caps, and floors portfolios at December 31,
1993. Both the timing of the maturities and the variable interest payments and
receipts vary as certain interest rates change. This schedule assumes that
interest rates remain unchanged from December 31, 1993 in order to estimate and
calculate the maturities and periodic rates shown below. The schedule could
change substantially as interest rates move. However, as part of its interest
rate risk management process AmSouth simulates the expected maturities and
periodic rates over several interest rate environments.
TABLE 22--MATURITIES AND INTEREST RATES EXCHANGED ON SWAPS, CAPS, AND FLOORS
MATURE DURING
DECEMBER 31, ------------------------------------------
1993 1994 1995 1996 1997 BEYOND TOTAL
------------ ----- ------ ----- ----- ------ ------
(DOLLARS IN MILLIONS)
Receive fixed swaps:
Notional.............. $ 185 $ 120 $ 65 $ -0- $ -0- $ -0- $ 185
Receive rate.......... 7.68% 9.04% 5.16% 7.68%
Pay rate.............. 3.17% 3.17% 3.17% 3.17%
Pay fixed swaps:
Notional.............. $ 120 $ 120 $ -0- $ -0- $ -0- $ -0- $ 120
Receive rate.......... 3.17% 3.17% 3.17%
Pay rate.............. 4.00% 4.00% 4.00%
Basis swaps:
Notional.............. $ 300 $ -0- $ 300 $ -0- $ -0- $ -0- $ 300
Receive rate.......... 3.37% 3.29% 3.29%
Pay rate.............. 3.79% 3.73% 3.73%
Other swaps:
Notional.............. $ 600 $ -0- $ -0- $ 600 $ -0- $ -0- $ 600
Receive rate.......... 4.00% 3.97% 3.97%
Pay rate.............. 3.31% 3.29% 3.29%
Total swaps portfolio:
Notional.............. $1,205 $ 240 $ 365 $ 600 $ -0- $ -0- $1,205
Receive rate.......... 4.32% 6.11% 3.62% 3.97% 4.29%
Pay rate.............. 3.48% 3.59% 3.63% 3.29% 3.45%
Total caps and floors
portfolio:
Notional.............. $1,025 $ 20 $ 915 $ 13 $ 77 $ -0- $1,025
Receive rate.......... .29%
Pay rate.............. .46% .26% .45% .46% .59% .46%
Total portfolio:
Notional.............. $2,230 $ 260 $1,280 $ 613 $ 77 $ -0- $2,230
Receive rate.......... 2.34% 5.66% 1.03% 3.89% 2.32%
Pay rate.............. 2.09% 3.33% 1.35% 3.23% .59% 2.07%
Additionally, AmSouth Mortgage, in the normal course of business, enters into
forward commitments to sell certain mortgages it originates. These forward
commitments normally have a term of 60 to 90 days. During 1993, 1992, and 1991,
AmSouth Mortgage originated $2.0 billion, $1.6 billion, and $611 million,
respectively.
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 AmSouth. This is accomplished through the active management
of both the asset and liability sides of the statement of condition. The
liquidity position of AmSouth is monitored on a daily basis. In addition, the
Asset/Liability Committee reviews liquidity reports on a monthly basis and
makes any changes necessary as a result of the asset/liability management
process or anticipated cash flow changes. The Committee also compares on a
monthly basis the company's liquidity position to established corporate
liquidity guidelines. At December 31, 1993, AmSouth was within all of the
limits which have been established. Management considers the liquidity of
AmSouth to be excellent. The
32
primary sources of liquidity on the asset side of the statement of condition
are maturities and cash flows from both loans and investments. Liquidity on the
liability side is maintained primarily through the growth in core deposits and
the ability to obtain economical wholesale funding in national and regional
markets. AmSouth's most commonly used sources of short-term borrowings are: (1)
federal funds (i.e., the excess reserves of other financial institutions); (2)
repurchase agreements, whereby U.S. government and government agency securities
are pledged as collateral for short-term borrowings; and (3) pledging
acceptable assets as collateral for public deposits and certain tax collection
monies. In addition to these sources, AmSouth has the ability to borrow from
the Federal Reserve Bank, and access other wholesale funding sources such as
Eurodollar deposits, certificates of deposit, commercial paper, and lines of
credit. Selected bank subsidiaries also have the ability to borrow from Federal
Home Loan Banks.
NONINTEREST REVENUES AND NONINTEREST EXPENSES
AmSouth's management stresses the importance of growth in noninterest
revenues, as well as the control of noninterest expenses. Noninterest revenues
have increased at a five year compound growth rate of 9.46%. For 1993,
noninterest revenues increased $30.1 million, or 18.3%, compared to 1992. This
increase included an $11.9 million increase in gains on securities held for
sale for 1993 compared to 1992. Exclusive of investment securities gains and
gains on securities held for sale, noninterest revenues increased $21.7
million, or 13.7%, from the prior year. Investment securities gains and gains
on securities held for sale resulted primarily from the restructuring of the
securities portfolios acquired in business combinations. Trust income increased
$1.6 million during 1993 versus 1992, compared to a $2.2 million increase
during 1992 over 1991 levels. Service charges on deposit accounts increased
$6.6 million, or 13.4%, during 1993 over 1992. This compares to a $2.3 million
increase in service charges on deposit accounts during 1992 over 1991. The
increase for both years was the result of higher corporate analysis income,
higher overdraft fee income, and increased fees earned on certain interest-
bearing accounts. Investment services income increased $3.0 million, or 17.5%,
compared to a $4.2 million increase in 1992. Both of these increases were
related to the favorable bond markets and an increased emphasis on sales of
investment products during 1993 and 1992.
TABLE 23--NONINTEREST REVENUES AND NONINTEREST EXPENSES
FIVE-YEAR
YEAR ENDED DECEMBER 31 COMPOUND
-------------------------------------------------- GROWTH RATE
1993 1992 1991 1990 1989 1993/1988
--------- --------- --------- --------- --------- -----------
(DOLLARS IN THOUSANDS)
Noninterest revenues:
Service charges on
deposit accounts...... $ 55,727 $ 49,161 $ 46,849 $ 38,003 $ 33,679 12.54 %
Trust income........... 41,659 40,069 37,891 36,196 32,421 3.84
Investment services in-
come.................. 19,835 16,875 12,715 7,936 7,441 25.87
Mortgage administration
fees.................. 16,638 17,392 16,222 15,684 14,161 .17
Investment securities
gains................. 1,216 4,615 12,266 435 5,325 (6.36)
Credit card income..... 13,129 10,691 9,945 9,134 11,088 5.74
Other revenues......... 46,157 25,446 26,614 22,855 20,742 14.02
--------- --------- --------- --------- ---------
$ 194,361 $ 164,249 $ 162,502 $ 130,243 $ 124,857 9.46 %
========= ========= ========= ========= =========
Noninterest expenses:
Salaries............... $ 166,470 $ 143,184 $ 126,962 $ 121,343 $ 114,899 8.52 %
Employee benefits...... 39,542 24,251 21,197 20,394 19,432 15.25
Net occupancy expense.. 33,103 28,144 24,654 23,027 20,787 12.44
Equipment expense...... 34,839 31,313 28,275 27,588 26,366 6.53
FDIC premiums.......... 19,260 17,104 15,275 8,174 5,487 30.38
Foreclosed properties
(income) expense...... (4,273) 22,106 35,226 5,846 6,649 --
Other operating ex-
penses................ 131,146 103,954 89,159 82,116 81,826 11.05
--------- --------- --------- --------- ---------
$ 420,087 $ 370,056 $ 340,748 $ 288,488 $ 275,446 10.04 %
========= ========= ========= ========= =========
33
Other noninterest revenues increased $23.1 million in 1993 compared to 1992.
The increase primarily resulted from an increase of $11.9 million in gains on
sale of securities held for sale, a $1.6 million increase in gains on sale of
mortgages, a $2.4 million increase in credit card fees, and $3.9 million
increase in portfolio options income. Portfolio options income for 1993 of $6.5
million is partially offset by $4.8 million in options expense included in
noninterest expenses.
Noninterest expenses for 1993 increased $50.0 million, or 13.5%, compared to
a 1992 increase of 8.6%. Salaries and employee benefits increased $38.6 million
over 1992. Approximately $8.5 million is attributable to the Chattanooga
franchise which resulted from the purchase of FCFC on February 1, 1993. The
remainder of the increase included normal merit increases, $1.0 million in
severance pay, $12.2 million in employee benefits related to AmSouth's early
retirement offering and $1.3 million in commissions related to mortgage loan
originations.
The early retirement offering was one component of a Productivity Plan
initiative announced by AmSouth in 1993. Management completed a comprehensive
study to determine steps to improve the overall efficiency of the company. One
component of the Productivity Plan included the elimination of 750 positions.
Over 300 reductions were achieved through the early retirement offering. An
additional 130 positions had been eliminated by December 31, 1993. This phase
of the plan is scheduled to be complete by mid-year 1994. Another component of
the Productivity Plan is the centralization of certain bank functions which
will affect noninterest expense amounts other than salaries and benefits.
AmSouth continues to place emphasis on its sales and service initiatives. An
increase of $2.8 million in nonexecutive incentive compensation reflected the
continued high levels of performance of AmSouth's employees. In 1993, the
consumer sales force opened 42% more deposit accounts than in 1992, approved
38% more loans, and opened 63% more credit card accounts. The commercial sales
force achieved similar results in 1993 with respect to deposit and fee growth.
Management believes that an effective sales culture is an essential element to
a continued high level of performance for the company.
Salaries and benefits increased $19.3 million in 1992 over 1991. The salary
and employee benefit increases in the 1992 year were mainly due to increased
staffing levels and sales related incentive compensation in income producing
areas, as well as merit increases.
Net occupancy expense increased 17.6% in 1993, and 14.2% in 1992. Both 1993
and 1992 increases reflect the greater number of AmSouth offices, higher rents
paid for facilities, higher depreciation on leasehold improvements, and
increased contract maintenance services. Equipment expense increased 11.3% and
10.7% for 1993 and 1992, respectively. The five year compound growth rate for
equipment expense is 6.53%. The increases in the past two years resulted from a
greater number of AmSouth offices and capital investments in technology.
Foreclosed properties expense decreased $26.4 million in 1993 compared to 1992.
This decrease included $3.5 million in recoveries on foreclosed properties in
the third quarter of 1993 as well as gains on sales of foreclosed properties
throughout 1993. The decrease in 1992 compared to 1991 reflected the continued
improvement in the loan portfolio and management's efforts to restore
foreclosed properties to more normalized levels from the 1991 peak related to
the weak real estate market at that time. Management does not anticipate gains
on the sale of foreclosed properties to repeat the 1993 levels.
FDIC deposit insurance premiums increased $2.2 million in 1993 versus a $1.8
million increase in 1992. Other operating expenses increased $27.2 million, or
26.2%, in 1993 due to operating expenses related to FCFC, additional expenses
related to the current acquisition program, and other general corporate
expenses.
INCOME TAXES
AmSouth's income tax expense was $71.1 million in 1993, $43.0 million in
1992, and $27.6 million in 1991. The significant increase in income tax expense
over the past three years is due primarily to the combined
34
effects of increased levels of pretax income in each succeeding year and an
increase in the company's effective tax rate.
The effective tax rate for 1993 was 32.7% compared to 28.5% in 1992 and 25.0%
in 1991. The effective tax rate is significantly impacted by the mix of taxable
versus tax-exempt revenues from investment securities and loans. The 1993
increase resulted from a continued decrease in tax-exempt revenues and an
increase in the statutory federal tax rate effective January 1, 1993. Cash
outlays for income taxes have exceeded income tax expense in 1993, 1992, and
1991 primarily due to the income tax treatment required for accounting for loan
losses. A detail of the deferred tax assets and liabilities is included in Note
R of the Notes to Consolidated Financial Statements.
Currently, AmSouth's consolidated tax returns for 1987 through 1990 are under
review by the Internal Revenue Service. Management does not anticipate these
reviews to result in any material impact on AmSouth's financial condition or
results of operations.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards, No. 109, entitled "Accounting for Income Taxes" which
requires companies to change from the deferred method of accounting for income
taxes to the liability method. AmSouth adopted this statement effective January
1, 1993. There was no material impact on AmSouth's financial condition or
results of operations upon adoption of this statement.
BUSINESS COMBINATIONS
AmSouth has a twenty-year history of successful mergers and acquisitions.
From 1971 through 1992, AmSouth integrated 40 financial services institutions.
Currently, AmSouth is carrying out a series of acquisitions in accordance with
a strategy to solidify its presence in Florida, Tennessee, and Georgia.
Transactions are described in Note B of the Notes to Consolidated Financial
Statements.
AmSouth's strategy for expansion focuses on markets where population growth
expectations indicate a favorable future banking environment. AmSouth's recent
acquisitions are concentrated primarily in the following geographic areas: the
Chattanooga, Tennessee metropolitan statistical area and the Interstate-75
corridor in Northwest Georgia; the west coast of central Florida from Tampa to
Naples; and central Florida from Jacksonville to Orlando.
Management evaluates each potential business combination on a number of
factors including, but not limited to, the effect of the business combination
on AmSouth's capital adequacy, liquidity, and future earnings. On a pro forma
combined basis after giving effect to the pending business combinations at
December 31, 1993, listed in Note B of the Notes to Consolidated Financial
Statements, AmSouth's consolidated Tier 1 Capital and Total Capital ratios
would have been approximately 9.71% and 13.15%, respectively. This compares to
December 31, 1993 actual ratios of 10.95% and 13.31%, respectively. Another
capital adequacy ratio used by regulators is the "leverage ratio" (defined as
Tier 1 capital to quarterly average assets, less certain goodwill and other
intangible assets). Bank holding companies are generally required to maintain a
leverage ratio of at least 3.00% plus an additional 100 to 200 basis points.
AmSouth's leverage ratio at December 31, 1993, was 8.65%. On a pro forma
combined basis after giving effect to the pending business combinations at
December 31, 1993, outlined in Note B of the Notes to Consolidated Financial
Statements, AmSouth's leverage ratio would have been approximately 7.09%.
AmSouth enjoys a strong capital position and does not anticipate the current or
pending business combinations to materially adversely effect its capital
position.
35
SUPPLEMENTAL FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CONDITION
AMSOUTH BANCORPORATION AND SUBSIDIARIES
DECEMBER 31, 1984-1993
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
ASSETS
Cash and due from
banks............. $ 577,006 $ 549,097 $ 521,189 $ 590,744 $ 468,013 $ 488,666 $ 454,219 $ 502,124 $ 487,908 $ 457,793
Earning assets:
Temporary invest-
ments............ 1,853,348 742,813 622,349 155,944 198,231 139,202 180,161 207,959 230,600 276,069
Investment securi-
ties............. 1,618,233 2,414,884 2,663,702 2,149,608 2,105,410 2,118,972 1,838,610 1,502,605 1,204,894 1,044,872
Loans net of un-
earned income.... 7,930,224 6,138,955 5,722,831 5,839,697 5,831,472 5,503,735 5,166,186 4,245,240 3,664,427 2,885,035
Less allowance for
loan losses...... 118,089 92,945 89,144 87,660 93,394 73,945 71,895 60,668 53,980 42,549
----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net loans......... 7,812,135 6,046,010 5,633,687 5,752,037 5,738,078 5,429,790 5,094,291 4,184,572 3,610,447 2,842,486
----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total earning
assets......... 11,283,716 9,203,707 8,919,738 8,057,589 8,041,719 7,687,964 7,113,062 5,895,136 5,045,941 4,163,427
Premises and equip-
ment, net......... 216,715 165,094 145,777 141,761 131,638 135,545 147,968 123,613 123,726 95,768
Other assets....... 470,434 290,708 338,187 358,289 351,411 401,220 394,590 344,604 269,141 201,494
----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets.... $12,547,871 $10,208,606 $9,924,891 $9,148,383 $8,992,781 $8,713,395 $8,109,839 $6,865,477 $5,926,716 $4,918,482
=========== =========== ========== ========== ========== ========== ========== ========== ========== ==========
LIABILITIES AND
SHAREHOLDERS' EQ-
UITY
Deposits........... $ 9,567,882 $ 7,799,816 $7,779,491 $7,449,207 $7,047,319 $6,871,116 $6,245,631 $5,242,258 $4,328,634 $3,757,920
Federal funds pur-
chased and repur-
chase agreements.. 791,184 988,565 569,890 826,903 1,076,951 881,237 963,187 822,348 759,977 465,179
Other interest-
bearing liabili-
ties.............. 775,210 483,480 360,522 151,668 160,582 219,255 181,550 141,758 283,130 247,750
----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total deposits
and interest-
bearing liabil-
ities.......... 11,134,276 9,271,861 8,709,903 8,427,778 8,284,852 7,971,608 7,390,368 6,206,364 5,371,741 4,470,849
Acceptances out-
standing.......... 6,264 6,005 3,498 22,245 24,422 90,123 104,166 103,803 71,293 63,331
Accrued expenses
and other liabili-
ties.............. 317,322 105,985 457,948 73,161 83,465 81,372 89,681 89,052 72,538 65,067
----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total liabili-
ties........... 11,457,862 9,383,851 9,171,349 8,523,184 8,392,739 8,143,103 7,584,215 6,399,219 5,515,572 4,599,247
SHAREHOLDERS' EQ-
UITY 1,090,009 824,755 753,542 625,199 600,042 570,292 525,624 466,258 411,144 319,235
----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total liabili-
ties and share-
holders' equi-
ty............. $12,547,871 $10,208,606 $9,924,891 $9,148,383 $8,992,781 $8,713,395 $8,109,839 $6,865,477 $5,926,716 $4,918,482
=========== =========== ========== ========== ========== ========== ========== ========== ========== ==========
36
CONSOLIDATED STATEMENT OF EARNINGS
AMSOUTH BANCORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1984-1993
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
Revenue from earning as-
sets................... $776,961 $704,516 $781,453 $812,551 $809,102 $710,511 $573,865 $513,491 $458,174 $455,802
Interest expense........ 314,884 311,079 446,741 515,026 531,359 446,216 330,459 281,187 267,587 298,856
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Gross interest margin... 462,077 393,437 334,712 297,525 277,743 264,295 243,406 232,304 190,587 156,946
Provision for loan loss-
es..................... 18,980 36,555 46,029 41,583 44,766 19,611 42,416 21,698 22,039 17,403
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net interest margin..... 443,097 356,882 288,683 255,942 232,977 244,684 200,990 210,606 168,548 139,543
Noninterest revenues.... 194,361 164,249 162,502 130,243 124,857 123,714 117,167 103,252 79,625 68,577
Noninterest expenses.... 420,087 370,056 340,748 288,488 275,446 260,398 237,587 221,796 181,876 159,182
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income before income
taxes.................. 217,371 151,075 110,437 97,697 82,388 108,000 80,570 92,062 66,297 48,938
Income taxes............ 71,144 43,026 27,636 22,297 15,185 24,128 14,825 19,229 8,656 2,672
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net income.............. $146,227 $108,049 $ 82,801 $ 75,400 $ 67,203 $ 83,872 $ 65,745 $ 72,833 $ 57,641 $ 46,266
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Average common shares
outstanding............ 47,153 42,993 39,957 38,261 39,400 39,307 38,665 38,240 32,887 31,645
Earnings per common
share.................. $3.10 $2.51 $2.07 $1.97 $1.71 $2.13 $1.70 $1.91 $1.75 $1.46
Cash dividends declared
per common share....... $1.22 $1.07 $0.98 $0.94 $0.89 $0.84 $0.79 $0.71 $0.63 $0.57
37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of AmSouth and supplementary data are
set forth in the pages listed below.
PAGE
----
Management's Statement on Responsibility for Financial Reporting........... 39
Report of Ernst & Young, Independent Auditors.............................. 40
Consolidated Statement of Condition........................................ 41
Consolidated Statement of Earnings......................................... 42
Consolidated Statement of Shareholders' Equity............................. 43
Consolidated Statement of Cash Flows....................................... 44
Notes to Consolidated Financial Statements................................. 45
38
MANAGEMENT'S STATEMENT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of AmSouth is responsible for content and integrity of the
financial statements and all other financial information included in this
annual report on Form 10-K. 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 on Form 10-K is consistent
with those financial statements. The financial statements necessarily include
amounts that are based on management's best estimates and judgments.
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 Committee of the Board of Directors.
The Audit 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 Audit 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 Audit Committee to discuss internal
controls, accounting, auditing or other financial reporting matters.
The consolidated financial statements of AmSouth have been audited by Ernst &
Young, independent auditors, who were engaged to express an opinion as to the
fairness of presentation of such financial statements.
/s/ John W. Woods /s/ M. List Underwood, Jr.
John W. Woods M. List Underwood, Jr.
Chairman of the Board Executive Vice President
and Chief Executive Officer and Chief Financial Officer
39
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
Board of Directors
AmSouth Bancorporation
We have audited the accompanying consolidated statement of condition of
AmSouth Bancorporation and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of earnings, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of AmSouth
Bancorporation and subsidiaries as of December 31, 1993 and 1992 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles.
/s/ Ernst & Young
Birmingham, Alabama
January 31, 1994
40
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31
-----------------------
1993 1992
----------- -----------
(DOLLARS IN THOUSANDS)
ASSETS
Cash and due from banks................................ $ 577,006 $ 549,097
Federal funds sold and securities purchased under
agreements to resell.................................. 133,873 135,400
Trading account securities............................. 94,844 39,397
Securities held for sale............................... 1,289,196 336,682
Investment securities (market value of $1,669,119 and
$2,474,193, respectively)............................. 1,618,233 2,414,884
Mortgage loans held for sale........................... 335,435 231,334
Loans.................................................. 7,999,925 6,207,119
Less:Allowance for loan losses......................... 118,089 92,945
Unearned income..................................... 69,701 68,164
----------- -----------
Net loans........................................... 7,812,135 6,046,010
Premises and equipment, net............................ 216,715 165,094
Customers' acceptance liability........................ 6,264 6,005
Accrued interest receivable and other assets........... 464,170 284,703
----------- -----------
$12,547,871 $10,208,606
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits and interest-bearing liabilities:
Deposits:
Noninterest-bearing demand......................... $ 1,618,687 $ 1,374,078
Interest-bearing demand............................ 3,169,936 2,942,888
Savings............................................ 809,539 552,813
Time............................................... 3,347,546 2,436,794
Certificates of deposit of $100,000 or more........ 622,174 493,243
----------- -----------
Total deposits................................... 9,567,882 7,799,816
Federal funds purchased and securities sold under
agreements to repurchase............................ 791,184 988,565
Other borrowed funds................................. 612,068 347,235
Long-term debt....................................... 163,142 136,245
----------- -----------
Total deposits and interest-bearing liabilities.. 11,134,276 9,271,861
Acceptances outstanding................................ 6,264 6,005
Accrued expenses and other liabilities................. 317,322 105,985
----------- -----------
Total liabilities................................ 11,457,862 9,383,851
----------- -----------
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--200,000,000 shares and 75,000,000
shares, respectively; Issued--51,016,138 shares
and 44,679,517 shares, respectively............... 51,016 44,679
Capital surplus...................................... 446,344 278,384
Retained earnings.................................... 619,766 528,280
----------- -----------
1,117,126 851,343
Less:Cost of common stock in treasury--1,500,000
shares................................................ 24,173 24,173
Deferred compensation on restricted stock........... 2,944 2,415
----------- -----------
Total shareholders' equity....................... 1,090,009 824,755
----------- -----------
$12,547,871 $10,208,606
=========== ===========
See notes to consolidated financial statements.
41
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31
---------------------------------------
1993 1992 1991
------------ ------------ ------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
REVENUE FROM EARNING ASSETS
Loans....................... $ 562,684 $ 487,829 $556,195
Investment securities:
Taxable securities........ 131,975 157,215 170,244
Tax-free securities....... 27,413 31,986 35,223
Securities held for sale.... 32,641 5,231 1,051
Mortgage loans held for
sale....................... 14,338 14,910 7,502
Federal funds sold and
securities purchased under
agreements to resell....... 5,487 5,592 9,083
Trading account securities.. 2,423 1,753 2,155
------------ ------------ ------------
Total revenue from earn-
ing assets............. 776,961 704,516 781,453
------------ ------------ ------------
INTEREST EXPENSE
Interest-bearing demand
deposits................... 79,407 87,198 134,588
Savings deposits............ 19,395 16,711 20,384
Time deposits............... 134,831 135,120 188,798
Certificates of deposit of
$100,000 or more........... 24,998 27,733 40,882
Federal funds purchased and
securities sold under
agreements to repurchase... 30,538 27,117 47,339
Other borrowed funds........ 13,850 5,650 2,655
Long-term debt.............. 11,865 11,550 12,095
------------ ------------ ------------
Total interest expense.. 314,884 311,079 446,741
------------ ------------ ------------
GROSS INTEREST MARGIN....... 462,077 393,437 334,712
Provision for loan losses... 18,980 36,555 46,029
------------ ------------ ------------
NET INTEREST MARGIN......... 443,097 356,882 288,683
------------ ------------ ------------
NONINTEREST REVENUES
Service charges on deposit
accounts................... 55,727 49,161 46,849
Trust income................ 41,659 40,069 37,891
Investment services income.. 19,835 16,875 12,715
Mortgage administration
fees....................... 16,638 17,392 16,222
Investment securities gains. 1,216 4,615 12,266
Other operating revenues.... 59,286 36,137 36,559
------------ ------------ ------------
Total noninterest reve-
nues................... 194,361 164,249 162,502
------------ ------------ ------------
NONINTEREST EXPENSES
Salaries and employee
benefits................... 206,012 167,435 148,159
Net occupancy expense....... 33,103 28,144 24,654
Equipment expense........... 34,839 31,313 28,275
FDIC premiums............... 19,260 17,104 15,275
Foreclosed properties
expense.................... (4,273) 22,106 35,226
Other operating expenses.... 131,146 103,954 89,159
------------ ------------ ------------
Total noninterest ex-
penses................. 420,087 370,056 340,748
------------ ------------ ------------
INCOME BEFORE INCOME TAXES.. 217,371 151,075 110,437
Income taxes................ 71,144 43,026 27,636
------------ ------------ ------------
Net income.............. $ 146,227 $ 108,049 $ 82,801
============ ============ ============
Average common shares
outstanding................ 47,153 42,993 39,957
Earnings per common share... $ 3.10 $ 2.51 $ 2.07
See notes to consolidated financial statements.
42
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
COMMON CAPITAL RETAINED TREASURY DEFERRED
STOCK SURPLUS EARNINGS STOCK COMPENSATION TOTAL
-------- -------- --------- -------- ------------ ----------
(IN THOUSANDS)
BALANCE AT JANUARY 1,
1991................... $ 27,407 $202,323 $ 420,181 $(24,173) $ (540) $ 625,198
Net income.............. -0- -0- 82,801 -0- -0- 82,801
Cash dividends declared. -0- -0- (38,005) -0- -0- (38,005)
Common stock transac-
tions:
Employee stock plans... 294 7,567 -0- -0- (1,224) 6,637
Proceeds from stock of-
fering................ 2,760 74,151 -0- -0- -0- 76,911
Three-for-two common
stock split........... 13,737 (13,737) -0- -0- -0- -0-
-------- -------- --------- -------- -------- ----------
BALANCE AT DECEMBER 31,
1991................... 44,198 270,304 464,977 (24,173) (1,764) 753,542
Net income.............. -0- -0- 108,049 -0- -0- 108,049
Cash dividends declared. -0- -0- (44,746) -0- -0- (44,746)
Common stock transac-
tions:
Employee stock plans... 481 8,080 -0- -0- (651) 7,910
-------- -------- --------- -------- -------- ----------
BALANCE AT DECEMBER 31,
1992................... 44,679 278,384 528,280 (24,173) (2,415) 824,755
Balance at begining of
period for First Sun-
belt Bankshares, Inc... 537 5,288 2,828 -0- -0- 8,653
Net income.............. -0- -0- 146,227 -0- -0- 146,227
Cash dividends declared. -0- -0- (57,569) -0- -0- (57,569)
Common stock transac-
tions:
Employee stock plans... 289 6,031 -0- -0- (529) 5,791
Acquisition of First
Chattanooga Financial
Corporation........... 3,470 98,468 -0- -0- -0- 101,938
Acquisition of Mid-
State Federal Savings
Bank.................. 2,041 58,173 -0- -0- -0- 60,214
-------- -------- --------- -------- -------- ----------
BALANCE AT DECEMBER 31,
1993................... $ 51,016 $446,344 $ 619,766 $(24,173) $ (2,944) $1,090,009
======== ======== ========= ======== ======== ==========
See notes to consolidated financial statements.
43
AMSOUTH BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31
-------------------------------------
1993 1992 1991
----------- ----------- -----------
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income.............................. $ 146,227 $ 108,049 $ 82,801
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Provision for loan losses.............. 18,980 36,555 46,029
Provision for foreclosed property
losses................................ (3,773) 15,508 29,452
Depreciation and amortization of
premises and equipment................ 19,951 15,746 14,337
Amortization of premiums and discounts
on investment securities and
securities held for sale.............. 470 512 1,573
Net increase in mortgage loans held for
sale.................................. (104,311) (98,904) (40,770)
Net (increase) decrease in trading
account securities.................... (56,198) 2,847 (9,315)
Proceeds from maturities and
prepayments of securities held for
sale.................................. 220,096 14,567 -0-
Proceeds from sales of securities held
for sale.............................. 899,726 686,238 159,467
Purchases of securities held for sale.. (1,204,389) (506,513) (176,947)
Net gains on sales of securities held
for sale.............................. (12,863) (1,009) (4,202)
Investment securities gains............ (1,216) (4,615) (12,266)
Net decrease in accrued interest
receivable and other assets........... 304,058 14,059 42,298
Net increase (decrease) in accrued
expenses and other liabilities........ 49,275 (344,735) 23,038
Net increase in deferred income tax
benefits.............................. (3,118) (7,222) (12,313)
Amortization of intangible assets...... 16,631 13,067 9,963
Other.................................. (1,049) 1,196 336
----------- ----------- -----------
Net cash provided (used) by operating
activities.......................... 288,497 (54,654) 153,481
INVESTING ACTIVITIES
Proceeds from maturities and prepayments
of investment securities............... 884,907 966,451 367,042
Proceeds from sales of investment
securities............................. 67,543 192,804 689,356
Purchases of investment securities...... (592,074) (1,334,253) (1,290,183)
Net decrease (increase) in federal funds
sold and securities purchased under
agreements to resell................... 68,623 210,196 (314,888)
Net (increase) decrease in loans........ (652,264) (441,337) 16,961
Net purchases of premises and equipment. (45,246) (35,063) (18,353)
Net cash used for acquisitions.......... (28,382) -0- -0-
----------- ----------- -----------
Net cash used by investing
activities.......................... (296,893) (441,202) (550,065)
FINANCING ACTIVITIES
Net (decrease) increase in demand
deposits and savings accounts.......... (260,168) 364,431 278,709
Net increase (decrease) in time
deposits............................... 374,848 (343,763) 51,743
Net (decrease) increase in federal funds
purchased and securities sold under
agreements to repurchase............... (272,381) 418,675 (257,013)
Net increase in other borrowed funds.... 242,080 129,280 199,897
Increase in long-term debt.............. 11,500 -0- 15,000
Payments for maturing long-term debt.... (11,058) (7,321) (6,393)
Cash dividends paid..................... (57,601) (44,752) (38,006)
Proceeds from employee stock plans...... 4,864 7,214 6,181
Proceeds from stock issuance............ -0- -0- 76,911
----------- ----------- -----------
Net cash provided by financing
activities.......................... 32,084 523,764 327,029
Increase (decrease) in cash and cash
equivalents............................ 23,688 27,908 (69,555)
Cash and cash equivalents at beginning
of year................................ 549,097 521,189 590,744
Beginning consolidated cash balance of
First Sunbelt
Bankshares, Inc. ...................... 4,221 -0- -0-
----------- ----------- -----------
Cash and cash equivalents at end of
year................................ $ 577,006 $ 549,097 $ 521,189
=========== =========== ===========
See notes to consolidated financial statements.
44
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of AmSouth Bancorporation (AmSouth) and the methods
of applying those policies which 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. Prior year financial statements have been restated to include the
accounts of business combinations accounted for as poolings-of-interests unless
immaterial. Results of operations of companies purchased are included from the
dates of acquisition.
CASH FLOWS
For the Consolidated Statement of Cash Flows, AmSouth has defined cash and
cash equivalents as those amounts included in the Consolidated Statement of
Condition caption as "Cash and due from banks." For the years ended December
31, 1993, 1992 and 1991 AmSouth paid interest of $313,593,000, $321,180,000 and
$454,518,000, respectively. For the years ended December 31, 1993, 1992, and
1991, noncash transfers from loans to foreclosed properties were $11,422,000,
$15,094,000, and $55,360,000, respectively. Noncash transfers from foreclosed
properties to loans for the years ended December 31, 1993, 1992, and 1991 were
$16,384,000, $22,635,000, and $19,520,000, respectively. For the years ended
December 31, 1993, 1992, and 1991, noncash transfers from investment securities
to securities held for sale were $736,721,000, $428,533,000, and $79,750,000,
respectively.
TRADING ACCOUNT SECURITIES
Trading account securities are carried at market. Monthly market adjustments
and realized gains or losses on the sale of trading account securities are
reported as other operating revenues.
SECURITIES HELD FOR SALE
AmSouth defines securities held for sale as securities to be held for
indefinite periods of time, including securities that management intends to use
as part of its asset and liability management strategy, or that may be sold in
response to changes in interest rates, changes in prepayment risk, or other
similar factors. These securities are stated at the lower of aggregate cost or
market value. Monthly market adjustments and realized gains or losses upon sale
of the securities are classified as other operating revenues.
In May 1993, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" (Statement 115). The Statement generally will
require that debt and equity securities that have readily determinable fair
values be carried at fair value unless they are intended to be held to
maturity. Securities will be classified as held for investment and carried at
amortized cost only if AmSouth has a positive intent and ability to hold those
securities to maturity. If not classified as held for investment, such
securities would be classified as trading securities or securities available
for sale. Net unrealized holding gains or losses for securities available for
sale would be excluded from earnings and reported as a separate component of
shareholders' equity. In management's opinion, the adoption of Statement 115,
effective January 1, 1994, will not have a material impact as of that date on
the financial condition of AmSouth.
45
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INVESTMENT SECURITIES
Investment securities are securities which at December 31 management had the
intent and ability to hold to maturity. Investment securities are stated at
cost, adjusted for amortization of premiums and accretion of discounts on the
straight-line method.
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are carried at the lower of aggregate cost or
market value. Monthly market adjustments and realized gains and losses are
classified as other operating revenues.
INTEREST RATE SWAPS
AmSouth, from time to time, enters into interest rate swaps to hedge
imbalances in sensitivity to fluctuating interest rates among certain assets
and liabilities. Any gains or losses realized are deferred and amortized as
yield/rate adjustments of the hedged assets or liabilities over the original
life of the swap.
FUTURES AND FORWARD CONTRACTS
Any gains and losses on futures and forward contracts that qualify as hedges
are deferred and recognized as an adjustment of the carrying amount of the
hedged asset or liability or anticipated transaction. Futures and forward
contracts used for trading purposes are recorded at market value. Changes in
market value are recognized in other operating revenues.
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.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level which is considered
adequate to provide for potential losses based upon management's evaluation of
known and inherent risk characteristics of the loan portfolio, the fair value
of underlying collateral, recent loan loss experience, current economic
conditions, and other pertinent factors. A provision for loan losses is charged
to operations based on management's periodic evaluation of these risks.
In May 1993, the FASB issued Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan" (Statement 114).
Statement 114 generally will require all creditors to account for impaired
loans, except those loans that are accounted for at fair value or at the lower
of cost or fair value, at the present value of the expected future cash flow
discounted at the loan's effective interest rate or if collateral dependent, at
the fair value of the underlying collateral. Statement 114, when adopted in
1995, is not expected to have a material impact on AmSouth's financial
condition or results of operations.
46
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 forty years for premises and three to ten years for furniture
and equipment.
FORECLOSED PROPERTIES
Foreclosed properties, including in-substance foreclosures, are carried at
the lower of the estimated net realizable value or cost and are included in
other assets, net of the allowance for foreclosed property losses. For the
years ended December 31, 1993, 1992, and 1991, a (reduction)/provision of
$(3,773,000), $15,508,000 and $29,452,000 was (credited)/charged to expense and
write downs of properties charged to the allowance totaled $2,887,000,
$14,701,000 and $22,775,000, respectively. At December 31, 1993, 1992 and 1991,
the allowance had a balance of $3,347,000, $7,484,000 and $6,677,000,
respectively.
INTANGIBLE ASSETS
Intangible assets, primarily goodwill and purchased mortgage servicing
rights, are included in other assets. Goodwill is amortized on a straight-line
basis primarily over twenty to twenty-five years. The carrying value of
goodwill will be reviewed if the facts and circumstances suggest that it may be
impaired. If this review indicates that goodwill will not be recoverable, as
determined based on the undiscounted cash flows of the entity acquired over the
remaining amortization period, AmSouth's carrying value of the goodwill will be
reduced by the estimated shortfall of cash flows. At December 31, 1993 and
1992, goodwill totaled $130,062,000 and $69,335,000, respectively. Purchased
mortgage servicing rights are amortized over the estimated average lives of the
related loans. At December 31, 1993 and 1992, purchased mortgage servicing
rights totaled $32,649,000 and $29,698,000, 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 timing differences.
Effective January 1, 1993, AmSouth adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (Statement 109). Under
Statement 109 deferred tax assets and liabilities are recognized for 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. Prior years' financial statements have not been restated to apply the
provisions of Statement 109. The adoption of Statement 109 did not have a
material impact on AmSouth's financial condition or results of operations.
PENSION AND OTHER EMPLOYEE BENEFIT PLANS
AmSouth has pension and other employee benefit plans for the benefit of
substantially all regular, full-time employees. The plans are trusteed and
noncontributory. Costs of AmSouth's pension plan are actuarially determined by
the projected unit credit method with actuarial gains or losses recognized each
year and amortized separately.
47
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AmSouth adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting For Postretirement Benefits Other than Pensions"
(Statement 106) as of January 1, 1993. Statement 106 requires employers to
recognize postretirement benefits on an accrual basis during the periods
employees provide services to earn those benefits. As permitted under Statement
106, AmSouth chose to amortize the transition postretirement benefit obligation
of approximately $4,400,000 over a 20 year period on a straight line basis. Net
income for the year ended December 31, 1993 included a pre-tax charge of
approximately $1,200,000 for the effect of this accounting change.
The FASB has also issued Statement of Financial Accounting Standards No. 112,
"Employers' Accounting For Postemployment Benefits" which requires employers
who provide benefits to former or inactive employees after employment but
before retirement to recognize the obligation of postemployment benefits on an
accrual basis over the related service period. Adoption is required for fiscal
years beginning after December 31, 1993. In management's opinion, the adoption
will not have a material impact on the financial condition or results of
operations of AmSouth.
EARNINGS PER COMMON SHARE
Earnings per common share are based on the average outstanding shares of
common stock excluding treasury stock. The effects of stock options outstanding
and convertible debentures are immaterial to the calculation of earnings per
common share.
FAIR VALUES OF FINANCIAL INSTRUMENTS
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 intangible,
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 disclosures should not be considered an indication of
the fair value of the corporation taken as a whole.
48
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following methods and assumptions were used by AmSouth in estimating its
fair value disclosures for financial instruments:
Cash and short-term instruments: The carrying amounts reported in the
statement of condition for cash and short-term instruments approximate
their fair values.
Investments: Fair values for investment securities, securities held for
sale, trading account securities, and mortgage 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 differences between the quoted instruments and
the instruments being valued.
Loans: The fair values of variable rate loans that reprice frequently and
have no significant change in credit risk are assumed to approximate
carrying values. The fair values for credit card loans and equity lines of
credit are estimated using pricing models with assumptions based on current
conditions in the secondary market for those instruments. The fair values
for other loans (e.g., commercial, 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.
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 corporation
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 value for variable
rate fixed-term money market accounts and certificates of deposit
approximate their carrying values. 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.
Short-term borrowings: The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings
approximate their fair values.
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.
49
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE B BUSINESS COMBINATIONS
During the year ended December 31, 1993, AmSouth completed the following
acquisitions which were accounted for using the purchase method of accounting:
COMMON
CONSOLIDATED SHARES CASH
LOCATION DATE ASSETS ISSUED PAID
-------- ---- ------------ ------ -------
(IN THOUSANDS)
First Chattanooga
Financial Corporation
(FCFC)................. Chattanooga, TN February $1,000,000 3,470 $ 2,800
Charter Banking
Corporation (Charter).. St. Petersburg, FL October 105,000 -0- 12,800
Mid-State Federal
Savings Bank
(Mid-State)............ Ocala, FL December 734,000 2,041 32,200
The resulting goodwill from the acquisitions of FCFC, Charter, and Mid-State
of $59.7 million will be amortized on a straight line basis over 20 years.
The operating results of these acquisitions are included in AmSouth's
consolidated statement of earnings since the dates of acquisition. The
following unaudited pro forma summary presents the consolidated statement of
earnings as if the acquisitions occurred at the beginning of 1992, after giving
effect to certain adjustments, including amortization of goodwill and related
income tax effects. These pro forma results have been prepared for comparison
purposes only and do not purport to be indications of what would have occurred
had the acquisitions been made as of the beginning of 1992 or of results which
may occur in the future.
YEAR ENDED DECEMBER 31
-----------------------
1993 1992
----------- -----------
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
Gross interest margin.............................. $490,629 $456,189
Net income......................................... 151,901 116,699
Earnings per common share.......................... 3.09 2.41
During the year ended December 31, 1993, AmSouth completed the following
business combinations which were accounted for using the pooling-of-interests
method of accounting:
COMMON
CONSOLIDATED SHARES
LOCATION DATE ASSETS ISSUED
-------- ---- ------------ ------
(IN THOUSANDS)
Mickler Corporation (Mickler)/The
First National Bank of Clearwater
(Clearwater)...................... Clearwater, FL October $436,000 2,987
First Sunbelt Bankshares, Inc.
(Sunbelt)......................... Rome, GA December 102,000 537
50
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AmSouth's 1993 consolidated financial statements include Mickler/Clearwater,
and Sunbelt for the entire year. AmSouth's consolidated financial statements
for all periods prior to 1993 have been restated to include Mickler/Clearwater,
but have not been restated to include Sunbelt, the effect of which is not
material to AmSouth's financial condition or results of operations. Gross
interest margin, net income, and earnings per common share have been restated
as follows:
NINE MONTHS YEAR ENDED DECEMBER 31
ENDED SEPTEMBER 30, -----------------------
1993 1992 1991
------------------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
AmSouth as reported:
Gross interest margin.......... $325,780 $375,998 $318,863
Net income..................... 103,613 102,013 80,370
Earnings per common share...... 2.39 2.55 2.17
As restated:
Gross interest margin.......... 343,786 393,437 334,712
Net income..................... 108,112 108,049 82,801
Earnings per common share...... 2.30 2.51 2.07
During January and February, 1994, AmSouth completed business combinations
with Orange Banking Corporation (Orange), headquartered in Orlando, Florida,
and FloridaBank, A Federal Savings Bank (FloridaBank), headquartered in
Jacksonville, Florida, both of which will be accounted for using the pooling-
of-interests method of accounting. AmSouth issued approximately 1,332,000 and
759,000 shares of common stock for all of the outstanding shares of common
stock of Orange and FloridaBank, respectively. At December 31, 1993, Orange and
FloridaBank had total consolidated assets of $354.4 million and $271.5 million,
respectively. In the aggregate, when 1993 is restated for the pooling-of-
interests, AmSouth's gross interest margin will be $488.6 million, net income
will be $144.9 million, and earnings per common share will be $2.94. These
business combinations will not have a material effect on AmSouth's financial
condition or results of operations when restated for 1992 and 1991.
AmSouth has announced the following business combinations which are expected
to be completed in 1994, pending all regulatory and shareholder approvals, and
will be accounted for using the pooling-of-interests method of accounting:
CONSOLIDATED
ASSETS
LOCATION DECEMBER 31, 1993
-------- -----------------
(IN THOUSANDS)
Parkway Bancorp, Inc........................ Fort Myers, FL $127,000
First Federal Savings Bank, Calhoun, GA..... Calhoun, GA 72,000
Citizens National Corporation............... Naples, FL 300,000
The Tampa Banking Company................... Tampa, FL 211,000
On September 12, 1993, AmSouth signed an agreement to acquire Fortune
Bancorp, Inc. (Fortune) and its subsidiary, Fortune Bank, a Savings Bank. Upon
completion of the transaction, AmSouth will issue a total of approximately
4,481,000 shares and approximately $142.5 million in cash. At December 31,
1993, Fortune had total consolidated assets of approximately $2.7 billion and
total consolidated deposits of approximately $1.8 billion. AmSouth anticipates
that the acquisition of Fortune will be accounted for using the purchase method
of accounting.
51
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE C CASH AND DUE FROM BANKS
AmSouth's bank subsidiaries are required to maintain average reserve balances
with the Federal Reserve Bank based on a percentage of deposits. The average
amount of those reserves for the year ended December 31, 1993 was approximately
$124,000,000.
NOTE D SECURITIES HELD FOR SALE
The amounts at which securities held for sale are carried and their
approximate fair market values at December 31 are summarized as follows:
1993 1992
------------------------------------------- ---------------------------------------
GROSS GROSS GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET CARRYING UNREALIZED UNREALIZED MARKET
AMOUNT GAINS LOSSES VALUE AMOUNT GAINS LOSSES VALUE
---------- ---------- ---------- ---------- -------- ---------- ---------- --------
(IN THOUSANDS)
U.S. Treasury and
federal agency
securities............. $ 446,929 $1,279 $632 $ 447,576 $ 60,691 $2,852 $-0- $ 63,543
Mortgage-backed
securities............. 803,276 8,319 199 811,396 226,037 3,967 -0- 230,004
Other securities........ 38,991 176 -0- 39,167 49,954 7 -0- 49,961
---------- ------ ---- ---------- -------- ------ ---- --------
$1,289,196 $9,774 $831 $1,298,139 $336,682 $6,826 $-0- $343,508
========== ====== ==== ========== ======== ====== ==== ========
The carrying amount and approximate market value of securities held for sale
by maturity at December 31, 1993, were as follows:
CARRYING MARKET
AMOUNT VALUE
---------- ----------
(IN THOUSANDS)
Due within 1 year..................................... $ 67,248 $ 67,554
Due after 1 year through 5 years...................... 359,052 359,337
Due after 5 years through 10 years.................... 26,761 27,244
Due after 10 years.................................... 32,859 32,608
Mortgage-backed securities............................ 803,276 811,396
---------- ----------
$1,289,196 $1,298,139
========== ==========
Sales of securities held for sale were $990,840,000 and $685,229,000, during
1993 and 1992, respectively. Gross gains of $13,797,000 and $4,208,000 and
gross losses of $934,000 and $3,199,000 were realized on these sales for 1993
and 1992, respectively.
Securities held for sale with a carrying amount of $487,431,000 and
$233,375,000 at December 31, 1993 and 1992, respectively, were pledged for
collateral for public funds and trust deposits.
52
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE E INVESTMENT SECURITIES
The amounts at which investment securities are carried and their approximate
fair market values at December 31 are summarized as follows:
1993 1992
------------------------------------------- -------------------------------------------
GROSS GROSS GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET CARRYING UNREALIZED UNREALIZED MARKET
AMOUNT GAINS LOSSES VALUE AMOUNT GAINS LOSSES VALUE
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
U.S. Treasury and
federal agency
securities............. $ 175,658 $ 8,092 $ 6 $ 183,744 $ 196,694 $ 7,062 $ 158 $ 203,598
State, county and
municipal securities... 352,534 27,733 122 380,145 406,187 23,058 161 429,084
Mortgage-backed
securities............. 1,073,002 18,206 2,947 1,088,261 1,709,612 30,069 4,042 1,735,639
Other securities........ 17,039 24 94 16,969 102,391 3,511 30 105,872
---------- ------- ------ ---------- ---------- ------- ------ ----------
$1,618,233 $54,055 $3,169 $1,669,119 $2,414,884 $63,700 $4,391 $2,474,193
========== ======= ====== ========== ========== ======= ====== ==========
The carrying amount and approximate market value of investment securities by
maturity at December 31, 1993, were as follows:
CARRYING MARKET
AMOUNT VALUE
---------- ----------
(IN THOUSANDS)
Due in one year or less............................... $ 39,552 $ 40,017
Due after 1 year through 5 years...................... 214,466 228,215
Due after 5 years through 10 years.................... 190,167 204,315
Due after ten years................................... 101,045 108,310
Mortgage-backed securities............................ 1,073,003 1,088,262
---------- ----------
$1,618,233 $1,669,119
========== ==========
Sales of investment securities were $66,327,000 and $188,185,000 during 1993
and 1992, respectively. Gross gains of $1,342,000 and $4,619,000 and gross
losses of $126,000 and $4,000 were realized on these sales for 1993 and 1992,
respectively.
Investment securities with a carrying amount of $974,164,000 and
$1,344,388,000 at December 31, 1993 and 1992, respectively, were pledged as
collateral for public funds and trust deposits.
53
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE F LOANS
The major categories of loans at December 31 are summarized as follows:
1993 1992
------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT
---------- ------- ---------- -------
(DOLLARS IN THOUSANDS)
Commercial................................ $2,373,517 29.7% $2,290,113 36.9%
Commercial real estate:
Commercial real estate mortgage......... 1,056,752 13.2 888,000 14.3
Real estate construction................ 342,534 4.3 236,223 3.8
---------- ----- ---------- -----
Total commercial real estate.......... 1,399,286 17.5 1,124,223 18.1
---------- ----- ---------- -----
Consumer:
Residential first mortgages............. 2,262,669 28.3 1,060,889 17.1
Other residential mortgages............. 487,984 6.1 442,276 7.1
Dealer indirect......................... 599,031 7.4 495,857 8.0
Other consumer.......................... 877,438 11.0 793,761 12.8
---------- ----- ---------- -----
Total consumer........................ 4,227,122 52.8 2,792,783 45.0
---------- ----- ---------- -----
$7,999,925 100.0% $6,207,119 100.0%
========== ===== ========== =====
At December 31, 1993 and 1992, nonaccrual and/or restructured loans totaled
$48,038,000 and $56,576,000, respectively. The amount of interest income
actually recognized on these loans during 1993 and 1992 was $130,000 and
$735,000, respectively. The additional amount of interest income that would
have been recorded during 1993 and 1992 if the above amounts had been current
in accordance with their original terms was $3,461,000 and $4,291,000,
respectively.
Certain directors of AmSouth and its significant subsidiaries, including
their immediate families and companies in which they are principal owners, were
loan customers of AmSouth during 1993 and 1992. 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, 1993 and 1992 amounted to
$84,225,000 and $92,760,000, respectively. Activity during 1993 in loans to
related parties resulted in additions of $141,378,000 representing new loans,
reductions of $150,580,000 representing payments, and net additions of $667,000
representing other changes.
The fair value estimate of net loans as of December 31, 1993 is $7,904
million compared to the net book value of $7,812 million. Management has made
estimates of the fair value based on assumptions that it believes to be
reasonable as discussed in Note A. However, because there is no market for many
of these loans, management has no basis to determine whether the fair value
computed would be indicative of the value negotiated in an actual sale.
54
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE G ALLOWANCE FOR LOAN LOSSES
A summary of changes in the allowance for loan losses is shown below:
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
Balance at January 1........................... $ 92,945 $ 89,144 $ 87,660
Loans charged off.............................. (33,847) (44,316) (59,157)
Recoveries of loans previously charged off..... 16,366 11,562 14,612
-------- -------- --------
Net charge-offs................................ (17,481) (32,754) (44,545)
Addition to allowance charged to expense....... 18,980 36,555 46,029
Allowance acquired in bank purchases........... 23,645 -0- -0-
-------- -------- --------
Balance at December 31......................... $118,089 $ 92,945 $ 89,144
======== ======== ========
NOTE H PREMISES AND EQUIPMENT
Premises and equipment at December 31 are summarized as follows:
1993 1992
-------- --------
(IN THOUSANDS)
Land...................................................... $ 33,897 $ 21,264
Buildings................................................. 135,269 111,540
Furniture and fixtures.................................... 43,282 32,006
Equipment................................................. 102,623 96,193
Leasehold improvements.................................... 34,334 30,936
-------- --------
349,405 291,939
Less allowances for depreciation and amortization......... 132,690 126,845
-------- --------
$216,715 $165,094
======== ========
NOTE I DEPOSITS
The carrying amounts and fair values of deposits consisted of the following
at December 31, 1993:
CARRYING FAIR
AMOUNT VALUE
-------- ------
(IN MILLIONS)
Deposits with no defined maturities......................... $5,598 $5,598
Deposits with fixed maturities.............................. 3,970 4,013
------ ------
$9,568 $9,611
====== ======
As disclosed in Note A, Statement 107 defines the fair value of deposits with
no defined maturities as the amount payable on demand, and prohibits adjusting
fair value for any value derived from retaining those deposits for an expected
future period of time. That component, commonly referred to as a deposit base
intangible, is neither considered in the above fair value amounts nor is it
recorded as an intangible asset in the balance sheet.
The aggregate amounts of time deposits of $100,000 or more, excluding
certificates of deposit of $100,000 or more, in domestic bank offices at
December 31, 1993 and 1992 were $181,841,000 and $125,230,000 respectively.
55
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE J OTHER BORROWED FUNDS
Other borrowed funds at December 31 is summarized as follows:
1993 1992
-------- --------
(IN THOUSANDS)
Treasury, tax and loan note............................... $329,963 $266,986
Term federal funds purchased.............................. 130,000 46,000
Securities sold short..................................... 90,361 396
Eurodollars purchased..................................... 11,194 15,266
Commercial paper.......................................... 1,968 3,129
Current portion of long-term debt......................... 150 500
Other short-term debt..................................... 48,432 14,958
-------- --------
$612,068 $347,235
======== ========
At December 31, 1993, AmSouth had lines of credit arrangements for short-term
debt with two banks enabling the parent company to borrow up to $21,000,000
subject to such terms as AmSouth and the banks may mutually agree. These
arrangements are reviewed annually for renewal of the credit lines. AmSouth
pays commitment fees of 1/4% per annum on $1,000,000 of these lines which is
available solely to support commercial paper borrowings. Neither of the lines
was in use at December 31, 1993.
NOTE K LONG-TERM DEBT
Long-term debt at December 31 is summarized as follows:
1993 1992
-------- --------
(IN THOUSANDS)
Subordinated Capital Notes Due 1999....................... $ 99,311 $ 99,182
Federal Home Loan Bank advances........................... 28,472 -0-
Floating Rate Notes Due 1999.............................. 7,951 8,524
7 1/2% Convertible Subordinated Debentures................ 3,598 3,377
Long-term notes payable................................... 23,810 25,162
-------- --------
$163,142 $136,245
======== ========
The Subordinated Capital Notes Due 1999 were issued in 1987 at a discounted
price of 99 1/8. The net proceeds to AmSouth after commissions totaled
$98,450,000 for an effective rate to maturity of 9.60%. The notes will mature
on May 1, 1999 and will be repaid with either equity securities with a market
value of $100,000,000 or with cash generated from the sale of equity
securities.
Advances from the Federal Home Loan Bank had maturities ranging from 1996 to
2013 and interest rates ranging from 3.00% to 9.30%.
The average outstanding balance and average interest rate for 1993 on the
Floating Rate Notes Due 1999 were $8,172,000 and 4.03%, respectively. The rate
per annum for each semiannual period is the higher of one percent above the
three month Treasury Bill rate or a rate fixed by AmSouth. The interest rate
payable for the period ending February 28, 1994 is 4.05%. The notes are
redeemable at the option of the holder on any March 1 or September 1 at their
principal amount plus accrued interest.
The 7 1/2% Convertible Subordinated Debentures, due 2001, are redeemable on
August 1, 1996 and debentureholders may thereafter elect, during the 30-day
period following the call, to convert their debentures
56
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
into either $170.91 cash per $100 principal amount, or 17.18199 shares of
AmSouth common stock (maximum of 419,103 shares) or a combination of each. The
redemption premium is being amortized to August 1, 1996.
Long-term notes payable at December 31, 1993, included $23,359,000 of notes
maturing from 2006 to 2017 with interest rates ranging from 3.25% to 5.22%. The
remaining $451,000 of notes will mature in 1997 and have an interest rate of
9.00%.
The fair value of long-term debt at December 31, 1993 is approximately $178.5
million, based on the current interest rate environment.
The aggregate maturities of long-term debt outstanding at December 31, 1993
are summarized as follows:
(IN THOUSANDS)
1994.......................................................... $ 150
1995.......................................................... 150
1996.......................................................... 13,150
1997.......................................................... 150
1998.......................................................... -0-
Thereafter.................................................... 149,692
--------
163,292
Less current portion of long-term debt........................ 150
--------
$163,142
========
On December 21, 1993, the Securities and Exchange Commission declared
AmSouth's registration statement on Form S-3 effective pursuant to which
AmSouth may offer from time to time not more than $300 million of unsecured
senior debt securities, unsecured subordinated debt securities, and/or warrants
to purchase such debt securities.
NOTE L 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 finance international activities. AmSouth also trades in
similar instruments to manage its exposure to changes in interest and foreign
exchange rates, as well as to profit from arbitrage opportunities.
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.
57
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
The following table identifies the gross contract or notional amounts of off-
balance sheet financial instruments:
DECEMBER 31
-----------------
1993 1992
-------- --------
(IN MILLIONS)
Forward contracts--commitments to sell.................... $ 338.0 $ 202.3
Notional amount of interest rate swaps:
Receive fixed rate...................................... 218.6 366.4
Receive variable rate................................... 1,053.6 901.4
Notional amount of interest rate caps and floors.......... 1,034.7 1,056.0
Forward foreign exchange contracts:
Commitments to purchase................................. 16.1 33.0
Commitments to sell..................................... 18.8 30.0
Written options sold...................................... 97.0 1.5
The fair value of the off-balance sheet financial instruments at December 31,
1993 is approximately $9.8 million.
NOTE M COMMITMENTS AND CONTINGENCIES
AmSouth and its subsidiaries lease land, premises, and equipment under
cancellable and noncancellable 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 is shown below:
YEAR ENDED DECEMBER 31
-----------------------
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
Minimum rentals...................................... $22,896 $23,068 $20,617
Contingent rentals................................... 37 55 47
------- ------- -------
$22,933 $23,123 $20,664
======= ======= =======
58
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum payments, by year and in the aggregate, for noncancellable
operating leases with initial or remaining terms of one year or more consisted
of the following at December 31, 1993:
OPERATING
LEASES
--------------
(IN THOUSANDS)
1994.......................................................... $ 21,620
1995.......................................................... 17,550
1996.......................................................... 14,659
1997.......................................................... 12,673
1998.......................................................... 11,874
Thereafter.................................................... 68,232
--------
$146,608
========
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 loss for loan commitments
(unfunded loans and unused lines of credit), standby letters of credit, loans
sold with recourse, and securities underwriting at December 31, 1993 was as
follows (in millions):
Commitments to extend credit........................................ $3,955.8
Standby letters of credit........................................... 497.6
Loans sold with recourse............................................ 43.6
Securities underwriting............................................. 37.7
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 the company's credit policies. Collateral is obtained based
on management's assessment of the customer.
The estimated fair value of commitments to extend credit and standby letters
of credit at December 31, 1993 is approximately $1.9 million.
At December 31, 1993, AmSouth had a contract with a related party for the
construction of a training and administration facility in the Birmingham,
Alabama area. This contract represents approximately $64.0 million of the
estimated total construction cost of $100.0 million.
Various legal proceedings are pending against AmSouth and its subsidiaries.
Based upon legal counsel's opinion, management considers that any liability
resulting from various legal proceedings would not have a material impact on
the financial condition or results of operations of AmSouth.
NOTE N 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 June 15, 1989, AmSouth's Board of Directors approved a Stockholder
Protection Rights Agreement and distributed Rights to common shareholders. 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 $115, subject to adjustment. The Rights will be
exercisable only if a person or group acquires 15% or more of AmSouth's common
stock or commences a tender offer that will result in such
59
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
person or group owning 15% or more of AmSouth's common stock. The Rights may be
redeemed by action of the Board of Directors for one cent per Right.
In August 1991, AmSouth completed a public sale of 2,760,000 shares of its
common stock, par value $1.00 per share, which generated net proceeds of
$76,911,000.
In November 1991, AmSouth's Board of Directors authorized a three-for-two
common stock split. The common stock split was payable to shareholders of
record as of December 13, 1991, and the shares were issued in January 1992.
Accordingly, the equity accounts and the shares of common stock issued and
outstanding at December 31, 1991 were adjusted to reflect the common stock
split.
At the Annual Meeting of Shareholders on April 15, 1993, an amendment of
AmSouth's Restated Certificate of Incorporation to increase the authorized
common stock, $1.00 par value, from 75,000,000 to 200,000,000 shares was
approved.
At December 31, 1993, there were 121,558 shares reserved for issuance under
the Dividend Reinvestment and Common Stock Purchase Plan, 1,874,727 shares
reserved for issuance under stock compensation plans and 256,838 shares
reserved for issuance under the employee stock purchase plan for a total of
2,253,123 shares.
As disclosed in Note B, approximately 9,035,000 shares of common stock were
issued for various acquisitions that were consummated during 1993.
NOTE O LONG-TERM INCENTIVE COMPENSATION PLAN
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.
The following table summarizes the activity relating to stock options during
1991, 1992 and 1993:
NUMBER
OF SHARES OPTION PRICE PER SHARE
--------- ----------------------
Balance at January 1, 1991................. 1,220,083 $10.17-$22.00
Options exercised.......................... (321,081) 10.17- 20.67
Options forfeited.......................... (66,717) 15.75- 20.67
Options granted............................ 443,250 16.67
---------
Balance at December 31, 1991............... 1,275,535 10.17- 22.00
Options exercised.......................... (404,773) 10.17- 22.00
Options forfeited.......................... (2,500) 26.50
Options granted............................ 200,900 26.50
---------
Balance at December 31, 1992............... 1,069,162 13.42- 26.50
Options exercised.......................... (191,488) 13.42- 26.50
Options forfeited.......................... (13,570) 15.92- 29.75
Options granted............................ 196,100 28.38- 29.75
---------
Balance at December 31, 1993............... 1,060,204 15.75- 29.75
=========
The option period for the stock options is ten years. Of the options
outstanding at December 31, 1993, those granted during 1993 have a one year
restriction period from the date of grant. All other options outstanding were
exercisable.
60
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AmSouth also has issued common stock as restricted stock awards to key
officers with the restriction that they remain employed with AmSouth for a
period ranging from three to five years at the same or a higher level. During
1991, 96,300 restricted shares were awarded, 3,375 shares of restricted stock
awards were forfeited and the restrictions were removed on 87,300 shares.
During 1992, 57,000 restricted shares were awarded and 12,000 shares of
restricted stock awards were forfeited. During 1993, 51,875 restricted shares
were awarded, 11,200 shares of restricted stock awards were forfeited and the
restrictions were removed on 35,200 shares. At December 31, 1993, AmSouth had
197,775 shares of common stock outstanding representing restricted stock
awards.
At December 31, 1993, there were no stock appreciation rights outstanding.
NOTE P RESTRICTIONS ON TRANSFER OF FUNDS
Certain restrictions exist regarding the ability of banking subsidiaries to
transfer funds to the parent company as loans, advances or dividends. The
approval of regulatory authorities is required to pay dividends in excess of
earnings retained in the current year plus retained net profits for the
preceding two years. At December 31, 1993, $149,960,000 of the subsidiary
banks' net assets were available for dividends without prior regulatory
approval. Substantially all of the parent company's retained earnings at
December 31, 1993 and 1992 represented undistributed earnings of its banking
subsidiaries.
NOTE Q PENSION AND OTHER EMPLOYEE BENEFIT PLANS
As of December 31, 1993, AmSouth maintained a corporate pension plan, which
covers substantially all regular full-time employees. The pension plan benefits
are based on years of service and the employee's compensation during the last
120 months of employment. AmSouth's policy is to fund the minimum level allowed
by ERISA.
Net periodic pension cost includes the following components:
YEAR ENDED DECEMBER 31
----------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
Service cost of the current period............ $ 4,332 $ 4,084 $ 3,655
Interest cost on the projected benefit
obligation................................... 9,690 8,810 8,073
Actual return on assets held in the plan...... (16,549) (16,409) (21,728)
Net amortization of transition asset and net
gain......................................... 4,699 5,578 11,010
Expense for enhanced retirement benefit
offering..................................... 11,400 -0- -0-
-------- -------- --------
Pension expense............................... $ 13,572 $ 2,063 $ 1,010
======== ======== ========
61
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the funded status of the plan and the amounts
shown in the accompanying Consolidated Statement of Condition at December 31:
1993 1992
--------- ---------
(IN THOUSANDS)
Actuarial present value of accumulated plan benefits:
Vested.............................................. $ 134,711 $ 87,899
Nonvested........................................... 4,409 4,954
--------- ---------
Accumulated benefit obligation........................ $ 139,120 $ 92,853
========= =========
Actuarial present value of projected benefit
obligation for service rendered to date.............. $(157,932) $(114,269)
Plan assets at fair value, primarily listed stocks and
bonds and U.S. obligations........................... 152,423 140,087
--------- ---------
Plan assets (less than) in excess of projected benefit
obligation........................................... (5,509) 25,818
Recognition of transfer of plan assets in excess of
projected benefit obligation......................... 3,053 3,053
Unrecognized net gain from past experience different
from that assumed and effects of changes in
assumptions.......................................... (5,381) (25,094)
Unrecognized net transition asset..................... (6,125) (7,305)
--------- ---------
Accrued pension cost included in other liabilities.... $ (13,962) $ (3,528)
========= =========
The weighted-average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.50% and 5.00%, respectively, at December
31, 1993, 8.50% and 5.50%, respectively, at December 31, 1992 and 8.50% and
6.00%, respectively, at December 31, 1991. The average expected long-term rate
of return on plan assets is approximately 8.50% at December 31, 1993 and 1992,
and 9.00% at December 31, 1991. At December 31, 1993, the plan assets included
AmSouth common stock with a market value of $10,331,000.
AmSouth also maintains a thrift plan which covers substantially all regular
full-time employees. AmSouth makes matching contributions of 50% of each
employee's contributions to the thrift plan, up to 5% of their base pay. The
cost of the thrift plan for the years ended December 31, 1993, 1992, and 1991
was $2,075,000, $2,128,000, and $1,839,000, respectively.
AmSouth also sponsors other postretirement benefit plans. In 1993, AmSouth
adopted Statement of Financial Accounting Standards No. 106, "Employers
Accounting for Postretirement Benefits Other than Pensions" (Statement 106).
The effect of the adoption of Statement 106 did not have a material impact on
the financial condition or results of operations of AmSouth.
62
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE R INCOME TAXES
The provisions for income taxes charged to earnings are summarized as
follows:
YEAR ENDED DECEMBER 31
--------------------------
1993 1992 1991
------- ------- --------
(IN THOUSANDS)
Current tax expense:
Federal........................................ $67,848 $42,651 $ 34,172
State.......................................... 9,326 7,597 5,777
------- ------- --------
77,174 50,248 39,949
------- ------- --------
Deferred tax benefit:
Federal........................................ (5,179) (5,599) (10,935)
State.......................................... (851) (1,623) (1,378)
------- ------- --------
(6,030) (7,222) (12,313)
------- ------- --------
$71,144 $43,026 $ 27,636
======= ======= ========
During 1992 and 1991, deferred income taxes were provided for timing
differences in the recognition of revenue and expense for tax and financial
reporting purposes. The tax effects of these differences for 1992 and 1991 were
as follows:
YEAR ENDED DECEMBER 31
-----------------------
1992 1991
----------- -----------
(IN THOUSANDS)
Depreciation........................................ $ 158 $ 887
Provision for loan losses........................... (1,595) (286)
Lease rentals....................................... (3,142) (3,446)
Recapture of bad debt reserves...................... (15) (103)
Write-downs on foreclosures......................... (1,388) (7,877)
Other............................................... (1,240) (1,488)
---------- -----------
$(7,222) $(12,313)
========== ===========
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
were as follows:
YEAR ENDED DECEMBER 31
----------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
Tax at federal income tax rate................ $ 76,080 $ 51,684 $ 37,814
State and local income taxes, net of federal
tax benefits................................. 5,508 3,747 2,893
Disallowed interest expense................... 978 1,247 1,920
Tax exempt interest........................... (12,478) (14,492) (16,775)
Other......................................... 1,056 840 1,784
-------- -------- --------
$ 71,144 $ 43,026 $ 27,636
======== ======== ========
63
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The significant temporary differences which create deferred tax assets and
liabilities at December 31, 1993 are as follows (in thousands):
Deferred tax assets:
Provision for loan losses........................................ $ 42,353
Accrued early retirement benefits................................ 4,587
Lease rentals.................................................... 7,599
Other............................................................ 23,748
--------
78,287
--------
Deferred tax liabilities:
Depreciation..................................................... (16,266)
Recapture of bad debt reserves-acquired thrifts.................. (10,865)
Other............................................................ (19,642)
--------
(46,773)
--------
Net deferred tax asset............................................. $ 31,514
========
Income taxes paid were $67,120,000, $42,895,000, and $35,316,000, for 1993,
1992, and 1991, respectively.
Applicable income taxes of $457,000, $1,694,000, and $4,502,000 on investment
securities gains for 1993, 1992, and 1991, respectively, are included in the
provision for income taxes.
NOTE S OTHER OPERATING REVENUES AND OTHER OPERATING EXPENSES
The components of other operating revenues and other operating expenses are
as follows:
YEAR ENDED DECEMBER 31
-------------------------
1993 1992 1991
-------- -------- -------
(IN THOUSANDS)
Other operating revenues:
Credit card income............................... $ 13,129 $ 10,691 $ 9,945
Gains on sale of securities held for sale........ 12,863 1,009 4,202
Other............................................ 33,294 24,437 22,412
-------- -------- -------
Total other operating revenues................. $ 59,286 $ 36,137 $36,559
======== ======== =======
Other operating expenses:
Postage and office supplies...................... $ 18,234 $ 15,774 $14,476
Professional fees................................ 9,898 8,226 7,391
Amortization of intangibles...................... 16,631 13,067 9,963
Other............................................ 86,383 66,887 57,329
-------- -------- -------
Total other operating expenses................. $131,146 $103,954 $89,159
======== ======== =======
64
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE T CONDENSED PARENT COMPANY INFORMATION
STATEMENT OF CONDITION
DECEMBER 31
-------------------
1993 1992
---------- --------
(IN THOUSANDS)
ASSETS
Investment in subsidiaries................................. $1,125,324 $830,228
Loans...................................................... 32,400 19,800
Securities purchased under agreements to resell............ 9,900 4,707
Other earning assets....................................... 20,405 74,500
Other assets............................................... 21,929 16,476
---------- --------
$1,209,958 $945,711
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper........................................... $ 1,968 $ 3,129
Subordinated Capital Notes................................. 99,311 99,182
Other long-term debt....................................... 16,150 16,652
Other borrowed funds....................................... 150 500
Accrued interest payable and other liabilities............. 2,370 1,493
---------- --------
Total liabilities...................................... 119,949 120,956
Shareholders' equity....................................... 1,090,009 824,755
---------- --------
$1,209,958 $945,711
========== ========
STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31
---------------------------
1993 1992 1991
-------- -------- -------
(IN THOUSANDS)
INCOME
Dividends from subsidiaries..................... $ 68,505 $ 53,946 $66,223
Interest and other.............................. 4,658 2,942 2,548
-------- -------- -------
73,163 56,888 68,771
-------- -------- -------
EXPENSES
Interest........................................ 10,526 10,919 11,728
Other........................................... 4,724 4,125 3,591
-------- -------- -------
15,250 15,044 15,319
-------- -------- -------
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDIS-
TRIBUTED EARNINGS OF SUBSIDIARIES................ 57,913 41,844 53,452
Income taxes (credit)............................. (3,502) (3,967) (3,826)
-------- -------- -------
INCOME BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES..................................... 61,415 45,811 57,278
Equity in undistributed earnings of subsidiaries.. 84,812 62,238 25,523
-------- -------- -------
NET INCOME.................................... $146,227 $108,049 $82,801
======== ======== =======
65
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31
----------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income..................................... $146,227 $108,049 $ 82,801
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of goodwill..................... 2,386 2,386 2,930
Other amortization........................... 1,772 961 477
Increase in accrued interest receivable and
other assets................................ (97) (257) (709)
Increase (decrease) in accrued expenses and
other liabilities........................... 752 (728) 695
Equity in undistributed earnings of subsidi-
aries....................................... (84,812) (62,238) (25,523)
-------- -------- --------
Net cash provided by operating activities.. 66,228 48,173 60,671
-------- -------- --------
INVESTING ACTIVITIES
Net increase in advances to subsidiaries....... (8,600) (7,800) (9,500)
Net decrease (increase) in short-term invest-
ments......................................... 48,902 5,752 (71,150)
Capital contributions to subsidiaries.......... (3,000) (1,000) (18,000)
Distribution from subsidiary................... -0- 2,270 -0-
Net purchases of premises and equipment........ (5,405) (4,761) -0-
Net cash used for acquisitions................. (44,119) -0- -0-
-------- -------- --------
Net cash used by investing activities...... (12,222) (5,539) (98,650)
-------- -------- --------
FINANCING ACTIVITIES
Net (decrease) increase in commercial paper.... (1,161) 63 (1,097)
Payments on long-term debt..................... (1,073) (4,671) (5,904)
Cash dividends paid............................ (57,601) (44,752) (38,006)
Proceeds from employee benefit plans........... 4,864 7,214 6,181
Proceeds from stock offering................... -0- -0- 76,911
-------- -------- --------
Net cash (used) provided by financing ac-
tivities.................................. (54,971) (42,146) 38,085
-------- -------- --------
(Decrease) increase in cash...................... (965) 488 106
Cash at beginning of year........................ 1,091 603 497
Beginning cash balance of First Sunbelt
Bankshares, Inc. ............................... 1,180 -0- -0-
-------- -------- --------
Cash at end of year........................ $ 1,306 $ 1,091 $ 603
======== ======== ========
66
AMSOUTH BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
NOTE U QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Selected quarterly results of operations for the four quarters ended December
31, 1993 and 1992 are as follows:
1993 1992
------------------------------------ -----------------------------------
FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
Revenue from earning
assets................. $196,895 $197,746 $194,631 $187,689 $173,699 $173,622 $176,650 $180,545
Interest expense........ 78,604 80,849 79,499 75,932 69,552 73,300 80,182 88,045
Gross interest margin... 118,291 116,897 115,132 111,757 104,147 100,322 96,468 92,500
Provision for loan
losses................. 4,620 (349) 7,705 7,004 9,857 12,530 7,315 6,853
Investment securities
gains.................. 131 101 23 961 7 55 43 4,510
Income before income
taxes.................. 55,571 54,609 55,078 52,113 39,161 39,873 36,633 35,408
Net income.............. 38,115 35,805 37,110 35,197 28,242 27,970 26,251 25,586
Per common share
Net income............ .80 .76 .78 .76 .66 .65 .61 .60
Cash dividends
declared............. .35 .29 .29 .29 .29 .26 .26 .26
Market price range
High................. 31 1/2 33 5/8 35 7/8 34 1/8 32 5/8 29 31 1/8 27 3/8
Low.................. 27 3/8 29 1/4 30 3/8 29 5/8 26 7/8 26 26 1/8 21 3/8
67
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
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, 10, and 11 of AmSouth's Proxy Statement for the Annual Meeting of
Shareholders to be held on April 21, 1994 (the Proxy Statement) is incorporated
herein by reference. Information on AmSouth's executive officers is included in
Part I of this report. Current director Mr. B. Phil Richardson will retire as a
director effective April 21, 1994 pursuant to the mandatory retirement
provisions of AmSouth's bylaws. Mr. Richardson, age 68, has served as a
director of AmSouth since 1980 and during the last five years has been
Executive Vice President--Operations of Alfa Insurance Companies (auto, fire
casualty and life insurance). Mr. Richardson is also a director of Alfa
Corporation.
Information regarding late filings under Section 16(a) of the Securities
Exchange Act of 1934 included at page 14 of the Proxy Statement is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding compensation of directors and executive officers
included at pages 15 through 22 of the Proxy Statement is incorporated herein
by reference.
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 2 through 5 of the Proxy Statement is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth in the Proxy Statement under the caption "Certain
Transactions" at pages 14 and 15 and in paragraphs (a), (b), and (c) under the
caption "Information with Respect to Compensation Committee Interlocks and
Insider Participation in Compensation Decisions" at page 19 is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENT SCHEDULES
The following report of independent auditors and consolidated financial
statements of AmSouth and its subsidiaries are included in Item 8:
Report of Independent Auditors
Consolidated Statement of Condition -- December 31, 1993 and 1992
Consolidated Statement of Earnings -- Years ended December 31, 1993, 1992,
and 1991
Consolidated Statement of Shareholders' Equity -- Years ended December 31,
1993, 1992, and 1991
Consolidated Statement of Cash Flows -- Years ended December 31, 1993, 1992,
and 1991
Notes to Consolidated Financial Statements -- Years ended December 31, 1993,
1992, and 1991
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.
(B) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed during the fourth quarter of
1993:
a) Report on form 8-K filed October 18, 1993 reporting AmSouth's
preliminary results of operations through the third quarter of 1993.
68
b) Report on Form 8-K filed November 24, 1993 to present pro forma
financial statements reflecting certain pending acquisitions, including
(i) an Unaudited Pro Forma Condensed Statement of Condition as of
September 30, 1993, and (ii) Unaudited Pro Forma Combined Condensed
Statements of Earnings for the year ended December 31, 1992 and the nine
months ended September 30, 1993.
c) Report on Form 8-K filed December 21, 1993 reporting the completion of
the acquisition of Mid-State Federal Savings Bank.
(C) EXHIBITS
The exhibits listed in the Exhibit Index at page 72 of this Form 10-K are
filed herewith or are incorporated herein by reference.
69
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
By /s/ John W. Woods
----------------------------------
JOHN W. WOODS
Chairman of the Board, Chief
Executive Officer and President
Date: March 21, 1994
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.
By /s/ John W. Woods By /s/ M. List Underwood, Jr.
---------------------------------- ----------------------------------
JOHN W. WOODS M. LIST UNDERWOOD, JR.
Chairman of the Board, Chief Executive Vice President and Chief
Executive Officer, President and A Financial Officer (Principal
Director (Principal Executive Financial Officer)
Officer) Date: March 21, 1994
Date: March 21, 1994
By /s/ Ricky W. Thomas
----------------------------------
RICKY W. THOMAS
Senior Vice President and
Controller (Principal Accounting
Officer)
Date: March 21, 1994
By /s/ C. Stanley Bailey By
---------------------------------- ----------------------------------
C. STANLEY BAILEY GEORGE W. BARBER, JR.
A Director and Officer A Director
Date: March 21, 1994 Date: March 21, 1994
By /s/ William D. Biggs, Sr. By /s/ Barney B. Burks, Jr.
---------------------------------- ----------------------------------
WILLIAM D. BIGGS, SR. BARNEY B. BURKS, JR.
A Director A Director
Date: March 21, 1994 Date: March 21, 1994
By /s/ William J. Cabaniss, Jr. By /s/ Joseph M. Farley
---------------------------------- ----------------------------------
WILLIAM J. CABANISS, JR. JOSEPH M. FARLEY
A Director A Director
Date: March 21, 1994 Date: March 21, 1994
By /s/ M. Miller Gorrie By /s/ Robert A. Guthans
---------------------------------- ----------------------------------
M. MILLER GORRIE ROBERT A. GUTHANS
A Director A Director
Date: March 21, 1994 Date: March 21, 1994
70
By /s/ Elmer B. Harris By /s/ James I. Harrison, Jr.
---------------------------------- ----------------------------------
ELMER B. HARRIS JAMES I. HARRISON, JR.
A Director A Director
Date: March 21, 1994 Date: March 21, 1994
By By /s/ Hugh B. Jacks
---------------------------------- ----------------------------------
DONALD E. HESS HUGH B. JACKS
A Director A Director
Date: March 21, 1994 Date: March 21, 1994
By /s/ Ronald L. Kuehn, Jr. By /s/ E. Roberts Leatherbury
---------------------------------- ----------------------------------
RONALD L. KUEHN, JR. E. ROBERTS LEATHERBURY
A Director A Director
Date: March 21, 1994 Date: March 21, 1994
By /s/ Mrs. H. Taylor Morrissette By /s/ Claude B. Nielsen
---------------------------------- ----------------------------------
MRS. H. TAYLOR MORRISSETTE CLAUDE B. NIELSEN
A Director A Director
Date: March 21, 1994 Date: March 21, 1994
By /s/ Arthur R. Outlaw By /s/ Z. Cartter Patten, III
---------------------------------- ----------------------------------
ARTHUR R. OUTLAW Z. CARTTER PATTEN, III
A Director A Director
Date: March 21, 1994 Date: March 21, 1994
By /s/ Benjamin F. Payton, Ph.D. By /s/ B. Phil Richardson
---------------------------------- ----------------------------------
BENJAMIN F. PAYTON, PH.D. B. PHIL RICHARDSON
A Director A Director
Date: March 21, 1994 Date: March 21, 1994
By /s/ C. Dowd Ritter By /s/ William J. Rushton, III
---------------------------------- ----------------------------------
C. DOWD RITTER WILLIAM J. RUSHTON, III
A Director and Officer A Director
Date: March 21, 1994 Date: March 21, 1994
By /s/ Herbert A. Sklenar By
---------------------------------- ----------------------------------
HERBERT A. SKLENAR W. A. WILLIAMSON, JR.
A Director A Director
Date: March 21, 1994 Date: March 21, 1994
By /s/ Spencer H. Wright
----------------------------------
SPENCER H. WRIGHT
A Director
Date: March 21, 1994
71
EXHIBIT INDEX
The following is a list of exhibits including items incorporated by
reference. Compensatory plans and arrangements are identified by an asterisk.
2-a Agreement and Plan of Merger dated as of June 29, 1992 between First
Chattanooga Financial Corporation and AmSouth Bancorporation (1)
2-b Agreement and Plan of Reorganization dated as of January 21, 1993
among The First National Bank of Clearwater and Mickler Corporation
and AmSouth Bancorporation (2)
2-c Agreement and Plan of Merger dated as of March 29, 1993 between
Orange Banking Corporation and AmSouth Bancorporation (3)
2-d Amended and Restated Agreement and Plan of Reorganization by and
between Mid-State Federal Savings Bank and AmSouth Bancorporation
dated as of April 22, 1993 and amended and restated as of June 22,
1993 (4)
2-e Agreement and Plan of Merger dated as of May 11, 1993 between First
Sunbelt Bankshares, Inc. and AmSouth Bancorporation (5)
2-f Agreement and Plan of Merger dated as of June 30, 1993 between
FloridaBank, a Federal Savings Bank and AmSouth Bancorporation (6)
2-g Agreement and Plan of Merger dated as of July 29, 1993 between
Parkway Bancorp, Inc. and AmSouth Bancorporation (7)
2-h Agreement and Plan of Merger dated as of August 3, 1993 between First
Federal Savings Bank, Calhoun, Georgia and AmSouth Bancorporation (8)
2-i Agreement and Plan of Merger dated as of August 9, 1993 between
Citizens National Corporation and AmSouth Bancorporation (9)
2-j Agreement and Plan of Merger dated as of September 12, 1993 between
Fortune Bancorp, Inc. and AmSouth Bancorporation (10)
3-a Restated Certificate of Incorporation of AmSouth Bancorporation (11)
3-b Bylaws of AmSouth Bancorporation, as amended
4-a Instruments defining the rights of security holders (12)
4-b Stockholder Protection Rights Agreement dated as of June 15, 1989
between AmSouth Bancorporation and AmSouth Bank, National Association
as Rights Agent, 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 (13)
4-c Certificate of Designation and Terms of Series A Preferred Stock of
AmSouth Bancorporation (14)
*10-a AmSouth Bancorporation Executive Incentive Plan (15)
10-b AmSouth Bancorporation Transfer/Employee Relocation Policy
*10-c AmSouth Bank Supplemental Retirement Plan (16)
*10-d AmSouth Bancorporation Long Term Incentive Compensation Plan (17)
*10-e Amendment No. 1 to the AmSouth Bancorporation Long Term Incentive
Compensation Plan (18)
*10-f Amendment No. 2 to the AmSouth Bancorporation Long Term Incentive
Compensation Plan (19)
72
*10-g Amendment No. 3 to the AmSouth Bancorporation Long Term Incentive
Compensation Plan (20)
*10-h Amendment No. 4 to the AmSouth Bancorporation Long Term Incentive
Compensation Plan (21)
*10-i 1989 AmSouth Bancorporation Long Term Incentive Compensation Plan (22)
*10-j AmSouth Bancorporation 1987 Substitute Stock Option Plan (23)
*10-k Change in Control Compensation Agreements (24)
*10-l Deferred Compensation Plan for Directors of AmSouth and AmSouth Bank
N.A. (25)
*10-m Agreement between AmSouth Bank N.A. and Brasfield and Gorrie General
Contractor, Inc., dated August 2, 1993 (26)
11 Statement Regarding Computation of Earnings per Share
21 List of Subsidiaries of AmSouth Bancorporation
23 Consent of Ernst & Young, Independent Auditors
73
NOTES TO EXHIBITS
(1) Filed as Exhibit 2 to AmSouth's Registration Statement on Form S-4
(Registration Statement No. 33-53088), incorporated herein by reference
(2) Filed as Exhibit 2(a) to AmSouth's Registration Statement on Form S-4
(Registration Statement No. 33-60164), incorporated herein by reference
(3) Filed as Exhibit 2(a) to AmSouth's Registration Statement on Form S-4
(Registration Statement No. 33-49865), incorporated herein by reference
(4) Filed as Exhibit 2(a) to AmSouth's Registration Statement on Form S-4
(Registration Statement No. 33-64960), incorporated herein by reference
(5) Filed as Exhibit 2(a) to AmSouth's Registration Statement on Form S-4
(Registration Statement No. 33-50041), incorporated herein by reference
(6) Filed as Exhibit 2(a) to AmSouth's Registration Statement on Form S-4
(Registration Statement No. 33-50605), incorporated herein by reference
(7) Filed as Exhibit 2(a) to AmSouth's Registration Statement on Form S-4
(Registration Statement No. 33-50727), incorporated herein by reference
(8) Filed as Exhibit 2(a) to AmSouth's Registration Statement on Form S-4
(Registration Statement No. 33-51767), incorporated herein by reference
(9) Filed as Exhibit 2(a) to AmSouth's Registration Statement on Form S-4
(Registration Statement No. 33-50865), incorporated herein by reference
(10) Filed as Exhibit 2(a) to AmSouth's Report on Form 8-K filed on September
16, 1993, as amended by a Form 8-K/A filed on September 23, 1993,
incorporated herein by reference
(11) Filed as Exhibit 3-b to AmSouth's Form 10-Q Quarterly Report for the
quarter ended March 31, 1993, incorporated herein by reference
(12) 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
(13) Filed as Exhibit 4-a to AmSouth's Form 10-Q Quarterly Report for the
quarter ended June 30, 1989, incorporated herein by reference
(14) Filed as Exhibit 4-c to AmSouth's Form 10-Q Quarterly Report for the
quarter ended June 30, 1989, incorporated herein by reference
(15) Filed as Exhibit 10(b) to AmSouth's Form 10-Q Quarterly Report for the
quarter ended September 30, 1993, incorporated herein by reference
(16) Filed as Exhibit 10-b to AmSouth's Form 10-Q Quarterly Report for the
quarter ended September 30, 1991, incorporated herein by reference
(17) Filed as part of Exhibit 23 to AmSouth's Form 10-Q Quarterly Report for
the quarter ended March 31, 1984, incorporated herein by reference
(18) Filed as Exhibit 10-e to AmSouth's Form 10-K Annual Report for the year
ended December 31, 1985, incorporated herein by reference
(19) Filed as Exhibit 10-b to AmSouth's Form 10-Q Quarterly Report for the
quarter ended March 31, 1987, incorporated herein by reference
(20) Filed as Exhibit 10(b) to AmSouth's Form 10-Q Quarterly Report for the
quarter ended September 30, 1988, incorporated herein by reference
(21) Filed as Exhibit 10-i to AmSouth's Form 10-K Annual Report for the year
ended December 31, 1988, incorporated herein by reference
(22) Filed as Exhibit 10 to AmSouth's Form 10-Q Quarterly Report for the
quarter ended March 31, 1993, incorporated herein by reference
(23) Filed as Exhibit 10-a to AmSouth's Form 10-Q Quarterly Report for the
quarter ended March 31, 1988, incorporated herein by reference
(24) Filed as Exhibit 10-k to AmSouth's Form 10-K Annual Report for the year
ended December 31, 1992, incorporated herein by reference
74
(25) Filed as Exhibit 10-a to AmSouth's Form 10-Q Quarterly Report for the
quarter ended June 30, 1986, incorporated herein by reference
(26) Filed as Exhibit 10(a) to AmSouth's Form 10-Q Quarterly Report for the
quarter ended September 30, 1993, incorporated herein by reference
75