AmSouth’s planned merger
unites the legacies of two great
companies. Together we will
strengthen our leadership
in fast-growing markets,
enhance shareholder value
and deliver even greater
choices to our customers.
SECOND QUARTER 2006
Letter to Our Shareholders
JULY 2006
When I look back to the start of my career as
a new branch manager at AmSouth years ago,
I remember the excitement and opportunities
that came with building something new. It was
a formative time, and I learned from some
great bankers and customers the importance
of service and relationships.
Today, I feel just as much excitement and
sense of opportunity as we turn the page to
another chapter at AmSouth: as we work to
merge with Regions Financial Corporation.
While we both have long histories of growth,
profitability and returns to shareholders, the
combination of our two premier companies
will create an even more formidable financial
services organization.
The new Regions will have some $140
billion in assets, operate in 16 states and
serve more than 5 million households. We will
rank as a top 10 bank having 2,000 branches
and 2,800 ATMs. Together we can offer more
options to customers, more opportunities
for our associates, be a stronger partner
with our communities and create value for
our shareholders.
As we continue to discover the strengths of
each company, I am reminded how different
banking is today — with thousands of systems
and millions of customers — compared to
banking in years past. At the same time,
banking is, in many ways, very much the
same. Today, just as always, it’s about meeting
the needs of customers. Our associates pride
themselves on making an individual difference
in the lives of those we serve. They will settle
for nothing less.
I’m proud of this and what they’ve
accomplished. And as we become busy with
the challenges and opportunities that will
certainly be offered in the next few months,
we have not lost sight of the present. Our
performance in the second quarter is evidence
of this fact.
FINANCIAL HIGHLIGHTS
We reported earnings per share of 53 cents
on net income of $184.7 million. Our earnings
performance was driven by revenue growth
from both interest and noninterest sources,
solid loan growth and continued strong credit
quality. Our profitability remained among the
highest in the industry with a return on equity
of 20.6 percent and return on assets was also
solid at 1.39 percent.
As we look at revenue drivers during the
quarter, noninterest revenues were a key.
They were higher by an annualized 21 percent
compared to last quarter as most categories,
including service charges, investment services
income and interchange income experienced
excellent increases. Each of these revenue
categories posted outstanding linked quarter
annualized growth well into the double digits
this quarter.
Net interest income also contributed
soundly to total revenue this quarter, increasing
an annualized 5.1 percent versus the first
quarter. During the second quarter the
Federal Reserve continued its response to
inflationary pressures and other economic
data by raising short-term interest rates
another 50 basis points. The most recent move
marked the seventeenth consecutive 25 basis
point increase, bringing the total increase over
the last two years to 425 basis points. Over
that same period, we had outstanding loan and
low-cost deposit growth. And our net interest
margin has held up well, decreasing just 5
basis points over that term. This quarter,
our net interest margin remained relatively
stable again, decreasing just 3 basis points
to 3.39 percent.
Loan growth was strong again this quarter,
increasing an annualized 7.4 percent, with
particularly strong demand for certain types
of loans. Commercial Real Estate loans
continued to lead the Company, increasing
27 percent on an annualized basis over
the first quarter. Other areas that performed
well this quarter were small business and
equity lending.
With nearly 1 million small businesses in
the geographic areas where we operate, we
have committed considerable resources to
winning these relationships. And our efforts
have been rewarded, with small business
loans growing at a 10 percent pace this quarter,
marking the fifth consecutive quarter of
annualized double-digit growth in this area.
Our equity lending also posted another good
quarter, despite pressures on balances from
high payoffs triggered by increasing short-term
interest rates. During the second quarter,
equity balances increased 5.1 percent on an
annualized basis as compared to last quarter.
While we are obviously delighted with our
loan growth, we are equally pleased by the
continued strength of our loan portfolio from
a credit quality perspective. Net charge-offs
were 0.19 percent of average loans this
quarter, evidence that our loan portfolio
remains healthy. And with a nonperforming
assets to net loans ratio of 29 basis points, the
near-term forecast looks strong as well.
the same commitment to service that’s defined
us both. Together, the strategic opportunities
we have are vast: strong customer bases,
enhanced revenue opportunities, accelerated
deposit growth, improved capital efficiencies
and other balance sheet benefits.
This merger is a tremendous value-creating
opportunity for our shareholders. It’s a
strategic merger of like-minded partners
with a shared vision. We’re already making
significant progress in our merger planning.
As one of the first steps, we’ve named more
than 100 leaders for the new Regions and we
are working hard to complete this process as
soon as possible.
AmSouth has been a part of so many lives
— as a bank, employer, investment and
community partner. A new day is coming to
AmSouth: a day where our future is joined
with Regions. Our history, our people and our
legacy of relationships have provided a
tremendous foundation for success and will
follow us as we enter this new era — to serve
our customers well, to continue building
communities, and as we create even more
value for shareholders.
Thank you for your continued support as
we build an outstanding new company.
LOOKING AHEAD
As you can see, we continue to show solid
earnings momentum, even as we plan for the
merger of our two great companies. For years,
Regions and AmSouth have faced each other
as competitors, and, in many ways, we are
very similar. In other ways, our differences
complement each other very well, with unique
strengths at both companies. Specifically, we
will leverage what each of us does well, such
as the strength of Region’s Morgan Keegan
investment arm and AmSouth’s successful
branch expansion model.
What does it mean for customers? More
options, more locations, more convenience and
Sincerely,
C. Dowd Ritter
Chairman, President and
Chief Executive Officer
AmSouth Bancorporation and Subsidiaries
FINANCIAL HIGHLIGHTS (UNAUDITED)
Three Months Ended June 30
(Dollars in thousands, except per share data)
2006
2005
% Change
EARNINGS SUMMARY
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 184,681
Earnings per common share – basic. . . . . . . . . . . . .
0.54
Earnings per common share – diluted . . . . . . . . . . .
0.53
Cash dividends declared per common share . . . . .
0.26
$ 184,599
0.52
0.52
0.25
0.0%
3.8
1.9
4.0
SELECTED RATIOS
Return on average assets (annualized) . . . . . . . . . .
Return on average equity (annualized) . . . . . . . . . .
Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average equity to average assets . . . . . . . . . . . . . . .
Allowance for loan and lease losses to loans
net of unearned income . . . . . . . . . . . . . . . . . . . . .
Book value per common share . . . . . . . . . . . . . . . . . $
1.39%
20.59
3.39
52.65
6.76
0.96
10.42
1.47%
20.92
3.40
51.4 1
7.03
$
1.09
10.33
Six Months Ended June 30
(Dollars in thousands, except per share data)
2006
2005
% Change
EARNINGS SUMMARY
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 365,672
Earnings per common share – basic. . . . . . . . . . . . .
1.06
Earnings per common share – diluted . . . . . . . . . . .
1.04
Cash dividends declared per common share . . . . .
0.52
$ 363,244
1.03
1.01
0.50
SELECTED RATIOS
Return on average assets (annualized) . . . . . . . . . .
Return on average equity (annualized) . . . . . . . . . .
Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average equity to average assets . . . . . . . . . . . . . . .
Allowance for loan and lease losses to loans
net of unearned income . . . . . . . . . . . . . . . . . . . . .
Book value per common share . . . . . . . . . . . . . . . . . $
1.39%
20.56
3.41
52.59
6.77
0.96
10.42
1.46%
20.70
3.42
52.06
7.03
$
1.09
10.33
0.7%
2.9
3.0
4.0
AmSouth Bancorporation and Subsidiaries
FINANCIAL HIGHLIGHTS (UNAUDITED)
June 30
(Dollars in thousands)
2006
2005
% Change
FINANCIAL CONDITION
End of period balances:
Loans net of unearned income . . . . . . . . . . . . . . . $
Earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .
37,454,093
49,372,999
53,929,814
37,437,500
3,579,061
$ 33,533,382
46,191,133
50,546,831
35,31 3,708
3,638,225
1 1 .7%
6.9
6.7
6.0
(1.6)
Quarter-to-date average balances:
Loans net of unearned income . . . . . . . . . . . . . . . $
Earning assets*. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .
37,01 2,965
48,937,299
53,182,063
37,067,142
3,597,1 1 2
$ 33,361,522
46,007,898
50,341,297
34,857,940
3,540,078
10.9%
6.4
5.6
6.3
1.6
Year-to-date average balances:
Loans net of unearned income . . . . . . . . . . . . . . . $
Earning assets*. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .
36,680,591
48,667,393
52,946,693
36,907,669
3,586,859
$ 33,285,458
45,968,517
50,318,828
34,785,672
3,539,233
10.2%
5.9
5.2
6. 1
1.3
* Excludes adjustment for market valuation on available-for-sale securities and certain noninterest-earning marketable equity securities.
** Statement 133 valuation adjustments related to time deposits and other interest-bearing liabilities are included in other liabilities.
Board of Directors
CHARLES D. MCCRARY
President and
Chief Executive Officer,
Alabama Power Company
Birmingham, AL
RONALD L. KUEHN, JR.
Chairman of the Board,
El Paso Corporation
Birmingham, AL
JAMES R. MALONE
Managing Partner,
Qorval LLC
Naples, FL
CLAUDE B. NIELSEN
Chairman of the Board and
Chief Executive Officer,
Coca-Cola Bottling Company
United, Inc.
Birmingham, AL
EARNEST W. DEAVENPORT, JR.
Retired Chairman of
the Board and Chief
Executive Officer,
Eastman Chemical Company
Kingsport, TN
DAVID J. COOPER, SR.
President,
Cooper/T. Smith Corporation
Mobile, AL
C. DOWD RITTER
Chairman of the Board,
President and
Chief Executive Officer,
AmSouth Bancorporation
Birmingham, AL
MARTHA R. INGRAM
Chairman of the Board,
Ingram Industries, Inc.
Nashville, TN
DON DEFOSSET
Retired Chairman of the Board,
President and Chief Executive
Officer,
Walter Industries, Inc.,
Tampa, FL
Directors are listed in
chronological order of
tenure, earliest to latest.
Management Committee
C. DOWD RITTER
Chairman, President and
Chief Executive Officer
DAVID B. EDMONDS
Senior Executive Vice President,
Human Resources Division
GEOFFREY A. VON KUHN
Senior Executive Vice President,
Wealth Management Group
O. B. GRAYSON HALL, JR.
Senior Executive Vice President,
Lines of Business/Operations
and Technology Group
JOHN M. GAFFNEY
Senior Executive Vice President,
Commercial Banking Group
WILLIAM C. WELLS, II
Senior Executive Vice President
and Chief Risk Officer,
Risk Management Group
W. CHARLES MAYER, III
Senior Executive Vice President,
General Banking Group
CANDICE W. BAGBY
Senior Executive Vice President,
Consumer Banking Group
SUSAN A. MARTINEZ
Senior Executive Vice President,
Florida Banking Group
E. W. STEPHENSON, JR.
Senior Executive Vice President,
Tennessee Banking Group
ALTON E. YOTHER
Executive Vice President
and Chief Financial Officer,
Finance Group
Corporate Information
CORPORATE
HEADQUARTERS
AmSouth Bancorporation
AmSouth Center
1900 Fifth Avenue North
Birmingham, AL 35203
MAILING
ADDRESS
Post Office Box 11007
Birmingham, AL 35288
prospectus, you can go online to www.stockbny.com
and select AmSouth Bancorporation’s Direct Stock
Purchase and Dividend Reinvestment Plan from the
“Company List” tab, or contact:
The Bank of New York
Dividend Reinvestment Department
P.O. Box 1958
Newark, NJ 07101-9774
1-800-432-0140
COMMON STOCK
AmSouth common stock is listed on the New York
Stock Exchange and is traded under the symbol ASO.
It is listed in The Wall Street Journal as AmSoBcp.
INVESTOR INQUIRIES
Analysts, investors and others seeking information
should contact:
M. List Underwood, Jr. or Tobin N. Vinson
Investor Relations
Investor Relations
(205) 801-0265
(205) 326-4891
INTERNET ADDRESS
www.amsouth.com
STOCK TRANSFER AGENT
The Bank of New York
Post Office Box 11002
Church Street Station
New York, NY 10286-1002
Shareholders requiring a change of address or
information about certificates or dividend checks
should contact:
Shareholders’ Services
(877) 679-5704 (Toll Free)
or (205) 326-5807
MEDIA INQUIRIES
Media representatives seeking general information
should contact:
Richard C. Swagler, Jr.
Media Relations
(205) 801-0105
DIRECT DEPOSIT
With Direct Deposit, shareholders may enjoy the
convenience of having dividends or interest payments
directly deposited into their AmSouth checking or
savings account. There is no cost for this service.
Shareholders may obtain further information about
Direct Deposit by contacting Shareholders’ Services
at (877) 679-5704, or by writing AmSouth’s corporate
headquarters in care of the Investor Relations
Department.
INVESTOR RELATIONS RESOURCE CENTER
AmSouth offers all of its financial publications
including annual and quarterly reports to shareholders
and Securities and Exchange Commission filings at its
Investor Relations Resource Center at www.amsouth.com.
The resource center also offers investors the latest
news and information about AmSouth, including news
releases and recent management presentations, as
well as research tools for investors.
Additional copies of the corporation’s Annual
Report, Form 10-K, quarterly reports and other
corporate publications are also available on request by
writing or calling our Investor Relations Department
at the corporate headquarters, (205) 581-7890.
DIRECT STOCK PURCHASE AND
DIVIDEND REINVESTMENT PLAN
Through the AmSouth Bancorporation Direct
Stock Purchase and Dividend Reinvestment Plan,
investors can make initial investments in AmSouth
common stock, reinvest their AmSouth dividends in
additional shares of common stock and make additional
optional cash investments. AmSouth assumes all costs
associated with the purchase of shares under the Plan.
Participating shareholders also have the option to
deposit certificates into their Dividend Reinvestment
Plan account. For more information and a Plan
ENROLL NOW FOR ELECTRONIC DELIVERY
Shareholders can enjoy the benefits and convenience of receiving Proxy Statements, Annual Reports
and other shareholder materials online, reducing
paper mailed to your home and helping AmSouth
communicate with shareholders more efficiently. To
receive shareholder communications via the Internet,
simply go to www.icsdelivery.com/aso and follow the
instructions. When information on AmSouth becomes
available electronically, you will be sent an e-mail
notification. Investors may also sign up at the Investor
Relations Resource Center at www.amsouth.com.
Post Office Box 11007
Birmingham, AL 35288