Edgar Filing: AMSOUTH BANCORPORATION

Form 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2003

Commission file number 1-7476

AmSouth Bancorporation

(Exact Name of registrant as specified in its charter)

Delaware		63-0591257
(State or other jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

AmSouth Center
1900 Fifth Avenue North
Birmingham, Alabama		35203
(Address of principal executive offices)		(Zip Code)

(205) 320-7151

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

As of July 31, 2003, AmSouth Bancorporation had 350,706,000 shares of common stock outstanding.

AMSOUTH BANCORPORATION

FORM 10-Q

INDEX

			Page
Part I.	Financial Information
	Item 1.	Financial Statements (Unaudited)
		Consolidated Statement of Condition—June 30, 2003, December 31, 2002, and June 30, 2002	3
		Consolidated Statement of Earnings—Three months and six months ended June 30, 2003 and 2002	4
		Consolidated Statement of Shareholders’ Equity—Six months ended June 30, 2003	5
		Consolidated Statement of Cash Flows—Six months ended June 30, 2003 and 2002	6
		Notes to Consolidated Financial Statements	7
		Independent Accountants’ Review Report	15
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
	Item 4.	Controls and Procedures	32

Part II.	Other Information
	Item 1.	Legal Proceedings	32
	Item 4.	Submission of Matters to a Vote of Security Holders	33
	Item 6.	Exhibits and Reports on Form 8-K	33
Signatures			34
Exhibit Index			35

Forward-Looking Statements. Statements made in this report that are not purely historical are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995), including any statements regarding descriptions of management’s plans, objectives or goals for future operations, products or services, and forecasts of its revenues, earnings or other measures of performance. Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. A number of factors-many of which are beyond AmSouth’s control-could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. Factors which could cause results to differ materially from current management expectations include, but are not limited to: execution of AmSouth’s strategic initiatives; legislation; general economic conditions, especially in the Southeast; the performance of the stock and bond markets; changes in interest rates, yield curves and interest rate spread relationships; prepayment speeds within the loan and investment security portfolios; deposit flows; the cost of funds; cost of federal deposit insurance premiums; demand for loan products; demand for financial services; competition; changes in the quality or composition of AmSouth’s loan and investment portfolios including capital market inefficiencies that may affect the marketability and valuation of available-for-sale securities; changes in accounting and tax principles, policies or guidelines; other economic, competitive, governmental and regulatory factors affecting AmSouth’s operations, products, services and prices; unexpected judicial actions and developments; and the outcome of litigation, which is inherently uncertain and depends on the findings of judges and juries. To the extent that terrorist attacks or other hostilities including geopolitical conflicts cause a prolonged negative impact on the economy, the effects may include: adverse changes in customers’ borrowing, investing or spending patterns; market disruptions; adverse effects on the performance of the United States and foreign equity markets; currency fluctuations; exchange controls; restriction of asset growth; negative effects on credit quality; and other effects that could adversely impact the performance, earnings, and revenue growth of the financial services industry, including AmSouth. Forward-looking statements speak only as of the date they are made. AmSouth does not undertake a duty to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

AMSOUTH BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CONDITION

(Unaudited)

	June 30 2003			December 31 2002			June 30 2002
	(Dollars in thousands)
ASSETS
Cash and due from banks	$	1,451,537		$	1,221,985		$	1,124,366
Federal funds sold and securities purchased under agreements to resell		484,300			26,018			147,000
Trading securities		287			47,964			30,006
Available-for-sale securities		5,814,466			4,744,866			4,590,271
Held-to-maturity securities (market value of $4,919,981, $4,552,727 and $4,299,533, respectively)		4,842,826			4,425,053			4,177,856
Loans held for sale		17,655			19,909			203,370
Loans		28,876,285			28,062,413			26,381,404
Less: Allowance for loan losses		384,011			381,579			371,418
Unearned income		653,743			711,495			728,496

Net loans		27,838,531			26,969,339			25,281,490
Other interest-earning assets		48,602			63,812			53,129
Premises and equipment, net		907,680			838,906			771,702
Cash surrender value—bank owned life insurance		1,041,391			1,016,288			991,123
Accrued interest receivable and other assets		1,336,932			1,197,132			1,128,790

	$	43,784,207		$	40,571,272		$	38,499,103

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits and interest-bearing liabilities:
Deposits:
Noninterest-bearing demand	$	5,849,456		$	5,494,657		$	4,981,783
Interest-bearing checking		5,739,344			5,470,243			5,234,927
Money market and savings deposits		7,553,650			7,270,541			6,455,526
Time		6,532,948			6,384,206			6,433,294
Foreign		727,329			640,663			356,789
Certificates of deposit of $100,000 or more		2,696,099			2,055,314			2,066,217

Total deposits		29,098,826			27,315,624			25,528,536
Federal funds purchased and securities sold under agreements to repurchase		1,837,292			1,769,547			2,040,929
Other borrowed funds		149,333			151,018			150,408
Long-term Federal Home Loan Bank advances		5,826,839			5,838,268			5,304,831
Other long-term debt		1,517,224			1,051,015			1,023,682

Total deposits and interest-bearing liabilities		38,429,514			36,125,472			34,048,386
Accrued expenses and other liabilities		2,209,118			1,329,803			1,376,454

Total liabilities		40,638,632			37,455,275			35,424,840


Shareholders’ equity:
Preferred stock—no par value:
Authorized—2,000,000 shares; Issued and outstanding—none		-0-			-0-			-0-
Common stock—par value $1 a share:
Authorized—750,000,000 shares; Issued—416,890,000, 416,909,000 and 416,923,000 shares, respectively		416,890			416,909			416,923
Capital surplus		706,042			706,081			699,786
Retained earnings		3,083,424			2,951,430			2,806,383
Cost of common stock in treasury—66,413,000, 63,485,000 and 56,564,000 shares, respectively		(1,106,191	)		(1,045,428	)		(907,950	)
Deferred compensation on restricted stock		(15,838	)		(15,954	)		(16,716	)
Accumulated other comprehensive income		61,248			102,959			75,837

Total shareholders’ equity		3,145,575			3,115,997			3,074,263

	$	43,784,207		$	40,571,272		$	38,499,103

See notes to consolidated financial statements.

AMSOUTH BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EARNINGS

(Unaudited)

	Six Months Ended June 30				Three Months Ended June 30
	2003		2002		2003		2002
	(In thousands except per share data)
INTEREST INCOME
Loans	$	788,402	$	838,057	$	389,859	$	419,599
Available-for-sale securities		152,747		172,008		75,065		86,700
Held-to-maturity securities		117,064		123,561		56,199		62,058
Trading securities		61		159		6		92
Loans held for sale		478		7,827		318		3,662
Federal funds sold and securities purchased under agreements to resell		1,055		1,151		889		406
Other interest-earning assets		264		778		110		468

Total interest income		1,060,071		1,143,541		522,446		572,985

INTEREST EXPENSE
Interest-bearing checking		16,164		23,985		8,129		12,015
Money market and savings deposits		27,816		37,676		13,819		18,907
Time deposits		103,409		124,879		51,116		60,593
Foreign deposits		3,359		2,431		1,675		1,329
Certificates of deposit of $100,000 or more		32,041		35,723		16,555		17,086
Federal funds purchased and securities sold under agreements to repurchase		10,474		13,933		4,555		7,704
Other borrowed funds		2,130		2,069		985		1,090
Long-term Federal Home Loan Bank advances		131,667		135,508		64,949		68,364
Other long-term debt		20,613		19,565		11,307		9,782

Total interest expense		347,673		395,769		173,090		196,870

NET INTEREST INCOME		712,398		747,772		349,356		376,115
Provision for loan losses		87,400		108,700		42,700		52,600

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		624,998		639,072		306,656		323,515

NONINTEREST REVENUES
Service charges on deposit accounts		157,233		132,681		81,677		67,551
Trust income		51,625		55,242		25,598		27,373
Consumer investment services income		32,359		42,552		16,049		21,641
Interchange income		35,047		30,040		18,360		16,165
Bank owned life insurance policies		26,894		31,683		13,060		15,046
Bankcard income		12,892		11,967		6,691		6,163
Mortgage income		27,146		10,345		17,130		4,469
Portfolio income		21,836		7,703		15,906		4,136
Other noninterest revenues		38,571		36,578		16,247		18,584

Total noninterest revenues		403,603		358,791		210,718		181,128

NONINTEREST EXPENSES
Salaries and employee benefits		310,788		297,072		156,723		146,806
Equipment expense		58,540		59,544		30,572		30,115
Net occupancy expense		65,009		58,007		33,484		29,474
Postage and office supplies		23,290		25,146		11,351		12,192
Marketing expense		18,331		17,765		9,173		8,719
Communications expense		14,607		17,159		7,044		8,257
Amortization of intangibles		2,396		2,712		1,198		1,350
Other noninterest expenses		95,267		96,502		49,077		49,864

Total noninterest expenses		588,228		573,907		298,622		286,777

INCOME BEFORE INCOME TAXES		440,373		423,956		218,752		217,866
Income taxes		130,192		126,017		63,927		65,497

NET INCOME	$	310,181	$	297,939	$	154,825	$	152,369

Average common shares outstanding		350,738		360,714		349,509		359,782
Earnings per common share	$	0.88	$	0.83	$	0.44	$	0.42
Diluted average common shares outstanding		354,304		365,334		353,354		364,756
Diluted earnings per common share	$	0.88	$	0.82	$	0.44	$	0.42

See notes to consolidated financial statements.

AMSOUTH BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)

	Common Stock			Capital Surplus			Retained Earnings			Treasury Stock			Deferred Compensation on Restricted Stock			Accumulated Other Comprehensive Income/(Loss)			Total
	(In thousands)
BALANCE AT JANUARY 1, 2003	$	416,909		$	706,081		$	2,951,430		$	(1,045,428	)	$	(15,954	)	$	102,959		$	3,115,997
Comprehensive income:
Net income		-0-			-0-			310,181			-0-			-0-			-0-			310,181
Other comprehensive income, net of tax:
Changes in unrealized gains and losses on derivative instruments (net of $3,745 tax benefit)		-0-			-0-			-0-			-0-			-0-			(6,955	)		(6,955	)
Changes in unrealized gains and losses on available-for-sale securities, net of reclassification adjustment (net of $25,436 tax benefit)		-0-			-0-			-0-			-0-			-0-			(34,756	)		(34,756	)

Comprehensive income																				268,470
Cash dividends declared		-0-			-0-			(159,894	)		-0-			-0-			-0-			(159,894	)
Common stock transactions:
Purchase of common stock		-0-			-0-			-0-			(152,048	)		-0-			-0-			(152,048	)
Employee stock plans		(19	)		(53	)		(18,293	)		86,407			116			-0-			68,158
Dividend reinvestment plan		-0-			14			-0-			4,878			-0-			-0-			4,892

BALANCE AT JUNE 30, 2003	$	416,890		$	706,042		$	3,083,424		$	(1,106,191	)	$	(15,838	)	$	61,248		$	3,145,575

Disclosure of reclassification amount:
Changes in unrealized holding gains and losses on available-for-sale securities arising during the period																$	(22,899	)
Less: Reclassification adjustment for net securities gains realized in net income																	11,857

Net change in unrealized gains and losses on available-for-sale securities, net of tax																$	(34,756	)

Changes in unrealized holding gains and losses on derivatives arising during the period																$	(1,884	)
Less: Reclassification adjustment for gains realized in net income (net of $3,055 tax expense)																	5,071

Net change in unrealized gains and losses on derivatives, net of tax																$	(6,955	)

See notes to consolidated financial statements.

AMSOUTH BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30
	2003			2002
OPERATING ACTIVITIES	(In thousands)
Net income	$	310,181		$	297,939
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		87,400			108,700
Depreciation and amortization of premises and equipment		47,744			45,767
Amortization of premiums and discounts on held-to-maturity securities and available-for-sale securities		16,947			315
Net decrease in loans held for sale		2,254			86,950
Net decrease (increase) in trading securities		47,671			(17,782	)
Net gains on sales of available-for-sale securities		(19,001	)		(6,069	)
Net gain on guaranteed mortgage loan securitization		(21,827	)		-0-
Net increase in accrued interest receivable, bank-owned life insurance and other assets		(70,472	)		(29,668	)
Net increase in accrued expenses and other liabilities		105,890			115,617
Provision for deferred income taxes		70,725			89,588
Amortization of intangible assets		2,396			2,690
Other operating activities, net		46,899			15,892

Net cash provided by operating activities		626,807			709,939

INVESTING ACTIVITIES
Proceeds from maturities and paydowns of available-for-sale securities		1,373,271			714,319
Proceeds from sales of available-for-sale securities		839,237			481,216
Purchases of available-for-sale securities		(2,800,723	)		(767,723	)
Proceeds from maturities, paydowns and calls of held-to-maturity securities		1,324,330			1,062,191
Purchases of held-to-maturity securities		(1,493,401	)		(1,078,391	)
Net (increase) decrease in federal funds sold and securities purchased under agreements to resell		(458,282	)		253,000
Net decrease (increase) in other interest-earning assets		15,210			(12,671	)
Net increase in loans, excluding guaranteed mortgage loan securitization		(2,360,281	)		(971,831	)
Proceeds from guaranteed mortgage loan securitization		1,234,703			-0-
Net purchases of premises and equipment		(116,518	)		(88,086	)

Net cash used by investing activities		(2,442,454	)		(407,976	)

FINANCING ACTIVITIES
Net increase (decrease) in deposits		1,784,652			(629,244	)
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase		67,745			(39,367	)
Net (decrease) increase in other borrowed funds		(1,685	)		70,954
Issuance of long-term Federal Home Loan Bank advances and other long-term debt		2,350,000			226,591
Payments for maturing Federal Home Loan Bank advances and other long-term debt		(1,914,083	)		(15,690	)
Cash dividends paid		(160,698	)		(160,147	)
Proceeds from employee stock plans and dividend reinvestment plan		71,316			28,272
Purchase of common stock		(152,048	)		(100,527	)

Net cash provided (used) by financing activities		2,045,199			(619,158	)

Increase (Decrease) in cash and cash equivalents		229,552			(317,195	)
Cash and cash equivalents at beginning of period		1,221,985			1,441,561

Cash and cash equivalents at end of period	$	1,451,537		$	1,124,366

See notes to consolidated financial statements.

AMSOUTH BANCORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Six months ended June 30, 2003 and 2002

Basis of Presentation—The consolidated financial statements conform to accounting principles generally accepted in the United States. The accompanying interim financial statements are unaudited; however, in the opinion of management, all adjustments necessary for the fair presentation of the consolidated financial statements have been included. All such adjustments are of a normal recurring nature. Certain amounts in the prior year’s financial statements have been reclassified to conform with the 2003 presentation. These reclassifications had no effect on net income. The notes included herein should be read in conjunction with the notes to consolidated financial statements included in AmSouth Bancorporation’s (AmSouth) 2002 annual report on Form 10-K.

The consolidated financial statements and notes are presented in accordance with the instructions for Form 10-Q. The consolidated financial statements include the accounts of AmSouth and those subsidiaries that are majority-owned by AmSouth and over which AmSouth exercises control. AmSouth has not consolidated any entity which is not a wholly-owned subsidiary of AmSouth. In consolidation, all significant intercompany accounts and transactions have been eliminated.

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, benefit plan obligations and expenses, valuation of retained interests on the sale and securitzation of loans and the valuation of derivative instruments used in hedging transactions and the corresponding value of items being hedged.

Recent Accounting Developments—In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (Interpretation 45). Interpretation 45 requires certain guarantees to be recorded at fair value. In general, Interpretation 45 applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying that is related to an asset, liability, or an equity security of the guaranteed party. The initial recognition and measurement provisions of Interpretation 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. On January 1, 2003, AmSouth began recording a liability and an offsetting asset for the fair value of any standby letters of credit issued by AmSouth beginning January 1, 2003. The impact of this new accounting was not material to the financial condition or results of operations of AmSouth. Interpretation 45 also requires new disclosures, even when the likelihood of making any payments under the guarantee is remote. These disclosure requirements were effective for financial statements of interim or annual periods ending after December 15, 2002. See discussion on “Guarantees” later in the Notes to Consolidated Financial Statements for additional disclosures.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51” (Interpretation 46). Interpretation 46 addresses whether business enterprises must consolidate the financial statements of entities known as “variable interest entities”. A variable interest entity is defined by Interpretation 46 to be a business entity which has one or both of the following characteristics: (1) The equity investment at risk is not sufficient to permit the entity to finance its activities without additional support from other parties, which is provided through other interests that will absorb some or all of the expected losses of the entity; and (2) The equity investors lack one or more of the following essential characteristics of a controlling financial interest: (a) direct or indirect ability to make decisions about the entity’s activities through voting rights or similar rights, (b) the obligation to absorb the expected losses of the entity if they occur, which

makes it possible for the entity to finance its activities, or (c) the right to receive the expected residual returns of the entity if they occur, which is the compensation for risk of absorbing expected losses. Interpretation 46 does not require consolidation by transferors to qualifying special purpose entities. Interpretation 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. AmSouth is currently assessing the impact of Interpretation 46. AmSouth has identified a limited liability asset management company that meets the definition of a variable interest entity which it will begin to consolidate in the third quarter of 2003. Under the ownership agreement, AmSouth provides one hundred percent of the funding for the operational start up of this company. Total assets of this company were $732 thousand at June 30, 2003. AmSouth had a recorded investment on its books associated with this company of $300 thousand, which represents AmSouth’s maximum exposure to loss related to its investment in this company. Consolidation of this entity will not have a material impact on AmSouth’s financial condition and results of operations. In addition to this company, AmSouth has limited partnership investments in affordable housing projects, for which it provides funding as a limited partner and receives tax credits related to its investments in the projects based on its partnership share. At June 30, 2003, AmSouth had recorded investments in other assets on its balance sheet of approximately $51.7 million associated with limited partnership investments in affordable housing projects entered into prior to January 31, 2003. AmSouth currently adjusts the carrying value of these investments for any losses incurred by the limited partnership through earnings. AmSouth has determined that these structures meet the definition of a variable interest entity. AmSouth is currently in the process of determining which, if any, of these entities it will need to consolidate. In addition, subsequent to January 31, 2003, AmSouth invested $6.8 million as a limited partner, in six new affordable housing projects. The impact of these new investments was immaterial to AmSouth. AmSouth is also reviewing the structures of its $1.5 billion leveraged lease portfolio entered into prior to January 31, 2003, to determine if any of the structures used to facilitate these transactions meet the definition of a variable interest entity. The determination of whether these entities are variable interest entities is not expected to impact the current leveraged lease accounting, and, accordingly, is not expected to have a material effect on AmSouth’s financial condition and results of operations.

In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (Statement 149). The statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (Statement 133). Statement 149 is effective for contracts entered into or modified after June 30, 2003, with certain exceptions, and for hedging relationships designated after June 30, 2003. In addition, the provisions of the statement, with certain exceptions, are required to be applied prospectively. AmSouth does not believe that the implementation of Statement 149 will have a material affect on AmSouth’s financial condition or results of operations.

On May 15, 2003, the FASB issued Statement No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (Statement 150). This statement requires certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity to be classified as liabilities. Many of these instruments previously were classified as equity or temporary equity. Statement 150 is effective for public companies for all financial instruments created or modified after May 31, 2003, and to other instruments at the beginning of the first interim period beginning after June 15, 2003. The adoption of Statement 150 did not have a material impact on AmSouth’s financial condition or results of operations.

Cash Flows—For the six months ended June 30, 2003 and 2002, AmSouth paid interest of $355.9 million and $397.5 million, respectively. During the six months ended June 30, 2003 and 2002, AmSouth paid income taxes of $42.1 million and $27.3 million, respectively. Noncash transfers from loans to foreclosed properties for the six months ended June 30, 2003 and 2002, were $33.4 million and $23.7 million, respectively. Noncash transfers from foreclosed properties to loans for the six months ended June 30, 2003 and 2002 were $343 thousand and $52 thousand, respectively. For the six months ended June 30, 2003, AmSouth had noncash transfers from loans to available-for-sale and held-to-maturity securities of approximately $109 million in connection with a guaranteed mortgage loan securitization. During the same period in 2002, AmSouth had a noncash transfer from loans to available-for-sale and held-to-maturity securities of $301.7 million in connection with a guaranteed mortgage loan securitization.

Stock-Based Compensation—AmSouth has long-term incentive compensation plans that permit the granting of incentive awards in the form of stock options, restricted stock awards and stock appreciation rights. Generally, the terms of these plans stipulate that the exercise price of options may not be less than the fair market value of AmSouth’s common stock on the date the options are granted. Options generally vest between one and three years from the date of grant, with all of the 2003 option grants vesting ratably over three years. All of the options granted during the first half of 2003 expire ten years from the date of grant. All other options outstanding generally expire not later than ten years from the date of grant.

AmSouth has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (Statement 123) which allows an entity to continue to measure compensation costs for those plans using the intrinsic value-based method of accounting prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25). AmSouth has elected to follow APB 25 and related interpretations in accounting for its employee stock options. Accordingly, compensation cost for fixed and variable stock-based awards is measured by the excess, if any, of the fair market price of the underlying stock over the amount the individual is required to pay. Compensation cost for fixed awards is measured at the grant date, while compensation cost for variable awards is estimated until both the number of shares an individual is entitled to receive and the exercise or purchase price are known (measurement date). No option-based employee compensation cost is reflected in net income, as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. AmSouth does, however, currently recognize compensation expense related to restricted stock issuances as disclosed in the table below. The pro forma information below was determined as if AmSouth had accounted for all employee stock-based awards under the fair value method of Statement 123. For purposes of pro forma disclosures, the estimated fair value of the options and restricted stock awards is amortized to expense over the awards vesting period. AmSouth’s pro forma information follows (in thousands except earnings per share information):

	For the six months ended
	June 30, 2003			June 30, 2002
Net income:
As reported	$	310,181		$	297,939
Add: Stock-based compensation expense included in reported net income, net of tax		973			1,092
Deduct: Total stock-based compensation expense determined under fair value-based method for all awards, net of tax		(13,360	)		(13,833	)

Pro forma	$	297,794		$	285,198

Earnings per common share:
As reported	$	.88		$	.83
Pro forma	$	.85		$	.79
Diluted earnings per common share:
As reported	$	.88		$	.82
Pro forma	$	.84		$	.78

	For the three months ended
	June 30, 2003			June 30, 2002
Net income:
As reported	$	154,825		$	152,369
Add: Stock-based compensation expense included in reported net income, net of tax		481			625
Deduct: Total stock-based compensation expense determined under fair value-based method for all awards, net of tax		(6,830	)		(7,073	)

Pro forma	$	148,476		$	145,921

Earnings per common share:
As reported	$	.44		$	.42
Pro forma	$	.43		$	.41
Diluted earnings per common share:
As reported	$	.44		$	.42
Pro forma	$	.42		$	.40

This pro forma information includes expenses related to all stock options granted during the first six months of 2003 and 2002, as well as the expense related to the unvested portion of prior year grants and assumes that the fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for the six months ending June 30, 2003 and 2002, respectively: a risk-free interest rate of 3.81% and 4.93%, a dividend yield of 4.49% and 4.36%, a volatility factor of 31.40% and 31.39%, and a weighted-average expected life of 7.0 years for both periods. The weighted-average fair value of options granted during the six months ended June 30, 2003 and 2002 was $4.48 and $4.94, respectively. The estimated fair value of the options is then amortized to expense over the options’ vesting period to determine the expense for the periods.

Derivatives—In accordance with Statement 133, AmSouth recognizes all of its derivative instruments as either assets or liabilities in the statement of financial condition at fair value. For those derivative instruments that are designated and qualify as hedging instruments, AmSouth designates the hedging instrument, based upon the exposure being hedged, as either a fair value hedge or a cash flow hedge. Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges under Statement 133. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows or other types of forecasted transactions are considered cash flow hedges.

For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in other noninterest revenue during the period of the change in fair values. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in other noninterest revenue during the period of change. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in current earnings during the period of change.

AmSouth, at the hedge’s inception and at least quarterly thereafter, performs a formal assessment to determine whether changes in the fair values or cash flows of the derivative instruments have been highly effective in offsetting changes in the fair values or cash flows of the hedged items and whether they are expected to be highly effective in the future. If it is determined a derivative instrument has not been or will not continue to

be highly effective as a hedge, hedge accounting is discontinued prospectively, and the derivative instrument continues to be carried at fair value with all changes in fair value being recorded in noninterest revenue, but with no corresponding offset being recorded on the hedged item or in other comprehensive income for cash flow hedges.

Fair Value Hedging Strategy—AmSouth has entered into interest rate swap agreements for interest rate risk exposure management purposes. The interest rate swap agreements utilized by AmSouth effectively modify AmSouth’s exposure to interest rate risk by converting a portion of AmSouth’s fixed-rate certificates of deposit to floating rate. AmSouth also has interest rate swap agreements which effectively convert portions of its fixed-rate long-term debt to floating rate. During the six months ended June 30, 2003 and 2002, AmSouth recognized a net loss of $831 thousand and $897 thousand, respectively, related to the ineffective portion of its hedging instruments.

Cash Flow Hedging Strategy—AmSouth has entered into interest rate swap agreements that effectively convert a portion of its floating-rate loans to a fixed-rate basis, thus reducing the impact of interest-rate changes on future interest income. Approximately $1.2 billion and $675 million of AmSouth’s loans were designated as the hedged items to interest rate swap agreements at June 30, 2003 and 2002, respectively. During the six months ended June 30, 2003 and 2002, AmSouth recognized a net loss of $1 thousand and $110 thousand, respectively, related to the ineffective portion of its hedging instruments.

Guarantees—AmSouth, as part of its ongoing business operations, issues financial guarantees in the form of financial and performance standby letters of credit. Standby letters of credit are contingent commitments issued by AmSouth generally to guarantee the performance of a customer to a third party. A financial standby letter of credit is a commitment by AmSouth to guarantee a customer’s repayment of an outstanding loan or debt instrument. In a performance standby letter of credit, AmSouth guarantees a customer’s performance under a contractual nonfinancial obligation for which it receives a fee. AmSouth has recourse against the customer for any amount it is required to pay to a third party under a standby letter of credit. Revenues are recognized ratably over the life of the standby letter of credit. At June 30, 2003, AmSouth had standby letters of credit outstanding with maturities ranging from less than one year to thirteen years. The maximum potential amount of future payments AmSouth could be required to make under its standby letters of credit at June 30, 2003 was $2.9 billion and represents AmSouth’s maximum credit risk. At June 30, 2003, AmSouth had $2.5 million of liabilities and $2.5 million of receivables associated with standby letters of credit agreements entered into subsequent to December 31, 2002 as a result of AmSouth’s adoption of Interpretation 45 at January 1, 2003. Standby letters of credit agreements entered into prior to January 1, 2003, have a carrying value of zero. AmSouth holds collateral to support standby letters of credit when deemed necessary.

AmSouth Investment Services, Inc. (AIS), a subsidiary of AmSouth, guarantees the margin account balances issued by its brokerage clearing agent on behalf of AIS’s customers. If a customer defaults on the margin account, AIS has guaranteed to the brokerage clearing agent to buy in the account so as to bring the account into compliance with applicable margin or maintenance requirements. The margin account balance as of June 30, 2003 was $26 million. The total potential margin guarantee for AIS was $218.3 million as of June 30, 2003, which is equal to 70% of customers’ account balances. In the event a customer defaults, AmSouth would have recourse to the customer. AmSouth has no liability recorded on its balance sheet related to this agreement. Interpretation 45 does not require AmSouth to record a liability associated with this guarantee agreement as this agreement was in place prior to January 1, 2003.

Contingencies—Various legal proceedings are pending against AmSouth and its subsidiaries. Some of these proceedings seek relief or allege damages that are substantial. The actions arise in the ordinary course of AmSouth’s business and include actions relating to its imposition of certain fees, lending, collections, loan servicing, deposit taking, investment, trust and other activities. Because some of these actions are complex and for other reasons, it may take a number of years to finally resolve them. Although it is not possible to determine

with certainty AmSouth’s potential exposure from these proceedings, based upon legal counsel’s opinion, management considers that any liability resulting from the proceedings would not have a material impact on the financial condition or results of operations of AmSouth.

AmSouth’s federal and state income tax returns are subject to review and examination by government authorities. In the normal course of these examinations, AmSouth is subject to challenges from federal and state authorities regarding amounts of taxes due. These challenges may alter the timing or amount of taxable income or deductions, or the allocation of income among tax jurisdictions. AmSouth is currently under examination by a number of the states in which it does business. AmSouth is also under examination by the Internal Revenue Service (IRS) for the years ended December 31, 1998, September 30, 1999, and December 31, 1999. In connection with this examination, the IRS has issued Notices of Proposed Adjustments with respect to AmSouth’s tax treatment of certain leveraged lease transactions that were entered into during the years under examination. Management believes that AmSouth’s treatment of these leveraged lease transactions was in compliance with existing tax laws and regulations and intends to vigorously defend its position. Management does not expect that resolution of the state or IRS audit issues will have a material impact on AmSouth’s financial position or operating results.

Comprehensive Income—Total comprehensive income was $131.5 million and $268.5 million for the three and six months ended June 30, 2003 and $209.0 million and $348.8 million for the three and six months ended June 30, 2002. Total comprehensive income consists of net income, the change in the unrealized gains or losses on AmSouth’s available-for-sale securities portfolio arising during the period and the effective portion of cash flow hedges marked to market.

Earnings Per Common Share—The following table sets forth the computation of earnings per common share and diluted earnings per common share:

	Three Months Ended June 30				Six Months Ended June 30
	2003		2002		2003		2002
	(In thousands except per share data)
Earnings per common share computation:
Numerator:
Net income	$	154,825	$	152,369	$	310,181	$	297,939
Denominator:
Average common shares outstanding		349,509		359,782		350,738		360,714
Earnings per common share	$	.44	$	.42	$	.88	$	.83
Diluted earnings per common share computation:
Numerator:
Net income	$	154,825	$	152,369	$	310,181	$	297,939
Denominator:
Average common shares outstanding		349,509		359,782		350,738		360,714
Dilutive shares contingently issuable		3,845		4,974		3,566		4,620

Average diluted common shares outstanding		353,354		364,756		354,304		365,334
Diluted earnings per common share	$	.44	$	.42	$	.88	$	.82

Shareholders’ Equity—In September 2001, AmSouth’s Board of Directors approved the repurchase by AmSouth of up to 25 million shares of its outstanding common stock over a two year period for the purpose of funding employee benefit and dividend reinvestment plans and for general corporate purposes. During the six month period ended June 30, 2003, AmSouth purchased 7.4 million shares under this authorization at a cost of $152.0 million. The total shares repurchased under this authorization through June 30, 2003 was 23.0 million

shares at a cost of $465.3 million. Cash dividends of $.23 per common share were declared in the second quarter of 2003. This represents a five percent increase over the dividend declared during the second quarter of 2002.

On April 17, 2003, AmSouth’s Board of Directors approved a plan to repurchase up to 25 million shares of the company’s outstanding common stock. The authorization represents 7 percent of AmSouth’s outstanding shares. The common shares may be repurchased in the open market or in privately negotiated transactions. The reacquired common shares will be held as treasury shares and may be reissued for various corporate purposes, including employee benefit programs.

Business Segment Information—AmSouth has three reportable segments: Consumer Banking, Commercial Banking, and Wealth Management. During the third quarter of 2002, AmSouth management changed the way revenue and expenses associated with Private Client Service (PCS) customers’ loans and deposit balances are reviewed for business segment purposes. Prior to the reporting change, the estimated spread on the PCS customers’ loan and deposit balances, as well as noninterest revenues (NIR) and noninterest expenses (NIE) associated with those balances and accounts, was included within the Commercial or Consumer segments based on the loan or deposit type. These revenues and expenses are now also being included within the Wealth Management segment since this segment is principally responsible for maintaining the relationships with these customers. These shared revenues and expenses are reversed within Treasury & Other to eliminate the duplication. The segment information for the three and six months ended June 30, 2002 has been restated to reflect this reporting change. For the three and six month periods ended June 30, 2003, $13.4 million and $26.1 million, respectively, and for the three and six month periods ended June 30, 2002, $11.7 million and $27.7 million, respectively, of net income associated with PCS customers accounts was included in the Wealth Management segment and eliminated within Treasury & Other. Treasury & Other also includes balance sheet management activities that include the investment portfolio, non-deposit funding and the impact of derivatives used in asset/liability management. Income from bank owned life insurance policies, gains and losses related to the ineffective portion of derivative hedging instruments, net gains and losses on sales of fixed assets, taxable-equivalent adjustments associated with lease residual option benefits, the amortization of deposit intangibles and corporate expenses such as corporate overhead are also shown in Treasury & Other. The following is a summary of the segment performance for the three and six months ended June 30, 2003 and 2002:

	Consumer Banking		Commercial Banking			Wealth Management			Treasury & Other			Total
	(In thousands)
Three Months Ended June 30, 2003
Net interest income before internal funding	$	198,365	$	114,544		$	36,494		$	(47	)	$	349,356
Internal funding		110,195		(13,480	)		(4,064	)		(92,651	)		-0-

Net interest income/(expense)		308,560		101,064			32,430			(92,698	)		349,356
Noninterest revenues		114,345		29,526			42,731			24,116			210,718

Total revenues		422,905		130,590			75,161			(68,582	)		560,074
Provision for loan losses		34,462		6,974			260			1,004			42,700
Noninterest expenses		180,360		46,141			49,317			22,804			298,622

Income/(Loss) before income taxes		208,083		77,475			25,584			(92,390	)		218,752
Income taxes/(benefits)		78,239		29,130			9,620			(53,062	)		63,927

Segment net income/(loss)	$	129,844	$	48,345		$	15,964		$	(39,328	)	$	154,825

Revenues from external customers	$	312,710	$	144,070		$	40,302		$	62,992		$	560,074

Ending Assets	$	19,042,342	$	11,318,780		$	3,436,135		$	9,986,950		$	43,784,207

	Consumer Banking		Commercial Banking			Wealth Management			Treasury & Other			Total
	(In thousands)
Three Months Ended June 30, 2002
Net interest income before internal funding	$	196,558	$	129,085		$	35,162		$	15,310		$	376,115
Internal funding		96,148		(35,148	)		(7,723	)		(53,277	)		-0-

Net interest income/(expense)		292,706		93,937			27,439			(37,967	)		376,115
Noninterest revenues		86,910		30,937			50,200			13,081			181,128

Total revenues		379,616		124,874			77,639			(24,886	)		557,243
Provision for loan losses		31,437		15,954			225			4,984			52,600
Noninterest expenses		172,924		43,128			47,445			23,280			286,777

Income/(Loss) before income taxes		175,255		65,792			29,969			(53,150	)		217,866
Income taxes/(benefits)		65,896		24,738			11,268			(36,405	)		65,497

Segment net income/(loss)	$	109,359	$	41,054		$	18,701		$	(16,745	)	$	152,369

Revenues from external customers	$	283,468	$	160,022		$	48,996		$	64,757		$	557,243

Ending Assets	$	16,989,052	$	10,623,937		$	2,954,391		$	7,931,723		$	38,499,103


Six Months Ended June 30, 2003
Net interest income before internal funding	$	400,748	$	233,584		$	73,424		$	4,642		$	712,398
Internal funding		212,987		(30,119	)		(10,267	)		(172,601	)		-0-

Net interest income/(expense)		613,735		203,465			63,157			(167,959	)		712,398
Noninterest revenues		213,256		61,748			86,281			42,318			403,603

Total revenues		826,991		265,213			149,438			(125,641	)		1,116,001
Provision for loan losses		68,407		14,189			508			4,296			87,400
Noninterest expenses		360,727		90,480			98,044			38,977			588,228

Income/(Loss) before income taxes		397,857		160,544			50,886			(168,914	)		440,373
Income taxes/(benefits)		149,594		60,365			19,134			(98,901	)		130,192

Segment net income/(loss)	$	248,263	$	100,179		$	31,752		$	(70,013	)	$	310,181

Revenues from external customers	$	614,004	$	295,332		$	81,386		$	125,279		$	1,116,001

Ending Assets	$	19,042,342	$	11,318,780		$	3,436,135		$	9,986,950		$	43,784,207


Six Months Ended June 30, 2002
Net interest income before internal funding	$	376,744	$	260,571		$	67,604		$	42,853		$	747,772
Internal funding		194,654		(71,824	)		(14,653	)		(108,177	)		-0-

Net interest income/(expense)		571,398		188,747			52,951			(65,324	)		747,772
Noninterest revenues		170,002		61,917			100,200			26,672			358,791

Total revenues		741,400		250,664			153,151			(38,652	)		1,106,563
Provision for loan losses		70,239		27,289			444			10,728			108,700
Noninterest expenses		353,046		87,546			95,121			38,194			573,907

Income/(Loss) before income taxes		318,115		135,829			57,586			(87,574	)		423,956
Income taxes/(benefits)		119,612		51,072			21,652			(66,319	)		126,017

Segment net income/(loss)	$	198,503	$	84,757		$	35,934		$	(21,255	)	$	297,939

Revenues from external customers	$	546,746	$	322,488		$	89,407		$	147,922		$	1,106,563

Ending Assets	$	16,989,052	$	10,623,937		$	2,954,391		$	7,931,723		$	38,499,103

Independent Accountants’ Review Report

The Board of Directors

AmSouth Bancorporation

We have reviewed the accompanying consolidated statements of condition of AmSouth Bancorporation and subsidiaries as of June 30, 2003 and 2002, and the related consolidated statements of earnings for the three-month and six-month periods ended June 30, 2003 and 2002, the consolidated statements of cash flows for the six-month periods ended June 30, 2003 and 2002, and the consolidated statement of shareholders’ equity for the six-month period ended June 30, 2003. These financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.

We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated statement of condition of AmSouth Bancorporation and subsidiaries as of December 31, 2002, and the related consolidated statements of earnings, shareholders’ equity, and cash flows for the year then ended (not presented herein) and in our report dated January 14, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of condition as of December 31, 2002 is fairly stated, in all material respects, in relation to the consolidated statement of condition from which it has been derived.

LOGO

Birmingham, Alabama

August 5, 2003

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

This discussion and analysis is part of our Quarterly Report on Form 10-Q to the Securities and Exchange Commission (SEC) and updates our Annual Report on Form 10-K for the year ended December 31, 2002, which we previously filed with the SEC. You should read this information together with the financial information contained in the 10-K. Certain prior period amounts presented in this discussion and analysis have been reclassified to conform to current period classifications.

AmSouth Bancorporation (AmSouth) is a regional bank holding company headquartered in Birmingham, Alabama, with approximately $44 billion in assets, 600 branch banking offices and more than 1,200 ATMs. AmSouth operates in Tennessee, Alabama, Florida, Mississippi, Louisiana and Georgia. AmSouth is a leader among regional banks in the Southeast in several key businesses, such as Consumer Banking which includes small business banking and mortgage lending, Commercial Banking, including equipment leasing, and Wealth Management, which includes annuity and mutual fund sales, trust and investment management services.

The preparation of consolidated financial statements requires management to make judgments in the application of certain of its accounting policies that involve significant estimates and assumptions about the effect of matters that are inherently uncertain. These estimates and assumptions are based on information available as of the date of the financial statements, and may materially impact the reported amounts of certain assets, liabilities, revenues and expenses as the information changes over time. Accordingly, different amounts could be reported as a result of the use of revised estimates and assumptions in the application of these accounting policies.

Accounting policies considered relatively more critical due to either the subjectivity involved in the estimate and/or the potential impact that changes in the estimates can have on the reported financial results include the accounting for the allowance for loan losses, sales of financial assets, pension accounting, and hedge accounting. Information concerning these policies is included in the “Critical Accounting Estimates” section of Management’s Discussion and Analysis in AmSouth’s 2002 10-K. There were no significant changes in these accounting policies during the first half of 2003.

This discussion and analysis contains statements that are considered “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. See page 2 for additional information regarding forward-looking statements.

AmSouth reported net income for the quarter ended June 30, 2003 of $154.8 million, or $.44 per share on a diluted basis and $310.2 million, or $.88 per share on a diluted basis for the first six months of 2003. In the same periods a year ago, net income totaled $152.4 million, or $.42 per share on a diluted basis, and $297.9 million, or $.82 per diluted share, respectively. For the three months and six months ended June 30, 2003, AmSouth’s return on average assets (ROA) was 1.48 percent and 1.51 percent, respectively, compared to 1.61 percent and 1.59 percent, respectively, for the same periods in 2002. Return on average equity (ROE) was 19.95 percent and 20.10 percent for the second quarter and first half of 2003, respectively, compared to 20.36 percent and 20.10 percent for the same periods last year.

Results for the second quarter and first half of 2003 were impacted by the sluggish economy and low interest rate environment resulting in lower net interest income (NII), trust income and consumer investment services income compared to the same periods in 2002. In spite of this challenging environment, notable improvements during the second quarter and the first six months of 2003 included growth in commercial, home equity and residential mortgage loans and low-cost core deposits and a reduced level of credit costs. AmSouth experienced growth in noninterest expenses (NIE), primarily associated with increases in personnel and occupancy costs associated with growth initiatives and the transition into a new operations center.

Statement of Condition

Total assets at June 30, 2003 were $43.8 billion, up 7.9 percent from $40.6 billion at December 31, 2002. This $3.2 billion increase in total assets was primarily the result of increases in AmSouth’s loan portfolio, the available-for-sale (AFS) and held-to-maturity (HTM) securities portfolios and an increase in Federal funds sold and securities purchased under agreements to resell. Loans net of unearned income at June 30, 2003 increased $871.6 million compared to year-end. This increase was attributable to $435.3 million of growth in consumer loans and a $436.3 million increase in commercial and commercial real estate loans. The increase in consumer loans was driven by increases in home equity and residential mortgage lending. The increase in home equity lending reflected AmSouth’s continued efforts to attract these loans due to their attractive spreads and historically low levels of losses. Home equity products continue to be a core relationship product with strong customer demand. The origination of residential mortgage loans continued to be strong reflecting AmSouth’s continued emphasis on residential mortgage lending and higher demand as a result of the continued low interest rate environment. During the first quarter of 2003, AmSouth successfully completed several initial steps related to its mortgage initiative that included training branch personnel and establishing an automated mortgage application system in the branches. AmSouth also hired additional teams of mortgage loan officers during the first half of 2003 and plans to continue to add new people in sales and administrative areas to support this initiative. Production of new residential mortgage loans was more than $2.2 billion during the first half of 2003 and application volume reached a record $3.5 billion. A key driver of this activity was referrals from branches, which totaled about $576 million for the first six months of 2003. The growth in commercial lending reflected a continuation in the momentum in commercial loan activity that began in the fourth quarter of 2002. The increase in commercial lending was spread across most categories led by growth in commercial real estate lending. The increase in AmSouth’s securities portfolios reflected additional purchases of securities, primarily mortgage-backed and collateralized mortgage obligation (CMO) securities, during the first six months of 2003 and the securitization and retention of approximately $109 million of residential mortgages. The increase in Federal funds sold and securities purchased under agreements to resell was the result of excess liquidity associated with the increase in deposits and a guaranteed mortgage loan securitization of approximately $680 million at the end of the second quarter.

On the liability side of the balance sheet, total deposits at June 30, 2003, increased by $1.8 billion compared to December 31, 2002. The increase in total deposits was seen in all categories of deposits. Low-cost deposits, which includes noninterest-bearing and interest-bearing checking, money market and savings accounts, increased by $907 million. Growth in low-cost deposits was primarily associated with AmSouth’s continuing initiative to grow deposits. This initiative included sales and advertising campaigns targeted to deposit products, as well as incentive programs related to deposit growth. Low-cost deposit growth was also impacted by the current low interest rate environment which reduced the attractiveness of other nondeposit investment alternatives. Time deposits, including certificates of deposits of $100,000 or more, increased by $790 million compared to year-end 2002. The increase in time deposits was associated with an initiative instituted in the first quarter of 2003 to grow time deposits by $1.0 billion. In addition, the increase included a $342 million increase in public time deposit funds. During the first quarter of 2003, AmSouth issued $500 million of subordinated debt which resulted in an increase in the level of long-term debt. The subordinated debt issued matures 10 years from the date of issuance. The increase in accrued expenses and other liabilities at June 30, 2003 compared to year-end was primarily associated with a $791 million increase in liabilities associated with the purchase of investment securities which had not yet settled at the end of June.

Net Interest Income

Net interest income (NII) on a fully taxable equivalent basis for the three and six months ended June 30, 2003, was $360.7 million and $735.4 million, respectively, down $28.4 million, or 7.3 percent compared to the same quarter last year and down $38.6 million or 5.0 percent on a year-to-date basis. The decrease in NII reflected compression in the net interest margin (NIM), somewhat offset by higher average interest-earning assets. The NIM was 3.84 percent for the second quarter of 2003, down 70 basis points from 4.54 percent, for the same quarter in 2002. The decline in the NIM can be largely attributed to tightening of the interest rate spreads

between loans and deposits as the Federal Reserve continued to move to lower interest rates during the first half of 2003. The Federal Reserve’s policy shift towards an aggressive stance on deflation caused a sharp decline in longer-term rates and a flattening in the yield curve. This resulted in significantly lower reinvestment yields for both loans and investment securities. At the same time high levels of security prepayments and run-off of higher yielding fixed-rate loans continued causing slower than anticipated growth in earning assets and higher premium amortization on securities. See additional discussion of prepayment risk within the “Asset/Liability Management” section. These events combined to decrease net interest income and compress the net interest margin.

Growth in interest-earning assets partially offset the decline in NII associated with the lower NIM. Average interest-earning assets for the three and six month periods ended June 30, 2003 were $37.7 billion and $37.3 billion, respectively, an increase of $3.3 billion and $3.1 billion from the same periods in 2002. As discussed above, the increase came principally from growth in the loan and the investment securities portfolios. The growth in the loan portfolio was primarily driven by commercial lending, residential mortgage production and equity lending. The increase in investment securities was primarily associated with purchases of mortgage-backed and CMO securities. The growth in earning assets was primarily funded by an increase in deposits. The increase in deposits was across all categories of deposits. In addition, AmSouth funded part of the increase through higher levels of FHLB long-term advances and the issuance of subordinated debt in the first quarter of 2003.

Asset/Liability Management

AmSouth maintains a formal asset and liability management process to quantify, monitor and control interest rate risk and to assist management in minimizing the income impact of varying interest rate environments. AmSouth accomplishes this process through the development and implementation of lending, funding, pricing and hedging strategies designed to maximize NII performance under varying interest rate environments subject to specific liquidity and interest rate risk guidelines.

An earnings simulation model is the primary tool used to assess the direction and magnitude of changes in NII resulting from changes in interest rates. Key assumptions in the model include prepayment speeds on mortgage-related assets; cash flows and maturities of derivatives and other financial instruments held for purposes other than trading; changes in market conditions, loan volumes and pricing; deposit volume, mix and rate sensitivity; customer preferences; and management’s financial and capital plans. These assumptions are inherently uncertain, and, as a result, the model cannot precisely estimate NII or precisely predict the impact of higher or lower interest rates on NII. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes and changes in market conditions and management’s strategies, among other factors.

AmSouth evaluates net interest income under various balance sheet and interest rate scenarios, using its simulation analysis model. Management evaluates “base” net interest income under what is believed to be the most likely balance sheet structure and current interest rate environment. This “base” case is then evaluated against various changes in interest rate scenarios. Asset prepayment levels, the shape of yield curves and the overall balance sheet mix and growth assumptions are adjusted to be consistent with each interest rate scenario. One scenario of the simulation model reviews the impact to NII if interest rates gradually increased or decreased by 100 basis points over a 12-month period. Based on the results of the simulation model as of June 30, 2003, AmSouth would expect NII to increase $14.1 million or approximately 1.0 percent and decrease $27.6 million or approximately 1.9 percent if interest rates gradually increase or decrease, respectively, from current rates by 100 basis points over a 12-month period. This scenario indicates that AmSouth is asset sensitive. It is important to note that, given the current low level of interest rates, the down 100 basis point scenario implies a federal funds target interest rate of zero percent. By comparison, as of June 30, 2002, the simulation model indicated that NII would increase $6 million or approximately 0.4 percent and decrease $6 million or approximately 0.4 percent if interest rates gradually increased or decreased, respectively, from their then-current rates by 100 basis points over a 12-month period. The increase in interest sensitivity between years can be attributed to the continued

emphasis on variable rate lending, strong growth in core deposits, and the extension of maturities of purchased funds. AmSouth’s current level of interest rate risk is well within its policy guidelines. Current policy states that NII should not fluctuate more than 2.5 percent in the event that interest rates gradually increase or decrease 100 basis points over a period of twelve months. In analyzing its interest rate risk, AmSouth also runs additional scenarios to stress the assumptions used in the analysis above. For example, the simulations above are based on a parallel shift in the yield curve for U.S. Treasury securities occurring gradually over a 12-month time period. AmSouth, however, recognizes that changes in the yield curve can also affect NII even if Federal Reserve-set short term rates remain unchanged. NII at AmSouth, as at most other banks, is affected if long term rates rise or fall more rapidly than short term rates, and thereby cause the slope of the yield curve to change. For example, if long term rates were to fall faster than short term rates, thereby causing a flattening in the slope of the yield curve, this would negatively affect NII as mortgage-related and other fixed rate loans and securities, which are priced based on long term rates, would be prepaid while the proceeds from such prepayments could likely not be invested at comparable rates. Accordingly, one of the stress tests regularly run by AmSouth is an immediate shift in the Treasury yield curve with all other short term interest rates unchanged. Based on the results of this modeling as of June 30, 2003, an immediate 50 basis point downward shift in the treasury curve, if sustained for 12 months, would cause NII to decrease by approximately $27 million.

As part of its activities to manage interest rate risk, AmSouth utilizes various derivative instruments such as interest rate swaps to hedge its interest rate risk. At June 30, 2003, AmSouth had interest rate swaps in the notional amount of approximately $2.4 billion, all of which were “receive fixed/pay floating” rate swaps. Of these swaps, $1.2 billion of notional value was used to hedge the cash flow of variable-rate commercial loans and $1.0 billion of notional value was used to hedge the fair value of fixed-rate consumer certificates of deposit and corporate and bank debt. AmSouth also had $150 million notional value of swaps that no longer qualified for hedge accounting. These swaps had previously been designated as fair value hedges of fixed-rate consumer certificates of deposit and corporate debt. These hedging relationships were determined to no longer be highly effective as defined by Statement of Financial Accounting Standards No. 133. Therefore, AmSouth ceased hedge accounting. All of the swaps that lost hedge accounting mature within nine months. Interest rate swaps with notional value of $100 million matured during the second quarter of 2003. There are $75 million notional amount of “receive fixed/pay floating” interest rate swaps expected to mature during the remainder of 2003.

In addition to using derivative instruments as an interest rate risk management tool, AmSouth also utilizes derivatives such as interest rate swaps, caps, floors and foreign exchange contracts in its capacity as an intermediary on behalf of its customers. AmSouth minimizes its market and liquidity risks by taking offsetting positions. AmSouth manages its credit risk, or potential risk of loss from default by counterparties, through credit limit approval and monitoring procedures. Market value changes on intermediated swaps and other derivatives are recognized in income in the period of change. At June 30, 2003, AmSouth had $130.0 million of assets and $129.2 million of liabilities associated with $1.97 billion notional amount of interest rate contracts with corporate customers and $1.97 billion notional amount of offsetting interest rate contracts with other financial institutions to hedge AmSouth’s rate exposure on its corporate customers’ contracts.

As part of its asset and liability management process, AmSouth actively monitors its exposure to prepayment risk. AmSouth, like most financial institutions, is subject to prepayment risk in falling interest rate environments. Prepayment risk is a significant risk to earnings and specifically to NII. For example, mortgage loans and other financial assets may be prepaid by a debtor so that the debtor may refund its obligations at new, lower rates. As loans and other financial assets prepay, AmSouth must reinvest these funds in the current lower yielding rate environment. Prepayments of assets carrying higher rates reduce AmSouth’s interest income and overall asset yields. Conversely, in a rising rate environment, these assets will prepay at a slower rate resulting in opportunity cost by not having the cash flow to reinvest at higher rates. Higher prepayments also impact the securities portfolio by increasing the amortization of any premiums associated with those securities, which also reduce interest income and the yield of the securities portfolio. Tools to hedge prepayment risk are limited and generally involve complex derivatives that AmSouth has chosen not to utilize.

AmSouth’s greatest exposure to prepayment risks primarily rests in its mortgage loan portfolio and its mortgage-backed and CMO securities portfolio. At June 30, 2003, AmSouth had approximately $3.0 billion in mortgage loans. In addition, AmSouth had $5.1 billion of CMOs and approximately $4.5 billion of mortgage-backed securities in its AFS and HTM portfolio with approximately $172 million of net unamortized premiums. While net cash flows from prepayment activity in the second quarter of 2003 remained relatively the same as those experienced in the first quarter of 2003, the composition of these prepayments was more heavily weighted to CMOs purchased at a premium. AmSouth estimates the impact of prepayments, including the accelerated premium amortization associated with its investment portfolio, to be a reduction to the NIM for the full year of 14 to 18 basis points as compared to the full year of 2002. This estimate assumes a continuation of the current above normal prepayment speeds experienced over the last two quarters.

Liquidity Management

AmSouth’s goal in liquidity management is to satisfy the cash flow requirements of depositors and borrowers while at the same time meeting its cash flow needs. This is accomplished through the active management of both the asset and liability sides of the balance sheet. The liquidity position of AmSouth is monitored on a daily basis by AmSouth’s Treasury Division. In addition, the Asset/Liability Committee, which consists of members of AmSouth’s senior management team, reviews liquidity on a regular basis and approves any changes in strategy that are necessary as a result of balance sheet or anticipated cash flow changes. Management also compares, on a monthly basis, AmSouth’s liquidity position to established corporate liquidity guidelines.

The primary sources of liquidity on the asset side of the balance sheet are maturities and cash flows from loans and investments as well as the ability to securitize or sell certain loans and investments. Liquidity on the liability side is generated primarily through growth in core deposits and the ability to obtain economical wholesale funding in national and regional markets through a variety of sources, including the Federal Home Loan Bank. See Table 10 for a breakout by maturity date of AmSouth’s contractual obligations and other commercial commitments.

As an additional source of liquidity, AmSouth periodically sells loans or pools of loans to qualifying special purpose entities called conduits in securitization transactions. The conduits are financed by the issuance of securities to asset-backed commercial paper issuers and are accounted for as sales. These transactions allow AmSouth to utilize its balance sheet capacity and capital for higher yielding, interest-earning assets, while continuing to manage the customer relationship. At June 30, 2003, the outstanding balance of loans sold to conduits was approximately $1.95 billion, including $771 million of commercial loans, $1.0 billion of residential first mortgages and $142 million of dealer indirect automobile loans. This balance was down from $2.5 billion in outstanding loan balances in conduits at December 31, 2002. AmSouth provides credit enhancements to these securitizations by providing standby letters of credit, which create exposure to credit risk to the extent of the letters of credit. At June 30, 2003, AmSouth had $107.0 million of letters of credit supporting the conduit transactions. This credit risk is reviewed quarterly and a reserve for loss exposure is maintained in other liabilities.

AmSouth also provides liquidity lines of credit to support the issuance of commercial paper under 364-day commitments associated with these conduit transactions. These liquidity lines can be drawn upon in the unlikely event of a commercial paper market disruption or other factors, such as credit rating downgrades of one of the asset-backed commercial paper issuers or of AmSouth as the provider of liquidity and credit support, which could prevent the asset-backed commercial paper issuers from being able to issue commercial paper. At June 30, 2003, AmSouth had liquidity lines of credit supporting these transactions of $1.95 billion. To date, there have been no drawdowns of the liquidity lines; however, AmSouth includes this liquidity risk in its monthly liquidity risk analysis to ensure that it would have sufficient sources of liquidity to meet demand. AmSouth also reviews the impact of the potential drawdown of the liquidity lines on its regulatory capital requirements. As of June 30, 2003, this analysis showed that AmSouth would retain its well-capitalized position even if the liquidity lines

were completely drawn down or if accounting rules were to be changed to require AmSouth to consolidate the conduits.

Credit Quality

AmSouth maintains an allowance for loan losses which management believes is adequate to absorb losses inherent in the loan portfolio. A formal review is prepared quarterly to assess the risk in the portfolio and to determine the adequacy of the allowance for loan losses. The review includes analyses of historical performance, the level of nonperforming and adversely rated loans, specific analyses of certain problem loans, loan activity since the previous quarter, reports prepared by the Credit Review Department, consideration of current economic conditions, and other pertinent information. The level of allowance to net loans outstanding will vary depending on the overall results of this quarterly review. The review is presented to and subsequently approved by senior management and reviewed by the Audit Committee of the Board of Directors.

Table 5 presents a five-quarter analysis of the allowance for loan losses. At June 30, 2003, the allowance for loan losses was $384.0 million, or 1.36 percent of loans net of unearned income, compared to $371.4 million, or 1.45 percent, at June 30, 2002 and $381.6 million, or 1.40 percent, at December 31, 2002. The coverage ratio of the allowance for loan losses to nonperforming loans was 301 percent at June 30, 2003, an increase from the June 30, 2002 ratio of 243 percent. The increase in the allowance at June 30, 2003 versus June 30, 2002 primarily reflected an increase in loan loss exposure as loan balances have increased over prior year levels, while decreases in the allowance as a percentage of loans reflects an overall improvement in the credit quality of the loan portfolio and the changing portfolio mix toward loans with lower inherent loss characteristics.

Net charge-offs for the quarter ended June 30, 2003, were $42.6 million, or 0.60 percent of average loans, on an annualized basis, a decrease of $6.4 million from the $49.0 million, or 0.76 percent of average loans, reported in the same period a year earlier. For the six months ended June 30, 2003, net charge-offs were $85.0 million, or 0.61 percent, compared to $100.9 million, or 0.80 percent, for the same period of 2002. The decrease in net charge-offs was primarily the result of a decrease in commercial net charge-offs. The decrease in commercial charge-offs reflected an overall improvement in the performance of the commercial portfolio. One of the primary drivers of the improvement in net charge-offs is the declining impact of syndicated credits. Syndicated loan losses for the quarter and the first six months of 2003 totaled only $2.6 million and $2.7 million, respectively, down from $9.6 million and $11.3 million for the three month and six month periods ended June 30, 2002. For the second quarter, consumer charge-offs increased $2.6 million compared to the same period in 2002 but declined $532 thousand for the first six months of 2003 compared to the same period in 2002. The increase in quarterly net charge-offs in the consumer portfolio reflected higher net charge-offs within the equity lending and dealer indirect loan portfolios. Net charge-offs in the equity lending portfolio were $9.2 million for the second quarter of 2003 and $16.1 million for the first six months of 2003, an increase of $2.9 million and $3.8 million, respectively, from the corresponding periods in 2002. The increase in equity lending charge-offs was primarily attributable to the impact of the current economic downturn on consumers, growth in the portfolio and charge-offs on a portion of the portfolio originated in 2000 and early 2001 using credit underwriting criteria that were subsequently made more rigorous. In addition, the level of equity lending charge-offs was impacted by a higher level of bankruptcy filings and a shift in the mix of bankruptcy filings to include more Chapter 7 liquidation filings than Chapter 13 reorganization filings. Net charge-offs in the dealer indirect portfolio were $10.1 million and $22.5 million for the three month and six month periods ended June 30, 2003 compared to $9.6 million and $25.8 million for the corresponding periods in 2002. The improvement in the year-to-date net charge-offs reflects enhanced credit controls which included more stringent underwriting standards implemented by AmSouth in 2001 and 2002, while the minor year over year increase in quarterly net charge-offs reflects the impact of a depressed used automobile market which significantly increased loss severity and offset the improvement associated with the lower loss incident rate. The provision for loan losses for the second quarter and first half of 2003 was $42.7 million and $87.4 million, respectively, compared to $52.6 million and $108.7 million for the corresponding year-earlier periods. The decrease in the provision for loan losses is consistent with the overall improvement in the credit quality of AmSouth’s loan portfolio.

Table 6 presents a five-quarter comparison of the components of nonperforming assets. At June 30, 2003, nonperforming assets as a percentage of loans net of unearned income, foreclosed properties and repossessions decreased 12 basis points to 0.62 percent compared to 0.74 percent at June 30, 2002, reflecting a $14.1 million decrease in nonperforming assets. Compared to year-end 2002, nonperforming assets declined $21.6 million primarily as a result of a $31.2 million decline in nonaccrual loans partially offset by a $2.7 million increase in repossessions and a $6.8 million increase in foreclosed properties. The decrease in nonaccrual loans was primarily the result of a $33.9 million decrease from December 31, 2002, in nonaccrual commercial and commercial real estate loans slightly offset by a $1.4 million increase in nonaccrual equity loans and lines and a $1.7 million increase in nonaccrual residential mortgage loans. The decrease in nonaccrual commercial loans reflects a downward trend in commercial problem loans. The increase in nonaccruing equity loans and lines is reflective of the impact of the current economic downturn on consumers and the increase in the size of the portfolio. This increase is also consistent with the national trend of higher bankruptcy and foreclosure actions. The increase in nonaccrual residential mortgage loans is indicative of the increase in the overall size of this portfolio. The increase in the dollar value of repossessions is primarily the result of operational and system changes which permitted AmSouth to record partial charge-offs on repossessed automobiles and more accurately record the value of repossessed automobiles. These operational and system enhancements resulted in an increase in the value assigned to AmSouth’s repossessed automobile inventory. AmSouth did not have any nonperforming assets considered restructured loans at June 30, 2003 and 2002. The increase in foreclosed properties was the result of foreclosures in residential first mortgages and home equity loans, which usually occur late in an economic downturn when unemployment is still rising.

Included in nonperforming assets at June 30, 2003 and 2002, was $69.8 million and $95.0 million, respectively, of loans that were considered to be impaired, substantially all of which were on a nonaccrual basis. At June 30, 2003 and 2002, there was $17.8 million and $23.5 million, respectively, in the allowance for loan losses specifically allocated to $54.1 million and $67.9 million, respectively, of impaired loans. No specific reserves were required for $15.7 million and $27.1 million of impaired loans at June 30, 2003 and 2002, respectively. The average recorded investment in impaired loans for the three months ended June 30, 2003 and 2002, was $88.5 million and $107.0 million, respectively, and $89.3 million and $103.3 million, respectively, for the six months ended June 30, 2003 and 2002. AmSouth recorded no material interest income on its impaired loans during the three and six months ended June 30, 2003. At June 30, 2003, AmSouth had approximately $47.8 million of potential problem commercial loans which were not included in the nonaccrual loans or in the 90 days past due categories at quarter-end but for which management had concerns as to the ability of such borrowers to comply with their present loan repayment terms.

Noninterest Revenues and Noninterest Expenses

Noninterest revenues (NIR) were $210.7 million during the second quarter of 2003 and $403.6 million for the first six months of 2003. The quarterly and six-month totals represent a 16.3 percent and 12.5 percent increase from the corresponding periods in 2002. The increase in NIR compared to 2002 was primarily due to increases in service charges on deposit accounts, interchange income, mortgage income, portfolio income and bankcard income. The growth of service charge revenues for the three months and six months ended June 30, 2003 of $14.1 million and $24.6 million or 20.9 percent and 18.5 percent compared to the corresponding periods in 2002 was primarily the result of increases in overdraft fees. The increase in overdraft fees was primarily the result of an increase in the volume of overdrafts, increase in the NSF fees charged per transaction and the implementation of payment posting procedures which standardized the posting of paper-based and electronic payments. Prior to and during the first six months of 2002, paper-based payments were prioritized ahead of electronic payments in posting transactions to accounts, which resulted in fewer overdrafts. The subsequent change in procedures provides consistent treatment for all customer initiated transactions and helps to ensure that larger, more important transactions are given priority in payment, whether electronic or paper-based. In addition, the increase also reflected charges for overdraft fees created by ATM withdrawals, which were not being charged during the first half of 2002. These new procedures are related to an ongoing initiative to manage, in a consistent manner, our customers’ intra-day account balances. Enhancing this management should also enable AmSouth to

better manage its risks, including fraud risks, arising from various transactions that can affect a customer’s intra-day account balances. The increase in mortgage income of $12.7 million and $16.8 million for the three months and six months ended June 30, 2003 reflected the impact of higher residential mortgage originations. The higher level of originations resulted in higher gains on the sale of mortgage loans. As discussed previously, the increase in mortgage originations was impacted by AmSouth’s ongoing mortgage initiative and the low interest rate environment during the first half of 2003. If interest rates begin to rise during the second half of 2003, it is likely to impact the level of mortgage originations as well as the level of mortgage income. Also contributing to the year over year growth in mortgage income was the impact of approximately $3.3 million of charges taken in the first half of 2002 associated with the decline in the fair market value of mortgage derivative instruments, primarily forward contracts utilized to economically hedge the sale of mortgage loans. The losses associated with marking these forward contracts to market would eventually be offset by gains recorded during the third quarter of 2002 when the mortgage loan sales being economically hedged were completed. The increase in interchange income for the second quarter and first six months of 2003 compared to the same periods in 2002 was primarily due to increases in the volume of checkcards outstanding and in transaction volumes. This growth was directly related to higher sales of convenience services through AmSouth’s strategic initiative to aggressively grow consumer banking business. However, AmSouth expects the recent VISA settlement to have a negative impact on the level of interchange income going forward. While the impact of the VISA settlement is contingent upon the volume of interchange transactions, AmSouth’s most recent estimate is that the decline in interchange income will reduce AmSouth’s earnings per share by approximately one cent a share for the remainder of the year. The increase in portfolio income reflected larger gains on the sale of securities during the period as AmSouth chose to realize a portion of available gains in the investment portfolio. The increase in bankcard income for both the three month and six month periods of 2003 reflected a higher level of interchange income.

These increases in NIR were offset by decreases in trust income, consumer investment services income and income from bank owned life insurance (BOLI). The decrease in trust income was primarily due to adverse equity market conditions that existed during the first half of the year. The soft economy and low interest rate environment also negatively impacted consumer investment services income. The decline in consumer investment services income between years was primarily caused by a decline in branch platform sales of fixed annuity products. The decrease in BOLI income was primarily the result of lower benefit payments being received during the three months and six months ended June 30, 2003 versus the same periods in 2002. The level of other NIR in 2003 was impacted by a charge of approximately $4.2 million taken in the second quarter of 2003 related to the write-off of lease residual values associated with two customers. Items impacting other NIR for 2002 included $2.0 million of losses associated with the sale of branch facilities and other assets recorded in the second quarter of 2002 and a $2.2 million fixed asset loss recorded in the first quarter of 2002.

Noninterest expenses (NIE) for the second quarter of 2003 increased $11.8 million or 4.1 percent compared to the same period in 2002 and increased $14.3 million or 2.5 percent for the first six months of 2003 compared to the corresponding period in 2002. The increase in NIE was primarily related to increases in salaries and employee benefits and net occupancy expense, partially offset by lower communication expenses, and for the six month period ended June 30, 2003, lower equipment expense. The increase in salaries and employee benefits reflected higher base salaries due to merit increases and an increase in head count primarily associated with revenue growth initiatives. The increase over 2002 levels also reflected changes in pension assumptions made at the end of 2002 which impact the pension expense calculation for 2003. Plan assumptions were lowered for the discount rate, the rate of compensation increase and the rate of return on pension plan assets. The increase in net occupancy expense was due mainly to an increase in depreciation associated with the new operations center and the cost of new branches as well as higher maintenance expense and higher rental expense. The decrease in communication expense was primarily the result of lower expenses associated with the consolidation and renegotiation of services associated with a vendor change. The decrease in equipment expense of approximately $1.0 million for the first half of 2003 compared to the first half of 2002 was due primarily to lower depreciation expense as a result of two large equipment projects becoming fully depreciated.

Capital Adequacy

At June 30, 2003, shareholders’ equity totaled $3.1 billion or 7.18 percent of total assets while average equity as a percentage of average assets for the three month and six month periods ended June 30, 2003 was 7.43% and 7.51%, respectively. Since December 31, 2002, shareholders’ equity increased $29.6 million primarily as a result of net income for the first six months of 2003 of $310.1 million. The increase in shareholders’ equity from net income was partially offset by the declaration of dividends of $159.9 million and the purchase of 7.4 million shares of AmSouth common stock for $152.0 million during the first six months of 2003. In addition, shareholders’ equity decreased $34.8 million as a result of lower valuation of the AFS portfolio and decreased $7.0 million due to changes in other comprehensive income associated with cash flow hedges.

Table 9 presents the capital amounts and risk-adjusted capital ratios for AmSouth and AmSouth Bank at June 30, 2003 and 2002. At June 30, 2003, AmSouth exceeded the regulatory minimum required risk-adjusted Tier 1 Capital Ratio of 4.00% and risk-adjusted Total Capital Ratio of 8.00%. In addition, the risk-adjusted capital ratios for AmSouth Bank were above the regulatory minimums, and the Bank was well capitalized at June 30, 2003.

Earnings Outlook

Looking ahead, actions taken as part of our asset/liability management efforts combined with continued balance sheet growth, should allow us to sustain net interest income close to second quarter levels for the remainder of the year despite a continued decline in our net interest margin. Though today’s business environment is marked with uncertainty, AmSouth expects diluted earnings per share for the full year 2003 to be at the low end of the $1.78 to $1.83 range provided at the beginning of the year. This earnings outlook is based on a number of factors including: gradual economic improvement for the remainder of the year, prepayments on loans and investments at current high levels for the remainder of the year, continued realization of securities gains, continued moderate growth in loans and deposits, modest noninterest revenue growth, and continued credit quality improvement. See the discussion of “Forward-Looking Statements” on page 2, which details a number of additional factors that could cause results to differ from management’s current expectations.

Table 1—Financial Summary

	June 30						% Change
	2003			2002			% Change
	(In thousands)
Balance sheet summary
End-of-period balances:
Loans net of unearned income	$	28,222,542		$	25,652,908		10.0	%
Total assets		43,784,207			38,499,103		13.7
Total deposits		29,098,826			25,528,536		14.0
Shareholders’ equity		3,145,575			3,074,263		2.3
Year-to-date average balances:
Loans net of unearned income	$	28,049,022		$	25,488,504		10.0	%
Total assets		41,433,111			37,873,709		9.4
Total deposits		27,643,726			25,497,298		8.4
Shareholders’ equity		3,111,683			2,989,393		4.1

	Six Months Ended June 30						% Change		Three Months Ended June 30						% Change
	2003			2002			% Change		2003			2002			% Change
	(In thousands except per share data)
Earnings summary
Net income	$	310,181		$	297,939		4.1	%	$	154,825		$	152,369		1.6	%
Earnings per common share		0.88			0.83		6.0			0.44			0.42		4.8
Diluted earnings per common share		0.88			0.82		7.3			0.44			0.42		4.8
Return on average assets (annualized)		1.51	%		1.59	%				1.48	%		1.61	%
Return on average equity (annualized)		20.10			20.10					19.95			20.36
Operating efficiency		51.64			50.66					52.26			50.30

Selected ratios
Average equity to assets		7.51	%		7.89	%				7.43	%		7.91	%
End-of-period equity to assets		7.18			7.99					7.18			7.99
End-of-period tangible equity to assets		6.54			7.25					6.54			7.25
Allowance for loan losses to loans net of
unearned income		1.36			1.45					1.36			1.45

Common stock data
Cash dividends declared	$	0.46		$	0.44				$	0.23		$	0.22
Book value at end of period		8.98			8.53					8.98			8.53
Market value at end of period		21.84			22.38					21.84			22.38
Average common shares outstanding		350,738			360,714					349,509			359,782
Average common shares outstanding-diluted		354,304			365,334					353,354			364,756

Table 2—Year-to-Date Yields Earned on Average Interest-Earning Assets

and Rates Paid on Average Interest-Bearing Liabilities

	2003							2002
	Six Months Ended June 30							Six Months Ended June 30
	Average Balance			Revenue/ Expense		Yield/ Rate		Average Balance			Revenue/ Expense		Yield/ Rate
	(Taxable equivalent basis-dollars in thousands)
Assets
Interest-earning assets:
Loans net of unearned income	$	28,049,022		$	801,859	5.76	%	$	25,488,504		$	853,890	6.76	%
Available-for-sale securities		4,579,495			154,594	6.81			4,334,907			174,518	8.12
Held-to-maturity securities		4,448,874			124,788	5.66			3,987,619			131,436	6.65

Total investment securities		9,028,369			279,382	6.24			8,322,526			305,954	7.41
Other interest-earning assets		255,827			1,858	1.46			440,916			9,915	4.53

Total interest-earning assets		37,333,218			1,083,099	5.85			34,251,946			1,169,759	6.89
Cash and other assets		4,319,011							3,863,594
Allowance for loan losses		(386,889	)						(369,008	)
Market valuation on available-for-sale securities		167,771							127,177

	$	41,433,111						$	37,873,709

Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing checking	$	5,672,682			16,164	0.57		$	5,257,291			23,985	0.92
Money market and savings deposits		7,477,182			27,816	0.75			6,540,682			37,676	1.16
Time deposits		6,373,981			103,409	3.27			6,501,544			124,879	3.87
Foreign deposits		688,132			3,359	0.98			354,661			2,431	1.38
Certificates of deposit of $100,000 or more		2,194,374			32,041	2.94			2,001,364			35,723	3.60
Federal funds purchased and securities sold under agreements to repurchase		2,008,015			10,474	1.05			2,026,831			13,933	1.39
Other interest-bearing liabilities		7,158,085			154,410	4.35			6,246,979			157,142	5.07

Total interest-bearing liabilities		31,572,451			347,673	2.22			28,929,352			395,769	2.76

Net interest spread						3.63	%						4.13	%

Noninterest-bearing demand deposits		5,237,375							4,841,756
Other liabilities		1,511,602							1,113,208
Shareholders’ equity		3,111,683							2,989,393

	$	41,433,111						$	37,873,709

Net interest income/margin on a taxable equivalent basis					735,426	3.97	%					773,990	4.56	%

Taxable equivalent adjustment:
Loans					13,457							15,833
Available-for-sale securities					1,847							2,510
Held-to-maturity securities					7,724							7,875

Total taxable equivalent adjustment					23,028							26,218

Net interest income				$	712,398						$	747,772

NOTE:

The taxable equivalent adjustment has been computed based on the statutory federal income tax rate, adjusted for applicable state income taxes net of the related federal tax benefit. Loans net of unearned income includes nonaccrual loans for all periods presented. Available-for-sale securities excludes certain noninterest-earning, marketable equity securities. Statement 133 valuation adjustments related to time deposits, certificates of deposit of $100,000 or more and other interest-bearing liabilities are included in other liabilities.

Table 3—Quarterly Yields Earned on Average Interest-Earning Assets and Rates Paid on Average Interest-Bearing Liabilities

	2003														2002
	Second Quarter							First Quarter							Fourth Quarter							Third Quarter							Second Quarter
	Average Balance			Revenue/ Expense		Yield/ Rate		Average Balance			Revenue/ Expense		Yield/ Rate		Average Balance			Revenue/ Expense		Yield/ Rate		Average Balance			Revenue/ Expense		Yield/ Rate		Average Balance			Revenue/ Expense		Yield/ Rate
	(Taxable equivalent basis-dollars in thousands)
Assets
Interest-earning assets:
Loans net of unearned income	$	28,265,837		$	396,476	5.63	%	$	27,829,798		$	405,383	5.91	%	$	26,817,981		$	413,571	6.12	%	$	25,877,960		$	419,283	6.43	%	$	25,701,987		$	427,313	6.67	%
Available-for-sale securities		4,646,425			75,971	6.56			4,511,821			78,623	7.07			4,286,045			80,291	7.43			4,321,112			85,518	7.85			4,267,756			87,919	8.26
Held-to-maturity securities		4,440,248			59,984	5.42			4,457,596			64,804	5.90			4,237,829			63,390	5.93			4,115,777			66,497	6.41			4,026,605			66,036	6.58

Total investment securities		9,086,673			135,955	6.00			8,969,417			143,427	6.49			8,523,874			143,681	6.69			8,436,889			152,015	7.15			8,294,361			153,955	7.44
Other interest-earning assets		356,393			1,323	1.49			154,144			535	1.41			569,309			2,562	1.79			620,380			4,263	2.73			396,264			4,628	4.68

Total interest-earning assets		37,708,903			533,754	5.68			36,953,359			549,345	6.03			35,911,164			559,814	6.18			34,935,229			575,561	6.54			34,392,612			585,896	6.83
Cash and other assets		4,444,195							4,192,435							4,120,380							3,914,917							3,819,140
Allowance for loan losses		(391,229	)						(382,501	)						(381,464	)						(377,708	)						(372,870	)
Market valuation on available-for-sale securities		156,129							179,543							187,887							177,922							123,815

	$	41,917,998						$	40,942,836						$	39,837,967						$	38,650,360						$	37,962,697

Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing checking	$	5,753,817			8,129	0.57		$	5,590,645			8,035	0.58		$	5,259,390			9,300	0.70		$	5,205,385			12,271	0.94		$	5,280,315			12,015	0.91
Money market and savings deposits		7,548,133			13,819	0.73			7,405,443			13,997	0.77			7,283,621			17,552	0.96			6,677,187			20,275	1.20			6,539,522			18,907	1.16
Time deposits		6,421,798			51,116	3.19			6,325,633			52,293	3.35			6,461,664			56,989	3.50			6,462,647			59,145	3.63			6,397,321			60,593	3.80
Foreign deposits		689,875			1,675	0.97			686,369			1,684	1.00			675,778			1,795	1.05			482,911			1,668	1.37			371,251			1,329	1.44
Certificates of deposit of $100,000 or more		2,352,829			16,555	2.82			2,034,158			15,486	3.09			2,134,920			16,864	3.13			2,178,556			18,140	3.30			1,988,035			17,086	3.45
Federal funds purchased and securities sold under agreements to repurchase		1,836,940			4,555	0.99			2,180,991			5,919	1.10			2,023,816			6,308	1.24			1,973,865			7,452	1.50			2,067,050			7,704	1.49
Other interest-bearing liabilities		7,333,085			77,241	4.22			6,981,141			77,169	4.48			6,464,030			78,335	4.81			6,406,880			79,613	4.93			6,346,331			79,236	5.01

Total interest-bearing liabilities		31,936,477			173,090	2.17			31,204,380			174,583	2.27			30,303,219			187,143	2.45			29,387,431			198,564	2.68			28,989,825			196,870	2.72

Net interest spread						3.51	%						3.76	%						3.73	%						3.86	%						4.11	%

Noninterest-bearing demand deposits		5,329,351							5,144,378							5,050,493							4,892,434							4,852,478
Other liabilities		1,539,225							1,483,672							1,406,418							1,304,866							1,118,620
Shareholders’ equity		3,112,945							3,110,406							3,077,837							3,065,629							3,001,774

	$	41,917,998						$	40,942,836						$	39,837,967						$	38,650,360						$	37,962,697

Net interest income/margin on a taxable equivalent basis					360,664	3.84	%					374,762	4.11	%					372,671	4.12	%					376,997	4.28	%					389,026	4.54	%

Taxable equivalent adjustment:
Loans					6,617							6,840							7,198							7,428							7,714
Available-for-sale securities					906							941							1,043							1,152							1,219
Held-to-maturity securities					3,785							3,939							3,947							4,032							3,978

Total taxable equivalent adjustment					11,308							11,720							12,188							12,612							12,911

Net interest income				$	349,356						$	363,042						$	360,483						$	364,385						$	376,115

NOTE: The

taxable equivalent adjustment has been computed based on the statutory federal income tax rate, adjusted for applicable state income taxes net of the related federal tax benefit. Loans net of unearned income includes nonaccrual loans for all periods presented. Available-for-sale securities excludes certain noninterest-earning, marketable equity securities. Statement 133 valuation adjustments related to time deposits, certificates of deposit of $100,000 or more and other interest-earning liabilities are included in other liabilities.

Table 4—Loans and Credit Quality

	Loans* June 30				Nonperforming Loans** June 30				Net Charge-offs Six Months Ended June 30
	2003		2002		2003		2002		2003		2002
	(In thousands)
Commercial:
Commercial & industrial	$	5,313,418	$	5,046,687	$	57,092	$	62,399	$	24,632	$	32,925
Commercial loans—secured by real estate		1,829,220		1,729,042		13,463		16,379		410		166
Commercial leases		1,787,725		1,672,353		5,967		14,407		990		9,007

Total commercial		8,930,363		8,448,082		76,522		93,185		26,032		42,098

Commercial real estate:
Commercial real estate mortgages		2,429,824		2,102,655		13,189		19,295		368		299
Real estate construction		2,126,456		2,264,041		9,934		16,710		650		42

Total commercial real estate		4,556,280		4,366,696		23,123		36,005		1,018		341

Consumer:
Residential first mortgages		3,024,847		1,652,231		13,704		11,655		1,292		1,052
Equity loans and lines		6,689,561		5,948,664		13,931		11,145		16,106		12,326
Dealer indirect		3,720,988		3,770,161		9		1		22,493		25,838
Revolving credit		525,109		510,427		-0-		-0-		11,776		12,503
Other consumer		775,394		956,647		356		693		6,251		6,731

Total consumer		14,735,899		12,838,130		28,000		23,494		57,918		58,450

	$	28,222,542	$	25,652,908	$	127,645	$	152,684	$	84,968	$	100,889

Net of unearned income.

Exclusive of accruing loans 90 days past due.

Table 5—Allowance for Loan Losses

	2003						2002
	2nd Quarter			1st Quarter			4th Quarter			3rd Quarter			2nd Quarter
	(Dollars in thousands)
Balance at beginning of period	$	383,936		$	381,579		$	379,878		$	371,418		$	367,819
Loans charged off		(55,565	)		(52,988	)		(61,334	)		(53,928	)		(59,857	)
Recoveries of loans previously charged off		12,940			10,645			9,585			10,988			10,856

Net charge-offs		(42,625	)		(42,343	)		(51,749	)		(42,940	)		(49,001	)
Addition to allowance charged to expense		42,700			44,700			53,450			51,400			52,600

Balance at end of period	$	384,011		$	383,936		$	381,579		$	379,878		$	371,418

Allowance for loan losses to loans net of unearned income		1.36	%		1.39	%		1.40	%		1.45	%		1.45	%
Allowance for loan losses to nonperforming loans*		300.84	%		256.73	%		240.25	%		250.84	%		243.26	%
Allowance for loan losses to nonperforming assets*		218.99	%		200.75	%		193.69	%		201.29	%		195.99	%
Net charge-offs to average loans net of unearned income (annualized)		0.60	%		0.62	%		0.77	%		0.66	%		0.76	%

Exclusive of accruing loans 90 days past due.

Table 6—Nonperforming Assets

	2003						2002
	June 30			March 31			December 31			September 30			June 30
	(Dollars in thousands)
Nonaccrual loans*	$	127,645		$	149,551		$	158,829		$	151,442		$	152,684
Foreclosed properties		40,656			34,622			33,828			32,567			32,838
Repossessions		7,058			7,082			4,346			4,716			3,982

Total nonperforming assets*	$	175,359		$	191,255		$	197,003		$	188,725		$	189,504

Nonperforming assets* to loans net of unearned income, foreclosed properties and repossessions		0.62	%		0.69	%		0.72	%		0.72	%		0.74	%
Accruing loans 90 days past due	$	67,454		$	80,585		$	91,045		$	93,700		$	91,376

Exclusive of accruing loans 90 days past due.

Table 7—Investment Securities

	June 30, 2003				June 30, 2002
	Carrying Amount		Market Value		Carrying Amount		Market Value
	(In thousands)
Held-to-maturity:
U.S. Treasury and federal agency securities	$	3,851,815	$	3,886,380	$	2,780,151	$	2,852,140
Other securities		660,699		667,532		1,055,065		1,083,383
State, county and municipal securities		330,312		366,069		342,640		364,010

	$	4,842,826	$	4,919,981	$	4,177,856	$	4,299,533

Available-for-sale:
U.S. Treasury and federal agency securities	$	5,072,858			$	3,739,796
Other securities		680,047				772,933
State, county and municipal securities		61,561				77,542

	$	5,814,466			$	4,590,271

NOTES:

The weighted average remaining life, which reflects the amortization on mortgage related and other asset-backed securities, and the weighted average yield on the combined held-to-maturity and available-for-sale portfolios at June 30, 2003, were approximately 2.4 years and 4.56%, respectively. Included in the combined portfolios was $9.6 billion of mortgage-backed securities. The weighted-average remaining life and the weighted-average yield of mortgage-backed securities at June 30, 2003, were approximately 2.2 years and 4.44%, respectively. The duration of the combined portfolios, which considers the repricing frequency of variable rate securities, is approximately 2.1 years.

The available-for-sale portfolio included net unrealized gains of $122.7 million and $164.8 million at June 30, 2003 and 2002, respectively.

Table 8—Other Interest-Bearing Liabilities

	June 30
	2003		2002
	(In thousands)
Other borrowed funds:
Treasury, tax and loan notes	$	100,000	$	100,000
Commercial paper		4,631		7,432
Other borrowings		44,702		42,976

Total other borrowed funds	$	149,333	$	150,408

Other long-term debt:
4.85% Subordinated Notes Due 2013	$	496,472	$	-0-
6.45% Subordinated Notes Due 2018		302,279		302,777
6.125% Subordinated Notes Due 2009		174,748		174,704
6.75% Subordinated Debentures Due 2025		149,959		149,942
7.75% Subordinated Notes Due 2004		149,916		149,824
7.25% Senior Notes Due 2006		99,798		99,726
6.875% Subordinated Notes Due 2003		-0-		49,974
6.625% Subordinated Notes Due 2005		49,868		49,815
Other long-term debt		724		3,475
Statement 133 valuation adjustment		93,460		43,445

Total other long-term debt	$	1,517,224	$	1,023,682

Table 9—Capital Amounts and Ratios

	June 30
	2003				2002
	Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
Tier 1 capital:
AmSouth	$	2,784,317	7.56	%	$	2,692,896	8.03	%
AmSouth Bank		3,303,602	8.99			3,299,085	9.85

Total capital:
AmSouth	$	4,168,541	11.32	%	$	3,756,972	11.20	%
AmSouth Bank		4,433,147	12.06			3,978,662	11.88

Leverage:
AmSouth	$	2,784,317	6.69	%	$	2,692,896	7.14	%
AmSouth Bank		3,303,602	7.94			3,299,085	8.76

Table 10—Contractual Obligations and Commercial Commitments

	Payments Due By Period
	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
	(Dollars in thousands)
Borrowings (1)	$	9,237,228	$	2,466,796	$	550,155	$	566,158	$	5,654,119
Operating leases		448,885		50,805		91,204		77,286		229,590
Time deposits (2)		9,955,898		6,857,756		2,049,892		1,048,250		-0-

Total contractual cash obligations	$	19,642,011	$	9,375,357	$	2,691,251	$	1,691,694	$	5,883,709


	Amount of Commitment Expiration Per Period
	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
	(Dollars in thousands)
Commercial letters of credit	$	41,320	$	41,309	$	11	$	-0-	$	-0-
Standby letters of credit		2,883,188		1,390,208		1,167,537		273,660		51,783
Commitments to extend credit (3)		14,522,750		10,867,587		3,003,768		568,288		83,107

Total commercial commitments	$	17,447,258	$	12,299,104	$	4,171,316	$	841,948	$	134,890

NOTES:

All maturities are based on contractual maturities. Excludes $93.5 million of FAS 133 valuation adjustments.

Excludes $478 thousand of FAS 133 valuation adjustments.

Excludes $3.2 billion of loan commitments under equity lines and $2.0 billion under revolving lines of credit which do not have scheduled expiration dates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is included on pages 18 and 19 of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 4. Controls and Procedures

An evaluation was performed as of June 30, 2003 under the supervision and with the participation of AmSouth’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of AmSouth’s disclosure controls and procedures. Based on that evaluation, AmSouth’s management, including the CEO and CFO, concluded that AmSouth’s disclosure controls and procedures were effective as of June 30, 2003. There have been no significant changes in AmSouth’s internal controls or in other factors that could significantly affect internal controls subsequent to June 30, 2003.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, AmSouth and its subsidiaries are from time to time named as defendants in or parties to pending and threatened legal actions and proceedings. Among the actions which are pending against AmSouth are actions brought on behalf of various classes of claimants. These actions and claims, including class actions, are similar to others that have been brought in recent years against financial institutions and relate to AmSouth’s lending, collections, loan servicing, depository, investment, trust and other activities. These actions and claims allege violations of consumer protection, securities, banking and other laws, both state and federal. Some of these claims and actions seek substantial compensatory and punitive damage awards and injunctive relief. Additionally, AmSouth, and certain of its subsidiaries which are regulated by one or more federal and state regulatory authorities, are the subject of regularly conducted examinations, reviews and investigations conducted by such regulatory authorities. AmSouth may occasionally have disagreements with regulatory authorities resulting from these investigations, examinations and reviews.

It may take a number of years to fully and finally resolve the legal proceedings, including actions, claims and disagreements with regulators, currently pending due to their complexity and for other reasons. Further, in view of the inherent difficulty of predicting the outcome of such proceedings, AmSouth cannot state what the eventual outcome of these proceedings will be. Nonetheless, based on current knowledge and the advice of legal counsel, AmSouth’s management is of the opinion that the ultimate resolution of these legal proceedings will not have a material adverse effect on the consolidated financial condition, operations or liquidity of AmSouth.

Item 4. Submission of Matters to a Vote of Security Holders

The regular Annual Meeting of Shareholders of AmSouth was held on April 17, 2003, at which meeting the shareholders (i) elected four nominees as directors and (ii) failed to approve a shareholder proposal related to executive compensation. The following is a tabulation of the voting on these matters:

ELECTION OF DIRECTORS

Names	Votes For	Votes Withheld	Abstentions	Broker Nonvotes
Martha R. Ingram	276,272,810	14,866,553	N/A	N/A
Ronald L. Kuehn, Jr	282,882,633	8,256,730	N/A	N/A
Charles D. McCrary	283,230,532	7,908,831	N/A	N/A
C. Dowd Ritter	280,077,610	11,061,753	N/A	N/A

SHAREHOLDER PROPOSAL

Votes For

Votes

Against

Abstentions

Broker

Nonvotes

28,840,727

188,365,210

6,710,311

67,223,115

Item 6. Exhibits and Reports on Form 8-K

Item 6(a)—Exhibits

The exhibits listed in the Exhibit Index at page 35 of this Form 10-Q are filed herewith or are incorporated by reference herein.

Item 6(b)—Reports on Form 8-K

Two reports on Form 8-K were filed by AmSouth during the period April 1, 2003 to June 30, 2003:

A report was filed on April 15, 2003 to furnish copies of the press release regarding preliminary results of operations for the quarter ended March 31, 2003.

A report was filed on April 17, 2003 to provide information regarding authorization for the repurchase of AmSouth Bancorporation common stock.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, AmSouth has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



August 11, 2003	By:	/s/ C. DOWD RITTER
		C. Dowd Ritter Chairman, President and Chief Executive Officer


August 11, 2003	By:	/s/ DONALD R. KIMBLE
		Donald R. Kimble Executive Vice President, Chief Accounting Officer and Controller

EXHIBIT INDEX

The following is a list of exhibits including items incorporated by reference.


3.1		Restated Certificate of Incorporation of AmSouth Bancorporation (1)

3.2		By-Laws of AmSouth Bancorporation (2)

15		Letter Re: Unaudited Interim Financial Information

31.1		Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification by Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

NOTES TO EXHIBITS

(1)

Filed as Exhibit 3.1 to AmSouth’s Report on Form 8-K filed October 15, 1999, incorporated herein by reference.

(2)

Filed as Exhibit 3-b to AmSouth’s Form 10-Q Quarterly Report for the quarter ended March 31, 2001, incorporated herein by reference.

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