Amsouth Bancorporation Business Information, Profile, and History

Company Perspectives:

To succeed as a bank, we give you a quality of service you won't find anywhere else--a relationship that is unparalleled. That extra level of service begins, we believe, with six basic values that we practice at AmSouth every day: do more that is expected; if something's wrong, make it right; make time for people; improve someone's life; make a difference; and do the right thing.

History of Am South Bancorporation

AmSouth Bancorporation is a regional bank holding company with interests in consumer banking, commercial banking, and wealth management. Through subsidiary AmSouth Bank, the firm operates approximately 600 branch offices and 1,200 ATMs in Alabama, Florida, Tennessee, Mississippi, Louisiana, and Georgia.

AmSouth Bancorporation was incorporated in 1972 to take advantage of new state and federal laws related to the banking industry. Indeed, during the early 1970s Alabama began to deregulate its banking sector, making it easier for holding companies to merge with or acquire other banks. Similarly, during the mid-1960s and early 1970s, Congress had eliminated several federal banking industry restrictions and created a variety of favorable tax incentives for specific banking activities. By moving to a holding company format, companies like the newly formed AmSouth Bancorporation were able to take advantage of deregulation and to participate in a number of non-banking-related financial markets.

Because of regulatory changes, several holding companies were formed in Alabama during the 1970s. The owners and managers of most of those holding companies hoped to establish regional or state-wide dominance by adding new banks to their portfolios. Specifically, many of them hoped to improve the performance of the institutions that they acquired and also benefit from various economies of scale. AmSouth Bancorporation, like other holding companies formed at the time, was structured as a corporation with its founding bank (Birmingham-based AmSouth) as its major subsidiary. Throughout the 1970s, AmSouth engaged in an aggressive growth and acquisition campaign that would make it the largest bank in Alabama by the end of the decade.

AmSouth Expansion: 1970s-80s

The man chosen to direct AmSouth's rampant expansion during the 1970s, which would continue into the 1990s, was John W. Woods. Woods was born in 1931 into a military family, and in the 1950s he tried to join the Marines but was rejected because he was color blind. He did, however, pass the entrance test for the Air Force, where he served as a pilot for two years. Woods credited his military experience with giving him the confidence and personal strength that later helped him to build one of the most successful banks in the United States. "There are tough moments in everybody's career," Woods related in the November 13, 1991 issue of American Banker, "and every time there's been a tough moment, I think about that Air Force training and think, by golly, I can whip this, too."

Immediately after leaving the service, Woods accepted an entry level position at New York-based Chemical Bank, where he had a successful career and eventually earned the title of vice-president in charge of Chemical's southern division. Woods spent several years traveling to banks throughout the Southeast, selling correspondent banking and loan syndication services. AmSouth hired Woods away from Chemical in 1969, and although he had only 12 years in the banking industry, he was named president of AmSouth's lead Birmingham bank. Three years later Woods was chosen to lead the newly formed holding company, AmSouth Bancorporation.

Under Woods' direction, AmSouth expanded rapidly during the 1970s and early 1980s by purchasing competitors and integrating their assets and branches into the AmSouth banking chain. By the early 1980s, AmSouth had become the largest banking chain in Alabama, with nearly 20 percent of all state bank deposits. Besides simply increasing AmSouth's asset base, Woods and his fellow executives achieved success by improving the financial performance of their acquisitions. Not only did the banks that they purchased benefit from improved management, they profited from having AmSouth's well-known and respected name attached to their branches. In fact, an integral aspect of Woods strategy was to focus on expanding into areas where the AmSouth name was already established. Finally, the bought-out banks enjoyed access to a larger base of lending capital, as well as centralized, efficient administrative operations.

Although AmSouth Bancorporation was created in 1972, the history of its banking chain actually dates back long before the start of the 19th century. AmSouth's immediate predecessor, the First National Bank of Alabama, was founded in the late 1800s, and AmSouth eventually acquired a patchwork of Alabama financial institutions with similarly rich histories. In 1983, AmSouth absorbed the Commercial National Bank (CNB) of Anniston. E. Guice Potter, CNB's president, stayed with AmSouth, assuming the title of president of the newly named AmSouth Bank in Anniston. Potter's father had gone to work at CNB in 1926, just six years after it was established. Potter, who had succeeded his father as president of CNB in 1974, stayed with AmSouth until his retirement in 1994.

As AmSouth continued to purchase Alabama banks and to increase its existing operations, the holding company flourished. Although Woods was at the helm of the swelling operation, the company's success was also attributable to savvy AmSouth executives like William L. Marks. Marks joined AmSouth's acquisition and turn-around team in 1977. The 33-year-old Marks was hired away from Wachovia Bank and Trust Co. and named president of AmSouth's new American National Bank subsidiary. Similar to other AmSouth acquisitions, the bank suffered from a troubled loan portfolio, poor marketing strategy, and generally weak management. However, it had a lot of potential.

Marks went to work revitalizing the bank and integrating it into the AmSouth empire. Within three years, the subsidiary made more money than it had in its entire 16-year history. "We decided what needed to be done and turned it around," recalled Marks in the March 12, 1990 issue of New Orleans City Business. During the next 13 years, Marks would be moved around to several other new AmSouth banks. He consistently boosted productivity and profits at his posts, and, like his fellow regional managers, contributed significantly to the holding company's success. Marks was hired away in the early 1990s by Whitney National Bank, a struggling New Orleans institution. Interestingly, the 107-year-old Whitney had hired its first out-of-state chief executive from AmSouth Bancorporation's predecessor in 1930.

Moving into the Florida Market: 1987

By 1984, AmSouth had blossomed into a dominant Alabama financial institution with nearly $5 billion in assets and more than $45 million in annual net income. Although that growth was impressive, it turned out to be mere preparation for the explosive expansion that AmSouth would conduct during the next decade. In fact, a turn of events in 1985 set the stage for what would become a major evolution in the banking industry. In that year, Congress effectively gave the okay for holding companies to engage in interstate banking. That meant that AmSouth could begin expanding outside of Alabama (and that AmSouth could potentially become a takeover target for larger out-of-state holding companies).

By increasing its Alabama holdings, AmSouth managed to swell its total asset base to nearly $7 billion by the end of 1986. Then, in 1987, AmSouth launched a major expansion into the Florida panhandle with its purchase of First Mutual Savings Association, a major regional thrift institution. Within the year, AmSouth had assembled a subsidiary bank with nearly $1 billion in assets. Unfortunately, that investment soon soured when the Florida real estate market collapsed, and AmSouth's Florida subsidiary was devastated as more than 40 percent of its total loans were eventually classified as nonperforming.

Although AmSouth also ventured into Tennessee in the late 1980s and considered other investment opportunities in Florida and Georgia, the company slowed its growth plans and focused on weathering a severe banking industry downturn. Indeed, in the late 1980s, the U.S. banking industry was trounced by the collapse of real estate and construction markets, as well as a general economic malaise in the United States during that time. As the number of nonperforming bank loans soared, many banks and thrifts were forced into bankruptcy. Although AmSouth was pressured, its tradition of sound management and making high quality loans paid off, allowing it to sustain meager profit growth during the late 1980s and early 1990s.

One of AmSouth's investments in Alabama that did not fare as well as others during the late 1980s was its loan to the Birmingham Turf Club, a venture initiated for the purpose of bringing horse racing to Birmingham. AmSouth had loaned $17 million to the organization and was eventually forced to write off the entire amount. Marks defended the loan decision on the basis that the venture would have brought more than 1,000 jobs to the Birmingham area. Nevertheless, AmSouth's local image was tarnished by the whole affair. Moreover, a string of fiscal problems and executive turmoil punctuated the AmSouth story between 1987 and 1992, before the banking industry in general began to recover.

Despite its losses in the 1987 Florida debacle, that acquisition boosted AmSouth's holdings to nearly $9 billion by 1989. Over the following three years, AmSouth's portfolio grew to about $10 billion. AmSouth's profit growth slowed during the period. Net income actually declined from $73 million in 1986 to $66 million in 1987, and then buoyed up around the $80 million mark until 1991. Spurred by recovering markets and improving loan portfolios in 1992, AmSouth enjoyed a net income surge to $108 million. Encouraged by improving margins and markets, AmSouth regained its vigor for growth and renewed its aggressive expansion strategy. Simultaneously, AmSouth was undergoing a three-year restructuring that it began in 1991. The intent was to slash operating costs by developing scrupulous performance standards for all of its subsidiaries and branches.

Growth Through Acquisition: Early 1990s

AmSouth elected to focus on the central and west Florida banking markets for expansion during the early 1990s. It started by acquiring First National Bank of Clearwater for about $90 million, and then snapped up an Orlando entity, Orange Bank, for about $50 million. Orange was the largest independent bank in the county, with 20 branches and $376 million in assets. AmSouth soon added nearby Mid-State Federal Savings Bank for about $100 million. After tagging St. Petersburg First Federal to its portfolio, AmSouth's Florida assets had suddenly surged to nearly $2 billion. During the same period, AmSouth boosted its holdings in Tennessee, where it would have 21 offices by 1994, and Georgia, where it would operate seven.

AmSouth's growth during the early 1990s was representative of a dynamic trend of consolidation within the U.S. banking industry that had been occurring since interstate banking began in the 1980s. Indeed, as smaller banks continued to face greater competitive pressures from less-regulated, non-bank financial institutions, the percentage of U.S. assets held by commercial banks had dropped from about 37 percent in the late 1970s to 25 percent by the early 1990s. To combat competitive threats, banks began merging to achieve economies of scale. The number of independent banking entities in the United States plunged from about 13,000 in 1983 to less than 10,000 by 1990. Meanwhile, the number of multi-bank holding companies grew from about 300 to around 1,000. Augmenting the consolidation trend was the fact that computers and electronic banking devices were increasingly making it easier for banks to operate across broad regions.

As a result of its acquisition activity, AmSouth's assets and income surged in 1993 to a $12.5 billion and $147 million, respectively. Furthermore, it was acquiring new banks and expanding existing subsidiaries at a rapid pace. Importantly, in 1993, AmSouth announced an agreement to purchase Fortune Bancorp. of Clearwater Florida. With 46 offices, Fortune was a major-league financial institution and gave AmSouth a commanding presence in central Florida.

By 1994, AmSouth would have at least 125 banking offices in Florida and more than $6 billion in assets. With its other operations, including about 150 Alabama offices, its total asset base would rise past the $17 billion mark by early 1995. Furthermore, the company's profits continued to be augmented by its emphasis on fee-based income activities, particularly trust services, mutual funds, and mortgage retail services. In a 1993 article for the Orlando Business Journal, banking analyst Sam Beebe suggested that AmSouth was "going to be very competitive" well into the 1990s.

After nearly 25 years of service at AmSouth, Woods was formulating plans for his retirement in 1995. Reminiscent of his early years in the armed services, Woods was an avid military history buff and was looking forward to doing a lot more reading in that area. In addition, he planned to spend more time at his 700-acre cattle-breeding farm near Birmingham. "Its kind of my entrepreneurial outlet," Woods explained in the November 13, 1991 issue of American Banker, noting that "on the farm, if I make a bad decision I pay for it pretty quickly." In 1996, C. Dowd Ritter was named to take over as chairman and CEO of the firm.

Internal Operations and Restructuring: Late 1990s and Beyond

Ritter, the firm's chief operating officer and president since 1994, found himself at the helm of a company in which many analysts felt was facing possible takeover attempts by 1997. At the time, the banking industry as a whole was undergoing major consolidation, especially in the South. Strong regional players including AmSouth were becoming increasingly attractive to larger competitors such as Wachovia Bank Corp. and SunTrust Corp. AmSouth had also been struggling for the past several years due to poor integration of its previous Florida acquisitions. Then, in early 1999, it lost $14 billion in trust assets when Chase Manhattan Bank was awarded custody of Alabama's retirement systems account.

AmSouth, however, remained intact and spent the next several years focused on strengthening its internal operations. In 1998, AmSouth sold off its bond administration and stock transfer businesses and also began divesting portions of its credit card portfolio. A 1999 American Banker article reported that Ritter had spent the "past five years cleaning up a troubled Florida operation, paring back inefficient staff and business units, and reviving revenues." Confident that his restructuring program had paid off, Ritter announced the $6.3 billion acquisition of First American Corp. in the spring of 1999. The deal with the Tennessee-based financial services concern was the first AmSouth purchase since its buying spree of the early 1990s.

During 2000, AmSouth once again restructured. This time, rising short-term interest rates and credit quality problems were taking their toll on the firm's bottom line. While industry analysts pointed to the First American Corp. purchase as the culprit in AmSouth's faltering earnings, the company claimed the acquisition integration was going smoothly and continued to eye expansion as key to future profit growth. During 2001, the company once again began to focus on the Florida region, especially in the Naples, Tampa, Orlando, and Jacksonville markets. At the time, Florida accounted for nearly 20 percent of company deposits and the firm believed that number could be pushed even higher due to Florida's population growth rates.

In 2001, AmSouth's net income surged to $536.3 million, an increase of 63 percent over the previous year's figures. As the banking industry remained highly competitive, Ritter announced a six-part strategy designed to ensure AmSouth's future success. These initiatives included: doubling the company's business banking segment; doubling the contribution of its wealth management business; expansion in the high-growth Florida markets; aggressive growth in the firm's consumer banking segment; increasing sales productivity and service quality; and utilizing the Internet in all business segments.

Principal Subsidiaries: AmSouth Bank; AmSouth Capital Corporation; AmSouth Investment Services, Inc.; OakBrook Investments, LLC; Rockhaven Asset Management, LLC; Sawgrass Asset Management, LLC.

Principal Competitors: Bank of America Corp.; Regions Financial Corporation; SouthTrust Corporation.

Chronology

• Key Dates:
• 1972: AmSouth Bancorporation is created to take advantage of new state and federal banking laws.
• 1983: The company absorbs the Commercial National Bank of Anniston.
• 1985: Congress allows holding companies to engage in interstate banking.
• 1987: AmSouth expands into Florida with the purchase of First Mutual Savings Association.
• 1991: The firm launches a three-year restructuring program.
• 1993: AmSouth's assets rise to $12.5 billion.
• 1996: C. Dowd Ritter is named chairman and CEO.
• 1999: AmSouth acquires First American Corp.
• 2001: The firm focuses on Florida expansion.