---




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, 2002

Commission file number 1-7476





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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 Center1900 Fifth Avenue NorthBirmingham, 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  ̈





As of July 31, 2002, AmSouth
Bancorporation had 358,639,000 shares of common stock outstanding.





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AMSOUTH BANCORPORATION





FORM 10-Q





INDEX





PagePart I.

Financial InformationItem 1.

Financial Statements (Unaudited)Consolidated Statement of ConditionJune 30, 2002, December 31, 2001 and June 30, 2001,

3Consolidated Statement of EarningsThree months and six months ended June 30, 2002 and 2001

4Consolidated Statement of Shareholders EquitySix months ended June 30, 2002

5Consolidated Statement of Cash FlowsSix months ended June 30, 2002 and 2001

6Notes to Consolidated Financial Statements

7Independent Accountants Review Report

12Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

13Item 3.

Quantitative and Qualitative Disclosures About Market Rate Risk

27Part II.

Other InformationItem 1.

Legal Proceedings

27Item 4.

Submission of Matters to a Vote of Security Holders

28Item 6.

Exhibits and Reports on Form 8-K

28Signature

29Exhibit Index

30





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. Some of these 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; 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, regulatory, and technical 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 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.




2




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PART I


FINANCIAL INFORMATION


Item 1.    
Financial Statements (Unaudited)





AMSOUTH BANCORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF CONDITION


(Unaudited)





June 30 2002


December 31 2001


June 30 2001(In thousands)ASSETSCash and due from banks

$
1,124,366


$
1,441,561


$
1,115,681Federal funds sold and securities purchased under agreements to resell


147,000



400,000



1,015,400Trading securities


30,006



12,979



13,538Available-for-sale securities


4,590,271



4,829,512



4,503,894Held-to-maturity securities (market value of $4,299,533, $4,071,008 and $4,582,237, respectively)


4,177,856



4,002,474



4,508,527Loans held for sale


203,370



291,782



231,343Loans


26,381,404



25,852,221



25,202,042Less:    Allowance for loan losses


371,418



363,607



380,663Unearned income


728,496



727,728



461,618Net loans


25,281,490



24,760,886



24,359,761Other interest-earning assets


53,129



40,458



54,422Premises and equipment, net


771,702



729,383



644,890Accrued interest receivable and other assets


2,119,913



2,091,379



1,999,767$
38,499,103


$
38,600,414


$
38,447,223LIABILITIES AND SHAREHOLDERS EQUITYDeposits and interest-bearing liabilities:Deposits:Noninterest-bearing demand

$
4,981,783


$
5,280,621


$
4,738,023Interest-bearing demand


10,378,312



10,518,922



9,819,838Savings


1,312,141



1,229,871



1,212,610Time


6,433,294



6,800,056



7,675,598Foreign time


356,789



309,641



252,860Certificates of deposit of $100,000 or more


2,066,217



2,027,906



2,285,972Total deposits


25,528,536



26,167,017



25,984,901Federal funds purchased and securities sold under agreements to repurchase


2,040,929



2,080,296



2,131,079Other borrowed funds


150,408



79,454



147,809Long-term Federal Home Loan Bank advances


5,304,831



5,093,834



5,177,955Other long-term debt


1,023,682



1,008,421



992,053Total deposits and interest-bearing liabilities


34,048,386



34,429,022



34,433,797Accrued expenses and other liabilities


1,376,454



1,216,293



1,105,975Total liabilities


35,424,840



35,645,315



35,539,772Shareholders 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416,923,000, 416,931,000 and 416,939,000 shares,
respectively


416,923



416,931



416,939Capital surplus


699,786



699,863



691,798Retained earnings


2,806,383



2,677,933



2,563,007Cost of common stock in treasury56,564,000, 53,896,000 and 48,095,000 shares, respectively


(907,950
)


(848,005
)


(738,183
)Deferred compensation on restricted stock


(16,716
)


(16,624
)


(18,134
)Accumulated other comprehensive income/(loss)


75,837



25,001



(7,976
)Total shareholders equity


3,074,263



2,955,099



2,907,451$
38,499,103


$
38,600,414


$
38,447,223





See notes to consolidated financial statements.




3




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AMSOUTH BANCORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF EARNINGS


(Unaudited)





Six Months Ended June 30

Three Months Ended June 302002

2001

2002

2001(In thousands except per share data)INTEREST INCOMELoans

$
850,612

$
1,027,944

$
425,617

$
502,490Available-for-sale securities


172,008


155,905


86,700


83,483Held-to-maturity securities


123,561


147,723


62,058


72,897Trading securities


159


136


92


128Loans held for sale


7,827


9,502


3,662


7,539Federal funds sold and securities purchased under agreements to resell


1,151


35,272


406


10,827Other interest-earning assets


778


1,916


468


1,217Total interest income


1,156,096


1,378,398


579,003


678,581INTEREST EXPENSEInterest-bearing demand deposits


57,955


155,668


29,034


72,061Savings deposits


3,706


9,550


1,888


4,641Time deposits


124,879


227,124


60,593


110,539Foreign time deposits


2,431


6,231


1,329


2,434Certificates of deposit of $100,000 or more


35,723


72,549


17,086


34,082Federal funds purchased and securities sold under agreements to repurchase


13,933


48,985


7,704


21,368Other borrowed funds


2,069


6,726


1,090


2,218Long-term Federal Home Loan Bank advances


135,508


148,050


68,364


73,695Other long-term debt


19,565


30,298


9,782


14,169Total interest expense


395,769


705,181


196,870


335,207NET INTEREST INCOME


760,327


673,217


382,133


343,374Provision for loan losses


108,700


84,300


52,600


46,100NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES


651,627


588,917


329,533


297,274NONINTEREST REVENUESService charges on deposit accounts


132,681


126,440


67,551


66,569Trust income


55,242


57,088


27,373


28,209Consumer investment services income


42,552


46,103


21,641


22,431Bank owned life insurance policies


31,683


27,434


15,046


13,353Interchange income


30,040


27,081


16,165


14,035Mortgage income


10,345


11,466


4,469


6,567Portfolio income


7,703


6,295


4,136


3,352Other noninterest revenues


48,545


68,041


24,747


33,131Total noninterest revenues


358,791


369,948


181,128


187,647NONINTEREST EXPENSESSalaries and employee benefits


309,627


289,776


152,824


148,044Equipment expense


59,544


60,509


30,115


30,213Net occupancy expense


58,007


55,680


29,474


27,867Postage and office supplies


25,146


24,199


12,192


11,290Communications expense


17,159


21,171


8,257


10,893Amortization of intangibles


2,712


17,062


1,350


8,545Marketing expense


17,765


17,083


8,719


8,576Other noninterest expenses


96,502


94,602


49,864


46,587Total noninterest expenses


586,462


580,082


292,795


292,015INCOME BEFORE INCOME TAXES


423,956


378,783


217,866


192,906Income taxes


126,017


119,051


65,497


59,385NET INCOME

$
297,939

$
259,732

$
152,369

$
133,521Average common shares outstanding


360,714


370,457


359,782


368,688Earnings per common share

$
.83

$
.70

$
.42

$
.36Diluted average common shares outstanding


365,334


373,695


364,756


372,464Diluted earnings per common share

$
.82

$
.70

$
.42

$
.36


See notes to consolidated financial statements.




4




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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


Total(In thousands)BALANCE AT JANUARY 1, 2002

$
416,931


$
699,863


$
2,677,933


$
(848,005
)

$
(16,624
)

$
25,001


$
2,955,099Comprehensive income:Net income


-0-



-0-



297,939



-0-



-0-



-0-



297,939Other comprehensive income, net of tax:Change in unrealized gains on derivative instruments (net of $3,107 tax benefit)


-0-



-0-



-0-



-0-



-0-



(5,770
)


(5,770
)Changes in unrealized gains and losses on available-for-sale securities, net of reclassification adjustment (net of
$23,360 taxexpense)


-0-



-0-



-0-



-0-



-0-



56,606



56,606Comprehensive income


























348,775Cash dividends declared


-0-



-0-



(159,473
)


-0-



-0-



-0-



(159,473
)Common stock transactions:Purchase of common stock


-0-



-0-



-0-



(100,527
)


-0-



-0-



(100,527
)Employee stock plans


(8
)


(153
)


(10,016
)


35,541



(92
)


-0-



25,272Dividend reinvestment plan


-0-



76



-0-



5,041



-0-



-0-



5,117BALANCE AT JUNE 30, 2002

$
416,923


$
699,786


$
2,806,383


$
(907,950
)

$
(16,716
)

$
75,837


$
3,074,263Disclosure of reclassification amount:Unrealized holding gains on available-for-sale securities arising during the period





















$
60,393Less:  Reclassification adjustment for gains realized in net income






















3,787Net unrealized gains on available-for-sale securities, net of tax





















$
56,606Unrealized holding gains on derivatives arising during the period





















$
4,109Less:  Reclassification adjustment for gains realized in net income






















9,879Net unrealized gains on derivatives, net of tax





















$
(5,770
)





See notes to consolidated financial statements.




5




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AMSOUTH BANCORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF CASH FLOWS





Six Months Ended June 302002


2001(In thousands)OPERATING ACTIVITIESNet income

$
297,939


$
259,732Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses


108,700



84,300Depreciation and amortization of premises and equipment


45,767



43,699Amortization of premiums and discounts on held-to-maturity securities and available-for-sale securities


315



(9,011
)Net decrease (increase) in loans held for sale


86,950



(138,532
)Net (increase) decrease in trading securities


(17,782
)


7,766Net gains on sales of available-for-sale securities


(6,069
)


(5,203
)Net increase in accrued interest receivable and other assets


(29,668
)


(48,927
)Net increase in accrued expenses and other liabilities


115,617



57,806Provision for deferred income taxes


89,588



100,765Amortization of intangible assets


2,690



17,039Other operating activities, net


15,892



20,650Net cash provided by operating activities


709,939



390,084INVESTING ACTIVITIESProceeds from maturities and prepayments of available-for-sale securities


714,319



607,453Proceeds from sales of available-for-sale securities


481,216



218,807Purchases of available-for-sale securities


(767,723
)


(1,176,736
)Proceeds from maturities, prepayments and calls of held-to-maturity securities


1,062,191



656,032Purchases of held-to-maturity securities


(1,078,391
)


(502,515
)Net decrease in federal funds sold and securities purchased under agreements to resell


253,000



1,140,265Net (increase) decrease in other interest-earning assets


(12,671
)


6,638Net increase in loans


(971,831
)


(244,161
)Net purchases of premises and equipment


(88,086
)


(54,388
)Net cash (used) provided by investing activities


(407,976
)


651,395FINANCING ACTIVITIESNet decrease in deposits


(629,244
)


(638,403
)Net decrease in federal funds purchased and securities sold under agreements to repurchase


(39,367
)


(189,185
)Net increase (decrease) in other borrowed funds


70,954



(389,039
)Issuance of long-term Federal Home Loan Bank advances and other long-termdebt


226,591



600,013Payments for maturing long-term debt


(15,690
)


(320,366
)Cash dividends paid


(160,147
)


(157,269
)Proceeds from employee stock plans and dividend reinvestment plan


28,272



21,426Purchase of common stock


(100,527
)


(129,406
)Net cash used for financing activities


(619,158
)


(1,202,229
)Decrease in cash and cash equivalents


(317,195
)


(160,750
)Cash and cash equivalents at beginning of period


1,441,561



1,276,431Cash and cash equivalents at end of period

$
1,124,366


$
1,115,681





See notes to consolidated financial statements.




6




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AMSOUTH BANCORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Six Months Ended June 30, 2002 and 2001





General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. The notes included herein should be read in conjunction with the notes to
consolidated financial statements included in AmSouth Bancorporations (AmSouth) 2001 annual report on Form 10-K.





Accounting ChangesIn July 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 141, Business Combinations (Statement 141), and Statement No. 142, Goodwill and Other Intangible
Assets (Statement 142). Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Statement 141 also specifies the criteria for intangible assets acquired in a purchase
method business combination to be recognized and reported apart from goodwill. Statement 142 requires companies to no longer amortize goodwill and intangible assets with indefinite useful lives, but instead test these assets for impairment at least
annually in accordance with the provisions of Statement 142. Under Statement 142, intangible assets with definite useful lives continue to be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with the FASBs Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (Statement 144).





AmSouth adopted the provisions of Statement 142 effective January 1, 2002. As of the date of adoption, AmSouth had unamortized goodwill in the amount of $288.4 million, and unamortized identifiable
intangible assets in the amount of $18.7 million, all of which were subject to the transition provisions of Statements 141 and 142. As part of its adoption of Statement 142, AmSouth has performed a transitional impairment test on its goodwill
assets, which indicated that no impairment charge was required. AmSouth does not currently have any other indefinite-lived intangible assets recorded in its statement of financial condition. In addition, no material reclassifications or adjustments
to the useful lives of finite-lived intangible assets were made as a result of adopting the new guidance. The full impact of adopting Statement 142 is expected to result in an increase in net income of approximately $29.0 million or approximately
$.08 per share in 2002 as a result of AmSouth no longer having to amortize goodwill against earnings. At June 30, 2002 and 2001, AmSouth had $16.0 million and $18.8 million, respectively, in unamortized identifiable intangible assets, substantially
all of which were core deposit intangibles. Total amortization expense associated with these intangible assets during the six months and three months ended June 30, 2002 was $2.7 million and $1.3 million, respectively, and was $2.3 million and $1.2
million, respectively, for the same periods in 2001. Assuming retroactive adoption of Statement 142, net income for the year ended December 31, 2001 and the six month and three month periods ended June 30, 2001 would have been $565.3 million, $274.2
million and $140.8 million, respectively, and diluted earnings per share would have been $1.52, $.73 and $.38 for the same periods, respectively.




7




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The following table sets forth the reconcilement of net income and earnings per
share excluding goodwill amortization for the year ended December 31, 2001 and the three and six month periods ended June 30, 2001:





Twelve Months Ended December 31, 2001

Six Months Ended June 30, 2001

Three Months Ended June 30, 2001Net Income

Earnings Per Share

Net Income

Earnings Per Share

Net Income

Earnings Per Share(In thousands except per share data)Earnings per common share computation:Net income/EPS as reported

$
536,346

$
1.46

$
259,732

$
.70

$
133,521

$
.36Add back: Goodwill amortization


29,385


.08


14,734


.04


7,367


.02Less: Tax on deductible goodwill


442


.00


222


.00


111


.00Adjusted net income/EPS

$
565,289

$
1.54

$
274,244

$
.74

$
140,777

$
.38Diluted earnings per common share computation:Net income/diluted EPS as reported

$
536,346

$
1.45

$
259,732

$
.70

$
133,521

$
.36Add back: Goodwill amortization


29,385


.07


14,734


.03


7,367


.02Less: Tax on deductible goodwill


442


.00


222


.00


111


.00Adjusted net income/diluted EPS

$
565,289

$
1.52

$
274,244

$
.73

$
140,777

$
.38








On January 1, 2002, AmSouth
adopted Statement 144. Statement 144 supersedes Statement 121 and provides a single accounting model for long-lived assets to be disposed of. Although retaining many of the fundamental recognition and measurement provisions of Statement 121, the new
rules significantly change the criteria that would have to be met to classify an asset as held-for-sale. Statement 144 also supersedes the provisions of Accounting Principle Board (APB) Opinion 30 with regard to reporting the effects of a disposal
of a segment of a business and requires expected future operating losses from discontinued operations to be displayed in discontinued operations in the period(s) in which the losses are incurred (rather than as of the measurement date as presently
required by APB Opinion 30). In addition, more dispositions will qualify for discontinued operations treatment in the income statement. The adoption of Statement 144 did not have a material impact on AmSouths financial condition or results of
operations.





In April 2002, FASB issued Statement of Financial Accounting Standard No. 145, Recission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections (Statement 145). Statement 145 rescinds Statement 4, which required all gains and losses from extinguishment of debt to be aggregated and, if
material, classified as an extraordinary item, net of related income tax effect. In addition, Statement 145 amends Statement 13 on leasing to require that certain lease modifications that have economic effects similar to sale-leaseback transactions
be accounted for in the same manner as sale-leaseback transactions. Provisions of Statement 145 related to the recission of Statement 4 are effective for financial statements issued by AmSouth after January 1, 2003. The provisions of the statement
related to sale-leaseback transactions are effective for any transactions occurring after May 15, 2002. All other provisions of the statement were effective as of the end of the second quarter of 2002. The adoption of the provisions of Statement 145
did not have a material impact on AmSouths financial condition or results of operations nor does AmSouth expect the future adoption of the other provisions of Statement 145 to have a material impact on AmSouths financial results.





Cash FlowsFor the six months ended June 30, 2002 and 2001, AmSouth paid interest of $397.5 million
and $702.7 million, respectively. During the six months ended June 30, 2002, AmSouth paid income taxes of $27.3 million and during the six months ended June 30, 2001, AmSouth received income tax refunds of $12.6 million. Noncash transfers from loans
to foreclosed properties for the six months ended June 30, 2002 and 2001, were $23.7 million and $17.6 million, respectively, and noncash transfers from foreclosed properties to loans




8




---

were $52 thousand and $380 thousand, respectively. During the second quarter of 2002, AmSouth also had noncash transfers from loans to available-for-sale securities in connection with a mortgage
loan securitization of $301.7 million.





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 risks, 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, 2002 and 2001, AmSouth recognized a net loss of $897 thousand and a net gain of $832 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 $675 million and $725 million of
AmSouths loans were designated as the hedged items to interest rate swap agreements at June 30, 2002 and 2001, respectively. During the six months ended June 30, 2002 and 2001, AmSouth recognized a net loss of $110 thousand and a net gain of
$219 thousand, respectively, related to the ineffective portion of its hedging instruments.





Comprehensive
IncomeTotal comprehensive income was $209.0 million and $348.8 million for the three and six months ended June 30, 2002 and $144.9 million and $359.3 million for the three and six months ended June 30, 2001. 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.




9




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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 EndedJune 302002

2001

2002

2001(In thousands except per share data)Earnings per common share computation:Numerator:Net income

$
152,369

$
133,521

$
297,939

$
259,732Denominator:Average common shares outstanding


359,782


368,688


360,714


370,457Earnings per common share

$
.42

$
.36

$
.83

$
.70Diluted earnings per common share computation:Numerator:Net income

$
152,369

$
133,521

$
297,939

$
259,732Denominator:Average common shares outstanding


359,782


368,688


360,714


370,457Dilutive shares contingently issuable


4,974


3,776


4,620


3,238Average diluted common shares outstanding


364,756


372,464


365,334


373,695Diluted earnings per common share

$
.42

$
.36

$
.82

$
.70





Shareholders EquityIn September 2001,
AmSouths Board of Directors approved the repurchase by AmSouth of up to 25.0 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. Through June 30, 2002, 6.9 million shares have been purchased under this authorization at a cost of $141.7 million. Cash dividends of $.22 per common share were declared in the second quarter of 2002. This represents a five
percent increase over the dividend declared during the second quarter of 2001.





Business Segment
InformationAmSouth has three reportable segments: Consumer Banking, Commercial Banking, and Wealth Management. Treasury & Other is comprised of balance sheet management activities that include the investment portfolio, non-deposit
funding and off-balance sheet financial instruments. Treasury & Other also includes income from bank owned life insurance policies, gains and losses related to the ineffective portion of derivative hedging instruments, net gains on sales of
fixed assets, taxable-equivalent adjustments associated with lease restructuring transactions, and corporate expenses such as corporate overhead . Treasury & Other also included goodwill amortization in 2001 and a $3.7 million charge related to
credit derivative contracts in 2002. The following is a summary of the segment performance for the three months and six months ended June 30, 2002 and 2001:




10




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Consumer Banking

Commercial Banking


Wealth Management


Treasury & Other


Total(In thousands)Three Months Ended June 30, 2002Net interest income from external customers

$
202,576

$
129,085


$
(76
)

$
50,548


$
382,133Internal funding


96,148


(35,148
)


1,259



(62,259
)


-0-Net interest income


298,724


93,937



1,183



(11,711
)


382,133Noninterest revenues


86,911


28,690



49,072



16,455



181,128Total revenues


385,635


122,627



50,255



4,744



563,261Provision for loan losses


31,437


15,954



-0-



5,209



52,600Noninterest expenses


178,942


43,128



39,007



31,718



292,795Income/(Loss) before income taxes


175,256


63,545



11,248



(32,183
)


217,866Income taxes/(benefits)


65,897


23,893



4,229



(28,522
)


65,497Segment net income/(loss)

$
109,359

$
39,652


$
7,019


$
(3,661
)

$
152,369Three Months Ended June 30, 2001Net interest income from external customers

$
119,972

$
169,852


$
(338
)

$
53,888


$
343,374Internal funding


129,977


(71,354
)


1,545



(60,168
)


-0-Net interest income


249,949


98,498



1,207



(6,280
)


343,374Noninterest revenues


87,910


25,771



50,691



23,275



187,647Total revenues


337,859


124,269



51,898



16,995



531,021Provision for loan losses


26,710


19,373



-0-



17



46,100Noninterest expenses


173,576


44,644



40,190



33,605



292,015Income/(Loss) before income taxes


137,573


60,252



11,708



(16,627
)


192,906Income taxes/(benefits)


51,786


22,625



4,395



(19,421
)


59,385Segment net income

$
85,787

$
37,627


$
7,313


$
2,794


$
133,521Six Months Ended June 30, 2002Net interest income from external customers

$
389,300

$
260,571


$
(168
)

$
110,624


$
760,327Internal funding


194,654


(71,824
)


2,313



(125,143
)


-0-Net interest income


583,954


188,747



2,145



(14,519
)


760,327Noninterest revenues


170,003


58,771



97,869



32,148



358,791Total revenues


753,957


247,518



100,014



17,629



1,119,118Provision for loan losses


70,239


27,289



-0-



11,172



108,700Noninterest expenses


365,602


87,545



78,336



54,979



586,462Income/(Loss) before income taxes


318,116


132,684



21,678



(48,522
)


423,956Income taxes/(benefits)


119,612


49,889



8,151



(51,635
)


126,017Segment net income

$
198,504

$
82,795


$
13,527


$
3,113


$
297,939Six Months Ended June 30, 2001Net interest income from external customers

$
216,577

$
346,686


$
(726
)

$
110,680


$
673,217Internal funding


265,491


(152,470
)


2,743



(115,764
)


-0-Net interest income


482,068


194,216



2,017



(5,084
)


673,217Noninterest revenues


169,192


51,234



103,414



46,108



369,948Total revenues


651,260


245,450



105,431



41,024



1,043,165Provision for loan losses


55,362


28,709



-0-



229



84,300Noninterest expenses


344,218


91,167



79,417



65,280



580,082Income/(Loss) before income taxes


251,680


125,574



26,014



(24,485
)


378,783Income taxes/(benefits)


94,736


47,144



9,755



(32,584
)


119,051Segment net income

$
156,944

$
78,430


$
16,259


$
8,099


$
259,732




11




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INDEPENDENT ACCOUNTANTS REVIEW REPORT





The Board of Directors


AmSouth Bancorporation





We have reviewed the accompanying consolidated statement of condition of AmSouth Bancorporation and subsidiaries as of June 30, 2002 and 2001, and the related consolidated statements of earnings for the three-month and
six-month periods ended June 30, 2002 and 2001, the consolidated statements of cash flows for the six-month periods ended June 30, 2002 and 2001, and the consolidated statement of shareholders equity for the six-month period ended June 30,
2002. 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, 2001, 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 15, 2002, 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, 2001 is fairly stated, in all material respects, in relation to the consolidated statement of condition from which it has been derived.





/s/ ERNST & YOUNG LLP





Birmingham, Alabama


August 5, 2002




12




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





Overview





AmSouth Bancorporation (AmSouth) reported net income for the quarter ended June
30, 2002 of $152.4 million, or $.42 per share on a diluted basis and $297.9 million, or $.82 per share on a diluted basis for the first six months of 2002. In the same periods last year, net income totaled $133.5 million, or $.36 per share on a
diluted basis, and $259.7 million, or $.70 per diluted share, respectively. For the three months and six months ended June 30, 2002, AmSouths return on average assets was 1.61 percent and 1.59 percent, respectively, compared to 1.40 percent
and 1.36 percent, respectively, for the same periods in 2001. Return on average equity increased to 20.36 percent and 20.10 percent for the second quarter and first half of 2002, respectively, from 18.72 percent and 18.40 percent for the second
quarter and first six months of 2001, respectively. The increase in earnings in 2002 versus 2001 was driven by higher net interest income primarily associated with a significant improvement in the net interest margin (NIM). The increase in net
interest income was partially offset by lower noninterest revenues and an increase in the provision for loan losses and noninterest expenses in 2002 compared to 2001.





Total assets at June 30, 2002 were $38.5 billion, down from $38.6 billion at year-end reflecting a decrease in available-for-sale (AFS) securities and lower cash balances
offset by an increase in loans. Loans net of unearned income at June 30, 2002 increased $528.4 million compared to year-end. This increase was attributable to $788.6 million of growth in consumer loans partially offset by decreases in commercial and
commercial real estate loans. The increase in consumer loans was driven by increases in home equity loans and lines and dealer indirect automobile 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. These efforts included a strong sales effort aided by an emphasis on AmSouths branch incentive scorecard, increased marketing activity, and back office
improvements that make the product more attractive to customers and easier for our branch personnel to originate. Managed loans, which include securitized dealer loans and loans sold to third-party conduits, decreased by $201.9 million at June 30,
2002 from year-end levels. This decrease reflected the paydown of dealer indirect loans previously securitized and the planned runoff in residential and dealer loans previously sold to third-party conduits.





On the liability side of the balance sheet, total deposits at June 30, 2002, decreased by $638.5 million compared to December 31, 2001.
The decrease in noninterest-bearing deposits reflected the impact of higher year-end commercial demand deposits, which normally occurs at the end of the year, while the decrease in interest-bearing demand deposits which include interest checking and
money market accounts was primarily the result of seasonal tax payments which are made by customers during the second quarter. The reduction in higher cost time deposits reflected managements strategy to reduce the overall level of higher cost
time deposits from 2001 levels. Long-term Federal Home Loan Bank (FHLB) borrowings grew from 2001 year-end levels as AmSouth took advantage of low interest rates in anticipation of having to replace approximately $500 million of FHLB borrowings
maturing early in 2003.





Net Interest Income





Net interest income (NII) on a fully taxable equivalent basis for the three and six months ended June 30, 2002 was $382.1 million and $760.3 million, respectively, up $38.8
million, or 11.3 percent compared to the same quarter last year and 12.9 percent on a year-to-date basis. The increase in NII reflected a higher net interest margin partially offset by lower average interest-earning assets. The NIM was 4.63 percent
for the first six months of 2002 and 4.61 percent for the second quarter of 2002, an increase of 61 and 49 basis points versus 4.02 percent and 4.12 percent, respectively, for the same periods in 2001. The improvement in the NIM reflected a
favorable shift in the mix of both assets and liabilities. On the balance sheet, AmSouth continued to replace lower yielding commercial loans and fixed-rate investment securities with higher yielding consumer loans. The improvement in the margin was
also the result of an increase in the proportion of AmSouths earning assets which were supported by low-cost deposits as higher cost time deposits and wholesale, short-term borrowings were partially replaced by low-cost and noninterest-bearing
deposits. The improvement in the margin




13




---

also reflected an increase in interest revenue associated with retained interests on loans sold to third-party conduits which resulted in a 10 basis point increase to the NIM in the second
quarter of 2002 and a 12 basis point increase for the first six months of 2002 when compared to the same periods in 2001.





Average interest-earning assets for the three and six month periods ended June 30, 2002 was $34.4 billion and $34.3 billion, respectively, a decrease of $554.4 million and $788.1 million from the same periods in 2001. The decrease
came principally from decreases in investments of held-to-maturity (HTM) securities and federal funds sold and securities purchased under agreements to resell. The decrease in these items were primarily the result of AmSouths strategy to shift
funds into higher yielding consumer loans, primarily home equity loans, and also reflected a decrease in deposits, primarily higher cost time deposits. The decrease in time deposits was a result of managements strategy to reduce reliance on
higher cost sources of funding through more aggressive pricing. This strategy resulted in the migration of time deposits into low-cost deposit categories or into alternative financial products offered by AmSouth such as fixed annuities.





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 maintaining stability in
the NIM under 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.





Based on the results of the simulation model as of June 30, 2002, AmSouth would expect NII to increase $6 million or approximately 0.4 percent and decrease $6 million or approximately 0.4 percent if interest rates gradually increase
or decrease, respectively, from current rates by 100 basis points over a 12-month period. This level of interest rate risk is well within AmSouths 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. By comparison, as of June 30, 2001, the simulation model indicated that NII would increase $3 million or approximately 0.2 percent and
decrease $5 million or approximately 0.3 percent if interest rates gradually increased or decreased, respectively, from their then-current rates by 100 basis points over a 12-month period.





AmSouths neutral interest rate risk profile is the result of continued actions taken over the last several quarters. These actions included the continued increase in
the level of variable-rate loans on the balance sheet while reducing the level of fixed-rate loans and investment securities. In addition, less rate sensitive, low-cost deposits have increased while higher cost and more rate sensitive time deposits
have declined. AmSouth also extended the maturity of purchased funds and allowed $731 million notional amount of receive fixed/pay floating interest rate swaps to mature without replacement since the second quarter of 2001. AmSouth plans
to continue its neutral interest rate risk position through 2002 by emphasizing variable-rate lending, especially equity lines. In addition, there are approximately $400 million notional amount of receive fixed/pay floating interest rate
swaps expected to mature during the remainder of 2002, $325 million of which is currently hedging variable rate commercial loans, which management does not currently anticipate replacing. These actions should help protect AmSouths interest
rate risk neutrality even if interest rates begin to rise.




14




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As part of its activities to manage interest rate risk, AmSouth utilizes various
derivative instruments such as interest rate swaps. At June 30, 2002, AmSouth had interest rate swaps in the notional amount of $1.5 billion, all of which were receive fixed/pay floating rate swaps. Of these swaps, $675 million of
notional value was used to hedge the cash flow of variable-rate commercial loans. The remaining $815 million of notional value was used to hedge the fair value of fixed-rate consumer certificates of deposit and corporate and bank debt. Interest rate
swaps with notional value of $571 million matured during the first six months of 2002.





AmSouth also enters into
forward commitments to sell groups of residential mortgage loans to protect against changes in the fair value of fixed-rate mortgage loans held for sale and mortgage loan commitments not yet funded. These forward commitment transactions and unfunded
loan commitments do not qualify for hedge accounting and are recorded on the statement of condition at fair value with changes in fair value during the period being recorded in mortgage income. At June 30, 2002, AmSouth had a liability of $1.5
million associated with the fair market value of $109.5 million notional amount of open forward contracts to sell residential mortgage loans and an $834 thousand asset associated with outstanding mortgage loan commitments.





In addition to using derivative instruments as an interest rate risk management tool, AmSouth also acts as an intermediary for interest
rate swaps, caps, floors, and foreign exchange contracts 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, 2002, AmSouth had $52.2 million of assets and
$50.8 million of liabilities associated with $1.4 billion notional amount of interest rate swaps with corporate customers and $1.4 billion notional amount of offsetting interest rate swaps with other banks to hedge AmSouths rate exposure on
its corporate customers swaps.





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. See Table 10 for a breakout by
maturity date of AmSouths contractual obligations and other 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, 2002, the outstanding
balance of loans sold to conduits was approximately $3.16 billion, including $1.1 billion of commercial loans, $1.7 billion of residential first mortgages and $332 million of dealer indirect automobile loans. This balance was down from $3.76 billion
in outstanding loan balances in conduits at December 31, 2001. 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, 2002, AmSouth had $148.1 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.




15




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AmSouth also provides liquidity lines of credit to these asset-backed commercial
paper issuers under 364 day commitments. 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. 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, 2002, this analysis showed that AmSouth would retain its well-capitalized position even if the liquidity lines were completely drawn down.





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 and Community Responsibility Committee of the Board of Directors.





Table 5 presents a five-quarter analysis of the allowance for loan losses. At June 30, 2002, the allowance for loan losses was $371.4 million, or 1.45 percent of loans net of unearned income, compared to $380.7 million, or
1.54 percent, at June 30, 2001 and $363.6 million, or 1.45 percent, at December 31, 2001. The coverage ratio of the allowance for loan losses to nonperforming loans was 243 percent at June 30, 2002, an increase from the June 30, 2001 ratio of 193
percent.





Net charge-offs for the quarter ended June 30, 2002, were $49.0 million, or 0.76 percent of average
loans, on an annualized basis, an increase of $2.9 million from the $46.1 million, or 0.75 percent of average loans, reported a year earlier. For the six months ended June 30, 2002, net charge-offs were $100.9 million, or 0.80 percent, compared to
$84.1 million, or 0.69 percent, for the same period of 2001. The increase in net charge-offs occurred primarily in the commercial loan, consumer revolving credit, dealer lending and equity lending portfolios and reflected the impact of a slowing
economy. Commercial loan net charge-offs increased $1.7 million for the six months versus the same period of 2001. Net charge-offs in the consumer portfolio increased $15.5 million versus the same period in 2001, reflecting higher charge-offs across
all consumer loan categories led by the revolving credit and equity lending portfolios. Net charge-offs for the revolving credit, dealer lending and equity lending portfolios increased $2.1 million, $7.2 million and $5.6 million, respectively, for
the six months ended June 30, 2002 versus the same period of the prior year. These increases reflected the impact of a weaker economy. Consistent with the increased charge-offs and the overall level of loan balances, the provision for loan losses
for the second quarter and the first half of 2002 was $52.6 million and $108.7 million, respectively, compared to $46.1 million and $84.3 million for the corresponding year-earlier periods.





Table 6 presents a five-quarter comparison of the components of nonperforming assets. At June 30, 2002, nonperforming assets as a percentage of loans net of unearned
income, foreclosed properties and repossessions decreased 16 basis points to 0.74 percent compared to 0.90 percent at June 30, 2001, reflecting a $34.2 million decrease in nonperforming assets. Compared to the year-end 2001 level of 0.76 percent,
nonperforming assets have remained relatively flat through the first six months of 2002.





Included in
nonperforming assets at June 30, 2002 and 2001, was $95.0 million and $138.0 million, respectively, in loans that were considered to be impaired, substantially all of which were on a nonaccrual basis. At June 30, 2002 and 2001, there was $23.5
million and $43.7 million, respectively, in the allowance for loan losses specifically allocated to $67.9 million and $116.8 million, respectively, of impaired loans. No specific




16




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reserves were required for $27.1 million and $21.3 million of impaired loans at June 30, 2002 and 2001, respectively. The average recorded investment in impaired loans for the three months ended
June 30, 2002 and 2001, was $107.0 million and $136.9 million, respectively, and $103.3 million and $132.7 million, respectively, for the six months ended June 30, 2002 and 2001. AmSouth recorded no material interest income on its impaired loans
during the three and six months ended June 30, 2002. At June 30, 2002, AmSouth had approximately $66.3 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.





AmSouth expects nonperforming loans and net charge-offs to fluctuate for the remainder of 2002, in a relatively narrow band around the levels of the last few quarters. This expectation is based on an anticipated improvement in
economic conditions as the year progresses. If economic conditions deteriorate further or fail to improve in 2002, credit quality could deteriorate from managements current expectations.





Noninterest Revenues and Noninterest Expenses





Noninterest revenue (NIR) was $181.1 million during the second quarter of 2002 and $358.8 million for the first six months of 2002. The quarterly and the six-month totals represent a 3.5 percent and 3.0 percent decline from
the corresponding periods in 2001. The decrease in NIR compared to 2001 was primarily due to a decrease in trust income, consumer investment services income, mortgage income and other non-interest revenues. These decreases were partially offset by
increases in service charges on deposits, income from bank owned life insurance (BOLI), portfolio income and interchange income. Trust revenues were down $836 thousand in the second quarter of 2002 and approximately $1.8 million for the first six
months of 2002 when compared to the same periods in 2001. This decrease in trust income reflected the continued weakness in the stock market and lower revenues related to the outsourcing of Retirement Services record-keeping plans. During the first
six months of 2002, the total return of the S&P 500 index was a negative 13.2 percent and reflected consumer fears over stock market performance. The soft economy and current market conditions also negatively impacted consumer investment
services income which was down $790 thousand in the second quarter of 2002 and approximately $3.6 million on a year-to-date basis when compared to the same period of 2001. The decrease in consumer investment services income reflected lower sales of
variable annuity products in 2002, as well as lower mutual fund commissions. Mortgage income was lower in the second quarter compared to the same period in 2001 primarily as a result of $1.7 million in charges associated with the decline in the fair
market value of mortgage derivative instruments recorded in the second quarter of 2002 compared to $838 thousand in income recorded in the second quarter of 2001. On a year-to-date basis, there was a $6.4 million decrease in mortgage income
associated with recording changes in the fair market values of mortgage derivative instruments. AmSouth utilizes derivative instruments, primarily forward contracts, to economically hedge future sales of mortgage loans. Because these forward
contracts do not meet the strict requirements for hedge accounting treatment, AmSouth is required to record changes in the fair value of these forward contracts as an increase or decrease to earnings while any offsetting increase in the value of
mortgage loans these contracts are hedging is not permitted to be recorded as earnings. In addition to forward contracts, loan commitments associated with mortgages AmSouth plans to originate and sell are also considered derivative instruments and
are marked to market through earnings and tend to partially offset the changes in value of the forward contracts. The decline in mortgage income related to changes in value of mortgage derivative instruments was partially offset by an increase in
gains on sales of mortgage loans and mortgage conduit income during the second quarter and first six months of 2002 compared to the same periods in 2001. Other noninterest revenues for the quarter declined $8.4 million and $19.5 million for the
first six months of 2002 when compared to the same periods last year. This decrease was due primarily to a steady decrease in servicing and other fee income related to an automobile loan securitization and conduit transactions which occurred during
the 2000 fiscal year. The decrease in fee income reflects the continued pay down of loan balances associated with these transactions. The decrease in other NIR in the second quarter of 2002 versus the second quarter of 2001 also reflected lower
market valuation on derivative instruments of approximately $500 thousand, losses associated with the sale of branch facilities and other assets of approximately $2.0 million recorded in the second quarter of 2002 and approximately $3.8 million of
gains




17




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recorded in the second quarter of 2001 related to the sale of leased equipment and an equity investment stock sale. On a year-to-date basis, the decrease in other NIR also reflected a $2.2
million fixed asset loss recorded in the first quarter of 2002 as well as a $4.4 million adjustment associated with an equity investment in the first quarter of 2001. These decreases in NIR were partially offset by increases in service charges on
deposit accounts, BOLI, interchange income, and portfolio income. The increase in service charge income was primarily the result of higher treasury management fees from corporate customers. The increase in service charge income also reflected higher
revenues from overdraft fees. The increase in BOLI income reflected the receipt of benefit payments in the first and second quarters of 2002. The increase in interchange income reflected an emphasis by AmSouth on debit card sales and reflected
increased utilization of checkcards and business checkcards and higher ATM fees.





Noninterest expenses (NIE) for
the second quarter of 2002 remained relatively flat compared to the same period in 2001 and increased $6.3 million or 1.1 percent for the first six months of 2002 compared to 2001. Excluding the impact of the accounting change which resulted in
goodwill no longer being amortized against earnings beginning in 2002, NIE increased $8.1 million or 2.9 percent in the second quarter of 2002 when compared to the corresponding period in 2001 and $21 million or 3.7 percent when comparing the first
six months of 2002 with 2001. The increase in NIE primarily reflected higher salaries and employee benefits, occupancy expense and other NIE offset partially by a decrease in communication expenses. The increase in salaries and employee benefits
primarily reflected higher employee benefit costs associated with higher insurance and pension costs as well as higher incentive accruals related to improved performance. The increase in occupancy expense reflected higher depreciation expenses
associated with the opening of new branches and other capital projects. The growth in other NIE reflected a charge of $3.7 million associated with credit derivative contracts. The credit derivative contracts insured AmSouth against credit related
losses associated with its loan exposure to one of its corporate customers. AmSouth for this protection was required to make quarterly payments under the contracts. In June 2002, AmSouth accrued the present value of the future remaining payments
under the contracts as a result of eliminating its credit exposure to the corporate customer for whom the credit derivative was providing protection. The decrease in communications expense reflected the impact of lower expenses as a result of a
change in vendor. As described above, amortization expense declined as a result of the adoption of Statement 142 on January 1, 2002. Statement 142 no longer permits the amortization of goodwill and intangible assets with indefinite useful lives but
requires these assets to be tested for impairment at least annually. For more information on the impact of adopting Statement 142, see the Notes to Consolidated Financial Statements section in Part I of this report.





Capital Adequacy





At June 30, 2002, shareholders equity totaled $3.1 billion or 7.99 percent of total assets. Since December 31, 2001, shareholders equity increased $119.2 million primarily as a result of net income for the first
six months of $297.9 million. The increase in shareholders equity from net income was partially offset by the declaration of dividends of $159.5 million and the purchase of 4.6 million shares of AmSouth common stock for $100.5 million during
the first six months of 2002. In addition, shareholders equity increased $56.6 million as a result of higher valuation of the AFS portfolio and decreased $5.8 million due to other comprehensive losses associated with cash flow hedges.





Table 9 presents the capital amounts and risk-adjusted capital ratios for AmSouth and AmSouth Bank at June 30,
2002 and 2001. At June 30, 2002, 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, 2002.




18




---

Table 1Financial Summary





June 30

%2002

2001

Change(In thousands)Balance sheet summaryEnd-of-period balances:Loans net of unearned income

$
25,652,908

$
24,740,424

3.7
%Total assets


38,499,103


38,447,223

0.1Total deposits


25,528,536


25,984,901

(1.8
)Shareholders equity


3,074,263


2,907,451

5.7Year-to-date average balances:Loans net of unearned income

$
25,488,504

$
24,671,034

3.3
%Total assets


37,873,709


38,438,335

(1.5
)Total deposits


25,497,298


26,042,410

(2.1
)Shareholders equity


2,989,393


2,845,837

5.0





Six Months Ended June 30


%


Three Months Ended June 30


%2002


2001


Change


2002


2001


Change(In thousands except per share data)Earnings summaryNet income

$
297,939


$
259,732


14.7
%

$
152,369


$
133,521


14.1
%Earnings per common share


.83



.70


18.6



.42



.36


16.7Diluted earnings per common share


.82



.70


17.1



.42



.36


16.7Return on average assets (annualized)


1.59
%


1.36
%





1.61
%


1.40
%Return on average equity (annualized)


20.10



18.40






20.36



18.72Return on average equity (excluding goodwill, annualized)


20.10



19.43






20.36



19.74Operating efficiency


51.20



54.25






50.82



53.42Operating efficiency (excludinggoodwill)


51.20



52.87






50.82



52.07Selected ratiosAverage equity to assets


7.89
%


7.40
%





7.91
%


7.45
%End-of-period equity to assets


7.99



7.56






7.99



7.56End-of-period tangible equity to assets


7.25



6.78






7.25



6.78Allowance for loan losses to loans net of unearned income


1.45



1.54






1.45



1.54Common stock dataCash dividends declared

$
.44


$
.42





$
.22


$
.21Book value at end of period


8.53



7.88






8.53



7.88Market value at end of period


22.38



18.49






22.38



18.49Average common shares outstanding


360,714



370,457






359,782



368,688Average common sharesoutstanding-diluted


365,334



373,695






364,756



372,464




19




---

Table 2Year-to-Date Yields Earned on Average Interest-Earning Assets  and Rates Paid on Average Interest-Bearing
Liabilities








2002


2001Six Months Ended
June 30


Six Months Ended
June 30Average Balance


Revenue/ Expense

Yield/ Rate


Average Balance


Revenue/ Expense

Yield/ Rate(Taxable equivalent basis-dollars in thousands)AssetsInterest-earning assets:Loans net of unearned income

$
25,488,504


$
866,445

6.86
%

$
24,671,034


$
1,043,467

8.53
%Available-for-sale securities:Taxable


4,263,621



171,687

8.12



4,033,123



154,831

7.74Tax-free


71,286



2,831

8.01



92,369



3,555

7.76Total available-for-sale securities


4,334,907



174,518

8.12



4,125,492



158,386

7.74Held-to-maturity securities:Taxable


3,645,653



118,566

6.56



4,220,706



143,165

6.84Tax-free


341,966



12,870

7.59



344,767



12,656

7.40Total held-to-maturity securities


3,987,619



131,436

6.65



4,565,473



155,821

6.88Total investment securities


8,322,526



305,954

7.41



8,690,965



314,207

7.29Other interest-earning assets


440,916



9,915

4.53



1,678,056



46,826

5.63Total interest-earning assets


34,251,946



1,182,314

6.96



35,040,055



1,404,500

8.08Cash and other assets


3,863,594









3,716,218Allowance for loan losses


(369,008
)








(381,103
)Market valuation on available-for-sale securities


127,177









63,165$
37,873,709








$
38,438,335Liabilities and Shareholders EquityInterest-bearing liabilities:Interest-bearing demand deposits

$
10,503,387



57,955

1.11


$
9,805,681



155,668

3.20Savings deposits


1,294,586



3,706

0.58



1,215,385



9,550

1.58Time deposits


6,501,544



124,879

3.87



7,770,415



227,124

5.89Foreign time deposits


354,661



2,431

1.38



305,794



6,231

4.11Certificates of deposit of $100,000 or more


2,001,364



35,723

3.60



2,420,238



72,549

6.04Federal funds purchased and securities sold under agreements to repurchase


2,026,831



13,933

1.39



2,291,976



48,985

4.31Other interest-bearing liabilities


6,246,979



157,142

5.07



6,360,111



185,074

5.87Total interest-bearing liabilities


28,929,352



395,769

2.76



30,169,600



705,181

4.71Net interest spread








4.20
%








3.37
%Noninterest-bearing demand deposits


4,841,756









4,524,897Other liabilities


1,113,208









898,001Shareholders equity


2,989,393









2,845,837$
37,873,709








$
38,438,335Net interest income/margin on a taxable equivalent basis






786,545

4.63
%






699,319

4.02
%Taxable equivalent adjustment:Loans






15,833









15,523Available-for-sale securities






2,510









2,481Held-to-maturity securities






7,875









8,098Total taxable equivalent adjustment






26,218









26,102Net interest income





$
760,327








$
673,217


---

|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.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



20




---




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





2002


2001Second Quarter


First Quarter


Fourth Quarter


Third Quarter


Second QuarterAverage


Revenue/

Yield/


Average


Revenue/

Yield/


Average


Revenue/

Yield/


Average


Revenue/

Yield/


Average


Revenue/

Yield/Balance


Expense

Rate


Balance


Expense

Rate


Balance


Expense

Rate


Balance


Expense

Rate


Balance


Expense

Rate(Taxable equivalent basis-dollars in thousands)AssetsInterest-earning assets:Loans net of unearned income

$25,701,987


$433,331

6.76
%

$25,272,649


$433,114

6.95
%

$24,947,167


$463,816

7.38
%

$24,762,932


$494,161

7.92
%

$24,695,993


$512,895

8.33
%Available-for-sale securities:Taxable

4,199,230


86,554

8.27


4,328,728


85,133

7.98


4,404,328


84,852

7.64


4,341,632


84,445

7.72


4,163,800


82,981

7.99Tax-free

68,526


1,365

7.99


74,076


1,466

8.03


79,009


1,580

7.93


81,699


1,590

7.72


89,578


1,725

7.72Total available-for-sale securities

4,267,756


87,919

8.26


4,402,804


86,599

7.98


4,483,337


86,432

7.65


4,423,331


86,035

7.72


4,253,378


84,706

7.99Held-to-maturity securities:Taxable

3,684,672


59,602

6.49


3,606,201


58,964

6.63


3,884,256


64,628

6.60


3,987,733


66,416

6.61


4,185,593


70,594

6.76Tax-free

341,933


6,434

7.55


341,999


6,436

7.63


341,890


6,401

7.43


341,982


6,365

7.38


341,906


6,340

7.44Total held-to-maturity securities

4,026,605


66,036

6.58


3,948,200


65,400

6.72


4,226,146


71,029

6.67


4,329,715


72,781

6.67


4,527,499


76,934

6.82Total investment securities

8,294,361


153,955

7.44


8,351,004


151,999

7.38


8,709,483


157,461

7.17


8,753,046


158,816

7.20


8,780,877


161,640

7.38Other interest-earning assets

396,264


4,628

4.68


486,064


5,287

4.41


553,016


5,711

4.10


1,265,120


13,766

4.32


1,470,097


19,711

5.38Total interest-earning assets

34,392,612


591,914

6.90


34,109,717


590,400

7.02


34,209,666


626,988

7.27


34,781,098


666,743

7.61


34,946,967


694,246

7.97Cash and other assets

3,819,140







3,908,544







3,841,728







3,678,731







3,726,748Allowance for loan losses

(372,870
)






(365,104
)






(359,404
)






(382,177
)






(380,983
)Market valuation on available-for-sale securities

123,815







130,575







185,967







127,813







86,153$37,962,697







$37,783,732







$37,877,957







$38,205,465







$38,378,885Liabilities and Shareholders' EquityInterest-bearing liabilities:Interest-bearing demand deposits

$10,503,635


29,034

1.11


$10,503,137


28,921

1.12


$10,298,075


36,367

1.40


$10,080,711


61,961

2.44


$9,902,714


72,061

2.92Savings deposits

1,316,202


1,888

0.58


1,272,730


1,818

0.58


1,227,991


2,347

0.76


1,213,940


3,817

1.25


1,219,045


4,641

1.53Time deposits

6,397,321


60,593

3.80


6,606,926


64,286

3.95


6,991,178


78,340

4.45


7,511,350


101,607

5.37


7,716,673


110,539

5.75Foreign time deposits

371,251


1,329

1.44


337,886


1,102

1.32


360,579


1,430

1.57


313,799


2,152

2.72


279,454


2,434

3.49Certificates of deposit of $100,000 or more

1,988,035


17,086

3.45


2,014,841


18,637

3.75


2,051,701


23,334

4.51


2,214,303


30,036

5.38


2,323,449


34,082

5.88Federal funds purchased and securities sold under agreements to repurchase

2,067,050


7,704

1.49


1,986,166


6,229

1.27


2,035,112


8,239

1.61


2,162,744


15,664

2.87


2,243,192


21,368

3.82Other interest-bearing liabilities

6,346,331


79,236

5.01


6,146,522


77,906

5.14


6,164,694


82,086

5.28


6,238,392


87,095

5.54


6,336,607


90,082

5.70Total interest-bearing liabilities

28,989,825


196,870

2.72


28,868,208


198,899

2.79


29,129,330


232,143

3.16


29,735,239


302,332

4.03


30,021,134


335,207

4.48Net interest spread






4.18
%






4.23
%






4.11
%






3.58
%






3.49
%Noninterest-bearing demand deposits

4,852,478







4,830,915







4,729,238







4,591,157







4,566,584Other liabilities

1,118,620







1,107,735







1,059,602







974,955







930,883Shareholders' equity

3,001,774







2,976,874







2,959,787







2,904,114







2,860,284$37,962,697







$37,783,732







$37,877,957







$38,205,465







$38,378,885Net interest income/margin on a taxable equivalent basis




395,044

4.61
%




391,501

4.65
%




394,845

4.58
%




364,411

4.16
%




359,039

4.12
%Taxable equivalent adjustment:Loans




7,714







8,119







13,951







13,168







10,405Available-for-sale securities




1,219







1,291







1,277







1,241







1,224Held-to-maturity securities




3,978







3,897







3,987







3,965







4,036Total taxable equivalent adjustment




12,911







13,307







19,215







18,374







15,665Net interest income




$382,133







$378,194







$375,630







$346,037







$343,374


---

|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 liabilites.
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|
|



21




---

Table 4Loans and Credit Quality





Loans*June 30

Nonperforming Loans**June 30

Net Charge-offs Six Months Ended June 302002

2001

2002

2001

2002

2001(In thousands)Commercial:Commercial & industrial

$
6,719,040

$
7,075,237

$
76,806

$
124,574

$
41,932

$
38,517Commercial loanssecured by real estate


1,729,042


1,687,629


16,379


20,780


166


1,906Total commercial


8,448,082


8,762,866


93,185


145,354


42,098


40,423Commercial real estate:Commercial real estate mortgages


2,102,655


2,263,335


19,295


20,206


299


402Real estate construction


2,264,041


2,498,698


16,710


12,846


42


329Total commercial real estate


4,366,696


4,762,033


36,005


33,052


341


731Consumer:Residential first mortgages


1,652,231


1,528,525


11,655


12,514


1,052


612Equity loans and lines


5,948,664


4,867,885


11,145


5,183


12,326


6,698Dealer indirect


3,770,161


3,169,281


1


1


25,838


18,647Revolving credit


510,427


497,933


-0-


-0-


12,503


10,429Other consumer


956,647


1,151,901


693


1,016


6,731


6,531Total consumer


12,838,130


11,215,525


23,494


18,714


58,450


42,917$
25,652,908

$
24,740,424

$
152,684

$
197,120

$
100,889

$
84,071


---

|* |  | Net of unearned income.
|- |  | -----------------------

|** |  | Exclusive of accruing loans 90 days past due.
|-- |  | ---------------------------------------------



22




---







Table 5Allowance for Loan Losses





2002


20012nd Quarter


1st Quarter


4th Quarter


3rd Quarter


2nd Quarter(Dollars in thousands)Balance at beginning of period

$
367,819


$
363,607


$
360,717


$
380,663


$
380,646Loans charged off


(59,857
)


(62,806
)


(60,582
)


(81,320
)


(57,478
)Recoveries of loans previously charged off


10,856



10,918



9,872



12,174



11,395Net charge-offs


(49,001
)


(51,888
)


(50,710
)


(69,146
)


(46,083
)Addition to allowance charged to expense


52,600



56,100



53,600



49,200



46,100Balance at end of period

$
371,418


$
367,819


$
363,607


$
360,717


$
380,663Allowance for loan losses to loans net of unearned income


1.45
%


1.45
%


1.45
%


1.45
%


1.54
%Allowance for loan losses to nonperforming loans*


243.26
%


232.16
%


228.29
%


211.32
%


193.11
%Allowance for loan losses to nonperforming assets*


195.99
%


190.60
%


190.29
%


176.69
%


170.18
%Net charge-offs to average loans net of unearned income (annualized)


0.76
%


0.83
%


0.81
%


1.11
%


0.75
%


---

|* |  | Exclusive of accruing loans 90 days past due.
|- |  | ---------------------------------------------




Table 6Nonperforming Assets





2002


2001June 30


March 31


December 31


September 30


June 30(Dollars in thousands)Nonaccrual loans

$
152,684


$
158,435


$
159,274


$
170,695


$
197,120Foreclosed properties


32,838



29,462



27,443



28,006



20,380Repossessions


3,982



5,080



4,365



5,449



6,177Total nonperforming assets*

$
189,504


$
192,977


$
191,082


$
204,150


$
223,677Nonperforming assets* to loans net ofunearned income, foreclosed propertiesand repossessions


0.74
%


0.76
%


0.76
%


0.82
%


0.90
%Accruing loans 90 days past due

$
91,376


$
117,068


$
116,576


$
102,373


$
88,747


---

|* |  | Exclusive of accruing loans 90 days past due.
|- |  | ---------------------------------------------



23




---

Table 7Investment Securities





June 30, 2002

June 30, 2001Carrying

Market

Carrying

MarketAmount

Value

Amount

Value(In thousands)Held-to-maturity:U.S. Treasury and federal agency securities

$
2,780,151

$
2,852,140

$
2,868,385

$
2,909,346Other securities


1,055,065


1,083,383


1,297,765


1,316,900State, county and municipal securities


342,640


364,010


342,377


355,991$
4,177,856

$
4,299,533

$
4,508,527

$
4,582,237Available-for-sale:U.S. Treasury and federal agency securities

$
3,739,796




$
3,534,854Other securities


772,933





872,491State, county and municipal securities


77,542





96,549$
4,590,271




$
4,503,894


---

NOTES:





|1. |  | 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, 2002, were approximately 3.7 years and 6.32%, respectively. Included in the combined portfolios was $7.4 billion of mortgage- backed securities. The weighted-average
remaining life and the weighted-average yield of mortgage-backed securities at June 30, 2002, were approximately 3.4 years and 6.30%, respectively. The duration of the combined portfolios, which considers the repricing frequency of variable rate
securities, is approximately 2.8 years.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|2. |  | The available-for-sale portfolio included net unrealized gains of $164.8 million and $98.1 million at June 30, 2002 and 2001, respectively.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------



24




---

Table 8Other Interest-Bearing Liabilities





June 302002

2001(In thousands)Other borrowed funds:Short-term bank notes

$
-0-

$
50,000Treasury, tax and loan notes


100,000


25,000Commercial paper


7,432


13,210Other borrowings


42,976


59,599Total other borrowed funds

$
150,408

$
147,809Other long-term debt:6.45% Subordinated Notes Due 2018

$
302,777

$
303,2746.125% Subordinated Notes Due 2009


174,704


174,5686.75% Subordinated Debentures Due 2025


149,942


149,9247.75% Subordinated Notes Due 2004


149,824


149,7337.25% Senior Notes Due 2006


99,726


99,6556.875% Subordinated Notes Due 2003


49,974


49,9426.625% Subordinated Notes Due 2005


49,815


49,762Other long-term debt


3,475


8,195Statement 133 valuation adjustment


43,445


7,000Total other long-term debt

$
1,023,682

$
992,053





Table 9Capital Amounts and Ratios





June 302002


2001Amount

Ratio


Amount

Ratio(Dollars in thousands)Tier 1 capital:AmSouth

$
2,692,896

8.03
%

$
2,590,226

7.70
%AmSouth Bank


3,299,085

9.85



3,278,150

9.77Total capital:AmSouth

$
3,756,972

11.20
%

$
3,716,964

11.04
%AmSouth Bank


3,978,662

11.88



3,970,705

11.83Leverage:AmSouth

$
2,692,896

7.14
%

$
2,590,226

6.80
%AmSouth Bank


3,299,085

8.76



3,278,150

8.62




25




---

Table 10Contractual Obligations and Other Commitments





Payments Due By PeriodTotal

Less than 1 year

1-3 years

3-5 years

After 5 years(Dollars in thousands)Borrowings(1)

$
8,476,404

$
2,745,956

$
1,483,430

$
575,230

$
3,671,788Operating leases


358,919


46,821


77,584


57,719


176,795Time deposits(2)


8,852,399


5,990,593


2,415,549


446,257


-0-Total contractual cash obligations

$
17,687,722

$
8,783,370

$
3,976,563

$
1,079,206

$
3,848,583Amount of Commitment Expiration Per PeriodTotal

Less than 1 year

1-3 years

3-5 years

After 5 years(Dollars in thousands)Commercial letters of credit

$
56,223

$
44,678

$
11,545

$
-0-

$
-0-Standby letters of credit


2,568,862


1,101,616


1,152,464


254,838


59,944Commitments to extend credit(3)


13,828,569


10,145,138


2,796,438


854,435


32,558Total commercial commitments

$
16,453,654

$
11,291,432

$
3,960,447

$
1,109,273

$
92,502


---

NOTES:


|1. |  | All maturities are based on contractual maturities. Excludes $43.4 million of FAS 133 valuation adjustments.
|-- |  | ------------------------------------------------------------------------------------------------------------

|2. |  | Excludes $3.9 million of FAS 133 valuation adjustments.
|-- |  | -------------------------------------------------------

|3. |  | Excludes $3.2 billion of loan commitments under equity lines and $2.1 billion under revolving lines of credit which do not have scheduled expiration dates.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



26




---




Item 3.    
Quantitative and Qualitative Disclosures About Market Risk





The information
required by this item is included on pages 14 and 15 of Part 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.





PART II





OTHER INFORMATION





Item 1.    
Legal Proceedings





Several of AmSouths subsidiaries are parties to legal
proceedings arising in the ordinary course of business. Some of these proceedings seek relief or damages that are substantial. The actions relate to AmSouths lending, collections, loan servicing, deposit taking, investment, trust, and other
activities.





Among the actions which are pending against AmSouth subsidiaries are actions filed as class actions.
The actions are similar to others that have been brought in recent years against financial institutions in that they seek punitive damage awards in transactions involving relatively small amounts of actual damages. A disproportionately higher number
of the more significant lawsuits against AmSouth have been filed in Mississippi relative to the amount of business done by AmSouth in Mississippi. In addition, lawsuits brought in Alabama and Mississippi against AmSouth and other corporate
defendants typically demand higher damages than similar lawsuits brought elsewhere, and often request punitive damages.Legislation has been enacted in Alabama that is designed to limit the potential amount of punitive damages that can be
recovered in individual cases in the future. However, AmSouth cannot predict the effect of the legislation at this time.





It may take a number of years to finally resolve some of these legal proceedings, due to their complexity and for other reasons. It is not possible to determine with any certainty at this time the corporations potential
exposure from the proceedings. At times, class actions are settled by defendants without admission or even an actual finding of wrongdoing but with payment of some compensation to purported class members and large attorneys fees to plaintiff
class counsel. Nonetheless, based upon the advice of legal counsel, AmSouths management is of the opinion that the ultimate resolution of these legal proceedings will not have a material adverse effect on AmSouths financial condition or
results of operations.




27




---




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





The regular Annual Meeting
of Shareholders of AmSouth was held on April 18, 2002, at which meeting the shareholders (i) elected five nominees as directors; (ii) approved the material terms of the Executive Incentive Plan, as amended; (iii) approved the 1996 Long Term
Incentive Compensation Plan, as amended; and (iv) 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 NonvotesJ. Harold Chandler

282,027,333

6,284,695

N/A

N/AJames E. Dalton, Jr.

280,579,669

7,732,359

N/A

N/AErnest W. Deavenport, Jr.

282,383,024

5,929,004

N/A

N/AElmer B. Harris

280,249,919

8,062,109

N/A

N/AJames R. Malone

282,083,576

6,228,452

N/A

N/A





EXECUTIVE INCENTIVE PLAN





Votes For

Votes Against

Abstentions

Broker Nonvotes262,235,224

26,215,119

4,542,713

4,605





1996 LONG TERM INCENTIVE COMPENSATION PLAN





Votes For

VotesAgainst

Abstentions

Broker Nonvotes252,422,215

35,535,267

5,040,179

0





SHAREHOLDER PROPOSAL





Votes For

VotesAgainst

Abstentions

BrokerNonvotes24,716,223

189,622,880

11,675,606

66,982,952





Item 6.    
Exhibits and Reports on Form 8-K





Item 6(a)Exhibits





The exhibits listed in the Exhibit Index at page 30 of this Form 10-Q are filed herewith or are incorporated by reference
herein.





Item 6(b)Reports on Form 8-K





No reports on Form 8-K were filed by AmSouth during the period April 1, 2002 to June 30, 2002.




28




---

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 6, 2002



By:

/s/    C. DOWD
RITTERC. Dowd Ritter Chairman,
President and Chief Executive Officer


August 6, 2002



By:

/s/    DONALD R.
KIMBLE Donald R. Kimble Executive Vice President, Chief Accounting Officer and
Controller




29




---




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





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.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------

|
|

|
|



30