<PAGE>
 
                                  EXHIBIT 13

                 AMSOUTH BANCORPORATION'S 1996 ANNUAL REPORT
               TO SHAREHOLDERS, EXCLUDING THE PORTIONS THEREOF
               NOT INCORPORATED BY REFERENCE IN THIS FORM 10-K 

  FINANCIALS


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


Summary of Consolidated Financial Performance
AmSouth Bancorporation (AmSouth) reported earnings per share in 1996 of $3.23
compared to $3.00 per share for 1995 and $2.25 per share in 1994. Net income for
the same periods totaled $182.7 million, $175.0 million and $127.3 million,
respectively. Included in net income for 1996 was a one-time, pre-tax charge of
$24.2 million, or $.27 per share after tax, required by federal legislation
passed during the third quarter to recapitalize the Savings Association
Insurance Fund (SAIF). Net income in 1996, without the effect of the SAIF
assessment, was $197.9 million or $3.50 per share.

     The increase in earnings for 1996 was due primarily to higher net interest
income and an increase in noninterest revenues. These improvements were offset,
in part, by a higher provision for loan losses and an increase in noninterest
expenses.

     Contributing to the improvement in earnings for 1995 were higher net
interest income, growth in noninterest revenues and control of noninterest
expenses. An increase in the provision for loan losses in 1995 partially offset
the improvement in earnings. Net income for 1995 includes a pre-tax gain of
$25.0 million from the sale of AmSouth's third-party mortgage servicing
portfolio and pre-tax expenses of $22.2 million recorded during the second
quarter associated primarily with productivity initiatives, including business
and branch consolidations and the development of new systems. Despite an
increase in net interest income in 1994, net income for the year declined,
reflecting lower noninterest revenues, an increase in noninterest expenses and a
higher provision for loan losses. The lower noninterest revenues in 1994 were
the result of losses on the sale of available-for-sale securities of $26.6
million and a loss on the termination of interest rate swaps of $11.9 million.
Partially offsetting the effect of these losses in 1994 were gains of $23.8
million from the sale of mortgage servicing and a gain of $5.5 million from the
sale of residential first mortgages.

     Two key measures of profitability in the banking industry are return on
average equity (ROE) and return on average assets (ROA). ROE was 13.23 percent
in 1996 versus 12.89 percent in 1995 and 10.24 percent in 1994. ROA was 1.02
percent in 1996 compared to 1.03 percent in 1995 and .83 percent in 1994.
Excluding the one-time SAIF charge in 1996, ROE reached 14.26 percent and ROA
rose to 1.10 percent. See graphs below.

                           [BAR GRAPHS APPEAR HERE]
<TABLE> 
<CAPTION> 
--------------------------------------------------------------------------------
Earnings Per Share      Return on Average Equity    Return on Average Assets
<S>     <C>             <C>      <C>                <C>       <C> 
92     $2.50            92       13.94%             92        1.12%
                                                    
93      2.89            93       14.23              93        1.19
                                                    
94      2.25            94       10.24              94        0.83
                                                    
95      3.00            95       12.89              95        1.03
                                                    
96*     3.50            96*      14.26              96*       1.10

                   * 1996 excludes one-time SAIF assessment 
--------------------------------------------------------------------------------
</TABLE> 

14
<PAGE>
 
Table 1

Composition of Earning Assets
<TABLE> 
<CAPTION> 
(Dollars in thousands)                             1996                          1995                           1994
=================================================================================================================================
                                         Average      Percent of         Average      Percent of        Average      Percent of 
                                         Balance         Total           Balance         Total          Balance         Total   
<S>                                   <C>               <C>           <C>               <C>          <C>               <C> 
Loans net of unearned income.....     $ 11,694,849       69.6%        $ 11,747,385       75.0%       $  9,918,274       70.5%
Held-to-maturity securities......        2,621,070       15.6            3,275,545       20.9           2,830,036       20.1
Available-for-sale securities....        2,391,748       14.2              538,133        3.4             979,974        7.0
Other earning assets.............          107,352        0.6              101,918        0.7             335,122        2.4
                                      --------------------------------------------------------------------------------------
                                      $ 16,815,019      100.0%        $ 15,662,981      100.0%       $ 14,063,406      100.0%
                                      ======================================================================================

Note:  Available-for-sale securities are net of market valuation.
=================================================================================================================================
</TABLE> 

     This section of the annual report provides a narrative discussion and
analysis of AmSouth's financial condition and results of operations for the
previous three years. Net income for all years presented has been restated to
include business combinations accounted for as pooling-of-interests unless
immaterial. All tables, graphs and financial statements should be considered an
integral part of this analysis.

Forward Looking Information  This Annual Report to Shareholders contains certain
forward looking information with respect to the financial condition, results of
operations and business of AmSouth including statements relating to: (A) the
ability to achieve certain financial goals; (B) the net interest margin; (C)
noninterest revenues; (D) loan losses; (E) various expenses, including
occupancy, equipment and employee benefits; (F) a decrease in Federal Deposit
Insurance Corporation premiums; (G) legal proceedings; (H) growth in various
categories of loans; (I) sources of funding for asset growth; and (J) AmSouth's
ability to achieve certain strategic goals.

     These forward looking statements involve certain risks, uncertainties,
estimates and assumptions by management. Factors that may cause actual results
to differ materially from those contemplated by such forward looking statements
include, among others, the following: (1) the rate of growth of the economy,
especially in the Southeast; (2) the stability of interest rates; (3) relative
strength/weakness in the consumer credit sector; (4) AmSouth's ability to
improve sales and service quality and to develop profitable new products; (5)
the successful implementation of technological enhancements; (6) the outcome of
litigation involving AmSouth, which depends on judicial interpretations of law
and findings of juries; (7) the strength of the real estate markets; (8) whether
levels of consumer confidence remain high; (9) the success of AmSouth's
marketing and sales efforts; and (10) the performance of the stock and bond
markets.

Earnings Analysis
Net Interest Income  Net interest income (NII), defined as the amount of revenue
generated by earning assets less the interest cost of funding those assets, is
the principal source of earnings for AmSouth, constituting 73.8 percent of total
net revenues in 1996, 72.3 percent in 1995 and 76.8 percent in 1994.
Consequently, changes in the mix and volume of earning assets and
interest-bearing liabilities, and their related yields and interest rates, have
a major impact on earnings.

     For purposes of this earnings analysis, NII has been adjusted to a fully
taxable equivalent basis for certain tax-exempt loans and investments included
in earning assets. Earning assets have been presented as averages.

     NII for 1996 was $661.7 million, an increase of 9.2 percent from the $605.9
million reported for 1995. In 1995, NII grew 4.1 percent from the $581.9 million
reported for 1994. In 1996, NII increased due to a higher volume of average


                                                                              15
<PAGE>
 
   FINANCIALS


Table 2

Volume and Yield/Rate Variances
<TABLE>
<CAPTION>
                                                        1996 Compared to 1995                       1995 Compared to 1994
(Taxable equivalent basis - in thousands)                    Change Due to                               Change Due to
===================================================================================================================================
                                                               Yield/                                      Yield/
                                                 Volume         Rate            Net         Volume          Rate            Net
<S>                                          <C>           <C>            <C>            <C>           <C>            <C>
REVENUE EARNED ON:
Loans net of unearned income................ $   (4,528)   $    (3,048)   $   (7,576)    $  154,780    $   62,488     $  217,268
Trading securities..........................        (93)           (82)         (175)        (1,908)         (360)        (2,268)
Available-for-sale securities...............    127,495         (1,056)      126,439        (27,930)       13,959        (13,971)
Held-to-maturity securities:
   Taxable..................................    (39,686)         5,200       (34,486)        32,753         4,711         37,464
   Tax-free.................................     (7,066)           829        (6,237)        (6,079)         (769)        (6,848)
                                             -----------------------------------------------------------------------------------
Total held-to-maturity securities...........    (46,752)         6,029       (40,723)        26,674         3,942         30,616
                                             -----------------------------------------------------------------------------------
Total securities............................     80,650          4,891        85,541         (3,164)       17,541         14,377
Federal funds sold and securities purchased
   under agreements to resell...............        403           (277)          126         (3,206)        1,665         (1,541)
Mortgage loans held for sale................         62           (351)         (289)        (8,580)        1,449         (7,131)
                                             -----------------------------------------------------------------------------------
Total earning assets........................     76,587          1,215        77,802        139,830        83,143        222,973
                                             -----------------------------------------------------------------------------------
INTEREST PAID ON:
Interest-bearing demand deposits............     (7,677)       (16,985)      (24,662)         2,316        18,586         20,902
Savings deposits............................      2,096         (1,164)          932          1,166         2,073          3,239
Time deposits...............................    (10,133)        (1,436)      (11,569)        76,413        61,135        137,548
Certificates of deposit of $100,000 or more.     (3,717)        (1,250)       (4,967)         8,067        12,460         20,527
Federal funds purchased and securities sold
   under agreements to repurchase...........     32,408         (7,802)       24,606        (15,823)       17,996          2,173
Other borrowed funds........................      9,632         (2,951)        6,681          3,914         7,377         11,291
Long-term Federal Home Loan Bank advances...     24,569         (1,184)       23,385         (3,897)        1,280         (2,617)
Subordinated Capital Notes Due 1999.........         12              6            18             12           (21)            (9)
6 3/4% Subordinated Debentures Due 2025.....      7,747            (91)        7,656          1,489            -0-         1,489
7 3/4% Convertible Notes Due 2004...........         35            (56)          (21)         4,641            29          4,670
7 1/2% Convertible Subordinated Debentures..       (126)          (133)         (259)            23           (23)            -0-
Other long-term debt........................        (32)           276           244           (100)         (131)          (231)
                                             -----------------------------------------------------------------------------------
Total interest-bearing liabilities..........     54,814        (32,770)       22,044         78,221       120,761        198,982
                                             -----------------------------------------------------------------------------------
Net interest income on a taxable
   equivalent basis......................... $   21,773    $    33,985        55,758     $   61,609    $  (37,618)        23,991
                                             =========================                   ========================
Add taxable equivalent adjustment...........                                   3,080                                       2,225
                                                                          ----------                                  ----------
Net interest income.........................                              $   58,838                                  $   26,216
                                                                          ==========                                  ==========
</TABLE>
Notes:
1. The change in interest resulting from both volume and yield/rate has been
   allocated to change due to volume and change due to yield/rate in proportion
   to the relationship of the absolute dollar amounts of the change in each.

2. The computation of the taxable equivalent adjustment has given effect to the
   disallowance of interest expense, for federal income tax purposes, related to
   certain tax-free assets.

================================================================================

16
<PAGE>
 
earning assets. Average earning assets in 1996 increased 7.4 percent over
1995 levels. Available-for-sale securities were purchased to more effectively
manage interest rate risk and to take advantage of attractive opportunities in
the financial markets. Average loans, excluding residential first mortgages,
grew 13.0 percent in 1996 compared to the prior year.

     The funding for the increase in average earning assets in 1996 was provided
by a combination of short and long-term borrowings. This was necessary because
of a decrease in average deposits between years of 2.8 percent or $377.7
million. The decline in deposits in 1996 was primarily due to a shift in
customers' investment preferences because of the strong financial and stock
markets during the year, coupled with a program in the third quarter to lower
the cost and restructure the maturities of $1.6 billion of consumer certificates
of deposit (CD). This program resulted in the run-off of approximately $400
million of high cost CD's from single service households in 1996.

     The improvement in NII for 1995 and 1994 was due to a higher volume of
average earning assets and a shift in the mix to include a higher proportion of
loans. In 1995, average earning assets increased 11.4 percent while average
loans grew 18.4 percent, reflecting growth in both commercial and consumer
loans. During the year, average loans as a percentage of average earning assets
increased to 75.0 percent from 70.5 percent in 1994.

     As contrasted with 1996, the growth in average earning assets in 1995 was
funded by an increase in deposits. Total average deposits increased 15.0 percent
to $13.3 billion and funded 84.9 percent of total average earning assets in
1995. The increase in total deposits, which were primarily time deposits, was
due to growth from new markets entered into through business combinations and
acquisitions and special marketing campaigns conducted during the last half of
1994 and the first quarter of 1995.

     Another key factor in the determination of the level of NII is the net 
interest margin (NIM). The NIM is computed by dividing fully taxable equivalent
NII by average earning assets and measures how effectively the bank utilizes its
earning assets in relationship to the interest cost of funding them. The NIM was
3.93 percent in 1996 compared to 3.87 percent during 1995 and 4.14 percent in
1994. Contributing to the increase in the NIM in 1996 was a widening in the net
interest spread or the difference between the average rate earned on earning
assets on a fully taxable equivalent basis and the average rate paid for
interest-bearing liabilities. The net interest spread in 1996 was 3.31 percent
versus 3.23 percent in 1995. The generally declining interest rate environment
throughout most of 1996 combined with proactive pricing of deposits and a change
in the mix of interest-bearing liabilities to lower cost funds were the primary
reasons for the improvement as the rates paid on interest-bearing liabilities
decreased 18 basis points between years. The decline in the NIM in 1995 compared
to 1994 can be attributed to a lower net interest spread of 3.23 percent
reflecting the repricing and rate sensitivity characteristics of AmSouth's
balance sheet during that time.

     Management anticipates a stable to modest widening of the NIM in 1997,
provided the economy continues to grow at a moderate pace, interest rates remain
relatively stable and the composition of earning assets does not change
significantly. In addition, competitive pressures adversely affecting AmSouth's
ability to set deposit and loan pricing could prevent such a widening from
occurring.

Provision for Loan Losses The provision for loan losses in 1996 totaled $65.2
million, a $25.1 million increase from the $40.1 million reported in 1995 and
$35.1 million higher than the $30.1 million reported in 1994. At the same time,
net charge-offs increased in 1996 to $64.6 million from $34.6 million in 1995
and $26.9 million in 1994. The large increase during 1996 in net charge-offs,
and, consequently, the provision for loan losses, was concentrated in consumer
loans. Total consumer loan losses, net of recoveries, rose to $61.3 million in
1996 from $28.4 million the previous year. Losses were higher in every consumer
loan category. The increases can be primarily attributed to an increase in
delinquencies and rising bankruptcies throughout the year, a reflection of the
weakness

                                                                              17
<PAGE>
 
     FINANCIALS
<TABLE> 
<CAPTION> 

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

(Taxable equivalent basis - dollars in thousands)                                            1996
=======================================================================================================================

                                                                          Average                 Revenue/       Yield/
                                                                          Balance                  Expense        Rate 
ASSETS  
<S>                                                                  <C>                    <C>                 <C> 
Earning assets:                                               
  Loans net of unearned income ........................              $    11,694,849        $     1,006,712      8.61  %
  Trading securities ..................................                        4,124                    144      3.49   
  Available-for-sale securities .......................                    2,391,748                164,473      6.88   
  Held-to-maturity securities:                                                                              
    Taxable ...........................................                    2,422,940                163,159      6.73   
    Tax-free ..........................................                      198,130                 22,204     11.21   
                                                                         -----------              ---------   
      Total held-to-maturity securities ...............                    2,621,070                185,363      7.07   
                                                                         -----------              ---------   
        Total securities ..............................                    5,016,942                349,980      6.98   
  Federal funds sold and securities purchased                                                               
    under agreements to resell ........................                       22,307                  1,221      5.47   
  Mortgage loans held for sale ........................                       80,921                  5,189      6.41   
                                                                         -----------              ---------     -----
     Total earning assets .............................                   16,815,019              1,363,102      8.11   
                                                                                                  ---------     -----
Cash and other assets .................................                    1,327,974                                    
Less allowance for loan losses ........................                     (178,592)                                   
Market valuation on available-for-sale securities .....                       25,220                                    
                                                                         -----------
                                                                     $    17,989,621                                    
LIABILITIES AND SHAREHOLDERS' EQUITY                                     ===========                                   
Interest-bearing liabilities:                                                                               
  Interest-bearing demand deposits ....................              $     3,671,241                115,192      3.14   
  Savings deposits ....................................                    1,036,240                 28,432      2.74   
  Time deposits .......................................                    5,591,950                318,410      5.69   
  Certificates of deposit of $100,000 or more .........                      859,468                 49,311      5.74   
  Federal funds purchased and securities sold                                                               
    under agreements to repurchase ....................                    1,771,305                 91,788      5.18   
  Other borrowed funds ................................                      754,369                 39,500      5.24   
  Long-term Federal Home Loan Bank advances ...........                      511,583                 27,210      5.32   
  Subordinated Capital Notes Due 1999 .................                       99,634                  9,513      9.55   
  6 3/4% Subordinated Debentures Due 2025 .............                      149,836                  9,145      6.10   
  7 3/4% Subordinated Notes Due 2004 ..................                      149,274                 11,696      7.84   
  7 1/2% Convertible Subordinated Debentures ..........                        2,390                    145      6.07   
  Other long-term debt ................................                       22,489                  1,098      4.88   
                                                                         -----------              ---------     -----
    Total interest-bearing liabilities .............                      14,619,779                701,440      4.80   
                                                                                                  ---------     ----- 
         Net interest spread ..........................                                                          3.31  %
Noninterest-bearing demand deposits ...................                    1,767,444                            =====        
Other liabilities .....................................                      221,866                                    
Shareholders' equity ..................................                    1,380,532                                    
                                                                         -----------
                                                                     $    17,989,621                                    
                                                                         =========== 
      Net interest margin on a taxable equivalent basis                                             661,662      3.93  % 
Taxable equivalent adjustment:                                                                                   ====         
  Loans ...............................................                                               2,178
  Held-to-maturity securities .........................                                               7,103
  Other earning assets ................................                                                  -0-
                                                                                                  ---------
     Total taxable equivalent adjustment ..............                                               9,281
                                                                                                  ---------
         Net interest income ..........................                                     $       652,381 
                                                                                                  =========

Note:

The taxable equivalent adjustment has been computed based on a 35% federal
income tax rate and has given effect to the disallowance of interest expense,
for federal income tax
=======================================================================================================================
</TABLE> 

18

<PAGE>
 
<TABLE> 
<CAPTION> 

                          1995                                                    1994
=======================================================================================================================
        Average                  Revenue/        Yield/              Average              Revenue/          Yield/
        Balance                  Expense          Rate               Balance              Expense            Rate 
   <S>                    <C>                     <C>         <C>                 <C>                       <C> 
   $    11,747,385        $     1,014,288         8.63  %     $     9,918,274     $       797,020           8.04  %
             6,331                    319         5.04                 43,089               2,587           6.00   
           538,133                 38,034         7.07                979,974              52,005           5.31   
                                                                                                                   
         3,014,160                197,645         6.56              2,512,922             160,181           6.37   
           261,385                 28,441        10.88                317,114              35,289          11.13   
   ---------------            -----------                     ---------------          ----------    
         3,275,545                226,086         6.90              2,830,036             195,470           6.91   
   ---------------            -----------                     ---------------          ----------       
         3,820,009                264,439         6.92              3,853,099             250,062           6.49   

            15,590                  1,095         7.02                 84,234               2,636           3.13   
            79,997                  5,478         6.85                207,799              12,609           6.07   
   ---------------            -----------         ----        ---------------           ---------          -----   
        15,662,981              1,285,300         8.21             14,063,406           1,062,327           7.55   
         1,453,599            -----------         ----              1,391,553          ----------         ------                
          (176,695)                                                  (148,801)                                     
             2,441                                                    (12,173)                                     
   ---------------                                            ---------------    
   $    16,942,326                                            $    15,293,985                                      
   ===============                                            ===============
                                                                                                                   
   $     3,893,721                139,854         3.59        $     3,820,580             118,952           3.11   
           960,969                 27,500         2.86                918,132              24,261           2.64   
         5,769,819                329,979         5.72              4,291,777             192,431           4.48   
           923,866                 54,278         5.88                762,403              33,751           4.43   
                                                                                                                   
         1,158,196                 67,182         5.80              1,476,696              65,009           4.40   
           573,921                 32,819         5.72                492,965              21,528           4.37   
            54,000                  3,825         7.08                112,550               6,442           5.72   
            99,505                  9,495         9.54                 99,376               9,504           9.56   
            22,987                  1,489         6.48                     -0-                 -0-           ---
           149,182                 11,717         7.85                 90,281               7,047           7.81   
             3,931                    404        10.28                  3,709                 404          10.89   
            23,340                    854         3.66                 25,863               1,085           4.20   
   ---------------            -----------       ------        ---------------           ---------          -----     
        13,633,437                679,396         4.98             12,094,332             480,414           3.97   
                              -----------       ------                                  ---------          ----- 
                                                  3.23  %                                                   3.58  %
                                                 =====                                                     =====
         1,755,717                                                  1,779,833                                      
           195,836                                                    176,669                                      
         1,357,336                                                  1,243,151                                      
   ---------------                                            ---------------
   $    16,942,326                                            $    15,293,985                                      
   ===============                                            ===============
                                  605,904         3.87  %                                 581,913           4.14  % 
                                                 =====                                                     =====
                                    2,968                                                   3,064
                                    9,383                                                  11,485
                                       10                                                      37
                          ---------------                                            ------------                    
                                   12,361                                                  14,586
                          ---------------                                            ------------
                          $       593,543                                         $       567,327 
                          ===============                                            ============


purposes, related to certain tax-free assets.  Loans net of unearned income 
includes nonaccrual loans for all years presented.
=======================================================================================================================
</TABLE> 
                                                                              19
<PAGE>
 
FINANCIALS


in the consumer sector of the economy during 1996. Aggressive direct marketing
initiatives in prior years to develop new business, particularly in credit
cards, also contributed to the increase in consumer net charge-offs in 1996, in
as much as the accounts resulting from such marketing initiatives experienced
higher charge-off rates than other parts of the portfolio. For additional
details on net charge-offs, see Tables 17 and 20.

     Measured as a percentage of average net loans, net charge-offs have
increased during the previous three years. Management expects loan losses to
continue to rise in 1997 both in absolute terms and measured as a percentage of
average net loans. The exact amount of the increase cannot be determined;
however, one of the primary factors affecting the magnitude of the increase is
the continuing shift in the mix of the loan portfolio to include a greater
proportion of commercial, commercial real estate and consumer loans and fewer
residential mortgages. Another factor includes anticipated further increases in
consumer loan delinquencies and charge-offs, industry-wide during 1997.

     Additional discussion of asset quality trends may be found in the section
of this report entitled Credit Risk Management Process and Loan Quality.

Noninterest Revenues Total noninterest revenues for the year increased 1.6
percent to $235.3 million from the $231.7 million reported for 1995. Other
operating revenues in 1995 included a $25.0 million gain from AmSouth's sale of
its third-party mortgage servicing portfolio. Excluding this amount from 1995,
total noninterest revenues in 1996 rose 13.8 percent.

     The largest category of noninterest revenues, service charges on deposit
accounts, increased $9.7 million or 11.4 percent in 1996. The principal reasons
for the increase were higher prices for services, fewer waived fees and
increased account activity.

     Trust income in 1996 increased $7.1 million, or 14.1 percent, compared to
the prior year. The improvement can be attributed to an increase in the number
of employee benefit plan administration and personal trust accounts and higher
fees.

     Investment services income was up $9.6 million or 131.3 percent in 1996.
One of the primary reasons for the increase was higher sales volume due to an
expansion of the sales force in late 1995 and early 1996. During this period,
the number of salespersons increased by 20 positions, or 44.4 percent. Another
factor was the continued strong performance of the financial and stock markets
during 1996. Also, the introduction of a new proprietary fixed annuity product
in the second quarter of 1996 contributed to the increase.

     Credit card income increased $1.6 million or 12.0 percent in 1996. This was
due primarily to an increase in the number of cardholder accounts from direct
mail marketing campaigns conducted in 1995 and 1996.

     Interchange income, the fees derived from debit card and ATM transactions,
grew $3.2 million or 56.3 percent in 1996. The primary reasons for the
improvement include an increase in the number of activated debit card accounts
year over year and an expansion in the ATM network to 612 machines at the end of
the year from 275 at year-end 1995.

     Mortgage administration fees declined $5.5 million or 64.0 percent in 1996
due to the sale of third-party mortgage servicing during 1995. 

     Other operating revenues in 1996 reached $39.2 million,

[CHART APPEARS HERE]

<TABLE> 
<CAPTION> 
-----------------------------------------------------------
         Provision for Loan Losses and 
         Net Charge-Offs to Average Loans
            (Dollars in millions)

                     92      93      94      95      96
<S>                <C>     <C>     <C>     <C>     <C> 
Provision          $38.6   $28.0   $30.1   $40.1   $65.2
Net Charge-Offs      .54%    .26%    .27%   . 29%    .55%

-----------------------------------------------------------
</TABLE> 

20
<PAGE>
 
an increase of $2.8 million or 7.7 percent over 1995 levels, after excluding the
$25.0 million gain recorded during 1995 from the sale of third-party mortgage
servicing. The primary reason for the increase in this category was an increase
in portfolio income, as the financial markets provided attractive opportunities
throughout the year to profitably restructure the securities portfolio.

     Other operating revenues in 1994 included gains of $23.8 million from the
sale of mortgage servicing, losses on the sale of available-for-sale securities
of $26.6 million, a loss on the termination of interest rate swaps of $11.9
million and a gain of $5.5 million from sales of residential first mortgages.
Excluding these items and the $25.0 million gain from the sale of the
third-party mortgage servicing portfolio during 1995, total noninterest revenues
increased 12.0 percent in 1995 from the prior year.

     The largest single category of noninterest revenues contributing to the
increase in 1995 was service charges on deposit accounts, which increased $16.3
million or 23.7 percent over 1994. Approximately one third of the increase, or
$5.1 million, is attributable to a revenue enhancement initiative that was
implemented in the second quarter of 1995 which automated the payment of certain
demand deposit account service fees. The remainder of the increase was due to a
reduction in the amount of waived service charges and a higher volume of
consumer account activity.

     Trust income increased in 1995 to $50.3 million, or 9.0 percent, from the
$46.1 million of revenue reported in 1994. The increase was primarily from
increased customer activity in personal trusts including estates, new employee
benefit plan administration accounts and higher fees.

     Investment services income of $7.3 million in 1995 grew $2.0 million or
37.8 percent over 1994 levels. The improvement was due to higher sales volume
and a strong stock market during the year.

     Credit card income also contributed to the overall increase in noninterest
revenues with an increase in 1995 of $1.8 million or 15.1 percent. The increase
reflects a higher level of customer activity and an increase in the number of
cardholder accounts, a result of direct mail marketing campaigns conducted in
1995.

     Partially offsetting the increases in total noninterest revenues in 1995
was a decline in mortgage administration fees. This category decreased $13.9
million due to the sale of third-party mortgage servicing during 1995.

     Management expects on a recurring basis, total noninterest revenues in 1997
to exceed the levels reported in 1996 provided the economy continues to grow at
a moderate pace and management is able to improve sales and service quality and
to develop new products which generate noninterest revenues. Performance of the
stock and bond markets will also influence management's ability to achieve its
noninterest revenue goals.

     Each of the major categories of noninterest revenues for 1991 through 1996,
with a five year compound growth rate for each component, is shown in Table 4.

Noninterest Expenses Total noninterest expenses increased to $534.2 million in
1996, an increase of $24.3 million or 4.8 percent over the levels incurred in
1995. Excluding the one-time SAIF assessment in 1996 and the $22.2 million in
nonrecurring productivity initiatives expenses in 1995, total noninterest
expenses increased approximately 4.6 percent in 1996.

     Salaries and employee benefits expense, the largest category of noninterest
expenses, increased $5.8 million, or 2.5 percent in 1996. Excluding the $6.7
million of expenses related to business and branch consolidations in 1995,
personnel expense in 1996 increased $12.5 million or 5.7 percent. The primary
reasons for the increase were a higher company match of employee thrift plan
contributions, enhancements to employee life insurance benefits, additional
personnel and higher incentive compensation.

     In 1996, net occupancy expense increased $293 thousand or less than one
percent. Netting out $5.5 million of nonrecurring costs related to branch
consolidations in 1995, occupancy expense increased in 1996 by $5.8 million or
12.0 percent. This increase was primarily related to increases in lease and
leasehold improvement costs associated with the occupation of new office space
during 1996 previously contracted for in 1994.

     Equipment costs in 1996 rose $4.8 million or 9.5 percent. Adjusting 1996
for a $2.5 million accrual for the write-off of software and equipment
anticipated to become obsolete with

                                                                              21
<PAGE>
 
FINANCIALS


the implementation of technology projects and 1995 for $4.7 million of systems
development costs and the write-off of equipment leases, equipment expense in
1996 increased $7.0 million or 15.3 percent. The principal reason for the
increase was the investment in several technology projects, the largest of which
are for the consumer and commercial lines of business. These expenses are
expected to continue to grow at a significant rate in the future as further
investments in technology are made in support of the lines of business and in
order to remain competitive with organizations having larger capacities to make
technology investments.

     Excluding the one-time SAIF charge of $24.2 million in 1996, as previously
discussed, FDIC premiums expense declined $12.5 million in 1996. These costs
were lower as a result of the FDIC reducing the premium rate on deposits insured
by the Bank Insurance Fund (BIF) to zero beginning in 1996. A further reduction
in this expense category of approximately $4.0 million is expected to occur in
1997 with the lowering of the SAIF deposit premium rate, which accompanied the
one-time assessment during 1996.

     Foreclosed properties expense was $980 thousand higher in 1996 than 1995
due to an increase in operating costs associated with the sale of repossessed
assets.

     Adjusting 1995 for $4.5 million of nonrecurring initiatives expense, other
operating expenses in 1996 increased $5.4 million or 3.5 percent between years.
The primary cause of the increase was an increase in telephone expense related
to the establishment of the network to support technology projects.

     Noninterest expenses for 1995 were $509.9 million compared to $519.2
million the previous year, a decrease of $9.3 million or 1.8 percent. Excluding
the one-time productivity initiatives expenses of $22.2 million charged to
earnings in the second quarter of 1995, total noninterest expenses in 1995
compared to 1994 declined $31.5 million or 6.1 percent. There were several
reasons for the decrease in noninterest expenses during 1995. The most
significant ones were the sale of third-party mortgage servicing rights, which
reduced the amortization expense of Purchased Mortgage Servicing Rights (PMSR's)
and other operating expenses, the consolidation of branches, the downsizing of
the institutional bond sales function within the correspondent banking area, and
the reduction of deposit insurance premiums by the FDIC.

     Salaries and employee benefits expense declined in 1995 to $226.3 million
or 2.5 percent from the level reported the prior year. Excluding the one-time
costs associated with the business and branch consolidations, salaries and
employee benefits in 1995 decreased $12.4 million or 5.4 percent. The lower
expense reflects an approximate 1,000 person or 13.0 percent decline in the
number of employees at the end of 1995 compared to year-end 1994.

     Net occupancy expense was $53.9 million in 1995 compared to $46.8 million
in 1994, an increase of $7.1 million or 15.3 percent. Included in the increase
were expenses totaling $5.5 million related to branch consolidation initiatives.
Without those costs, net occupancy expense increased 3.5 percent between years,
primarily from higher rental costs.

     Equipment expense in 1995 was $50.3 million, an increase of $8.9 million or
21.4 percent from 1994, and included $4.7 million for development costs of new
systems and the write-off of various leases. Excluding these one-time costs,
equipment expense in 1995 increased $4.2 million or 10.1 percent, due primarily
to investments in technology related to the consumer and commercial lines of
business.

     FDIC premiums declined $4.3 million or 17.6 percent in 1995. This reflected
the reduction in insurance premium rates from 23 cents to 4 cents per $100 of
deposits for those deposits insured by the BIF.

     Foreclosed properties expense decreased $4.3 million in 1995 compared to
1994. This decline directly reflected the lower level of foreclosed properties
held as nonperforming assets in 1995 versus 1994. Foreclosed properties totaled
$16.2 million at the end of 1995, a decrease of $12.1 million from $28.3 million
at the prior year-end.

     Other operating expenses in 1995 were $158.7 million compared to $169.6
million in 1994, a decrease of $10.9 million or 6.4 percent. The decrease
included $4.5 million of expense related to productivity initiatives. The
remainder of the decrease was primarily the result of lower amortization of
PMSR's due to the sale of third-party mortgage servicing earlier in the year.

22
<PAGE>
 
     Each of the major categories of noninterest expenses for 1991 through 1996,
with a five year compound growth rate for each component, is shown in Table 4.

Operating Efficiency Productivity in the banking industry is commonly measured
by the operating efficiency ratio. It measures the amount of expense dollars
utilized to generate a dollar of revenue. The ratio is calculated by dividing
total noninterest expenses by the sum of NII and total noninterest revenues. In
1996, AmSouth's operating efficiency ratio was 59.56 percent compared to 60.98
percent in 1995 and 68.72 percent in 1994. Excluding the SAIF assessment in
1996, the ratio was 56.86 percent. The improvements in efficiency the last three
years reflect the strong growth in NII and noninterest revenues, coupled with
tight control of expenses. Management's ability to continue the improvement in
operating efficiency during 1997 will depend upon its ability to continue
similar trends in revenues and expenses incurred the previous two years.

[CHART APPEARS HERE]
<TABLE> 
<CAPTION> 
------------------------------------------------------------------------
          Operating Efficiency Ratio


                                  92      93      94      95       96*
<S>                             <C>     <C>     <C>     <C>      <C>   
Operating Efficiency Ratio      64.24%  63.48%  68.72%  60.98%   56.86%

* 1996 excludes one-time 
    SAIF assessment

------------------------------------------------------------------------
</TABLE> 

Table 4

Noninterest Revenues and
Noninterest Expenses
<TABLE> 
<CAPTION> 
                                                                                                                        Compound
(Dollars in thousands)                                                     Years Ended December 31                     Growth Rate 
===================================================================================================================================
                                              1996         1995         1994        1993         1992         1991      1996/1991
<S>                                       <C>          <C>          <C>         <C>          <C>          <C>           <C> 
Noninterest revenues: 
 Service charges on deposit accounts...   $  94,765    $  85,085    $  68,780   $  60,541    $  53,670    $  51,243      13.08%
 Trust income..........................      57,354       50,272       46,121      41,659       40,069       37,891       8.64 
 Investment services income............      16,944        7,325        5,314         485        6,167        2,844      42.90 
 Credit card income....................      14,915       13,316       11,565      12,115       10,132        9,156      10.25 
 Interchange income....................       8,982        5,747        2,719       1,435          279          197     114.67 
 Mortgage administration fees..........       3,087        8,572       22,518      18,178       17,392       17,227     (29.10)
 Other operating revenues..............      39,227       61,354       18,338      64,824       41,010       50,821      (5.05)
                                          -------------------------------------------------------------------------
                                          $ 235,274    $ 231,671    $ 175,355   $ 199,237    $ 168,719    $ 169,379       6.79 %
                                          =========================================================================
Noninterest expenses:                                                                                                          
 Salaries and employee benefits........   $ 232,076    $ 226,317    $ 232,050   $ 222,756    $ 181,766    $ 160,483       7.66 %
 Net occupancy expense.................      54,211       53,918       46,770      36,537       32,524       26,956      15.00 
 Equipment expense.....................      55,044       50,289       41,432      39,213       32,548       30,882      12.25 
 FDIC premiums.........................       7,814       20,315       24,664      21,413       18,868       16,834     (14.23)
 SAIF assessment.......................      24,196           -0-          -0-         -0-          -0-          -0-      ---- 
 Foreclosed properties expense (income)       1,352          372        4,721      (2,197)      22,426       36,933     (48.39)
 Other operating expenses..............     159,539      158,687      169,602     136,277      107,981       93,036      11.39 
                                          -------------------------------------------------------------------------
                                          $ 534,232    $ 509,898    $ 519,239   $ 453,999    $ 396,113    $ 365,124       7.91% 
                                          =========================================================================
===================================================================================================================================
</TABLE> 
                                                                              23
<PAGE>
 
F I N A N C I A L S



Income Taxes AmSouth's income tax expense was $105.6 million in 1996, $100.2
million in 1995, and $66.1 million in 1994. The increases in income tax expense
in 1996 and 1995 were due primarily to increases in pre-tax income. The
effective tax rate for 1996 was 36.6 percent compared to 36.4 percent in 1995,
and 34.2 percent in 1994. The 1996 increase resulted from a continued decrease
in tax-exempt income. Detail of the deferred tax assets and liabilities is
included in Note R of the Notes to Consolidated Financial Statements.

Balance Sheet Analysis
At December 31, 1996, AmSouth reported total assets of $18.4 billion compared to
$17.7 billion at the end of 1995. Average total assets were $18.0 billion in
1996 versus $16.9 billion in 1995.

                           [BAR GRAPH APPEARS HERE]
<TABLE> 
<CAPTION> 

-------------------------------------------------------------------------------------------------------
Average Earning Assets as a 
Percentage of Average Assets

                                   92              93              94              95              96
<S>                             <C>             <C>             <C>             <C>             <C> 
Average Earning Assets To
  Average Assets                91.4%           92.0%           92.0%           92.4%           93.5%

Other Earning Assets             4.4%            4.6%            2.4%            0.7%            0.6%

Investment Securities           29.3%           28.3%           27.1%           24.3%           29.8%

Loans                           66.3%           67.1%           70.5%           75.0%           69.6%
-------------------------------------------------------------------------------------------------------
</TABLE> 


Table 5

Securities
<TABLE> 
<CAPTION> 

(In millions)                                                                   December 31
=============================================================================================================
                                                                     1996           1995            1994  
<S>                                                              <C>             <C>             <C> 
Trading securities:
  U.S. Treasury and federal agency securities...............     $      -0-      $      -0-      $      -0-
  Other securities..........................................             4               3               4
                                                                 -----------------------------------------
     Total taxable..........................................             4               3               4
  State, county and municipal securities....................            -0-             -0-              2
                                                                 -----------------------------------------
                                                                         4               3               6
                                                                 -----------------------------------------
Available-for-sale securities:
  U.S. Treasury and federal agency securities...............         2,001           2,138             322
  Other securities..........................................           289             342              61
                                                                 -----------------------------------------
                                                                     2,290           2,480             383
                                                                 -----------------------------------------
Held-to-maturity securities:
  U.S. Treasury and federal agency securities...............         2,211           1,842           3,037
  Other securities..........................................           255             101               7
                                                                 -----------------------------------------
     Total taxable..........................................         2,466           1,943           3,044
  State, county and municipal securities....................           179             224             293
                                                                 -----------------------------------------
                                                                     2,645           2,167           3,337
                                                                 -----------------------------------------
                                                                 $   4,939       $   4,650       $   3,726 
                                                                 =========================================
=============================================================================================================
</TABLE> 


24
<PAGE>
 
Table 6
Available-for-Sale Securities and Held-to-Maturity Securities
Relative Contractual Maturities and Weighted-Average Yields

<TABLE> 
<CAPTION> 

(Taxable equivalent basis-                Due Within        Due After One but     Due After Five but        Due After
dollars in thousands)                      One Year         Within Five Years      Within Ten Years         Ten Years
===============================================================================================================================
                                       Amount     Yield      Amount     Yield      Amount     Yield      Amount     Yield 
<S>                                  <C>          <C>     <C>           <C>      <C>          <C>      <C>          <C> 
Available-for-sale securities:
  U.S. Treasury and federal          
     agency securities ...........   $  63,902    7.79%   $ 318,060     6.58%    $ 358,221     6.82%   $ 1,225,377     7.47%  
  Other securities ...............          -0-     --           -0-      --        57,423     7.04         56,427     7.22
                                     -------------------------------------------------------------------------------------- 
                                     $  63,902    7.79%   $ 318,060     6.58%    $ 415,644     6.85%   $ 1,281,804     7.46%
                                     ======================================================================================
Percentage of total portfolio ....        3.07%               15.30%                 19.99%                  61.64%         
                                                                                                                            
Held-to-maturity securities:                                                                                                
  U.S. Treasury and federal                                                                                                
     agency securities ...........   $  28,268    6.82%   $ 331,774     6.27%    $ 358,761     6.64%   $ 1,491,986     7.11%
  State, county and                                                                                                         
     municipal obligations .......      47,811   11.60       84,124    11.48        30,422    10.88         16,602    10.44 
  Other securities ...............          -0-     --        1,127     8.09           150     6.85        253,681     6.75 
                                     --------------------------------------------------------------------------------------
                                     $  76,079    9.83%   $ 417,025     7.32%    $ 389,333     6.97%   $ 1,762,269     7.09%
                                     ======================================================================================
Percentage of total portfolio ....        2.88%               15.77%                 14.72%                  66.63% 
Taxable equivalent adjustment                                                                                      
   for calculation of yield ......   $   1,941            $   3,381              $   1,158             $       606 
</TABLE> 

Notes:
1. The weighted-average yields were computed by dividing the taxable equivalent
   interest income by the book value of the appropriate securities. The taxable
   equivalent interest income does not give effect to the disallowance of
   interest expense, for federal income tax purposes, related to certain
   tax-free assets.
2. The amount of available-for-sale securities indicated as maturing after five
   but within ten years includes $259 million of mortgage-backed securities, and
   those indicated as maturing after ten years includes $1.3 billion of
   mortgage-backed securities. Although these securities have long-term
   maturities, according to mortgage industry standards, the estimated
   weighted-average remaining life of these securities held in AmSouth's
   investment portfolio is less than five years.
3. The amount of held-to-maturity securities indicated as maturing after five
   but within ten years includes $193 million of mortgage-backed securities, and
   those indicated as maturing after ten years includes $1.5 billion of
   mortgage-backed securities. Although these securities have long-term
   maturities, according to mortgage industry standards, the estimated
   weighted-average remaining life of these securities held in AmSouth's
   investment portfolio is four years.
4. Federal Reserve Bank stock, Federal Home Loan Bank stock, and equity stock of
   other corporations held by AmSouth are not included in the above table.
================================================================================

Earning Assets In banking, the predominant earning assets are loans and
investment securities. The proportion of earning assets to total assets measures
the effectiveness of management's efforts to invest available funds into the
most efficient and profitable uses. In 1996, earning assets were 93.5 percent of
total average assets compared to 92.4 percent in 1995. The increase in 1996 was
primarily a reflection of the increase in loans and investment securities during
the year as well as management's attention to reducing nonearning assets.

Securities Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (Statement 115) requires
entities to classify debt and equity securities as either held-to-maturity,
available-for-sale or trading securities. Securities are classified as
held-to-maturity and carried at amortized cost only if AmSouth has the positive
intent and ability to hold those securities to maturity. If not classified as
held-to-maturity, such securities are classified as trading securities or
available-for-sale securities. Trading securities are carried at market value
with unre-

                                                                              25
<PAGE>
 
FINANCIALS



alized gains and losses included in other operating revenues. Available-for-sale
securities are also carried at market value with unrealized gains and losses,
net of deferred taxes, reported as a separate component of shareholders' equity.

     At December 31, 1996, available-for-sale securities totaled $2.3 billion
and represented 46.4 percent of the total portfolio compared to $2.5 billion or
53.3 percent in available-for-sale securities at the end of 1995. These
securities at year-end 1996 consisted of U.S. Treasury securities, variable and
fixed rate mortgage-backed securities, other private asset-backed securities and
equities. The average life of the portfolio is estimated to be 4.1 years with a
duration of 1.9 years. Total realized gains of $9.3 million from the sale of
available-for-sale securities were included in other operating revenues for
1996, compared to $3.7 million of realized gains in 1995. Unrealized gains on
the securities of $24.3 million, net of deferred taxes, were included as an
addition to shareholders' equity on December 31, 1996.

     Held-to-maturity securities were $2.6 billion at the end of 1996 compared
to $2.2 billion at year-end 1995. Securities classified as held-to-maturity at
the end of 1996 consisted primarily of collateralized mortgage obligations,
federal agency securities, mortgage-backed securities and state, county and
municipal obligations. The average life of these securities is estimated to be
3.6 years with a duration of 2.2 years. At December 31, 1996, the
held-to-maturity portfolio had an unrealized gain of $4.8 million. Trading
securities are primarily held to provide a short-term inventory of securities
for sale to customers of AmSouth's investment services. The balance at December
31, 1996 increased to $4.0 million from $3.0 million at the end of 1995. See
Table 5.

     AmSouth's policy requires all securities purchased for the securities
portfolio, except state, county and local municipal obligations, to be rated
investment grade or better. Securities backed by the U.S. Government and its
agencies, both on a direct and indirect basis, represented approximately 89.6
percent of the portfolio at December 31, 1996. Approximately 82.0 percent of
state, county and local municipal securities at year-end 1996 were rated either
single A or above by the rating agencies or were escrowed in U.S. Treasury
obligations.

Loans  Loans are the single largest category of earning assets for AmSouth and
produce the highest level of revenues. At December 31, 1996, loans, net of
unearned income, totaled $12.1 billion, an increase of 2.9 percent from the
$11.7 billion reported at the end of 1995. The growth in loans during 1996 would
have been greater, except for management's decision to reduce the proportion of
residential first mortgages held in the loan portfolio. To accomplish this
objective, approximately $705 million of residential first mortgages were
securitized and reclassified to securities; residential first mortgages
continued to be originated but, for the most part, sold into the secondary
market; and the existing portfolio was allowed to run-off through normal
pay-downs, maturities and prepayments. All of these elements in 1996 combined to
reduce residential first mortgages to $3.0 billion at the end of the year from
$3.8 billion at year-end 1995. Excluding residential first mortgages, total
loans, net of unearned income, increased $1.2 billion or 14.7 percent at
December 31, 1996 from the level reported at the end of 1995. Table 7 provides a
five year trend of major loan categories. At December 31, 1996, there were no
loan concentrations other than those shown in Table 7.

     The loan portfolio at AmSouth is comprised of four main components:
commercial loans, commercial real estate loans, consumer loans and, within the
consumer loan category, residential first mortgages. At the end of 1996,
commercial loans represented 30.1 percent of the total portfolio, commercial
real estate loans were 19.3 percent, while consumer loans, excluding residential
first mortgages, were 26.2 percent and residential first mortgages comprised
24.4 percent. This compares with 26.3 percent, 17.4 percent, 24.1 percent, and
32.2 percent at the end of 1995 for commercial loans, commercial real estate
loans, consumer loans and residential first mortgages, respectively. The shift
in the mix of the loan portfolio between years was primarily the result of the
decision to reduce the proportion of residential first mortgages held in the
portfolio while increasing other consumer, commercial and commercial real estate
loans.

     Commercial loans at the end of 1996 were $3.7 billion compared to $3.1
billion at December 31, 1995, an increase of

26
<PAGE>
 
Table 7
Major Loan Categories

<TABLE> 
<CAPTION> 

(In millions)                                                          December 31
========================================================================================================================
                                                 1996            1995           1994           1993           1992
<S>                                          <C>             <C>            <C>            <C>            <C> 
Commercial ..............................    $   3,668       $   3,112      $   2,699      $   2,461      $   2,345           
Commercial real estate:                                                                                              
   Commercial real estate mortgages .....        1,653           1,523          1,371          1,217          1,050  
   Real estate construction .............          693             526            541            416            288
                                             ----------------------------------------------------------------------  
      Total commercial real estate ......        2,346           2,049          1,912          1,633          1,338
                                             ----------------------------------------------------------------------  
Consumer:                                                                                                            
   Residential first mortgages ..........        2,971           3,802          4,276          2,488          1,291  
   Other residential mortgages ..........          872             693            632            512            450  
   Dealer indirect ......................        1,225           1,058            887            599            496  
   Revolving credit .....................          522             477            350            341            358  
   Other consumer .......................          564             629            740            578            509
                                             ----------------------------------------------------------------------  
      Total consumer ....................        6,154           6,659          6,885          4,518          3,104  
                                             ----------------------------------------------------------------------  
                                                12,168          11,820         11,496          8,612          6,787  
Less unearned income ....................           88              77             66             72             70  
                                             ----------------------------------------------------------------------  
                                             $  12,080       $  11,743      $  11,430      $   8,540      $   6,717  
                                             ======================================================================
========================================================================================================================
</TABLE> 

[PIE CHART APPEARS HERE]

Loan Composition

<TABLE> 
<CAPTION> 
                          1995   1996
-------------------------------------------
<S>                       <C>    <C> 
Consumer                  24.1%  26.2%
Commercial Real Estate    17.4%  19.3%
Residential               32.2%  24.4%
Commercial                26.3%  30.1%
-------------------------------------------
</TABLE> 


17.9 percent. The strong growth was primarily a function of management's
strategy, formulated several years ago, to apply targeted sales efforts and
relationship banking concepts across all lines of business. In 1996, this
approach produced solid results in many commercial lending segments and
increases in several industry groups. An area where AmSouth has developed a
specialty over the last several years is lending to the health services
industry. Commercial loans to this industry increased approximately $85.0
million in 1996, reflecting the generally strong growth in the industry and
demand from the large number of healthcare providers and related businesses in
AmSouth's primary markets. Another area of emphasis is equipment lease
financing, which expanded significantly in 1996 and contributed approximately
$100.0 million of growth during the year. The increase was centered in the
transportation, communication and utilities industry groups with most
counterparties rated investment grade. Finally, increases were also experienced
in the manufacturing and trade industries during 1996.

                                                                              27
<PAGE>
 
     FINANCIALS

Table 8

Selected Loan Maturities and Sensitivity to
Change in Interest Rates

<TABLE> 
<CAPTION> 
                                    Due in One
(In millions)                       Year or Less   Due After One But Within Five Years       Due After Five Years
====================================================================================================================================

                                                   Fixed      Variable                 Fixed     Variable                
                                                   Rate         Rate       Total       Rate        Rate       Total       Total 
<S>                                  <C>          <C>         <C>         <C>         <C>        <C>          <C>         <C> 
Commercial.........................  $ 1,913      $   582     $   601     $ 1,183     $   408     $   164     $   572     $ 3,668
Commercial real estate mortgages...      263          461         299         760         423         207         630       1,653
Real estate construction...........      335           85         136         221          62          75         137         693
                                     --------------------------------------------------------------------------------------------
                                     $ 2,511      $ 1,128     $ 1,036     $ 2,164     $   893     $   446     $ 1,339     $ 6,014
                                     ============================================================================================
====================================================================================================================================

</TABLE> 

     Management expects further growth in commercial loans in 1997 due to new
business development, expansion of healthcare lending and equipment lease
financing and further application of its relationship banking concept. In order
for this growth to occur, the economy must remain stable or improve throughout
the year for loan demand to be sufficient to meet the company's goals. In
addition, management must be able to provide satisfactory sales and service
quality and develop new products in the commercial lending area.

     Commercial real estate loans are comprised of two primary categories;
commercial real estate mortgages and real estate construction loans. In 1996,
commercial real estate mortgage loans increased $130.0 million or 8.5 percent.
Real estate construction loans also increased in 1996 to $693.0 million from
$526.0 million reported at the end of 1995, an increase of $167.0 million or
31.7 percent. The increases reflect the strength of the real estate markets in
AmSouth's four state area of the southeastern U.S., particularly Florida.

     On a combined basis, owner occupied properties totaled $781.0 million or
33.3 percent of total commercial real estate loans in 1996, while nonowner
occupied properties were $1.6 billion or 66.7 percent of the total. This
compares with $776.0 million or 37.8 percent of owner occupied properties and
$1.3 billion or 62.2 percent of nonowner occupied properties at the end of 1995.

     Management anticipates both categories of commercial real estate loans to
increase during 1997, provided the economy and AmSouth's real estate markets
remain strong, sales goals are met and credit quality can be maintained.

     Consumer loans, excluding residential first mortgages, include primarily
dealer indirect, other residential mortgages including second mortgage
installment loans and home equity lines of credit, revolving credit, and other
consumer loans. Dealer indirect loans reached $1.2 billion at the end of 1996,
an increase of $167.0 million or 15.8 percent from the $1.1 billion of loans
outstanding at the end of 1995. These loans consist primarily of loans made to
individuals to finance the purchase of new and used automobiles. The increase in
1996 was a direct result of a new office opened in Atlanta, Georgia during the
first quarter combined with a generally strong economy.

     Other residential mortgages increased $179.0 million during 1996 to $872.0
million at the end of the year from $693.0 million at the prior year-end. The
increase was primarily the result of new customers acquired in 1996 from direct
mail marketing promotions and the cross selling of home equity lines of credit.

     Revolving credit, which consists primarily of bankcard outstandings, at the
end of 1996 increased $45.0 million or 9.4 percent above the level reported at
year-end 1995. The reason for the increase was an increase in the number of
cardholders from 367,000 accounts in 1995 to 453,000 accounts in 1996, a result
of several targeted, direct marketing campaigns conducted during the year. Other
consumer loans decreased in 1996 primarily due to the sale of approximately
$50.5 million of government guaranteed student loans, reflecting management's
decision to exit this business.

     Management anticipates in 1997 that consumer loans,

28
<PAGE>
 
Table 9
Average Deposits

<TABLE> 
<CAPTION> 

(In thousands)                                                        December 31
==================================================================================================================================
                                           1996              1995              1994              1993              1992
<S>                                  <C>               <C>               <C>               <C>               <C> 
Noninterest-bearing demand ........  $     1,767,444   $     1,755,717   $     1,779,833   $     1,611,428   $     1,304,787
Interest-bearing demand ...........        3,671,241         3,893,721         3,820,580         3,263,054         3,033,034
Savings ...........................        1,036,240           960,969           918,132           773,131           575,082
Time:                                                                                                                       
   Retail .........................        4,442,109         4,652,502         3,343,936         2,359,352         2,085,556
   Individual retirement accounts .          926,633           928,901           784,736           639,866           517,227
   Other ..........................          223,208           188,416           163,105           168,668           149,395
                                     --------------------------------------------------------------------------------------- 
      Total time ..................        5,591,950         5,769,819         4,291,777         3,167,886         2,752,178
                                     --------------------------------------------------------------------------------------- 
Certificates of deposit of                                                                                                  
   $100,000 or more ...............          859,468           923,866           762,403           728,206           687,514
                                     --------------------------------------------------------------------------------------- 
                                     $    12,926,343   $    13,304,092   $    11,572,725   $     9,543,705   $     8,352,595
                                     =======================================================================================
==================================================================================================================================
</TABLE> 

excluding residential mortgages, will continue to grow, provided the economy
remains stable or grows and consumer borrowing patterns remain at least stable.
Whether growth will be achieved will also depend on the success of management's
planned direct mail marketing campaigns and on the success of its continued
emphasis on cross selling and service quality.

Other Earning Assets Other earning assets consist primarily of federal funds
sold and securities purchased under agreements to resell (resell agreements) and
mortgage loans held for sale. Federal funds sold and resell agreements serve as
temporary investments in the corporation's overall funding and cash management
operations. Average federal funds sold and resell agreements in 1996 were $22.3
million, an increase of $6.7 million from 1995. Mortgage loans held for sale
averaged approximately $80.0 million in both 1996 and 1995.

Deposits Deposits are AmSouth's primary source of funding and their cost is the
largest category of interest expense. Average total deposits were $12.9 billion
in 1996, representing a decrease of $377.7 million or 2.8 percent from total
average deposits in 1995 of $13.3 billion. There are five principal components
of total deposits: noninterest-bearing demand, interest-bearing demand, savings,
time and certificates of deposit of $100,000 or more. The largest component is
time deposits, which comprised approximately 43.3 percent of the total in 1996.
These deposits, which consist primarily of consumer certificates of deposits,
declined to $5.6 billion on average in 1996 from $5.8 billion in 1995, a
decrease of $177.9 million or 3.1 percent. This decline was anticipated because
management, during 1996, as part of an overall program to restructure the
balance sheet, repriced and restructured the maturities of the portfolio. The
result was the run-off of approximately $400 million of mostly high cost, single
service household consumer certificates of deposit of approximately $1.6 billion
maturing during the third and fourth quarters. Approximately 70 percent of the
accounts were retained while costs, on average, were lowered by 1.25 percent and
the maturities were more widely dispersed.

     The second largest category of deposits, interest-bearing demand,
represented 28.4 percent of total average deposits in 1996. This compares with
29.3 percent of total average deposits in 1995. These deposits in 1996 averaged
$3.7 bil-

                                                                              29
<PAGE>
 
  FINANCIALS

[PIE CHART APPEARS HERE]

Deposit Composition

<TABLE> 
<CAPTION> 
------------------------------------------------
                               1995     1996
<S>                            <C>      <C> 
CDs greater than $100M          6.9%     6.6%
Interest-Bearing Demand        29.3%    28.4%
Noninterest-Bearing Demand     13.2%    13.7%
Savings                         7.2%     8.0%
Time                           43.4%    43.3%
------------------------------------------------
</TABLE> 

lion, a decrease of $222.5 million or 5.7 percent from 1995 levels, reflecting
customers' preference for alternative investments due to the strong performance
of the financial and stock markets.

     Another deposit category is certificates of deposit of $100,000 or more.
These accounts comprised 6.6 percent of total average deposits in 1996. They
declined $64.4 million on average during the year. These deposits, for the most
part, are competitively bid and fluctuate based on the level of interest rates
and management's determination of the need for such deposits from time to time.
The primary reason for the decline was the lower interest rate environment
throughout 1996 and the strong performance of the financial and stock markets.

     Partially offsetting the declines experienced in these deposit categories
were increases in noninterest-bearing demand and savings accounts. Noninterest-
bearing demand deposits, which comprised 13.7 percent of total average deposits
in 1996, increased during the year $11.7 million on average or less than one
percent. Savings deposits, representing 8.0 percent of total average deposits,
increased to $1.0 billion on average in 1996, or $75.3 million, an increase of
7.8 percent between years. This deposit category increased across all of
AmSouth's markets but did particularly well in Florida.

     Table 10 provides a maturity schedule for time deposits of $100,000 or more
at December 31.

Other Interest-Bearing Liabilities Other interest-bearing liabilities include
all interest-bearing liabilities except deposits.

     Short-term liabilities included in this category consist of federal funds
purchased and securities sold under agreements to repurchase (repurchase
agreements), and other borrowed funds. Average federal funds purchased and
repurchase agreements increased in 1996 to $1.8 billion or 52.9 percent from the
$1.2 billion averaged in 1995. Other borrowed funds, which include master notes,
commercial paper, short-term Federal Home Loan Bank (FHLB) advances, the current
portion of long-term debt, and treasury, tax and loan notes, increased in 1996
to average $754.4 million versus $573.9 million in 1995, an increase of 31.4
percent. The principal reason for the increases was to fund earning asset growth
in 1996.

     At December 31, 1996, 1995 and 1994, federal funds purchased and
repurchased agreements totaled $1.9 billion, $1.9 billion and $1.2 billion,
respectively, with weighted-average interest rates of 6.00%, 4.93% and 5.48%,
respectively. The maximum amount outstanding at any month end during each of the
last three years was $2.3 billion, $1.9 billion and $2.4 billion, respectively.
The average daily balance and average interest rates for each year are presented
in Table 3.

     Long-term debt consists of subordinated capital notes due 1999, FHLB
advances, 6 3/4% subordinated debentures due 2025, 7 3/4% subordinated notes due
2004 and long-term notes payable. The only significant increase in long-term
funding during 1996 was in FHLB advances. The long-term FHLB advances increased
to $511.6 million on average in 1996 from $54.0 million in 1995. These funds
were utilized in 1996 because of their relatively low cost and the ability to
match their maturities with those of the assets being funded.

     In November 1995, AmSouth Bancorporation issued $150 million of 6 3/4%
subordinated debentures due in the year 2025, which may be redeemed by the
holder after ten

30
<PAGE>
 
Table 10
Maturity of Time Deposits of $100,000 or More

(In thousands)

<TABLE> 
<CAPTION> 
                                                         December 31
==========================================================================================
                                              1996              1995               1994
<S>                                 <C>               <C>                <C> 
Three months or less............... $       360,894   $       493,848    $       233,282
Over three through six months......         123,449           131,062            102,370
Over six through twelve months.....         167,509           254,626            127,775
Over twelve months.................         163,800           171,958            435,971
                                    ------------------------------------------------------
                                    $       815,652   $     1,051,494    $       899,398
                                    ======================================================

==========================================================================================
</TABLE> 

years. The proceeds of these funds have been used to purchase shares of AmSouth
common stock under plans approved by AmSouth's Board of Directors. During 1996,
2.7 million shares were purchased.

Shareholders' Equity At December 31, 1996, shareholders' equity totaled $1.4
billion, an increase of $12.4 million from year-end 1995. The sources of growth
in shareholders' equity during 1996 were the retention of net income, issuances
of common stock under the various stock-based employee benefits plans and a $2.6
million increase in unrealized gains on available-for-sale securities.
Offsetting the increases were cash dividends declared of $91.4 million and the
purchase of 2.7 million shares of AmSouth common stock for $113.9 million to
provide shares for dividend reinvestment, employee benefit plans and other
corporate purposes. Information on prior years may be found in the Consolidated
Statement of Shareholders' Equity on page 48 of this report. Also, see Note N of
the Notes to Consolidated Financial Statements.

     In October 1995, management recommended, and the Board of Directors
approved, a new capital and dividend policy for AmSouth. All of the guidelines
contained within the policy were developed based on industry standards,
regulatory requirements, perceived risk of the various lines of business and
future growth opportunities. Periodically, management will re-evaluate the
policy and present its findings to the Board of Directors to ensure that the
policy continues to support corporate objectives, the regulatory environment,
and changes in market conditions.

     At December 31, 1996, AmSouth met or exceeded all of the minimum capital
standards for the parent company and its subsidiaries as established by the
company's capital and dividend policy. Refer to Table 11 and Note P of the Notes
to Consolidated Financial Statements for specific information.

Risk Management

Risk identification and management are key elements in the overall management of
AmSouth. Management believes the primary risk exposures are interest rate,
liquidity and credit risks. Some of the more significant processes used to
manage and control these risks are described in the following paragraphs.

Asset and Liability 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 net interest margin under varying
interest rate environments. This is accomplished through the development and
implementation of lending, funding and pricing strategies designed to maximize
net interest income performance under varying interest rate environments subject
to


                                                                              31
<PAGE>
 
FINANCIALS


Table 11
Capital Ratios

<TABLE> 
<CAPTION> 

(Dollars in thousands)                                                                                December 31
==================================================================================================================================
                                                                                              1996                   1995
<S>                                                                                     <C>                    <C> 
Risk-based capital:
      Shareholders' equity........................................................      $     1,395,829        $     1,383,475
      Unrealized gains on available-for-sale securities (net of deferred taxes)...              (24,296)               (21,705)
      Less certain intangible assets..............................................             (268,139)              (284,707)
                                                                                        --------------------------------------
         Tier I capital...........................................................            1,103,394              1,077,063
                                                                                        --------------------------------------
      Adjusted allowance for loan losses..........................................              175,346                171,294
      Qualifying long-term debt...................................................              339,045                358,797
                                                                                        --------------------------------------
         Tier II capital..........................................................              514,391                530,091
                                                                                        --------------------------------------
            Total capital.........................................................      $     1,617,785        $     1,607,154
                                                                                        ======================================

Risk-adjusted assets..............................................................      $    14,023,996        $    13,687,977
                                                                                        ======================================
Capital ratios:
      Tier I capital to total risk-adjusted assets................................                 7.87%                  7.87%
      Total capital to total risk-adjusted assets.................................                11.54                  11.74
      Leverage....................................................................                 6.20                   6.38
      Ending equity to assets.....................................................                 7.58                   7.80
      Ending tangible equity to assets............................................                 6.22                   6.29

==================================================================================================================================
</TABLE>


specific liquidity and interest rate risk guidelines.

Interest Rate Risk The primary tool used by AmSouth to measure interest rate
risk is an earnings simulation model which evaluates the impact of different
interest rate scenarios on the company's projected business plan over a 12 to 24
month horizon. Management feels that a more traditional interest sensitivity gap
analysis does not provide a complete picture of AmSouth's exposure to interest
rate changes since static gap models are a point-in-time measurement and,
therefore, do not incorporate the effects of future balance sheet trends,
changes in the relationship between yields earned and rates paid, patterns or
rate movements in general or changes in prepayment speeds due to changes in
rates. AmSouth's earnings simulation model incorporates the effect of these
factors in addition to the impact of certain embedded interest rate caps and
floors on certain assets and liabilities while also reflecting management's
anticipated action under varying interest rate environments. Interest rate
scenarios are simulated on a regular basis to determine the range of interest
rate risk. Net interest income performance is measured under scenarios ranging
from plus or minus 100 basis points to plus or minus 300 basis points over 12
months compared to a stable interest rate environment. The net interest income
differential is expressed as a percent of net interest income over twelve months
if interest rates are unchanged. As of December 31, 1996, the earnings
simulation model results indicated that the corporation was in a relatively
neutral interest rate risk position with the net interest income differential,
in a plus or minus 200 basis point scenario, being less than 2 percent when
compared to net interest income under stable rates. This level of interest rate
risk is well within the company's




32
<PAGE>
 
Table 12

Interest Sensitivity Analysis

(Dollars in thousands)
<TABLE> 
<CAPTION> 
======================================================================================================================

                                               0-30               31-60             61-90             91-180 
                                               Days               Days              Days               Days 
<S>                                       <C>                 <C>                <C>               <C>
ASSETS
Earning assets:
  Federal funds sold and securities
   purchased under agreements to
   resell.............................    $      15,000       $         -0-      $         -0-     $         -0-
  Trading securities..................            3,879                 -0-                -0-               -0-
  Available-for-sale securities.......          337,809             62,521             52,477           170,943
  Held-to-maturity securities.........           38,284             35,570             27,097            89,011
  Mortgage loans held for sale........           30,290             30,292                 -0-               -0-
  Loans net of unearned income........        3,709,388          1,319,517            443,006           683,391
                                        -----------------------------------------------------------------------
     Total earning assets.............        4,134,650          1,447,900            522,580           943,345
Cash and other assets.................               -0-                -0-                -0-               -0-
Less allowance for loan losses........               -0-                -0-                -0-               -0-
Market valuation on
   available-for-sale securities......               -0-                -0-                -0-               -0-
                                        -----------------------------------------------------------------------
                                          $   4,134,650       $  1,447,900       $    522,580      $    943,345
                                        =======================================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
  Interest-bearing demand deposits....    $   2,290,885       $     36,475       $     15,837      $     47,511
  Savings deposits....................          329,962              8,914              8,914            26,742
  Time deposits.......................          399,482            266,550            298,943           731,554
  Certificates of deposit of
   $100,000 or more...................          195,221             61,767             69,486           116,344
  Federal funds purchased and
   securities sold under agreements
   to repurchase......................        1,872,286                 -0-                -0-               -0-
  Other borrowed funds................        1,010,041              5,000             10,000               246
  Long-term Federal Home
   Loan Bank advances.................          750,053                 53            215,054            50,162
  Other long-term debt................               -0-                -0-                -0-               -0-
                                        -----------------------------------------------------------------------
  Total interest-bearing liabilities..        6,847,930            378,759            618,234           972,559
Noninterest-bearing demand
  deposits............................          146,355             21,937             21,937            65,812
Other liabilities.....................               -0-                -0-                -0-               -0-
Shareholders' equity..................               -0-                -0-                -0-               -0-
                                        -----------------------------------------------------------------------
                                          $   6,994,285       $    400,696       $    640,171      $  1,038,371
                                        =======================================================================
Off-balance sheet
  financial instruments...............    $    (290,000)      $    (30,000)      $    (50,000)     $         -0-
                                        =======================================================================
Rate sensitivity gap:
   Dollar amount......................    $  (3,149,635)      $  1,017,204       $   (167,591)     $    (95,026)
   Percent of total earning assets....            (18.5)%              6.0%              (1.0)%            (0.6)%
   Cumulative dollar amount...........    $  (3,149,635)      $ (2,132,431)      $ (2,300,022)     $ (2,395,048)


Note: Certain interest-sensitive assets and liabilities are included in the
table based on historical experience rather than contractual maturities.

======================================================================================================================
</TABLE> 

<PAGE>
<TABLE>
<CAPTION>
======================================================================================================================

                                             181-365         Over One and         Over Five            Total 
                                               Days            Less Than            Years              
                                                                 Five
                                                                Years
<S>                                       <C>                 <C>                <C>               <C>
ASSETS
Earning assets:
  Federal funds sold and securities
   purchased under agreements to
   resell.............................    $          -0-      $         -0-      $         -0-     $     15,000
  Trading securities..................               -0-                -0-                -0-            3,879
  Available-for-sale securities.......          517,591            671,578            439,329         2,252,248
  Held-to-maturity securities.........          210,726          1,626,402            617,616         2,644,706
  Mortgage loans held for sale........               -0-                -0-                -0-           60,582
  Loans net of unearned income........        1,254,722          3,972,359            697,863        12,080,246
                                        -----------------------------------------------------------------------
     Total earning assets.............        1,983,039          6,270,339          1,754,808        17,056,661
Cash and other assets.................               -0-                -0-         1,491,422         1,491,422
Less allowance for loan losses........               -0-                -0-          (179,049)         (179,049)
Market valuation on
   available-for-sale securities......               -0-                -0-            38,230            38,230
                                        -----------------------------------------------------------------------
                                          $   1,983,039       $  6,270,339       $  3,105,411      $ 18,407,264
                                        =======================================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
  Interest-bearing demand deposits....    $      95,021       $    678,020       $    436,238      $  3,599,987
  Savings deposits....................           53,484            388,256            252,283         1,068,555
  Time deposits.......................        1,176,234          2,190,504             10,120         5,073,387
  Certificates of deposit of
   $100,000 or more...................          167,509            163,599                201           774,127
  Federal funds purchased and
   securities sold under agreements
   to repurchase......................               -0-                -0-                -0-        1,872,286
  Other borrowed funds................               96                 -0-                -0-        1,025,383
  Long-term Federal Home
   Loan Bank advances.................              440              3,112              4,855         1,023,729
  Other long-term debt................               -0-           100,081            311,865           411,946
                                        -----------------------------------------------------------------------
  Total interest-bearing liabilities..        1,492,784          3,523,572          1,015,562        14,849,400
Noninterest-bearing demand
  deposits............................          131,623            957,812            606,067         1,951,543
Other liabilities.....................               -0-                -0-           210,492           210,492
Shareholders' equity..................               -0-                -0-         1,395,829         1,395,829
                                        -----------------------------------------------------------------------
                                          $   1,624,407       $  4,481,384       $  3,227,950      $ 18,407,264
                                        =======================================================================
Off-balance sheet
  financial instruments...............    $          -0-      $    370,000       $         -0-     $         -0-
                                        =======================================================================
Rate sensitivity gap:
   Dollar amount......................    $     358,632
   Percent of total earning assets....              2.1%
   Cumulative dollar amount...........    $  (2,036,416)
======================================================================================================================
</TABLE> 
                                                                 


                                                                              33
<PAGE>
 
FINANCIALS



policy guidelines. A very important factor in determining this interest rate
risk position is the extent to which pricing on administered rate deposit
products including interest checking, savings, and money market accounts would
be affected under varying interest rate scenarios. At AmSouth, pricing for these
products is assumed to be more variable in rising rate scenarios than in
declining rate scenarios. While these assumptions are somewhat subjective,
management reviews the anticipated pricing for these products on a regular basis
and alters these assumptions whenever trends or market conditions dictate.

     AmSouth has, from time to time, utilized various off-balance sheet
instruments such as interest rate swaps and caps to assist in managing interest
rate risk. As of December 31, 1996, AmSouth had $1.0 billion notional amount of
caps outstanding, $500 million of caps sold and $500 million of caps purchased,
as hedges on $500 million of prime rate loans. This transaction effectively
locks in the historically wide 300 basis point spread between the federal funds
and prime interest rates in a rising rate environment. If interest rates
increased immediately by 200 basis points at the beginning of 1997 and assuming
no change in the spread between the federal funds rate and prime rate at
December 31, 1996, the earnings impact of these caps would be immaterial. An
immediate decrease of 200 basis points would have no impact as the rates would
be below the caps. Assuming that the current market spread between the prime
rate and the federal funds rate widens by 50 basis points, AmSouth would incur
an additional loss of $2.5 million for the year. If the spread decreased by 50
basis points, AmSouth would have a positive effect on earnings of $2.5 million
for the year.

     In addition to the caps, AmSouth had interest rate swaps as of December 31,
1996 in the notional amount of $370.0 million. One of the interest rate swaps
was purchased to hedge the cost of $150.0 million of 6 3/4% subordinated
debentures issued in the fourth quarter of 1995. This swap effectively converts
the fixed rate debt to a floating rate, tied to the one month LIBOR rate. The
other interest rate swaps consist of a $155 million notional amount purchased to
hedge variable rate securities held in the available-for-sale portfolio and $65
million of notional amount purchased to hedge fixed rate consumer CD's. Assuming
a 200 basis point immediate increase in rates as of the beginning of January
1997, AmSouth would recognize a loss in earnings of approximately $3.6 million
for the year from these swaps. Conversely, a 200 basis point decrease in rates
would result in approximately $6.8 million of income for the year.

     As of December 31, 1996, AmSouth held other off-balance sheet instruments
as hedges as well as futures and forward contracts to provide customers and
AmSouth a means of managing the risks of changing interest and foreign exchange
rates. These other off-balance sheet instruments are immaterial.

     AmSouth terminated $1.1 billion of interest rate swaps and $915.0 million
of interest rate caps during the fourth quarter of 1994. The impact of interest
rate contracts on net interest income in 1995 was a decrease of $10.8 million.
This compares with a decrease in net interest income from the effect of interest
rate contracts during 1994 of $4.3 million. Of these amounts, $10.3 million in
1995 and $2.4 million in 1994 was due to the amortization of the deferred loss
on the termination of interest rate swaps that occurred in the fourth quarter of
1994. The effect of the amortization of the deferred loss on net interest income
in 1996 was $6.6 million and in 1997, when it will be fully amortized, is $292
thousand.

     Table 13 summarizes the activity, by notional amount, of off-balance sheet
financial instruments utilized in the asset and liability management process at
AmSouth for the years 1996, 1995 and 1994.

     Table 14 summarizes the expected maturities on all of AmSouth's off-balance
sheet positions at December 31, 1996 and interest rates exchanged on swaps. Both
the timing of the maturities and the variable interest payments and receipts
vary as certain interest rates change. The maturities and interest rates
exchanged are calculated assuming that interest rates remain unchanged from
average December 1996 rates. The information presented could change as future
rates increase or decrease. See Note L of the Notes to Consolidated Financial
Statements.


34

<PAGE>
 
Table 13

Interest Rate Swaps, Caps and Floors
<TABLE> 
<CAPTION> 
                                                               Swaps                         Caps & 
(In millions)                          Receive fixed    Pay fixed    Basis       Other       Floors      Total
==================================================================================================================
<S>                                    <C>             <C>         <C>         <C>         <C>         <C> 
Balance at January 1, 1994 ........       $    185     $    120    $    300    $    600    $  1,025    $  2,230    
  Additions .......................             -0-          -0-         -0-        400         350         750    
  Maturities ......................             -0-          -0-       (300)         -0-        (20)       (320)   
  Calls ...........................           (120)        (120)         -0-         -0-         -0-       (240)   
  Terminations ....................            (65)          -0-         -0-     (1,000)       (915)     (1,980)   
                                       ---------------------------------------------------------------------------
Balance at December 31, 1994 ......             -0-          -0-         -0-         -0-        440         440    
  Additions .......................            150           -0-         -0-         -0-      1,000       1,150    
  Maturities ......................             -0-          -0-         -0-         -0-        (30)        (30)   
  Calls ...........................             -0-          -0-         -0-         -0-         -0-         -0-   
  Terminations ....................             -0-          -0-         -0-         -0-       (300)       (300)   
                                       ---------------------------------------------------------------------------
Balance at December 31, 1995 ......            150           -0-         -0-         -0-      1,110       1,260    
  Additions .......................            220           -0-         -0-         -0-         -0-        220    
  Maturities ......................             -0-          -0-         -0-         -0-        (33)        (33)   
  Calls ...........................             -0-          -0-         -0-         -0-         -0-         -0-   
  Terminations ....................             -0-          -0-         -0-         -0-         -0-         -0-   
                                       ---------------------------------------------------------------------------
Balance at December 31, 1996 ......       $    370     $     -0-   $     -0-   $     -0-   $  1,077    $  1,447    
                                       ===========================================================================
==================================================================================================================
</TABLE> 

Liquidity AmSouth's goal in liquidity management is to satisfy the cash flow
requirements of depositors and borrowers while at the same time meeting the cash
flow needs of the corporation. 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. In addition, the
Asset/Liability Committee reviews liquidity on a monthly basis and approves any
changes in strategy that are necessary as a result of the asset/liability
management process or anticipated cash flow changes. The Committee also compares
on a monthly basis the company's liquidity position to established corporate
liquidity guidelines. At December 31, 1996, AmSouth was within all of the
guidelines which have been established. The primary sources of liquidity on the
asset side of the balance sheet are maturities and cash flows from both loans
and investments as well as the ability to securitize certain assets. 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. AmSouth's most commonly used sources of
wholesale funding are (1) federal funds (i.e., the excess reserves of other
financial institutions); (2) repurchase agreements, whereby U.S. government and
government agency securities are pledged as collateral for short-term
borrowings; and (3) pledges of acceptable assets as collateral for public
deposits and certain tax collection monies. 

  In addition to these sources,  AmSouth can access other

                                                                              35
<PAGE>
 
   FINANCIALS


Table 14

Maturities on Caps and Interest Rates Exchanged on Swaps

<TABLE> 
<CAPTION> 

(Dollars in millions)                            Mature During
==========================================================================================
                                 1997        1998       1999         2000       Total
<S>                          <C>         <C>         <C>         <C>         <C> 
Receive fixed rate swaps:
   Notional amount ........  $    215    $    115    $     40    $     -0-   $    370 
   Receive rate ...........      6.46%       6.66%       6.70%          --       6.55%
   Pay rate ...............      5.61%       5.58%       5.53%          --       5.59%
Caps:                                                                                 
   Notional amount ........  $     77    $     -0-   $     -0-   $  1,000    $  1,077 
==========================================================================================

</TABLE> 
                                                                 
wholesale funding sources such as Eurodollar deposits, certificates of deposit,
commercial paper, and lines of credit. All bank subsidiaries also have the
ability to borrow from the FHLB. FHLB advances are competitively priced and
actively used as a source of funds with usage expected to continue increasing in
the future. Also, AmSouth Bank of Alabama during 1995 established a short and
medium-term note facility with a commitment of up to $1.0 billion in borrowing
capacity.
     Maintaining adequate credit ratings on debt issues is critical to liquidity
because it affects the ability of AmSouth to attract funds from various sources
on a cost competitive basis. Table 15 summarizes AmSouth's credit ratings at
December 31, 1996.

Credit Risk Management Process and Loan Quality The loan portfolio at AmSouth
holds the highest degree of risk for the company. AmSouth manages and controls
risk in the loan portfolio through adherence to consistent standards established
by senior management, combined with a commitment to producing quality assets,
developing profitable relationships and meeting strategic growth targets.
     AmSouth has written credit policies based on the strategic direction of the
company. These policies establish underwriting standards, place limits on
exposure, and set other limits or standards as deemed necessary and prudent.
Also included in the policy, and primarily determined by the amount of the loan,
are various approval levels, ranging from the branch or department level to the
centralized Corporate Credit


Table 15

Credit Ratings
<TABLE> 
<CAPTION> 

                                                                      Standard &
                                                      Moody's          Poor's          Bankwatch
=======================================================================================================
<S>                                                   <C>             <C>              <C>      
7 3/4% Subordinated Notes Due 2004 .............        A3              BBB+              A   
6 3/4% Subordinated Debentures Due 2025 ........        A3              BBB+              A  
Subordinated Capital Notes Due 1999 ............        A3              BBB+              A  
Floating Rate Notes Due 1999 ...................        A2               A-               -  
Commercial paper ...............................        P-1             A-2             TBW-1
Certificates of deposit ........................        AA3*             A                -  
Short-term counterparty ........................        P-1*            A-1               -  
Long-term counterparty  ........................        AA3*             A                -  
                                                            
* AmSouth Bank of Alabama
=======================================================================================================
</TABLE> 
36
<PAGE>
 
Table 16
Nonperforming Assets

<TABLE> 
<CAPTION> 

(Dollars in thousands)                                                 December 31
==================================================================================================================
                                               1996         1995            1994           1993          1992

<S>                                        <C>           <C>            <C>            <C>           <C> 
Nonaccrual loans...................        $  78,048     $  96,246      $   89,545     $   53,020    $   57,213
Restructured loans.................               -0-           -0-         13,203          2,420         4,924
                                           --------------------------------------------------------------------
  Nonperforming loans..............           78,048        96,246         102,748         55,440        62,137
                                           --------------------------------------------------------------------
Foreclosed properties..............           14,445        16,150          28,263         29,273        52,771
Repossessions......................            1,822         3,114           2,079          1,081         1,196
                                           --------------------------------------------------------------------
  Total nonperforming assets*......        $  94,315     $ 115,510      $  133,090     $   85,794    $  116,104
                                           ====================================================================
Nonperforming assets*
  to loans net of unearned income, 
  foreclosed properties            
  and repossessions................             0.78%         0.98%           1.16%          1.00%         1.71%
                                           ====================================================================
Accruing loans 90 days past due....        $  36,382     $  39,618      $   34,246     $   20,917    $   18,007
                                           ====================================================================

*Exclusive of accruing loans 90 days past due
==================================================================================================================
</TABLE> 


Table 17
Nonperforming Loans and Net Charge-offs
<TABLE> 
<CAPTION> 

(In thousands)                                         Nonperforming Loans*                            
==============================================================================================
                                                         % of                       % of    
                                         December 31    Average    December 31    Average   
                                            1996      Loans** per     1995      Loans** per 
                                                        Category                  Category  

<S>                                        <C>        <C>         <C>           <C> 
Commercial............................     $  14,853      0.47%   $  16,301         0.57%   
                                         ----------------------------------------------- 
Commercial real estate:
  Commercial real estate mortgages...         21,796      1.37       36,617         2.58
  Real estate construction...........          1,693      0.27        3,075         0.60
                                         -----------------------------------------------
       Total commercial real estate..         23,489      1.06       39,692         2.05
                                         -----------------------------------------------
Consumer:
  Residential first mortgages........         28,527      0.87       30,459         0.71
  Other residential mortgages........          4,311      0.56        1,011         0.16
  Dealer indirect....................          4,273      0.38        6,486         0.69
  Revolving credit...................            165      0.03            0           --
  Other consumer.....................          2,430      0.39        2,297         0.35
                                         -----------------------------------------------
       Total consumer................         39,706      0.63       40,253         0.58
                                         -----------------------------------------------
                                           $  78,048      0.67%   $  96,246         0.82%
                                         ===============================================

==============================================================================================
</TABLE> 
<PAGE>
<TABLE> 
<CAPTION> 
                                                        Net Charge-offs 
==============================================================================================
                                                         % of                      % of    
                                         December 31    Average  December 31      Average  
                                            1996     Loans** per     1995       Loans** per
                                                       Category                   Category  
<S>                                        <C>        <C>         <C>           <C> 

Commercial.........................      $   3,830       0.12%    $   4,595         0.16%
                                         -----------------------------------------------
Commercial real estate:
  Commercial real estate mortgages            (193)     (0.01)        1,397         0.10
  Real estate construction......              (404)     (0.06)          185         0.04
                                         -----------------------------------------------
         Total commercial real estate         (597)     (0.03)        1,582         0.08
                                         -----------------------------------------------
Consumer:
  Residential first mortgages....            2,742       0.08           726         0.02
  Other residential mortgages....              567       0.07          (153)       (0.02)
  Dealer indirect................           14,057       1.26         7,599         0.80
  Revolving credit...............           29,904       6.08        15,401         3.99
  Other consumer.................           14,070       2.26         4,858         0.75
                                         -----------------------------------------------
         Total consumer..........           61,340       0.97        28,431         0.41
                                         -----------------------------------------------
                                         $  64,573       0.55%    $  34,608         0.29%
                                         ===============================================

*   Exclusive of accruing loans 90 days past due              
**  Net of unearned income                       
==============================================================================================
</TABLE> 
                                                                              37
<PAGE>
 
  FINANCIALS


Committee or the Board of Directors of the banks. AmSouth maintains a
diversified portfolio in order to spread its risk and reduce its exposure to
economic downturns which may occur in different segments of the economy or in
particular industries. Industry and loan type diversification is reviewed
quarterly.

     AmSouth has a Credit Review Department which performs ongoing, independent
reviews of the risk management process, proper documentation and specific loans.
This department is centralized and independent of the lending function. The
results of its examinations are reported to the Audit and Community
Responsibility Committee of the Board of Directors as well as AmSouth's
independent auditors. In addition, regular reports are made to senior management
and the Board of Directors regarding the credit quality of the loan portfolio as
well as trends in the portfolio.

     Each commercial loan recorded at AmSouth is assigned a risk rating on a
numerical scale from one to nine by the loan officer using established credit
policy guidelines, subject to review by the Credit Review Department.

     In addition, commercial real estate loans are categorized by the type of
collateral. Owner occupied properties include mortgages where the borrower is a
primary tenant, such as a factory or warehouse loan. Nonowner occupied lending
represents those loans where the primary method of repayment is anticipated to
come from rental income and generally has inherently more risk than owner
occupied lending. Consumer loan portfolios are assigned ratings by pools on the
same scale as commercial loans and are based on type of loan and performance.
The risk profile of the loan portfolio established by these ratings and trends
is reported to management, the Audit and Community Responsibility Committee and
the Board of Directors.

     The Credit Administration function includes designated credit officers, who
are organizationally independent of the production areas, that oversee the loan
approval process, ensure adherence to credit policies and monitor efforts to
reduce nonperforming and classified assets. Additionally, a centralized special
assets function handles the resolution and disposition of certain other assets
to ensure the optimal level of performance of these assets is achieved.

     Risk in the consumer loan portfolio is further managed through utilization
of state-of-the-art computerized credit scoring, in-depth analysis of portfolio
components and specific account selection, management and collection techniques.
In addition, collections is centralized to capitalize on the collection
specialization and economies of scale as well as to provide consistent
application of collection procedures. The collection process is also automated
to ensure timely collection of accounts and consistent management of risk
associated with delinquent accounts. Finally, loan operations provides a final
independent document review with notification to the loan officers of any
document exceptions.

Nonperforming Assets Management closely monitors loans and other assets which
are classified as nonperforming assets. Nonperforming assets include nonaccrual
loans, restructured loans, foreclosed properties, and repossessions. Effective
January 1, 1995, AmSouth adopted Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan," as amended by Statement
of Financial Accounting Standards No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures" (Statement 114). A
loan is impaired when, based on the current information and events, it is
probable that AmSouth will be unable to collect all amounts due according to the
contractual terms of the loan agreement. Statement 114 does not apply to larger
groups of homogeneous consumer loans so impaired loans are primarily commercial
loans and commercial real estate loans. Essentially all impaired loans at the
end of 1996 were on nonaccrual status. Loans are generally placed on nonaccrual
if full collection of principal and interest becomes unlikely (even if all
payments are current) or if the loan is delinquent in principal or interest
payments for 90 days or more, unless the loan is well secured and in the process
of collection.

     Nonperforming assets, excluding accruing loans 90 days past due, decreased
$21.2 million, or 18.3 percent, during 1996. This follows a $17.6 million, or
13.2 percent, decrease during 1995. The graph entitled Nonperforming Assets
Trend and Table 16 provide trend information and detail components of
nonperforming assets for each of the last five years.

38
<PAGE>
 
Table 18

Composition of
Foreclosed Properties

(Dollars in thousands)
<TABLE> 
<CAPTION> 
================================================================
                                   Carrying    Percent of
                                    Value        Total
<S>                              <C>           <C> 
Residential....................  $   7,361       47.0% 
Commercial buildings...........      5,744       36.6 
Land/lots......................      2,568       16.4 
                                 --------------------
                                    15,673      100.0%
                                                =====
Allowance for foreclosed                   
   property losses.............     (1,228)
                                 ---------
                                 $  14,445 
                                 =========
================================================================
</TABLE> 


     The decline in nonperforming assets in 1996, compared to 1995, was the
result of a decrease in nonperforming loans. Nonperforming loans were $78.0
million at the end of the year, a decline of $18.2 million or 18.9 percent.
Commercial and commercial real estate nonperforming loans were lower in 1996, on
a combined basis, by $17.7 million, while total nonperforming consumer loans
were lower by $547 thousand. The improvement in the levels of nonperforming
commercial and commercial real estate loans during 1996 is attributable to a
combination of lower interest rates, relatively strong real estate markets
throughout AmSouth's service areas and continued aggressive collection efforts.

     Table 17 presents nonperforming loans and year-to-date net charge-offs and
each as a percentage of average net loans by category for December 31, 1996 and
1995.  

     For the year ended December 31, 1996, the level of foreclosed properties
improved from the level reported at year-end 1995. The improvement was due to a
combination of an improved economic environment and continued aggressive efforts
to dispose of these properties. Table 18 presents foreclosed properties by type
of property and their carrying values at December 31, 1996.

     Table 19 is a summary of the allowance for foreclosed property losses for
1996, 1995 and 1994.

[CHART APPEARS HERE]
<TABLE> 
<CAPTION> 
----------------------------------------------------------------
Nonperforming        
Assets Trend         
(Dollars in millions) 

                             92     93     94     95     96
<S>                        <C>    <C>      <C>     <C>    <C> 
Nonperforming Assets       $ 116  $   86   $ 133   $116   $ 94
Nonperforming Assets/Loans  1.71%   1.00%   1.16%   .98%   .78%

----------------------------------------------------------------
</TABLE> 
Allowance for Loan Losses AmSouth maintains an allowance for loan losses which
it 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
analyzes of historical performance, the level of nonperforming


Table 19
Allowance for Foreclosed 
Property Losses

<TABLE> 
<CAPTION> 
(In thousands)                          1996       1995       1994
==========================================================================
<S>                                  <C>        <C>        <C> 
Balance at January 1..............   $    766   $  3,638   $  3,908 
Net recoveries (write-downs)......        161     (2,550)    (2,018)
Addition (reduction)                                                
   to allowance                                                     
   charged (credited)                                               
   to expense.....................        301       (322)     1,748 
                                     ------------------------------
Balance at December 31............   $  1,228   $    766   $  3,638 
                                     ==============================
==========================================================================
</TABLE> 
                                                                              39
<PAGE>
 
   FINANCIALS


Table 20
Allowance for Loan Losses
<TABLE> 
<CAPTION> 
(Dollars in thousands)                                    1996           1995           1994            1993           1992
================================================================================================================================
<S>                                                <C>               <C>            <C>            <C>            <C> 
Balance at January 1...........................    $     178,451     $  171,167     $  131,509     $   99,646     $   95,392 
Loans charged off:
   Commercial..................................           (8,348)        (7,991)       (13,304)        (8,492)       (16,276)
   Commercial real estate mortgages............           (2,455)        (3,474)        (3,869)        (2,581)       (12,992)
   Commercial real estate construction.........              (88)          (455)          (154)          (178)          (537)
   Residential first mortgages.................           (2,977)          (854)        (2,724)          (932)        (1,394)
   Other residential mortgages.................             (596)          (127)           (68)          (263)          (299)
   Dealer indirect.............................          (20,203)       (10,385)        (4,270)        (3,557)        (4,612) 
   Revolving credit............................          (32,145)       (17,203)       (14,810)       (15,449)        (5,196) 
   Other consumer..............................          (16,467)        (6,793)        (4,730)        (4,917)        (4,734) 
                                                   -------------------------------------------------------------------------
      Total charge-offs........................          (83,279)       (47,282)       (43,929)       (36,369)       (46,040) 
                                                   -------------------------------------------------------------------------
Recoveries of loans previously charged off:        
   Commercial..................................            4,518          3,396          7,420          4,464          3,252 
   Commercial real estate mortgages............            2,648          2,077          3,639          6,749            305 
   Commercial real estate construction.........              492            270            224            217          3,828 
   Residential first mortgages.................              235            128            227            329            286 
   Other residential mortgages.................               29            280            107             28              1 
   Dealer indirect.............................            6,146          2,786          1,702          1,760          1,572 
   Revolving credit............................            2,241          1,802          1,470          1,009            781 
   Other consumer..............................            2,397          1,935          2,245          2,065          1,688 
                                                   -------------------------------------------------------------------------
      Total recoveries.........................           18,706         12,674         17,034         16,621         11,713 
                                                   -------------------------------------------------------------------------
Net charge-offs................................          (64,573)       (34,608)       (26,895)       (19,748)       (34,327)
                                                   -------------------------------------------------------------------------
Addition to allowance charged to expense.......           65,171         40,139         30,103         27,966         38,581 
Allowance acquired in bank purchases...........               -0-         1,753         36,450         23,645             -0-
                                                   -------------------------------------------------------------------------
Balance at December 31.........................    $     179,049  $     178,451  $     171,167  $     131,509  $      99,646  
                                                   =========================================================================
Loans net of unearned income,                      
   outstanding at end of period................    $  12,080,246  $  11,743,273  $  11,429,907  $   8,540,412  $   6,716,595 
Average loans net of unearned income,                                                                                        
   outstanding for the period..................    $  11,694,849  $  11,747,385  $   9,918,274  $   7,634,984  $   6,334,313  
Ratios:                                            
   Allowance at end of period to loans             
      net of unearned income...................             1.48%          1.52%          1.50%          1.54%          1.48% 
   Allowance at end of period to average                                                                                      
      loans net of unearned income.............             1.53           1.52           1.73           1.72           1.57 
   Allowance at end of period to                                                                                             
      nonperforming loans * ...................           229.41         185.41         166.59         237.21         160.36 
   Allowance at end of period to                                                                                             
      nonperforming assets * ..................           189.41         154.49         128.61         153.28          85.82 
   Net charge-offs to average loans                                                                                          
      net of unearned income...................             0.55           0.29           0.27           0.26           0.54 
   Net charge-offs to allowance                                                                                              
      at end of period.........................            36.06          19.39          15.71          15.02          34.45 
   Recoveries to prior year charge-offs........            39.56          28.85          46.84          36.10          19.14  
                                                   
* Exclusive of accruing loans 90 days past due     
===============================================================================================================================
</TABLE> 


40
<PAGE>
 
and adversely rated loans, specific analyzes 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 then presented to
and subsequently approved by senior management and the Audit and Community
Responsibility Committee of the Board of Directors.

     At December 31, 1996, the allowance for loan losses to loans, net of
unearned income, was 1.48 percent while coverage of nonperforming loans was
229.4 percent. This compares with an allowance for loan losses, net of unearned
income, at the end of 1995 of 1.52 percent and to nonperforming loans for the
same period of 185.4 percent.

     Table 21 is a summary of the allocation of the allowance for loan losses as
determined by internal analysis. Although amounts are assigned to certain
classifications of loans, the balance of the allowance for loan losses at
December 31, 1996 is considered to be a general allowance and, therefore, is
available for charge-offs of any type of loan which may be necessary in the
future.


Table 21
Allocation of the Allowance for Loan Losses
<TABLE> 
<CAPTION> 

(Dollars in thousands)                          December 31, 1996                  December 31, 1995  
==============================================================================================================
                                                           Percentage of                      Percentage of
                                                           Loans* in Each                     Loans* in Each
                                         Allowance         Category to      Allowance         Category to 
                                         Allocation        Total Loans*     Allocation        Total Loans*
<S>                                     <C>                <C>             <C>                <C>       
Commercial............................  $  24,919            29.6%         $  30,125            26.0%  
                                        ------------------------------------------------------------
Commercial real estate:                                                                                
   Commercial real estate mortgages...     21,243            13.7             29,177            13.0    
   Real estate construction...........      8,677             5.7              5,302             4.5    
                                        ------------------------------------------------------------
      Total commercial real estate....     29,920            19.4             34,479            17.5    
                                        ------------------------------------------------------------
Consumer:                                                                                              
   Residential first mortgages........      4,538            24.6             18,699            32.4    
   Other residential mortgages........      1,766             7.3              4,188             6.0    
   Dealer indirect....................     14,701            10.1             13,809             8.8    
   Revolving credit...................     41,824             4.3             23,837             4.1    
   Other consumer.....................     19,214             4.7             16,845             5.2    
                                        ------------------------------------------------------------
      Total consumer..................     82,043            51.0             77,378            56.5    
                                        ------------------------------------------------------------
Unfunded commitments..................      7,144              --              6,685              --   
Standby letters of credit.............      1,963              --              3,880              --   
Unallocated...........................     33,060              --             25,904              --   
                                        ------------------------------------------------------------
                                        $ 179,049           100.0%         $ 178,451           100.0%  
                                        ============================================================
<CAPTION>                                                                                                                    
                                                 December 31, 1994                  December 31, 1993
==============================================================================================================
                                                           Percentage of                      Percentage of
                                                           Loans* in Each                     Loans* in Each
                                         Allowance         Category to      Allowance         Category to 
                                         Allocation        Total Loans      Allocation        Total Loans
<S>                                     <C>                <C>             <C>                <C>         
Commercial............................  $  29,184            23.6%         $  37,868            29.9%  
                                        ------------------------------------------------------------
Commercial real estate:                                                              
   Commercial real estate mortgages...     30,464            12.0             21,385            13.3     
   Real estate construction...........     12,021             4.7              5,901             4.3     
                                        ------------------------------------------------------------
      Total commercial real estate....     42,485            16.7             27,286            17.6     
                                        ------------------------------------------------------------
Consumer:                                                                            
   Residential first mortgages........     18,514            37.4              4,076            28.5     
   Other residential mortgages........      2,289             5.6                719             6.2     
   Dealer indirect....................      7,916             7.2              6,108             6.7     
   Revolving credit...................     12,441             3.1             16,099             4.0     
   Other consumer.....................      9,381             6.4              4,514             7.1     
                                        ------------------------------------------------------------
      Total consumer..................     50,541            59.7             31,516            52.5     
                                        ------------------------------------------------------------
Unfunded commitments..................      7,241              --              5,650              --    
Standby letters of credit.............      1,825              --              1,660              --    
Unallocated...........................     39,891              --             27,529              --    
                                        ------------------------------------------------------------
                                        $ 171,167           100.0%         $ 131,509           100.0%  
                                        ============================================================
*   Net of unearned income
==============================================================================================================
</TABLE> 

                                                                              41
<PAGE>
 
  F I N A N C I A L S


Supplemental Financial Statements

AmSouth Bancorporation and Subsidiaries
Consolidated Statement of Condition
December 31, 1986-1996
<TABLE>
<CAPTION>

(In thousands)                                   1996           1995           1994           1993          1992
=======================================================================================================================
<S>                                         <C>            <C>            <C>            <C>            <C>
ASSETS
Cash and due from banks...................  $    648,494   $    651,641   $    616,639   $    614,698   $    589,084
Temporary investments.....................     2,369,939      2,546,583        672,170      1,896,220        806,257
Held-to-maturity securities...............     2,644,706      2,167,009      3,336,557      1,823,317      2,607,748
Loans net of unearned income..............    12,080,246     11,743,273     11,429,907      8,540,412      6,716,595
Less allowance for loan losses............       179,049        178,451        171,167        131,509         99,646
                                            ------------------------------------------------------------------------
    Net loans.............................    11,901,197     11,564,822     11,258,740      8,408,903      6,616,949
Premises and equipment....................       301,592        276,426        282,095        234,155        182,305
Other assets..............................       541,336        532,314        611,750        492,328        313,984
                                            ------------------------------------------------------------------------
    Total assets..........................  $ 18,407,264   $ 17,738,795   $ 16,777,951   $ 13,469,621   $ 11,116,327
                                            ========================================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits..................................  $ 12,467,599   $ 13,420,287   $ 13,203,101   $ 10,374,183   $  8,641,487
Federal funds purchased and
    repurchase agreements.................     1,872,286      1,861,090      1,212,723        793,177        989,790
Other interest-bearing liabilities........     2,461,058        919,635        906,225        829,266        494,649
                                            ------------------------------------------------------------------------
    Total deposits and
      interest-bearing liabilities........    16,800,943     16,201,012     15,322,049     11,996,626     10,125,926
Acceptances outstanding...................         3,190          2,007          6,979          6,264          6,005
Accrued expenses and other liabilities....       207,302        152,301        138,465        324,006        111,022
                                            ------------------------------------------------------------------------
    Total liabilities.....................    17,011,435     16,355,320     15,467,493     12,326,896     10,242,953
Shareholders' equity......................     1,395,829      1,383,475      1,310,458      1,142,725        873,374
                                            ------------------------------------------------------------------------
    Total liabilities and
      shareholders' equity................  $ 18,407,264   $ 17,738,795   $ 16,777,951   $ 13,469,621   $ 11,116,327
                                            ========================================================================
</TABLE>

Consolidated Statement of Earnings
Years Ended December 31, 1986-1996

<TABLE>
<CAPTION>

(In thousands except per share data)             1996*          1995           1994          1993            1992
=======================================================================================================================
<S>                                         <C>            <C>            <C>            <C>            <C>
Revenue from earning assets...............  $  1,353,821   $  1,272,939   $  1,047,741   $    840,617   $    772,251
Interest expense..........................       701,440        679,396        480,414        339,326        341,706
                                            ------------------------------------------------------------------------
Net interest income.......................       652,381        593,543        567,327        501,291        430,545
Provision for loan losses.................        65,171         40,139         30,103         27,966         38,581
                                            ------------------------------------------------------------------------
Net interest income after provision
   for loan losses........................       587,210        553,404        537,224        473,325        391,964
Noninterest revenues......................       235,274        231,671        175,355        199,237        168,719
Noninterest expenses......................       534,232        509,898        519,239        453,999        396,113
                                            ------------------------------------------------------------------------
Income before income taxes................       288,252        275,177        193,340        218,563        164,570
Income taxes..............................       105,576        100,222         66,050         71,843         47,977
                                            ------------------------------------------------------------------------
Net income................................  $    182,676   $    174,955   $    127,290   $    146,720   $    116,593
                                            ========================================================================

Average common shares outstanding.........        56,605         58,262         56,527         50,848         46,684

Earnings per common share.................         $3.23          $3.00          $2.25          $2.89          $2.50

Cash dividends declared per
     common share.........................         $1.62          $1.54          $1.43          $1.22          $1.07
</TABLE>

*  Excluding the one-time, pre-tax third quarter charge of $24,196,000 or $.27
   per share after tax, required under federal legislation to recapitalize the
   Savings Association Insurance Fund (SAIF), net income for 1996 was
   $197,895,000 or $3.50 per share. Excluding SAIF, the ten-year compound growth
   rate for net income and earnings per share was 10.21% and 6.97%,
   respectively.
                


42

<PAGE>
 
  F I N A N C I A L S 
                                                                             
Supplemental Financial Statements         
                                          
AmSouth Bancorporation and Subsidiaries   
Consolidated Statement of Condition      
December 31, 1986-1996                 

<TABLE>
<CAPTION>
                                                                                                                          Ten-Year
                                                                                                                          Compound
                                                                                                                         Growth Rate
(In thousands)                               1991        1990          1989          1988        1987          1986       1996/1986
====================================================================================================================================

<S>                                     <C>          <C>           <C>           <C>         <C>           <C>           <C>
ASSETS
Cash and due from banks...............  $    560,249 $   623,744   $   495,013   $   511,666 $   463,219   $   511,124       2.41%
Temporary investments.................       676,604     178,944       221,231       160,202     195,161       224,959      26.55
Held-to-maturity securities...........     2,780,821   2,214,608     2,166,410     2,185,972   1,887,610     1,529,605       5.63
Loans net of unearned income..........     6,293,509   6,382,299     6,316,472     5,873,735   5,426,186     4,424,240      10.57
Less allowance for loan losses........        95,392      92,946        96,142        75,945      72,895        61,668      11.25
                                        -----------------------------------------------------------------------------------------
    Net loans.........................     6,198,117   6,289,353     6,220,330     5,797,790   5,353,291     4,362,572      10.56
Premises and equipment................       160,984     154,761       143,638       142,545     153,968       126,613       9.07
Other assets..........................       363,214     382,196       371,159       408,220     400,590       347,604       4.53
                                        -----------------------------------------------------------------------------------------
    Total assets......................  $ 10,739,989 $ 9,843,606   $ 9,617,781   $ 9,206,395 $ 8,453,839   $ 7,102,477       9.99%
                                        =========================================================================================

LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits..............................  $  8,538,296 $ 8,086,234   $ 7,613,948   $ 7,328,081 $ 6,563,364   $ 5,483,180       8.56%
Federal funds purchased and
    repurchase agreements.............       572,970     828,903     1,079,951       883,237     964,187       822,348       8.58
Other interest-bearing liabilities....       367,833     164,059       175,953       223,290     180,817       124,836      34.73
                                        -----------------------------------------------------------------------------------------
    Total deposits and
      interest-bearing liabilities....     9,479,099   9,079,196     8,869,852     8,434,608   7,708,368     6,430,364      10.08
Acceptances outstanding...............         3,498      22,245        24,422        90,123     104,166       103,803     (29.41)
Accrued expenses and other liabilities       463,349      82,378        94,465        86,372      93,681        92,052       8.46
                                        -----------------------------------------------------------------------------------------
    Total liabilities.................     9,945,946   9,183,819     8,988,739     8,611,103   7,906,215     6,626,219       9.89
Shareholders' equity..................       794,043     659,787       629,042       595,292     547,624       476,258      11.35
                                        -----------------------------------------------------------------------------------------
    Total liabilities and
      shareholders' equity............  $ 10,739,989 $ 9,843,606   $ 9,617,781   $ 9,206,395 $ 8,453,839   $ 7,102,477       9.99%
                                        =========================================================================================
</TABLE>

Consolidated Statement of Earnings     
Years Ended December 31, 1986-1996     
<TABLE>
<CAPTION>

                                                                                                                         Ten - Year
                                                                                                                          Compound
                                                                                                                         Growth Rate
(In thousands except per share data)         1991        1990          1989          1988        1987          1986       1996/1986
====================================================================================================================================

<S>                                     <C>           <C>          <C>           <C>         <C>           <C>           <C>
Revenue from earning assets...........  $    852,251 $   880,032   $   871,102   $   747,511 $   600,865   $   531,491       9.80%
Interest expense......................       486,848     556,404       570,359       469,216     347,459       294,187       9.08
                                        -----------------------------------------------------------------------------------------
Net interest income...................       365,403     323,628       300,743       278,295     253,406       237,304      10.64
Provision for loan losses.............        48,647      45,407        47,766        19,611      42,416        21,698      11.63
                                        -----------------------------------------------------------------------------------------
Net interest income after provision
 for loan losses......................       316,756     278,221       252,977       258,684     210,990       215,606      10.54
Noninterest revenues..................       169,379     136,619       130,863       128,714     121,167       106,252       8.27
Noninterest expenses..................       365,124     311,658       294,356       274,398     247,587       227,796       8.90
                                        -----------------------------------------------------------------------------------------
Income before income taxes............       121,011     103,182        89,484       113,000      84,570        94,062      11.85
Income taxes..........................        31,785      24,734        17,185        25,128      16,825        19,229      18.57
                                        -----------------------------------------------------------------------------------------
Net income............................  $     89,226 $    78,448   $    72,299   $    87,872 $    67,745   $    74,833       9.33%
                                        =========================================================================================
Average common shares outstanding.....        43,652      41,956        43,095        43,002      42,360        41,935       3.05%

Earnings per common share.............         $2.04       $1.87         $1.68         $2.04       $1.60         $1.78       6.11%

Cash dividends declared per
   common share.......................         $0.98       $0.94         $0.89         $0.84       $0.79         $0.71       8.60%
</TABLE>
                                                                          
                                                                              43

<PAGE>
 
     FINANCIALS


Management's Statement on
Responsibility for Financial Reporting


The management of AmSouth is responsible for the content and integrity of the
financial statements and all other financial information included in this annual
report. Management believes that the financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis to reflect, in all material respects, the substance of events and
transactions that should be included, and that the other financial information
in the annual report is consistent with those financial statements. The
financial statements necessarily include amounts that are based on management's
best estimates and judgments.

     Management maintains and depends upon AmSouth's accounting systems and
related systems of internal controls. The internal control systems are designed
to ensure that transactions are properly authorized and recorded in the
corporation's financial records and to safeguard the corporation's assets from
material loss or misuse. The corporation maintains an internal audit staff which
monitors compliance with the corporation's systems of internal controls and
reports to management and to the Audit and Community Responsibility Committee of
the Board of Directors.

     The Audit and Community Responsibility Committee of the Board of Directors,
composed solely of outside directors, has responsibility for recommending to the
Board of Directors the appointment of the independent auditors for AmSouth. The
Audit and Community Responsibility Committee meets periodically with the
internal auditors and the independent auditors to review the scope and findings
of their respective audits. The internal auditors, independent auditors and
management each have full and free access to meet privately as well as together
with the Audit and Community Responsibility Committee to discuss internal
controls, accounting, auditing or other financial reporting matters.

     The consolidated financial statements of AmSouth have been audited by Ernst
& Young LLP, independent auditors, who were engaged to express an opinion as to
the fairness of presentation of such financial statements.

/s/ C. Dowd Ritter                       /s/ Kristen M. Hudak
-----------------------                  -------------------------------
C. Dowd Ritter                           Kristen M. Hudak
Chairman, President and                  Senior Executive Vice President
Chief Executive Officer                  Chief Financial Officer


44
<PAGE>
 
Report of Ernst & Young LLP, 
Independent Auditors


Board of Directors
AmSouth Bancorporation

We have audited the accompanying consolidated statement of condition of AmSouth
Bancorporation and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of AmSouth
Bancorporation and subsidiaries at December 31, 1996 and 1995 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.



/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP

Birmingham, Alabama
January 31, 1997


                                                                              45
<PAGE>
 
  FINANCIALS


Consolidated Financial Statements


AmSouth Bancorporation and Subsidiaries
Consolidated Statement of Condition
<TABLE> 
<CAPTION> 


(Dollars in thousands)                                                                      December 31
=========================================================================================================================
                                                                                        1996              1995
<S>                                                                              <C>               <C> 
ASSETS
Cash and due from banks...................................................       $     648,494     $     651,641  
Federal funds sold and securities purchased under agreements to resell....              15,000             1,775  
Trading securities........................................................               3,879             2,978  
Available-for-sale securities.............................................           2,290,478         2,479,813  
Held-to-maturity securities (market value of $2,649,481                                                           
  and $2,193,421, respectively)...........................................           2,644,706         2,167,009  
Mortgage loans held for sale..............................................              60,582            62,017  
Loans.....................................................................          12,168,572        11,819,809  
Less:  Allowance for loan losses..........................................             179,049           178,451  
       Unearned income....................................................              88,326            76,536  
                                                                                 -------------------------------
       Net loans..........................................................          11,901,197        11,564,822  
Premises and equipment, net...............................................             301,592           276,426  
Customers' acceptance liability...........................................               3,190             2,007  
Accrued interest receivable and other assets..............................             538,146           530,307  
                                                                                 -------------------------------
                                                                                 $  18,407,264     $  17,738,795  
                                                                                 ===============================
LIABILITIES AND SHAREHOLDERS' EQUITY                                                                              
Deposits and interest-bearing liabilities:                                                                        
   Deposits:                                                                                                      
      Noninterest-bearing demand..........................................       $   1,951,543     $   1,834,853  
      Interest-bearing demand.............................................           3,599,987         3,912,506  
      Savings.............................................................           1,068,555         1,005,099  
      Time................................................................           5,073,387         5,672,586  
      Certificates of deposit of $100,000 or more.........................             774,127           995,243  
                                                                                 -------------------------------
         Total deposits...................................................          12,467,599        13,420,287  
   Federal funds purchased and securities sold under                                                              
     agreements to repurchase.............................................           1,872,286         1,861,090  
   Other borrowed funds...................................................           1,025,383           478,736  
   Long-term Federal Home Loan Bank advances..............................           1,023,729            15,014  
   Other long-term debt...................................................             411,946           425,885  
                                                                                 -------------------------------
         Total deposits and interest-bearing liabilities..................          16,800,943        16,201,012  
Acceptances outstanding...................................................               3,190             2,007  
Accrued expenses and other liabilities....................................             207,302           152,301  
                                                                                 -------------------------------
         Total liabilities................................................          17,011,435        16,355,320  
                                                                                 -------------------------------
Shareholders' equity:                                                                                             
   Preferred stock -- no par value:                                                                               
      Authorized -- 2,000,000 shares; Issued and outstanding -- none......                 -0-               -0- 
   Common stock -- par value $1 a share:                                                                          
      Authorized -- 200,000,000 shares                                                                            
      Issued -- 60,022,682 and 60,030,242 shares, respectively.............             60,023            60,030  
   Capital surplus.........................................................            592,470           590,882  
   Retained earnings.......................................................            858,329           788,170  
   Cost of common stock in treasury -- 3,998,491                                                                  
      and 2,765,000 shares, respectively...................................           (128,889)          (73,192) 
   Deferred compensation on restricted stock...............................            (10,400)           (4,120) 
   Unrealized gains on available-for-sale securities,                                                             
     net of deferred taxes.................................................             24,296            21,705  
                                                                                 -------------------------------
         Total shareholders' equity........................................          1,395,829         1,383,475  
                                                                                 -------------------------------
                                                                                 $  18,407,264     $  17,738,795  
                                                                                 ===============================
=========================================================================================================================
</TABLE> 

See notes to consolidated financial statements. 

46
<PAGE>
 
Amsouth Bancorporation and Subsidiaries
Consolidated Statement of Earnings
<TABLE> 
<CAPTION> 
(In thousands except per share data)                         Years Ended December 31
=========================================================================================
                                                         1996         1995        1994
<S>                                                    <C>           <C>         <C> 
REVENUE FROM EARNING ASSETS
Loans.............................................  $1,004,534   $1,011,320   $  793,956
Securities:
  Trading securities..............................         144          309        2,550
  Available-for-sale securities...................     164,473       38,034       52,005
  Held-to-maturity securities.....................     178,260      216,703      183,985
                                                    ------------------------------------
    Total securities..............................     342,877      255,046      238,540

Mortgage loans held for sale......................       5,189        5,478       12,609
Federal funds sold and securities purchased
  under agreements to resell......................       1,221        1,095        2,636
                                                    ------------------------------------
    Total revenue from earning assets.............   1,353,821    1,272,939    1,047,741
                                                    ------------------------------------
INTEREST EXPENSE
Interest-bearing demand deposits..................     115,192      139,854      118,952
Savings deposits..................................      28,432       27,500       24,261
Time deposits.....................................     318,410      329,979      192,431
Certificates of deposit of $100,000 or more.......      49,311       54,278       33,751
Federal funds purchased and securities sold
  under agreements to repurchase..................      91,788       67,182       65,009
Other borrowed funds..............................      39,500       32,818       21,528
Long-term Federal Home Loan Bank advances.........      27,210        3,825        6,442
Other long-term debt..............................      31,597       23,960       18,040
                                                    ------------------------------------
  Total interest expense..........................     701,440      679,396      480,414
                                                    ------------------------------------

NET INTEREST INCOME...............................     652,381      593,543      567,327
Provision for loan losses.........................      65,171       40,139       30,103
                                                    ------------------------------------

NET INTEREST INCOME AFTER PROVISION FOR
  LOAN LOSSES.....................................     587,210      553,404      537,224
                                                    ------------------------------------

NONINTEREST REVENUES
Service charges on deposit accounts...............      94,765       85,085       68,780
Trust income......................................      57,354       50,272       46,121
Investment services income........................      16,944        7,325        5,314
Credit card income................................      14,915       13,316       11,565
Interchange income................................       8,982        5,747        2,719
Mortgage administration fees......................       3,087        8,572       22,518
Other operating revenues..........................      39,227       61,354       18,338
                                                    ------------------------------------
    Total noninterest revenues....................     235,274      231,671      175,355
                                                    ------------------------------------

NONINTEREST EXPENSES
Salaries and employee benefits....................     232,076      226,317      232,050
Net occupancy expense.............................      54,211       53,918       46,770
Equipment expense.................................      55,044       50,289       41,432
FDIC premiums.....................................       7,814       20,315       24,664
SAIF assessment...................................      24,196          -0-          -0-
Foreclosed properties expense.....................       1,352          372        4,721
Other operating expenses..........................     159,539      158,687      169,602
                                                    ------------------------------------
    Total noninterest expenses....................     534,232      509,898      519,239

INCOME BEFORE INCOME TAXES........................     288,252      275,177      193,340
Income taxes......................................     105,576      100,222       66,050
                                                    ------------------------------------
    NET INCOME....................................  $  182,676   $  174,955   $  127,290
                                                    ====================================

Average common shares outstanding.................      56,605       58,262       56,527
Earnings per common share.........................       $3.23        $3.00        $2.25
</TABLE> 

See notes to consolidated financial statements.


                                                                              47
<PAGE>
 
   FINANCIALS

AmSouth Bancorporation and Subsidiaries
Consolidated Statement of Shareholders' Equity
<TABLE>
<CAPTION>

                                                          Common       Capital      Retained      Treasury      Deferred
(In thousands)                                            Stock        Surplus      Earnings       Stock      Compensation
==========================================================================================================================
<S>                                                  <C>           <C>           <C>           <C>            <C>
BALANCE AT JANUARY 1, 1994.......................... $    54,708   $   469,669   $   645,465   $   (24,173)   $    (2,944)
Balance at beginning of period for immaterial
   pooling-of-interest entities.....................       1,070         9,192        11,231            -0-            -0-
Net income..........................................          -0-           -0-      127,290            -0-            -0-
Cash dividends declared ($1.43 per share)...........          -0-           -0-      (80,865)           -0-            -0-
Common stock transactions:
   Employee stock plans.............................         304         8,402            -0-           -0-           (87)
   Acquisition of Fortune Bancorp, Inc..............       4,474       121,363            -0-           -0-            -0-
   Purchase and retirement of common stock..........      (1,000)      (29,047)           -0-           -0-            -0-
Unrealized losses on available-for-sale securities,
   net of deferred taxes............................          -0-           -0-           -0-           -0-            -0-
                                                     ---------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994........................      59,556       579,579       703,121       (24,173)        (3,031)

Net income..........................................          -0-           -0-      174,955            -0-            -0-
Cash dividends declared ($1.54 per share)...........          -0-           -0-      (89,906)           -0-            -0-
Common stock transactions:
   Employee stock plans.............................         474        11,303            -0-           -0-        (1,089)
   Purchase of common stock.........................          -0-           -0-           -0-      (49,019)            -0-
Unrealized gains on available-for-sale securities,
   net of deferred taxes............................          -0-           -0-           -0-           -0-            -0-
                                                     ---------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995........................      60,030       590,882       788,170       (73,192)        (4,120)

Net income..........................................          -0-           -0-      182,676            -0-            -0-
Cash dividends declared ($1.62 per share)...........          -0-           -0-      (91,378)           -0-            -0-
Common stock transactions:
   Employee stock plans.............................          (7)        1,483        (8,796)       36,538         (6,280)
   Dividend reinvestment plan.......................          -0-          105          (106)        5,274             -0-
   Purchase of common stock.........................          -0-           -0-           -0-     (113,877)            -0-
   Retirement of debt...............................          -0-           -0-      (12,237)       16,368             -0-
Unrealized gains on available-for-sale securities,
   net of deferred taxes............................          -0-           -0-           -0-           -0-            -0-
                                                     ---------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996........................ $    60,023   $   592,470   $   858,329   $  (128,889)   $   (10,400)
                                                     =====================================================================
<CAPTION>

                                                     Unrealized
                                                       Gains/
                                                     (Losses) on
(In thousands)                                       Securitites       Total
================================================================================
<S>                                                  <C>           <C>
BALANCE AT JANUARY 1, 1994.......................... $        -0-  $ 1,142,725
Balance at beginning of period for immaterial
   pooling-of-interest entities.....................          -0-       21,493
Net income..........................................          -0-      127,290
Cash dividends declared ($1.43 per share)...........          -0-      (80,865)
Common stock transactions:
   Employee stock plans.............................          -0-        8,619
   Acquisition of Fortune Bancorp, Inc..............          -0-      125,837
   Purchase and retirement of common stock..........          -0-      (30,047)
Unrealized losses on available-for-sale securities,
   net of deferred taxes............................      (4,594)       (4,594)
                                                     -------------------------
BALANCE AT DECEMBER 31, 1994........................      (4,594)    1,310,458

Net income..........................................          -0-      174,955
Cash dividends declared ($1.54 per share)...........          -0-      (89,906)
Common stock transactions:
   Employee stock plans.............................          -0-       10,688
   Purchase of common stock.........................          -0-      (49,019)
Unrealized gains on available-for-sale securities,
   net of deferred taxes............................      26,299        26,299
                                                     -------------------------
BALANCE AT DECEMBER 31, 1995........................      21,705     1,383,475

Net income..........................................          -0-      182,676
Cash dividends declared ($1.62 per share)...........          -0-      (91,378)
Common stock transactions:
   Employee stock plans.............................          -0-       22,938
   Dividend reinvestment plan.......................          -0-        5,273
   Purchase of common stock.........................          -0-     (113,877)
   Retirement of debt...............................          -0-        4,131
Unrealized gains on available-for-sale securities,
   net of deferred taxes............................       2,591         2,591
                                                     -------------------------
BALANCE AT DECEMBER 31, 1996........................ $    24,296   $ 1,395,829
                                                     =========================
</TABLE>

See notes to consolidated financial statements.


48
<PAGE>
 
AmSouth Bancorporation and Subsidiaries
Consolidated Statement of Cash Flows

<TABLE> 
<CAPTION> 

(In thousands)                                                                                  Years Ended December 31
===================================================================================================================================
                                                                                         1996            1995             1994     
<S>                                                                                 <C>             <C>              <C> 
OPERATING ACTIVITIES
Net income......................................................................... $     182,676   $     174,955    $     127,290
Adjustments to reconcile net income to net cash
  provided by operating activities:
     Provision for loan losses.....................................................        65,171          40,139           30,103
     Provision for foreclosed property losses (recoveries).........................           301            (322)           1,748
     Depreciation and amortization of premises and equipment.......................        27,696          27,825           24,714
     Amortization of premiums and discounts on held-to-maturity securities
        and available-for-sale securities..........................................        (3,802)         (5,172)          (1,446)
     Net decrease in mortgage loans held for sale..................................         1,435          68,275          221,642
     Net (increase) decrease in trading securities.................................          (901)          5,300           89,281
     Net (gains) losses on sales of available-for-sale securities..................        (7,530)         (3,717)          26,642
     Net gains on calls of held-to-maturity securities.............................          (307)           (741)            (354)
     Net (increase) decrease in accrued interest receivable and other assets.......          (933)         73,841          155,597
     Net increase (decrease) in accrued expenses and other liabilities.............         2,000          16,990         (293,437)
     Provision for deferred income taxes...........................................        54,806           2,598           19,681
     Amortization of intangible assets.............................................        16,642          21,402           26,537
     Other.........................................................................         4,479          (2,012)          (1,528)
                                                                                    ----------------------------------------------  

        Net cash provided by operating activities..................................       341,733         419,361          426,470
                                                                                    ----------------------------------------------  

INVESTING ACTIVITIES
Proceeds from maturities and prepayments of
  available-for-sale securities....................................................       512,102          64,561          332,288
Proceeds from sales of available-for-sale securities...............................     1,678,997         225,546        1,650,528
Purchases of available-for-sale securities.........................................    (1,282,598)       (496,766)        (545,757)
Proceeds from maturities, prepayments and calls of
  held-to-maturity securities......................................................       407,397         353,823          348,144
Purchases of held-to-maturity securities...........................................      (883,502)       (692,966)      (1,481,636)
Net (increase) decrease in federal funds sold and securities
  purchased under agreements to resell.............................................       (13,225)        150,750           32,245
Net increase in loans..............................................................    (1,132,183)       (612,821)      (1,347,994)
Net purchases of premises and equipment............................................       (52,862)        (20,473)         (39,916)
Net cash used for acquisitions.....................................................            -0-        (13,221)        (109,351)
                                                                                    ----------------------------------------------  

        Net cash used by investing activities......................................      (765,874)     (1,041,567)      (1,161,449)
                                                                                    ----------------------------------------------  

FINANCING ACTIVITIES
Net (decrease) increase in demand deposits and savings accounts....................      (133,073)       (150,913)          91,767
Net (decrease) increase in time deposits...........................................      (819,362)        288,685          894,603
Net increase (decrease) in federal funds purchased
  and securities sold under agreements to repurchase...............................        11,196         648,367          (59,603)
Net increase (decrease) in other borrowed funds....................................       486,757         (60,118)        (104,543)
Issuance of long-term Federal Home Loan Bank advances
  and other long-term debt.........................................................     1,245,000         150,592          149,084
Payments for maturing long-term debt...............................................      (186,655)        (89,317)        (138,488)
Cash dividends paid................................................................       (91,378)        (89,906)         (80,823)
Proceeds from employee stock plans and dividend reinvestment plan..................        22,386           8,837            6,745
Purchase of common stock...........................................................      (113,877)        (49,019)         (30,047)
                                                                                    ----------------------------------------------  

        Net cash provided by financing activities..................................       420,994         657,208          728,695
                                                                                    ----------------------------------------------  


(Decrease) increase in cash and cash equivalents...................................        (3,147)         35,002           (6,284)

Cash and cash equivalents at beginning of period...................................       651,641         616,639          614,698

Beginning consolidated cash balances of immaterial pooling-of-interests entities...            -0-             -0-           8,225

                                                                                    ----------------------------------------------  

Cash and cash equivalents at end of period......................................... $     648,494   $     651,641    $     616,639
                                                                                    ==============================================  

</TABLE> 
 
See notes to consolidated financial statements.    

                                                                              49
<PAGE>
 
  FINANCIALS


  Notes to Consolidated
  Financial Statements


Note A - Summary of Significant
Accounting Policies

AmSouth Bancorporation (AmSouth), through its wholly owned subsidiaries,
provides a broad array of financial products and services throughout Alabama,
Florida, Tennessee and Georgia. AmSouth's principal activities include retail
and commercial banking, and trust operations. The accounting policies of AmSouth
and the methods of applying those policies which materially affect the
accompanying financial statements are presented below.

Basis of Presentation   The consolidated financial statements include the 
accounts of AmSouth and its subsidiaries. All significant intercompany balances
and transactions have been eliminated. Prior years financial statements have
been restated to include the accounts of business combinations accounted for as
poolings-of-interests unless immaterial. Results of operations of companies
purchased are included from the dates of acquisition. Certain amounts in the
prior years financial statements have been reclassified to conform with the 1996
presentation. These reclassifications are immaterial and had no effect on net
income.

Use of Estimates The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Cash Flows  For the Consolidated Statement of Cash Flows, AmSouth has defined
cash and cash equivalents as those amounts included in the Consolidated
Statement of Condition caption as "Cash and due from banks." For the years ended
December 31, 1996, 1995 and 1994, AmSouth paid interest of $703,449,000,
$663,834,000 and $467,791,000, respectively. For the years ended December 31,
1996, 1995 and 1994, noncash transfers from loans to foreclosed properties were
$20,469,000, $16,731,000 and $28,184,000, respectively. Noncash transfers from
foreclosed properties to loans for the years ended December 31, 1996, 1995 and
1994 were $1,284,000, $2,987,000 and $3,773,000, respectively. Noncash transfers
from held-to-maturity securities to available-for-sale securities were
$1,544,737,000 for the year ended December 31, 1995. For the years ended
December 31, 1996 and 1995, noncash transfers from loans to available-for-sale
securities of approximately $704,525,000 and $352,000,000 were made in
connection with mortgage loan securitizations. In addition, $5,309,000 of
noncash transfers were made from loans to other assets in connection with
mortgage loan securitizations. For the year ended December 31,1996, a $4,131,000
transfer from long-term debt to shareholders' equity was made due to the
redemption of convertible debt.

Securities   Securities are classified as either held-to-maturity,
available-for-sale or trading. AmSouth defines held-to-maturity securities as
debt securities which management has the positive intent and ability to hold to
maturity. Held-to-maturity securities are stated at cost, adjusted for
amortization of premiums and accretion of discounts on the constant effective
yield method. Trading securities are carried at market. Market adjustments and
realized gains or losses on the sale of trading securities are reported as other
operating revenues. Available-for-sale securities are defined as equity
securities and debt securities not classified as trading securities or held-


50
<PAGE>
 
to-maturity securities. Available-for-sale securities are carried at fair value.
Unrealized holding gains or losses, net of deferred taxes, on available-for-sale
securities are excluded from earnings and reported as a separate component of
shareholders' equity. AmSouth determines the appropriate classification of debt
securities at the time of purchase. The cost of securities is based on the
specific identification method.

Mortgage Loans Held For Sale Mortgage loans held for sale are carried at the
lower of aggregate cost or market value. Market adjustments and realized gains
and losses are classified as other operating revenues.

Interest Rate Contracts and Other Off-Balance Sheet Financial Instruments
AmSouth has from time to time utilized various off-balance sheet instruments
such as interest rate swaps and caps which are designated to hedge imbalances in
sensitivity to fluctuating interest rates for designated assets and liabilities.
To qualify as a hedge used to manage interest rate risk, the following criteria
must be met: (1) the asset or liability to be hedged exposes the institution, as
a whole, to the interest rate risk, (2) the instrument alters or reduces
sensitivity to interest rate changes and (3) the instrument is designated and
effective as a hedge. Accrual accounting is applied for off-balance sheet
investment products classified as a hedge. Under accrual accounting, any gains
or losses realized as a result of termination of an off-balance sheet investment
product are deferred and amortized as yield/rate adjustments of the hedged
assets or liabilities over the original life of the contract. If the designated
asset or liability being hedged is terminated, matures or is sold, any realized
or unrealized gain or loss from the related off-balance sheet investment product
would be recognized in income coincident with the extinguishment or termination.
If the balance of the related balance sheet item falls below that of the related
off-balance sheet investment product, the excess portion of the off-balance
sheet investment product is marked to market and the resulting gain or loss
included in income. If an off-balance sheet investment product does not satisfy
the criteria for a hedge, including those to be used in trading activities, it
is carried at market value. Any changes in market value are recognized in other
operating revenues.

     AmSouth has purchased and sold interest rate cap agreements to modify the
interest characteristics of designated prime rate loans, deposits and federal
funds purchased and securities sold under agreements to repurchase (federal
funds purchased). The strike price of these agreements exceeded the current
market levels at the date of inception. The interest rate indices specified by
the agreements have been and are expected to be highly correlated with the
interest rates AmSouth incurs on its prime rate loans, deposits and federal
funds purchased. Payments to be paid or received as a result of the specified
interest rate index exceeding the strike price are accrued in other liabilities
or assets and are recognized as an adjustment of interest income or interest
expense (the accrual accounting method described above) depending on the nature
of the balance sheet item being hedged. The cost of these agreements is included
in other assets and amortized to interest income or expense ratably during the
life of the agreement.

     AmSouth has entered into interest rate swap agreements to modify the
interest characteristics of some of its subordinated debt and mortgage-backed
securities held in its available-for-sale portfolio. These interest rate swap
agreements are designated to hedge a portion or all of the principal balance and
term of a specific debt obligation or mortgage-backed security. These agreements
involve the exchange of amounts based on a fixed interest rate for amounts based
on variable interest rates over the life of the agreement without an exchange of
the notional amount upon which the payments are based. The differential to be
paid or received as interest rates change is accrued and recognized as an
adjustment of interest expense related to the debt or interest income related to
the mortgage-backed securities (the accrual accounting method described above).
The related amounts payable to or receivable from counterparties are included in
other liabilities or assets.

Loans Interest income on commercial and real estate loans is accrued daily based
upon the outstanding principal amounts except for those classified as nonaccrual
loans.  Interest


                                                                              51
<PAGE>
 
  FINANCIALS



income on certain consumer loans is accrued monthly based upon the outstanding
principal amounts except for those classified as nonaccrual loans. Interest
accrual is discontinued when it appears that future collection of principal or
interest according to the contractual terms may be doubtful. Interest
collections on nonaccrual loans for which the ultimate collectibility of
principal is uncertain are applied as principal reductions. Otherwise, such
collections are credited to income when received.

     Effective January 1, 1995, AmSouth adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan," as amended by Statement of Financial Accounting Standards No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures" (Statement 114). Impairment of a loan within the scope of Statement
114 is to be recognized and reported based on the present value of expected
future cash flows discounted at the loan's effective interest rate, at the
loan's observable market price, or the fair value of the collateral if the loan
is collateral dependent. Impaired loans are specifically reviewed loans for
which it is probable that the creditor will be unable to collect all amounts due
according to the terms of the loan agreement. A valuation allowance is required
to the extent that the measure of the impaired loans is less than the recorded
investment. A loan is not impaired during a period of delay in payment if the
ultimate collectibility of all amounts due is expected. Statement 114 does not
apply to larger groups of homogeneous loans such as consumer installment,
bankcard and residential real estate mortgage loans, which are collectively
evaluated for impairment. Impaired loans are therefore primarily commercial
loans and commercial real estate loans.

     Payments received on impaired loans for which the ultimate collectibility
of principal is uncertain are generally applied first as principal reductions.
No material amount of interest income was recognized on impaired loans for the
years ended December 31, 1996 and 1995. In accordance with Statement 114, no
retroactive application of its provision has been made to the consolidated
financial statements for the periods prior to January 1, 1995.

Allowance for Loan Losses The allowance for loan losses is maintained at a level
which is considered adequate to provide for potential losses based upon
management's evaluation of known and inherent risk characteristics of the loan
portfolio, the fair value of underlying collateral, recent loan loss experience,
current economic conditions and other pertinent factors. A provision for loan
losses is charged to operations based on management's periodic evaluation of
these risks. As the reserve is based on management's estimate of future losses,
actual losses may vary from the current estimate.

Premises and Equipment Premises and equipment are stated at cost, less
accumulated depreciation and amortization. The provisions for depreciation and
amortization are computed generally by the straight-line method over the
estimated useful lives of the assets or terms of the leases, as applicable. The
annual provisions for depreciation and amortization have been computed
principally using estimated lives of five to forty years for premises and three
to ten years for furniture and equipment.

Foreclosed Properties Foreclosed properties are carried at the lower of the
estimated net realizable value or cost and are included in other assets, net of
the allowance for foreclosed property losses. For the years ended December 31,
1996, 1995 and 1994, a provision/(reduction) of $301,000, $(322,000) and
$1,748,000 was charged/(credited) to expense and (recoveries)/write downs of
properties (credited)/charged to the allowance totaled $(161,000), $2,550,000
and $2,018,000, respectively. At December 31, 1996, 1995 and 1994, the allowance
had a balance of $1,228,000, $766,000 and $3,638,000, respectively.

Intangible Assets Intangible assets, primarily goodwill, are included in other
assets. Goodwill is amortized on a straight-line basis primarily over twenty to
twenty-five years. AmSouth reviews on a regular basis the carrying value of
goodwill to determine if any impairment has occurred or if the period of
recoverability has changed. If this review indicates that goodwill will not be
recoverable, as determined based on the undiscounted cash flows of the entity
acquired


52
<PAGE>
 
over the remaining amortization period, AmSouth's carrying value of the goodwill
will be reduced by the estimated shortfall of such cash flows. At December 31,
1996 and 1995, goodwill totaled $267,157,000 and $283,400,000, respectively.

Mortgage Servicing Rights Effective January 1, 1996, AmSouth adopted
prospectively Statement of Financial Accounting Standards No. 122, "Accounting
for Mortgage Servicing Rights, an amendment of FASB Statement No. 65" (Statement
122). Statement 122 requires entities that sell or securitize mortgage loans
with servicing rights retained to allocate the total cost of the mortgage loans
to the mortgage servicing rights and the loan based on their relative fair
values. The resulting capitalized mortgage servicing rights are assessed for
impairment periodically based on fair value with any impairment recognized
through a valuation allowance. Mortgage servicing rights are amortized as
noninterest expense in proportion to, and over the period of, estimated net
servicing income based on the historical and projected prepayments of the
underlying loans. The adoption of Statement 122 did not have a material impact
on AmSouth's earnings, liquidity or capital resources.

Impairment of Long-Lived Assets  In January 1996, AmSouth adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (Statement 121)
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the market value or the
undiscounted cash flows estimated to be generated by those assets is less than
the assets' carrying amount. In addition, Statement 121 also requires that
long-lived assets to be disposed of be reported in the balance sheet at the
lower of their carrying amount or fair value less cost to sell. The adoption of
Statement 121 resulted in no material impact on AmSouth's financial condition or
results of operations.

Income Taxes The consolidated financial statements have been prepared on the
accrual basis. When income and expenses are recognized in different periods for
financial reporting purposes and for purposes of computing income taxes
currently payable, deferred taxes are provided on such temporary differences.
Deferred tax assets and liabilities are recorded for the expected future tax
consequences of events that have been recognized in the financial statements or
tax returns. Deferred tax assets and liabilities are measured using the enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be realized or settled.

Pension and Other Postretirement Employee Benefit Plans AmSouth has a pension
plan for the benefit of substantially all regular, full-time employees. The plan
is trusteed and noncontributory. Costs of AmSouth's pension plan are actuarially
determined by the projected unit credit method with actuarial gains or losses
recognized each year and amortized separately.

Stock-Based Compensation  In October 1995, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (Statement 123). Statement 123
establishes a "fair value" based method of accounting for stock-based
compensation plans and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. However, it also
allows an entity to continue to measure compensation cost for those plans using
the intrinsic value based method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees" (Opinion 25). AmSouth has elected to
follow Opinion 25 and related interpretations in accounting for its employee
stock options because, as discussed below, the alternative fair value accounting
provided for under Statement 123 requires use of option valuation models that
were not developed for use in valuing employee stock options. Under Opinion 25,
because the exercise price of AmSouth's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.



                                                                              53
<PAGE>
 
     FINANCIALS


     Statement 123 requires the disclosure of pro forma net income and earnings
per share determined as if AmSouth had accounted for its employee stock options
under the fair value method of that statement. The fair value for these options
was estimated at the date of grant using a Black-Scholes option pricing model.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
AmSouth's employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options. See Note O for a
further description of the assumptions used for preparing the pro forma
disclosures.

Earnings Per Common Share Earnings per common share are based on the average
outstanding shares of common stock. The effects of stock options outstanding and
convertible debentures are immaterial to the calculation of earnings per common
share.

Transfer of Assets and Liabilities In June 1996, FASB issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" (Statement 125).
Statement 125 provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities based on
consistent application of a "financial-components approach" that focuses on
control. Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered
and derecognizes liabilities when extinguished. Statement 125 provides standards
for consistently distinguishing transfers of financial assets that are sales
from transfers that are secured borrowings. AmSouth will adopt Statement 125 on
January 1, 1997, and based on current estimates, management does not believe the
effect of adoption will be material to AmSouth's financial condition or results
of operations.

Note B - Business Combinations
On February 16, 1995, AmSouth completed the acquisition of Community Federal
Savings Bank (Community), headquartered in Fort Oglethorpe, Georgia. Under the
terms of the agreement, AmSouth paid $65.50 for each of the outstanding shares
of Community common stock for a total purchase price of approximately
$17,000,000. The transaction was accounted for using the purchase method of
accounting. Approximately $7,500,000 of goodwill resulting from the acquisition
is being amortized on a straight-line basis over 20 years. Due to the
immateriality of the transaction, pro forma information is not presented. The
operating results of Community are included in AmSouth's consolidated statement
of earnings since the date of acquisition.

     On June 23, 1994, AmSouth completed the acquisition of Fortune Bancorp,
Inc. (Fortune) which was accounted for using the purchase method of accounting
through the issuance of approximately 4,474,000 shares of common stock and
payment of approximately $144,600,000 in cash. AmSouth purchased and retired
1,000,000 shares of common stock for the sole purpose of replenishing shares
issued in connection with this purchase. Fortune had approximately $2.6 billion
in consolidated assets at the date of acquisition. Approximately $172,500,000 of
goodwill resulting from the acquisition is being amortized on a straight-line
basis over 20 years. The operating results of Fortune are included in AmSouth's
consolidated statement of earnings since the date of acquisition.

     During the year ended December 31, 1994, AmSouth completed business
combinations with five other institutions whose total assets were approximately
$1,141,000,000. AmSouth issued 4,766,000 shares of common stock in these
transactions which were accounted for using the pooling-of-interests method of
accounting.

54



<PAGE>
 
Note C - Cash and Due From Banks
AmSouth's banking subsidiaries are required to maintain reserve balances with
the Federal Reserve Bank based on a percentage of deposits. The average amount
of those reserves was approximately $61,000,000 and $141,000,000 for the years
ended December 31, 1996 and 1995, respectively.

Note D - Available for-Sale Securities
The following is a summary of available-for-sale securities at December 31:
<TABLE> 
<CAPTION> 
(In thousands)                                 1996                                                  1995
====================================================================================================================================
                                        Gross        Gross                                    Gross         Gross               
                        Amortized    Unrealized    Unrealized     Carrying     Amortized    Unrealized    Unrealized     Carrying
                           Cost         Gains        Losses        Amount        Cost          Gains        Losses        Amount 
<S>                    <C>           <C>           <C>            <C>          <C>          <C>           <C>            <C> 
U.S. Treasury and
   federal agency
   securities........   $   323,420  $     2,984   $     2,297   $   324,107   $   480,690  $     8,659   $       560   $   488,789 
Mortgage-backed                                                                                                                    
   securities........     1,673,594       37,565         2,068     1,709,091     1,627,274       25,729         1,436     1,651,567
Equity securities....       172,838           -0-           -0-      172,838       187,029           -0-           -0-      187,029
Other debt securities        82,396        2,046            -0-       84,442       150,966        1,462            -0-      152,428
                        -----------------------------------------------------------------------------------------------------------
                        $ 2,252,248  $    42,595   $     4,365   $ 2,290,478   $ 2,445,959  $    35,850   $     1,996   $ 2,479,813
                        ===========================================================================================================
====================================================================================================================================
</TABLE> 
     The carrying amount and amortized cost of available-for-sale securities by
maturity at December 31, 1996, were as follows:
<TABLE> 
<CAPTION> 
                                    Amortized           Carrying
(In thousands)                        Cost               Amount 
=====================================================================
<S>                               <C>                 <C> 
Due within 1 year............     $     63,902        $     64,719
Due after 1 year through                                          
   5 years...................          160,269             160,002
Due after 5 years through                                         
   10 years..................          156,672             157,550
Due after 10 years...........           24,973              26,278
Mortgage-backed securities...        1,673,594           1,709,091
Equity securities............          172,838             172,838
                                  --------------------------------
                                  $  2,252,248        $  2,290,478
                                  ================================
=====================================================================
</TABLE> 
     Sales of available-for-sale securities were $1,671,010,000 and $220,471,000
during 1996 and 1995, respectively. Gross gains of $9,977,000 and $4,621,000 and
gross losses of $2,447,000 and $904,000 were realized on these sales for 1996
and 1995, respectively.

     Available-for-sale securities with a carrying amount of $1,908,228,000 and
$1,767,747,000 at December 31, 1996 and 1995, respectively, were pledged to
secure short-term borrowings, public deposits, trust funds and for other
purposes as required or permitted by law.

     On November 15,1995, the FASB staff issued a Special Report, A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities. In accordance with provisions in that Special Report,
AmSouth chose to reclassify securities from held-to-


                                                                             55


<PAGE>
 
  FINANCIALS

maturity to available-for-sale. At the date of transfer, the amortized cost of
those securities was $1,544,737,000 and the unrealized gain on those securities
was $21,290,000 which was included in shareholders' equity.

Note E - Held-to-Maturity Securities
The amounts at which held-to-maturity securities are carried and their
approximate fair market values at December 31 are summarized as follows:


<TABLE> 
<CAPTION> 
(In thousands)                                  1996                                                   1995
===================================================================================================================================
                                       Gross         Gross                                     Gross        Gross             
                       Carrying      Unrealized    Unrealized     Market       Carrying      Unrealized    Unrealized     Market 
                        Amount         Gains         Losses        Value        Amount         Gains        Losses         Value 
<S>                   <C>           <C>           <C>           <C>           <C>           <C>           <C>           <C> 
U.S. Treasury and
   federal agency
   securities......   $   470,899   $     1,594   $     1,260   $   471,233   $   359,933   $     4,704   $     4,532   $   360,105
State, county and                                                                                                                  
   municipal                                                                                                                       
   securities......       178,959         6,998            31       185,926       224,742        12,298            13       237,027
Mortgage-backed                                                                                                                    
   securities......     1,993,571        16,490        18,929     1,991,132     1,579,931        24,576        10,540     1,593,967
Other securities...         1,277             6            93         1,190         2,403            16            97         2,322
                      -------------------------------------------------------------------------------------------------------------
                      $ 2,644,706   $    25,088   $    20,313   $ 2,649,481   $ 2,167,009   $    41,594   $    15,182   $ 2,193,421
                      =============================================================================================================
===================================================================================================================================
</TABLE> 

    The carrying amount and approximate market value of held-to-maturity
securities by maturity at December 31, 1996, were as follows:

<TABLE> 
<CAPTION> 
                                      Carrying            Market
(In thousands)                         Amount              Value 
====================================================================
<S>                                <C>                 <C> 
Due within 1 year...............   $     47,811        $     48,537
Due after 1 year through                                           
   5 years......................        390,321             393,589
Due after 5 years through                                          
   10 years.....................        196,401             198,852
Due after 10 years..............         16,602              17,371
Mortgage-backed securities......      1,993,571           1,991,132
                                   ---------------------------------
                                   $  2,644,706        $  2,649,481
                                   =================================
====================================================================
</TABLE> 

    There were no sales of held-to-maturity securities during 1996 and 1995.
Gains on calls of held-to-maturity securities were $307,000 and $741,000 in 1996
and 1995, respectively.
     
    Held-to-maturity securities with a carrying amount of $2,410,132,000 and
$1,588,262,000 at December 31, 1996 and 1995, respectively, were pledged to
secure short-term borrowings, public deposits, trust funds and for other
purposes as required or permitted by law.

Note F - Loans
The major categories of loans at December 31 are summarized as follows:

56
<PAGE>
 
<TABLE> 
<CAPTION> 
(Dollars in thousands)                                       1996                                   1995
=====================================================================================================================
                                                   Amount           Percent                Amount           Percent
<S>                                         <C>                     <C>               <C>                   <C> 
Commercial...............................   $     3,668,226          30.1%            $     3,111,722          26.3% 
                                            -------------------------------------------------------------------------
Commercial real estate:                                                                                              
     Commercial real estate mortgages....         1,652,990          13.6                   1,523,284          12.9  
     Real estate construction............           693,417           5.7                     525,985           4.5  
                                            -------------------------------------------------------------------------
          Total commercial real estate...         2,346,407          19.3                   2,049,269          17.4  
                                            -------------------------------------------------------------------------
Consumer:                                                                                                            
     Residential first mortgages.........         2,971,250          24.4                   3,801,713          32.2  
     Other residential mortgages.........           872,067           7.2                     693,549           5.9  
     Dealer indirect.....................         1,224,549          10.1                   1,057,695           8.9  
     Revolving credit....................           522,217           4.3                     477,201           4.0  
     Other consumer......................           563,856           4.6                     628,660           5.3  
                                            -------------------------------------------------------------------------
          Total consumer.................         6,153,939          50.6                   6,658,818          56.3  
                                            -------------------------------------------------------------------------
                                            $    12,168,572         100.0%            $    11,819,809         100.0% 
                                            =========================================================================
=====================================================================================================================
</TABLE> 

     At December 31, 1996 and 1995, nonaccrual loans totaled $78,048,000 and
$96,246,000, respectively. The amount of interest income actually recognized on
these loans during 1996 and 1995 was $1,467,000 and $1,364,000, respectively.
The additional amount of interest income that would have been recorded during
1996 and 1995 if the above amounts had been current in accordance with their
original terms was $6,720,000 and $8,681,000, respectively.
     At December 31, 1996 and 1995, the recorded investment in loans that were
considered to be impaired under Statement 114 was $41,104,000 and $55,993,000,
respectively (primarily all of which were on a nonaccrual basis). Collateral
dependent loans, which were measured at the fair value of the collateral,
constituted approximately all of impaired loans at December 31, 1996. There was
approximately $6,100,000 and $6,807,000 at December 31, 1996 and 1995,
respectively, in the allowance for loan losses specifically allocated to these
loans. The average recorded investment in impaired loans for the years ended
December 31, 1996 and 1995 was approximately $48,133,000 and $60,475,000,
respectively.
     Certain directors of AmSouth and its significant subsidiaries, including
their immediate families and companies in which they are principal owners, were
loan customers of AmSouth during 1996 and 1995. Such loans are made in the
ordinary course of business at normal credit terms, including interest rates and
collateral, and do not represent more than a normal risk of collection. Total
loans to these persons at December 31, 1996 and 1995 amounted to $109,793,000
and $73,587,000, respectively. Activity during 1996 in loans to related parties
resulted in additions of $434,214,000 representing new loans, reductions of
$427,454,000 representing payments, and net additions of $29,446,000
representing other changes.

Note G  - Allowance For Loan Losses
A summary of changes in the allowance for loan losses is shown below:

<TABLE> 
<CAPTION> 
(In thousands)                      1996            1995           1994
==========================================================================
<S>                              <C>             <C>            <C> 
Balance at January 1...........  $ 178,451       $ 171,167      $ 131,509 
                                                                          
Loans charged-off..............    (83,279)        (47,282)       (43,929)
Recoveries of loans                                                       
  previously charged-off.......     18,706          12,674         17,034 
                                 -----------------------------------------
Net charge-offs................    (64,573)        (34,608)       (26,895)
Addition to allowance                                                     
  charged to expense...........     65,171          40,139         30,103 
Allowance acquired in                                                     
  bank purchases...............         -0-          1,753         36,450 
                                 -----------------------------------------
Balance at December 31.........  $ 179,049       $ 178,451      $ 171,167 
                                 =========================================
==========================================================================
</TABLE> 

                                                                              57
<PAGE>
 
     FINANCIALS


     Included in the loans charged-off for 1996 and 1995 were impaired loans of
approximately $10,713,000 and $7,755,000, respectively.

Note H - Premises and Equipment
Premises and equipment at December 31 are summarized as follows:
<TABLE> 
<CAPTION> 
(In thousands)                                  1996              1995
==========================================================================
<S>                                       <C>               <C> 
Land.................................     $     51,112      $     53,757  
Buildings............................          138,466           144,397  
Furniture and fixtures...............           61,439            55,440  
Equipment............................          179,583           147,956  
Leasehold improvements...............           64,340            65,207  
                                          ------------------------------
                                               494,940           466,757  
Less allowances for                                                       
   depreciation and amortization.....          193,348           190,331  
                                          ------------------------------
                                          $    301,592      $    276,426  
                                          ==============================
==========================================================================
</TABLE> 

Note I - Deposits
The aggregate amounts of time deposits of $100,000 or more, excluding
certificates of deposit of $100,000 or more, in domestic bank offices at
December 31, 1996 and 1995 were $41,525,000 and $56,851,000, respectively.

     At December 31, 1996, the aggregate maturities, in thousands, of time
deposits are summarized as follows:
<TABLE> 
================================================================
<S>                                             <C> 
1997........................................    $  3,421,968
1998........................................       1,358,439
1999........................................         560,914
2000........................................         397,293
2001 and thereafter.........................         108,900
                                                ------------
                                                $  5,847,514
                                                ============
================================================================
</TABLE> 

Note J - Other Borrowed Funds
Other borrowed funds at December 31 are summarized as follows:
<TABLE> 
<CAPTION> 
(In thousands)                         1996           1995
================================================================
<S>                              <C>            <C> 
Treasury, tax and loan notes...  $    732,712   $    256,790  
Short-term Federal Home                                       
  Loan Bank advances...........       150,000        204,500  
Short-term bank notes..........       125,000             -0- 
Commercial paper...............         6,800          1,851  
Floating Rate Notes                                           
   due 1999....................         6,769          6,899  
Current portion of                                            
   long-term debt..............           341            452  
Other short-term debt..........         3,761          8,244  
                                 ---------------------------
                                 $  1,025,383   $    478,736  
                                 ===========================
================================================================
</TABLE> 

     At December 31, 1996, AmSouth had a line of credit arrangement for
short-term debt enabling the parent company to borrow up to $25,000,000 subject
to such terms as AmSouth and the bank may mutually agree. The arrangement is
reviewed annually for renewal of the credit line. The line is available to
support commercial paper borrowings and was not in use at December 31, 1996.

     The interest rate on the treasury, tax and loan notes at December 31, 1996
was 6.01%. Short-term advances from the Federal Home Loan Bank had interest
rates ranging from 5.15% to 5.60% at December 31, 1996. The short-term bank
notes had an average rate of 5.46% at December 31, 1996. All other borrowed
funds at December 31, 1996 had interest rates ranging from 3.50% to 9.00%, and
substantially all of these balances had interest rates below 6.10%.

58
<PAGE>
 
Note K - Long-Term Debt
Long-term debt at December 31 is summarized as follows:
<TABLE> 
<CAPTION> 
(In thousands)                           1996             1995
================================================================
<S>                                <C>             <C> 
Long-term Federal
   Home Loan Bank advances......   $  1,023,729    $     15,014
                                   ----------------------------
Other long-term debt:                                          
   6 3/4% Subordinated                                         
      Debentures Due 2025.......        149,845         149,827
   7 3/4% Subordinated                                         
      Notes Due 2004............        149,320         149,229
   Subordinated Capital                                        
      Notes Due 1999............         99,699          99,569
   7 1/2% Convertible                                          
      Subordinated Debentures...             -0-          4,042
   Long-term notes payable......         13,082          23,218
                                   ----------------------------
Total other long-term debt......        411,946         425,885
                                   ----------------------------
                                   $  1,435,675    $    440,899
                                   ============================
================================================================
</TABLE> 

     Advances from the Federal Home Loan Bank (FHLB) had maturities ranging from
1998 to 2013 and interest rates ranging from 3.00% to 7.06%. Of the balances
outstanding at December 31, 1996, $875,000,000 is callable by the FHLB during
the first quarter of 1997. Under the Blanket Agreement for Advances and Security
Agreement with the FHLB, residential mortgage loans are pledged as collateral
for the FHLB advances outstanding.

     The 6 3/4% Subordinated Debentures Due November 1, 2025 were issued
November 6, 1995 at a discounted price of 99.883%. The net proceeds to AmSouth
after commissions totaled $148,900,000. The debentures will mature on 
November 1, 2025 and may be redeemed on November 1, 2005 at the option of the
registered holders thereof. AmSouth purchased an interest rate swap in the
notional amount of $150,000,000 to hedge these debentures. The swap requires
AmSouth to pay a variable rate based on the 30 day London Interbank Borrowing
Rate (LIBOR) while receiving a fixed rate. This swap effectively converts the
fixed rate debt to floating rate.

     The 7 3/4% Subordinated Notes Due 2004 were issued May 19, 1994 at a
discounted price of 99.389%. The net proceeds to AmSouth after commissions
totaled $148,100,000. The notes will mature on May 15, 2004 and are not
redeemable prior to maturity.

     The Subordinated Capital Notes Due 1999 were issued in 1987 at a discounted
price of 99.125%. The net proceeds to AmSouth after commissions totaled
$98,450,000 for an effective rate to maturity of 9.60%. The notes will mature on
May 1, 1999 and will be repaid with either equity securities with a market value
of $100,000,000 or with cash generated from the sale of equity securities.

     The 7 1/2% Convertible Subordinated Debentures, due 2001, were called on
August 1, 1996. All of the debentures were redeemed in the 30 day period
following the call. The debentures were redeemed for 413,449 shares of AmSouth
common stock and approximately $8,000 cash.

     Long-term notes payable at December 31, 1996 included notes maturing from
1999 to 2017 with interest rates ranging from 3.20% to 5.33%. 

     The aggregate stated maturities, in thousands, of long-term debt
outstanding at December 31, 1996 are summarized as follows:
<TABLE> 
================================================================
<S>                                             <C> 
1997.........................................   $        341 
1998.........................................         90,191 
1999.........................................        499,890 
2000.........................................             -0-
2001.........................................        525,000 
Thereafter...................................        320,594 
                                                ------------
                                                   1,436,016 
Less current portion of long-term debt.......            341 
                                                ------------
                                                $  1,435,675 
                                                ============
================================================================
</TABLE> 

Note L - Off-Balance Sheet Financial Agreements
AmSouth enters into a variety of financial instrument agreements to help
customers manage their exposure to interest rate and foreign currency
fluctuations and to finance international activities. AmSouth also uses similar
instruments to manage its exposure to changes in interest and foreign exchange
rates, as well as to profit from arbitrage opportunities.

     Futures and forward contracts provide customers and AmSouth a means of
managing the risks of changing interest and foreign exchange rates. These
contracts represent com-

                                                                              59
<PAGE>
 
     FINANCIALS

mitments either to purchase or sell securities, other money market instruments
or foreign currency at a future date and at a specified price. AmSouth is
subject to the market risk associated with changes in the value of the
underlying financial instrument as well as the risk that another party will fail
to perform. The gross contract amount of futures and forward contracts
represents the extent of AmSouth's involvement. However, those amounts
significantly exceed the future cash requirements as AmSouth intends to close
out open trading positions prior to settlement and thus is subject only to the
change in value of the instruments. The gross amount of contracts represents
AmSouth's maximum exposure to credit risk.

     Interest rate swaps are agreements to exchange interest payments computed
on notional amounts. Swaps subject AmSouth to market risk associated with
changes in interest rates, as well as the risk that another party will fail to
perform. Interest rate caps and floors are contracts in which a counterparty
pays or receives a cash payment from another counterparty if a floating rate
index rises above or falls below a predetermined level. The present value of
purchased caps and floors in a gain position represents the potential credit
risk to AmSouth.

     Market risk resulting from a position in a particular off-balance sheet
financial instrument may be offset by other on or off-balance sheet
transactions. AmSouth monitors overall sensitivity to interest rate changes by
analyzing the net effect of potential changes in interest rates on the market
value of both on and off-balance sheet financial instruments and the related
future cash flow streams. AmSouth manages the credit risk of counterparty
defaults in these transactions by limiting the total amount of arrangements
outstanding, both by individual counterparty and in the aggregate, and by
monitoring the size and maturity structure of the off-balance sheet portfolio.
AmSouth requires collateralization by a counter-party on credit exposure above a
specified credit limit. Trading and dealer activities in the aggregate are not
material to AmSouth and are not separately disclosed.

     The following table identifies the gross contract or notional amount of
off-balance sheet financial instruments at December 31:
<TABLE> 
<CAPTION> 
(In millions)                                   1996         1995
=====================================================================
<S>                                        <C>          <C> 
Forward contracts-commitments
     to sell............................   $     42.9   $     44.1 
Notional amount of interest rate swaps:                            
     Receive fixed rate.................        395.7        177.4 
     Receive variable rate..............         25.7         27.4 
Notional amount of interest                                        
     rate caps and floors...............      1,077.0      1,116.5 
Forward foreign exchange contracts:                                
     Commitments to purchase............         17.5         15.6 
     Commitments to sell................         20.6         17.1 
Written options sold....................          2.0         25.0 
Written options purchased...............          2.0         23.0 

=====================================================================
</TABLE> 

     The notional amounts of interest rate contracts used by AmSouth to hedge
balance sheet items at December 31 are shown below:
<TABLE> 
<CAPTION> 
(In millions)                                1996       1995
================================================================
<S>                                        <C>        <C> 
Loans....................................  $1,000     $1,000 
Securities...............................     155         -0-
Federal funds purchased and                                  
   securities sold under agreements                          
   to repurchase.........................      77         90 
Deposits.................................      65         20 
Long-term debt...........................     150        150 
                                           -----------------
                                           $1,447     $1,260 
                                           =================
================================================================
</TABLE> 
     During 1994, AmSouth terminated all non-customer interest rate swaps, and
$915,000,000 of interest rate caps. Interest rate swaps held for trading
purposes for a portion of 1994 resulted in a 1994 fourth quarter realized loss
of $16,372,000 which was included in other operating revenues. The average fair
value of these interest rate swaps during the period in which they were held for
trading purposes represented a liability of approximately $26,500,000. The
amortization of deferred loss related to these closed interest rate contracts
and included in net interest income was $6,559,000, $10,296,000 and $2,400,000
in 1996, 1995 and 1994, respectively. The remaining amount of deferred loss is
$292,000 and will be recognized in 1997.

60
<PAGE>
 
Note M - Commitments and Contingencies

AmSouth and its subsidiaries lease land, premises and equipment under
cancellable and noncancellable leases some of which contain renewal options
under various terms. The leased properties are used primarily for banking
purposes.

     The total rental expense on operating leases for the years ended December
31, 1996, 1995 and 1994 was $38,379,000, $34,121,000 and $32,693,000,
respectively. There were no material contingent rental expenses for 1996, 1995
or 1994.

     Future minimum payments, in thousands, by year and in the aggregate, for
noncancellable operating leases with initial or remaining terms of one year or
more consisted of the following at December 31, 1996:
<TABLE> 

        ======================================================
           <S>                                 <C> 
           1997...........................     $     32,215
           1998...........................           28,862
           1999...........................           25,706
           2000...........................           24,064
           2001...........................           23,098
           Thereafter.....................          203,062
                                               ------------
                                               $    337,007
                                               ============
        ======================================================
</TABLE> 


     AmSouth and its subsidiaries are contingently liable with respect to
various loan commitments and other contingent liabilities in the normal course
of business. AmSouth's maximum exposure to credit risk for loan commitments
(unfunded loans and unused lines of credit), and standby letters of credit, at
December 31, 1996 was as follows (in millions):
<TABLE> 
        ======================================================
           <S>                                 <C> 
           Commitments to extend credit....... $    5,481.4
           Standby letters of credit..........        631.6

        ======================================================
</TABLE> 
     The credit risk associated with loan commitments and standby letters of
credit is essentially the same as that involved in extending loans to customers
and is subject to AmSouth's credit policies. Collateral is obtained based on
management's assessment of the customer.

     During 1994, AmSouth entered into a transaction to sell and leaseback
certain property in conjunction with the construction of an office complex in
the Birmingham, Alabama area. The future minimum rental payments are included in
the table above. AmSouth contracted with a related party to construct the office
complex. These contracts represent approximately $63,000,000 of the estimated
total construction cost of $93,000,000. AmSouth made payments on the contracts
of approximately $3,000,000, $27,000,000 and $23,000,000 during 1996, 1995 and
1994, respectively.

     Various legal proceedings are pending against AmSouth and its subsidiaries.
Some of these proceedings seek relief or allege damages that are substantial.
The actions arise in the ordinary course of AmSouth's business and include
actions relating to its lending, collections, servicing, investment, trust and
other activities. Because some of these actions are complex and for other
reasons, it may take a number of years to finally resolve them. Based upon legal
counsel's opinion, management considers that any liability resulting from the
proceedings would not have a material impact on the financial condition or
results of operations of AmSouth.

Note N - Shareholders' Equity

AmSouth offers a Dividend Reinvestment and Common Stock Purchase Plan, whereby
shareholders can reinvest dividends to acquire shares of common stock.
Shareholders may also invest additional cash up to $5,000 per quarter with no
brokerage commissions or fees charged.

     On June 15, 1989, AmSouth's Board of Directors approved a Stockholder
Protection Rights Agreement and distributed Rights to common shareholders. Each
Right entitles its registered holder, upon occurrence of certain events, to
purchase from AmSouth one one-hundredth of a share of Series A Preferred Stock,
without par value, for $76.67, subject to adjustment. The Rights will be
exercisable only if a person or group acquires 15% or more of AmSouth's common
stock or commences a tender offer that will result in such person or group
owning 15% or more of AmSouth's common stock. The Rights may be redeemed by
action of the Board of Directors for one cent per Right.


                                                                             61

<PAGE>
 
     FINANCIALS


     On October 19, 1995, AmSouth's Board of Directors approved the repurchase
by AmSouth of up to an aggregate of 2,265,000 shares of its common stock through
December 31, 1998. During 1995, AmSouth purchased 1,265,000 shares of its common
stock under this approval at a cost of $49,019,000. The remaining 1,000,000
shares of this program were purchased March 1, 1996 at a cost of $39,592,000.
The shares will be used for the purpose of satisfying requirements of employee
benefit, dividend reinvestment and other stock issuance plans.

     On July 18, 1996, AmSouth's Board of Directors authorized a new plan to
repurchase up to five percent of AmSouth's outstanding shares of common stock as
of June 30, 1996, or approximately 2,800,000 shares, from time to time. The
shares will be used to issue stock under AmSouth's dividend reinvestment and
employee benefit plans or for general corporate purposes. Under this plan,
AmSouth purchased 1,650,000 shares at cost of $74,285,000 during 1996.

     During 1994, AmSouth purchased and retired 1,000,000 shares of its common
stock at a cost of $30,047,000 for the sole purpose of replenishing shares
issued by AmSouth in connection with its acquisition of Fortune.

     At December 31, 1996, there were 693,171 shares reserved for issuance under
the Dividend Reinvestment and Common Stock Purchase Plan, 4,160,802 shares
reserved for issuance under stock compensation plans (1,067,361 shares represent
stock options outstanding) and 53,002 shares reserved for issuance under the
employee stock purchase plan for a total of 4,906,975 shares.

Note O - Long-Term Incentive Compensation Plans

AmSouth has long-term incentive compensation plans which permit the granting of
incentive awards in the form of stock options, restricted stock awards and stock
appreciation rights. Generally, the terms of these plans stipulate that the
exercise price of options may not be less than the fair market value of
AmSouth's common stock at the date the options are granted. Options granted
generally vest one year from the date of the grant. Options granted generally
expire not later than ten years from the date of the grant.

     FASB Statement 123 requires pro forma information regarding net income and
earnings per share. This pro forma information has been determined as if AmSouth
had accounted for its employee stock options under the fair value method of that
statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1996: a risk-free interest rate of 5.57%; a dividend yield of
4.01%; a volatility factor of 19.00%; and a weighted-average expected life of
the option of seven years. The weighted-average fair value of options granted
during 1996 was $7.21.

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. AmSouth's pro
forma information follows (in thousands except for earnings per share
information):

<TABLE> 
<CAPTION> 
                                             1996            1995
        ============================================================
        <S>                            <C>             <C> 
          Net income:
             As reported...........    $   182,676     $   174,955
             Pro forma.............        181,064         173,924

          Earnings per share:
             As reported...........    $     3.23      $     3.00
             Pro forma.............          3.20            2.99

        ============================================================
</TABLE> 

     The following table summarizes AmSouth's stock option activity and related
information during 1994, 1995 and 1996:



62
<PAGE>
 
<TABLE>
<CAPTION>

                                                       Number                               Weighted-Average
                                                      of Shares   Option Price per Share      Option Price
=============================================================================================================
<S>                                                  <C>          <C>          <C>              <C>
Balance at January 1, 1994.........................  1,060,204    $  15.75  -  $  29.75
Options assumed in business combinations...........     72,748        4.53  -     17.34
Options exercised..................................   (188,422)       6.96  -     29.75
Options forfeited..................................    (54,800)      16.67  -     31.25
Options granted....................................    324,750       29.63  -     31.50
                                                    ----------
Balance at December 31, 1994.......................  1,214,480        4.53  -     31.50
Options exercised..................................   (340,736)       4.53  -     30.75
Options forfeited..................................    (41,659)       6.96  -     32.25
Options granted....................................    454,550       28.75  -     40.00
                                                    ----------
Balance at December 31, 1995.......................  1,286,635        6.96  -     40.00         $  25.09
Options exercised..................................   (564,549)       6.96  -     40.38            24.04
Options forfeited..................................    (14,925)      28.75  -     40.38            35.76
Options granted....................................    360,200       38.75  -     47.63            40.47
                                                    ----------
Balance at December 31, 1996.......................  1,067,361    $   6.96  -  $  47.63         $  30.69
                                                    ==========
Exercisable at December 31, 1996...................    748,911    $   6.96  -  $  40.00         $  26.53
                                                    ==========

=============================================================================================================
</TABLE>

     Of the options outstanding at December 31, 1996, those granted since
January 1, 1996, have a one year restriction period from the date of grant. All
other options outstanding were exercisable. Options outstanding at December 31,
1996, had a weighted-average contractual life of seven years and two months.

     AmSouth also has issued common stock as restricted stock awards to key
officers with the restriction that they remain employed with AmSouth for periods
of three years or longer. During 1994, 115,777 restricted shares were awarded,
62,525 restricted shares were forfeited and the restrictions were removed on
17,975 shares. During 1995, 101,891 restricted shares were awarded, 44,784
restricted shares were forfeited and the restrictions were removed on 22,743
shares. During 1996, 182,180 restricted shares were awarded with a
weighted-average fair value of $47.89, 7,875 restricted shares were forfeited
and the restrictions were removed on 94,560 shares. During 1995, 29,192
restricted shares were also granted to, and 400 restricted shares were forfeited
by, non-employee members of the Boards of Directors of AmSouth and its
subsidiaries. During 1996, 2,450 restricted shares with a weighted-average fair
value of $38.52 were granted to non-employee members of the Boards of Directors
of AmSouth and its subsidiaries. The restrictions were removed from 6,142 shares
held by non-employee members of the Boards of Directors. There were no
forfeitures by non-employee members of the Boards of Directors during 1996. At
December 31, 1996, AmSouth had 372,262 shares of common stock outstanding
representing restricted stock awards.

     At December 31, 1996, there were no stock appreciation rights outstanding.

Note P - Regulatory Capital
Requirements and Restrictions

Capital is the primary tool used by regulators to monitor the financial health
of insured banks and savings institutions. The Federal Reserve Board and the
Federal Deposit Insurance Corporation have historically had common capital
adequacy guidelines involving minimum leverage capital and risk-based capital
requirements. Based on the risk-based capital rules and definitions prescribed
by the banking regulators, should an institution's capital ratios decline below
predetermined levels, it would become subject to a series of increasingly
restrictive regulatory actions. All banks are required to have core capital
(Tier 1) of at least 4% of risk-weighted



                                                                              63
<PAGE>
 
     F I N A N C I A L S


assets, total capital of 8% of risk-weighted assets and a leverage ratio of 3%
of adjusted quarterly average assets. Tier 1 capital consists primarily of
shareholders' equity, excluding unrealized gains and losses on securities
available-for-sale, less goodwill and certain other intangibles. Total capital
consists of Tier 1 capital plus certain debt instruments and the reserve for
credit losses, subject to limitation. The regulations also define well
capitalized levels of Tier 1, total capital and leverage as ratios of 6%, 10%
and 5%, respectively. AmSouth and its significant banking subsidiaries had Tier
1, total capital and leverage ratios above the well capitalized levels at
December 31, 1996 and 1995. These ratios and capital amounts are as follows:
<TABLE> 
<CAPTION> 


(Dollars in thousands)                                  1996                                   1995
=================================================================================================================
                                             Amount             Ratio               Amount             Ratio

Tier 1 capital:
<S>                                    <C>                      <C>           <C>                      <C> 
   AmSouth.........................    $     1,103,394           7.87%        $     1,077,063           7.87%
   AmSouth Bank of Alabama.........            836,984           9.54                 786,067           9.06
   AmSouth Bank of Florida.........            444,794          10.39                 407,321           9.97
   AmSouth Bank of Tennessee.......            102,387          13.31                 100,330          14.32
                                       ---------------------------------------------------------------------

Total capital:
   AmSouth.........................    $     1,617,785          11.54%        $     1,607,154          11.74%
   AmSouth Bank of Alabama.........            928,975          10.59                 873,590          10.07
   AmSouth Bank of Florida.........            498,534          11.64                 458,679          11.22
   AmSouth Bank of Tennessee.......            112,026          14.57                 109,126          15.58
                                       ---------------------------------------------------------------------

Leverage:
   AmSouth.........................    $     1,103,394           6.20%        $     1,077,063           6.38%
   AmSouth Bank of Alabama.........            836,984           8.21                 786,067           8.46
   AmSouth Bank of Florida.........            444,794           6.49                 407,321           6.26
   AmSouth Bank of Tennessee.......            102,387           9.37                 100,330           9.27
                                       ---------------------------------------------------------------------
=================================================================================================================
</TABLE> 


     Certain restrictions exist regarding the ability of banking subsidiaries to
transfer funds to the parent company as loans, advances or dividends. At
December 31, 1996, approximately $188,400,000 of the subsidiary banks' net
assets were available for dividends without prior regulatory approval.
Substantially all of the parent company's retained earnings at December 31, 1996
and 1995, represented undistributed earnings of its banking subsidiaries.


Note Q - Pension and Other
Employee Benefit Plans

As of December 31, 1996, AmSouth maintained a corporate pension plan, which
covers substantially all regular full-time employees. The pension plan benefits
are based on years of service and the employee's compensation during the last
120 months of employment. AmSouth's funding policy is to contribute an amount
that meets the minimum funding requirements set forth in the Employee Retirement
Income Security Act of 1974, plus such additional amounts as the corporation
determines to be appropriate.


64

<PAGE>
 
     Net periodic pension expense includes the following components:
<TABLE> 
<CAPTION> 

(In thousands)                         Years Ended December 31
=======================================================================
                                    1996         1995        1994
<S>                              <C>          <C>         <C> 
Service cost of the
  current period..............   $   6,010    $   5,104   $   5,556
Interest cost on the
  projected benefit
  obligation..................      12,073       11,590      11,098
Actual (return) loss on
  assets held in the plan.....     (19,635)     (32,527)      2,321
Net amortization of
  transition asset and
  net gain(loss)..............       3,648       20,360     (14,536)
                                 ----------------------------------
Pension expense...............   $   2,096    $   4,527   $   4,439
                                 ==================================
=======================================================================
</TABLE> 

     The following table sets forth the funded status of the plan and the
amounts shown in the accompanying Consolidated Statement of Condition at
December 31:
<TABLE> 
<CAPTION> 


(In thousands)                                          1996          1995
================================================================================
<S>                                                  <C>           <C> 
Actuarial present value of 
  accumulated plan benefits:
       Vested....................................    $  143,268    $  140,745
       Nonvested.................................         6,887         6,649
                                                     ------------------------
Accumulated benefit obligation...................    $  150,155    $  147,394
                                                     ========================

Actuarial present value of projected benefit
  obligation for service rendered to date........    $ (166,997)   $ (165,608)
Plan assets at fair value, primarily listed
  stocks and bonds and U.S. obligations..........       182,439       167,431
                                                     ------------------------
Plan assets greater than
  projected benefit obligation...................        15,442         1,823
Recognition of transfer of plan assets in
  excess of projected benefit obligation.........         4,803         4,903
Unrecognized net gain from past experience
  different from that assumed and effects of
  changes in assumptions.........................       (25,285)      (20,185)
Unrecognized net transition asset................        (1,159)       (2,814)
                                                     ------------------------
Accrued pension cost included
  in other liabilities...........................    $  ( 6,199)   $  (16,273)
                                                     ========================
================================================================================
</TABLE> 


     The weighted-average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.75% and 4.50%, respectively, at December 31,
1996, 7.50% and 4.50%, respectively, at December 31, 1995, and 8.50% and 4.50%,
respectively, at December 31, 1994. The average expected long-term rate of
return on plan assets is approximately 9.00% at December 31, 1996 and 8.50% at
December 31, 1995 and 1994. At December 31, 1996, the plan assets included
180,600 shares of AmSouth common stock with a market value of $8,737,000. The
plan received $288,700 in dividends on AmSouth stock during the year ended
December 31, 1996.
     AmSouth also maintains a thrift plan and an employee stock purchase plan
which cover substantially all regular full-time employees. For each employee,
during 1995, AmSouth made matching contributions of 50% of the first 5% of base
pay that each employee contributed to the thrift plan. Beginning January 1,
1996, AmSouth began matching pre-tax contributions dollar for dollar on the
first 6% of base pay that each employee contributes to the thrift plan.
After-tax contributions to the thrift plan continue to be matched at 50 cents
for every dollar contributed by an employee but are matched through the first 6%
of base pay. Employees may make both pre-tax and after-tax contributions, but no
matching contributions are made on any employee contributions above 6%, with
pre-tax contributions being matched first. In addition, beginning January 1,
1996, all company matching contributions are no longer self directed by the
employee but instead are allocated to the AmSouth stock investment option. The
cost of the thrift plan for the years ended December 31, 1996, 1995 and 1994 was
$5,632,000, $2,379,000 and $2,350,000, respectively. Under the employee stock
purchase plan, an employee may invest up to $2,000 each calendar year in
purchases of AmSouth common stock and AmSouth will contribute a matching 25%
toward the purchase. Additional purchases of up to $8,000 may be made on an
unmatched basis with no administrative or brokerage fees charged. Under the
employee stock purchase plan, 46,574 shares of AmSouth common stock were
purchased during 1996 with a weighted-average fair value of $41.21.


                                                                             
                                                                              65
<PAGE>
 
FINANCIALS


     AmSouth also sponsors other postretirement benefit plans. In accordance
with Statement of Financial Accounting Standards No. 106, "Employers Accounting
for Postretirement Benefits Other than Pensions", the effect of these plans did
not have a material impact on the financial condition or results of operations
of AmSouth for the years ended December 31, 1996, 1995 and 1994.

Note R - Income Taxes
The provisions for income taxes charged to earnings are summarized as follows:

<TABLE> 
<CAPTION> 

(In thousands)                                Years Ended December 31
========================================================================
                                        1996       1995           1994
<S>                                  <C>         <C>           <C> 
Current tax expense:
   Federal........................   $  47,262   $  86,138     $  41,309
   State..........................       3,508      11,486         5,060
                                     -----------------------------------
                                        50,770      97,624        46,369
                                     -----------------------------------
Deferred tax expense:                                      
   Federal.......................       49,388       2,455        16,459
   State.........................        5,418         143         3,222
                                     -----------------------------------
                                        54,806       2,598        19,681
                                     -----------------------------------
                                      $105,576    $100,222     $  66,050
                                     ===================================
========================================================================
</TABLE> 

     The differences between the actual income tax expense and the amount
computed by applying the statutory federal income tax rate to income before
income taxes were as follows:



<TABLE> 
<CAPTION> 

(In thousands)                                Years Ended December 31
========================================================================
                                        1996         1995         1994
<S>                                  <C>         <C>           <C>   
Tax at federal income tax rate.....  $ 100,888   $  96,312     $  67,669  
State and local income taxes,                                             
     net of federal tax benefits...      5,802       7,559         5,383  
Goodwill amortization..............      5,558       5,540         3,911  
Tax exempt interest................     (6,169)     (9,032)      (10,437) 
Other..............................       (503)       (157)         (476) 
                                     -----------------------------------
                                     $ 105,576     $ 100,222   $  66,050  
                                     ===================================
========================================================================
</TABLE> 

     The significant temporary differences which create deferred tax assets and
liabilities at December 31 are as follows:

<TABLE> 
<CAPTION> 


(In thousands)                                       1996          1995
================================================================================
<S>                                              <C>           <C>  
Deferred tax assets:
  Basis differences in acquisitions...........   $   2,615     $   5,186  
  Accrued expenses............................      12,220        12,718 
  Loan loss reserves..........................      68,312        66,979 
  Interest income on nonaccruing loans........       3,118         2,898 
  Other.......................................       5,762         8,793 
                                                 -----------------------
                                                    92,027        96,574 
                                                 -----------------------
                                                                         
Deferred tax liabilities:                                                
  Employee benefits...........................      (2,822)        9,610 
  Leasing activities..........................     (64,246)      (19,224)
  Depreciation................................      (8,928)       (8,217)
  Discount accretion..........................      (6,077)       (4,899)
  Recapture tax loan loss reserves............     (10,602)      (14,820)
  Statement 115 equity adjustment.............     (14,511)      (12,921)
  Deferred loss on notional                                              
     principal contracts......................        (313)       (2,566)
  Other.......................................      (6,953)       (7,968)
                                                 -----------------------
                                                  (114,452)      (61,005)
                                                 -----------------------
      Net deferred tax (liability) asset......   $ (22,425)     $ 35,569 
                                                 =======================
================================================================================
</TABLE> 


     Income taxes paid were $59,054,000, $79,405,000 and $66,979,000, for the
years ended December 31, 1996, 1995 and 1994, respectively. Applicable income
tax expense (benefit) of $115,000, $279,000 and $(9,884,000), on securities
gains and losses for the years ended December 31, 1996, 1995 and 1994,
respectively, is included in the provision for income taxes.
                                                              


66
<PAGE>
 
Note S - Other Operating Revenues and Other 
Operating Expenses
The components of other operating revenues and other operating expenses are as
follows:
<TABLE> 
<CAPTION> 
(In thousands)                                  Years Ended December 31        
================================================================================
                                            1996          1995          1994   
<S>                                     <C>            <C>           <C> 
Other operating revenues:                                                      
   Gains on sales of                                                           
     mortgage servicing...............  $      -0-     $  29,826     $  23,766 
   Gains (losses) on sales of                                                  
     available-for-sale securities....      7,530          3,717       (26,642)
   Gains on calls of                                                           
     held-to-maturity securities......        307            741           354 
   Other portfolio income (losses)....      1,416            328       (18,118)
   Other..............................     29,974         26,742        38,978 
                                        --------------------------------------
                                        $  39,227      $  61,354     $  18,338 
                                        ====================================== 
Other operating expenses:                                                      
   Postage and office supplies........  $  23,072      $  23,399     $  22,718 
   Marketing..........................     16,755         17,299        13,758 
   Telephone..........................     16,466         12,984        11,834 
   Professional fees..................     12,580         12,886        12,501 
   Amortization of intangibles........     16,642         21,402        26,537 
   Other..............................     74,024         70,717        82,254 
                                        --------------------------------------
                                        $ 159,539      $ 158,687     $ 169,602 
                                        ======================================
================================================================================
</TABLE> 
Note T - Condensed Parent Company Information

Statement of Condition
<TABLE> 
<CAPTION> 
(In thousands)                                   December 31
================================================================================
                                           1996               1995
<S>                                    <C>                 <C>           
ASSETS                                                                       
Investment in subsidiaries..........   $ 1,714,962         $ 1,635,283   
Loans...............................            -0-             20,400   
Securities purchased                                                     
   under agreements to resell.......        21,845               9,500   
Other earning assets................        54,852             110,000   
Other assets........................        20,947              23,404   
                                       -------------------------------
                                       $ 1,812,606         $ 1,798,587   
                                       ===============================
LIABILITIES AND                                                        
SHAREHOLDERS' EQUITY                                                   
Commercial paper....................   $     6,800         $     1,851 
Subordinated debt...................       398,864             402,667 
Other long-term debt................            -0-                150 
Other borrowed funds................         6,919               7,049 
Accrued interest payable                                                 
   and other liabilities............         4,194               3,395   
                                       -------------------------------
      Total liabilities.............       416,777             415,112   
Shareholders' equity................     1,395,829           1,383,475   
                                       -------------------------------
                                       $ 1,812,606         $ 1,798,587 
                                       ===============================
================================================================================
</TABLE> 

Statement of Earnings
<TABLE> 
<CAPTION> 
(In thousands)                              Years Ended December 31
================================================================================
                                         1996         1995         1994
<S>                                   <C>          <C>          <C> 
INCOME                          
     Dividends from subsidiaries....  $ 125,809    $ 103,643    $  97,025
     Interest and other.............      5,761        3,662        2,827
                                      -----------------------------------
                                        131,570      107,305       99,852
                                      -----------------------------------
EXPENSES                                                                 
     Interest.......................     31,059       23,942       17,607
     Other..........................      4,922        5,074        4,307
                                      -----------------------------------
                                         35,981       29,016       21,914
                                      -----------------------------------
Income before income                                                     
     taxes and equity in                                                 
     undistributed earnings                                              
     of subsidiaries................     95,589       78,289       77,938
Income tax credit...................     10,462        8,582        6,163
                                      -----------------------------------
Income before equity in                                                  
     undistributed earnings                                              
     of subsidiaries................    106,051       86,871       84,101
Equity in undistributed                                                  
     earnings of subsidiaries.......     76,625       88,084       43,189
                                      -----------------------------------
NET INCOME..........................  $ 182,676    $ 174,955    $ 127,290
                                      ===================================
================================================================================
</TABLE> 
                                                                              67
<PAGE>
 
    FINANCIALS



Statement of Cash Flows
<TABLE> 
<CAPTION> 

(In thousands)                                                                         Years Ended December 31
=================================================================================================================================
                                                                              1996               1995              1994
<S>                                                                      <C>                 <C>               <C> 
OPERATING ACTIVITIES                                                            
     Net income......................................................    $    182,676        $    174,955      $    127,290  
     Adjustments to reconcile net income to                                                                                 
         net cash provided by operating activities:                                                                          
          Amortization of goodwill...................................           2,386               2,386             2,386 
          Other amortization and depreciation........................           1,375               1,243             1,107 
          Net decrease (increase) in accrued interest                                                                       
             receivable and other assets.............................           1,116               1,535              (908)
          Net increase in accrued expenses and other liabilities.....           4,243               2,934               922 
          Equity in undistributed earnings of subsidiaries...........         (76,625)            (88,084)          (43,189) 
                                                                         --------------------------------------------------
            Net cash provided by operating activities................         115,171              94,969            87,608 
                                                                         -------------------------------------------------- 
INVESTING ACTIVITIES                                                                                                         
     Net decrease (increase) in short-term investments...............          63,203             (92,535)            3,339 
     Net purchases of premises and equipment.........................              -0-                 -0-             (218)
     Net cash used for acquisitions..................................              -0-            (17,069)         (138,007)
                                                                         --------------------------------------------------
            Net cash provided (used) by investing activities.........          63,203            (109,604)         (134,886)
                                                                         -------------------------------------------------- 
FINANCING ACTIVITIES                                                                                                        
     Net increase (decrease) in commercial paper.....................           4,949                  65              (182)
     Net decrease in other borrowed funds............................            (130)               (575)             (477)
     Issuance of long-term debt......................................              -0-            149,827           149,084 
     Payments on long-term debt......................................            (150)             (4,300)             (151)
     Cash dividends paid.............................................         (91,378)            (89,906)          (80,823)
     Proceeds from employee stock plans and                                                                                 
        dividend reinvestment plan...................................          22,386               8,837             6,745 
     Purchase of common stock........................................        (113,877)            (49,019)          (30,047)
                                                                         --------------------------------------------------
           Net cash (used) provided by financing activities..........        (178,200)             14,929            44,149 
                                                                         --------------------------------------------------
Increase (decrease) in cash..........................................             174                 294            (3,129)
Cash at beginning of period..........................................             327                  33             3,058 
Beginning cash balances of immaterial                                                                                       
   pooling-of-interests entities.....................................              -0-                 -0-              104 
                                                                         --------------------------------------------------
Cash at end of period................................................    $        501        $        327      $         33 
                                                                         ==================================================
=================================================================================================================================
</TABLE> 

68
<PAGE>
 
Note U - Quarterly Results
of Operations (Unaudited)
Selected quarterly results of operations for the four quarters ended December 31
are as follows:

<TABLE>
<CAPTION>
(In thousands except per share data)                1996                                                  1995
====================================================================================================================================
                               Fourth         Third        Second         First        Fourth       Third       Second       First
                              Quarter        Quarter*     Quarter        Quarter      Quarter      Quarter     Quarter      Quarter
<S>                          <C>            <C>           <C>           <C>          <C>          <C>         <C>          <C>
Revenue from earning assets..$ 342,577      $343,595      $336,285      $331,364     $325,937     $318,971    $317,970     $310,061
Interest expense.............  173,111       178,540       176,130       173,659      172,731      169,706     172,382      164,577
Net interest income..........  169,466       165,055       160,155       157,705      153,206      149,265     145,588      145,484
Provision for loan losses....   18,497        17,505        14,049        15,120       10,090        9,398      12,307        8,344
Income before income taxes...   80,496        55,658        77,266        74,832       75,038       73,305      64,531       62,303
Net income...................   51,615        35,193        48,705        47,163       47,892       46,095      40,858       40,110
Per common share:
   Net income................      .92           .62           .86           .83          .82          .79         .70          .69
   Cash dividends declared...      .42           .40           .40           .40          .40          .38         .38          .38
   Market price range:
        High.................    50.88         44.50         40.13         41.25        41.38        39.38       34.50        33.00
        Low..................    42.88         34.38         36.00         36.75        37.50        32.38       30.63        25.75
</TABLE>

*  Excluding the one-time, pre-tax third quarter charge of $24,196,000, or $.27
   per share after tax, required under federal legislation to recapitalize the
   Savings Association Insurance Fund, net income for the third quarter 1996 was
   $50,412,000 or $.89 per share.
================================================================================

Note V - Fair Value of Financial Instruments
For purposes of this disclosure, the estimated fair value of financial
instruments with immediate and shorter-term maturities (generally 90 days or
less) is assumed to be the same as the recorded book value. These instruments
include the statement of condition lines captioned cash and due from banks,
federal funds sold and securities purchased under agreements to resell,
customers' acceptance liability, federal funds purchased and securities sold
under agreements to repurchase, other borrowed funds, and acceptances
outstanding.
     The carrying amount and estimated fair values of other financial
instruments at December 31 is summarized as follows:

<TABLE>
<CAPTION>
(In thousands)                                                1996                                1995
====================================================================================================================
                                                    Carrying         Estimated          Carrying        Estimated
                                                     Amount         Fair Value           Amount        Fair Value
<S>                                              <C>               <C>               <C>              <C>
Financial assets:
   Net loans.................................... $  11,901,197     $  11,877,655     $  11,564,822    $  11,747,723
   Mortgage loans held for sale.................        60,582            60,582            62,017           62,017

Financial liabilities:
   Deposits.....................................    12,467,599        12,449,605        13,420,287       13,363,864
   Long-term FHLB advances......................     1,023,729         1,046,752            15,014           14,461
   Other long-term debt.........................       411,946           422,696           425,885          461,378

Off-balance sheet:
   Off-balance sheet financial instruments
       (net receivable position)................            ----           3,746                ----         (2,966)
   Commitments to extend credit
        and standby letters of credit...........            ----          (1,842)               ----         (3,226)
====================================================================================================================
</TABLE>

                                                                              69
<PAGE>
 
FINANCIALS


     Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" (Statement 107), requires the disclosure of
estimated fair values for all financial instruments, both assets and liabilities
on and off-balance sheet, for which it is practicable to estimate their value
along with pertinent information on those financial instruments for which such
values are not available.

     Fair value estimates are made at a specific point in time and are based on
relevant market information which is continuously changing. Because no quoted
market prices exist for a significant portion of AmSouth's financial
instruments, fair values for such instruments are based on management's
assumptions with respect to future economic conditions, estimated discount
rates, estimates of the amount and timing of future cash flows, expected loss
experience, and other factors. These estimates are subjective in nature
involving uncertainties and matters of significant judgment; therefore, they
cannot be determined with precision. Changes in the assumptions could
significantly affect the estimates.

     Statement 107 fair value estimates include certain on and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. For example, AmSouth has a substantial trust department
that contributes net fee income annually. The trust department is not considered
a financial instrument, and its value has not been incorporated into the fair
value estimates. Other significant assets and liabilities that are not
considered financial assets or liabilities include the mortgage banking
operation, brokerage network, premises and equipment, core deposit intangible
and goodwill. In addition, the tax ramifications related to the realization of
the unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates. As a result, the
Statement 107 fair value disclosures should not be considered an indication of
the fair value of the corporation taken as a whole.

     The following methods and assumptions were used by AmSouth in estimating
its fair value disclosures for financial instruments:


Loans The fair values of variable rate loans that reprice frequently and have no
significant change in credit risk are assumed to approximate carrying amounts.
For credit card loans and equity lines of credit, the carrying value reduced by
an estimate of credit losses inherent in the portfolio is a reasonable estimate
of fair value. The fair values for other loans (e.g., commercial, commercial
real estate, certain mortgage loans and consumer loans) are estimated using
discounted cash flow analyses, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality and estimates of
maturity based on AmSouth's historical experience. The carrying amount of
accrued interest receivable approximates its fair value.


Securities and Mortgage loans held for sale Fair values for securities and
mortgage loans held for sale are based on quoted market prices, where available.
Where quoted market prices are not available, fair values are based on quoted
market prices of similar instruments, adjusted for any significant differences
between the quoted instruments and the instruments being valued.


Commitments to extend credit and Standby letters of credit The fair value of
commitments to extend credit is estimated based on the amount of unamortized
deferred loan commitment fees. The fair value of letters of credit is based on
the amount of unearned fees plus the estimated cost to terminate the letters of
credit.


Off-balance sheet instruments The fair value of interest rate swaps, financial
futures, and interest rate caps and floors are obtained from dealer quotes.
These values represent the esti-

70
<PAGE>
 
mated amount the corporation would receive or pay to terminate the contracts or
agreements, taking into account current interest rates and, when appropriate,
the current creditworthiness of the counterparties.


Deposit liabilities The fair value of deposits with no stated maturity, such as
noninterest-bearing demand deposits, savings accounts, and money market and
interest-bearing checking accounts is, by definition, equal to the amount
payable on demand (carrying amount). The fair values for variable rate
fixed-term money market accounts and certificates of deposit approximate their
carrying amounts. Fair values for fixed rate certificates of deposit are
estimated using a discounted cash flow calculation that applies interest rates
currently being offered on certificates of deposit to a schedule of aggregated
expected monthly maturities on time deposits.


Long-term borrowings The fair values of long-term borrowings (other than
deposits) are estimated using discounted cash flow analyses, based on AmSouth's
current incremental borrowing rates for similar types of borrowing arrangements.

                                                                              71