AmSouth recorded provision charges in the third quarter of 2000 totaling $88.3 million, specifically related to deterioration in its syndicated loan portfolio caused by higher interest rates and a slowing economy. See the sections entitled “Loans” and “Allowance for Loan Losses” for further discussion.

The provision for 1999 reflected credit quality deterioration among long-term healthcare providers caused by federal legislation reducing Medicare reimbursements to healthcare providers. This legislation had a material adverse financial impact on certain companies in this sector which heavily rely on such reimbursements. Both AmSouth and First American have been lenders to the healthcare industry. During 1999, management decided to exit the Medicare-dependent long-term care segment of the healthcare loan portfolio and transferred to AHAD $149 million in loans, net of a $71.0 million valuation allowance. Loan impairment charges associated with these loans of $71.0 million were included in the loan loss provision for 1999. Another item in the loan loss provision for 1999 was a $3.0 million charge to conform First American’s accounting policies with AmSouth’s.

Net charge-offs of loans in 2000 were higher compared to 1999. Increases occurred in the commercial and consumer loan portfolios, primarily the dealer indirect automobile and equity lending portfolios, and reflected the impact of higher interest rates and slowing economic growth. The increase in 1999 charge-offs over 1998 was primarily the result of higher charge-offs among commercial loans and within consumer loans, dealer indirect and equity loans.

Measured as a percentage of average net loans, net charge-offs followed the same pattern as the absolute amount of loan losses during the past three years. In 2000, net charge-offs were 0.48 percent of average net loans versus 0.40 percent in 1999 and 0.35 percent in 1998.

Management expects net charge-offs to increase in 2001 while the net charge-off ratio should be in a range more consistent with fourth quarter 2000 charge-offs of 0.66 percent. This reflects AmSouth’s expectation of more modest economic growth in 2001 compared to the above-average economic growth rates experienced from 1998 through 2000.

For additional details on net charge-offs, see Tables 16 and 18. Also, 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 Noninterest revenues (NIR) represent fees and income derived from sources other than interest-earning assets such as deposit account service charges or consumer investment services. NIR totaled $669.5 million in 2000 compared to $847.6 million in 1999 and $799.9 million in 1998. Noninterest revenues represented 31.7 percent of total tax equivalent net revenues in 2000 versus 35.6 percent in 1999 and 35.2 percent in 1998.

The decrease in NIR during 2000 reflected decreases in service charges on deposit accounts, investment services income and other NIR, partially offset by an increase in trust income.

Service charges in 2000 were lower compared to 1999 primarily as a result of fewer consumer service charges resulting from the popularity of AmSouth’s free checking products.

The decrease in consumer investment services income reflected the loss of revenue from the sale, at the end of the third quarter, of IFC.

Excluding the impact of the IFC sale, 2000 consumer investment services income was $87.0 million versus $74.8 million in 1999, a 16.4 percent increase. The growth was the result of higher sales of annuities, traditional brokerage services and mutual funds. At the end of 2000, AmSouth had approximately 1,300 trained and licensed professionals selling annuity products in branches across the franchise and more than 190 trained and licensed investment sales representatives. In addition, AmSouth had $7.2 billion in mutual fund assets under management in 28 proprietary mutual funds at the end of 2000.

Trust income was higher in 2000 due to growth in AmSouth’s wealth management business, new employee benefit plan administration business and increases in fees. Discretionary trust assets under management were $15.6 billion at the end of 2000. Total trust assets were $26.2 billion.

The decrease in other NIR reflected decreases in portfolio income, mortgage income and other NIR, partially offset by increases in interchange income, income from bank-owned life insurance (BOLI) and gains on sales of businesses.

During 2000, AmSouth recorded $105.3 million of portfolio losses versus $21.3 million of portfolio income in 1999. The decrease reflects $105.6 million of portfolio losses resulting from management’s decision to sell $4.0 billion of lower yielding securities as part of the third-quarter financial restructuring. Also included in the portfolio losses was a $12.1 million writedown in the third quarter of interest-only “strips” related to mortgage loan sales to third-party conduits. Portfolio income in 1999 included $8.0 million associated with the impairment of a First American portfolio investment. This charge was related to the Merger. Exclusive of these amounts, portfolio income for 2000 was $12.4 million, a decrease of $17.0 million compared to 1999. The decline primarily reflected the lower level of gains on the sale of available-for-sale securities during 2000 due to the overall decline in investment portfolio values caused by higher interest rates.