BIRMINGHAM, Ala -- Wondering about the future of AmSouth Bancorp? C. Dowd Ritter is the man to talk to. Last month, Mr. Ritter, 47, was appointed AmSouth's president and chief operating officer. Since he also was designated the clear heir-apparent to succeed chairman John W. Woods, who plans to retire in August 1996, Mr. Ritter is the man likely to lead AmSouth into the 21st century -- if the bank survives that long as an independent entity.

Mr. Ritter, like Mr. Woods before him, insists AmSouth can and will reward its shareholders by .remaining independent. But it's a fact of life that Alabarea's largest bank holding company always has been viewed as a desirable acquisition target. The recent passage of interstate banking legislation will only intensify those pressures.

Mr. Ritter steps into his new role at a delicate juncture in AmSouth's history. The Birmingham-based bank has just completed an ambitious expansion program, adding about $7 billion in assets since 1993. When two pending deals are completed early next year, it will have $17.5 billion of total assets.

The growth spurt didn't come without cost. Several stock analysts recently downgraded earnings estimates on AmSouth for 1994 and 1995 because earnings per-share dilution from buying Clearwater-based Fortune Bancorp., a $2.7 billion-asset thrift, was greater than expected.

In a recent interview with American Banker, Mr. Ritter confirmed that AmSouth expects several more quarters of fiat earnings until improvements in Fortune's business mix take hold by the middle of next year. "Putting the Florida franchise together is probably going to take a little bit longer than we anticipated," Mr. Woods agreed.

So whipping that Florida bank into shape, particularly Fortune, is crucial to AmSouth's future. Mr. Ritter seems well qualified to handle the task, given the fact that his 25-year career at AmSouth was mainly focused on retail banking. And Florida certainly holds great promise for AmSouth. Pinellas County, where Clearwater is located, holds 20% of the population of the entire state of Alabama.

If Mr. Ritter fails, well, there are plenty of potential acquirers out there waiting in the wings.

Q.: Jon Burke at RobinsonHumphrey and John Mason at Interstate/Johnson Lane recently downgraded their earnings estimates on AmSouth for 1994 and 1995. What happened there?

RITTER: We obviously didn't do as good a job as we thought we had done in sending some pretty strong signals, even as early as last spring. We stated at that time to the analysts that, during the next 18 to 36 months after acquiring Fortune, mortgage servicing was going to have to continue to be a heavy piece of their business until we changed the mix to be more like a commercial bank. Now we came out of that meeting and almost no one downgraded their estimates.

I think it has just taken time for people to understand that we were going to have a few flat quarters here. We think you'll see our earnings starting to improve by midyear next year.

One of the things the analysts didn't take into account, and it's very hard to factor in for anybody, is the things that we can add to the Fortune franchise. We've added dealer lending [for automobiles] in Tampa. We're already beyond our first year targets m dealer financing in Florida. We've also added commercial lending. Most of these acquired banks are small, or in Fortune's case, a thrift. We've already, again, far exceeded our expectations in commercial lending. That's one of the places where we're having to add people to keep up with the volumes. But as that mix of business changes, it's really going to add to the bottom line.

The other piece would be the trust and private banking side. Trust has always been, for AmSouth, a very good source of revenues and one of our high return-on-equity businesses. We're very pleased with the new business results we're seeing so far. We think we'll see much greater growth rates in our basic business lines in Florida than we do in Alabama. The opportunities in Florida are just so much greater for us to add new business.

Q.: What does the interstate banking legislation do for AmSouth?

RITTER: We've been on a very fast track, for us, in terms of acquisitions in the past 18 months. We've completed 11 acquisitions and have two more pending, That will make about 13 acquisitions in two years.

We're in a pretty heavy digestive mode trying to get our arms around those. So we know we have a challenge ahead of us, short term, to get that performance up. Right now, we think our. main objective is creating that shareholder value in terms of taking what we've already bought and improving the performance.

On the other front -- somebody looking to acquire AmSouth -- we've all stated that our primary objective is to create long-term shareholder value. Our feeling is the better returns we can have, and the better earnings we can have, the less vulnerable we are to someone acquiring AmSouth.

Who knows, after interstate banking, what will happen? But the premiums today are generally about 40% on market price. That means, for a company like little ol' AmSouth, somebody's going to have to pay about $2.7 billion. And if we look at those numbers and the potential group out there that could do that, it becomes a fairly dilutive transaction.

Sure, our franchise in Florida may have some fiat earnings for a quarter or two due to the asset mix and the spreads. But we've created the fifth largest bank in Florida, with $6 billion of assets, a franchise that frankly can't be replicated in the state of Florida anymore. Through luck or outstanding planning or whatever, we have done something that can't be done by someone else in Florida.

Q.: AmSouth has expanded into Florida, north Georgia and Tennessee, but not yet Mississippi. Any interest in Mississippi?

RITTER: Right now, our plate is full. We watch Mississippi. It is adjacent to us so proximity is m its favor. But finding the right size institution at the right price is not something we've seen yet and don't see right around the comer.

Q.: Margin compression has been a problem for AmSouth in recent quarters. What's the cause of that and what can you do about it?

RITTER: Margin compression has indeed been a problem for us and I think will be so short term. A good bit of it goes back to those thrift assets we acquired and the deposit costs at Fortune. How we change that is by adding some higher yielding assets to the books -- their mix was primarily mortgages -- and adding basic checking and saving products along with fee-based services. That's not an overnight process.

Q.: So margin compression could be a problem for a few more

RITTER: Yes. Again, I think towards midyear 1995 a lot of the things that we're doing now trying to change the business mix of those new acquisitions will begin to really pay off.

Q.: Is life a little more hectic for you now that you've been appointed president and chief operating officer?

RITTER: I guess lt's been much more hectic since I've been trying to complete the part of the schedule I had previously set up plus the new things that have come in. I have a feeling it's going to remain a little more hectic.

Q.: Assuming the succession goes as planned, what special qualities will you bring to the CEO position?

RITTER: Looking back on it, I was fortunate to start off, and have always through my career, put a good bit of my efforts on the customer side of the business. After all, everything else is a result of that interaction.

I think one of my strengths is understanding our customer segments and their characteristics and the products and services they demand -- not only today, but what they're going to demand tomorrow. Our emphasis is having the most services per household, i.e.; the best relationship we can, with each customer segment, whether consumer, commercial or private banking.

Q.: Has AmSouth recently changed its strategy for retail banking?

RITTER: We made a very significant change about two years ago and went to a team approach in all our branches, teller through the branch manager. We have pretty finite goals set out in advance of each quarter for the households they serve, trying to sell and service specific products: checking accounts, home equity lines of credit, those type things, things that were talked about before, but are measured very quantitatively today.

So, as a result, we're selling far more services through the same number of branches today than we did two years ago. Dramatically different. The employees have been put far more in control of their own destinies, financially, and all of the goals are goals that they can be held accountable for.

As I move around the company, it's delightful to see the improvement in creativity.

Q.: Where's retail banking going in the future?

RITTER: Some people talk about branches being a thing of the past. It may be that far more transactions are done outside the traditional branch. But I still think we'll see, and we are seeing, increased sales and transaction activity in the branches themselves. I don't think that relationship will change.

We've had telephone banking for years and it keeps growing at double-digit volume every year. Some customers love it. But other customers keep coming into those branches.

In terms of services, I think there's got to be some regulatory change. When somebody goes to finance an automobile, they've got to get insurance and why in the world shouldn't they be able to get 1 that through the bank? We may provide those services through a third party vendor, making a fee on the transaction, but it just makes a lot of sense to me to have one-stop shopping. Frankly, people are able to do a lot of those things today at nonbank competitors.

Other than the fact that deposits in our institutions are insured today, you sometimes wonder if you wouldn't be much better off to be out there in the marketplace without that. Competitors are out there today able to offer everything the bank does. For the future, we've got to offer more of the things that have left the banking industry over the past few years.

Q.: Where does this leave a mid-size bank like AmSouth, which is far too large to function as a community bank, but still smaller than a superregional?

RITTER: I know you read about how we'll shrink to a handful of banks over the next few years. I think that's almost ludicrous. Any bank that is taking good care of its customers and that is providing an above average return for its shareholders has got a place. That has been our philosophy and will continue to be.

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