SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the Period Ended September 30, 1994 Commission File No. 0-6032
COMPASS BANCSHARES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-0593897
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
15 South 20th Street
Birmingham, Alabama 35233
----------------------------------------
(Address of principal executive offices)
(205) 933-3000
-------------------------------
(Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $2 par value
--------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 1994
- -------------------------- -------------------------------
Common Stock, $2 Par Value 36,957,048
The number of pages of this report is 22.
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
- ------------------------------ ----
Item 1 Financial Statements
Consolidated Balance Sheets as of September 30, 1994 and
December 31, 1993 3
Consolidated Statements of Income for the Three and Nine Months Ended
September 30, 1994 and 1993 4
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1994 and 1993 5
Notes to Consolidated Financial Statements 7
Item 2
Management's Discussion & Analysis of Results of Operations and Financial
Condition 9
PART II. OTHER INFORMATION
- ---------------------------
Item 6 Exhibits and Reports on Form 8-K 18
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
<CAPTION>
September 30, 1994 December 31, 1993
------------------ -----------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 393,787 $ 283,783
Federal funds sold and securities purchased
under agreements to resell 105,943 144,764
Interest bearing deposits with other banks 99 10,474
Investment securities (market value of
$1,476,912 and $631,794 for 1994 and
1993, respectively) 1,485,618 604,464
Investment securities available for sale 701,818 645,454
Trading account securities 69,696 239,491
Loans, net of unearned income 5,457,381 5,197,464
Allowance for loan losses (109,224) (110,616)
------------ ------------
Net loans 5,348,157 5,086,848
Premises and equipment, net 192,659 176,790
Other assets 147,869 141,526
------------ ------------
Total assets $ 8,445,646 $ 7,333,594
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing $ 1,246,102 $ 1,156,039
Interest bearing 4,824,421 4,469,058
------------ ------------
Total deposits 6,070,523 5,625,097
Federal funds purchased and securities
sold under agreements to repurchase 745,565 623,443
Other short-term borrowings 293,185 171,014
Accrued expenses and other liabilities 375,468 37,266
FHLB and other borrowings 374,962 325,437
------------ ------------
Total liabilities 7,859,703 6,782,257
Shareholders' equity:
Common stock of $2 par value:
Authorized--100,000,000 shares;
Issued--36,957,048 shares in 1994 and
36,927,277 shares in 1993 73,914 73,854
Surplus 37,445 36,815
Loans to finance stock purchases (5,915) (6,576)
Net unrealized holding gain (loss) on
available-for-sale securities (7,960) 6,545
Retained earnings 488,459 440,699
------------ ------------
Total shareholders' equity 585,943 551,337
------------ ------------
Total liabilities and shareholders'
equity $ 8,445,646 $ 7,333,594
============ ============
</TABLE>
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In Thousands Except Per Share Data)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 111,438 $ 103,616 $ 322,658 $ 308,190
Interest and dividends on
investment securities 21,057 16,073 47,263 53,879
Interest on investment
securities available
for sale 8,702 7,823 31,419 24,938
Interest on trading account
securities 1,217 2,518 8,847 5,919
Interest on federal funds
sold and securities
purchased under agreements
to resell 1,170 978 3,756 2,176
Interest on interest bearing
deposits with other banks 75 222 506 668
---------- ---------- ---------- ----------
Total interest income 143,659 131,230 414,449 395,770
Interest expense:
Interest on deposits 47,519 40,193 132,992 121,166
Interest on federal funds
purchased and securities
sold under agreements to
repurchase 7,050 4,512 18,180 14,334
Interest on other short-
term borrowings 3,917 1,765 7,706 5,404
Interest on FHLB and other
borrowings 4,178 3,471 11,308 7,879
---------- ---------- ---------- ----------
Total interest expense 62,664 49,941 170,186 148,783
---------- ---------- ---------- ----------
Net interest income 80,995 81,289 244,263 246,987
Provision for loan losses 1,099 6,512 3,404 28,287
---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses 79,896 74,777 240,859 218,700
Noninterest income:
Service charges on deposit
accounts 11,379 9,951 32,489 29,027
Trust fees 4,335 4,049 13,157 11,944
Trading account profits and
commissions 1,642 2,206 (4,623) 10,036
Investment securities
gains, net 138 - 3,297 772
Loss on purchase of
securities from common
trust fund - - (8,222) -
Other 8,609 8,056 24,750 25,057
---------- ---------- ---------- ----------
Total noninterest income 26,103 24,262 60,848 76,836
Noninterest expense:
Salaries and benefits 34,777 32,205 97,808 97,660
Net occupancy expense 5,530 4,773 16,477 14,393
Equipment expense 4,863 4,604 14,528 13,168
FDIC insurance premium 3,337 3,034 9,993 9,031
Other 19,048 19,226 52,070 56,071
---------- ---------- ---------- ----------
Total noninterest expense 67,555 63,842 190,876 190,323
---------- ---------- ---------- ----------
Net income before income
tax expense 38,444 35,197 110,831 105,213
Income tax expense 13,614 12,384 37,667 37,848
---------- ---------- ---------- ----------
Net income $ 24,830 $ 22,813 $ 73,164 $ 67,365
========== ========== ========== ==========
Net income per common share $ 0.67 $ 0.60 $ 1.97 $ 1.77
Weighted average shares
outstanding 37,248 37,206 37,220 37,192
Dividends per common share $ 0.23 $ 0.19 $ 0.69 $ 0.57
</TABLE>
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1994 1993
-------------- --------------
<S> <C> <C>
Operating Activities:
Net income $ 73,164 $ 67,365
Adjustments to reconcile net income to
cash provided (used) by operations:
Depreciation and amortization 22,032 16,236
Accretion of discount and loan fees (8,464) (3,837)
Provision for loan losses 3,404 28,287
Net change in trading account securities 191,782 (141,659)
Net change in mortgage loans available
for sale 10,765 (9,019)
Gain on sale of investment securities (3,297) (772)
Loss on purchase of securities from
common trust fund 8,222 -
Gain on sale of premises and equipment (57) (122)
Gain on sale of other real estate owned (60) (102)
Provision for losses on other real
estate owned (507) 1,010
Decrease in interest receivable 1,300 9,306
Increase in other assets (5,248) (6,377)
Increase (decrease) in interest payable 4,597 (1,851)
Increase (decrease) in taxes payable 1,584 (6,711)
Increase (decrease) in other payables (4,753) 11,930
----------- -----------
Net cash provided (used) by operating
activities 294,464 (36,316)
----------- -----------
Investing Activities:
Proceeds from sales of investment securities 698 39,603
Proceeds from maturities/calls of investment
securities 239,252 287,280
Purchases of investment securities (707,392) (19,160)
Proceeds from sales of securities available
for sale 239,407 51,767
Proceeds from maturities/calls of securities
available for sale 103,427 170,079
Purchases of securities available for sale (496,443) (193,246)
Net (increase) decrease in federal funds
sold and securities purchased under
agreements to resell 185,371 (49,121)
Net increase in loan portfolio (193,799) (255,210)
Acquisitions 6,132 1,242
Purchases of premises and equipment (19,640) (30,188)
Proceeds from sales of premises and equipment 427 367
Net decrease in interest bearing deposits
with other banks 10,376 704
Proceeds from sales of other real estate
owned 5,188 6,748
----------- -----------
Net cash provided (used) by investing
activities (626,996) 10,865
----------- -----------
</TABLE>
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1994 1993
-------------- --------------
<S> <C> <C>
Financing Activities:
Net increase in demand deposits, NOW
accounts and savings accounts $ 54,465 $ 126,399
Net increase (decrease) in time deposits 125,426 (89,728)
Net increase (decrease) in federal funds
purchased 32,298 (229,577)
Net increase in securities sold under
agreements to repurchase 82,724 7,663
Net increase in short-term borrowings 122,103 149,805
Issuance of FHLB advances and other
borrowings 49,619 122,485
Repayment of long-term debt (136) (911)
Purchase of treasury shares (14) -
Common dividends paid (25,396) (20,679)
Preferred dividends paid - (1,531)
Redemption of preferred stock - (25,965)
Proceeds from issuance of common stock - 664
Repayment of loans to finance stock purchases 747 -
Proceeds from exercise of stock options 700 1,337
----------- -----------
Net cash provided by financing activities 442,536 39,962
----------- -----------
Net increase in cash and due from banks 110,004 14,511
Cash and due from banks at beginning of period 283,783 316,092
----------- -----------
Cash and due from banks at end of period $ 393,787 $ 330,603
=========== ===========
Schedule of noncash investing and financing
activities:
Transfers of loans to other real estate owned $ 2,152 $ 6,411
Loans to facilitate the sale of other real
estate owned 10,777 7,598
Transfer of securities to investment
securities available for sale - 28,671
Transfer of securities available for sale to
held-to-maturity securities 224,971 -
Trade date securities purchases -- Note 2 344,122 -
Acquisition of banks:
Fair value of assets acquired $ 309,037
Liabilities assumed 273,725
-----------
Cash paid $ 35,312
===========
</TABLE>
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 1 - General
The consolidated financial statements in this report have not been audited.
In the opinion of management, all adjustments necessary to present fairly the
financial position and the results of operations for the interim periods have
been made. All such adjustments are of a normal recurring nature. The results
of operations are not necessarily indicative of the results of operations for
the full year or any other interim periods. For further information, refer to
the consolidated financial statements and footnotes included in the Company's
annual report on Form 10-K for the year ended December 31, 1993.
NOTE 2 - Business Combinations
On October 14, 1993, the Company purchased First Federal Savings Bank of
Northwest Florida ("First Federal"), of Ft. Walton Beach, Florida, for $13.7
million in cash. The acquisition was accounted for under the purchase method
of accounting. At the date of acquisition, First Federal had assets of
approximately $101 million, deposits of $91 million and equity of $10 million.
On October 21, 1993, the Company purchased all of the outstanding shares of
Peoples Holding Company, Inc. ("Liberty") and its bank subsidiary, Liberty Bank
of Ft. Walton Beach, Florida, for $4.95 million in cash. At the date of
acquisition, Liberty had assets of $43 million, deposits of $35 million and
equity of $4 million. The acquisition was accounted for as a purchase.
The Company completed the acquisition of Spring National Bank ("Spring
National"), of Houston, Texas on November 3, 1993, with the issuance of 326,940
shares of the Company's common stock. At the date of acquisition, Spring
National had assets of $75 million, deposits of $66 million and equity of $6
million. The acquisition was accounted for as a pooling-of-interests and
accordingly all prior period information has been restated.
On January 27, 1994, the Company acquired 1st Performance National Bank ("1st
Performance"), of Jacksonville, Florida, in a cash transaction. The acquisition
was accounted for as a purchase. At the date of acquisition, 1st Performance
had assets of $267 million, deposits of $235 million and equity of $25 million.
The Company completed the acquisition of Security Bank, N.A. ("Security") of
Houston, Texas on May 5, 1994, with the issuance of 465,297 shares of the
Company's common stock. At the date of acquisition, Security had assets of $76
million, deposits of $69 million, and equity of $6 million. The transaction
was accounted for under the pooling-of-interests method of accounting and
accordingly all prior period information has been restated.
On May 12, 1994, the Company acquired three branches of Anchor Savings Bank
in the Jacksonville, Florida area with deposits of $31 million. The acquisition
was accounted for as a purchase.
On October 1, 1994, the Company completed the acquisition of 22 branches of
First Heights Bank, fsb, of Houston, Texas, with deposits of approximately $870
million and assets of $61 million, for approximately $6.8 million in a cash
transaction. The acquisition was accounted for as a purchase.
The Company announced on June 20, 1994, an agreement to acquire Southwest
Bankers, Inc. ("Southwest"), of San Antonio, Texas, and its bank subsidiary,
The Bank of San Antonio, for 950,000 shares of the Company's common stock. At
September 30, 1994, Southwest had assets of $144 million, deposits of $128
million, and equity of $11 million. It is anticipated that the transaction
will close in the first quarter of 1995 and will be accounted for under the
pooling-of-interests method of accounting.
On September 27, 1994, the Company announced an agreement to acquire American
Bancorporation of the South ("American"), of Brevard County, Florida, and its
bank subsidiary, American Bank of the South, for up to $15,350,000 in cash.
American had total assets of $188 million, deposits of $172 million, and equity
of $11 million at September 30, 1994. The transaction is expected to close
during the first quarter of 1995 and will be accounted for under the purchase
method of accounting.
<PAGE>
NOTE 3 - Recently Issued Accounting Standards
During the second quarter of 1993, the Financial Accounting Standards Board
("FASB") issued FASB Statement No. 114, Accounting by Creditors for Impairment
of a Loan ("FAS114"). FAS114 requires that impaired loans be measured based on
the present value of expected future cash flows discounted at the loan's
effective interest rate, which is the contractual interest rate adjusted for
any deferred loan fees or costs, premium, or discount existing at the inception
or acquisition of the loan. FAS114 is effective for fiscal years beginning
after December 15, 1994, with early adoption permitted. The Company does not
anticipate adopting FAS114 prior to its effective date. Presently, the Company
is unable to determine the impact that adoption of FAS114 will have on the
consolidated financial statements of the Company, but management anticipates
that the impact will not be material.
On December 31, 1993, the Company adopted FASB Statement No. 115, Accounting
for Certain Investments in Debt and Equity Securities ("FAS115"). FAS115
requires that a company's debt and equity securities be classified into one of
three categories based on management's intent to hold the securities: i.
trading account securities, ii. held-to-maturity securities, and iii.
securities available for sale. Securities held in a trading account are
required to be reported at fair value, with unrealized gains and losses
included in earnings. Securities designated to be held to maturity are
required to be reported at amortized cost. Securities classified as available
for sale are required to be reported at fair value with unrealized gains
and losses excluded from earnings and shown separately as a component of share-
holders' equity. At September 30, 1994, tax-effected net unrealized losses
in the Company's available-for-sale portfolio totaled $8.0 million, a decrease
of $14.5 million from net unrealized gains of $6.5 million at December 31,
1993. This decline in the market value of the Company's available-for-sale
portfolio was reflected as a reduction of shareholders' equity in accordance
with FAS115.
NOTE 4 - Loss on Purchase of Securities From Common Trust Fund
During the second quarter of 1994, the Company recorded losses of
approximately $8.2 million from the purchase of collateralized mortgage
obligation inverse floaters ("inverse floaters") from a common trust fund
managed by the trust division of the Company's lead bank. Due to the increase
in the general level of interest rates, the common trust fund customers faced
significant losses on inverse floaters held in the portfolio. In evaluating the
suitability of these investments for the common trust fund subsequent to their
decline in market value, the Company determined that it would be in the best
interests of the Company, its lead bank, and its trust customers to purchase
these securities at book value from the common trust fund. As a result of this
decision, the Company purchased inverse floaters with a fair value of $27.0
million from the common trust fund at the fund's cost of $35.2 million with the
difference between purchase price and fair value reflected in the Company's
Statement of Income as a separate component of noninterest income. These
securities are reflected at cost in the Company's held-to-maturity investment
securities portfolio at September 30, 1994.
NOTE 5 - Statement of Cash Flows
In connection with the Company's acquisition of First Heights on October 1,
1994, the Company received cash of approximately $800 million. In anticipation
of the closing of the transaction on October 1, 1994, the Company executed
securities purchases of approximately $344 million with trade dates prior to
September 30, 1994, and settlement dates subsequent to that date. While the
purchase of these securities and the related liability are reflected in the
Company's balance sheet as of September 30, 1994 in accordance with generally
accepted accounting principles, the cash transactions related to these
purchases did not occur until the fourth quarter of the year. Therefore, the
purchase of securities and the incurrence of the related liability are
presented as a noncash transaction in the Statement of Cash Flows.
In the third quarter of 1994, the Company transferred investment securities,
primarily collateralized mortgage obligations, totaling $225 million from its
available-for-sale securities portfolio to investment securities held to
maturity.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Overview
Net income for the quarter ended September 30, 1994, increased 9 percent to
$24.8 million while net income for the first nine months of 1994 increased 9
percent to $73.2 million from the comparable prior year periods. Net income per
common share for the third quarter increased 12 percent to $0.67 compared to
the same period in 1993 while net income per common share for the first nine
months of 1994 increased 11 percent to $1.97. The larger increase in net income
per common share as compared to net income is due to the lack of preferred
stock dividends in 1994 as a result of the Company's redemption of its
outstanding preferred stock during the third quarter of 1993. Net interest
income decreased less than one percent during the third quarter of 1994 while
decreasing one percent for the first nine months of 1994 over the prior year
period. The provision for loan losses decreased significantly in 1994 from
prior periods due to a decrease in nonperforming assets and credit losses. For
the three months ended September 30, 1994, the provision for loan losses
declined $5.4 million from the third quarter of 1993 to $1.1 million while
decreasing 88 percent, or $24.9 million, for the nine months ended September
30, 1994. Noninterest income for the third quarter of 1994 increased 8 percent
from 1993 while noninterest expense increased 6 percent. For the first nine
months of 1994, noninterest income declined 21 percent over the prior year
while noninterest expense for the period remained relatively unchanged.
In November of 1993, the Company completed the acquisition of Spring National
Bank in Houston, Texas ("Spring National"). During May, 1994, the Company
acquired Security Bank, N.A. ("Security") in Houston, Texas. The acquisitions
of Spring National and Security were accounted for under the pooling-of-
interests method of accounting and accordingly the financial statements have
been restated for all periods to reflect the acquisitions. During the first
quarter of 1994, the Company completed the purchase of 1st Performance National
Bank ("1st Performance"), of Jacksonville, Florida, with assets of $267
million. On October 1, 1994, the Company completed the acquisition of First
Heights Bank, fsb, of Houston, Texas ("First Heights") in which the Company
purchased 22 branches of First Heights, assuming deposits of $870 million and
acquiring assets of $61 million. A complete list of acquisitions is included
in "Acquisitions" and "Pending Acquisitions" under Item I - Business in the
Company's 1993 Form 10-K and in Note 2, "Business Combinations," in the Notes
to the Consolidated Financial Statements in this Form 10-Q.
Net Interest Income
Net interest income for the three months ended September 30, 1994, decreased
less than $1 million from the third quarter of 1993. On a tax-equivalent basis,
net interest income declined less than $1 million, or 1 percent. This decrease
was a result of a $12.7 million, or 25 percent, increase in interest expense
offset by a $12.0 million, or 9 percent, increase in interest income on a tax-
equivalent basis. The increase in interest income was due to an increase in
average earning assets of $726 million which more than offset a decrease in the
average yield on earning assets from 7.98 percent to 7.84 percent. The largest
portion of the increase in earning assets occurred in the average balances of
real estate and commercial loans and total investment securities, specifically
investment securities held to maturity. This increase in the average balance of
loans and investment securities was funded predominantly by growth in all
categories of deposits as well as an increase in other short-term borrowings
and a decrease in trading account securities.
Interest expense for the three months ended September 30, 1994, increased by
$12.7 million or 25 percent from the prior year, due principally to a 13
percent increase in average interest bearing deposits coupled with a 16 basis
point increase in the average rate paid on deposits. Additionally, other
short-term borrowed funds increased by $107 million, or 49 percent, the average
balances of federal funds purchased and securities sold under agreements to
repurchase rose by $20 million, or 3 percent, while the rate paid on these
liabilities increased by 158 and 155 basis points, respectively.
Net interest income for the nine months ended September 30, 1994, decreased
$2.7 million to $244.3 million. Tax-equivalent net interest income for the nine
months ended September 30, 1994, decreased $4.1 million, or 2 percent, over the
first nine months of 1993. On a tax-equivalent basis, the decrease in net
interest income resulted from an increase in interest expense of $21.4 million,
or 14 percent, offset by a $17.3 million, or 4 percent, increase in interest
income. The increase in interest income resulted from a 10 percent increase in
average earning assets, primarily real estate loans and investment securities
available for sale, combined with a decrease in the average yield on earning
assets of 42 basis points from 8.22 percent for the nine months ended September
30, 1993, to 7.80 percent for the comparable period in 1994.
Interest expense increased as a result of an 11 percent increase in average
interest bearing liabilities, primarily total deposits and FHLB and other
borrowings, coupled with an 11 basis point increase in the rate paid on
interest bearing liabilities, from 3.70 percent in 1993 to 3.81 percent in
1994. The major components of the increase in the rate paid on interest bearing
liabilities were an 86 basis point increase in the rate paid on federal funds
purchased and securities sold under agreements to repurchase and a 100 basis
point increase in the rate paid on other short-term borrowings. Average
interest bearing deposits increased by $516 million, or 12 percent, due in part
to the acquisition of 1st Performance in January, 1994. Increases in FHLB and
other borrowings and other short-term borrowings of 26 percent and 10 percent,
respectively, more than offset a decrease in federal funds purchased and
securities sold under agreements to repurchase.
Net Interest Margin
Net interest margin, stated as a percentage, is the yield on average earning
assets obtained by dividing the difference between the overall interest income
on earning assets and the interest expense paid on all funding sources by
average earning assets. For the first nine months of 1994, the net interest
margin, on a tax-equivalent basis, was 4.63 percent compared to 5.17 percent
for the same period in 1993. This 54 basis point decrease resulted from the
changes in rates and volumes of earning assets and the corresponding funding
sources noted previously. A 40 basis point decrease in the rates earned on
loans and a 72 basis point decline in the yield on investment securities
available for sale were major contributors to the continued decline in the net
interest margin along with the increase in the average rate paid on interest
bearing liabilities from 3.70 percent to 3.81 percent. The impact of these
factors on net interest margin was partially offset by a six percent increase
in noninterest bearing demand deposits. During the first nine months of 1994,
the Company's net interest margin was positively impacted by the Company's use
of interest rate contracts, increasing taxable equivalent net interest margin
by 15 basis points as compared to a positive impact of 21 basis points for the
same period in 1993. The decline in the impact of interest rate contracts on
the Company's net interest margin was due to the increase in the general level
of interest rates during the first nine months of 1994.
For the quarter ended September 30, 1994, the net interest margin was 4.45
percent compared to 4.98 percent for the same period in 1993. This 53 basis
point decline resulted from a 14 basis point decrease in the yield on total
earning assets and a 39 basis point increase in the rate paid on interest
bearing liabilities. The decrease in the yield on average earning assets was
due to an 11 basis point decline in the yield on loans while the yield on
investment securities and investment securities available for sale decreased by
66 and 42 basis points, respectively. For the quarter ended September 30, 1994,
the taxable equivalent net interest margin was increased by 11 basis points due
to the Company's use of interest rate contracts, down from a 20 basis point
increase for the comparable prior year period.
The tables on the following page detail the components of the changes in net
interest income (on a tax-equivalent basis) by major category of interest
earning assets and interest bearing liabilities for the nine months and three
months ended September 30, 1994, as compared to the comparable periods of 1993
(in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1994
----------------------------------------------
Change
1994 Attributed to
to ----------------------------------
1993 Volume Rate Mix
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Loans $ 14,267 $ 30,101 $(14,432) $ (1,402)
Investment securities (7,733) (5,872) (2,072) 211
Investment securities available
for sale 6,440 10,632 (2,947) (1,245)
Trading account securities 2,883 564 2,119 200
Fed funds and resale agreements 1,580 832 541 207
Time deposits in other banks (162) (172) 13 (3)
--------- --------- --------- ---------
Increase in interest income $ 17,275 $ 36,085 $(16,778) $ (2,032)
========= ========= ========= =========
Interest expense:
Deposits $ 11,826 $ 15,198 $ (2,893) $ (479)
Fed funds purchased and repos 3,846 (193) 4,094 (55)
Other short-term borrowings 2,302 519 1,627 156
FHLB and other borrowings 3,429 2,066 1,080 283
--------- --------- --------- ---------
Increase in interest expense $ 21,403 $ 17,590 $ 3,908 $ (95)
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1994
----------------------------------------------
Change
1994 Attributed to
to ----------------------------------
1993 Volume Rate Mix
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Loans $ 7,770 $ 9,221 $ (1,333) $ (118)
Investment securities 4,675 6,595 (1,388) (532)
Investment securities available
for sale 833 1,548 (598) (117)
Trading account securities (1,326) (1,536) 528 (318)
Fed funds and resale agreements 192 (195) 483 (96)
Time deposits in other banks (147) (148) 4 (3)
--------- --------- --------- ---------
Increase in interest income $ 11,997 $ 15,485 $ (2,304) $ (1,184)
========= ========= ========= =========
Interest expense:
Deposits $ 7,326 $ 6,093 $ 1,241 $ (8)
Fed funds purchased and repos 2,538 157 2,302 79
Other short-term borrowings 2,152 873 856 423
FHLB and other borrowings 707 87 605 15
--------- --------- --------- ---------
Increase in interest expense $ 12,723 $ 7,210 $ 5,004 $ 509
========= ========= ========= =========
</TABLE>
Noninterest Income and Noninterest Expense
For the nine months ended September 30, 1994, noninterest income decreased
$16.0 million, or 21 percent, to $60.8 million from $76.8 million for the first
nine months of 1993. Noninterest income for the third quarter of 1994 increased
by $1.8 million, or 8 percent, from the same period in 1993. Service charges on
deposit accounts increased 14 percent and trust fees increased 7 percent during
the third quarter of 1994 while increasing 12 and 10 percent, respectively, for
the first nine months of 1994. The increase in service charges resulted from
the increase in deposits while the increase in trust fee income is due to
increased trust activity at River Oaks Trust Company, a subsidiary, and at the
Company's lead bank as assets under trust increased from $5.3 billion at
September 30, 1993 to $5.9 billion at September 30, 1994. Securities gains and
losses from the sale of available-for-sale investment securities increased from
gains of $772,000 during the first nine months of 1993 to gains of $3.3 million
during the comparable period of 1994. Securities gains and losses during the
third quarters of 1994 and 1993 were not material.
During the third quarter, trading account profits and commissions on bond
sales and trading activities decreased by $600,000 from $2.2 million during the
third quarter of 1993 to $1.6 million. For the nine months ended September 30,
1994, trading account profits and commissions decreased from income of $10.0
million to a loss of $4.6 million. This $14.6 million decrease was due in large
part to an $8.4 million decline during the first two quarters of the year in
the market value of speculative securities held in the Company's trading
account, primarily collateralized mortgage obligation inverse floaters
("inverse floaters"). Such inverse floaters represented securities in which the
coupon, and consequently the return, floated inversely to changes in interest
rates. The coupons on inverse floaters are generally a function of a base rate
minus the product of a multiplier and a floating index. In the case of the
inverse floaters held by the Company in its trading account, the coupon rate
was typically based on a base rate less two times 1 month LIBOR. Therefore, for
each 100 basis point increase in 1 month LIBOR, the coupon earned on such
securities declined by 200 basis points. As the level of interest rates rose in
the first six months of 1994, the repayment speed on the mortgages
collateralizing the inverse floaters slowed, which caused the average life of
such securities to extend at the same time coupon rates were falling. The
resulting decreased yield and the extended weighted average life generated a
substantial decline in market value. It should be noted, however, that all
inverse floaters held in the trading account were sold prior to June 30, 1994.
The remaining decrease in trading account profits and commissions resulted
from the increase in the general level of interest rates during the first nine
months of 1994. It should be noted that changes in the trading account profits
and commissions in future quarters cannot be predicted accurately because of
the uncertainty of changes in market conditions. There can be no assurance
that such amounts will or will not continue at their current levels.
The components of trading account assets at September 30, 1994, and December
31, 1993, are presented in the table on the following page. The overall level
of the trading account decreased from December 31, 1993, as a result of the
Company's decisions to sell the inverse floaters and to substantially limit its
proprietary trading (as distinguished from the retail trading necessary to
facilitate customer transactions) efforts in response to the rising interest
rate environment.
<TABLE>
<CAPTION>
September 30, 1994 December 31, 1993
------------------ -----------------
(in Thousands)
<S> <C> <C>
U.S. Treasury and Government agency $ 34,988 $ 45,158
State and political subdivisions 3,027 10,984
Mortgage-backed pass through securities 22,809 10,651
Other debt securities 136 6,321
Derivative securities:
Collateralized mortgage obligations
Fixed and floating 7,434 129,652
Inverse floaters - 31,306
Interest rate floors and caps 1,252 5,131
Exchange traded options 50 288
---------- ----------
$ 69,696 $ 239,491
========== ==========
</TABLE>
The $8.2 million loss on purchase of securities from common trust fund
resulted from the purchase of inverse floaters by the Company during the second
quarter from a common trust fund managed by the trust division of the Company's
lead bank. Due to the increase in the general level of interest rates, the
common trust fund customers faced significant losses on inverse floaters held
in the portfolio. In evaluating the suitability of these investments for the
common trust fund subsequent to the decline in market value, the Company
determined that it would be in the best interests of the Company, its lead
bank, and its trust customers to purchase these securities at book value from
the common trust fund. As a result of this decision, the Company purchased
inverse floaters with a fair value of $27.0 million from the common trust fund
at the fund's cost of $35.2 million with the difference between purchase price
and fair value reflected in the Company's Statement of Income as a separate
component of noninterest income. The securities purchased by the Company are
reflected at its cost of $27.0 million in its held-to-maturity investment
securities portfolio at September 30, 1994.
Following the purchase of the inverse floaters, the Company conducted a
review of all securities held by the common trust funds managed by the Company
or its subsidiaries. No inverse floaters or other high risk derivatives are
held by the common trust funds, however, certain individual trust accounts hold
derivative securities which may include high risk derivative securities. In
those cases where there are derivative securities, the Company believes after
reasonable investigation that the customer is sophisticated, is aware of the
risks associated with holding such securities, and is capable of holding such
securities to maturity. No other "high risk" derivatives are held by the
Company in its held-to-maturity and available-for-sale portfolios at December
31, 1993, or at September 30, 1994, other than those inverse floaters held by
the parent company as of September 30, 1994, as discussed above.
Noninterest expense increased $3.7 million, or 6 percent, during the third
quarter of 1994 from the same period in 1993. For the nine months ended
September 30, 1994, noninterest expense increased by less than one percent.
Salaries increased $2.1 million, or 8 percent, for the third quarter and
employee benefits increased 9 percent. During the first nine months of 1994,
salaries increased by $1.7 million or 2 percent while employee benefits
decreased by 9 percent. The modest increase in salaries from 1993 levels is the
result of a decrease in executive incentives offset by normal business growth
and regular merit increases while the decrease in employee benefits is due to
decreased ESOP and pension expense. Other noninterest expense decreased $4.0
million, or 7 percent, in the first three quarters of 1994, principally from
decreased legal expenses, decreased other real estate owned expenses, and the
lack of expenses associated with the Company's name change in 1993.
Income Taxes
Income tax expense increased by $1.2 million, or 10 percent, during the third
quarter of 1994 compared to the same period in 1993 while remaining relatively
unchanged during the first nine months of 1994. The effective tax rates for the
nine months ended September 30 decreased from 36 percent in 1993 to 34 percent
in 1994 while the effective tax rate remained unchanged at 35 percent for the
quarter ended September 30, 1994. The higher effective tax rate in 1993 was due
to the Company's provision for nondeductible acquisition expenses incurred
during the second quarter of 1993. The effective tax rate in 1994 was adversely
impacted by a decrease in tax-exempt income as a percentage of pretax income,
from 9 percent in 1993 to 7 percent in 1994.
Provision and Allowance for Loan Losses
The provision for loan losses decreased from $6.5 million during the three
months ended September 30, 1993, to $1.1 million in the comparable period in
1994. For the nine months ended September 30, 1994, the provision decreased by
$24.9 million, or 88 percent, to $3.4 million. This decrease reflected the 34
percent decrease in nonperforming assets from December 31, 1993, while net
chargeoffs as a percentage of average loans declined. Management considers
changes in the size and character of the loan portfolio, changes in
nonperforming and past due loans, historical loan loss experience, the existing
risk of individual loans, concentrations of loans to specific borrowers or
industries and existing and prospective economic conditions when determining
the adequacy of the loan loss allowance. The allowance for loan losses at
September 30, 1994, was $109.2 million compared to $110.6 million at December
31, 1993. The ratio of the allowance for loan losses to loans outstanding was
2.00 percent at September 30, 1994, down slightly from 2.13 percent at December
31, 1993. Net loan chargeoffs expressed as an annualized percentage of average
loans for the first nine months of 1994 were 0.14 percent compared with 0.16
percent for the first nine months of 1993.
Nonperforming Assets and Past Due Loans
Nonperforming assets, comprised of nonaccrual loans, renegotiated loans and
other real estate owned, totaled $26.4 million at September 30, 1994, compared
to $40.1 million at December 31, 1993. At September 30, 1994, the allowance for
loan losses as a percentage of nonperforming loans was 592 percent as compared
to 573 percent at December 31, 1993. The allowance for loan losses as a
percentage of nonperforming loans and accruing loans ninety days or more past
due increased from 472 percent at December 31, 1993, to 484 percent at
September 30, 1994.
Nonperforming assets as a percentage of total loans and other real estate
owned were 0.48 percent at September 30, 1994, down from 0.77 percent at
December 31, 1993. The amount carried in other repossessed assets was
$173,000 at September 30, 1994, and $375,000 at December 31, 1993. Loans
past due 90 days or more but still accruing interest decreased 1 percent at
September 30, 1994, from the $4.1 million at December 31, 1993, representing
0.07 percent of total loans and other real estate owned. During 1994,
other real estate owned declined 62 percent from $20.8 million at December
31, 1993, to $7.9 million at September 30, 1994.
The Company regularly monitors selected accruing loans for which general
economic conditions or changes within a particular industry could cause the
borrowers financial difficulties. This continuous monitoring of the loan
portfolio and the related identification of loans with a high degree of credit
risk are essential parts of the Company's credit management. Management
continues to emphasize maintaining a low level of nonperforming assets and
returning current nonperforming assets to an earning status.
Financial Condition
Overview
Total assets at September 30, 1994, were $8.4 billion, up 15 percent from
December 31, 1993. This increase was due to the acquisition of 1st Performance
in January, 1994, and the purchase of investment securities in anticipation of
the closing of the First Heights acquisition on October 1, 1994. Retained
earnings remained the primary source of growth for the Company's capital base.
Assets and Funding
At September 30, 1994, earning assets totaled $7.8 billion, an increase of 14
percent from December 31, 1993. The mix of earning assets shifted moderately in
the first nine months of 1994 with total investment securities at September 30,
1994, increasing by $938 million, or 75 percent, from year end while loans
increased by $260 million, or 5 percent. The growth in loans and total
investment securities was funded principally by a $170 million decrease in
trading account securities, a $445 million increase in total deposits, and a
$338 million increase in accrued expenses and other liabilities. The increase
in accrued expenses and other liabilities was due to the liability recorded in
connection with the purchase of investment securities prior to September 30,
1994, that did not settle in cash until after the end of the quarter. Loans
comprised 70 percent of total earning assets at September 30, 1994, as compared
to 76 percent at December 31, 1993, while the percentage of earning assets
represented by total investment securities increased from 18 percent to 28
percent. The decrease in the percentage of earning assets represented by loans
resulted from the purchase of investment securities in anticipation of the
closing of the First Heights acquisition. In connection with the purchase of
branches of First Heights and the assumption of the related deposits, the
Company purchased loans of only $48 million while receiving cash of
approximately $800 million upon closing on October 1, 1994. A portion of the
cash received was paid to settle the liability discussed above with the
remainder invested in federal funds sold. Management anticipates that it will
take several quarters for the Company to return its loan-to-deposit ratio to
desirable levels as funds are continually shifted from investment securities
and federal funds sold to loans while at the same time maintaining the
Company's standards of acceptable credit risk. While the initial composition of
interest bearing assets acquired will likely have a negative impact on the
Company's percentage net interest margin in the near future due to the fact
that investment securities and federal funds sold historically have lower
yields than loans, the total actual dollars of net interest income during the
fourth quarter of 1994 will increase as a result of this transaction.
Interest bearing deposits at September 30, 1994, increased $355 million from
December 31, 1993, while noninterest bearing deposits increased by $90 million.
During the third quarter of 1994, the mix of short-term liabilities shifted
toward other short-term borrowings, primarily short-term notes. At September
30, 1994, deposits accounted for 72 percent of the Company's funding, down from
77 percent at year end.
Liquidity and Capital Resources
Net cash provided by operating activities totaled $294 million for the nine
months ended September 30, 1994, consisting principally of the decrease in
trading account securities. For the first nine months of 1994, net cash used by
investing activities of $627 million consisted of proceeds from maturities of
investment securities of $239 million, proceeds from maturities of securities
available for sale of $103 million, proceeds from sales of securities available
for sale of $239 million, and a $185 million decrease in federal funds sold and
securities sold under agreements to repurchase with cash outflows of $707
million in investment securities purchases, $496 million in purchases of
securities available for sale, and a $194 million increase in loans
outstanding. Net cash provided by financing activities of $443 million was
composed of the issuance of $50 million in subordinated debentures in
September, 1994, and increases in time deposits and other short-term
borrowings, which funded the payment of $25 million in common stock dividends.
Total shareholders' equity at September 30, 1994, was 6.94 percent of total
assets compared to 7.52 percent at December 31, 1993. The decrease since year-
end 1993 reflects the 15 percent growth in total assets, due primarily to the
acquisition of 1st Performance and the purchase of investment securities in
anticipation of the closing of the First Heights acquisition, which outpaced
the growth in total shareholders' equity of 6 percent. The growth in
shareholders' equity consisted of earnings retained after payment of dividends
on common stock offset by the decrease in the net unrealized holding gain/loss
on available-for-sale securities. On December 31, 1993, the Company adopted
Financial Accounting Standard No. 115, Accounting for Certain Investments in
Debt and Equity Securities, ("FAS115"). At the date of adoption, the tax-
effected unrealized holding gain of $6.5 million on the Company's securities
available for sale was reflected as an additional component of shareholders'
equity. Pursuant to the requirements of FAS115, the after tax change in the
unrealized holding gain/loss in the Company's available-for-sale portfolio
from December 31, 1993, to September 30, 1994, of $14.5 million has been
reflected as a reduction of equity.
The leverage ratio, defined as period-end common equity adjusted for goodwill
divided by average assets adjusted for goodwill, was 7.19 percent at September
30, 1994, compared to 7.33 percent at December 31, 1993. Similarly, the
Company's tangible leverage ratio, defined as period-end common equity adjusted
for all intangibles divided by average assets adjusted for all intangibles,
decreased from 6.96 at December 31, 1993, to 6.89 at September 30, 1994. The
decrease in these ratios is due to goodwill and other intangibles recorded in
connection with the purchase of 1st Performance.
Tier I capital and total qualifying capital (Tier I capital plus Tier II
capital), as defined by regulatory agencies, as of September 30, 1994, exceeded
the well-capitalized target ratios of 6.0 percent and 10.0 percent,
respectively, under current regulations. The Tier I and total qualifying
capital ratios at September 30, 1994, were 10.17 percent and 13.65 percent,
respectively. Tier II capital includes supplemental capital components such as
qualifying allowances for loan losses, certain qualifying classes of preferred
stock and qualifying subordinated debt. The $50 million in subordinated
debentures issued by the Company in September, 1994, qualify as Tier II
capital. Increased regulatory activity in the financial industry as a whole
will continue to impact the structure of the industry; however, management does
not anticipate any negative impact on the capital resources or operations of
the Company.
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Allowance for Loan Losses/Nonperforming Assets
(In Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1994 1993
------------ ------------
<S> <C> <C>
Allowance for Loan Losses
Balance at beginning of period $ 110,616 $ 83,859
Add: Provision charged to earnings 3,404 28,287
Balance due to acquisition 810 439
Deduct: Loans charged off 11,537 11,782
Loan recoveries (5,931) (5,877)
----------- -----------
Net charge-offs 5,606 5,905
----------- -----------
Balance at end of period $ 109,224 $ 106,680
=========== ===========
Net charge-offs as a percentage of
average loans (annualized) 0.14% 0.16%
Recoveries as a percentage of charge-offs 51.41% 49.88%
</TABLE>
<TABLE>
<CAPTION>
At September 30, 1994 At December 31,1993
--------------------- -------------------
<S> <C> <C>
Nonperforming Assets
Nonaccrual loans $ 12,198 $ 12,165
Renegotiated loans 6,257 7,143
----------- -----------
Total nonperforming loans 18,455 19,308
Other real estate 7,947 20,831
----------- -----------
Total nonperforming assets $ 26,402 $ 40,139
=========== ===========
Accruing loans ninety days past due $ 4,089 $ 4,143
=========== ===========
Other repossessed assets $ 173 $ 375
=========== ===========
Allowance for loan losses $ 109,224 $ 110,616
=========== ===========
Allowance as a percentage of loans 2.00% 2.13%
Total nonperforming loans as a percentage
of loans and ORE 0.34% 0.37%
Total nonperforming assets as a percentage
of loans and ORE 0.48% 0.77%
Accruing loans ninety days past due as a
percentage of loans and ORE 0.07% 0.08%
Allowance for loan losses as a percentage
of nonperforming loans 591.84% 572.90%
Allowance for loan losses as a percentage
of nonperforming assets 413.70% 275.58%
</TABLE>
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
- -----------------------------------------------------------------------------
Item 6 Exhibits and Reports on Form 8-K Page
(a) Exhibits
(10)(a) Compass Bancshares, Inc., 1982 Long Term Incentive Plan
(incorporated by reference to Exhibit 1 to the Company's
Registration Statement on Form S-8 filed June 15, 1983, with the
Securities and Exchange Commission)
(10)(b) Compass Bancshares, Inc., 1989 Long Term Incentive Plan
(incorporated by reference to Exhibit 28 to the Company's
Registration Statement on Form S-8 filed February 21, 1991, with
the Securities and Exchange Commission)
(10)(c) Supplemental Retirement Agreement, dated as of March 18,
1991, between Compass Bank and Harry B. Brock, Jr. (incorporated
by reference to Exhibit 10(c) to the Company's Form 10-K for the
year ended December 31, 1991, filed March 26, 1992, with the
Securities and Exchange Commission)
(11) Computation of Per Share Earnings 20
(12)(a) Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends 21
(12)(b) Ratio of Earnings to Fixed Charges 22
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
November 14, 1994 /s/ GARRETT R. HEGEL
- ----------------- ---------------------------
Date By Garrett R. Hegel, as its
Chief Financial Officer
<TABLE>
Exhibit (11)
Compass Bancshares, Inc.
Computation of Earnings Per Share
Three and Nine Months Ended September 30, 1994 and 1993
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1994 1993 1994 1993
--------- --------- --------- ---------
(in Thousands Except Per Share Data)
<S> <C> <C> <C> <C>
PRIMARY:
Weighted average shares outstanding 36,952 36,895 36,941 36,876
Net effect of the assumed exercise
of stock options - based on the
treasury stock method using
average market price 296 311 279 316
--------- --------- --------- ---------
Total weighted average shares
and common stock equivalents
outstanding 37,248 37,206 37,220 37,192
========= ========= ========= =========
Net income $ 24,830 $ 22,813 $ 73,164 $ 67,365
Preferred dividends - 495 - 1,531
--------- --------- --------- ---------
Net income available
to common shareholders $ 24,830 $ 22,318 $ 73,164 $ 65,834
========= ========= ========= =========
Net income per common share $0.67 $0.60 $1.97 $1.77
========= ========= ========= =========
FULLY DILUTED:
Weighted average shares outstanding 36,952 36,895 36,941 36,876
Net effect of the assumed conversion
of the preferred stock - 1,063 - 1,093
Net effect of the assumed exercise
of stock options - based on the
treasury stock method using average
market price or period-end market
price, whichever is higher 296 311 279 316
--------- --------- --------- ---------
Total weighted average shares and
common stock equivalents
outstanding 37,248 38,269 37,220 38,285
========= ========= ========= =========
Net income $ 24,830 $ 22,813 $ 73,164 $ 67,365
========= ========= ========= =========
Net income per common share $0.67 $0.60 $1.97 $1.76
========= ========= ========= =========
</TABLE>
<TABLE>
Exhibit (12)(a)
Compass Bancshares, Inc. and Subsidiaries
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
Nine Months Ended September 30, 1994 and 1993
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1994 1993
---------- ----------
(in Thousands)
<S> <C> <C>
Pretax income $ 110,831 $ 105,213
Add fixed charges:
Interest on deposits 132,992 121,166
Interest on borrowings 37,194 27,617
Portion of rental expense representing
interest expense 2,081 1,884
---------- ----------
Total fixed charges 172,267 150,667
---------- ----------
Income before fixed charges $ 283,098 $ 255,880
========== ==========
Total fixed charges $ 172,267 $ 150,667
Preferred stock dividends - 1,531
Tax effect of preferred stock dividends - 860
---------- ----------
Combined fixed charges and preferred stock
dividends $ 172,267 $ 153,058
========== ==========
Pretax income $ 110,831 $ 105,213
Add fixed charges (excluding interest on
deposits):
Interest on borrowings 37,194 27,617
Portion of rental expense representing
interest expense 2,081 1,884
---------- ----------
Total fixed charges 39,275 29,501
---------- ----------
Income before fixed charges (excluding
interest on deposits) $ 150,106 $ 134,714
========== ==========
Total fixed charges $ 39,275 $ 29,501
Preferred stock dividends - 1,531
Tax effect of preferred stock dividends - 860
---------- ----------
Combined fixed charges and preferred stock
dividends $ 39,275 $ 31,892
========== ==========
Ratio of Earnings to Fixed Charges:
Including interest on deposits 1.64x 1.67x
Excluding interest on deposits 3.82x 4.22x
</TABLE>
<PAGE>
<TABLE>
Exhibit (12)(b)
Compass Bancshares, Inc. and Subsidiaries
Ratio of Earnings to Fixed Charges
Nine Months Ended September 30, 1994 and 1993
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1994 1993
---------- ----------
(in Thousands)
<S> <C> <C>
Pretax income $ 110,831 $ 105,213
Add fixed charges:
Interest on deposits 132,992 121,166
Interest on borrowings 37,194 27,617
Portion of rental expense representing
interest expense 2,081 1,884
---------- ----------
Total fixed charges 172,267 150,667
---------- ----------
Income before fixed charges $ 283,098 $ 255,880
========== ==========
Pretax income $ 110,831 $ 105,213
Add fixed charges (excluding interest on
deposits):
Interest on borrowings 37,194 27,617
Portion of rental expense representing
interest expense 2,081 1,884
---------- ----------
Total fixed charges 39,275 29,501
---------- ----------
Income before fixed charges (excluding
interest on deposits) $ 150,106 $ 134,714
========== ==========
Ratio of Earnings to Fixed Charges:
Including interest on deposits 1.64x 1.70x
Excluding interest on deposits 3.82x 4.57x
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME AND RELATED
SUPPLEMENTAL SCHEDULES OF COMPASS BANCSHARES, INC. AS OF AND FOR THE PERIOD
ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS AND RELATED SUPPLEMENTAL SCHEDULES.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 393,797
<INT-BEARING-DEPOSITS> 99
<FED-FUNDS-SOLD> 105,943
<TRADING-ASSETS> 69,696
<INVESTMENTS-HELD-FOR-SALE> 701,818
<INVESTMENTS-CARRYING> 1,485,618
<INVESTMENTS-MARKET> 1,476,912
<LOANS> 5,457,381
<ALLOWANCE> 109,224
<TOTAL-ASSETS> 8,445,646
<DEPOSITS> 6,070,523
<SHORT-TERM> 1,038,750
<LIABILITIES-OTHER> 375,468
<LONG-TERM> 374,962
<COMMON> 73,914
0
0
<OTHER-SE> 512,029
<TOTAL-LIABILITIES-AND-EQUITY> 8,445,646
<INTEREST-LOAN> 322,658
<INTEREST-INVEST> 78,682
<INTEREST-OTHER> 13,109
<INTEREST-TOTAL> 414,449
<INTEREST-DEPOSIT> 132,992
<INTEREST-EXPENSE> 170,186
<INTEREST-INCOME-NET> 244,263
<LOAN-LOSSES> 3,404
<SECURITIES-GAINS> 3,297
<EXPENSE-OTHER> 190,876
<INCOME-PRETAX> 110,831
<INCOME-PRE-EXTRAORDINARY> 110,831
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,164
<EPS-PRIMARY> 1.97
<EPS-DILUTED> 1.97
<YIELD-ACTUAL> 4.63
<LOANS-NON> 12,198
<LOANS-PAST> 4,089
<LOANS-TROUBLED> 6,257
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 110,616
<CHARGE-OFFS> 11,537
<RECOVERIES> 5,931
<ALLOWANCE-CLOSE> 109,224
<ALLOWANCE-DOMESTIC> 109,224
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>Information is not required to be disclosed in interim filings with the
Commission.
</FN>
</TABLE>