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 March 31, 1994 Commission File No. 0-6032
Compass Bancshares, Inc.
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(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 April 30, 1994
- - -------------------------- -----------------------------
Common Stock, $2 Par Value 36,472,173
The number of pages of this report is 18.
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
- - ------------------------------ ----
Item 1 Financial Statements
Consolidated Balance Sheets as of March 31, 1994 and December 31, 1993 3
Consolidated Statements of Income for the Three Months Ended March 31, 1994
and 1993 4
Consolidated Statements of Cash Flows for the Three Months Ended March 31,
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 14
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
<CAPTION>
March 31, 1994 December 31, 1993
-------------- -----------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 328,560 $ 279,622
Federal funds sold and securities purchased
under agreements to resell 246,994 140,043
Interest bearing deposits with other banks 10,098 10,474
Investment securities 489,297 589,869
Investment securities available for sale 934,398 639,801
Trading account securities 224,521 239,491
Loans, net of unearned income 5,210,308 5,148,486
Allowance for loan losses (111,522) (110,036)
------------- -------------
Net loans 5,098,786 5,038,450
Premises and equipment, net 188,798 173,911
Other assets 154,620 140,680
------------- -------------
Total assets $ 7,676,072 $ 7,252,341
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing $ 1,176,301 $ 1,135,898
Interest bearing 4,749,517 4,416,928
------------- -------------
Total deposits 5,925,818 5,552,826
Federal funds purchased and securities
sold under agreements to repurchase 618,322 620,411
Other short-term borrowings 206,401 171,014
Accrued expenses and other liabilities 41,874 37,069
FHLB and other borrowings 325,410 325,437
------------- -------------
Total liabilities 7,117,825 6,706,757
Shareholders' equity:
Common stock of $2 par value:
Authorized--50,000,000 shares;
Issued--36,464,765 shares in 1994 and
36,461,980 shares in 1993 72,930 72,924
Surplus 33,308 33,285
Loans to finance stock purchases (6,231) (6,576)
Net unrealized holding gain on available-
for-sale securities 3,342 6,494
Retained earnings 454,898 439,457
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Total shareholders' equity 558,247 545,584
-------------- -------------
Total liabilities and shareholders'
equity $ 7,676,072 $ 7,252,341
============== =============
</TABLE>
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In Thousands Except Per Share Data)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
---------------------------
1994 1993
------------ ------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 102,850 $ 100,492
Interest and dividends on investment securities 11,461 19,696
Interest on investment securities available
for sale 10,565 8,792
Interest on trading account securities 4,287 1,362
Interest on federal funds sold and securities
purchased under agreements to resell 1,603 562
Interest on interest bearing deposits
with other banks 216 222
----------- -----------
Total interest income 130,982 131,126
Interest expense:
Interest on deposits 40,681 40,307
Interest on federal funds purchased and
securities sold under agreements to repurchase 5,337 5,349
Interest on other short-term borrowings 1,321 1,682
Interest on FHLB and other borrowings 3,399 1,817
----------- -----------
Total interest expense 50,738 49,155
----------- -----------
Net interest income 80,244 81,971
Provision for loan losses 2,203 11,679
----------- -----------
Net interest income after provision
for loan losses 78,041 70,292
Noninterest income:
Service charges on deposit accounts 9,905 8,875
Trust fees 4,451 3,929
Trading account profits and commissions (3,355) 4,693
Investment securities gains, net - 160
Other 7,808 7,867
----------- -----------
Total noninterest income 18,809 25,524
Noninterest expense:
Salaries and benefits 31,775 31,100
Net occupancy expense 5,182 4,272
Equipment expense 4,834 4,476
FDIC insurance premium 3,269 3,008
Other 15,075 18,270
----------- -----------
Total noninterest expense 60,135 61,126
----------- -----------
Net income before income tax expense 36,715 34,690
Income tax expense 12,884 12,900
----------- -----------
Net income $ 23,831 $ 21,790
=========== ===========
Net income per common share $ 0.65 $ 0.58
Weighted average shares outstanding 36,717 36,719
Dividends per common share $ 0.23 $ 0.19
</TABLE>
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended March 31,
------------------------------
1994 1993
------------- -------------
<S> <C> <C>
Operating Activities:
Net income $ 23,831 $ 21,790
Adjustments to reconcile net income to cash
provided by operations:
Depreciation and amortization 6,742 6,191
Accretion of discount and loan fees (3,353) (1,834)
Provision for loan losses 2,203 11,679
Net change in trading account securities 36,957 (19,628)
Net change in mortgage loans available for sale (3,381) (2,608)
Gain on sale of investment securities - (160)
Gain on sale of premises and equipment (24) (15)
Gain on sale of other real estate owned (20) (42)
Provision for losses on other real estate owned - 368
Decrease in interest receivable 2,286 6,034
Increase in other assets (1,031) (3,769)
Increase (decrease) in interest payable 79 (2,351)
Increase in taxes payable 10,633 13,746
Decrease in other payables (5,925) (193)
------------ ------------
Net cash provided by operating activities 68,997 29,208
------------ ------------
Investing Activities:
Proceeds from sales of investment securities 1,935 29,108
Proceeds from maturities/calls of securities 114,256 81,679
Purchases of investment securities (13,492) (6,775)
Proceeds from sales of securities available
for sale 51,515 -
Proceeds from maturities/calls of securities
available for sale 69,290 68,851
Purchases of securities available for sale (420,780) (10,126)
Net decrease in federal funds sold and securities
purchased under agreements to resell 39,599 14,336
Net (increase) decrease in loan portfolio 11,826 (41,286)
Acquisition of banks, net of cash acquired (23,649) -
Purchases of premises and equipment (9,264) (8,364)
Proceeds from sales of premises and equipment 135 171
Net decrease in interest bearing deposits with
other banks 377 489
Proceeds from sales of other real estate owned 1,347 1,889
------------ ------------
Net cash provided (used) by investing
activities (176,905) 129,972
------------ ------------
</TABLE>
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended March 31,
------------------------------
1994 1993
------------- ------------
<S> <C> <C>
Financing Activities:
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts $ 116,585 $ (40,900)
Net increase (decrease) in time deposits 22,187 (41,854)
Net decrease in federal funds purchased (9,661) (154,445)
Net increase in securities sold under agreements
to repurchase 472 9,204
Net increase in short-term borrowings 35,319 67,994
Repayment of long-term debt (40) (37)
Purchase of treasury shares (6) -
Common dividends paid (8,387) (6,853)
Preferred dividends paid - (515)
Repayment of loans to finance stock purchases 345 -
Proceeds from exercise of stock options 32 1,293
------------ ------------
Net cash provided (used) by financing
activities 156,846 (166,113)
------------ ------------
Net increase (decrease) in cash and cash
equivalents 48,938 (6,933)
Cash and cash equivalents at beginning of period 279,622 309,441
------------ ------------
Cash and cash equivalents at end of period $ 328,560 $ 302,508
============ ============
Schedule of noncash investing and financing
activities:
Transfers of loans to other real estate owned $ 480 $ 1,355
Loans to facilitate the sale of other real
estate owned 1,236 991
Transfer of securities to investment securities
available for sale - 28,671
Acquisition of banks:
Fair value of assets acquired $ 278,139
Liabilities assumed 242,819
------------
Cash paid $ 35,320
============
</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 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 Spring, 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 completed the acquisition of 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 March 31, 1994, 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 will be restated beginning with the
Company's June 30, 1994 Form 10-Q.
On May 12, 1994, the Company completed the acquisition of 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 April 4, 1994, the Company announced an agreement to acquire 22 branches
of First Heights Bank, of Houston, Texas with deposits of approximately $885
million and assets of $54 million, in a purchase transaction. The acquisition
is expected to close in the third quarter of 1994.
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.
<PAGE>
NOTE 3 - Recently Issued Accounting Standards (continued)
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
shareholders' equity. At March 31, 1994, tax-effected net unrealized gains in
the Company's available-for-sale portfolio totaled $3.3 million, a decrease of
$3.2 million from 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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Overview
Net income for the quarter ended March 31, 1994, increased 9 percent to
$23.8 million over net income for the first quarter of 1993. Net income per
common share for the first quarter increased 12 percent to $.65 compared to the
same period in 1993. 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 2 percent
during the first three months of 1994 while noninterest income and noninterest
expense for the first quarter of 1994 declined 26 percent and 2 percent,
respectively.
In November of 1993, the Company completed the acquisition of Spring
National Bank in Houston, Texas ("Spring National"). The acquisition of Spring
National was accounted for under the pooling-of-interests method of accounting
and accordingly the financial statements have been restated for all periods to
reflect the acquisition. 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. A complete list of
acquisitions is included in "Acquisitions" and "Pending Acquisitions" under
Item I - Business in the Company's 1993 Form 10-K.
Net Interest Income
Net interest income for the three months ended March 31, 1994, decreased
$1.7 million over the first three months of 1993. On a tax-equivalent basis,
net interest income decreased $2.0 million (2 percent). This decrease was a
result of a $1.6 million (3 percent) increase in interest expense and a slight
decrease in interest income on a tax-equivalent basis. The decrease in
interest income was due to a decrease in the average yield on earning assets
from 8.44 percent to 7.77 percent offset by an increase in average earning
assets of $530 million. The largest portion of the increase in earning assets
occurred in the average balances of real estate and commercial loans, with a
decline in the average balances of total investment securities, which includes
investment securities available for sale. This increase in the average balance
of loans was funded by the maturities of investment securities, growth in all
categories of deposits and an increase in FHLB and other borrowings.
Interest expense for the three months ended March 31, 1994, increased by
$1.6 million or 3 percent from the prior year, due principally to a 9 percent
increase in total deposits offset by a 30 basis point decline in the average
rate paid on deposits. Additionally, the average balances of Fed funds
purchased and securities sold under agreements to repurchase declined 3
percent while the average balance of FHLB advances and other borrowings
increased by $122 million as $75 million of subordinated debentures issued by
the Company in the second quarter of 1993 and additional FHLB advances of $48
million in the third quarter of 1993 were used to reduce Fed funds purchased
and securities sold under agreements to repurchase and other short-term
borrowings.
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 three months of 1994, the net interest
margin, on a tax-equivalent basis, was 4.79 percent compared to 5.32 percent
for the same period in 1993. This 53 basis point decrease resulted from the
changes in rates and volumes of earning assets and the corresponding funding
sources noted previously. A 75 basis point decrease in the rates earned on
loans was the major contributor to the continued decline in the net interest
margin. The impact of this decline on net interest margin was partially offset
by an eight percent increase in noninterest bearing demand deposits and a
decrease in the average rate paid on interest bearing deposits from 3.91
percent to 3.61 percent.
The following table details 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 three months ended March 31, 1994, as
compared to the three months ended March 31, 1993:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1994
-------------------------------------
Change
1994 Attributed to
to --------------------------
1993 Volume Rate Mix
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest Income:
Loans $ 2,287 $11,802 $(8,520) $ (995)
Investment securities (8,476) (9,829) 2,560 (1,207)
Investment securities available
for sale 1,799 3,307 (1,099) (409)
Trading account securities 2,925 2,012 371 542
Fed funds and resale agreements 1,042 918 47 77
Time deposits in other banks (6) (7) 1 -
---------- -------- -------- --------
Decrease in interest income $ (429) $ 8,203 $(6,640) $(1,992)
========== ======== ======== ========
Interest expense:
Deposits $ 374 $ 3,313 $(2,723) $ (216)
Fed funds purchased and repos (12) (146) 138 (4)
Other short-term borrowed funds (361) (439) 106 (28)
FHLB and other borrowings 1,582 1,083 313 186
---------- -------- -------- --------
Increase in interest expense $ 1,583 $ 3,811 $(2,166) $ (62)
========== ======== ======== ========
</TABLE>
Noninterest Income and Noninterest Expense
Noninterest income for the first three months of 1994 decreased $6.7 million
or 26 percent over the same period in 1993. Service charges on deposit
accounts and trust fees increased 12 and 13 percent, respectively. 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 and the Company's lead bank as assets administered increased from $4.9
billion at March 31, 1993, to $5.8 billion at March 31, 1994. Trading account
profits and commissions on bond sales and trading activities decreased by $8.0
million for the three months as compared to the same period in the prior year.
This decrease was primarily due to an unexpected and significant decline in the
market value of certain speculative securities held in the Company's trading
account resulting from volatility in the bond market at the end of the first
quarter. It should be noted that changes in the trading account profits and
commissions in future quarters cannot be anticipated because of the uncertainty
of changes in market conditions. There can be no assurance that such amounts
will not continue at their current level. There were no gains or losses
realized on the sale of securities available for sale during the first three
months of 1994. Gains on securities sold during the first quarter of 1993 were
not material.
Noninterest expense decreased $1.0 million or 2 percent during the first
three months of 1994 over the same period in 1993. Salaries increased $910,000
or 4 percent for the first quarter while employee benefits declined 4 percent.
The increase in salaries over 1993 levels was the result of normal business
growth and regular merit increases. Net occupancy expense increased 21 percent
to $5.2 million due primarily to increased depreciation and occupancy expenses
associated with the Company's move to its new corporate headquarters during the
third quarter of 1993 and the acquisition of 1st Performance in January, 1994.
Other noninterest expense declined $3.2 million during the quarter due to a
decrease in legal and professional services expenses.
Income Taxes
Income tax expense remained relatively unchanged during the first three
months of 1994 compared to the same period in 1993. The effective tax rates
for 1994 and 1993 were 35 percent and 37 percent, respectively. The higher
effective tax rate in 1993 was due to the Company's provision for potentially
nondeductible acquisition expenses incurred during the first quarter of 1993.
Conversely, the effective tax rate in 1994 was adversely impacted by a decrease
in tax-exempt income as a percentage of pretax income, from 10 percent in 1993
to 7 percent in 1994.
Provision and Allowance for Possible Loan Losses
The provision for loan losses for the three months ended March 31, 1994,
decreased 81 percent to $2.2 million from the $11.7 million reported for the
same period in 1993. This decrease reflected the six percent decrease in
nonperforming assets from December 31, 1993, as well as a decline in net
chargeoffs during the first quarter of 1994 compared to the first quarter of
1993. 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 March 31, 1994, was $111.5 million compared to
$110.0 million at December 31, 1993. The ratio of the allowance for loan
losses to loans outstanding was 2.14 percent at March 31, 1994, unchanged from
December 31, 1993.
Net chargeoffs decreased $769,000 from the comparable three month period in
1993. Net loan chargeoffs expressed as an annualized percentage of average
loans for the first three months of 1994 were 0.12 percent compared with 0.20
percent for the first three months of 1993.
Nonperforming Assets and Past Due Loans
Nonperforming assets, comprised of nonaccrual loans, renegotiated loans and
other real estate owned, totaled $37.4 million at March 31, 1994, compared to
$39.8 million at December 31, 1993. At March 31, 1994, the allowance for loan
losses as a percentage of nonperforming loans was 599 percent as compared to
574 percent at December 31, 1993. The loan loss reserve as a percentage of
nonperforming loans and accruing loans ninety days or more past due increased
from 472 percent at December 31, 1993, to 490 percent at March 31, 1994.
Nonperforming assets as a percentage of total loans and other real estate
owned was 0.71 percent at March 31, 1994, and 0.77 percent at December 31,
1993. The amount carried in other repossessed assets at March 31, 1994, was
$170,000 at March 31, 1994, and $303,000 at December 31, 1993. Loans past due
90 days or more but still accruing interest were relatively unchanged at
March 31, 1994, from the $4.1 million at December 31, 1993, representing 0.08
percent of total loans and other real estate owned.
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 March 31, 1994, were $7.7 billion, up 6 percent from
December 31, 1993. This increase was due primarily to the acquisition of 1st
Performance in January, 1994. Retained earnings remained the primary source of
growth for the Company's capital base.
Assets and Funding
At March 31, 1994, earning assets totaled $7.1 billion, an increase of 5
percent from December 31, 1993. The mix of earning assets shifted moderately
in the first three months of 1994 with total investment securities at March 31,
1994, increasing by $194 million (16 percent) from year end while loans
increased by $62 million (1 percent). The growth in loans and total investment
securities was funded principally by a $373 million (7 percent) increase in
total deposits. Loans comprised 73 percent of total earning assets at
March 31, 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 20 percent.
Interest bearing deposits at March 31, 1994, increased $333 million from
December 31, 1993, while noninterest bearing deposits increased by $40 million.
During the first quarter of 1994, the mix of short-term liabilities moved
toward other short-term borrowings, primarily commercial paper and trading
account short sales. At March 31, 1994, deposits accounted for 77 percent of
the Company's funding, unchanged from year end.
Liquidity and Capital Resources
Net cash provided by operating activities totaled $69 million for the three
months ended March 31, 1994. For the first quarter of 1994, net cash used by
investing activities of $177 million consisted of proceeds from maturities of
investment securities of $114 million, proceeds from maturities of securities
available for sale of $69 million, proceeds from sales of securities available
for sale of $52 million, and a $12 million decrease in loans outstanding with
cash outflows of $13 million in investment securities purchases, $421 million
in purchases of securities available for sale, and the purchase of 1st
Performance for $24 million, net of cash acquired. Net cash provided by
financing activities of $157 million consisted of increases in deposits and
other short-term borrowings which funded the payment of $8 million in common
stock dividends and the decrease in federal funds purchased.
Total shareholders' equity at March 31, 1994, was 7.27 percent of total
assets compared to 7.52 percent at December 31, 1993. The decrease since year-
end 1993 reflects the six percent growth in total assets, due primarily to the
acquisition of 1st Performance, while at the same time total equity increased
by only two 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 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
change in the unrealized holding gain in the Company's available-for-sale
portfolio from December 31, 1993, to March 31, 1994, of $3.3 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 7.07 percent at
March 31, 1994, compared to 7.31 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 6.95 at December 31, 1993, to 6.74 at March 31, 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 March 31, 1994, exceeded the
target ratios of 6.0 percent and 10.0 percent, respectively, under current
regulations. The Tier I and total qualifying capital ratios at March 31, 1994,
were 10.21 percent and 12.92 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.
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>
Three Months Ended
March 31,
-----------------------------
1994 1993
----------- -----------
<S> <C> <C>
Allowance for Loan Losses
Balance at beginning of period $ 110,036 $ 83,352
Add: Provision charged to earnings 2,203 11,679
Balance due to acquisition 810 -
Deduct: Loans charged off 3,144 3,596
Loan recoveries (1,617) (1,300)
----------- -----------
Net charge-offs 1,527 2,296
----------- -----------
Balance at end of period $ 111,522 $ 92,735
=========== ===========
Net charge-offs as a percentage of
average loans (annualized) 0.12% 0.20%
Recoveries as a percentage of charge-offs 51.43% 36.15%
<CAPTION>
March 31, 1994 December 31, 1993
-------------- -----------------
<S> <C> <C>
Nonperforming Assets
Nonaccrual loans $ 11,930 $ 12,024
Renegotiated loans 6,703 7,143
----------- -----------
Total nonperforming loans 18,633 19,167
Other real estate 18,747 20,653
----------- -----------
Total nonperforming assets $ 37,380 $ 39,820
=========== ===========
Accruing loans ninety days past due $ 4,137 $ 4,141
=========== ===========
Other repossessed assets $ 170 $ 303
=========== ===========
Allowance for loan losses $ 111,522 $ 110,036
=========== ===========
Allowance as a percentage of loans 2.14% 2.14%
Total nonperforming loans as a percentage
of loans and ORE 0.36% 0.37%
Total nonperforming assets as a percentage
of loans and ORE 0.71% 0.77%
Accruing loans ninety days past due as a
percentage of loans and ORE 0.08% 0.08%
Allowance for loan losses as a percentage of
nonperforming loans 598.52% 574.09%
Allowance for loan losses as a percentage of
nonperforming assets 298.35% 276.33%
</TABLE>
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION Page
- - --------------------------- ----
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit (11) Computation of Per Share Earnings 16
Exhibit (12)(a) Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends 17
Exhibit (12)(b) Ratio of Earnings to Fixed Charges 18
(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.
May 11, 1994 /s/ GARRETT R. HEGEL
- - ------------ ---------------------------
Date By Garrett R. Hegel, as its
Chief Financial Officer
<TABLE>
Exhibit (11)
Compass Bancshares, Inc. and Subsidiaries
Computation of Per Share Earnings
Three Months Ended March 31, 1994 and 1993
<CAPTION>
Three Months Ended March 31,
------------------------------------
1994 1993
-------------- --------------
(in Thousands Except Per Share Data)
<S> <C> <C>
PRIMARY:
Weighted average shares outstanding 36,464 36,396
Net effect of the assumed exercise
of stock options - based on the
treasury stock method using average
market price 253 323
------------ ------------
Total weighted average shares and common
stock equivalents outstanding 36,717 36,719
============ ============
Net income $ 23,831 $ 21,790
Preferred dividends - 515
------------ ------------
Net income available to common
shareholders $ 23,831 $ 21,275
============ ============
Net income per common share $ 0.65 $ 0.58
============ ============
FULLY DILUTED:
Weighted average shares outstanding 36,464 36,396
Net effect of the assumed conversion
of the preferred stock - 1,045
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 256 344
------------ ------------
Total weighted average shares and common
stock equivalents outstanding 36,720 37,785
============ ============
Net income $ 23,831 $ 21,790
============ ============
Net income per common share $ 0.65 $ 0.58
============ ============
</TABLE>
<TABLE>
Exhibit (12)(a)
Compass Bancshares, Inc. and Subsidiaries
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
Three Months Ended March 31, 1994 and 1993
<CAPTION>
Three Months Ended March 31,
------------------------------
1994 1993
------------ ------------
(in Thousands)
<S> <C> <C>
Pretax income $ 36,715 $ 34,690
Add fixed charges:
Interest on deposits 40,681 40,307
Interest on borrowings 10,057 8,848
Portion of rental expense representing
interest expense 673 662
----------- -----------
Total fixed charges 51,411 49,817
----------- -----------
Income before fixed charges $ 88,126 $ 84,507
=========== ===========
Total fixed charges $ 51,411 $ 49,817
Preferred stock dividends - 515
Tax effect of preferred stock dividends - 305
----------- -----------
Combined fixed charges and preferred stock
dividends $ 51,411 $ 50,637
=========== ===========
Pretax income $ 36,715 $ 34,690
Add fixed charges (excluding interest on
deposits):
Interest on borrowings 10,057 8,848
Portion of rental expense representing
interest expense 673 662
----------- -----------
Total fixed charges 10,730 9,510
----------- -----------
Income before fixed charges (excluding
interest on deposits) $ 47,445 $ 44,200
=========== ===========
Total fixed charges $ 10,730 $ 9,510
Preferred stock dividends - 515
Tax effect of preferred stock dividends - 305
----------- -----------
Combined fixed charges and preferred stock
dividends $ 10,730 $ 10,330
=========== ===========
Ratio of Earnings to Fixed Charges:
Including interest on deposits 1.71x 1.67x
Excluding interest on deposits 4.42x 4.28x
</TABLE>
<PAGE>
<TABLE>
Exhibit (12)(b)
Compass Bancshares, Inc. and Subsidiaries
Ratio of Earnings to Fixed Charges
Three Months Ended March 31, 1994 and 1993
<CAPTION>
Three Months Ended March 31,
------------------------------
1994 1993
------------ ------------
(in Thousands)
<S> <C> <C>
Pretax income $ 36,715 $ 34,690
Add fixed charges:
Interest on deposits 40,681 40,307
Interest on borrowings 10,057 8,848
Portion of rental expense representing
interest expense 673 662
----------- -----------
Total fixed charges 51,411 49,817
----------- -----------
Income before fixed charges $ 88,126 $ 84,507
=========== ===========
Pretax income $ 36,715 $ 34,690
Add fixed charges (excluding interest on
deposits):
Interest on borrowings 10,057 8,848
Portion of rental expense representing
interest expense 673 662
----------- -----------
Total fixed charges 10,730 9,510
----------- -----------
Income before fixed charges (excluding
interest on deposits) $ 47,445 $ 44,200
=========== ===========
Ratio of Earnings to Fixed Charges:
Including interest on deposits 1.71x 1.70x
Excluding interest on deposits 4.42x 4.65x
</TABLE>
