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[LOGO OF COMPASS BANCSHARES APPEARS HERE] COMPASS BANCSHARES March 9, 1995
DEAR SHAREHOLDER:
1994 was another great year for Compass Bancshares. We achieved our seventh
consecutive year of record performance with demonstrated growth in assets,
return on equity and net income. Compass also delivered solid returns to its
shareholders despite a difficult year for bank stocks as we increased our
dividend rate by 22% -- the 14th consecutive annual increase and the second
consecutive increase of more than 20%.
As we move forward in 1995, we remain extremely confident about the future
prospects for our company and believe that Compass is well-positioned to benefit
from the exciting changes taking place in the financial services industry. Our
goal has always been and will always be to maximize the value of each
shareholder's investment, while providing the highest quality of service to our
customers and the communities we serve and a stable environment for our
employees. We greatly appreciate your continued loyalty and support.
COMPASS' RECORD SPEAKS FOR ITSELF
Compass has consistently generated above market returns for its shareholders.
Over the past 10 years, the compounded annual return to Compass shareholders
through dividends and stock appreciation is a stellar 19.6% compared to 14.1%
for the S&P 500 Index. Since December 31, 1989, the total return to Compass
shareholders has been 210% -- far exceeding returns provided by the S&P Bank
Index and S&P 500 Index as well as almost all of our regional bank peers.
The current management team has successfully transformed Compass from a $5
billion bank with more than 85% of its assets in Alabama into a highly
competitive $9.1 billion multi-state bank holding company. Since December 31,
1989, the Company has grown from 85 full service bank offices to over 175 while
expanding our operations in Texas and Florida, states which we continue to view
as attractive market complements to our core Alabama franchise. Our market
capitalization has grown from $277 million to nearly $1 billion. During the same
time period, non-performing assets declined as a percentage of total assets from
1.66% to 0.21% while total shareholders' equity rose from $333 million to $601
million, reflecting a 12.53% annual compound growth rate.
Our growth has been healthy and carefully planned, and has consistently
generated excellent financial results providing shareholders with a superior
total rate of return. Earnings per share increased from $1.23 in 1989 to $2.68
in 1994. In the same five-year period, the Company's stock price has increased
over 150%. The market expects our prosperity to continue. As recently as October
1994, a Dean Witter analyst predicted that "On fundamentals, we expect Compass
to trade at $30 during the next 12 months."
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[LOGO OF COMPASS BANCSHARES APPEARS HERE] COMPASS BANCSHARES
1994 FINANCIAL RESULTS PLACE COMPASS AMONG THE TOP PERFORMING BANKS IN THE
NATION
The Company's performance in 1994, the year in which Harry Brock began his
disruptive attempts to distract us from our current direction, reflects the
continuation of Compass' highly successful performance. Customers gave us a vote
of confidence by increasing deposits 26% to more than $7 billion. Earnings per
share, an important indicator of Compass' current performance, were up 13%. The
Company's return on equity, the yardstick that measures management's stewardship
of shareholders' money, increased to 17.35% -- the highest level in 15 years. As
a demonstration of the Board's continued confidence in Compass' long-term
earnings prospects, the Board voted to increase dividends twice during the last
12 months reflecting an aggregate increase of over 47%.
HISTORICAL ROE -- COMPASS VS. PEER GROUP
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Compass 15.16% 15.48% 15.77% 16.65% 17.35%
Peer Group (Compiled
by Keefe Bruyette &
Woods Southern Regionals) 10.29% 11.53% 14.27% 15.66% 15.49%
</TABLE>
Data has been restated to reflect pooling-of-interests transactions.
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[LOGO OF COMPASS BANCSHARES APPEARS HERE] COMPASS BANCSHARES
YOUR BOARD OF DIRECTORS - QUALIFIED, DEDICATED AND INDEPENDENT
Compass' financial results are the product of a dedicated, independent and
well-qualified Board of Directors and our family of over 4,000 hard-working
Compass employees. The current Board consists of 11 directors, none of whom are
officers of the Company except for CEO Paul Jones. The Company's Board includes
some of the state's most respected and capable business leaders. Seven of the
Company's Board members are Presidents or Chief Executive Officers of major
Alabama corporations. The average length of service of the current Board
members, excluding Mr. Brock and his committee, is 11 years. All but one became
directors before Mr. Brock's retirement in 1991. This is the Board that built
Compass Bancshares.
In addition to being experienced and seasoned business executives, the Company's
Board members have a substantial financial stake in the Company. The current
Board members and their families, excluding Brock and his committee, hold
approximately 12% or $119 million worth of common stock in the Company. This
combination of business expertise, independence and investment in the Company
has led the Board to chart a successful and dynamic track record for Compass.
YOUR BOARD TAKES ITS RESPONSIBILITIES SERIOUSLY
The Company's Board has followed a deliberative and thoughtful process in
evaluating Compass' future. After Mr. Brock initiated unauthorized contacts in
an attempt to sell our bank, the Board informed First Union that Mr. Brock had
been acting without authority and that First Union's attention had not been
invited. The Board then undertook a formal process to re-evaluate all strategic
options including the proposal that he suggested.
As a part of this process, the Board sought and received advice from its
independent financial advisor, CS First Boston Corporation, regarding our
strategic alternatives including the First Union proposal Mr. Brock released to
the news media. Their well-supported conclusion was that now is not the time to
sell. In CS First Boston's presentation to the Board, the reasons cited were
numerous and included:
- - Compass has higher growth prospects than potential acquirors including
First Union
- - Acquisition value of Compass is significantly above the $30.71 per share in
First Union's proposal
- - Bank stocks are selling at depressed prices
- - Buyers' ability to pay is limited by reduced relative multiples
- - There presently are a limited number of potential buyers
- - Potential buyers' universe is likely to grow with interstate banking
- - Acquisition premiums are currently at relatively low levels
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[LOGO OF COMPASS BANCSHARES APPEARS HERE] COMPASS BANCSHARES
Our current strategic plan was reviewed by CS First Boston and endorsed by the
Board after detailed analysis. This plan calls for the Company to continue the
well-proven strategy for generating strong and consistent financial performance
that has long been the source of Compass' superior returns to shareholders.
Historical results support both the viability of the Compass strategy and the
ability of our management team to execute this strategy.
COMPASS BANCSHARES GROWTH IN EQUITY
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Compass Bancshares $233 $259 $275 $308 $333 $363 $454 $511 $551 $601
</TABLE>
COMPASS BANCSHARES GROWTH IN ASSETS
(DOLLARS IN BILLIONS)
<TABLE>
<CAPTION>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Compass Bancshares $3.4 $4.0 $4.1 $4.6 $5.0 $5.5 $6.8 $7.1 $7.3 $9.1
</TABLE>
Data has been restated to reflect pooling-of-interests transactions.
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[LOGO OF COMPASS BANCSHARES APPEARS HERE] COMPASS BANCSHARES
<TABLE>
HISTORICAL DIVIDENDS & EARNINGS PER SHARE
<CAPTION>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends Per Share $0.34 $0.39 $0.44 $0.47 $0.51 $0.53 $0.59 $0.67 $0.76 $0.92
Earnings Per Share $0.87 $0.98 $0.86 $1.20 $1.23 $1.51 $1.74 $2.01 $2.37 $2.68
</TABLE>
Data has been restated to reflect pooling-of-interests transactions.
Shareholders have been well rewarded for their commitment to the Compass
strategy.
<TABLE>
TOTAL STOCKHOLDERS RETURN - 5 YEARS (12/31/89-12/31/94)
<CAPTION>
PEER GROUP S&P BANK
COMPASS AVERAGE* INDEX S&P 500
------- ---------- -------- -------
<S> <C> <C> <C> <C>
Total Stockholder's Return 209.79% 105.45% 54.77% 50.64%
</TABLE>
* CS First Boston Peer Group
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[LOGO OF COMPASS BANCSHARES APPEARS HERE] COMPASS BANCSHARES
BROCK'S ACTIONS JUST DON'T MAKE SENSE
Since the Company's recent performance and prospects are so outstanding, Mr.
Brock's recent activities just don't make any sense. The Board of the Company
considered all reasonable options and came to the conclusion that continuing to
pursue the Company's strategic plan and operating the bank for long term growth
and profitability is in the best interests of the shareholders, employees and
communities we serve.
No one is foreclosing a sale or strategic merger if it makes sense. Your Board
will remain open to such alternatives if and when they may arise. However, it is
your Board's informed judgment that in the current market environment and in
light of the Company's bright future prospects, pursuing such a strategy at this
time does not make sense.
BROCK IS PURSUING A PERSONAL AGENDA
In spite of the Company's respect for and long affiliation with Mr. Brock, we
find that his current activities have placed us in the uncomfortable position of
having to take a stand against his behavior. Although Mr. Brock along with many
other important people helped build Compass Bancshares into the strong, stable
institution it is today, this does not give him the authority to act or speak on
the Company's behalf without the Board's prior approval. For nearly nine months
now, he has tried to assert control over the Board and to bully the members into
pursuing his agenda.
Compass Bancshares is not Mr. Brock's to give away. No matter what his views may
be as a member of our Board of Directors, he has only one vote. And as a
colleague, we expect him to respect the opinions of the other members and to
honor the will of the majority of the Board. Before he officially retired in
1991, Harry Brock helped select a respected and talented Board of Directors and
management team to run the Company. It is time that he step aside and respect
the informed judgments of these qualified and dedicated individuals.
CONTROL IS AT THE CORE OF BROCK'S EFFORTS
At the core of Mr. Brock's efforts is an attempt to regain control of the
Company. Although he mentions the future of the Company and "maximizing
shareholder value", his actions indicate that he is more interested in
dominating the Board and the destiny of the Company. Mr. Brock's nominees to the
Board include long-time friends Wendell Taylor and Jim Hayes as well as the
son-in-law of another old friend Carl Wittichen.
Rather than evaluating proposals on their merit as your current experienced and
independent Board has done, Mr. Brock's nominees will show allegiance to him by
automatically aligning their votes with his. Notably, other than this intent to
remove the current successful management team, Mr. Brock and his nominees have
not indicated what would happen if their ill-advised efforts to find a suitor
for the bank are unsuccessful.
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[LOGO OF COMPASS BANCSHARES APPEARS ABOVE] COMPASS BANCSHARES
WE APPRECIATE YOUR CONTINUED LOYALTY AND SUPPORT
We regret that Mr. Brock has forced this costly proxy contest upon our Company,
and we appreciate your continued patience and support. We intend to call as many
of you as we can over the course of the next few weeks to answer any questions
you may have. In the meantime, if you would like to communicate directly with
us, you may call 1-800-566-9061 between the hours of 9:00 A.M. and 8:00 P.M.
Central Time, Monday through Friday.
Except as described in the Company's proxy statement relating to the Annual
Meeting of Shareholders to be held on April 11, 1995, no director, nominee as a
director or executive officer of the Company is a party to any contract,
arrangement or understanding with respect to securities of the Company or with
respect to future employment or future transactions with the Company.
YOUR VOTE IS IMPORTANT TO ENSURE THAT COMPASS REMAINS ON THE STEADY COURSE THAT
HAS SERVED SHAREHOLDERS SO WELL OVER THESE PAST MANY YEARS.
YOUR VOTE IS IMPORTANT TO ENSURE THAT COMPASS REMAINS IN THE CONTROL OF AN
EXPERIENCED AND INDEPENDENT BOARD OF DIRECTORS.
PLEASE VOTE YOUR SUPPORT FOR YOUR CURRENT BOARD BY SIGNING, DATING AND PROMPTLY
MAILING THE ENCLOSED WHITE PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED.
Thank you again for your continued loyalty and support.
Sincerely,
The Board of Directors
Compass Bancshares, Inc.
/s/ Charles W. Daniel /s/ D. Paul Jones, Jr.
- ------------------------ ------------------------
Charles W. Daniel D. Paul Jones, Jr.
/s/ W. Eugene Davenport /s/ Goodwin L. Myrick
- ------------------------ ------------------------
W. Eugene Davenport Goodwin L. Myrick
/s/ Marshall Durbin, Jr. /s/ John S. Stein
- ------------------------ ------------------------
Marshall Durbin, Jr. John S. Stein
/s/ Tranum Fitzpatrick
- ------------------------
Tranum Fitzpatrick
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