<PAGE>
[LOGO OF COMPASS BANCSHARES APPEARS HERE] Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
<PAGE>
MARCH 3, 1995
CONTENTS
TAB
-----
A EXECUTIVE SUMMARY
B TRANSFORMATION AND GROWTH IN THE 90'S
C SUMMARY FINANCIAL RESULTS
D CORPORATE PHILOSOPHY/STRATEGY
E BUSINESS PLAN AND OUTLOOK
F CHRONOLOGY OF RECENT EVENTS
G MISCELLANEOUS INFORMATION
<PAGE>
TAB A
<PAGE>
EXECUTIVE SUMMARY
- Since December 31, 1989, the current management team has successfully
transformed Compass Bancshares from a $4.5 billion bank with more than 95%
of its assets in Alabama into a highly competitive $9.5 billion multi-state
bank holding company.
- During this period of transformation and accelerated growth, Compass
Bancshares has consistently generated superior financial results and
provided its shareholders with an above market total rate of return.
- These results can be attributed in large part to the execution of a sound
business strategy which can be characterized as low risk. Its soundness, as
well as management's ability to execute, have been well proven.
- A detailed three-year business plan has been prepared by senior management.
This plan, which has been endorsed by the Board after careful scrutiny by a
large, nationally recognized investment banking firm, outlines the
management team's plan for continuing to generate strong financial results
and superior increases in shareholder value.
- Following a lengthy and intense review of the strategic options available to
the Company, the Board has decided that the shareholders' interests are
currently best served by executing this three-year plan.
- The Board views Mr. Brock's recent disruptive activities as a control issue,
not a strategic issue.
1
<PAGE>
TAB B
<PAGE>
OVERVIEW OF COMPASS PROGRESS IN THE 90'S:
<TABLE>
<CAPTION>
December 31: Percent
1994 1989* Change CAGR
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Assets ($ millions): 9,456.25 ** 4,518.74 109.27% 15.92%
Market Capitalization ($ millions): 813.39 276.79 193.87% 24.06%
Nonperforming Assets ($ millions): 19.26 63.87 -69.84% -21.32%
Net Charge-Offs ($ millions): 8.09 15.06 -46.31% -11.70%
Earnings Per Share: 2.68 1.30 106.15% 15.57%
Dividends Per Share: 0.92 0.51 80.39% 12.52%
Stock Price: 22.00 8.67 153.85% 20.48%
Full Service Banking Offices: 204 ** 85 140.00% 19.14%
% Of Assets Outside Alabama: 41.35%** 4.98% 730.32% 52.70%
% Of Banking Offices Outside Alabama: 55.88%** 8.24% 578.16% 46.64%
</TABLE>
Notes:
* Actual numbers as reported in 1989.
** Adjusted to reflect pending acquisitions of American Bancorporation of the
South and Southwest Bankers.
2
<PAGE>
COMPASS BANCSHARES' LEGAL STRUCTURE *
(ASSETS IN THOUSANDS)
Compass Bancshares, Inc.
Assets: $9,456,253
Compass Bank Compass Banks Compass Bank
and Subs of Texas, Inc. (Florida)
(Alabama)
Assets: $5,700,733 Assets: $3,174,995 Assets: $735,348
Compass Bank - Compass Bank - Compass Bank - River Oaks Trust -
Houston Dallas San Antonio Houston
Assets: Assets: Assets: Assets Administered:
$1,973,115 $1,065,070 $143,000 $1,170,000
* Adjusted to reflect the pending acquisitions of American Bancorporation of the
South and Southwest Bankers.
3
<PAGE>
G E O G R A P H I C M A R K E T S
ALABAMA: 90 Banking Offices in 48 Cities
(includes Pending Acquisitions) FLORIDA: 45 Banking Offices in 16 Cities
(includes Pending Acquisitions) TEXAS: 38 Offices in the Houston area
21 Offices in the Dallas-Fort Worth
area
10 Offices in San Antonio
CORRESPONDENT BANKING: Over 1000 Correspondent Bank Customers
DEALER FINANCE: Over 900 Dealers throughout the U.S.
Open Star Denotes: Pending Acquisitions
Open Circle Denotes: Trust Offices
Closed Circle Denotes: Cities with Banking Offices
Closed Triangle Denotes: Key Correspondent Bank Markets
Closed Star Denotes: Primary Dealer Finance Markets
[MAP OF THE UNITED STATES APPEARS HERE]
[DETAILING THE ITEMS NOTED IN THE LEGEND ABOVE]
<PAGE>
TAB C
<PAGE>
<TABLE>
<CAPTION>
COMPASS BANCSHARES GROWTH IN EQUITY AND ASSETS
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY 210,958 235,773 259,515 284,192 307,284 331,710 417,102 488,508 545,584 600,613
TOTAL ASSETS 3,239,684 3,777,068 3,873,886 4,108,909 4,518,743 4,914,837 6,121,900 6,736,045 7,252,341 9,123,253
<CAPTION>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY $211 $236 $260 $284 $307 $332 $417 $489 $546 $601
TOTAL ASSETS $3,240 $3,777 $3,874 $4,109 $4,519 $4,915 $6,122 $6,736 $7,252 $9,123
EQUITY/ASSETS 6.51% 6.24% 6.70% 6.92% 6.80% 6.75% 6.81% 7.25% 7.52% 6.58%
</TABLE>
COMPOUND ANNUAL GROWTH RATES FOR THE 1985 - 1989 PERIOD
SHAREHOLDERS' EQUITY= 9.86% TOTAL ASSETS = 8.67%
COMPOUND ANNUAL GROWTH RATES FOR THE 1989 - 1994 PERIOD
SHAREHOLDERS' EQUITY= 14.34% TOTAL ASSETS = 15.09%
Note: Data has not been adjusted to reflect pending acquisitions or pooling
of interests transactions. 5
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL/PROJECTED DIVIDENDS AND EARNINGS
PER SHARE
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Est.
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- --------
<S> <C> <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 $1.12
EARNINGS PER SHARE $0.98 $1.15 $1.05 $1.27 $1.30 $1.56 $1.80 $2.08 $2.39 $2.68 $3.06
PAYOUT
RATIO 34.62% 33.82% 42.04% 36.91% 39.23% 33.97% 32.78% 32.21% 31.80% 34.33% 36.60%
</TABLE>
COMPOUND ANNUAL GROWTH RATE FOR THE 1985 - 1989 PERIOD
EARNINGS PER SHARE - 7.32% DIVIDENDS PER SHARE - 10.67%
COMPOUND ANNUAL GROWTH RATE FOR THE 1989 - 1994 PERIOD
EARNINGS PER SHARE - 15.57% DIVIDENDS PER SHARE - 12.52%
COMPOUND ANNUAL GROWTH RATE FOR THE 1989 - 1995 PERIOD (PROJECTED)
EARNINGS PER SHARE - 15.34% DIVIDENDS PER SHARE - 14.01%
Notes:
(1) The 1995 EPS estimate is the mean estimate from Zack's Earnings Estimates
service.
(2) EPS have not been restated to reflect pooling of interests transactions.
6
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL ROE - COMPASS VS PEER GROUP
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPASS 15.3% 16.4% 13.4% 15.1% 14.1% 15.4% 16.1% 16.6% 17.0% 17.4%
PEER GROUP 15.6% 15.6% 13.8% 14.9% 14.3% 10.3% 11.5% 14.3% 15.7% 15.5%
</TABLE>
AVERAGE ROE FOR THE PERIOD 1985-1989
COMPASS - 14.9% PEER GROUP 14.9%
AVERAGE ROE FOR THE PERIOD 1990 - 1994
COMPASS - 16.5% PEER GROUP - 13.5%
Note: To facilitate comparison with KBW peer group data, historical data for
Compass has not been restated to reflect pooling of interests
transactions.
7
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL ROA - COMPASS VS PEER GROUP
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPASS 0.98% 1.05% 0.91% 1.05% 0.98% 1.04% 1.08% 1.16% 1.27% 1.24%
PEER GROUP 1.01% 1.01% 0.93% 0.97% 0.97% 0.64% 0.76% 1.03% 1.21% 1.26%
</TABLE>
AVERAGE ROA FOR THE PERIOD 1985-1989
COMPASS - 0.99% PEER GROUP 0.98%
AVERAGE ROA FOR THE PERIOD 1990 - 1994
COMPASS - 1.16% PEER GROUP - 0.98%
Note: To facilitate comparison with KBW peer group data, historical data for
Compass has not been restated to reflect pooling of interests
transactions.
8
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN ANALYSIS
FOR THE PERIOD 12/31/89 TO 12/31/94
<S> <C>
CFBI 216%
FTEN 212%
CBSS 210%
DEPS 169%
FTU 151%
STI 143%
RGBK 138%
SBK 122%
FCOM 120%
BOAT 118%
SOTR 118%
CFBS 117%
HBAN 110%
I 107%
ASO 107%
FVB 95%
WB 89%
CMA 87%
SNV 86%
BAC 74%
BKSO 72%
BBTF 70%
SNB 69%
CF 64%
CHL 56%
ONE 53%
FATN 39%
BBI 30%
NB 18%
</TABLE>
Source: First Boston 9
<PAGE>
PEER GROUP FOR TOTAL RETURN ANALYSIS
Ticker Bank
--------- ---------------------------
CFBI Cullen Frost Bankers
FTEN First Tennessee Natl Corp
CBSS Compass Bancshares Inc
DEPS Deposit Guaranty Corp
FTU First Union Corp
STI SunTrust Banks Inc
RGBK Regions Financial Corp
SBK Signet Banking Corp
FCOM First Commerce Corp
BOAT Boatmen's Bancshares Inc
SOTR SouthTrust Corp
CFBS Central Fidelity Bks Inc
HBAN Huntington Bancshares
I First Interstate Bancorporation
ASO AmSouth Bancorporation
FVB First Virginia Banks Inc
WB Wachovia Corp
CMA Comerica Inc
SNV Synovus Financial Corp
BAC BankAmerica Corp
BKSO Bank South Corp
BBTF BB&T Financial Corp
SNB Southern National Corp
CF Crestar Financial Corp
CHL Chemical Banking Corp
ONE Banc One Corp
FATN First American Corp
BBI Barnett Banks Inc
NB NationsBank Corp
10
<PAGE>
TOTAL RETURN ANALYSIS
FOR THE PERIOD 12/31/89 TO 12/31/94
<TABLE>
<S> <C>
Compass 209.79%
Peer Group Avg 105.45%
S&P Bank Index 54.77%
S&P 500 50.64%
</TABLE>
Source: First Boston 11
<PAGE>
COMPASS BANCSHARES
CURRENT VALUATION VERSUS PEER GROUP
<TABLE>
<CAPTION>
CURRENT PRICE/ PRICE/ PRICE/ INDICATED
PRICE BOOK '94 EPS '95 EPS YIELD
----- ---- ------- ------- -----
<S> <C> <C> <C> <C> <C>
PEER GROUP AVERAGE $33.44 1.5 10.1 8.9 4.0%
CBSS $27.50 1.7 10.3 9.0 4.1%
</TABLE>
12
<PAGE>
TAB D
<PAGE>
COMPASS BANCSHARES STRATEGY AND PHILOSOPHY
The primary goal of Compass Bancshares' corporate strategy is to provide a
strong and consistent financial performance, as we believe that this will
ultimately be rewarded by the marketplace in the form of superior shareholder
returns. Historical results support both the viability of the Compass strategy
as well as the ability of the current management team to execute the strategy.
Principal tenets of the Compass strategy include:
- Generating consistent and profitable asset and revenue growth through a
combination of internal activities and acquisitions;
- Utilizing acquisitions of manageable size in targeted markets to
increase geographic coverage and diversification;
- Maintaining high employee productivity through the development of a
loyal employee base with a strong sales culture;
- Instilling a uniquely high level of motivation and regard for creating
shareholder value by promoting significant stock ownership by both
directors and employees;
- Maintaining the low cost producer status;
- Maintaining superior credit quality; and
- Maintaining the additional flexibility provided by strong
capitalization.
13
<PAGE>
<TABLE>
<CAPTION>
COMPASS BANCSHARES
INTERNAL AND EXTERNAL GROWTH
ASSETS:
1984 1985 1986 1987 1988 1989 1990
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
ACQUISITIONS 100,000 0 58,000 84,000 82,000 174,000
ENDING ASSETS (AS REPORTED) 3,037,470 3,239,684 3,777,068 3,873,886 4,108,909 4,518,743 4,914,837
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE INCREASES:
1985 1986 1987 1988 1989 1990
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INCREASE FROM ACQUISITIONS 3.29% 0.00% 1.54% 2.17% 2.00% 3.85%
INTERNAL GROWTH 3.37% 16.59% 1.03% 3.90% 7.98% 4.91%
----- ------ ----- ----- ----- -----
TOTAL ASSETS 6.66% 16.59% 2.56% 6.07% 9.97% 8.77%
</TABLE>
<TABLE>
<CAPTION>
AVERAGES: 1985 to 1990 to
1989 1994
---- ----
<S> <C> <C>
INCREASE FROM ACQUISITIONS 1.80% 9.69%
INTERNAL GROWTH 6.57% 5.67%
----- ------
TOTAL ASSETS 8.37% 15.36%
</TABLE>
<TABLE>
<CAPTION>
ASSETS:
1991 1992 1993 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
ACQUISITIONS 776,000 289,000 458,000 1,255,000
ENDING ASSETS (AS REPORTED) 6,121,900 6,736,045 7,252,341 9,123,253
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE INCREASES:
1991 1992 1993 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCREASE FROM ACQUISITIONS 15.79% 4.72% 6.80% 17.30%
INTERNAL GROWTH 8.77% 5.31% 0.87% 8.49%
------ ------ ----- ------
TOTAL ASSETS 24.56% 10.03% 7.66% 25.80%
</TABLE>
Note: Data has not been adjusted to reflect pending acquisitions of American
Bancorporation of the South and Southwest Bankers.
14
<PAGE>
COMPASS BANCSHARES
APPROACH TO ACQUISITIONS
- Manageable size, typically under $500 million.
- Targeted markets which offer: (1) superior growth
demographics and (2) are either highly fragmented with
opportunities for "add-on" acquisitions or highly
concentrated with opportunities to enter and compete at
prices below the levels offered by the primary banks.
- Conservative approach to due diligence.
- Disciplined pricing. Acquisitions must be nondilutive or,
at most, only minimally dilutive in the first year and
accretive thereafter.
- Value enhancing to the franchise.
- No surprises.
- Quick integration.
15
<PAGE>
COMPASS BANCSHARES - ACQUISITION SUMMARY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Total Outstandings: 1987 1988 1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Compass Bank - Houston 7,228 126,261 167,786 239,026 757,502 853,422 945,163 1,973,115
Compass Bank - Dallas 0 0 57,376 158,847 453,498 709,154 968,504 1,065,070
----------------------------------------------------------------------------------------
Total Texas 7,228 126,261 225,162 397,873 1,211,000 1,562,576 1,913,667 3,038,185
Total Florida 0 0 0 0 39,968 57,371 217,410 735,348
Total Texas and Florida 7,228 126,261 225,162 397,873 1,250,968 1,619,947 2,131,077 3,773,533
========================================================================================
Acquisitions Completed:
(Included In Outstandings Above)
FNB Crosby (Houston)(FDIC) 7,000
Weslayan Bank (Houston) 47,000
Westside Nat'l (Houston)(FDIC) 37,000
City National (Dallas)(FDIC) 82,000
Signature Bank (Dallas)(FDIC) 22,000
Memorial Bank (Houston)(FDIC) 75,000
First Plano Bank (Dallas)(FDIC) 9,000
Willow Bend (Dallas)(FDIC) 68,000
Plaza National (Dallas) 50,000
River Oaks Bancshares (Houston) 427,000
Las Colinas (Dallas) 20,000
Glen Eagles (Dallas) 30,000
C & B Fed. Sav. (Pensacola)(RTC) 39,000
Promenade Bancshares (Dallas) 170,000
Ameriway (Houston) 40,000
Interstate Bancshares (Houston) 66,000
FWNB Bancshares, Inc. (Dallas) 161,000
City National Bancshares (Dallas) 62,000
Cornerstone Bancshares (Dallas) 239,000
Peoples Hldg Co., Inc. (Ft. Walton) 43,000
First Fed. Sav. Bank of N.W. FL (Ft. Walton) 101,000
Spring National Bank (Houston) 75,000
1st Performance Nat'l Bank (Jacksonville) 278,000
Security Bank, N.A. (Houston) 76,000
Anchor Branches (Florida) 31,000
First Heights (Houston) 870,000
----------------------------------------------------------------------------------------
Total Assets Acquired - By Year 7,000 84,000 82,000 174,000 776,000 289,000 458,000 1,255,000
========================================================================================
Total Assets Acquired - Cumulative 7,000 91,000 173,000 347,000 1,123,000 1,412,000 1,870,000 3,125,000
========================================================================================
Pending Acquisitions:
Southwest Bankers (San Antonio) 143,000
American Bancorporation (Merritt Island) 190,000
----------
Total 333,000
==========
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
COMPASS BANCSHARES
HISTORIC GEOGRAPHIC BUSINESS MIX
ASSETS BY STATE:
----------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 CURRENT
----------------------------------------------------------------------------------------------------------------------------
% OF % OF % OF % OF % OF % OF
ASSETS TOTAL ASSETS TOTAL ASSETS TOTAL ASSETS TOTAL ASSETS TOTAL ASSETS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AL 4,293,358 95.02% 4,524,042 91.92% 4,893,137 79.64% 5,223,037 76.33% 5,188,942 70.89% 5,700,733 59.31%
TX 225,162 4.98% 397,873 8.08% 1,211,000 19.71% 1,562,576 22.83% 1,913,667 26.14% 3,174,995 33.03%
FL 0 0.00% 0 0.00% 39,968 0.65% 57,371 0.84% 217,410 2.97% 735,348 7.65%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
BRANCH OFFICES BY STATE:
----------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 CURRENT
----------------------------------------------------------------------------------------------------------------------------
% OF % OF % OF % OF % OF % OF
OFFICES TOTAL OFFICES TOTAL OFFICES TOTAL OFFICES TOTAL OFFICES TOTAL OFFICES TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AL 78 91.76% 82 91.11% 82 79.61% 84 73.68% 89 58.55% 90 44.12%
TX 7 8.24% 8 8.89% 17 16.50% 26 22.81% 35 23.03% 69 33.82%
FL 0 0.00% 0 0.00% 4 3.88% 4 3.51% 28 18.42% 45 22.06%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FROM 1989 TO 1994:
ASSETS OUTSIDE THE STATE OF ALABAMA HAVE GROWN AT A COMPOUND ANNUAL RATE OF 77%
BRANCH OFFICES OUTSIDE THE STATE OF ALABAMA
HAVE GROWN AT A COMPOUND ANNUAL RATE OF 75%
Note: Current data has been adjusted to reflect the pending acquisitions of
American Bancorporation of the South and Southwest Bankers.
17
<PAGE>
COMPASS BANCSHARES
MARKET POTENTIAL
<TABLE>
<CAPTION>
5-Year Projected
1994 Deposits Median Population Growth Deposits/
----------------------
Households ($000's) Income Numbers Percent Household
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alabama 1,587,753 43,530,028 28,434 233,585 5.53% 27,416
Dallas MSA 1,089,929 43,394,757 37,592 286,665 9.89% 39,814
Houston MSA 1,331,111 41,020,789 40,079 482,860 13.04% 30,817
North & Central Florida 2,181,750 54,115,665 29,791 585,083 10.37% 24,804
</TABLE>
Source: Claritas 18
<PAGE>
HISTORICAL OVERHEAD RATIO - COMPASS VS PEER
GROUP
<TABLE>
<CAPTION>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPASS 62.05% 61.60% 64.73% 63.13% 60.83% 59.32% 58.08% 57.35% 58.55% 60.10%
PEER GROUP 61.27% 61.43% 62.99% 64.38% 64.28% 64.04% 64.71% 61.78% 62.58% 61.85%
</TABLE>
AVERAGE OVERHEAD RATIO FOR THE PERIOD 1985-1989
COMPASS - 62.47% PEER GROUP - 62.87%
AVERAGE OVERHEAD RATIO FOR THE PERIOD 1990 - 1994
COMPASS - 58.68% PEER GROUP - 62.99%
Notes:
(1) To facilitate comparison with KBW peer group data, historical data for
Compass has not been restated to reflect pooling of interests transactions.
(2) The 1994 ratio has been restated to exclude $16.6 million of non-recurring
derivatives losses. The reported ratio for 1994 is 61.28%
19
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL NET CHARGE-OFF/AVERAGE LOAN RATIO
COMPASS VS PEER GROUP
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPASS 0.28% 0.31% 0.45% 0.37% 0.56% 0.53% 0.88% 0.56% 0.22% 0.15%
PEER GROUP 0.48% 0.53% 0.61% 0.54% 0.49% 0.87% 0.96% 0.78% 0.33% 0.19%
</TABLE>
AVERAGE NET CHARGE-OFF/AVERAGE LOAN RATIO FOR THE PERIOD 1985-1989
COMPASS - 0.39% PEER GROUP - 0.53%
AVERAGE NET CHARGE-OFF/AVERAGE LOAN RATIO FOR THE PERIOD 1990-1994
COMPASS - 0.47% PEER GROUP - 0.63%
Note: To facilitate comparison with KBW peer group data, historical data for
Compass has not been restated to reflect pooling of interests
transactions.
20
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL NONPERFORMING ASSET/LOAN RATIO
COMPASS VS PEER GROUP
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPASS 1.02% 1.11% 1.11% 1.01% 2.25% 1.85% 1.68% 1.31% 0.77% 0.33%
PEER GROUP 1.12% 1.12% 1.05% 0.95% 1.31% 2.56% 2.49% 2.82% 1.19% 0.71%
</TABLE>
AVERAGE NONPERFORMING ASSET/LOAN RATIO FOR THE PERIOD 1985-1989
COMPASS - 1.30% PEER GROUP - 1.11%
AVERAGE NONPERFORMING ASSET/LOAN RATIO FOR THE PERIOD 1990 - 1994
COMPASS - 1.19% PEER GROUP - 1.91%
Note: To facilitate comparison with KBW peer group data, historical data for
Compass has not been restated to reflect pooling of interests
transactions.
21
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL LOAN LOSS RESERVE/NON PERFORMING
ASSET RATIO
COMPASS VS PEER GROUP
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPASS 101.66% 88.40% 91.71% 107.21% 48.96% 62.98% 81.95% 136.73% 276.33% 556.48%
PEER GROUP 151.46% 159.97% 165.47% 174.80% 141.56% 104.21% 139.05% 161.09% 234.79% 327.98%
</TABLE>
AVERAGE LOAN LOSS RESERVE/NONPERFORMING ASSET RATIO FOR THE PERIOD 1985-1989
COMPASS - 87.59% PEER GROUP - 158.65%
AVERAGE LOAN LOSS RESERVE/NONPERFORMING ASSET RATIO FOR THE PERIOD 1990-1994
COMPASS - 222.89% PEER GROUP - 193.42%
Note: To facilitate comparison with KBW peer group data, historical data for
Compass has not been restated to reflect pooling of interests
transactions.
22
<PAGE>
<TABLE>
<CAPTION>
COMPASS BANCSHARES
HISTORICAL TANGIBLE LEVERAGE RATIO
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<C> <C> <C> <C> <C>
6.59% 6.03% 6.58% 6.95% 6.35%
</TABLE>
Well Capitalized guideline = 5.00%
Note: 1994 data is estimated. Data has not been restated to reflect pooling of
interests transactions.
23
<PAGE>
<TABLE>
<CAPTION>
COMPASS BANCSHARES
HISTORICAL TIER I CAPITAL RATIO
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<C> <C> <C> <C> <C>
9.86% 9.76% 9.92% 10.49% 9.52%
</TABLE>
Well Capitalized guideline = 6.00%
Note: 1994 data is estimated. Data has not been restated to reflect pooling
of interests transactions.
24
<PAGE>
<TABLE>
<CAPTION>
COMPASS BANCSHARES
HISTORICAL TOTAL QUALIFYING CAPITAL RATIO
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<C> <C> <C> <C> <C>
10.53% 11.61% 11.69% 13.23% 12.82%
</TABLE>
Well Capitalized guideline = 10.00%
Note: 1994 data is estimated. Data has not been restated to reflect pooling of
interests transactions.
25
<PAGE>
TAB E
<PAGE>
COMPASS BANCSHARES
OVERVIEW OF THREE-YEAR PLAN
In February, the Board of Directors approved a detailed three-year business
plan. This plan was prepared by senior management in conjunction with a
nationally recognized consulting firm. The plan was also carefully scrutinized
by both the Board of Directors and First Boston representatives before it was
adopted.
The plan calls for the Company to proceed with its historically successful
strategy. It also identifies a number of the key strategic strengths of the
Company and its management that should facilitate continued superior financial
performance. Among these strengths are:
- An established and effective incentive based sales process
and motivated sales force;
- An unwavering commitment to credit discipline and monitoring;
- A strategic acquisition process capable of generating low
risk growth in attractive markets; and
- A commitment to cost control which results in the
competitive advantage of the low cost producer position.
In addition to refinements in the previously discussed strategy, this plan
highlights a number of specific actions intended to generate significant
improvement in a few key areas; including:
- Generation of noninterest income;
- Increased operating efficiencies; and
- Improvement in net interest margin.
26
<PAGE>
COMPASS BANCSHARES
OVERVIEW OF THREE-YEAR PLAN
The plan calls for continued growth and aggressive financial performance.
However, based on both the Company's historical performance and peer group
benchmarks, the plan is reasonable. Outlined below are some of the plan's
financial objectives.
<TABLE>
<CAPTION>
1990 - 1994
Plan Levels Actual Levels
-------------------- --------------------
<S> <C> <C>
Asset Growth 9-10% Annually 15.1% Annually
Net Income Growth 15%+ Annually 18.9% Annually
EPS Growth 15% Annually 15.6% Annually
Average ROA 1.3% Annually 1.16% Annually
Average ROE 18%+ Annually 16.5% Annually
</TABLE>
Note: Actual levels are based on actual annual results and do not reflect
restatement for pooling of interests transactions. 27
<PAGE>
TAB F
<PAGE>
COMPASS BANCSHARES
SUMMARY OF RECENT EVENTS
Jan 1989 Harry Brock announces that, upon his retirement, Paul Jones will
assume the role of Chairman and Chief Executive Officer. Paul
Jones is named President and Chief Operating Officer and assumes
responsibility for day to day operations.
Dec 1989 - Compass reports record financial results in each year.
Dec 1990
Mar 1991 Harry Brock retires and Paul Jones assumes the position of
Chairman and Chief Executive Officer.
At the request of Paul Jones and the Board, Harry Brock continues
to serve as a director. Harry Brock is given the title Founder
Chairman, but has no duties or authority.
Dec 1991 - Compass Bancshares' growth program accelerates and record
Dec 1993 financial results are reported in each year.
Jun 1994 Compass Bancshares reports record six month financial results
despite a $16.6 million securities loss related in part to
proprietary trading in mortgage derivative securities.
Harry Brock initiates efforts to control the Board by
establishing a director nominating committee controlled by Harry
Brock.
Aug 1994 Compass officer Buck Brock, son of Harry Brock, resigns to pursue
unspecified personal interests. Birmingham Post-Herald reports
----------------------
"Brock said a friendly succession over Jones would mean a long
wait."
Board rejects Harry Brock's nominating committee scheme.
Oct 1994 Without warning, in a regular Board meeting Harry Brock announces
that he has tried to sell Compass and that he has contacted
several institutions to ask if they would make an acquisition
proposal. He tells the Board that First Union would be willing
to meet with the Board and discuss an acquisition.
28
<PAGE>
The Board discusses Harry Brock's unauthorized activities and
concludes that the Board should not meet with First Union under
these circumstances. The Board directs Paul Jones to inform the
Chairman of First Union that Harry Brock's solicitations are not
authorized and that First Union's attention had not been invited
by the Board.
Paul Jones telephones First Union's Chairman and delivers the
message. The Chairman of First Union responds that, under these
circumstances, First Union is withdrawing.
Two days after the meeting, Harry Brock sends each Board member a
draft of materials he says First Union's Chairman would have used
to speak from had the Compass Board wished to meet with First
Union. Harry Brock styles the materials an "offer."
The Board initiates a study of Compass' strategic alternatives
and engages CS First Boston as its financial advisor to assist in
the study. The Board implements measures, including severance
agreements, in order to keep key officers and retain the ability
to conduct business in the face of Harry Brock's disruptive
activities.
Oct 1994 - With the assistance of a number of experts, including First
Jan 1995 Boston, the Board reviews and analyzes all strategic options
available to Compass for maximizing shareholder value.
At the direction of the Board, First Boston analyzes the First
Union materials, which, along with all other strategic
alternatives, are compared to the strategic business plan of
Compass.
Dec 1994 Compass posts record financial results.
Harry Brock and Red Leach submit proposals for shareholder
consideration at the 1995 Annual Meeting.
Jan 1995 Prior to conclusion of the Board's strategic study process, Harry
Brock publicly announces his intention to seek control of the
Board through a proxy fight.
Compass Bancshares responds with a news release clarifying that
Harry Brock is not the Chairman of Compass and explains that his
actions are unauthorized and contrary to the intentions of the
Board and the best interest of shareholders.
Harry Brock announces the formation of his Committee To Maximize
Shareholder Value, which includes Harry Brock, his son, Skip
Brock, John Isreal, a Director Emeritus of Compass Bank, and Red
Leach, a life long friend of Harry Brock. Mr. Leach is also a
Compass director whose term expires this year and who is not
eligible for reelection due to age.
29
<PAGE>
Several members of the Board who are large stockholders and were
originally selected as Board members by Harry Brock, publicly
denounce Harry Brock's actions as well as question his motives
and judgement. These directors characterize his actions as
"incomprehensible," "disruptive to progress," and "a pure grab
for power."
In subsequent news releases, Harry Brock indicates that he has
filed with the SEC a preliminary proxy statement identifying his
own slate of nominees for Board positions. His candidates are
Wendell Taylor, a local 67 year old orthodontist and member of
the Birmingham City Advisory Board; David Henderson, son-in-law
of Carl Wittichen, who is a retired Birmingham City Advisory
Board member and founder of a local air conditioning supply
company; and James Hayes, a Huntsville City Advisory Board
member, who is involved in local land development.
Feb 1995 Compass director Thomas Jernigan resigns.
The Board approves a three-year strategic plan which was prepared
by senior management in conjunction with a nationally recognized
consulting firm.
After receiving and studying the report of First Boston, the
Board determines that shareholder interest would at this time be
served best by pursing the strategic plan of Compass. Mergers of
equals, sales (specifically including a sale to First Union on
the basis described in its materials), and other alternatives are
determined not to be as good as following the Compass business
plan.
The Board approves a 22% increase in the Compass dividend, to an
annual rate of $1.12 per share.
Mar 8, 1995 Record Date
Apr 11, 1995 Annual Meeting
30
<PAGE>
TAB G
<PAGE>
DEAN WITTER
EQUITY RESEARCH
COMPASS BANKSHARES INC DAVIS, A CLOSE PRICE: 26 1/4
NOTE 08/94-1576 RATING:N 01/30/95 RANK 058 SIGNAL 1.6
PREV:B 12/16/93 PRICE: 26 3/8
Price: $26 3/8 Date: January 30, 1995
Target Price: $27 First Call Consensus: 1994:$2.70
1995:$3.06
<TABLE>
<CAPTION>
EPS (FY Mo: DEC) P/E Ratios++ ROE Ind. Curr++
Rating 93A 94A 95E 94A 95E 94A 95E Div. Yld.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Current: N $2.37 $2.68A $3.00 9.8x 8.8x 17% 18% $0.92 3.5%
- --------------------------------------------------------------------------------
Prior: B
- --------------------------------------------------------------------------------
<CAPTION>
5-year Quarterly Earnings
Book LT Debt/ Est. EPS Qtr Est. Yr. Foot-
Value Capital Growth (Mo.) EPS Ago notes
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current: $16.25 36.1% 11% Mar $0.71E $0.65 m
- --------------------------------------------------------------------------------
</TABLE>
++ Yield and P/E figures are based on the price in effect when this report was
written. These numbers should be recalculated using the current price.
<TABLE>
<CAPTION>
1993A 1994A 1995E
<S> <C> <C> <C>
Mar Quarter $0.58 $0.65 $0.71
Jun Quarter 0.59 0.66 0.74
Sep Quarter 0.60 0.67 0.76
Dec Quarter 0.61 0.71 0.77
</TABLE>
REASON FOR OPINION CHANGE: Rise in stock price due to takeover speculation
REASON FOR ESTIMATE CHANGE: N/A
1. Former Chairman & CEO attempts to put CBSS in play; stock up 15%
2. Management does not want to sell; stage is set for proxy fight
3. Shareholders likely to side w/ mgmt based on excellent track record
4. Downgrading to Neutral; stock is now near our target price of $27
Compass Bancshares is the fourth-largest bank holding company in Alabama with
$8.4 billion in assets and 155 full-service branches. More recently, CBSS has
entered the fast-growing Florida and Texas markets which now account for 40% of
assets.
DWR: COMPASS BANKSHARES DOWNGRADED TO NEUTRAL FROM BUY; SALE UNLIKELY
* INV OPIN: CURRENT MGMT TEAM UNLIKELY TO SELL; CBSS NEAR TARGET: NEUTRAL
Last Friday, Compass Bancshares' stock rose nearly 15% following a release over
Bloomberg stating that the company is putting itself up for sale. The statement
was issued by Harry B. Brock Jr., age 67, a director and the former chairman and
CEO of Compass who owns approximately 2.4% of the outstanding shares. Management
has responded that this statement was released without authorization by the
board or the company. We believe that the company is currently not looking for
--------------------------------------------------------
any potential suitors, a situation that appears to be heading towards a proxy
- -----------------------------------------------------------------------------
fight at the annual shareholder's meeting in April. We view that such a fight
- -----------------------------------------------------------------------------
will probably be unsuccessful for Brock.
- ---------------------------------------
<PAGE>
Based on this recent insurrection, Compass is now trading close to our target
price of $27 on fundamentals alone. At 8.8x our 1995 estimate of $3.00 and 1.6
times book, CBSS is now trading at a slight premium to our universe. If CBSS
were to be taken out, an event that we do not see immediately likely, we would
expect it to fetch 1.8 to 2.0x book or $30-32, implying an additional 12-15%
premium. Given the low probability of this occurring in the near future, we are
lowering our rating to Neutral.
* BROCK'S COMMITTEE MAY ATTEMPT TO OUST CURRENT MANAGEMENT
Brock issued the press release as head of "The Committee to Maximize Shareholder
Value of Compass Bancshares." The committee's goal is to seek a merger proposal
similar to the one that CBSS's directors apparently had recently rejected.
According to the committee, the rejected bid was for $30.70 a share. Since Brock
is a director and former CEO, we anticipate a proxy fight occurring at the
annual shareholder's meeting, which is scheduled around the third week in April.
Brock has already filed a preliminary proxy with the SEC which includes his own
nominees for the board. Based on Brock's shares along with the three other
directors who have a significant holding, we anticipate this committee could
control as much as 12% of the outstanding shares. However, Compass' management
states that a majority of the directors are opposed to seeing the bank sold.
Additionally, total institutional ownership was only 30% at the end of last June
with the top five institutions holding about 6%.
* MANAGEMENT'S PERFORMANCE RECORD IS STERLING, IN OUR VIEW
Based on the past performance record of current management team, we doubt a
majority of shareholders would choose to side with Brock. We believe that in
his four years as CEO of the bank, Paul Jones has done an outstanding job both
in terms of CBSS' fundamentals and stock price. During his tenure, Compass
has averaged a 16.5% ROE and a 1.18% ROA, easily surpassing the respective 14.1%
and 1.05% returns posted by our average regional bank, while non-performing
assets have averaged less than half the amount of our typical regional. For
1994, CBSS posted record earnings for the seventh consecutive year, along with a
17.3% return on equity. Finally, since Paul Jones assumed the CEO role in
April 1991, CBSS's stock has appreciated 102%, versus a 78% rise for the Dean
Witter regional bank universe and a 25% increase for the S&P 500.
* WE FIND THAT CBSS' OVERALL EXPANSION STRATEGY HAS BEEN SOUND AS WELL
Compass' acquisition strategy has been to expand its franchise into
faster-growing economic and demographic regions. Focusing exclusively on
Northern Florida and the major cities in Texas, CBSS now has completed 27
acquisitions in these regions since 1987. In fact, 40% of Compass's assets are
now located in these two markets which, between 1993 and 1998, are projected to
account for 20% of total U.S. population growth. Despite this aggressive
acquisition strategy, we think that CBSS's record with regard to shareholder
dilution has been exemplary.
(m) Dean Witter Reynolds Inc. makes a market in this security.
ADDT'L INFORMATION ON CO'S MENTIONED IN THIS REPORT IS AVAILABLE ON REQUEST.
The information and data in this report were obtained from sources considered
reliable. Their accuracy or completeness is not guaranteed, and the giving of
the same is not to be deemed an offer or solicitation on our part with respect
to the sale or purchase of any securities or commodities. Dean Witter Reynolds
or its officers and directors may in the normal course of business have a
position in securities mentioned in this report. "S&P 100," "500," "S&P
Industrials" & "S&P Composite" are trademarks of Standard & Poor's Corp.
COPYRIGHT 1994 DEAN WITTER REYNOLDS INC. 2 WTC, NY NY 10048 (212) 392-2222
<PAGE>
FIRST
MANHATTAN
CO. RESEARCH Research Notes
January 27 - February 2, 1995
- --------------------------------------------------------------------------------
BayBanks, Inc. (BBNK) (Page 2)
Fundamentals continue to strengthen.
Compass Bancshares, Inc. (CBSS) (Page 4)
------------------------------- --------
Former Chairman pushes for sale of company.
------------------------------------------
Marion Merrell Dow (MKC)
Impact of patent problems delayed; 1995-96 earnings prospects (Page 6)
improved.
Millipore (MIL) (Page 8)
Restructured Millipore moves forward.
Praxair Inc. (PX) (Page 9)
Rating upgrade to buy from hold.
Sears (S) (Page 10)
Sears merchandising group made significant progress in 1994.
- -------------------------------------------------------------------------------
FIRST MANHATTAN CO. 457 MADISON AVE, NEW YORK, N.Y. 10022 (212) 756-3300
MEMBERS NEW YORK STOCK EXCHANGE
(C)Copyright 1994 by First Manhattan Co.
First Manhattan is a service mark of First Manhattan Co.
<PAGE>
FIRST
4 MANHATTAN
CO. RESEARCH
COMPASS BANCSHARES, INC. (CBSS)
Recent price: $26 3/8 Shares outstanding: 37.2 mil.
Current rating: Buy Prior: Buy Market cap.: $981 mil.
52-week range: $27-21
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EPS Prior P/E ROE Book value/share: $16.25
12/94 $2.68 17.3% Price/book value: 1.62x
12/95E 3.10 3.15 8.5x 18.0% Div.: $0.92 -- Yield: 3.5%
12/96E 3.55 --- 7.4x 18.4%
- --------------------------------------------------------------------------------
</TABLE>
CBSS: FORMER CHAIRMAN PUSHES FOR SALE OF COMPANY; NEVERLESS BUY RATING
MAINTAINED
NEWS
++ FORMER CHAIRMAN HARRY BROCK SEEKS SALE OF COMPANY ++
Harry Brock, former chairman of Compass Bancshares, recently announced his
desire to see the company sold and his intention to nominate a slate of
directors supporting his position. The company has indicated that a majority of
the board does not agree with Brock's contention that now is the best time to
sell the company. Brock owns approximately 3.5% of the outstanding common shares
of Compass Bancshares.
ANALYSIS
++ BROCK'S ACTIONS ++
Brock and his associates (The Committee for Maximizing Shareholder Value of
Compass Bancshares, Inc.) intend to file documents with the SEC stating that a
group of shareholders are working together with the objective of selling the
company, and that the committee plans to nominate a slate of directors. In
addition to Brock, the group consists of his son Stanley (who is a current
director of Compass), Red Leach (also a director who is retiring in 1995),
Leach's son, and John Israel. Collectively the group owns approximately 4.6% of
the outstanding Compass shares.
Compass has a staggered board consisting of 12 members. In addition to Leach's
term, the terms of both Chairman and CEO D. Paul Jones (owns 1.4% of outstanding
shares) and Charles Daniel expire in 1995--both have been nominated for
reelection.
Brock is 68 years old and would be 70, the company's mandatory retirement age,
when his term expires in 1997. As a founder of the company, the single largest
individual shareholder, and the driving force behind its success prior to his
retirement as chairman in 1991, we believe Brock is being motivated by a desire
to "cash in" his position while he still can exert some influence over the
direction of the company.
++ CASE FOR BROCK POSITION ++
Although most potential acquisitors of Compass have seen the value of their own
shares weaken in the last several months, the advantage of selling the company
at this point is that shareholders would be paid a premium to the current market
price at the time of the transaction in the form of an undervalued security (of
the acquiring company). Thus, as the share price of the buyer improves, Compass
shareholders would realize additional value. This argument has a certain degree
of validity and has been cited as reasons why companies such as Norwest and Banc
One have been able to complete acquisitions without necessarily paying the
highest price offered.
<PAGE>
FIRST
5 MANHATTAN
CO. RESEARCH
In our opinion, the most likely acquisitors (First Union, NationsBank, SunTrust,
Wachovia, Banc One, and BankAmerica) could pay two times Compass' year-end book
value and still structure an accretive transaction on a purchase basis, assuming
20% cost savings. Assuming the transaction is structured as a pooling of
interests, with the same 20% cost savings only Wachovia and Banc One (of these
companies) could complete accretive transactions at twice book value. The
attraction of Compass' franchise rests in the distribution of its asset base:
34% in Texas, 8% in Florida, and 58% in Alabama.
++ CASE AGAINST BROCK POSITION ++
Approximately 35-40% of the outstanding Compass shares are owned by the
officers, board, and employees of the company. Included in this total are
approximately 9% of the shares held in a company ESOP. These shares are voted on
a pass-through basis--that is, the individual employees vote their allocated
shares. We believe the employees are more likely to side with management than
with Brock.
To the best of our knowledge, it appears only two other directors (Brock's son
and Leach) agree with Brock's position that the company should be sold.
Moreover, two other directors with substantial ownership positions (who were
among the founding shareholders of the company) are not members of Brock's
committee. The combined ownership position of these directors plus Jones is
approximately 5.5% of the outstanding shares. Thus, it seems as though the board
has split into two large blocks, each with a certain degree of legitimacy, given
their respective ownership positions. Moreover, even if Brock is successful in
electing his slate of directors, we believe he still would not have a majority
of the board.
Excluding the ESOP, institutional investors own only 20-21% of the outstanding
shares. Therefore, it could be difficult to marshall a large of block of shares
to exert pressure on the board.
++ FUNDAMENTALS AT COMPASS REMAIN STRONG ++
Perhaps the best argument against Brock is the strong performance Compass
continues to report. Fourth-quarter earnings of $0.71 per share were in line
with expectations. While there were questions regarding the quality of earnings
(the company made no loss provision against $2.5 million of net charge-offs),
loan growth was strong and the company's balance sheet remains very strong: the
loan loss reserve was 873% of nonperforming loans, and tangible common equity
was 6.5% of assets. We have adjusted our 1995 earnings estimate downward to
reflect further compression in the net interest margin arising from the
acquisition of First Heights, which brought over $800 million in deposits but no
loans.
INVESTMENT OPINION
++ PURCHASE RECOMMENDATION REAFFIRMED ++
We continue to recommend purchase of Compass common shares based on our view
that the long-term performance of the company will exceed that of the group as
evidenced by our projections of 15% annual EPS growth through 1996. Given the
volatile trading environment that is likely to persist for the stock in the near
term, however, we would be cautious buyers at this juncture. The price has
increased over $3, or more than 15%, since Brock made his objective public on
January 27, 1995. We are at this time assigning a low probability of success to
his efforts given the large ownership position of his opponents and the apparent
lack of disgruntled shareholders.
Raimundo C. Archibold Jr., CFA (212) 756-3436
January 30, 1995
