SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Period Ended March 31, 1995 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, 1995
- -------------------------- -----------------------------
Common Stock, $2 Par Value 38,052,954
The number of pages of this report is 18.
Exhibit index at page 14.
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
- ------------------------------ ----
Item 1 Financial Statements
Consolidated Balance Sheets as of March 31, 1995 and December 31, 1994 3
Consolidated Statements of Income for the Three Months Ended March 31,
1995 and 1994 4
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Results of Operations
and Financial Condition 8
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, 1995 December 31, 1994
-------------- -----------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 411,776 $ 490,494
Federal funds sold and securities purchased
under agreements to resell 76,525 46,535
Interest bearing deposits with other banks 99 99
Investment securities (market value of
$1,799,846 and $1,813,671 for 1995 and
1994, respectively) 1,807,904 1,865,218
Investment securities available for sale 678,735 711,680
Trading account securities 48,633 58,012
Loans, net of unearned income 5,895,209 5,828,308
Allowance for loan losses (107,304) (108,337)
------------- -------------
Net loans 5,787,905 5,719,971
Premises and equipment, net 207,482 206,477
Other assets 156,652 166,651
------------- -------------
Total assets $ 9,175,711 $ 9,265,137
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing $ 1,290,638 $ 1,405,377
Interest bearing 5,825,936 5,783,536
------------- -------------
Total deposits 7,116,574 7,188,913
Federal funds purchased and securities
sold under agreements to repurchase 748,588 832,608
Other short-term borrowings 141,548 104,598
Accrued expenses and other liabilities 53,021 39,429
FHLB and other borrowings 484,921 487,916
------------- -------------
Total liabilities 8,544,652 8,653,464
Shareholders' equity:
Common stock of $2 par value:
Authorized--100,000,000 shares;
Issued--38,051,664 shares in 1995 and
37,922,435 shares in 1994 76,103 75,845
Surplus 42,851 41,547
Loans to finance stock purchases (7,168) (5,914)
Net unrealized holding loss on
available-for-sale securities (6,295) (11,686)
Retained earnings 525,568 511,881
------------- -------------
Total shareholders' equity 631,059 611,673
------------- -------------
Total liabilities and shareholders'
equity $ 9,175,711 $ 9,265,137
============= =============
</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
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 126,824 $ 104,892
Interest and dividends on investment
securities 34,298 12,199
Interest on investment securities available
for sale 9,285 10,711
Interest on trading account securities 900 4,286
Interest on federal funds sold and securities
purchased under agreements to resell 1,062 1,696
Interest on interest bearing deposits
with other banks 2 217
----------- -----------
Total interest income 172,371 134,001
INTEREST EXPENSE:
Interest on deposits 65,110 41,613
Interest on federal funds purchased and
securities sold under agreements
to repurchase 10,163 5,347
Interest on other short-term borrowings 1,860 1,315
Interest on FHLB and other borrowings 8,517 3,456
----------- -----------
Total interest expense 85,650 51,731
----------- -----------
Net interest income 86,721 82,270
Provision for loan losses 1,300 2,278
----------- -----------
Net interest income after provision
for loan losses 85,421 79,992
NONINTEREST INCOME:
Service charges on deposit accounts 12,059 10,259
Trust fees 3,745 4,451
Trading account profits (losses)
and commissions 1,619 (3,877)
Investment securities gains, net 35 -
Other 8,860 8,837
----------- -----------
Total noninterest income 26,318 19,670
NONINTEREST EXPENSE:
Salaries and benefits 36,845 33,047
Net occupancy expense 5,992 5,405
Equipment expense 4,779 4,933
FDIC insurance premium 3,953 3,372
Other 22,670 15,666
----------- -----------
Total noninterest expense 74,239 62,423
----------- -----------
Net income before income tax expense 37,500 37,239
Income tax expense 13,159 13,060
----------- -----------
NET INCOME $ 24,341 $ 24,179
=========== ===========
NET INCOME PER COMMON SHARE $ 0.64 $ 0.63
Weighted average shares outstanding 38,190 38,132
Dividends per common share $ 0.28 $ 0.23
</TABLE>
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31
-------------------------
1995 1994
----------- -----------
<S> <C> <C>
Operating Activities:
Net income $ 24,341 $ 24,179
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization 7,478 6,941
Accretion of discount and loan fees (4,299) (3,376)
Provision for loan losses 1,300 2,278
Net change in trading account securities 9,379 36,957
Net change in mortgage loans available
for sale 13,616 (509)
Gain on sale of investment securities (35) -
(Gain) loss on sale of premises and
equipment 7 (24)
(Gain) loss on sale of other real estate
owned (100) 20
Provision for losses on other real
estate owned 170 -
Decrease in interest receivable 12,990 2,061
Increase in other assets (4,703) (801)
Increase in interest payable 3,178 72
Increase in taxes payable 11,640 10,705
Decrease in other payables (5,776) (7,691)
----------- -----------
Net cash provided by operating
activities 69,186 70,812
----------- -----------
Investing Activities:
Proceeds from sales of investment securities - 1,935
Proceeds from maturities/calls of investment
securities 60,259 115,350
Purchases of investment securities (1,617) (22,625)
Proceeds from sales of securities available
for sale 13,346 51,515
Proceeds from maturities/calls of securities
available for sale 28,201 69,627
Purchases of securities available for sale (73) (420,780)
Net (increase) decrease in federal funds
sold and securities purchased under
agreements to resell (29,990) 34,792
Net (increase) decrease in loan portfolio (82,214) 13,206
Acquisitions, net of cash acquired - (23,649)
Purchases of premises and equipment (6,160) (9,286)
Proceeds from sales of premises
and equipment 479 135
Net decrease in interest bearing deposits
with other banks - 377
Proceeds from sales of other real estate
owned 1,176 1,347
----------- -----------
Net cash used by investing activities (16,593) (188,056)
----------- -----------
</TABLE>
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31
-------------------------
1995 1994
----------- -----------
<S> <C> <C>
Financing Activities:
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts $ (185,566) $ 123,642
Net increase in time deposits 113,227 20,868
Net decrease in federal funds purchased (40,278) (2,561)
Net decrease in securities sold under
agreements to repurchase (43,742) (3,447)
Net increase in short-term borrowings 36,950 35,319
Repayment of long-term debt (3,018) (40)
Purchase of treasury shares - (6)
Common dividends paid (10,654) (8,387)
Repayment of loans to finance stock purchases 208 345
Proceeds from exercise of stock options 1,562 32
----------- -----------
Net cash provided (used) by financing
activities (131,311) 165,765
----------- -----------
Net increase (decrease) in cash and due
from banks (78,718) 48,521
Cash and due from banks at beginning of period 490,494 291,520
----------- -----------
Cash and due from banks at end of period $ 411,776 $ 340,041
=========== ===========
Schedule of noncash investing and financing
activities:
Transfers of loans to other real estate owned $ 1,082 $ 480
Loans to facilitate the sale of other real
estate owned 411 1,236
Loans to finance stock purchases 1,462 -
Acquisition of banks:
Fair value of assets acquired $ 278,139
Liabilities assumed 242,819
------------
Cash received $ 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 included in the Company's
annual report on Form 10-K for the year ended December 31, 1994.
NOTE 2 - Business Combinations
On January 27, 1994, the Company acquired 1st Performance National Bank
("1st Performance"), of Jacksonville, Florida, in a cash transaction. The
acquisition was accounted for as a purchase. At the date of acquisition, 1st
Performance had assets of $278 million and equity of $35 million.
The Company completed the acquisition of Security Bank, N.A. ("Security") of
Houston, Texas on May 1, 1994, with the issuance of 465,297 shares of the
Company's common stock. At the date of acquisition, Security had assets of $76
million and equity of $6 million. The transaction was accounted for under
the pooling-of-interests method of accounting and accordingly all prior period
information has been restated.
On May 12, 1994, the Company acquired three branches of Anchor Savings Bank
in the Jacksonville, Florida area with deposits of $31 million and assets of
$1 million, with the balance received in cash. The deposit assumption and
branch acquisition were accounted for as a purchase.
On October 1, 1994, the Company completed the acquisition of 22 branches of
First Heights Bank, fsb, of Houston, Texas, with deposits of approximately $870
million and assets of $68 million, with the balance received in cash. The
deposit assumption and branch acquisition were accounted for as a purchase.
The Company completed the acquisition of Southwest Bankers, Inc.
("Southwest"), of San Antonio, Texas, and its bank subsidiary, The Bank of San
Antonio, on March 7, 1995, with the issuance of 949,987 shares of the Company's
common stock. At the date of acquisition, Southwest had assets of $142 million
and equity of $9 million. The transaction was accounted for under the
pooling-of-interests method of accounting and accordingly all prior period
information has been restated.
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, as amended by FASB Statement No. 118, Accounting by Creditors for
Impairment of a Loan--Income Recognition and Disclosures, ("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. As
a practical alternative, a company may base the measurement of impairment on a
loan's observable market price, or the fair value of the collateral if the
repayment of the loan is expected to be provided solely by the collateral
(i.e., the loan is collateral dependent). FAS114 is effective for fiscal years
beginning after December 15, 1994.
The Company adopted the provisions of FAS114 during the first quarter of
1995. At March 31, 1995, the recorded investment in loans that are considered
impaired under FAS114 was $50.7 million, of which $7.4 million were on
nonaccrual status. Included in this amount is $50.6 million of impaired loans
for which the related allowance for loan losses was $11.3 million and $100,000
of loans that have no related allowance for loan losses. The adoption of
FAS114 did not have a material impact on the Company's results of operations.
<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, 1995, increased less than one
percent to $24.3 million over net income for the first quarter of 1994. Net
income per common share for the first quarter increased 2 percent to $.64
compared to the same period in 1994. Net interest income increased 5 percent
during the first three months of 1995 while noninterest income and noninterest
expense for the first quarter of 1995 increased 34 percent and 19 percent,
respectively.
In March of 1995, the Company completed the acquisition of Southwest
Bankers, Inc. ("Southwest"), of San Antonio, Texas, and its bank subsidiary,
The Bank of San Antonio, for 949,987 shares of the Company's common stock. The
acquisition of Southwest 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 fourth quarter
of 1994, the Company completed the acquisition of 22 branches of First Heights
Bank, fsb, ("First Heights"), of Houston, Texas, with deposits of $870 million
and assets of $68 million. A complete list of acquisitions is included in
"Acquisitions" and "Pending Acquisitions" under Item 1 - Business in the
Company's 1994 Form 10-K.
Net Interest Income
Net interest income for the three months ended March 31, 1995, increased
$4.5 million over the first three months of 1994 to $86.7 million. On a tax-
equivalent basis, net interest income increased $4.3 million, or 5 percent.
This increase was a result of a $38.2 million, or 28 percent, increase in
interest income on a tax-equivalent basis and a $33.9 million, or 66 percent,
increase in interest expense. The increase in interest income was due to a
increase in the average yield on earning assets from 7.74 percent to 8.28
percent coupled with an increase in average earning assets of $1.4 billion.
The largest portion of the increase in earning assets occurred in the average
balances of investment securities and loans, specifically real estate
mortgages, with a decline in the average balances of all other categories of
earning assets. This increase in the average balance of loans and investment
securities was funded by growth in all categories of deposits and an increase
in FHLB and other borrowings. The increase in the average balance of
investment securities is due primarily to the investment of cash received in
the acquisition of First Heights.
Interest expense for the three months ended March 31, 1995, increased by
$33.9 million, or 66 percent, from the prior year, due principally to a 24
percent increase in interest bearing deposits and a 93 basis point increase in
the average rate paid on deposits. The increase in the average balance of
deposits was principally due to the assumption of $870 million in deposits in
the First Heights acquisition. Additionally, the average balances of federal
funds purchased and securities sold under agreements to repurchase increased
9 percent while the average balance of FHLB advances and other borrowings
increased by $158 million, as $50 million of subordinated debentures issued by
the Company in the third quarter of 1994 and additional FHLB advances of $110
million in the fourth quarter of 1994 were used to fund asset growth and reduce
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 1995, the net interest
margin, on a tax-equivalent basis, was 4.20 percent compared to 4.79 percent
for the same period in 1994. This 59 basis point decrease resulted from the
changes in rates and volumes of earning assets and the corresponding funding
sources noted previously. A 93 basis point increase in the rates paid on
deposits 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 a six percent increase in noninterest bearing demand deposits and an
increase in the average rate earned on interest earning assets from 7.74
percent to 8.28 percent. During the first quarter of 1995, the Company's net
interest margin was positively impacted by the Company's use of interest rate
contracts, increasing taxable equivalent net interest margin by 3 basis points
as compared to a positive impact of 20 basis points for the same period in
1994. Due to the fact that the Company continues to be liability sensitive at
March 31, 1995, it is anticipated that the Company's net interest margin will
continue to be negatively impacted by the more frequent repricing of interest
bearing liabilities.
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, 1995, as
compared to the three months ended March 31, 1994:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1995
-----------------------------------------
Change
1995 Attributed to
to ------------------------------
1994 Volume Rate Mix
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest income:
Loans $ 21,989 $ 11,199 $ 9,754 $ 1,036
Investment securities 21,965 28,239 (1,990) (4,284)
Investment securities available
for sale (1,503) (1,113) (436) 46
Trading account securities (3,395) (3,386) (43) 34
Fed funds and resale agreements (634) (1,135) 1,514 (1,013)
Time deposits in other banks (215) (215) (5) 5
--------- --------- --------- ---------
Increase in interest income $ 38,207 $ 33,589 $ 8,794 $ (4,176)
========= ========= ========= =========
Interest expense:
Deposits $ 23,497 $ 12,691 $ 8,887 $ 1,919
Fed funds purchased and repos 4,816 477 3,984 355
Other short-term borrowings 545 (234) 948 (169)
FHLB and other borrowings 5,061 1,662 2,296 1,103
--------- --------- --------- ---------
Increase in interest expense $ 33,919 $ 14,596 $ 16,115 $ 3,208
========= ========= ========= =========
</TABLE>
Noninterest Income and Noninterest Expense
Noninterest income for the first three months of 1995 increased $6.6
million, or 34 percent, over the same period in 1994. Service charges on
deposit accounts increased $1.8 million, or 18 percent, while trading account
profits (losses) and commissions increased $5.5 million. The increase in
service charges resulted from the increase in deposits. The increase in
trading account profits and commissions on bond sales and trading activities
was due chiefly to the absence of losses incurred during the first quarter of
1994 on collateralized mortgage obligation inverse floaters ("inverse
floaters") held in the Company's trading account resulting from the increase in
the general level of interest rates during the period. All of the inverse
floaters previously held in the trading account were sold in the first and
second quarters of 1994. It should be noted that changes in the trading
account profits and commissions in future quarters cannot be predicted
accurately because of the uncertainty of changes in market conditions. There
can be no assurance that such amounts will or will not continue at their
current levels. For the first quarter of 1995, trading account losses related
specifically to derivative securities were less than $100,000, consisting of
$400,000 of profits related to collateralized mortgage obligations ("CMOs")
held in the trading account offset by $500,000 of losses on non-CMO derivative
securities, specifically options and interest rate swaps, caps, and floors.
Gains on investment securities sold during the first quarter of 1995 were not
material.
The components of trading account assets at March 31, 1995, and December 31,
1994, are presented in the following table.
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
-------------- -----------------
(in Thousands)
<S> <C> <C>
U.S. Treasury and Government agency $ 25,779 $ 26,599
State and political subdivisions 2,696 9,046
Mortgage-backed pass through securities 11,955 15,567
Other debt securities 1,698 201
Derivative securities:
Collateralized mortgage obligations 4,147 5,344
Interest rate floors and caps 2,046 1,178
Other options 312 77
---------- ----------
$ 48,633 $ 58,012
========== ==========
</TABLE>
Noninterest expense increased $11.8 million, or 19 percent, during the first
three months of 1995 over the same period in 1994. Salaries increased $2.8
million, or 10 percent, for the first quarter while employee benefits increased
19 percent. The increase in salaries over 1994 levels was the result of the
addition of personnel in connection with the acquisition of 22 branches of
First Heights, normal business growth, and regular merit increases. The
increase in employee benefits was due to increased payroll tax expense and
other employee benefits associated with the First Heights acquisition. Net
occupancy expense increased 11 percent to $6.0 million due primarily to
increased depreciation and occupancy expenses resulting from the acquisition of
First Heights branches. FDIC deposit insurance premiums increased 17 percent
due to an increase in deposits while other noninterest expense increased $7.0
million, or 45 percent, during the quarter due to increases in legal and other
professional services expenses associated with acquisition activities and with
a proxy contest initiated by three directors of the Company during the first
quarter of 1995.
Income Taxes
Income tax expense remained relatively unchanged during the first three
months of 1995 compared to the same period in 1994. The effective tax rate for
1995 and 1994 was 35 percent.
Provision and Allowance for Loan Losses
The provision for loan losses for the three months ended March 31, 1995,
decreased 43 percent to $1.3 million from the $2.3 million reported for the
same period in 1994. This decrease resulted from a five percent decrease in
nonperforming assets from December 31, 1994, as well as the continuation of the
trend of decreasing nonperforming assets that the Company experienced during
1994, as evidenced by the decline in nonperforming assets from $37.9 million at
March 31, 1994, to $18.6 million at March 31, 1995. 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, 1995, was $107.3 million compared to $108.3 million at December 31,
1994. The ratio of the allowance for loan losses to loans outstanding was 1.82
percent at March 31, 1995, down slightly from 1.86 percent at December 31,
1994.
Net charge-offs increased $784,000 from the comparable three month period in
1994. Net loan charge-offs expressed as an annualized percentage of average
loans for the first three months of 1995 were 0.16 percent compared with 0.12
percent for the first three months of 1994.
Nonperforming Assets and Past Due Loans
Nonperforming assets, comprised of nonaccrual loans, renegotiated loans and
other real estate owned, totaled $18.6 million at March 31, 1995, compared to
$19.7 million at December 31, 1994. At March 31, 1995, the allowance for loan
losses as a percentage of nonperforming loans was 893 percent as compared to
852 percent at December 31, 1994. The allowance for loan losses as a
percentage of nonperforming loans and accruing loans ninety days or more past
due decreased from 658 percent at December 31, 1994, to 607 percent at March
31, 1995.
Nonperforming assets as a percentage of total loans and other real estate
owned declined to 0.32 percent at March 31, 1995, from 0.34 percent at December
31, 1994. The amount carried in other repossessed assets at March 31, 1995,
was $161,000, down from $235,000 at December 31, 1994. Loans past due ninety
days or more but still accruing interest increased over 50 percent from the
$3.7 million at December 31, 1994, to $5.7 million at March 31, 1995,
representing 0.10 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, 1995, were $9.2 billion, down 1 percent from
December 31, 1994. This decrease was due to decreases in nonearning assets and
noninterest bearing liabilities. Retained earnings remained the primary source
of growth for the Company's capital base.
Assets and Funding
At March 31, 1995, earning assets totaled $8.5 billion, unchanged from
December 31, 1994. The mix of earning assets shifted moderately in the first
three months of 1995 with total investment securities at March 31, 1995,
decreasing by $90.3 million, or 4 percent, from year end while loans increased
by $66.9 million, or 1 percent. Loans comprised 69 percent of total earning
assets at March 31, 1995, as compared to 68 percent at December 31, 1994, while
the percentage of earning assets represented by total investment securities
decreased from 30 percent to 29 percent. Cash and due from banks declined
$78.7 million, or 16 percent, and federal funds sold and securities purchased
under agreements to resell increased $30.0 million.
A $42.4 million increase in interest bearing deposits during the first
quarter of 1995 was more than offset by a $114.7 million decrease in
noninterest bearing deposits. During the first quarter of 1995, the mix of
short-term liabilities moved toward federal funds purchased and securities sold
under agreements to repurchase. At March 31, 1995, deposits accounted for 78
percent of the Company's funding, unchanged from year end.
Liquidity and Capital Resources
Net cash provided by operating activities totaled $69.2 million for the
three months ended March 31, 1995, due in part to decreases in trading account
securities and mortgage loans held for sale. For the first quarter of 1995,
net cash used by investing activities of $16.6 million consisted of proceeds
from maturities of investment securities of $60.3 million, proceeds from
maturities of securities available for sale of $28.2 million, and proceeds from
sales of securities available for sale of $13.3 million with cash outflows of
$1.6 million in investment securities purchases, an $82.2 million increase in
loans outstanding, and an increase of $30.0 million in federal funds sold and
securities purchased under agreements to resell. Net cash used by financing
activities of $131.3 million consisted of the payment of $10.7 million in
common stock dividends as well as decreases in federal funds purchased,
securities sold under agreements to repurchase, and demand deposits, NOW
accounts and savings accounts funded in part by increases in time deposits and
other short-term borrowings.
Total shareholders' equity at March 31, 1995, was 6.88 percent of total
assets compared to 6.60 percent at December 31, 1994. The increase since year-
end 1994 reflects the one percent decrease in total assets and the three
percent increase in shareholders' equity. The growth in shareholders' equity
consisted of earnings retained after payment of dividends on common stock
coupled with the decrease in the net unrealized holding loss on available-for-
sale securities. The change in the unrealized holding loss in the Company's
available-for-sale portfolio from December 31, 1994, to March 31, 1995, of $5.4
million has been reflected as additional shareholders' equity.
The leverage ratio, defined as period-end common equity adjusted for
goodwill divided by average assets adjusted for goodwill, was 6.62 percent at
March 31, 1995, and at December 31, 1994. 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, increased
from 6.38 at December 31, 1994, to 6.39 at March 31, 1995.
Tier I capital and total qualifying capital (Tier I capital plus Tier II
capital), as defined by regulatory agencies, as of March 31, 1995, exceeded the
target ratios of 6.00 percent and 10.00 percent, respectively, under current
regulations. The Tier I and total qualifying capital ratios at March 31, 1995,
were 9.99 percent and 13.30 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
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period $ 108,337 $ 111,744
Add: Provision charged to earnings 1,300 2,278
Balance due to acquisition - 810
Deduct: Loans charged off 4,040 3,186
Loan recoveries (1,707) (1,637)
----------- -----------
Net charge-offs 2,333 1,549
----------- -----------
Balance at end of period $ 107,304 $ 113,283
=========== ===========
Net charge-offs as a percentage of
average loans (annualized) 0.16% 0.12%
Recoveries as a percentage of charge-offs 42.25% 51.38%
</TABLE>
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
-------------- -----------------
<S> <C> <C>
NONPERFORMING ASSETS
Nonaccrual loans $ 9,919 $ 11,283
Renegotiated loans 2,096 1,428
----------- -----------
Total nonperforming loans 12,015 12,711
Other real estate 6,630 6,980
----------- -----------
Total nonperforming assets $ 18,645 $ 19,691
=========== ===========
Accruing loans ninety days past due $ 5,668 $ 3,745
=========== ===========
Other repossessed assets $ 161 $ 235
=========== ===========
Allowance for loan losses $ 107,304 $ 108,337
=========== ===========
Allowance as a percentage of loans 1.82% 1.86%
Total nonperforming loans as a percentage
of loans and ORE 0.20% 0.22%
Total nonperforming assets as a percentage
of loans and ORE 0.32% 0.34%
Accruing loans ninety days past due as a
percentage of loans and ORE 0.10% 0.06%
Allowance for loan losses as a percentage
of nonperforming loans 893.08% 852.31%
Allowance for loan losses as a percentage
of nonperforming assets 575.51% 550.19%
</TABLE>
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION Page
- --------------------------- ----
Item 4 Submission of Matters to a Vote of Security Holders
The election of three directors, approval of auditors and two
shareholder proposals were submitted to a vote of shareholders at the
Company's Annual Meeting held April 11, 1995. D. Paul Jones, Jr., Charles
W. Daniel and George W. Hansberry, M.D. were elected upon receipt of the
following votes for/against, respectively, 19,492,256/175,876,
19,485,143/182,989, and 19,475,867/183,782. James R. Hayes, David B.
Henderson and Dr. Wendall H. Taylor, Sr. were defeated upon receipt of the
following votes for/withheld, respectively, 14,205,676/170,671,
14,204,926/171,421, and 14,204,912/171,435. William Eugene Davenport,
Marshall Durbin, Jr., Tranum Fitzpatrick, Goodwyn L. Myrick, John S.
Stein, Harry B. Brock, Jr., Stanley M. Brock, and Garry N. Drummond, Sr.
were not subject to reelection and their terms continued after the
meeting. KPMG Peat Marwick LLP was approved as independent auditors by a
vote for/against/abstain of 33,411,633/150,951/440,446. Two shareholder
proposals of amendments to the Company's by-laws, which required a vote of
80% of the outstanding shares, failed to be adopted. One proposal related
to notification to shareholders of acquisition or merger proposals. The
second proposal related to shareholder approval of certain executive
compensation. These proposals received votes respectively
for/against/abstain, 16,432,715/11,877,053/5,607,159 and
17,190,265/11,251,290/5,484,584.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
(10)(a) Compass Bancshares, Inc., 1982 Long Term Incentive Plan
(incorporated by reference to Exhibit 1 to the Company's
Registration Statement on Form S-8 filed June 15, 1983, with the
Securities and Exchange Commission)
(10)(b) Compass Bancshares, Inc., 1989 Long Term Incentive Plan
(incorporated by reference to Exhibit 28 to the Company's
Registration Statement on Form S-8 filed February 21, 1991, with
the Securities and Exchange Commission)
(10)(c) Supplemental Retirement Agreement, dated as of March 18, 1991,
between Compass Bank and Harry B. Brock, Jr. (incorporated by
reference to Exhibit 10(c) to the Company's Form 10-K for the year
ended December 31, 1991, filed March 26, 1992, with the Securities
and Exchange Commission)
(10)(d) Employment Agreement, dated December 14, 1994, between Compass
Bancshares, Inc. and D. Paul Jones, Jr. (incorporated by reference
to Exhibit 10(d) to the Company's Form 10-K for the year ended
December 31, 1994, filed February 27, 1995, with the Securities
and Exchange Commission)
(10)(e) Employment Agreement, dated December 14, 1994, between Compass
Bancshares, Inc. and Jerry W. Powell (incorporated by reference to
Exhibit 10(e) to the Company's Form 10-K for the year ended
December 31, 1994, filed February 27, 1995, with the Securities
and Exchange Commission)
(10)(f) Employment Agreement, dated December 14, 1994, between Compass
Bancshares, Inc. and Garrett R. Hegel (incorporated by reference
to Exhibit 10(f) to the Company's Form 10-K for the year ended
December 31, 1994, filed February 27, 1995, with the Securities
and Exchange Commission)
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION Page
- --------------------------- ----
Item 6 Exhibits and Reports on Form 8-K (continued)
(a) Exhibits (continued)
(10)(g) Employment Agreement, dated December 14, 1994, between Compass
Bancshares, Inc. and Byrd Williams (incorporated by reference to
Exhibit 10(g) to the Company's Form 10-K for the year ended
December 31, 1994, filed February 27, 1995, with the Securities
and Exchange Commission)
(10)(h) Employment Agreement, dated December 14, 1994, between Compass
Bancshares, Inc. and Charles E. McMahen (incorporated by reference
to Exhibit 10(h) to the Company's Form 10-K for the year ended
December 31, 1994, filed February 27, 1995, with the Securities
and Exchange Commission)
(11) Computation of Per Share Earnings 16
(12) Ratio of Earnings to Fixed Charges 17
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
May 11, 1995 /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, 1995 and 1994
<CAPTION>
Three Months Ended
March 31
--------------------------
1995 1994
----------- -----------
(in Thousands Except Per Share Data)
<S> <C> <C>
PRIMARY:
Weighted average shares outstanding 37,960 37,879
Net effect of the assumed exercise
of stock options - based on the
treasury stock method using
average market price 230 253
----------- -----------
Total weighted average shares and
common stock equivalents
outstanding 38,190 38,132
=========== ===========
Net income available to common
shareholders $ 24,341 $ 24,179
=========== ===========
Net income per common share $ 0.64 $ 0.63
=========== ===========
FULLY DILUTED:
Weighted average shares outstanding 37,960 37,879
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 241 257
----------- -----------
Total weighted average shares and
common stock equivalents
outstanding 38,201 38,136
=========== ===========
Net income $ 24,341 $ 24,179
=========== ===========
Net income per common share $ 0.64 $ 0.63
=========== ===========
</TABLE>
<TABLE>
Exhibit (12)
Compass Bancshares, Inc. and Subsidiaries
Ratio of Earnings to Fixed Charges
Three Months Ended March 31, 1995 and 1994
<CAPTION>
Three Months Ended
March 31
------------------------------
1995 1994
---------- ----------
(in Thousands)
<S> <C> <C>
Pretax income $ 37,500 $ 37,239
Add fixed charges:
Interest on deposits 65,110 41,613
Interest on borrowings 20,540 10,118
Portion of rental expense representing
interest expense 864 693
---------- ----------
Total fixed charges 86,514 52,424
---------- ----------
Income before fixed charges $ 124,014 $ 89,663
========== ==========
Pretax income $ 37,500 $ 37,239
Add fixed charges (excluding interest on
deposits):
Interest on borrowings 20,540 10,118
Portion of rental expense representing
interest expense 864 693
---------- ----------
Total fixed charges 21,404 10,811
---------- ----------
Income before fixed charges
(excluding interest on deposits) $ 58,904 $ 48,050
========== ==========
Ratio of Earnings to Fixed Charges:
Including interest on deposits 1.43x 1.71x
Excluding interest on deposits 2.75x 4.44x
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME AND RELATED SUPPLEMENTAL
SCHEDULES OF COMPASS BANCSHARES, INC. AS OF AND FOR THE PERIOD ENDED MARCH 31,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
AND RELATED SUPPLEMENTAL SCHEDULES.
</LEGEND>
<MULTIPLIER> 1,000
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994 DEC-31-1994
<PERIOD-END> MAR-31-1995 DEC-31-1994 SEP-30-1994
<CASH> 411,776 490,494 400,015
<INT-BEARING-DEPOSITS> 99 99 99
<FED-FUNDS-SOLD> 76,525 46,535 108,244
<TRADING-ASSETS> 48,633 58,012 69,696
<INVESTMENTS-HELD-FOR-SALE> 678,735 711,680 714,864
<INVESTMENTS-CARRYING> 1,807,904 1,865,218 1,538,582
<INVESTMENTS-MARKET> 1,799,846 1,813,671 1,528,372
<LOANS> 5,895,209 5,828,308 5,520,944
<ALLOWANCE> (107,304) (108,337) (110,371)
<TOTAL-ASSETS> 9,175,711 9,265,137 8,589,456
<DEPOSITS> 7,116,574 7,188,913 6,198,881
<SHORT-TERM> 890,136 937,206 1,038,969
<LIABILITIES-OTHER> 53,021 39,429 376,721
<LONG-TERM> 484,921 487,916 378,195
<COMMON> 76,103 75,845 75,814
0 0 0
0 0 0
<OTHER-SE> 554,956 535,828 520,876
<TOTAL-LIABILITIES-AND-EQUITY> 9,175,711 9,265,137 8,589,456
<INTEREST-LOAN> 126,824 447,560 326,130
<INTEREST-INVEST> 43,583 122,030 80,889
<INTEREST-OTHER> 1,964 16,334 13,356
<INTEREST-TOTAL> 172,371 585,924 420,375
<INTEREST-DEPOSIT> 65,110 195,087 134,860
<INTEREST-EXPENSE> 85,650 249,156 172,215
<INTEREST-INCOME-NET> 86,721 336,768 248,160
<LOAN-LOSSES> 1,300 3,404 3,404
<SECURITIES-GAINS> 35 3,224 3,297
<EXPENSE-OTHER> 74,239 267,559 195,064
<INCOME-PRETAX> 37,500 153,693 112,278
<INCOME-PRE-EXTRAORDINARY> 24,341 101,246 74,260
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 24,341 101,246 74,260
<EPS-PRIMARY> 0.64 2.65 1.95
<EPS-DILUTED> 0.64 2.65 1.95
<YIELD-ACTUAL> 4.20 4.53 4.62
<LOANS-NON> 9,919 11,283 12,600
<LOANS-PAST> 5,668 3,745 4,098
<LOANS-TROUBLED> 2,096 1,428 6,257
<LOANS-PROBLEM> 0 0 0
<ALLOWANCE-OPEN> 108,337 111,744 111,744
<CHARGE-OFFS> 4,040 15,590 11,552
<RECOVERIES> 1,707 7,531 5,965
<ALLOWANCE-CLOSE> 107,304 108,337 110,371
<ALLOWANCE-DOMESTIC> 107,304 108,337 110,371
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0<F1> 52,110 0<F1>
<FN>
<F1>Information is not required to be disclosed in interim filings with the
Commission.
</FN>
</TABLE>
