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 June 30, 1998 Commission File No. 0-6032
COMPASS BANCSHARES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-0593897
------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
15 South 20th Street
Birmingham, Alabama 35233
----------------------------------------
(Address of principal executive offices)
(205) 933-3000
-------------------------------
(Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $2 par value
--------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1998
-------------------------- ----------------------------
Common Stock, $2 Par Value 70,173,479
The number of pages of this report is 22.
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
- ----------------------------------------------------------------------- ----
Item 1 Financial Statements
Consolidated Balance Sheets as of June 30, 1998 and December 31,
1997 3
Consolidated Statements of Income for the Three and Six Months
Ended June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1998 and 1997 5
Consolidated Statements of Comprehensive Income for the Three and
Six Months Ended June 30, 1998 and 1997 7
Notes to Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis of Results of Operations
and Financial Condition 11
Item 3 Quantitative and Qualitative Disclosures About Market Risk 18
PART II. OTHER INFORMATION
- -----------------------------------------------------------------------
Item 1 Legal Proceedings 19
Item 4 Submission of Matters to a Vote of Security Holders 19
Item 6 Exhibits and Reports on Form 8-K 19
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
<CAPTION>
June 30 December 31
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 633,624 $ 739,263
Federal funds sold and securities purchased
under agreements to resell 177,521 133,802
Interest bearing deposits with other banks 693 1,008
Investment securities (market value of
$1,600,308 and $1,114,415 for 1998 and
1997, respectively) 1,581,114 1,095,804
Investment securities available for sale 2,557,903 2,421,622
Trading account securities 82,606 112,460
Loans, net of unearned income 8,983,479 8,944,323
Allowance for loan losses (123,272) (126,506)
------------ ------------
Net loans 8,860,207 8,817,817
Premises and equipment, net 325,505 311,560
Other assets 429,094 439,115
------------ ------------
Total assets $14,648,267 $14,072,451
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing $ 2,230,261 $ 2,179,822
Interest bearing 8,421,986 8,002,072
------------ ------------
Total deposits 10,652,247 10,181,894
Federal funds purchased and securities
sold under agreements to repurchase 970,587 1,171,666
Other short-term borrowings 206,391 183,153
Accrued expenses and other liabilities 313,758 135,473
FHLB and other borrowings 1,333,051 1,294,653
Guaranteed preferred beneficial interests
in Company's junior subordinated
deferrable interest debentures (Note 4) 100,000 100,000
------------ ------------
Total liabilities 13,576,034 13,066,839
Shareholders' equity:
Common stock of $2 par value:
Authorized--200,000,000 shares;
Issued--70,170,834 shares in 1998 and
69,790,630 shares in 1997 140,342 139,581
Surplus 113,538 104,334
Loans to finance stock purchases (1,781) (5,224)
Unearned restricted stock (4,790) (2,775)
Accumulated other comprehensive income --
net unrealized holding gain on
available-for-sale securities 6,361 745
Retained earnings 818,563 768,951
------------ ------------
Total shareholders' equity 1,072,233 1,005,612
------------ ------------
Total liabilities and shareholders'
equity $14,648,267 $14,072,451
============ ============
</TABLE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In Thousands Except Per Share Data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $199,987 $187,798 $392,192 $364,638
Interest and dividends on
investment securities 15,664 22,311 33,669 44,936
Interest on investment
securities available
for sale 41,356 34,370 81,144 68,381
Interest on trading account
securities 1,281 1,785 2,887 3,350
Interest on federal funds
sold and securities
purchased under agreements
to resell 1,460 1,564 2,658 3,341
Interest on interest bearing
deposits with other banks 18 22 33 45
---------- ---------- ---------- ----------
Total interest income 259,766 247,850 512,583 484,691
INTEREST EXPENSE:
Interest on deposits 94,935 90,469 185,152 179,776
Interest on federal funds
purchased and securities
sold under agreements to
repurchase 11,928 12,439 24,791 22,254
Interest on other short
-term borrowings 2,249 3,042 4,322 5,266
Interest on FHLB and other
borrowings 17,377 12,787 35,294 24,285
Interest on guaranteed prefer-
red beneficial interests in
Company's junior subordinated
deferrable interest debentures 2,057 2,058 4,115 3,681
---------- ---------- ---------- ----------
Total interest expense 128,546 120,795 253,674 235,262
---------- ---------- ---------- ----------
Net interest income 131,220 127,055 258,909 249,429
Provision for loan losses 7,432 4,871 14,243 10,476
---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses 123,788 122,184 244,666 238,953
NONINTEREST INCOME:
Service charges on deposit
accounts 21,185 18,510 40,683 36,745
Trust fees 3,714 3,880 8,510 7,971
Trading account profits and
commissions 2,851 3,343 7,160 7,478
Investment securities
gains (losses), net - (84) 2,017 (164)
Gain on sale of securitized
loans 4,264 - 4,264 -
Retail investment sales 5,263 4,251 9,458 8,296
Other 17,386 15,017 35,236 27,012
---------- ---------- ---------- ----------
Total noninterest income 54,663 44,917 107,328 87,338
NONINTEREST EXPENSE:
Salaries and benefits 58,336 54,250 115,499 109,021
Net occupancy expense 8,266 8,340 16,558 16,247
Equipment expense 8,244 7,580 16,649 14,564
Professional services 9,257 8,245 17,869 15,388
Other 26,691 26,544 52,699 48,823
---------- ---------- ---------- ----------
Total noninterest expense 110,794 104,959 219,274 204,043
---------- ---------- ---------- ----------
Net income before income
tax expense 67,657 62,142 132,720 122,248
Income tax expense 23,024 22,225 45,138 44,072
---------- ---------- ---------- ----------
NET INCOME $ 44,633 $ 39,917 $ 87,582 $ 78,176
========== ========== ========== ==========
BASIC EARNINGS PER SHARE $0.63 $0.58 $1.25 $1.13
DILUTED EARNINGS PER SHARE 0.63 0.57 1.24 1.12
Basic weighted average shares
outstanding 69,948 69,438 69,851 69,407
Diluted weighted average shares
outstanding 70,937 70,271 70,832 70,165
Dividends per common share $0.2625 $0.2367 $0.5250 $0.4733
</TABLE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30
-----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Operating Activities:
Net income $ 87,582 $ 78,176
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization 19,926 21,444
Accretion of discount and loan fees (6,335) (6,746)
Provision for loan losses 14,243 10,476
Net change in trading account securities 29,854 (20,237)
Net change in mortgage loans available
for sale (22,005) 5,566
Gain on sale of securitized loans (4,264) -
(Gain) loss on sale of investment securities (2,017) 164
(Gain) loss on sale of premises and equipment 155 (47)
Gain on sale of other real estate owned (392) (156)
Provision for losses on other real estate
owned - 144
(Increase) decrease in interest receivable 4,718 (8,655)
(Increase) decrease in other assets (3,519) 1,792
Decrease in interest payable (6,452) (1,464)
Increase in taxes payable 6,181 3,161
Increase (decrease) in other payables 174,152 (15,211)
------------ ------------
Net cash provided by operating activities 291,827 68,407
Investing Activities:
Proceeds from maturities/calls of investment
securities 358,350 174,450
Purchases of investment securities (842,946) (67,033)
Proceeds from sales of securities
available for sale 468,513 133,156
Proceeds from maturities/calls of
securities available for sale 436,408 293,705
Purchases of securities available for sale (996,120) (417,530)
Net increase in federal funds
sold and securities purchased
under agreements to resell (43,719) (8,607)
Net increase in loan portfolio (416,615) (541,461)
Sale of securitized loans 359,680 -
Purchase of branches - 22,216
Purchases of premises and equipment (27,346) (36,539)
Net decrease in interest
bearing deposits with other banks 315 174
Proceeds from sales of other
real estate owned 3,145 3,882
------------ ------------
Net cash used by investing activities (700,335) (443,587)
</TABLE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Financing Activities:
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts $ 401,663 $(105,413)
Net increase (decrease) in time deposits 68,690 (97,623)
Net decrease in federal funds
purchased (360,740) (134,774)
Net increase in securities sold
under agreements to repurchase 159,661 20,784
Net increase in short-term
borrowings 23,238 172,106
Issuance of FHLB advances and
other borrowings 146,000 312,500
Repayment of FHLB advances and
other borrowings (107,648) (104,831)
Issuance of guaranteed preferred beneficial
interests in Company's junior subordinated
deferrable interest debentures - 100,000
Common dividends paid (36,793) (30,336)
Exercise of stock options of acquired
entities prior to acquisition 599 6,473
Repayment of loans to finance stock
purchases 4,606 1,966
Proceeds from exercise of stock options 3,593 507
------------ ------------
Net cash provided by
financing activities 302,869 141,359
------------ ------------
Net decrease in cash and due from banks (105,639) (233,821)
Cash and due from banks at beginning of period 739,263 754,416
------------ ------------
Cash and due from banks at end of period $ 633,624 $ 520,595
============ ============
Schedule of noncash investing and
financing activities:
Transfers of loans to other real estate owned $ 4,007 $ 4,097
Loans to facilitate the sale of
other real estate owned 63 494
Loans to finance stock purchases 1,163 1,077
Tax benefit realized upon exercise
of stock options 419 1,778
Issuance of restricted stock 3,014 2,706
Assets retained in loan securitization and sale 36,593 -
Change in unrealized gain/loss on available-
for-sale securities 8,448 1,337
Transfer of securities available for
sale to held-to-maturity securities - 119,382
Receipt of treasury stock upon exercise
of stock options 2,014 386
Issuance of treasury stock upon exercise
of stock options 2,014 386
Acquisition of branches:
Liabilities assumed $ 25,661
Assets acquired 3,445
------------
Net liabilities assumed $ 22,216
============
</TABLE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
---------------------- ---------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $ 44,633 $ 39,917 $ 87,582 $ 78,176
Other comprehensive income,
before tax:
Unrealized holding gain
(loss) on available for
sale securities 7,320 16,113 10,829 1,738
Less reclassification
adjustment for gains
(losses) on securities
available for sale - (84) 2,017 (164)
---------- ---------- ---------- ----------
Total other comprehensive
income, before tax 7,320 16,197 8,812 1,902
Income tax expense (benefit)
related to other
comprehensive income:
Unrealized holding gain
(loss) on available for
sale securities 2,562 5,845 3,917 527
Less reclassification
adjustment for gains
(losses) on securities
available for sale - (32) 720 (62)
---------- ---------- ---------- ----------
Total income tax expense
(benefit) related to
other comprehensive income 2,562 5,877 3,197 589
---------- ---------- ---------- ----------
Total other comprehensive
income, net of tax 4,758 10,320 5,615 1,313
---------- ---------- ---------- ----------
Total comprehensive income $ 49,391 $ 50,237 $ 93,197 $ 79,489
========== ========== ========== ==========
</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 notes included in the Company's
annual report on Form 10-K for the year ended December 31, 1997.
NOTE 2 - Business Combinations
Completed Acquisitions
Summarized below are acquisitions completed by the Company during the first
six months of 1998. All of the acquisitions completed during the period were
accounted for under the pooling-of-interests method of accounting and
accordingly all prior period information has been restated.
<TABLE>
<CAPTION>
Common
dollars in millions Location Date Assets Equity Shares Issued
- ---------------------------- -------------------- ------- ------ ------ -------------
<S> <C> <C> <C> <C> <C>
G.S.B. Investments, Inc. Gainesville, Florida 1/13/98 $213 $22 1,649,807
First University Corporation Houston, Texas 1/29/98 68 4 349,874
Fidelity Resources Company Dallas, Texas 2/9/98 335 20 1,800,077
</TABLE>
Pending Acquisitions at June 30, 1998
The Company completed the acquisition of Hill Country Bank ("Hill Country")
of Austin, Texas, on August 1, 1998. At the date of closing, Hill Country had
assets of $109 million and equity of $10 million. The transaction was accounted
for under the pooling-of-interests method of accounting and accordingly all
prior period information will be restated in the third quarter of 1998.
On July 6, 1998, the Company signed a definitive agreement to acquire
Arizona Bank, of Tucson, Arizona. At June 30, 1998, Arizona Bank had assets of
$759 million and equity of $72 million. It is anticipated that the transaction
will close in the fourth quarter of 1998 and will be accounted for under the
pooling-of-interests method of accounting.
NOTE 3 - Impaired Loans
At June 30, 1998, the recorded investment in loans that are considered
impaired under generally accepted accounting principles was $28.2 million, of
which $14.3 million were on nonaccrual status. Included in this amount is $27.0
million of impaired loans for which the related allowance for loan losses was
$4.6 million and $1.2 million of loans which are carried at estimated fair
value without a specifically allocated allowance for loan losses. At December
31, 1997, impaired loans totaled $23.8 million.
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements - Continued
NOTE 4 - Capital Securities
In January, 1997, the Company formed a wholly owned Delaware statutory
business trust, Compass Trust I, which issued $100 million of guaranteed
preferred beneficial interests in the Company's junior subordinated deferrable
interest debentures ("Capital Securities") that qualify as Tier I capital under
Federal Reserve Board guidelines. All of the common securities of Compass Trust
I are owned by the Company. The proceeds from the issuance of the Capital
Securities ($100 million) and common securities ($3.1 million) were used by
Compass Trust I to purchase $103.1 million of junior subordinated deferrable
interest debentures of the Company which carry an interest rate of 8.23
percent. The debentures represent the sole asset of Compass Trust I. The
debentures and related income statement effects are eliminated in the Company's
financial statements.
The Capital Securities accrue and pay distributions semiannually at a rate
of 8.23 percent per annum of the stated liquidation value of $1,000 per capital
security. The Company has entered into contractual arrangements which, taken
collectively, fully and unconditionally guarantee payment of: (i) accrued and
unpaid distributions required to be paid on the Capital Securities; (ii) the
redemption price with respect to any Capital Securities called for redemption
by Compass Trust I; and (iii) payments due upon a voluntary or involuntary
liquidation, winding-up or termination of Compass Trust I.
The Capital Securities are mandatorily redeemable upon the maturity of the
debentures on January 15, 2027, or upon earlier redemption as provided in the
indenture. The Company has the right to redeem the debentures purchased by
Compass Trust I: (i) in whole or in part, on or after January 15, 2007, and
(ii) in whole (but not in part) at any time within 90 days following the
occurrence and during the continuation of a tax event or capital treatment
event (as defined in the offering circular and indenture). As specified in the
indenture, if the debentures are redeemed prior to maturity, the redemption
price will be the principal amount, any accrued but unpaid interest, plus a
premium ranging from 4.12 percent in 2007 to 0.41 percent in 2016.
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements - Continued
NOTE 5 - Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(In Thousands Except Per Share Data)
(Unaudited)
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Weighted average shares
outstanding 69,948 69,438 69,851 69,407
========= ========== ========= ==========
Net income $ 44,633 $ 39,917 $ 87,582 $ 78,176
========= ========== ========= ==========
Basic earnings per share $ 0.63 $ 0.58 $ 1.25 $ 1.13
========= ========== ========= ==========
DILUTED EARNINGS PER SHARE:
Weighted average shares
outstanding 69,948 69,438 69,851 69,407
Net effect of the assumed
exercise of stock options
and nonvested restricted
stock - based on the
treasury stock method
using average market
price for the year 989 833 981 758
--------- --------- --------- ---------
Total weighted average
shares and common stock
equivalents outstanding 70,937 70,271 70,832 70,165
========= ========== ========= ==========
Net income $ 44,633 $ 39,917 $ 87,582 $ 78,176
========= ========== ========= ==========
Diluted earnings per share $ 0.63 $ 0.57 $ 1.24 $ 1.12
========= ========== ========= ==========
</TABLE>
NOTE 6 - Recently Issued Accounting Standards
In June, 1997, the FASB issued Financial Accounting Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information,
("FAS131"). FAS131 requires that financial and descriptive information be
disclosed for each reportable operating segment based on the management
approach. The management approach focuses on financial information that an
enterprise's decision makers use to assess performance and make decisions
about resource allocation. The statement also prescribes the enterprise-wide
disclosures to be made about products, services, geographic areas and major
customers. FAS131 is effective for annual financial statements issued for
periods beginning after December 15, 1997, and for interim financial
statements in the second year of application. The Company adopted FAS131
as of January 1, 1998.
In June, 1998, the FASB issued Financial Accounting Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities, ("FAS133").
FAS133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This Statement is
effective for all fiscal quarters of fiscal years beginning after June 15,
1999. Presently, the Company is unable to quantify the impact that the
adoption of FAS133 will have on the consolidated financial statements of
the Company.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Overview
This report may contain forward-looking statements which are subject to
numerous assumptions, risks and uncertainties. Statements pertaining to future
periods are subject to uncertainty because of the possibility of changes in
underlying factors and assumptions. Actual results could differ materially from
those contained in or implied by such forward-looking statements for a variety
of factors including: sharp and/or rapid changes in interest rates; significant
changes in the economic scenario from the current anticipated scenario which
could materially change anticipated credit quality trends and the ability to
generate loans; significant delay in or inability to execute strategic
initiatives designed to grow revenues and/or control expenses; and significant
changes in accounting, tax, or regulatory practices or requirements.
Net income for the quarter ended June 30, 1998, increased 12 percent from
the second quarter of 1997 to $44.6 million while basic earnings per share
increased 9 percent to $0.63 per share and diluted earnings per share increased
11 percent to $0.63 per share. Net interest income increased 3 percent to
$131.2 million from the second quarter of 1997 while the provision for loan
losses increased 53 percent to $7.4 million. Noninterest income increased 22
percent to $54.7 million during the second quarter of 1998 while noninterest
expense increased 6 percent to $110.8 million.
For the first six months of 1998, net income increased 12 percent to $87.6
million while both basic and diluted earnings per share for the period
increased 11 percent, to $1.25 per share and $1.24 per share, respectively. For
the year-to-date period, net interest income grew by 4 percent to $258.9
million while the provision for loan losses increased by 36 percent to $14.2
million. Noninterest income and noninterest expense increased by 23 percent and
7 percent, respectively, over the prior year period.
All acquisitions completed in 1998 were accounted for under the pooling-of-
interests method of accounting and, accordingly, the financial statements have
been restated for all periods to reflect the acquisitions. Acquisitions
completed in 1998 and pending acquisitions are detailed in Note 2 - Business
Combinations in the Notes to the Consolidated Financial Statements and
acquisitions completed prior to 1998 are included in "Acquisitions" under Item
1 - Business in the Company's 1997 Form 10-K.
Net Interest Income
Net interest income for the quarter ended June 30, 1998, increased $4.2
million over the second quarter of 1997 to $131.2 million. On a tax-equivalent
basis, net interest income increased $3.9 million, or 3 percent, as a result of
an $11.7 million, or 5 percent, increase in interest income on a tax-equivalent
basis offset in part by a $7.8 million, or 6 percent, increase in interest
expense. The increase in interest income was primarily due to an increase in
average earning assets of $747 million, or 6 percent, reduced by the effect of
an 11 basis point decrease in the average yield on earning assets from 8.23
percent to 8.12 percent. The largest portion of the increase in average earning
assets from the second quarter of 1997 occurred in the average balance of
loans, which increased 8 percent, or $692 million, with funding provided
primarily by increases in the average balance of noninterest bearing demand
deposits, savings accounts, and FHLB and other borrowings. The 6 percent
increase in interest expense resulted from a $646 million, or 6 percent,
increase in the average balance of interest bearing liabilities along with a 1
basis point increase in the rate paid.
While net interest income for the six months ended June 30, 1998, increased
$9.5 million over the prior year period, on a tax-equivalent basis, net
interest income increased $9.1 million, or 4 percent. This increase was a
function of a $27.5 million, or 6 percent, increase in interest income and an
$18.4 million, or 8 percent, increase in interest expense. The increase in
interest income was due to a 7 percent, or $780 million, increase in average
earning assets for the six month period while the average yield on earning
assets declined by 7 basis points to 8.14 percent. At the same time, average
interest bearing liabilities increased $682 million, primarily in savings
accounts and FHLB and other borrowings, while the rate paid on interest bearing
liabilities increased 4 basis points to 4.77 percent.
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 second quarter of 1998, the net interest
margin, on a tax-equivalent basis, was 4.12 percent compared to 4.24 percent
for the same period in 1997. This change resulted from the changes in rates and
volumes of earning assets and the corresponding funding sources noted
previously. The yield on interest earning assets for the second quarter
decreased 11 basis points, including a 13 basis point decrease in the yield on
loans, while the yield on interest bearing liabilities increased 1 basis point.
The impact of the increase in the yield on interest bearing liabilities on net
interest margin was partially offset by a 13 percent increase in the average
balance of noninterest bearing demand deposits during the second quarter of
1998.
For the six months ended June 30, 1998, the net interest margin declined 11
basis points to 4.13 percent from the prior year period due to a 7 basis point
decrease in yield on earning assets coupled with a 4 percent increase in the
rate paid on interest bearing liabilities. The decrease in yield on earning
assets was due to a 10 basis point decrease in the yield on loans from 8.83
percent to 8.73 percent. A six basis point increase in the rate paid on
interest bearing deposits, primarily savings accounts, was the leading
contributor to the increase in the rate paid on interest bearing liabilities.
For the six month period, the rate paid on savings accounts increased from 3.60
percent in 1997 to 3.74 percent in the current year.
During the second quarter of 1998, 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 10 basis points as compared to a 4
basis point impact for the same period in 1997. For the six months ended June
30, 1998, the use of interest rate contracts increased the Company's taxable
equivalent net interest margin by nine basis points, up significantly from the
three basis point impact for the first six months of 1997.
The following tables detail the components of the changes in net interest
income (on a tax-equivalent basis) by major category of interest earning assets
and interest bearing liabilities for the six month and three month periods
ended June 30, 1998, as compared to the comparable periods of 1997 (in
thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1998
--------------------------------------------
Change
1997 Attributed to
to -------------------------------
1998 Volume Rate Mix
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest income:
Loans $27,400 $32,037 $(4,263) $ (374)
Investment securities (11,471) (11,168) (399) 96
Investment securities available
for sale 12,727 12,974 (208) (39)
Trading account securities (471) (425) (53) 7
Fed funds and resale agreements (683) (843) 215 (55)
Time deposits in other banks (12) (15) 4 (1)
--------- --------- --------- ---------
Increase in interest income $27,490 $32,560 $(4,704) $ (366)
========= ========= ========= =========
Interest expense:
Deposits $ 5,376 $ 1,330 $ 3,909 $ 137
Fed funds purchased and repos 2,537 2,294 220 23
Other short-term borrowings (944) (843) (120) 19
FHLB and other borrowings* 11,443 15,925 (2,856) (1,626)
--------- --------- --------- ---------
Increase in interest expense $18,412 $18,706 $ 1,153 $(1,447)
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1998
--------------------------------------------
Change
1997 Attributed to
to ---------------------------------
1998 Volume Rate Mix
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest income:
Loans $12,119 $15,266 $(2,911) $ (236)
Investment securities (6,770) (6,583) (262) 75
Investment securities available
for sale 6,971 7,452 (395) (86)
Trading account securities (521) (484) (49) 12
Fed funds and resale agreements (104) (191) 99 (12)
Time deposits in other banks (4) (7) 4 (1)
--------- --------- --------- ---------
Increase in interest income $11,691 $15,453 $(3,514) $ (248)
========= ========= ========= =========
Interest expense:
Deposits $ 4,466 $ 2,850 $ 1,514 $ 102
Fed funds purchased and repos (511) (370) (145) 4
Other short-term borrowings (793) (694) (129) 30
FHLB and other borrowings* 4,589 6,426 (1,282) (555)
--------- --------- --------- ---------
Increase in interest expense $ 7,751 $ 8,212 $ (42) $ (419)
========= ========= ========= =========
<FN>
* Includes Capital Securities.
</FN>
</TABLE>
Noninterest Income and Noninterest Expense
During the second quarter of 1998, noninterest income increased $9.7
million, or 22 percent, to $54.7 million, due primarily to a $4.3 million gain
on the sale of securitized indirect auto loans, a $2.7 million increase in
service charges on deposit accounts, and a $2.4 million increase in other
income. For the six months ended June 30, 1998, noninterest income increased
$20.0 million, or 23 percent, over the prior year period to $107.3 million. The
primary components of the increase included the $4.3 million gain on sale of
securitized loans, a $3.9 million increase in service charges on deposit
accounts, a $2.2 million increase in investment securities gains, and a $8.2
million increase in other income. The increase in service charges on deposit
accounts was due to growth in deposits while the increase in other income was
due to increased mortgage banking income and increased income from tax-
advantaged assets. Trading account profits and commissions decreased 15 percent
to $2.9 million in the second quarter of 1998 and declined 4 percent to $7.2
million during the first six months of the year. Trading account profits for
the first six months of 1998 related specifically to derivative securities were
approximately $477,000, consisting of $492,000 of profits related to
collateralized mortgage obligations ("CMOs") held in the trading account and
trading losses of $15,000 on non-CMO derivative securities, specifically
options, futures, and interest rate swaps, caps, and floors.
The components of trading account assets at June 30, 1998, and December 31,
1997, are presented in the following table (in thousands):
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
------------ -------------
<S> <C> <C>
U.S. Treasury and Government agency $ 29,532 $ 55,487
State and political subdivisions 5,700 8,135
Mortgage-backed pass through securities 33,345 34,282
Other securities 527 281
Derivative securities:
Collateralized mortgage obligations 13,194 13,906
Interest rate caps and floors 224 305
Other 84 64
----------- -----------
$ 82,606 $ 112,460
=========== ===========
</TABLE>
Noninterest expense increased $5.8 million, or 6 percent, during the second
quarter of 1998 principally as a result of increases in salaries and benefits
and professional services. For the six months ended June 30, 1998, noninterest
expense increased $15.2 million, or 7 percent, due to increases in all expense
categories. Salaries increased 8 percent and 6 percent, respectively, for the
second quarter and the first six months of 1998 while employee benefits
increased 3 percent and 5 percent. The increase in salaries over 1997 levels
was the result of regular merit increases and increased incentive expense.
Equipment expense increased during 1998 due to increased computer equipment
depreciation and software maintenance while professional services expense
increased as a result of increased consulting expenses primarily associated
with internal service quality initiatives. Other noninterest expense increased
$3.9 million, or 8 percent, during the first six months of 1998 due in large
part to increased advertising associated with the Company's new branding
campaign.
Income Taxes
Income tax expense increased by $1.1 million, or 2 percent, during the first
six months of 1998 compared to the same period in 1997 while pretax income
increased 9 percent. The effective tax rate for the first six months of 1998
was 34.0 percent, down significantly from the 36.1 percent effective tax rate
for the same period in 1997. The decrease in the effective tax rate was
primarily attributable to investment in tax-advantaged assets.
Provision and Allowance for Loan Losses
The provision for loan losses for the six months ended June 30, 1998,
increased $3.8 million, or 36 percent, from the same period in 1997 due to a 37
percent increase in net loan charge-offs during the period. Net loan charge-
offs expressed as an annualized percentage of average loans for the first six
months of 1998 were 0.32 percent, up from 0.25 percent for the first six months
of 1997. 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 June 30, 1998, was $123 million, down from $127
million at December 31, 1997. The ratio of the allowance for loan losses to
loans outstanding was 1.37 percent at June 30, 1998, down from 1.41 percent at
December 31, 1997.
Nonperforming Assets and Past Due Loans
Nonperforming assets, comprised of nonaccrual loans, renegotiated loans and
other real estate owned, totaled $40.4 million at June 30, 1998, increasing 8
percent from December 31, 1997, as nonaccrual loans increased $2.0 million and
other real estate increased by $1.1 million. At June 30, 1998, the allowance
for loan losses as a percentage of nonperforming loans was 377 percent as
compared to 412 percent at December 31, 1997. The allowance for loan losses as
a percentage of nonperforming loans and accruing loans ninety days or more past
due increased from 287 percent at December 31, 1997, to 291 percent at June 30,
1998.
Nonperforming assets as a percentage of total loans and other real estate
owned increased slightly to 0.45 percent at June 30, 1998, from 0.42 percent at
December 31, 1997. The amount recorded in other repossessed assets at June 30,
1998, was $399,000, relatively unchanged from $472,000 at December 31, 1997.
Loans past due ninety days or more but still accruing interest decreased 28
percent from $13.4 million at December 31, 1997, to $9.7 million at June 30,
1998, representing 0.11 percent of total loans.
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 June 30, 1998, were $14.6 billion, up 4 percent from
December 31, 1997, as an increase in earning assets more than offset a decrease
in cash and due from banks. Retained earnings remained the primary source of
growth for the Company's capital base.
Assets and Funding
At June 30, 1998, earning assets totaled $13.4 billion, up from $12.7
billion at December 31, 1997, an increase of 5 percent. The mix of earning
assets shifted moderately toward investment securities in the first six months
of 1998 with total investment securities comprising 31 percent of total earning
assets at June 30, 1998, up from 28 percent at December 31, 1997, while the
percentage of earning assets represented by loans decreased to 67 percent from
70 percent. This shift was due in large part to the securitization and sale of
approximately $400 million in indirect auto loans in June, 1998.
A $470 million increase in total deposits and a $178 million increase in
accrued expenses and other liabilities during the first six months of 1997 was
partially offset by a $201 million decrease in federal funds purchased and
securities sold under agreements to repurchase. The increase in accrued
expenses and other liabilities was principally due to investment securities
purchases with trade dates prior to June 30, 1998, that did not settle until
July, which represented the reinvestment of funds received in connection with
the auto loan securitization. At June 30, 1998, deposits accounted for 73
percent of the Company's funding, unchanged from year end.
Liquidity and Capital Resources
Net cash provided by operating activities totaled $292 million for the six
months ended June 30, 1998, represented primarily by net income and the
increase in other payables related to the purchase of investment securities
with trade dates prior to June 30, 1998. Net cash used by investing activities
of $700 million consisted of $996 million in purchases of investment securities
available for sale, $843 million in purchases of investment securities, and a
$417 million increase in loans outstanding. Cash inflows consisted of $360
million received in the securitization and sale of indirect auto loans,
proceeds from maturities/calls of investment securities of $358 million,
proceeds from maturities/calls of securities available for sale of $436 million
and proceeds from sales of securities available for sale of $469 million. Net
cash provided by financing activities of $303 million consisted of a $470
million increase in deposits, an increase in securities sold under agreements
to repurchase of $160 million, and a net increase in long-term borrowings of
$38 million, reduced by decreases in federal funds purchased of $361 million
and the payment of $37 million in common stock dividends.
Total shareholders' equity at June 30, 1998, was 7.32 percent of total
assets compared to 7.15 percent at December 31, 1997. The leverage ratio,
defined as period-end common equity and the Capital Securities adjusted for
goodwill divided by average quarterly assets adjusted for goodwill, was 7.60
percent at June 30, 1998 and 7.40 percent at December 31, 1997. Similarly, the
Company's tangible leverage ratio, defined as period-end common equity and the
Capital Securities adjusted for all intangibles divided by average quarterly
assets adjusted for all intangibles, increased from 7.29 percent at December
31, 1997 to 7.50 percent at June 30, 1998.
Tier I capital and total qualifying capital (Tier I capital plus Tier II
capital), as defined by regulatory agencies, as of June 30, 1998, 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 June 30, 1998,
were 9.62 percent and 11.73 percent, respectively, compared to 9.91 percent and
12.39 percent at December 31, 1997. 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 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>
Six Months Ended
June 30
---------------------------
1998 1997
----------- -----------
<S> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period $ 126,506 $ 123,924
Add: Provision charged to earnings 14,243 10,476
Deduct: Allowance sold in loan securitization 3,212 -
Loans charged off 17,781 13,675
Loan recoveries (3,516) (3,299)
----------- -----------
Net charge-offs 14,265 10,376
----------- -----------
Balance at end of period $ 123,272 $ 124,024
=========== ===========
Net charge-offs as a percentage of
average loans (annualized) 0.32% 0.25%
Recoveries as a percentage of charge-offs 19.77% 24.12%
</TABLE>
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
----------- -----------
<S> <C> <C>
NONPERFORMING ASSETS
Nonaccrual loans $ 30,389 $ 28,369
Renegotiated loans 2,297 2,334
----------- -----------
Total nonperforming loans 32,686 30,703
Other real estate 7,703 6,581
----------- -----------
Total nonperforming assets $ 40,389 $ 37,284
=========== ===========
Accruing loans ninety days past due $ 9,710 $ 13,428
Other repossessed assets 399 472
Allowance for loan losses 123,272 126,506
Allowance as a percentage of loans 1.37% 1.41%
Total nonperforming loans as a percentage
of loans 0.36% 0.34%
Total nonperforming assets as a percentage
of loans and ORE 0.45% 0.42%
Accruing loans ninety days past due as a
percentage of loans 0.11% 0.15%
Allowance for loan losses as a percentage of
nonperforming loans 377.14% 412.03%
Allowance for loan losses as a percentage of
nonperforming assets 305.21% 339.30%
</TABLE>
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Quantitative and Qualitative Disclosures About Market Risk
(In thousands)
(Unaudited)
The Company's interest rate risk management policies and practices, along
with the assumptions used in the net interest income sensitivity analysis, are
described on page 20 of its December 31, 1997 Form 10-K. Net interest income
sensitivities over a one-year time horizon as of June 30, 1998 and December 31,
1997 are shown below.
<TABLE>
<CAPTION>
Percentage
Increase/(Decrease)
in Interest Income/
Expense Given
Immediate and
Principal/Notional Sustained Parallel
Amount of Earning Interest Rate Shifts
Assets, Interest --------------------------
Bearing Liabilities Down 100 Up 100
and Swaps Basis Points Basis Points
-------------------- ------------ ------------
<S> <C> <C> <C>
December 31, 1997:
- ------------------
Assets which reprice in:
One year or less $ 5,136,985 (9.02)% 10.20%
Over one year 7,572,034 (3.20) 2.36
------------
$ 12,709,019 (5.67) 5.69
============
Liabilities which reprice in:
One year or less $ 8,037,854 (12.63) 16.86
Over one year 2,713,690 (4.58) 3.45
------------
$ 10,751,544 (10.06) 12.58
============
Non-trading swaps $ 1,561,303 (27.72) (75.80)
============
Total net interest income
sensitivity (1.60) (2.60)
June 30, 1998:
- --------------
Assets which reprice in:
One year or less $ 5,261,428 (10.60)% 9.76%
Over one year 7,993,035 (5.26) 2.24
------------
$ 13,254,463 (7.46) 5.34
============
Liabilities which reprice in:
One year or less $ 7,708,437 (13.50) 16.27
Over one year 3,323,578 (5.25) 6.49
------------
$ 11,032,015 (10.45) 12.66
============
Non-trading swaps $ 1,769,677 13.92 (85.55)
============
Total net interest income
sensitivity (3.88) (4.46)
</TABLE>
As shown in the table above, net interest income sensitivity increased from
December 31, 1997 to June 30, 1998. In the down-rate scenario, the increased
sensitivity is due largely to an increase in estimated prepayment speeds for
mortgage loans and mortgage-backed securities, including CMOs. Increased
prepayments in a down-rate environment would result in reinvestment of cash
flows at lower rates, thus increasing net interest income sensitivity. For the
up-rate scenario, the increased sensitivity is due primarily to callable
receive-fixed swaps and callable FHLB advances entered into during 1998. Both
instruments will result in lower net interest income in an up-rate scenario.
The Company will continue to closely monitor interest rate risk relative to its
established policy limits.
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION Page
- ------------------------------------------------------------------------- ----
Item 1 Legal Proceedings
- ------ -----------------
During the ordinary course of business, the Company is subject to legal
proceedings which involve claims for substantial monetary relief. However,
based upon the advice of legal counsel, management is of the opinion that any
legal proceedings, individually or in the aggregate, will not have a material
adverse effect on the Company's financial condition or results of operations.
Item 4 Submission of Matters to Vote of Security Holders
- ------ -------------------------------------------------
The election of three directors and the approval of an increase in the number
of authorized shares of common stock were submitted to the shareholders at the
Company's Annual Meeting held April 20, 1998. Charles W. Daniel, D. Paul Jones,
Jr., and Carl J. Gessler, Jr., M.D. were elected upon receipt of the following
votes for/withheld, respectively, 54,626,605/458,908, 54,565,492/520,021, and
54,860,097/225,416. Jack C. Demetree, Tranum Fitzpatrick, John S. Stein,
William Eugene Davenport, Marshall Durbin, Jr., and Robert J. Wright were not
subject to reelection and their terms continued after the meeting. An increase
in the number of authorized shares of the Company's common stock to 200
million shares was approved by a vote of for/against/abstain of
52,580,997/2,220,683/283,833.
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) Compass Bancshares, Inc. 1996 Long Term Incentive Plan
(incorporated by reference to Exhibit 4(g) to the Company's
Registration Statement on Form S-8, Registration No. 333-15117,
filed October 30, 1996, 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)
- ------ --------------------------------------------
(10)(g) 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)
(10)(h) Employment Agreement, dated December 14, 1994, between Compass
Bancshares, Inc. and G. Ray Stone (incorporated by reference to
Exhibit 10(i) to the Company's Registration Statement on Form S-
4, Registration No. 333-15373, filed November 1, 1996, with the
Securities and Exchange Commission)
(10)(i) Compass Bancshares, Inc., Employee Stock Ownership Benefit
Restoration Plan, dated as of May 1, 1997 (incorporated by
reference to Exhibit 10(j) to the December 31, 1997 Form 10-K
filed with the Commission)
(10)(j) Compass Bancshares, Inc., Supplemental Retirement Plan, dated as
of May 1, 1997 (incorporated by reference to Exhibit 10(k) to
the December 31, 1997 Form 10-K filed with the Commission)
(10)(k) Deferred Compensation Plan for Compass Bancshares, Inc., dated
as of February 1, 1996 (incorporated by reference to Exhibit
10(l) to the December 31, 1997 Form 10-K filed with the
Commission)
(12) Ratio of Earnings to Fixed Charges 22
(27) Financial Data Schedule (Filed electronically only)
(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.
August 13, 1998 /s/ GARRETT R. HEGEL
- --------------- ---------------------------
Date By Garrett R. Hegel, as its
Chief Financial Officer
<TABLE>
Exhibit (12)
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Ratio of Earnings to Fixed Charges
(in Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
Pretax income $ 132,720 $ 122,248
Add fixed charges:
Interest on deposits 185,152 179,776
Interest on borrowings 68,522 55,486
Portion of rental expense
representing interest expense 2,745 2,488
---------- ----------
Total fixed charges 256,419 237,750
---------- ----------
Income before fixed charges $ 389,139 $ 359,998
========== ==========
Pretax income $ 132,720 $ 122,248
Add fixed charges (excluding
interest on deposits):
Interest on borrowings 68,522 55,486
Portion of rental expense
representing interest expense 2,745 2,488
---------- ----------
Total fixed charges 71,267 57,974
---------- ----------
Income before fixed charges
(excluding interest on deposits) $ 203,987 $ 180,222
========== ==========
RATIO OF EARNINGS TO FIXED CHARGES:
Including interest on deposits 1.52x 1.51x
Excluding interest on deposits 2.86x 3.11x
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME AND RELATED SUPPLEMENTAL
SCHEDULES OF COMPASS BANCSHARES, INC. AS OF AND FOR THE PERIOD ENDED JUNE 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
AND RELATED SUPPLEMENTAL SCHEDULES.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 633,624
<INT-BEARING-DEPOSITS> 693
<FED-FUNDS-SOLD> 177,521
<TRADING-ASSETS> 82,606
<INVESTMENTS-HELD-FOR-SALE> 2,557,903
<INVESTMENTS-CARRYING> 1,581,114
<INVESTMENTS-MARKET> 1,600,308
<LOANS> 8,983,479
<ALLOWANCE> 123,272
<TOTAL-ASSETS> 14,648,267
<DEPOSITS> 10,652,247
<SHORT-TERM> 1,176,978
<LIABILITIES-OTHER> 313,758
<LONG-TERM> 1,433,051
0
0
<COMMON> 140,342
<OTHER-SE> 931,891
<TOTAL-LIABILITIES-AND-EQUITY> 14,648,267
<INTEREST-LOAN> 392,192
<INTEREST-INVEST> 114,813
<INTEREST-OTHER> 5,578
<INTEREST-TOTAL> 512,583
<INTEREST-DEPOSIT> 185,152
<INTEREST-EXPENSE> 253,674
<INTEREST-INCOME-NET> 258,909
<LOAN-LOSSES> 14,243
<SECURITIES-GAINS> 2,017
<EXPENSE-OTHER> 219,274
<INCOME-PRETAX> 132,720
<INCOME-PRE-EXTRAORDINARY> 87,582
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,582
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.24
<YIELD-ACTUAL> 4.13
<LOANS-NON> 30,389
<LOANS-PAST> 9,710
<LOANS-TROUBLED> 2,297
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 126,506
<CHARGE-OFFS> 17,781
<RECOVERIES> 3,516
<ALLOWANCE-CLOSE> 123,272
<ALLOWANCE-DOMESTIC> 123,272
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
