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, 1999 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 April 30, 1999
-------------------------- -----------------------------
Common Stock, $2 Par Value 113,540,566
The number of pages of this report is 23.
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
- ------------------------------------------------------------- ----
Item 1 Financial Statements
Consolidated Balance Sheets as of March 31, 1999
and December 31, 1998 3
Consolidated Statements of Income for the Three
Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998 5
Consolidated Statements of Comprehensive Income
for the Three Months Ended March 31, 1999 and 1998 7
Notes to Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis of Results of
Operations and Financial Condition 12
Item 3 Quantitative and Qualitative Disclosures About
Market Risk 18
PART II. OTHER INFORMATION
- ---------------------------------------------------------------
Item 1 Legal Proceedings 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>
March 31 December 31
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 807,257 $ 831,614
Investment securities (fair value of
$1,757,863 and $1,923,938 for 1999 and
1998, respectively) 1,738,210 1,896,039
Investment securities available for sale 4,177,650 3,645,761
Trading account securities 69,610 127,671
Federal funds sold and securities purchased
under agreements to resell 42,357 27,786
Loans, net of unearned income 9,790,948 10,101,285
Allowance for loan losses (136,826) (136,677)
------------- -------------
Net loans 9,654,122 9,964,608
Premises and equipment, net 357,126 353,009
Other assets 446,336 442,420
------------- -------------
Total assets $ 17,292,668 $ 17,288,908
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing $ 2,470,188 $ 2,551,958
Interest bearing 9,670,456 9,461,488
------------- -------------
Total deposits 12,140,644 12,013,446
Federal funds purchased and securities
sold under agreements to repurchase 1,496,034 1,736,066
Other short-term borrowings 158,710 159,404
Accrued expenses and other liabilities 261,376 137,871
FHLB and other borrowings 1,935,940 1,945,980
Guaranteed preferred beneficial interests
in Company's junior subordinated
deferrable interest debentures (Note 3) 100,000 100,000
------------- -------------
Total liabilities 16,092,704 16,092,767
Shareholders' equity:
Preferred stock 11,500 28,750
Common stock of $2 par value:
Authorized--200,000,000 shares;
Issued--113,514,798 shares in 1999 and
75,567,333 shares in 1998 227,030 151,135
Surplus 129,566 126,813
Loans to finance stock purchases (2,593) (2,941)
Unearned restricted stock (4,422) (3,472)
Accumulated other comprehensive income 215 10,555
Retained earnings 838,668 885,301
------------- -------------
Total shareholders' equity 1,199,964 1,196,141
------------- -------------
Total liabilities and shareholders'
equity $ 17,292,668 $ 17,288,908
============= =============
</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
------------------------
1999 1998
---------- ----------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 201,579 $ 207,437
Interest on investment
securities 30,750 18,081
Interest on investment
securities available
for sale 63,660 41,479
Interest on trading account
securities 1,331 1,606
Interest on federal funds
sold and securities
purchased under agreements
to resell 397 1,597
---------- ----------
Total interest income 297,717 270,200
INTEREST EXPENSE:
Interest on deposits 98,147 96,666
Interest on federal funds
purchased and securities
sold under agreements to
repurchase 16,974 12,863
Interest on other short
-term borrowings 1,680 2,079
Interest on FHLB and other
borrowings 24,900 18,490
Interest on guaranteed preferred
beneficial interests in
Company's junior subordinated
deferrable interest debentures 2,058 2,058
---------- ----------
Total interest expense 143,759 132,156
---------- ----------
Net interest income 153,958 138,044
Provision for loan losses 6,435 8,064
---------- ----------
Net interest income
after provision for
loan losses 147,523 129,980
NONINTEREST INCOME:
Service charges on deposit
accounts 21,951 20,199
Trust fees 4,695 4,796
Trading account profits and
commissions 3,610 4,309
Retail investment sales 5,187 4,197
Investment securities
gains, net 2,063 2,097
Other 19,774 18,381
---------- ----------
Total noninterest income 57,280 53,979
NONINTEREST EXPENSE:
Salaries, benefits, and commissions 66,741 59,759
Net occupancy expense 9,454 8,704
Equipment expense 10,023 9,080
Professional services 8,128 8,497
Merger and integration 1,382 1,949
Other 28,231 26,994
---------- ----------
Total noninterest expense 123,959 114,983
---------- ----------
Net income before income
tax expense 80,844 68,976
Income tax expense 27,845 23,371
---------- ----------
NET INCOME $ 52,999 $ 45,605
========== ==========
BASIC EARNINGS PER SHARE $ 0.46 $ 0.41
Basic weighted average shares
outstanding 113,229 110,557
DILUTED EARNINGS PER SHARE $ 0.45 $ 0.39
Diluted weighted average shares
outstanding 114,173 113,872
Dividends per share $ 0.20 $ 0.175
</TABLE>
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Operating Activities:
Net income $ 52,999 $ 45,605
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization 13,034 11,721
Accretion of discount and loan fees (2,247) (3,029)
Provision for loan losses 6,435 8,064
Net change in trading account securities 58,061 10,559
Net change in mortgage loans held
for sale 6,182 (22,801)
Gain on sale of investment securities (2,063) (2,097)
Loss on sale of premises and equipment 41 30
Gain on sale of other real estate owned (168) (24)
Provision for losses on other real estate
owned - (186)
(Increase) decrease in interest receivable (4,390) 137
(Increase) decrease in other assets 3,081 12,032
Increase (decrease) in interest payable 2,086 (2,980)
Increase (decrease) in taxes payable (10,994) 12,008
Increase (decrease) in other payables 7,509 (49,052)
------------ ------------
Net cash provided by operating activities 129,566 19,987
Investing Activities:
Proceeds from maturities of investment
securities 158,307 204,589
Purchases of investment securities - (49,735)
Proceeds from sales of securities
available for sale 291,541 446,687
Proceeds from maturities of
securities available for sale 318,703 194,533
Purchases of securities available for sale (512,271) (744,569)
Net increase in federal funds
sold and securities purchased
under agreements to resell (14,571) (229,882)
Net increase in loan portfolio (221,244) (61,530)
Purchases of premises and equipment (12,639) (14,380)
Proceeds from sales of other
real estate owned 1,698 1,600
------------ ------------
Net cash provided (used) by
investing activities 9,524 (252,687)
</TABLE>
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Financing Activities:
Net increase in demand deposits,
NOW accounts and savings accounts $ 214,432 $ 341,018
Net increase (decrease) in time deposits (87,234) 12,241
Net decrease in federal funds
purchased and securities sold
under agreements to repurchase (240,032) (114,615)
Net decrease in short-term
borrowings (695) (29,708)
Repayment of FHLB advances and
other borrowings (10,063) (7,589)
Common dividends paid (22,707) (18,374)
Preferred stock dividends (695) (766)
Retirement of preferred stock (17,768) -
Exercise of stock options of acquired
entities prior to acquisition - 599
Repayment of loans to finance stock
purchases 925 3,772
Proceeds from exercise of stock options 390 2,093
------------ ------------
Net cash provided (used) by
financing activities (163,447) 188,671
------------ ------------
Net decrease in cash and due from banks (24,357) (44,029)
Cash and due from banks at beginning of period 831,614 793,812
------------ ------------
Cash and due from banks at end of period $ 807,257 $ 749,783
============ ============
Schedule of noncash investing and
financing activities:
Transfers of loans to other real estate owned $ 2,404 $ 1,855
Loans to facilitate the sale of
other real estate owned 287 63
Loans to finance stock purchases 577 521
Purchases of securities, not yet settled 125,799 275,003
Sales of securities, not yet settled 116 25,386
Tax benefit realized upon exercise
of stock options 329 414
Issuance of restricted stock 2,122 3,015
Change in unrealized gain/loss on available-
for-sale securities (16,757) 820
Securitization and tranfer of loans to
investment securities 516,997 -
Receipt/issuance of treasury stock upon
exercise of stock options 2,472 943
</TABLE>
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31
----------------------
1999 1998
---------- ----------
<S> <C> <C>
Net income $ 52,999 $ 45,605
Other comprehensive income, before tax:
Unrealized holding gain (loss) on
available for sale securities, net (14,575) 2,917
Less reclassification adjustment for gains
(losses) on securities available for sale 2,063 2,097
---------- ----------
Total other comprehensive income, before tax (16,638) 820
Income tax expense (benefit) related to other
comprehensive income:
Unrealized holding gain (loss) on
available for sale securities, net (5,544) 1,404
Less reclassification adjustment for gains
(losses) on securities available for sale 754 770
---------- ----------
Total income tax expense (benefit) related
to other comprehensive income (6,298) 634
---------- ----------
Total other comprehensive income, net of tax (10,340) 186
---------- ----------
Total comprehensive income $ 42,659 $ 45,791
========== ==========
</TABLE>
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 1 - General
The consolidated financial statements of Compass Bancshares, Inc. (the
"Company") 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, 1998.
NOTE 2 - Business Combinations
On April 19, 1999, the Company completed the purchase of 15 branches in
Arizona from Wells Fargo Bank, N.A. These branches, primarily in the Phoenix
area, added approximately $400 million in deposits. The transaction was
accounted for under the purchase method of accounting.
NOTE 3 - 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 4 - Stock Split
On February 16, 1999, the Company announced a three-for-two stock split that
was effected in the form of a 50 percent stock dividend on April 2, 1999, to
shareholders of record as of March 15, 1999. Stockholders' equity at March 31,
1999, as presented in the Consolidated Balance Sheets, reflects the issuance of
37,838,166 shares of the Company' common stock on April 2, 1999. Per share
information for all periods has been restated to reflect the stock split in
accordance with generally accepted accounting principles.
NOTE 5 - Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board ("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.
FAS133 will significantly change the accounting treatment of derivative
instruments and, depending upon the underlying risk management strategy, these
accounting changes could affect future earnings, assets, liabilities, and
shareholders' equity. As a result, the Company may reconsider its risk
management strategies since the new standard would not reflect the results of
many of those strategies in the same manner as current accounting practice. The
Company is presently evaluating the impact of FAS133 on its computer systems
and accounting policies and is also closely monitoring the deliberations of the
FASB's derivative implementation task force. The Company will be required to
adopt FAS133 on January 1, 2000. Presently, the Company has not yet quantified
the impact that the adoption will have on the consolidated financial statements
of the Company.
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements - Continued
NOTE 6 - Earnings Per Share
<TABLE>
Three Months Ended
March 31
---------------------
1999 1998
---------- ---------
(In Thousands Except Per Share Data)
(Unaudited)
<S> <C> <C>
BASIC EARNINGS PER SHARE:
Net income $ 52,999 $ 45,605
Less: Dividends on non-convertible
and convertible preferred stock and
redemption premium 1,326 766
---------- ---------
Net income available to
common shareholders $ 51,673 $ 44,839
========== =========
Weighted average shares outstanding 113,229 110,557
========== =========
Basic earnings per share $ 0.46 $ 0.41
========== ========
DILUTED EARNINGS PER SHARE:
Net income $ 52,999 $ 45,605
Less: dividends on non-convertible
preferred stock and redemption
premium 1,213 696
---------- ---------
Net income available to
common shareholders
and assumed conversions $ 51,786 $ 44,909
========== =========
Weighted average shares outstanding 113,229 110,557
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
period 944 1,625
Assumed conversion of
preferred stock - 1,690
--------- ---------
Total weighted average shares and
common stock equivalents
outstanding 114,173 113,872
========== =========
Diluted earnings per share $ 0.45 $ 0.39
========== =========
</TABLE>
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements - Continued
NOTE 7 - Segment Information
The following tables present the segment information for the Company's
segments as of and for the periods ended March 31, 1999 and 1998. Due to
impracticality, prior period information has not been restated to reflect the
securitization and transfer from other segments, predominantly the Retail
Banking segment, to the Treasury segment for segment reporting purposes of
approximately $1 billion in real estate mortgages. This transfer, along with
the increase in the investment securities portfolios from purchases of
securities, resulted in increased interest income for the Treasury segment in
the period ended March 31, 1999. For a discussion of the Company's segments,
refer to Note 16 of the "Notes to the Consolidated Financial Statements" as
presented in the Company's 1998 Form 10-K.
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1999
(in Thousands)
Corporate Community Retail Asset
Banking Banking Banking Management
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income Statement
Net interest income $ 43,159 $ 34,997 $ 35,205 $ 6,505
Noninterest income 9,987 11,568 25,403 5,305
Noninterest expense 17,178 20,226 34,124 5,387
---------- ---------- ---------- ---------
Segment net income 35,968 26,339 26,484 6,423
Balance Sheet
Average total assets $4,643,527 $2,021,506 $ 875,055 $ 357,501
Average total loans 4,494,138 1,857,194 790,907 349,804
Average total deposits 1,845,225 3,966,070 4,993,138 681,381
</TABLE>
<TABLE>
<CAPTION>
Corporate
Support
Treasury and Other Consolidated
---------- ------------ ------------
<S> <C> <C> <C>
Income Statement
Net interest income $ 37,337 $ (3,245) $ 153,958
Noninterest income 4,485 532 57,280
Noninterest expense 986 46,058 123,959
---------- --------- -----------
Segment net income 40,836 (48,771) 87,279
Provision for loan losses 6,435
-----------
Net income before income
tax expense 80,844
Income tax expense 27,845
-----------
Net income $ 52,999
===========
Balance Sheet
Average total assets $8,605,151 $ 481,231 $16,983,972
Average total loans 1,348,753 957,686 9,798,482
Average total deposits 1,046,704 (580,183) 11,952,336
</TABLE>
<TABLE>
For the Three Months Ended March 31, 1998
(in Thousands)
<CAPTION>
Corporate Community Retail Asset
Banking Banking Banking Management
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income Statement
Net interest income $38,407 $34,233 $37,462 $5,592
Noninterest income 9,508 10,297 23,045 5,488
Noninterest expense 16,106 20,316 32,536 5,368
---------- ---------- ---------- ---------
Segment net income 31,809 24,214 27,971 5,712
Balance Sheet
Average total assets $4,213,863 $1,945,273 $1,080,256 $355,028
Average total loans 4,038,439 1,796,975 953,750 344,364
Average total deposits 1,522,213 3,609,339 4,979,538 500,991
</TABLE>
<TABLE>
<CAPTION>
Corporate
Support
Treasury and Other Consolidated
---------- ------------ ------------
<S> <C> <C> <C>
Income Statement
Net interest income $19,197 $3,153 $138,044
Noninterest income 4,876 765 53,979
Noninterest expense 1,236 39,421 114,983
---------- --------- -----------
Segment net income 22,837 (35,503) 77,040
Provision for loan losses 8,064
-----------
Net income before income
tax expense 68,976
Income tax expense 23,371
-----------
Net income $45,605
===========
Balance Sheet
Average total assets $5,826,411 $1,233,951 $14,654,781
Average total loans 1,179,392 1,235,388 9,548,308
Average total deposits 474,467 (195,900) 10,890,648
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Forward-Looking Information
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; unforeseen
business risks related to Year 2000 computer systems issues; and significant
changes in accounting, tax, or regulatory practices or requirements.
Overview
Net income for the quarter ended March 31, 1999, increased 16 percent to
$53.0 million while diluted earnings per share increased 15 percent to $0.45.
Net interest income increased 12 percent to $154.0 million from the first
quarter of 1998. Noninterest income increased 6 percent to $57.3 million during
the first quarter of 1998 while noninterest expense increased 8 percent to
$124.0 million.
Net Interest Income
Net interest income for the quarter ended March 31, 1999, increased $15.9
million over the first quarter of 1998 to $154.0 million. The increase in
interest income was primarily due to an increase in average earning assets of
$2.3 billion, or 17 percent, partially offset by a 49 basis point decrease in
the average yield on earning assets from 8.23 percent to 7.74 percent. The
largest portion of the increase in average earning assets from the first
quarter of 1998 to the first quarter of 1999 occurred in the average balance of
investment securities available for sale, which increased 52 percent, or $1.3
billion, primarily due to the securitization of approximately $1 billion in
real estate mortgages and their transfer to investment securities available for
sale ($500 million each in September, 1998, and February, 1999). Average loans,
including the impact of loans securitized and transferred, increased three
percent from the first quarter of 1998. Excluding the impact of the
securitizations discussed above and the securitization and sale of
approximately $400 million in indirect auto loans in June, 1998, average loans
grew 18 percent from the prior year period. Additionally, the average balance
of investment securities increased by approximately $800 million.
Interest expense for the quarter ended March 31, 1999, increased by $11.6
million, or 9 percent, from the first quarter of 1998, due principally to an 18
percent increase in total interest bearing liabilities partially offset by a 35
basis point decrease in the rate paid on liabilities. The increase in interest
bearing liabilities was principally due to an almost $900 million increase in
deposits, primarily savings accounts, along with a $500 million increase in
average federal funds purchased and securities sold under agreements to
repurchase and a $600 million increase in average FHLB and other borrowings.
The decrease in the rate paid on interest bearing liabilities was primarily a
function of decreases in the rates paid on each category of interest bearing
liability.
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 quarter of 1999, the net interest margin,
on a tax-equivalent basis, was 4.01 percent compared to 4.22 percent for the
same period in 1998. This decrease 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 first quarter
decreased 49 basis points, including a 47 basis point decrease in the yield on
loans, while the yield on interest bearing liabilities decreased 35 basis
points.
During the first quarter of 1999, 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 11 basis points as compared to a 7
basis point impact for the same period in 1998.
The following table details the components of the change in net interest
income (on a tax-equivalent basis) by major category of interest earning assets
and interest bearing liabilities for the three month period ended March 31,
1999, as compared to the comparable period of 1998 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------------------------
Change
1998 Attributed to
to ----------------------------------
1999 Volume Rate Mix
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Interest income:
Loans $(5,869) $ 5,438 $(11,019) $ (288)
Investment securities 12,516 14,333 (1,031) (786)
Investment securities available
for sale 22,358 21,870 320 168
Trading account securities (286) (200) (98) 12
Fed funds and resale agreements (1,201) (1,129) (245) 173
-------- -------- --------- --------
Increase in interest income $27,518 $40,312 $(12,073) $ (721)
======== ======== ========= ========
Interest expense:
Deposits $ 1,481 $10,745 $(9,130) $ (134)
Fed funds purchased and repos 4,111 6,768 (1,741) (916)
Other short-term borrowings (399) (115) (300) 16
FHLB and other borrowings* 6,410 8,868 (1,717) (741)
-------- -------- --------- --------
Increase in interest expense $11,603 $26,266 $(12,888) $(1,775)
======== ======== ========= ========
</TABLE>
* Includes Capital Securities.
Noninterest Income and Noninterest Expense
During the first quarter of 1999, noninterest income increased $3.3 million,
or 6 percent, to $57.3 million, due primarily to a $1.8 million increase in
service charges on deposit accounts, a $1.4 million increase in other income,
and a $1.0 million increase in retail investment sales income. The increase in
service charges on deposit accounts was due to the increase in deposits while
the increase in other income was due to increased mortgage banking income,
credit card fees, and the first quarter activity of newly-acquired Albrecht
and Associates, which provides specialized divestment and advisory services to
the oil and gas production industry. Trading account profits and commissions
decreased $700,000 to $3.6 million in the first quarter of 1999. At March 31,
1999, trading account securities totaled approximately $70 million as compared
to $102 million a year ago.
Noninterest expense increased $9.0 million, or 8 percent, during the first
quarter of 1999 primarily due to increased salaries and benefits. Salaries
increased $7.0 million, or 12 percent, for the first quarter as the result of
regular merit increases, increased incentive expense, and increased employee
benefits. Equipment expense increased 10 percent in the first quarter of 1999
due to increased computer equipment depreciation and software amortization.
Income Taxes
Income tax expense increased by $4.5 million, or 19 percent, during the
first three months of 1999 compared to the same period in 1998 as pretax income
increased 17 percent. The effective tax rate for the first three months of 1999
was 34.4 percent, up slightly from the 33.9 percent effective tax rate for the
same period in 1998.
Provision and Allowance for Loan Losses
The provision for loan losses for the three months ended March 31, 1999,
decreased $1.6 million from the same period in 1998 due to a 22 percent
decrease in net loan charge-offs during the period. Net loan charge-offs
expressed as an annualized percentage of average loans for the first three
months of 1999 were 0.26 percent, down from 0.34 percent for the first three
months of 1998. 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, 1999, was $137 million. The ratio of the
allowance for loan losses to loans outstanding was 1.40 percent at March 31,
1999, up from 1.35 percent at December 31, 1998.
Nonperforming Assets and Past Due Loans
Nonperforming assets, comprised of nonaccrual loans, renegotiated loans and
other real estate owned, totaled $56.1 million at March 31, 1999, increasing
less than one percent from December 31, 1998, as nonaccrual loans were
unchanged and other real estate increased slightly. At March 31, 1999, the
allowance for loan losses as a percentage of nonperforming loans was 281
percent as compared to 279 percent at December 31, 1998. The allowance for loan
losses as a percentage of nonperforming loans and accruing loans ninety days or
more past due decreased from 237 percent at December 31, 1998, to 232 percent
at March 31, 1999.
Nonperforming assets as a percentage of total loans and other real estate
owned increased slightly to 0.57 percent at March 31, 1999, from 0.55 percent
at December 31, 1998. The amount recorded in other repossessed assets at March
31, 1999, was $1.2 million, down 34 percent from $1.8 million at December 31,
1998. Loans past due ninety days or more but still accruing interest increased
17 percent from $8.7 million at December 31, 1998, to $10.2 million at March
31, 1999.
As discussed in the Company's 1998 Form 10-K, three percent of the Company's
loan portfolio is represented by loans to energy-related companies that are
dependent on oil and natural gas production as a source of repayment. The low
level of energy prices during the latter half of 1998 adversely impacted this
segment of the Company's portfolio. As energy prices have rebounded during the
first quarter of 1999, a continuation of the current level of energy prices has
the potential to significantly reduce the risk of credit loss in the energy
portfolio. However, this segment of the portfolio continues to experience
considerable stress as a result of an extended period of depressed oil prices.
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.
Year 2000 Issues
The Company initiated a program in 1997 to review all of the computer
systems of the Company in order to determine whether the systems were Year 2000
compliant. This study not only involved identifying any required modifications
or replacements of certain hardware and software maintained by the Company, but
also receiving assurance from vendors that the appropriate actions have been
taken or are being taken by them to remedy their Year 2000 issues for computer
systems that the vendors are responsible for maintaining and that are relied
upon by the Company.
As a financial institution, the Company's compliance has been closely
monitored by federal regulatory agencies which have completed two examinations
of the Company and its Year 2000 readiness in the past twelve months. The
Company is not aware of any existing regulatory restrictions imposed on it by
the federal regulatory authorities as a result of the Company's current plan
and implementation.
As of March 31, 1999, the Company has identified its information technology
("IT") and non-IT systems and has completed the assessment phase of each
system's Year 2000 readiness. IT systems within the Company include mainframe
computer applications, including loan and deposit systems, while non-IT systems
typically include embedded technology, for example, microcontrollers in
elevators. In connection with the identification process, each system was
classified as to its importance within the Company with systems categorized in
one of four categories: mission critical, medium priority, low priority or
immaterial. Mission critical systems are those identified as vital to a core
business activity of the Company.
For each IT and non-IT system that was assessed as Year 2000 compliant,
testing was performed to confirm compliance while for each system that was
found to be not Year 2000 compliant, a three-step plan involving renovation,
validation and implementation was developed to bring the system into
compliance. Renovation is comprised of modifying or replacing hardware and
software in order to make the system compliant (the "Renovation Phase").
Validation involves testing the system to determine compliance after
modification (the "Validation Phase"). Implementation entails bringing the
compliant system into production (the "Implementation Phase"). As of March 31,
1999, none of the Company's mission critical systems were in the Renovation
Phase, 4 percent were in the Validation Phase, and 96 percent were in the
Implementation Phase. With regard to all mission critical systems, the
Company's plan calls for the substantial completion of the Implementation Phase
by June 30, 1999.
In addition, the Company is also taking appropriate actions to receive
assurance that its customers, principally commercial lending customers, are
taking necessary steps to address their Year 2000 issues due to the fact that
noncompliance could adversely effect their ability to repay borrowings to the
Company. As of March 31, 1999, the Company has evaluated the readiness of a
majority of its commercial lending customers as well as a substantial majority
of its financial instrument issuers, broker/dealer counterparties, and federal
funds counterparties. Based on these assessments, management currently believes
that there is a low risk of a material detrimental impact on the Company's
results of operations and financial position because of third party business
disruptions or failures related to Year 2000 events. The Company's assessment
of these parties will be ongoing throughout 1999 in order to identify any
changes in third party readiness that could negatively impact the Company.
The Company expects to pay less than $25 million related to Year 2000
compliance and anticipates remaining additional payments of approximately
$2.7 million. A substantial portion of these costs have been or will be
capitalized in the installation of software and hardware and will be amortized
over the life of the related assets. There has been no material increase in IT
salaries expense due to Year 2000 compliance activities as many of the system
renovations have coincided with previously planned system replacements or
enhancements, the costs of which have been included in the costs disclosed
above. The deferral of certain other IT projects in order to assure Year 2000
readiness has not had, and is not expected to have, a material impact on the
Company's financial condition and results of operations.
While a failure to achieve Year 2000 compliance with regard to the Company's
IT and non-IT systems could have an adverse impact on the Company's results of
operations and financial condition due to inability to perform normal lending,
investing and deposit gathering functions, the Company believes that its Year
2000 readiness will be essentially completed by the target date of June 30,
1999, and that any impact of failure to achieve Year 2000 compliance with any
of the Company's systems will be immaterial.
The Company's contingency plans have concentrated on potential funding needs
that may arise if there are disruptions in the Company's normal sources of
funds as a result of Year 2000 events, including increased withdrawals by
depositors and the inability of corporate customers to maintain their usual
levels of deposits because of disruptions in their business caused by Year 2000-
related computer problems. The plan also addresses the possibility that some of
the Company's federal funds counterparties may be unable to sell federal funds
to the Company and that some of the Company's downstream federal funds
counterparties may increase borrowing over normal levels. However, the
Company's plan does not address funding requirements arising from the systemic
failure of the financial system in the United States or globally. The Company's
plan also addresses other potential failures by third parties to fully remedy
their systems. This plan will be continually updated as more information
becomes available on the Year 2000 status of the Company's funds providers and
as funding sources are evaluated and procedures to access those sources are put
in place.
Financial Condition
Overview
Total assets at March 31, 1999, were $17.3 billion, unchanged from December
31, 1998. The Company redeemed its outstanding Series F preferred stock of
$17.25 million during the first quarter of 1999. Additionally, the Company's
March 31, 1999 balance sheet reflects the effect of the Company's three-for-two
stock split that was effective April 2, 1999.
Assets and Funding
At March 31, 1999, earning assets totaled $15.8 billion, unchanged from
December 31, 1998. The mix of earning assets shifted moderately toward
investment securities in the first three months of 1999 as a result of the
first quarter real estate mortgage securitization discussed earlier with total
investment securities comprising 37 percent of total earning assets at March
31, 1999, up from 35 percent at December 31, 1998, while the percentage of
earning assets represented by loans decreased to 62 percent from 64 percent.
Increases in total deposits and accrued expenses and other liabilities
during the first three months of 1999 offset a 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 March 31, 1999, that did not
settle until April. At March 31, 1999, deposits accounted for 70 percent of the
Company's funding, up slightly from year end.
Liquidity and Capital Resources
Net cash provided by operating activities totaled $130 million for the three
months ended March 31, 1999. Net cash provided by investing activities of $10
million consisted of proceeds from maturities of investment securities of $158
million, proceeds from maturities of securities available for sale of $319
million and proceeds from sales of securities available for sale of $291
million offset by $512 million in purchases of investment securities available
for sale, a $221 million increase in loans outstanding, and an increase in
federal funds sold and securities purchased under agreements to resell of $15
million. Net cash used by financing activities of $163 million consisted of a
$127 million increase in deposits reduced by a decrease in federal funds
purchased and securities sold under agreements to repurchase of $240 million,
the retirement of preferred stock of $18 million, the repayment of $10 million
in FHLB advances and other borrowings, and the payment of $23 million in common
stock and preferred stock dividends.
Total shareholders' equity at March 31, 1999, was 6.94 percent of total
assets compared to 6.92 percent at December 31, 1998. 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 7.14
percent at March 31, 1999, and 7.26 percent at December 31, 1998. 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, was 7.05 percent at March 31,
1999, compared to 7.16 percent at December 31, 1998.
Tier I capital and total qualifying capital (Tier I capital plus Tier II
capital), as defined by regulatory agencies, as of March 31, 1999, 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, 1999,
were 8.76 percent and 10.55 percent, respectively, compared to 8.81 percent and
10.71 percent at December 31, 1998. 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>
Three Months Ended
March 31
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period $ 136,677 $ 135,225
Add: Provision charged to earnings 6,435 8,064
Deduct: Loans charged off 9,096 10,244
Loan recoveries (2,810) (2,192)
---------- ----------
Net charge-offs 6,286 8,052
---------- ----------
Balance at end of period $ 136,826 $ 135,237
========== ==========
Net charge-offs as a percentage of
average loans (annualized) 0.26% 0.34%
Recoveries as a percentage of charge-offs 30.89% 21.40%
</TABLE>
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
---------- -----------
<S> <C> <C>
NONPERFORMING ASSETS
Nonaccrual loans $ 48,246 $ 48,250
Renegotiated loans 523 665
---------- -----------
Total nonperforming loans 48,769 48,915
Other real estate 7,304 6,657
---------- -----------
Total nonperforming assets $ 56,073 $ 55,572
========== ===========
Accruing loans ninety days
or more past due $ 10,171 $ 8,699
Other repossessed assets 1,170 1,779
Allowance for loan losses 136,826 136,677
Allowance as a percentage of loans 1.40% 1.35%
Total nonperforming loans as a percentage
of loans 0.50% 0.48%
Total nonperforming assets as a percentage
of loans and ORE 0.57% 0.55%
Accruing loans ninety days past due as a
percentage of loans 0.10% 0.09%
Allowance for loan losses as a percentage of
nonperforming loans 280.56% 279.42%
Allowance for loan losses as a percentage of
nonperforming assets 244.01% 245.95%
</TABLE>
<PAGE>
<TABLE>
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, 1998 Form 10-K. Net interest income
sensitivities over a one-year time horizon as of March 31, 1999 and December
31, 1998 are shown below.
<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, 1998:
Assets which reprice in:
One year or less $5,670,836 (10.97)% 10.71%
Over one year 10,127,706 (5.88) 2.87
------------
$15,798,542 (7.73) 5.72
============
Liabilities which reprice in:
One year or less $9,967,789 (14.09) 17.44
Over one year 3,435,149 (4.84) 9.23
------------
$13,402,938 (11.08) 14.77
============
Non-trading swaps $1,577,714 33.20 (37.13)
============
Total net interest income
sensitivity (4.34) (3.03)
March 31, 1999:
Assets which reprice in:
One year or less $5,470,144 (11.30)% 11.01%
Over one year 10,348,631 (4.59) 2.28
------------
$15,818,775 (7.01) 5.43
============
Liabilities which reprice in:
One year or less $9,795,353 (14.30) 17.65
Over one year 3,585,887 (4.77) 8.84
------------
$13,381,240 (11.11) 14.70
============
Non-trading swaps $1,838,351 63.05 (104.51)
============
Total net interest income
sensitivity (2.40) (4.39)
</TABLE>
As shown in the table above, from December 31, 1998 to March 31, 1999, net
interest income sensitivity decreased in the down-rate scenario and increased
in the up-rate scenario. Both of these movements are due in large part to the
increase in the general level of interest rates during the first quarter of
1999. This increase in interest rates caused estimated prepayments on mortgage
loans and mortgage-backed securities, including CMOs, to slow. Slower
prepayments resulted in a smaller amount of cashflows requiring reinvestment at
lower rates in a down-rate scenario, thereby, decreasing sensitivity to lower
rates. However, slower prepayments also resulted in smaller cashflows available
to reinvest at higher rates in the up-rate scenario, hence, increasing
sensitivity to higher rates. The addition of receive-fixed structured swaps to
replace swaps that are anticipated to roll off in the second quarter also
contributed to the changes in sensitivity.
<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 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 Securities
and Exchange 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 Securities and Exchange
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 Securities and Exchange
Commission)
(12)(a) Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends 22
(12)(b) Ratio of Earnings to Fixed Charges 23
(27) Financial Data Schedule (Filed electronically only)
(b) Reports on Form 8-K
On March 25, 1999, the Company filed a Form 8-K disclosing operating results
for the month ended January 31, 1999.
<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 14, 1999 /s/ GARRETT R. HEGEL
------------ ---------------------------
Date By Garrett R. Hegel, as its
Chief Financial Officer
<TABLE>
Exhibit (12)(a)
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Pretax income $ 80,844 $ 68,976
Add fixed charges:
Interest on deposits 98,147 96,666
Interest on borrowings 45,612 35,490
Portion of rental expense
representing interest expense 1,518 1,434
---------- ----------
Total fixed charges 145,277 133,590
---------- ----------
Income before fixed charges $ 226,121 $ 202,566
========== ==========
Total fixed charges $ 145,277 $ 133,590
Preferred stock dividends and
redemption premium 1,326 766
Tax effect of preferred stock dividends 697 393
---------- ----------
Combined fixed charges and preferred
stock dividends $ 147,300 $ 134,749
========== ==========
Pretax income $ 80,844 $ 68,976
Add fixed charges (excluding
interest on deposits):
Interest on borrowings 45,612 35,490
Portion of rental expense
representing interest expense 1,518 1,434
---------- ----------
Total fixed charges 47,130 36,924
---------- ----------
Income before fixed charges (excluding
interest on deposits) $ 127,974 $ 105,900
========== ==========
Total fixed charges $ 47,130 $ 36,924
Preferred stock dividends and
redemption premium 1,326 766
Tax effect of preferred stock
dividends 697 393
---------- ----------
Combined fixed charges and preferred
stock dividends $ 49,153 $ 38,083
========== ==========
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
Including interest on deposits 1.54x 1.50x
Excluding interest on deposits 2.60x 2.78x
</TABLE>
<TABLE>
Exhibit (12)(b)
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Ratio of Earnings to Fixed Charges
(in Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Pretax income $ 80,844 $ 68,976
Add fixed charges:
Interest on deposits 98,147 96,666
Interest on borrowings 45,612 35,490
Portion of rental expense
representing interest expense 1,518 1,434
---------- ----------
Total fixed charges 145,277 133,590
---------- ----------
Income before fixed charges $ 226,121 $ 202,566
========== ==========
Pretax income $ 80,844 $ 68,976
Add fixed charges (excluding
interest on deposits):
Interest on borrowings 45,612 35,490
Portion of rental expense
representing interest expense 1,518 1,434
---------- ----------
Total fixed charges 47,130 36,924
---------- ----------
Income before fixed charges
(excluding interest on deposits) $ 127,974 $ 105,900
========== ==========
RATIO OF EARNINGS TO FIXED CHARGES:
Including interest on deposits 1.56x 1.52x
Excluding interest on deposits 2.72x 2.87x
</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 MARCH 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
AND RELATED SUPPLEMENTAL SCHEDULES.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 807,257
<INT-BEARING-DEPOSITS> 595
<FED-FUNDS-SOLD> 41,762
<TRADING-ASSETS> 69,610
<INVESTMENTS-HELD-FOR-SALE> 4,177,650
<INVESTMENTS-CARRYING> 1,738,210
<INVESTMENTS-MARKET> 1,757,863
<LOANS> 9,790,948
<ALLOWANCE> 136,826
<TOTAL-ASSETS> 17,292,668
<DEPOSITS> 12,140,644
<SHORT-TERM> 1,654,744
<LIABILITIES-OTHER> 261,376
<LONG-TERM> 2,035,940
0
11,500
<COMMON> 227,030
<OTHER-SE> 961,434
<TOTAL-LIABILITIES-AND-EQUITY> 17,292,668
<INTEREST-LOAN> 201,579
<INTEREST-INVEST> 94,410
<INTEREST-OTHER> 1,728
<INTEREST-TOTAL> 297,717
<INTEREST-DEPOSIT> 98,147
<INTEREST-EXPENSE> 143,759
<INTEREST-INCOME-NET> 153,958
<LOAN-LOSSES> 6,435
<SECURITIES-GAINS> 2,063
<EXPENSE-OTHER> 123,959
<INCOME-PRETAX> 80,844
<INCOME-PRE-EXTRAORDINARY> 52,999
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,999
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.45
<YIELD-ACTUAL> 4.01
<LOANS-NON> 48,246
<LOANS-PAST> 10,171
<LOANS-TROUBLED> 523
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 136,677
<CHARGE-OFFS> 9,096
<RECOVERIES> 2,810
<ALLOWANCE-CLOSE> 136,826
<ALLOWANCE-DOMESTIC> 136,826
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
