<PAGE> 1
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, 2000 Commission File No. 0-6032
[LOGO] 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, 2000
------------------------------------ ------------------------------------
Common Stock, $2 Par Value 120,899,291
The number of pages of this report is 24.
<PAGE> 2
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<S><C>
PART I. FINANCIAL INFORMATION Page
-----------------------------------------------------------------------------------------------------------
Item 1 Financial Statements
Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999 3
Consolidated Statements of Income for the Three and Six Months Ended June 30, 2000 and 1999 4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999 5
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended
June 30, 2000 and 1999 7
Notes to Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis of Results of Operations and Financial Condition 14
Item 3 Quantitative and Qualitative Disclosures About Market Risk 20
PART II. OTHER INFORMATION
----------------------------------------------------------------------------------------------------------
Item 1 Legal Proceedings 21
Item 4 Submission of Matters to Vote of Security Holders 21
Item 6 Exhibits and Reports on Form 8-K 21
</TABLE>
2
<PAGE> 3
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 768,447 $ 700,146
Federal funds sold and securities purchased
under agreements to resell 78,334 118,640
Trading account securities 14,456 50,705
Investment securities available for sale 4,294,088 4,218,435
Investment securities (fair value of $1,448,046 and
$1,501,320 for 2000 and 1999, respectively) 1,510,252 1,560,379
Loans 11,326,057 10,936,609
Allowance for loan losses (150,187) (145,890)
------------ ------------
Net loans 11,175,870 10,790,719
Premises and equipment, net 433,856 405,321
Other assets 662,189 601,177
------------ ------------
Total assets $ 18,937,492 $ 18,445,522
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 2,934,274 $ 2,711,598
Interest bearing 10,778,670 10,338,001
------------ ------------
Total deposits 13,712,944 13,049,599
Federal funds purchased, securities sold under
agreements to repurchase and other short-term
borrowings 1,575,369 1,515,122
Long-term debt:
FHLB and other borrowings 2,065,999 2,465,127
Guaranteed preferred beneficial interests in
Company's junior subordinated deferrable
interest debentures 112,000
100,000
Accrued expenses and other liabilities 146,140 86,449
------------ ------------
Total liabilities 17,612,452 17,216,297
Shareholders' equity:
Preferred stock -- --
Common stock of $2 par value:
Authorized--200,000,000 shares;
Issued--120,893,216 shares in 2000 and
117,042,020 shares in 1999 241,786 234,084
Surplus 150,480 138,493
Loans to finance stock purchases (1,893) (1,715)
Unearned restricted stock (3,104) (2,746)
Accumulated other comprehensive loss (99,790) (93,198)
Retained earnings 1,037,561 954,307
------------ ------------
Total shareholders' equity 1,325,040 1,229,225
------------ ------------
Total liabilities and shareholders' equity $ 18,937,492 $ 18,445,522
============ ============
</TABLE>
3
<PAGE> 4
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------------- --------------------------
2000 1999 2000 1999
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $251,545 $212,834 $487,047 $417,513
Interest on investment securities available for sale 74,854 67,106 146,117 131,182
Interest on investment securities 25,911 29,244 52,097 60,924
Interest on federal funds sold, securities
purchased under agreements to resell and
other earning assets 1,603 2,343 3,397 4,417
-------- -------- -------- --------
Total interest income 353,913 311,527 688,658 614,036
INTEREST EXPENSE:
Interest on deposits 125,497 102,343 238,680 202,297
Interest on federal funds purchased and securities
sold under agreements to repurchase and other
short-term borrowings 19,556 21,764 40,149 40,553
Interest on FHLB borrowings and other
long-term debt 36,517 25,417 73,422 52,375
-------- -------- -------- --------
Total interest expense 181,570 149,524 352,251 295,225
-------- -------- -------- --------
Net interest income 172,343 162,003 336,407 318,811
Provision for loan losses 17,183 8,509 26,806 15,064
-------- -------- -------- --------
Net interest income after provision for loan losses 155,160 153,494 309,601 303,747
NONINTEREST INCOME:
Service charges on deposit accounts 31,126 25,591 59,864 47,762
Credit card service charges and fees 6,867 4,619 12,822 8,522
Retail investment sales 4,442 5,864 9,777 11,086
Asset management fees 4,755 4,645 9,488 9,340
Trading account profits and commissions 1,156 2,288 3,335 5,898
Investment securities gains, net -- 35 -- 2,098
Other 31,668 15,651 50,655 31,751
-------- -------- -------- --------
Total noninterest income 80,014 58,693 145,941 116,457
NONINTEREST EXPENSE:
Salaries, benefits and commissions 72,016 64,102 142,565 131,603
Equipment expense 11,796 10,597 23,225 20,667
Net occupancy expense 10,913 9,433 21,370 18,935
Professional services 8,632 10,286 16,689 18,481
Merger and integration 2,287 1,618 4,989 3,126
Other 36,968 31,890 68,550 59,893
-------- -------- -------- --------
Total noninterest expense 142,612 127,926 277,388 252,705
-------- -------- -------- --------
Net income before income tax expense 92,562 84,261 178,154 167,499
Income tax expense 31,881 28,549 61,351 56,408
-------- -------- -------- --------
NET INCOME $ 60,681 $ 55,712 $116,803 $111,091
======== ======== ======== ========
BASIC EARNINGS PER SHARE $ 0.50 $ 0.48 $ 0.98 $ 0.94
Basic weighted average shares outstanding 120,604 116,643 118,752 116,603
DILUTED EARNINGS PER SHARE $ 0.50 $ 0.47 $ 0.98 $ 0.93
Diluted weighted average shares outstanding 121,432 117,916 119,519 117,717
Dividends per share $ 0.22 $ 0.20 $ 0.44 $ 0.40
</TABLE>
4
<PAGE> 5
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------------------
2000 1999
---------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 116,803 $ 111,091
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization 32,574 28,654
Accretion of discount and loan fees (8,810) (10,409)
Provision for loan losses 26,806 15,064
Net change in trading account securities 36,249 51,205
Gain on sale of securities available for sale -- (2,098)
(Gain) loss on sale/write-off of premises and equipment 135 (124)
Gain on sale of other real estate owned (1,145) (427)
Gain on sale of branches (11,848) --
Increase in other assets (51,666) (16,936)
Increase (decrease) in other payables 54,572 (21,118)
--------- ---------
Net cash provided by operating activities 193,670 154,902
INVESTING ACTIVITIES:
Proceeds from maturities of investment securities 72,917 287,185
Purchases of investment securities (22,294) --
Proceeds from sales of securities available for sale 60,300 297,472
Proceeds from maturities of securities available for sale 374,844 583,376
Purchases of securities available for sale (34,216) (942,652)
Net (increase) decrease in federal funds sold and securities
purchased under agreements to resell 58,005 (11,535)
Net increase in loan portfolio (651,981) (796,738)
Net cash received from acquisitions 17,182 209,664
Net cash paid from sale of branches (60,207) --
Purchases of premises and equipment (35,400) (35,260)
Proceeds from sales of other real estate owned 5,873 3,768
--------- ---------
Net cash used by investing activities (214,977) (404,720)
</TABLE>
5
<PAGE> 6
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
------------------------------
2000 1999
------------- -----------
<S> <C> <C>
FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts
and savings accounts 221,912 379,907
Net increase (decrease) in time deposits 269,630 (171,366)
Net increase (decrease) in federal funds purchased and
securities sold under agreements to repurchase 53,634 (430,221)
Net increase (decrease) in short-term borrowings (3,823) 60,609
Proceeds from FHLB advances and other borrowings 700,000 803,031
Repayment of FHLB advances and other borrowings (1,100,130) (510,131)
Redemption of preferred stock -- (17,768)
Common and preferred dividends paid (52,868) (49,748)
Repayment of loans to finance stock purchases 418 1,322
Proceeds from exercise of stock options 835 791
----------- -----------
Net cash provided by financing activities 89,608 66,426
----------- -----------
Net increase (decrease) in cash and due from banks 68,301 (183,392)
Cash and due from banks at beginning of period 700,146 845,959
----------- -----------
Cash and due from banks at end of period $ 768,447 $ 662,567
=========== ===========
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfers of loans to other real estate owned $ 10,438 $ 4,150
Loans to facilitate the sale of other real estate owned 2,575 994
Assets retained in loan securitizations 469,463 516,997
Loans to finance stock purchases 596 1,217
Change in unrealized gain (loss) on available-for-sale securities (10,275) (102,234)
Issuance of restricted stock, net of cancellations 1,610 1,640
Common stock issued 35,924 --
Assets acquired 334,578 173,105
Liabilities assumed 315,836 382,769
Liabilities sold 115,077 --
Assets sold 43,022 --
</TABLE>
6
<PAGE> 7
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- -------------------------------
2000 1999 2000 1999
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
NET INCOME $ 60,681 $ 55,712 $ 116,803 $ 111,091
OTHER COMPREHENSIVE INCOME (LOSS), BEFORE TAX:
Unrealized holding gain (loss) on securities
available for sale, net 5,039 (85,146) (10,275) (100,136)
Less reclassification adjustment for gains
(losses) on securities available for sale -- 35 -- 2,098
--------- --------- --------- ---------
Total other comprehensive income (loss),
before tax 5,039 (85,181) (10,275) (102,234)
INCOME TAX EXPENSE (BENEFIT) RELATED TO OTHER
COMPREHENSIVE INCOME:
Unrealized holding gain (loss) on securities
available for sale, net 2,099 (32,147) (3,683) (37,790)
Less reclassification adjustment for gains
(losses) on securities available for sale -- 14 -- 789
--------- --------- --------- ---------
Total income tax expense (benefit) related
to other comprehensive income 2,099 (32,161) (3,683) (38,579)
--------- --------- --------- ---------
Total other comprehensive income (loss),
net of tax 2,940 (53,020) (6,592) (63,655)
--------- --------- --------- ---------
TOTAL COMPREHENSIVE INCOME $ 63,621 $ 2,692 $ 110,211 $ 47,436
========= ========= ========= =========
</TABLE>
7
<PAGE> 8
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, 1999.
NOTE 2 - BUSINESS COMBINATIONS AND DIVESTITURES
On January 13, 2000, the Company completed the merger with Western
Bancshares, Inc. in Albuquerque, New Mexico, with assets in excess of $300
million. The transaction was accounted for under the pooling-of-interests method
of accounting. All prior information has been restated.
On April 3, 2000, the Company completed the merger with MegaBank Financial
Corporation ("MegaBank") in Denver, Colorado, with assets in excess of $300
million. The transaction was accounted for under the pooling-of-interests method
of accounting. Prior-period information has not been restated due to
immateriality.
On July 17, 2000, the Company completed the acquisition of Founders Bank
of Arizona ("Founders") in Phoenix, with assets of approximately $400 million.
The Company acquired all of the outstanding shares of Founders in exchange for
approximately $80 million in cash. The transaction was accounted for under the
purchase method of accounting. Intangible assets resulting from the purchase
totaled approximately $70 million.
On June 22, 2000, the Company completed the sale of three non-strategic
branches with deposits in excess of $115 million. An $11.8 million gain was
realized on the sale and included in other income on the income statement.
On June 15, 2000, the Company announced it signed a definitive agreement
to sell five non-strategic branches with deposits of approximately $80 million.
The transaction is expected to close in the third quarter of 2000.
NOTE 3 - CAPITAL AND PREFERRED SECURITIES
Compass Trust I
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.
8
<PAGE> 9
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
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.
MB Capital I
In February 1998, MB Capital I, formerly a subsidiary of MegaBank, a
special-purpose wholly-owned Delaware trust subsidiary of the Company, completed
an offering of 1,200,000 shares (issue price of $10 per share) totaling $12.0
million of fixed-rate 8.75%Cumulative Trust Preferred Securities (Preferred
Securities), which are guaranteed by the Company. MB Capital I invested the
total proceeds it received in 8.75% Junior Subordinated Deferrable Interest
Debentures (Debentures) issued by the Company. Interest paid on the Debentures
will be distributed to the holders of the Preferred Securities. These Debentures
are unsecured and rank junior and are subordinate in right of payment to all
senior debt of the Company.
The distribution rate payable on the Preferred Securities is cumulative
and payable quarterly in arrears. The Company has the right, subject to events
of default, to defer payments of interest on the Debentures at any time by
extending the interest payment period for a period not exceeding 20 consecutive
quarters with respect to each deferral period, provided that no extension period
may extend beyond the redemption or maturity date of the Debentures. The
Preferred Securities are subject to mandatory redemption upon repayment of the
Debentures. The Debentures mature on February 9, 2028, which may be shortened to
not earlier than February 9, 2003, if certain conditions are met, or at any time
upon the occurrence and continuation of certain changes in either the tax
treatment or the capital treatment of MB Capital I, the Debentures or the
Preferred Securities. The Company has the right to terminate MB Capital I and
cause the Debentures to be distributed to the holders of the Preferred
Securities in liquidation of such trust.
9
<PAGE> 10
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 4 - EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
---------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- --------
(In Thousands Except Per Share Data)
(Unaudited)
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Net income $ 60,681 $ 55,712 $ 16,803 $111,091
Less: Dividends on non-convertible and
convertible preferred stock and redemption
premium -- 339 -- 1,552
-------- -------- -------- --------
Net income available to common shareholders $ 60,681 $ 55,373 $116,803 $109,539
======== ======== ======== ========
Weighted average shares outstanding 120,604 116,643 118,752 116,603
======== ======== ======== ========
Basic earnings per share $ 0.50 $ 0.48 $ 0.98 $ 0.94
======== ======== ======== ========
DILUTED EARNINGS PER SHARE:
Net income $ 60,681 $ 55,712 $116,803 $111,091
Less: Dividends on non-convertible preferred
stock and redemption premium -- 339 -- 1,552
-------- -------- -------- --------
Net income available to common shareholders
and assumed conversions $ 60,681 $ 55,373 $116,803 $109,539
======== ======== ======== ========
Weighted average shares outstanding 120,604 116,643 118,752 116,603
Net effect of the assumed exercise of nonvested
restricted stock and stock options - based
on the treasury stock method using average
market price for the period 828 1,273 767 1,114
-------- -------- -------- --------
Total weighted average shares and
common stock equivalents outstanding 121,432 117,916 119,519 117,717
======== ======== ======== ========
Diluted earnings per share $ 0.50 $ 0.47 $ 0.98 $ 0.93
======== ======== ======== ========
</TABLE>
10
<PAGE> 11
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 5 - SEGMENT INFORMATION
The Company's segment information is presented by line of business. Each
line of business is a strategic unit that serves a particular group of customers
that have certain common characteristics, through various products and services.
The segment results include certain overhead allocations and intercompany
transactions. All intercompany transactions have been eliminated to determine
the consolidated balances. The Company's reportable operating segments are
Corporate Banking, Retail Banking, Asset Management, and Treasury.
Previously, the Company reported Community Banking as a separate operating
segment. This segment is no longer viewed by the Company as a separate operating
segment but instead is viewed as a component of Retail Banking. As a result, all
corresponding financial information for earlier periods has been restated to
reflect this change.
The Corporate Banking segment is responsible for providing a full array of
banking and investment services to business banking, commercial banking, and
other institutional clients in each of the Company's major metropolitan markets.
The Corporate Banking segment also includes a National Industries unit that is
responsible for serving larger national accounts, principally in targeted
industries. In addition to traditional credit and deposit products, the
Corporate Banking segment also supports its customers with capabilities in
treasury management, leasing, accounts receivable purchasing, asset-based
lending, international services, and interest rate protection and investment
products.
The Retail Banking segment serves the Company's consumer customers through
an extensive banking office network and through the use of alternative delivery
channels such as PC Banking, the internet, and telephone banking. The Retail
Banking segment provides individuals with comprehensive products and services,
including home mortgages, credit cards, deposit accounts, mutual funds, and
brokerage and insurance. In addition, Retail Banking also serves the Company's
small business customers and provides the Company's non-metropolitan markets
with the same products and services offered by the Corporate Banking and Asset
Management segments.
The Asset Management segment provides specialized investment portfolio
management, traditional credit products, financial counseling, and customized
services to the Company's private clients and foundations as well as investment
management and retirement services to companies and their employees. The Asset
Management segment is also the discretionary investment manager of Expedition
Funds, the Company's family of proprietary mutual funds.
The Treasury segment's primary function is to manage the investment
securities portfolio, certain residential real estate loans, public entity
deposits, and liquidity and funding positions of the Company.
Corporate Support and Other includes activities that are not directly
attributable to the reportable segments. Included in this category are the
activities of the parent company and support functions, i.e., accounting, loan
review, etc., along with the Company's indirect automobile portfolio and the
elimination of intercompany transactions.
The following tables present the segment information for the Company's
segments as of and for the periods ended June 30, 2000 and 1999.
11
<PAGE> 12
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
For the Six Months Ended June 30, 2000
(in Thousands)
<TABLE>
<CAPTION>
Corporate
Corporate Retail Asset Support and
Banking Banking Management Treasury Other Consolidated
------------- -------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
Net interest income $ 110,854 $ 161,585 $ 19,731 $ 37,690 $ 6,547 $ 336,407
Noninterest income 17,915 95,138 12,201 5,102 15,585 145,941
Noninterest expense 43,947 125,582 12,304 2,226 93,329 277,388
--------- ---------- --------- ---------- ---------- -----------
Segment net income 84,822 131,141 19,628 40,566 (71,197) 204,960
Provision for loan losses 26,806
-----------
Net income before income
tax expense 178,154
Income tax expense 61,351
-----------
Net income $ 116,803
===========
BALANCE SHEET
Average assets $5,701,597 $3,007,347 $ 605,023 $6,956,603 $2,308,727 $18,579,297
Average loans 5,590,319 2,829,579 595,860 960,299 1,093,867 11,069,924
Average deposits 2,387,483 9,664,755 896,407 384,287 46,003 13,378,935
Period-end assets $6,067,560 $2,990,728 $ 627,440 $6,965,773 $2,285,991 $18,937,492
Period-end loans 5,975,732 2,792,432 618,933 847,438 1,091,522 11,326,057
Period-end deposits 2,563,034 9,824,005 908,979 348,188 68,738 13,712,944
<CAPTION>
For the Six Months Ended June 30, 1999
(in Thousands)
Corporate
Corporate Retail Asset Support and
Banking Banking Management Treasury Other Consolidated
------------- -------------- --------------- --------------- --------------- ---------------
INCOME STATEMENT
Net interest income $ 92,447 $ 133,597 $ 17,389 $ 51,078 $ 24,300 $ 318,811
Noninterest income 17,854 79,037 11,401 5,387 2,778 116,457
Noninterest expense 40,874 113,919 11,290 2,423 84,199 252,705
---------- ---------- --------- ---------- ---------- -----------
Segment net income 69,427 98,715 17,500 54,042 (57,121) 182,563
Provision for loan losses 15,064
-----------
Net income before income
tax expense 167,499
Income tax expense 56,408
-----------
Net income $ 111,091
===========
BALANCE SHEET
Average assets $4,867,163 $2,506,012 $ 519,256 $7,587,121 $2,063,601 $17,543,153
Average loans 4,722,088 2,283,876 511,299 1,247,827 1,379,284 10,144,374
Average deposits 1,873,053 9,251,097 898,275 395,455 18,687 12,436,567
Period-end assets $4,990,558 $2,616,368 $ 608,313 $7,547,889 $2,248,611 $18,011,739
Period-end loans 4,858,136 2,390,895 602,403 1,271,412 1,480,485 10,603,331
Period-end deposits 1,933,149 9,419,549 969,519 496,680 22,147 12,841,044
</TABLE>
12
<PAGE> 13
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 2000
(in Thousands)
Corporate
Corporate Retail Asset Support and
Banking Banking Management Treasury Other Consolidated
------------- -------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
Net interest income $ 57,351 $ 85,212 $ 10,004 $ 19,336 $ 440 $ 172,343
Noninterest income 9,147 48,465 6,209 2,392 13,801 80,014
Noninterest expense 22,308 64,530 6,043 1,220 48,511 142,612
---------- ---------- --------- ---------- ---------- -----------
Segment net income 44,190 69,147 10,170 20,508 (34,270) 109,745
Provision for loan losses 17,183
-----------
Net income before income
tax expense 92,562
Income tax expense 31,881
-----------
Net income $ 60,681
===========
BALANCE SHEET
Average assets $5,829,741 $3,100,476 $ 608,344 $6,938,418 $2,274,814 $18,751,793
Average loans 5,724,753 2,967,543 599,175 813,931 1,098,166 11,203,568
Average deposits 2,482,602 9,938,871 900,608 351,287 45,882 13,719,250
Period-end assets $6,067,560 $2,990,728 $ 627,440 $6,965,773 $2,285,991 $18,937,492
Period-end loans 5,975,732 2,792,432 618,933 847,438 1,091,522 11,326,057
Period-end deposits 2,563,034 9,824,005 908,979 348,188 68,738 13,712,944
<CAPTION>
For the Three Months Ended June 30, 1999
(in Thousands)
Corporate
Corporate Retail Asset Support and
Banking Banking Management Treasury Other Consolidated
------------- -------------- --------------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
Net interest income $ 46,789 $ 69,381 $ 8,854 $ 24,148 $ 12,831 $ 162,003
Noninterest income 7,988 41,460 5,736 1,696 1,813 58,693
Noninterest expense 20,384 58,677 5,819 1,688 41,358 127,926
---------- ---------- --------- ---------- ---------- -----------
Segment net income 34,393 52,164 8,771 24,156 (26,714) 92,770
Provision for loan losses 8,509
-----------
Net income before income
tax expense 84,261
Income tax expense 28,549
-----------
Net income $ 55,712
===========
BALANCE SHEET
Average assets $4,978,653 $2,524,824 $ 537,844 $7,567,095 $2,206,865 $17,815,281
Average loans 4,830,896 2,326,222 529,776 1,220,705 1,440,565 10,348,164
Average deposits 1,898,066 9,442,310 929,784 386,439 27,119 12,683,718
Period-end assets $4,990,558 $2,616,368 $ 608,313 $7,547,889 $2,248,611 $18,011,739
Period-end loans 4,858,136 2,390,895 602,403 1,271,412 1,480,485 10,603,331
Period-end deposits 1,933,149 9,419,549 969,519 496,680 22,147 12,841,044
</TABLE>
13
<PAGE> 14
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 reasons 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.
OVERVIEW
Net income for the quarter ended June 30, 2000, increased nine percent to
$60.7 million while diluted earnings per share increased six percent to $0.50
per share. Net interest income increased six percent to $172.3 million from the
second quarter of 1999. Noninterest income increased 36 percent to $80.0 million
while noninterest expense increased 11 percent to $142.6 million.
For the first six months of 2000, net income increased five percent to
$116.8 million and diluted earnings per share increased five percent to $0.98
per share. Net interest income for the six months grew to $336.4 million, an
increase of 6 percent, while noninterest income and noninterest expense
increased 25 percent and 10 percent, respectively.
NET INTEREST INCOME
Net interest income is the principal component of a financial
institution's income stream and represents the difference or spread between
interest and fee income generated from earning assets and the interest expense
paid on deposits and borrowed funds. Fluctuations in interest rates as well as
changes in the volume and mix of earning assets and interest bearing liabilities
can materially impact net interest income. The following discussion of net
interest income is presented on a taxable equivalent basis, unless otherwise
noted, to facilitate performance comparisons among various taxable and
tax-exempt assets.
Net interest income for the quarter ended June 30, 2000, increased $10.3
million over the second quarter of 1999 to $173.6 million with interest income
and interest expense increasing $42.3 million and $32.0 million, respectively.
The increase in interest income was due to an increase in average earning assets
of $971.8 million, or six percent, and by a 57 basis point increase in the
average yield on earning assets from 7.64 percent to 8.21 percent. The largest
portion of the increase in average earning assets from the second quarter of
1999 occurred in the average balance of loans, which increased eight percent, or
$855.4 million, due principally to internal loan growth, the acquisition of
Hartland Bank ("Hartland), in October 1999, and the merger with MegaBank
Financial Corporation ("MegaBank"), in April 2000, partially offset by the
securitization of approximately $970 million of loans and their transfer to
investment securities available for sale ($470 million in real estate mortgage
loans in March 2000 and $500 million in indirect auto loans in September 1999).
Excluding the impact of the acquisitions, mergers, and securitizations discussed
above, average loans grew 15 percent from the second quarter of 1999. The 21
percent increase in interest expense during the quarter was a result of a $708.7
million increase in average interest bearing liabilities and a 68 basis point
increase in the rate paid on interest bearing liabilities. The increase in
interest bearing liabilities was primarily due to increases in both savings
accounts and time deposits, which were partially offset by a decrease in FHLB
and other borrowings.
14
<PAGE> 15
For the first six months of 2000, net interest income increased five
percent, or $17.6 million, to $338.8 million consisting of a $74.6 million
increase in interest income and a $57.0 million increase in interest expense.
The increase in interest income was due to a six percent increase in average
earning assets and a five percent increase in the yield on earning assets, or 39
basis points, to 8.07 percent from 7.68 percent. The average balance of loans
for the first six months of 2000 increased $926 million over the comparable 1999
period due to the factors discussed previously. An $819 million increase in
average interest bearing liabilities combined with a 53 basis point increase in
the rate paid on interest bearing liabilities resulted in a 19 percent increase
in interest expense.
Net interest margin, stated as a percentage, is the yield 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.
The following discussion of net interest margin is presented on a taxable
equivalent basis.
For the second quarter of 2000, the net interest margin was 4.01 percent
compared to 3.99 percent for the same period in 1999. For the six months ended
June 30, 2000, net interest margin decreased four basis points from 4.00 percent
in the prior year to 3.96 percent. These changes 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
increased 57 basis points, including a 78 basis point increase in the yield on
loans, while the cost of interest bearing liabilities increased 68 basis points.
Similarly, a 55 basis point increase in the yield on loans contributed to a 39
basis point increase in the yield on interest earning assets for the first six
months of 2000 while the cost of interest bearing liabilities increased 53 basis
points.
During the second quarter of 2000, the Company's net interest margin was
impacted by the Company's use of interest rate contracts, decreasing taxable
equivalent net interest margin by three basis points as compared to an eight
basis point positive impact for the same period in 1999. For the six months
ended June 30, 2000, the Company's use of interest rate contracts decreased the
Company's net interest margin by one basis point as compared to a nine basis
point positive impact for the first six months of 1999.
15
<PAGE> 16
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, 2000, as compared to the comparable periods of 1999 (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30, 2000
--------------------------------------------------
Change
1999 Attributed to
to --------------------------------------
2000 Volume Rate Mix
--------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income:
Loans $ 69,406 $ 38,114 $ 28,676 $ 2,616
Investment securities (8,899) (9,504) 714 (109)
Investment securities available for sale 15,129 14,790 305 34
Trading account securities (1,364) (1,564) 481 (281)
Fed funds and resale agreements 341 (115) 487 (31)
-------- -------- -------- --------
Increase in interest income $ 74,613 $ 41,721 $ 30,663 $ 2,229
======== ======== ======== ========
Interest expense:
Deposits $ 36,383 $ 17,259 $ 17,519 $ 1,605
Fed funds purchased and repos (3,263) (10,359) 9,899 (2,803)
Other short-term borrowings 2,859 1,616 883 360
FHLB and other borrowings* 21,047 13,157 6,306 1,584
-------- -------- -------- --------
Increase in interest expense $ 57,026 $ 21,673 $ 34,607 $ 746
======== ======== ======== ========
<CAPTION>
Three Months Ended
June 30, 2000
--------------------------------------------------
Change
1999 Attributed to
to --------------------------------------
2000 Volume Rate Mix
--------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income:
Loans $ 38,649 $ 17,602 $ 19,440 $ 1,607
Investment securities (3,317) (3,692) 428 (53)
Investment securities available for sale 7,752 6,678 978 96
Trading account securities (844) (905) 191 (130)
Fed funds and resale agreements 105 (222) 417 (90)
-------- -------- -------- --------
Increase in interest income $ 42,345 $ 19,461 $ 21,454 $ 1,430
======== ======== ======== ========
Interest expense:
Deposits $ 23,154 $ 10,946 $ 10,968 $ 1,240
Fed funds purchased and repos (2,627) (6,831) 6,472 (2,268)
Other short-term borrowings 419 (102) 546 (25)
FHLB and other borrowings* 11,100 6,488 3,674 938
-------- -------- -------- --------
Increase in interest expense $ 32,046 $ 10,501 $ 21,660 $ (115)
======== ======== ======== ========
</TABLE>
* Includes Capital and Preferred Securities.
16
<PAGE> 17
NONINTEREST INCOME AND NONINTEREST EXPENSE
During the second quarter of 2000, noninterest income increased $21.3
million, or 36 percent, to $80.0 million, due primarily to an $11.8 million gain
on the sale of the three non-strategic branches included in other noninterest
income, a $5.5 million increase in service charges on deposit accounts and a
$2.2 million increase in credit card service charges and fees. Noninterest
income for the first six months of 2000 increased $29.5 million, or 25 percent,
to $145.9 million as a result of the gain on sale of the branches discussed
above, a 25 percent increase in service charges on deposit accounts, and a 50
percent increase in credit card service charges and fees, which was partially
offset by decreases in trading account profits and commissions of $2.6 million
and investment securities gains of $2.1 million. The increase in service charges
on deposit accounts was primarily due to the increase in deposits while the
increase in credit card service charges and fees was primarily due to merchant
processing fees resulting from a significant increase in the number of merchants
and service charges and fees from increased cardholders and receivables. The
decreases in trading account profits and commissions and investment securities
gains are due to the unfavorable market conditions during the first six months
of 2000.
Noninterest expense increased $14.7 million, or 11 percent, during the
second quarter and $24.7 million, or 10 percent, during the first six months of
2000. The growth in each caption of noninterest expense, excluding professional
services, can be attributed primarily to the Hartland acquisition and the
MegaBank merger, discussed earlier, and normal growth. The decrease in
professional services, and reduced growth in the other captions, is attributed
to the Company's continued focus on efficiency.
INCOME TAXES
Income tax expense during the three and six month periods ended June 30,
2000, increased by $3.3 million and $4.9 million, respectively, compared to the
same periods in 1999. The increases are primarily the result of increases in
pretax income.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses for the three and six months ended June 30,
2000, increased $8.7 million and $11.7 million from the same periods in 1999,
respectively. The allowance for loan losses, and the resulting provision for
loan losses, was based on 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. The allowance for loan losses at June 30, 2000, was $150 million.
The ratio of the allowance for loan losses to loans outstanding was 1.33 percent
at June 30, 2000, unchanged from December 31, 1999. Management believes that the
allowance for loan losses at June 30, 2000 is adequate.
NONPERFORMING ASSETS AND PAST DUE LOANS
Nonperforming assets, comprised of nonaccrual loans, renegotiated loans
and other real estate owned, totaled $71.8 million at June 30, 2000, decreasing
13 percent from December 31, 1999, as nonaccrual loans decreased $13.4 million,
or 18 percent. The decrease in nonaccrual loans was due to continued efforts by
management to work-out nonperforming loans resulting in paydowns or a return to
an accrual status, and the charge-off of a commercial credit. At June 30, 2000,
the allowance for loan losses as a percentage of nonperforming loans was 245
percent as compared to 195 percent at December 31, 1999. The allowance for loan
losses as a percentage of nonperforming loans and accruing loans ninety days or
more past due increased from 165 percent at December 31, 1999, to 186 percent at
June 30, 2000.
Nonperforming assets as a percentage of total loans and other real estate
owned decreased to 0.63 percent at June 30, 2000, from 0.75 percent at December
31, 1999. The amount recorded in other repossessed assets at June 30, 2000, was
$0.8 million, down from $1.7 million at December 31, 1999. Loans past due ninety
days or more but still accruing interest increased from $13.3 million at
December 31, 1999, to $19.4 million at June 30, 2000, primarily as a result of
acquisition activity.
17
<PAGE> 18
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, 2000, were $18.9 billion, up from $18.4 billion
at December 31, 1999. The increase in assets was primarily due to internal loan
growth and the merger with MegaBank.
ASSETS AND FUNDING
At June 30, 2000, earning assets totaled $17.2 billion, up from $16.9
billion at December 31, 1999. The mix of earning assets remained relatively
unchanged with total investment securities and loans comprising 34 percent and
66 percent, respectively, of total earning assets at June 30, 2000. The largest
component of the growth in earning assets was concentrated in net loans. Net
loans increased by $385 million due to internal loan growth and the merger,
discussed earlier, which was partially offset by the securitization of
approximately $500 million in mortgage loans, during the first quarter, and the
transfer of the resulting securities to the investment securities available for
sale portfolio. Total liabilities increased by $396 million primarily due to the
increase in total deposits of $663 million, which was partially offset by a $399
million reduction in FHLB and other borrowings. The deposit growth, which
included a $223 million, or eight percent, increase in noninterest bearing
deposits, was due to strong internal growth and the merger. At June 30, 2000,
deposits accounted for 79 percent of the Company's funding, up slightly from
year-end.
LIQUIDITY AND CAPITAL RESOURCES
The following is a discussion of cash flows; these amounts are based on
cash flows which exclude changes resulting from merger activity. Net cash
provided by operating activities totaled $194 million for the six months ended
June 30, 2000. Net cash used by investing activities of $215 million primarily
consisted of a $652 million increase in loans outstanding offset by proceeds
from maturities of investment securities of $73 million, proceeds from
maturities of securities available for sale of $375 million, and proceeds from
sales of securities available for sale of $60 million. Net cash provided by
financing activities of $90 million primarily consisted of a $492 million
increase in deposits reduced by a $400 million net decrease in FHLB and other
borrowings.
Total shareholders' equity at June 30, 2000, was 7.00 percent of total
assets compared to 6.66 percent at December 31, 1999 primarily due to an $83
million increase in retained earnings. 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 7.00 percent at June 30,
2000 and 6.52 percent at December 31, 1999. 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 6.93 percent at June 30, 2000 compared to 6.45 percent at
December 31, 1999.
Tier I capital and total qualifying capital (Tier I capital plus Tier II
capital), as defined by regulatory agencies, as of June 30, 2000, exceeded the
target ratios for well capitalized of 6.00 percent and 10.00 percent,
respectively, under current regulations. The Tier I and total qualifying capital
ratios at June 30, 2000, were 8.68 percent and 11.95 percent, respectively,
compared to 8.19 percent and 11.65 percent at December 31, 1999. 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.
18
<PAGE> 19
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES/NONPERFORMING ASSETS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
--------------------------------
2000 1999
--------- ---------
<S> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period $ 145,890 $ 139,423
Add: Provision charged to earnings 26,806 15,064
Allowance for loans acquired 3,994 1,296
Deduct: Loans charged off 32,176 18,312
Loan recoveries (5,673) (5,082)
--------- ---------
Net charge-offs 26,503 13,230
--------- ---------
Balance at end of period $ 150,187 $ 142,553
========= =========
Net charge-offs as a percentage of
average loans (annualized) 0.48% 0.26%
Recoveries as a percentage of charge-offs 17.63% 27.75%
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
------------------- ----------------
<S> <C> <C>
NONPERFORMING ASSETS
Nonaccrual loans $ 61,185 $ 74,605
Renegotiated loans 97 239
--------- ---------
Total nonperforming loans 61,282 74,844
Other real estate 10,504 7,250
--------- ---------
Total nonperforming assets $ 71,786 $ 82,094
========= =========
Accruing loans ninety days or more past due $ 19,398 $ 13,325
Other repossessed assets 848 1,678
Allowance for loan losses 150,187 145,890
Allowance as a percentage of loans 1.33% 1.33%
Total nonperforming loans as a percentage
of loans 0.54% 0.68%
Total nonperforming assets as a percentage
of loans and ORE 0.63% 0.75%
Accruing loans ninety days or more past due as a
percentage of loans 0.17% 0.12%
Allowance for loan losses as a percentage of
nonperforming loans 245.08% 194.93%
Allowance for loan losses as a percentage of
nonperforming assets 209.21% 177.71%
</TABLE>
19
<PAGE> 20
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 pages 17 through 19 of its December 31, 1999 Form 10-K. Net
interest income sensitivities over a one-year time horizon as of June 30, 2000
and December 31, 1999 are shown below.
<TABLE>
<CAPTION>
Percentage
Increase/(Decrease)
in Interest Income/
Expense Given
Immediate and
Principal/Notional Sustained Parallel
Amount of Earning Interest Rates Shifts
Assets, Interest ----------------------------------------
Bearing Liabilities Down 100 Up 100
and Swaps Basis Points Basis Points
------------------------- ------------------ -------------------
<S> <C> <C> <C>
JUNE 30, 2000:
Assets which reprice in:
One year or less $ 6,630,539 (7.38%) 7.39%
Over one year 10,592,648 (1.46) 1.54
--------------
$ 17,223,187 (3.97) 4.02
==============
Liabilities which reprice in:
One year or less $ 10,706,083 (13.55) 12.64
Over one year 3,825,955 (3.31) 3.26
--------------
$ 14,532,038 (10.24) 9.61
==============
Total net interest income sensitivity 3.33 (2.48)
DECEMBER 31, 1999:
Assets which reprice in:
One year or less $ 6,628,301 (7.66%) 7.73%
Over one year 10,256,467 (1.74) 1.70
--------------
$ 16,884,768 (4.19) 4.19
==============
Liabilities which reprice in:
One year or less $ 10,816,883 (14.75) 16.35
Over one year 3,601,367 (3.22) 3.85
--------------
$ 14,418,250 (11.10) 12.39
==============
Total net interest income sensitivity 2.92 (4.25)
</TABLE>
As shown in the table above, from December 31, 1999 to June 30, 2000, net
interest income sensitivity improved in both the up-rate and down-rate
scenarios. Sensitivity improved in the up-rate scenario because of a shift in
the funding mix away from wholesale funds to time deposits and extension in the
maturity of the time deposits. Another factor contributing to better up-rate
sensitivity was a change in assumptions regarding deposit rate sensitivity. A
decrease in the size of the callable wholesale liability portfolio helped
improve rate sensitivity in both the up and down rate scenarios.
20
<PAGE> 21
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
-----------------------------------------------------------------------------
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 two directors was submitted to the shareholders at the
Company's Annual Meeting held April 17, 2000. William Eugene Davenport and
Marshall Durbin, Jr. were elected upon receipt of the following votes
for/withheld, respectively, 90,137,057/805,975 and 89,783,126/1,159,906. Charles
W. Daniel, D. Paul Jones, Jr., Carl J. Gessler, Jr., M.D., Tranum Fitzpatrick,
John Stein and James H. Click, Jr. were not subject to reelection and their
terms continued after the meeting.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
(3) Articles of Incorporation and By-Laws of Compass Bancshares, Inc.
(a) Restated Certificate of Incorporation of Compass Bancshares,
Inc., dated May 17, 1982 (incorporated by reference to Exhibit
3(a) to the December 31, 1997 Form 10-K filed with the
Commission)
(b) Certificate of Amendment, dated May 20, 1986, to
Restated Certificate of Incorporation of Compass Bancshares, Inc.
(incorporated by reference to Exhibit 3.2 of the Company's
Registration Statement on Form S-4, Registration No. 33-46086
filed with the Commission)
(c) Certificate of Amendment, dated May 15, 1987, to
Restated Certificate of Incorporation of Compass Bancshares, Inc.
(incorporated by reference to Exhibit 3.1.2 to the Company's
Post-Effective Amendment No. 1 to Registration Statement on Form
S-4, Registration No. 33-10797 filed with the Commission)
(d) Certificate of Amendment, dated September 19, 1994, to
Restated Certificate of Incorporation of Compass Bancshares, Inc.
(incorporated by reference to Exhibit 3.5(1) to the Company's
Registration Statement on Form S-4, Registration No. 33-55899
filed with the Commission)
(e) Certificate of Amendment, dated November 8, 1993 to
Restated Certificate of Incorporation of Compass Bancshares, Inc.
(incorporated by reference to Exhibit 3(d) to the Company's
Registration Statement on Form S-4, Registration No. 33-51919
filed with the Commission)
(f) Bylaws of Compass Bancshares, Inc. (Amended and Restated as
of March 15, 1982) (incorporated by reference to Exhibit 3(f) to
the December 31, 1997 Form 10-K filed with the Commission)
21
<PAGE> 22
(A) EXHIBITS (CONTINUED)
(10) Material Contracts
(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
Commission)
(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 Commission)
(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 Commission)
(d) Compass Bancshares, Inc., 1999 Omnibus Incentive Compensation
Plan (incorporated by reference to Exhibit 10(a) to the Company's
Registration Statement on Form S-8, Registration No. 333-86455,
filed September 2, 1999, with the Commission)
(e) Employment Agreement, dated December 14, 1994, between Compass
Bancshares, Inc. and D. Paul Jones, Jr. (incorporated by
reference to Exhibit 10(e) to the March 31, 2000 Form 10-Q filed
with the Commission)
(f) Employment Agreement, dated December 14, 1994, between
Compass Bancshares, Inc. and Jerry W. Powell (incorporated by
reference to Exhibit 10(f) to the March 31, 2000 Form 10-Q filed
with the Commission)
(g) Employment Agreement, dated December 14, 1994, between
Compass Bancshares, Inc. and Garrett R. Hegel (incorporated by
reference to Exhibit 10(g) to the March 31, 2000 Form 10-Q filed
with the Commission)
(h) Employment Agreement, dated December 14, 1994, between Compass
Bancshares, Inc. and Charles E. McMahen (incorporated by
reference to Exhibit 10(h) to the March 31, 2000 Form 10-Q filed
with the Commission)
(i) 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-8, Registration No. 333-15373, filed November
1, 1996, with the Commission)
(j) Employment Agreement, dated November 24, 1997, between
Compass Bancshares, Inc. and James D. Barri (incorporated by
reference to Exhibit 10(j) to the March 31, 2000 Form 10-Q filed
with the Commission)
(k) Compass Bancshares, Inc., Employee Stock Ownership Benefit
Restoration Plan, date as of May 1, 1997 (incorporated by
reference to Exhibit 10(j) to the December 31, 1999 Form 10-K
filed with the Commission)
22
<PAGE> 23
(A) EXHIBITS (CONTINUED)
(l) Compass Bancshares, Inc., Supplemental Retirement Plan, dated
as of May 1, 1997 (incorporated by reference to Exhibit 10(k) to
the December 31, 1999 Form 10-K filed with the Commission)
(m) Deferred Compensation Plan for Compass Bancshares, Inc., dated
as of February 1, 1996. (Amended and Restated as of May 1, 1998)
(incorporated by reference to Exhibit 10(l) to the December 31,
1999 Form 10-K filed with the Commission)
(n) Compass Bancshares, Inc. Special Supplemental Retirement Plan,
dated as of May 1, 1997. (Amended and Restated as of February 27,
2000) (incorporated by reference to Exhibit 10(n) to the March
31, 2000 Form 10-Q filed with the Commission)
(27) Financial Data Schedule
Certain financial statement schedules and exhibits have been omitted because
they are not applicable.
(b) Reports on Form 8-K
None
23
<PAGE> 24
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 11, 2000 /s/ GARRETT R. HEGEL
------------------------- --------------------------------
Date By Garrett R. Hegel, as its
Chief Financial Officer
24
