<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED
MARCH 31, 1995.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ___________ TO _____________.
COMMISSION FILE NUMBER 1-13508
THE COLONIAL BANCGROUP, INC.
(A DELAWARE CORPORATION)
EMPLOYER IDENTIFICATION NUMBER 63-0661573
ONE COMMERCE STREET, MONTGOMERY, ALABAMA 36104
TELEPHONE: (205) 240-5000
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
------- -------
Shares of common stock ($2.50 par value) outstanding at April
30, 1995 was 12,219,699.
<PAGE> 2
Part I, Item 1
Condensed Consolidated Financial Statements
<PAGE> 3
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CONDITION (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
March 31, December 31, March 31,
(Dollars in thousands, except per share amounts) 1995 1994* 1994*
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Cash and due from banks......................................... $ 120,749 $ 129,720 $ 79,195
Interest-bearing deposits in banks.............................. 2,481 1,777 7,407
Federal funds sold.............................................. 1,480 500 175
Securities available for sale................................... 83,239 78,265 108,470
Investment securities........................................... 334,817 326,599 381,737
Mortgage loans held for sale.................................... 61,428 60,536 257,878
Loans, net of unearned income................................... 2,255,258 2,093,702 1,831,507
Less:
Allowance for possible loan losses............................ (34,095) (33,410) (30,063)
-------------------------------------------------------------------------------------------------------
Loans, net...................................................... 2,221,163 2,060,292 1,801,444
Premises and equipment.......................................... 47,248 45,874 45,378
Excess of cost over tangible and identified intangible
assets acquired, net.......................................... 18,635 16,239 16,204
Purchased mortgage servicing rights............................. 57,299 54,796 33,250
Other real estate owned......................................... 8,611 8,141 12,927
Accrued interest and other assets............................... 57,504 55,604 53,421
-------------------------------------------------------------------------------------------------------
Total........................................................... $3,014,654 $2,838,343 $2,797,486
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity:
Deposits........................................................ $2,295,341 $2,171,464 $2,176,037
FHLB short-term borrowings...................................... 310,000 210,000 195,150
Other short-term borrowings..................................... 112,748 134,550 86,848
Subordinated debt............................................... 17,458 17,458 17,458
Other long-term debt............................................ 25,290 69,596 62,246
Other liabilities............................................... 48,483 44,276 81,745
-------------------------------------------------------------------------------------------------------
Total liabilities............................................... 2,809,320 2,647,344 2,619,484
-------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preference Stock $2.50 par value; 1,000,000 shares
authorized, none issued
Common Stock, $2.50 par value; 44,000,000 shares
authorized, 12,208,446 shares issued and outstanding at
March 31, 1995............................................... 30,521 - -
Class A Common Stock, $2.50 par value; 40,000,000 shares
authorized, 11,280,031 shares and 11,207,256 shares issued
and oustanding at December 31, 1994 and March 31, 1994,
respectively**............................................... - 28,200 28,018
Class B Common Stock, $2.50 par value; 4,000,000 shares
authorized, 635,088 shares and 636,669 shares issued and
and outstanding at December 31, 1994 and March 31, 1994,
respectively**............................................... - 1,588 1,592
Additional paid in capital...................................... 115,672 109,658 108,569
Retained earnings............................................... 60,677 54,490 40,050
Unrealized loss on securities available for sale, net of taxes (1,536) (2,937) (227)
-------------------------------------------------------------------------------------------------------
Total shareholders' equity...................................... 205,334 190,999 178,002
-------------------------------------------------------------------------------------------------------
Total........................................................... $3,014,654 $2,838,343 $2,797,486
-------------------------------------------------------------------------------------------------------
</TABLE>
* As restated - See Note B
**On February 21, 1995 the Class A and Class B Common Stock were
reclassified into one class.
See Notes to the Unaudited Condensed Consolidated Financial Statements
<PAGE> 4
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(Dollars in thousands, except per share amounts) 1995 1994*
- - - - ----------------------------------------------------------------------------------
<S> <C> <C>
Interest Income:
Interest and fees on loans.................................... $48,031 $38,023
Interest on investments....................................... 5,912 5,200
Other interest income......................................... 66 187
- - - - ----------------------------------------------------------------------------------
Total interest income......................................... 54,009 43,410
- - - - ----------------------------------------------------------------------------------
Interest Expense:
Interest on deposits.......................................... 20,502 16,599
Interest on short-term borrowings............................. 5,152 1,498
Interest on long-term debt.................................... 1,177 757
- - - - ----------------------------------------------------------------------------------
Total interest expense........................................ 26,831 18,854
- - - - ----------------------------------------------------------------------------------
Net Interest Income Before Provision for
Possible Loan Losses........................................ 27,178 24,556
Provision for possible loan losses............................ 1,067 1,448
- - - - ----------------------------------------------------------------------------------
Net Interest Income After Provision for
Possible Loan Losses........................................ 26,111 23,108
- - - - ----------------------------------------------------------------------------------
Noninterest Income:
Service charges on deposit accounts........................... 3,293 2,928
Other charges, fees and commissions........................... 6,488 6,511
Securities gains, net......................................... 5 83
Other income.................................................. 1,078 1,700
- - - - ----------------------------------------------------------------------------------
Total noninterest income...................................... 10,864 11,222
- - - - ----------------------------------------------------------------------------------
Noninterest Expense:
Salaries and employee benefits................................ 10,397 10,463
Occupancy expense of bank premises, net....................... 2,142 2,118
Furniture and equipment expenses.............................. 1,960 1,838
Amortization of intangible assets............................. 1,990 1,458
Other expense................................................. 7,714 8,098
- - - - ----------------------------------------------------------------------------------
Total noninterest expense..................................... 24,203 23,975
- - - - ----------------------------------------------------------------------------------
Income before income taxes 12,772 10,355
Applicable income taxes....................................... 4,471 3,507
- - - - ----------------------------------------------------------------------------------
Net Income.................................................... $ 8,301 $ 6,848
- - - - ----------------------------------------------------------------------------------
Earnings per share:
Primary...................................................... $ 0.69 $ 0.57
Fully diluted................................................ 0.67 0.56
Dividends paid:
Class A**..................................... $ 0.225 $ 0.20
Class B**..................................... 0.125 0.10
- - - - ----------------------------------------------------------------------------------
</TABLE>
N/A-not applicable
* As restated - See Note B
**On February 21, 1995 BancGroup's Class A and Class B Common Stock were
reclassified into one class of stock called Common Stock.
See Notes to the Unaudited Condensed Consolidated Financial Statements
<PAGE> 5
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited) (In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994*
--------- --------
<S> <C> <C>
Net cash provided by operating activities.......................... $ 16,785 $ 6,329
Cash flows from investing activities:
Proceeds from maturities of securities available
for sale...................................................... 1,775 16,154
Proceeds from sales of securities available for sale............ 180 5,150
Purchase of securities available for sale....................... (4,652) -
Proceeds from maturities of investment securities............... 8,054 16,083
Proceeds from sales of investment securities.................... 365 207
Purchase of investment securities............................... (3,348) (37,403)
Net increase in short-term securities........................... - (90,900)
Net (increase) decrease in mortgage loans held for sale......... (892) 103,617
Net increase in loans........................................... (131,856) (59,571)
Cash received in bank acquisitions.............................. 5,118 -
Capital expenditures............................................ (1,699) (1,817)
Proceeds from sale of other real estate owned................... 784 2,185
Purchase of servicing rights.................................... (4,205) (5,586)
Increase in excess servicing fees receivable.................... - (1,720)
Other, net...................................................... (31) 2
--------- --------
Net cash used in investing activities.............................. (130,407) (53,599)
Cash flows from financing activities:
Net increase (decrease) in demand, savings, and time deposits... 77,833 (14,961)
Net increase (decrease) in federal funds purchased, repurchase
agreements and other short-term borrowings.................... 78,191 (13,749)
Proceeds from issuance of long-term debt........................ 5,834 6,647
Repayment of long-term debt..................................... (53,644) (2,798)
Proceeds from issuance of common stock.......................... 234 262
Dividends paid.................................................. (2,113) (1,853)
--------- --------
Net cash provided by (used in) financing activities................ 106,335 (26,452)
--------- --------
Net decrease in cash and cash equivalents.......................... (7,287) (73,722)
Cash and cash equivalents at beginning of year..................... 131,997 160,499
--------- --------
Cash and cash equivalents at March 31.............................. $ 124,710 $ 86,777
========= ========
Supplemental Disclosure of cash flow information:
Cash paid during the three months for:
Interest...................................................... $ 25,219 $ 22,614
Income taxes.................................................. 1,300 1,166
Non-cash investing activities:
Transfer of loans to other real estate.......................... $ 1,476 $ 266
Origination of loans for the sale of other real estate.......... 277 386
Non-cash financing activities:
Issuance of Class A common stock in bank acquisitions........... $ 6,209 $ 107
</TABLE>
*As restated - See Note B
See Notes to the Unaudited Condensed Financial Statements
<PAGE> 6
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
NOTE A - ACCOUNTING POLICIES/RESTATEMENT
The Colonial BancGroup, Inc. ("BancGroup") and its subsidiaries have
not changed their accounting and reporting policies from those stated in the
1994 annual report, except for the change in accounting for loan impairment
described in Note D. However, the previously issued 1994 financial statements
have been restated to reflect the acquisition described in Note B. These
unaudited interim financial statements should be read in conjunction with the
audited financial statements and footnotes included in BancGroup's 1994 annual
report.
In the opinion of BancGroup, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the financial position
as of March 31, 1995 and the results of operations and cash flows for the
interim periods ended March 31, 1995 and 1994. All 1995 interim amounts are
subject to year-end audit, and the results of operations for the interim period
herein are not necessarily indicative of the results of operations to be
expected for the year.
NOTE B - ACQUISITIONS
On February 17, 1995, BancGroup completed the acquisition of Colonial
Mortgage Company (CMC) and its parent company, The Colonial Company (TCC). At
the acquisition date, TCC's only asset was its investment in CMC. At
acquisition, the acquired entities had total assets of $71 million, total
liabilities of $64 million, and total shareholder's equity of $7.0 million.
BancGroup issued 2,272,727 shares of its common stock and assumed the debts of
TCC. CMC had $1.2 billion in mortgage loan originations in 1994 and as of
March 31, 1995 has a $6.6 billion mortgage loan servicing portfolio. This
business combination by entities under common control was accounted for in a
manner similar to a pooling-of-interests. Accordingly, all the financial
statements have been restated to reflect this combination.
The following table shows the summary results of operations
information for the period January 1, 1995 through February 28, 1995 on a
separate company basis. The results listed are not necessarily indicative of
future operations and the information is unaudited.
(In thousands)
Total revenue:
BancGroup $21,279
CMC 4,193
Net Income
BancGroup $ 5,230
CMC 242
Additionally, BancGroup completed the acquisition of Brundidge
Banking Company, Inc. on March 31, 1995. Brundidge Banking had assets of $54
million and deposits and other liabilities of $50 million. This acquisition
was accounted for as a purchase with 266,434 shares of Common Stock being
issued to the Brundidge Banking shareholders.
On March 16, 1995, BancGroup signed a letter of intent to merge Mt.
Vernon Financial Corporation into Colonial BancGroup. Mt. Vernon has assets of
approximately $193 million and is servicing approximately $210 million of
mortgage loans. Mt. Vernon has three banking offices and a mortgage loan
production office in Atlanta Georgia.
On April 3, 1995, BancGroup signed a letter of intent to merge Farmers
and Merchants Bank (F&M) into Colonial Bank. F&M has total assets of $51
million and currently operates one branch in Ariton, Alabama and two branches
in Ozark, Alabama.
NOTE C - COMMITMENTS AND CONTINGENCIES
BancGroup's subsidiary banks make loan commitments and incur
contingent liabilities in the normal course of business which are not reflected
in the consolidated statements of condition.
<PAGE> 7
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Notes, Continued
NOTE D - ACCOUNTING CHANGE
BancGroup adopted Financial Accounting Standards (SFAS 114),
Accounting by Creditors for Impairment of a Loan, as amended by SFAS No. 118,
Accounting by Creditors for Impairedment of a Loan - Income Recognition and
Disclosure, on January 1, 1995. Under the new standards, a loan is considered
impaired, based on current information and events, if it is probable that
BancGroup will be unable to collect the scheduled payments of principal or
interest when due according to the contractual terms of the loan agreement.
Uncollateralized loans are measured for impairment based on the present value
of expected future cash flows discounted at the historical effective interest
rate, while all collateral-dependent loans are measured for impairment based on
the fair value of the collateral. The adoption of FAS 114 resulted in no
additional provision for credit losses, at January 1, 1995 or during the three
months ended March 31, 1995.
At March 31, 1995, the recorded investment in loans for which
impairment has been recognized in accordance with FAS 114 totaled $ 9,029,000
and these loans had a corresponding valuation allowance of $ 3,508,000. For
the period ended March 31, 1995, the average recorded investment in impairment
loans was approximately $9,675,000. BancGroup recognized $109,000 of interest
on impaired loans (during the portion of the year that they were impaired).
At March 31, 1995, BancGroup has nonaccrual loans of $7,067,000.
Interest income recognized on these loans during the quarter ended March 31,
1995 was not material.
NOTE E - ADOPTION OF SFAS 121
In March 1995, the Financial Standards Board issued SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of". SFAS 121 requires that long-lived assets and certain
identificable intangibles to be held and used by the entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the future undiscounted
cash flows expected to result from the use of the asset and its eventual
disposition are less than the carrying amount of the asset, an impairment loss
is recognized. This statement also requires that long-lived assets and certain
intangibles to be disposed of be reported at the lower of carrying amount or
fair value less cost to sell. SFAS No. 121 is effective for fiscal years
beginning after December 15, 1995. Management believes that the adoption of
SFAS No. 121 will not have a material impact on the Company's financial
statements.
<PAGE> 8
Part I, Item 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
<PAGE> 9
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations
FINANCIAL CONDITION:
Ending balances of total assets, securities, mortgage loans held for
sale, net loans, and deposits changed from December 31, 1994 (as restated) to
March 31, 1995 as follows (in thousands):
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------
Amount %
---------- -----
<S> <C> <C>
Total Assets $176,311 6.2%
Securities 13,192 3.3%
Mortgage loans held
for sale 892 1.5%
Loans, net of
unearned income 161,556 7.7%
Deposits 123,877 5.7%
</TABLE>
Securities:
Investment securities and securities available for sale have increased
$13.2 million from December 31, 1994 to March 31, 1995. The primary reason
for the increase was the securities acquired in Brundidge Banking merger
partially off-set by the normal maturities and purchases of securities within
the portfolio.
Loans and Mortgage Loans Held for Sale:
Included in this increase are $32 million in loans acquired with
Brundidge Banking. The remaining $129.6 million represents internal loan
growth at an annualized rate of 24%. Approximately $71 million of the internal
loan growth are adjustable rate mortgages originated by CMC for Colonial Bank's
portfolio. Loans increased at an 18% internal growth rate for the full year in
1994.
Mortgage loans held for sale are funded on a short-term basis (less
than 90 days) while they are being packaged for sale in the secondary market by
Colonial Mortgage Company, a wholly owned subsidiary of Colonial Bank. Loans
originated amounted to $69,750,000 and $456,412,000 and sales thereof
amounted to $68,858,000 and $560,029,000 for the three months ended March 31,
1995 and 1994, respectively.
<PAGE> 10
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Gross loans by category and summary of loan loss experience are shown in the
following schedules.
<TABLE>
<CAPTION>
GROSS LOANS BY CATEGORY March 31, Dec. 31, March 31,
(In thousands) 1995 1994 1994
- - - - -----------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial, financial, and
agricultural $ 318,716 $ 298,708 $ 259,956
Real estate-commercial 576,853 574,155 513,027
Real estate-construction 169,750 152,423 147,802
Real estate-residential 961,277 857,314 722,219
Installment and consumer 188,357 169,577 155,606
Other 40,757 41,577 33,031
- - - - -----------------------------------------------------------------------------
Total loans $2,255,710 $2,093,754 $1,831,641
- - - - -----------------------------------------------------------------------------
Percent of loans in each
category to total loans:
Commercial financial, and
agricultural 14.1% 14.3% 14.2%
Real estate-commercial 25.6% 27.4% 28.0%
Real estate-construction 7.5% 7.3% 8.1%
Real estate-residential 42.6% 40.9% 39.4%
Installment and consumer 8.4% 8.1% 8.5%
Other 1.8% 2.0% 1.8%
- - - - -----------------------------------------------------------------------------
100.0% 100.0% 100.0%
- - - - -----------------------------------------------------------------------------
</TABLE>
Loans secured by commercial real estate and other commercial loans
increased $3 million and $20 million, respectively during the first three
months of 1995. The increase in real estate-residential loans of $104 million,
is primarily due to the ARM loans originated by Colonial Mortgage Company as
well as an emphasis on residential real estate lending in the Company's
existing branches. These loans continue to be a significant source of loan
growth, and are concentrated in various geographic market areas in
Alabama and across the United States.
<PAGE> 11
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
<TABLE>
<CAPTION>
Three Months Year Three Months
Ended Ended Ended
SUMMARY OF LOAN LOSS EXPERIENCE March 31, Dec. 31, March 31,
(In thousands) 1995 1994 1994
- - - - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Allowance for possible loan
losses - January 1 $33,410 $28,633 $28,633
Charge-offs:
Commercial, financial, and
argicultural 661 1,836 246
Real estate-commercial 267 1,143 43
Real estate-construction 0 2 1
Real estate-residential 35 357 58
Installment and consumer 309 1,635 214
Other 19 168 60
- - - - ------------------------------------------------------------------------------
Total charge-offs 1,291 5,141 622
- - - - ------------------------------------------------------------------------------
Recoveries:
Commercial, financial, and
agricultural 137 1,646 170
Real estate-commercial 0 202 26
Real estate-construction 0 12 1
Real estate-residential 90 77 26
Installment and consumer 367 1,430 337
Other 1 43 20
- - - - ------------------------------------------------------------------------------
Total recoveries 596 3,410 580
- - - - ------------------------------------------------------------------------------
Net charge-offs 695 1,731 42
Addition to allowance charged to
operating expense 1,068 6,481 1,448
Allowance added from bank
acquisitions 312 27 25
- - - - ------------------------------------------------------------------------------
Allowance for possible loan
losses-end of period $34,095 $33,410 $30,064
- - - - ------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Asset quality as measured by nonperforming assets remains very good.
Nonperforming assets have decreased $1,805,000 from December 31, 1994.
Management continuously monitors and evaluates recoverability of problem assets
and adjusts loan loss reserves accordingly. The loan loss reserve is 1.51% of
loans at March 31, 1995. The increase in allowance since year end has been due
to provisions in excess of net charge-offs totalling $373,000 as well as an
additional $312,000 from the Brundidge Banking acquisition. The provisions in
excess of net charge-offs have been made primarily as a result of loan growth.
Nonperforming assets are summarized below (in thousands):
<TABLE>
<CAPTION>
March 31, Dec. 31, March 31,
1995 1994 1994
- - - - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual loans $ 7,067 $ 8,293 $ 9,515
Restructured loans 1,311 2,360 1,746
- - - - ------------------------------------------------------------------------------
Total nonperforming loans 8,378 10,653 11,261
Other real estate owned 8,611 8,141 12,927
- - - - ------------------------------------------------------------------------------
Total nonperforming assets $16,989 $18,794 $24,188
- - - - ------------------------------------------------------------------------------
Aggregate loans contractually
past due 90 days for which
interest is being accrued $ 2,185 $ 2,559 $ 3,245
Net charge-offs year-to-date 695 1,731 42
- - - - ------------------------------------------------------------------------------
RATIOS
Period end:
Total nonperforming assets as
a percent of net loans and
other real estate 0.75% 0.89% 1.31%
Allowance as a percent of net
loans 1.51% 1.60% 1.64%
Allowance as a percent of
nonperforming assets 201% 178% 124%
Allowance as a percent of
nonperforming loans 407% 314% 267%
For the period ended:
Net charge-offs as a percent of
average net loans
(annualized basis) 0.13% 0.09% 0.01%
- - - - ------------------------------------------------------------------------------
</TABLE>
<PAGE> 13
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Management, through its loan officers, internal loan review staff, and
external examinations by regulatory agencies and independent auditors, has
identified approximately $77 million of potential problem loans not included
above. The status of these loans is reviewed at least quarterly by loan
officers and the centralized loan review function and annually by independent
auditors and regulatory agencies. In connection with such reviews collateral
values are updated where considered necessary. If collateral values are judged
insufficient and other sources of repayment inadequate the loans are reduced to
estimated recoverable amounts through increases in reserves allocated to the
loans or charge-offs. As of March 31, 1995 substantially all of these loans
are current with their existing repayment terms. Given the reserves and the
ability of the borrowers to comply with the existing repayment terms,
management believes any exposure from these potential problem loans has been
adequately addressed at the present time.
The above nonperforming loans and potential problem loans represent
all material credits for which management has doubts as to the ability
of the borrowers to comply with the loan repayment terms. Of these loans,
management believes it is probable that loans totaling $9,029,000 will not be
collected as scheduled and therefore are considered impaired (see Note D).
Management also expects that the resolution of these problem credits as well
as other performing loans will not materially impact future operating results,
liquidity or capital resources.
Allocations of the allowance for possible loan losses are made on an
individual loan basis for all identified potential problem loans with a
percentage allocation for the remaining portfolio. The allocations of the
total allowance represent an approximation of the reserves for each category of
loans based on management's evaluation of risk within each loan type.
ALLOCATION OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
March 31, Dec. 31, March 31,
(In thousands) 1995 1994 1994
- - - - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial, financial, and
agricultural $ 6,796 $ 6,010 $ 4,797
Real estate-commercial 11,295 12,168 12,942
Real estate-construction 3,067 3,156 1,678
Real estate-mortgage 9,613 8,560 7,212
Installment and consumer 2,099 2,227 2,388
Other 1,225 1,289 1,047
- - - - ------------------------------------------------------------------------------
TOTAL $34,095 $33,410 $30,064
- - - - ------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
LIQUIDITY:
The maintenance of an adequate liquidity position is a principal
component of BancGroup's asset/liability management strategy. BancGroup's
governing policy provides for daily and longer term monitoring of both sources
and uses of funds to properly maintain the cash position. The increase in
residential real estate loans of $104 million from $857 million at March 31,
1994 to $961 million at March 31, 1995 is primarily due to the lending activity
generated by an emphasis on residential real estate lending in the Company's
branches, as well as the addition of lending activity generated by Colonial
Mortgage Company. In connection with this increase in residential real estate
lending, BancGroup has increased its credit facilities at the Federal Home
Loan Bank. BancGroup has an $800 million credit line secured by these loans
with only $310 million outstanding at March 31, 1995. This source of credit
reduces BancGroup's dependency on deposits as a source of liquidity
resulting in an increase in the loan to deposit ratio from 96.4% at December
31, 1994 to 98.3% at March 31, 1995. Rate sensitivity is also constantly
monitored. BancGroup's one year asset/liability gap is comparable to
December 31, 1994 at approximately 0.81% of assets as of March 31, 1995.
CAPITAL RESOURCES:
Management continuously monitors the capital adequacy and potential for
future growth. The primary measurement for these evaluations for a bank
holding company is its tangible leverage ratio. Tangible capital for BancGroup
at March 31, 1994 consists of $205.3 million of equity less $18.6 million in
intangibles 6.48% providing a 6.46% tangible leverage ratio at March 31, 1995
compared to 6.48% at December 31, 1994. The ratio of shareholders' equity to
total assets at March 31, 1995 was 6.81% as compared to 6.73% at December 31,
1994. Capital levels are sufficient to support future internally generated
growth and fund the quarterly dividend rates which are currently $0.225 per
share.
BancGroup also has access to equity capital markets through both
public and private issuances. Management considers these sources and related
return in addition to internally generated capital in evaluating future
expansion or acquisition opportunities.
<PAGE> 15
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994:
SUMMARY:
BancGroup's net income increased $1,453,000 from $6,848,000 or $0.56
per fully diluted share to $8,301,000 or $0.67 per fully diluted share for the
three months ended March 31, 1994 and 1995, respectively. This increase is
primarily attributable to an increase in net interest margin partially off-set
by an increase in noninterest expense.
<PAGE> 16
THE COLONIAL BANCGROUP, INC.
AVERAGE VOLUME AND RATES (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1995 March 31, 1994*
------------------------------------ ---------------------------------
Average Average
(Dollars in thousands) Volume Interest Rate Volume Interest Rate
- - - - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans, net............................................. $2,150,112 $47,499 8.96% $1,796,057 $34,563 7.80%
Mortgage loans held for sale........................... 41,429 836 8.08% 248,177 3,681 5.93%
Investment securities and securities available for sale 402,770 6,209 6.19% 392,699 5,450 5.57%
Other interest-earning assets.......................... 4,434 66 6.07% 25,085 187 3.03%
- - - - --------------------------------------------------------------------------------------- ------------------------
Total interest-earning assets(1)....................... 2,598,745 $54,610 8.50% 2,462,018 $43,881 7.21%
- - - - --------------------------------------------------------------------------------------- ------------------------
Nonearning assets...................................... 252,358 238,438
- - - - ---------------------------------------------------------------------------- --------------
Total assets......................................... $2,851,103 $2,700,456
- - - - -----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity:
Interest-bearing deposits.............................. $1,834,760 $20,502 4.53% $1,870,661 $16,599 3.60%
Short-term borrowings.................................. 345,466 5,152 5.99% 185,373 1,498 3.25%
Long-term debt......................................... 62,546 1,177 7.53% 79,917 757 3.84%
- - - - --------------------------------------------------------------------------------------- ------------------------
Total interest-bearing liabilities..................... 2,242,772 $26,831 4.84% 2,135,951 $18,854 3.58%
- - - - --------------------------------------------------------------------------------------- ------------------------
Noninterest-bearing demand deposits.................... 373,451 303,059
Other liabilities...................................... 38,758 86,238
- - - - ---------------------------------------------------------------------------- --------------
Total liabilities...................................... 2,654,981 2,525,248
Shareholders' equity................................... 196,122 175,208
- - - - ---------------------------------------------------------------------------- --------------
Total liabilities and shareholders' equity............... $2,851,103 $2,700,456
- - - - -----------------------------------------------------------------------------------------------------------------------------------
Rate differential........................................ 3.66% 3.63%
Net yield on interest-earning assets..................... $27,779 4.34% $25,027 4.12%
- - - - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*As restated
(1) Interest earned and average rates on obligations of states and political
subdivisions are reflected on a tax equivalent basis. Tax equivalent
interest earned is: actual interest earned times 145%. The taxable
equivalent adjustment has given effect to the disallowance of interest
expense deductions, for federal income tax purposes, related to certain
tax-free assets.
Dividends earned and average rates for preferred stocks are reflected on a
tax equivalent basis. Tax equivalent dividends are: actual dividends times
137.7%.
<PAGE> 17
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
ANALYSIS OF INTEREST INCREASES (DECREASES)
FOR THE THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
(Dollars in thousands) Three Months Ended March 31,
1995 Change from 1994
-----------------------------
Due to (1)
Total Volume Rate
-----------------------------
<S> <C> <C> <C>
Interest Income:
Total Loans, net $12,936 $ 7,373 $ 5,563
Mortgage loans held for sale (2,845) (9,418) 6,573
Investment securities and securities
available for sale 759 142 617
Other interest earning assets (121) (742) 621
------- ------- -------
Total interest income (2) 10,729 (2,645) 13,374
------- ------- -------
Interest Expense:
Interest bearing deposits 3,903 (2,135) 6,038
Short-term borrowings 3,654 1,849 1,805
Long-term debt 420 (1,011) 1,431
------- ------- -------
Total interest expense 7,977 (1,297) 9,274
------- ------- -------
Net interest income $ 2,752 $(1,348) $ 4,100
------- ------- -------
</TABLE>
(1) Increases (decreases) are attributable to volume changes and rate changes
on the following basis: Volume Change = change in volume times old rate.
Rate Change = change in rate times old volume. The Rate/Volume Change =
change in volume times change in rate, and it is allocated between volume
change and rate change at the ratio that the absolute value of each
component bears to the absolute value of their total.
(2) Interest earned on obligations of state and political subdivisions is
reflected on a tax equivalent basis. Tax equivalent interest earned is:
actual interest earned times 145%. The taxable equivalent adjustment has
given effect to the disallowance of interest, for federal income tax
purposes, related to certain tax-free assets. Dividends earned on
preferred stock are reflected on a tax equivalent basis. Tax equivalent
dividends earned are: acutal dividends times 137.7%. Tax equivalent
average rate is tax equivalent interest or dividends earned divided by
average volume.
<PAGE> 18
NET INTEREST INCOME:
Net interest income on a tax equivalent basis increased $2.8 million
to $27.8 million for the quarter ended March 31, 1995 from $25.0 million for
the quarter ended March 31, 1994. The net yield on interest earning assets
increased from 4.12% to 4.34% for the three months ended March 31, 1994 and
1995, respectively, while the rate differential increased from 3.63% to 3.66%
for the three month period ended March 31, 1994 compared to 1995. As reflected
on the previous tables this increase was primarily attributable to loan growth
and increasing rates.
LOAN LOSS PROVISION:
The provision for loan losses for the first three months of 1995 was
$1,067,000 compared to $1,448,000 for the same period in 1994. Asset quality
has remained very good. The current allowances for loan losses provides a 201%
coverage of nonperforming assets compared to 178% at December 31, 1994 and 124%
at March 31, 1994. See management's discussion on loan quality and the
allowance for possible loan losses presented in the Financial Condition section
of this report.
NONINTEREST INCOME:
The decrease in noninterest income for the first quarter of 1995
compared to the first quarter of 1994 is primarily due to the lower fees from
loan originations by Colonial Mortgage, which was driven since the first
quarter of 1994. This decrease was partially off-set by $365,000 in additional
fees on deposit acounts and $897,000 in additional mortgage servicing fees.
The acquisition of Colonial Mortgage provides additional sources
of noninterest income to BancGroup through fees from its $6.6 billion servicing
portfolio as well as loan originations from its 22 branches located in 13
states. This noninterest income was $5.8 million and $6.2 million at March 31,
1995 and 1994, respectively.
OVERHEAD EXPENSES:
BancGroup's net overhead expense (total noninterest expense less
noninterest income excluding security gains) was $13.3 million and $12.8
million for the three months ended March 31, 1995 and 1994, respectively.
Salary and benefit expense decreased $66,000 for the three month period
ended March 31, 1995, as compared to the same period in 1994. This decrease
was due primarily to reductions in staff by Colonial Mortgage, attributable to
the lower levels of loan originations experienced in the latter part of 1994.
This decrease was partially off-set by normal wage increases.
<PAGE> 19
OVERHEAD EXPENSES (Continued):
The remaining decrease in other noninterest expenses has been due to
decreased expenses directly related to decreased mortgage lending activities in
1995.
PROVISION FOR INCOME TAXES:
BancGroup's provision for income taxes is based on an approximately
35.0% and 33.9% estimated annual effective tax rate for the years 1995 and
1994, respectively. The provision for income taxes for the three months ended
March 31, 1995 and 1994 was $4,471,000 and $3,507,000, respectively.
<PAGE> 20
Part II
Other Information
<PAGE> 21
Item 1: Legal Proceedings - See Note C - COMMITMENTS AND
CONTINGENCIES AT PART I ITEM 1
Item 2: Changes in Securities - On February 21, 1995 the Class A and Class B
Common Stock were reclassified into one class of common stock. This
reclass was reported in Form 8-K filed on February 21, 1995 as noted
in Item 5.
Item 3: Defaults Upon Senior Securities - n/a
Item 4: Submission of Matters to a Vote of Security Holders - On April 19,
1995 the annual meeting of the shareholders of Colonial BancGroup was
held; shareholders present at such meeting, by proxy or in person,
elected the following directors which constitutes all of the directors
of Colonial BancGroup.
<TABLE>
<CAPTION>
Term expires in 1996:
For Against
--------- -------------
<S> <C> <C>
Young J. Boozer 9,936,093 156,813
William Britton 9,963,089 129,817
Patrick F. Dye 9,961,793 131,113
D.B. Jones 9,962,938 129,968
Milton E. McGregor 9,946,226 146,680
Jack H. Rainer 9,963,288 129,618
Term expires in 1997:
For Against
--------- ------------
Jerry J. Chesser 9,964,070 128,836
John Ed Mathison 9,963,970 128,936
Joe D. Mussafer 9,962,070 130,836
William E. Powell, III 9,964,070 128,836
Frances E. Roper 9,963,394 129,512
Ed V. Welch 9,937,670 155,236
Term expires in 1998:
For Against
--------- ------------
Augustus K. Clements, III 9,937,670 155,236
Robert S. Craft 9,963,814 129,092
Clinton O. Holdbrooks 9,937,670 155,236
Harold D. King 9,937,670 155,236
Robert E. Lowder 9,937,670 155,236
John C.H. Miller, Jr. 9,892,836 200,070
</TABLE>
There were no abstentions in the election of directors.
<PAGE> 22
Item 5: Exhibits and Reports on Form 8-K - BancGroup has filed one Form 8-K
and one form 8-K/A in 1995. Form 8-K was filed on February 21, 1995
disclosing the business combination with Colonial Mortgage Company and
The Colonial Company, the reclassification of BancGroup's two classes
of stock into one class, amendments to BancGroup's restated
Certificate of Incorporation, amendments to its bylaws and the
resignation of James K. and Thomas H. Lowder as directors of BancGroup.
Form 8K/A was filed on April 21, 1995 containing the financial
statements and proforma information required due to the acquisition of
Colonial Mortgage Company.
Exhibit 11- Calculation of earnings per share (attached)
<PAGE> 23
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
The Colonial BancGroup, Inc.
By: /s/ W. Flake Oakley
-----------------------------------------------
W. Flake Oakley
Chief Financial Officer, Secretary & Treasurer
Date: April 12, 1995
<PAGE> 1
EXHIBIT 11
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
COMPUTATIONS OF EARNINGS PER SHARE
FOR THE PERIOD ENDED MARCH 31, 1995
(Unaudited) (In thousands, except per share amounts)
<TABLE>
<CAPTION>
Primary Fully Diluted
------- -------------
Quarter Quarter
------- -------
<S> <C> <C>
Net income $ 8,301 $ 8,301
Interest expense on $7,493,859, 12.75%
convertible subordinated debentures 239
Interest expense on $9,957,000, 7.50%
convertible subordinated debentures 187
Tax effect @ 35.00% for the quarter (149)
ended March 31, 1995
------- -------
Net income $ 8,301 $ 8,578
------- -------
Average shares outstanding 11,931 11,931
Effect of stock options 118 118
------- -------
Primary average shares outstanding 12,049 12,049
------- -------
Contingent shares:
Additional effect of stock options 2
Effect of convertible debentures:
$7,493,859 / $18.25 411
$9,957,000 / $28.00 356
-------
Fully diluted average shares outstanding 12,818
-------
Earnings per share:
------- -------
Net income $ 0.69 $ 0.67
------- -------
</TABLE>
See Notes to the Unaudited Condensed Consolidated Financial Statements
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMETNS OF COLONIAL BANCGROUP, INC. FOR THE THREE MONTHS ENDED
MARCH 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 120,749
<INT-BEARING-DEPOSITS> 2,481
<FED-FUNDS-SOLD> 1,480
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 83,239
<INVESTMENTS-CARRYING> 334,817
<INVESTMENTS-MARKET> 330,635
<LOANS> 2,255,258
<ALLOWANCE> 34,095
<TOTAL-ASSETS> 3,014,654
<DEPOSITS> 2,295,341
<SHORT-TERM> 422,748
<LIABILITIES-OTHER> 48,483
<LONG-TERM> 42,748
<COMMON> 30,521
0
0
<OTHER-SE> 174,813
<TOTAL-LIABILITIES-AND-EQUITY> 3,014,654
<INTEREST-LOAN> 48,031
<INTEREST-INVEST> 5,912
<INTEREST-OTHER> 66
<INTEREST-TOTAL> 54,009
<INTEREST-DEPOSIT> 20,502
<INTEREST-EXPENSE> 26,831
<INTEREST-INCOME-NET> 27,178
<LOAN-LOSSES> 1,067
<SECURITIES-GAINS> 5
<EXPENSE-OTHER> 24,203
<INCOME-PRETAX> 12,772
<INCOME-PRE-EXTRAORDINARY> 8,301
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,301
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.67
<YIELD-ACTUAL> 4.34
<LOANS-NON> 7,067
<LOANS-PAST> 2,185
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 77,000
<ALLOWANCE-OPEN> 33,410
<CHARGE-OFFS> 1,291
<RECOVERIES> 596
<ALLOWANCE-CLOSE> 34,095
<ALLOWANCE-DOMESTIC> 34,095
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
