<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 JUNE 30,
1996.
( ) 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 July 31, 1996 was
16,264,504.
<PAGE> 2
Part I, Item 1
Condensed Consolidated Financial Statements
<PAGE> 3
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CONDITION (Unaudited)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
(Dollars in thousands, except per share amounts) 1996 1995 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Cash and due from banks........................................... $ 114,758 $ 126,777 $ 139,775
Interest-bearing deposits in banks................................ 2,189 5,384 3,036
Federal funds sold................................................ - - -
Securities available for sale..................................... 157,347 159,863 117,299
Investment securities............................................. 284,857 269,493 317,028
Mortgage loans held for sale...................................... 165,925 110,486 164,846
Loans, net of unearned income..................................... 3,131,562 2,875,581 2,433,495
Less:
Allowance for possible loan losses.............................. (39,175) (36,912) (35,095)
- ------------------------------------------------------------------------------------------------------------------
Loans, net........................................................ 3,092,387 2,838,669 2,398,400
Premises and equipment............................................ 59,853 55,161 47,571
Excess of cost over tangible and identified intangible
assets acquired, net............................................ 27,118 26,262 18,391
Mortgage servicing rights......................................... 92,511 80,053 67,582
Other real estate owned........................................... 8,492 8,781 9,481
Accrued interest and other assets................................. 63,633 60,288 56,738
- ------------------------------------------------------------------------------------------------------------------
Total............................................................. $4,069,070 $3,741,217 $3,340,147
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity:
Deposits.......................................................... $2,960,397 $2,785,958 $2,452,008
FHLB short-term borrowings........................................ 565,000 465,000 430,000
Other short-term borrowings....................................... 146,254 132,256 122,650
Subordinated debt................................................. 8,082 17,121 17,458
Other long-term debt.............................................. 26,147 29,038 24,428
Other liabilities................................................. 85,159 58,696 78,097
- ------------------------------------------------------------------------------------------------------------------
Total liabilities................................................. 3,791,039 3,488,069 3,124,641
- ------------------------------------------------------------------------------------------------------------------
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, 13,601,589, 13,084,721 and 12,239,384 shares issued
and outstanding at June 30, 1996, December 31, 1995 and
June 30, 1995, respectively.................................... 34,004 32,712 30,598
Additional paid in capital...................................... 145,807 137,107 115,982
Retained earnings............................................... 100,102 83,315 68,729
Unearned compensation........................................... (740) (822) -
Unrealized losses on securites available for sale, net of taxes (1,142) 836 197
- ------------------------------------------------------------------------------------------------------------------
Total shareholders' equity........................................ 278,031 253,148 215,506
- ------------------------------------------------------------------------------------------------------------------
Total............................................................. $4,069,070 $3,741,217 $3,340,147
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the Unaudited Condensed Consolidated Financial Statements.
<PAGE> 4
<TABLE>
<CAPTION>
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Six Months Ended Three Months Ended
CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) June 30, June 30,
------------------ ------------------
(Dollars in thousands, except per share amounts) 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans.................................... $134,544 $102,039 $69,219 $54,008
Interest on investments....................................... 13,198 12,384 6,719 6,472
Other interest income......................................... 301 250 119 184
- ------------------------------------------------------------------------------------------------------
Total interest income......................................... 148,043 114,673 76,057 60,664
- ------------------------------------------------------------------------------------------------------
Interest Expense:
Interest on deposits.......................................... 58,813 44,304 29,242 23,802
Interest on short-term borrowings............................. 18,289 12,583 9,928 7,431
Interest on long-term debt.................................... 1,275 2,037 627 860
- ------------------------------------------------------------------------------------------------------
Total interest expense........................................ 78,377 58,924 39,797 32,093
- ------------------------------------------------------------------------------------------------------
Net Interest Income Before Provision for
Possible Loan Losses........................................ 69,666 55,749 36,260 28,571
Provision for possible loan losses............................ 3,231 2,165 1,732 1,098
- ------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for
Possible Loan Losses........................................ 66,435 53,584 34,528 27,473
- ------------------------------------------------------------------------------------------------------
Noninterest Income:
Mortgage servicing and origination fees....................... 13,683 11,072 6,830 5,852
Service charges on deposit accounts........................... 8,273 6,663 4,246 3,374
Other charges, fees and commissions........................... 1,955 1,654 1,047 824
Securities gains, net......................................... 112 5 (2) -
Other income.................................................. 7,287 4,416 4,414 3,697
- ------------------------------------------------------------------------------------------------------
Total noninterest income...................................... 31,310 23,810 16,535 13,747
- ------------------------------------------------------------------------------------------------------
Noninterest Expense:
Salaries and employee benefits................................ 22,687 19,091 11,445 9,495
Occupancy expense of bank premises, net....................... 5,049 4,331 2,561 2,189
Furniture and equipment expenses.............................. 5,021 4,004 2,521 2,044
Amortization of mortgage servicing rights..................... 5,716 3,733 2,974 2,031
Amortization of intangible assets............................. 890 610 453 322
Other expense................................................. 20,974 16,986 10,813 9,272
- ------------------------------------------------------------------------------------------------------
Total noninterest expense..................................... 60,337 48,755 30,767 25,353
- ------------------------------------------------------------------------------------------------------
Income before income taxes 37,408 28,639 20,296 15,867
Applicable income taxes....................................... 13,243 10,088 7,185 5,617
- ------------------------------------------------------------------------------------------------------
Net Income.................................................... $24,165 $18,551 $13,111 $10,250
- ------------------------------------------------------------------------------------------------------
Earnings per share:
Primary...................................................... $ 1.77 $ 1.52 $ 0.96 $ 0.83
Fully diluted................................................ 1.75 1.47 0.95 0.80
Dividends paid: Common Stock.................................. $ 0.54 $ 0.225 $ 0.27 $ 0.225
Class A*...................................... N/A 0.225 N/A N/A
Class B*...................................... N/A 0.125 N/A N/A
- ------------------------------------------------------------------------------------------------------
</TABLE>
N/A-not applicable
*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>
Six Months Ended
June 30,
1996 1995
-------- --------
<S> <C> <C>
Net cash (used in) operating activities $(10,540) $(61,981)
-------- --------
Cash flows from investing activities:
Proceeds from maturities of securities available for sale 43,126 3,889
Proceeds from sales of securities available for sale 1 25
Purchase of securities available for sale (43,914) (29,562)
Proceeds from maturities of investment securities 47,163 51,217
Proceeds from sales of investment securities 19 -
Purchase of investment securities (72,600) (35,889)
Net decrease in short-term securities 10,000 -
Net increase in loans (239,099) (310,346)
Cash received in bank acquisitions 7,034 5,118
Capital expenditures (8,144) (4,076)
Proceeds from sale of other real estate owned 3,784 2,253
Other, net 1 (32)
-------- --------
Net cash used in investing activities (252,629) (317,403)
-------- --------
Cash flows from financing activities:
Net increase in demand, savings, and time deposits 143,445 234,500
Net increase in federal funds purchased, repurchase
agreements and other short-term borrowings 113,992 208,095
Proceeds from issuance of long-term debt 350 5,834
Repayment of long-term debt (3,179) (53,927)
Proceeds from issuance of common stock 725 560
Dividends paid (7,378) (4,864)
-------- --------
Net cash provided by financing activities 247,955 390,198
-------- --------
Net (decrease) increase in cash and cash equivalents (15,214) 10,814
Cash and cash equivalents at beginning of year 132,161 131,997
-------- --------
Cash and cash equivalents at June 30 $116,947 $142,811
======== ========
Supplemental Disclosure of cash flow information:
Cash paid during the six months for:
Interest $ 79,328 $ 54,943
Income taxes 12,443 11,304
Non-cash investing activities:
Transfer of loans to other real estate $ 3,309 $ 3,591
Origination of loans from the sale of other real estate 205 435
Non-cash financing activities:
Conversion of subordinated debentures to common stock $ 8,914 -
Assets acquired in business combinations 24,394 $ 55,136
Liabilities assumed in business combinations 31,428 48,928
</TABLE>
See Notes to the Unaudited Condensed Consolidated Financial Statements.
<PAGE> 6
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial Statements
NOTE A - ACCOUNTING POLICIES
The Colonial BancGroup, Inc. ("BancGroup") and its subsidiaries have
not changed their accounting and reporting policies from those stated in the
1995 annual report. These unaudited interim financial statements should be read
in conjunction with the audited financial statements and footnotes included in
BancGroup's 1995 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 June 30, 1996 and the results of operations and cash flows for the
interim periods ended June 30, 1996 and 1995. All 1996 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 April 19, 1996 BancGroup's subsidiary Colonial Bank purchased
approximately $31 million in assets and assumed approximately $31 million in
liabilities of the Enterprise, Alabama branch of First Federal Bank of
Tuscaloosa.
On July 3, 1996 BancGroup completed the acquisition of Commercial
Bancorp of Georgia. Commercial Bancorp's subsidiary, Commerial Bank of Georgia
("Commercial"), became a wholly owned subsidiary of BancGroup. Commercial has
assets of approximately $233 million and deposits and other liabilities of
approximately $212 million. Commercial operates seven full-service offices in
the northern area of Atlanta.
On July 3, 1996 BancGroup completed the acquisition of Southern
Banking Corporation. Southern Banking Corporation's subsidiary Southern Bank
of Central Florida ("Southern")became a wholly-owned subsidiary of BancGroup.
Southern has approximately $232 million in assets and deposits and other
liabilities of approximately $214 million. Southern operates eight branch
locations in the three county Central Florida area.
Both the Commercial and Southern mergers were accounted for as
poolings of interest. Please refer to the restated financial information
included herein as Supplemental Information under Item 6 Exhibit 99.
On July 8, 1996 BancGroup completed the acquisition of Dothan Federal
Savings Bank ("Dothan Federal"). Dothan Federal has approximately $49 million
in assets and deposits and other liabilities of approximately $45 million.
Dothan Federal has one branch office in Dothan, Alabama. The Dothan
acquisition was accounted for as a purchase with the issuance of 77,345 shares
of BancGroup Common Stock and paid $2.6 million in cash to Dothan Federal
shareholders.
<PAGE> 7
On July 23, 1996, BancGroup entered into a definitive agreement to
merge Tomoka Bancorp into Colonial BancGroup. Tomoka Bancorp's subsidiary
Tomoka State Bank ("Tomoka") based in Ormond Beach, Florida will be merged into
BancGroup's Florida subsidiary, Colonial Bank, headquartered in Orlando. Tomoka
has assets of approximately $73 million and deposits and other liabilities of
approximately $67 million. Tomoka currently has four offices located in Ormond
Beach, New Smyrna Beach, Pierson and Port Orange, Florida.
On July 25, 1996, BancGroup entered into a definitive agreement to
merge First Family Financial Corporation ("First Family") into Colonial
BancGroup. First Family Financial Corporation's subsidiary First Family Bank,
FSB, based in Eustis, Florida, will become a wholly-owned subsidiary of
Colonial BancGroup. First Family has assets of approximately $156 million and
deposits and other liabilities of approximately $147 million. First Family has
five offices and another scheduled to open in August. All six offices are
located in Lake County, Florida and considered part of the Orlando Metropolitan
area.
On August 2, 1996, BancGroup signed a letter of intent to merge Dalton
Whitfield Bankshares ("Bankshares") into Colonial BancGroup. Bankshares'
subsidiary bank, Dalton Whitfield Bank & Trust of Dalton, Georgia will be
merged into BancGroup's Georgia subsidiary, Colonial Bank, headquartered in
Atlanta; Bankshares has assets of approximately $139.7 million and deposits and
other liabilities $129.3 million. Bankshares currently has two offices located
in Dalton and a third office is scheduled to open in October.
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.
NOTE D - ACCOUNTING CHANGE
BancGroup adopted Statement of Financial Accounting Standards (SFAS)
No. 121, Accounting for the Impairment of Long-Lived Assets to be disposed of
on January 1, 1996. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
circumstances indicate that the carrying amount of the assets may not be
recoverable.
<PAGE> 8
SFAS No. 123, Accounting for Stock-Based Compensation defines a fair
value based method of accounting for an employee stock option or similar equity
instrument. However, SFAS 123 allows an entity to continue to measure
compensation costs for those plans using the intrinsic value based method of
accounting prescribed by APB Opinion No. 25, Accounting for Stock Issued to
Employees. BancGroup has elected to continue to measure the compensation cost
for their stock option plans under the provisions of APB Opinion 25.
The adoption of SFAS 121 and 123 did not result in any adjustments to
BancGroup earnings during the six months ended June 30, 1996.
In June 1996 the Financial Accounting Standards Board issued SFAS No.
125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities which requires an entity to recognize the
financial and servicing assets it controls and the liabilities it has incurred,
derecognize financial assets when control has been surrendered, and derecognize
liabilities when extinguished. This statement distinguishes between transfers
that are sales and those that are secured borrowings.
SFAS No. 125 also provides implementation guidance for assessing
isolation of transferred assets and for accounting for transfers of partial
interests, servicing of financial assets, securitizations, transfers of
sales-type and direct financing lease receivables, securities lending
transactions, repurchase agreements, loan syndications and participations, risk
participations in banker's acceptances, factoring arrangements, transfers of
receivables with recourse, and extinguishments of liabilities.
This statement is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after December 31, 1996 and
is to be applied prospectively. Management does not believe that the adoption
of SFAS No. 125 will have a material impact on BancGroup's financial
statements.
<PAGE> 9
Part I, Item 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
<PAGE> 10
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, 1995 to June 30, 1996
as follows (in thousands):
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------
Amount %
------ -----
<S> <C> <C>
Total assets $327,853 8.8%
Securities 12,848 3.0%
Mortgage loans held
for sale 55,439 50.2%
Loans, net of
unearned income 255,981 8.9%
Deposits 174,439 6.3%
</TABLE>
Securities:
Investment securities and securities available for sale have increased
$12.8 million from December 31, 1995 to June 30, 1996. The increase in
securities included the purchase of $7.7 million of FHLB Stock with the
remainder from the maturities and purchases of securities resulting from the
normal funding operations of the Company.
Loans and Mortgage Loans Held for Sale:
The increase in loans, net of unearned income, of $256 million is
primarily from internal loan growth of $233 million at an annualized rate of
16%. The remaining increase of $23 million resulted from the purchase of
assets of the Enterprise, Alabama branch of First Federal Bank of Tusculoosa.
Loans increased at a 25% internal growth rate for the full year in 1995.
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 approximately $702.8 million and $259.9 million and
sales thereof amounted to approximately $647.4 million and $155.6 million for
the six months ended June 30, 1996 and 1995, respectively. The increase in
originations was primarily due to the lower rates which resulted in
refinancings as well as new originations.
<PAGE> 11
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 June 30, Dec. 31, June 30,
(In thousands) 1996 1995 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial, financial, and
agricultural $ 393,931 $ 362,991 $ 338,964
Real estate-commercial 664,740 623,805 587,824
Real estate-construction 256,347 234,487 190,199
Real estate-residential 1,556,732 1,411,380 1,075,086
Installment and consumer 215,343 199,481 195,624
Other 44,591 43,667 46,124
- ---------------------------------------------------------------------------------
Total loans $3,131,684 $2,875,811 $2,433,821
- ---------------------------------------------------------------------------------
Percent of loans in each
category to total loans:
Commercial financial, and
agricultural 12.6% 12.6% 13.9%
Real estate-commercial 21.2% 21.7% 24.2%
Real estate-construction 8.2% 8.2% 7.8%
Real estate-residential 49.7% 49.1% 44.2%
Installment and consumer 6.9% 6.9% 8.0%
Other 1.4% 1.5% 1.9%
- ---------------------------------------------------------------------------------
100.0% 100.0% 100.0%
- ---------------------------------------------------------------------------------
</TABLE>
Loans collateralized by commercial real estate and other commercial
loans increased $41 million and $31 million, respectively during the first six
months of 1996. Loans secured by residential real estate increased $145
million. These loan categories continue to be a significant source of loan
growth and are concentrated in various areas in Alabama and with regard to
residential real estate also in the metropolitan Atlanta market in Georgia.
<PAGE> 12
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
Six Months Year Six Months
Ended Ended Ended
June 30, Dec. 31, June 30,
(In thousands) 1996 1995 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Allowance for possible loan
losses - January 1 $36,912 $33,410 $33,410
Charge-offs:
Commercial, financial, and
agricultural 910 2,211 859
Real estate-commercial 629 339 267
Real estate-construction 745 44 23
Real estate-residential 136 263 77
Installment and consumer 1,254 2,320 602
Other 121 163 76
- ----------------------------------------------------------------------------------------------------------------
Total charge-offs 3,795 5,340 1,904
- ----------------------------------------------------------------------------------------------------------------
Recoveries:
Commercial, financial, and
agricultural 592 698 259
Real estate-commercial 1,089 26 1
Real estate-construction 1 11 10
Real estate-residential 140 159 117
Installment and consumer 735 1,294 705
Other 44 45 20
- ----------------------------------------------------------------------------------------------------------------
Total recoveries 2,601 2,233 1,112
- ----------------------------------------------------------------------------------------------------------------
Net charge-offs 1,194 3,107 792
Addition to allowance charged to
operating expense 3,231 5,480 2,165
Allowance added from bank
acquisitions 226 1,129 312
- ----------------------------------------------------------------------------------------------------------------
Allowance for possible loan
losses-end of period $39,175 $36,912 $35,095
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 13
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Asset quality as measured by nonperforming assets remains very good at
0.64% of net loans and other real estate. Nonperforming assets have decreased
$2.2 million from December 31, 1995. The decrease in nonperforming assets is
$1.9 million from nonaccrural loans and $0.3 million in other real estate. The
decrease in nonaccrual loans and other real estate is from various credits
primarily located in Alabama and Georgia. Management continuously monitors and
evaluates recoverability of problem assets and adjusts loan loss reserves
accordingly. The loan loss reserve is 1.25% of loans at June 30, 1996. The
increase in allowance since year end has been due to provisions in excess of
net charge- offs totaling $2 million. 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>
June 30, Dec. 31, June 30,
1996 1995 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual loans $10,745 $12,600 $7,363
Restructured loans 959 1,035 1,294
- ---------------------------------------------------------------------------------------
Total nonperforming loans 11,704 13,635 8,657
Other real estate owned 8,492 8,781 9,481
- ---------------------------------------------------------------------------------------
Total nonperforming assets * $20,196 $22,416 $18,138
- ---------------------------------------------------------------------------------------
Aggregate loans contractually
past due 90 days for which
interest is being accrued $ 2,963 $ 1,029 $ 1,840
Net charge-offs (recoveries)
year-to-date 1,194 3,107 792
- ---------------------------------------------------------------------------------------
RATIOS
Period end:
Total nonperforming assets as
a percent of net loans and
other real estate 0.64% 0.78% 0.74%
Allowance as a percent of net
loans 1.25% 1.28% 1.44%
Allowance as a percent of
nonperforming assets 194% 165% 193%
Allowance as a percent of
nonperforming loans 335% 271% 405%
For the period ended:
Net charge-offs
as a percent of average net
loans-(annualized basis) 0.08% 0.13% 0.07%
- ---------------------------------------------------------------------------------------
* Total does not include loans contractually past due 90 days or more which are
still accruing.
</TABLE>
<PAGE> 14
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 $96 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 June 30, 1996 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 $11.7 million will not be collected
as scheduled and therefore are considered impaired. 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>
June 30, Dec. 31, June 30,
(In thousands) 1996 1995 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial, financial, and
agricultural $ 7,312 $ 6,915 $ 6,850
Real estate-commercial 13,142 12,306 11,132
Real estate-construction 6,198 5,593 3,127
Real estate-mortgage 7,784 7,057 10,751
Installment and consumer 3,378 2,853 1,957
Other 1,361 2,188 1,278
- ------------------------------------------------------------------------------------
TOTAL $39,175 $36,912 $35,095
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE> 15
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. To assist in funding
a projected 16% annualized growth in loans, BancGroup has credit facilities at
the Federal Home Loan Bank (FHLB). FHLB of Atlanta has established credit
availability in an amount up to $850 million with only $565 million outstanding
at June 30, 1996. This source of credit reduces BancGroup's dependency on
deposits as a source of liquidity resulting in a loan to deposit ratio of
103.2% at December 31, 1995 and 105.8% at June 30, 1996. In 1995, BancGroup
initiated a brokered Certificate of Deposit (CD) program in conjunction with
Merrill Lynch to offer CD's in increments of $1,000 to $99,000 to out of market
customers at competitive rates ranging from 5.05% to 5.65% maturing in 6 to 24
month periods. At June 30, 1996, $125 million is outstanding under this
program. Rate sensitivity is also constantly monitored. BancGroup's one year
asset/liability gap is comparable to December 31, 1995 at slightly above
negative 11% of assets as of June 30, 1996.
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 tier one leverage ratio. Tangible capital for BancGroup
at June 30, 1996 consists of $279.2 million of equity less $27.1 million in
intangibles providing a 6.35% leverage ratio at June 30, 1996 compared to 6.19%
at December 31, 1995. The ratio of shareholders' equity to total assets at
June 30, 1996 was 6.83% as compared to 6.77% at December 31, 1995. Capital
levels are sufficient to support future internally generated growth and fund
the quarterly dividend rates which are currently $0.27 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> 16
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
COMPARISON OF THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995:
SUMMARY:
BancGroup's net income increased $2,861,000 from $10,250,000 or $0.80
per fully diluted share to $13,111,000 or $0.95 per fully diluted share for the
three months ended June 30, 1995 and 1996, respectively. BancGroup's net
income increased $5,614,000 from $18,551,000 or $1.47 per fully diluted share
to $24,165,000 or $1.75 per fully diluted share for the six months ended June
30, 1995 and 1996, respectively. These increases are primarily attributable to
increases in interest earning assets and noninterest income partially off-set
by lower interest spreads and increases in loan loss provision and noninterest
expenses.
<PAGE> 17
<TABLE>
<CAPTION>
THE COLONIAL BANCGROUP, INC.
AVERAGE VOLUME AND RATES Three Months Ended June 30,
(Unaudited) -------------------------------------------------------------
1996 1995
----------------------------- ------------------------------
Average Average
(Dollars in thousands) Volume Interest Rate Volume Interest Rate
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans, net............................................. $3,039,518 $66,167 8.74% $2,332,894 $52,842 9.08%
Mortgage loans held for sale........................... 175,660 3,340 7.61% 75,885 1,479 7.71%
Investment securities and securities available for sale 437,501 6,980 6.39% 430,358 6,799 6.32%
Other interest-earning assets.......................... 9,784 119 4.86% 12,185 184 5.98%
- --------------------------------------------------------------------------------------- --------------------
Total interest-earning assets(1)....................... 3,662,463 $76,606 8.39% 2,851,322 $61,304 8.62%
- --------------------------------------------------------------------------------------- --------------------
Nonearning assets...................................... 334,823 276,249
- --------------------------------------------------------------------------------------- ----------
Total assets......................................... $3,997,286 $3,127,571
- --------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity:
Interest-bearing deposits.............................. $2,375,262 $29,242 4.95% $1,927,703 $23,802 4.95%
Short-term borrowings.................................. 726,811 9,928 5.49% 471,861 7,431 6.23%
Long-term debt......................................... 36,392 627 6.90% 43,655 860 7.88%
- --------------------------------------------------------------------------------------- --------------------
Total interest-bearing liabilities..................... 3,138,465 $39,797 5.10% 2,443,219 $32,093 5.26%
- --------------------------------------------------------------------------------------- --------------------
Noninterest-bearing demand deposits.................... 508,659 434,659
Other liabilities...................................... 75,778 39,709
- ----------------------------------------------------------------------------- ----------
Total liabilities...................................... 3,722,902 2,917,587
Shareholders' equity................................... 274,384 209,984
- ----------------------------------------------------------------------------- ----------
Total liabilities and shareholders' equity............... $3,997,286 $3,127,571
- --------------------------------------------------------------------------------------------------------------------------------
Rate differential........................................ 3.29% 3.36%
Net yield on interest-earning assets..................... $36,809 4.04% $29,211 4.11%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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> 18
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
ANALYSIS OF INTEREST INCREASES (DECREASES)
FOR THE THREE MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
(Dollars in thousands) Three Months Ended June
1996 Change from 19
---------------------------
Due to (1)
Total Volume Rate
---------------------------
<S> <C> <C> <C>
Interest Income:
Total Loans, net $13,325 $40,249 ($26,924)
Mortgage loans held for sale 1,861 2,146 (285)
Investment securities and securities
available for sale 181 109 72
Other interest earning assets (65) (33) (32)
---------------------------
Total interest income (2) 15,302 42,471 (27,169)
---------------------------
Interest Expense:
Interest bearing deposits 5,440 5,440 0
Short-term borrowings 2,497 13,559 (11,062)
Long-term debt (233) (133) (100)
---------------------------
Total interest expense 7,704 18,866 (11,162)
---------------------------
Net interest income $7,598 $23,605 ($16,007)
---------------------------
</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 the 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> 19
<TABLE>
<CAPTION>
THE COLONIAL BANCGROUP, INC.
AVERAGE VOLUME AND RATES Six Months Ended June 30,
(Unaudited) --------------------------------------------------------------
1996 1995
------------------------------- -----------------------------
Average Average
(Dollars in thousands) Volume Interest Rate Volume Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Loans, net............................................. $2,970,246 $129,761 8.77% $2,242,185 $100,340 9.01%
Mortgage loans held for sale........................... 141,389 5,376 7.60% 58,751 2,316 7.84%
Investment securities and securities available for sale 433,061 13,730 6.35% 416,716 13,008 6.26%
Other interest-earning assets.......................... 12,805 301 4.71% 8,344 250 6.05%
- -------------------------------------------------------------------------------------- -------------------
Total interest-earning assets(1)....................... 3,557,501 $149,168 8.41% 2,725,996 $115,914 8.56%
- -------------------------------------------------------------------------------------- -------------------
Nonearning assets...................................... 338,238 263,636
- -------------------------------------------------------------------------- ----------
Total assets......................................... $3,895,739 $2,989,632
- ------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity:
Interest-bearing deposits.............................. $2,361,590 $ 58,813 5.01% $1,881,702 $ 44,304 4.75%
Short-term borrowings.................................. 668,328 18,289 5.48% 408,741 12,583 6.14%
Long-term debt......................................... 37,916 1,275 6.73% 53,068 2,037 7.68%
- -------------------------------------------------------------------------------------- -------------------
Total interest-bearing liabilities..................... 3,067,834 $ 78,377 5.13% 2,343,511 $ 58,924 5.06%
- -------------------------------------------------------------------------------------- -------------------
Noninterest-bearing demand deposits.................... 490,567 404,265
Other liabilities...................................... 68,720 39,146
- -------------------------------------------------------------------------- ---------
Total liabilities...................................... 3,627,121 2,786,922
Shareholders' equity................................... 268,618 202,710
- -------------------------------------------------------------------------- ----------
Total liabilities and shareholders' equity............... $3,895,739 $2,989,632
- ------------------------------------------------------------------------------------------------------------------------------
Rate differential........................................ 3.28% 3.50%
Net yield on interest-earning assets..................... $ 70,791 3.99% $ 56,990 4.22%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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> 20
<TABLE>
<CAPTION>
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
ANALYSIS OF INTEREST INCREASES (DECREASES)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(Dollars in thousands) Six Months Ended June 30,
1996 Change from 1995
----------------------------
Due to (1)
Total Volume Rate
----------------------------
<S> <C> <C> <C>
Interest Income:
Total Loans, net $29,421 $47,192 ($17,771)
Mortgage loans held for sale 3,060 3,550 (490)
Investment securities and securities
available for sale 722 528 194
Other interest earning assets 51 354 (303)
----------------------------
Total interest income (2) 33,254 51,624 (18,370)
----------------------------
Interest Expense:
Interest bearing deposits 14,509 11,945 2,564
Short-term borrowings 5,706 14,160 (8,454)
Long-term debt (762) (532) (230)
----------------------------
Total interest expense 19,453 25,573 (6,120)
----------------------------
Net interest income $13,801 $26,051 ($12,250)
----------------------------
</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> 21
NET INTEREST INCOME:
Net interest income on a tax equivalent basis increased $7.6 million
to $36.8 million for the quarter ended June 30, 1996 from $29.2 million for the
quarter ended June 30, 1995. The net yield on interest earning assets
decreased from 4.11% to 4.04% for the three months ended June 30, 1995 and
1996, respectively, while the rate differential decreased from 3.36% to 3.29%
for the three month period ended June 30, 1995 compared to 1996.
Net interest income on a tax equivalent basis increased $13.8 million
to $70.8 million for the six months ended June 30, 1996 from $57.0 million for
the same period in 1995. The net yield on an interest earning assets decreased
from 4.22% to 3.99% for the six months ended June 30, 1995 and 1996,
respectively, while the rate differential decreased from 3.50% to 3.28% for the
six month period ended June 30, 1995 compared to 1996.
As reflected on the previous tables the increases for the three and
six months were primarily attributable to loan growth offset by decreasing
rates. The prime rate decreased from 9% in February 1995 to 8.5% in December
in 1995 to 8.25% in February 1996. The increase in deposit rates is primarily
due to competition in the market for time deposits as well as the acquisition
of Mt. Vernon Federal Savings Bank, a thrift, in the fourth quarter of 1995.
LOAN LOSS PROVISION:
The provision for loan losses for the first six months of 1996 was
$3,231,000 compared to $2,165,000 for the same period in 1995. Asset quality
has remained very good. The current allowance for loan losses provides a 194%
coverage of nonperforming assets compared to 165% at December 31, 1995 and 193%
at June 30, 1995. 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:
Noninterest income increased $2.8 million for the three months ended
June 30, 1996 compared to the same period in 1995. The increase is primarily
due to increased servicing related fee income of $1.0 million, additional fees
on deposit accounts of $0.9 million, and $0.9 million in other income primarily
related to the sale of mortgage loans.
The increase in noninterest income for the six months ended June 30,
1996 compared to the six months ended June 30, 1995 of $7.5 million is
primarily due to $2.6 million in increased mortgage servicing related fee
income, $1.6 million in additional fees on deposit accounts, and $3.3 million
in other income primarily related to the sale of loans.
Colonial Mortgage provides additional sources of noninterest income to
BancGroup through fees from its $10.1 billion servicing portfolio as well as
loan originations from its 8 regional offices. Colonial Mortgage originates
loans in 20 states. This noninterest income was
<PAGE> 22
$9.9 million and $18.6 million for the three and six months ended June 30,
1996, respectively compared to $7.6 million and $12.6 million for the three and
six months ended June 30, 1995, respectively.
OVERHEAD EXPENSES:
BancGroup's net overhead expense (total noninterest expense less
noninterest income excluding security gains) was $14.2 million and $11.6
million for the three months ended June 30,1996 and 1995, respectively and
$29.1 million and $25.0 million for the six months ended June 30, 1996 and
1995, respectively.
Salary and benefit expense increased $2.0 million and $3.6 million for the
three and six months ended June 30, 1996, as compared to the same periods in
1995. The increase for the six months was due primarily to $1.7 million from
acquisitions and $770,000 from increases in staff by Colonial Mortgage,
attributable to the higher levels of loan originations experienced in the first
half of 1996. The remaining increase is primarily due to normal wage
increases.
The increase in other noninterest expenses has been due to increased
amortization of mortgage servicing rights, acquisition expenses, advertising,
public relations, donations and expenses related to Colonial Mortgage loan pool
pay- offs as well as increases of other miscellaneous expenses. These
increases were somewhat off-set by a reduction in the Bank Insurance Fund (BIF)
deposit assessment from $.23 per $100 in deposits for the six months ended
June 30, 1995 to $0 per $100 in deposits for the same period in 1996.
OTHER INFORMATION:
BancGroup's subsidiary banks pay deposit insurance premiums to the
Savings Association Insurance Fund (SAIF) in addition to the BIF premiums
previously discussed. These deposits came from BancGroup's acquisitions of
savings association institutions. Legislation is currently pending for a one
time assessment to fully fund the SAIF fund. BancGroup currently has
approximately 30% or $895 million of deposits insured in the SAIF fund. The
impact of this additional assessment cannot be accurately determined until the
assessments are made by the FDIC.
PROVISION FOR INCOME TAXES:
BancGroup's provision for income taxes is based on an approximately
35.4% and 35.2% estimated annual effective tax rate for the years 1996 and
1995, respectively. The provision for income taxes for the six months ended
June 30, 1996 and 1995 was $13,243,000 and $10,088,000, respectively.
<PAGE> 23
Part II
Other Information
<PAGE> 24
Item 1: Legal Proceedings - See Note C - COMMITMENTS AND
CONTINGENCIES AT PART 1 ITEM 1
Item 2: Changes in Securities - N/A
Item 3: Defaults Upon Senior Securities - N/A
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Events - N/A
Item 6: Exhibits and Reports on Form 8-K - Report on Form 8-K was filed on
July 18,1996 disclosing financial information and consents of
accountants regarding the acquisition of Commercial Bancorp of Georgia
and Southern Banking Corporation.
Exhibit 11 - Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule (for SEC use only)
Exhibit 99 - Supplemental Information reflecting the Restatement of
Colonial BancGroup's June 30, 1996 financials to reflect the
mergers of Commercial Bancorp of Georgia and Southern Banking
Corporation which were accounted for as poolings of interest.
<PAGE> 25
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: August 12, 1996
--------------------
<PAGE> 1
COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
COMUPTATION OF EARNINGS PER SHARE
June 30, 1996
(Unaudited)(In thousands, except per share amounts)
EXHIBIT 11
<TABLE>
<CAPTION>
Primary Fully Diluted
Q-T-D Y-T-D Q-T-D Y-T-D
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Net income $13,111 $24,165 $13,111 $24,165
Interest expense on $9,333,000, 7.50%
convertible subordinated debentures 181 364
Tax effect @ 35.40% for the quarter (64) (129)
------- ------- ------- -------
Net income $13,111 $24,165 $13,228 $24,400
------- ------- ------- -------
Average shares outstanding 13,581 13,512 13,581 13,512
Effect of stock options 108 104 108 104
------- ------- ------- -------
Primary average shares outstanding 13,689 13,616 13,689 13,616
------- ------- ------- -------
Contingent shares:
Addtional effect of stock options - -
$8,074,200 / $28.00 288 288
------- -------
Fully diluted average shares outstanding 13,977 13,904
------- -------
Earnings per share:
------ ------- ------- -------
Net income $ 0.96 $ 1.77 $ 0.95 $ 1.75
------ ------- ------- -------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 114,758
<INT-BEARING-DEPOSITS> 2,189
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 157,347
<INVESTMENTS-CARRYING> 284,857
<INVESTMENTS-MARKET> 284,427
<LOANS> 3,131,562
<ALLOWANCE> 39,175
<TOTAL-ASSETS> 4,069,070
<DEPOSITS> 2,960,397
<SHORT-TERM> 711,254
<LIABILITIES-OTHER> 85,159
<LONG-TERM> 34,229
0
0
<COMMON> 34,004
<OTHER-SE> 244,027
<TOTAL-LIABILITIES-AND-EQUITY> 4,069,070
<INTEREST-LOAN> 134,544
<INTEREST-INVEST> 13,198
<INTEREST-OTHER> 301
<INTEREST-TOTAL> 148,043
<INTEREST-DEPOSIT> 58,813
<INTEREST-EXPENSE> 78,377
<INTEREST-INCOME-NET> 69,666
<LOAN-LOSSES> 3,231
<SECURITIES-GAINS> 112
<EXPENSE-OTHER> 60,337
<INCOME-PRETAX> 37,408
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,165
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.75
<YIELD-ACTUAL> 3.99
<LOANS-NON> 10,745
<LOANS-PAST> 2,963
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 96,000
<ALLOWANCE-OPEN> 36,912
<CHARGE-OFFS> 3,795
<RECOVERIES> 2,601
<ALLOWANCE-CLOSE> 39,175
<ALLOWANCE-DOMESTIC> 39,175
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE> 1
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
EXHIBIT 99
Supplemental Information reflecting the restatement of Colonial
BancGroup's June 30, 1996 financials to reflect the mergers of Commercial
Bancorp of Georgia and Southern Banking Corporation which were accounted for as
poolings of interest.
<PAGE> 2
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES (RESTATED)
CONDENSED CONSOLIDATED STATEMENT OF CONDITION (Unaudited)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
(Dollars in thousands, except per share amounts) 1996 1995 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Cash and due from banks......................................... $ 142,175 $ 162,891 $ 173,137
Interest-bearing deposits in banks.............................. 2,688 6,279 4,084
Federal funds sold.............................................. 12,380 32,139 34,270
Securities available for sale................................... 202,191 214,293 169,704
Investment securities........................................... 298,183 284,539 327,609
Mortgage loans held for sale.................................... 165,925 110,486 164,846
Loans, net of unearned income................................... 3,442,323 3,175,560 2,715,178
Less:
Allowance for possible loan losses............................ (43,643) (41,489) (38,969)
- --------------------------------------------------------------------------------------------------------------
Loans, net...................................................... 3,398,680 3,134,071 2,676,209
Premises and equipment.......................................... 70,720 65,833 58,233
Excess of cost over tangible and identified intangible
assets acquired, net.......................................... 30,114 29,440 20,849
Mortgage servicing rights....................................... 92,511 80,053 67,582
Other real estate owned......................................... 10,342 10,754 10,788
Accrued interest and other assets............................... 82,117 71,417 63,868
- --------------------------------------------------------------------------------------------------------------
Total........................................................... $4,508,026 $4,202,195 $3,771,179
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity:
Deposits........................................................ $3,373,641 $3,204,198 $2,843,149
FHLB short-term borrowings...................................... 565,000 465,000 430,000
Other short-term borrowings..................................... 127,032 132,256 122,650
Subordinated debt............................................... 8,082 17,121 17,458
Other long-term debt............................................ 26,197 29,142 24,428
Other liabilities............................................... 90,462 65,014 82,629
- --------------------------------------------------------------------------------------------------------------
Total liabilities............................................... 4,190,414 3,912,731 3,520,314
- --------------------------------------------------------------------------------------------------------------
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, 16,184,374, 15,519,688 and 14,674,351 shares issued
and outstanding at June 30, 1996, December 31, 1995 and
June 30, 1995, respectively.................................. 40,461 38,799 36,686
Additional paid in capital.................................... 168,985 159,434 138,295
Retained earnings............................................. 110,522 90,886 75,767
Unearned compensation......................................... (740) (822) -
Unrealized losses on securities available for sale, net of taxes (1,616) 1,167 117
- --------------------------------------------------------------------------------------------------------------
Total shareholders' equity...................................... 317,612 289,464 250,865
- --------------------------------------------------------------------------------------------------------------
Total........................................................... $4,508,026 $4,202,195 $3,771,179
- --------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Restated financial results above reflect the July 3, 1996 mergers of
Colonial BancGroup with Commercial Bancorp of Georgia and Southern Banking
Corporation. These mergers were accounted for as poolings of interests
and the financial results were restated accordingly.
See notes to the Unaudited Condensed Consolidated Financial Statements.
<PAGE> 3
<TABLE>
<CAPTION>
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES (RESTATED) Six Months Ended Three Months Ended
CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) June 30, June 30,
------------------ ------------------
(Dollars in thousands, except per share amounts) 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans.................................... $150,786 $116,720 $77,350 $61,653
Interest on investments....................................... 15,172 14,253 7,680 7,448
Other interest income......................................... 748 888 297 620
- ------------------------------------------------------------------------------------------------------
Total interest income......................................... 166,706 131,861 85,327 69,721
- ------------------------------------------------------------------------------------------------------
Interest Expense:
Interest on deposits.......................................... 66,545 50,863 33,129 27,427
Interest on short-term borrowings............................. 17,564 12,658 9,452 7,431
Interest on long-term debt.................................... 1,277 2,041 629 862
- ------------------------------------------------------------------------------------------------------
Total interest expense........................................ 85,386 65,562 43,210 35,720
- ------------------------------------------------------------------------------------------------------
Net Interest Income Before Provision for
Possible Loan Losses........................................ 81,320 66,299 42,117 34,001
Provision for possible loan losses............................ 3,468 2,779 1,898 1,440
- ------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for
Possible Loan Losses........................................ 77,852 63,520 40,219 32,561
- ------------------------------------------------------------------------------------------------------
Noninterest Income:
Mortgage servicing and origination fees....................... 13,859 11,140 6,923 5,846
Service charges on deposit accounts........................... 9,404 7,885 4,811 3,970
Other charges, fees and commissions........................... 2,292 1,956 1,220 1,005
Securities gains, net......................................... 112 (33) (2) 0
Other income.................................................. 7,644 4,777 4,618 3,910
- ------------------------------------------------------------------------------------------------------
Total noninterest income...................................... 33,311 25,725 17,570 14,731
- ------------------------------------------------------------------------------------------------------
Noninterest Expense:
Salaries and employee benefits................................ 27,342 23,160 13,823 11,572
Occupancy expense of bank premises, net....................... 5,873 5,093 2,978 2,566
Furniture and equipment expenses.............................. 5,555 4,509 2,797 2,296
Amortization of mortgage servicing rights..................... 5,716 3,733 2,974 2,031
Amortization of intangible assets............................. 990 710 503 372
Other expense................................................. 23,727 19,786 12,253 10,633
- ------------------------------------------------------------------------------------------------------
Total noninterest expense..................................... 69,203 56,991 35,328 29,470
- ------------------------------------------------------------------------------------------------------
Income before income taxes 41,960 32,254 22,461 17,822
Applicable income taxes....................................... 14,910 11,446 7,960 6,325
- ------------------------------------------------------------------------------------------------------
Net Income.................................................... $ 27,050 $ 20,808 $14,501 $11,497
- ------------------------------------------------------------------------------------------------------
Earnings per share:
Primary...................................................... $ 1.65 $ 1.41 $ 0.88 $ 0.77
Fully diluted................................................ 1.63 1.38 0.87 0.75
- ------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Restated financial results above reflect the July 3, 1996 mergers of
Colonial BancGroup with Commercial Bancorp of Georgia and Southern Banking
Corporation. These mergers were accounted for as poolings of interest and
the financial results were restated accordingly.
See notes to the Unaudited Condensed Consolidated Financial Statements.
<PAGE> 4
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES (RESTATED)
Condensed Consolidated Statement of Cash Flow
(Unaudited)(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
--------- ---------
<S> <C> <C>
Net cash (used in) operating activities $ (9,546) $(56,904)
Cash flows from investing activities:
Proceeds from maturities of securities available for sale 52,236 7,589
Proceeds from sales of securities available for sale 1 175
Purchase of securities available for sale (44,061) (34,562)
Proceeds from maturities of investment securities 48,339 53,581
Proceeds from sales of investment securities 19 0
Purchase of investment securities (72,600) (37,547)
Net decrease in short-term securities 10,000 0
Net increase in loans (255,644) (334,531)
Cash received in bank acquisitions 7,034 5,118
Capital expenditures (8,883) (4,221)
Proceeds from sale of other real estate owned 4,133 2,895
Other, net 1 (32)
-------- --------
Net cash used in investing activities (259,425) (341,535)
-------- --------
Cash flows from financing activities:
Net increase in demand, savings, and time deposits 138,449 292,680
Net increase in federal funds purchased, repurchase
agreements and other short-term borrowings 94,770 196,045
Reduction of capital lease obligation (53) (68)
Proceeds from issuance of long-term debt 350 5,834
Repayment of long-term debt (3,179) (53,927)
Proceeds from issuance of common stock 1,946 595
Dividends paid (7,378) (4,864)
-------- --------
Net cash provided by financing activities 224,905 436,295
-------- --------
Net (decrease) increase in cash and cash equivalents (44,066) 37,856
Cash and cash equivalents at beginning of year 201,309 173,635
-------- --------
Cash and cash equivalents at June 30 $157,243 $211,491
======== ========
Supplemental Disclosure of cash flow information:
Cash paid during the six months for:
Interest $ 82,581 $ 57,482
Income taxes 13,446 11,693
Non-cash investing activities:
Transfer of loans to other real estate $ 3,309 $ 3,591
Origination of loans from the sale of other real estate 205 435
Non-cash financing activities:
Conversion of subordinated debentures to common stock $ 8,914 -
Assets acquired in business combinations 24,394 55,136
Liabilities assumed in business combinations 31,428 48,928
</TABLE>
See Notes to the Unaudited Condensed Consolidated Financial Statements.
<PAGE> 5
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES (RESTATED)
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, 1995 to June 30, 1996
as follows (in thousands):
<TABLE>
<CAPTION>
Increase (Decrease)
---------------------
Amount %
--------- -----
<S> <C> <C>
Total assets $ 305,831 7.3%
Securities 1,542 0.3%
Mortgage loans held
for sale 55,439 50.2%
Loans, net of
unearned income 266,763 8.4%
Deposits 169,443 5.3%
</TABLE>
Securities:
Investment securities and securities available for sale have increased
$1.5 million from December 31, 1995 to June 30, 1996. The increase in
securities includes an additional purchase of FHLB stock of $7.7 million with
an off setting decrease from the maturities and purchases of securities
resulting from the normal funding operations of the Company.
Loans and Mortgage Loans Held for Sale:
The increase in loans, net of unearned income, of $267 million is
primarily from internal loan growth of $244 million at an annualized rate of
15%. The remaining increase of $23 million resulted from the purchase of
assets of the Enterprise, Alabama branch of First Federal Bank of Tusculoosa.
Loans increased at a 25% internal growth rate for the full year in 1995.
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 approximately $702.8 million and $259.9 million and
sales thereof amounted to approximately $647.4 million and $155.6 million for
the six months ended June 30, 1996 and 1995, respectively. The increase in
originations was primarily due to the lower rates which resulted in
refinancings as well as new originations.
<PAGE> 6
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES (RESTATED)
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 June 30, Dec. 31, June 30,
(In thousands) 1996 1995 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial, financial, and agricultural $ 470,312 $ 436,791 $ 408,807
Real estate-commercial 736,984 692,550 649,931
Real estate-construction 363,127 335,645 284,057
Real estate-residential 1,596,064 1,451,338 1,115,103
Installment and consumer 230,796 215,043 211,918
Other 45,617 44,746 46,353
- --------------------------------------------------------------------------------------------------------
Total loans $3,442,900 $3,176,113 $2,716,169
- --------------------------------------------------------------------------------------------------------
Percent of loans in each
category to total loans:
Commercial financial, and
agricultural 13.7% 13.7% 15.0%
Real estate-commercial 21.4% 21.8% 23.9%
Real estate-construction 10.5% 10.6% 10.5%
Real estate-residential 46.4% 45.7% 41.1%
Installment and consumer 6.7% 6.8% 7.8%
Other 1.3% 1.4% 1.7%
- --------------------------------------------------------------------------------------------------------
100.0% 100.0% 100.0%
- --------------------------------------------------------------------------------------------------------
</TABLE>
Loans collateralized by commercial real estate and other commercial
loans increased $44 million and $34 million, respectively during the first six
months of 1996. Loans secured by residential real estate increased $145
million. These loan categories continue to be a significant source of loan
growth and are concentrated in various areas primarily in Alabama and with
regard to residential real estate also in the metropolitan Atlanta market in
Georgia.
<PAGE> 7
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES (RESTATED)
Management's Discussion, Continued
SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
Six Months Year Six Months
Ended Ended Ended
June 30, Dec. 31, June 30,
(In thousands) 1996 1995 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Allowance for possible loan
losses - January 1 $41,489 $36,985 $36,985
Charge-offs:
Commercial, financial, and agricultural 1,192 2,781 976
Real estate-commercial 629 339 292
Real estate-construction 745 44 23
Real estate-residential 136 372 91
Installment and consumer 1,343 2,603 777
Other 121 163 77
- -----------------------------------------------------------------------------------------------
Total charge-offs 4,166 6,302 2,236
- -----------------------------------------------------------------------------------------------
Recoveries:
Commercial, financial, and agricultural 612 777 271
Real estate-commercial 1,089 26 1
Real estate-construction 1 11 10
Real estate-residential 140 161 117
Installment and consumer 740 1,307 710
Other 44 45 20
- -----------------------------------------------------------------------------------------------
Total recoveries 2,626 2,327 1,129
- -----------------------------------------------------------------------------------------------
Net charge-offs 1,540 3,975 1,107
Addition to allowance charged to
operating expense 3,468 7,350 2,779
Allowance added from bank acquisitions 226 1,129 312
- -----------------------------------------------------------------------------------------------
Allowance for possible loan
losses-end of period $43,643 $41,489 $38,969
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES (RESTATED)
Management's Discussion, Continued
Asset quality as measured by nonperforming assets remains very good at
0.67% of net loans and other real estate. Nonperforming assets have decreased
$3.1 million from December 31, 1995. The decrease in nonperforming assets is
$1.9 million from nonaccrural loans and $0.4 million in other real estate. The
decrease in nonaccrual loans and other real estate is from various credits
primarily located in Alabama and Georgia. Management continuously monitors and
evaluates recoverability of problem assets and adjusts loan loss reserves
accordingly. The loan loss reserve is 1.27% of loans at June 30, 1996. The
increase in allowance since year end has been due to provisions in excess of
net charge-offs totaling $2 million. 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>
June 30, Dec. 31, June 30,
1996 1995 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual loans $11,935 $13,840 $ 9,696
Restructured loans 1,012 1,800 1,364
- -----------------------------------------------------------------------------------
Total nonperforming loans 12,947 15,640 11,060
Other real estate owned 10,342 10,754 10,788
- -----------------------------------------------------------------------------------
Total nonperforming assets* $23,289 $26,394 $21,848
- -----------------------------------------------------------------------------------
Aggregate loans contractually
past due 90 days for which
interest is being accrued $ 3,731 $ 1,381 $ 1,940
Net charge-offs year-to-date 1,540 3,975 1,107
- -----------------------------------------------------------------------------------
RATIOS
Period end:
Total nonperforming assets as
a percent of net loans and
other real estate 0.67% 0.83% 0.80%
Allowance as a percent of net loans 1.27% 1.31% 1.44%
Allowance as a percent of
nonperforming assets 187% 157% 178%
Allowance as a percent of
nonperforming loans 337% 265% 352%
For the period ended:
Net charge-offs
as a percent of average net
loans-(annualized basis) 0.09% 0.15% 0.09%
- -----------------------------------------------------------------------------------
</TABLE>
* Total does not include loans contractually past due 90 days or more which
are still accruing.
<PAGE> 9
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES (RESTATED)
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 $103 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 June 30, 1996 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 $11.7 million will not be collected
as scheduled and therefore are considered impaired. 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>
June 30, Dec. 31, June 30,
(In thousands) 1996 1995 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial, financial, and
agricultural $ 8,301 $ 8,020 $ 7,936
Real estate-commercial 14,570 13,662 12,308
Real estate-construction 7,780 7,233 4,170
Real estate-mortgage 7,980 7,256 11,151
Installment and consumer 3,620 3,076 2,120
Other 1,392 2,242 1,284
- ---------------------------------------------------------------------------
TOTAL $43,643 $41,489 $38,969
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 10
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES (RESTATED)
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. To assist in funding
a projected 15% annualized growth in loans, BancGroup has credit facilities at
the Federal Home Loan Bank (FHLB). FHLB of Atlanta has established credit
availability in an amount up to $850 million with only $565 million outstanding
at June 30, 1996. This source of credit reduces BancGroup's dependency on
deposits as a source of liquidity resulting in a loan to deposit ratio of 99.1%
at December 31, 1995 and 102.0% at June 30, 1996. In 1995, BancGroup initiated
a brokered Certificate of Deposit (CD) program in conjunction with Merrill
Lynch to offer CD's in increments of $1,000 to $99,000 to out of market
customers at competitive rates ranging from 5.05% to 5.65% maturing in 6 to 24
month periods. At June 30,1996, $125 million is outstanding under this
program. Rate sensitivity is also constantly monitored.
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 tier one leverage ratio. Tangible capital for BancGroup
at June 30, 1996 consists of $319.2 million of equity less $30.1 million in
intangibles providing a 6.58% leverage ratio at June 30, 1996. The ratio of
shareholders' equity to total assets at June 30, 1996 was 7.05% as compared to
6.89% at December 31, 1995. Capital levels are sufficient to support future
internally generated growth and fund the quarterly dividend rates which are
currently $0.27 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> 11
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES (RESTATED)
Management's Discussion, Continued
COMPARISON OF THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995:
SUMMARY:
BancGroup's net income increased $3,004,000 from $11,497,000 or $0.75
per fully diluted share to $14,501,000 or $0.87 per fully diluted share for the
three months ended June 30, 1995 and 1996, respectively. BancGroup's net
income increased $6,242,000 from $20,808,000 or $1.38 per fully diluted share
to $27,050,000 or $1.63 per share for the six months ended June 30, 1995 and
1996, respectively. These increases are primarily attributable to increases in
interest earning assets and noninterest income partially off-set by lower
interest spreads and increases in loan loss provision and noninterest expenses.
<PAGE> 12
<TABLE>
<CAPTION>
THE COLONIAL BANCGROUP, INC. (RESTATED)
AVERAGE VOLUME AND RATES Three Months Ended June 30,
(Unaudited) -----------------------------------------------------------
1996 1995
---------------------------- -----------------------------
Average Average
(Dollars in thousands) Volume Interest Rate Volume Interest Rate
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans, net............................................. $3,340,474 $74,358 8.94% $2,609,214 $60,488 9.08%
Mortgage loans held for sale........................... 175,660 3,340 7.61% 75,885 1,479 7.71%
Investment securities and securities available for sale 497,244 7,964 6.41% 488,132 7,793 6.39%
Other interest-earning assets.......................... 25,046 297 4.76% 50,686 620 4.91%
- ------------------------------------------------------------------------------- -------------------
Total interest-earning assets(1)....................... 4,038,424 $85,959 8.54% 3,223,917 $70,380 8.75%
- ------------------------------------------------------------------------------- -------------------
Nonearning assets...................................... 387,041 319,107
- ---------------------------------------------------------------------- ----------
Total assets......................................... $4,425,465 $3,543,024
- ----------------------------------------------------------------------------------------- ----------------------------
Liabilities and Shareholders' Equity:
Interest-bearing deposits.............................. $2,717,879 $33,129 4.90% $2,233,540 $27,427 4.93%
Short-term borrowings.................................. 693,267 9,452 5.48% 471,861 7,431 6.23%
Long-term debt......................................... 36,464 629 6.89% 43,655 862 7.88%
- ------------------------------------------------------------------------------- -------------------
Total interest-bearing liabilities..................... 3,447,610 $43,210 5.04% 2,749,056 $35,720 5.21%
- ------------------------------------------------------------------------------- -------------------
Noninterest-bearing demand deposits.................... 583,863 507,266
Other liabilities...................................... 81,362 43,881
- ---------------------------------------------------------------------- ----------
Total liabilities...................................... 4,112,835 3,300,203
Shareholders' equity................................... 312,630 242,821
- ---------------------------------------------------------------------- ----------
Total liabilities and shareholders' equity............... $4,425,465 $3,543,024
- -----------------------------------------------------------------------------------------------------------------------
Rate differential........................................ 3.50% 3.54%
Net yield on interest-earning assets..................... $42,749 4.26% $34,660 4.32%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Restated financial results above reflect the July 3, 1996 mergers of
Colonial BancGroup with Commercial Bancorp of Georgia and Southern Banking
Corporation. These mergers were accounted for as poolings of interest and
the financial results were restated accordingly.
(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> 13
<TABLE>
<CAPTION>
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
ANALYSIS OF INTEREST INCREASES (DECREASES) RESTATED
FOR THE THREE MONTHS ENDED JUNE 30, 1996
(Dollars in thousands) Three Months Ended June 30,
1996 Change from 1995
-----------------------------------
Due to (1)
Total Volume Rate
-----------------------------------
<S> <C> <C> <C>
Interest Income:
Total Loans, net $13,870 $40,987 ($27,117)
Mortgage loans held for sale 1,861 2,448 (587)
Investment securities and securities
available for sale 171 146 25
Other interest earning assets (323) (305) (18)
-------------------------
Total interest income (2) 15,579 43,276 (27,697)
-------------------------
Interest Expense:
Interest bearing deposits 5,702 10,790 (5,088)
Short-term borrowings 2,021 24,264 (22,243)
Long-term debt (233) (132) (101)
-------------------------
Total interest expense 7,490 34,922 (27,432)
-------------------------
Net interest income $ 8,089 $8,354 ($265)
-------------------------
</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> 14
<TABLE>
<CAPTION>
THE COLONIAL BANCGROUP, INC. (RESTATED)
AVERAGE VOLUME AND RATES Six Months Ended June 30,
(Unaudited) -----------------------------------------------------------------
1996 1995
--------------------------------- ------------------------------
Average Average
(Dollars in thousands) Volume Interest Rate Volume Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans, net............................................. $3,270,940 $146,131 8.97% $2,509,973 $115,024 9.01%
Mortgage loans held for sale........................... 141,389 5,376 7.60% 58,751 2,316 7.84%
Investment securities and securities available for sale 495,968 15,755 6.36% 475,182 14,913 6.29%
Other interest-earning assets.......................... 31,359 748 4.79% 35,239 888 5.08%
- ------------------------------------------------------------------------------------ --------------------
Total interest-earning assets(1)....................... 3,939,656 $168,010 8.56% 3,079,145 $133,141 8.70%
- ------------------------------------------------------------------------------------ --------------------
Nonearning assets...................................... 402,867 306,229
- -------------------------------------------------------------------------- -----------
Total assets......................................... $4,342,523 $3,385,374
- ------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity:
Interest-bearing deposits.............................. $2,699,453 $ 66,545 4.96% $2,169,705 $50,863 4.73%
Short-term borrowings.................................. 642,995 17,564 5.47% 410,376 12,658 6.15%
Long-term debt......................................... 37,962 1,277 6.73% 53,068 2,041 7.68%
- ------------------------------------------------------------------------------------ --------------------
Total interest-bearing liabilities..................... 3,380,410 $ 85,386 5.08% 2,633,149 $65,562 5.02%
- ------------------------------------------------------------------------------------ --------------------
Noninterest-bearing demand deposits.................... 567,574 474,549
Other liabilities...................................... 87,815 43,016
- -------------------------------------------------------------------------- -----------
Total liabilities...................................... 4,035,799 3,150,714
Shareholders' equity................................... 306,724 234,660
- -------------------------------------------------------------------------- -----------
Total liabilities and shareholders' equity............... $4,342,523 $3,385,374
- ------------------------------------------------------------------------------------------------------------------------------
Rate differential........................................ 3.48% 3.68%
Net yield on interest-earning assets..................... $82,624 4.20% $67,579 4.42%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Restated financial results above reflect the July 3, 1996 mergers of
Colonial BancGroup with Commercial Bancorp of Georgia and Southern Banking
Corporation. These mergers were accounted for as poolings of interest and
the financial results were restated accordingly.
(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> 15
<TABLE>
<CAPTION>
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
ANALYSIS OF INTEREST INCREASES (DECREASES) RESTATED
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(Dollars in thousands) Six Months Ended June 30,
1996 Change from 1995
--------------------------------
Due to (1)
Total Volume Rate
--------------------------------
<S> <C> <C> <C>
Interest Income:
Total Loans, net $31,107 $34,634 ($3,527)
Mortgage loans held for sale 3,060 3,550 (490)
Investment securities and securities
available for sale 842 671 171
Other interest earning assets (140) (92) (48)
--------------------------
Total interest income (2) 34,869 38,763 (3,894)
--------------------------
Interest Expense:
Interest bearing deposits 15,682 13,079 2,603
Short-term borrowings 4,906 13,497 (8,591)
Long-term debt (764) (533) (231)
--------------------------
Total interest expense 19,824 26,043 (6,219)
--------------------------
Net interest income $15,045 $12,720 $2,325
--------------------------
</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> 16
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES (RESTATED)
NET INTEREST INCOME:
Net interest income on a tax equivalent basis increased $8.0 million
to $42.7 million for the quarter ended June 30, 1996 from $34.7 million for the
quarter ended June 30, 1995. The net yield on interest earning assets
decreased from 4.32% to 4.26% for the three months ended June 30, 1995 and
1996, respectively, while the rate differential decreased slightly from 3.54%
to 3.50% for the three month period ended June 30, 1995 compared to 1996.
Net interest income on a tax equivalent basis increased $15.0 million
to $82.6 million for the six months ended June 30, 1996 from $67.6 million for
the same period in 1995. The net yield on interest earning assets decreased
from 4.42% to 4.20% for the six months ended June 30, 1995 and 1996,
respectively, while the rate differential decreased from 3.68% to 3.48% for the
six month period ended June 30, 1995 compared to 1996.
As reflected on the previous tables the increases for the three and
six months were primarily attributable to loan growth offset by decreasing
rates. The prime rate decreased from 9% in February 1995 to 8.5% in December
in 1995 to 8.25% in February 1996. The increase in deposit rates is primarily
due to competition in the market for time deposits as well as the acquisition
of Mt. Vernon Federal Savings Bank, a thrift, in the fourth quarter of 1995.
LOAN LOSS PROVISION:
The provision for loan losses for the first six months of 1996 was
$3,468,000 compared to $2,779,000 for the same period in 1995. Asset quality
has remained very good. The current allowance for loan losses provides a 187%
coverage of nonperforming assets compared to 157% at December 31, 1995 and 178%
at June 30, 1995. 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:
Noninterest income increased $2.8 million for the three months ended
June 30, 1996 compared to the same period in 1995. The increase is primarily
due to increased servicing related fee income of $965 million, additional fees
on deposit accounts of $0.8 million, and $1.0 million in other income primarily
related to the sale of mortgage loans.
The increase in noninterest income of $7.6 million for the six months
ended June 30, 1996 compared to the six months ended June 30, 1995 is primarily
due to $2.7 million in increased mortgage servicing related fee income, $1.5
million in additional fees on deposit accounts, and $3.4 million in other
income primarily related to the sale of loans.
Colonial Mortgage provides additional sources of noninterest income to
BancGroup through fees from its $10.1 billion servicing portfolio as
<PAGE> 17
THE COLONIAL BANCGROUP, INC AND SUBSIDIARIES (RESTATED)
NONINTEREST INCOME, CONTINUED
well as loan originations from its 8 regional offices. Colonial Mortgage
originates loans in 20 states. This noninterest income was $9.9 million and
$18.6 million for the three and six months ended June 30, 1996, respectively
compared to $7.6 million and $12.6 million for the three and six months ended
June 30, 1995, respectively.
OVERHEAD EXPENSES:
BancGroup's net overhead expense (total noninterest expense less
noninterest income excluding security gains) was $17.8 million and $14.7
million for the three months ended June 30,1996 and 1995, respectively and
$36.0 million and $31.2 million for the six months ended June 30, 1996 and
1995, respectively.
Salary and benefit expense increased $2.2 million and $4.2 million for the
three and six months ended June 30, 1996, as compared to the same periods in
1995. The increase for the six months was due primarily to $1.7 million from
acquisitions and $770,000 from increases in staff by Colonial Mortgage,
attributable to the higher levels of loan originations experienced in the first
half of 1996. The remaining increase is primarily due to normal wage increases.
The increase in other noninterest expenses has been due to increased
amortization of mortgage servicing rights, acquisition expenses, advertising,
public relations, donations and expenses related to Colonial Mortgage loan pool
pay-offs as well as increases of other miscellaneous expenses. These increases
were somewhat off-set by a reduction in the Bank Insurance Fund (BIF) deposit
assessment from $.23 per $100 in deposits for the six months ended June 30,
1995 to $0 per $100 in deposits for the same period in 1996.
OTHER INFORMATION:
BancGroup's subsidiary banks pay deposit insurance premiums to the
Savings Association Insurance Fund (SAIF) in addition to the BIF premiums
previously discussed. These deposits came from BancGroup's acquisitions of
savings association institutions. Legislation is currently pending for a one
time assessment to fully fund the SAIF fund. BancGroup currently has
approximately 30% or $1 million of deposits insured in the SAIF fund. The
impact of this additional assessment cannot be accurately determined until the
assessments are made by the FDIC.
PROVISION FOR INCOME TAXES:
BancGroup's provision for income taxes is based on an approximately
35.5% estimated annual effective tax rate for the years 1996 and 1995,
respectively. The provision for income taxes for the six months ended June 30,
1996 and 1995 was $14,910,000 and $11,446,000, respectively.
<PAGE> 18
COLONIAL BANCGROUP, INC. AND SUBSIDIARIES (RESTATED)
COMUPTATION OF EARNINGS PER SHARE
June 30, 1996
(Unaudited)(In thousands, except per share amounts)
EXHIBIT 11
<TABLE>
<CAPTION>
Primary Fully Diluted
Q-T-D Y-T-D Q-T-D Y-T-D
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $14,500 $27,050 $14,500 $27,050
Interest expense on $9,333,000, 7.50%
convertible subordinated debentures 181 364
Tax effect @ 35.40% for the quarter (64) (129)
------- ------- ------- -------
Net income $14,500 $27,050 $14,617 $27,285
------- ------- ------- -------
Average shares outstanding 16,006 15,922 16,006 15,922
Effect of stock options 507 496 507 496
------- ------- ------- -------
Primary average shares outstanding 16,513 16,418 16,513 16,418
------- ------- ------- -------
Contingent shares:
Addtional effect of stock options - 1
$8,074,200 / $28.00 288 288
------- -------
Fully diluted average shares outstanding 16,801 16,707
------- -------
Earnings per share:
------- ------- ------- -------
Net income $ 0.88 $ 1.65 $ 0.87 $ 1.63
------- ------- ------- -------
</TABLE>
