<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED
MARCH 31, 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: (334) 240-5000
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Shares of common stock ($2.50 par value) outstanding at April 30, 1996 was
13,574,845.
<PAGE> 2
Part I, Item 1
Condensed Consolidated Financial Statements
<PAGE> 3
<TABLE>
<CAPTION>
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CONDITION (Unaudited)
March 31, December 31, March 31,
(Dollars in thousands, except per share amounts) 1996 1995 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Cash and due from banks......................................... $ 140,571 $ 126,777 $ 120,749
Interest-bearing deposits in banks.............................. 5,003 5,384 2,481
Federal funds sold.............................................. 700 - 1,480
Securities available for sale................................... 172,206 159,863 83,239
Investment securities........................................... 259,165 269,493 334,817
Mortgage loans held for sale.................................... 193,672 110,486 61,428
Loans, net of unearned income................................... 2,945,625 2,875,581 2,255,647
Less:
Allowance for possible loan losses............................ (38,443) (36,912) (34,095)
- ------------------------------------------------------------------------------------------------------------
Loans, net...................................................... 2,907,182 2,838,669 2,221,552
Premises and equipment.......................................... 58,602 55,161 47,248
Excess of cost over tangible and identified intangible
assets acquired, net.......................................... 25,825 26,262 18,635
Mortgage servicing rights....................................... 88,788 80,053 57,829
Other real estate owned......................................... 9,785 8,781 8,748
Accrued interest and other assets............................... 62,894 60,288 56,448
- ------------------------------------------------------------------------------------------------------------
Total........................................................... $3,924,393 $3,741,217 $3,014,654
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity:
Deposits........................................................ $2,859,262 $2,785,958 $2,295,341
FHLB short-term borrowings...................................... 515,000 465,000 310,000
Other short-term borrowings..................................... 169,620 132,256 112,748
Subordinated debt............................................... 9,341 17,121 17,458
Other long-term debt............................................ 27,254 29,038 25,290
Other liabilities............................................... 75,688 58,696 47,931
- ------------------------------------------------------------------------------------------------------------
Total liabilities............................................... 3,656,165 3,488,069 2,808,768
- ------------------------------------------------------------------------------------------------------------
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, 13,539,827, 13,084,721 and 12,208,446 shares
issued and outstanding at March 31, 1996, December 31, 1995 and
March 31, 1995, respectively................................. 33,850 32,712 30,521
Additional paid in capital.................................... 144,334 137,107 115,672
Retained earnings............................................. 90,658 83,315 61,229
Unearned compensation......................................... (782) (822) -
Unrealized gains (losses) on securites available for sale,
net of taxes.................................................. 168 836 (1,536)
- ------------------------------------------------------------------------------------------------------------
Total shareholders' equity...................................... 268,228 253,148 205,886
- ------------------------------------------------------------------------------------------------------------
Total........................................................... $3,924,393 $3,741,217 $3,014,654
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to the Unaudited Condensed Consolidated Financial Statements.
<PAGE> 4
<TABLE>
<CAPTION>
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Three Months Ended
CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) March 31,
------------------
(Dollars in thousands, except per share amounts) 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Interest Income:
Interest and fees on loans.................................... $65,325 $48,031
Interest on investments....................................... 6,479 5,912
Other interest income......................................... 182 66
- ----------------------------------------------------------------------------------
Total interest income......................................... 71,986 54,009
- ----------------------------------------------------------------------------------
Interest Expense:
Interest on deposits.......................................... 29,571 20,502
Interest on short-term borrowings............................. 8,361 5,152
Interest on long-term debt.................................... 648 1,177
- ----------------------------------------------------------------------------------
Total interest expense........................................ 38,580 26,831
- ----------------------------------------------------------------------------------
Net Interest Income Before Provision for
Possible Loan Losses........................................ 33,406 27,178
Provision for possible loan losses............................ 1,499 1,067
- ----------------------------------------------------------------------------------
Net Interest Income After Provision for
Possible Loan Losses........................................ 31,907 26,111
- ----------------------------------------------------------------------------------
Noninterest Income:
Mortgage servicing and origination fees....................... 6,853 5,220
Service charges on deposit accounts........................... 4,027 3,289
Other charges, fees and commissions........................... 908 830
Securities gains, net......................................... 114 5
Other income.................................................. 2,873 719
- ----------------------------------------------------------------------------------
Total noninterest income...................................... 14,775 10,063
- ----------------------------------------------------------------------------------
Noninterest Expense:
Salaries and employee benefits................................ 11,242 9,596
Occupancy expense of bank premises, net....................... 2,488 2,142
Furniture and equipment expenses.............................. 2,500 1,960
Amortization of mortgage servicing rights..................... 2,742 1,702
Amortization of intangible assets............................. 437 288
Other expense................................................. 10,161 7,714
- ----------------------------------------------------------------------------------
Total noninterest expense..................................... 29,570 23,402
- ----------------------------------------------------------------------------------
Income before income taxes 17,112 12,772
Applicable income taxes....................................... 6,058 4,471
- ----------------------------------------------------------------------------------
Net Income.................................................... $11,054 $ 8,301
- ----------------------------------------------------------------------------------
Earnings per share:
Primary...................................................... $ 0.82 $ 0.69
Fully diluted................................................ 0.80 0.67
Dividends paid: Common Stock.................................. $ 0.27 N/A
Class A(*).................................... N/A $ 0.225
Class B(*).................................... N/A 0.125
- ----------------------------------------------------------------------------------
</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 Flows
(Unaudited) (In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-------- --------
<S> <C> <C>
Net cash (used in) provided by operating activities ................................... ($61,575) $ 11,688
-------- --------
Cash flows from investing activities:
Proceeds from maturities of securities available
for sale .......................................................................... 25,215 1,775
Proceeds from sales of securities available for sale ................................ 1 180
Purchase of securities available for sale ........................................... (38,671) (4,652)
Proceeds from maturities of investment securities ................................... 10,203 8,054
Proceeds from sales of investment securities ........................................ 19 365
Purchase of investment securities ................................................... (10,007) (3,348)
Net decrease in short-term securities ............................................... 10,000 -
Net increase in loans ............................................................... (72,419) (131,856)
Cash received in bank acquisitions .................................................. - 5,118
Capital expenditures ................................................................ (5,136) (1,699)
Proceeds from sale of other real estate owned ....................................... 870 784
Other, net .......................................................................... - (31)
-------- --------
Net cash used in investing activities ................................................. (79,925) (125,310)
-------- --------
Cash flows from financing activities:
Net increase in demand, savings, and time deposits .................................. 73,304 77,833
Net increase in federal funds purchased, repurchase
agreements and other short-term borrowings ........................................ 87,361 78,191
Proceeds from issuance of long-term debt ............................................ 350 5,834
Repayment of long-term debt ......................................................... (2,104) (53,644)
Proceeds from issuance of common stock .............................................. 413 234
Dividends paid ...................................................................... (3,711) (2,113)
-------- --------
Net cash provided by financing activities ............................................. 155,613 106,335
-------- --------
Net increase (decrease) in cash and cash equivalents .................................. 14,113 (7,287)
Cash and cash equivalents at beginning of year ........................................ 132,161 131,997
Cash and cash equivalents at March 31 ................................................. $146,274 $124,710
-------- --------
Supplemental Disclosure of cash flow information:
Cash paid during the three months for:
Interest .......................................................................... $ 34,266 $ 25,219
Income taxes ...................................................................... 31 1,300
Non-cash investing activities:
Transfer of loans to other real estate .............................................. $ 1,659 $ 1,476
Origination of loans for the sale of other real estate .............................. 164 277
Non-cash financing activities:
Conversion subordinated debentures to common stock .................................. $ 7,656 -
Assets acquired in business combinations ............................................ - $ 55,136
Liabilities assumed in business combinations ........................................ - 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/RESTATEMENT
The Colonial BancGroup, Inc. ("BancGroup") and its subsidiaries have
not changed their accounting and reporting policies from those stated in the
1995 annual report except as discussed herein in Note D. 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 March 31, 1996 and the results of operations and cash flows for the
interim periods ended March 31, 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 December 21, 1995 BancGroup entered into a definitive agreement to
merge Commercial Bancorp of Georgia into Colonial BancGroup. Commercial
Bancorp's subsidiary, Commerial Bank of Georgia ("Commercial"), will become a
wholly owned subsidiary of BancGroup. Commercial has assets of approximately
$235 million and deposits and other liabilities of approximately $215 million.
Commercial operates seven full-service offices in the northern area of
metropolitan Atlanta.
On January 22, 1996 BancGroup entered into a definitive agreement to
merge Dothan Federal Savings Bank ("Dothan Federal") into Colonial Bank.
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.
On February 15, 1996 BancGroup entered into a definitive agreement to
merge Southern Banking Corporation into BancGroup. Southern Banking
Corporation's subsidiary Southern Bank of Central Florida ("Southern") will
become a wholly-owned subsidiary of BancGroup. Southern has approximately $229
million in assets and deposits and other liabilities of approximately $212
million. Southern operates eight branch locations in three counties comprising
the Orlando, Florida metropolitan area.
NOTE C - COMMITMENTS AND CONTINGENCIES
BancGroup's subsidiary banks make loan commitments and incur
contingent liabilities in the normal course of business which are not reflected
in the consolidated statements of condition.
<PAGE> 7
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Notes, Continued
NOTE D - ACCOUNTING CHANGE
BancGroup adopted 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.
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 three months ended March 31, 1996.
<PAGE> 8
Part I, Item 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
<PAGE> 9
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations
FINANCIAL CONDITION:
Ending balances of total assets, securities, mortgage loans held for
sale, net loans, and deposits changed from December 31, 1995 to March 31, 1996
as follows (in thousands):
<TABLE>
<CAPTION>
Increase
-----------------
Amount %
-------- -----
<S> <C> <C>
Total assets 183,176 4.9%
Securities 2,015 0.5%
Mortgage loans held
for sale 83,186 75.3%
Loans, net of
unearned income 70,044 2.4%
Deposits 73,304 2.6%
</TABLE>
Securities:
Investment securities and securities available for sale have increased
$2.0 million from December 31, 1995 to March 31, 1996. The increase in
securities is 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 $70 million is from
internal loan growth at an annualized rate of 10%. 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 $308.0 million and $69.8 million and sales
thereof amounted to approximately $224.8 million and $68.9 million for the
three months ended March 31, 1996 and 1995, respectively. The increase in
orginations was primarily due to the lower rates in December and January which
resulted in refinancings as well as new originations.
<PAGE> 10
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Gross loans by category and summary of loan loss experience are shown in the
following schedules.
<TABLE>
<CAPTION>
GROSS LOANS BY CATEGORY March 31, Dec. 31, March 31,
(In thousands) 1996 1995 1995
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Commercial, financial, and
agricultural $ 385,604 $ 362,991 $ 318,716
Real estate-commercial 652,038 623,805 576,853
Real estate-construction 251,043 234,487 169,750
Real estate-residential 1,405,690 1,411,380 961,277
Installment and consumer 206,901 199,481 188,357
Other 44,521 43,667 40,757
- --------------------------------------------------------------------------------------------------------------
Total loans $2,945,797 $2,875,811 $2,255,710
- --------------------------------------------------------------------------------------------------------------
Percent of loans in each
category to total loans:
Commercial financial, and
agricultural 13.1% 12.6% 14.1%
Real estate-commercial 22.1% 21.7% 25.6%
Real estate-construction 8.5% 8.2% 7.5%
Real estate-residential 47.7% 49.1% 42.6%
Installment and consumer 7.1% 6.9% 8.4%
Other 1.5% 1.5% 1.8%
- --------------------------------------------------------------------------------------------------------------
100.0% 100.0% 100.0%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Loans secured by commercial real estate and other commercial loans
increased $28 million and $23 million, respectively during the first three
months of 1996. These loans continue to be a significant source of loan
growth, and are concentrated in various geographic market areas in Alabama. The
decrease in real estate - residential loans of $6 million is due to normal
run-off.
<PAGE> 11
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
<TABLE>
<CAPTION>
SUMMARY OF LOAN LOSS EXPERIENCE
Three Months Year Three Months
Ended Ended Ended
March 31, Dec. 31, March 31,
(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 397 2,211 661
Real estate-commercial 602 339 267
Real estate-construction 23 44 --
Real estate-residential 90 263 35
Installment and consumer 525 2,320 309
Other 64 163 19
- --------------------------------------------------------------------------------------------------------------
Total charge-offs 1,701 5,340 1,291
- --------------------------------------------------------------------------------------------------------------
Recoveries:
Commercial, financial, and
agricultural 82 698 137
Real estate-commercial 1,126 26 --
Real estate-construction 1 11 --
Real estate-residential 84 159 90
Installment and consumer 421 1,294 368
Other 19 45 1
- --------------------------------------------------------------------------------------------------------------
Total recoveries 1,733 2,233 596
- --------------------------------------------------------------------------------------------------------------
Net charge-offs (recoveries) (32) 3,107 695
Addition to allowance charged to
operating expense 1,499 5,480 1,068
Allowance added from bank
acquisitions -- 1,129 312
- --------------------------------------------------------------------------------------------------------------
Allowance for possible loan
losses-end of period $38,443 $36,912 $34,095
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Asset quality as measured by nonperforming assets remains very good at
0.85% of net loans and other real estate. Nonperforming assets have increased
$2.7 million from December 31, 1995. The increase in nonperforming assets is
$1.7 million from nonaccrural loans and $1 million in other real estate. The
increases 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 1.31% of loans at March 31, 1996. The
increase in allowance since year end has been due to provisions in excess of
net charge-offs totaling $1.5 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>
March 31, Dec. 31, March 31,
1996 1995 1995
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Nonaccrual loans $14,279 $12,600 $ 7,067
Restructured loans 1,035 1,035 1,311
- -----------------------------------------------------------------------------------------
Total nonperforming loans 15,314 13,635 8,378
Other real estate owned 9,785 8,781 8,748
- -----------------------------------------------------------------------------------------
Total nonperforming assets* $25,099 $22,416 $17,126
- -----------------------------------------------------------------------------------------
Aggregate loans contractually
past due 90 days for which
interest is being accrued $ 3,020 $ 1,029 $ 2,185
Net charge-offs (recoveries)
year-to-date (32) 3,107 695
- -----------------------------------------------------------------------------------------
RATIOS
Period end:
Total nonperforming assets as
a percent of net loans and
other real estate 0.85% 0.78% 0.76%
Allowance as a percent of net
loans 1.31% 1.28% 1.51%
Allowance as a percent of
nonperforming assets* 153% 165% 199%
Allowance as a percent of
nonperforming loans 251% 271% 407%
For the period ended:
Net charge-offs (recoveries)
as a percent of average net
loans-(annualized basis) (0.01)% 0.13% 0.13%
- -----------------------------------------------------------------------------------------
*Excludes loans contractually past due 90 days for which interest is being
accrued.
</TABLE>
<PAGE> 13
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Management, through its loan officers, internal loan review staff, and
external examinations by regulatory agencies and independent auditors, has
identified approximately $132 million of potential problem loans not included
above. The status of these loans is reviewed at least quarterly by loan
officers and the centralized loan review function and annually by independent
auditors and regulatory agencies. In connection with such reviews collateral
values are updated where considered necessary. If collateral values are judged
insufficient and other sources of repayment inadequate the loans are reduced to
estimated recoverable amounts through increases in reserves allocated to the
loans or charge-offs. As of March 31, 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 $15,314,000 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>
March 31, Dec. 31, March 31,
(In thousands) 1996 1995 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial, financial, and
agricultural $ 6,832 $ 6,915 $ 6,796
Real estate-commercial 12,025 12,306 11,295
Real estate-construction 5,767 5,593 3,067
Real estate-mortgage 7,028 7,057 9,613
Installment and consumer 3,755 2,853 2,099
Other 3,036 2,188 1,225
- -----------------------------------------------------------------------------------------
TOTAL $38,443 $36,912 $34,095
- -----------------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
LIQUIDITY:
The maintenance of an adequate liquidity position is a principal
component of BancGroup's asset/liability management strategy. BancGroup's
governing policy provides for daily and longer term monitoring of both sources
and uses of funds to properly maintain the cash position. To assist in funding
a projected 10% 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 $800 million with only $515 million outstanding
at March 31, 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 103.0% at March 31, 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 March 31, 1996, $75 million are 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 9% of assets as of March 31, 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 March 31, 1996 consists of $268.2 million of equity less $25.8 million in
intangibles providing a 6.42% leverage ratio at March 31, 1996 compared to
6.19% at December 31, 1995. The ratio of shareholders' equity to total assets
at March 31, 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> 15
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Management's Discussion, Continued
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995:
SUMMARY:
BancGroup's net income increased $2,753,000 from $8,301,000 or $0.67
per fully diluted share to $11,054,000 or $0.80 per fully diluted share for the
three months ended March 31, 1995 and 1996, respectively. This increase is
primarily attributable to increases in interest earning assets and noninterest
income partially off-set by a lower interest spread and increases in loan loss
provision and noninterest expense.
<PAGE> 16
<TABLE>
<CAPTION>
THE COLONIAL BANCGROUP, INC.
AVERAGE VOLUME AND RATES Three Months Ended March 31,
(Unaudited) ------------------------------------------------------------
1996 1995
------------------------------ ----------------------------
Average Average
(Dollars in thousands) Volume Interest Rate Volume Interest Rate
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans, net............................................. $2,900,975 $63,595 8.80% $2,150,112 $47,499 8.96%
Mortgage loans held for sale........................... 123,470 2,035 6.59% 41,429 836 8.08%
Investment securities and securities
available for sale................................... 428,621 6,750 6.31% 402,770 6,209 6.19%
Other interest-earning assets.......................... 15,826 182 4.62% 4,434 66 6.07%
- --------------------------------------------------------------------------------- ------------------
Total interest-earning assets(1)....................... 3,468,892 $72,562 8.40% 2,598,745 $54,610 8.50%
- --------------------------------------------------------------------------------- ------------------
Nonearning assets...................................... 328,460 252,358
- ------------------------------------------------------------------------- ----------
Total assets......................................... $3,797,352 $2,851,103
- ------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity:
Interest-bearing deposits.............................. $2,347,916 $29,571 5.07% $1,834,760 $20,502 4.53%
Short-term borrowings.................................. 609,845 8,361 5.51% 345,466 5,152 5.99%
Long-term debt......................................... 39,440 648 6.57% 62,546 1,177 7.53%
- --------------------------------------------------------------------------------- ------------------
Total interest-bearing liabilities..................... 2,997,201 $38,580 5.18% 2,242,772 $26,831 4.84%
- --------------------------------------------------------------------------------- ------------------
Noninterest-bearing demand deposits.................... 476,014 373,451
Other liabilities...................................... 61,664 38,758
- ------------------------------------------------------------------------- ----------
Total liabilities...................................... 3,534,879 2,654,981
Shareholders' equity................................... 262,473 196,122
- ------------------------------------------------------------------------- ----------
Total liabilities and shareholders' equity............... $3,797,352 $2,851,103
- ------------------------------------------------------------------------------------------------------------------------
Rate differential........................................ 3.22% 3.66%
Net yield on interest-earning assets..................... $33,982 3.94% $27,779 4.34%
- ------------------------------------------------------------------------------------------------------------------------
</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> 17
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
ANALYSIS OF INTEREST INCREASES (DECREASES)
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
(Dollars in thousands) Three Months Ended March 31,
1996 Change from 1995
----------------------------
Due to (1)
Total Volume Rate
------- --------- ------
<S> <C> <C> <C>
Interest Income:
Total Loans, net $16,096 $41,628 ($25,532)
Mortgage loans held for sale 1,199 5,640 (4,441)
Investment securities and securities
available for sale 541 416 125
Other interest earning assets 116 580 (464)
------- ------- --------
Total interest income (2) 17,952 48,264 (30,312)
------- ------- --------
Interest Expense:
Interest bearing deposits 9,069 6,353 2,716
Short-term borrowings 3,209 14,980 (11,771)
Long-term debt (529) (394) (135)
------- ------- --------
Total interest expense 11,749 20,939 (9,190)
------- ------- --------
Net interest income $ 6,203 $27,325 ($21,122)
------- ------- --------
</TABLE>
(1) Increases (decreases) are attributable to volume changes and rate changes
on the following basis: Volume Change = change in volume times old rate.
Rate Change = change in rate times old volume. The Rate/Volume Change =
change in volume times change in rate, and it is allocated between volume
change and rate change at the ratio that the absolute value of each
component bears to the absolute value of their total.
(2) Interest earned on obligations of state and political subdivisions is
reflected on a tax equivalent basis. Tax equivalent interest earned is:
actual interest earned times 145%. The taxable equivalent adjustment has
given effect to the disallowance of interest, for federal income tax
purposes, related to certain tax-free assets. Dividends earned on
preferred stock are reflected on a tax equivalent basis. Tax equivalent
dividends earned are: acutal dividends times 137.7%. Tax equivalent
average rate is tax equivalent interest or dividends earned divided by
average volume.
<PAGE> 18
NET INTEREST INCOME:
Net interest income on a tax equivalent basis increased $6.2 million
to $34.0 million for the quarter ended March 31, 1996 from $27.8 million for
the quarter ended March 31, 1995. The net yield on interest earning assets
decreased from 4.34% to 3.94% for the three months ended March 31, 1995 and
1996, respectively, while the rate differential decreased from 3.66% to 3.22%
for the three month period ended March 31, 1995 compared to 1996.
As reflected on the previous table the increase for the three months
was primarily attributable to loan growth offset by decreasing rates. The
prime rate decreased from 9% in February 1995 to 8.5% in December 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.
LOAN LOSS PROVISION:
The provision for loan losses for the first three months of 1996 was
$1,499,000 compared to $1,067,000 for the same period in 1995. Asset quality
has remained very good. The current allowance for loan losses provides a 153%
coverage of nonperforming assets compared to 165% at December 31, 1995 and 199%
at March 31, 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:
The increase in noninterest income for the first quarter of 1996
compared to the first quarter of 1995 of $4.7 million is primarily due to
increased mortgage servicing related fee income of $1.6 million, additional
fees on deposit accounts of $0.7 million, and $2.2 million in other income
primarily related to the sale of mortgage loans.
Colonial Mortgage provides additional sources of noninterest income to
BancGroup through fees from its $9.8 billion servicing portfolio as well as
loan originations from its 8 regional offices. Colonial Mortgage originates
loans in 20 states. This noninterest income was $8.7 million and $5.0 for the
three months ended March 31, 1996 and 1995, respectively.
OVERHEAD EXPENSES:
BancGroup's net overhead expense (total noninterest expense less
noninterest income excluding security gains) was $14.9 million and $13.3
million for the three months ended March 31,1996 and 1995, respectively.
Salary and benefit expense increased $1.6 million for the three months
ended March 31, 1996, as compared to the same period in 1995. This increase
was due primarily to $900,000 from acquisitions and $340,000 from increases in
staff by Colonial Mortgage, attributable to the higher levels of loan
originations experienced in the first quarter of 1996. The remaining increase
is primarily due to normal wage increases.
<PAGE> 19
The remaining increase in other noninterest expenses has been due to
increased amortization of mortgage servicing rights, acquisition expenses,
advertising, public relations and donations 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 three months ended March 31, 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 in Congress
to recapitalize the SAIF with a special one time charge estimated to be
approximately .75% of the deposits insured by SAIF. This recapitalization
would allow a reduction in the current .23% average annual premium rate.
BancGroup currently has approximately $764 million, after adjusting for certain
allowances in the current proposal, which would be subject to the special
assessment. The additional assessment is estimated to be approximately $5.7
million.
PROVISION FOR INCOME TAXES:
BancGroup's provision for income taxes is based on an approximately
35.4% and 35% estimated annual effective tax rate for the years 1996 and 1995,
respectively. The provision for income taxes for the three months ended March
31, 1996 and 1995 was $6,058,000 and $4,471,000, respectively.
<PAGE> 20
Part II
Other Information
<PAGE> 21
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 - On April 17,
1996 the annual meeting of the shareholders of Colonial BancGroup was
held; shareholders present at such meeting, by proxy or in person,
elected the following directors:
<TABLE>
<CAPTION>
Term expires in 1999:
For Against Withhold
--------- ------- ----------
<S> <C> <C> <C>
Young J. Boozer 7,829,156 14,306 56,259
William Britton 7,889,593 5,019 5,109
Patrick F. Dye 7,873,862 20,650 5,209
D. B. Jones 7,890,593 4,019 5,109
Milton E. McGregor 7,861,033 32,880 5,809
Jack H. Rainer 7,873,876 20,736 5,109
In addition to the foregoing the following directors will continue to
serve.
Term expires in 1997:
Jerry J. Chesser
John Ed Mathison
Joe D. Mussafer
William E. Powell, III
Frances E. Roper
Ed V. Welch
Term expires in 1998:
Augustus K. Clements, III
Robert S. Craft
Clinton O. Holdbrooks
Harold D. King
Robert E. Lowder
John C.H. Miller, Jr.
</TABLE>
Exhibit 11- Calculation of earnings per share (attached)
Item 5: Other Events - N/A
Item 6: Exhibits and Reports on Form 8-K - No reports on form 8-K were
filed during the three months ended March 31, 1996.
Exhibit 27 - Financial Data Schedule (for SEC use only)
<PAGE> 22
COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
March 31, 1996
(Unaudited)(In thousands, except per share amounts)
EXHIBIT 11
<TABLE>
<CAPTION>
Primary Fully Diluted
------- -------------
<S> <C> <C>
Net income $11,054 $11,054
Interest expense on $9,333,000, 7.50%
convertible subordinated debentures 183
Tax effect @ 35.40% for the quarter (65)
------- -------
Net income $11,054 $11,172
------- -------
Average shares outstanding 13,441 13,441
Effect of stock options 105 105
------- -------
Primary average shares outstanding 13,546 13,546
------- -------
Contingent shares:
Addtional effect of stock options 4
Effect of convertible debentures:
$9,333,000 / $28.00 334
-------
Fully diluted average shares outstanding 13,884
-------
Earnings per share:
------- -------
Net income $ 0.82 $ 0.80
------- -------
</TABLE>
<PAGE> 23
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
The Colonial BancGroup, Inc.
By:
------------------------------------
W. Flake Oakley
Chief Financial Officer, Secretary & Treasurer
Date: May 15, 1996
------------
<PAGE> 24
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: May 15, 1996
------------
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 140,571
<INT-BEARING-DEPOSITS> 5,003
<FED-FUNDS-SOLD> 700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 172,206
<INVESTMENTS-CARRYING> 259,165
<INVESTMENTS-MARKET> 260,828
<LOANS> 2,945,625
<ALLOWANCE> 38,443
<TOTAL-ASSETS> 3,924,393
<DEPOSITS> 2,859,262
<SHORT-TERM> 684,620
<LIABILITIES-OTHER> 75,688
<LONG-TERM> 36,595
0
0
<COMMON> 33,850
<OTHER-SE> 234,378
<TOTAL-LIABILITIES-AND-EQUITY> 3,924,393
<INTEREST-LOAN> 65,325
<INTEREST-INVEST> 6,479
<INTEREST-OTHER> 182
<INTEREST-TOTAL> 71,986
<INTEREST-DEPOSIT> 29,571
<INTEREST-EXPENSE> 38,580
<INTEREST-INCOME-NET> 33,406
<LOAN-LOSSES> 1,499
<SECURITIES-GAINS> 114
<EXPENSE-OTHER> 29,570
<INCOME-PRETAX> 17,112
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,054
<EPS-PRIMARY> 0.82
<EPS-DILUTED> 0.80
<YIELD-ACTUAL> 3.94
<LOANS-NON> 14,279
<LOANS-PAST> 3,020
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 132,000
<ALLOWANCE-OPEN> 36,912
<CHARGE-OFFS> 1,701
<RECOVERIES> 1,733
<ALLOWANCE-CLOSE> 38,443
<ALLOWANCE-DOMESTIC> 38,443
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
