<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1997 COMMISSION FILE NUMBER 1-13508
[LOGO] THE COLONIAL BANCGROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 63-0661573
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Commerce Street
Montgomery, Alabama 36104
---------------------------------------
(Address of principle executive offices)
(334) 240-5000
-------------------------------
(Registrant's telephone number)
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 and (2) has been subject to the filing requirements for
at least the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Class Outstanding at October 31, 1997
- ----------------------------- -------------------------------
Common Stock, $2.50 Par Value 42,504,863
<PAGE> 2
THE COLONIAL BANCGROUP, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page Number
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Condition - September 30, 1997, December 31, 1996 and
September 30, 1996................................................................................................... 1
Consolidated Statements of Income - Three months ended September 30, 1997 and
September 30, 1996 and Nine months ended September 30, 1997 and September 30, 1996.................................. 2
Consolidated Statements of Cash Flows - Nine months ended September 30, 1997
and September 30, 1996............................................................................................... 3
Notes to Consolidated Financial Statements - September 30, 1997..................................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................ 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................................................... 15
Item 6. Exhibits and Reports on Form 8-K..................................................................................... 15
SIGNATURES................................................................................................................... 16
</TABLE>
<PAGE> 3
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1997 1996* 1996*
------------- ------------ -------------
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 221,463 $ 239,781 $ 177,301
Interest-bearing deposits in banks 14,013 5,143 5,117
Federal funds sold 2,470 15,990 7,780
Securities available for sale 524,740 462,313 460,250
Investment securities 311,796 300,121 322,124
Mortgage loans held for sale 182,878 157,966 161,864
Loan, net of unearned income 4,970,765 4,215,802 4,089,404
Less: Allowance for possible loan losses (61,913) (53,443) (50,833)
----------- ----------- -----------
Loans, net 4,908,852 4,162,359 4,038,571
Premises and equipment 123,776 93,009 91,559
Excess of cost over tangible and identified intangible
assets acquired, net 68,849 30,431 31,048
Mortgage servicing rights 134,118 98,856 95,076
Other real estate owned 12,612 10,229 11,170
Accrued interest and other assets 100,360 96,339 91,757
----------- ----------- -----------
TOTAL ASSETS $ 6,605,927 $ 5,672,537 $ 5,493,617
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits $ 5,136,556 $ 4,299,821 $ 4,237,610
FHLB short-term borrowings 610,000 715,000 580,000
Other short-term borrowings 185,333 129,129 164,695
Subordinated debt 6,208 8,612 9,193
Trust preferred securities 70,000 -- --
Other long-term debt 24,891 30,480 24,597
Other liabilities 100,586 86,787 84,700
----------- ----------- -----------
Total liabilities 6,133,574 5,269,829 5,100,795
----------- ----------- -----------
SHAREHOLDERS' EQUITY
Common Stock, $2.50 par value; 100,000,000 shares
authorized, 41,964,197; 39,145,685 and 38,932,764
shares issued and outstanding at September 30, 1997,
December 31, 1996 and September 30,1996, respectively 104,910 97,864 97,332
Additional paid in capital 187,260 168,064 165,829
Retained earnings 180,778 137,956 136,686
Unearned compensation (1,796) (1,603) (1,358)
Unrealized gains (losses) on securities available for sale,
net of taxes 1,201 427 (5,667)
----------- ----------- -----------
Total shareholders' equity 472,353 402,708 392,822
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,605,927 $ 5,672,537 $ 5,493,617
=========== =========== ===========
</TABLE>
* See Note A
See Notes to the Unaudited Condensed Consolidated Financial Statements
1
<PAGE> 4
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ---------------------
1997 1996* 1997 1996*
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $321,289 $267,168 $112,160 $ 93,566
Interest on investments 39,944 31,519 13,607 10,859
Other interest income 1,597 2,256 448 419
-------- -------- -------- ---------
Total interest income 362,830 300,943 126,215 104,844
-------- -------- -------- ---------
INTEREST EXPENSE:
Interest on deposits 146,277 120,775 50,359 41,954
Interest on short-term borrowings 30,713 28,749 10,940 10,114
Interest on long-term debt 5,507 2,023 1,984 696
-------- -------- -------- ---------
Total interest expense 182,497 151,547 63,283 52,764
-------- -------- -------- ---------
NET INTEREST INCOME 180,333 149,396 62,932 52,080
Provision for possible loan losses 8,833 6,292 2,578 2,669
-------- -------- -------- ---------
Net Interest Income After Provision for
Possible Loan Losses 171,500 143,104 60,354 49,411
-------- -------- -------- ---------
NONINTEREST INCOME:
Mortgage servicing and origination fees 25,242 21,229 8,375 6,365
Service charges on deposit accounts 18,655 16,196 5,901 4,462
Other charges, fees and commissions 5,170 4,795 2,347 2,504
Securities gains (losses), net 63 99 80 (22)
Other income 12,493 11,581 4,822 4,668
-------- -------- -------- ---------
Total noninterest income 61,623 53,900 21,525 17,977
-------- -------- -------- ---------
NONINTEREST EXPENSE:
Salaries and employee benefits 59,343 52,555 21,398 17,474
Occupancy expense, net 14,489 11,557 4,742 3,491
Furniture and equipment expenses 11,975 9,873 4,397 3,320
Amortization of mortgage servicing rights 12,161 8,954 4,449 3,238
Amortization of intangible assets 2,129 1,558 849 537
SAIF assessment -- 4,465 -- 4,465
Acquisition expense 3,333 1,610 579 628
Other expense 40,179 38,806 13,229 13,240
-------- -------- -------- ---------
Total noninterest expense 143,609 129,378 49,643 46,393
-------- -------- -------- ---------
Income before taxes 89,514 67,626 32,236 20,995
Applicable income taxes 33,460 23,794 12,187 7,360
-------- -------- -------- ---------
Net income $ 56,054 $ 43,832 $ 20,049 $ 13,635
======== ======== ======== =========
EARNINGS PER SHARE:
Primary $ 1.32 $ 1.11 $ 0.47 $ 0.34
Fully diluted 1.31 1.10 0.47 0.34
</TABLE>
* See Note A
See Notes to the Unaudited Condensed Consolidated Financial Statements.
2
<PAGE> 5
THE COLONIAL BANCGROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1996*
--------- ---------
<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 36,857 $ (5,309)
--------- ---------
Cash flows from investing activities:
Proceeds from maturities of securities available for sale 77,406 76,170
Proceeds from sales/paydowns of securities available for sale 25,291 28,732
Purchase of securities available for sale (52,821) (100,090)
Proceeds from maturities of investment securities 129,706 129,442
Purchase of investment securities (126,636) (146,027)
Net decrease in short-term securities -- 9,400
Net increase in loans (318,517) (488,590)
Cash received in bank acquisitions/dispositions 20,425 11,471
Capital expenditures (28,297) (18,003)
Proceeds from sale of other real estate owned 2,784 5,944
Other, net 3,009 30
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES $(267,650) $(491,521)
--------- ---------
Cash flows from financing activities:
Net increase in demand, savings, and time deposits 230,919 319,113
Net (decrease) increase in federal funds purchased, repurchase agreements
and other short-term borrowings (56,579) 120,030
Proceeds from issuance of long-term debt 80,000 5,017
Repayment of long-term debt (17,614) (3,664)
Proceeds from issuance of common stock 5,639 2,476
Acquisition of treasury stock for issuance in a purchase business combination (15,887) --
Dividends paid ($.45 per share in 1997 and $.405 per share in 1996) (18,653) (13,451)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 207,825 $ 429,521
--------- ---------
NET DECEASE IN CASH AND CASH EQUIVALENTS (22,968) (67,309)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 260,914 257,507
--------- ---------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 $ 237,946 $ 190,198
========= =========
Disclosure of cash flow information
Cash paid during nine months for:
Interest $ 171,815 $ 150,129
Income taxes 34,483 24,949
Non-cash investing activities:
Transfer of loans to other real estate 6,410 3,933
Origination of loans for the sale of other real estate -- 205
Securitization of mortgage loans -- 87,641
Non-cash financing activities:
Conversion of subordinated debentures 2,395 9,228
Assets acquired in business combinations 521,251 78,505
Liabilities assumed in business combinations (464,945) 75,905
</TABLE>
* See Note A
See Notes to the Unaudited Condensed Consolidated Financial Statements
3
<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
1996 annual report. These unaudited interim financial statements should be read
in conjunction with the audited financial statements and footnotes included in
BancGroup's 1996 annual report and also the restated audited financial
statements and footnotes included in BancGroup's 8-K filing dated June 24,
1997. The September 30, 1996 financial statements have been restated to give
retroactive effect to the pooling-of-interests business combinations with
Jefferson Bancorp, Inc., D/W Bankshares, Inc. and Fort Brooke Bancorporation.
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 September 30, 1997 and 1996 and the results of operations and cash flows for
the interim periods ended September 30, 1997 and 1996. All 1997 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 - BUSINESS COMBINATIONS
On January 3, 1997, Jefferson Bancorp, Inc. ("Jefferson") was merged
into BancGroup. Jefferson's subsidiary, Jefferson Bank of Florida was merged
into BancGroup's existing subsidiary bank, Colonial Bank. At December 31, 1996
Jefferson had approximately $473 million in assets and deposits and other
liabilities of approximately $441 million. Jefferson operated fifteen offices in
Miami and South Florida. This business combination was accounted for as a
pooling of interests and the financial statements have been restated
accordingly.
On January 3, 1997, Tomoka Bancorp, Inc. ("Tomoka") was merged into
BancGroup. Tomoka's subsidiary, Tomoka State Bank, was merged into BancGroup's
existing subsidiary bank, Colonial Bank. At December 31, 1996, Tomoka had
approximately $77 million in assets and deposits and other liabilities of
approximately $70 million. Tomoka operated four offices in Ormond Beach, New
Smyrna Beach, Pierson and Port Orange, Florida. This business combination was
accounted for as a pooling of interests, however, due to immateriality, the
prior year financial statements were not restated.
On January 9, 1997, First Family Financial Corporation ("First Family")
was merged into BancGroup. First Family's subsidiary, First Family Bank was
merged into BancGroup's existing subsidiary bank, Colonial Bank. At December 31,
1996, First Family had approximately $167 million in assets and deposits and
other liabilities of approximately $158 million. First Family operated six
offices in part of the Orlando metropolitan area. This business combination was
accounted for as a purchase and the results of operations are included in the
accompanying financial statements only from the date of consummation forward.
On January 31, 1997, D/W Bankshares, Inc. ("D/W") was merged into
BancGroup. D/W's subsidiary, Dalton/Whitfield Bank & Trust, was merged into
BancGroup's existing subsidiary bank, Colonial Bank. At December 31, 1996, D/W
had approximately $139 million in assets and deposits and other liabilities of
approximately $129 million. D/W operated three offices in the Dalton, Georgia
area. This business combination was accounted for as a pooling of interests and
the financial statements have been restated accordingly.
On March 5, 1997, Shamrock Holding, Inc. ("Shamrock") was merged into
BancGroup. Shamrock's subsidiary, Union Bank, was merged into BancGroup's
existing subsidiary, Colonial Bank. As of December 31, 1996, Union Bank had
approximately $54 million in assets and deposits and other liabilities of
approximately $47 million. This business combination was accounted for as a
purchase and the results of operations are included in the accompanying
financial statements only from the date of consummation forward.
On April 22, 1997, Fort Brooke Bancorporation ("Fort Brooke") was
merged into BancGroup. Fort Brooke's subsidiary, Fort Brooke Bank, was merged
into BancGroup's existing subsidiary bank, Colonial Bank. At December 31, 1996,
Fort Brooke had approximately $209 million in assets and deposits and other
liabilities of approximately $192 million. Fort Brooke operated eight offices in
the Tampa Florida area. This business combination was accounted for as a pooling
of interests and the financial statements have been restated accordingly.
On July 1, 1997, Great Southern Bancorp ("Great Southern") was merged
into BancGroup. Great Southern's subsidiary, Great Southern Bank, was merged
into BancGroup's existing subsidiary bank, Colonial Bank. At June 30, 1997,
Great Southern had approximately $121 million in assets and deposits and other
liabilities of approximately $111 million. Great Southern operated five offices
in Palm Beach County, Florida. This business combination was accounted for as a
pooling of interests, however due to immateriality, the prior year financial
statements were not restated.
On July 1, 1997, First Commerce Banks of Florida, Inc. ("First
Commerce") was merged into BancGroup. First Commerce's subsidiary, First
Commerce Bank of Polk County, was merged into BancGroup's existing subsidiary
bank, Colonial Bank. At June 30, 1997, First Commerce had approximately
$99 million in assets and deposits and
4
<PAGE> 7
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
other liabilities of approximately $89 million. First Commerce operated 5
offices in the Polk County, Florida area. This business combination was
accounted for as a purchase and the results of operations are included in the
accompanying financial statements only from the date of consummation forward.
On September 15, 1997, Dadeland BancShares, Inc. ("Dadeland"), was
merged into BancGroup. Dadeland's subsidiary, Dadeland Bank, was merged into
BancGroup's existing subsidiary bank, Colonial Bank. At June 30, 1997,
Dadeland had approximately $134 million in assets and deposits and other
liabilities of approximately $118 million. Dadeland operated 4 offices in Miami,
Florida. This business combination was accounted for as a purchase and the
results of operations are included in the accompanying financial statements only
from the date of consummation forward.
The following table presents net interest income, noninterest income,
and net income as reported by BancGroup, D/W and Fort Brooke on a combined basis
for the nine months ended September 30, 1996. In 1997, prior to consummation of
the business combination with BancGroup, D/W recorded $445,000 of net interest
income, $82,000 of noninterest income and $146,000 of net income and Fort
Brooke recorded $3,153,000 of net interest income, $535,000 of noninterest
income and $900,000 of net income.
<TABLE>
<CAPTION>
Net Interest Nointerest Net
(Dollars in thousands) Income Income Income
-------- ------- -------
<S> <C> <C> <C>
BancGroup $138,487 $51,999 $41,418
D/W 4,236 770 1,213
Fort Brooke 6,673 1,131 1,201
-------- ------- -------
Combined $149,396 $53,900 $43,832
======== ======= =======
</TABLE>
On October 1,1997 First Independence Bank of Florida ("First
Independence") was merged into BancGroup's existing subsidiary bank, Colonial
Bank. At June 30, 1997, First Independence had approximately $66 million in
assets and deposits and other liabilities of approximately $61 million. First
Independence operated three office located in Fort Myers, Fort Myers Beach and
Sanibel Island, Florida. This business combination was accounted for as a
pooling of interests, however, due to immateriality, the prior year financial
statements will not be restated.
On August 28, 1997, BancGroup entered into a definitive agreement to
acquire ASB Bancshares, Inc. ("ASB"). ASB is a Delaware corporation and is a
holding company for Ashville Savings Bank located in Ashville, Alabama. ASB will
merge with BancGroup and following such merger Ashville Savings Bank will merge
with BancGroup's existing subsidiary bank, Colonial Bank, BancGroup will issue a
maximum of 632,362 shares of its Common Stock depending upon the market value at
the time of such merger and issue an aggregate amount of $7,724,813 of
subordinated debentures to the stockholders of ASB. This transaction is subject
to, among other things, approval by the stockholders of ASB and approval by
appropriate regulatory authorities and will be accounted for as a purchase. At
June 30, 1997, ASB had assets of $142.2 million, deposits of $129.3 million and
stockholders' equity of $11.6 million
On September 4, 1997, BancGroup entered into a definitive agreement to
acquire South Florida Banking Corp. ("South Florida"). South Florida is a
Florida corporation and is a holding company for First National Bank of Florida
at Bonita Springs located in Bonita Springs, Florida. South Florida will merge
with BancGroup and following such merger First National Bank of Florida at
Bonita Springs will merge with BancGroup's existing subsidiary bank, Colonial
Bank. BancGroup will issue a maximum of 1,929,744 shares of its Common Stock
depending upon whether certain conditions are met prior to the effective date of
the merger. This transaction is subject to, among other things, approval by the
stockholders of South Florida and approval by appropriate regulatory authorities
and is expected to be accounted for as a pooling of interests. At June 30, 1997
South Florida had assets of $249.6 million, deposits of $210.4 million and
stockholders' equity of $16.2 million
On September 8, 1997, BancGroup entered into a definitive agreement
with United American Holding Company ("United American"). United American is a
Florida corporation and is a holding company for United American Bank of Central
Florida located in Orlando, Florida. United American will merge with BancGroup
and following such merger United American Bank of Central Florida will merge
with BancGroup's existing subsidiary bank, Colonial Bank. BancGroup will issue a
maximum of 2,729,218 shares of its Common Stock depending upon the market value
at the time of such merger to the stockholders of United American. This
transaction is subject to, among other things, approval by the stockholders of
United American and approval by appropriate regulatory authorities and is
expected to be accounted for as a pooling of interests. At June 30, 1997 United
American had assets of $240.8 million, deposits of $209.9 million and
stockholders' equity of $19.3 million.
On September 9, 1997, BancGroup entered into a definitive agreement
with First Central Bank ("First Central"). First Central is a Florida bank
located in St. Petersburg, Florida. First Central will merge with BancGroup's
existing subsidiary bank, Colonial Bank. BancGroup will issue a maximum of
841,796 shares of its Common Stock depending upon
5
<PAGE> 8
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
Notes Unaudited Condensed Consolidated Financial Statements--Continued
the market value at the time of such merger to the stockholders of First
Central. This transaction is subject to, among other things, approval by the
stockholders of First Central and approval by appropriate regulatory authorities
and is expected to be accounted for as a pooling of interests. At June 30, 1997
First Central had assets of $54.7 million, deposits of $44.5 million and
stockholders' equity of $9.7 million.
NOTE C - COMMITMENTS AND CONTINGENCIES
BancGroup's subsidiary bank makes loan commitments and incurs
contingent liabilities in the normal course of business which are not reflected
in the consolidated statements of condition.
NOTE D - RECENT ACCOUNTING PRONOUNCEMENTS
In September 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 the financial assets when control has been surrendered, and
derecognize liabilities when extinguished. This statement distinquishes between
transfers that are sales and chose 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.
BancGroup adopted SFAS No. 125 as of January 1, 1997. The adoption of
SFAS No. 125 did not have a material impact on BancGroup's financial statements.
This statement is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring as of December 31, 1996 and is to be
applied prospectively. Earlier or retroactive application is not permitted.
However, in December 1996, the Financial Accounting Standards Board issued SFAS
No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement
No. 125." This statement defers the effective date of certain provisions for one
year (December 31, 1997). The deferred provisions relate to repurchase
agreements, dollar-roll transactions, securities lending, and similar
transactions. The effective date for all other transfers and servicing of
financial assets is unchanged.
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, Earnings Per Share, which establishes standards for computing and
presenting earnings per share (EPS) and applies to entities with publicly held
common stock or potential common stock. This statement replaces the
presentation of primary EPS with a presentation of basic EPS and requires dual
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures and requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation.
This statement is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier application
is not permitted. Under SFAS No. 128, BancGroup's basic EPS would be $1.35 and
$1.13 for the nine months ended September 30, 1997 and 1996, respectively and
$.48 and $.35 for the quarter ended September 30, 1997 and 1996, respectively.
Fully-diluted EPS would not change from amounts currently reported for the nine
months and quarter ended September 30, 1997 and 1996, respectively.
In September 1997, the Financial Accounting Standards Board issued SFAS
No. 130, Reporting of Comprehensive Income, which establishes standards for
reporting and display of comprehensive income and its components (revenues
expenses, gains, and losses) in a full set of financial statements. This
statement also requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements.
This statement is effective for fiscal years beginning after December
15, 1997. Although earlier application is permitted, BancGroup has chosen not
to adopt early. Reclassification of financial statements for earlier periods
provided for comparative purposes is required.
In September 1997, the Financial Accounting Standards Board also issued
SFAS No.131, Disclosures about Segments of an Enterprise and Related
Information, which establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
This statement also establishes standards for related disclosures about
produces and services, geographic areas, and major customers. This statement
requires the reporting of financial and descriptive information about an
enterprise's reportable operating segments.
This statement is effective for financial statements for periods
beginning after December 15, 1997. In the initial year of application,
comparative information for earlier years is to be restated.
6
<PAGE> 9
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, deposits and long-term debt changed for the nine months and
twelve months ended September 30, 1997, respectively, as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 SEPTEMBER 30, 1996
TO SEPTEMBER 30, 1997 TO SEPTEMBER 30, 1997
INCREASE (DECREASE) INCREASE (DECREASE)
--------------------- ---------------------
AMOUNT % AMOUNT %
------ -------- ------- --------
<S> <C> <C> <C> <C>
Total Assets $933,390 16.5% $1,112,310 20.2%
Securities 74,102 9.7 54,162 6.9
Mortgage loans held for sale 24,912 15.8 21,014 13.0
Loans, net of unearned income 754,963 17.9 881,361 21.6
Deposits 836,735 19.5 898,946 21.2
Long term debt 62,007 158.6 67,309 199.2
</TABLE>
SECURITIES:
Investment securities and securities available for sale have increased
approximately $74 million from December 31, 1996 to September 30, 1997.
Approximately $128 million of the increase resulted from business combinations.
The off-setting decrease resulted from normal funding operations and maturities
in excess of purchases of approximately $47 million.
LOANS AND MORTGAGE LOANS HELD FOR SALE:
Loans have increased 21.6% since September 30, 1996. This increase is a
result of a 8.4% internal loan growth from September 30, 1996 to September
30, 1997, with the remainder from acquisition activity.
The increase in loans, net of unearned income, since December 31, 1996
of approximately $755 million is partially from internal loan growth of
approximately $300 million (an annualized rate of 8.4%). The remaining increase
of approximately $455 million resulted from acquisition activity. Loans
increased at a 16% internal growth rate for the year ended December 31, 1996.
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 $1,036.1 million and $1,028.9 million and
sales thereof amounted to approximately $1,011.2 million and $977.6 million
during the nine months ended September 30, 1997 and 1996, respectively. The
stabilization in originations was primarily due to the slightly higher interest
rates which resulted in a decrease in refinancings and new originations.
Gross loans by category and summary of loan loss experience are shown
in the following schedules.
<TABLE>
<CAPTION>
GROSS LOANS BY CATEGORY SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(In thousands) 1997 1996 1996
----------- ----------- -----------
<S> <C> <C> <C>
Commercial, financial and agricultural $ 594,030 $ 589,418 $ 586,737
Real estate-commercial 1,248,438 1,032,970 995,027
Real estate-construction 600,417 460,537 400,812
Real estate-residential 2,153,869 1,801,703 1,784,972
Installment and consumer 303,413 278,600 265,720
Other 71,503 55,883 52,837
----------- ----------- -----------
Total loans $ 4,971,670 $ 4,219,111 $ 4,086,105
=========== =========== ===========
PERCENT OF LOANS IN EACH CATEGORY TO TOTAL LOANS:
Commercial, financial and agricultural 12.0% 14.0% 14.4%
Real estate-commercial 25.1 24.5 24.3
Real estate-construction 12.1 10.9 9.8
Real estate-residential 43.3 42.7 43.7
Installment and consumer 6.1 6.6 6.5
Other 1.4 1.3 1.3
----------- ----------- -----------
100.0% 100.0% 100.0%
=========== =========== ===========
</TABLE>
7
<PAGE> 10
Loans collateralized by commercial real estate increased approximately
$253 million since September 30,1996 and $215 million since December 31, 1996.
Loans secured by residential real estate increased $369 and $352 million since
September 30, 1996 and December 31, 1996, respectively. These loan categories
continue to be a significant source of loan growth and are concentrated in
various areas in Alabama, the metropolitan Atlanta market in Georgia as well as
Central and South Florida.
SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
NINE MONTHS YEAR NINE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(In thousands) 1997 1996 1996
------------- ----------- -----------
<S> <C> <C> <C>
Allowance for possible loan losses - January 1 $53,443 $46,917 $46,917
Charge-offs:
Commercial, financial, and agricultural 2,717 3,196 2,109
Real estate-commercial 763 2,074 1,241
Real estate-construction 147 1,774 754
Real estate-residential 1,141 878 484
Installment and consumer 3,991 3,334 2,098
Other 593 594 163
------- ------- -------
Total charge-offs 9,352 11,850 6,849
------- ------- -------
Recoveries:
Commercial, financial, and agricultural 521 1,418 1,242
Real estate-commercial 720 1,450 886
Real estate-construction 67 1 1
Real estate-residential 140 693 200
Installment and consumer 1,248 1,566 1,472
Other 110 85 54
------- ------- -------
Total recoveries 2,806 5,213 3,855
------- ------- -------
Net charge-offs 6,546 6,637 2,994
Addition to allowance charged to operating expense 8,833 12,545 6,292
Allowance added from bank mergers 6,183 618 618
------- ------- -------
Allowance for possible loan losses-end of period $61,913 $53,443 $50,833
======= ======= =======
</TABLE>
Asset quality as measured by nonperforming assets remains good at 0.82%
of net loans and other real estate. Nonperforming assets have increased $6.7
million from December 31,1996. The increase in nonperforming assets resulted
from a $4.9 million increase in nonaccrual loans, a $.6 million decrease in
restructured loans and a $2.4 million increase in other real estate. The
increase in nonaccrual loans is primarily from one large commercial real estate
loan in North Alabama together with the business combinations consummated since
the end of 1996. The increase in other real estate is due to the write-off of a
commercial loan in North Alabama. 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 September 30, 1997 as
compared to 1.24% at September 30, 1996. The increase in allowance since year
end has been due to provisions in excess of net charge-offs totaling $2.3
million and reserves of $6.2 million from the purchase of First Family, Tomoka,
Shamrock, Great Southern, First Commerce and Dadeland. The provisions in excess
of net charge-offs have been made primarily as a result of loan growth.
8
<PAGE> 11
NONPERPORMING ASSETS ARE SUMMARIZED BELOW
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(In thousands) 1997 1996 1996
------- ------- -------
<S> <C> <C> <C>
Nonaccrual loans $27,230 $22,334 $21,802
Restructured loans 1,061 1,683 2,367
------- ------- -------
Total nonperforming loans* 28,291 24,017 24,169
Other real estate owned 12,612 10,229 11,170
------- ------- -------
Total nonperforming assets* $40,903 $34,246 $35,339
======= ======= =======
Aggregate loans contractually past due 90
days for which interest is being accrued $ 6,048 $ 7,682 $ 5,665
Net charge-offs (recoveries):
Year to date $ 6,546 $ 6,637 $ 2,994
Quarter to date $ 2,526 $ 3,643 $ 1,632
RATIOS
Period end:
Total nonperforming assets as a percent of
net loans and other real estate 0.82% 0.81% 0.86%
Allowance as a percent of net loans 1.25% 1.27% 1.24%
Allowance as a percent of nonperforming assets 151% 156% 144%
Allowance as a percenc of nonperforming loans 219% 223% 210%
Net charge-offs (recoveries) as a percent of average
net loans (annualized basis):
Year to date 0.19% 0.17% 0.10%
Quarter to date 0.21% 0.39% 0.16%
</TABLE>
* Total does not include loans contractually past due 90 days or more
which are still accruing interest.
Management, through its loan officers, internal loan review staff, and
external examinations by regulatory agencies has identified approximately
$162.6 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 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 September 30,
1997 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 rime.
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 $20.4 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>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(In thousands) 1997 1996 1996
---- ---- ----
<S> <C> <C> <C>
Commericial, financial and agricultural $11,888 $11,318 $10,694
Real estate-commercial 21,040 16,866 18,126
Real estate-construction 12,138 9,910 7,290
Real estate-residential 10,769 9,009 8,925
Installment and consumer 4,585 4,251 4,839
Other 1,493 2,089 959
------- ------- -------
TOTAL $61,913 $53,443 $50,833
======= ======= =======
</TABLE>
9
<PAGE> 12
LIQUIDITY:
The maintenance of an adequate liquidly position is a principal
component of BancGroup's asset/liabiliy 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 8% 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 $1.7 billion with only $621 million outstanding
at September 30, 1997. This source of credit reduces BancGroup's dependency on
deposits as a source of liquidity resulting in a loan to deposit ratio of 97%
at September 30, 1997 and 1996 and 98% at December 31, 1996. BancGroup has a
brokered Certificate of Deposit (CD) program in conjunction with Merrill Lynch,
Dean Witter and Oppenheimer Capital to offer CD's in increments of $l,000 to
$99,000 to out of market customers at competitive rates ranging from 5.20% to
5.65% maturing in 6 to 24 month periods. At September 30,1997, $128 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. Tier one capital for BancGroup at
September 30, 1997 consists of $472 million of equity and $70 million in trust
preferred securities less $70 million of intangibles providing a 7.28% leverage
ratio at September 30,1997. The ratio of shareholders' equity to total assets
at September 30, 1997 and 1996 was 7.15%. Management believes that capital
levels are sufficient to support future internally generated growth and fund
the quarterly dividend rates which are currently $0.15 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, merger
or acquisition opportunities.
On January 29, 1997, BancGroup issued, through a special purpose trust,
$70 million of Trust Preferred Securities. The securities bear interest at 8.92%
and are subject to redemption by BancGroup, in whole or in part, at any time
after January 29, 2007 until maturity in January 2027. Circumstances are remote
that redemption will occur prior to maturity. The securities are subordinated
to substantially all of BancGroup's indebtedness.
YEAR 2000 COMPLIANCE:
Most computer software programs and processing systems, including
those used by BancGroup and its subsidiaries in their operations, have not been
designed to accommodate entries beyond the year 1999 in date fields. Failure to
address the anticipated consequences of this design deficiency could have
material adverse effects on the business and operations of any business,
including BancGroup, that relies on computers and associated technologies. In
response to the challenges of addressing such consequences in the banking
industry, bank regulatory agencies, including the Federal Reserve, BancGroup's
primary regulator, have established a Year 2000 Supervision Program and
published guidelines for implenting procedures to bring the computer software
programs and processing systems into year 2000 compliance.
In compliance with the guidelines of the Federal Reserve, BancGroup has
assigned staff on a full time basis to assess the impact of year 2000 on all
areas of BancGroup, Colonial Bank and the bank's mortgage company subsidiary.
The staff is responsible for developing and implementing a strategy to ensure
that all critical systems are year 2000 compliant and testing has begun by
fourth quarter 1998. All critical Bank software and processing systems are
currently being upgraded to year 2000 compliant status. The anticipated costs of
upgrading those systems for Colonial Bank is presently estimated to be
approximately $800,000. The mortgage company servicing system is scheduled to be
rewritten into year 2000 compliant format by November 1998. The cost of the
mortgage company servicing system rewrite, in addition to other systems upgrades
is estimated to be $2.7 million spread over the next two to three years.
BancGroup anticipates that these modifications will bring added functionality
and capacity to BancGroup. Micro computer based systems are currently being
assessed and the cost of bringing those systems into year 2000 compliance is not
currently ascertainable. The costs to bring other miscellaneous systems into
year 2000 compliance are not expected to be material.
COMPARISON OF THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996:
SUMMARY:
BancGroup's net income for the quarter ended September 30, 1997,
increased 47% to $20,049,000 compared to $13,635,000 in the prior year. Fully
diluted earnings per share for the quarter increased 38% to $.47 per share
compared to $.34 per share for the same quarter of the previous year.
BancGroup's net income for the nine months ended September 30, 1997 was
$56,054.000. This was a 28% increase over the prior year net income of
$43,832,000. Fully diluted earnings per share for the nine months ended
September 30, 1997, were $1.31 compared to $1.10 for the same period in 1996, a
19% increase.
The increase in net income is primarily attributable to increases in
interest earning assets and noninterest income partially off-set by increases in
loan loss provision and noninterest expenses. In addition, the September 30,
1996 financials reflect a one-time SAIF special assessment incurred in the
third quarter of 1996.
10
<PAGE> 13
AVERAGE VOLUME AND RATES
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997 1996*
--------------------------------- --------------------------------
AVERAGE AVERAGE
VOLUME INTEREST RATE VOLUME INTEREST RATE
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans, net $4,823,323 $109,352 8.99% $4,076,610 $ 91,057 8.86%
Mortgage loans held for sale 157,764 3,068 7.72% 136,154 2,799 8.16%
Investment securities and securities
available for sale and other interest-
earning assets 878,534 14,392 6.50% 750,071 11,630 6.15%
---------- -------- ---------- ----------
Total interest-earning assets(l) 5,859,621 $126,812 8.59% 4,962,835 $ 105,486 8.43%
-------- ----------
Nonearning assets 558,251 455,859
---------- ----------
Total assets $6,417,872 $5,418,694
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Incerest-bearing deposits $4,116,170 $ 50,357 4.85% $3,436,668 $ 41,938 4.84%
Short-term borrowings 789,389 10,938 5.50% 752,365 10,113 5.33%
Long-term debt 95,562 1,985 8.24% 40,147 697 6.89%
---------- -------- ---------- ----------
Tocal interest-bearing liabilities 5,001,121 $ 63,280 5.07% 4,229,180 $ 52,748 4.95%
-------- ----------
Nonincerest-bearing demand deposits 862,944 711,029
Other liabilities 89,173 87,785
---------- ----------
Total liabilities 5,953,238 5,027,994
Shareholders' equity 464,634 390,700
---------- ----------
Total liabilities and shareholders'
equity $6,417,872 $5,418,694
========== ==========
RATE DIFFERENTIAL 3.51% 3.48%
NET YIELD ON INTEREST-EARNING ASSETS $ 63,532 4.30% $ 52,738 4.22%
======== ==========
</TABLE>
* Restated financial results above reflect the business combinations with
Jefferson Bancorp, Inc. D/W Bankshares, Inc. and Fort Brooke
Bancorporation. These mergers were accounted for as poolings of
interests and the financial results have been restated accordingly.
(1) Interest earned and average rates on obligatons of states and
political subdivisons 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%.
11
<PAGE> 14
Average VOLUME AND RATES
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997** 1996*
------------------------------------ --------------------------------
AVERAGE AVERAGE
VOLUME INTEREST RATE VOLUME INTEREST RATE
---------- -------- ---- ---------- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans, net $4,658,757 $313,904 9.00% $3,858,774 $ 259,863 9.00%
Mortgage loans held for sale 137,939 8,142 7.87% 140,534 8,176 7.76%
Investment securities and securities
available for sale and other interest-
earning assets 876,880 42,573 6.49% 758,296 34,825 6.14%
---------- -------- ---------- ----------
Total interest-earning assets(l) 5,673,576 $364,619 8.58% 4,757,604 $ 302,864 8.50%
-------- ----------
Nonearning assets 514,581 450,987
---------- ----------
Total assets $6,188,157 $5,208,591
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing deposits $4,034,268 $146,274 4.85% $3,315,404 $ 120,775 4.87%
Short-term borrowings 744,524 30,712 5.52% 708,532 28,749 5.42%
Long-term debt 88,583 5,507 8.31% 39,659 2,023 6.81%
---------- -------- ---------- ----------
Total interest-bearing liabilities 4,867,375 $182,493 5.01% 4,063,595 $ 151,547 4.98%
-------- ----------
Noninterest-bearing demand deposits 791,220 682,395
Other liabilities 84,411 85,098
---------- ----------
Total liabilities 5,743,006 4,831,088
Shareholders' equity 445,151 377,503
---------- ----------
Total liabilities and shareholders'
equity $6,188,157 $5,208,591
========== ==========
RATE DIFFERENTIAL 3.57% 3.52%
NET YIELD ON INTEREST-EARNING ASSETS $182,126 4.28% $ 151,317 4.25%
======== ========== ====
</TABLE>
* Restated financial results above reflect the business combinations with
Jefferson Bancorp, Inc., D/W Bankshares, Inc. and Fort Brooke
Bancorporation. These mergers were accounted for as poolings of
interests and the financial results have been restated accordingly
** Restated financial results above reflect the business combination with
Great Southern Bancorp on July 1, 1997. This merger was accounted for
as a pooling of interests and the 1997 financial results have been
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%
12
<PAGE> 15
ANALYSIS OF INTEREST INCREASES (DECREASES)
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1997 CHANGE FROM 1996*
---------------------------------------------------------
DUE TO (1)
TOTAL VOLUME RATE MIX
----------- ---------- --------- ---------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Total Loans, Net $ 18,295 $ 16,676 $ 1,336 $ 283
Mortgage loans held for sale 269 444 (151) (24)
Investment securities and securities available
for sale and other interest-earning assets 2,762 1,991 662 109
-------- -------- ------- -----
Total interest income (2) 21,326 19,111 1,847 368
-------- -------- ------- -----
INTEREST EXPENSE:
Interest bearing deposits 8,419 8,290 87 42
Short-term borrowings 825 497 322 6
Long-term debt 1,288 962 137 189
-------- -------- ------- -----
Total interest expense 10,532 9,749 546 237
-------- -------- ------- -----
Net Interest Income $ 10,794 $ 9,362 $ 1,301 $ 131
======== ======== ======= =====
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997** CHANCE FROM 1996*
--------------------------------------------------------
DUE TO (1)
TOTAL VOLUME RATE MIX
----------- ---------- --------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Total Loans, Net $ 54,041 $ 53,851 $ -- $ 190
Mortgage loans held for sale (34) (151) 116 1
Investment securities and securities available
for sale and other interest-earning assets 7,748 5,446 1,985 317
-------- -------- ------- -----
Total interests income (2) 61,755 59,146 2,101 508
-------- -------- ------- -----
INTEREST EXPENSE:
Interest bearing deposits 25,499 26,185 (496) (190)
Short-term borrowings 1,963 1,459 530 (26)
Long-term debt 3,484 2,492 445 547
-------- -------- ------- -----
Total interest expense 30,946 30,136 479 331
-------- -------- ------- -----
Net Interest Income $ 30,809 $ 29,010 $ 1,622 $ 177
======== ======== ======= =====
</TABLE>
* Restated financial results above reflect the business combinations with
Jefferson Bancorp, Inc., D/W Bankshares, Inc. and Fort Brooke
Bancorporation. These mergers were accounted for as poolings of
interests and the financial results have been restated accordingly
** Restated financial results above reflect the business combination with
Great Southern Bancorp on July 1, 1997. This merger was accounted for
as a pooling of interests and the 1997 financial results have been
restated accordingly
(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; Mix
Change = change in volume times change in rate.
(2) Interest earned on obligations of state and political subdivisions is
reflected on a tax equivalent basis. Tax equivalent interest rate 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: actual dividends times 137.7%. Tax equivalent
average rate is tax equivalent interest or dividends earned divided by
average volume.
13
<PAGE> 16
NET INTEREST INCOME:
Net interest income on a tax equivalent basis increased $10.8 million
to $63.5 million for the quarter ended September 30, 1997 from $52.7 million
for the quarter ended September 30, 1996. The net yield on interest earning
assets increased from 4.22% to 4.30% for the three months ended September 30,
1996 and 1997, respectively, while the rate differential increased from 3.48%
to 3.51% for the three month period ended September 30, 1997 and 1996,
respectively.
Net interest income on a tax equivalent basis increased $30.8 million
to $182.1 million for the nine months ended September 30, 1997 from $151.3
million for the same period in 1996. The net yield on interest earning assets
increased from 4.25% to 4.28% for the nine months ended September 30, 1996 and
1997, respectively, while the rate differential increased from 3.52% to 3.57%
for the nine months ended September 30, 1996 compared to 1997.
As reflected on the previous tables, the increase for the three and
nine months was primarily attributable to loan growth, which was partially
offset by an increase in deposits. The prime rate decreased to 8.5% in
December 1995 and continued to decline to 8.25% in 1996. During the first
quarter of 1997 the prime rate increased to 8.50%. This increase in prime will
be reflected in increasing rates as repricing occurs.
LOAN LOSS PROVISION:
The provision for loan losses for the first nine months of 1997 was
$8,833,000 compared to $6,292,000 for the same period in 1996. Asset quality
remains good. The current allowance for loan losses provides a 151% coverage
of nonperforming assets compared to 156% at December 31, 1996 and 144% at
September 30, 1996. 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 $7.7 million for the nine months ended
September 30, 1997 compared to the same period in 1996. The increase is
primarily due to increased mortgage servicing related fee income of $4 million,
additional fees on deposit accounts of $2.5 million and $.9 million in other
income.
The increase in noninterest income for the three months ended September
1997 compared to the three months ended September 30, 1996 of $3.5 million is
primarily due to $2 million in increased mortgage servicing fees and $1.4
million additional fees on deposit accounts.
Mortgage servicing fees increased due to an increase in the servicing
portfolio of $2.2 million to $12.5 million for the nine months ended September
30, 1997 from $10.3 million for the same period in 1996. Colonial Mortgage
provides additional sources of noninterest income to BancGroup through fees
from its $12.5 billion servicing portfolio as well as loan originations from
its 4 divisional offices. Colonial Mortgage originates loans in 36 states.
Colonial Mortgage had noninterest income of $10.8 million and $31.9 million for
the three and nine months ended September 30, 1997, respectively, compared to
$7.5 million and $22.1 million for the three and nine months ended September
30, 1996, respectively.
OVERHEAD EXPENSES:
BancGroup's net overhead expense (total noninterest expense less
noninterest income excluding security gains) was $28.2 million and $28.4
million for the three months ended September 30, 1997 and 1996, respectively,
and $82.1 million and $75.6 million for the nine months ended September 30, 1997
and 1996, respectively.
Noninterest expenses increased $14.2 million and $3.3 million for the
nine and three months ended September 30, 1997, compared to the same period in
1996. The majority of this increase is related to salary and benefit expense
increases of $6.8 million and $3.9 million for the nine and three months ended
September 30, 1997, as compared to the same period in 1996. The increase in
salaries and benefits is primarily due to increased staffing levels as a result
of activity related to business combinations and normal wage increases.
Acquisition related expenses include legal and accounting costs, asset
write-offs, contract buyouts and severance costs in connection with the
acquisition of various banking institutions and the integration of those
companies into BancGroup's systems. These are one-time costs with respect to
each individual transaction, but represent ongoing expenses so long as
BancGroup continues its acquisition program. Acquisition expenses increased
approximately $1.7 million from $1.6 million for the first nine months of 1996
to $3.3 million for the first nine months of 1997.
Other noninterest expenses for the nine months ended September 30, 1997
increased over September 30, 1996 by $1.4 million. This increase is mostly
attributable to an increase in advertising expenses and computer services.
PROVISION FOR INCOME TAXES:
BancGroup's provision for income taxes is based on an approximately
37.8% and 35.2%, respectively, estimated annual effective tax rate for the years
1997 and 1996, respectively. The provision for income taxes for the nine months
ended September 30, 1997 and 1996 was $33,460,000 and $23,794,000, respectively.
14
<PAGE> 17
PART II
OTHER INFORMATION
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 - N/A
ITEM 5: Other Events - N/A
ITEM 6: Exhibits and Reports on Form 8-K
Exhibit 11 - Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule (for SEC purposes only).
Report on Form 8-K was filed on October 31, 1997 disclosing the
approval of the nomination of Purser L. McLeod, Jr. as President
of the Registrant.
15
<PAGE> 18
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE COLONIAL BANCGROUP, INC.
Date: November 13, 1997 By: /s/ W. Flake Oakley, IV
-------------------------------------
W. Flake Oakley, IV
Its Chief Financial Officer
<PAGE> 1
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
SEPTEMBER 30, 1997
(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 $20,049 $56,054 $ 20,049 56,054
Interest expense on convertible subordinated debentures 117 356
Tax effect @ 37.8% for the quarter and 36.9% year to date (44) (134)
------- ------- -------- --------
Net income $20,049 $56,054 $ 20,122 $ 56,276
======= ======= ======== ========
Average shares outstanding 41,932 41,601 41,932 41,601
Effect of stock options 826 769 826 769
------- ------- -------- --------
Primary average shares outstanding 42,758 42,370 42,758 42,370
======= ======= ======== ========
Contingent shares:
Convertible subordinated debentures 479 593
-------- --------
Fully diluted average shares outstanding 43,237 42,963
======== ========
Earnings per share:
Net Income $ 0.47 $ l.32 $ 0.47 $ 1.31
======= ======= ======== ========
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF COLONIAL BANCGROUP, INC. FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 221,463
<INT-BEARING-DEPOSITS> 14,013
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<LONG-TERM> 101,099
0
0
<COMMON> 104,910
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<INTEREST-DEPOSIT> 146,277
<INTEREST-EXPENSE> 182,497
<INTEREST-INCOME-NET> 180,333
<LOAN-LOSSES> 8,833
<SECURITIES-GAINS> 63
<EXPENSE-OTHER> 143,609
<INCOME-PRETAX> 89,514
<INCOME-PRE-EXTRAORDINARY> 89,514
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<EPS-PRIMARY> 1.32
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<YIELD-ACTUAL> 4.28
<LOANS-NON> 27,230
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<ALLOWANCE-CLOSE> 61,913
<ALLOWANCE-DOMESTIC> 61,913
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,493
</TABLE>
