<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-25463
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 1, 1997)
LOGO
$50,000,000
THE COLONIAL BANCGROUP, INC.
% SUBORDINATED NOTES DUE 2007
The Subordinated Notes offered hereby (the "Subordinated Notes") will
mature on August 15, 2007. Interest is payable semiannually in arrears on August
15 and February 15 of each year, beginning February 15, 1998. The Subordinated
Notes are not subject to redemption prior to maturity. The Subordinated Notes
are subordinated to all existing and future Senior Indebtedness of The Colonial
BancGroup, Inc. ("BancGroup" or the "Company") as described in the accompanying
Prospectus. "Senior Indebtedness" is defined in this Prospectus Supplement at
"Description of Subordinated Notes -- Subordination." Payment of the principal
of the Subordinated Notes may be accelerated only in the case of certain events
involving the bankruptcy, insolvency or reorganization of the Company. There is
no right of acceleration in the case of default in performance of any covenants
of the Company including the failure to pay principal or interest on the
Subordinated Notes when due. See "Description of Subordinated Notes."
All of the Subordinated Notes initially will be represented by Global
Securities (each a "Global Note"), which will be deposited with The Depository
Trust Company ("DTC") and will be registered in the name of its nominee. See
"Description of Subordinated Notes -- Global Notes" and "-- Same-Day Settlement
and Payment."
THE SUBORDINATED NOTES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS
OF ANY BANK OR NONBANK SUBSIDIARY OF THE COMPANY AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS
ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
====================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note................................. $ $ $
- --------------------------------------------------------------------------------------------------------------------
Total.................................... $ $ $
====================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from , 1997, to the date of
delivery.
(2) The Company has agreed to indemnify the several Underwriters, as defined
below, against certain liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $ .
------------------------------
The Subordinated Notes are offered subject to receipt and acceptance by
Bear, Stearns & Co. Inc., Keefe, Bruyette & Woods, Inc. and Morgan Keegan &
Company, Inc. (the "Underwriters"), to prior sale and to the Underwriters' right
to reject any order in whole or in part and to withdraw, cancel or modify the
offer without notice. It is expected that delivery of the Global Notes will be
made through the facilities of DTC on or about , 1997.
BEAR, STEARNS & CO. INC.
KEEFE, BRUYETTE & WOODS, INC.
MORGAN KEEGAN & COMPANY, INC.
The date of this Prospectus Supplement is , 1997.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SUBORDINATED NOTES AT LEVELS
ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS
MAY BE EFFECTED IN THE OPEN MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME. SEE "UNDERWRITING."
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROSPECTUS SUPPLEMENT INCORPORATES DOCUMENTS OF THE COMPANY BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
ARE AVAILABLE, WITHOUT CHARGE, UPON REQUEST FROM THE PERSON SPECIFIED BELOW.
The following documents filed by the Company with the Securities and
Exchange Commission (the "Commission") are hereby incorporated by reference in
the Prospectus as supplemented by this Prospectus Supplement:
(1) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(2) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997 and June 30, 1997; and
(3) Reports on Form 8-K dated January 20, 1997, March 10, 1997, April
15, 1997, June 11, 1997, June 24, 1997, and August , 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 after the date of this Prospectus
Supplement and prior to the termination of the offering of the Subordinated
Notes, shall be deemed incorporated by reference in this Prospectus Supplement
and made a part hereof from the date of filing of such documents. Any statement
contained in any document incorporated or deemed incorporated herein by
reference will be deemed to be modified or superseded for the purpose of this
Prospectus Supplement to the extent that a statement contained herein or in
another subsequently filed document which also is, or is deemed to be,
incorporated herein by reference modifies or supersedes such statement. Any such
statement so modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of the Prospectus or this Prospectus
Supplement.
The Company will provide without charge to each person to whom this
Prospectus Supplement is delivered, on the request of any such person, a copy of
any and all of the documents which have been incorporated herein by reference
but not delivered herewith (other than the exhibits to such documents unless
specifically incorporated herein). Such request, in writing or by telephone,
should be directed to W. Flake Oakley, IV, Secretary, The Colonial BancGroup,
Inc., One Commerce Street, Post Office Box 1108, Montgomery, Alabama 36101
(telephone 334-240-5000).
S-2
<PAGE> 3
THE COMPANY
The Company is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended ("BHCA"). It was organized in 1974 under the
laws of Delaware and has operated under its current name and management since
1981. The Company has one commercial bank subsidiary, Colonial Bank, that
conducts a full service commercial banking business through 119 branches in
Alabama, three branches in Tennessee, fourteen branches in Georgia and 45
branches in Florida. Colonial Bank is an Alabama banking corporation and a
member of the Federal Reserve System.
Colonial Mortgage Company, a subsidiary of Colonial Bank headquartered in
Montgomery, is a mortgage banking company which services approximately $10.6
billion in residential loans and which originates mortgages in 37 states through
6 regional offices.
BancGroup's commercial banking loan portfolio is comprised primarily of
commercial real estate loans (28%) and residential real estate loans (46%), a
significant portion of which is located within the State of Alabama. BancGroup's
growth in loans over the past several years has been concentrated in commercial
and residential real estate loans.
Since 1981, the Company has grown from $166 million in assets to total
assets of over $6 billion as of June 30, 1997. As of June 30, 1997, the Company
had completed 44 acquisitions including 3 acquisitions in 1996 and 8
acquisitions in 1997.
Colonial Bank is the fifth largest bank in the State of Alabama based on
total assets as of March 31, 1997. Colonial Bank operates under a community bank
philosophy, with active regional and local boards and management in each state
where the bank operates. Local and regional boards are able to make loan
decisions within certain limits, and this structure maintains community
involvement in the Bank.
The Company is continuing to develop its franchise through the acquisition
of financial institutions in Alabama and Florida pursuant to transactions which
are expected to be consummated in 1997. These acquisitions will significantly
continue the expansion of the Company's presence in Florida. See "Recent
Developments -- Pending Business Combinations."
As of June 30, 1997, Colonial Bank's assets were located in the following
states:
<TABLE>
<CAPTION>
ASSETS
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Alabama..................................................... $4,255,199
Florida..................................................... 1,217,199
Georgia..................................................... 526,410
Tennessee................................................... 101,808
</TABLE>
RECENT DEVELOPMENTS
SECOND QUARTER RESULTS
The Company's net income for the three months ended June 30, 1997 was
$18.99 million, or $.46 per share, compared to net income of $16.1 million, or
$.41 per share, for the same period in 1996. This increase is primarily
attributable to increases in earning assets and noninterest income partially
off-set by increases in loan loss provisions.
Net interest income on a tax equivalent basis increased $8.2 million to
$59.0 million for the quarter ended June 30, 1997 from $50.8 million for the
quarter ended June 30, 1996. The net yield (fully taxable equivalent net
interest income as a percentage of average interest-earning assets) increased
from 4.26% for the three months ended June 30, 1996 to 4.27% for the three
months ended June 30, 1997. The rate differential (difference in the average
yield on interest-earning assets and the average rate of interest-bearing
liabilities) increased from 3.53% for the three months ended June 30, 1996 to
3.58% for the three months ended June 30, 1997.
S-3
<PAGE> 4
Noninterest income increased $3.0 million for the three months ended June
30, 1997 as compared to the same period in 1996. This increase is primarily due
to a $1.4 million increase in mortgage servicing fees from the $12 billion
servicing portfolio of Colonial Mortgage Company, a wholly owned subsidiary of
Colonial Bank, and $.4 million in additional fees on deposit accounts.
The provision for loan losses for the first six months of 1997 was $6.2
million compared to $3.6 million for the same period in 1996. With the current
levels of growth, this increase allowed the Company to maintain a 161% coverage
of nonperforming assets compared to 156% at December 31, 1996 and 173% at June
30, 1996.
RECENTLY COMPLETED BUSINESS COMBINATIONS
Since June 30, 1997, the Company has acquired by merger two banking
institutions located in Florida: Great Southern Bancorp ("Great Southern"),
which was accounted for by the Company as a pooling of interests, and First
Commerce Banks of Florida, Inc. ("First Commerce"), which was accounted for as a
purchase. Aggregate assets and stockholders' equity for both institutions
acquired were $219.6 million and $19.5 million, respectively.
PENDING BUSINESS COMBINATIONS
BancGroup has entered into a definitive agreement dated as of June 23,
1997, to acquire Dadeland Bancshares, Inc. ("Dadeland"). Dadeland is a Florida
corporation and is a holding company for Dadeland Bank located in Miami,
Florida. Dadeland will merge with BancGroup and following such merger Dadeland
Bank will merge with Colonial Bank. BancGroup will pay an aggregate merger
consideration of $38,000,000 in cash for the shares of Dadeland common stock
currently outstanding. This transaction is subject to, among other things,
approval by the stockholders of Dadeland and approval by appropriate regulatory
authorities and will be accounted for as a purchase. At June 30, 1997, Dadeland
had assets of $126.7 million, deposits of $103.9 million and stockholders'
equity of $14.7 million.
BancGroup has entered into a definitive agreement dated as of May 8, 1997,
and amended as of July 7, 1997, to acquire First Independence Banks of Florida,
Inc. ("First Independence"). First Independence is a Florida corporation and is
a holding company for First Independence Bank located in Ft. Myers, Florida.
First Independence will merge with BancGroup and following such merger First
Independence Bank will merge with Colonial Bank. BancGroup will issue
approximately 532,000 shares of its Common Stock, depending upon the market
value at the time of such merger. This transaction is subject to, among other
things, approval by the stockholders of First Independence and approval by
appropriate regulatory authorities and is expected to be accounted for as a
pooling of interests. At June 30, 1997, First Independence had total assets of
approximately $66.1 million, deposits of $60.7 million and stockholders' equity
of $5.0 million.
BancGroup has entered into a letter of intent dated as of July 1, 1997, to
acquire ASB Bancshares, Inc. ("ASB"). ASB is a Delaware corporation and is a
holding company for Ashville Savings Bank located in St. Clair County, Alabama.
ASB will merge with BancGroup and following such merger Ashville Savings Bank
will merge with Colonial Bank. BancGroup will issue a maximum of 617,054 shares
of its Common Stock, depending upon the market value at the time of such merger,
and issue an aggregate amount of $7,725,000 in subordinated debentures to the
shareholders of ASB. This transaction is subject to, among other things, the
execution of a definitive agreement, 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 $142.1 million, deposits of $129.3
million and stockholders' equity of $11.6 million.
BancGroup has entered into a letter of intent dated as of July 21, 1997, 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 the Company and following such merger First National Bank of Florida at
Bonita Springs will merge with Colonial Bank. The Company will issue a maximum
of 2,007,000 shares of its Common Stock. This transaction is subject to, among
other things, the execution of a definitive agreement, approval by the
stockholders of South Florida and approval by appropriate regulatory authorities
and is expected to be
S-4
<PAGE> 5
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.
See "Capitalization" and "Selected Financial Data -- Condensed Pro Forma
Statement of Condition."
USE OF PROCEEDS
The net proceeds of the Subordinated Notes will be approximately
$ after deducting the underwriting discount and estimated offering
expenses. The net proceeds will be added to the general funds of the Company and
will be available for general corporate purposes, including acquisitions of
other financial institutions. It is expected that approximately $38 million of
the proceeds will be used in the acquisition of Dadeland. Pending such use, the
Company may temporarily invest the net proceeds in investment grade securities.
See "Capitalization."
Based upon the historical and anticipated future growth of the Company and
the financial needs of the Company and its subsidiaries, the Company may engage
in additional financings of a character and amount to be determined as the need
arises.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following are the Company's consolidated ratios of earnings to fixed
charges for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------ --------------------------------
1997 1996 1996 1995 1994 1993 1992
----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS TO FIXED CHARGES:
Excluding Interest on Deposits............. 3.32 3.17 2.74 2.95 4.04 4.15 3.76
Including Interest on Deposits............. 1.48 1.46 1.37 1.42 1.48 1.44 1.29
</TABLE>
S-5
<PAGE> 6
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at June 30, 1997, and as adjusted as of such date to give effect to the
sale of the Subordinated Notes offered hereby, and as further adjusted to
reflect the completed business combinations of Great Southern and First Commerce
and pending business combinations of Dadeland, First Independence, ASB and South
Florida. The table should be read in conjunction with the Company's Current
Reports on Form 8-K dated January 20, 1997, March 10, 1997, April 15, 1997, June
11, 1997 and June 24, 1997, incorporated herein by reference. For additional
information relating to specific transactions within the scope of recently
completed business combinations and probable business combinations, see "Recent
Developments" and "Selected Financial Data -- Condensed Pro Forma Statement of
Condition."
<TABLE>
<CAPTION>
COLONIAL COMPLETED & OTHER COLONIAL
BANCGROUP PROBABLE BUSINESS SUBORDINATED BANCGROUP
AS REPORTED COMBINATIONS(2) NOTES AS ADJUSTED
----------- ----------------- ------------ -----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Short term borrowings
Fed funds & repos...................... $125,479 $31,782 $157,261
FHLB................................... 610,000 610,000
-------- ------- ------- --------
Total short term borrowings.... 735,479 31,782 767,261
Long term debt
Other.................................. 15,279 1,600 16,879
Subordinated debt...................... 6,676 7,725 $50,000 64,401
Trust Preferred Securities............. 70,000 70,000
-------- ------- ------- --------
Total long term debt........... 91,955 9,325 $50,000 151,280
-------- ------- ------- --------
Total debt..................... $827,434 $41,107 $50,000 $918,541
======== ======= ======= ========
Shareholders' Equity
Common Stock, $2.50 par value;
100,000,000 shares authorized,
40,926,440 issued and outstanding... 102,316 10,261 112,577
Additional paid in capital............. 180,736 25,854 206,590
Retained earnings...................... 164,984 8,174 173,158
Treasury stock, at cost................ (15,887) 15,887 0
Unearned compensation.................. (1,887) (1,887)
Unrealized gain/loss on securities
available for sale, net of taxes.... 1,106 (83) 1,023
-------- ------- --------
Total shareholders' equity..... $431,368 $60,093 $491,461
======== ======= ========
Capital Ratios:
Tier 1 Capital(1)...................... 10.59% 9.82%
Risk Adjusted Capital(1)............... 11.99% 12.53%
Leverage Ratio......................... 7.68% 7.05%
</TABLE>
- ---------------
(1) Preliminary figures
(2) Includes adjustments to give effect to the completed and other probable
business combinations. See "Selected Financial Data -- Condensed Pro Forma
Statement of Condition."
S-6
<PAGE> 7
SELECTED FINANCIAL DATA
The following tables present for the Company, on a historical basis,
selected unaudited consolidated financial data for the five years ended December
31, 1996, and for the six months ended June 30, 1997 and 1996. The information
has been derived from the consolidated financial statements of the Company
incorporated in the accompanying Prospectus by reference to the Company's report
on Current Form 8-K dated June 24, 1997 for the fiscal year ended December 31,
1996, and the unaudited interim consolidated financial statements for the three
and six month periods ended June 30, 1997 included in the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997, and should be read in
conjunction therewith and with the notes thereto. See "Documents Incorporated by
Reference." Historical results are not necessarily indicative of results to be
expected for any future period. In the opinion of the Company's management, all
adjustments, consisting of normal recurring adjustments necessary to arrive at a
fair statement of interim results of operations of the Company, have been
included.
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
----------------------- --------------------------------------------------------------
1997 1996* 1996* 1995* 1994* 1993* 1992*
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF CONDITION SUMMARY
At period end:
Total assets................ $6,100,616 $5,273,401 $5,672,537 $4,960,165 $3,865,936 $3,728,270 $2,658,833
Loans, net of unearned
income.................... 4,582,254 3,946,343 4,215,802 3,645,727 2,736,041 2,289,233 1,657,604
Mortgage loans held for
sale...................... 165,476 165,925 157,966 112,203 61,556 368,515 150,835
Deposits.................... 4,747,342 4,049,960 4,299,821 3,869,012 3,067,500 2,990,190 2,251,299
Long-term debt.............. 91,955 35,704 39,092 47,688 86,662 57,397 22,979
Shareholders' equity........ 431,368 378,711 402,708 352,731 275,319 256,866 165,142
Average daily balances:
Total assets................ 5,956,312 5,101,431 5,286,587 4,373,227 3,708,350 3,015,787 2,592,966
Interest-earning assets..... 5,462,405 4,653,010 4,835,713 3,985,649 3,349,026 2,681,428 2,294,670
Loans, net of unearned
income.................... 4,479,967 3,747,357 3,931,084 3,123,407 2,477,768 1,813,569 1,615,713
Mortgage loans held for
sale...................... 127,862 142,748 135,135 98,785 135,046 248,502 121,820
Deposits.................... 3,913,525 3,252,611 4,032,610 3,420,881 2,994,868 2,407,015 2,181,233
Shareholders' equity........ 424,886 371,046 383,401 308,532 269,353 200,217 159,785
Book value per share at period
end......................... 10.54 10.11 10.29 9.43 7.93 7.69 6.34
Tangible book value per share
at period end............... 9.56 9.51 9.51 8.62 7.35 7.18 6.06
Selected Ratios:
Net income:**
Average assets............ 1.23% 1.19% 0.95% 1.06% 0.93% 0.84% 0.72%
Average shareholders'
equity.................. 17.24 16.37 13.09 15.06 12.81 12.68 11.61
Efficiency ratio............ 58.09 61.69 64.94 64.39 69.83 71.96 73.16
Dividend payout ratio....... 34.09 34.62 42.86 36.59 41.67 38.59 50.00
Average equity to average
total assets.............. 7.13 7.27 7.25 7.06 7.26 6.64 6.16
Total nonperforming assets
to net loans, other real
estate and
repossessions............. 0.79 0.72 0.81 0.85 1.28 1.79 2.30
Net charge-offs to average
loans (annualized)........ 0.17 0.07 0.17 0.18 0.12 0.34 0.65
Allowance for possible loan
losses to total loans (net
of unearned income)....... 1.28 1.25 1.27 1.29 1.55 1.61 1.50
Allowance for possible loan
losses to nonperforming
loans..................... 223% 307% 223% 258% 238% 215% 130%
</TABLE>
S-7
<PAGE> 8
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1997 1996* 1996* 1995* 1994* 1993* 1992*
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest Income........................ $231,674 $196,099 $406,838 $341,826 $255,758 $204,322 $192,526
Interest Expense....................... 117,445 98,782 205,843 170,483 105,797 81,008 86,283
-------- -------- -------- -------- -------- -------- --------
Net interest income.................... 114,229 97,317 200,995 171,343 149,961 123,314 106,243
Provision for possible loan losses..... 6,190 3,623 12,545 8,986 8,254 11,767 14,625
-------- -------- -------- -------- -------- -------- --------
Net interest income after provision for
possible loan losses................. 108,039 93,694 188,450 162,357 141,707 111,547 91,618
Noninterest income..................... 39,627 35,923 72,382 60,527 54,149 50,990 46,226
Noninterest expense.................... 90,051 82,986 183,316 150,654 144,119 125,901 112,340
-------- -------- -------- -------- -------- -------- --------
Income before income taxes............. 57,615 46,631 77,516 72,230 51,737 36,636 25,504
Applicable income taxes................ 21,286 16,434 27,303 25,765 17,243 11,249 6,960
-------- -------- -------- -------- -------- -------- --------
Income before extraordinary items and
the cumulative effect of a change in
accounting for income taxes.......... 36,329 30,197 50,213 46,465 34,494 25,387 18,544
Extraordinary items, net of income
taxes................................ -- -- -- -- -- (396) --
Cumulative effect of a change in
accounting for income taxes.......... -- -- -- -- -- 3,890 --
-------- -------- -------- -------- -------- -------- --------
Net income...................... $ 36,329 $ 30,197 $ 50,213 $ 46,465 $ 34,494 $ 28,881 $ 18,544
======== ======== ======== ======== ======== ======== ========
EARNINGS PER COMMON SHARE
Income before extraordinary items and
change in accounting for income
taxes:
Primary.............................. $ 0.88 $ 0.78 $ 1.26 $ 1.23 $ 0.96 $ 0.81 $ 0.67
Fully Diluted........................ $ 0.87 $ 0.77 $ 1.25 $ 1.19 $ 0.95 $ 0.81 $ 0.67
Net Income:
Primary.............................. 0.88 0.78 1.26 1.23 0.96 0.92 0.67
Fully Diluted........................ 0.87 0.77 1.25 1.19 0.95 0.91 0.67
Average shares outstanding:
Primary.............................. 41,231 38,950 39,764 37,912 35,907 31,272 27,785
Fully Diluted........................ 41,798 39,624 40,623 39,796 37,383 33,458 30,407
Cash dividends per common share:
Common................................. $ 0.300 $ 0.270 $ 0.540 $ 0.3375
Class A................................ -- -- -- $ 0.1125 $ 0.400 $ 0.355 $ 0.335
Class B................................ -- -- -- $ 0.0625 $ 0.200 $ 0.155 $ 0.135
</TABLE>
- ---------------
* Restated to reflect the April 22, 1997 pooling-of-interests combination with
Fort Brooke Bancorporation.
** Net income before extraordinary items and the cumulative effect of a change
in accounting for income taxes.
S-8
<PAGE> 9
THE COLONIAL BANCGROUP INC. AND SUBSIDIARIES CONDENSED PRO FORMA STATEMENT OF
CONDITION (UNAUDITED) (IN THOUSANDS)
The following summary includes (i) the condensed consolidated statement of
condition of BancGroup and subsidiaries as of June 30, 1997, (ii) the combined
presentation of the condensed consolidated statements of condition of completed
and probable business combinations: Great Southern, First Commerce, First
Independence, South Florida, Dadeland and ASB ("Completed and Other Probable
Business Combinations") as of June 30, 1997, (iii) adjustments to give effect to
the Completed and Other Probable Business Combinations, and (iv) the pro forma
combined condensed statement of condition of BancGroup and subsidiaries as if
such combinations had occurred on June 30, 1997.
These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of condition of
BancGroup and subsidiaries, incorporated by reference herein. The pro forma
information provided below may not be indicative of future results.
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------------------------------------
COMPLETED AND
CONSOLIDATED OTHER PROBABLE PRO FORMA
COLONIAL BUSINESS ADJUSTMENTS/ COMBINED
BANCGROUP COMBINATIONS (DEDUCTIONS)* TOTAL
------------ -------------- ------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks............................. $ 188,777 $ 34,247 $(38,000) $ 185,024
Interest-bearing deposits in banks.................. 8,134 8,134
Federal funds sold.................................. 16,567 8,768 25,335
Securities available for sale....................... 502,772 157,233 (637) 659,368
Investment securities............................... 307,483 3,810 311,293
Mortgage loans held for sale........................ 165,476 165,476
Loans, net of unearned income....................... 4,582,254 570,095 218 5,152,567
Less: Allowance for possible loan losses............ (58,525) (4,808) (63,333)
---------- -------- -------- ----------
Loans, net.......................................... 4,523,729 565,287 218 5,089,234
Premises and equipment, net......................... 114,501 21,673 (947) 135,227
Excess of cost over tangible and identified
intangible assets acquired, net................... 38,991 41,399 80,390
Mortgage servicing rights........................... 125,342 125,342
Other real estate owned............................. 10,120 1,419 11,539
Accrued interest and other assets................... 98,724 11,663 1,285 111,672
---------- -------- -------- ----------
Total Assets............................... $6,100,616 $804,100 $ 3,318 $6,908,034
========== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits............................................ $4,747,342 $699,284 $5,446,626
FHLB short-term borrowings.......................... 610,000 610,000
Other short-term borrowings......................... 125,479 31,782 157,261
Subordinated debt................................... 6,676 $ 7,725 14,401
Trust preferred securities.......................... 70,000 70,000
Other long-term debt................................ 15,279 1,600 16,879
Other liabilities................................... 94,472 4,414 2,520 101,406
---------- -------- -------- ----------
Total liabilities.......................... 5,669,248 737,080 10,245 6,416,573
Common Stock........................................ 102,316 3,894 6,367 112,577
Additional paid in capital.......................... 180,736 31,457 (5,603) 206,590
Retained earnings................................... 164,984 33,640 (25,466) 173,158
Treasury Stock...................................... (15,887) (1,912) 17,799
Unearned compensation............................... (1,887) (1,887)
Unrealized gain (loss) on securities available for
sale, net of taxes................................ 1,106 (59) (24) 1,023
---------- -------- -------- ----------
Total equity............................... 431,368 67,020 (6,927) 491,461
Total liabilities and equity........................ $6,100,616 $804,100 $ 3,318 $6,908,034
========== ======== ======== ==========
</TABLE>
- ---------------
* See the following Schedule of Adjustments to give effect to the Completed and
Other Probable Business Combinations.
S-9
<PAGE> 10
SCHEDULE OF ADJUSTMENTS
COMPLETED BUSINESS COMBINATIONS
GREAT SOUTHERN
(pooling of interests)
To record the issuance of 927,975 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of Great Southern:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
Great Southern outstanding shares........................... 1,731,620
Conversion ratio............................................ 0.5359
BancGroup shares issued..................................... 927,975
Par value of 927,975 shares issued at $2.50 per share....... $ 2,320
Shares issued at par value.................................. $ 2,320
Total capital stock of Great Southern....................... 8,226
Excess recorded as an increase in contributed capital....... 5,906
--------
8,226
To eliminate Great Southern
Common stock, at par value................................ (17)
Contributed capital....................................... (8,209)
--------
(8,226)
Net change in equity.............................. $ 0
========
</TABLE>
FIRST COMMERCE
(purchase)
To assign the amount by which the estimated value of BancGroup's investment
in First Commerce is in excess of the historical carrying value amount of the
net assets acquired, based on their estimated fair value of such assets and to
record the investment in First Commerce by the issuance of 685,695 shares of
BancGroup Common Stock for all of the outstanding 1,585,737 shares of First
Commerce as follows:
<TABLE>
<S> <C>
Equity in carrying value of net assets of First Commerce.... $ 9,250
Adjustments to state assets as fair value:
Write-down of fixed assets................................ (148)
Write-down securities..................................... (637)
Write-off organization expenses........................... (17)
Write-off deferred fee.................................... 192
Write-off other assets and prepaid expenses............... (133)
Write-off accrued expenses................................ 11
Acquisition accruals:
Broker fee................................................ (156)
Buy out option holders.................................... (238)
Buy out data processing contract.......................... (540)
Other legal, accounting and professional.................. (182)
Tax effect of purchase adjustments.......................... 647
Goodwill.................................................... 7,729
-------
6,528
Adjusted equity in carrying value of net assets............. $15,778
=======
</TABLE>
S-10
<PAGE> 11
SCHEDULE OF ADJUSTMENTS -- (CONTINUED)
Allocated as follows:
Cost of 671,165 shares of BancGroup Common Stock purchased
and re-issued for First Commerce outstanding shares.... $15,887
Issuance of an additional 14,530 shares of BancGroup
Common Stock........................................... 36
Adjustment to contributed capital for difference in cost
of treasury stock and fair value at date of re-issue... (145)
-------
Total purchase price.............................. $15,778
=======
PROBABLE BUSINESS COMBINATIONS
FIRST INDEPENDENCE
(pooling of interests)
To record the issuance of 537,989 shares of BancGroup Common Stock in
exchange for all of the outstanding shares and warrants of First Independence:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
First Independence outstanding shares....................... 529,167
First Independence warrants (converted according to merger
agreement)................................................ 103,389
--------
632,556
Conversion ratio............................................ 0.8505
BancGroup shares to be issued............................... 537,989
Par value of 537,989 shares issued at $2.50 per share....... $ 1,345
Shares issued at par value.................................. $ 1,345
Total capital stock of First Independence................... 5,198
Excess recorded as a decrease to contributed capital........ 3,853
--------
5,198
To eliminate First Independence
Common stock, at par value................................ (2,646)
Contributed capital....................................... (2,552)
--------
(5,198)
Net change in equity.............................. $ 0
========
</TABLE>
S-11
<PAGE> 12
SCHEDULE OF ADJUSTMENTS -- (CONTINUED)
SOUTH FLORIDA
(pooling of interests)
To record the issuance of 2,006,899 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of South Florida:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
South Florida outstanding shares............................ 1,212,000
Conversion ratio............................................ 1.6559
BancGroup shares to be issued............................... 2,006,899
Par value of 2,006,899 shares issued at $2.50 per share..... $ 5,017
Shares issued at par value.................................. $ 5,017
Total capital of South Florida.............................. 9,900
Excess recorded as a decrease to contributed capital........ 4,883
----------
9,900
To eliminate South Florida
Common stock, at par value................................ (1,212)
Contributed capital....................................... (8,688)
----------
(9,900)
Net change in equity.............................. $ 0
==========
</TABLE>
DADELAND
(purchase)
To assign the amount by which the estimated value of BancGroup's investment
in Dadeland is in excess of the historical carrying value amount of the net
assets acquired, based on their estimated fair value of such assets:
<TABLE>
<S> <C>
Equity in carrying value of net assets of Dadeland.......... $14,738
Adjustments to state assets at fair value:
Write-up FASB 91 fees..................................... 26
Write-down of fixed assets................................ (684)
Acquisition accruals:
Accounts payable and other miscellaneous.................. (196)
Buy out data processing contract.......................... (20)
Executive severance....................................... (766)
Legal, accounting and professional........................ (10)
Tax effect of purchase adjustments.......................... 594
Goodwill.................................................... 24,318
23,262
Adjusted equity in carrying value of net assets............. 38,000
-------
Total purchase price to be paid in cash........... $38,000
=======
</TABLE>
S-12
<PAGE> 13
SCHEDULE OF ADJUSTMENTS -- (CONTINUED)
ASB
(purchase)
To assign the amount by which the estimated value of BancGroup's investment
in ASB is in excess of the historical carrying value amount of the net assets
acquired, based on their estimated fair value of such assets:
<TABLE>
<S> <C>
Equity in carrying value of net assets of ASB............... $11,617
Adjustments to state assets at fair value:
Write-up computer software and hardware................... (115)
Acquisition accruals:
Present value of deferred compensation.................... (393)
Litigation accrual........................................ (15)
Legal, accounting and professional........................ (15)
Tax effect of purchase adjustment........................... 194
Goodwill.................................................... 9,352
-------
9,008
Adjusted equity in carrying value of net assets............. 20,625
-------
Allocated as follows:
Issuance of 477,785 shares of BancGroup Common Stock at an
assumed market value of $27.00 per share............... 12,900
Issuance of subordinated debentures....................... 7,725
-------
Total purchase price.............................. $20,625
=======
</TABLE>
S-13
<PAGE> 14
DESCRIPTION OF SUBORDINATED NOTES
The following is a brief description of the terms of the Subordinated
Notes. This description does not purport to be complete, should be read in
conjunction with the statements under "Description of Securities" in the
accompanying Prospectus and is subject to, and qualified in its entirety by,
such description and the Subordinated Indenture, dated as of March 31, 1997 (the
"Indenture"), as amended by the First Supplemental Indenture dated as of August
8, 1997 (the "Supplemental Indenture") between the Company and SunTrust Bank,
Atlanta, as Trustee (the "Trustee"). The Indenture is an exhibit to the
Registration Statement of which the accompanying Prospectus and this Prospectus
Supplement form a part, and the Supplemental Indenture is an exhibit to the
Company's Form 8-K dated , 1997.
GENERAL
The Subordinated Notes will mature on August 15, 2007. The Subordinated
Notes will bear interest at the rate of % per annum, from August , 1997.
Interest is payable semiannually in arrears on August 15 and February 15 of each
year, beginning February 15, 1998, to the persons in whose names the
Subordinated Notes are registered at the close of business 15 calendar days
prior to the applicable interest payment date, and at maturity to the persons to
whom principal is payable. The Subordinated Notes are not subject to redemption
prior to maturity. No sinking fund is provided for the Subordinated Notes.
The Subordinated Notes are expected to be rated BBB by Fitch Investors
Services, L.P., BB+ by Standard & Poor's Ratings Services and Ba2 by Moody's
Investors Service. A security rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or withdrawal at any time by the
assigning rating organization.
The Subordinated Notes will be unsecured and subordinate in right of
payment to the prior payment in full of all existing and future Senior
Indebtedness of the Company as described under "Description of
Securities -- Subordination of Securities" in the accompanying Prospectus and as
described below under "Subordination." As of June 30, 1997, the Company had
approximately $751 million principal amount of Senior Indebtedness outstanding,
excluding guarantees and other contingent obligations of the Company.
Payment of the principal of the Subordinated Notes may be accelerated only
in the case of certain events involving the bankruptcy, insolvency or
reorganization of the Company. There is no right of acceleration of the payment
of principal of the Subordinated Notes upon a default in the payment of interest
on the Subordinated Notes or in the performance of any covenant of the Company
contained in the Subordinated Notes or the Indenture.
GLOBAL NOTES
DTC, New York, New York will act as securities depository for the
Subordinated Notes. The Subordinated Notes will be initially issued in the form
of one or more Global Notes registered in the name of Cede & Co. (DTC's
partnership nominee). The Global Note(s) will be issued in the aggregate
principal amount of the Subordinated Notes to be held by DTC and will be
deposited with DTC. DTC is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the Securities Exchange Act of 1934.
DTC is owned by certain of the securities brokers and dealers, banks, trust
companies, clearing corporations and other organizations that maintain accounts
with DTC (the "Participants") and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. The rules applicable to DTC and its Participants are on file with
the Commission.
Upon the issuance of a Global Note, DTC will credit to the accounts of the
Participants on its book-entry registration and transfer system the respective
principal amounts of the Subordinated Notes represented by such Global Note. The
accounts to be credited will be designated by the Underwriters. Ownership of
beneficial interests in a Global Note will be limited to Participants or persons
that may indirectly hold
S-14
<PAGE> 15
beneficial interests through Participants. Ownership of beneficial interests in
such Global Note will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC for such Global Note (with
respect to interests of Participants) and the records of Participants (with
respect to persons other than Participants). Beneficial owners will not receive
certificates representing their ownership interests in the Subordinated Notes
unless the use of the book-entry system for the Subordinated Notes should be
discontinued. The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form which
will not be possible with the Subordinated Notes. The Company at any time and in
its sole discretion may determine not to have book-entry notes represented by
Global Notes and, in such event, will issue certificated notes in exchange
therefor.
So long as DTC is the holder of a Global Note, DTC or its nominee, as the
case may be, will be considered the sole owner or holder of the Subordinated
Notes represented by such Global Note for all purposes under the Indenture.
Payment of the principal of, premium, if any, and interest, if any, on the
Subordinated Notes held by DTC will be made to DTC's nominee as the registered
holder of the Global Note. Neither the Company, the Trustee, any paying agent
nor the registrar for such Subordinated Notes will have any responsibility or
liability for any aspect of the records relating to, or payments made on account
of, beneficial interests in a Global Note or for maintaining, supervising or
reviewing any records relating to such beneficial interests. The Participants
are solely responsible for keeping account of their holdings on behalf of their
customers.
If DTC should at any time become unwilling, unable or ineligible to
continue as the depository for the Subordinated Notes and a successor depository
should not be appointed by the Company within 90 days, the Company will issue
Subordinated Notes in definitive form in exchange for the Global Note(s).
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Subordinated Notes will be made by the Underwriters in
immediately available funds. As long as the Subordinated Notes are represented
by Global Notes, all payments of principal and interest will be made by the
Company in immediately available funds, provided DTC makes its Same-Day Funds
Settlement System available to the Company.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, as long as
the Subordinated Notes are represented by Global Notes registered in the name of
DTC or its nominee, the Subordinated Notes will trade in the Same-Day Funds
Settlement System maintained by DTC until maturity, and secondary market trading
activity in the Subordinated Notes will therefore be required by DTC to settle
in immediately available funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on trading activity in the
Subordinated Notes.
NOT A DEPOSIT
Any certificate for the Subordinated Notes will bear the following legend:
"THIS SUBORDINATED NOTE IS NOT A SAVINGS OR DEPOSIT ACCOUNT OR OTHER OBLIGATION
OF A BANK AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY."
SUBORDINATION
As described in the accompanying Prospectus, the Subordinated Notes are
subordinate and subject in right of payment to the prior payment in full of all
existing and future Senior Indebtedness of the Company. See "Subordinated Debt
Securities -- Subordination" in the accompanying Prospectus. Neither the
Indenture nor the Supplemental Indenture limits or prohibits the incurrence of
additional Senior Indebtedness.
S-15
<PAGE> 16
The Supplemental Indenture has amended and replaced the term "Senior
Indebtedness" as defined in the Indenture and described in the Prospectus.
"Senior Indebtedness" is defined in the Supplemental Indenture as follows:
"Senior Indebtedness" means any indebtedness (including
principal, premium and interest) for money borrowed, or any
indebtedness incurred by the Company in connection with an acquisition
by the Company or an Affiliate of the stock or substantially all of
the assets of another Person or a merger or consolidation to which the
Company or an Affiliate is a party, outstanding on the date of
execution of this Indenture as originally executed, or thereafter
created, incurred or assumed, for the payment of which the Company is
at the time of determination responsible or liable as obligor,
guarantor or otherwise, and all deferrals, renewals, extensions and
refundings of any such indebtedness or obligations; provided, however,
that Senior Indebtedness shall not include (a) indebtedness as to
which, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such
indebtedness is subordinate in right of payment to the Securities, (b)
indebtedness which by its terms refers explicitly to the Securities
issued hereunder and states that such indebtedness shall not be senior
thereto and shall be either equally subordinate and equally junior
with the Securities issued hereunder, (c) indebtedness of the Company
in respect of the Securities, (d) the Company's 7 1/2% Convertible
Subordinated Debentures due 2011, issued in 1986, which shall rank
pari passu with the Securities, (e) the Company's 8.92% Junior
Subordinated Deferrable Interest Debentures, (f) any indebtedness of
the Company that, when incurred and without respect to any election
under Section 1111(b) of the Bankruptcy Reform Act of 1978, was
without recourse to the Company, (g) any indebtedness of the Company
to any of its Subsidiaries, (h) any indebtedness of the Company to any
Person who is an employee of the Company in such Person's capacity as
such, (i) trade accounts payable of the Company, and (j) accrued
liabilities arising in the ordinary course of business of the Company.
As described in the accompanying Prospectus, payment of the principal of
the Subordinated Notes may be accelerated in the case of certain events
involving the bankruptcy, insolvency or reorganization of the Company. There is
no right of acceleration in the case of a default by the Company in the
performance of any covenant or agreement in the Subordinated Notes or the
Indenture, including the failure to pay principal of or interest on the
Subordinated Notes when due. See "Description of Securities -- Events of Default
and Limited Rights of Acceleration" in the accompanying Prospectus.
CERTAIN REGULATORY CONSIDERATIONS
The Company is a registered bank holding company subject to supervision and
regulation by the Board of Governors of the Federal Reserve System (the "Federal
Reserve"). As such, it is subject to the Bank Holding Company Act of 1956, as
amended (the "BHCA"), and many of the Federal Reserve's regulations promulgated
thereunder.
The Company's subsidiary bank ("Colonial Bank") is subject to the
supervision and examination by the Federal Reserve and the Alabama State Banking
Department (the "Department"). (Colonial Bank, previously a state non-member
bank, became a member of the Federal Reserve on June 13, 1997.) The deposits of
Colonial Bank are insured by the Federal Deposit Insurance Corporation ("FDIC")
to the extent provided by law. The FDIC assesses deposit insurance premiums the
amount of which may, in the future, depend in part on the condition of Colonial
Bank. Moreover, the FDIC may terminate deposit insurance of Colonial Bank under
certain circumstances. Both the Federal Reserve and the Department have
jurisdiction over a number of the same matters, including branching and mergers.
One limitation under the BHCA and the Federal Reserve's regulations
requires that the Company obtain prior approval of the Federal Reserve before
the Company acquires, directly or indirectly, more than five percent of any
class of voting securities of another bank. Prior approval also must be obtained
before the Company acquires all or substantially all of the assets of another
bank, or before it merges or consolidates with another bank holding company. The
Company may not engage in "non-banking" activities unless it demonstrates to the
Federal Reserve's satisfaction that the activity in question is closely related
to banking and
S-16
<PAGE> 17
a proper incident thereto. Because the Company is a registered bank holding
company, persons seeking to acquire 25 percent or more of any class of its
voting securities must receive the approval of the Federal Reserve. Similarly,
under certain circumstances, persons seeking to acquire between 10 percent and
25 percent also may be required to obtain prior Federal Reserve approval.
In 1989 Congress expressly authorized the acquisition of savings
associations by bank holding companies. The Company must obtain the prior
approval of the Federal Reserve before making such an acquisition, and must
demonstrate that the likely benefits to the public of the proposed transaction
(such as greater convenience, increased competition, or gains in efficiency)
outweigh potential burdens (such as an undue concentration of resources,
decreased or unfair competition, conflicts of interest, or unsound banking
practices).
As a result of enactment in 1991 of the FDIC Improvement Act, banks are
subject to increased reporting requirements and more frequent examinations by
the bank regulators. The agencies also have the authority to dictate certain key
decisions that formerly were left to management, including compensation
standards, loan underwriting standards, asset growth, and payment of dividends.
Failure to comply with these standards, or failure to maintain capital above
specified levels set by the regulators, could lead to the imposition of
penalties or the forced resignation of management. If a bank becomes critically
undercapitalized, the banking agencies have the authority to place an
institution into receivership or require that the bank be sold to, or merged
with, another financial institution.
In September 1994 Congress enacted the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994. This legislation, among other things, amended
the BHCA to permit bank holding companies, subject to certain limitations, to
acquire either control or substantial assets of a bank located in states other
than that bank holding company's home state regardless of state law
prohibitions. This legislation became effective on September 29, 1995. In
addition, this legislation also amended the Federal Deposit Insurance Act to
permit, beginning on June 1, 1997 (or earlier where state legislatures provide
express authorization), the merger of insured banks with banks in other states.
The officers and directors of the Company and Colonial Bank are subject to
numerous insider transaction restrictions, including limits on the amount and
terms of transactions involving Colonial Bank, on the one hand, and their
principal stockholders, officers, directors, and affiliates, on the other. There
are a number of other laws that govern the relationship between Colonial Bank
and its customers. For instance, the Community Reinvestment Act is designed to
encourage lending by banks to persons in low and moderate income areas. The Home
Mortgage Disclosure Act and the Equal Credit Opportunity Act attempt to minimize
lending decisions based on impermissible criteria, such as race or gender. The
Truth-in-Lending Act and the Truth-in-Savings Act require banks to provide full
disclosure of relevant terms related to loans and savings accounts,
respectively. Anti-tying restrictions (which prohibit, for instance,
conditioning the availability or terms of credit on the purchase of another
banking product) further restrict Colonial Bank's relationships with its
customers.
The federal banking agencies have broad enforcement powers over depository
institutions, including the power to terminate deposit insurance, to impose
substantial fines and other civil and criminal penalties, and to appoint a
conservator or receiver if any of a number of conditions are met. The Federal
Reserve has broad enforcement powers over bank holding companies, including the
power to impose substantial fines and other civil and criminal penalties.
Almost every aspect of the operations and financial condition of Colonial
Bank is subject to extensive regulation and supervision and to various
requirements and restrictions under federal and state laws, including
requirements governing capital adequacy, liquidity, earnings, dividends,
reserves against deposits, management practices, branching, loans, investments
and the provision of services. In addition to the impact of regulation, banks
and bank holding companies may be significantly affected by legislation, which
can change banking statutes in substantial and unpredictable ways, and by the
actions of the Federal Reserve as it attempts to control the money supply and
credit availability in order to influence the economy.
S-17
<PAGE> 18
PAYMENTS OF DIVIDENDS AND OTHER RESTRICTIONS
The Company is a legal entity separate and distinct from its subsidiaries,
including Colonial Bank. There are various legal and regulatory limitations on
the extent to which Colonial Bank may finance or otherwise supply funds to the
Company.
The principal source of the Company's cash revenues is dividends from
Colonial Bank and there are certain legal restrictions under federal and state
law on the payment of such dividends. The relevant regulatory agencies also have
authority to prohibit a bank holding company from engaging in what, in the
opinion of such regulatory body, constitutes an unsafe or unsound practice in
conducting its business. The payment of dividends could, depending upon the
financial condition of Colonial Bank, be deemed to constitute such an unsafe or
unsound practice.
Retained earnings of Colonial Bank available for payment of cash dividends
under all applicable regulations without obtaining governmental approval were
approximately $112 million as of December 31, 1996.
In addition, Colonial Bank and its subsidiaries are subject to limitations
under Section 23A of the Federal Reserve Act with respect to extensions of
credit to, investments in, and certain other transactions with, the Company and
its other subsidiaries. Furthermore, loans and extensions of credit are also
subject to various collateral requirements.
CAPITAL ADEQUACY
The federal bank regulatory agencies have adopted minimum risk-based and
leverage capital guidelines for United States banking organizations. The minimum
required ratio of total capital to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit), is 8%, of which 4%
must consist of Tier 1 capital. As of June 30, 1997, the Company's preliminary
total risk-based capital ratio was 11.99%, including 10.59% of Tier 1 capital.
The minimum required leverage capital ratio (Tier 1 capital to average total
assets) is 3% for banking organizations that meet certain specified criteria,
including that they have the highest regulatory rating. A higher leverage ratio
may apply under certain circumstances. As of June 30, 1997, the Company's
leverage capital ratio was 7.68%.
Failure to meet capital guidelines can subject a bank to a variety of
enforcement remedies, including additional substantial restrictions on its
operations and activities, termination of deposit insurance by the FDIC, and
under certain conditions the appointment of a receiver or conservator.
Federal banking statutes establish five capital categories for depository
institutions ("well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized"), and impose
significant restrictions on the operations of an institution that is not at
least adequately capitalized. Under certain circumstances, an institution may be
downgraded to a category lower than that warranted by its capital levels, and
subjected to the supervisory restrictions applicable to institutions in the
lower capital category.
An undercapitalized depository institution is subject to restrictions in a
number of areas, including capital distributions, payment of management fees,
and expansion. In addition, an undercapitalized depository institution is
required to submit a capital restoration plan to the appropriate federal banking
agency. A depository institution's holding company must guarantee the capital
plan up to an amount equal to the lesser of 5% of the depository institution's
assets at the time it becomes undercapitalized or the amount needed to restore
the capital of the institution to the levels required for the institution to be
classified as adequately capitalized at the time the institution fails to comply
with the plan. A depository institution is treated as if it is significantly
undercapitalized if it fails in any material respect to implement a capital
restoration plan.
Significantly undercapitalized depository institutions may be subject to a
number of additional significant requirements and restrictions, including
requirements to sell sufficient voting stock to become adequately capitalized,
to improve management, to restrict asset growth, to prohibit acceptance of
correspondent bank deposits, to restrict senior executive compensation, and to
limit transactions with affiliates. Critically
S-18
<PAGE> 19
undercapitalized depository institutions are further subject to restrictions on
paying principal or interest on subordinated debt, making investments,
expanding, acquiring or selling assets, extending credit for highly-leveraged
transactions, paying excessive compensation, amending their charters or bylaws,
and making any material changes in accounting methods. In general, a receiver or
conservator must be appointed for a depository institution within 90 days after
the institution becomes critically undercapitalized.
SUPPORT OF SUBSIDIARY BANKS
Under Federal Reserve policy, the Company is expected to act as a source of
financial strength to, and to commit resources to support, Colonial Bank. This
support may be required at times when, absent such Federal Reserve policy, the
Company may not be inclined to provide it. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain the capital of a subsidiary bank will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
FDIC INSURANCE ASSESSMENTS
Colonial Bank is subject to FDIC deposit insurance assessments. The FDIC
applies a risk-based assessment system that places each financial institution in
one of nine risk categories with premium rates, based on capital levels and
supervisory criteria, ranging from 0.00% to 0.27% of deposits. The FDIC has the
authority to raise or lower assessment rates on insured deposits in order to
achieve certain designated reserve ratios in the deposit insurance funds.
It should be noted that supervision, regulation, and examination of the
Company and Colonial Bank are intended primarily for the protection of
depositors, not security holders.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to the Underwriters named below and
the Underwriters have agreed to purchase from the Company, the amount of
Subordinated Notes set forth opposite their names below.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- ----------- ----------
<S> <C>
Bear, Stearns & Co. Inc..................................... $
Keefe, Bruyette & Woods, Inc................................
Morgan Keegan & Company, Inc................................
----------
Total............................................. $
==========
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Subordinated
Notes offered hereby if any Subordinated Notes are purchased. The Underwriters
have advised the Company that they propose initially to offer the Subordinated
Notes to the public at the public offering price set forth on the cover page of
this Prospectus Supplement and to certain dealers at such price less a
concession not in excess of % of the principal amount of the Subordinated
Notes. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of % of such principal amount to certain other dealers. After
the initial public offering, the public offering price and such concessions may
be changed.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments the Underwriters
may be required to make in respect thereof.
The Subordinated Notes are a new issue of securities with no established
trading market and will not be listed on any securities exchange. The Company
has been advised by the Underwriters that they may make a market in the
Subordinated Notes. The several Underwriters are not obligated, however, to make
a market in the Subordinated Notes and any such market making activity may be
discontinued at any time at the sole
S-19
<PAGE> 20
discretion of the several Underwriters. Accordingly, the Company cannot provide
any assurance that a secondary market for the Subordinated Notes will develop.
In order to facilitate the offering of the Subordinated Notes, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Subordinated Notes during and after the offering.
Specifically, the Underwriters may over-allot or otherwise create a short
position in the Subordinated Notes for their own account by selling more
Subordinated Notes than have been sold to them by the Company. The Underwriters
may elect to cover any such short position by purchasing Subordinated Notes in
the open market. In addition, the Underwriters may stabilize or maintain the
price of the Subordinated Notes by bidding for or purchasing Subordinated Notes
in the open market and may impose penalty bids, under which selling concessions
allowed to syndicate members or other broker-dealers participating in the
offering are reclaimed if Subordinated Notes previously distributed in the
offering are repurchased in connection with stabilization transactions or
otherwise. The effect of these transactions may be to stabilize or maintain the
market price of the Subordinated Notes at a level above that which might
otherwise prevail in the open market. The imposition of a penalty bid may also
affect the price of the Subordinated Notes to the extent that it discourages
resales thereof. No representation is made as to the magnitude or effect of any
such stabilization or other transactions. Such transactions, if commenced, may
be discontinued at any time.
VALIDITY OF SUBORDINATED NOTES
The validity of the Subordinated Notes will be passed upon for the Company
by Miller, Hamilton, Snider & Odom, L.L.C., Mobile, Alabama and for the
Underwriters by Sullivan & Cromwell, New York, New York. Sullivan & Cromwell
will rely on the opinion of Miller, Hamilton, Snider & Odom, L.L.C., as to
matters of Alabama law, and Miller, Hamilton, Snider & Odom, L.L.C. will rely on
the opinion of Sullivan & Cromwell as to matters of New York law. John C. H.
Miller, Jr. is a partner of Miller, Hamilton, Snider & Odom, L.L.C. and a
director of BancGroup. Miller, Hamilton, Snider & Odom, L.L.C. received fees for
legal services performed in 1996 of $1,474,853. John C. H. Miller, Jr.
beneficially owns 40,480 shares of BancGroup Common Stock. Mr. Miller also
received employee-related compensation from BancGroup in 1996 of $41,000.
S-20
<PAGE> 21
PROSPECTUS
$100,000,000
THE COLONIAL BANCGROUP, INC.
SUBORDINATED DEBT SECURITIES
---------------------
The Colonial BancGroup, Inc. ("BancGroup") may offer from time to time up
to $100,000,000 aggregate principal amount of its subordinated debt securities
(the "Securities") at prices and on terms to be determined at the time of sale.
The specific designation, aggregate principal amount, maturity, authorized
denominations, any premium, any interest rate (which may be fixed or variable),
any interest payment dates, any optional or mandatory redemption terms, the
initial public offering price and other terms of the offering of the Securities
in respect of which this Prospectus is being delivered ("Offered Securities")
are set forth in the accompanying Prospectus Supplement (the "Prospectus
Supplement").
The Securities will be unsecured and will be subordinate in right of
payment to the proper payment in full of all existing and future Senior
Indebtedness of BancGroup, as described in "Description of Securities --
Subordination of Securities." Unless specified otherwise in a Prospectus
Supplement, the Securities will be subject to acceleration of maturity only in
the event of certain events of bankruptcy, insolvency or reorganization of
BancGroup. There is no right of acceleration in the case of a default in the
payment of principal of, premium, if any, or interest on, the Securities or in
the performance of any covenant or agreement of BancGroup. See "Description of
Securities -- Events of Default and Limited Rights of Acceleration."
The Securities may be sold (i) directly by BancGroup to the public or
through agents designated by it from time to time, (ii) through underwriting
syndicates led by one or more managing underwriters, or (iii) through one or
more underwriters acting alone. If any agent of BancGroup or any underwriter is
involved in the sale of the Securities offered hereby, the name of such agent or
underwriter and any applicable commissions or discounts are set forth in, or may
be calculated from, the Prospectus Supplement, and the net proceeds to BancGroup
from such sale will be the purchase price of such Securities less such
commissions or discounts and the other attributable issuance and distribution
expenses. See "Plan of Distribution" for possible indemnification arrangements
for agents or underwriters.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement or a term sheet setting forth the terms
of the Securities.
---------------------
THE SECURITIES WILL NOT BE SAVING ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY
BANK OR NONBANK SUBSIDIARY OF BANCGROUP AND WILL NOT BE INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION
INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is May 1, 1997.
<PAGE> 22
AVAILABLE INFORMATION
BancGroup is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and, in accordance therewith, files reports
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information filed by BancGroup, including
proxy and information statements, can be inspected and copied at the public
reference facilities of the Commission, Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at certain regional offices: 7 World
Trade Center, 13th Floor, New York, New York 10048; Citicorp Center, 500 West
Madison Street, suite 1400, Chicago, Illinois 60661-2511; 1401 Brickell Avenue,
Suite 200, Miami, Florida 33131; 1801 California Street, Suite 4800, Denver,
Colorado 80202-2648; 5670 Wilshire Boulevard, 11th Floor, Los Angeles,
California 90036-3648. Copies of such material can be obtained from the Public
Reference Section of the Commission at prescribed rates.
The Commission also maintains a Web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission.
BancGroup's Common Stock is listed for trading on the NYSE. Reports,
including proxy and information statements, of BancGroup and other information
may be inspected at the NYSE, 20 Broad Street, New York, New York 10005.
BancGroup has filed with the Commission a Registration Statement under the
Securities Act of 1933, as amended, to register the Securities offered hereby.
This Prospectus omits certain information contained in the Registration
Statement and exhibits thereto. Such Registration Statement, including the
exhibits thereto, can be inspected at the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of such
Registration Statement can be obtained at prescribed rates from the Commission
at that address.
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
THE PERSON SPECIFIED BELOW.
The following documents filed by BancGroup with the Commission are hereby
incorporated by reference into this Prospectus:
(1) BancGroup's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(2) BancGroup's Report on Form 8-K dated January 20, 1997;
(3) BancGroup's Report on Form 8-K dated March 10, 1997; and
(4) BancGroup's Report on Form 8-K dated April 15, 1997.
All documents filed by BancGroup pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 after the date of this Prospectus
and prior to the termination of this offering shall be deemed incorporated by
reference in this Prospectus and made a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated or deemed
incorporated herein by reference will be deemed to be modified or superseded for
the purpose of this Prospectus to the extent that a statement contained herein
or in the other subsequently filed document which also is, or is deemed to be,
incorporated herein by reference modifies or supersedes such statement. Any such
statement so modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
BancGroup will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the request of any
such person, a copy of any and all of the documents which have been incorporated
herein by reference but not delivered herewith (other than the exhibits to such
documents). Such request, in writing or by telephone, should be directed to W.
Flake Oakley, IV, Secretary, at
2
<PAGE> 23
BancGroup's principal offices, The Colonial BancGroup, Inc., One Commerce
Street, Post Office Box 1108, Montgomery, Alabama 36102 (telephone
334-240-5000).
BUSINESS OF BANCGROUP
GENERAL
BancGroup is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended, and incorporated under the laws of Delaware. It
was organized in 1974, but has operated under its current name and management
since 1981. BancGroup operates wholly owned commercial banking subsidiaries in
the states of Alabama, Florida, Georgia and Tennessee, each under the name
"Colonial Bank." Colonial Bank conducts a full service commercial banking
business in the state of Alabama through 110 branches. In Tennessee, Colonial
Bank conducts a general commercial banking business through three branches. In
Georgia, Colonial Bank operates eleven branches in the Atlanta area and three
branches in the Dalton area. In Florida, Colonial Bank operates eleven branches
in the Orlando and Ormond Beach areas, nine branches in Dade, Broward and Palm
Beach Counties, and six branches in Eustis and Lake County. Colonial Mortgage
Company, a subsidiary of Colonial Bank in Alabama, is a mortgage banking company
which services approximately $10.6 billion in residential loans and which
originates mortgages in 37 states through 6 regional offices. BancGroup's
commercial banking loan portfolio is comprised primarily of commercial real
estate loans (24%) and residential real estate loans (43%), a significant
portion of which is located within the State of Alabama. BancGroup's growth in
loans over the past several years has been concentrated in commercial and
residential real estate loans.
BancGroup plans to merge all of its existing subsidiary banks into its
Alabama bank, Colonial Bank, no later than July 1, 1997.
BancGroup is a legal entity separate and distinct from its subsidiaries,
including its bank subsidiaries. There are various legal limitations governing
the extent to which certain of BancGroup's subsidiaries may extend credit, pay
dividends or otherwise supply funds to, or engage in transactions with,
BancGroup or certain of its other subsidiaries. The rights of BancGroup to
participate in any distribution of assets of any subsidiary upon its
dissolution, winding-up, liquidation or reorganization or otherwise are subject
to the prior claims of creditors of that subsidiary, except to the extent that
BancGroup may itself be a creditor of that subsidiary and its claims are
recognized. Claims on BancGroup's subsidiaries by creditors other than BancGroup
include long-term debt and substantial obligations with respect to deposit
liabilities, trading liabilities, federal funds purchased, securities sold under
repurchase agreements, as well as short-term borrowings and accounts payable.
BancGroup's principal office is located at One Commerce Street, Montgomery,
Alabama 36104. Its telephone number is (334) 240-5000. Additional information
about BancGroup is included in documents incorporated herein by reference. See
"DOCUMENTS INCORPORATED BY REFERENCE."
RECENT AND PENDING BUSINESS COMBINATIONS
Since December 31, 1996, BancGroup has acquired three financial
institutions in Florida, one in Georgia and one in Alabama, with aggregate
assets of $896.9 million and aggregate stockholders equity of $66.6 million.
BancGroup has pending three acquisitions of financial institutions in Florida
which, when completed, will add in the aggregate $421.4 million in assets and
$25.8 million in stockholders' equity.
Acquisitions of other financial institutions have been, and are expected to
continue to be, an important part of the expansion of BancGroup's business.
BancGroup expects to continue to take advantage of the consolidation of the
financial services industry by further developing its franchise through the
acquisition of financial institutions. In effecting acquisitions, BancGroup's
management's fundamental objective is to enhance the value of BancGroup's
franchise on a going forward basis. Future acquisitions may at times require
BancGroup to pay consideration in excess of the current book or market value of
the net assets acquired, thereby resulting in dilution of the current book value
per share of the BancGroup common stock or resulting
3
<PAGE> 24
in the incurrence of additional indebtedness by BancGroup which may rank senior
to the Securities offered hereby.
USE OF PROCEEDS
The net proceeds from the sale of the Securities will be used for general
corporate purposes, including BancGroup's working capital needs, possible
additional contributions to the capital of BancGroup's subsidiaries, possible
acquisitions of other financial institutions or their assets, possible
acquisitions of, or investments in, other businesses of a type eligible for bank
holding companies and possible reduction of outstanding indebtedness of
BancGroup. See "Business of BancGroup -- Recent and Pending Business
Combinations." Pending such use, BancGroup may temporarily invest the net
proceeds in investment-grade securities. BancGroup, from time to time, may
engage in additional capital financing of a character and in amounts to be
determined by BancGroup in light of its needs at such time or times and in light
of prevailing market conditions. If BancGroup elects at the time of issuance of
the Securities to make a different or more specified use of the proceeds other
than that set forth herein, such use will be described in the applicable
Prospectus Supplement.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth BancGroup's consolidated ratios of earnings
to fixed charges. The following ratios should be read in conjunction with the
Consolidated Financial Statements, the notes thereto and other financial
information incorporated by reference herein. For the purpose of computing the
consolidated ratios of earnings to fixed charges, earnings represent
consolidated income before income taxes. Fixed charges consist of interest on
deposits, long-term debt and short-term borrowings and one-third of rental
expense (which is deemed representative of the interest factor).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EARNINGS TO FIXED CHARGES:
Excluding Interest on Deposits(1)......................... 1.38 1.41 1.49 1.45 1.31
</TABLE>
- ---------------
(1) Restated to give retroactive effect to the mergers with Jefferson Bancorp,
Inc. on January 3, 1997 and D/W Bankshares, Inc. on January 31, 1997.
4
<PAGE> 25
DESCRIPTION OF SECURITIES
The following sets forth certain general terms and provisions of the
Securities to which any Prospectus Supplement may relate. The particular terms
of the Securities offered by the Prospectus Supplement will be described in the
Prospectus Supplement relating to such Offered Securities.
The Securities will be issued under a Subordinated Indenture dated as of
March 31, 1997 (the "Indenture"), between BancGroup and SunTrust Bank, Atlanta,
Atlanta, Georgia, as Trustee for the Securities (the "Trustee"). A copy of the
Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. The following summaries of certain provisions of
the Indenture do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
Indenture, including definitions therein of certain terms. Whenever particular
Sections, Articles or defined terms of the Indenture are referred to, it is
intended that such Sections, Articles, or definitions of the defined terms be
incorporated herein by reference. The particular terms of the Offered Securities
and the extent, if any, to which the general provisions may apply to the Offered
Securities will be described in the Prospectus Supplement relating to such
Offered Securities. Unless otherwise indicated, Section references contained
herein refer to the Sections of the Indenture. As of the date hereof, BancGroup
had not issued any Securities pursuant to the Indenture.
Since BancGroup is a holding company, the right of BancGroup, and hence the
right of creditors and shareholders of BancGroup, including Holders of the
Securities, to participate in any distribution of assets of any subsidiary of
BancGroup upon its liquidation, reorganization or otherwise is necessarily
subject to the prior claims of creditors of the subsidiary, except to the extent
that the claims of BancGroup itself as a creditor of the subsidiary may be
recognized.
GENERAL
The Securities will be unsecured obligations of BancGroup. The Indenture
does not limit the amount of the Securities which may be issued thereunder and
provides that the Securities of any series may be issued thereunder up to the
aggregate principal amount which may be authorized from time to time by
BancGroup. All Securities issued under the Indenture will rank equally and
ratably with any additional Securities issued under the Indenture. The Indenture
does not contain covenants prohibiting BancGroup from disposing of voting stock
of its subsidiaries, including the stock of any of its banking subsidiaries.
Neither the Indenture nor the Securities will limit or otherwise restrict the
amount of other indebtedness which may be incurred or the other securities which
may be issued by BancGroup or any of its subsidiaries.
The Securities will be subordinated to all existing and future Senior
Indebtedness of BancGroup as described below under "Subordination of
Securities." THE SECURITIES WILL NOT BE SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF A BANK OR A SAVINGS ASSOCIATION AND WILL NOT BE INSURED BY THE
FDIC, THE BIF, THE SAIF OR ANY OTHER GOVERNMENT AGENCY.
Any Prospectus Supplement will, among other matters, set forth the
following specific terms relating to the Offered Securities as applicable: (i)
title; (ii) any limit on the aggregate principal amount or price; (iii) maturity
date or dates; (iv) interest rate or rates per annum or method of determining
the interest rate or rates per annum; (v) dates from and on which such interest
will accrue and be payable and designated record dates for such interest
payments; (vi) place or places, if any, in addition to or other than the City of
Atlanta, State of Georgia, where principal (and premium, if any) and interest
will be payable; (vii) any optional redemption terms; (viii) any mandatory or
optional sinking fund or analogous provisions; (ix) whether the Securities will
be issued in registered form, or be payable to bearer, with or without coupons,
and (x) any other terms of the Offered Securities not inconsistent with the
Indenture (Section 3.01).
Securities may be issued as Original Issue Discount Securities to be
offered and sold at a substantial discount below their stated principal amount.
Federal income tax consequences and other special considerations applicable to
any such Original Issue Discount Securities will be described in a Prospectus
Supplement. "Original Issue Discount Security" means any security which provides
for an amount less than the principal
5
<PAGE> 26
amount thereof to be due and payable upon the declaration of acceleration of the
Maturity thereof upon the occurrences of an Event of Default and the
continuation thereof. (Section 1.01) Interest on the Securities of any series
will be payable to the persons in whose names the Securities are registered at
the close of business on the record date designated for an interest payment date
(Section 3.07). At the option of BancGroup, interest may be paid by mailing a
check to the addresses of the persons entitled thereto as they may appear on the
register for the Securities (Section 3.07). Unless otherwise indicated in the
Prospectus Supplement, the Securities will be issued only in fully registered
form without coupons in denominations of $1,000 and any integral multiple of
$1,000 (Section 3.02). No service charge will be made for any exchange,
registration of transfer or redemption of a Security, but BancGroup may require
payment of a sum sufficient to cover any tax or other governmental charge
thereon (Section 3.05) other than exchanges not involving any transfer (Sections
3.04, 8.06 and 12.07).
SUBORDINATION OF SECURITIES
The obligation of BancGroup to make payment on account of the principal of
(and premium, if any) and interest on the Securities of any series will be
subordinated and junior in right of payment to BancGroup's obligations to the
holders of Senior Indebtedness of BancGroup to the extent described in the
following paragraph. "Senior Indebtedness" means any indebtedness (including
principal, premium or interest) for money borrowed, or any indebtedness incurred
by BancGroup in connection with an acquisition by BancGroup or an Affiliate of
the stock or substantially all of the assets of another Person or a merger or
consolidation to which BancGroup or an Affiliate is a party, outstanding on the
date of execution of the Indenture as originally executed, or thereafter
created, incurred or assumed, for the payment of which BancGroup is at the time
of determination responsible or liable as obligor, guarantor or otherwise, and
all deferrals, renewals, extensions and refundings of any such indebtedness or
obligations; provided, however, that Senior Indebtedness shall not include (a)
indebtedness as to which, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such indebtedness
is subordinate in right of payment to any other indebtedness of BancGroup, (b)
indebtedness which by its terms refers explicitly to the Securities and states
that such indebtedness shall not be senior thereto and shall be either equally
subordinate and equally junior with such Securities, (c) indebtedness of
BancGroup in respect of the Securities, and (d) BancGroup's 7 1/2% Convertible
Subordinated Debentures due 2011, issued 1986, which shall rank in pari passu
with the Securities. (Section 1.01, 13.01)
In the event of any insolvency, bankruptcy, receivership, liquidation,
reorganization or other similar proceedings with respect to BancGroup or any
liquidation, dissolution or winding-up of the affairs of or relating to
BancGroup as a whole, whether voluntary or involuntary, all obligations of
BancGroup to the holders of Senior Indebtedness of BancGroup will be entitled to
be paid in full (or provisions will be made for such payment) before any payment
will be made on account of the principal of (and premium, if any) and interest
on the Securities. In the event of any such proceedings, after payment in full
(or provision has been made for such payment) of the principal of (and premium,
if any) and interest on Senior Indebtedness of BancGroup, the Holders of the
Securities, together with the holders of any obligations of BancGroup ranking on
a parity with the Securities, will be entitled to be paid from the remaining
assets of BancGroup the amounts at the time due and owing on account of unpaid
principal (and premium, if any) and interest on the Securities and such
obligations ranking on a parity therewith before any payment or other
distribution, whether in cash, property or otherwise, will be made on account of
any capital stock or any obligations of BancGroup ranking junior to the
Securities (Section 13.01 and 13.02). By reason of such subordination, in the
event of the insolvency of BancGroup, the holders of Senior Indebtedness of
BancGroup may receive more, ratably, and the Holders of the Securities having a
claim pursuant to the Securities may receive less, ratably, than other creditors
of BancGroup. As of the date hereof, BancGroup had approximately $936 million
principal amount of Senior Indebtedness outstanding, excluding trade payables
and guarantees and other contingent obligations of BancGroup.
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<PAGE> 27
GLOBAL SECURITIES
In order to facilitate the holding of the Securities in "book-entry" form,
the Securities of a series may be issued in whole or in part in the form of one
or more global securities (the "Global Securities") that will be deposited with,
or on behalf of, a depository identified in the Prospectus Supplement relating
to such series. Global Securities may be issued in either temporary or permanent
form. A Global Security may not be transferred except as a whole by the
depository for such Global Security to a nominee of such depository or by a
nominee of such depository to such depository or another nominee of such
depository or by such depository or any such nominee to a successor of such
depository or a nominee of such successor. Thus, the holder of a beneficial
interest in a Global Security will not have the right to convert such holder's
"book-entry" Securities into definitive Securities in certificated form.
The specific terms of the depository arrangement, if any, with respect to a
series of Securities issued in whole as "Global Securities" will be described in
the Prospectus Supplement relating to such series.
EVENTS OF DEFAULT AND LIMITED RIGHTS OF ACCELERATION
An Event of Default is defined under the Indenture with respect to the
Securities of any series issued thereunder only as certain events of bankruptcy,
insolvency or reorganization of BancGroup (Section 6.01).
Unless stated otherwise in a Prospectus Supplement, the Indenture does not
provide for any right of acceleration of the payment of the principal of a
series of the Securities upon a default in the payment of an installment of
principal or interest or a default in the performance of any covenant or
agreement in the Offered Securities of a particular series or in the Indenture.
In the event of a default in the payment of an installment of principal or
interest, the Holder of a security (or the Trustee under the Indenture on behalf
of the Holders of all of the series of the Securities so affected) may seek to
enforce payment of such installment of principal or interest.
The Indenture provides that if an Event of Default shall have occurred and
be continuing, either the Trustee or the Holders of not less that 25% in
principal amount of the then outstanding Securities of the series as to which
the Event of Default has occurred (or such lesser amount as may be provided for
in the Securities of such series) may declare the principal of all of the
Securities of such series to be then due and payable immediately by a notice in
writing to BancGroup (and to the Trustee if given by the Holders), and upon any
such declaration, all such principal or such lesser amount shall become
immediately due and payable. However, at any time after such a declaration of
acceleration with respect to the Securities of any series has been made and
before a judgment or decree based on such acceleration has been obtained by the
Trustee, the Holders of not less than a majority in principal amount of the
Outstanding Securities of such series may, under certain circumstances, rescind
and annul such acceleration and its consequences, if, among other things, all
Events of Default have been cured or waived as provided in the Indenture
(Section 6.02).
MODIFICATION OF THE INDENTURE AND WAIVER
The Indenture provides that modification and amendment may be made by
BancGroup and the Trustee with the consent of the Holders of not less than 66
2/3% in principal amount of the Outstanding Securities of each series affected
thereby; provided, however, that no such modification or amendment may, without
the consent of the Holder of each Outstanding Security affected thereby: (i)
change the stated maturity date of the principal of, or any installment of
interest on, any Security; (ii) reduce the principal amount, or the rate of
interest on, or any premium payable upon, the redemption of any Security; (iii)
change the place of payment or the currency in which a Security is payable; (iv)
impair the right to institute suit for the enforcement of any payment on or
after the stated maturity date thereof, or, in the case of redemption, on or
after the redemption date; (v) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of the Holders of which is
required to modify or amend the Indenture; (vi) reduce the percentage in
principal amount of the Outstanding Security in any series, the consent of the
Holders of which is required for waiver of compliance with certain provisions of
the Indenture or for waiver of certain defaults; (vii) modify any provision of
the Indenture relating to modification and amendment of the Indenture or waiver
of compliance with conditions or defaults thereunder, except to increase the
percentage in principal amount of the
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<PAGE> 28
Outstanding Securities of any series the consent of the Holders of which is
required for such modification or waiver or to provide that certain other
provisions of the Indenture cannot be modified or waived without the consent of
the holder of each Security affected thereby; or (viii) alter in any respect the
provisions regarding subordination of the Securities issued thereunder in a
manner adverse to the Holders thereof (Section 8.02).
Modification and amendment of the Indenture may be made by BancGroup and
the Trustee without the consent of any Holder for any of the following purposes:
(i) to evidence the succession of another Person to BancGroup; (ii) to add to
the covenants of BancGroup for the benefit of the Holders of all or any series
of the Securities; (iii) to add Events of Default; (iv) to add to, delete from
or revise the conditions, limitations and restrictions on the authorized amount,
terms or purposes of issue, authentication and delivery of the Securities, as
set forth in the Indenture; (v) to establish the form or terms of the Securities
of any series; (vi) to provide for the acceptance of appointment by a successor
Trustee; (vii) to cure any ambiguity, defect or inconsistency in the Indenture,
provided such action is not inconsistent with the provisions of the Indenture
and does not adversely affect the interests of the Holders of the Securities of
any series in any material respect; (viii) to add to or change any of the
provisions to provide for or to permit or facilitate the issuance of Securities
in bearer form, and with or without interest coupons; (ix) to provide terms and
conditions upon which Securities which qualify as capital under applicable rules
and regulations of BancGroup's primary federal regulator may be issued provided
that no such supplemental indenture may make any change in Securities already
outstanding; and (x) to modify, eliminate or add to the provisions of the
Indenture to such extent as may be necessary to conform the obligations of
BancGroup and the Trustee under the Indenture to the Trust Indenture Act
(Section 8.01).
The Holders of a majority in principal amount of the Outstanding Securities
of any series may on behalf of the Holders of all Securities of such series
waive, insofar as such series is concerned, compliance by BancGroup with certain
restrictive provisions of the Indenture (Section 4.08). The Holders of a
majority in principal amount of the Outstanding Securities of any series may on
behalf of the Holders of all Securities of any series waive any past default
under the Indenture with respect to such series, except a default in the payment
of principal of (and premium, if any) or interest on, any Security of such
series or in respect of a covenant or provision which under the terms of the
Indenture cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected (Section 6.13).
CONSOLIDATION, MERGER AND SALE OF ASSETS
BancGroup may not consolidate with or merge into any other corporation or
sell, lease or convey all or substantially all of its assets to any other
corporation, unless (i) either (a) BancGroup shall be the continuing corporation
or (b) any successor or purchaser is a corporation organized under the laws of
the United States or any State thereof and any such successor or purchaser
expressly assumes BancGroup's obligations on the Securities and under the
Indenture and certain other conditions are met; and (ii) immediately after
giving effect to such transaction, BancGroup or such successor corporation shall
not be in default in the performance of any covenant or condition of the
Indenture to be performed by BancGroup (Section 9.01).
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect with respect to any series
of Securities (except as to surviving rights of registration of transfer or
exchange of any series of Securities, as expressly provided for in the
Indenture) as to all outstanding Securities of such series when (i) either (a)
all the Securities of such series theretofore authenticated (except (1) lost,
stolen or destroyed Securities which have been replaced or paid, and (2)
Securities for such series for whose payment money has been deposited in trust
or segregated or held in trust by BancGroup and thereafter repaid to BancGroup
or discharged from such trust, as provided in the Indenture) have been delivered
to the Trustee for cancellation or (b) all Securities of such series and not
theretofore delivered to the Trustee for cancellation (1) have become due and
payable, (2) by their terms are to become due within one year, or (3) if
redeemable, are to be called for redemption within one year, and BancGroup in
the case of clauses (b)(1), (2) or (3) above has deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay and discharge
the entire indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal of and interest to the date of maturity
or
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<PAGE> 29
redemption; (ii) BancGroup has paid all other sums payable by BancGroup under
the Indenture; and (iii) BancGroup has delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with (Section 10.01).
ADDITIONAL PROVISIONS
No Holder of any Security of any series will have the right to institute
any proceeding, judicial or otherwise, with respect to the Indenture for any
remedy thereunder unless (i) such Holder shall have previously given to the
Trustee written notice of a continuing Event of Default with respect to the
Securities of such series; (ii) the Holders of not less that 25% in principal
amount of the Outstanding Securities of such series shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceedings as Trustee; (iii) the Trustee shall not have received for 60 days
after its receipt of such request from the Holders of a majority in principal
amount of the Outstanding Securities of such series a direction inconsistent
with such request; and (iv) the Trustee shall have failed to institute such
proceeding within 60 days after its receipt of such notice, request and offer of
indemnity (Section 6.07). However, the Holder of any Security will have an
absolute and unconditional right to receive payment of the principal of (and
premium, if any) and interest, in respect of such Security on or after the due
dates expressed in such Security and to institute suit for the enforcement of
any such payment (Section 6.08).
CONCERNING THE TRUSTEE
SunTrust Bank, Atlanta, Atlanta, Georgia, is Trustee under the Indenture.
Notices by U.S. Mail or by hand delivery to the Trustee should be directed to
the Trustee at SunTrust Bank, Atlanta, Atlanta, Georgia, Mail Code 008, 58
Edgewood Avenue, Room 400-Annex, Atlanta, Georgia 30303, telephone
(404)588-7191.
Subject to the duty of the Trustee during default to act with the required
standard of care, the Indenture provides that the Trustee will be under no
obligation to exercise any right or power under the Indenture at the request of
the Holders of the Securities unless said Holders shall have offered the Trustee
reasonable indemnity (Section 7.03). The Indenture also provides that, subject
to the provisions for indemnification described above and subject to certain
other conditions, the Holders of a majority in principal amount of the
Outstanding Securities of any series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred upon the Trustee with respect to the Securities of
such series (Section 6.12).
The Indenture contains a covenant requiring BancGroup to file annually with
the Trustee a certificate as to the absence of any default or specifying any
default that may exist (Section 4.04).
In addition to serving as Trustee under the Indenture, SunTrust Bank,
Atlanta, provides ordinary correspondent banking products and services to
BancGroup and certain of its subsidiaries, including deposit accounts, and
serves as transfer agent for BancGroup's outstanding common stock. The Trustee
is also currently serving as Trustee under an Indenture dated March 25, 1986
pursuant to which at December 31, 1996, $7,187,000 in aggregate principal amount
of BancGroup's 7 1/2% Convertible Subordinated Debentures is outstanding. Should
a conflict of interest arise by reason of such service, the trustee may be
required, or deem it necessary, to resign as Trustee under the Indenture and be
replaced by a successor Trustee.
PLAN OF DISTRIBUTION
BancGroup may offer and sell Securities to or through underwriters, acting
as principals for their own accounts or as agents, and also may offer and sell
Securities directly to other purchasers. Any underwriters or agents in
connection with Offered Securities will be named in the related Prospectus
Supplement and any underwriting compensation paid to such underwriters or agents
will be set forth therein. Such underwriters may include a single firm or may be
a group of underwriters represented by such firm, Unless otherwise indicated in
the Prospectus Settlement, any underwriters will be required to purchase all of
the Offered Securities if any are purchased.
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<PAGE> 30
The distribution of Securities may be effected from time to time in one or
more transactions at a fixed price or prices, which may be changed, or at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
In connection with the sale of Securities, underwriters may receive
compensation from BancGroup and from purchasers of Securities for whom they may
act as agents, in the form of discounts, concessions or commissions.
Underwriters, dealers and agents that participate in the distribution of
Securities may be deemed to be underwriters and any discounts or commissions
received by them and any profit on the resale of Securities by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Under agreements which may be entered into with BancGroup, underwriters,
dealers and agents who participate in the distribution of the Offered Securities
may be entitled to indemnification by BancGroup against certain liabilities,
including liabilities under the Securities Act, or contribution with respect to
payments which the underwriters, dealers or agents may be required to make in
respect thereof. Underwriters, dealers and agents may be customers of, engage in
transactions with, or perform services for BancGroup and its subsidiaries in the
ordinary course of business.
If so indicated in the Prospectus Supplement, BancGroup will authorize
dealers or other persons acting as BancGroup's agents to solicit offers by
certain institutions to purchase Offered Securities from BancGroup pursuant to
delayed delivery contracts ("Contracts") providing for payment and delivery on a
future date or dates stated in the Prospectus Supplement. Each Contract will be
for an amount not less than, and the aggregate amount of Offered Securities sold
pursuant to Contracts shall not be less than nor more than, the respective
amounts stated in the Prospectus Supplement. Institutions with which Contracts
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and others,
but in all cases such institutions must be approved by BancGroup. The
obligations of any purchaser under any Contract will not be subject to any
conditions except that (a) the purchase of the Offered Securities shall not at
the time of delivery be prohibited under the laws of any jurisdiction to which
such purchaser is subject, and (b) if the Offered Securities are also being sold
to underwriters, BancGroup will have sold to such underwriters the Offered
Securities not sold for delayed delivery. The dealers and such other persons
acting as agents of BancGroup will not have any responsibility in respect of the
validity or performance of Contracts.
EXPERTS
Coopers & Lybrand L.L.P. serves as the independent accountants for
BancGroup. The consolidated financial statements of BancGroup as of December 31,
1996 and 1995 and for each of the three years ended December 31, 1996 are
incorporated by reference in this Prospectus in reliance upon the report of such
firm, given on the authority of that firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters regarding the Securities offered hereby are being
passed upon by the law firm of Miller, Hamilton, Snider & Odom, L.L.C., Mobile,
Alabama, of which John C. H. Miller, Jr., a director of BancGroup and of
Colonial Bank, is a partner. John C. H. Miller, Jr. beneficially owns 40,480
shares of BancGroup Common Stock. Mr. Miller also received employee-related
compensation from BancGroup in 1996 of $41,000. Miller, Hamilton, Snider & Odom,
L.L.C. received legal fees from BancGroup for services performed for BancGroup
in 1996 of $1,474,856.
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======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Documents Incorporated by Reference... S-2
The Company........................... S-3
Recent Developments................... S-3
Use of Proceeds....................... S-5
Consolidated Ratios of Earnings to
Fixed Charges....................... S-5
Capitalization........................ S-6
Selected Financial Data............... S-7
Description of Subordinated Notes..... S-14
Certain Regulatory Considerations..... S-16
Underwriting.......................... S-19
Validity of Subordinated Notes........ S-20
PROSPECTUS
Available Information................. 2
Documents Incorporated by Reference... 2
Business of BancGroup................. 3
Use of Proceeds....................... 4
Consolidated Ratios of Earnings to
Fixed Charges....................... 4
Description of Securities............. 5
Plan of Distribution.................. 9
Experts............................... 10
Legal Matters......................... 10
</TABLE>
======================================================
======================================================
$50,000,000
[COLONIAL BANCGROUP LOGO]
THE COLONIAL BANCGROUP, INC.
% SUBORDINATED NOTES
DUE 2007
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
BEAR, STEARNS & CO. INC.
KEEFE, BRUYETTE & WOODS, INC.
MORGAN KEEGAN & COMPANY, INC.
AUGUST , 1997
======================================================
