<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1998 COMMISSION FILE NUMBER 1-13508
THE COLONIAL BANCGROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 63-0661573
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Commerce Street
Montgomery, Alabama 36104
---------------------------------------
(Address of principle executive offices)
(334) 240-5000
-------------------------------
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to the filing requirements for
at least the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Class Outstanding at April 30, 1998
- ----------------------------- -----------------------------
Common Stock, $2.50 Par Value 48,194,098
<PAGE> 2
THE COLONIAL BANCGROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Condition - March 31, 1998, December 31, 1997 and March 31, 1997... 1
Consolidated Statements of Income - Three months ended March 31, 1998 and March 31, 1997 ..... 2
Consolidated Statements of Comprehensive Income - Three months ended March 31, 1998
and March 31, 1997 ........................................................................... 3
Consolidated Statements of Cash Flows - Three months ended March 31, 1998 and March 31, 1997.. 4
Notes to Consolidated Financial Statements - March 31, 1998 .................................. 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ........ 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ............................................................................ 17
Item 6. Exhibits and Reports on Form 8-K ............................................................. 18
SIGNATURES ........................................................................................... 19
</TABLE>
<PAGE> 3
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This report contains "forward-looking statements" within the meaning of the
federal securities laws. The forward-looking statements in this report are
subject to risks and uncertainties that could cause actual results to differ
materially from those expressed in or implied by the statements. Factors that
may cause actual results to differ materially from those contemplated by such
forward-looking statements include, among other things, the following
possibilities: (i) deposit attrition, customer loss, or revenue loss in the
ordinary course of business; (ii) increases in competitive pressure in the
banking industry; (iii) costs or difficulties related to the integration of the
businesses of BancGroup and the institutions acquired are greater than expected;
(iv) changes in the interest rate environment which reduce margins (v) general
economic conditions, either nationally or regionally, that are less favorable
than expected, resulting in, among other things, a deterioration in credit
quality; (vi) changes which may occur in the regulatory environment; (vii) a
significant rate of inflation (deflation); and (viii) changes in the securities
markets. When used in this Report, the words "believes," "estimates," "plans,"
"expects," "should," "may," "might," "outlook," and "anticipates," and similar
expressions as they relate to BancGroup (including its subsidiaries), or its
management are intended to identify forward-looking statements.
iii
<PAGE> 4
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
1998 1997* 1997*
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 311,523 $ 293,310 $ 224,200
Interest-bearing deposits in banks 17,949 24,947 111,474
Securities held for trading 24,824 -- --
Securities available for sale 745,655 594,545 592,091
Investment securities 265,711 269,213 346,963
Mortgage loans held for sale 455,716 225,331 142,510
Loans, net of unearned income 5,724,844 5,585,901 4,987,150
Less:
Allowance for possible loan losses (69,680) (67,528) (63,506)
---------- ---------- ----------
Loans, net 5,655,164 5,518,373 4,923,644
Premises and equipment, net 146,448 146,189 121,256
Excess of cost over tangible and
identified intangible
assets acquired, net 78,861 69,200 41,595
Mortgage servicing rights 151,412 141,865 114,616
Other real estate owned 12,530 14,491 13,290
Accrued interest and other assets 140,566 145,197 99,854
---------- ---------- ----------
Total $8,006,359 $7,442,661 $6,731,493
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits $6,082,744 $5,771,702 $5,356,191
FHLB short-term borrowings 460,000 420,000 492,000
Other short-term borrowings 287,468 299,419 162,998
Subordinated debt 13,125 6,088 7,522
Trust preferred securities 70,000 70,000 70,000
FHLB long-term debt 283,693 234,830 60,646
Other long-term debt 93,608 4,334 9,316
Other liabilities 144,135 93,026 91,002
---------- ---------- ----------
Total liabilities 7,434,773 6,899,399 6,249,675
---------- ---------- ----------
SHAREHOLDERS' EQUITY:
Preference Stock, $2.50 par value; 1,000,000
shares authorized, none issued -- -- --
Common Stock, $2.50 par value; 100,000,000
shares authorized, 48,129,118,
47,171,504 and 45,285,414 shares issued
and outstanding at March 31, 1998,
December 31, 1997 and March 31, 1997 respectively 120,323 117,929 113,214
Additional paid in capital 230,682 213,854 205,687
Retained earnings 221,544 211,243 167,701
Unearned compensation (3,604) (1,751) (1,978)
Unrealized gains (losses) on securities available
for sale, net of taxes 2,641 1,987 (2,806)
---------- ---------- ----------
Total shareholders' equity 571,586 543,262 481,818
---------- ---------- ----------
Total $8,006,359 $7,442,661 $6,731,493
========== ========== ==========
</TABLE>
*See Note A.
See Notes to the Unaudited Condensed Consolidated Financial Statements
1
<PAGE> 5
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1998 1997*
--------- ---------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 131,158 $ 111,420
Interest on investments 14,288 14,605
Other interest income 588 1,019
--------- ---------
Total interest income 146,034 127,044
--------- ---------
INTEREST EXPENSE:
Interest on deposits 56,582 51,011
Interest on short-term borrowings 9,867 10,002
Interest on long-term debt 6,153 1,956
--------- ---------
Total interest expense 72,602 62,969
--------- ---------
NET INTEREST INCOME 73,432 64,075
Provision for possible loan losses 3,670 3,056
--------- ---------
Net Interest Income After Provision for
Possible Loan Losses 69,762 61,019
--------- ---------
NONINTEREST INCOME:
Mortgage servicing and origination fees 9,380 7,929
Service charges on deposit accounts 8,027 6,870
Other charges, fees and commissions 1,985 1,893
Securities gains (losses), net 159 (18)
Other income 6,524 3,431
--------- ---------
Total noninterest income 26,075 20,105
--------- ---------
NONINTEREST EXPENSE:
Salaries and employee benefits 24,417 21,817
Occupancy expense of bank premises, net 6,110 5,066
Furniture and equipment expenses 5,496 4,139
Amortization of mortgage servicing rights 4,888 3,699
Amortization of intangible assets 1,170 636
Acquisition and restructuring costs 6,119 757
Year 2000 expense 2,330 --
Other expense 16,404 14,517
--------- ---------
Total noninterest expense 66,934 50,631
--------- ---------
Income before income taxes 28,903 30,493
Applicable income taxes 10,953 11,021
--------- ---------
Net Income $ 17,950 $ 19,472
========= =========
Earnings per share:
Basic $ 0.38 $ 0.42
Diluted 0.37 0.41
</TABLE>
*See Note A.
See Notes to the Unaudited Condensed Consolidated Financial Statements
2
<PAGE> 6
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1997*
-------- --------
<S> <C> <C>
NET INCOME:
Other comprehensive income, net of taxes: $ 17,950 $ 19,472
Unrealized gains (losses) on securities available for sale arising
during the quarter, net of taxes 775 (3,045)
Less: reclassification adjustment for net gains (losses)
included in net income (121) 12
-------- --------
Comprehensive income $ 18,604 $ 16,439
======== ========
</TABLE>
*See Note A.
See Notes to the Unaudited Condensed Consolidated Financial Statements
3
<PAGE> 7
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1997*
--------- ---------
<S> <C> <C>
Net cash provided by (used in) operating activities ($155,656) $ 30,349
--------- ---------
Cash flows from investing activities:
Proceeds from maturities of securities available for sale 72,371 47,638
Proceeds from sales of securities available for sale 39,136 12,821
Purchase of securities available for sale (236,395) (24,604)
Proceeds from maturities of investment securities 66,679 14,744
Purchase of investment securities (63,852) (40,400)
Net increase in securities held for trading (24,824) --
Net increase in loans (32,541) (105,735)
Cash received in bank acquisitions/dispositions 9,943 29,561
Purchase of treasury stock for issuance in a
business combination (3,152)
Capital expenditures (5,012) (7,876)
Proceeds from sale of other real estate owned 3,843 2,498
Other, net 1,048 248
--------- ---------
Net cash used in investing activities (169,604) (74,257)
--------- ---------
Cash flows from financing activities:
Net increase in demand, savings, and time deposits 175,102 195,369
Net increase (decrease) in federal funds purchased,
repurchase agreements and other short-term borrowings 28,186 (166,152)
Proceeds from issuance of long-term debt 138,242 70,175
Repayment of long-term debt (242) (15,748)
Proceeds from issuance of common stock 2,835 3,289
Dividends paid (7,648) (6,129)
--------- ---------
Net cash provided by financing activities 336,475 80,804
--------- ---------
Net increase in cash and cash equivalents 11,215 36,896
Cash and cash equivalents at beginning of year 318,257 298,778
--------- ---------
Cash and cash equivalents at March 31 $ 329,472 $ 335,674
========= =========
Supplemental Disclosure of cash flow information:
Cash paid during the three months for:
Interest $ 76,432 $ 61,983
Income taxes 14,014 1,859
Non-cash investing activities:
Transfer of loans to other real estate $ 3,082 $ 4,641
Origination of loans for the sale of other real estate 107
Non-cash financing activities:
Conversion of subordinated debentures $ 688 $ 1,081
Assets acquired in business combinations 144,821 225,799
Liabilities assumed in business combinations 138,023 207,504
</TABLE>
*See Note A.
See Notes to the Unaudited Condensed Consolidated Financial Statements.
4
<PAGE> 8
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ACCOUNTING POLICIES/RESTATEMENT
The Colonial BancGroup, Inc. ("BancGroup") and its subsidiaries have not
changed their accounting and reporting policies from those stated in the 1997
annual report. These unaudited interim financial statements should be read in
conjunction with the audited financial statements and footnotes included in
BancGroup's 1997 annual report on Form 10-K. The March 31, 1997 and December 31,
1997 financial statements have been restated to give retroactive effect to the
pooling-of-interests business combinations with United American Holding
Corporation, First Central Bank and South Florida Banking Corp.
In the opinion of BancGroup, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the financial position as
of March 31, 1998 and 1997 and the results of operations and cash flows for the
interim periods ended March 31, 1998 and 1997. All 1998 interim amounts are
subject to year-end audit, and the results of operations for the interim period
herein are not necessarily indicative of the results of operations to be
expected for the year.
NOTE B - BUSINESS COMBINATIONS
On February 2, 1998, United American Holding Corporation ("United") was
merged into BancGroup. United's subsidiary, United American Bank of Central
Florida was merged into BancGroup's existing subsidiary bank, Colonial Bank. At
December 31, 1997, United had approximately $275 million in assets and deposits
and other liabilities of $252 million. United operated nine offices in Orange,
Seminole, and Osceola counties, Florida. This business combination was accounted
for as a pooling of interests and the financial statements have been restated
accordingly.
On February 5, 1998, ASB Bancshares, Inc. ("ASB") was merged into BancGroup.
ASB's subsidiary, Ashville Savings Bank was merged into BancGroup's existing
subsidiary bank, Colonial Bank. On February 5, 1998, ASB had approximately $159
million in assets and deposits and other liabilities of $138 million. ASB
operated nine branches in Blount, Etowah and St. Clair counties, Alabama. This
business combination was accounted for as a purchase and the results of
operations are included in the accompanying financial statements only from the
date of consummation forward.
On February 11, 1998, First Central Bank was merged into BancGroup's existing
subsidiary bank, Colonial Bank. At December 31, 1997, First Central had
approximately $63 million in assets and deposits and other liabilities of $53
million. First Central operated a single branch located in St. Petersburg,
Florida. This business combination was accounted for as a pooling of interests
and the financial statements have been restated accordingly.
On February 12, 1998, South Florida Banking Corp. ("SFB") was merged into
BancGroup. SFB's subsidiary, First National Bank of Florida at Bonita Springs
was merged into BancGroup's existing subsidiary bank, Colonial Bank. At December
31, 1997, SFB had approximately $256 million in assets and deposits and other
liabilities of $238 million. SFB operated twelve branches in Lee, Collier, and
Hendry counties, Florida. This business combination was accounted for as a
pooling of interests and the financial statements have been restated
accordingly.
Presented below is BancGroup's summary operating information for the quarter
ended March 31, 1997, showing the effect of business combinations described
above.
<TABLE>
<CAPTION>
As Previously Effect of Currently
Reported Poolings Reported
---------------------------------------------
<S> <C> <C> <C>
Net interest income $58,144 $5,931 $64,075
Non interest income 18,456 1,649 20,105
Net income 17,884 1,588 19,472
</TABLE>
On February 25, 1998, BancGroup entered into a definitive agreement with
Commercial Bank of Nevada ("CBN"). CBN is a Nevada bank located in Las Vegas,
Nevada. CBN will merge with BancGroup's existing subsidiary bank, Colonial Bank.
BancGroup expects to issue approximately 842,157 shares of its Common Stock to
the stockholders of CBN. This transaction is subject to, among other things,
approval by the stockholders of CBN and approval by appropriate regulatory
authorities and is expected to be accounted for as a pooling of interests. At
March 31, 1998, CBN had assets of $131.3 million, deposits of $119.7 million and
stockholders' equity of $10.6 million.
On March 27, 1998, BancGroup entered into a definitive agreement with CNB
Holding Company ("CNB"). CNB is a Florida corporation and is a holding company
for Commercial National Bank located in Daytona Beach, Florida. CNB will merge
with BancGroup and following such merger Commercial National Bank will merge
with BancGroup's existing subsidiary bank, Colonial Bank. BancGroup will issue a
maximum of 937,227 shares of its Common Stock (depending upon the market value
at the time of such merger) to the stockholders of CNB. This transaction is
subject to, among other things, approval by the stockholders of CNB and approval
by appropriate regulatory authorities and is
5
<PAGE> 9
expected to be accounted for as a pooling of interest. At March 31, 1998, CNB
had assets of $88.6 million, deposits of $80.0 million and stockholders' equity
of $8.5 million.
On April 24, 1998, BancGroup entered into a letter of intent with First Macon
Bank & Trust Company ("First Macon"). First Macon is located in Macon, Georgia.
First Macon will merge with BancGroup's existing subsidiary bank, Colonial Bank.
BancGroup expects to issue a maximum of 1,844,500 shares of its Common Stock to
the stockholders of First Macon. This transaction is subject to, among other
things, approval by the stockholders of First Macon and by the appropriate
regulatory authorities and is expected to be accounted for as a pooling of
interests. At March 31, 1998, First Macon had assets of $195 million, deposits
of $177 million and stockholders' equity of $15 million.
On May 5, 1998, BancGroup entered into a definitive agreement with FirstBank
("FirstBank"). FirstBank is located in Dallas, Texas. CBG Acquisition Corp., a
subsidiary of BancGroup, will be merged into FirstBank, and FirstBank will
become a banking subsidiary of BancGroup. BancGroup expects to issue
approximately 1,200,000 shares of its Common Stock to the stockholders of
FirstBank. This transaction is subject to, among other things, approval by the
stockholders of FirstBank and by the appropriate regulatory authorities and is
expected to be accounted for as a pooling of interests. At March 31, 1998,
FirstBank had assets of $163 million, deposits of $138 million and stockholders'
equity of $9 million.
NOTE C - COMMITMENTS AND CONTINGENCIES
BancGroup and its subsidiaries are from time to time defendants in legal
actions from normal business activities. Management does not anticipate that the
ultimate liability arising from litigation outstanding at March 31, 1997,
will have a materially adverse effect on BancGroup's financial statements.
NOTE D - RECENT ACCOUNTING PRONOUNCEMENTS
On January 1, 1998, BancGroup adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 125 which had been delayed under
SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125." The deferred provisions related to repurchase agreements,
dollar-roll transactions, securities lending, and similar transactions. The
adoption of the provisions of SFAS No. 125 as amended by SFAS No. 127 resulted
in no material impact on BancGroup's financial condition or results of
operations.
On January 1, 1998, BancGroup adopted SFAS No. 130, "Reporting of
Comprehensive Income," which establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of financial statements. This statement also requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. This standard
is effective for fiscal years beginning after December 15, 1997 and has been
implemented herein. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The adoption of SFAS No. 130 did
not have a material impact on BancGroup's financial condition or results of
operations.
In February, 1998, the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits,"
which revises employers' disclosures about pension costs and other
post-retirement benefit plans. It does not change the measurement or recognition
of these plans but standardizes the disclosure requirements for pension and
other postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair value of plan assets
that will facilitate financial analysis and eliminates certain disclosures no
longer useful. This statement is effective for fiscal years beginning after
December 15, 1997.
6
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION:
Ending balances of total assets, securities, mortgage loans held for sale,
net loans, mortgage servicing rights, deposits, and long term debt changed for
the three months and twelve months ended March 31, 1998, respectively, as
follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1997 March 31, 1997
to March 31, 1998 to March 31, 1998
---------------------- -------------------------
Increase (Decrease) Increase (Decrease)
---------------------- -------------------------
Amount % Amount %
-------- ----- ----------- ------
<S> <C> <C> <C> <C>
ASSETS
Colonial Bank $326,398 4.6% $ 921,118 14.3%
CMC 235,096 60.2 351,896 128.6
Other 2,204 16.2 1,852 13.3
-------- ----- -----------------------
Total assets $563,698 7.6 $1,274,866 18.9
Securities 172,432 20.0 97,136 10.3
Mortgage loans held for sale 230,385 102.2 313,206 219.8
Loans, net of unearned income 138,943 2.5 737,694 14.8
Mortgage Servicing Rights 9,547 6.7 36,796 32.1
Deposits 311,042 5.4 726,553 13.6
Long term debt 145,174 46.1% 312,942 212.2%
</TABLE>
ASSETS:
BancGroup's assets have increased 18.9% since March 31, 1997. The Company's
strategy is to increase its asset size both internally and through acquisition
efforts. BancGroup has concentrated on expanding into growth markets by merging
with banks that have strong local management. BancGroup has been most successful
with this strategy in Florida and with the announcement of the pending mergers
with CBN and FirstBank has made its first step into growth markets outside the
Southeast. For a number of years Colonial Mortgage Company has operated on a
national basis focusing on the highest growth markets. These pending
acquisitions represent the initiation of BancGroup's strategy to parallel the
mortgage company's focus and provide its banking services in some of these same
markets.
SECURITIES:
Investment securities, securities available for sale and securities
held for trading have increased $172 million (20%) from December 31, 1997 to
March 31, 1998. The increase included $24 million from business combinations,
$24 million from the purchase of trading securities and $10 million from the
purchase of preferred stocks. In addition, BancGroup entered into a reverse
repurchase arrangement with Morgan Stanley under which it purchased mortgage
backed securities totaling approximately $100 million. These securities are
collateral for $100 million in debt issued in connection with the purchase of
these securities. The remainder of the increase is from normal funding
operations of the Company.
LOANS AND MORTGAGE LOANS HELD FOR SALE:
The increase in loans, net of unearned income, since March 31, 1997 is $738
million (15%) with $278 million attributable to purchase method business
combinations. Mortgage loans held for sale are funded on a short-term basis
(less than 90 days) while they are being packaged for sale in the secondary
market by Colonial Mortgage Company, a wholly owned subsidiary of Colonial Bank.
Loans originated amounted to approximately $755.1 million and $268.8 million and
sales thereof amounted to approximately $578.6 million and $295.1 million during
the three months ended March 31, 1998 and 1997, respectively. The increase in
originations in 1998 was primarily due to a decrease in rates.
7
<PAGE> 11
<TABLE>
<CAPTION>
GROSS LOANS BY CATEGORY MARCH 31, DEC. 31, MARCH 31,
(In thousands) 1998 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
Commercial, financial, and agricultural $ 714,552 $ 680,020 $ 632,850
Real estate-commercial 1,599,727 1,515,645 1,316,246
Real estate-construction 630,951 674,557 520,781
Real estate-residential 2,384,262 2,332,611 2,136,367
Installment and consumer 320,464 313,121 322,571
Other 75,412 70,639 59,124
----------- ----------- -----------
Total loans $5,725,368 $5,586,593 $4,987,939
========== ========== ==========
</TABLE>
Loans collateralized by commercial real estate loans increased approximately
$283 million since March 31, 1997 and $84 million since December 31, 1997.
Excluding the impact of business combinations accounted for as
purchases, growth from December 31, 1997 in commercial and commercial real
estate loans was at an annualized rate of 16.6%. On the same basis, construction
loans decreased $46 million due to the seasonality of the business and large
payoffs. Residential real estate loans, excluding purchase method business
combinations, decreased $28 million or 4.5% on an annualized basis. This decline
in residential real estate is primarily attributable to the refinancing of these
predominately adjustable rate loans to fixed rates. Due to current market rates
for fixed mortgage loans, ARM loans are not in demand and run-off is expected to
continue through the second quarter and then remain constant. These loans are
concentrated in various areas in Alabama, the metropolitan Atlanta market in
Georgia as well as the Company's markets in Florida.
Allocations of the allowance for possible loan losses are made on an
individual loan basis for all identified potential problem loans with a
percentage allocation for the remaining portfolio. The allocations of the total
allowance represent an approximation of the reserves for each category of loans
based on management's evaluation of risk within each loan type.
ALLOCATION OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
Percent of Percent of Percent of
MARCH 31, Loans to Dec. 31, Loans to March 31, Loans to
(In thousands) 1998 Total Loans 1997 Total Loans 1997 Total Loans
-------- ----------- ------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial,
and agricultural $14,714 12.5% $12,845 12.2% $11,952 12.7%
Real estate-commercial 25,229 27.9 23,706 27.1 22,863 26.4
Real estate-construction 12,363 11.0 13,078 12.1 11,328 10.4
Real estate-mortgage 11,921 41.7 11,663 41.8 10,682 42.8
Installment and consumer 4,463 5.6 5,004 5.6 5,540 6.5
Other 990 1.3 1,232 1.2 1,141 1.2
------- ----- ------- ----- ------- -----
TOTAL $69,680 100.0% $67,528 100.0% $63,506 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
8
<PAGE> 12
SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
THREE MONTHS Year Three Months
ENDED Ended Ended
(In thousands) MARCH 31, 1998 Dec. 31, 1997 March 31, 1997
-------------- ------------- --------------
<S> <C> <C> <C>
Allowance for possible loan losses - January 1 $67,528 $58,016 $58,016
Charge-offs:
Commercial, financial, and agricultural 711 5,107 1,038
Real estate-commercial 853 2,954 125
Real estate-construction 144 433 3
Real estate-residential 360 1,724 250
Installment and consumer 1,648 5,577 1,191
Other 167 693 253
------- ------- -------
Total charge-offs 3,883 16,488 2,860
------- ------- -------
Recoveries:
Commercial, financial, and agricultural 451 984 212
Real estate-commercial 164 1,019 3
Real estate-construction 28 91 35
Real estate-residential 74 244 35
Installment and consumer 514 1,796 397
Other 38 134 37
------- ------- -------
Total recoveries 1,269 4,268 719
------- ------- -------
Net charge-offs 2,614 12,220 2,141
Addition to allowance charged to operating expense 3,670 14,860 3,056
Allowance added from business combinations 1,096 6,872 4,575
------- ------- -------
Allowance for possible loan losses-end of period $69,680 $67,528 $63,506
======= ======= =======
</TABLE>
Asset quality as measured by nonperforming assets remains good at 0.72% of
net loans and other real estate. Nonperforming assets have decreased $1.3
million from December 31, 1997. The decrease in nonperforming assets resulted
primarily from a $.7 million increase in nonaccrual loans and a $2.0 million
decrease in other real estate and repossessions. Management continuously
monitors and evaluates recoverability of problem assets and adjusts loan loss
reserves accordingly. The loan loss reserve is 1.22% of loans at March 31, 1998
as compared to 1.27% at March 31, 1997.
NONPERFORMING ASSETS ARE SUMMARIZED BELOW
<TABLE>
<CAPTION>
(In thousands): MARCH 31, 1998 Dec. 31, 1997 March 31, 1997
-------------- ------------- --------------
<S> <C> <C> <C>
Nonaccrual loans $27,215 $27,010 $26,331
Restructured loans 1,411 952 2,084
------- ------- -------
Total nonperforming loans* 28,626 27,962 28,415
Other real estate owned 11,883 13,695 12,938
Repossessions 647 796 352
------- ------- -------
Total nonperforming assets* $41,156 $42,453 $41,705
======= ======= =======
Aggregate loans contractually past due 90 days
for which interest is being accrued $ 6,818 $ 7,028 $ 6,420
Net charge-offs (recoveries) year-to-date $ 2,614 $12,220 $ 2,141
RATIOS
Period end:
Total nonperforming assets as a percent of net
loans and other real estate 0.72% 0.76% 0.83%
Allowance as a percent of net loans 1.22% 1.21% 1.27%
Allowance as a percent of nonperforming assets* 169% 159% 152%
Allowance as a percent of nonperforming loans* 243% 241% 223%
For the period ended:
Net charge-offs as a percent of average net loans-
(annualized basis) 0.19% 0.24% 0.18%
</TABLE>
*Total does not include loans contractually past due 90 days or more which
are still accruing interest.
9
<PAGE> 13
Management, through its loan officers, internal loan review staff, and
external examinations by regulatory agencies and independent auditors has
identified approximately $165 million of potential problem loans not included
above. The status of these loans is reviewed at least quarterly by loan officers
and the centralized loan review function and annually by independent auditors
and regulatory agencies. In connection with such reviews, collateral values are
updated where considered necessary. If collateral values are judged insufficient
and other sources of repayment inadequate, the loans are reduced to estimated
recoverable amounts through increases in reserves allocated to the loans or
charge-offs. As of March 31, 1998 substantially all of these loans are current
with their existing repayment terms. Given the reserves and the ability of the
borrowers to comply with the existing repayment terms, management believes any
exposure from these potential problem loans has been adequately addressed at the
present time.
The above nonperforming loans and potential problem loans represent all
material credits for which management has doubts as to the ability of the
borrowers to comply with the loan repayment terms. Of these loans, management
believes it is probable that loans totaling $24 million will not be collected as
scheduled and therefore are considered impaired. Management also expects that
the resolution of these problem credits as well as other performing loans will
not materially impact future operating results, liquidity or capital resources.
LIQUIDITY:
The maintenance of an adequate liquidity position and the constant
monitoring of rate sensitivity are principle components of BancGroup's
asset/liability management strategy. BancGroup's governing policy provides for
daily and longer term monitoring of both sources and uses of funds to properly
maintain the cash position. The policy also establishes the criteria for
monitoring the short and long term impact of interest late fluctuations on these
funds. To assist in funding loan growth, BancGroup has credit facilities at the
Federal Home Loan Bank (FHLB). FHLB of Atlanta has established credit
availability in an amount up to $1.5 billion with only $745 million outstanding
at March 31, 1998. This source of credit reduces BancGroup's dependency on
deposits as a source of liquidity resulting in a loan to deposit ratio of 94% at
March 31, 1998 and 97% at December 31, 1997. BancGroup has a brokered
Certificate of Deposit (CD) program in conjunction with Merrill Lynch, Dean
Witter and Oppenheimer Capital to offer CD's in increments of $1,000 to $99,000
to out of market customers at competitive rates ranging from 5.20% to 5.65%
maturing in 6 to 24 month periods. At March 31, 1998, $92 million is outstanding
under this program. BancGroup also has a brokered money market program with
Merrill Lynch. At March 31, 1998, $118 million is oustanding under this program
at an average rate of 5.5%. Funds are transferred daily to meet short-term
funding fluctuations. As discussed previously, BancGroup has received funds
under a reverse repurchase arrangement with Morgan Stanley. At March 31, 1998,
there was $100 million in outstanding debt under this agreement which is
collateralized by approximately $100 million in mortgage-backed securities.
CAPITAL RESOURCES:
Management continuously monitors the capital adequacy and potential for
future growth. The primary measurement for these evaluations for a bank holding
company is its tier one leverage ratio. Tier one capital for BancGroup at March
31, 1998 consists of $568 million of equity and $70 million in trust preferred
securities less $79 million of intangibles providing a 7.36% leverage ratio at
March 31, 1998. The ratio of shareholders' equity to total assets at March 31,
1998 was 7.14% as compared to 7.16% at December 31, 1997. Management believes
that capital levels are sufficient to support future internally generated growth
and fund the quarterly dividend rates which are currently $0.17 per share.
BancGroup also has access to equity capital markets through both public and
private issuances. Management considers these sources and related return in
addition to internally generated capital in evaluating future expansion, merger
or acquisition opportunities.
YEAR 2000 COMPLIANCE:
The Federal Reserve has established a Year 2000 Supervision Program and
published guidelines for implementing procedures to bring computer software
programs and processing systems into Year 2000 compliance. In compliance with
the guidelines of the Federal Reserve, BancGroup has established a full time
Year 2000 task force to address all Year 2000 compliance issues as well as
enhancements to computer and communications systems resulting from upgrades
initiated in response to Year 2000 issues. Currently BancGroup is in the process
of implementing its plans to bring all major computer systems into Year 2000
compliant status by the last quarter of 1998. Testing of all systems and changes
will continue through the full year of 1999. The major computer systems involved
are:
- Colonial Bank's mainframe based systems: These systems are provided by
third-party vendors of national stature. Upgrades to these systems are in
progress and are intended to bring the systems into Year 2000 compliant
status and provide enhancements to current capabilities. The costs
associated with these upgrades are part of BancGroup's ongoing operating
costs.
- Colonial Mortgage Company's (CMC) servicing and production systems: CMC's
systems are primarily in-house systems and are currently being rewritten to
Year 2000 compliant status. The cost of the rewrites is estimated to be
$1.0 million and is incremental to BancGroup's ongoing operating costs.
This cost is expected to be incurred through
10
<PAGE> 14
September 30, 1998. In addition, CMC's computer hardware is being upgraded
to Year 2000 compliant status. This upgrade will also provide additional
capacity for the servicing systems as well as an enhanced capability for
production. The additional annual cost of the mainframe upgrade
(approximately $240,000) is expected to be absorbed through growth in the
servicing portfolio and through increased production.
- Branch automation operating systems: Colonial Bank's branch automation
operating systems are being converted to Windows NT from OS/2. This
conversion along with establishment of an intranet and increased capacity of
communication lines is the most cost effective method of bringing the
operating system to Year 2000 compliant status while allowing for more
efficient flow of information to and from the branches and providing the
highest assurance of continuing vendor support for BancGroup's branch
automation solution. The incremental operating cost for these upgrades
(approximately $400,000 annually) is expected to be absorbed through
operational efficiencies and increased revenue. BancGroup incurred a
one-time pretax charge during the first quarter of 1998 of approximately $2
million to write-off the remaining book value of the current branch
automation equipment that is not Windows NT compatible.
Year 2000 expenses of $2.3 million were incurred during the first quarter
of 1998 and include the one-time pretax charge of approximately $2 million to
write off the remaining book value of branch automation equipment that is not
Windows NT compatible and $330,000 related to the completion of the assessment
of the Company's systems and one-time third party costs incurred with upgrading
internal systems to Year 2000 compliance. The above reflects management's
current assessment and estimates. Various factors could cause actual results to
differ materially from those contemplated by such assessments, estimates and
forward-looking statements. Some of these factors may be beyond the control of
BancGroup, including but not limited to, vendor representations, technological
advancements, economic factors and competitive considerations. Management's
evaluation of Year 2000 compliance and technological upgrades is an on-going
process involving continual evaluation. Unanticipated problems could develop and
alternative solutions may be available that could cause current solutions to be
more difficult or costly than currently anticipated.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997:
SUMMARY:
BancGroup is involved in two primary lines of business: commercial banking
and mortgage banking, through its wholly owned subsidiaries Colonial Bank and
Colonial Mortgage Company ("CMC"). The following schedule of BancGroup's results
of operations reflects the related impact of each line of business to the
earnings of the company.
LINE OF BUSINESS RESULTS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Colonial Colonial Consolidated
QUARTER ENDED MARCH 31,1998 Bank Mortgage Other BancGroup
---------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income $72,867 $2,209 $(1,644) $73,432
Provision for possible loan losses (3,670) -- -- (3,670)
Noninterest income 13,143 12,945 (13) 26,075
Amortization and depreciation 5,701 5,111 (64) 10,748
Noninterest expense 49,907 5,663 616 56,186
------- ------ ------- -------
Pretax income 26,732 4,380 (2,209) 28,903
Income taxes (9,914) (1,650) 611 (10,953)
------- ------ ------- -------
Net Income $16,818 $2,730 $(1,598) $17,950
======= ====== ======= =======
Acquisition and restructuring costs, net of taxes 4,147 -- 14 4,161
Year 200 expense net of taxes 1,224 223 -- 1,447
------- ------ ------- -------
Income excluding acquisition and restructuring
costs and Year 2000 expense $22,189 $2,953 $(1,584) $23,558
Diluted earnings per share excluding acquisition and
restructuring costs and Year 2000 expense $ .48
</TABLE>
11
<PAGE> 15
LINE OF BUSINESS RESULTS (continued)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Colonial Colonial Consolidated
QUARTER ENDED MARCH 31,1997* Bank Mortgage Other BancGroup
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net interest income $64,310 $ 776 $(1,011) $64,075
Provision for possible loan losses (3,056) -- -- (3,056)
Noninterest income 10,741 9,366 (2) 20,105
Amortization and depreciation 3,611 3,865 70 7,546
Noninterest expense 38,056 4,000 1,029 43,085
------- ------ ------- -------
Pretax income 30,328 2,277 (2,112) 30,493
Income taxes (10,763) (849) 591 (11,021)
------- ------ ------- -------
Net Income $19,565 $1,428 $(1,521) $19,472
======= ====== ======= =======
Acquisition and restructuring costs, net of taxes 580 -- 26 606
Income excluding acquisition and restructuring ------- ---- ------- -------
costs $20,145 $1,428 $(1,495) $20,078
Diluted earnings per share excluding acquisition and
restructuring costs and Year 2000 expense $ .42
</TABLE>
<TABLE>
<CAPTION>
SELECTED RATIOS: March 31, 1998 March 31, 1997*
-------------- ---------------
<S> <C> <C>
Income excluding acquisition and restructuring
costs and Year 2000 expenses to:
Average assets 1.25% 1.24%
Average shareholders' equity 16.99% 17.06%
Efficiency ratio (excluding acquisition and
Year 2000 expenses) 58.38% 58.75%
</TABLE>
* Restated financial results above reflect the business combinations with
United American Holding Corporation, South Florida Banking Corp. and First
Central Bank. These mergers were accounted for as poolings of interests and
the financial results have been restated accordingly.
12
<PAGE> 16
AVERAGE VOLUME AND RATES
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997*
-------------------------------- -------------------------------
AVERAGE AVERAGE
VOLUME INTEREST RATE VOLUME INTEREST RATE
ASSETS ---------- --------- ---- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Loans, net $5,675,060 $126,704 9.02% $4,920,561 $109,518 8.99%
Mortgage loans held for sale 254,992 4,674 7.33% 114,879 2,166 7.54%
Investment securities and securities
available for sale and other
interest-earning assets 951,510 15,335 6.46% 1,010,957 16,069 6.39%
---------- -------- ---------- --------
Total interest-earning assets(l) 6,881,562 $146,713 8.60% 6,046,397 $127,753 8.53%
Nonearning assets 739,076 -------- 521,808 --------
---------- ----------
Total assets $7,620,638 $6,568,205
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing deposits $4,823,700 $ 56,582 4.76% $4,350,007 $ 51,011 4.75%
Short-term borrowings 704,421 9,867 5.68% 737,818 10,002 5.50%
Long-term debt 391,731 6,153 6.31% 107,264 1,956 7.29%
---------- --------- ---------- ---------
Total interest-bearing liabilities 5,919,852 $ 72,602 4.97% 5,195,089 $ 62,969 4.92%
Noninterest-bearing demand deposits 1,028,498 --------- 810,382 ---------
Other liabilities 110,116 85,359
---------- ----------
Total liabilities 7,058,466 6,090,830
Shareholders' equity 562,172 477,375
---------- ----------
Total liabilities and shareholders'
equity $7,620,638 $6,568,205
========== ==========
Rate differential 3.63% 3.61%
Net yield on interest-earning assets $ 74,111 4.33% $ 64,784 4.31%
========= =========
</TABLE>
* Restated financial results above reflect the business combinations with
United American Holding Corporation, South Florida Banking Corp. and First
Central Bank. These mergers were accounted for as poolings of interests and
the financial results have been restated accordingly.
(1) Interest earned and average rates on obligations of states and political
subdivisions are reflected on a tax equivalent basis. Tax equivalent
interest earned is: actual interest earned times 145%. The taxable
equivalent adjustment has given effect to the disallowance of interest
expense deductions, for federal income tax purposes, related to certain
tax-free assets. Dividends earned and average rates for preferred stocks are
reflected on a tax equivalent basis. Tax equivalent dividends are: actual
dividends times 137.7%.
13
<PAGE> 17
ANALYSIS OF INTEREST INCREASES (DECREASES)
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998 CHANGE FROM 1997*
---------------------------------------------------------
DUE TO (1)
TOTAL VOLUME RATE MIX
------- ------- ------ ----
<S> <C> <C> <C> <C>
INTEREST INCOME:
Total Loans, Net $17,186 $17,097 $ 372 (283)
Mortgage loans held for sale 2,508 2,093 (77) 492
Investment securities and securities available
for sale and other interest-earning assets (734) (957) 178 45
------- ------- ------ ----
Total interest income(2) 18,960 18,233 473 254
------- ------- ------ ----
INTEREST EXPENSE:
Interest bearing deposits 5,571 5,671 110 (210)
Short-term borrowings (135) (463) 335 (7)
Long-term debt 4,197 5,227 (265) (765)
------- ------- ------ ----
Total interest expense 9,633 10,435 180 (982)
------- ------- ------ ----
Net interest income $ 9,327 $ 7,798 $ 293 $1,236
======== ======== ====== ======
</TABLE>
* Restated financial results above reflect the business combinations with
United American Holding Corporation, South Florida Banking Corp. and First
Central Bank. These mergers were accounted for as poolings of interests and
the financial results have been restated accordingly.
(1) Increases (decreases) are attributable to volume changes and rate changes on
the following basis: Volume Change = change in volume times old rate. Rate
Change = change in rate times old volume. The Mix Change = change in volume
times change in rate.
(2) Interest earned on obligations of state and political subdivisions is
reflected on a tax equivalent basis. Tax equivalent interest earned is:
actual interest earned times 145%. The taxable equivalent adjustment has
given effect to the disallowance of interest, for federal income tax
purposes, related to certain tax-free assets. Dividends earned on preferred
stock are reflected on a tax equivalent basis. Tax equivalent dividends
earned are: actual dividends times 137.7%. Tax equivalent average rate is
tax equivalent interest or dividends earned divided by average volume.
14
<PAGE> 18
NET INTEREST INCOME:
Net interest income on a tax equivalent basis increased $9.3 million to $74.1
million for the quarter ended March 31, 1998 from $64.8 million for the quarter
ended March 31, 1997. The net yield on interest earning assets increased from
4.31% to 4.33% for the three months ended March 31, 1997 and 1998, respectively.
Colonial Bank has improved its cost of funds through its acquisitions in Florida
and maintenance of realistic pricing standards. BancGroup's net interest margin
prior to Florida acquisitions, which began in July 1996, was 4.04% compared to
its peers 4.52%. By the first quarter of 1998, net interest margin has improved
to 4.33% compared to its peers fourth quarter 1997, 4.38%. As the deposit base
continues to expand in Florida, net interest margin should continue to improve.
As reflected on the previous tables the increase in net interest income for
the three months was primarily attributable to loan growth, improvement in the
rate differential from 3.61% to 3.63% for the three months ended March 31, 1997
and 1998, respectively, and a more favorable mix of funding sources which was
partially offset by deposit growth. During the first quarter of 1997 the prime
rate increased to 8.50% where it has remained through the first quarter of 1998.
LOAN LOSS PROVISION:
The provision for loan losses for the first three months of 1998 was
$3,670,000 compared to $3,056,000 for the same period in 1997. Asset quality
remains good. The current allowance for loan losses provides a 243% coverage of
nonperforming loans compared to 241% at December 31, 1997 and 223% at March 31,
1997. See management's discussion on loan quality and the allowance for possible
loan losses presented in the Financial Condition section of this report.
NONINTEREST INCOME:
Noninterest income increased $6.0 million for the three months ended March
31, 1998 compared to the same period in 1997. The increase is primarily due to
an increase in mortgage servicing and origination fees of $1.5 million,
additional fees on deposit accounts of $1.2 million and gains on sales of loans
of $1.9 million.
Mortgage servicing fees increased $1.3 million for the three months ended
March 31, 1998 compared to the same period in 1998. The increase in servicing
fee income is primarily due to an increase in the servicing portfolio of $2.3
billion to $13.8 billion for the month ended March 31, 1998 from $11.2 billion
for the same period in 1997. Gain on sales increased due to additional loan
volume resulting from increased refinancing activity. Colonial Mortgage provides
additional sources of non-interest income to BancGroup through fees from its
servicing portfolio as well as loan originations from its 4 divisional offices
and six regional offices. Colonial Mortgage purchases, originates and services
conventional, government, and jumbo mortgage products in 44 states and the
District of Columbia. Colonial Mortgage had non-interest income of $12.9
million for the three months ended March 31, 1998, compared to $9.4 million for
the three months ended March 31, 1997.
BancGroup is continuing to expand its services through increased efforts in
private banking, additional products, asset management through trust services,
investment sales products and services. In addition, BancGroup has established
an international banking unit through its South Florida Region to provide and
service the needs of customers involved in international activities.
NONINTEREST EXPENSES:
BancGroup's net overhead expense (total noninterest expense, excluding
acquisition and restructuring costs and Year 2000 expenses, less noninterest
income, excluding security gains) was $41.0 million and $30.5 million for the
three months ended March 31, 1998 and 1997, respectively. Noninterest expenses,
excluding acquisition and restructuring costs and Year 2000 expenses, increased
$8.6 million for the three months ended March 31, 1998, compared to the same
period in 1997. The majority of this increase is due to the addition of
acquisitions accounted for as purchases and normal salary increases.
BancGroup's efficiency ratio, excluding acquisition and restructuring costs
and Year 2000 expense, improve to 58.38% at March 31, 1998 from 58.75% at March
31, 1997. The Company will continue to improve efficiencies with the conversion
of the newly acquired banks. Conversions will allow the consolidation of
back-shop operational areas into BancGroup's existing loan and deposit
operations, accounting and data processing departments. These consolidation
efforts should result in continued improvement of the efficiency ratio through
the reduction of expenses.
ACQUISITION AND RESTRUCTURING COSTS:
Acquisition and restructuring costs of $6.1 million include legal and
accounting services, asset write-offs, contract buyouts and severance costs in
connection with the acquisition of various banking institutions and the
integration of those companies into BancGroup's systems as well as the
restructuring of BancGroup's regional banks in Florida. These one-time costs
should be more than offset by cost savings in 1998 and 1999 from the
consolidation of back office operations and revenue growth from the acquired
banks. These are one-time costs with respect to each individual transaction, but
represent ongoing expenses so long as BancGroup continues its acquisition
program.
15
<PAGE> 19
YEAR 2000 EXPENSES:
Year 2000 expenses of $2.3 million were incurred during the first quarter of
1998 and include a one-time pretax charge of $2 million to write off the
remaining book value of branch automation equipment that is not Windows NT
compatible and $330,000 related to the completion of the assessment of the
Company's systems and one-time third party costs incurred with upgrading
internal systems to Year 2000 compliance.
PROVISION FOR INCOME TAXES:
BancGroup's provision for income taxes is based on an approximately 37.9% and
36.1%, respectively, estimated annual effective tax rate for the years 1998 and
1997, respectively. The provision for income taxes for the three months ended
March 31, 1998 and 1997 was $10,953,000 and $11,021,000, respectively.
16
<PAGE> 20
Part II
Other Information
ITEM 1: Legal Proceedings - See Note C - COMMITMENTS AND CONTINGENCIES AT
PART 1 ITEM 1
ITEM 2: Changes in Securities - N/A
ITEM 3: Defaults Upon Senior Securities - N/A
ITEM 4: Submission of Matters to a Vote of Security Holders
On April 15, 1998, the annual meeting of the shareholders of Colonial
BancGroup was held. The following is the results of the votes cast by
shareholders present at such meeting, by proxy or in person, for such proposals
1 ) Election of the following directors:
<TABLE>
<CAPTION>
FOR WITHHOLD
----------------------------
<S> <C> <C>
TERM EXPIRES IN 2001:
Augustus K. Clements, III 40,539,493 63,779
Robert S. Craft 40,541,989 61,284
Clinton O. Holdbrooks 40,540,806 62,467
Harold D. King 40,541,919 61,354
Robert E. Lowder 40,540,214 63,059
John C. H. Miller, Jr. 40,518,266 85,007
Jimmy Rane 38,796,812 1,806,460
</TABLE>
TERM EXPIRES IN 1999:
James L. Hewitt 40,544,681 58,592
In addition to the foregoing the following directors will continue to serve:
TERM EXPIRES IN 2000:
Jerry J. Chesser
John Ed Mathison
Joe D. Mussafer
William E. Powell, III
J. Donald Prewitt
Frances E. Roper
Ed V. Welch
TERM EXPIRES IN 1999:
Young J. Boozer
William Britton
Patrick F. Dye
D.B. Jones
Milton E. McGregor
Jack H. Rainer
Simuel Sippial
2) Approval of an amendment to the Restated Certificate of Incorporation to
increase the authorized numbers of BancGroup's common stock, par value
$2.50 (the "Common Stock") from 100,000,000 to 200,000,000.
<TABLE>
<CAPTION>
FOR WITHHOLD ABSTAIN
-----------------------------------------
<S> <C> <C>
39,334,046 1,000,445 268,781
</TABLE>
17
<PAGE> 21
3) Approval of an amendment to the 1992 Incentive Stock Option Plan of the
Colonial BancGroup, Inc. (the "ISO Plan") to:
a. increase the number of shares of Common Stock Eligible to be issued upon
exercise of options under the ISO Plan from 1,100,000 to 2,100,000
shares and;
b. permit a committee of disinterested persons created by the Board of
Directors to allow, at or afler the time of grant, incentive stock
options to be exercised as non-qualified stock options, if such options
could not be exercised as incentive stock option under the federal tax
laws.
<TABLE>
<CAPTION>
FOR WITHHOLD ABSTAIN
------------------------------------------------
<S> <C> <C>
39,236,228 1,088,357 278,687
</TABLE>
ITEM 5: Other Events - N/A
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Computation of Earnings Per Share.
27 - Financial Data Schedule (for SEC use only).
(b) Form 8-K - A) Report on Form 8-K was filed March 16, 1998, disclosing
BancGroup's Year 2000 costs. B) Report on Form 8-K was filed on April
15, 1998 disclosing the financial results for the three months ended
March 31, 1998 to include United American Holding Corporation, First
Central Bank and South Florida Banking Corp.
18
<PAGE> 22
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE COLONIAL BANCGROUP, INC.
Date: May 13, 1998 By: /s/ W. Flake Oakley, IV
-----------------------
W. Flake Oakley, IV
Its Chief Financial Officer
19
<PAGE> 1
EXHIBIT 11
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
March 31, 1998
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Basic Diluted
-----------------------
Q-T-D Q-T-D
------- --------
<S> <C> <C>
Net income $17,950 $17,950
Interest expense on convertible subordinated debentures 101
Tax effect @ 37.90% for the quarter to date (38)
------- -------
Net income $17,950 $18,013
======= =======
Average shares outstanding 47,779 47,779
Effect of stock options 1,001
Convertible subordinated debentures 398
-------
Diluted average shares outstanding 49,178
=======
Earnings per share:
Net Income $ 0.38 $ 0.37
======= =======
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF COLONIAL BANCGROUP, INC. FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 311,523
<INT-BEARING-DEPOSITS> 17,949
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 24,824
<INVESTMENTS-HELD-FOR-SALE> 745,655
<INVESTMENTS-CARRYING> 265,711
<INVESTMENTS-MARKET> 267,464
<LOANS> 5,724,844
<ALLOWANCE> 69,680
<TOTAL-ASSETS> 8,006,359
<DEPOSITS> 6,082,744
<SHORT-TERM> 747,468
<LIABILITIES-OTHER> 144,135
<LONG-TERM> 460,426
0
0
<COMMON> 120,323
<OTHER-SE> 451,263
<TOTAL-LIABILITIES-AND-EQUITY> 8,006,359
<INTEREST-LOAN> 131,158
<INTEREST-INVEST> 14,288
<INTEREST-OTHER> 588
<INTEREST-TOTAL> 146,034
<INTEREST-DEPOSIT> 56,582
<INTEREST-EXPENSE> 72,602
<INTEREST-INCOME-NET> 73,432
<LOAN-LOSSES> 3,670
<SECURITIES-GAINS> 159
<EXPENSE-OTHER> 66,934
<INCOME-PRETAX> 28,903
<INCOME-PRE-EXTRAORDINARY> 28,903
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,950
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.37
<YIELD-ACTUAL> 4.33
<LOANS-NON> 27,215
<LOANS-PAST> 6,818
<LOANS-TROUBLED> 1,411
<LOANS-PROBLEM> 165,000
<ALLOWANCE-OPEN> 67,528
<CHARGE-OFFS> 3,883
<RECOVERIES> 1,269
<ALLOWANCE-CLOSE> 69,680
<ALLOWANCE-DOMESTIC> 69,680
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 990
</TABLE>
