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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 2, 1998
THE COLONIAL BANCGROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-07945 63-0661573
(State of Incorporation) (Commission File No.) (IRS Employer I.D. No.)
Colonial Financial Center, Suite 800
One Commerce Street, Montgomery, Alabama 36104
(Address of Principal Executive Office) (Zip code)
Registrant's telephone number, including area code: 334-240-5000
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ITEM 5. OTHER EVENTS
Pursuant to Section 7(b) of the Year 2000 Information and Readiness
Disclosure Act, Colonial BancGroup hereby identifies the below information as
"Year 2000 Readiness Disclosures." Such information has since been updated by
subsequent filings and can not be relied upon as accurate as of the date of this
filing.
The information in Section A of this filing was filed by Colonial
BancGroup on Form 8-K, dated as of March 16, 1998.
SECTION A
YEAR 2000 READINESS DISCLOSURE
ACQUISITION AND RESTRUCTURING COSTS AND YEAR 2000 COSTS
Colonial BancGroup has incurred and expects to continue to incur costs
outside the course of its normal ongoing operations in connection with
acquisitions and related restructuring of acquired companies' operations, costs
associated with Year 2000 computer systems compliance and upgrades to
technological capabilities. Substantial portions of these costs are internal and
not incremental to the ongoing operations of the Company. Certain costs are
however additional costs incurred from third parties or in connection with
write-downs of existing systems. The current status of these costs is discussed
below:
YEAR 2000 COSTS AND TECHNOLOGICAL RESTRUCTURING:
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 begin in the last quarter of 1998 and
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 the Company's ongoing operating costs. This cost
is expected to be incurred through September 30, 1998. In
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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 the Company'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.
The Company will incur 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.
BancGroup incurred $432,000 in costs during 1997 related to
assessing the status of the Company's systems and defining its
strategy to bring all systems into Year 2000 compliance. BancGroup
expects to incur certain additional third-party costs totaling
approximately $300,000 in 1998 relating to the completion of the
assessment of the Company's systems and the definition of its strategy
to bring all systems into Year 2000 compliance. These costs have been
and will continue to be expensed as incurred and are not significant
to BancGroup's on-going operating costs.
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.
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The information in Section B of this filing was filed by Colonial BancGroup
on Form 10-K for the Fiscal Year ended December 31, 1997.
SECTION B
YEAR 2000 READINESS DISCLOSURE
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 begin in the last
quarter of 1998 and 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 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 will incur 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.
BancGroup incurred $432,000 in costs during 1997 related to assessing
the status of BancGroup's systems and defining its strategy to bring all
systems into Year 2000 compliance. BancGroup expects to incur certain
additional third-party costs totaling approximately $300,000 in 1998
relating to the completion of the assessment of BancGroup's systems and the
definition of its strategy to bring all systems into Year 2000 compliance.
These costs have been and will continue to be expensed as incurred and are
not significant to BancGroup's on-going operating costs.
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.
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The information in Section C of this filing was filed by Colonial BancGroup
on Form 10-Q for the Fiscal Quarter ended March 31, 1998.
SECTION C
YEAR 2000 READINESS DISCLOSURE
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 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.
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The information in Section D of this filing was filed by Colonial BancGroup
on Form 10-Q for the Fiscal Quarter ended June 30, 1998.
SECTION D
YEAR 2000 READINESS DISCLOSURE
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.
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. BancGroup is in the process of implementing plans in
accordance with regulatory guidelines to bring all business critical
computer systems into Year 2000 compliant status. These guidelines include
requirements regarding project plans, testing plans and contingency plans.
BancGroup is in conformity with the current requirements regarding
completion and implementation of these plans. All business critical systems
have been scheduled for implementation or upgrade and testing procedures
established for completion by year end 1998.
Year 2000 expenses of $3 million were incurred through the six months
ended June 30, 1998. These expenses included a one-time pretax charge of
approximately $2 million in the first quarter for the write off of the
remaining book value of branch automation equipment that is to be replaced
with year 2000 compliant software. The remaining $1 million is one time
third party incremental costs related to the completion of assessment of
the Company's systems and upgrading internal systems to Year 2000
compliance. BancGroup anticipates approximately $2 million of additional
expense throughout the remainder of 1998. In addition to these expenses,
BancGroup plans to purchase $9 million in replacement equipment and
software over the remainder of the year which will be depreciated over a
period of 3 to 5 years.
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 ongoing 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.
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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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE COLONIAL BANCGROUP, INC.
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(Registrant)
Date: December 2, 1998 /s/ W. Flake Oakley
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W. Flake Oakley
Chief Financial Officer
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