-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JEzZI8NSIjQFqWj2wZushs5Q7cmlkcF+vOMixhA1DR+I1VoaonEBhGvR+ejL2gg9 6crGEldODEivpoi60TD12g== 0000950144-96-008386.txt : 19961118 0000950144-96-008386.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950144-96-008386 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIAL BANCGROUP INC CENTRAL INDEX KEY: 0000092339 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 630661573 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07945 FILM NUMBER: 96666507 BUSINESS ADDRESS: STREET 1: ONE COMMERCE ST STE 800 STREET 2: P O BOX 1108 CITY: MONTGOMERY STATE: AL ZIP: 36104 BUSINESS PHONE: 3342405000 MAIL ADDRESS: STREET 1: ONE COMMERCE STREET STE 800 STREET 2: PO BOX 1108 CITY: MONTGOMERY STATE: AL ZIP: 36101 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHLAND BANCORPORATION DATE OF NAME CHANGE: 19820205 10-Q 1 COLONIAL BANCGROUP FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED September 30, 1996. ------------------- ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . -------------------- ------------------- COMMISSION FILE NUMBER 1-13508 THE COLONIAL BANCGROUP, INC. (A DELAWARE CORPORATION) EMPLOYER IDENTIFICATION NUMBER 63-0661573 ONE COMMERCE STREET, MONTGOMERY, ALABAMA 36104 TELEPHONE: (205) 240-5000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Shares of common stock ($2.50 par value) outstanding at October 31, 1996 was 16,309,710. 2 Part I, Item 1 Condensed Consolidated Financial Statements 3 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CONDITION (Unaudited) (Dollars in thousands, except per share amounts)
September 30, December 31, September 30, 1996 1995 1995 - ------------------------------------------------------------------------------------------------------------------------ Assets: (Restated) (Restated) Cash and due from banks................................................ $ 150,320 $ 162,874 $ 125,645 Interest-bearing deposits in banks..................................... 4,977 6,270 4,802 Federal funds sold..................................................... 32,139 36,650 Securities available for sale.......................................... 289,378 214,293 136,201 Investment securities.................................................. 297,397 284,539 352,483 Mortgage loans held for sale........................................... 161,864 110,486 140,437 Loans, net of unearned income.......................................... 3,570,490 3,175,506 2,848,089 Less: Allowance for possible loan losses................................... (45,098) (41,490) (39,282) - ----------------------------------------------------------------------------------------------------------------------- Loans, net............................................................. 3,525,392 3,134,016 2,808,807 Premises and equipment................................................. 76,620 65,833 58,470 Excess of cost over tangible and identified intangible assets acquired, net................................................. 30,624 29,460 21,438 Mortgage servicing rights.............................................. 95,076 80,053 74,489 Other real estate owned................................................ 9,246 10,020 10,360 Accrued interest and other assets...................................... 72,630 72,212 68,187 - ----------------------------------------------------------------------------------------------------------------------- Total.................................................................. $4,713,524 $4,202,195 $3,837,969 - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity: Deposits............................................................... $3,561,923 $3,204,260 $2,935,768 FHLB short-term borrowings............................................. 580,000 465,000 420,000 Other short-term borrowings............................................ 134,918 132,256 106,418 Subordinated debt...................................................... 7,760 17,113 17,410 Other long-term debt................................................... 24,605 29,150 24,070 Other liabilities...................................................... 74,401 64,952 74,265 - ----------------------------------------------------------------------------------------------------------------------- Total liabilities...................................................... 4,383,607 3,912,731 3,577,931 - ----------------------------------------------------------------------------------------------------------------------- Shareholders' equity: Preference Stock $2.50 par value; 1,000,000 shares authorized, none issued............................................ Common Stock, $2.50 par value; 44,000,000 shares authorized, 16,296,730, 15,519,688 and 14,683,701 shares issued and outstanding at September 30, 1996, December 31, 1995 and September 30, 1995, respectively.................................... 40,742 38,799 36,709 Additional paid in capital........................................... 172,413 159,434 138,525 Retained earnings.................................................... 118,465 90,886 84,677 Unearned compensation................................................ (699) (822) Unrealized losses on securites available for sale, net of taxes...... (1,004) 1,167 127 - ----------------------------------------------------------------------------------------------------------------------- Total shareholders' equity............................................. 329,917 289,464 260,038 - ----------------------------------------------------------------------------------------------------------------------- Total.................................................................. $4,713,524 $4,202,195 $3,837,969 - -----------------------------------------------------------------------------------------------------------------------
NOTE: Restated financial results above reflect the July 3, 1996 mergers of Colonial BancGroup with Commercial Bancorp of Georgia, Inc. and Southern Banking Corporation. These mergers were accounted for as poolings of interests and the financial results restated accordingly. See Notes to the Unaudited Condensed Consolidated Financial Statements 4
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Nine Months Ended Three Months Ended CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) September 30, September 30, 1996 (Dollars in thousands, except per share amounts) -------------------------- ------------------------- 1996 1995 1996 1995 - ------------------------------------------------------------------------------------------------------------------------ (Restated) (Restated) Interest Income: Interest and fees on loans.................... $232,187 $183,488 $81,402 $66,767 Interest on investments....................... 23,096 21,761 7,919 7,532 Other interest income......................... 1,780 1,634 286 718 - ------------------------------------------------------------------------------------------------------------------------ Total interest income......................... 257,063 206,883 89,607 75,017 - ------------------------------------------------------------------------------------------------------------------------ Interest Expense: Interest on deposits.......................... 102,049 80,694 $35,503 $29,831 Interest on short-term borrowings............. 28,038 20,992 9,745 8,335 Interest on long-term debt.................... 1,948 2,889 671 848 - ------------------------------------------------------------------------------------------------------------------------ Total interest expense........................ 132,035 104,575 45,919 39,014 - ------------------------------------------------------------------------------------------------------------------------ Net Interest Income Before Provision for Possible Loan Losses........................ 125,028 102,308 43,688 36,003 Provision for possible loan losses............ 6,023 4,155 2,555 1,433 - ------------------------------------------------------------------------------------------------------------------------ Net Interest Income After Provision for Possible Loan Losses........................ 119,005 98,153 41,133 34,570 - ------------------------------------------------------------------------------------------------------------------------ Noninterest Income: Mortgage servicing and origination fees....... 21,105 17,302 7,242 6,151 Service charges on deposit accounts........... 14,223 11,946 4,861 4,107 Other charges, fees and commissions........... 3,335 2,914 1,103 1,005 Securities gains, net......................... 111 (26) (1) 6 Other income.................................. 11,080 7,155 3,409 2,371 - ------------------------------------------------------------------------------------------------------------------------ Total noninterest income...................... 49,854 39,291 16,614 13,640 - ------------------------------------------------------------------------------------------------------------------------ Noninterest Expense: Salaries and employee benefits................ 41,165 35,164 13,828 12,014 Occupancy expense, net........................ 8,848 7,765 3,001 2,684 Furniture and equipment expenses.............. 8,346 6,859 2,778 2,341 Amortization of mortgage servicing rights..... 8,954 5,950 3,238 2,217 Amortization of intangible assets............. 1,513 1,084 523 374 SAIF special assessment....................... 3,817 3,817 Other expense................................. 35,216 30,227 11,522 10,413 - ------------------------------------------------------------------------------------------------------------------------ Total noninterest expense..................... 107,859 87,049 38,707 30,043 - ------------------------------------------------------------------------------------------------------------------------ Income before income taxes 61,000 50,395 19,040 18,167 Applicable income taxes....................... 21,650 17,963 6,740 6,502 - ------------------------------------------------------------------------------------------------------------------------ Net Income.................................... $39,350 $32,432 $12,300 $11,665 - ------------------------------------------------------------------------------------------------------------------------ Earnings per share: Primary...................................... 2.39 $2.19 0.74 $0.78 Fully diluted................................ 2.37 2.13 0.73 0.76 - ------------------------------------------------------------------------------------------------------------------------
NOTE: Restated financial results above reflect the July 3, 1996 mergers of Colonial BancGroup with Commercial Bancorp of Georgia, Inc. and Southern Banking Corporation. These mergers were accounted for as poolings of interests and the financial results restated accordingly. See Notes to the Unaudited Condensed Consolidated Financial Statements 5 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Condensed Consolidated Statement of Cash Flow (Unaudited)(In Thousands)
Nine Months Ended September 30, 1996 1995 -------- -------- Net cash used in operating activities ($3,729) ($36,819) -------- -------- Cash flows from investing activities: Proceeds from maturities of securities available for sale 57,428 10,937 Proceeds from sales of securities available for sale 3,425 25 Purchase of securities available for sale (44,654) (32,060) Proceeds from maturities of investment securities 108,971 71,040 Purchase of investment securities (131,809) (52,332) Net decrease in short-term securities 10,000 - Net increase in loans (432,816) (472,754) Cash received in bank acquisitions 8,471 5,118 Capital expenditures (15,970) (6,384) Proceeds from sale of other real estate owned 5,564 6,880 Other, net 30 146 -------- -------- Net cash used in investing activities (431,360) (469,384) -------- -------- Cash flows from financing activities: Net increase in demand, savings, and time deposits 286,738 385,219 Net increase in federal funds purchased, repurchase agreements and other short-term borrowings 110,048 169,861 Proceeds from issuance of long-term debt 5,017 5,841 Repayment of long-term debt (3,664) (54,428) Proceeds from issuance of common stock 2,733 792 Dividends paid (11,769) (7,620) -------- -------- Net cash provided by financing activities 389,103 499,665 -------- -------- Net decrease in cash and cash equivalents (45,986) (6,538) Cash and cash equivalents at beginning of year 201,283 173,635 -------- -------- Cash and cash equivalents at September 30 $155,297 $167,097 -------- -------- Supplemental Disclosure of cash flow information: Cash paid during the nine months for: Interest $131,542 $97,076 Income taxes 22,430 19,010 Non-cash investing activities: Transfer of loans to other real estate $3,309 $4,611 Origination of loans for the sale of other real estate 205 435 Securitization of mortgage loans 87,641 Non-cash financing activities: Conversion subordinated debentures $9,228 Assets acquired in business combinations 78,505 $55,136 Liabilities assumed in business combinations 75,905 48,928
See Notes to the Unaudited Condensed Consolidated Financial Statements. 6 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Notes to the Unaudited Condensed Consolidated Financial Statements NOTE A - ACCOUNTING POLICIES/RESTATEMENT The Colonial BancGroup, Inc. ("BancGroup") and its subsidiaries have not changed their accounting and reporting policies from those stated in the 1995 annual report. These unaudited interim financial statements should be read in conjunction with the audited financial statements and footnotes included in BancGroup's 1995 annual report and also the restated audited financial statements and footnotes included in BancGroup's 8-K/A filing dated October 9, 1996. In the opinion of BancGroup, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of September 30, 1996 and the results of operations and cash flows for the interim periods ended September 30, 1996 and 1995. All 1996 interim amounts are subject to year-end audit, and the results of operations for the interim period herein are not necessarily indicative of the results of operations to be expected for the year. NOTE B - BUSINESS COMBINATONS On April 19, 1996 BancGroup's subsidiary Colonial Bank purchased approximately $31 million in assets and assumed approximately $31 million in liabilities of the Enterprise, Alabama branch of First Federal Bank of Tuscaloosa. On July 3, 1996 BancGroup completed the combination with Commercial Bancorp of Georgia, Inc. Commercial Bancorp's subsidiary, Commerial Bank of Georgia ("Commercial"), became a wholly owned subsidiary of BancGroup. Commercial had assets of approximately $233 million and deposits and other liabilities of approximately $212 million. Commercial operated seven full-service offices in the northern area of Atlanta. On July 3, 1996 BancGroup completed the combination with Southern Banking Corporation. Southern Banking Corporation's subsidiary Southern Bank of Central Florida ("Southern")became a wholly-owned subsidiary of BancGroup. Southern had approximately $232 million in assets and deposits and other liabilities of approximately $214 million. Southern operated eight branch locations in the three county central florida area. 7 Both the Commercial and Southern mergers were accounted for as poolings of interests and therefore, the prior periods financial results have been restated. On July 8, 1996 BancGroup completed the combination with Dothan Federal Savings Bank ("Dothan Federal"). Dothan Federal had approximately $49 million in assets and deposits and other liabilities of approximately $45 million. Dothan Federal had one branch office in Dothan, Alabama. The Dothan combination was accounted for as a purchase with the issuance of 77,345 shares of BancGroup Common Stock and payment of $2.6 million in cash to Dothan Federal shareholders. On July 23, 1996, BancGroup entered into a definitive agreement to merge Tomoka Bancorp, Inc. ("Tomoka") into Colonial BancGroup. Tomoka's subsidiary Tomoka State Bank based in Ormond Beach, Florida will be merged into BancGroup's subsidiary, Colonial Bank, headquartered in Orlando, Florida. Tomoka has assets of approximately $72 million and deposits of approximately $63 million. Tomoka currently has four offices located in Ormond Beach, New Smyrna Beach, Pierson and Port Orange, Florida. On July 25, 1996, BancGroup entered into a definitive agreement to merge First Family Financial Corporation ("First Family") into BancGroup. First Family Financial Corporation's subsidiary First Family Bank, FSB, based in Eustis, Florida, will become a wholly-owned subsidiary of BancGroup. At September 30, First Family has assets of approximately $170 million and deposits of approximately $158 million. First Family has six offices located in Lake County, Florida which is considered part of the Orlando Metropolitan area. On September 12, 1996, BancGroup entered into a definitive agreement to merge D/W Bankshares, Inc. ("Bankshares") into BancGroup. Bankshares is a Georgia corporation and is a holding company for Dalton/Whitfield Bank & Trust located in Dalton, Georgia. Bankshares will be merged into BancGroup's subsidiary, Colonial Bank, headquartered in Lawrenceville, Georgia. At September 30, 1996, Bankshares had assets of $130 million, deposits of $116 million and stockholders' equity of $11 million. BancGroup has signed a definitive agreement dated October 25, 1996, to merge Jefferson Bancorp, Inc. ("Jefferson") into BancGroup. Jefferson is a Florida corporation and is a holding company for Jefferson Bank of Florida located in Miami Beach, Florida. At September 30, 1996, Jefferson has assets of approximately $459 8 million, deposits of approximately $386 million and stockholders' equity of $38 million. BancGroup has signed a letter of intent dated September 20, 1996, to merge Fort Brooke Bancorporation ("Fort Brooke") into BancGroup. Fort Brooke is a Florida corporation and is a holding company for Fort Brooke Bank located in Tampa, Florida. Fort Brooke will be merged into BancGroup's subsidiary Colonial Bank, headquartered in Orlando, Florida. At September 30, 1996, Fort Brooke has assets of approximately $193 million, deposits of approximately $174 million and stockholders' equity of approximately $16 million. BancGroup has also entered into a definitive agreement to acquire The Union Bank in Evergreen, Alabama. At September 30, 1996 the Union Bank had assets of approximately $53 million and stockholders' equity of $7.8 million. NOTE C - COMMITMENTS AND CONTINGENCIES BancGroup's subsidiary banks make loan commitments and incur contingent liabilities in the normal course of business which are not reflected in the consolidated statements of condition. NOTE D - ACCOUNTING CHANGE BancGroup adopted Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets to be disposed of on January 1, 1996. SFAS No. 121 requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable. SFAS No. 123, Accounting for Stock-Based Compensation defines a fair value based method of accounting for an employee stock option or similar equity instrument. However, SFAS 123 allows an entity to continue to measure compensation costs for those plans using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees. BancGroup has elected to continue to measure the compensation cost for their stock option plans under the provisions of APB Opinion 25. The adoption of SFAS 121 and 123 did not result in any adjustments to BancGroup earnings during the nine months ended September 30, 1996. In June 1996, the Financial Accounting Standards Board issued SFAS No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, which requires an entity to recognize the financial and servicing assets it controls and the liabilities it has incurred, derecognize financial assets when control has been surrendered, and derecognize liabilities when extinguished. 9 This statement distinguishes between transfers that are sales and those that are secured borrowings. SFAS No. 125 also provides implementation guidance for assessing isolation of transferred assets and for accounting for transfers of partial interests, servicing of financial assets, securitizations, transfers of sales-type and direct financing lease receivables, securities lending transactions, repurchase agreements, loan syndications and participations, risk participations in banker's acceptances, factoring arrangements, transfers of receivables with recourse, and extinguishments of liabilities. This statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after December 31, 1996 and is to be applied prospectively. Management does not believe that the adoption of SFAS No. 125 will have a material impact on BancGroup's financial statements. 10 Part I, Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations FINANCIAL CONDITION: Ending balances of total assets, securities, mortgage loans held for sale, net loans, and deposits changed from December 31, 1995 to September 30, 1996 as follows (in thousands):
Increase (Decrease) ------------------- Amount % -------- ----- Total assets $511,329 12.2% Securities 87,943 17.6% Mortgage loans held for sale 51,378 46.5% Loans, net of unearned income 394,984 12.4% Deposits 357,663 11.2%
Securities: Investment securities and securities available for sale have increased $88 million from December 31, 1995 to September 30, 1996. The increase in securities primarily consisted of the securitization of $87 million of 1 - 4 family residential mortgages.The remaining change in securities resulted from the maturities and purchases of securities resulting from normal funding operations of the Company. Loans and Mortgage Loans Held for Sale: The increase in loans, net of unearned income, of $395 million is primarily from internal loan growth of approximately $423 million at an annualized rate of 18%. This growth was partially off-set by a decrease of $87 million resulting from the securitization noted in the previous paragraph. The remaining increase of $59 million resulted from the purchase of assets of the Enterprise, Alabama branch of First Federal Bank of Tusculoosa and the business combination with Dothan Federal Savings Bank. Loans increased at a 25% internal growth rate for the full year in 1995. Mortgage loans held for sale are funded on a short-term basis (less than 90 days) while they are being packaged for sale in the secondary market by Colonial Mortgage Company, a wholly owned subsidiary of Colonial Bank. Loans originated amounted to approximately $1028.9 million and $638.7 million and sales thereof amounted to approximately $977.6 12 million and $558.8 million for the nine months ended September 30, 1996 and 1995, respectively. The increase in originations was primarily due to the lower interest rates which resulted in refinancings as well as new originations. 13 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Management's Discussion, Continued Gross loans by category and summary of loan loss experience are shown in the following schedules.
GROSS LOANS BY CATEGORY September 30, Dec. 31, September 30, (In thousands) 1996 1995 1995 (Restated) (Restated) - ----------------------------------------------------------------------------------- Commercial, financial, and agricultural $ 494,018 $ 436,791 $ 418,225 Real estate-commercial 762,827 692,550 663,710 Real estate-construction 347,601 335,645 297,430 Real estate-residential 1,674,391 1,451,338 1,202,366 Installment and consumer 240,869 215,043 217,800 Other 50,875 44,746 48,819 - ----------------------------------------------------------------------------------- Total loans $3,570,581 $3,176,113 $2,848,350 - ----------------------------------------------------------------------------------- Percent of loans in each category to total loans: Commercial financial, and agricultural 13.8% 13.7% 14.7% Real estate-commercial 21.4% 21.8% 23.3% Real estate-construction 9.7% 10.6% 10.4% Real estate-residential 46.9% 45.7% 42.2% Installment and consumer 6.8% 6.8% 7.7% Other 1.4% 1.4% 1.7% - ----------------------------------------------------------------------------------- 100.0% 100.0% 100.0% - -----------------------------------------------------------------------------------
Loans collateralized by commercial real estate and other commercial loans increased approximately $70 million and $57 million, respectively during the first nine months of 1996. Loans secured by residential real estate increased $223 million for the same period. These loan categories continue to be a significant source of loan growth and are concentrated in various areas primarily in Alabama and with regard to residential real estate also in the metropolitan Atlanta market in Georgia. 14 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Management's Discussion, Continued SUMMARY OF LOAN LOSS EXPERIENCE
Nine Months Year Nine Months Ended Ended Ended September 30, Dec. 31, September 30, (In thousands) 1996 1995 1995 (Restated) (Restated) - -------------------------------------------------------------------------------- Allowance for possible loan losses - January 1 $41,489 $36,985 $36,985 Charge-offs: Commercial, financial, and agricultural 1,948 2,781 1,927 Real estate-commercial 1,084 339 363 Real estate-construction 755 44 32 Real estate-residential 430 372 174 Installment and consumer 2,131 2,603 1,121 Other 35 163 115 - -------------------------------------------------------------------------------- Total charge-offs 6,383 6,302 3,732 - -------------------------------------------------------------------------------- Recoveries: Commercial, financial, and agricultural 745 777 379 Real estate-commercial 1,092 26 12 Real estate-construction 1 11 11 Real estate-residential 195 161 149 Installment and consumer 1,202 1,307 980 Other 24 45 30 - -------------------------------------------------------------------------------- Total recoveries 3,259 2,327 1,561 - -------------------------------------------------------------------------------- Net charge-offs 3,124 3,975 2,171 Addition to allowance charged to operating expense 6,023 7,350 4,155 Allowance added from bank mergers 710 1,129 313 - -------------------------------------------------------------------------------- Allowance for possible loan losses-end of period $45,098 $41,489 $39,282 - --------------------------------------------------------------------------------
15 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Management's Discussion, Continued Asset quality as measured by nonperforming assets remains very good at 0.85% of net loans and other real estate. Nonperforming assets have increased $4.1 million from December 31, 1995. The increase in nonperforming assets resulted primarily from a $6.3 million increase in nonaccrural loans and a $1.5 million decrease in other real estate. The increase in nonaccrual loans is primarily from three credits in Alabama and one in Georgia. Management continuously monitors and evaluates recoverability of problem assets and adjusts loan loss reserves accordingly. The loan loss reserve is 1.26% of loans at September 30, 1996. The increase in allowance since year end has been due to provisions in excess of net charge-offs totaling $2.9 million and reserves of $710,000 from the purchase of Dothan Federal and the Enterprise branch of First Federal Bank of Tuscaloosa. The provisions in excess of net charge-offs have been made primarily as a result of loan growth. Nonperforming assets are summarized below (in thousands):
Sept. 30, Dec. 31, Sept. 30, 1996 1995 1995 (Restated) (Restated) - ------------------------------------------------------------------------------------------- Nonaccrual loans $20,213 $13,840 $ 8,874 Restructured loans 1,006 1,800 1,321 - ------------------------------------------------------------------------------------------- Total nonperforming loans* 21,219 15,640 10,195 Other real estate owned 9,246 10,754 11,103 - ------------------------------------------------------------------------------------------- Total nonperforming assets* $30,465 $26,394 $21,298 - ------------------------------------------------------------------------------------------- Aggregate loans contractually past due 90 days for which interest is being accrued $ 3,554 $ 1,381 $ 2,939 Net charge-offs (recoveries) year-to-date 3,124 3,975 2,171 - ------------------------------------------------------------------------------------------- RATIOS Period end: Total nonperforming assets as a percent of net loans and other real estate 0.85% 0.83% 0.75% Allowance as a percent of net loans 1.26% 1.31% 1.38% Allowance as a percent of
16 nonperforming assets 148% 157% 184% Allowance as a percent of nonperforming loans 213% 265% 385% For the period ended: Net charge-offs as a percent of average net loans-(annualized basis) 0.12% 0.15% 0.11% - -------------------------------------------------------------------------------------------
* Total does not include loans contractually past due 90 days or more which are still accruing interest. 17 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Management's Discussion, Continued Management, through its loan officers, internal loan review staff, and external examinations by regulatory agencies and independent auditors, has identified approximately $129 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 September 30, 1996 substantially all of these loans are current with their existing repayment terms. Given the reserves and the ability of the borrowers to comply with the existing repayment terms, management believes any exposure from these potential problem loans has been adequately addressed at the present time. The above nonperforming loans and potential problem loans represent all material credits for which management has doubts as to the ability of the borrowers to comply with the loan repayment terms. Of these loans, management believes it is probable that loans totaling $12 million will not be collected as scheduled and therefore are considered impaired. Management also expects that the resolution of these problem credits as well as other performing loans will not materially impact future operating results, liquidity or capital resources. Allocations of the allowance for possible loan losses are made on an individual loan basis for all identified potential problem loans with a percentage allocation for the remaining portfolio. The allocations of the total allowance represent an approximation of the reserves for each category of loans based on management's evaluation of risk within each loan type. 18 ALLOCATION OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
Sept. 30, Dec. 31, Sept. 30, (In thousands) 1996 1995 1995 (Restated) (Restated) - ------------------------------------------------------------------------ Commercial, financial, and agricultural $ 8,498 $ 8,020 $ 7,595 Real estate-commercial 14,482 13,662 11,851 Real estate-construction 9,294 7,233 4,405 Real estate-mortgage 8,372 7,256 12,064 Installment and consumer 3,202 3,076 2,056 Other 1,250 2,242 1,311 - ------------------------------------------------------------------------ TOTAL $45,098 $41,489 $39,282 - ------------------------------------------------------------------------
19 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Management's Discussion, Continued LIQUIDITY: The maintenance of an adequate liquidity position is a principal component of BancGroup's asset/liability management strategy. BancGroup's governing policy provides for daily and longer term monitoring of both sources and uses of funds to properly maintain the cash position. To assist in funding a projected 18% annualized growth in loans, BancGroup has credit facilities at the Federal Home Loan Bank (FHLB). FHLB of Atlanta has established credit availability in an amount up to $850 million with only $580 million outstanding at September 30, 1996. This source of credit reduces BancGroup's dependency on deposits as a source of liquidity resulting in a loan to deposit ratio of 100.2% at September 30, 1996 and 99.1% at December 31, 1995. In 1995, BancGroup initiated a brokered Certificate of Deposit (CD) program in conjunction with Merrill Lynch to offer CD's in increments of $1,000 to $99,000 to out of market customers at competitive rates ranging from 5.15% to 5.65% maturing in 6 to 24 month periods. At September 30,1996, $163 million is outstanding under this program. Rate sensitivity is also constantly monitored. CAPITAL RESOURCES: Management continuously monitors the capital adequacy and potential for future growth. The primary measurement for these evaluations for a bank holding company is its tier one leverage ratio. Tangible capital for BancGroup at September 30, 1996 consists of $330.9 million of equity less $30.6 million in intangibles providing a 6.52% leverage ratio at September 30, 1996. The ratio of shareholders' equity to total assets at September 30, 1996 was 7.00% as compared to 6.89% at December 31, 1995. Capital levels are sufficient to support future internally generated growth and fund the quarterly dividend rates which are currently $0.27 per share. BancGroup also has access to equity capital markets through both public and private issuances. Management considers these sources and related return in addition to internally generated capital in evaluating future expansion merger or acquisition opportunities. 20 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Management's Discussion, Continued COMPARISON OF THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995: SUMMARY: BancGroup's operating earnings for the quarter increased 27% to $14,766,000 compared to $11,665,000 in the prior year. Operating EPS increased 16% to $.88 per share compared to $.76 per share for the previous year. Year-to-date operating earnings per share were $2.52 compared to $2.13 for the same period in 1995, an 18% increase. On September 30, 1996 Congress passed a law requiring thrifts and commercial banks which have acquired thrifts in the past to pay a special assessment to recapitalize SAIF. As a result of acquiring several thrifts over the past few years, Colonial has deposits insured by SAIF. This one-time payment resulted in a pre-tax expense of $3.8 million or $0.15 per share after tax in September. BancGroup's net income (including a one-time assessment to recapitalize the Savings Association Insuranc Fund (SAIF)) increased $635,000 from $11,665,000 or $0.76 per fully diluted share to $12,300,000 or $0.73 per fully diluted share for the three months ended September 30, 1995 and 1996, respectively. BancGroup's net income increased $6,918,000 from $32,432,000 or $2.13 per fully diluted share to $39,350,000 or $2.37 per share for the nine months ended September 30, 1995 and 1996, respectively. The increases in operating earnings are primarily attributable to increases in interest earning assets and noninterest income partially off-set by lower interest spreads and increases in loan loss provision and noninterest expenses. 21
THE COLONIAL BANCGROUP, INC. AVERAGE VOLUME AND RATES (Unaudited) Three Months Ended September 30, (Dollars in thousands) ------------------------------------------------------------------------ 1996 1995 ---------------------------------- ---------------------------------- Average Average Volume Interest Rate Volume Interest Rate - ----------------------------------------------------------------------------------------------------------------------------------- Assets Loans, net............................................... $3,565,388 $78,899 8.82% $2,758,379 $64,041 9.22% Mortgage loans held for sale............................. 134,378 2,799 8.33% 159,943 3,112 7.78% Investment securities and securities available for sale and other interest-earning assets....................... 541,283 8,476 6.26% 539,994 8,577 6.35% - ---------------------------------------------------------------------------------- ----------------------- Total interest-earning assets(1)......................... 4,241,049 $90,174 8.48% 3,458,316 $75,730 8.71% - ---------------------------------------------------------------------------------- ----------------------- Nonearning assets........................................ 393,887 322,852 - ---------------------------------------------------------------------- ---------- Total assets........................................... $4,634,936 $3,781,168 - ----------------------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity: Interest-bearing deposits................................ $2,856,446 $35,503 4.94% $2,342,577 $29,831 5.05% Short-term borrowings.................................... 722,613 9,745 5.36% 543,855 8,335 6.00% Long-term debt........................................... 38,722 671 6.94% 42,931 848 7.89% - ---------------------------------------------------------------------------------- ----------------------- Total interest-bearing liabilities....................... 3,617,781 $45,919 5.05% 2,929,363 $39,014 5.28% - ---------------------------------------------------------------------------------- ----------------------- Noninterest-bearing demand deposits...................... 612,831 551,810 Other liabilities........................................ 78,096 46,895 - ---------------------------------------------------------------------- ---------- Total liabilities........................................ 4,308,708 3,528,068 Shareholders' equity..................................... 326,228 253,100 - ---------------------------------------------------------------------- ---------- Total liabilities and shareholders' equity................. $4,634,936 $3,781,168 - ----------------------------------------------------------------------------------------------------------------------------------- Rate differential.......................................... 3.43% 3.43% Net yield on interest-earning assets....................... $44,255 4.15% $36,716 4.21% - -----------------------------------------------------------------------------------------------------------------------------------
NOTE: Restated financial results above reflect the July 3, 1996 mergers of Colonial BancGroup with Commercial Bancorp of Georgia and Southern Banking Corporation. These mergers were accounted for as poolings of interests and the financial results 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%. 22 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES ANALYSIS OF INTEREST INCREASES (DECREASES) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(Dollars in thousands) Three Months Ended September 30 1996 Change from 1995 ----------------------------------- Due to (1) Total Volume Rate ----------- ------------- --------- Interest Income: Total Loans, Net $ 14,858 $ 90,222 $ (75,364) Mortgage loans held for sale (313) (5,123) 4,810 Investment securities and securities available for sale and other interest-earning assets (101) 549 (650) --------- -------- --------- Total interest income (2) 14,444 85,648 (71,204) --------- -------- --------- Interest Expense: Interest bearing deposits 5,672 24,013 (18,341) Short-term borrowings 1,410 22,203 (20,793) Long-term debt (177) (80) (97) --------- -------- --------- Total interest expense 6,905 46,136 (39,231) --------- -------- --------- Net interest income $ 7,539 $ 39,512 $ (31,973) --------- -------- ---------
(1) Increases (decreases) are attributable to volume changes and rate changes on the following basis: Volume Change = change in volume times old rate. Rate Change = change in rate times old volume. The Rate/Volume Change = change in volume times change in rate, and it is allocated between volume change and rate change at the ratio that the absolute value of each component bears to the absolute value of their total. (2) Interest earned on obligations of state and political subdivisions is reflected on a tax equivalent basis. Tax equivalent interest earned is: actual interest earned times 145%. The taxable equivalent adjustment has given effect to the disallowance of interest, for federal income tax purposes, related to certain tax-free assets. Dividends earned on preferred stock are reflected on a tax equivalent basis. Tax equivalent dividends earned are: actual dividends times 137.7%. Tax equivalent average rate is tax equivalent interest or dividends earned divided by average volume. 23
THE COLONIAL BANCGROUP, INC. AVERAGE VOLUME AND RATES (Unaudited) Nine Months Ended September 30, (Dollars in thousands) ------------------------------------------------------------------------ 1996 1995 --------------------------------- ----------------------------------- Average Average Volume Interest Rate Volume Interest Rate - ---------------------------------------------------------------------------------------------------------------------------- Assets Loans, net..................................... $3,370,975 $224,899 8.91% $2,594,649 $179,174 9.23% Mortgage loans held for sale................... 139,035 8,176 7.85% 92,852 5,428 7.79% Investment securities and securities available for sale and other interest-earning assets............. 549,153 25,726 6.26% 520,336 24,347 6.24% - ------------------------------------------------- ---------------------- ---------------------- Total interest-earning assets(1)............... 4,059,163 $258,801 8.51% 3,207,837 $208,949 8.71% - ------------------------------------------------- ---------------------- ---------------------- Nonearning assets.............................. 388,458 312,367 - ------------------------------------------------- ---------- ---------- Total assets................................. $4,447,621 $3,520,204 - ---------------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity: Interest-bearing deposits...................... $2,752,166 $102,049 4.95% $2,228,520 $80,694 4.84% Short-term borrowings.......................... 686,640 28,038 5.45% 454,274 20,992 6.09% Long-term debt................................. 38,235 1,948 6.81% 49,652 2,889 7.74% - --------------------------------------------------------------------------- ---------------------- Total interest-bearing liabilities............. 3,477,041 $132,035 5.07% 2,732,446 $104,575 5.12% - ------------------------------------------------- ---------------------- ---------------------- Noninterest-bearing demand deposits............ 581,747 500,699 Other liabilities.............................. 75,615 44,775 - ------------------------------------------------- ---------- ---------- Total liabilities.............................. 4,134,403 3,277,920 Shareholders' equity........................... 313,218 242,284 - ------------------------------------------------- ---------- ---------- Total liabilities and shareholders' equity....... $4,447,621 $3,520,204 - ---------------------------------------------------------------------------------------------------------------------------- Rate differential................................ 3.44% 3.59% Net yield on interest-earning assets............. $126,766 4.17% $104,374 4.35% - ----------------------------------------------------------------------------------------------------------------------------
NOTE: Restated financial results above reflect the July 3, 1996 mergers of Colonial BancGroup with Commercial Bancorp of Georgia and Southern Banking Corporation. These mergers were accounted for as poolings of interests and the financial results 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%. 24 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES ANALYSIS OF INTEREST INCREASES (DECREASES) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Dollars in thousands) Nine Months Ended September 30 1996 Change from 1995 ----------------------------------- Due to (1) Total Volume Rate ----------- ------------- --------- Interest Income: Total Loans, Net $ 45,725 $ 70,900 $ (25,175) Mortgage loans held for sale 2,748 2,706 42 Investment securities and securities available for sale and other interest-earning assets 1,379 1,304 75 --------- -------- --------- Total interest income (2) 49,852 74,910 (25,058) --------- -------- --------- Interest Expense: Interest bearing deposits 21,355 19,472 1,883 Short-term borrowings 7,046 15,545 (8,499) Long-term debt (941) (618) (323) --------- -------- --------- Total interest expense 27,460 34,399 (6,939) --------- -------- --------- Net interest income $ 22,392 $ 40,511 $ (18,119) --------- -------- ---------
(1) Increases (decreases) are attributable to volume changes and rate changes on the following basis: Volume Change = change in volume times old rate. Rate Change = change in rate times old volume. The Rate/Volume Change = change in volume times change in rate, and it is allocated between volume change and rate change at the ratio that the absolute value of each component bears to the value of their total. (2) Interest earned on obligations of state and political subdivisions is reflected on a tax equivalent basis. Tax equivalent interest earned is: actual interest earned times 145%. The taxable equivalent adjustment has given effect to the disallowance of interest, for federal income tax purposes, related to certain tax-free assets. Dividends earned on preferred stock are reflected on a tax equivalent basis. Tax equivalent dividends earned are: actual dividends times 137.7%. Tax equivalent average rate is tax equivalent interest or dividends earned divided by average volume. 25 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES (RESTATED) NET INTEREST INCOME: Net interest income on a tax equivalent basis increased $7.6 million to $44.3 million for the quarter ended September 30, 1996 from $36.7 million for the quarter ended September 30, 1995. The net yield on interest earning assets decreased from 4.21% to 4.15% for the three months ended September 30, 1995 and 1996, respectively, while the rate differential remained constant at 3.43% for the three month period ended September 30, 1995 and 1996. Net interest income on a tax equivalent basis increased $22.4 million to $126.8 million for the nine months ended September 30, 1996 from $104.4 million for the same period in 1995. The net yield on interest earning assets decreased from 4.35% to 4.17% for the nine months ended September 30, 1995 and 1996, respectively, while the rate differential decreased from 3.59% to 3.44% for the nine month period ended September 30, 1995 compared to 1996. As reflected on the previous tables the increases for the three and nine months were primarily attributable to loan growth offset by decreasing rates. The prime rate decreased from 9% in February 1995 to 8.5% in December 1995 to 8.25% in February 1996. The slight increase in deposit rates for the nine months is primarily due to competition in the market for time deposits as well as the acquisition of Mt. Vernon Federal Savings Bank, a thrift, in the fourth quarter of 1995. LOAN LOSS PROVISION: The provision for loan losses for the first nine months of 1996 was $6,023,000 compared to $4,155,000 for the same period in 1995. Asset quality has remained very good. The current allowance for loan losses provides a 148% coverage of nonperforming assets compared to 157% at December 31, 1995 and 184% at September 30, 1995. See management's discussion on loan quality and the allowance for possible loan losses presented in the Financial Condition section of this report. NONINTEREST INCOME: Noninterest income increased $3.0 million for the three months ended September 30, 1996 compared to the same period in 1995. The increase is primarily due to increased servicing related fee income of $1.1 million, additional fees on deposit accounts of $0.8 million, and $1.0 million in other income primarily related to the sale of mortgage 26 loans and other real estate. The increase in noninterest income for the nine months ended September 30, 1996 compared to the nine months ended September 30, 1995 of $10.6 million is primarily due to $3.8 million in increased mortgage servicing fees, $2.3 million in additional fees on deposit accounts, and $3.9 million in other income primarily related to $3.0 million from the sale of mortgage loans. Colonial Mortgage provides additional sources of noninterest income to BancGroup through fees from its $10.3 billion servicing portfolio as well as loan originations from its 8 regional offices. Colonial Mortgage originates loans in 20 states. Colonial Mortgage had noninterest income of $7.5 million and $22.1 million for the three and nine months ended September 30, 1996, respectively compared to $6.4 million and $17.7 million for the three and nine months ended September 30, 1995, respectively. OVERHEAD EXPENSES: BancGroup's net overhead expense (total noninterest expense less noninterest income excluding security gains) was $22.1 million and $16.4 million for the three months ended September 30,1996 and 1995, respectively and $58.1 million and $47.8 million for the nine months ended September 30, 1996 and 1995, respectively. Salary and benefit expense increased $1.8 million and $6.0 million for the three and nine months ended September 30, 1996, as compared to the same periods in 1995. The increase for the nine months was due primarily to $1.8 million from acquisitions and $750,000 from increases in staff by Colonial Mortgage, attributable to the higher levels of loan originations experienced in the first nine months of 1996 compared to 1995. The remaining increase is primarily due to staff additions in the central support areas and normal wage increases. The increase in other noninterest expenses for the nine months has been due to increases in merger expenses, advertising, public relations, donations and expenses related to Colonial Mortgage loan pool pay-offs as well as increases of other miscellaneous operating expenses. These increases were somewhat off-set by a reduction in the Bank Insurance Fund (BIF) deposit assessment from $.23 per $100 in deposits for a portion of 1995 to $0 per $100 in deposits for the nine month period in 1996. Other expense also includes $3.8 million in a one-time SAIF Assessment as discussed in the summary earnings. 27 PROVISION FOR INCOME TAXES: BancGroup's provision for income taxes is based on an approximately 35.5% estimated annual effective tax rate for the years 1996 and 1995, respectively. The provision for income taxes for the nine months ended September 30, 1996 and 1995 was $21,650,000 and $17,963,000, respectively. 28 Part II Other Information 29 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 Item 5: Other Events - N/A Form 8-K/A - Report on Form 8-K/A was filed on October 9, 1996 disclosing the amended and restated financial statements for December 31, 1995. Exhibit 11 - Computation of Earnings Per Share Exhibit 27 - Financial Data Schedule (for SEC use only) 30 SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. The Colonial BancGroup, Inc. By: /s/ W. Flake Oakley --------------------------------------------------- W. Flake Oakley Chief Financial Officer, Secretary & Treasurer Date: November 14, 1996 ------------------------------------------- EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 COLONIAL BANCGROUP, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE September 30, 1996 (Unaudited)(In thousands, except per share amounts) EXHIBIT 11
Primary Fully Diluted Q-T-D Y-T-D Q-T-D Y-T-D ------- ------- -------- -------- Net income $12,300 $39,350 $12,300 $39,350 Interest expense on $7,800,000, 7.50% convertible subordinated debentures 181 545 Tax effect @ 35.40% for the quarter and year to date (64) (193) ------- ------- ------- ------- Net income $12,300 $39,350 $12,417 $39,702 ------- ------- ------- ------- Average shares outstanding 16,270 16,039 16,270 16,039 Effect of stock options 428 426 428 426 ------- ------- ------- ------- Primary average shares outstanding 16,698 16,465 16,698 16,465 ------- ------- ------- ------- Contingent shares: Addtional effect of stock options 10 11 $7,760,200/$28.00 277 277 ------- ------- Fully diluted average shares outstanding 16,985 16,753 ------- ------- Earnings per share: ------- ------- ------- ------- Net income $ 0.74 $ 2.39 $ 0.73 $ 2.37 ------- ------- ------- ------- SAIF adjustment, net of income taxes $ 2,466 $ 2,466 $ 2,466 $ 2,466 $ 0.88 $ 2.54 $ 0.88 $ 2.52 ------- ------- ------- -------
EX-27 3 FINANCIAL DATA SCHEDULE
9 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 150,320 4,977 0 0 289,378 297,397 298,117 3,570,490 45,098 4,713,524 3,561,923 714,918 74,401 32,365 0 0 40,742 289,175 4,713,524 232,187 23,096 1,780 257,063 102,049 29,986 125,028 6,023 111 107,859 61,000 0 0 0 39,350 2.39 2.37 4.17 20,213 3,554 0 128,877 41,489 6,383 3,259 45,098 45,098 0 0
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