0000950144-95-002353.txt : 19950816 0000950144-95-002353.hdr.sgml : 19950816 ACCESSION NUMBER: 0000950144-95-002353 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 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: 001-13508 FILM NUMBER: 95563854 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, INC. 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 JUNE 30, 1995. ( ) 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 July 31, 1995 was 12,239,832. 2 Part I, Item 1 Condensed Consolidated Financial Statements 3 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CONDITION (Unaudited)
June 30, December 31, June 30, (Dollars in thousands, except per share amounts) 1995 1994* 1994* ---------------------------------------------------------------------------------------------------------------- Assets: Cash and due from banks......................................... $139,775 $129,720 $119,123 Interest-bearing deposits in banks.............................. 3,036 1,777 9,632 Federal funds sold.............................................. - 500 21,000 Securities available for sale................................... 117,299 78,265 97,089 Investment securities........................................... 317,028 326,599 305,755 Mortgage loans held for sale.................................... 164,846 60,536 114,912 Loans, net of unearned income................................... 2,433,045 2,093,703 1,894,694 Less: Allowance for possible loan losses............................ (35,095) (33,410) (30,602) ---------------------------------------------------------------------------------------------------------------- Loans, net...................................................... 2,397,950 2,060,293 1,864,092 Premises and equipment.......................................... 47,571 45,874 45,906 Excess of cost over tangible and identified intangible assets acquired, net.......................................... 18,391 16,239 16,487 Purchased mortgage servicing rights............................. 67,582 54,797 36,125 Other real estate owned......................................... 9,481 8,440 11,382 Accrued interest and other assets............................... 57,122 55,303 51,499 ---------------------------------------------------------------------------------------------------------------- Total........................................................... $3,340,081 $2,838,343 $2,693,002 ---------------------------------------------------------------------------------------------------------------- ________________________________________________________________________________________________________________ Liabilities and Shareholders' Equity: Deposits........................................................ $2,452,008 $2,171,464 $2,142,697 FHLB short-term borrowings...................................... 430,000 210,000 123,150 Other short-term borrowings..................................... 122,650 134,550 112,485 Subordinated debt............................................... 17,458 17,458 17,458 Other long-term debt............................................ 24,428 69,043 66,473 Other liabilities............................................... 78,031 44,277 47,569 ---------------------------------------------------------------------------------------------------------------- Total liabilities............................................... 3,124,575 2,646,792 2,509,832 ---------------------------------------------------------------------------------------------------------------- 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, 12,239,384 shares issued and outstanding at June 30, 1995................................................ 30,598 - - Class A Common Stock, $2.50 par value; 40,000,000 shares authorized, 11,280,031 shares and 11,253,642 shares issued and outstanding at December 31, 1994 and March 31, 1994, respectively**............................................... - 28,200 28,134 Class B Common Stock, $2.50 par value; 4,000,000 shares authorized, 635,088 shares and 636,225 shares issued and and outstanding at December 31, 1994 and March 31, 1994, respectively**............................................... - 1,588 1,591 Additional paid in capital...................................... 115,982 109,658 109,311 Retained earnings............................................... 68,729 55,042 45,801 Unrealized gains (losses) on securites available for sale, net of taxes.................................................. 197 (2,937) (1,667) ---------------------------------------------------------------------------------------------------------------- Total shareholders' equity...................................... 215,506 191,551 183,170 ---------------------------------------------------------------------------------------------------------------- Total........................................................... $3,340,081 $2,838,343 $2,693,002 ---------------------------------------------------------------------------------------------------------------- *As restated - See Notes A and B. **On February 21, 1995 the Class A and Class B Common Stock were reclassified into one class.
See Notes to the Unaudited Condensed Consolidated Financial Statements. 4 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) For the Three Months Ended June 30, 1995 and 1994
Six Months Ended Three Months June 30, June 30, ------------------------------------------------- (Dollars in thousands, except per share amounts) 1995 1994* 1995 1994* --------------------------------------------------------------------------------------------------------------------- Interest Income: Interest and fees on loans.................................... $102,039 $78,191 $54,008 $40,130 Interest on investments....................................... 12,384 10,723 6,472 5,570 Other interest income......................................... 250 266 184 79 ------------------------------------------------------------------------------------------------------------------- Total interest income......................................... 114,673 89,180 60,664 45,779 ------------------------------------------------------------------------------------------------------------------- Interest Expense: Interest on deposits.......................................... 44,304 33,093 23,802 16,494 Interest on short-term borrowings............................. 12,583 4,049 7,431 2,551 Interest on long-term debt.................................... 2,037 1,627 860 870 ------------------------------------------------------------------------------------------------------------------- Total interest expense........................................ 58,924 38,769 32,093 19,915 ------------------------------------------------------------------------------------------------------------------- Net Interest Income Before Provision for Possible Loan Losses........................................ 55,749 50,411 28,571 25,864 Provision for possible loan losses............................ 2,165 2,896 1,098 1,448 ------------------------------------------------------------------------------------------------------------------- Net Interest Income After Provision for Possible Loan Losses........................................ 53,584 47,515 27,473 24,416 ------------------------------------------------------------------------------------------------------------------- Noninterest Income: Mortgage servicing and origination fees....................... 11,072 11,235 5,835 5,396 Service charges on deposit accounts........................... 6,663 6,002 3,370 3,074 Other charges, fees and commissions........................... 1,654 1,412 846 731 Securities gains, net......................................... 5 84 - 1 Other income.................................................. 4,416 3,379 3,697 1,679 ------------------------------------------------------------------------------------------------------------------- Total noninterest income...................................... 23,810 22,112 13,748 10,881 ------------------------------------------------------------------------------------------------------------------- Noninterest Expense: Salaries and employee benefits................................ 19,091 21,127 9,496 10,664 Occupancy expense of bank premises, net....................... 4,331 4,253 2,189 2,135 Furniture and equipment expenses.............................. 4,004 3,697 2,044 1,859 Amortization of purchased servicing rights.................... 3,733 2,568 2,031 1,420 Amortization of intangible assets............................. 610 623 322 313 Other expense................................................. 16,986 16,637 9,272 8,539 ------------------------------------------------------------------------------------------------------------------- Total noninterest expense..................................... 48,755 48,905 25,354 24,930 ------------------------------------------------------------------------------------------------------------------- Income before income taxes 28,639 20,722 15,867 10,367 Applicable income taxes....................................... 10,088 7,134 5,617 3,627 ------------------------------------------------------------------------------------------------------------------- Net Income.................................................... $18,551 $13,588 $10,250 $6,740 ------------------------------------------------------------------------------------------------------------------- Earnings per share: Primary...................................................... $1.52 $1.14 $0.83 $0.56 Fully diluted................................................ 1.47 1.11 0.80 0.55 Dividends paid: Common Stock.................................. $0.450 N/A $0.225 N/A Class A**..................................... N/A $0.40 N/A $0.20 Class B**..................................... N/A 0.20 N/A 0.10 ------------------------------------------------------------------------------------------------------------------- N/A-not applicable *As restated - See Notes A and B. **On February 21, 1995 BancGroup's Class A and Class B Common Stock were reclassified into one class of stock called Common Stock.
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)
Six Months Ended June 30, 1995 1994* --------- --------- Net cash (used in) provided by operating activities............... $ (48,137) $ 235,527 Cash flows from investing activities: Proceeds from maturities of securities available for sale....................................................... 3,889 25,147 Proceeds from sales of securities available for sale............ 25 5,356 Purchase of securities available for sale....................... (29,562) (49) Proceeds from maturities of investment securities............... 51,217 23,950 Purchase of investment securities............................... (35,889) (64,969) Net decrease in short-term securities........................... - 4,000 Net increase in loans........................................... (310,346) (123,914) Cash received in bank acquisitions.............................. 5,118 - Cash received in the purchase of assets and the assumption of liablilities*.............................................. - 15,275 Capital expenditures............................................ (4,076) (3,778) Proceeds from sale of other real estate owned................... 2,253 3,199 Purchase of servicing rights.................................... (13,844) (10,143) Increase in excess servicing fees receivable - (2,293) Other, net...................................................... (32) 20 --------- --------- Net cash used in investing activities............................. (331,247) (128,199) Cash flows from financing activities: Net increase (decrease) in demand, savings, and time deposits... 234,500 (64,012) Net increase (decrease) in federal funds purchased, repurchase agreements and other short-term borrowings.................... 208,095 (60,332) Proceeds from issuance of long-term debt........................ 5,834 14,805 Repayment of long-term debt..................................... (53,927) (5,671) Proceeds from issuance of common stock.......................... 560 846 Dividends paid.................................................. (4,864) (3,708) --------- --------- Net cash provided by (used in) financing activities............... 390,198 (118,072) --------- --------- Net increase (decrease) in cash and cash equivalents.............. 10,814 (10,744) Cash and cash equivalents at beginning of year.................... 131,997 160,499 --------- --------- Cash and cash equivalents at June 30.............................. $ 142,811 $ 149,755 ========= ========= Supplemental Disclosure of cash flow information: Cash paid during the three months for: Interest...................................................... $ 54,943 $ 45,141 Income taxes.................................................. 11,304 13,116 Non-cash investing activities: Transfer of loans to other real estate......................... $ 3,591 $ 664 Origination of loans for the sale of other real estate......... 435 1,111 Transfer of equity securities to available for sale............ 22,188 *During the second quarter of 1994, BancGroup assumed certain liabilities, primarily deposits, of $15,711,000 of Altus Federal Savings Bank from the Resolution Trust Corporation. Non-cash financing activities: Issuance of Class A common stock in bank acquisitions.......... $ 6,209 $ 107
* As restated - See Notes A and B. 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 1994 annual report, except for the change in accounting for loan impairment and the change in accounting for mortgage servicing rights as described in Note D. However, the previously issued 1994 financial statements have been restated to reflect the acquisition described in Note B. These unaudited interim financial statements should be read in conjunction with the audited financial statements and footnotes included in BancGroup's restated 1994 annual report filed on Form 8-K, dated July 10, 1995 (See Item 5 under Part II, Other Information). 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 June 30, 1995 and the results of operations and cash flows for the interim periods ended June 30, 1995 and 1994. All 1995 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 - ACQUISITIONS On February 17, 1995, BancGroup completed the acquisition of Colonial Mortgage Company (CMC) and its parent company, The Colonial Company (TCC). At the acquisition date, TCC's only asset was its investment in CMC. At acquisition, the acquired entities had total assets of $71 million, total liabilities of $64 million, and total shareholder's equity of $7.0 million. BancGroup issued 2,272,727 shares of its common stock and assumed the debts of TCC. CMC had $1.2 billion in mortgage loan originations in 1994 and as of June 30, 1995 had a $7.7 billion mortgage loan servicing portfolio. This business combination by entities under common control was accounted for in a manner similar to a pooling-of-interests. Accordingly, all the financial statements have been restated to reflect this combination. The following table shows the summary results of operations information for the period January 1, 1995 through February 28, 1995 on a separate company basis. The results listed are not necessarily indicative of future operations and the information is unaudited. (In thousands) Total revenue: BancGroup $21,279 CMC 4,193 Net Income BancGroup $ 5,230 CMC 242 7 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Notes, Continued Additionally, BancGroup completed the acquisition of Brundidge Banking Company, Inc. on March 31, 1995. Brundidge Banking had assets of $54 million and deposits and other liabilities of $50 million. This acquisition was accounted for as a purchase with 266,434 shares of BancGroup common stock being issued to the Brundidge Banking shareholders On May 4, 1995, BancGroup signed a definitive agreement to merge Mt. Vernon Financial Corporation into BancGroup. Mt. Vernon had assets of approximately $198 million at March 31, 1995 and is servicing approximately $210 million of mortgage loans. Mt. Vernon has three banking offices and a mortgage loan production office in the Atlanta, Georgia market area. On May 19, 1995, BancGroup signed a definitive agreement to merge Farmers and Merchants Bank (F&M) into Colonial Bank. F&M has total assets of approximately $51 million at March 31, 1995 and currently operates one branch in Ariton, Alabama and two branches in Ozark, Alabama. On August 2, 1995, BancGroup signed a letter of intent to merge Southland Bancorporation into Colonial BancGroup and to merge Southland's subsidiary, Southland Bank, into Colonial Bank. Southland has assets of approximately $100.9 million and operates two offices in Dothan, Alabama with additional Alabama offices in Abbeville, Clayton, Eufaula and Headland. 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 CHANGES BancGroup adopted Statement of Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS No. 118, Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosure, on January 1, 1995. Under the new standards, a loan is considered impaired, based on current information and events, if it is probable that BancGroup will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Uncollateralized loans are measured for impairment based on the present value of expected future cash flows discounted at the historical effective interest rate, while all collateral-dependent loans are measured for impairment based on the fair value of the collateral. The adoption of SFAS 114 and 118 resulted in no additional provision for credit losses, at January 1, 1995 or during the six months ended June 30, 1995. 8 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Notes, Continued BancGroup adopted Statement of Financial Accounting Standards (SFAS) No. 122 Accounting for Mortgage Servicing Rights in May 1995 effective January 1, 1995. This statement amends certain provisions of SFAS No. 65 to substantially eliminate the accounting distinction between rights to service mortgage loans for others that are acquired through loan origination activities and those acquired through purchase transactions. The statement requires the allocation of the total cost of the mortgage loans to the mortgage servicing rights and the loans (without the mortgage servicing rights), based on their relative fair values if it is practicable to estimate those fair values. Mortgage servicing rights are then amortized in proportion to and over the period of estimated net servicing income and should be evaluated for impairment based on their fair value. At June 30, 1995, BancGroup had mortgage servicing rights with a book value of $67.6 million and excess servicing fees with a book value of $8.4 million. The estimated combined fair value of these assets is approximately $120 million. When determining fair value BancGroup considers the date of origination, the average note rate and the average remaining term. The fair value is calculated by estimating the present value of future net servicing income. The impact to net income due to the adoption of SFAS 122 was approximately $500,000 for the six months ended June 30, 1995. NOTE E - RECENTLY ISSUED ACCOUNTING STANDARD In March 1995, the Financial Standards Board issued SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS 121 requires that long-lived assets and certain identifiable intangibles to be held and used by the entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount of the asset, an impairment loss is recognized. This statement also requires that long-lived assets and certain intangibles to be disposed of be reported at the lower of carrying amount or fair value less cost to sell. SFAS No. 121 is effective for fiscal years beginning after December 15, 1995. Management believes that the adoption of SFAS No. 121 will not have a material impact on the Company's financial statements. 9 Part I, Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 10 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Discussion and Analysis of Financial Condition and Results of Operations is presented on the following pages. All appropriate financial data has been restated to include the February 17, 1995 acquisition of Colonial Mortgage Company, a combination accounted for in a manner similar to a pooling of interest. FINANCIAL CONDITION: Ending balances of total assets, securities, mortgage loans held for sale, net loans, and deposits increased from December 31, 1994 (as restated) to June 30, 1995 as follows (in thousands): Increase ------------------- Amount % -------- ----- Total assets $501,738 17.7% Securities 29,463 7.3% Mortgage loans held for sale 104,310 172.3% Loans, net of unearned income 339,342 16.2% Deposits 280,544 12.9% Securities: Investment securities and securities available for sale have increased approximately $29.5 million from December 31, 1994 to June 30, 1995. The primary reason for the increase was the securities acquired in the Brundidge Banking merger and purchases of an additional $10 million in Federal Home Loan Bank Stock. Loans and Mortgage Loans Held for Sale: Included in this increase are $32 million in loans acquired with Brundidge Banking. The remaining $307.3 million represents internal loan growth at an annualized rate of 29%. Approximately $142 million of the internal loan growth are adjustable rate mortgages originated by Colonial Mortgage for Colonial Bank's portfolio. Loans increased at an 18% internal growth rate for the full year in 1994. 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 $259.9 million and $795.9 million and sales thereof amounted to approximately $155.6 million and $1042.5 million for the six months ended June 30, 1995 and 1994, respectively. 11 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Management's Discussion, Continued Gross loans by category and a summary of loan loss experience are shown in the following schedules.
GROSS LOANS BY CATEGORY June 30, Dec. 31, June 30, (In thousands) 1995 1994 * 1994 * ___________________________________________________________________________________________________________ Commercial, financial, and agricultural $ 338,964 $ 298,708 $ 261,804 Real estate-commercial 587,824 574,155 527,454 Real estate-construction 190,199 152,423 135,858 Real estate-residential 1,075,086 857,314 777,104 Installment and consumer 195,624 169,577 159,054 Other 46,124 41,577 33,496 ------------------------------------------------------------------------------------------------------------ Total loans $2,433,821 $2,093,754 $1,894,770 ------------------------------------------------------------------------------------------------------------ Percent of loans in each category to total loans: Commercial financial, and agricultural 13.9% 14.3% 13.8% Real estate-commercial 24.2% 27.4% 27.8% Real estate-construction 7.8% 7.3% 7.2% Real estate-residential 44.2% 40.9% 41.0% Installment and consumer 8.0% 8.1% 8.4% Other 1.9% 2.0% 1.8% ------------------------------------------------------------------------------------------------------------ 100.0% 100.0% 100.0% ------------------------------------------------------------------------------------------------------------ * As restated
Loans collateralized by commercial real estate and other commercial loans increased $13 million and $40 million, respectively during the first six months of 1995. The increase in real estate - residential loans of $218 million, is primarily due to the ARM loans originated by Colonial Mortgage as well as an emphasis on residential real estate lending in the Company's existing branches. These loans continue to be a significant source of loan growth, and are concentrated in various geographic market areas in Alabama and across the United States. 12 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Management's Discussion, Continued SUMMARY OF LOAN LOSS EXPERIENCE
Six Months Year Six Months Ended Ended Ended June 30, Dec. 31, June 30, (In thousands) 1995 1994 * 1994 * -------------------------------------------------------------------------------------------- Allowance for possible loan losses - January 1 $33,410 $28,633 $28,633 Charge-offs: Commercial, financial, and argicultural 859 1,836 1,098 Real estate-commercial 267 1,143 640 Real estate-construction 23 2 2 Real estate-residential 77 357 122 Installment and consumer 602 1,635 809 Other 76 168 116 --------------------------------------------------------------------------------------------- Total charge-offs 1,904 5,141 2,787 -------------------------------------------------------------------------------------------- Recoveries: Commercial, financial, and agricultural 259 1,646 1,021 Real estate-commercial 1 202 29 Real estate-construction 10 12 10 Real estate-residential 117 77 27 Installment and consumer 705 1,430 720 Other 20 43 26 -------------------------------------------------------------------------------------------- Total recoveries 1,112 3,410 1,833 -------------------------------------------------------------------------------------------- Net charge-offs 792 1,731 954 Addition to allowance charged to operating expense 2,165 6,481 2,896 Allowance added from bank acquisitions 312 27 27 -------------------------------------------------------------------------------------------- Allowance for possible loan losses-end of period $35,095 $33,410 $30,602 -------------------------------------------------------------------------------------------- * As restated
13 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Management's Discussion, Continued Asset quality as measured by nonperforming assets remains very good. Nonperforming assets have decreased $955,000 from December 31, 1994 with the allowance as a percent of nonperforming loans increasing from 175% at December 31, 1994 to 193% at June 30, 1995. Management continuously monitors and evaluates recoverability of problem assets and adjusts loan loss reserves accordingly. The loan loss reserve is 1.44% of loans at June 30, 1995. The increase in allowance since year end has been due to provisions in excess of net charge-offs totalling $1,373,000 as well as an additional $312,000 from the Brundidge Banking acquisition. 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):
June 30, Dec. 31, June 30, 1995 1994 * 1994 * ---------------------------------------------------------------------------------------- Nonaccrual loans $ 7,363 $ 8,293 $9,784 Restructured loans 1,294 2,360 2,150 ---------------------------------------------------------------------------------------- Total nonperforming loans 8,657 10,653 11,934 Other real estate owned 9,481 8,440 11,382 ---------------------------------------------------------------------------------------- Total nonperforming assets $18,138 $19,093 $23,316 ---------------------------------------------------------------------------------------- Aggregate loans contractually past due 90 days for which interest is being accrued $1,840 $2,559 $1,944 Net charge-offs year-to-date 792 1,731 954 ---------------------------------------------------------------------------------------- RATIOS Period end: Total nonperforming assets as a percent of net loans and other real estate 0.74% 0.91% 1.22% Allowance as a percent of net loans 1.44% 1.60% 1.62% Allowance as a percent of nonperforming assets 193% 175% 131% Allowance as a percent of nonperforming loans 405% 314% 256% For the period ended: Net charge-offs as a percent of average net loans (annualized basis) 0.07% 0.09% 0.10% ---------------------------------------------------------------------------------------- * As restated
14 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 $75 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 June 30, 1995 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 $8,657,000 will not be collected as scheduled and therefore are considered impaired. Management also expects that the resolution of these problem credits as well as other performing loans will not materially impact future operating results, liquidity or capital resources. Allocations of the allowance for possible loan losses are made on an individual loan basis for all identified potential problem loans with a percentage allocation for the remaining portfolio. The allocations of the total allowance represent an approximation of the reserves for each category of loans based on management's evaluation of risk within each loan type. ALLOCATION OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
June 30, Dec. 31, June 30, (In thousands) 1995 1994 * 1994 * ----------------------------------------------------------------------------- Commercial, financial, and agricultural $ 6,850 $ 6,010 $4,561 Real estate-commercial 11,132 12,168 11,736 Real estate-construction 3,127 3,156 2,762 Real estate-mortgage 10,751 8,560 7,758 Installment and consumer 1,957 2,227 2,479 Other 1,278 1,289 1,306 ----------------------------------------------------------------------------- TOTAL $35,095 $33,410 $30,602 ----------------------------------------------------------------------------- * As restated
15 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. The increase in residential real estate loans of $218 million from $857 million at December 31, 1994 to $1,075 million at June 30, 1995 is primarily due to the lending activity generated by an emphasis on residential real estate lending in the Company's branches, as well as the addition of lending activity generated by Colonial Mortgage. In connection with this increase in residential real estate lending, BancGroup has increased its credit facilities at the Federal Home Loan Bank (FHLB). FHLB of Atlanta has established credit availability in an amount up to $800 million with only $430 million outstanding at June 30, 1995. This source of credit reduces BancGroup's dependency on deposits as a source of liquidity resulting in an increase in the loan to deposit ratio from 96.4% at December 31, 1994 to 99.2% at June 30, 1995. Rate sensitivity is also constantly monitored. BancGroup's one year asset/liability gap is comparable to December 31, 1994 at less than negative 1% of assets as of June 30, 1995. 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 tangible leverage ratio. Tangible capital for BancGroup at June 30, 1995 consists of $215.5 million of equity less $18.4 million in intangibles providing a 6.34% tangible leverage ratio at June 30, 1995 and December 31, 1994. The ratio of shareholders' equity to total assets at June 30, 1995 was 6.45% as compared to 6.75% at December 31, 1994. Capital levels are sufficient to support future internally generated growth and fund the quarterly dividend rates which are currently $0.225 per share. BancGroup is in compliance with all regulatory capital requirements. 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 or acquisition opportunities. 16 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Management's Discussion, Continued COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994: SUMMARY: BancGroup's net income increased $3,510,000 from $6,740,000 or $0.55 per fully diluted share to $10,250,000 or $0.80 per fully diluted share for the three months ended June 30, 1994 and 1995, respectively. This increase is primarily attributable to increases in net interest margin and noninterest income partially off-set by an increase in noninterest expense. COMPARISON OF SIX MONTHS ENDED JUNE 30, 1995 AND 1994: SUMMARY: BancGroup's net income increased $4,963,000 from $13,588,000 or $1.11 per fully diluted share to $18,551,000 or $1.47 per fully diluted share for the six months ended June 30, 1994 and 1995, respectively. This increase is primarily attributable to an increase in net interest margin. 17
THE COLONIAL BANCGROUP, INC. AVERAGE VOLUME AND RATES For the three Months Ended June 30, 1995 Three Months Ended June 30, (Unaudited) _____________________________________________________________________ 1995 1994* ---------------------------------- --------------------------------- Average Average (Dollars in thousands) Volume Interest Rate Volume Interest Rate -------------------------------------------------------------------------------------------- ----------------------------------- Assets Loans, net............................................. $2,332,894 $52,842 9.08% $1,868,903 $37,090 7.96% Mortgage loans held for sale........................... 75,885 1,479 7.71% 168,275 3,281 7.71% Investment securities and securities available for sale 430,358 6,799 6.32% 442,623 5,929 5.36% Other interest-earning assets.......................... 12,185 184 5.98% 9,614 79 3.26% ------------------------------------------------------------------------------------- ------------------------ Total interest-earning assets(1)....................... 2,851,322 $61,304 8.62% 2,489,415 $46,379 7.46% ------------------------------------------------------------------------------------- ------------------------ Nonearning assets...................................... 276,249 265,843 -------------------------------------------------------------------------- ------------- Total assets............................................. $3,127,571 $2,755,258 ---------------------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity: Interest-bearing deposits.............................. $1,927,703 $23,802 4.95% $1,838,335 $16,494 3.60% Short-term borrowings.................................. 471,861 7,431 6.23% 259,109 2,551 3.89% Long-term debt......................................... 43,655 860 7.88% 82,037 870 4.24% ------------------------------------------------------------------------------------- ----------------------- Total interest-bearing liabilities..................... 2,443,219 $32,093 5.26% 2,179,481 $19,915 3.66% ------------------------------------------------------------------------------------- ----------------------- Noninterest-bearing demand deposits.................... 434,659 324,996 Other liabilities...................................... 39,709 70,333 -------------------------------------------------------------------------- ------------- Total liabilities...................................... 2,917,587 2,574,810 Shareholders' equity................................... 209,984 180,448 -------------------------------------------------------------------------- ------------- Total liabilities and shareholders' equity............... $3,127,571 $2,755,258 ---------------------------------------------------------------------------------------------------------------------------------- Rate differential........................................ 3.36% 3.80% Net yield on interest-earning assets..................... $29,211 4.11% $26,464 4.26% ---------------------------------------------------------------------------------------------------------------------------------- *As restated (1) Interest earned and average rates on obligations of states and political subdivisions are reflected on a tax equivalent basis. Tax 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: act dividends times 137.7%.
18
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES ANALYSIS OF INTEREST INCREASES (DECREASES) (UNAUDITED) FOR THE THREE MONTHS ENDED JUNE 30, 1995 (Dollars in thousands) Three Months Ended June 30, 1995 Change from 1994 ----------------------------------- Due to (1) Total Volume Rate ----------- ----------- ------------ Interest Income: Total Loans, net $15,752 $10,053 $5,699 Mortgage loans held for sale (1,802) (1,802) - Investment securities and securities available for sale 870 (1,021) 1,891 Other interest earning assets 105 25 80 ----------- ----------- ------------ Total interest income (2) 14,925 7,255 7,670 ----------- ----------- ------------ Interest Expense: Interest bearing deposits 7,308 840 6,468 Short-term borrowings 4,880 2,816 2,064 Long-term debt (10) (2,110) 2,100 ----------- ----------- ------------ Total interest expense 12,178 1,546 10,632 ----------- ----------- ------------ Net interest income $2,747 $5,709 ($2,962) ----------- ----------- ------------ (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: acutal dividends times 137.7%. Tax equivalent average rate is tax equivalent interest or dividends earned divided by average volume.
19
THE COLONIAL BANCGROUP, INC. AVERAGE VOLUME AND RATES For the Six Months Ended June 30, 1995 Six Months Ended June 30, (Unaudited) ________________________________________________________________________ 1995 1994* ------------------------------------ ---------------------------------- Average Average (Dollars in thousands) Volume Interest Rate Volume Interest Rate ---------------------------------------------------------------------------------------------------------------------------------- Assets Loans, net............................................. $2,242,185 $100,340 9.01% $1,832,682 $71,690 7.89% Mortgage loans held for sale........................... 58,751 2,316 7.84% 186,934 6,962 7.41% Investment securities and securities available for sale 416,716 13,008 6.26% 417,800 11,332 5.44% Other interest-earning assets.......................... 8,344 250 6.05% 17,307 266 3.10% ------------------------------------------------------------------------------------ ------------------------- Total interest-earning assets(1)....................... 2,725,996 $115,914 8.56% 2,454,723 $90,250 7.40% ------------------------------------------------------------------------------------ ------------------------- Nonearning assets...................................... 263,636 273,286 ------------------------------------------------------------------------ ------------- Total assets............................................. $2,989,632 $2,728,009 ---------------------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity: Interest-bearing deposits.............................. $1,881,702 $44,304 4.75% $1,854,409 $33,093 3.60% Short-term borrowings.................................. 408,741 12,583 6.14% 222,445 4,049 3.64% Long-term debt......................................... 53,068 2,037 7.68% 80,211 1,627 4.06% ------------------------------------------------------------------------------------ ------------------------ Total interest-bearing liabilities..................... 2,343,511 $58,924 5.06% 2,157,065 $38,769 3.62% ------------------------------------------------------------------------------------ ------------------------ Noninterest-bearing demand deposits.................... 404,265 303,059 Other liabilities...................................... 39,146 89,768 ------------------------------------------------------------------------ ------------- Total liabilities...................................... 2,786,922 2,549,892 Shareholders' equity................................... 202,710 178,117 ------------------------------------------------------------------------ ------------- Total liabilities and shareholders' equity............... $2,989,632 $2,728,009 ---------------------------------------------------------------------------------------------------------------------------------- Rate differential........................................ 3.50% 3.78% Net yield on interest-earning assets..................... $56,990 4.22% $51,481 4.23% ---------------------------------------------------------------------------------------------------------------------------------- *As restated (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%.
20 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES ANALYSIS OF INTEREST INCREASES (DECREASES) (UNAUDITED) For the Six Months Ended June 30, 1995
(Dollars in thousands) Six Months Ended June 30, 1995 Change from 1994 ----------------------------------- Due to (1) Total Volume Rate ----------------------------------- Interest Income: Total Loans, net $28,650 $17,520 $11,130 Mortgage loans held for sale (4,646) (5,766) 1,120 Investment securities and securities available for sale 1,676 (88) 1,764 Other interest earning assets (16) (366) 350 ----------------------------------- Total interest income (2) 25,664 11,300 14,364 ----------------------------------- Interest Expense: Interest bearing deposits 11,211 494 10,717 Short-term borrowings 8,534 4,689 3,845 Long-term debt 410 (1,485) 1,895 ----------------------------------- Total interest expense 20,155 3,698 16,457 ----------------------------------- Net interest income $5,509 $7,602 ($2,093) ----------------------------------- (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: acutal dividends times 137.7%. Tax equivalent average rate is tax equivalent interest or dividends earned divided by average volume.
21 NET INTEREST INCOME: Net interest income on a tax equivalent basis increased $2.8 million to $29.2 million for the quarter ended June 30, 1995 from $26.4 million for the quarter ended June 30, 1994. The net yield on interest earning assets decreased from 4.26% to 4.11% for the three months ended June 30, 1994 and 1995, respectively, while the rate differential decreased from 3.80% to 3.36% for the three month period ended June 30, 1994 compared to 1995. Net interest income on a tax equivalent basis for the six months ended June 30, 1995 increased $5.5 million from $51.5 million for the six months ended June 30, 1994 to $57.0 million for the same period in 1995. The net yield on interest earning assets remained level at 4.23% and 4.22% for the six months ended June 30, 1994 and 1995, respectively, while the rate differential decreased from 3.78% to 3.50% for the same period. As reflected on the previous tables the increases for the three and six months were primarily attributable to loan growth and increasing rates. The prime rate increased from 8.50% to 9% in February 1995. LOAN LOSS PROVISION: The provision for loan losses for the first six months of 1995 was $2,165,000 compared to $2,896,000 for the same period in 1994. Asset quality has remained very good. The current allowance for loan losses provides a 193% coverage of nonperforming assets compared to 175% at December 31, 1994 and 131% at June 30, 1994. 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: The increase in noninterest income for the first quarter of 1995 compared to the first quarter of 1994 of $2.9 million is primarily due to increased servicing related fee income of $1.5 million, additional fees on deposit accounts of $296,000 and $991,000 in gains on the sale of Other Real Estate. Noninterest income increased $1.7 million for the six months ended June 30, 1995 compared to the same period for 1994. This increase was primarily due to increase in servicing related fee income of $2.5 million, additional fees on deposit accounts of $661,000, additional gains on sales of Other Real Estate of $879,000 and additional fee income from ATMs of $208,000. These increases are partially off-set by decreases in income related to the origination and sales of mortgage loans of $2.4 milliion, and decreases in commissions from security and annuity sales of $242,000. The acquisition of Colonial Mortgage provides additional sources of noninterest income to BancGroup through fees from its $7.7 billion servicing portfolio as well as loan originations from its 22 branches located in 13 states. This noninterest income was $7.5 million and $5.7 million for the three months ended June 30, 1995 and 1994, respectively and $12.6 million and $11.9 million for the six months ended June 30, 1995 and 1994, respectively. 22 OVERHEAD EXPENSES: BancGroup's net overhead expense (total noninterest expense less noninterest income excluding security gains) was $11.6 million and $14.0 million for the three months ended June 30, 1995 and 1994, respectively and $25.0 million and $26.9 million for the six months ended June 30, 1995 and 1994, respectively. Salary and benefit expense decreased $1.2 million and $2.0 million for the three months and six months ended June 30, 1995, respectively, as compared to the same period in 1994. This decrease was due primarily to reductions in staff by Colonial Mortgage, attributable to the lower levels of loan originations experienced in the latter part of 1994 and continuing into 1995 and by Colonial Bank in conjunction with reenginerring plans being implemented throughout the organization to emphasize efficient branch operations. This decrease was partially off-set by normal wage increases. The remaining increase in other noninterest expenses has been due to increased amortization of mortgage servicing rights and expenses related to the development of the reenginerring plan previously mentioned. PROVISION FOR INCOME TAXES: BancGroup's provision for income taxes is based on an approximately 35.2% and 34.4% estimated annual effective tax rate for the years 1995 and 1994, respectively. The provision for income taxes for the six months ended June 30, 1995 and 1994 was $10,088,000 and $7,134,000, respectively. OTHER INFORMATION: BancGroup's subsidiary banks pay deposit insurance premiums to the Federal Deposit Insurance Corporation (FDIC) for deposits in both the Bank Insurance Fund (BIF) and Savings Association Insurance Fund (SAIF). In August, 1995 the FDIC announced a reduction in premium rates for BIF deposits. BancGroup currently has approximately 71% of its deposits or $1.7 billion insured in the BIF fund and the remaining approximately $700 million insured in the SAIF fund. The impact of the above premium reduction cannot be accurately estimated until assessments are made by the FDIC. 23 Part II Other Information 24 Item 1: Legal Proceedings - See Note C - COMMITMENTS AND CONTINGENCIES AT PART 1 ITEM 1 Item 2: Changes in Securities - N/A Item 3: Defaults Upon Senior Securities - N/A Item 4: Submission of Matters to a Vote of Security Holders - N/A Item 5: Exhibits and Reports on Form 8-K - Form 8-K was filed on July 10, 1995 restating the consolidated selected financial data, management's discussion and analysis and consolidated financial statements as of December 31, 1994, 1993 and 1992 and for each of the three years in the period ended December 31, 1994 to give retroactive effect to the acquisition of CMC and include the combined operations of BancGroup and CMC for all periods presented. Incorporation into the Registration statements on Form S-8, statements regarding indemnification for liabilities arising under the Securities Act of 1933 as related to directors, officers and controlling persons. Exhibit 11- Calculation of earnings per share (attached) 25 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: ____________________ EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES Computations of Earnings per Share For the period ended June 30, 1995 (Unaudited) (In thousands, except per share amounts) COMUPTATION OF EARNINGS PER SHARE June 30, 1995
Primary Fully Diluted ------------------- ------------------ Quarter Y-T-D Quarter Y-T-D ------- ------- ------- ------- Net income $10,250 $18,551 $10,250 $18,551 Interest expense on $7,493,859, 12.75% convertible subordinated debentures 239 478 Interest expense on $9,957,000, 7.50% convertible subordinated debentures 187 373 Tax effect @ 35.00% (151) (300) ------- ------- ------- ------- Net income $10,250 $18,551 $10,525 $19,102 ------- ------- ------- ------- Average shares outstanding 12,225 12,079 12,225 12,079 Effect of stock options 111 108 111 108 ------- ------- ------- ------- Primary average shares outstanding 12,336 12,187 12,336 12,187 ------- ------- ------- ------- Contingent shares: Addtional effect of stock options 4 8 Effect of convertible debentures: $7,493,859 / $18.25 411 411 $9,957,000 / $28.00 356 356 ------- ------- Fully diluted average shares outstanding 13,107 12,962 ------- ------- Earnings per share: ------- ------- ------- ------- Net income $0.83 $1.52 $0.80 $1.47 ------- ------- ------- -------
See Notes to the Unaudited Condensed Consolidated Financial Statements. EX-27 3 FINANCIAL DATA SCHEDULE
9 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 139,775 3,036 0 0 117,299 317,028 318,243 2,433,045 35,095 3,340,081 2,452,008 552,650 78,031 41,886 30,598 0 0 184,908 3,340,081 102,039 12,384 250 114,673 44,304 58,924 55,749 2,165 5 48,755 28,639 28,639 0 0 18,551 1.52 1.47 4.22 7,363 1,840 1,294 75,000 33,410 1,904 1,112 35,095 35,095 0 0