COMPASS BANCSHARES INC - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934


For the Period Ended June 30, 2002		Commission File No. 0-6032

(LOGO)

(Exact name of registrant as specified in its charter)


Delaware		63-0593897




(State of Incorporation)		(I.R.S. Employer Identification No.)

15 South 20th Street
Birmingham, Alabama 35233

(Address of principal executive offices)

(205) 297-3000

(Registrant’s telephone number)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:


		Name of each exchange
Title of each class		on which registered

None		None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Stock, $2 par value

(Title of Class)

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				No

Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date.


Class	Outstanding at July 31, 2002

Common Stock, $2 Par Value		128,779,958

The number of pages of this report is 32.

TABLE OF CONTENTS


	Consolidated Balance Sheets
	Consolidated Statements of Income
	Consolidated Statements of Cash Flows
	Consolidated Statements of Comprehensive Income
	Notes to the Consolidated Financial Statements
PART II. OTHER INFORMATION
Item 1 Legal Proceedings
Item 4 Submission of Matters to Vote of Security Holders
Item 6 Exhibits and Reports on Form 8-K
SIGNATURES

COMPASS BANCSHARES, INC. AND SUBSIDIARIES

INDEX


PART I.	FINANCIAL INFORMATION	Page

Item 1	Financial Statements




	Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001	3




	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2002 and 2001	4




	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001	5




	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2002 and 2001	7




	Notes to Consolidated Financial Statements	8




Item 2	Management’s Discussion and Analysis of Results of Operations and Financial Condition	19




Item 3	Quantitative and Qualitative Disclosures About Market Risk	27




PART II	OTHER INFORMATION

Item 1	Legal Proceedings	28




Item 4	Submission of Matters to Vote of Security Holders	28




Item 6	Exhibits and Reports on Form 8-K	28

-2-

COMPASS BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
(In Thousands)
(Unaudited)

June 30, 2002

December 31, 2001

Assets

Cash and due from banks

724,450

715,991

Federal funds sold and securities purchased

under agreements to resell

62,061

19,201

Trading account securities

31,837

21,331

Investment securities available for sale

5,479,326

6,563,705

Investment securities held to maturity (fair value of

$745,588 and $718,694 for 2002 and 2001, respectively)

725,182

707,524

Loans

15,178,669

13,707,286

Allowance for loan losses

(212,828

)

(191,393

)

Net loans

14,965,841

13,515,893

Premises and equipment, net

478,180

459,901

Other assets

1,048,227

1,011,454

Total assets

23,515,104

23,015,000

Liabilities and Shareholders’ Equity

Deposits:

Noninterest bearing

3,555,870

3,576,289

Interest bearing

10,845,485

10,158,956

Total deposits

14,401,355

13,735,245

Federal funds purchased and securities sold under

agreements to repurchase

1,684,599

2,922,802

Other short-term borrowings

406,056

551,307

FHLB and other borrowings

4,418,577

3,708,143

Guaranteed preferred beneficial interests in Company’s junior

subordinated deferrable interest debentures

437,012

129,307

Accrued expenses and other liabilities

260,483

252,555

Total liabilities

21,608,082

21,299,359

Shareholders’ equity:

Preferred stock (25,000,000 shares authorized; Issued – none)

—

Common stock of $2 par value:

Authorized — 300,000,000 shares;

Issued — 130,177,075 shares in 2002 and

128,759,887 shares in 2001

260,354

257,520

Surplus

191,859

160,441

Loans to finance stock purchases

(3,854

)

(3,399

)

Unearned restricted stock

(3,989

)

(2,314

)

Accumulated other comprehensive income

141,307

69,938

Treasury stock, at cost (2002 — 1,841,200 shares

and 2001 — 1,959,000 shares)

(50,746

)

(50,146

)

Retained earnings

1,372,091

1,283,601

Total shareholders’ equity

1,907,022

1,715,641

Total liabilities and shareholders’ equity

23,515,104

23,015,000

-3-

COMPASS BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statements of Income
(In Thousands Except Per Share Data)
(Unaudited)


					Three Months Ended				Six Months Ended
					June 30				June 30

					2002		2001		2002		2001

Interest income:




	Interest and fees on loans				$	257,886	$	271,429	$	508,338	$	547,520




	Interest on investment securities available for sale					78,668		97,816		167,355		198,009




	Interest on investment securities held to maturity					11,267		15,561		23,988		31,349




	Interest on federal funds sold and securities




		purchased under agreements to resell				128		118		236		489




	Interest on trading account securities					222		720		460		1,199

			Total interest income			348,171		385,644		700,377		778,566




Interest expense:




	Interest on deposits					63,517		111,294		126,087		243,983




	Interest on federal funds purchased and securities




		sold under agreements to repurchase				9,467		30,337		23,111		57,269




	Interest on other short-term borrowings					424		1,653		1,656		4,457




	Interest on FHLB and other borrowings					41,899		39,087		80,960		78,917




	Interest on guaranteed preferred beneficial interests in




		Company’s junior subordinated deferrable interest




		debentures				4,308		2,139		6,235		4,911

			Total interest expense			119,615		184,510		238,049		389,537

			Net interest income			228,556		201,134		462,328		389,029




Provision for loan losses						34,779		21,951		65,099		34,832

			Net interest income after provision for loan losses			193,777		179,183		397,229		354,197




Noninterest income:




	Service charges on deposit accounts					48,810		38,708		89,687		73,235




	Credit card service charges and fees					11,206		8,276		20,946		14,882




	Retail investment sales income					7,051		4,792		13,330		9,737




	Trading account profits and commissions					4,892		5,587		9,688		10,903




	Asset management fees					5,127		5,165		10,329		10,258




	Investment securities gains, net					3,452		2,605		3,972		7,591




	Other					29,375		25,999		56,931		53,245

				Total noninterest income		109,913		91,132		204,883		179,851




Noninterest expense:




	Salaries, benefits and commissions					93,306		84,430		187,931		168,243




	Equipment expense					16,847		14,786		32,486		29,526




	Net occupancy expense					13,914		13,360		27,763		26,139




	Professional services					12,272		11,721		23,915		22,182




	Marketing					7,881		6,018		15,280		9,958




	Merger and integration					679		604		1,447		5,348




	Other					41,050		36,924		80,676		74,368

				Total noninterest expense		185,949		167,843		369,498		335,764

				Net income before income tax expense		117,741		102,472		232,614		198,284




Income tax expense						39,680		35,500		78,736		68,749

				Net income	$	78,061	$	66,972	$	153,878	$	129,535

Basic earnings per share					$	0.61	$	0.53	$	1.21	$	1.03




Basic weighted average shares outstanding						127,429		127,768		127,194		127,717




Diluted earnings per share					$	0.60	$	0.52	$	1.19	$	1.02




Diluted weighted average shares outstanding						130,210		129,323		129,598		129,101




Dividends per share					$	0.25	$	0.23	$	0.50	$	0.46

-4-

COMPASS BANCSHARES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)


		Six Months Ended
		June 30

		2002			2001

Operating Activities:




Net income		$	153,878		$	129,535




Adjustments to reconcile net income to cash provided by operations:




Depreciation and amortization			62,228			44,580




Accretion of discount and loan fees			(14,519	)		(7,850	)




Provision for loan losses			65,099			34,832




Net change in trading account securities			(10,506	)		(5,696	)




Gain on sale of investment securities available for sale			(3,972	)		(7,591	)




Loss on sale of premises and equipment			296			197




Increase in other assets			(6,463	)		(34,113	)




Increase (decrease) in other liabilities			(32,216	)		32,992

	Net cash provided by operating activities		213,825			186,886




Investing Activities:




Proceeds from maturities of investment securities held to maturity			181,306			115,526




Purchases of investment securities held to maturity			(201,400	)		(31,318	)




Proceeds from sales of investment securities available for sale			555,761			638,501




Proceeds from maturities of investment securities available for sale			1,102,586			777,349




Purchases of investment securities available for sale			(483,775	)		(1,851,355	)




Net (increase) decrease in federal funds sold and securities




	purchased under agreements to resell		(42,860	)		149,290




Net increase in loan portfolio			(1,510,446	)		(1,112,699	)




Proceeds from sale of loans to third party conduit			—			500,000




Net cash received in acquisitions			1,412			—




Purchases of premises and equipment			(44,209	)		(26,134	)

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