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SECURITIES AND EXCHANGE COMMISSION
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2003 | Commission File No. 0-6032 |
Compass Bancshares, Inc. Employee Stock Ownership Plan
Delaware | 63-0593897 | |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
15 South 20th Street
Birmingham, Alabama 35233
(205) 297-3000
Page(s) | ||||||||
1 | ||||||||
Financial Statements | ||||||||
2 | ||||||||
3 | ||||||||
4–11 | ||||||||
12 | ||||||||
13 | ||||||||
14 | ||||||||
Exhibits | ||||||||
Exhibit 23 – Consent of Independent Registered Public Accounting Firm | 15 | |||||||
Consent of Independent Registered Public Acct Firm |
Note: | Other schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable. |
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Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
Compass Bancshares, Inc. Employee Stock Ownership Plan
In our opinion, the accompanying statements of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of Compass Bancshares, Inc. Employee Stock Ownership Plan (the “Plan”) at December 31, 2003 and 2002, and the changes in net assets available for benefits for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets (held at end of year) and reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
Birmingham, Alabama
June 25, 2004
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Compass Bancshares, Inc. Employee Stock Ownership Plan
Year Ended December 31, 2003
2003 | 2002 | |||||||
Assets | ||||||||
Cash | $ | 1,036,831 | $ | 4,994,409 | ||||
Investments, at fair value (Note 3) | ||||||||
Compass Bancshares, Inc. common stock | 196,337,097 | 156,572,767 | ||||||
Money market | 6,579,417 | 8,705,567 | ||||||
Other investments | 56,011,031 | 27,172,229 | ||||||
Dividends and interest income receivable | 1,395,382 | 1,261,530 | ||||||
Participant contributions receivable | — | 524,844 | ||||||
Employer contributions receivable | 1,949,711 | 1,895,836 | ||||||
Other assets | 29,355 | — | ||||||
Total Assets | 263,338,824 | 201,127,182 | ||||||
Liabilities | ||||||||
Dividends payable to participants | 493,741 | 192,424 | ||||||
Due to broker | 734,002 | — | ||||||
Other payable | 4,533 | — | ||||||
Total liabilities | 1,232,276 | 192,424 | ||||||
Net assets available for benefits | $ | 262,106,548 | $ | 200,934,758 | ||||
The accompanying notes are an integral part of these financial statements
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Compass Bancshares, Inc. Employee Stock Ownership Plan
Year Ended December 31, 2003
Investment income | ||||
Dividends on Compass Bancshares, Inc. common stock (Note 4) | $ | 7,040,371 | ||
Other dividends and interest | 1,031,526 | |||
Net investment income | 8,071,897 | |||
Net appreciation in fair value of investments (Note 3) | 45,416,717 | |||
53,488,614 | ||||
Contributions | ||||
Participant | 15,643,828 | |||
Employer | 6,583,890 | |||
Rollovers and other | 1,116,313 | |||
Total contributions | 23,344,031 | |||
Distributions to participants | (15,660,855 | ) | ||
Net increase | 61,171,790 | |||
Net assets available for benefits | ||||
Beginning of year | 200,934,758 | |||
End of year | $ | 262,106,548 | ||
The accompanying notes are an integral part of these financial statements
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Compass Bancshares, Inc. Employee Stock Ownership Plan
December 31, 2003
1. | Description of Plan | |||
The following description of the Compass Bancshares, Inc. Employee Stock Ownership Plan (the “Plan”) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions. | ||||
Compass Bancshares, Inc. operates 376 banking centers in Alabama, Arizona, Colorado, Florida, New Mexico and Texas. The banking centers in Alabama are located throughout the state while its Florida banking centers are concentrated in the Jacksonville area and in the Florida panhandle. In Texas, the banking centers are primarily located in the state’s four largest metropolitan areas of Houston, Dallas, San Antonio and Austin. The Arizona operations are primarily located in Tucson and Phoenix. The New Mexico banking centers are concentrated around the Albuquerque metropolitan area. The Colorado banking centers are concentrated around the Denver metropolitan area. | ||||
General | ||||
The Plan is a defined contribution plan for the benefit of employees of Compass Bancshares, Inc. (the “Employer”). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended. Nationwide Trust Company, FSB, serves as trustee to the Plan. The 401(k) Company serves as recordkeeper to the Plan. | ||||
Eligibility and Participant Contributions | ||||
Employees are eligible to participate in the SmartInvestor-401(k) provision of the Plan beginning on their date of employment. Participants become eligible for employer matching contributions on the first day of the month coinciding with or following completion of one year of service. | ||||
Effective for Plan years beginning on or after January 1, 2001 and ending on December 31, 2003, employees who had not previously made a salary deferral election during their first year of service were automatically enrolled in the Plan at a contribution rate of 3% of eligible pay upon attaining eligibility to receive employer matching contributions unless the employee waived enrollment or elected a different contribution rate. Effective for Plan years beginning on or after January 1, 2004, employees who do not have a salary deferral election in effect are automatically enrolled in the Plan twelve months after their employment or reemployment date at a contribution rate of 3% of eligible pay unless the employee waives enrollment or elects a different contribution rate. | ||||
For Plan years ending prior to January 1, 2004, participants may elect to have up to 15% of their compensation deferred and contributed to the Plan. Participants may allocate their contributions, in multiples of 1%, to the various investment options of the Plan. Effective January 1, 2004, participants may elect to defer up to 25% of their compensation to the Plan. | ||||
The Plan was amended effective January 1, 2002 to allow participants the option to reinvest cash dividends in common stock of the Employer or elect to receive pass through cash dividends. |
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Compass Bancshares, Inc. Employee Stock Ownership Plan
Notes to Financial Statements
December 31, 2003
Employer Contributions | ||||
The Employer, in its sole discretion, may make matching contributions in an amount determined by the Board of Directors of the Employer under the 401(k) provisions of the Plan. Generally, these matching contributions did not exceed the lesser of a participant’s elective contribution or 2% of such participant’s base compensation for the Plan years ending prior to January 1, 2003. | ||||
Effective January 1, 2003, participants who elected to continue their participation in the Compass Bancshares, Inc. Retirement Plan under special election available in 2002, and for employees of affiliates, or divisions of affiliates, that are predominantly engaged in the business of a commercial insurance agency or an investment management firm, regular employer matching contributions are 100% of the first 2% of eligible pay contributed to the Plan. | ||||
For all other participants, regular employer matching contributions are allocated based on years of service according to the following schedule: |
Years of Service | Employer Matching Contribution | |
Less than 1 | None | |
1 - 3 | 100% of the 1st 2% of base compensation contributed | |
4 - 7 | 125% of the 1st 2% of base compensation contributed | |
8 or more | 150% of the 1st 2% of base compensation contributed |
For purposes of the service-based match above, participants were credited with their years of benefit service under the Compass Bancshares, Inc. Retirement Plan on December 31, 2002, if any, provided that past benefit service under the Compass Bancshares, Inc. Retirement Plan (without regard to whether the participant became a participant in the Compass Bancshares, Inc. Retirement Plan). Beginning January 1, 2003, participants are credited with a year of service on each employment anniversary date (based on the employee’s most recent hire date). | ||||
The Employer, in its sole discretion may make an additional contribution to the SmartInvestor 401(k) provision of the Plan, which will be allocated to participants employed on the last day of the Plan year and will be equal to 100% of the first 1% of compensation contributed to the Plan and in excess of 2% of eligible pay contributed to the Plan. If the Employer’s earnings reach a targeted amount, the Employer may elect to make a contribution to the employee stock ownership Plan (ESOP) provision of the Plan. The Employer’s earnings did not reach the targeted amount for the years ended December 31, 2003 or 2002 and contributions were not made under the ESOP provision of the Plan. | ||||
All Employer matching contributions and ESOP contributions are made in Compass Bancshares, Inc. common stock. |
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Compass Bancshares, Inc. Employee Stock Ownership Plan
Notes to Financial Statements
December 31, 2003
Investment Options | ||||
The Plan provides for separate investment programs, which allow participants to direct their investing among different investment options. The Plan offers six mutual funds, four managed asset allocation models, two money market funds, two common collective trust funds and Employer stock as investment options for participant contributions. | ||||
Vesting | ||||
Participants hired on or before December 31, 2000 have a fully vested and nonforfeitable interest in the portion of their accounts attributable to their elective contributions, rollovers, and the Employer’s matching contributions, including earnings thereon. Participants hired on or after January 1, 2001 have a fully vested and nonforfeitable interest in the portion of their accounts attributable to their elective contributions and rollovers and acquires a vested interest in amounts attributable to the Employer’s matching contributions based on length of service as follows: |
Vesting | ||||
Years of Service | Percentage | |||
Less than 1 | 0 | % | ||
1 | 33 | % | ||
2 | 67 | % | ||
3 or more | 100 | % |
Participants acquire a vested interest in amounts attributable to the ESOP provision of the Plan based on length of employment, as follows: |
Vesting | ||||
Years of Service | Percentage | |||
Less than 5 | 0 | % | ||
5 or more | 100 | % |
Effective as of January 1, 2003 and effective for Plan years beginning on or after January 1, 2003, for the purposes of vesting, the years of service for employees who have a most recent hire date with a predecessor employer, were employed by the predecessor employer as of the date the predecessor employer was merged with or acquired by the Employer, and have contributed continuous service since the date of merger or acquisition are considered service with the Employer. | ||||
Rollovers | ||||
The Plan document provides the Retirement Committee of the Board of Directors of Compass Bancshares, Inc. the authority to accept rollovers into the Plan. Effective January 1, 2003, the Retirement Committee authorized the Plan to allow a participant to transfer the balance of a separate, qualified plan into the participant’s account in a tax-free transaction, provided the transfer meets the criteria set forth by the Internal Revenue Code (“IRC”) and applicable Treasury Regulations. | ||||
Forfeitures | ||||
�� | If a participant incurs a “break in service,” as defined in the Plan document, for any reason other than permanent disability, death, or normal retirement, and is not 100% vested in the employer discretionary contributions, the nonvested portion is forfeited. Forfeited amounts are used to reduce future Employer matching contributions. Approximately $102,000 and $11,000 were available at December 31, 2003 and 2002, respectively, to reduce future employer matching contributions. |
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Compass Bancshares, Inc. Employee Stock Ownership Plan
Notes to Financial Statements
December 31, 2003
Distribution of Benefits | ||||
Upon retirement, disability, or death, participants become fully vested in their account. Upon termination of employment, a participant may elect to receive an amount equal to the value of the participant’s vested interest in his or her account. The form of payment is a lump-sum distribution. | ||||
Withdrawal Provisions | ||||
Participants may request that all or part of their accounts attributable to elective contributions, adjusted for gain or loss thereon, be paid to them to meet an immediate and heavy financial hardship for which funds are not reasonably available to them from other sources. The amount paid to a participant in this fashion is taxable and may not be repaid to the Plan. | ||||
Participant Loans | ||||
The Plan is prohibited by the Plan document to make loans to participants. The loans held by the Plan are the result of prior mergers or acquisitions executed by the Employer, whereby the participants in the predecessor employer’s plan had loans outstanding and were able to transfer the holdings at the time of acquisition into the Plan. No loans were added during the years ended December 31, 2003 or 2002. | ||||
2. | Summary of Significant Accounting Policies | |||
Basis of Presentation | ||||
The accompanying financial statements of the Plan have been prepared on an accrual basis in accordance with accounting principles generally accepted in the United States of America. | ||||
Investments | ||||
Compass Bancshares, Inc. common stock and mutual funds are valued at fair value based on quoted market prices. Quoted market prices are based on the last reported sales price on the last business day of the year as reported by the principal securities exchange on which the security is traded. | ||||
Purchases and sales of investments are recorded on a trade-date basis. Interest income is recorded when earned. Dividend income is recorded on the ex-dividend date. Realized gains and losses on mutual funds are calculated using the average cost method. Realized gains and losses on Compass Bancshares, Inc. common stock are calculated using historical cost. | ||||
The Plan presents in the statement of changes in net assets available for benefits, the net appreciation in the fair value of its investments, which consists of the realized gains or losses and the unrealized appreciation on those investments. | ||||
Administrative Fees | ||||
The Employer pays certain administrative expenses on behalf of the Plan. The Employer, in its sole discretion may elect for participants to pay these fees through reductions to participant accounts. | ||||
Use of Estimates | ||||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and |
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Compass Bancshares, Inc. Employee Stock Ownership Plan
Notes to Financial Statements
December 31, 2003
assumptions that affect the reported amounts of net assets available for benefits and changes therein. Actual results could differ from those estimates. | ||||
Risks and Uncertainties | ||||
The Plan provides for various investment options which, in turn, invest in any combination of stocks, mutual funds, and other investment securities. The Plan is subject to concentration risk due to the significant level of investment in Compass Bancshares, Inc. common stock. Generally, all investments are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investments and the level of uncertainty related to changes in the value of investments, it is at least reasonably possible that changes in risks in the near term could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits and the statement of changes in net assets available for benefits. | ||||
3. | Investments | |||
The investments of the Plan at December 31, 2003 and 2002 are summarized as follows: |
Fair Value | ||||||||
2003 | 2002 | |||||||
Common stock | ||||||||
Compass Bancshares, Inc.* | $ | 196,337,097 | $ | 156,572,767 | ||||
Money market funds | ||||||||
Alliance Bernstein Capital Reserve | 4,938 | — | ||||||
Expedition Money Market Fund* | 6,574,479 | 8,705,567 | ||||||
Mutual funds | ||||||||
AIM Constellation Fund | — | 5,393,868 | ||||||
AIM MidCap Core Equity Fund | 2,107,652 | — | ||||||
Dodge & Cox Stock Fund | 8,994,348 | — | ||||||
EuroPacific Growth Fund | 4,875,304 | — | ||||||
Expedition Bond Fund | 5,683,408 | 2,085,424 | ||||||
Expedition Equity Fund | — | 14,953,228 | ||||||
Fidelity Advisor Balanced Fund | — | 2,748,239 | ||||||
Fidelity Advisor Overseas Fund | — | 1,991,470 | ||||||
Legg Mason Batterymarch US Small Cap Equity Fund | 2,687,208 | — | ||||||
PIMCO Funds: RCM Large Cap Growth | 6,044,290 | — | ||||||
Common collective trusts | ||||||||
SEI Stable Asset | 14,086,963 | — | ||||||
State Street S&P 500 Index Fund | 11,531,858 | — | ||||||
$ | 258,927,545 | $ | 192,450,563 | |||||
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Compass Bancshares, Inc. Employee Stock Ownership Plan
Notes to Financial Statements
December 31, 2003
For the year ended December 31, 2003, the Plan’s investments (including gains and losses on investments bought and sold, as well as those held during the year) had net appreciation in fair value as follows: |
Compass Bancshares, Inc. common stock* | $ | 38,760,706 | ||
Mutual funds and other | 6,656,011 | |||
Net appreciation in fair value of investments | $ | 45,416,717 | ||
The following individual investments represent 5% or more of the net assets available for benefits at December 31, 2003 and 2002: |
Fair Value | ||||||||
2003 | 2002 | |||||||
Common stock | ||||||||
Compass Bancshares, Inc.* | $ | 196,337,097 | $ | 156,572,767 | ||||
Mutual fund | ||||||||
Expedition Equity Fund | * | * | $ | 14,953,228 | ||||
Other | ||||||||
SEI Stable Asset Fund | $ | 14,086,963 | $ | — |
* | A portion of this investment is nonparticipant-directed (Note 4). | |||
** | Less than 5% in the current year. |
4. | Nonparticipant-Directed Investments | |||
Information about the net assets and the significant components of the changes in net assets relating to the nonparticipant-directed investments are as follows: |
2003 | 2002 | |||||||
Assets | ||||||||
Investments, at fair value | ||||||||
Compass Bancshares, Inc. common stock | $ | 155,305,542 | $ | 126,604,184 | ||||
Expedition Money Market Fund | — | 2,225 | ||||||
Net investments | 155,305,542 | 126,606,409 | ||||||
Dividends and interest income receivable | 1,102,352 | 1,261,530 | ||||||
Employer contributions receivable | 1,949,648 | 1,895,836 | ||||||
Liabilities | ||||||||
Dividends payable to participants | (405,452 | ) | (192,424) | |||||
Net assets available for benefits | $ | 157,952,090 | $ | 129,571,351 | ||||
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Compass Bancshares, Inc. Employee Stock Ownership Plan
Notes to Financial Statements
December 31, 2003
2003 | ||||
Investment Income | ||||
Dividends on Compass Bancshares, Inc. common stock | $ | 4,412,610 | ||
Net investment income | 4,412,610 | |||
Net appreciation in fair value of investments | 27,567,652 | |||
Contributions | ||||
Total employer contributions | 6,583,890 | |||
Distributions/transfers to participants | (10,183,413 | ) | ||
Net increase | 28,380,739 | |||
Net assets available for benefits | ||||
Beginning of year | 129,571,351 | |||
End of year | $ | 157,952,090 | ||
5. | Plan Termination | |||
Although it has not expressed any intent to do so, the Employer has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants would become fully vested and the net assets available for benefits would be distributed to the participants. | ||||
6. | Tax Status | |||
The Internal Revenue Service issued a determination letter dated March 26, 2003 stating that the Plan, as amended through December 27, 2001, was designed in accordance with applicable Internal Revenue Code (“IRC”) requirements. The Plan has been amended since December 27, 2001. However, the Plan administrator and the Plan’s tax counsel believe the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC and continues to be tax-exempt at December 31, 2003 and 2002. Therefore, no provision for income taxes is included in the Plan’s financial statements. | ||||
7. | Related Party Transactions | |||
Prior to January 1, 2003, Compass Bank, a wholly owned banking subsidiary of the Employer, served as trustee of the Plan, controlling the distribution and investment of the Plan’s assets. Additionally, Compass Bank acts as investment adviser for the Expedition Equity Fund, Expedition Money Market Fund and the Expedition Bond Fund. Accordingly, all transactions with Compass Bank and the Employer, which include Compass Bancshares, Inc. common stock, qualify as party-in-interest transactions. During 2003 and 2002, trustee fees were paid by the Employer. |
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Compass Bancshares, Inc. Employee Stock Ownership Plan
Notes to Financial Statements
December 31, 2003
8. | Subsequent Events | |||
On April 14, 2004, the Plan was amended to provide diversification rights for participants attaining the age of 55 and having contributed 10 years of participation. These diversification rights include the right to elect a distribution or a transfer to any of three investment funds (as determined by the Retirement Committee of the Employer). The distribution or transfer may consist of at least 25% of the number of shares of Compass Bancshares, Inc. stock credited to the restricted portion of the eligible participant’s account. The effect of this amendment had no material impact on the financial statements contained herein. |
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Compass Bancshares, Inc. Employee Stock Ownership Plan
December 31, 2003
(c) Description of investment | ||||||||||||||||
including maturity date, rate | ||||||||||||||||
(b) Identity of issue, borrower, | of interest, collateral, par, | (e) Current | (f) Loan | |||||||||||||
(a) | lessor or similar party | or maturity value | (d) Cost | value | payment | |||||||||||
* | Compass Bancshares, Inc. | Common stock | $ | 158,688,597 | $ | 196,337,097 | ||||||||||
* | Expedition Money Market Fund | Mutual fund | * | * | 6,574,479 | |||||||||||
* | Expedition Bond Fund | Mutual fund | * | * | 5,683,408 | |||||||||||
Dodge and Cox Stock Fund | Mutual fund | * | * | 8,994,348 | ||||||||||||
AIM Mid Cap Core Equity Fund | Mutual fund | * | * | 2,107,652 | ||||||||||||
PIMCO Funds: RCM Large Cap Growth Fund | Mutual fund | * | * | 6,044,290 | ||||||||||||
State Street S&P 500 Index Fund | Common collective trust | * | * | 11,531,858 | ||||||||||||
Legg Mason Batterymarch US Small Cap Equity Fund | Mutual fund | * | * | 2,687,208 | ||||||||||||
EuroPacific Growth Fund/A | Mutual fund | * | * | 4,875,304 | ||||||||||||
Alliance Bernstein Capital Reserve | Mutual fund | * | * | 4,938 | ||||||||||||
SEI Stable Asset | Common collective trust | * | * | 14,086,963 | ||||||||||||
Participant/Beneficiary Loans | Loans made to participants or beneficiaries under the plan | * | ** | 11,984 | $ | 5,090 | ||||||||||
$ | 258,939,529 | $ | 5,090 | |||||||||||||
* | Represents a party-in-interest | |
** | Cost of participant-directed investments is not required. | |
*** | Partly amortized with final lump sum payment |
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Compass Bancshares, Inc. Employee Stock Ownership Plan
December 31, 2003
(b) Description of | ||||||||||||||||||||||
asset (include | ||||||||||||||||||||||
interest rate and | (h) Current value | |||||||||||||||||||||
(a) Identity of | maturity in case | (c) Purchase | (d) Selling | (g) Cost | of assets on | (i) Net gain | ||||||||||||||||
Party involved | of a loan) | price | price | of asset | transaction date | or (loss) | ||||||||||||||||
Series of Transactions | ||||||||||||||||||||||
Compass Bancshares, Inc. | Common Stock | $ | 14,691,078 | $ | 14,969,898 | $ | 13,857,963 | $ | 14,969,898 | $ | 1,111,935 |
NOTE: Information required in columns e and f is not applicable.
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SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
COMPASS BANCSHARES, INC. EMPLOYEE STOCK OWNERSHIP PLAN | ||||
Date: June 28, 2004 | By | /s/ E. Lee Harris | ||
E. Lee Harris | ||||
Executive Vice President, Human Resources | ||||
Compass Bank | ||||
Principal Executive Officer of the Plan | ||||
Date: June 28, 2004 | By | /s/ Kirk P. Pressley | ||
Kirk P. Pressley | ||||
Chief Accounting Officer | ||||
Compass Bank | ||||
Principal Financial Officer of the Plan |
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