##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No. 1-31272
 (LOGO)
    
    Compass Bancshares, Inc.
 (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
 
  (205) 297-3000
 
  þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
 o þ
  Class
    
    Outstanding at April 30,2006Common Stock, $2 Par Value
    
    129,129,199




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##### 



PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Consolidated Balance Sheets as of March 31, 2006 and December 31, 2005
    
    
    3Consolidated Statements of Income for the Three Months Ended March 31, 2006 and 2005
    
    
    4Consolidated Statements of Changes In Shareholders Equity for the Three Months Ended March 31, 2006 and 2005
    
    
    5Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2006 and 2005
    
    
    6Notes to Consolidated Financial Statements (Unaudited)
    
    
    8Item 2
    
    Managements Discussion and Analysis of Results of Operations and Financial Condition
    
    
    24Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4
    
    Controls and Procedures
    
    
    32PART II. OTHER INFORMATIONItem 1
    
    Legal Proceedings
    
    
    33Item 1A
    
    Risk Factors
    
    
    33Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 5
    
    Other Information
    
    
    33Item 6
    
    Exhibits
    
    
    34EX-10.(P) EMPLOYEE STOCK OWNERSHIP BENEFIT RESTORATION PLANEX-10.(R) DEFERRED COMPENSATION PLANEX-10.(AE) DISTRIBUTION AGREEMENTEX-10.(AF) ISSUING AND PAYING AGENCY AGREEMENTEX-31.(A) SECTION 302 CERTIFICATION OF CEOEX-31.(B) SECTION 302 CERTIFICATION OF CFOEX-32.(A) SECTION 906 CERTIFICATION OF CEOEX-32.(B) SECTION 906 CERTIFICATION OF CFO
  -2-




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1  Financial Statements
 COMPASS BANCSHARES, INC. AND SUBSIDIARIES
 
 Consolidated Balance Sheets
   March 31, 2006
    
    
    December 31, 2005AssetsCash and due from banks
    
    $
    765,709
    
    
    $
    805,556Federal funds sold and securities purchased
under agreements to resell
    
    
    99,175
    
    
    
    46,393Trading account assets
    
    
    85,165
    
    
    
    76,559Investment securities available for sale
    
    
    4,321,876
    
    
    
    4,704,375Investment securities held to maturity (fair value of
$2,165,483 and $2,212,273 for 2006 and 2005, respectively)
    
    
    2,224,138
    
    
    
    2,245,942Loans
    
    
    23,308,114
    
    
    
    21,372,215Allowance for loan losses
    
    
    (282,457
    )
    
    
    (267,173
    )Net loans
    
    
    23,025,657
    
    
    
    21,105,042Premises and equipment, net
    
    
    588,455
    
    
    
    547,195Bank owned life insurance
    
    
    459,833
    
    
    
    441,226Goodwill
    
    
    677,460
    
    
    
    316,197Other assets
    
    
    534,711
    
    
    
    509,747Total assets
    
    $
    32,782,179
    
    
    $
    30,798,232Liabilities and Shareholders EquityDeposits:Noninterest bearing
    
    $
    6,765,908
    
    
    $
    6,097,881Interest bearing
    
    
    15,362,601
    
    
    
    14,286,234Total deposits
    
    
    22,128,509
    
    
    
    20,384,115Federal funds purchased and securities sold under
agreements to repurchase
    
    
    3,448,011
    
    
    
    3,102,572Other short-term borrowings
    
    
    267,209
    
    
    
    652,750FHLB and other borrowings
    
    
    4,010,753
    
    
    
    4,111,462Accrued expenses and other liabilities
    
    
    369,757
    
    
    
    311,304Total liabilities
    
    
    30,224,239
    
    
    
    28,562,203Shareholders equity:Preferred stock (25,000,000 shares authorized; issued  none)
    
    
    
    
    
    
    Common stock of $2 par value:Authorized  300,000,000 sharesIssued  134,429,511 shares in 2006 and
133,950,243 shares in 2005
    
    
    268,859
    
    
    
    267,900Treasury stock, at cost (5,369,668 shares in 2006 and
10,411,684 shares in 2005)
    
    
    (194,601
    )
    
    
    (377,327
    )Surplus
    
    
    378,175
    
    
    
    300,375Retained earnings
    
    
    2,180,130
    
    
    
    2,121,310Accumulated other comprehensive loss
    
    
    (72,569
    )
    
    
    (63,156
    )Loans to finance stock purchases
    
    
    (2,054
    )
    
    
    (1,262
    )Unearned restricted stock
    
    
    
    
    
    
    (11,811
    )Total shareholders equity
    
    
    2,557,940
    
    
    
    2,236,029Total liabilities and shareholders equity
    
    $
    32,782,179
    
    
    $
    30,798,232
  -3-




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Income
   Three Months EndedMarch 31,2006
    
    
    2005Interest income:Interest and fees on loans
    
    $
    372,380
    
    
    $
    269,283Interest on investment securities available for sale
    
    
    51,165
    
    
    
    46,161Interest on investment securities held to maturity
    
    
    25,881
    
    
    
    32,123Interest on federal funds sold and securities purchased under
agreements to resell
    
    
    529
    
    
    
    213Interest on trading account assets
    
    
    243
    
    
    
    172Total interest income
    
    
    450,198
    
    
    
    347,952Interest expense:Interest on deposits
    
    
    99,301
    
    
    
    49,462Interest on federal funds purchased and securities sold under
agreements to repurchase
    
    
    37,277
    
    
    
    26,192Interest on other short-term borrowings
    
    
    4,501
    
    
    
    532Interest on FHLB and other borrowings
    
    
    48,858
    
    
    
    40,193Total interest expense
    
    
    189,937
    
    
    
    116,379Net interest income
    
    
    260,261
    
    
    
    231,573Provision for loan losses
    
    
    17,112
    
    
    
    20,273Net interest income after provision for loan losses
    
    
    243,149
    
    
    
    211,300Noninterest income:Service charges on deposit accounts
    
    
    72,168
    
    
    
    62,649Card and merchant processing fees
    
    
    25,707
    
    
    
    21,330Insurance commissions
    
    
    17,604
    
    
    
    15,724Retail investment sales
    
    
    9,420
    
    
    
    8,781Asset management fees
    
    
    7,748
    
    
    
    7,061Corporate and correspondent investment sales
    
    
    5,229
    
    
    
    4,120Bank owned life insurance
    
    
    4,903
    
    
    
    4,240Gain on prepayment of FHLB advances
    
    
    14,893
    
    
    
    Investment securities losses, net
    
    
    (14,838
    )
    
    
    Gain on sale of business
    
    
    
    
    
    
    4,791Trading losses and settlements on economic hedge swaps
    
    
    
    
    
    
    (4,596
    )Other
    
    
    22,510
    
    
    
    25,865Total noninterest income
    
    
    165,344
    
    
    
    149,965Noninterest expense:Salaries, benefits and commissions
    
    
    136,010
    
    
    
    121,344Equipment
    
    
    21,547
    
    
    
    20,059Net occupancy
    
    
    17,217
    
    
    
    16,652Professional services
    
    
    14,904
    
    
    
    14,080Marketing
    
    
    12,264
    
    
    
    11,885Communications
    
    
    5,622
    
    
    
    5,476Amortization of intangibles
    
    
    1,490
    
    
    
    1,527Merger and integration
    
    
    2,626
    
    
    
    234Other
    
    
    32,690
    
    
    
    30,615Total noninterest expense
    
    
    244,370
    
    
    
    221,872Net income before income tax expense
    
    
    164,123
    
    
    
    139,393Income tax expense
    
    
    56,214
    
    
    
    46,409Net income
    
    $
    107,909
    
    
    $
    92,984Basic earnings per share
    
    $
    0.87
    
    
    $
    0.75Basic weighted average shares outstanding
    
    
    123,839
    
    
    
    123,286Diluted earnings per share
    
    $
    0.85
    
    
    $
    0.74Diluted weighted average shares outstanding
    
    
    126,793
    
    
    
    126,388Dividends declared per share
    
    $
    0.39
    
    
    $
    0.35
  -4-




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Changes In Shareholders Equity
    AccumulatedOther
    
    
    
    
    
    
    TotalCommon
    
    
    Treasury
    
    
    
    
    
    
    Retained
    
    
    Comprehensive
    
    
    
    
    
    
    Shareholders
    
    
    ComprehensiveStock
    
    
    Stock
    
    
    Surplus
    
    
    Earnings
    
    
    Loss
    
    
    Other
    
    
    Equity
    
    
    IncomeBalance, December 31, 2004
    
    $
    265,806
    
    
    $
    (333,351
    )
    
    $
    264,400
    
    
    $
    1,894,546
    
    
    $
    (23,376
    )
    
    $
    (11,680
    )
    
    $
    2,056,345Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,984
    
    
    
    
    
    
    
    
    
    
    
    92,984
    
    
    $
    92,984Net change in unrealized losses on securities
available for sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,824
    )
    
    
    
    
    
    
    (36,824
    )
    
    
    (36,824
    )Net change in accumulated losses on cash-
flow hedging instruments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (268
    )
    
    
    
    
    
    
    (268
    )
    
    
    (268
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    55,892Common dividends declared ($0.35 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,338
    )
    
    
    
    
    
    
    
    
    
    
    (43,338
    )Exercise of stock options and other issuances
    
    
    528
    
    
    
    
    
    
    
    4,657
    
    
    
    (898
    )
    
    
    
    
    
    
    
    
    
    
    4,287Cancellations of restricted stock, net of issuances
    
    
    1
    
    
    
    
    
    
    
    (215
    )
    
    
    
    
    
    
    
    
    
    
    214
    
    
    
    Repayments on loans to finance stock purchases,
net of advances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Issuance of treasury stock for acquisitions and
stock options
    
    
    
    
    
    
    11,842
    
    
    
    3,407
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,249Amortization of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    957
    
    
    
    957Purchase of treasury stock
    
    
    
    
    
    
    (1,531
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,531
    )Balance, March 31, 2005
    
    $
    266,335
    
    
    $
    (323,040
    )
    
    $
    272,249
    
    
    $
    1,943,294
    
    
    $
    (60,468
    )
    
    $
    (10,507
    )
    
    $
    2,087,863Balance, December 31, 2005
    
    $
    267,900
    
    
    $
    (377,327
    )
    
    $
    300,375
    
    
    $
    2,121,310
    
    
    $
    (63,156
    )
    
    $
    (13,073
    )
    
    $
    2,236,029Adoption of SFAS No. 123R
    
    
    
    
    
    
    
    
    
    
    (11,811
    )
    
    
    
    
    
    
    
    
    
    
    11,811
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107,909
    
    
    
    
    
    
    
    
    
    
    
    107,909
    
    
    $
    107,909Net change in unrealized losses on securities
available for sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,528
    )
    
    
    
    
    
    
    (8,528
    )
    
    
    (8,528
    )Net change in accumulated losses on cash-
flow hedging instruments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (885
    )
    
    
    
    
    
    
    (885
    )
    
    
    (885
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    98,496Common dividends declared ($0.39 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,142
    )
    
    
    
    
    
    
    
    
    
    
    (48,142
    )Exercise of stock options and other issuances
    
    
    938
    
    
    
    
    
    
    
    11,214
    
    
    
    (947
    )
    
    
    
    
    
    
    
    
    
    
    11,205Issuances of restricted stock, net of cancellations
    
    
    21
    
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Advances on loans to finance stock purchases,
net of repayments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (792
    )
    
    
    (792
    )Issuance of treasury stock for acquisitions and
stock options
    
    
    
    
    
    
    184,028
    
    
    
    77,240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    261,268Amortization of restricted stock and stock
option grants
    
    
    
    
    
    
    
    
    
    
    1,178
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,178Purchase of treasury stock
    
    
    
    
    
    
    (1,302
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,302
    )Balance, March 31, 2006
    
    $
    268,859
    
    
    $
    (194,601
    )
    
    $
    378,175
    
    
    $
    2,180,130
    
    
    $
    (72,569
    )
    
    $
    (2,054
    )
    
    $
    2,557,940
  -5-




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
   Three Months EndedMarch 31,2006
    
    
    2005Operating Activities:Net income
    
    $
    107,909
    
    
    $
    92,984Adjustments to reconcile net income to cash provided by operations:Depreciation and amortization
    
    
    24,460
    
    
    
    24,731Stock-based compensation
    
    
    1,178
    
    
    
    957Accretion of discount and loan fees
    
    
    (2,798
    )
    
    
    (3,040
    )Provision for loan losses
    
    
    17,112
    
    
    
    20,273Net change in trading account assets
    
    
    (8,282
    )
    
    
    788Investment securities losses, net
    
    
    14,838
    
    
    
    Gain on prepayment of FHLB advances
    
    
    (14,893
    )
    
    
    Net gain on sale of business
    
    
    
    
    
    
    (4,791
    )Increase in other assets
    
    
    (1,349
    )
    
    
    (1,803
    )Increase in accrued expenses and other liabilities
    
    
    41,581
    
    
    
    26,109Net cash provided by operating activities
    
    
    179,756
    
    
    
    156,208Investing Activities:Proceeds from prepayments, maturities and calls of
investment securities held to maturity
    
    
    88,122
    
    
    
    130,281Purchases of investment securities held to maturity
    
    
    (2,555
    )
    
    
    Proceeds from sales of investment securities available for sale
    
    
    733,979
    
    
    
    21,742Proceeds from prepayments, maturities and calls of
investment securities available for sale
    
    
    259,440
    
    
    
    158,364Purchases of investment securities available for sale
    
    
    (563,853
    )
    
    
    (399,041
    )Net (increase) decrease in federal funds sold and securities
purchased under agreements to resell
    
    
    (27,894
    )
    
    
    17,107Net increase in loan portfolio
    
    
    (554,112
    )
    
    
    (334,168
    )Net cash paid in acquisitions
    
    
    (190,071
    )
    
    
    (202
    )Net cash received in sale of business
    
    
    
    
    
    
    4,726Purchases of premises and equipment, net
    
    
    (18,774
    )
    
    
    (15,141
    )Proceeds from sales of other real estate owned
    
    
    2,675
    
    
    
    4,038Net cash used by investing activities
    
    
    (273,043
    )
    
    
    (412,294
    )
  -6-




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows  Continued
 Three Months EndedMarch 31,2006
    
    
    2005Financing Activities:Net increase in demand deposits, NOW accounts
and savings accounts
    
    
    810,454
    
    
    
    193,556Net (decrease) increase in time deposits
    
    
    (541,027
    )
    
    
    407,705Net increase (decrease) in federal funds purchased and
securities sold
under agreements to repurchase
    
    
    324,561
    
    
    
    (270,638
    )Net decrease in other short-term borrowings
    
    
    (388,229
    )
    
    
    (50,623
    )Proceeds from FHLB advances and other borrowings
    
    
    546,441
    
    
    
    297,198Repayment of FHLB advances and other borrowings
    
    
    (660,377
    )
    
    
    (115
    )Common dividends paid
    
    
    (48,689
    )
    
    
    (78,965
    )Purchase of treasury stock
    
    
    (1,409
    )
    
    
    (1,531
    )Issuance of treasury stock for stock options
    
    
    1,302
    
    
    
    1,540Repayment of loans to finance stock purchases
    
    
    148
    
    
    
    206Proceeds from exercise of stock options
    
    
    10,265
    
    
    
    4,083Net cash provided by financing activities
    
    
    53,440
    
    
    
    502,416Net (decrease) increase in cash and due from banks
    
    
    (39,847
    )
    
    
    246,330Cash and due from banks at beginning of period
    
    
    805,556
    
    
    
    585,679Cash and due from banks at end of period
    
    $
    765,709
    
    
    $
    832,009Schedule of noncash investing and financing activities:Transfers of loans to other real estate owned
    
    $
    2,735
    
    
    $
    1,899Loans to facilitate the sale of other real estate owned
    
    
    375
    
    
    
    150Loans to finance stock purchases
    
    
    940
    
    
    
    204Change in unrealized loss on available for sale
investment securities
    
    
    (13,385
    )
    
    
    (58,019
    )Issuance of restricted stock, net of cancellations
    
    
    
    
    
    
    (214
    )Treasury stock exchanged for acquisition earnouts
    
    
    6,081
    
    
    
    5,840Allowance transferred to other liabilities
    
    
    
    
    
    
    12,189Business combinations and divestitures:Common stock issued
    
    
    253,992
    
    
    
    7,869Assets acquired
    
    
    2,012,632
    
    
    
    8,092Liabilities assumed
    
    
    1,568,569
    
    
    
    21Assets sold
    
    
    
    
    
    
    13Liabilities sold
    
    
    
    
    
    
    78
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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
 
 Notes to Consolidated Financial Statements (Unaudited)
 NOTE 1  General
     Critical Accounting Policies
  Allowance for Loan Losses
 Derivative Instruments
 Consolidation
 -8-




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
 Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities
 Income Taxes
 Goodwill Calculation and Impairment
 Stock-Based Compensation
 Accounting for Stock-Based Compensation. Accounting for Stock Issued to Employees Share-Based Payments
  Three MonthsEndedMarch 31,2005Net income:As reported
    
    $
    92,984Deduct: Total share-based employee compensation
expense determined under fair value based method
for all awards, net of tax
    
    
    1,918Pro forma net income
    
    $
    91,066Basic earnings per share:As reported
    
    $
    0.75Pro forma
    
    
    0.74Diluted earnings per share:As reported
    
    $
    0.74Pro forma
    
    
    0.72
  -9-




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
   Website Availability of Reports Filed with the SEC
 www.compassbank.com
 NOTE 2  Business Combinations and Divestitures
 TexasBank Acquisition
    Assets:Cash and cash equivalents
    
    $
    41,918Federal funds sold and securities
purchased under agreements to resell
    
    
    24,888Investment securities available for sale
    
    
    77,526Investment securities held to maturity
    
    
    63,397Net loans
    
    
    1,387,248Premises and equipment, net
    
    
    38,002Intangible assets
    
    
    385,071Other assets
    
    
    36,500Total assets
    
    $
    2,054,550Liabilities:Deposits
    
    $
    1,475,862Fed funds purchased and securities
sold under agreements to repurchase
    
    
    20,878Other short-term borrowings
    
    
    2,688FHLB and other borrowings
    
    
    51,722Other liabilities
    
    
    17,419Total liabilities
    
    
    1,568,569Net assets acquired
    
    $
    485,981
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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
  Three Months EndedMarch 31,2006
    
    
    2005Interest income
    
    $
    477,622
    
    
    $
    369,747Interest expense
    
    
    198,362
    
    
    
    120,784Net interest income
    
    
    279,260
    
    
    
    248,963Provision for loan losses
    
    
    17,628
    
    
    
    21,012Net interest income after provision for loan losses
    
    
    261,632
    
    
    
    227,951Noninterest income
    
    
    170,384
    
    
    
    155,697Noninterest expense
    
    
    283,784
    
    
    
    236,419Net income before taxes
    
    
    148,232
    
    
    
    147,229Income tax
    
    
    51,846
    
    
    
    49,154Net income
    
    $
    96,386
    
    
    $
    98,075Basic EPS
    
    $
    0.75
    
    
    $
    0.76Diluted EPS
    
    $
    0.73
    
    
    $
    0.75
 Other Business Combinations
    Divestitures
  NOTE 3  Capital Securities and Preferred Stock
 Capital Securities
  Consolidation of Variable Interest Entities, an interpretation of ARB No. 51
 -11-




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COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
   Class B Preferred Stock
    Maturity
    
    
    March 31,
    
    
    December 31,Dates
    
    
    2006
    
    
    2005(in Thousands)Capital Securities:8.23% debentures payable to Compass Trust I *
    
    
    2027
    
    
    $
    103,093
    
    
    $
    103,0937.35% debentures payable to Compass Trust III *
    
    
    2032
    
    
    
    309,279
    
    
    
    309,279LIBOR plus 2.60% floating rate debentures
payable to TexasBanc Capital Trust I *
    
    
    2034
    
    
    
    25,774
    
    
    
    Fair value of and unamortized fees on hedged
capital securities
    
    
    2027, 2032
    
    
    
    (4,436
    )
    
    
    (1,969
    )Class B Preferred Stock
    
    
    
    
    
    
    18,090
    
    
    
    18,077Total Capital Securities and Preferred Stock
    
    
    
    
    
    $
    451,800
    
    
    $
    428,480
 
 *
    
    - Majority of amounts qualify for Tier I Capital Subordinated Debentures
  -12-




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COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
 NOTE 4  Earnings Per Share
 Three Months EndedMarch 31,2006
    
    
    2005(In Thousands, Except Per Share Data)BASIC EARNINGS PER SHARE:Net income
    
    $
    107,909
    
    
    $
    92,984Weighted average shares outstanding
    
    
    123,839
    
    
    
    123,286Basic earnings per share
    
    $
    0.87
    
    
    $
    0.75DILUTED EARNINGS PER SHARE:Net income
    
    $
    107,909
    
    
    $
    92,984Weighted average basic shares outstanding
    
    
    123,839
    
    
    
    123,286Net effect of nonvested restricted stock and the assumed
exercise of stock options  based on the treasury stock
method using average market price for the period
    
    
    2,954
    
    
    
    3,102Weighted average diluted shares outstanding
    
    
    126,793
    
    
    
    126,388Diluted earnings per share
    
    $
    0.85
    
    
    $
    0.74
 NOTE 5  Segment Information
        -13-




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
    For the Three Months Ended March 31, 2006
(in Thousands)
 CorporateCorporate
    
    
    Retail
    
    
    Wealth
    
    
    
    
    
    
    Support andBanking
    
    
    Banking
    
    
    Management
    
    
    Treasury
    
    
    Other
    
    
    ConsolidatedIncome StatementNet interest income
    
    $
    104,625
    
    
    $
    116,398
    
    
    $
    14,869
    
    
    $
    8,788
    
    
    $
    15,581
    
    
    $
    260,261Noninterest income
    
    
    37,196
    
    
    
    110,886
    
    
    
    10,143
    
    
    
    7,635
    
    
    
    (516
    )
    
    
    165,344Noninterest expense
    
    
    57,052
    
    
    
    119,363
    
    
    
    13,858
    
    
    
    5,519
    
    
    
    48,578
    
    
    
    244,370Segment income (loss)
    
    $
    84,769
    
    
    $
    107,921
    
    
    $
    11,154
    
    
    $
    10,904
    
    
    $
    (33,513
    )
    
    
    181,235Provision for loan losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,112Net income before income
tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164,123Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,214Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    107,909Balance SheetAverage assets
    
    $
    11,697,457
    
    
    $
    8,880,833
    
    
    $
    1,487,845
    
    
    $
    7,360,543
    
    
    $
    1,489,334
    
    
    $
    30,916,012Average loans
    
    
    11,654,596
    
    
    
    8,687,806
    
    
    
    1,487,706
    
    
    
    
    
    
    
    (79,005
    )
    
    
    21,751,103Average deposits
    
    
    4,889,681
    
    
    
    11,365,962
    
    
    
    1,246,262
    
    
    
    2,836,545
    
    
    
    38,826
    
    
    
    20,377,276Period-end assets
    
    $
    12,099,617
    
    
    $
    8,935,254
    
    
    $
    1,531,503
    
    
    $
    7,180,272
    
    
    $
    3,035,533
    
    
    $
    32,782,179Period-end loans
    
    
    11,897,326
    
    
    
    8,665,332
    
    
    
    1,519,703
    
    
    
    
    
    
    
    1,225,753
    
    
    
    23,308,114Period-end deposits
    
    
    5,150,190
    
    
    
    11,909,188
    
    
    
    1,312,758
    
    
    
    2,333,694
    
    
    
    1,422,679
    
    
    
    22,128,509
 
 CorporateCorporate
    
    
    Retail
    
    
    Wealth
    
    
    
    
    
    
    Support andBanking
    
    
    Banking
    
    
    Management
    
    
    Treasury
    
    
    Other
    
    
    ConsolidatedIncome StatementNet interest income
    
    $
    91,141
    
    
    $
    105,563
    
    
    $
    13,439
    
    
    $
    7,601
    
    
    $
    13,829
    
    
    $
    231,573Noninterest income
    
    
    43,556
    
    
    
    99,228
    
    
    
    9,407
    
    
    
    2,422
    
    
    
    (4,648
    )
    
    
    149,965Noninterest expense
    
    
    50,049
    
    
    
    106,490
    
    
    
    11,980
    
    
    
    4,690
    
    
    
    48,663
    
    
    
    221,872Segment income (loss)
    
    $
    84,648
    
    
    $
    98,301
    
    
    $
    10,866
    
    
    $
    5,333
    
    
    $
    (39,482
    )
    
    
    159,666Provision for loan losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,273Net income before income
tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139,393Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,409Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    92,984Balance SheetAverage assets
    
    $
    10,149,207
    
    
    $
    8,046,098
    
    
    $
    1,295,333
    
    
    $
    7,698,996
    
    
    $
    1,330,446
    
    
    $
    28,520,080Average loans
    
    
    10,150,121
    
    
    
    7,865,726
    
    
    
    1,297,114
    
    
    
    
    
    
    
    (299,191
    )
    
    
    19,013,770Average deposits
    
    
    4,747,689
    
    
    
    9,687,541
    
    
    
    1,207,383
    
    
    
    1,937,672
    
    
    
    (38,247
    )
    
    
    17,542,038Period-end assets
    
    $
    10,320,661
    
    
    $
    8,264,583
    
    
    $
    1,304,118
    
    
    $
    7,634,394
    
    
    $
    1,274,924
    
    
    $
    28,798,680Period-end loans
    
    
    10,171,455
    
    
    
    7,987,988
    
    
    
    1,294,466
    
    
    
    
    
    
    
    (286,882
    )
    
    
    19,167,027Period-end deposits
    
    
    4,894,181
    
    
    
    9,881,934
    
    
    
    1,223,191
    
    
    
    1,679,272
    
    
    
    (34,439
    )
    
    
    17,644,139
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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
 NOTE 6
 Loans and Allowance for Loan Losses
  March 31,
    
    
    December 31,2006
    
    
    2005(in Thousands)Commercial loans:Commercial, financial and agricultural
    
    $
    4,245,120
    
    
    $
    3,896,207Real estate  construction
    
    
    5,143,502
    
    
    
    4,233,148Commercial real estate  mortgage
    
    
    4,482,017
    
    
    
    4,080,164Total commercial loans
    
    
    13,870,639
    
    
    
    12,209,519Consumer loans:Residential real estate  mortgage
    
    
    2,137,392
    
    
    
    1,916,951Equity lines of credit
    
    
    1,651,350
    
    
    
    1,614,608Equity loans
    
    
    1,238,842
    
    
    
    1,160,481Credit card
    
    
    518,691
    
    
    
    523,148Consumer  direct
    
    
    517,965
    
    
    
    423,278Consumer  indirect
    
    
    3,373,235
    
    
    
    3,524,230Total consumer loans
    
    
    9,437,475
    
    
    
    9,162,696Total
    
    $
    23,308,114
    
    
    $
    21,372,215
  Three Months Ended March 31,2006
    
    
    2005(in Thousands)Balance at beginning of period
    
    $
    267,173
    
    
    $
    258,339Add: Provision charged to income
    
    
    17,112
    
    
    
    20,273Allowance for loans acquired
    
    
    15,258
    
    
    
    Deduct: Allowance transferred to other liabilities
    
    
    
    
    
    
    12,189Net charge-offs (recoveries):Commercial, financial and agricultural
    
    
    1,628
    
    
    
    726Real estate  construction
    
    
    89
    
    
    
    (50
    )Commercial real estate  mortgage
    
    
    1,099
    
    
    
    164Residential real estate  mortgage
    
    
    180
    
    
    
    459Equity lines of credit
    
    
    461
    
    
    
    612Equity loans
    
    
    248
    
    
    
    520Credit card
    
    
    4,827
    
    
    
    7,911Consumer  direct
    
    
    878
    
    
    
    2,257Consumer  indirect
    
    
    7,676
    
    
    
    7,259Total net charge-offs
    
    
    17,086
    
    
    
    19,858Balance at end of period
    
    $
    282,457
    
    
    $
    246,565
  March 31,
    
    
    December 31,2006
    
    
    2005(in Thousands)Nonaccrual loans
    
    $
    55,716
    
    
    $
    47,578Renegotiated loans
    
    
    3,286
    
    
    
    698Total nonperforming loans
    
    
    59,002
    
    
    
    48,276Other real estate
    
    
    11,155
    
    
    
    11,510Total nonperforming assets
    
    $
    70,157
    
    
    $
    59,786
 -15-




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COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
 NOTE 7
 Securitized Assets
   NOTE 8
 Investments
   March 31, 2006Securities in a loss position
    
    
    Securities in a loss positionfor less than 12 months
    
    
    for 12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(in Thousands)Investment securities available for sale:Debt securities:U.S. Treasury and other U.S. Government
agencies and corporations
    
    $
    9,882
    
    
    $
    13
    
    
    $
    9,771
    
    
    $
    164
    
    
    $
    19,653
    
    
    $
    177Mortgage-backed pass-through securities
    
    
    180,614
    
    
    
    2,573
    
    
    
    326,686
    
    
    
    16,269
    
    
    
    507,300
    
    
    
    18,842Collateralized mortgage obligations
    
    
    867,268
    
    
    
    17,694
    
    
    
    2,298,905
    
    
    
    74,629
    
    
    
    3,166,173
    
    
    
    92,323States and political subdivisions
    
    
    40,887
    
    
    
    1,286
    
    
    
    
    
    
    
    
    
    
    
    40,887
    
    
    
    1,286Total
    
    $
    1,098,651
    
    
    $
    21,566
    
    
    $
    2,635,362
    
    
    $
    91,062
    
    
    $
    3,734,013
    
    
    $
    112,628
 December 31, 2005Securities in a loss position
    
    
    Securities in a loss positionfor less than 12 months
    
    
    for 12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(in Thousands)Investment securities available for sale:Debt securities:U.S. Treasury and other U.S. Government
agencies and corporations
    
    $
    44,845
    
    
    $
    138
    
    
    $
    55
    
    
    $
    1
    
    
    $
    44,900
    
    
    $
    139Mortgage-backed pass-through securities
    
    
    150,147
    
    
    
    2,312
    
    
    
    276,093
    
    
    
    10,136
    
    
    
    426,240
    
    
    
    12,448Collateralized mortgage obligations
    
    
    902,859
    
    
    
    13,080
    
    
    
    2,644,937
    
    
    
    65,567
    
    
    
    3,547,796
    
    
    
    78,647States and political subdivisions
    
    
    35,369
    
    
    
    758
    
    
    
    
    
    
    
    
    
    
    
    35,369
    
    
    
    758Total
    
    $
    1,133,220
    
    
    $
    16,288
    
    
    $
    2,921,085
    
    
    $
    75,704
    
    
    $
    4,054,305
    
    
    $
    91,992
  -16-




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COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
  NOTE 9
 Derivatives, Hedging and Off-Balance Sheet Activities
 Accounting for Derivative Instruments and Hedging Activities
  March 31, 2006
    
    
    December 31, 2005Other
    
    
    
    
    
    
    OtherThan
    
    
    
    
    
    
    ThanTrading
    
    
    Trading
    
    
    Trading
    
    
    Trading(in Thousands)Forward and futures contracts
    
    $
    296,615
    
    
    $
    29,189
    
    
    $
    304,233
    
    
    $
    25,948Interest rate swap agreements:Pay fixed versus receive float
    
    
    1,763,662
    
    
    
    200,000
    
    
    
    1,723,291
    
    
    
    200,000Receive fixed versus pay float
    
    
    1,763,661
    
    
    
    2,021,745
    
    
    
    1,703,799
    
    
    
    1,258,108Pay float versus receive float
    
    
    22,000
    
    
    
    
    
    
    
    22,000
    
    
    
    Written options
    
    
    405,881
    
    
    
    33,649
    (1)
    
    
    401,950
    
    
    
    32,044
    (1)Purchased options
    
    
    385,880
    
    
    
    
    
    
    
    381,941
    
    
    
    
 
 (1)
    
    Written options classified as other than trading represent interest rate loan commitments related to the
Companys mortgage banking activities   March 31, 2006
    
    
    December 31, 2005Notional
    
    
    Carrying
    
    
    Notional
    
    
    CarryingValue
    
    
    Value
    
    
    Value
    
    
    Value(in Thousands)Cash Flow Hedges:Interest rate swap agreements
    
    $
    900,000
    
    
    $
    (3,382
    )
    
    $
    400,000
    
    
    $
    (1,110
    )Fair Value Hedges:Interest rate swap agreements
    
    
    1,321,745
    
    
    
    (4,192
    )
    
    
    1,058,108
    
    
    
    22,535Forward contracts (1)
    
    
    29,189
    
    
    
    167
    
    
    
    25,948
    
    
    
    (99
    )
 
 (1)
    
    Derivatives related to the Companys mortgage banking activities Interest-Rate Risk
  Fair-Value Hedges
  -17-




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COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
   Cash-Flow Hedges
  Off-Balance Sheet Activities
   -18-




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COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
  NOTE 10  Shareholders Equity
    NOTE 11  Goodwill and Other Acquired Intangible Assets
   Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    Value(in Thousands)Nonamortizing goodwill
    
    $
    731,266
    
    
    $
    (53,806
    )
    
    $
    677,460Amortizing intangible assets:Core deposit intangibles
    
    $
    86,943
    
    
    $
    (51,654
    )
    
    $
    35,289Other customer intangibles
    
    
    44,847
    
    
    
    (14,079
    )
    
    
    30,768Total amortizing intangible assets
    
    $
    131,790
    
    
    $
    (65,733
    )
    
    $
    66,057
  NOTE 12  Commitments, Contingencies and Guarantees
   -19-




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
   March 31,
    
    
    December 31,2006
    
    
    2005(in Thousands)Commitments to extend credit
    
    $
    12,170,899
    
    
    $
    11,498,497Standby and commercial letters of credit
    
    
    986,999
    
    
    
    942,176
        NOTE 13  Stock-Based Compensation
  -20-




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
 Accounting for Stock-Based Compensation. Accounting for Stock Issued to Employees Share-Based Payments
   WeightedShares
    
    
    Average
    
    
    ContractualUnderlying
    
    
    Exercise
    
    
    TermOptions
    
    
    Price
    
    
    (years)Outstanding, beginning of the period
    
    
    8,011,142
    
    
    $
    31.54Granted
    
    
    5,000
    
    
    
    49.68Exercised
    
    
    (545,957
    )
    
    
    26.83Cancelled
    
    
    (7,500
    )
    
    
    42.95Outstanding, end of the period
    
    
    7,462,685
    
    
    
    31.88
    
    
    
    6.27Weighted average fair value of options
granted during the period
    
    $
    8.54Exercisable, end of the period
    
    
    6,506,591
    
    
    
    
    
    
    
    5.92
   WeightedAverageExerciseOptions
    
    
    PriceNonvested, beginning of the period
    
    
    1,083,444
    
    
    $
    40.87Granted
    
    
    5,000
    
    
    
    49.68Vested
    
    
    (125,600
    )
    
    
    31.72Forfeited
    
    
    (6,750
    )
    
    
    43.31Nonvested, end of the period
    
    
    956,094
    
    
    $
    42.10
   -21-




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
  NOTE 14  Defined Benefit Pension Plan
  Three Months EndedMarch 31,2006
    
    
    2005(in Thousands)Service cost
    
    $
    1,960
    
    
    $
    1,971Interest cost
    
    
    2,569
    
    
    
    2,430Expected return on plan assets
    
    
    (3,388
    )
    
    
    (3,046
    )Amortization of prior service cost
    
    
    8
    
    
    
    11Amortization of net loss
    
    
    830
    
    
    
    859Net periodic benefit cost
    
    $
    1,979
    
    
    $
    2,225
  NOTE 15  Recently Issued Accounting Standards
 Consolidation of Variable Interest Entities
 Consolidation of Variable
Interest Entities Consolidation of Variable Interest Entities,
an interpretation of ARB No. 51,
  Accounting for Certain Loans or Debt Securities Acquired in a Transfer
 Accounting for Certain Loans or Debt Securities Acquired in a Transfer.
 -22-




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
  Share-Based Payments
 Share-Based Payments, , Accounting for Stock-Based Compensation.
 Accounting Changes and Error Corrections
 Accounting Changes and Error Corrections, a Replacement
of APB Opinion 20 and FASB Statement No. 3.
 Accounting for Certain Hybrid Financial Instruments
 Accounting for Certain Hybrid Financial
Instruments  an amendment of FASB Statements No. 133 and 140 Accounting
for Derivative Instruments and Hedging Activities Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities,
 Accounting for Servicing of Financial Assets
 Accounting for Servicing of Financial Assets  an
amendment of FASB Statement No. 140 Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities
 -23-




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##### Table of Contents



Item 2
 Managements Discussion and Analysis of Results of Operations and Financial
Condition
 Results of Operations
 Forward-Looking Information
    Overview
    Net Interest Income
   -24-




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##### Table of Contents



For the Quarter EndingMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2005
    
    
    2005
    
    
    2005
    
    
    2005Actual
    
    
    Actual
    
    
    Actual
    
    
    Actual
    
    
    Total(in Thousands)Hedging derivatives positive
impact to net interest margin
    
    $
    2,167
    
    
    $
    2,394
    
    
    $
    1,684
    
    
    $
    1,013
    
    
    $
    7,258
 For the Quarter EndingMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2006
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    TotalActual
    
    
    Projected*
    
    
    Projected*
    
    
    Projected*
    
    
    Projected*(in Thousands)Hedging derivatives positive
impact to net interest
margin
    
    $
    2,010
    
    
    $
    2,261
    
    
    $
    2,457
    
    
    $
    2,422
    
    
    $
    9,150
 
 *
    
    Projected impact based on March 31, 2006 interest rates. -25-




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##### Table of Contents



April 1, 2006throughDecember 31,
    
    
    For the Year Ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    Thereafter($ in Thousands)Non-trading interest rate contractsCash Flow HedgesNotional maturity
    
    $
    400,000
    
    
    $
    
    
    
    $
    500,000
    
    
    $
    Weighted average coupon received
on maturities
    
    
    3.42
    %
    
    
    
    %
    
    
    4.88
    %
    
    
    
    %Weighted
average time to maturity (months)
    
    
    3
    
    
    
    
    
    
    
    22
    
    
    
    Fair Value HedgesNotional maturity
    
    $
    82,000
    
    
    $
    323,500
    
    
    $
    
    
    
    $
    916,245Weighted average coupon received
on maturities
    
    
    4.63
    %
    
    
    7.55
    %
    
    
    
    %
    
    
    5.96
    %Weighted
average time to maturity (months)
    
    
    3
    
    
    
    11
    
    
    
    
    
    
    
    144
   Three Months EndedMarch 31, 2006Change2005to
    
    
    Attributed to2006
    
    
    Volume
    
    
    Rate
    
    
    MixInterest income:Federal funds sold and securities
purchased
under agreements to resell
    
    $
    316
    
    
    $
    114
    
    
    $
    132
    
    
    $
    70Trading account assets
    
    
    71
    
    
    
    74
    
    
    
    (2
    )
    
    
    (1
    )Investment securities available for sale
    
    
    5,205
    
    
    
    1,448
    
    
    
    3,643
    
    
    
    114Investment securities held to maturity
    
    
    (6,292
    )
    
    
    (5,952
    )
    
    
    (416
    )
    
    
    76Loans
    
    
    103,186
    
    
    
    38,809
    
    
    
    56,275
    
    
    
    8,102Increase in interest income
    
    $
    102,486
    
    
    $
    34,493
    
    
    $
    59,632
    
    
    $
    8,361Interest expense:Deposits
    
    $
    49,839
    
    
    $
    15,255
    
    
    $
    30,049
    
    
    $
    4,535Federal funds purchased and securities
sold under agreements to repurchase
    
    
    11,085
    
    
    
    (5,602
    )
    
    
    21,226
    
    
    
    (4,539
    )Other short-term borrowings
    
    
    3,969
    
    
    
    1,134
    
    
    
    905
    
    
    
    1,930FHLB and other borrowings*
    
    
    8,665
    
    
    
    (819
    )
    
    
    9,682
    
    
    
    (198
    )Increase (decrease) in interest expense
    
    $
    73,558
    
    
    $
    9,968
    
    
    $
    61,862
    
    
    $
    1,728
 
 *
    
    Includes Capital Securities and Preferred Stock -26-




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##### Table of Contents



Noninterest Income and Noninterest Expense
   Income Taxes
  Provision and Allowance for Loan Losses
  Credit  Nonperforming Assets and Past Due Loans
    -27-




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Allowance for Loan Losses/Nonperforming Assets
 Three Months EndedMarch 31,2006
    
    
    2005Allowance for Loan LossesBalance at beginning of period
    
    $
    267,173
    
    
    $
    258,339Add: Provision charged to income
    
    
    17,112
    
    
    
    20,273Allowance for loans acquired
    
    
    15,258
    
    
    
    Deduct: Allowance transferred to other liabilities
    
    
    
    
    
    
    12,189Loans charged off
    
    
    25,141
    
    
    
    28,506Loan recoveries
    
    
    (8,055
    )
    
    
    (8,648
    )Net charge-offs
    
    
    17,086
    
    
    
    19,858Balance at end of period
    
    $
    282,457
    
    
    $
    246,565Net charge-offs as a percentage of
average loans (annualized)
    
    
    0.32
    %
    
    
    0.42
    %
 March 31, 2006
    
    
    December 31, 2005Nonperforming AssetsNonaccrual loans
    
    $
    55,716
    
    
    $
    47,578Renegotiated loans
    
    
    3,286
    
    
    
    698Total nonperforming loans
    
    
    59,002
    
    
    
    48,276Other real estate, net
    
    
    11,155
    
    
    
    11,510Total nonperforming assets
    
    $
    70,157
    
    
    $
    59,786Accruing loans ninety days or more past due
    
    $
    16,080
    
    
    $
    14,539Other repossessed assets
    
    
    599
    
    
    
    763Allowance as a percentage of loans
    
    
    1.21
    %
    
    
    1.25
    %Total nonperforming loans as a percentage
of loans
    
    
    0.25
    
    
    
    0.23Total nonperforming assets as a percentage
of loans and ORE
    
    
    0.30
    
    
    
    0.28Accruing loans ninety days or more past due as a
percentage of loans
    
    
    0.07
    
    
    
    0.07Allowance for loan losses as a percentage of
nonperforming loans
    
    
    478.72
    
    
    
    553.43Allowance for loan losses as a percentage of
nonperforming assets
    
    
    402.61
    
    
    
    446.88
 -28-




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##### Table of Contents



Financial Condition
 Overview
  Assets and Funding
  Liquidity and Capital Resources
       -29-




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##### Table of Contents



-30-




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##### Table of Contents



Item 3  Quantitative and Qualitative Disclosures About Market Risk
   Principal
    
    
    PercentageAmount of Earning
    
    
    Increase/(Decrease)Assets, Interest
    
    
    in Interest Income/ExpenseBearing Liabilities
    
    
    Down 100
    
    
    Up 100and Swaps
    
    
    Basis Points
    
    
    Basis Points(in Thousands)(Unaudited)March 31, 2006:Assets which reprice in: *One year or less
    
    $
    16,195,640
    
    
    
    (6.61
    )%
    
    
    6.71
    %Over one year
    
    
    13,787,648
    
    
    
    (1.51
    )
    
    
    1.19$
    29,983,288
    
    
    
    (4.58
    )
    
    
    4.51Liabilities which reprice in:One year or less
    
    $
    18,392,358
    
    
    
    (9.77
    )%
    
    
    12.84
    %Over one year
    
    
    4,696,216
    
    
    
    (1.49
    )
    
    
    1.63$
    23,088,574
    
    
    
    (7.36
    )
    
    
    9.58Total net interest income sensitivity
    
    
    
    
    
    
    (2.44
    )%
    
    
    0.62
    %December 31, 2005:Assets which reprice in: *One year or less
    
    $
    14,557,658
    
    
    
    (7.48
    )%
    
    
    7.59
    %Over one year
    
    
    13,839,052
    
    
    
    (2.16
    )
    
    
    1.46$
    28,396,710
    
    
    
    (5.19
    )
    
    
    4.96Liabilities which reprice in:One year or less
    
    $
    17,488,014
    
    
    
    (11.64
    )%
    
    
    15.11
    %Over one year
    
    
    4,665,004
    
    
    
    (0.82
    )
    
    
    2.17$
    22,153,018
    
    
    
    (8.24
    )
    
    
    11.04Total net interest income sensitivity
    
    
    
    
    
    
    (3.01
    )%
    
    
    0.59
    %
 
 *
    
    Excludes noninterest earning trading account assets  -31-




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##### Table of Contents



Item 4  Controls and Procedures
   -32-




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
 
  
 Item 1
 Legal Proceedings
  
 Item 1A
 Risk Factors
  
 Item 2
 Unregistered Sales of Equity Securities and Use of Proceeds
  Total Number of
    
    
    Maximum Number ofShares Purchased as
    
    
    Shares that May YetTotal Number of
    
    
    Average Price
    
    
    Part of Publicly
    
    
    Be PurchasedShares Purchased (1)
    
    
    Paid Per Share
    
    
    Announced Program (2)
    
    
    Under the Program (2)January 1, 2006 
January 31, 2006
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    3,088,600February 1, 2006 
February 28, 2006
    
    
    51,746
    
    
    
    49.56
    
    
    
    
    
    
    
    3,088,600March 1, 2006 
March 31, 2006
    
    
    8,313
    
    
    
    50.98
    
    
    
    
    
    
    
    3,088,600Total
    
    
    60,059
    
    
    $
    49.76
    
    
    
    
 
 (1)
    
    This column includes (a) purchases of the Companys common stock under the Companys publicly
announced share repurchase program described in (2) below and (b) the surrender to the Company by
plan participants of shares of common stock to satisfy the exercise price and tax withholdings
related to the exercise of employee stock options and restricted stock during the period indicated.(2)
    
    In 2003, the Company announced that its Board of Directors authorized management to purchase
approximately 4.1 million shares of the Companys outstanding common stock. 
 Item 5
 Other Information
   -33-




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##### Table of Contents



Item 6  Exhibits
 (3)
    
    Articles of Incorporation and By-Laws of Compass Bancshares, Inc.
 (a)
    
    Restated Certificate of Incorporation of Compass Bancshares, Inc., as amended,
dated May 17, 1982 (incorporated by reference to Exhibit 3(a) to Compass Bancshares,
Inc.s December 31, 1997 Form 10-K, file number 000-06032, filed March 23, 1998 with
the Commission)(b)
    
    Certificate of Amendment, dated May 20, 1986, to Restated Certificate of
Incorporation of Compass Bancshares, Inc. (incorporated by reference to Exhibit 3.2 to
Compass Bancshares, Inc.s Registration Statement on Form S-4, Registration No.
33-46086, filed with the Commission)(c)
    
    Certificate of Amendment, dated May 15, 1987, to Restated Certificate of
Incorporation of Compass Bancshares, Inc. (incorporated by reference to Exhibit 3.1.2
to Compass Bancshares, Inc.s Post-Effective Amendment No. 1 to Registration Statement
on Form S-4, Registration No. 33-10797, filed with the Commission)(d)
    
    Certificate of Amendment, dated September 16, 1994, to Restated Certificate of
Incorporation of Compass Bancshares, Inc. (incorporated by reference to Exhibit 3.5(1)
to Compass Bancshares, Inc.s Registration Statement on Form S-4, Registration No.
33-55899, filed with the Commission)(e)
    
    Certificate of Amendment, dated November 3, 1993, to Restated Certificate of
Incorporation of Compass Bancshares, Inc. (incorporated by reference to Exhibit 3(d) to
Compass Bancshares, Inc.s Registration Statement on Form S-4, Registration No.
33-51919, filed with the Commission)(f)
    
    Certificate of Amendment, dated May 15, 1998, to Restated Certificate of
Incorporation of Compass Bancshares, Inc. (filed as exhibit 4.6 to Compass Bancshares,
Inc.s Registration Statement on Form S-3, Registration Statement No. 333-60725, filed
with the Commission)(g)
    
    Certificate of Amendment, dated May 1, 2002, to Restated Certificate of
Incorporation of Compass Bancshares, Inc. (incorporated by reference to Exhibit 4.7 to
Compass Bancshares, Inc.s Registration Statement on Form S-8, Registration No.
333-90806, filed June 19, 2002 with the Commission)(h)
    
    Bylaws of Compass Bancshares, Inc. (Amended and Restated as of March 15, 1982)
(incorporated by reference to Exhibit 3(f) to Compass Bancshares, Inc.s December 31,
1997 Form 10-K, file number 000-06032, filed March 23, 1998 with the Commission)
 (4)
    
    Instruments Defining the Rights of Security Holders, Including Indentures
 (a)
    
    Form of Indenture between Compass Bancshares, Inc. (formerly Central Bancshares
of the South, Inc.) and JPMorgan Chase Bank (formerly Chemical Bank), as Senior Trustee
(incorporated by reference to Exhibit 4(g) to Compass Bancshares, Inc.s Registration
Statement on Form S-3, Registration No. 33-61018, filed with the Commission)
 -34-




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##### Table of Contents



Exhibits  continued
 (b)
    
    Form of Indenture between Compass Bancshares, Inc. (formerly Central Bancshares
of the South, Inc.) and JPMorgan Chase Bank (formerly Chemical Bank), as Subordinated
Trustee (incorporated by reference to Exhibit 4(f) to Compass Bancshares, Inc.s
Registration Statement on Form S-3, Registration No. 33-61018, filed with the
Commission)
 (10)
    
    Material Contracts
 (a)
    
    Compass Bancshares, Inc., 1996 Long Term Incentive Plan (incorporated by
reference to Exhibit 4(g) to Compass Bancshares, Inc.s Registration Statement on Form
S-8, Registration No. 333-15117, filed October 30, 1996 with the Commission) *(b)
    
    Compass Bancshares, Inc., 1999 Omnibus Incentive Compensation Plan
(incorporated by reference to Exhibit 10(a) to Compass Bancshares, Inc.s Registration
Statement on Form S-8, Registration No. 333-86455, filed September 2, 1999 with the
Commission) *(c)
    
    Employment Agreement, dated December 14, 1994, between Compass Bancshares, Inc.
and D. Paul Jones, Jr. (incorporated by reference to Exhibit 10(e) to Compass
Bancshares, Inc.s March 31, 2000 Form 10-Q, file number 000-06032, filed May 15, 2000
with the Commission) *(d)
    
    Employment Agreement, dated December 14, 1994, between Compass Bancshares, Inc.
and Garrett R. Hegel (incorporated by reference to Exhibit 10(g) to Compass Bancshares,
Inc.s March 31, 2000 Form 10-Q, file number 000-06032, filed May 15, 2000 with the
Commission) *(e)
    
    Employment Agreement, dated November 24, 1997, between Compass Bancshares, Inc.
and James D. Barri (incorporated by reference to Exhibit 10(j) to Compass Bancshares,
Inc.s March 31, 2000 Form 10-Q, file number 000-06032, filed May 15, 2000 with the
Commission) *(f)
    
    Employment Agreement, dated December 14, 1994, between Compass Bancshares, Inc.
and G. Ray Stone (incorporated by reference to Exhibit 10(i) to Compass Bancshares,
Inc.s Registration Statement on Form S-4, Registration No. 333-15373, filed November
1, 1996 with the Commission) *(g)
    
    Employment Agreement, dated March 1, 1998, between Compass Bancshares, Inc. and
Clayton D. Pledger (incorporated by reference to Exhibit 10(g) to Compass Bancshares,
Inc.s December 31, 2001 Form 10-K, file number 000-06032, filed March 11, 2002 with
the Commission) *(h)
    
    First Amendment to Employment Agreement, dated March 31, 1997, between Compass
Bancshares, Inc. and D. Paul Jones, Jr. (incorporated by reference to Exhibit 10(h) to
Compass Bancshares, Inc.s December 31, 2004 Form 10-K, file number 001-31272, filed
February 28, 2005 with the Commission) *(i)
    
    First Amendment to Employment Agreement, dated April 14, 1997, between Compass
Bancshares, Inc. and Garrett R. Hegel (incorporated by reference to Exhibit 10(i) to
Compass Bancshares, Inc.s December 31, 2004 Form 10-K, file number 001-31272, filed
February 28, 2005 with the Commission) *(j)
    
    First Amendment to Employment Agreement, dated April 18, 1997, between Compass
Bancshares, Inc. and G. Ray Stone (incorporated by reference to Exhibit 10(j) to
Compass Bancshares, Inc.s December 31, 2004 Form 10-K, file number 001-31272, filed
February 28, 2005 with the Commission) *(k)
    
    Amendment to Employment Agreement, dated October 12, 2001, between Compass
Bancshares, Inc. and D. Paul Jones, Jr. (incorporated by reference to Exhibit 10(i) to
Compass Bancshares, Inc.s December 31, 2001 Form 10-K, file number 000-06032, filed
March 11, 2002 with the Commission) *(l)
    
    Amendment to Employment Agreement, dated October 12, 2001, between Compass
Bancshares, Inc. and Garrett R. Hegel (incorporated by reference to Exhibit 10(j) to
Compass Bancshares, Inc.s December 31, 2001 Form 10-K, file number 000-06032, filed
March 11, 2002 with the Commission) *(m)
    
    Amendment to Employment Agreement, dated October 12, 2001, between Compass
Bancshares, Inc. and James D. Barri (incorporated by reference to Exhibit 10(l) to
Compass Bancshares, Inc.s December 31, 2001 Form 10-K, file number 000-06032, filed
March 11, 2002 with the Commission) *
 -35-




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##### Table of Contents



Exhibits  continued
 (n)
    
    Amendment to Employment Agreement, dated October 12, 2001, between Compass
Bancshares, Inc. and Clayton D. Pledger (incorporated by reference to Exhibit 10(h) to
Compass Bancshares, Inc.s December 31, 2001 Form 10-K, file number 000-06032, filed
March 11, 2002 with the Commission) *(o)
    
    Amendment to Employment Agreement, dated October 12, 2001, between Compass
Bancshares, Inc. and G. Ray Stone (incorporated by reference to Exhibit 10(o) to
Compass Bancshares, Inc.s December 31, 2004 Form 10-K, file number 001-31272, filed
February 28, 2005 with the Commission) *(p)
    
    Compass Bancshares, Inc., Employee Stock Ownership Benefit Restoration Plan, as
amended and restated as of January 1, 2003. *(q)
    
    Compass Bancshares, Inc., Supplemental Retirement Plan, dated May 1, 1997
(incorporated by reference to Exhibit 10(k) to Compass Bancshares, Inc.s December 31,
1999 Form 10-K, file number 000-06032, filed March 23, 2000 with the Commission) *(r)
    
    Deferred Compensation Plan for Compass Bancshares, Inc., as amended and
restated as of December 1, 2003. *(s)
    
    Compass Bancshares, Inc. Special Supplemental Retirement Plan, dated May 1,
1997. (Amended and Restated as of February 27, 2000) (incorporated by reference to
Exhibit 10(n) to Compass Bancshares, Inc.s March 31, 2000 Form 10-Q, file number
000-06032, filed May 15, 2000 with the Commission) *(t)
    
    Amendment Number One to the Compass Bancshares, Inc., Special Supplemental
Retirement Plan, dated April 26, 2000 (incorporated by reference to Exhibit 10(q) to
Compass Bancshares, Inc.s December 31, 2001 Form 10-K, file 000-06032, filed March 11,
2002 with the Commission) *(u)
    
    Amendment Number Two to the Compass Bancshares, Inc., Special Supplemental
Retirement Plan, dated February 9, 2001 (incorporated by reference to Exhibit 10(r) to
Compass Bancshares, Inc.s December 31, 2001 Form 10-K, file number 000-06032, filed
March 11, 2002 with the Commission) *(v)
    
    Compass Bancshares, Inc., Director & Executive Stock Purchase Plan (formerly
known as Monthly Investment Plan), as Amended and Restated, effective as of September
1, 2001 (incorporated by reference to Exhibit 4.8 to Compass Bancshares, Inc.s
Registration Statement on Form S-8, Registration No. 333-26884, filed July 31, 2001
with the Commission) *(w)
    
    Compass Bancshares, Inc. 2002 Incentive Compensation Plan (incorporated by
reference to Exhibit 4.9 to Compass Bancshares, Inc.s Registration Statement on Form
S-8, Registration No. 333-90806, filed June 19, 2002 with the Commission) *(x)
    
    Form of Performance Contingent Restricted Stock Agreement (incorporated by
reference to Exhibit 10.1 to Compass Bancshares, Inc.s Form 8-K, file number
001-31272, filed February 22, 2005 with the Commission) *(y)
    
    Form of Amendment Number One to the Performance Contingent Restricted Stock
Award Agreement (incorporated by reference to Compass Bancshares, Inc.s Form 8-K, file
number 001-31272, filed October 21, 2005 with the Commission) *(z)
    
    Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit
10.2 to Compass Bancshares, Inc.s Form 8-K, file number 001-31272, filed February 22,
2005 with the Commission) *(aa)
    
    Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit
10.3 to Compass Bancshares, Inc.s Form 8-K, file number 001-31272, filed February 22,
2005 with the Commission) *(ab)
    
    Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit
10.4 to Compass Bancshares, Inc.s Form 8-K, file number 001-31272, filed February 22,
2005 with the Commission) *(ac)
    
    Executive Officer Compensation Arrangements (incorporated by reference to Exhibit 10(y)
to Compass Bancshares, Inc.s March 31, 2005 Form 10-Q, file number 001-31272, filed
May 6, 2005 with the Commission) *
 -36-




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##### Table of Contents



Exhibits  continued
 (ad)
    
    Form of Stock Option Agreement for Non-Employee Directors (incorporated by
reference to Exhibit 10(cc) to Compass Bancshares, Inc.s March 31, 2005 Form 10-Q,
file number 001-31272, filed May 6, 2005 with the Commission) *(ae)
    
    Distribution Agreement, dated March 13, 2006, among Compass Bank and Compass
Bacshares, inc., and Citigroup Global Markets Inc., Keefe, Bruyette & Woods, Inc.
Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Sandler
ONeill & Partners, L.P. as agents(af)
    
    Issuing and Paying Agency Agreement, dated March 13, 2006, between Compass
Bank, as issuer, and Compass Bank, as issuing and paying agent(31)(a)
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by D. Paul
Jones, Jr., Chief Executive Officer(31)(b)
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Garrett. R.
Hegel, Chief Financial Officer(32)(a)
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 by D. Paul Jones, Jr., Chief Executive Officer(32)(b)
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 by Garrett R. Hegel, Chief Financial Officer
  
 *
    
    Management contract or compensatory plan or arrangement -37-




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
 SIGNATURES
  May 8,
2005
       Date
    
    By:
    

/s/Garrett R. Hegel

Garrett R. HegelChief Financial Officer
 -38-