##### 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, 2007
 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
 (COMPASS BANCSHARES, INC. LOGO)
 (Exact name of registrant as specified in its charter)
 Delaware
    
    63-0593897(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
 15 South 20th Street
Birmingham, Alabama 35233
 
  (205) 297-3000
 
  þ o
  þ o o
 o þ
  Class
    
    Outstanding at April 30,2007Common Stock, $2 Par Value
    
    131,709,663




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##### Table of Contents



PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006
    
    
    3Consolidated Statements of Income for the Three Months Ended March 31, 2007 and 2006
    
    
    4Consolidated Statements of Changes In Shareholders Equity for the Three Months Ended
March 31, 2007 and 2006
    
    
    5Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006
    
    
    6Notes to Consolidated Financial Statements (Unaudited)
    
    
    8Item 2 Managements Discussion and Analysis of Results of Operations and Financial Condition
    
    
    25Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 4 Controls and Procedures
    
    
    33PART II. OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    34Item 1A Risk Factors
    
    
    34Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    34Item 6 Exhibits
    
    
    35EX-31.(A) SECTION 302 CERTIFICATION OF THE CEOEX-31.(B) SECTION 302 CERTIFICATION OF THE CFOEX-32.(A) SECTION 906 CERTIFICATION OF THE CEOEX-32.(B) SECTION 906 CERTIFICATION OF THE 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, 2007
    
    
    December 31, 2006(Unaudited)AssetsCash and due from banks
    
    $
    702,240
    
    
    $
    738,168Federal funds sold and securities purchased
under agreements to resell
    
    
    21,298
    
    
    
    24,423Trading account assets
    
    
    100,329
    
    
    
    86,706Investment securities available for sale
    
    
    4,684,468
    
    
    
    4,687,782Investment securities held to maturity (fair value of
$1,848,202 and $1,914,863 for 2007 and 2006, respectively)
    
    
    1,882,904
    
    
    
    1,953,166Loans
    
    
    24,981,351
    
    
    
    24,665,273Allowance for loan losses
    
    
    (292,282
    )
    
    
    (291,050
    )Net loans
    
    
    24,689,069
    
    
    
    24,374,223Premises and equipment, net
    
    
    582,353
    
    
    
    589,264Bank owned life insurance
    
    
    472,704
    
    
    
    474,664Goodwill
    
    
    688,666
    
    
    
    677,314Other assets
    
    
    567,662
    
    
    
    594,045Total assets
    
    $
    34,391,693
    
    
    $
    34,199,755Liabilities and Shareholders EquityDeposits:Noninterest bearing
    
    $
    6,454,508
    
    
    $
    6,459,669Interest bearing
    
    
    17,576,531
    
    
    
    16,585,860Total deposits
    
    
    24,031,039
    
    
    
    23,045,529Federal funds purchased and securities sold under
agreements to repurchase
    
    
    3,227,207
    
    
    
    3,179,351Other short-term borrowings
    
    
    277,920
    
    
    
    1,242,963FHLB and other borrowings
    
    
    3,503,276
    
    
    
    3,511,601Accrued expenses and other liabilities
    
    
    420,477
    
    
    
    396,177Total liabilities
    
    
    31,459,919
    
    
    
    31,375,621Shareholders equity:Preferred stock (25,000,000 shares authorized)
    
    
    
    
    
    
    Common stock of $2 par value:Authorized  300,000,000 shares in 2007 and 2006Issued  136,877,386 shares in 2007 and
135,603,484 shares in 2006
    
    
    273,755
    
    
    
    271,207Treasury stock, at cost (5,502,690 shares in 2007 and
5,520,533 shares in 2006)
    
    
    (204,022
    )
    
    
    (201,950
    )Surplus
    
    
    469,501
    
    
    
    430,826Loans to finance stock purchases
    
    
    (3,591
    )
    
    
    (2,177
    )Accumulated other comprehensive loss
    
    
    (38,542
    )
    
    
    (53,932
    )Retained earnings
    
    
    2,434,673
    
    
    
    2,380,160Total shareholders equity
    
    
    2,931,774
    
    
    
    2,824,134Total liabilities and shareholders equity
    
    $
    34,391,693
    
    
    $
    34,199,755
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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Income
   Three Months EndedMarch 31,2007
    
    
    2006Interest income:Interest and fees on loans
    
    $
    466,277
    
    
    $
    372,380Interest on investment securities available for sale
    
    
    54,464
    
    
    
    51,165Interest on investment securities held to maturity
    
    
    22,016
    
    
    
    25,881Interest on federal funds sold and securities purchased under
agreements to resell
    
    
    550
    
    
    
    529Interest on trading account assets
    
    
    349
    
    
    
    243Total interest income
    
    
    543,656
    
    
    
    450,198Interest expense:Interest on deposits
    
    
    159,423
    
    
    
    99,301Interest on federal funds purchased and securities sold under
agreements to repurchase
    
    
    44,966
    
    
    
    37,277Interest on other short-term borrowings
    
    
    10,147
    
    
    
    4,501Interest on FHLB and other borrowings
    
    
    50,719
    
    
    
    48,858Total interest expense
    
    
    265,255
    
    
    
    189,937Net interest income
    
    
    278,401
    
    
    
    260,261Provision for loan losses
    
    
    20,045
    
    
    
    17,112Net interest income after provision for loan losses
    
    
    258,356
    
    
    
    243,149Noninterest income:Service charges on deposit accounts
    
    
    75,930
    
    
    
    72,168Card and merchant processing fees
    
    
    28,188
    
    
    
    25,707Insurance commissions
    
    
    16,579
    
    
    
    17,604Retail investment sales
    
    
    11,845
    
    
    
    9,420Asset management fees
    
    
    9,524
    
    
    
    7,748Corporate and correspondent investment sales
    
    
    7,046
    
    
    
    5,229Bank owned life insurance
    
    
    5,333
    
    
    
    4,903Gain on prepayment of FHLB advances
    
    
    
    
    
    
    14,893Investment securities losses, net
    
    
    
    
    
    
    (14,838
    )Other
    
    
    24,359
    
    
    
    22,510Total noninterest income
    
    
    178,804
    
    
    
    165,344Noninterest expense:Salaries, benefits and commissions
    
    
    152,727
    
    
    
    136,010Equipment
    
    
    23,037
    
    
    
    21,547Net occupancy
    
    
    19,277
    
    
    
    17,217Professional services
    
    
    14,615
    
    
    
    14,904Marketing
    
    
    12,095
    
    
    
    12,264Communications
    
    
    5,105
    
    
    
    5,622Amortization of intangibles
    
    
    2,797
    
    
    
    1,490Merger and integration
    
    
    2,035
    
    
    
    2,626Other
    
    
    33,747
    
    
    
    32,690Total noninterest expense
    
    
    265,435
    
    
    
    244,370Net income before income tax expense
    
    
    171,725
    
    
    
    164,123Income tax expense
    
    
    58,589
    
    
    
    56,214Net income
    
    $
    113,136
    
    
    $
    107,909Basic earnings per share
    
    $
    0.87
    
    
    $
    0.87Basic weighted average shares outstanding
    
    
    130,364
    
    
    
    123,839Diluted earnings per share
    
    $
    0.85
    
    
    $
    0.85Diluted weighted average shares outstanding
    
    
    132,781
    
    
    
    126,793Dividends declared per share
    
    $
    0.43
    
    
    $
    0.39
  - 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, 2005
    
    $
    267,900
    
    
    $
    (377,327
    )
    
    $
    300,375
    
    
    $
    2,121,310
    
    
    $
    (63,156
    )
    
    $
    (13,073
    )
    
    $
    2,236,029Net 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
    )Adoption of SFAS No. 123R
    
    
    
    
    
    
    
    
    
    
    (11,811
    )
    
    
    
    
    
    
    
    
    
    
    11,811
    
    
    
    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
    )
    
    $
    2,557,940Balance, December 31, 2006
    
    $
    271,207
    
    
    $
    (201,950
    )
    
    $
    430,826
    
    
    $
    2,380,160
    
    
    $
    (53,932
    )
    
    $
    (2,177
    )
    
    $
    2,824,134Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,136
    
    
    
    
    
    
    
    
    
    
    
    113,136
    
    
    $
    113,136Net change in unrealized losses on
securities available for sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,931
    
    
    
    
    
    
    
    12,931
    
    
    
    12,931Net
change in accumulated gains (losses) on cash-
flow hedging instruments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,316
    
    
    
    
    
    
    
    2,316
    
    
    
    2,316Net change in additional minimum pension
liability, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143
    
    
    
    
    
    
    
    143
    
    
    
    143Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    128,526Common dividends declared ($0.43 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (56,453
    )
    
    
    
    
    
    
    
    
    
    
    (56,453
    )Adoption of FIN No. 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,621
    )
    
    
    
    
    
    
    
    
    
    
    (1,621
    )Exercise of stock options and other issuances
    
    
    2,179
    
    
    
    
    
    
    
    29,227
    
    
    
    (549
    )
    
    
    
    
    
    
    
    
    
    
    30,857Issuances of restricted stock, net of cancellations
    
    
    369
    
    
    
    361
    
    
    
    (730
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Advances on loans to finance stock purchases,
net of repayments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,414
    )
    
    
    (1,414
    )Issuance of treasury stock for acquisitions and
stock options
    
    
    
    
    
    
    6,154
    
    
    
    4,697
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,851Amortization of restricted stock and stock
option grants
    
    
    
    
    
    
    
    
    
    
    5,481
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,481Purchase of treasury stock
    
    
    
    
    
    
    (8,587
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,587
    )Balance, March 31, 2007
    
    $
    273,755
    
    
    $
    (204,022
    )
    
    $
    469,501
    
    
    $
    2,434,673
    
    
    $
    (38,542
    )
    
    $
    (3,591
    )
    
    $
    2,931,774
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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
   Three Months EndedMarch 31,2007
    
    
    2006Operating Activities:Net income
    
    $
    113,136
    
    
    $
    107,909Adjustments to reconcile net income to cash provided by operations:Depreciation and amortization
    
    
    26,781
    
    
    
    24,460Amortization of stock-based compensation
    
    
    5,481
    
    
    
    1,178Accretion of discount and loan fees
    
    
    (5,258
    )
    
    
    (2,798
    )Provision for loan losses
    
    
    20,045
    
    
    
    17,112Net change in trading account assets
    
    
    (10,714
    )
    
    
    (8,282
    )Net loss on sale of investment securities available for sale
    
    
    
    
    
    
    14,838Gain on prepayment of FHLB advances
    
    
    
    
    
    
    (14,893
    )Increase in other assets
    
    
    (4,833
    )
    
    
    (1,349
    )Increase in accrued expenses and other liabilities
    
    
    40,501
    
    
    
    41,581Net cash provided by operating activities
    
    
    185,139
    
    
    
    179,756Investing Activities:Proceeds from prepayments, maturities and calls of
investment securities held to maturity
    
    
    70,532
    
    
    
    88,122Purchases of investment securities held to maturity
    
    
    
    
    
    
    (2,555
    )Proceeds from sales of investment securities available for sale
    
    
    114,197
    
    
    
    733,979Proceeds from prepayments, maturities and calls of
investment securities available for sale
    
    
    244,065
    
    
    
    259,440Purchases of investment securities available for sale
    
    
    (335,848
    )
    
    
    (563,853
    )Net decrease (increase) in federal funds sold and securities
purchased under agreements to resell
    
    
    3,125
    
    
    
    (27,894
    )Net increase in loan portfolio
    
    
    (340,331
    )
    
    
    (554,112
    )Net cash paid in acquisitions
    
    
    
    
    
    
    (190,071
    )Purchases of premises and equipment, net
    
    
    (11,447
    )
    
    
    (18,774
    )Proceeds from sales of other real estate owned
    
    
    6,752
    
    
    
    2,675Net cash used by investing activities
    
    
    (248,955
    )
    
    
    (273,043
    )
  - 6 -




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows  Continued
 Three Months EndedMarch 31,2007
    
    
    2006Financing Activities:Net increase in demand deposits, NOW accounts
and savings accounts
    
    
    479,189
    
    
    
    810,454Net increase (decrease) in time deposits
    
    
    505,748
    
    
    
    (541,027
    )Net increase in federal funds purchased and securities sold
under agreements to repurchase
    
    
    47,856
    
    
    
    324,561Net decrease in other short-term borrowings
    
    
    (965,043
    )
    
    
    (388,229
    )Proceeds from FHLB and other borrowings
    
    
    
    
    
    
    546,441Repayment of FHLB and other borrowings
    
    
    (5,424
    )
    
    
    (660,377
    )Common dividends paid
    
    
    (56,271
    )
    
    
    (48,689
    )Purchase of treasury stock
    
    
    (8,587
    )
    
    
    (1,409
    )Issuance of treasury stock for stock options
    
    
    977
    
    
    
    1,302Repayment of loans to finance stock purchases
    
    
    916
    
    
    
    148Proceeds from exercise of stock options
    
    
    28,527
    
    
    
    10,265Net cash provided by financing activities
    
    
    27,888
    
    
    
    53,440Net decrease in cash and due from banks
    
    
    (35,928
    )
    
    
    (39,847
    )Cash and due from banks at beginning of period
    
    
    738,168
    
    
    
    805,556Cash and due from banks at end of period
    
    $
    702,240
    
    
    $
    765,709Schedule of noncash investing and financing activities:Transfers of loans to other real estate owned
    
    $
    6,525
    
    
    $
    2,735Loans to facilitate the sale of other real estate owned
    
    
    
    
    
    
    375Loans to finance stock purchases
    
    
    2,330
    
    
    
    940Change in unrealized loss on available for sale investment
securities
    
    
    19,885
    
    
    
    (13,385
    )Issuance of restricted stock, net of cancellations
    
    
    14,129
    
    
    
    Treasury stock exchanged for acquisition earnouts
    
    
    9,874
    
    
    
    6,081Adoption of FIN 48
    
    
    1,621
    
    
    
    Business combinations and divestitures:Common stock issued from treasury stock
    
    
    
    
    
    
    253,992Assets acquired
    
    
    
    
    
    
    2,012,632Liabilities assumed
    
    
    
    
    
    
    1,568,569
  - 7 -




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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
 Website Availability of Reports Filed with the SEC
 www.compassbank.com
 NOTE 2  Business Combinations
 BBVA Transaction
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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
 TexasBank Acquisition
    Assets:Cash and due from banks
    
    $
    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
  Three Months 
EndedMarch 31,2006Interest income
    
    $
    477,622Interest expense
    
    
    198,362Net interest income
    
    
    279,260Provision for loan losses
    
    
    17,628Net interest income after provision for loan losses
    
    
    261,632Noninterest income
    
    
    170,384Noninterest expense
    
    
    283,784Net income before taxes
    
    
    148,232Income tax
    
    
    51,846Net income
    
    $
    96,386Basic EPS
    
    $
    0.75Diluted EPS
    
    $
    0.73
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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
  NOTE 3  Capital Securities and Preferred Stock
 Capital Securities
  Consolidation of Variable Interest Entities, an interpretation
of ARB No. 51
   Class B Preferred Stock
   - 11 -




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COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
  Maturity
    
    
    March 31,
    
    
    December 31,Dates
    
    
    2007
    
    
    2006(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
    
    
    
    25,774Fair value of and unamortized fees on hedged
capital securities
    
    
    
    
    
    
    332
    
    
    
    1,030Class B Preferred Stock
    
    
    
    
    
    
    18,164
    
    
    
    18,149Total Capital Securities and Preferred Stock
    
    
    
    
    
    $
    456,642
    
    
    $
    457,325
 
 *
    
    Majority of amounts qualify for Tier I Capital NOTE 4  Earnings Per Share
 Three Months EndedMarch 31,2007
    
    
    2006(In Thousands, Except Per Share Data)BASIC EARNINGS PER SHARE:Net income
    
    $
    113,136
    
    
    $
    107,909Weighted average shares outstanding
    
    
    130,364
    
    
    
    123,839Basic earnings per share
    
    $
    0.87
    
    
    $
    0.87DILUTED EARNINGS PER SHARE:Net income
    
    $
    113,136
    
    
    $
    107,909Weighted average basic shares outstanding
    
    
    130,364
    
    
    
    123,839Net 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
    
    
    2,417
    
    
    
    2,954Weighted average diluted shares outstanding
    
    
    132,781
    
    
    
    126,793Diluted earnings per share
    
    $
    0.85
    
    
    $
    0.85
 NOTE 5  Segment Information
    - 12 -




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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, 2007
(in Thousands)
 CorporateCorporate
    
    
    Retail
    
    
    Wealth
    
    
    
    
    
    
    Support andBanking
    
    
    Banking
    
    
    Management
    
    
    Treasury
    
    
    Other
    
    
    ConsolidatedIncome StatementNet interest income
    
    $
    120,428
    
    
    $
    121,111
    
    
    $
    15,152
    
    
    $
    8,655
    
    
    $
    13,055
    
    
    $
    278,401Noninterest income
    
    
    40,520
    
    
    
    118,145
    
    
    
    11,731
    
    
    
    7,232
    
    
    
    1,176
    
    
    
    178,804Noninterest expense
    
    
    62,827
    
    
    
    123,645
    
    
    
    14,140
    
    
    
    4,669
    
    
    
    60,154
    
    
    
    265,435Segment income (loss)
    
    $
    98,121
    
    
    $
    115,611
    
    
    $
    12,743
    
    
    $
    11,218
    
    
    $
    (45,923
    )
    
    
    191,770Provision for loan losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,045Net income before income
tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    171,725Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,589Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    113,136Balance SheetAverage assets
    
    $
    14,379,310
    
    
    $
    9,361,563
    
    
    $
    1,642,473
    
    
    $
    7,162,408
    
    
    $
    1,736,550
    
    
    $
    34,282,304Average loans
    
    
    14,345,518
    
    
    
    9,170,240
    
    
    
    1,639,319
    
    
    
    
    
    
    
    (149,710
    )
    
    
    25,005,367Average deposits
    
    
    5,892,255
    
    
    
    13,605,960
    
    
    
    1,346,678
    
    
    
    2,492,515
    
    
    
    (117,481
    )
    
    
    23,219,927Period-end assets
    
    $
    14,500,499
    
    
    $
    9,475,089
    
    
    $
    1,680,254
    
    
    $
    7,221,613
    
    
    $
    1,514,238
    
    
    $
    34,391,693Period-end loans
    
    
    14,253,005
    
    
    
    9,206,647
    
    
    
    1,663,123
    
    
    
    
    
    
    
    (141,424
    )
    
    
    24,981,351Period-end deposits
    
    
    6,312,807
    
    
    
    13,991,731
    
    
    
    1,383,605
    
    
    
    2,458,156
    
    
    
    (115,260
    )
    
    
    24,031,039
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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
 
 CorporateCorporate
    
    
    Retail
    
    
    Wealth
    
    
    
    
    
    
    Support andBanking
    
    
    Banking
    
    
    Management
    
    
    Treasury
    
    
    Other
    
    
    ConsolidatedIncome StatementNet interest income
    
    $
    104,500
    
    
    $
    116,415
    
    
    $
    14,893
    
    
    $
    11,566
    
    
    $
    12,887
    
    
    $
    260,261Noninterest income
    
    
    36,975
    
    
    
    109,862
    
    
    
    10,306
    
    
    
    7,654
    
    
    
    547
    
    
    
    165,344Noninterest expense
    
    
    56,828
    
    
    
    118,318
    
    
    
    14,024
    
    
    
    5,517
    
    
    
    49,683
    
    
    
    244,370Segment income (loss)
    
    $
    84,647
    
    
    $
    107,959
    
    
    $
    11,175
    
    
    $
    13,703
    
    
    $
    (36,249
    )
    
    
    181,235Provision for loan losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,112Net income before income
tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164,123Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,214Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    107,909Balance SheetAverage assets
    
    $
    11,702,960
    
    
    $
    8,870,351
    
    
    $
    1,487,845
    
    
    $
    7,363,532
    
    
    $
    1,491,324
    
    
    $
    30,916,012Average loans
    
    
    11,660,714
    
    
    
    8,688,140
    
    
    
    1,487,706
    
    
    
    
    
    
    
    (85,457
    )
    
    
    21,751,103Average deposits
    
    
    4,889,974
    
    
    
    11,366,171
    
    
    
    1,246,262
    
    
    
    2,838,813
    
    
    
    36,056
    
    
    
    20,377,276Period-end assets
    
    $
    12,184,078
    
    
    $
    8,927,743
    
    
    $
    1,531,503
    
    
    $
    7,193,790
    
    
    $
    2,945,065
    
    
    $
    32,782,179Period-end loans
    
    
    11,980,425
    
    
    
    8,669,080
    
    
    
    1,519,703
    
    
    
    
    
    
    
    1,138,906
    
    
    
    23,308,114Period-end deposits
    
    
    5,150,190
    
    
    
    11,911,827
    
    
    
    1,312,758
    
    
    
    2,359,239
    
    
    
    1,394,495
    
    
    
    22,128,509
 NOTE 6  Loans and Allowance for Loan Losses
  March 31, 
2007
    
    
    December 31, 
2006(in Thousands)Commercial loans:Commercial, financial and agricultural
    
    $
    4,397,812
    
    
    $
    4,376,572Real estate  construction
    
    
    6,568,936
    
    
    
    6,365,283Commercial real estate  mortgage
    
    
    4,217,519
    
    
    
    4,266,776Total commercial loans
    
    
    15,184,267
    
    
    
    15,008,631Consumer loans:Residential real estate  mortgage
    
    
    2,573,531
    
    
    
    2,454,565Equity lines of credit
    
    
    1,826,798
    
    
    
    1,786,211Equity loans
    
    
    1,374,808
    
    
    
    1,382,779Credit card
    
    
    485,650
    
    
    
    505,216Consumer  direct
    
    
    425,226
    
    
    
    409,277Consumer  indirect
    
    
    3,111,071
    
    
    
    3,118,594Total consumer loans
    
    
    9,797,084
    
    
    
    9,656,642Total
    
    $
    24,981,351
    
    
    $
    24,665,273
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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
  Three Months Ended March 31,2007
    
    
    2006(in Thousands)Balance at beginning of period
    
    $
    291,050
    
    
    $
    267,173Add: Provision charged to income
    
    
    20,045
    
    
    
    17,112Allowance for loans acquired
    
    
    
    
    
    
    15,258Deduct: Net charge-offs (recoveries):Commercial, financial and agricultural
    
    
    4,144
    
    
    
    1,628Real estate  construction
    
    
    89
    
    
    
    89Commercial real estate  mortgage
    
    
    39
    
    
    
    1,099Residential real estate  mortgage
    
    
    204
    
    
    
    180Equity lines of credit
    
    
    294
    
    
    
    461Equity loans
    
    
    152
    
    
    
    248Credit card
    
    
    6,334
    
    
    
    4,827Consumer  direct
    
    
    2,136
    
    
    
    878Consumer  indirect
    
    
    5,421
    
    
    
    7,676Total net charge-offs
    
    
    18,813
    
    
    
    17,086Balance at end of period
    
    $
    292,282
    
    
    $
    282,457
  March 31,
    
    
    December 31,2007
    
    
    2006(in Thousands)Nonaccrual loans
    
    $
    73,786
    
    
    $
    53,014Renegotiated loans
    
    
    8,988
    
    
    
    3,258Total nonperforming loans
    
    
    82,774
    
    
    
    56,272Other real estate
    
    
    17,079
    
    
    
    17,105Total nonperforming assets
    
    $
    99,853
    
    
    $
    73,377
 NOTE 7  Securitized Assets
   - 15 -




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
 NOTE 8  Investments
  March 31, 2007Securities 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
    
    $
    
    
    
    $
    
    
    
    $
    9,963
    
    
    $
    56
    
    
    $
    9,963
    
    
    $
    56Mortgage-backed pass-through securities
    
    
    134,312
    
    
    
    493
    
    
    
    345,601
    
    
    
    9,153
    
    
    
    479,913
    
    
    
    9,646Collateralized mortgage obligations
    
    
    177,034
    
    
    
    481
    
    
    
    2,261,815
    
    
    
    41,921
    
    
    
    2,438,849
    
    
    
    42,402States and political subdivisions
    
    
    12,772
    
    
    
    63
    
    
    
    27,510
    
    
    
    517
    
    
    
    40,282
    
    
    
    580Total
    
    $
    324,118
    
    
    $
    1,037
    
    
    $
    2,644,889
    
    
    $
    51,647
    
    
    $
    2,969,007
    
    
    $
    52,684
 December 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
    
    $
    10,006
    
    
    $
    2
    
    
    $
    9,910
    
    
    $
    89
    
    
    $
    19,916
    
    
    $
    91Mortgage-backed pass-through securities
    
    
    203,198
    
    
    
    908
    
    
    
    364,104
    
    
    
    10,622
    
    
    
    567,302
    
    
    
    11,530Collateralized mortgage obligations
    
    
    352,743
    
    
    
    1,581
    
    
    
    2,385,800
    
    
    
    55,641
    
    
    
    2,738,543
    
    
    
    57,222States and political subdivisions
    
    
    12,214
    
    
    
    75
    
    
    
    28,892
    
    
    
    527
    
    
    
    41,106
    
    
    
    602Total
    
    $
    578,161
    
    
    $
    2,566
    
    
    $
    2,788,706
    
    
    $
    66,879
    
    
    $
    3,366,867
    
    
    $
    69,445
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##### Table of Contents



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, 2007
    
    December 31, 2006Other
    
    
    
    
    
    OtherThan
    
    
    
    
    
    ThanTrading
    
    Trading
    
    Trading
    
    Trading(in Thousands)Forward and futures contracts
    
    $
    402,180
    
    
    $
    37,224
    
    
    $
    354,064
    
    
    $
    19,538Interest rate swap agreements:Pay fixed versus receive float
    
    
    1,813,976
    
    
    
    
    
    
    
    1,892,968
    
    
    
    Receive fixed versus pay float
    
    
    1,823,801
    
    
    
    2,075,519
    
    
    
    1,892,968
    
    
    
    2,160,382Pay float versus receive float
    
    
    22,000
    
    
    
    
    
    
    
    22,000
    
    
    
    Written options
    
    
    635,451
    
    
    
    44,511
    (1)
    
    
    601,314
    
    
    
    23,274
    (1)Purchased options
    
    
    605,451
    
    
    
    1,500,000
    
    
    
    581,314
    
    
    
    1,500,000
 
 (1)
    
    Written options classified as other than trading represent interest rate loan commitments
related to the Companys mortgage banking activities.   March 31, 2007
    
    December 31, 2006Notional
    
    Carrying
    
    Notional
    
    CarryingValue
    
    Value
    
    Value
    
    Value(in Thousands)Cash Flow Hedges:Interest rate swap agreements
    
    $
    850,000
    
    
    $
    966
    
    
    $
    850,000
    
    
    $
    (348
    )Purchased options
    
    
    1,500,000
    
    
    
    27,253
    
    
    
    1,500,000
    
    
    
    29,213Fair Value Hedges:Interest rate swap agreements
    
    
    1,225,519
    
    
    
    3,296
    
    
    
    1,310,382
    
    
    
    9,777Forward contracts (1)
    
    
    37,224
    
    
    
    (81
    )
    
    
    19,538
    
    
    
    37
 
 (1)
    
    Derivatives related to the Companys mortgage banking activities Interest-Rate Risk
  Fair-Value Hedges
  - 17 -




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##### Table of Contents



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




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
 NOTE 10  Shareholders Equity
    NOTE 11  Goodwill and Other Acquired Intangible Assets
    March 31, 2007Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    ValueAmortizing intangible assets:Core deposit intangibles
    
    $
    67,832
    
    
    $
    (42,411
    )
    
    $
    25,421Other customer intangibles
    
    
    44,827
    
    
    
    (17,895
    )
    
    
    26,932Total amortizing intangible assets
    
    $
    112,659
    
    
    $
    (60,306
    )
    
    $
    52,353
 December 31, 2006Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    ValueAmortizing intangible assets:Core deposit intangibles
    
    $
    67,832
    
    
    $
    (40,502
    )
    
    $
    27,330Other customer intangibles
    
    
    44,827
    
    
    
    (17,007
    )
    
    
    27,820Total amortizing intangible assets
    
    $
    112,659
    
    
    $
    (57,509
    )
    
    $
    55,150
  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 31,2007
    
    2006(in Thousands)Commitments to extend credit
    
    $
    12,655,915
    
    
    $
    12,661,226Standby and commercial letters of credit
    
    
    1,073,301
    
    
    
    1,136,411
       NOTE 13  Stock-Based Compensation
  Share-Based Payment
 - 20 -




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
   Three Months
    
    Three MonthsEnded
    
    EndedMarch 31, 2007
    
    March 31, 2006Dividend yield
    
    
    3.29
    %
    
    
    3.97
    %Expected volatility
    
    
    0.1970
    
    
    
    0.2340Risk free interest rate
    
    
    4.76
    %
    
    
    4.38
    %Expected life
    
    5.0 years
    
    5.0 yearsForfeiture rate*
    
    
    2.58
    %
    
    
    10.00
    %
 
 *
    
    Forfeiture rate represents the weighted average assumed forfeiture rate based on the
Companys actual historical forfeiture experience. The Company granted
597,349 and 5,000 stock options during the three months ended March 31, 2007
and 2006, respectively.   Weighted
    
    
    
    
    
    AggregateShares
    
    Average
    
    Contractual
    
    IntrinsicUnderlying
    
    Exercise
    
    Term
    
    ValueOptions
    
    Price
    
    (Years)
    
    (In Thousands)Outstanding, beginning of the period
    
    
    7,012,176
    
    
    $
    34.21Granted
    
    
    597,349
    
    
    
    60.11Exercised
    
    
    (1,096,811
    )
    
    
    28.74Cancelled
    
    
    (12,434
    )
    
    
    44.79Outstanding, end of the period
    
    
    6,500,280
    
    
    
    37.45
    
    
    
    6.38
    
    
    $
    203,765Exercisable, end of the period
    
    
    4,837,960
    
    
    
    31.98
    
    
    
    5.47
    
    
    $
    178,138
   - 21 -




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
   Restricted
    
    Grant DateStock
    
    Fair ValueNonvested, beginning of the period
    
    
    502,825
    
    
    $
    55.35Granted
    
    
    193,331
    
    
    
    60.32Vested
    
    
    (34,369
    )
    
    
    44.28Forfeited
    
    
    (2,401
    )
    
    
    56.13Nonvested, end of the period
    
    
    659,386
    
    
    
    57.38
  NOTE 14  Defined Benefit Pension Plan
 Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans  an amendment of FASB Statements 87, 88, 106 and 132(R)
  Three Months EndedMarch 31,2007
    
    
    2006Service cost
    
    $
    1,706
    
    
    $
    1,960Interest cost
    
    
    2,714
    
    
    
    2,569Expected return on plan assets
    
    
    (3,837
    )
    
    
    (3,388
    )Amortization of prior service cost
    
    
    9
    
    
    
    8Amortization of net loss
    
    
    192
    
    
    
    830Net periodic benefit cost
    
    $
    784
    
    
    $
    1,979
  NOTE 15  Income Taxes
    - 22 -




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COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
  NOTE 16  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 Hybrid Financial Instruments
 Accounting for Certain Hybrid Financial
Instruments  an amendment of FASB Statements 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 140 Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities
 Accounting for Uncertainty in Income Taxes
 Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement 109 Accounting for Income Taxes
 - 23 -




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COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
  Fair Value Measurements
 Fair Value Measurements
 Accounting for Defined Pension and Other Postretirement Plans
 Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans  an amendment of FASB Statements 87, 88, 106 and 132(R)
 Considering the Effects of Misstatements
 Financial Statements
 Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current
Year Financial Statements
 Fair Value Option
 The Fair Value Option for Financial Assets and
Financial Liabilities, Including an amendment of FASB Statement No. 115
 - 24 -




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Item 2  Managements Discussion and Analysis of Results of Operations and Financial Condition
 Results of Operations
 Forward-Looking Information
    Overview
   Pending Acquisition
  - 25 -




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www.compassbank.com
  Net Interest Income
    - 26 -




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##### Table of Contents



April 1, 2007throughDecember 31,
    
    For the Year Ended December 31,2007
    
    2008
    
    2009
    
    Thereafter($ in Thousands)Non-trading interest rate contractsCash Flow HedgesNotional maturity
    
    $
    
    
    
    $
    500,000
    
    
    $
    350,000
    
    
    $
    1,500,000Weighted average coupon received
on maturities
    
    
    
    %
    
    
    4.88
    %
    
    
    5.32
    %
    
    
    5.12
    %Weighted average time to maturity (months)
    
    
    
    
    
    
    10
    
    
    
    29
    
    
    
    44Fair Value HedgesNotional maturity
    
    $
    332,000
    
    
    $
    
    
    
    $
    318,519
    
    
    $
    575,000Weighted average coupon received
on maturities
    
    
    6.68
    %
    
    
    
    %
    
    
    6.66
    %
    
    
    5.69
    %Weighted average time to maturity (months)
    
    
    1
    
    
    
    
    
    
    
    28
    
    
    
    193
   Three Months EndedMarch 31, 2007Change2006to
    
    
    Attributed to2007
    
    
    Volume
    
    
    Rate
    
    
    MixInterest income:Federal funds sold and securities
purchased
under agreements to resell
    
    $
    21
    
    
    $
    (75
    )
    
    $
    112
    
    
    $
    (16
    )Trading account assets
    
    
    107
    
    
    
    78
    
    
    
    22
    
    
    
    7Investment securities available for sale
    
    
    4,584
    
    
    
    (283
    )
    
    
    4,894
    
    
    
    (27
    )Investment securities held to maturity
    
    
    (3,725
    )
    
    
    (3,478
    )
    
    
    (284
    )
    
    
    37Loans
    
    
    94,499
    
    
    
    55,770
    
    
    
    33,689
    
    
    
    5,040Increase in interest income
    
    $
    95,486
    
    
    $
    52,012
    
    
    $
    38,433
    
    
    $
    5,041Interest expense:Deposits
    
    $
    60,122
    
    
    $
    20,319
    
    
    $
    33,480
    
    
    $
    6,323Federal funds purchased and securities
sold under agreements to repurchase
    
    
    7,689
    
    
    
    815
    
    
    
    6,727
    
    
    
    147Other short-term borrowings
    
    
    5,646
    
    
    
    3,677
    
    
    
    1,084
    
    
    
    885FHLB and other borrowings*
    
    
    1,861
    
    
    
    (6,543
    )
    
    
    9,703
    
    
    
    (1,299
    )Increase (decrease) in interest expense
    
    $
    75,318
    
    
    $
    18,268
    
    
    $
    50,994
    
    
    $
    6,056
 
 *
    
    Includes Capital Securities and Preferred Stock - 27 -




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Noninterest Income and Noninterest Expense
   Income Taxes
  Provision and Allowance for Loan Losses
  Credit  Nonperforming Assets and Past Due Loans
    - 28 -




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COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Allowance for Loan Losses/Nonperforming Assets
 Three Months EndedMarch 31,2007
    
    
    2006Allowance for Loan LossesBalance at beginning of period
    
    $
    291,050
    
    
    $
    267,173Add: Provision charged to income
    
    
    20,045
    
    
    
    17,112Allowance for loans acquired
    
    
    
    
    
    
    15,258Deduct: Loans charged off
    
    
    26,026
    
    
    
    25,141Loan recoveries
    
    
    (7,213
    )
    
    
    (8,055
    )Net charge-offs
    
    
    18,813
    
    
    
    17,086Balance at end of period
    
    $
    292,282
    
    
    $
    282,457Net charge-offs as a percentage of
average loans (annualized)
    
    
    0.31
    %
    
    
    0.32
    %
 March 31, 2007
    
    
    December 31, 2006Nonperforming AssetsNonaccrual loans
    
    $
    73,786
    
    
    $
    53,014Renegotiated loans
    
    
    8,988
    
    
    
    3,258Total nonperforming loans
    
    
    82,774
    
    
    
    56,272Other real estate, net
    
    
    17,079
    
    
    
    17,105Total nonperforming assets
    
    $
    99,853
    
    
    $
    73,377Accruing loans ninety days or more past due
    
    $
    19,451
    
    
    $
    18,023Other repossessed assets
    
    
    722
    
    
    
    856Allowance as a percentage of loans
    
    
    1.17
    %
    
    
    1.18
    %Total nonperforming loans as a percentage
of loans
    
    
    0.33
    
    
    
    0.23Total nonperforming assets as a percentage
of loans and ORE
    
    
    0.40
    
    
    
    0.30Accruing loans ninety days or more past due as a
percentage of loans
    
    
    0.08
    
    
    
    0.07Allowance for loan losses as a percentage of
nonperforming loans
    
    
    353.11
    
    
    
    517.22Allowance for loan losses as a percentage of
nonperforming assets
    
    
    292.71
    
    
    
    396.65
 - 29 -




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##### Table of Contents



Financial Condition
 Overview
  Assets and Funding
  Liquidity and Capital Resources
       - 30 -




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- 31 -




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##### Table of Contents



Item 3  Quantitative and Qualitative Disclosures About Market Risk
   PercentageIncrease/(Decrease)in Interest Income/ExpenseDown 100
    
    Up 100Basis Points
    
    Basis PointsMarch 31, 2007:Total net interest income sensitivity
    
    
    (0.27
    )%
    
    
    0.36
    %December 31, 2006:Total net interest income sensitivity
    
    
    (0.23
    )%
    
    
    (0.18
    )%
  - 32 -




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##### Table of Contents



Item 4  Controls and Procedures
   - 33 -




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
 
 PART II. OTHER INFORMATION
 
 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, 2007 
January 31, 2007
    
    
    135,824
    
    
    $
    59.05
    
    
    
    123,003
    
    
    
    2,798,407February 1, 2007 
February 28, 2007
    
    
    5,462
    
    
    $
    60.90
    
    
    
    
    
    
    
    2,798,407March 1, 2007 
March 31, 2007
    
    
    3,636
    
    
    $
    63.86
    
    
    
    
    
    
    
    2,798,407Total
    
    
    144,922
    
    
    $
    59.24
    
    
    
    123,003
 
 (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. - 34 -




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##### Table of Contents



Item 6  Exhibits
 (2)
    
    Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
 (a)
    
    Transaction Agreement, dated as of February 16, 2007, between Compass
Bancshares, Inc. and Banco Bilbao Vizcaya Argentaria, S.A. (incorporated by reference
to Exhibit 2.1 to Compass Bancshares, Inc.s Form 8-K, file number 001-31272, filed
February 22, 2007 with the Commission)
 (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 3.1 to Compass Bancshares,
Inc.s Registration Statement on Form S-4, Registration No. 333-129940, filed November
23, 2005 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.
333-129940, filed November 23, 2005 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 3.3 to
Compass Bancshares, Inc.s Registration Statement on Form S-4, Registration No.
333-129940, filed November 23, 2005 with the Commission)(d)
    
    Certificate of Amendment, dated November 3, 1993, to Restated Certificate of
Incorporation of Compass Bancshares, Inc. (incorporated by reference to Exhibit 3.4 to
Compass Bancshares, Inc.s Registration Statement on Form S-4, Registration No.
333-129940, filed November 23, 2005 with the Commission)(e)
    
    Certificate of Amendment, dated September 16, 1994, to Restated Certificate of
Incorporation of Compass Bancshares, Inc. (incorporated by reference to Exhibit 3.5 to
Compass Bancshares, Inc.s Registration Statement on Form S-4, Registration No.
333-129940, filed November 23, 2005 with the Commission)(f)
    
    Certificate of Amendment, dated May 15, 1998, to Restated Certificate of
Incorporation of Compass Bancshares, Inc. (incorporated by reference to Exhibit 3.6 to
Compass Bancshares, Inc.s Registration Statement on Form S-4, Registration No.
333-129940, filed November 23, 2005 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 3.7 to
Compass Bancshares, Inc.s Registration Statement on Form S-4, Registration No.
333-129940, filed November 23, 2005 with the Commission)(h)
    
    Bylaws of Compass Bancshares, Inc. as amended and restated as of March 15, 1982
and amended on February 17, 1986 and February 15, 1988 (incorporated by reference to
Exhibit 3(h) to Compass Bancshares, Inc.s June 30, 2006 Form 10-Q, file number
001-31272, filed August 8, 2006 with the Commission)
 (4)
    
    Instruments Defining the Rights of Security Holders, Including Indentures
  (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)
    
    Form of Amended and Restated Employment Agreement, effective as of January 23,
2007, between Compass Bancshares, Inc. and each executive officer of Compass
Bancshares, Inc. (incorporated by reference to Exhibit 10.8 to Compass Bancshares,
Inc.s Form 8-K, file number 001-31272, filed January 29, 2007 with the Commission) *
 - 35 -




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##### Table of Contents



Exhibits  continued
 (d)
    
    Compass Bancshares, Inc. Supplemental Retirement Plan, as amended and restated
as of January 1, 2005 (incorporated by reference to Exhibit 10(d) to Compass
Bancshares, Inc.s December 31, 2006 Form 10-K, file number 001-31272, filed February
27, 2007 with the Commission)*(e)
    
    Compass Bancshares, Inc. Special Supplemental Retirement Plan, as amended and
restated as of January 1, 2005 (incorporated by reference to Exhibit 10(e) to Compass
Bancshares, Inc.s December 31, 2006 Form 10-K, file number 001-31272, filed February
27, 2007 with the Commission)*(f)
    
    Compass Bancshares, Inc. Employee Stock Ownership Benefit Restoration Plan, as
amended and restated as of January 1, 2005 (incorporated by reference to Exhibit 10(f)
to Compass Bancshares, Inc.s December 31, 2006 Form 10-K, file number 001-31272, filed
February 27, 2007 with the Commission)*(g)
    
    Compass Bancshares, Inc. Smartinvestor Retirement Benefit Restoration Plan, as
amended and restated as of January 1, 2005 (incorporated by reference to Exhibit 10(g)
to Compass Bancshares, Inc.s December 31, 2006 Form 10-K, file number 001-31272, filed
February 27, 2007 with the Commission)*(h)
    
    Deferred Compensation Plan for Compass Bancshares, Inc., as amended and
restated as of January 1, 2005 (incorporated by reference to Exhibit 10(r) to Compass
Bancshares, Inc.s June 30, 2006 Form 10-Q, file number 001-31272, filed August 8, 2006
with the Commission) *(i)
    
    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) *(j)
    
    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) *(k)
    
    2005 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) *(l)
    
    Form of Amendment Number One to the 2005 Performance Contingent Restricted
Stock Award Agreement (incorporated by reference Exhibit 10.1 to Compass Bancshares,
Inc.s Form 8-K, file number 001-31272, filed October 21, 2005 with the Commission) *(m)
    
    2005 Form of Incentive Stock Option Agreement (D. Paul Jones, Jr.)
(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) *(n)
    
    2005 Form of Incentive Stock Option Agreement (Garrett R. Hegel, James D.
Barri, George M. Boltwood and William C. Helms) (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) *(o)
    
    Compass Bancshares, Inc. 2006 Incentive Compensation Plan (incorporated by
reference to Exhibit 4.9 to Compass Bancshares, Inc.s Registration Statement on Form
S-8, Registration No. 333-135154, filed June 20, 2006 with the Commission) *(p)
    
    2006 Form of Performance Contingent Restricted Stock Agreement (D. Paul Jones,
Jr.) (incorporated by reference to Exhibit 10.1 to Compass Bancshares, Inc.s Form 8-K,
file number 001-31272, filed May 31, 2006 with the Commission) *(q)
    
    2006 Form of Performance Contingent Restricted Stock Agreement (Garrett R.
Hegel, James D. Barri, George M. Boltwood and William C. Helms) (incorporated by
reference to Exhibit 10.3 to Compass Bancshares, Inc.s Form 8-K, file number
001-31272, filed May 31, 2006 with the Commission) *
 - 36 -




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##### Table of Contents



Exhibits  continued
 (r)
    
    2006 Form of Incentive Stock Option Agreement (D. Paul Jones, Jr.)
(incorporated by reference to Exhibit 10.4 to Compass Bancshares, Inc.s Form 8-K, file
number 001-31272, filed May 31, 2006 with the Commission) *(s)
    
    2006 Form of Incentive Stock Option Agreement (Garrett R. Hegel, James D.
Barri, George M. Boltwood and William C. Helms) (incorporated by reference to Exhibit
10.6 to Compass Bancshares, Inc.s Form 8-K, file number 001-31272, filed May 31, 2006
with the Commission) *(t)
    
    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) *(u)
    
    Form of Restricted Stock Award Agreement for Non-Employee Directors
(incorporated by reference to Exhibit 10(u) to Compass Bancshares, Inc.s December 31,
2006 Form 10-K, file number 001-31272, filed February 27, 2007 with the Commission)*(v)
    
    Form of Performance Unit Award Agreement (incorporated by reference to Exhibit
10.1 to Compass Bancshares, Inc.s Form 8-K, file number 001-31272, filed January 29,
2007 with the Commission) *(w)
    
    Form of Performance Contingent Restricted Stock Award Agreement (Jones)
(incorporated by reference Exhibit 10.2 to Compass Bancshares, Inc.s Form 8-K, file
number 001-31272, filed January 29, 2007 with the Commission) *(x)
    
    Form of Performance Contingent Restricted Stock Award Agreement (Stone)
(incorporated by reference to Exhibit 10.3 to Compass Bancshares, Inc.s Form 8-K, file
number 001-31272, filed January 29, 2007 with the Commission) *(y)
    
    Form of Performance Contingent Restricted Stock Award Agreement (executive
officer) (incorporated by reference to Exhibit 10.4 to Compass Bancshares, Inc.s Form
8-K, file number 001-31272, filed January 29, 2007 with the Commission) *(z)
    
    Form of Stock Option Agreement (Jones) (incorporated by reference to Exhibit
10.5 to Compass Bancshares, Inc.s Form 8-K, file number 001-31272, filed January 29,
2007 with the Commission) *(aa)
    
    Form of Stock Option Agreement (Stone) (incorporated by reference to Exhibit
10.6 to Compass Bancshares, Inc.s Form 8-K, file number 001-31272, filed January 29,
2007 with the Commission) *(bb)
    
    Form of Stock Option Agreement (executive officer) (incorporated by reference
to Exhibit 10.7 to Compass Bancshares, Inc.s Form 8-K, file number 001-31272, filed
January 29, 2007 with the Commission) *(cc)
    
    Summary of Compensation Arrangements for Named Executive Officers and Directors
(incorporated by reference to Exhibit 10(cc) to Compass Bancshares, Inc.s December 31,
2006 Form 10-K, file number 001-31272, filed February 27, 2007 with the Commission)*(dd)
    
    Distribution Agreement, dated March 13, 2006, among Compass Bank and Compass
Bancshares, 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 (incorporated by reference to Exhibit 10(ae) to
Compass Bancshares, Inc.s March 31, 2006 Form 10-Q, file number 001-31272, filed May
8, 2006 with the Commission)(ee)
    
    Issuing and Paying Agency Agreement, dated March 13, 2006, between Compass
Bank, as issuer, and Compass Bank, as issuing and paying agent (incorporated by
reference to Exhibit 10(af) to Compass Bancshares, Inc.s March 31, 2006 Form 10-Q,
file number 001-31272, filed May 8, 2006 with the Commission)(ff)
    
    Employment Agreement, dated as of February 16, 2007, among Compass Bancshares,
Inc., Banco Bilbao Vizcaya Argentaria, S.A. and D. Paul Jones, Jr. (incorporated by
reference to Exhibit 10.1 to Compass Bancshares, Inc.s Form 8-K, file number
001-31272, filed February 22, 2007 with the Commission)*
 - 37 -




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##### Table of Contents



Exhibits  continued
 (gg)
    
    Form of Employment Agreement, dated as of February 16, 2007, among Compass
Bancshares, Inc. Banco Bilbao Vizcaya Argentaria, S.A. and each of the executive
officers (incorporated by reference to Exhibit 10.2 to Compass Bancshares, Inc.s Form
8-K, file number 001-31272, filed February 22, 2007 with the Commission)*(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 - 38 -




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##### Table of Contents



COMPASS BANCSHARES, INC. AND SUBSIDIARIES
 SIGNATURES
  May 7, 2007

Date
    
    
    
    By:
    
    /s/ Garrett R. Hegel

Garrett R. HegelChief Financial Officer
 - 39 -