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SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

Compass Bancshares, Inc.

(205) 297-3000

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

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:   YES þ  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act rule 12b-2):  YES þ  No o

As of June 30, 2003, the aggregate market value of voting and non-voting common equity held by non-affiliates was $4,168,611,025.

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

The number of pages of this report is 99.

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COMPASS BANCSHARES, INC.

TABLES OF CONTENTS

FORM 10-K

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PART I

ITEM 1 — BUSINESS

      The term “Company” is used throughout this Annual Report on Form 10-K to refer to Compass Bancshares, Inc. and its subsidiaries. The term “Parent Company” is used to refer to Compass Bancshares, Inc. wherever a distinction between Compass Bancshares, Inc. and its subsidiaries aids in the understanding of this Annual Report on Form 10-K.

General Development of the Company

      The Company is a financial services company with its principal place of business in Birmingham, Alabama. The Parent Company was organized in 1970 as “Central Bancshares of the South, Inc.” The Company has two bank subsidiaries. The Company’s principal bank subsidiary is Compass Bank (“Compass Bank”), an Alabama banking corporation headquartered in Birmingham, Alabama. Compass Bank currently operates in Alabama, Arizona, Texas, Colorado, Florida and New Mexico. The Company’s other bank subsidiary is Central Bank of the South (“Central Bank of the South”), an Alabama banking corporation headquartered in Anniston, Alabama. Central Bank of the South has limited activities. The bank subsidiaries of the company are referred to collectively as the “Subsidiary Banks.”

Parent Company

      The principal role of the Parent Company is to supervise and coordinate the activities of its subsidiaries and to provide them with capital and services of various kinds. The Parent Company derives substantially all of its income from dividends from its subsidiaries. These dividends are determined on an individual basis, generally in relation to each subsidiary’s earnings and capital position.

Subsidiary Banks

      Compass Bank conducts a general commercial banking and trust business at 376 banking centers, including 136 in Texas, 89 in Alabama, 71 in Arizona, 42 in Florida, 28 in Colorado, and 10 in New Mexico. In addition, Compass Bank operates loan production offices in Georgia and Maryland. Compass Bank performs banking services customary for full service banks of similar size and character. Such services include receiving demand and time deposits, making personal and commercial loans and furnishing personal and commercial checking accounts. Compass Bank, through its Wealth Management segment and wholly owned subsidiary St. Johns Investment Management Company, offers its customers a variety of fiduciary services, including portfolio management and administration and investment services to estates, trusts and employee benefit plans. Compass Bank, through its wholly owned subsidiaries, Texas Insurance Agency, Inc., Olson & Olson, Ltd., Mueller & Associates, Inc., Apogee Holdings, Inc. and Compass Bancshares Insurance, Inc., makes available to its customers and others, as agent for a variety of insurance companies, term life insurance, fixed-rate annuities, property and casualty insurance and other insurance products. Compass Bank, through its wholly owned subsidiaries Compass Mortgage Corporation and Arizona Financial Products, Inc., also provides loans and related products to consumers and investor advisory services to Compass Bank and others.

      Compass Bank provides correspondent banking services, including educational seminars and operational and investment services, to approximately 750 financial institutions located throughout the United States. Through the Correspondent and Investment Services Division, Compass Bank distributes or makes available a variety of investment services and products to institutional and individual investors, including institutional sales, bond accounting, safekeeping and interest rate risk analysis services. Through its wholly owned subsidiary Compass Brokerage, Inc., Compass Bank also provides discount brokerage services, mutual funds and variable annuities to individuals and businesses. Compass Bank provides lease financing services to individuals and businesses, through its wholly owned subsidiary Compass Financial Corporation.

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Nonbanking Subsidiaries

      The Parent Company, through wholly owned subsidiaries, Horizons Insurance Group, Inc., Maxson-Mahoney-Turner, Inc. and Schaefer-Smith-Ankeney Insurance Agency, Inc., is engaged in providing insurance products to its customers. The Company may subsequently engage in other activities permissible for registered financial services companies when suitable opportunities arise.

Lines of Business

      The Company is currently organized along lines of business. Each line of business is a strategic unit that serves a particular group of customers that have certain common characteristics, through various products and services. The Company’s primary operating segments are Corporate Banking, Retail Banking, Wealth Management and Treasury.

      The Corporate Banking segment is responsible for providing a full array of banking and investment services to business banking, commercial banking and other institutional clients in each of the Company’s markets. The Corporate Banking segment also includes a National Industries unit that is responsible for serving larger national accounts, principally in targeted industries. In addition to traditional credit and deposit products, the Corporate Banking segment also supports its customers with capabilities in treasury management, leasing, accounts receivable purchasing, asset-based lending, international services, insurance, interest rate protection and investment products.

      The Retail Banking segment serves the Company’s consumer customers through its 376 full-service banking centers and through the use of alternative delivery channels such as personal computer banking, the internet and telephone banking. The Retail Banking segment provides individuals with a broad array of products and services, including home mortgages, credit cards, deposit accounts, mutual funds and discount brokerage. In addition, Retail Banking serves the Company’s small business customers and is responsible for the Company’s indirect automobile portfolio.

      The Wealth Management segment provides specialized investment portfolio management, traditional credit products, financial counseling and customized services to the Company’s private clients and foundations as well as investment management and retirement services to companies and their employees. The Wealth Management segment is also the discretionary investment manager of Expedition Funds®, the Company’s family of proprietary mutual funds.

      The Treasury segment’s primary function is to manage the investment securities portfolio, certain residential real estate loans, public entity deposits and the liquidity and funding positions of the Company.

      For financial information regarding the Company’s segments, which are presented by line of business, as of and for the years ended December 31, 2003, 2002 and 2001, see Note 19, Segment Information, in the Notes to Consolidated Financial Statements.

Business Combinations and Divestitures

      The Company may seek to combine with or acquire other financial services companies, banks and banking offices should suitable opportunities arise. Discussions are held from time to time with institutions about their possible affiliation with the Company. It is impossible to predict accurately whether any discussions will lead to agreement. Any bid or proposal for the combination of additional banks is subject to approval by appropriate regulatory authorities. Refer to “Supervision and Regulation” below for a discussion of certain aspects of the regulatory environment in which the Company operates. Since 1987, the Company has combined with approximately 50 financial institutions, six insurance agencies, an investment advisory firm and engaged in numerous asset and deposit purchase and sale transactions.

Business Combinations

      On July 2, 2003, the Company completed the acquisition of Apogee Holdings, Inc. (“Apogee”), a Houston, Texas based compensation and benefits consulting company. Apogee specializes in providing health and welfare plans, qualified retirement plan services, executive benefits and compensation consulting to

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      On March 10, 2003, the Company completed the acquisition of Maxson-Mahoney-Turner, Inc. (“MM&T”), a Dallas, Texas based full-line general insurance brokerage firm. MM&T has annual revenues of approximately $5 million and services commercial and retail customers in the Dallas/ Ft. Worth metroplex and the southwestern United States. MM&T specializes in providing property and casualty insurance, personal insurance, employee benefit plans and surety products. The transaction was accounted for under the purchase method of accounting.

      On March 3, 2003, the Company completed the acquisition of Mueller & Associates, Inc. (“Mueller”), a Tucson, Arizona based full-line general insurance brokerage firm. Mueller has annual revenues of approximately $4 million and services commercial and retail customers in Tucson and throughout the state of Arizona. Mueller specializes in providing property and casualty insurance, personal insurance, life insurance and surety products. The transaction was accounted for under the purchase method of accounting.

      On December 2, 2002, the Company completed the acquisition of St. Johns Investment Management Company (“St. Johns”), a Jacksonville, Florida based investment advisory firm with approximately $250 million in assets under management. Founded in 1984, St. Johns specializes in providing comprehensive wealth management for high net worth individuals, families, not-for-profit organizations, trusts, 401(k) plans, retirement and pension plans, corporations, endowments and foundations. The transaction was accounted for under the purchase method of accounting.

      On July 10, 2002, the Company completed the acquisition of Schaefer-Smith-Ankeney Insurance Agency, Inc. (“Schaefer-Smith-Ankeney”), a Phoenix, Arizona based full-line general insurance brokerage firm. Schaefer-Smith-Ankeney has annual revenues in excess of $17 million. The transaction was accounted for under the purchase method of accounting.

      On May 30, 2002, the Company completed the acquisition of Olson & Olson, Ltd. (“Olson & Olson”), a Denver, Colorado based full-line general insurance brokerage firm. Olson & Olson has annual revenues of approximately $4 million and services commercial and retail customers in the Denver metropolitan area. Olson & Olson specializes in providing property and casualty insurance, personal insurance, employee benefit plans and surety products. The transaction was accounted for under the purchase method of accounting.

      On January 4, 2002, the Company completed the acquisition of Horizons Insurance Group, Inc. (“Horizons”), a Dallas, Texas based full-line general insurance brokerage firm with annual revenues of more than $4 million. Horizons services commercial and retail customers in the Dallas/ Fort Worth metroplex and the southwestern United States. Horizons specializes in providing property and casualty insurance, personal insurance, employee benefit plans and financial planning for businesses and individuals. The transaction was accounted for under the purchase method of accounting.

      On January 4, 2001, the Company completed the merger with FirsTier Corporation (“FirsTier”). FirsTier was the parent of FirsTier Bank, an approximately $815 million asset bank primarily located in the greater Denver area, and Firstate Bank, an $85 million asset bank in Nebraska. FirsTier shareholders received 6.8 million shares of Compass common stock in exchange for all of the outstanding shares of FirsTier. The transaction was accounted for under the pooling-of-interests method of accounting, and all prior-period information has been restated to reflect the inclusion of FirsTier.

      Several of the acquisition agreements, related to the insurance agencies and the investment advisory firm, include contingent consideration provisions. These provisions are generally based upon future revenue or earnings goals, for a period of typically three years. At December 31, 2003, the maximum potential amount of future undiscounted payments the Company could be required to make under outstanding contingent payment provisions is approximately $22.7 million, primarily in the form of stock.

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Divestitures

      During 2003, the Company completed the sale of two non-strategic banking centers in Nebraska. A gain of $2.1 million was realized on the sale and is included in other income on the Consolidated Statements of Income for the year ended December 31, 2003.

Competition

      The Company encounters intense competition in its businesses, generally from other banks located in Alabama, Arizona, Colorado, Florida, New Mexico, Texas and adjoining states. The Company competes for interest bearing funds with other banks, mutual funds and many non-bank issuers of commercial paper and other securities. In most of the markets served by the Company, it encounters intense competition from other financial institutions, many of which are substantially larger in terms of assets and deposits. Competition for the correspondent banking and securities sales business also exists from commercial and investment banks and brokerage firms. In the case of larger customers, competition exists with financial institutions in major metropolitan areas in the United States, many of which are larger in terms of capital, resources and personnel. Increasingly, in the conduct of certain aspects of its businesses, the Company competes with finance companies, savings and loan associations, credit unions, mutual funds, factors, insurance companies and similar financial institutions.

      There is significant competition among financial services companies in most of the markets served by the Company. The Company believes that intense competition for banking business among bank holding companies with operations in Alabama, Arizona, Colorado, Florida, New Mexico and Texas will continue. During 2004, the competition may further intensify if additional financial services companies enter these states through the acquisition of local financial institutions.

Employees

      At December 31, 2003, the Company had approximately 7,700 full-time equivalent employees.

Government Monetary Policy

      The Parent Company and the Subsidiary Banks are affected by the credit policies of monetary authorities including the Board of Governors of the Federal Reserve System (“Federal Reserve”). An important function of the Federal Reserve is to regulate the national supply of bank credit. Among the instruments of monetary policy used by the Federal Reserve to implement these objectives are open market operations in United States Government securities, changes in the discount rate, reserve requirements on member bank deposits and funds availability regulations. These instruments are used in varying combinations to influence the overall growth of bank loans, investments and deposits and may also affect interest rates charged on loans or paid on deposits.

      The monetary policies of the Federal Reserve authorities have had a significant effect on the operating results of financial institutions in the past and will continue to do so in the future. In view of changing conditions in the national economy and money markets, as well as the effect of actions by monetary and fiscal authorities, no reasonable prediction can be made as to the future impact that changes in interest rates, deposit levels or loan demand may have on the business and income of the Parent Company and the Subsidiary Banks.

SUPERVISION AND REGULATION

The Company

      During 2000, the Parent Company filed a declaration with the Federal Reserve to be certified as a financial holding company (“FHC”) under the Gramm-Leach-Bliley Financial Modernization Act of 1999 (“GLB Act”). As a bank holding company, the Company is required to file with the Federal Reserve an annual report and such additional information as the Federal Reserve may require pursuant to the Bank Holding Company Act of 1956 (“BHC Act”). The Federal Reserve also may make examinations of the

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      The GLB Act was enacted on November 12, 1999. The GLB Act permits bank holding companies meeting certain management, capital and community reinvestment standards to engage in a substantially broader range of non-banking activities than were permitted previously, including insurance underwriting and merchant banking activities. The Company has certified that it meets these criteria. The GLB Act repealed sections 20 and 32 of the Glass Steagall Act, permitting affiliations of banks with securities firms and registered investment companies. The GLB Act permits banks to be under common control with securities firms, insurance companies, investment companies and other financial interests if these companies are subsidiaries of a FHC. Some of these affiliations are also permissible for bank subsidiaries. The GLB Act gives the Federal Reserve broad authority to regulate FHCs, but provides for functional regulation of subsidiary activities by the Securities and Exchange Commission, the Federal Trade Commission, state insurance and securities authorities and similar regulatory agencies.

      The GLB Act includes significant provisions regarding the privacy of financial information. These financial privacy provisions generally require a financial institution to adopt a privacy policy regarding its practices for sharing nonpublic personal information and to disclose that policy to its customers, both at the time the customer relationship is established and at least annually during the relationship. These provisions also prohibit the Company from disclosing nonpublic personal financial information to third parties unless customers have the opportunity to opt out of the disclosure.

      The Company continues to be regulated by the BHC Act which requires a FHC to obtain the prior approval of the Federal Reserve before it may acquire substantially all the assets of any bank or ownership or control of any voting shares of any bank if, after such acquisition, it would own or control, directly or indirectly, more than five percent of the voting shares of any such bank. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (“Interstate Act”) facilitates branching and the establishment of agency relationships across state lines and permits bank holding companies to acquire banks located in any state without regard to whether the transaction is prohibited under any state law, subject to certain state provisions, including the establishment by states of a minimum age of their local banks subject to interstate acquisition by out-of-state companies. The minimum age of local banks subject to interstate acquisition is limited to a maximum of five years.

      The states of Alabama, Arizona, Colorado, Florida, New Mexico and Texas, where the Company currently operates banking centers, each have laws relating specifically to acquisitions of banks, bank holding companies and other types of financial institutions in those states by financial institutions that are based in, and not based in, those states. The laws of each of these states currently permit out-of-state bank holding companies to acquire banks in Alabama, Arizona, Colorado, Florida, New Mexico and Texas, regardless of where the acquiror is based, subject to the satisfaction of various provisions of state law, including the requirement that the bank to be acquired has been in existence at least five years in Alabama, Arizona, Colorado, New Mexico and Texas and three years in Florida.

      The Federal Reserve Act generally imposes certain limitations on extensions of credit and other transactions by and between banks that are members of the Federal Reserve and other affiliates (which includes any holding company of which a bank is a subsidiary and any other non-bank subsidiary of such holding company). Banks that are not members of the Federal Reserve are also subject to these limitations. Further, federal law prohibits a bank holding company and its subsidiaries from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property or the furnishing of services.

      In December 1991, the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) was enacted. This act recapitalized the Bank Insurance Fund (“BIF”), of which the Subsidiary Banks are members, and the Savings Association Insurance Fund (“SAIF”), which insures certain of the Subsidiary Banks’ deposits; substantially revised statutory provisions, including capital standards; restricted certain powers of state banks; gave regulators the authority to limit officer and director compensation; and required holding companies to guarantee the capital compliance of their banks in certain instances. Among other

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      If a depository institution fails to meet regulatory capital requirements, the regulatory agencies can require submission and funding of a capital restoration plan by the institution, place limits on its activities, require the raising of additional capital and, ultimately, require the appointment of a conservator or receiver for the institution. The obligation of a controlling FHC under FDICIA to fund a capital restoration plan is limited to the lesser of five percent of an undercapitalized subsidiary’s assets or the amount required to meet regulatory capital requirements. If the controlling FHC fails to fulfill its obligations under FDICIA and files (or has filed against it) a petition under the Federal Bankruptcy Code, the FDIC’s claim may be entitled to a priority in such bankruptcy proceeding over third party creditors of the bank holding company.

      An insured depository institution may not pay management fees to any person having control of the institution nor may an institution, except under certain circumstances and with prior regulatory approval, make any capital distribution (including the payment of dividends) if, after making such payment or distribution, the institution would be undercapitalized. FDICIA also restricts the acceptance of brokered deposits by insured depository institutions and contains a number of consumer banking provisions, including disclosure requirements and substantive contractual limitations with respect to deposit accounts.

      At December 31, 2003, the Subsidiary Banks were “well capitalized” and were not subject to any of the foregoing restrictions, including, without limitation, those relating to brokered deposits. The Subsidiary Banks do not rely upon brokered deposits as a primary source of deposit funding.

The Subsidiary Banks

      In general, federal and state banking laws and regulations govern all areas of the operations of the Subsidiary Banks, including reserves, loans, mortgages, capital, issuances of securities, payment of dividends and establishment of banking centers. Federal and state banking regulatory agencies also have the general authority to limit the dividends paid by insured banks and bank holding companies if such payments may be deemed to constitute an unsafe and unsound practice. Federal and state banking agencies also have authority to impose penalties, initiate civil and administrative actions and take other steps to prevent banks from engaging in unsafe or unsound practices.

      Compass Bank, organized under the laws of the State of Alabama, is a member of the Federal Reserve. As such, it is supervised, regulated and regularly examined by the Alabama State Banking Department and the Federal Reserve. The Subsidiary Banks are also subject to the provisions of the Federal Deposit Insurance Act and to examination by and regulations of the FDIC.

      Compass Bank is governed by Alabama laws restricting the declaration and payment of dividends to 90 percent of annual net income until its surplus funds equal at least 20 percent of capital stock. Compass Bank has surplus in excess of this amount. As a member of the Federal Reserve, Compass Bank is subject to dividend limitations imposed by the Federal Reserve that are similar to those applicable to national banks.

      Federal law further provides that no insured depository institution may make any capital distribution, including a cash dividend, if, after making the distribution, the institution would not satisfy one or more of its minimum capital requirements. Moreover, the federal bank regulatory agencies also have the general authority

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      The Community Reinvestment Act of 1977 (“CRA”) and the regulations of the Federal Reserve and the FDIC implementing that act are intended to encourage regulated financial institutions to help meet the credit needs of their local community or communities, including low and moderate income neighborhoods, consistent with the safe and sound operation of such financial institutions. The CRA and its implementing regulations provide that the appropriate regulatory authority will assess the records of regulated financial institutions in satisfying their continuing and affirmative obligations to help meet the credit needs of their local communities as part of their regulatory examination of the institution. The results of such examinations are made public and are taken into account upon the filing of any application to establish a domestic branch or to merge or to acquire the assets or assume the liabilities of a bank. In the case of a bank holding company, the CRA performance record of the banks involved in the transaction are reviewed in connection with the filing of an application to acquire ownership or control of shares or assets of a bank or to merge with any other bank holding company. An unsatisfactory record can substantially delay or block the transaction.

Recent Legislation

USA Patriot Act

      On October 26, 2001, President George W. Bush signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”). The USA Patriot Act is intended to allow the federal government to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. Title III of the USA Patriot Act takes measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies. Certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act.

      Among its provisions, the USA Patriot Act requires each financial institution: (i) to establish an anti-money laundering program, (ii) to establish due diligence policies, procedures and controls with respect to its private banking accounts and correspondent banking accounts involving foreign individuals and certain foreign banks and (iii) to avoid establishing, maintaining, administering or managing correspondent accounts in the United States for, or on behalf of, a foreign bank that does not have a physical presence in any country. In addition, the USA Patriot Act contains a provision encouraging cooperation among financial institutions, regulatory authorities and law enforcement authorities with respect to individuals, entities and organizations engaged in, or reasonably suspected of engaging in, terrorist acts or money laundering activities. The federal banking agencies have begun proposing and implementing regulations interpreting the USA Patriot Act. It is not anticipated that the USA Patriot Act will have a significant impact on the financial condition or results of operations of the Company.

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ITEM 1 (CONTINUED) — STATISTICAL DISCLOSURE

      The Company owns or leases buildings that are used in the normal course of business. The principal executive office is owned by the Company and is located at 15 South 20th Street, Birmingham, Alabama, in a 289,000 square-foot office building. The Company owns or leases various other offices and facilities in Alabama, Arizona, Colorado, Florida, New Mexico and Texas. In addition, the Company owns a 306,000 square-foot administrative headquarters facility located in Birmingham, Alabama.

      The Parent Company and its subsidiaries are defendants in legal proceedings arising in the ordinary course of business. Based upon the advice of legal counsel, management is of the opinion that the ultimate resolution of these legal proceedings will not have a material adverse effect on the Company’s financial condition or results of operations.

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      None

Executive Officers of the Registrant

      The names, ages and positions held by the executive officers of the Company on December 31, 2003 are set forth in the following table. All of the persons listed are officers of Compass Bank and, where specifically indicated, are officers of Compass Bancshares, Inc.

      All of the above named Executive Officers, except William C. Helms, have been employed by the Company in their present position for more than five years.

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PART II

Market Information

      The primary market for the Parent Company’s common stock is the National Association of Securities Dealers, Inc. Automated Quotation National Market System (the “NASDAQ”). The Parent Company’s common stock is quoted under the symbol of “CBSS.” The following table sets forth the high and low closing prices and the end-of-quarter closing price of the common stock of the Parent Company as reported through the NASDAQ and the dividends paid thereon during the periods indicated.

Dividends

      The Parent Company paid dividends of $139 million in 2003 and $128 million in 2002. The payment of dividends on the Parent Company’s common stock is subject to determination and declaration by the board of directors of the Parent Company. In making the determination whether and in what amount to declare dividends, the Parent Company’s board of directors considers a number of factors, including general economic conditions, regulatory limitations on the payment of dividends, the Company’s capital requirements, the results of operations and financial condition of the Company and tax considerations. There is no assurance that dividends will be declared or, if declared, what the amount of dividends will be, or whether such dividends will continue.

Holders

      As of January 31, 2004, there were approximately 5,500 shareholders of record of the Parent Company’s common stock.

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Compensation Plan Information

      The following table presents information regarding the Company’s equity compensation plans at December 31, 2003:

	(1)	Includes the 1996 Long-Term Incentive Plan, the 1999 Omnibus Incentive Compensation Plan and the 2002 Incentive Compensation Plan
	(2)	Amount includes 305,281 of restricted shares awarded
	(3)	Includes the Compass Share Accumulation Plan, formerly known as the Compass ShareBuilder Plan
	(4)	The number of shares that may be issued pursuant to Compass’ stock purchase plans during a given period and the purchase price of such shares cannot be determined in advance of such purchases

Recent Sales of Unregistered Securities

      None.

ITEM 6 — SELECTED FINANCIAL DATA

      The following table sets forth selected financial data for the last five years.

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      The following is a summary of the results of operations for each quarter of 2003 and 2002.

ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The purpose of this discussion is to focus on significant changes in the financial condition and results of operations of the Company during the past three years. The discussion and analysis are intended to supplement and highlight information contained in the accompanying consolidated financial statements and the selected financial data presented elsewhere in this Annual Report on Form 10-K. Information prior to 2000 has been restated to reflect the FirsTier and Western Bancshares acquisitions accounted for using the pooling-of-interests accounting method. Financial institutions acquired by the Company during the past three years and accounted for as purchases and immaterial pooling-of-interests transactions are reflected in the financial position and results of operations of the Company since the date of their acquisition.

Forward-Looking Statements

      In addition to historical information, this Annual Report on Form 10-K may contain forward-looking statements. For this purpose, any statements contained herein, including documents incorporated by reference, that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking

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      Forward-looking statements are based on current management expectations and, by their nature, are subject to risk and uncertainties because of the possibility of changes in underlying factors and assumptions. Actual conditions, events or results could differ materially from those contained in or implied by such forward-looking statements for a variety of reasons, including: sharp and/or rapid changes in interest rates; significant changes in the economic scenario from the current anticipated scenario which could materially change anticipated credit quality trends and the ability to generate loans and gather deposits; significant delay in or inability to execute strategic initiatives designed to grow revenues and/or control expenses; unanticipated issues during the integration of acquisitions; and significant changes in accounting, tax or regulatory practices or requirements. The Company undertakes no obligation to, nor does it intend to, update forward-looking statements to reflect circumstances or events that occur after the date hereof or to reflect the occurrence of unanticipated events.

Critical Accounting Policies

      The accounting principles followed by the Company and the methods of applying these principles conform with generally accepted accounting principles in the United States and with general practices within the banking industry. The Company’s critical accounting policies relate to (1) the allowance for loan losses, (2) the assessment of hedge effectiveness of derivatives and other hedging instruments, (3) the transfer of financial assets and the determination of when special purpose vehicles should be included in the Consolidated Balance Sheets and Consolidated Statements of Income and (4) the calculation of income taxes. These critical accounting policies require the use of estimates, assumptions and judgments which are based on information available as of the date of the financial statements. Accordingly, as this information changes, the financial statements could reflect the use of different estimates, assumptions and judgments. Certain determinations inherently have a greater reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported.

      Management’s evaluation process to determine the adequacy of the allowance for loan losses combines three factors which involve the use of estimates, assumptions and judgments: historical loss experience derived from analytical models, current trends and economic conditions and reasonably foreseeable events. Because current economic conditions can change and future events are inherently difficult to predict, the anticipated amount of estimated loan losses, and therefore the adequacy of the allowance, could change. Management believes the allowance for loan losses is adequate and properly recorded in the financial statements. For further discussion of the allowance for loan losses, see Provisions for Loan Losses, Net Charge-Offs and Allowance for Loan Losses later in this Management Discussion and Analysis Section.

      In various segments of its business, the Company uses derivative financial instruments to reduce exposure to changes in interest rates and market prices for financial instruments. The application of the hedge accounting policy requires judgment in the assessment of hedge effectiveness, identification of similar hedged item groupings and measurement of changes in the fair value of hedged items. The Company believes that its techniques for addressing these judgmental areas are in accordance with generally accepted accounting principles in the United States and are in line with industry practices in assessing hedge effectiveness. However, if in the future the derivative financial instruments used by the Company no longer qualify for hedge accounting treatment and, consequently, the change in fair value of hedged items could not be recognized in earnings, the impact on the consolidated results of operations and reported earnings could be significant. Management believes hedge effectiveness is evaluated properly in preparation of the financial statements. All of the derivative financial instruments used by the Company have active markets and indications of fair value can be obtained readily.

      The Company utilizes certain financing arrangements to meet its balance sheet management, funding, liquidity and market or credit risk management needs. These financing arrangements are with separate legal entities, corporations, partnerships or trusts, and are not consolidated in the Company’s balance sheet. The majority of these activities are basic term or revolving securitization vehicles. The Company evaluates whether

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      The calculation of the Company’s income tax provision is complex and requires the use of estimates and judgments in its determination. As part of the Company’s evaluation and implementation of business strategies, consideration is given to the regulations and tax laws that apply to the specific facts and circumstances for any transaction under evaluation. This analysis includes the amount and timing of the realization of income tax liabilities or benefits. Management closely monitors tax developments in order to evaluate the effect they may have on the Company’s overall tax position.

Net Income and Earnings Per Share

      In 2003, the Company reported record net income of $342 million, a 9 percent increase over net income of $314 million in 2002, which represented a 16 percent increase from 2001 levels. Basic earnings per share for 2003 were $2.74, also a record, compared with $2.46 per share in 2002 and $2.13 per share in 2001, representing an 11 percent increase in 2003 and a 15 percent increase in 2002. Diluted earnings per share increased to $2.69 in 2003, an 11 percent increase from $2.42 per share in 2002. Diluted earnings per share in 2002 increased 15 percent over 2001 levels. Pretax income for 2003 increased $41 million, or 9 percent, over 2002 levels while income tax expense increased 8 percent over the same period. The effective tax rate was 34 percent for both 2003 and 2002.

Earning Assets

      Average earning assets in 2003 increased 8 percent over 2002 levels due principally to an 11 percent increase in total loans. The average earning asset mix in 2003 changed slightly from 2002 with loans comprising 73 percent and 71 percent of earning assets for 2003 and 2002, respectively, while total investment securities accounted for the remaining 27 percent and 29 percent for 2003 and 2002, respectively. The mix of earning assets is monitored on a continuous basis in order to place the Company in a position to react to interest rate movements and to maximize the return on earning assets.

Loans

      Total loans outstanding at year-end increased five percent over previous year-end levels. Commercial real estate mortgage loans increased 20 percent, equity lines of credit increased 15 percent and consumer installment indirect loans increased 23 percent. The increase in commercial real estate mortgage loans and equity lines of credit is due to a favorable interest rate environment, which resulted in strong demand. The increase in consumer installment indirect loans, which are automobile loans, is a result of favorable interest rates and targeted growth in this market. Equity loans decreased 21 percent compared to 2002 levels and residential real estate mortgage loans decreased 2 percent compared to 2002 levels. The decreases in equity loans and residential real estate mortgage loans reflect securitizations in the amount of $750 million and $373 million, respectively, in the current year. Excluding the effect of the securitizations, equity loans increased 17 percent and residential real estate mortgage loans decreased 3 percent over prior year levels. For additional information, see Note 4, Managed Loans, in the Notes to Consolidated Financial Statements.

      Total loans outstanding at December 31, 2002 increased 20 percent over previous year-end levels. Residential real estate mortgage loans increased 32 percent compared to the previous year. Equity loans and lines increased 48 percent while commercial real estate mortgage loans increased 33 percent from year-end 2001 to 2002. The increase in the residential real estate loans, equity loans and equity lines of credit categories are due to favorable interest rates. The increase in commercial real estate mortgage loans during 2002 and 2003 was based on strong demand. In addition, the increase in 2002 was due in part to the termination of the commercial real estate conduit (see Note 10, Off-Balance Sheet Activities, Derivatives and Hedging, in the

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Table of Contents

      The Loan Portfolio table presents the classifications of loans by major category at December 31, 2003, and for each of the preceding four years. The second table presents maturities of certain loan classifications at December 31, 2003, and an analysis of the rate structure for such loans with maturities greater than one year.

Loan Portfolio

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Table of Contents

Selected Loan Maturity and Interest Rate Sensitivity

*	Real estate construction includes both real estate construction commercial and real estate construction residential loans

      Managed loans include loans recorded on the balance sheet and loans that have been securitized and sold or retained as investment securities, in either the held to maturity or available for sale portfolios. A detailed discussion of securitization transactions utilized by the Company is included in Note 4, Managed Loans, in the Notes to Consolidated Financial Statements.

      At December 31, 2003, managed loans totaled $18.9 billion, compared to $17.6 billion at December 31, 2002 and $15.9 billion at December 31, 2001. The growth and change in mix of the Company’s managed loan portfolio is consistent with the discussion of loans recorded on the balance sheet.

Managed Loan Portfolio