<PAGE> 1
Filed pursuant to rule 424(b)(5)
Registration no. 33-54225
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 6, 1994.
$100,000,000
(LOGO)
Regions Financial Corporation
7 3/4% Subordinated Notes Due 2024
Interest payable March 15 and September 15 Due September 15, 2024
------------------
The Notes will not be redeemable prior to maturity by Regions Financial
Corporation, formerly known as First Alabama Bancshares, Inc. ("Regions"), but
the registered holder of each Note may elect to have that Note, or any portion
of the principal amount thereof that is an integral multiple of $1,000,
redeemed on September 15, 2004, at 100% of the principal amount thereof,
together with accrued interest to September 15, 2004. Such election,
which is irrevocable when made, must be made within the period
commencing on July 15, 2004, and ending at 5:00 p.m., New York City
time, on August 15, 2004. See "Description of the
Notes -- Redemption at Option of Holder". The Notes will be
represented by one or more Global Notes (as defined herein)
registered in the name of the nominee of The Depository Trust
Company ("DTC"). Except as provided herein and in the
accompanying Prospectus, Notes in definitive form will not
be issued. See "Description of the
Notes -- Book-Entry Procedures".
The Notes are subordinate to all "Senior Indebtedness" of Regions as described
in the accompanying Prospectus under "Description of Subordinated Debt
Securities -- Subordination", generally including (with certain
exceptions) all other indebtedness and other obligations of Regions to
its creditors. Payment of the principal of the Notes may be
accelerated only in the case of certain events involving
bankruptcy, insolvency proceedings or reorganization of Regions.
There is no right of acceleration in the case of a default in
the payment of principal or interest on the Notes or in the
performance of any other covenant of Regions in the
Indenture described herein. See "Description of
Subordinated Debt Securities -- Defaults and
Limited Rights of Acceleration" in the
accompanying Prospectus.
------------------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION BUT ARE UNSECURED AND
SUBORDINATED DEBT OBLIGATIONS OF REGIONS AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions Regions(1)(2)
----------------- ----------------- -----------------
Per Note................................. 100% 0.35% 99.65%
Total.................................... $100,000,000 $350,000 $99,650,000
</TABLE>
(1) Plus accrued interest, if any, from September 15, 1994.
(2) Before deduction of expenses payable by Regions estimated at $150,000.
------------------
The Notes are offered by the several Underwriters when, as and if issued by
Regions, delivered to and accepted by the Underwriters and subject to their
right to reject orders in whole or in part. It is expected that delivery of the
Notes in book-entry form will be made through the facilities of DTC on or about
September 15, 1994.
CS First Boston
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
The date of this Prospectus Supplement is September 8, 1994.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE COMPANY
Regions is a regional bank holding company headquartered in Birmingham,
Alabama which operated 247 banking offices in Alabama, Florida, Georgia,
Louisiana and Tennessee as of June 30, 1994. At such date, Regions had total
consolidated assets of approximately $10.8 billion, total consolidated deposits
of approximately $8.8 billion and total consolidated stockholders' equity of
approximately $905 million. Regions operates six state-chartered commercial bank
subsidiaries and one federal stock savings bank in Alabama, Florida, Georgia,
Louisiana and Tennessee and four banking-related subsidiaries engaged in
mortgage banking, credit life insurance, leasing and securities brokerage
activities with offices in various Southeastern states. Through its
subsidiaries, Regions offers a broad range of banking and banking-related
services.
In Alabama, Regions operates through First Alabama Bank, which at June 30,
1994, had total consolidated assets of approximately $8.2 billion, total
consolidated deposits of approximately $6.8 billion and total consolidated
stockholders' equity of approximately $667 million. First Alabama Bank operates
172 banking offices throughout Alabama.
In Florida, Regions operates through Regions Bank of Florida, which at June
30, 1994, had total consolidated assets of approximately $499 million, total
consolidated deposits of approximately $447 million and total consolidated
stockholders' equity of approximately $49 million. Regions Bank of Florida
operates 27 banking offices in the panhandle region of Florida.
In Georgia, Regions operates through Regions Bank of Georgia, which at June
30, 1994, had total consolidated assets of approximately $105 million, total
consolidated deposits of approximately $95 million and total consolidated
stockholders' equity of approximately $10 million. Regions Bank of Georgia
operates three banking offices in Columbus, Georgia.
In Louisiana, Regions operates through (i) Secor Bank, Federal Savings Bank
("Secor"), a federal savings bank which Regions acquired on December 31, 1993,
(ii) Guaranty Bank and Trust Company ("Guaranty"), which Regions acquired on May
31, 1994, and (iii) Bank of New Roads ("New Roads"), which Regions acquired on
August 31, 1994. At June 30, 1994, Secor, Guaranty and New Roads had total
combined assets of approximately $1.7 billion, total combined deposits of
approximately $1.2 billion and total combined stockholders' equity of
approximately $165 million. Secor, Guaranty and New Roads operate 30 banking
offices in Louisiana.
In Tennessee, Regions operates through Regions Bank of Tennessee, which at
June 30, 1994, had total consolidated assets of approximately $451 million,
total consolidated deposits of approximately $391 million and total consolidated
stockholders' equity of approximately $38 million. Regions Bank of Tennessee
operates 24 banking offices in middle Tennessee.
As part of its ongoing business strategy, Regions continually evaluates
business combination opportunities and frequently conducts due diligence
activities in connection with possible business combinations. As a result,
business combination discussions and, in some cases, negotiations frequently
take place, and future business combinations involving cash, debt or equity
securities can be expected. Any future business combination or series of
business combinations that Regions might undertake may be material, in terms of
assets acquired or liabilities assumed, to Regions' financial condition.
Regions was organized under the laws of the State of Delaware and commenced
operations in 1971 under the name First Alabama Bancshares, Inc. On May 2, 1994,
the name of First Alabama Bancshares, Inc. was changed to Regions Financial
Corporation. All references to First Alabama Bancshares, Inc. in the documents
incorporated by reference into the accompanying Prospectus shall be deemed to be
references to Regions.
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<PAGE> 3
RECENT DEVELOPMENTS
RECENTLY COMPLETED ACQUISITIONS
During the first six months of 1994, Regions (i) acquired Guaranty, located
in Baton Rouge, Louisiana, contributing approximately $187 million in assets,
$136 million in loans and $173 million in deposits to Regions' consolidated
balance sheet and (ii) consummated certain transactions with the Resolution
Trust Corporation ("RTC"), as a result of which Regions Bank of Florida acquired
four branch offices in Panama City, Florida, and First Alabama Bank acquired one
branch office in each of Atmore and Brewton, Alabama, with combined deposits in
the six offices of approximately $50 million. For additional information with
respect to these transactions, see Regions' Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994, incorporated herein by reference. See
"Documents Incorporated by Reference" in the accompanying Prospectus.
Since June 30, 1994, Regions has completed (i) the acquisition of the
institutions described in the following table and (ii) the RTC transactions
described in the paragraph following the table (collectively the acquisitions
enumerated in (i) and (ii) are referred to as the "Recently Completed
Acquisitions"):
<TABLE>
<CAPTION>
CONSIDERATION
---------------
APPROXIMATE
------------------ ACCOUNTING
INSTITUTION ASSET SIZE VALUE TYPE TREATMENT
- ------------------------------------------------------- ---------- ----- ------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
First Fayette Bancshares, Inc. and its subsidiary,
First Bank of Fayette, located in Fayette, Alabama... $ 78 $17 Cash Purchase
and
Notes
BNR Bancshares, Inc. and its subsidiary, Bank of New
Roads, located in New Roads, Louisiana............... 139 26 Regions Pooling of
------- ---- Common Interests
Stock
Totals....................................... $217 $43
======= ====
</TABLE>
Also since June 30, 1994, Regions consummated certain additional
transactions with the RTC, as a result of which Secor acquired one branch office
in Houma, Louisiana, and Guaranty acquired two branch offices in Baton Rouge,
Louisiana, with combined deposits in the three offices of approximately $39
million.
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<PAGE> 4
PENDING ACQUISITIONS
As of the date of this Prospectus Supplement, Regions has pending three
additional acquisitions in Alabama, Georgia and Louisiana, certain aspects of
which transactions are set forth below (collectively the three acquisitions and
one RTC transaction consummated by American Bancshares, Inc. ("ABI") subsequent
to June 30, 1994, are referred to as the "Pending Acquisitions"):
<TABLE>
<CAPTION>
CONSIDERATION
--------------
APPROXIMATE ANTICIPATED
------------------ ACCOUNTING
INSTITUTION ASSET SIZE VALUE TYPE TREATMENT
- -------------------------------------------------------- ---------- ----- ------ -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
American Bancshares, Inc. and its subsidiary, First
American Bank and Trust Company of Louisiana, located
in Monroe, Louisiana.................................. $ 313 $ 61 Regions Purchase
Common
Stock
First Community Bancshares, Inc. and its subsidiary,
First Bank of Rome, located in Rome, Georgia.......... 129 24 Regions Pooling of
Common Interests
Stock
Union Bank & Trust Company ("Union"), located in
Montgomery, Alabama................................... 429 65 Regions Purchase
------- ---- Common
Stock
Totals........................................ $ 871 $ 150
======= ====
</TABLE>
If the Recently Completed Acquisitions and all of the Pending Acquisitions
had been consummated on June 30, 1994, based on June 30, 1994 pro forma
financial information, Regions' total consolidated assets would have increased
by approximately $1.2 billion to approximately $12.0 billion; its total
consolidated deposits would have increased by approximately $951 million to
approximately $9.7 billion; and its total consolidated stockholders' equity
would have increased by approximately $29 million to approximately $934 million.
See "Capitalization" and the related pro forma financial information in Regions'
Current Report on Form 8-K dated September 6, 1994. See "Documents Incorporated
by Reference" in the accompanying Prospectus.
Consummation of the Pending Acquisitions is subject to the approval of
certain regulatory agencies and of the stockholders of the institutions to be
acquired and to the effectiveness of the registration statements filed or to be
filed with the Securities and Exchange Commission. Moreover, the closing of each
transaction is subject to various contractual conditions precedent. No assurance
can be given that the conditions precedent to consummating the Pending
Acquisitions will be satisfied in a manner that will result in the consummation
of all of the Pending Acquisitions.
In connection with the acquisitions of ABI and Union, Regions has announced
that it may purchase, in the open market, an equivalent number of some or all of
the shares of the $.625 par value common stock of Regions ("Regions Common
Stock") to be issued in such transactions. As a result of the ABI and Union
transactions, Regions anticipates that it may purchase in the open market as
much as approximately $126 million of Regions Common Stock. The timing and
amount of such possible purchases will be determined based on the Regions Common
Stock price, capital needs and other factors. As of September 6, 1994, Regions
had purchased, in the open market, approximately $43.2 million of Regions Common
Stock pursuant to this repurchase program.
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be approximately
$99,500,000, after deducting the underwriting discount and estimated offering
expenses. Such net proceeds will be used for general corporate purposes.
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<PAGE> 5
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of and for the five
years ended December 31, 1993, are derived from the consolidated financial
statements of Regions which have been audited by Ernst & Young LLP, independent
auditors. The financial data as of and for the six months ended June 30, 1994
and 1993, are derived from unaudited consolidated financial statements. The
unaudited consolidated financial statements include all adjustments, consisting
of normal recurring accruals, that Regions considers necessary for a fair
presentation of its financial position and the results of its operations as of
such dates and for such periods. Results for the six months ended June 30, 1994
and 1993, are not necessarily indicative of the results which might be expected
for any other interim period or for the year as a whole. The data should be read
in conjunction with the consolidated financial statements, related notes and
other financial information incorporated by reference herein. See "Documents
Incorporated by Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------ ---------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
----------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA AND RATIOS)
INCOME STATEMENT DATA:
Total interest income............ $ 356,621 $ 273,590 $ 555,667 $ 536,747 $ 556,821 $ 519,753 $ 496,392
Total interest expense........... 152,323 104,771 213,614 224,068 292,017 297,613 292,687
Net interest income.............. 204,298 168,819 342,053 312,679 264,804 222,140 203,705
Provision for loan losses........ 9,179 13,300 21,533 27,072 24,005 24,208 15,800
Net interest income after loan
loss provision................. 195,119 155,519 320,520 285,607 240,799 197,932 187,905
Total noninterest income
excluding security gains
(losses)....................... 72,466 63,155 131,949 119,130 101,964 94,730 71,976
Security gains (losses).......... 106 42 78 (53) (507) (982) 506
Total noninterest expense........ 164,036 135,096 287,026 264,659 230,340 195,611 176,707
Income tax expense............... 34,435 28,257 53,476 44,977 33,660 27,175 21,046
Net income....................... $ 69,220 $ 55,363 $ 112,045 $ 95,048 $ 78,256 $ 68,894 $ 62,634
PER SHARE:
Net income....................... $ 1.65 $ 1.49 $ 3.01 $ 2.60 $ 2.16 $ 1.91 $ 1.72
Cash dividends................... 0.60 0.52 1.04 0.91 0.87 0.84 0.76
Book value....................... 21.60 18.48 20.73 17.62 15.76 14.54 13.48
OTHER INFORMATION:
Average number of shares
outstanding.................... 41,925 37,172 37,205 36,532 36,191 36,097 36,331
BALANCE SHEET DATA (PERIOD END):
Total assets..................... $10,822,808 $8,070,569 $10,476,348 $7,881,026 $6,745,053 $6,344,406 $5,549,612
Securities....................... 2,428,865 1,610,389 2,368,445 1,670,170 1,575,725 1,489,200 1,133,087
Loans, net of unearned income.... 7,297,575 5,432,548 6,833,246 5,142,531 4,274,958 4,092,262 3,552,082
Total deposits................... 8,787,549 6,863,551 8,770,694 6,701,142 5,917,028 5,353,211 4,744,364
Long-term debt................... 437,488 141,819 462,862 136,990 18,782 19,707 45,343
Stockholders' equity............. 905,450 686,656 850,965 656,655 572,971 524,132 489,441
PERFORMANCE RATIOS:
Return on average assets(1)...... 1.32% 1.44% 1.40% 1.34% 1.23% 1.23% 1.20%
Return on average stockholders'
equity(1)...................... 15.82 16.60 16.14 15.64 14.27 13.64 13.25
Net interest margin(1)........... 4.31 4.91 4.82 4.98 4.78 4.67 4.65
Efficiency(2).................... 58.16 56.96 59.24 59.87 60.77 59.22 60.68
Dividend payout.................. 36.36 34.90 34.55 35.00 40.28 43.98 44.19
EARNINGS TO FIXED CHARGES(3):
Excluding interest on deposits... 6.21x 11.00x 10.90x 15.15x 10.04x 6.88x 4.01x
Including interest on deposits... 1.68 1.79 1.77 1.62 1.38 1.32 1.28
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income(1)...... 0.10% 0.04% 0.19% 0.28% 0.35% 0.44% 0.42%
Problem assets to net loans and
other real estate(4)........... 0.68 0.75 0.84 0.70 0.89 0.98 0.72
Nonperforming assets to net loans
and other real estate(5)....... 0.76 0.81 1.03 0.81 1.01 1.12 0.94
Allowance for loan losses to
loans, net of unearned
income......................... 1.48 1.59 1.47 1.43 1.28 1.10 1.05
Allowance for loan losses to
nonperforming assets(5)........ 196.00 194.60 143.05 175.92 126.32 98.18 110.71
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------- ---------------------------------------------
1994 1993 1993 1992 1991 1990 1989
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to average
assets.................................... 8.31% 8.65% 8.70% 8.59% 8.63% 9.03% 9.06%
Average loans to average deposits........... 79.10 77.53 78.14 72.46 73.40 76.67 75.23
Tier 1 risk-based capital(6)................ 11.82 11.63 11.13 11.68 11.85 11.31 n/a
Total risk-based capital(6)................. 14.15 14.32 13.48 14.44 13.19 12.51 n/a
Tier 1 leverage(6).......................... 8.08 8.30 10.11 8.44 8.40 7.65 8.36
</TABLE>
- ---------------
(1) Interim period ratios are annualized.
(2) Noninterest expense divided by the sum of net interest income
(tax-equivalent basis) and non-interest income net of gains (losses) from
security transactions.
(3) Earnings represent net income plus applicable income taxes and fixed
charges. Fixed charges represent interest expense (exclusive of interest on
deposits in one case and inclusive of such interest in the other), and
one-third (the amount deemed to represent an appropriate interest factor)
of net rent expense under all lease commitments.
(4) Problem assets include loans on a nonaccrual basis, restructured loans and
foreclosed properties.
(5) Nonperforming assets include loans on a nonaccrual basis, restructured
loans, loans 90 days or more past due and foreclosed properties.
(6) The required minimum Tier 1 and total risk-based capital ratios are 4.0% and
8.0%, respectively. The minimum leverage ratio of Tier 1 capital to total
adjusted assets is 3.0% to 5.0%, depending on the risk profile of the
institution and other factors.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby supplements and modifies the description of the general terms and
provisions of the Notes (which are referred to in the accompanying Prospectus as
the "Subordinated Debt Securities") set forth in the accompanying Prospectus
under "Description of Subordinated Debt Securities", to which description
reference is hereby made. Capitalized terms not defined herein have the
respective meanings assigned to such terms in the Prospectus.
GENERAL
The Notes are to be issued under the Indenture (the "Indenture"), dated as
of December 1, 1992, between Regions and Bankers Trust Company, as trustee (the
"Trustee"). The Notes will bear interest at 7 3/4% per annum and be limited to
$100,000,000 in aggregate principal amount. Interest on the Notes will accrue
from September 15, 1994, or from the most recent Interest Payment Date to which
interest has been paid or provided for, payable semi-annually on March 15 and
September 15 of each year commencing March 15, 1995, to the person in whose name
the Note is registered at the close of business on the next preceding March 1 or
September 1, as the case may be. Principal of and interest on the Notes will be
payable, and the transfer of Notes will be registrable, through DTC as described
below under "-- Book-Entry Procedures". The Notes will be sold in denominations
of $1,000 and integral multiples thereof. The Notes will not be redeemable by
Regions, in whole or in part, prior to their final stated maturity and do not
provide for any sinking fund, but the registered holder of each Note may elect
to have that Note, or any portion of the principal amount thereof that is an
integral multiple of $1,000, redeemed as described below under " -- Redemption
at Option of Holder". The Notes will mature on September 15, 2024.
The Notes are subordinate to all Senior Indebtedness of Regions as
described in the accompanying Prospectus under "Description of Subordinated Debt
Securities -- Subordination", generally including (with certain exceptions) all
other indebtedness and other obligations of Regions to its creditors. The
Indenture does not limit or prohibit the incurrence of additional Senior
Indebtedness. As of June 30, 1994, and excluding $100 million in existing
subordinated indebtedness, there was an aggregate of approximately $866 million
in borrowed funds of Regions outstanding, approximately $337 million of which
represented long-term debt and $529 million of which represented short-term
borrowings, including $510 million of federal funds purchased
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<PAGE> 7
and securities sold subject to agreements to repurchase, all of which is
included in the definition of "Senior Indebtedness". Senior Indebtedness also
includes other liabilities, such as accounts payable. Because of the inclusion
of short-term components, the amount of Senior Indebtedness outstanding is
subject to significant fluctuation over even short periods of time. Also as of
the date of this Prospectus Supplement, Regions had outstanding (i) $75 million
of unsecured subordinated indebtedness designated 7.80% Subordinated Notes Due
2002 (the "7.80% Subordinated Notes") and (ii) $25 million of unsecured
subordinated indebtedness designated 7.65% Subordinated Notes Due 2001 (the
"7.65% Subordinated Notes"), both of which issuances qualify as Subordinated
Debt Securities as described in the accompanying Prospectus under "Description
of Subordinated Debt Securities -- Subordination". The 7.80% Subordinated Notes
and the 7.65% Subordinated Notes were issued under the Indenture.
Payment of the principal of the Notes may be accelerated only in the case
of certain events involving bankruptcy, insolvency proceedings or reorganization
of Regions. There is no right of acceleration in the case of a default in the
payment of principal or interest on the Notes or in the performance of any other
covenant of Regions in the Indenture. See "Description of Subordinated Debt
Securities -- Defaults and Limited Rights of Acceleration" in the accompanying
Prospectus.
REDEMPTION AT OPTION OF HOLDER
The Notes may be redeemed in whole or in part (in integral multiples of
$1,000) at the option of the registered holders thereof on September 15, 2004
(or, if September 15, 2004, is not a Business Day, the next succeeding Business
Day) at 100% of the principal amount to be redeemed, together with accrued
interest to September 15, 2004. Under certain circumstances the Notes may be
issued in definitive registered form. See " -- Book-Entry Procedures". If a
registered holder of a Note in definitive registered form elects to exercise the
redemption option with respect to such Note or a portion thereof, such Note must
be received, together with the form entitled "Option to Elect Redemption" on the
reverse side of the Note duly completed, by the Trustee in New York, New York,
no earlier than July 15, 2004, and no later than 5:00 p.m., New York City time,
on August 15, 2004 (or, if August 15, 2004, is not a Business Day, the next
succeeding Business Day).
The exercise of the redemption option by the registered holder of a Note
will be irrevocable following receipt by the Trustee of the "Option to Elect
Redemption" form. Interest shall cease to accrue on September 15, 2004, on any
Note or portion thereof as to which the redemption option has been exercised.
If a Note is represented by a Global Note (as defined below under
" -- Book-Entry Procedures"), DTC's nominee will be the holder thereof entitled
to exercise a right of redemption. In order to ensure that DTC's nominee will
exercise in a timely manner a right to repayment with respect to a particular
Note, the Beneficial Owner (as defined below under " -- Book-Entry Procedures")
of an interest in such Note must instruct the broker or the Direct or Indirect
Participant (as defined below under " -- Book-Entry Procedures") through which
it holds an interest in such Note to notify DTC of its desire to exercise a
right to repayment. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each such Beneficial Owner
should consult the broker or the Direct or Indirect Participant through which it
holds an interest in a Global Note in order to ascertain the cut-off time by
which such instruction must be given in order for timely notice to be delivered
to DTC.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of any Note for redemption will be determined by Regions
whose determination will be final and binding. The deposit of the redemption
price shall be made by Regions and received by the Trustee no later than 10:00
a.m., New York City time, on September 15, 2004 (or, if September 15, 2004, is
not a Business Day, the next succeeding Business Day). The redemption price
shall be paid to those registered holders of Notes who have properly exercised
the right of optional redemption by check to the address as set forth on the
Security Register. In the case of Notes represented by a Global Note, the
redemption price shall be paid to DTC or successor or DTC's nominee or successor
nominee for distribution pursuant to the applicable book-entry procedures. See
" -- Book-Entry Procedures".
BOOK-ENTRY PROCEDURES
Upon issuance, all Notes will be represented by one or more global notes
(the "Global Notes"). Each such Global Note will be deposited with, or on behalf
of, DTC, as depositary, and registered in the name of
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<PAGE> 8
DTC or a nominee thereof. Unless and until it is exchanged in whole or in part
for Notes in definitive form, no Global Note may be transferred, except as a
whole, by DTC to a successor depositary or between DTC or such successor
depositary and any nominee of either.
DTC has advised Regions as follows: DTC is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). DTC
holds securities that its participants (the "Participants") deposit with DTC.
DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to DTC's book-entry
system is also available to others, such as banks, securities brokers and
dealers and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly (the
"Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Securities and Exchange Commission.
Purchases of Notes under DTC's book-entry system must be made by or through
Direct Participants, which will receive a credit for the Notes on DTC's records.
The ownership interest of each actual purchaser of securities, including the
Notes (the "Beneficial Owner"), is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in Notes,
except in the event that use of the book-entry system for the Notes is
discontinued.
To facilitate subsequent transfers, all securities deposited by
Participants with DTC, including the Notes, are registered in the name of DTC's
partnership nominee, Cede & Co. The deposit of securities with DTC and their
registration in the name of Cede & Co. effect no change in beneficial ownership.
DTC has no knowledge of the actual Beneficial Owners of the Notes; DTC's records
reflect only the identity of the Direct Participants to whose accounts such
Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to securities,
including the Notes. Under its usual procedures, DTC mails an omnibus proxy to
the issuer as soon as possible after the record date. The omnibus proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the securities are credited on the record date (identified in a listing
attached to the omnibus proxy).
Principal and interest payments on the Notes will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on payable date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name", and will be the
responsibility of such Participant and not of DTC, the paying agent or Regions,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal and interest to DTC is the responsibility of
Regions or the paying agent, disbursement of such payments to Direct
Participants shall be
S-8
<PAGE> 9
the responsibility of DTC and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct and Indirect Participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that Regions believes to be reliable, but Regions
takes no responsibility for the accuracy thereof.
If (i) DTC is at any time unwilling or unable to continue as depositary, or
DTC ceases to be a clearing agency registered or in good standing under the
Exchange Act, and Regions does not appoint a successor depositary within 90 days
of notice of such condition or (ii) Regions determines that the Notes shall no
longer be represented by a Global Note, the Global Notes will be transferable or
exchangeable, in whole but not in part, for Notes in definitive registered form
of like tenor and of an equal aggregate principal amount, in denominations of
$1,000 and integral multiples thereof. Such definitive Notes shall be registered
in such name or names and in such authorized denominations as DTC shall instruct
the Trustee. It is expected that such instructions may be based upon directions
received by DTC from Participants with respect to ownership of beneficial
interests in such Global Notes.
The Indenture provides that Regions may designate a successor depositary
under certain circumstances. In that event Regions anticipates that such
successor depositary would implement record-keeping and clearing procedures
comparable to those described above.
S-9
<PAGE> 10
CAPITALIZATION
The following table sets forth the consolidated capitalization of Regions
at June 30, 1994, and as adjusted as of such date to give effect to the sale of
the Notes offered hereby, and as further adjusted to reflect the consummation of
the Recently Completed Acquisitions and the Pending Acquisitions. The table
should be read in conjunction with the unaudited pro forma financial information
included in Regions' Current Report on Form 8-K dated September 6, 1994. For
additional information relating to specific transactions within the scope of the
Recently Completed Acquisitions and the Pending Acquisitions, see "Recent
Developments".
<TABLE>
<CAPTION>
AT JUNE 30, 1994
---------------------------------------------
AS ADJUSTED
FOR OFFERING,
RECENTLY COMPLETED
AS ADJUSTED ACQUISITIONS AND
FOR PENDING
ACTUAL OFFERING ACQUISITIONS
---------- ----------- ------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt:
8 3/4% debentures due 1998.......................... $ 5,600 $ 5,600 $ 5,600
Mortgage notes payable.............................. 4,695 4,695 4,695
Federal Home Loan Bank notes........................ 321,903 321,903 321,903
Other notes payable................................. 30,290 30,290 48,495
7.80% subordinated notes due 2002................... 75,000 75,000 75,000
7.65% subordinated notes due 2001(1)................ 25,000 25,000 25,000
7 3/4% subordinated notes due 2024(2)............... -- 100,000 100,000
---------- ----------- ------------------
Total long-term debt........................... 462,488 562,488 580,693
Stockholders' equity:
Common stock, $.625 par value; authorized
120,000,000 shares;
issued (including treasury stock) 43,510,939;
43,510,939; and 44,901,330 shares,
respectively..................................... 27,194 27,194 28,063
Surplus............................................. 379,105 379,105 394,033
Undivided profits................................... 515,804 515,804 526,913
Less treasury stock at cost -- 1,590,579;
1,590,579; and 1,474,579 shares,
respectively................................... (16,276) (16,276) (12,441)
Less unearned restricted stock................... (1,265) (1,265) (1,265)
Unrealized gain (loss) on securities available for
sale............................................. 888 888 (839)
---------- ----------- ------------------
Total stockholders' equity..................... 905,450 905,450 934,464
---------- ----------- ------------------
Total long-term debt and stockholders'
equity...................................... $1,367,938 $ 1,467,938 $1,515,157
========= ========= ==============
</TABLE>
- ---------------
(1) Reflects the issuance on July 21, 1994, of the 7.65% Subordinated Notes.
(2) The Notes may be redeemed in whole or in part at the option of the
registered holders thereof on September 15, 2004, at 100% of the principal
amount to be redeemed, together with accrued interest to September 15,
2004. See "Description of the Notes -- Redemption at Option of Holder".
S-10
<PAGE> 11
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated September 8, 1994 (the "Underwriting Agreement"), the
Underwriters named below (the "Underwriters") have severally but not jointly
agreed to purchase from Regions the following respective principal amounts of
the Notes:
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT
--------------------------------------------------------------------- ----------------
<S> <C>
CS First Boston Corporation.......................................... $ 33,340,000
Bear, Stearns & Co. Inc.............................................. 33,330,000
Donaldson, Lufkin & Jenrette Securities Corporation.................. 33,330,000
----------------
Total...................................................... $100,000,000
=============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the Notes if any are
purchased. The Underwriting Agreement provides that, in the event of a default
by an Underwriter, in certain circumstances the purchase commitments of
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated.
Regions has been advised by the Underwriters that they propose to offer the
Notes to the public initially at the public offering price set forth on the
cover page of this Prospectus Supplement and to certain dealers at such price
less a concession of 0.30% of the principal amount per Note; that the
Underwriters and such dealers may allow a discount of 0.25% of such principal
amount per Note on sales to certain other dealers; and that after the initial
public offering, the public offering price and concession and discount to
dealers may be changed by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Underwriters have advised Regions that one or more of them intend to act as
market makers for the Notes. However, the Underwriters are not obligated to do
so and may discontinue any market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the Notes.
Regions has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or contribute to payments which the Underwriters may be required to make in
respect thereof.
The Underwriters and their affiliates may be customers of, engage in
transactions with and perform services for Regions and its subsidiaries in the
ordinary course of business.
LEGAL MATTERS
Certain legal matters will be passed upon for the Underwriters by Alston &
Bird, Washington, D.C. From time to time, Alston & Bird provides, and may in the
future continue to provide, legal services to Regions and its subsidiaries.
S-11
<PAGE> 12
PROSPECTUS
REGIONS FINANCIAL CORPORATION
SUBORDINATED DEBT SECURITIES
Regions Financial Corporation ("Regions") intends to offer from time to
time in one or more series up to $100,000,000 in aggregate initial offering
price of its unsecured subordinated notes, debentures, bonds or other evidences
of indebtedness (the "Subordinated Debt Securities"). The Subordinated Debt
Securities may be offered, separately or together, in separate series, in
amounts, at prices and on terms to be determined at the time of sale and set
forth in one or more supplements to this Prospectus (each a "Prospectus
Supplement"), which will be delivered to the offerees.
The Subordinated Debt Securities will be subordinated in right of payment
to all Senior Indebtedness of Regions (as described herein). The Prospectus
Supplement will set forth the terms of such Subordinated Debt Securities,
including the specific designation, aggregate principal amount, authorized
denominations, any premium, interest rate (which may be fixed or variable), if
any, interest payment dates, if any, maturity, any optional or mandatory
redemption terms, any sinking fund provisions, any conversion terms, the initial
public offering price and any other terms of the offering.
The Subordinated Debt Securities may be sold (i) to or through underwriters
or dealers, on a negotiated or competitive bid basis, such underwriters or
dealers to be designated at the time of sale, (ii) through agents designated
from time to time or (iii) directly by Regions. The names of any underwriters or
agents of Regions involved in the sale of the Subordinated Debt Securities, and
any applicable commissions or discounts, will be set forth in the corresponding
Prospectus Supplement. The net proceeds to Regions from such sale also will be
set forth in the corresponding Prospectus Supplement.
This Prospectus may not be used to consummate sales of Subordinated Debt
Securities unless accompanied by a Prospectus Supplement.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION BUT ARE SUBORDINATED DEBT
OBLIGATIONS OF REGIONS AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is September 6, 1994.
<PAGE> 13
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR THE CORRESPONDING PROSPECTUS SUPPLEMENT, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY REGIONS OR THE UNDERWRITERS. NEITHER THIS PROSPECTUS
NOR THE CORRESPONDING PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SUBORDINATED DEBT SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS AND THE CORRESPONDING PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF REGIONS SINCE SUCH
DATE.
AVAILABLE INFORMATION
Regions is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). Copies of such reports, proxy statements and other
information can be obtained, at prescribed rates, from the SEC by addressing
written requests for such copies to the Public Reference Section at the SEC at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In addition,
such reports, proxy statements and other information can be inspected at the
public reference facilities referred to above and at the regional offices of the
SEC at 7 World Trade Center, 13th Floor, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.
This Prospectus constitutes part of the Registration Statement on Form S-3
of Regions (including any exhibits and amendments thereto, the "Registration
Statement") filed with the SEC under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the Subordinated Debt Securities offered hereby.
This Prospectus does not include all of the information in the Registration
Statement, certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. For further information about Regions and the
Subordinated Debt Securities offered hereby, reference is made to the
Registration Statement. The Registration Statement may be inspected and copied,
at prescribed rates, at the SEC's public reference facilities at the addresses
set forth above.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by Regions pursuant
to the Exchange Act are hereby incorporated by reference herein:
1. Regions' Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.
2. Regions' Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 1994.
3. Regions' Current Reports on Form 8-K dated as of December 31, 1993,
July 8 and 18, 1994, and September 6, 1994.
4. Regions' Reports on Form 10-C dated as of December 31, 1993, and
May 2, 1994.
Regions' Annual Report on Form 10-K for the year ended December 31, 1993
incorporates by reference specific portions of Regions' Annual Report to
Stockholders for that year (the "Annual Report to Stockholders"), but does not
incorporate other portions of the Annual Report to Stockholders. Only those
portions of the Annual Report to Stockholders captioned "Financial Summary &
Review 1993," "Financial Statements and Notes" and "Historical Financial
Summary" are incorporated herein. Other portions of the Annual Report to
Stockholders are NOT incorporated herein and are not a part of the Registration
Statement.
All documents filed by Regions pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Subordinated Debt Securities offered hereby
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes hereof to the
extent that a statement contained herein or in any subsequently filed document
which also is, or is deemed to be, incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part hereof, except as so modified or superseded.
Copies of documents incorporated herein by reference, excluding exhibits
not specifically incorporated into the information incorporated herein, are
available without charge upon written or telephone request to Stockholder
Assistance, Ronald C. Jackson, Regions Financial Corporation, P.O. Box 1448,
Montgomery, Alabama 36102. Telephone requests may be directed to (205) 832-8450.
2
<PAGE> 14
THE COMPANY
Regions is a regional bank holding company headquartered in Birmingham,
Alabama, which operated as of June 30, 1994, 247 banking offices in Alabama,
Florida, Georgia, Louisiana and Tennessee. As of June 30, 1994, Regions had
total consolidated assets of approximately $10.8 billion, total consolidated
deposits of approximately $8.8 billion and total consolidated stockholders'
equity of approximately $905 million. Regions operates six state-chartered
commercial bank subsidiaries and one federal stock savings bank in Alabama,
Florida, Georgia, Louisiana and Tennessee (collectively referred to as the
"Subsidiary Institutions") and four banking-related subsidiaries engaged in
mortgage banking, credit life insurance, leasing and securities brokerage
activities with offices in various Southeastern states. Through its
subsidiaries, Regions offers a broad range of banking and banking-related
services.
As part of its ongoing business strategy, Regions continually evaluates
business combination opportunities and frequently conducts due diligence
activities in connection with possible business combinations. As a result,
business combination discussions and, in some cases, negotiations frequently
take place, and future business combinations involving cash, debt or equity
securities can be expected. Any future business combination or series of
business combinations that Regions might undertake may be material, in terms of
assets acquired or liabilities assumed, to Regions' financial condition.
During the 1994 fiscal year, Regions has completed the acquisition of three
financial institutions in Alabama and Louisiana, and has entered into definitive
agreements to acquire three additional financial institutions in Alabama,
Georgia and Louisiana. Information with respect to such acquisitions is included
in documents incorporated by reference in this Prospectus. See "Available
Information" and "Documents Incorporated by Reference."
Regions was organized under the laws of the State of Delaware and commenced
operations in 1971 under the name First Alabama Bancshares, Inc. On May 2, 1994,
the name of First Alabama Bancshares, Inc. was changed to Regions Financial
Corporation. All references to First Alabama Bancshares, Inc. in the documents
incorporated by reference herein shall be deemed to be references to Regions.
Regions is a registered bank holding company under the Bank Holding Company Act
of 1956, as amended (the "BHC Act"). Regions' principal executive offices are
located at 417 North 20th Street, Birmingham, Alabama 35203, and its telephone
number at such address is (205) 326-7100.
USE OF PROCEEDS
The net proceeds from the sale of the Subordinated Debt Securities will be
used for general corporate purposes, including Regions' working capital needs,
possible acquisition of other financial institutions or their assets, possible
acquisitions of failed financial institutions by arrangements with regulatory
authorities, possible acquisitions of other businesses of a type eligible for
bank holding companies and possible reduction or repayment of outstanding
indebtedness. Pending such uses, Regions may temporarily invest such proceeds.
If Regions elects at the time of issuance of the Subordinated Debt Securities to
make definite or more specific use of proceeds other than as set forth herein,
such use of proceeds will be described in the corresponding Prospectus
Supplement.
SUPERVISION AND REGULATION
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to banks and bank holding companies and provides
certain specific information related to Regions.
GENERAL
Regions is a bank holding company, registered with the Board of Governors
of the Federal Reserve System (the "Federal Reserve") under the BHC Act. As
such, Regions and its subsidiaries are subject to the supervision, examination
and reporting requirements of the BHC Act and the regulations of the Federal
Reserve.
3
<PAGE> 15
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or control
more than 5.0% of the voting shares of the bank, (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of the bank, or (iii) it may merge or consolidate with any other bank
holding company.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy, and consideration of convenience and needs issues includes the
parties' performance under the Community Reinvestment Act of 1977 (the "CRA"),
both of which are discussed below.
The BHC Act prohibits the Federal Reserve from approving a bank holding
company's application to acquire a bank or bank holding company located outside
the state in which the deposits of its banking subsidiaries were greatest on the
date the company became a bank holding company (Alabama in the case of Regions),
unless such acquisition is specifically authorized by statute of the state in
which the bank or bank holding company to be acquired is located. Alabama has
adopted reciprocal interstate banking legislation permitting Alabama-based bank
holding companies to acquire banks and bank holding companies in other states
and allowing bank holding companies located in Arkansas, the District of
Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North
Carolina, South Carolina, Tennessee, Texas, Virginia and West Virginia to
acquire Alabama banks and bank holding companies. Under legislation pending in
Congress the existing restrictions on interstate acquisitions of banks would be
repealed one year following enactment such that any bank holding company located
in Alabama would be able to acquire a bank located in any other state and a bank
holding company located outside Alabama could acquire any Alabama-based bank, in
either case subject to certain deposit percentage and other restrictions.
The BHC Act generally prohibits Regions from engaging in activities other
than banking or managing or controlling banks or other permissible subsidiaries
and from acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined by the Federal
Reserve to be so closely related to banking or managing or controlling banks as
to be a proper incident thereto. In determining whether a particular activity is
permissible, the Federal Reserve must consider whether the performance of such
an activity reasonably can be expected to produce benefits to the public, such
as greater convenience, increased competition or gains in efficiency, that
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interest or unsound banking
practices. For example, factoring accounts receivable, acquiring or servicing
loans, leasing personal property, conducting discount securities brokerage
activities, performing certain data processing services, acting as agent or
broker in selling credit life insurance and certain other types of insurance in
connection with credit transactions and performing certain insurance
underwriting activities all have been determined by the Federal Reserve to be
permissible activities of bank holding companies. The BHC Act does not place
territorial limitations on permissible non-banking activities of bank holding
companies. Despite prior approval, the Federal Reserve has the power to order a
holding company or its subsidiaries to terminate any activity or to terminate
its ownership or control of any subsidiary when it has reasonable cause to
believe that continuation of such activity or such ownership or control
constitutes a serious risk to the financial safety, soundness or stability of
any bank subsidiary of that bank holding company.
Each of the Subsidiary Institutions is a member of the Federal Deposit
Insurance Corporation (the "FDIC"), and as such, their deposits are insured by
the FDIC to the extent provided by law. Each Subsidiary Institution is also
subject to numerous state and federal statutes and regulations that affect its
business,
4
<PAGE> 16
activities and operations, and each is supervised and examined by one or more
state or federal bank regulatory agencies.
Because each of Regions' subsidiary banks is a state-chartered bank that is
not a member of the Federal Reserve System, such banks are subject to
supervision and examination by the FDIC. Regions' subsidiary savings bank is a
federally-chartered savings bank that is a member of the Federal Home Loan Bank
System and is subject to supervision and examination by the Office of Thrift
Supervision (the "OTS") and to the back-up supervisory authority of the FDIC.
Such agencies regularly examine the operations of the Subsidiary Institutions
and are given authority to approve or disapprove mergers, consolidations, the
establishment of branches and similar corporate actions. Such agencies also have
the power to prevent the continuance or development of unsafe or unsound banking
practices or other violations of law.
The Subsidiary Institutions are subject to the provisions of the CRA. Under
the terms of the CRA, the appropriate federal bank regulatory agency is
required, in connection with its examination of a Subsidiary Institution, to
assess such institution's record in assessing and meeting the credit needs of
the community served by that institution, including low- and moderate-income
neighborhoods. The regulatory agency's assessment of the institution's record is
made available to the public. Further, such assessment is required of any
institution which has applied to (i) charter a national bank, (ii) obtain
deposit insurance coverage for a newly chartered institution, (iii) establish a
new branch office that will accept deposits, (iv) relocate an office, or (v)
merge or consolidate with, or acquire the assets or assume the liabilities of, a
federally regulated financial institution. In the case of a bank holding company
applying for approval to acquire a bank or other bank holding company, the
Federal Reserve will assess the records of each depository institution of the
applicant bank holding company, and such records may be the basis for denying
the application.
In December 1993, the federal banking agencies proposed to revise their CRA
regulations in order to provide clearer guidance to depository institutions on
the nature and extent of their CRA obligations and the methods by which those
obligations will be assessed and enforced. The proposed regulation would
substitute a new evaluation system for the current process-based CRA assessment
factors that would rate institutions based on their actual performance in
meeting community credit needs. Under the proposal, all depository institutions
would be subject to three CRA-related tests: a lending test; an investment test;
and a service test. The lending test, which would be the primary test for all
institutions other than wholesale and limited-purpose banks, would evaluate an
institution's lending activities by comparing the institution's share of
housing, small business and consumer loans in low- and moderate-income areas in
its service area with its share of such loans in the other parts of its service
area. The agencies would also evaluate the institution's performance independent
of other lenders by examining the ratio of such loans made by the institution to
low- and moderate-income areas to all such loans made by the institution. At the
election of an institution, the agencies would also consider "indirect" loans
made by affiliates and subsidiaries of the institution as well as lending
consortia and other lenders in which the institution had made lawful
investments.
The focus of the investment test, under which wholesale and limited-purpose
institutions would normally be evaluated, would be the amount of assets
(compared to its risk-based capital) that an institution has devoted to
"qualified investments" that benefit low- and moderate-income individuals and
areas in the institution's service area. The service test would evaluate an
institution based on the percentage of its branch offices that are located in or
are readily accessible to low- and moderate-income areas. Smaller institutions,
those having total assets of less than $250 million, would be evaluated under
more streamlined criteria.
The joint agency CRA proposal provides that an institution evaluated under
a given test would receive one of five ratings for that test: outstanding; high
satisfactory; low satisfactory; needs to improve; or substantial non-compliance.
The ratings for each test would then be combined to produce an overall composite
rating of either outstanding, satisfactory (including both high and low
satisfactory), needs to improve or substantial non-compliance. In the case of a
retail-oriented institution, its lending test rating would form the basis for
its composite rating. That rating would then be increased by up to two levels in
the case of outstanding or high satisfactory investment performance, increased
by one level in the case of outstanding service and decreased by one level in
the case of substantial non-compliance in service. An institution found to have
engaged in
5
<PAGE> 17
illegal lending discrimination would be rebuttably presumed to have a
less-than-satisfactory composite CRA rating.
Under the proposal, an institution's CRA rating would continue to be taken
into account by a regulator in considering various types of applications. In
addition, an institution receiving a rating of "substantial non-compliance"
would be subject to civil money penalties or a cease and desist order under
Section 8 of the Federal Deposit Insurance Act (the "FDIA").
In response to widespread criticisms of the original CRA proposal, the
federal banking agencies have indicated that they will be issuing a revised
proposal in the fall of 1994 that will scale back a number of key provisions
initially proposed. The exact timing of the revised proposal, the specific tests
and other provisions that it will contain, and when and in what form any CRA
regulation may ultimately be adopted are uncertain at this time.
PAYMENT OF DIVIDENDS
Regions is a legal entity separate and distinct from its banking and other
subsidiaries. The principal source of cash flow of Regions, including cash flow
to pay dividends to its stockholders and to service the indebtedness represented
by the Subordinated Debt Securities as well as other Regions' debt, is dividends
from the Subsidiary Institutions. There are statutory and regulatory limitations
on the payment of dividends by the Subsidiary Institutions to Regions as well as
by Regions to its stockholders.
As state nonmember banks, the subsidiary banks are subject to the
respective laws and regulations of Alabama, Florida, Georgia, Louisiana and
Tennessee and to the regulations of the FDIC as to the payment of dividends. The
subsidiary savings bank is subject to the regulations of the OTS as to payment
of dividends.
If, in the opinion of the federal regulatory agencies, an institution under
its jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the institution, could
include the payment of dividends), such authority may require, after notice and
hearing, that such institution cease and desist from such practice. The Federal
Reserve, the FDIC and the OTS have indicated that paying dividends that deplete
an institution's capital base to an inadequate level would be an unsafe and
unsound banking practice. Under the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), an insured institution may not pay any
dividend while it is undercapitalized or if payment would cause it to become
undercapitalized. See "-- Prompt Corrective Action." Moreover, the Federal
Reserve and the FDIC have issued policy statements which provide that bank
holding companies and insured banks should generally only pay dividends out of
current operating earnings.
At June 30, 1994, under dividend restrictions imposed under federal and
state laws, the Subsidiary Institutions, without obtaining governmental
approvals, could declare aggregate dividends to Regions of approximately $237
million.
TRANSACTIONS WITH AFFILIATES
There are various restrictions on the extent to which Regions and it
nonbank subsidiaries can borrow or otherwise obtain credit from the Subsidiary
Institutions. Each Subsidiary Institution (and its subsidiaries) is limited in
engaging in borrowing and other "covered transactions" with nonbank or
non-savings-bank affiliates to the following amounts: (i) in the case of any
such affiliate, the aggregate amount of covered transactions of the Subsidiary
Institution and its subsidiaries may not exceed 10% of the capital stock and
surplus of such Subsidiary Institution; and (ii) in the case of all affiliates,
the aggregate amount of covered transactions of the Subsidiary Institution and
its subsidiaries may not exceed 20% of the capital stock and surplus of such
Subsidiary Institution. "Covered transactions" are defined by statute to include
a loan or extension of credit as well as a purchase of securities issued by an
affiliate, a purchase of assets (unless otherwise exempted by the Federal
Reserve), the acceptance of securities issued by the affiliate as collateral for
a loan and the issuance of a guarantee, and the issuance of a guarantee,
acceptance or letter of credit on behalf of an affiliate. Covered transactions
are also subject to certain collateralization requirements. Further, a bank
holding company and its
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subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of property or furnishing
of services.
CAPITAL ADEQUACY
Regions and the Subsidiary Institutions are required to comply with the
capital adequacy standards established by the Federal Reserve in the case of
Regions, the FDIC in the case of the subsidiary banks and the OTS in the case of
the subsidiary savings bank. There are two basic measures of capital adequacy
for bank holding companies that have been promulgated by the Federal Reserve: a
risk-based measure and a leverage measure. All applicable capital standards must
be satisfied for a bank holding company to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance sheet exposure and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items are
assigned to broad risk categories, each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance-sheet items.
The minimum guideline for the ratio of total capital ("Total Capital") to
risk-weighted assets (including certain off-balance-sheet items, such as standby
letters of credit) is 8.0%. At least half of the Total Capital must be composed
of common stock, minority interests in the equity accounts of consolidated
subsidiaries, noncumulative perpetual preferred stock and a limited amount of
cumulative perpetual preferred stock, less goodwill and certain other intangible
assets ("Tier 1 Capital"). The remainder may consist of subordinated debt, other
preferred stock and a limited amount of loan loss reserves. At June 30, 1994,
Regions' consolidated Tier 1 Capital and Total Capital ratios were 11.82% and
14.15%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets (the "Leverage Ratio"), of 3.0% for bank holding companies
that meet certain specified criteria, including having the highest regulatory
rating. All other bank holding companies generally are required to maintain a
Leverage Ratio of at least 3.0% plus an additional cushion of 100 to 200 basis
points. Regions' Leverage Ratio at June 30, 1994, was 8.08%. The guidelines also
provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the Federal Reserve has indicated that it will consider a
"tangible Tier 1 Capital leverage ratio" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities.
Each of Regions' subsidiary banks is subject to risk-based and leverage
capital requirements adopted by the FDIC, and Regions' subsidiary savings bank
is subject to tangible, risk-based and core capital requirements adopted by the
OTS. Each of the Subsidiary Institutions was in compliance with applicable
minimum capital requirements as of June 30, 1994. Neither Regions nor any of the
Subsidiary Institutions has been advised by any federal banking agency of any
specific minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business. See "-- Prompt Corrective
Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve, the FDIC and the OTS have, pursuant
to FDICIA, proposed an amendment to the risk-based capital standards which would
calculate the change in an institution's net economic value attributable to
increases and decreases in market interest rates and would require banks with
excessive interest rate risk exposure to hold additional amounts of capital
against such exposures.
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SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, Regions is expected to act as a source of
financial strength to, and to commit resources to support, each of the
Subsidiary Institutions. This support may be required at times when, absent such
Federal Reserve policy, Regions may not be inclined to provide it. In addition,
any capital loans by a bank holding company to any of the Subsidiary
Institutions are subordinate in right of payment to deposits and to certain
other indebtedness of such Subsidiary Institution. In the event of a bank
holding company's bankruptcy, any commitment by the bank holding company to a
federal bank regulatory agency to maintain the capital of a Subsidiary
Institution will be assumed by the bankruptcy trustee and entitled to a priority
of payment.
Under the FDIA, a depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC after August 9, 1989, in connection with (i) the default of a commonly
controlled FDIC-insured depository institution or (ii) any assistance provided
by the FDIC to any commonly controlled FDIC-insured depository institution "in
danger of default." "Default" is defined generally as the appointment of a
conservator or receiver, and "in danger of default" is defined generally as the
existence of certain conditions indicating that a default is likely to occur in
the absence of regulatory assistance. The FDIC's claim for damages is superior
to claims of stockholders of the insured depository institution or its holding
company but is subordinate to claims of depositors, secured creditors and
holders of subordinated debt (other than affiliates) of the commonly controlled
insured depository institution. The Subsidiary Institutions are subject to these
cross-guarantee provisions. As a result, any loss suffered by the FDIC in
respect of any of the Subsidiary Institutions would likely result in assertion
of the cross-guarantee provisions, the assessment of such estimated losses
against Regions' other Subsidiary Institutions and a potential loss of Regions'
investment in such other Subsidiary Institutions.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories ("well-capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized") and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to a
narrow exception, the FDICIA requires the banking regulator to appoint a
receiver or conservator for an institution that is critically undercapitalized.
The federal banking agencies have specified by regulation the relevant capital
level for each category.
Under the final agency rule implementing the prompt corrective action
provisions, an institution that (i) has a Total Capital ratio of 10% or greater,
a Tier 1 Capital ratio of 6.0% or greater and a Leverage Ratio of 5.0% or
greater, and (ii) is not subject to any written agreement, order, capital
directive or prompt corrective action directive issued by the appropriate
federal banking agency, is deemed to be "well-capitalized." An institution with
a Total Capital ratio of 8.0% or greater, a Tier 1 Capital ratio of 4.0% or
greater and a Leverage Ratio of 4.0% or greater is considered to be "adequately
capitalized." A depository institution that has a Total Capital ratio of less
than 8.0%, a Tier 1 Capital ratio of less than 4.0% or a Leverage Ratio of less
than 4.0% is considered to be "undercapitalized." A depository institution that
has a Total Capital ratio of less than 6.0%, a Tier 1 Capital ratio of less than
3.0% or a Leverage Ratio of less than 3.0% is considered to be "significantly
undercapitalized" and an institution that has a tangible equity capital to
assets ratio equal to or less than 2.0% is deemed to be "critically
undercapitalized." For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 capital for purposes of the
risk-based capital standards plus the amount of outstanding cumulative perpetual
preferred stock (including related surplus), minus all intangible assets with
certain exceptions. A depository institution may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
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An institution that is categorized as undercapitalized, significantly
undercapitalized or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution will meet its capital restoration plan, subject to certain
limitations. The obligation of a controlling bank holding company under FDICIA
to fund a capital restoration plan is limited to the lesser of 5.0% of an
undercapitalized subsidiary's assets and the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches or engaging in any new line of business except in
accordance with an accepted capital restoration plan or with the approval of the
FDIC. In addition, the appropriate federal banking agency has authority with
respect to any undercapitalized depository institution to take any of the
actions it is permitted or required to take with respect to a significantly
undercapitalized institution as described below if it determines "that those
actions are necessary to carry out the purpose" of FDICIA.
For those institutions that are (i) significantly undercapitalized or (ii)
undercapitalized and (a) fail to submit an acceptable capital restoration plan
or (b) fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions: (i) sell enough shares, including voting shares, to become
adequately capitalized; (ii) merge with (or be sold to) another institution (or
holding company), but only if grounds exist for appointing a conservator or
receiver; (iii) restrict certain transactions with banking affiliates as if the
"sister bank" exception to the requirements of Section 23A of the Federal
Reserve Act did not exist; (iv) otherwise restrict transactions with bank or
nonbank affiliates; (v) restrict the interest rates that the institution pays on
deposits to "prevailing rates" in the institution's "region;" (vi) restrict
asset growth or reduce total assets; (vii) alter, reduce or terminate
activities; (viii) hold a new election of directors; (ix) dismiss any director
or senior executive officer who held office for more than 180 days immediately
before the institution became undercapitalized; provided that in requiring
dismissal of a director or senior officer, the agency must comply with certain
procedural requirements, including the opportunity for an appeal in which the
director or officer will have the burden of proving his or her value to the
institution; (x) employ "qualified" senior executive officers; (xi) cease
accepting deposits from correspondent depository institutions; (xii) divest
certain nondepository affiliates which pose a danger to the institution; or
(xiii) be divested by a parent holding company. In addition, unless it has the
prior approval of the appropriate federal banking agency, a significantly
undercapitalized institution may not pay any bonus to any senior executive
officer or increase the rate of compensation for such an officer without
regulatory approval.
At June 30, 1994, all of the Subsidiary Institutions had the requisite
capital levels to qualify as well capitalized.
BROKERED DEPOSITS
The FDIC has adopted regulations governing the receipt of brokered
deposits. Under the regulations, a depository institution cannot accept, roll
over or renew brokered deposits unless (i) it is well-capitalized or (ii) it is
adequately capitalized and receives a waiver from the FDIC. A depository
institution that cannot receive brokered deposits also cannot offer
"pass-through" insurance on certain employee benefit accounts. Whether or not it
has obtained such a waiver, an adequately capitalized depository institution may
not pay an interest rate on any deposits in excess of 75 basis points over
certain prevailing market rates specified by regulation. There are no such
restrictions on a depository institution that is well-capitalized. Because all
of the Subsidiary Institutions had at June 30, 1994, the requisite capital
levels to qualify as well-capitalized, Regions believes the brokered deposits
regulation will have no material effect on the funding or liquidity of any of
the Subsidiary Institutions.
FDIC INSURANCE ASSESSMENTS
In July 1993, the FDIC adopted a new risk-based assessment system for
insured depository institutions that takes into account the risks attributable
to different categories and concentrations of assets and liabilities. The new
system, which went into effect on January 1, 1994, and replaces a transitional
system that the FDIC had utilized for the 1993 calendar year, assigns an
institution to one of three capital categories: (i) well-
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capitalized; (ii) adequately capitalized; and (iii) undercapitalized. These
three categories are substantially similar to the prompt corrective action
categories described above, with the "undercapitalized" category including
institutions that are undercapitalized, significantly undercapitalized and
critically undercapitalized for prompt corrective action purposes. An
institution is also assigned by the FDIC to one of three supervisory subgroups
within each capital group. The supervisory subgroup to which an institution is
assigned is based on a supervisory evaluation provided to the FDIC by the
institution's primary federal regulator and information which the FDIC
determines to be relevant to the institution's financial condition and the risk
posed to the deposit insurance funds (which may include, if applicable,
information provided by the institution's state supervisor). An institution's
insurance assessment rate is then determined based on the capital category and
supervisory category to which it is assigned. Under the final risk-based
assessment system, as well as the prior transitional system, there are nine
assessment risk classifications (i.e., combinations of capital groups and
supervisory subgroups) to which different assessment rates are applied.
Assessment rates for 1994, as they had during 1993, will range from .23% of
deposits for an institution in the highest category (i.e., "well-capitalized"
and "healthy") to .31% of deposits for an institution in the lowest category
(i.e., "undercapitalized" and "substantial supervisory concern").
The FDIC is authorized to raise insurance premiums in certain
circumstances. The current assessment rates for the Bank Insurance Fund (the
"BIF") and the Savings Association Insurance Fund (the "SAIF") are designed to
increase the reserve ratios (i.e., the ratios of reserves to insured deposits)
for both funds to a designated ratio - 1.25% - within a specified period of
time. Once the designated ratio is reached, the FDIC is to set future assessment
rates at levels that will maintain a fund's reserve ratio at the designated
level. The attainment by either fund of its designated reserve ratio could cause
a reduction in assessment rates for that fund.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC.
SAFETY AND SOUNDNESS STANDARDS
In November 1993, federal banking agencies issued for comment proposed
safety and soundness standards relating to internal controls, information
systems and internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth, compensation, fees and benefits. With
respect to internal controls, information systems and internal audit systems,
the standards describe the functions that adequate internal controls and
information systems must be able to perform, including (i) monitoring adherence
to prescribed policies, (ii) effective risk management, (iii) timely and
accurate financial, operational and regulatory reporting, (iv) safeguarding and
managing assets, and (v) compliance with applicable laws and regulations. The
standards also include requirements that (i) those performing internal audits be
qualified and independent, (ii) internal controls and information systems be
tested and reviewed, (iii) corrective actions be adequately documented, and (iv)
that results of an audit be made available for review of management actions.
As in the case of internal controls and information systems, the proposal
establishes general principles and standards, rather than specific requirements,
that must be followed in other areas. For example, loan documentation and credit
underwriting practices must be such that they enable the institution to make an
informed lending decision and assess credit risk on an ongoing basis. Similarly,
an institution must manage interest rate risk "in a manner that is appropriate
to the size of [the institution] and the complexity of its assets and
liabilities" and must conduct any asset growth in accordance with a plan that
has taken a variety of factors such as deposit volatility, capital and interest
rate risk into account. The proposal also prohibits "excessive compensation,"
which is defined as amounts paid that are unreasonable or disproportionate to
the services performed by an officer, employee, director or principal
stockholder in light of all circumstances. In order to help alert institutions
and their regulators to deteriorating financial conditions, the proposed rule
also would impose a maximum ratio of classified assets to total capital of 1.0
and, in the case of an institution that had incurred a net loss over the last
four quarters, would require that institution to have sufficient capital to
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absorb a similar loss over the next four quarters and still remain in compliance
with its minimum capital requirements.
DEPOSITOR PREFERENCE
The Omnibus Budget Reconciliation Act of 1993 provides that deposits and
certain claims for administrative expenses and employee compensation against an
insured depository institution would be afforded a priority over other general
unsecured claims against such an institution, including the Subordinated Debt
Securities, in the "liquidation or other resolution" of such an institution by
any receiver.
DESCRIPTION OF SUBORDINATED DEBT SECURITIES
The following description of the terms of the Subordinated Debt Securities
sets forth certain general terms and provisions of the Subordinated Debt
Securities to which any Prospectus Supplement may relate. The particular terms
of the Subordinated Debt Securities offered by any Prospectus Supplement and the
extent, if any, to which such general provisions may apply to the Subordinated
Debt Securities so offered will be described in the Prospectus Supplement
relating to such Subordinated Debt Securities.
The Subordinated Debt Securities are to be issued under an Indenture (the
"Indenture"), entered into between Regions and Bankers Trust Company, as trustee
(the "Trustee") as of December 1, 1992, and, if applicable, any supplemental
indenture. The Indenture is incorporated by reference as an exhibit to the
Registration Statement of which this Prospectus is a part. The following summary
of certain provisions of the Indenture does not purport to be complete and is
subject to and qualified in its entirety by reference to the provisions of the
Indenture. Whenever particular sections or defined terms of the Indenture are
referred to, it is intended that such sections or defined terms shall be
incorporated herein by reference. Unless otherwise indicated, capitalized terms
shall have the meanings ascribed to them in the Indenture.
As of the date of this Prospectus, Regions has issued and has outstanding
under the Indenture (i) $75 million of unsecured subordinated indebtedness
designated 7.80% Subordinated Notes Due 2002 (the "7.80% Subordinated Notes")
and (ii) $25 million of unsecured subordinated indebtedness designated 7.65%
Subordinated Notes Due 2001 (the "7.65% Subordinated Notes") (together, the
"Subordinated Notes").
GENERAL
Although the amount of Subordinated Debt Securities offered by this
Prospectus will be limited to the aggregate initial offering price described on
the cover page of this Prospectus, the Indenture does not include any
limitations on the amount of debt securities that may be issued thereunder from
time to time in one or more series. (Section 301).
The Subordinated Debt Securities will be unsecured and will be subordinate
and junior in right of payment to the prior payment in full of the Senior
Indebtedness of Regions (as described below). (Sections 101, 1502). As of the
date of this Prospectus, Regions has outstanding (i) $75 million of the 7.80%
Subordinated Notes and (ii) $25 million of the 7.65% Subordinated Notes, both of
which issuances qualify as Subordinated Debt Securities. Subordinated Debt
Securities may be issued on a parity with previously outstanding subordinated
indebtedness of Regions, or may be issued senior to or subordinate to the
outstanding subordinated indebtedness.
Principal, premium, if any, and interest on the Subordinated Debt
Securities will be payable and the Subordinated Debt Securities may be
transferable or exchangeable, without payment of any service charge, other than
any tax or governmental charge payable in connection therewith, at the principal
Corporate Trust Office of the Trustee and at any other office or agency
maintained by Regions for such purposes, except that at the option of Regions,
interest may be paid by mailing a check to the address of the person entitled
thereto as it appears on the Security Register. (Sections 307, 1002). The
Subordinated Debt Securities may be sold at a substantial original issue
discount below their stated principal amount, bearing no interest or interest at
a rate which at the time of issuance is below market rates. (Sections 101, 301).
Special federal income tax
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consequences and other considerations applicable to any such Subordinated Debt
Securities will be described in the corresponding Prospectus Supplement relating
thereto.
Because Regions is a holding company, its rights and the rights of its
creditors, including the holders of the Subordinated Debt Securities offered
hereby, to participate in any distribution of the assets of any subsidiary of
Regions upon the latter's liquidation or recapitalization will be subject to the
prior claims of such subsidiary's creditors (including, in the case of a
subsidiary depository institution, its depositors), except to the extent that
Regions may itself be a creditor with recognized claims against such subsidiary.
Claims on subsidiaries of Regions by creditors other than Regions include claims
with respect to long-term debt and substantial obligations with respect to
deposit liabilities, federal funds purchased, securities sold under repurchase
agreements and other short-term borrowings. See "The Company" and "Supervision
and Regulation."
Reference is made to the Prospectus Supplement for the specific terms of
the Subordinated Debt Securities offered hereby, including: (i) the specific
title of the Subordinated Debt Securities; (ii) the aggregate principal amount
of the Subordinated Debt Securities offered hereby; (iii) the denominations in
which the Subordinated Debt Securities are authorized to be issued and whether
the Subordinated Debt Securities will be issued in registered form, without
coupons or in global book-entry registered form; (iv) any sinking fund
provisions; (v) the percentage of the principal amount at which the Subordinated
Debt Securities will be issued; (vi) the date on which the Subordinated Debt
Securities will mature; (vii) the rate or rates per annum or the method for
determining such rate or rates, if any, at which the Subordinated Debt
Securities will bear interest (which may be fixed or variable); (viii) any
premium payments; (ix) the times at which any such interest will be payable; (x)
any provisions relating to optional or mandatory redemption of the Subordinated
Debt Securities at the option of Regions or the Holders of the Subordinated Debt
Securities or pursuant to sinking fund or analogous provisions; (xi) any terms
by which the Subordinated Debt Securities may be convertible into common stock
or other securities of Regions; (xii) any provisions relating to the conversion
or exchange of the Subordinated Debt Securities into Subordinated Debt
Securities of another series; (xiii) the place or places at which Regions will
make payments of principal, premium, if any, and interest and the method of such
payment; (xiv) any additional covenants and Events of Default (as described
below) and the remedies with respect thereto not currently set forth in the
Indenture; and (xv) any other specific terms of the Subordinated Debt
Securities.
SUBORDINATION
The Subordinated Debt Securities are subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness of Regions.
(Section 1502). "Senior Indebtedness" is defined by the Indenture to include all
indebtedness and other obligations of Regions to its creditors, whether
outstanding on the date of execution of the Indenture or thereafter created,
assumed or incurred, including, but not limited to, (i) the principal of, and
premium, if any, and interest on all indebtedness for money borrowed, (ii) all
obligations to make payment pursuant to the terms of financial instruments
(including securities contracts, derivative instruments, option contracts and
similar financial instruments), (iii) any indebtedness or obligations of others
of the kind described in either (i) or (ii) above for the payment of which
Regions is responsible or liable as guarantor or otherwise, and (iv) any
deferrals, renewals or extensions of any such Senior Indebtedness, other than
the Subordinated Debt Securities and any other obligations expressly made
subordinate in right of payment to Senior Indebtedness. (Section 101). As of
June 30, 1994, and excluding $100 million in outstanding Subordinated Notes,
there was an aggregate of approximately $866 million in borrowed funds of
Regions outstanding, approximately $337 million of which represented long-term
debt and $529 million of which represented short-term borrowings, including $510
million of federal funds purchased and securities sold subject to agreements to
repurchase, all of which is included in the definition of "Senior Indebtedness."
Senior Indebtedness also includes other liabilities, such as accounts payable.
Because of the inclusion of short-term components, the amount of Senior
Indebtedness outstanding is subject to significant fluctuation over even short
periods of time. The Indenture does not limit the amount of Subordinated Debt
Securities or other debt securities that Regions may incur. (Section 301).
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No payment on account of principal of or interest, if any, on the
Subordinated Debt Securities shall be made, and no Subordinated Debt Securities
shall be purchased, either directly or indirectly, by Regions or any of its
subsidiaries, if any default or Event of Default with respect to any Senior
Indebtedness shall have occurred and be continuing. (Section 1502).
Upon any receivership, insolvency, bankruptcy, assignment for the benefit
of creditors, reorganization, whether or not pursuant to bankruptcy laws, sale
of all or substantially all of the assets, dissolution, liquidation or other
marshaling of the assets and liabilities of Regions, no amount shall be paid by
Regions, in respect of the principal, premium, if any, or interest on the
Subordinated Debt Securities unless and until all Senior Indebtedness shall have
been paid in full together with all interest thereon and all other amounts
payable in respect thereof. (Section 1502).
In the event that any payment or distribution of any character, whether in
cash or other property, shall be received by the Trustee or any Holder of
Subordinated Debt Securities in contravention of any of the subordination terms
thereof, such payment or distribution shall, provided that the Trustee shall
have received notice of an event which triggers a requirement that no payment be
made with respect to Subordinated Debt Securities at least three business days
prior to the date for any payment on the Subordinated Debt Securities, be
received in trust for the benefit of, and shall be paid over or delivered and
transferred to, the holders of the Senior Indebtedness at the time outstanding
in accordance with the priorities then existing among such holders for
application to the payment of all Senior Indebtedness remaining unpaid, to the
extent necessary to pay all such Senior Indebtedness in full. (Section 1502). In
the event of the failure of the Trustee or any Holder to endorse or assign any
such payment, distribution or security, each holder of Senior Indebtedness is
hereby irrevocably authorized to endorse or assign the same. (Section 1502).
Notwithstanding the foregoing, Holders of Subordinated Debt Securities may
receive securities of Regions or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in the subordination provisions of the Subordinated Debt
Securities, to the payment of all Senior Indebtedness at the time outstanding
and to any securities issued in respect thereof under any such plan of
reorganization.
Upon the payment in full of all Senior Indebtedness, the Holders of
Subordinated Debt Securities shall be subrogated (equally and ratably with the
holders of all indebtedness of Regions which, by its express terms, ranks on a
parity with the Subordinated Debt Securities and is entitled to like rights of
subrogation) to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets of Regions applicable to the Senior
Indebtedness until the Subordinated Debt Securities shall be paid in full.
(Section 1502).
COVENANTS
In the Indenture, Regions agrees not to merge or consolidate with another
entity or to sell its properties or assets as an entirety unless the successor
entity expressly assumes the obligations of Regions with respect to the
Securities and the covenants of Regions under the Indenture. (Section 801). The
Indenture does not restrict Regions from incurring, assuming or becoming liable
for any type of debt nor from creating, assuming, incurring or permitting any
mortgage, pledge, encumbrance, lien or charge on its property. In addition, the
Indenture does not include any covenant or any other provision which would
provide any recourse or other protection to the Holders of the Securities in the
event of any decline in credit rating or other indicia of credit quality, no
matter how sudden or significant, resulting from any cause, including from a
merger, consolidation, change in control, recapitalization or similar
restructuring.
The Indenture does not restrict Regions' ability to sell, encumber or
otherwise dispose of the stock of its subsidiaries, including the stock of First
Alabama Bank, the principal bank subsidiary of Regions.
MODIFICATION OF THE INDENTURE
The Indenture includes provisions permitting Regions and the Trustee, with
the consent of the Holders of not less than a majority in principal amount of
any series of the Securities to be affected at the time outstanding under the
Indenture, to modify, by supplemental indenture, the Indenture or the rights of
the
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Holders of such Securities, except that without the consent of each Holder of
each outstanding Security affected thereby, no such modification shall: (i)
change the fixed maturity, reduce the principal amount or redemption premium, if
any, or reduce the rate or extend the time of payment of interest on any
Security; (ii) reduce the percentage in principal amount of the outstanding
Securities, the consent of whose Holders is required to approve any such
modification or to waive any default or other waivable requirement of the
indenture; (iii) change the obligation of Regions to maintain an office or agent
for payment; or (iv) modify any applicable subordination provisions in a manner
adverse to the Holder of any of the Securities. (Section 902).
DEFAULTS AND LIMITED RIGHTS OF ACCELERATION
An Event of Default is defined in the Indenture as (i) a default in the
payment of principal or premium thereon at maturity or in the deposit of any
sinking fund payment when and as due by the terms of the Securities of a series,
(ii) a default in the payment of interest at the due date thereof and the
continuance of such default for a period of 30 days, (iii) a default in the
performance of or breach of any other covenant or warranty therein by Regions
and continuance of such default or breach for a period of 60 days after notice
thereof to Regions by the Trustee or the Holders of at least 15% in principal
amount of the affected series, or (iv) certain events of bankruptcy, insolvency
proceedings or reorganization of Regions. (Section 501).
Payment of principal of the Subordinated Debt Securities may be accelerated
only in the case of an "Acceleration Event," which is defined in the Indenture
as including only the bankruptcy, insolvency proceedings or reorganization
events with respect to Regions that constitute an Event of Default. (Sections
101, 501). There is no right of acceleration in the case of a default in the
payment of principal, any premium or interest on the Subordinated Debt
Securities or the performance of any other covenant of Regions in the Indenture.
In the event an Acceleration Event shall have occurred and shall be
continuing, either the Trustee or the Holders of 25% in principal amount of
those affected series of Securities then outstanding under the Indenture may
declare the principal amount of all of such series of Securities to be due and
payable immediately. (Section 502). Upon certain conditions a declaration of an
Event of Default may be annulled and past defaults may be waived by the Holders
of a majority in principal amount of the Securities then outstanding. (Section
502).
Regions is obligated to furnish the Trustee annually a statement as to the
compliance by Regions with all conditions and covenants under the Indenture.
(Section 704).
COLLECTION OF INDEBTEDNESS
The Indenture also provides that in the event of a failure by Regions to
make payment of principal of, or applicable premium or sinking fund installment
or interest on, the Securities (and, in the case of payment of interest, such
failure to pay shall have continued for 30 days) Regions will, upon demand of
the Trustee, pay to it, for the benefit of the Holders of the Securities, the
whole amount then due and payable on the Securities for principal and any
premium, sinking fund installment and interest, including, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium, on any sinking fund installment and on any overdue
interest, computed from the date of default in the payment of such interest, at
the rate or rates prescribed therefor in such Securities. (Section 503). The
Indenture further provides that if Regions fails to pay such amount forthwith
upon such demand, the Trustee may, among other things, institute a judicial
proceeding for the collection thereof. (Section 503). The Indenture includes
limitations on the right of any Holder of the Securities to institute judicial
proceedings in respect thereto. (Section 507). However, the Indenture provides
that notwithstanding any other provision of the Indenture, the Holder of any
Security shall have the right to institute suit for the enforcement of any
payment of principal of and interest on such Security on the respective stated
maturities expressed in such Security and that such right shall not be impaired
without the consent of such Holder. (Section 508).
The Holders of a majority in principal amount of the Securities then
outstanding under the Indenture shall have the right to direct the time, method
and place of conducting any proceeding for any remedy
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available to the Trustee under that Indenture, subject to certain exceptions.
(Section 512). The Indenture requires the annual filing by Regions with the
Trustee of a certificate as to the absence of default and as to compliance with
the terms of that Indenture. (Section 1004).
CONCERNING THE TRUSTEE
Regions and Bankers Trust Company have from time to time engaged in
customary banking transactions in the ordinary course of business. Bankers Trust
Company also serves as Trustee under the Indenture for the 7.80% Subordinated
Notes and the 7.65% Subordinated Notes.
PLAN OF DISTRIBUTION
Regions may sell the Subordinated Debt Securities on a negotiated or
competitive bid basis to or through underwriters or dealers, and may also sell
the Subordinated Debt Securities directly to other purchasers or through agents.
The distribution of the Subordinated Debt Securities may be effected from time
to time in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. The Prospectus
Supplement corresponding to such Subordinated Debt Securities will set forth the
terms of the offering of the Subordinated Debt Securities of such series,
including the name or names of any underwriters, the purchase price and the
proceeds to Regions from such sales, any underwriting discounts, agency fees and
other items constituting underwriters' compensation, the initial public offering
price, any discounts or concessions to be allowed or reallowed or paid to
dealers and the securities exchange, if any, on which such Subordinated Debt
Securities may be listed.
If underwriters are used in the sale, the Subordinated Debt Securities may
be acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at the time of
sale. The Subordinated Debt Securities may be offered to the public either
through underwriting syndicates represented by managing underwriters, or by
underwriters without a syndicate, all of which underwriters in either case will
be designated in the Prospectus Supplement with respect to such offering. Unless
otherwise set forth in the Prospectus Supplement, under the terms of the
underwriting agreement, the obligations of the underwriters to purchase the
Subordinated Debt Securities will be subject to certain conditions precedent and
the underwriters will be obligated to purchase all the Subordinated Debt
Securities if any are purchased.
The Subordinated Debt Securities may be sold directly by Regions or through
agents designated by Regions from time to time. Any agent involved in the offer
or sale of the Subordinated Debt Securities with respect to which this
Prospectus is delivered will be named, and any commission payable by Regions to
such agent will be set forth, in the corresponding Prospectus Supplement. Unless
otherwise indicated in such Prospectus Supplement, any such agent will be acting
on a best-efforts basis for the period of its appointment.
The Subordinated Debt Securities will be newly issued securities with no
established market. No assurance can be given as to the liquidity of the trading
market, if any, for any of the Subordinated Debt Securities.
Underwriters and agents may be entitled under agreements entered into with
Regions to indemnification by Regions against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which the underwriters or agents may be required to make in respect
thereof. Underwriters and agents also may be customers of, engage in
transactions with or perform other services for Regions in the ordinary course
of business.
EXPERTS
The consolidated financial statements of Regions, incorporated by reference
in Regions' Annual Report (Form 10-K) for the year ended December 31, 1993, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
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consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
LEGAL OPINIONS
Certain legal matters with respect to the Subordinated Debt Securities
offered hereby will be passed upon for Regions by Lange, Simpson, Robinson &
Somerville, Birmingham, Alabama. Henry E. Simpson, a partner in the law firm of
Lange, Simpson, Robinson & Somerville, is a director of Regions. As of July 15,
1994, attorneys of that firm beneficially owned, directly or indirectly, an
aggregate of 120,695 shares of Regions common stock.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY REGIONS OR
ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF REGIONS SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company......................... S-2
Recent Developments................. S-3
Use of Proceeds..................... S-4
Selected Consolidated Financial
Data.............................. S-5
Description of the Notes............ S-6
Capitalization...................... S-10
Underwriting........................ S-11
Legal Matters....................... S-11
PROSPECTUS
Available Information............... 2
Documents Incorporated by
Reference......................... 2
The Company......................... 3
Use of Proceeds..................... 3
Supervision and Regulation.......... 3
Description of Subordinated Debt
Securities........................ 11
Plan of Distribution................ 15
Experts............................. 15
Legal Opinions...................... 16
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
(LOGO)
$100,000,000
Regions Financial Corporation
7 3/4% Subordinated
Notes Due 2024
PROSPECTUS SUPPLEMENT
CS First Boston
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
- ------------------------------------------------------
