<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1994 COMMISSION FILE NUMBER
0-6159
REGIONS FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 63-0589368
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
417 North 20th Street, Birmingham, Alabama 35202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 832-8450
FIRST ALABAMA BANCSHARES, INC.
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to the filing requirements for at least
the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common Stock, $.625 Par Value-41,120,551 shares outstanding
as of April 30, 1994
<PAGE>
REGIONS FINANCIAL CORPORATION
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statement of Condition -
March 31, 1994, December 31, 1993
and March 31, 1993 2
Consolidated Statement of Income -
Three months ended March 31, 1994 and
March 31, 1993 3
Consolidated Statement of Cash Flows -
Three months ended March 31, 1994 and
March 31, 1993 4
Notes to Consolidated Financial Statements -
March 31, 1994 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 4. Submissions of Matters to a Vote of Security
Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CONDITION
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
March 31 December 31 March 31
1994 1993 1993
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 416,422 $ 462,032 $ 383,840
Interest-bearing deposits in other
banks 794 11,031 30,337
Investment securities 1,914,403 2,368,445 1,637,036
Securities available for sale 564,536 0 0
Trading account assets 8,272 20,368 11,896
Mortgage loans held for sale 229,888 285,665 164,355
Federal funds sold and securities
purchased under agreement to resell 67,259 106,724 137,695
Loans 6,880,277 6,869,497 5,239,601
Unearned income (31,576) (36,251) (51,698)
Loans, net of unearned income 6,848,701 6,833,246 5,187,903
Allowance for loan losses (103,330) (100,762) (81,332)
Net Loans 6,745,371 6,732,484 5,106,571
Premises and equipment 139,653 140,206 116,548
Interest receivable 71,602 67,488 59,029
Due from customers on acceptances 71,095 75,913 32,621
Other assets 207,409 205,992 156,985
$10,436,704 $10,476,348 $7,836,913
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing $ 1,133,105 $ 1,196,685 $1,038,595
Interest-bearing 7,633,890 7,574,009 5,684,867
Total Deposits 8,766,995 8,770,694 6,723,462
Borrowed funds:
Short-term borrowings:
Federal funds purchased and
securities sold under agreement
to repurchase 114,642 184,566 136,033
Commercial paper 17,000 17,201 20,140
Other short-term borrowings 3,129 1,994 2,839
Total Short-term Borrowings 134,771 203,761 159,012
Long-term borrowings 449,665 462,862 141,718
Total Borrowed Funds 584,436 666,623 300,730
Bank acceptances outstanding 71,095 75,913 32,621
Other liabilities 135,939 112,153 105,177
Total Liabilities 9,558,465 9,625,383 7,161,990
Stockholders' Equity:
Common Stock, par value $.625 a share:
Authorized - 60,000,000 shares
Issued, including treasury stock -
42,538,946; 42,520,025; and
38,781,392 shares, respectively 26,587 26,575 24,238
Surplus 376,200 375,983 260,287
Undivided profits 483,113 462,280 405,649
Treasury stock, at cost - 1,474,579
shares in 1994 and 1,470,700 in 1993 (12,441) (12,320) (12,320)
Unearned restricted stock (1,409) (1,553) (2,931)
Unrealized gain on securities available
for sale, net of taxes 6,189 0 0
Total Stockholders' Equity 878,239 850,965 674,923
$10,436,704 $10,476,348 $7,836,913
</TABLE>
See notes to consolidated financial statements.
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<TABLE>
Three Months Ended
March 31
<S> <C> <C>
1994 1993
Interest Income:
Interest and fees on loans $128,009 $102,034
Interest on securities:
Taxable interest income 35,228 27,034
Tax-exempt interest income 3,212 2,591
Total Interest on Securities 38,440 29,625
Interest on mortgage loans held for sale 3,519 3,085
Income on federal funds sold
and securities purchased under
agreement to resell 863 797
Interest on time deposits in other banks 58 134
Interest on trading account assets 17 44
Total Interest Income 170,906 135,719
Interest Expense:
Interest on deposits 65,039 48,429
Interest on short-term borrowings 1,206 826
Interest on long-term borrowings 7,294 2,620
Total Interest Expense 73,539 51,875
Net Interest Income 97,367 83,844
Provision for loan losses 4,326 7,300
Net Interest Income After Provision
for Loan Losses 93,041 76,544
Non-Interest Income:
Trust department income 5,055 4,427
Service charges on deposit accounts 11,270 10,604
Mortgage servicing and origination fees 10,652 8,979
Securities gains (losses) 32 47
Other 9,539 6,572
Total Non-Interest Income 36,548 30,629
Non-Interest Expense:
Salaries and employee benefits 41,424 38,505
Net occupancy expense 4,848 3,563
Furniture and equipment expense 5,015 4,214
Other 28,858 19,809
Total Non-Interest Expense 80,145 66,091
Income Before Income Taxes 49,444 41,082
Applicable income taxes 16,292 13,656
Net Income $ 33,152 $ 27,426
Average number of shares outstanding 41,059 37,290
Per share:
Net income $.81 $.74
Cash dividends declared $.30 $.26
</TABLE>
See notes to consolidated financial statements.
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
Three Months Ended
March 31
<S> <C> <C>
1994 1993
Operating Activities:
Net income $ 33,152 $ 27,426
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization of premises
and equipment 4,152 3,399
Provision for loan losses 4,326 7,300
Net amortization (accretion) of securities 2,475 (350)
Amortization of loans and other assets 4,450 2,719
Amortization of deposits and borrowings (1,680) 0
Provision for losses on other real estate 184 94
Deferred income taxes (5,162) (3,024)
(Gain) on sale of premises and equipment (287) (33)
Realized security (gains) (32) (47)
Decrease in trading account assets 12,096 193
Decrease in mortgages held for sale 55,777 43,257
(Increase) in interest receivable (4,114) (5,909)
(Increase) in other assets (5,909) (17,650)
Increase in other liabilities 25,341 18,380
Other 145 208
Net Cash Provided By Operating Activities 124,914 75,963
Investing Activities:
Net (increase) in loans (17,356) (46,297)
Proceeds from sale of securities 220 230
Proceeds from maturity of investment securities 545,636 99,038
Proceeds from maturity of securities available for
sale 1,761 0
Purchase of investment securities (650,758) (65,738)
Net (increase) decrease in interest-bearing deposits
in other banks 10,237 (29,995)
Proceeds from sale of premises and equipment 520 51
Purchase of premises and equipment (3,832) (4,094)
Net (increase) decrease in customers' acceptance
liability 4,818 (5,443)
Net Cash (Used) By Investing Activities (108,754) (52,248)
Financing Activities:
Net increase (decrease) in deposits (2,602) 22,320
Net (decrease) in short-term borrowings (68,990) (94,147)
Proceeds from long-term borrowings 1,097 5,000
Payments on long-term borrowings (13,711) (272)
Net increase (decrease) in bank acceptance
liability (4,818) 5,443
Cash dividends (12,319) (9,701)
Purchase of treasury stock (121) 0
Proceeds from exercise of stock options 229 336
Net Cash (Used) By Financing Activities (101,235) (71,021)
(Decrease) In Cash And Cash Equivalents (85,075) (47,306)
Cash and Cash Equivalents, Beginning of Period 568,756 568,841
Cash And Cash Equivalents, End of Period $ 483,681 $ 521,535
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
NOTE A -- Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q, and,
therefore, do not include all information and footnotes necessary
for a fair presentation of financial position, results of operations
and cash flows in conformity with generally accepted accounting
principles. For a summary of significant accounting policies that
have been consistently followed, see NOTE A to the Consolidated
Financial Statements included in the 1993 Annual Report to Stockholders
previously filed as Exhibit 13 to Form 10-K. It is management's opinion
that all adjustments, consisting of only normal and recurring items
necessary for a fair presentation, have been included.
NOTE B --Name Change and Increase in Authorized Shares
At the Company's annual stockholders' meeting on April 27, 1994, stockholders
voted to change the name of the Company from First Alabama Bancshares, Inc.
to Regions Financial Corporation (Regions). Stockholders also approved
increasing the number of authorized shares of common stock from 60 million
to 120 million.
NOTE C -- Proposed Acquisitions
During the first quarter of 1994, Regions entered into an agreement to
acquire all the outstanding stock and related options of First Community
Bancshares, Inc. (First Community) of Rome, Georgia, and its wholly owned
subsidiary, First Rome Bank. The agreement calls for the exchange of .95
shares of Regions' stock for each share of First Community's outstanding
shares. First Community currently has 699,909 shares outstanding which
would result in the issuance of 664,914 shares of Regions' common stock.
This transaction is subject to approval by the stockholders of First
Community and by various regulatory authorities. First Community, which
operates two offices, had assets of $124 million and deposits of $114
million at March 31, 1994.
Regions also entered into an agreement, during the first quarter, to
acquire all the outstanding stock of BNR Bancshares, Inc. (BNR) of
New Roads, Louisiana, and its wholly owned subsidiary The Bank of
New Roads. The agreement calls for the exchange of Regions' common
stock for all of BNR's outstanding shares. The number of Regions'
shares to be issued will be adjusted based on the market price of
Regions' common stock during a specified period. At current price
levels, the total number of Regions' common stock to be issued for
BNR would be approximately 788,000 shares, valued at approximately
$26 million. This transaction is subject to approval by the
stockholders of BNR and by various regulatory authorities. BNR,
which operates six offices in the greater Baton Rouge Louisiana
area, had assets of $143 million and deposits of $125 million at
March 31, 1994.
NOTE D - Change in Method of Accounting for Debt and Equity Securities
In May 1993 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity Securities." Regions adopted the
provisions of the new standard for investments held on or acquired
after January 1, 1994. In accordance with the statement, prior period
financial statements have not been restated to reflect the change in
accounting principle. Adoption of Statement 115 did not have a material
effect on the consolidated financial statements.
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Regions' total assets at March 31, 1994, were $10.4 billion --an increase
of 33% over a year earlier. This increase was due to growth in almost all
categories of assets, particularly loans and securities, primarily related
to acquisition activity. Since year-end 1993, total assets have remained
relatively unchanged.
Comparisons with the prior year are significantly affected by four acquisitions
during 1993, all of which were accounted for as purchases. These acquisitions
are summarized as follows:
<TABLE>
<S> <C> <C> <C>
Date Acquired Company Acquired Headquarters Location Total Assets (in thousands)
June 1993 Franklin County Bank Winchester, Tennessee $ 68,034
October 1993 First Federal Savings DeFuniak Springs, 89,295
Bank of DeFuniak Springs Florida
December 1993 First Federal Savings Marianna, Florida 101,084
Marianna, Florida
December 1993 Secor Bank, Federal Birmingham, Alabama 1,831,937
Saving Bank
</TABLE>
Loans have increased 32% since a year ago. The four acquisitions accounted
for a 23% increase in loans, with the remaining 9% increase attributable to
internal growth, primarily in consumer and one-to-four family residential
mortgage loans. Since year-end, total loans have been relatively stable.
The average yield on loans during the first quarter of 1994 was 7.70%,
compared to 8.20% during the same period in 1993. This decrease was
primarily the result of lower average base lending rates.
Non-performing assets were as follows (in thousands):
<TABLE>
March 31, Dec. 31, March 31,
1994 1993 1993
<S> <C> <C> <C>
Non-accruing loans $ 39,012 $ 39,519 $ 26,945
Loans past due 90
days or more 4,315 13,028 4,784
Renegotiated loans 4,061 4,169 2,483
Other real estate 11,505 13,720 11,743
Total $ 58,893 $ 70,436 $ 45,955
Non-performing assets
as a percentage of
loans and other real
estate 0.86% 1.03% 0.88%
</TABLE>
Non-accruing loans have increased $12.1 million since March 31, 1993, but
decreased $507,000 since year-end. The increase from the prior year is
due primarily to non-accruing commercial real estate loans added as a
result of the Secor acquisition. At March 31, 1994, real estate loans
comprised $25.4 million of total non-accruing loans, with commercial loans
accounting for $11.1 million and installment loans $2.5 million. Other
real estate decreased $2.2 million since year-end and $238,000 since the
first quarter of last year, due primarily to the disposition of several
parcels of other real estate.
Activity in the allowance for loan losses is summarized as follows
(in thousands):
<TABLE>
<S> <C> <C>
March 31, March 31,
1994 1993
Balance at beginning of year $100,762 $ 73,619
Net loans charged-off (recovered):
Commercial (1,106) (795)
Real estate 2,284 (109)
Installment 580 491
Total 1,758 (413)
Provision charged to expense 4,326 7,300
Balance at end of period $103,330 $ 81,332
</TABLE>
Net loan losses in the first quarter of 1994 were 0.10% of loans
(annualized), compared to a net recovery of 0.03% of loans (annualized)
in the first quarter of 1993. Higher net charge-offs of real estate
loans in the first quarter of 1994, resulted in higher net loan losses
in 1994. At March 31, 1994, the allowance for loan losses stood at
1.51% of loans, compared to 1.57% a year ago and 1.47% at year-end.
The allowance for loan losses as a percentage of non-performing loans
and non-performing assets was 218% and 175%, respectively, at March 31,
1994, down from 238% and 177%, respectively, at March 31, 1993.
The allowance for loan losses is maintained at a level deemed adequate
by management to absorb possible unidentified losses from loans in the
portfolio. In determining the adequacy of the allowance for loan
losses, management considers numerous factors, including but not
limited to: (1) management's estimate of future economic conditions and
the resulting impact on Regions, (2) management's estimate of the
financial condition and liquidity of certain loan customers, and
(3) management's estimate of collateral values of property securing
certain loans. Because all of these factors and others involve the use
of management's estimation and judgment, the allowance for loan losses
is inherently subject to adjustment at future dates. At March 31, 1994,
it is management's opinion that the allowance for loan losses is
adequate. However, unfavorable changes in any of the above factors or
other factors could require additional provisions, in excess of normal
provisions, to the allowance for loan losses in future periods.
Total securities have increased 51% since a year ago, primarily as a
result of securities added by the 1993 acquisitions. Since year-end,
securities have increased 5%.
Mortgage loans held for sale decreased $55.8 million since year-end,
but increased $65.5 million since March 31, 1993. Increases in
residential mortgage interest rates in the first quarter of 1994,
coupled with a decline in refinancing activity, resulted in reduced
residential loan production, relative to the fourth quarter of last
year. Production during the first quarter of 1994, was, however,
above first quarter 1993 production levels.
Interest-bearing deposits in other banks at March 31, 1994 totaled
$794,000, a decrease of $29.5 million over the same period in 1993
and $10.2 million since year-end. Maturities from these short-term
investments were not reinvested in this category of earning assets.
Net federal funds purchased and security repurchase agreements
totaled $47.4 at March 31, 1994 and $77.8 million at year-end.
This compares to net federal funds sold and security resell
agreements of $1.7 million at March 31, 1993. The level of federal
funds and security agreements can fluctuate significantly on a
day-to-day basis, depending on funding needs and which sources of
funds are used to satisfy those needs. During the first quarter
of 1994, net funds purchased averaged $24.6 million, compared to
$3.4 million in the first quarter of 1993, indicating more
reliance on purchased funds to support earning assets in the first
quarter of 1994 than in the same period last year.
Premises and equipment increased $23.1 million from the first
quarter of 1993. This increase was due primarily to the addition
of premises and equipment obtained through the 1993 acquisitions.
Other assets increased $1.4 million since year-end and $50.4
million since the first quarter of 1993, due primarily to
increased excess purchase price and deferred tax assets added by
the 1993 acquisitions.
Total deposits have increased 30% since March of last year. The
deposits acquired in connection with acquisitions resulted in a
24% increase, with the remaining 6% attributable to internal
growth. The internal growth resulted primarily from increases
in money market savings accounts, regular savings, and interest-
bearing transaction accounts. Since year-end, total deposits
have been remained relatively unchanged.
Long-term borrowings have decreased $13.2 million since year-end
but have increased $307.9 million since March 31, 1993. In 1993,
as a result of acquisitions, Regions assumed $296.5 million of
Federal Home Loan Bank advances and $27.0 million in medium term
notes. The decline in long-term borrowings since year-end,
resulted from normal payments and maturities, primarily on
Federal Home Loan Bank advances.
Stockholders' equity was $878 million at March 31, 1994, an increase
of 30% over last year and an increase of 3% since year-end. These
increases resulted primarily from internally generated capital and
equity added in connection with the four acquisitions in 1993. Also
adding to equity was a $6.2 million unrealized gain on securities
classified as available for sale, arising from the adoption of SFAS 115.
Regions' ratio of equity to total assets was 8.41% at March 31, 1994,
compared to 8.61% a year ago and 8.12% at year-end.
Regions' primary sources of liquidity are maturities from its
loan and securities portfolios. At March 31, 1994, Regions had
approximately $171 million of securities maturing in one year or less.
The average maturity of the securities portfolio was 9.3 years using
contractual maturities. At December 31, 1993, approximately $1.2
billion in loans was due to mature in one year or less. Although
the amount at March 31, 1994, has not been determined, loan maturities
would provide significant liquidity. In addition to these sources of
liquidity, Regions has access to purchased funds in the state and
national money markets. Liquidity is further enhanced by a relatively
stable source of deposits. At March 31, 1994, the loan to deposit
ratio was 78.12%, compared to 77.16% a year ago and 77.91% at year-end.
Regions' management places constant emphasis on the maintenance of
adequate liquidity to meet conditions that might reasonably be
expected to occur.
Net interest income for the first quarter of 1994 increased $13.5
million, compared to the same period in 1993. The increased net
interest income resulted from a higher level of earning assets,
partially offset by lower spreads on those earning assets. The net
yield on interest-earning assets (taxable equivalent basis) was 4.25%
in the first quarter of 1994, compared to 4.98% in the same period
in 1993. This ratio declined primarily because of the lower spread
associated with the assets acquired in the 1993 acquisitions.
Non-interest income increased $5.9 million or 19% over the first
quarter of 1993. Trust department income increased $628,000 or 14%
on a year-to-year comparison. This resulted from growth in trust
assets and increases in personal, corporate, estate and employee
benefit trust fees. Increased charges for selected deposit account
services, coupled with an increase in the number of deposit accounts,
resulted in service charges on deposit accounts increasing $666,000
or 6% in the first quarter of 1994, compared to the same period in
1993. Mortgage servicing and origination fees increased $1.7 million
or 19% in the first quarter of 1994, compared to the same period in
1993. This was due to increases in the number and dollar amount of
loans serviced and to increased volume of new loan closings. The
mortgage company's servicing portfolio totaled $8.7 billion at
March 31, 1994--up $2.3 billion over a year earlier. Other
non-interest income increased $3.0 million or 45% in the first
quarter of 1994, over the comparable year ago period, due primarily
to a $2.3 million gain on the sale of mortgage servicing rights,
increases in insurance fees and commissions, credit card fees and
international department income.
Non-interest expense increased $14.1 million or 21% in the first quarter
of 1994, compared to the same period in 1993. Excluding the expenses
added by the 1993 acquisitions, total non-interest expense would have
increased approximately 10%. Salaries and employee benefits were up 8%
in the first quarter of 1994, due to an increase in the number of
employees because of acquisitions and increased business activity,
particularly at Regions' mortgage banking subsidiary, coupled with
normal merit increases and higher benefit costs. Net occupancy expense
and furniture and equipment expense increased 27% in the first quarter
of 1994, over the same period in 1993, primarily because of additional
expenses associated with branch offices and equipment added by the 1993
acquisitions. Other non-interest expense increased $9.0 million or 46%
in the first quarter of 1994, primarily because of expenses added by
the 1993 acquisitions, particularly in supplies, postage, insurance,
communications, amortization of mortgage servicing rights and excess
purchase price. Also, losses from the sale or holding of residential
mortgages originated by the mortgage company totaled $1.9 million in
1994, compared to gains of $224,000 in 1993.
Income tax expense increased $2.6 million (19%) over the first quarter
of 1993, primarily because of an increase in taxable income, and an
increase in taxable income as a percentage of total income.
Net income for the quarter was $33,152,000--up 21% over the first
quarter of last year. Return on stockholders' equity declined to
15.55%, compared to 16.71% in the first quarter of last year.
Return on assets also declined to 1.30% in the first quarter of 1994,
compared to 1.45% in the first quarter of 1993.
Part II. Other Information
Item 4. Submissions of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held April 27, 1994.
The following members were elected to the Company's Board of
Directors to hold office for a three year term.
<TABLE>
<S> <C> <C> <C>
Nominee For Withheld Abstain
James B. Boone, Jr. 36,799,141 75,062 341
Albert P. Brewer 36,787,836 85,717 991
James S. M. French 36,801,459 72,744 341
Richard D. Horsley 36,798,950 75,143 451
J. Stanley Mackin 36,799,426 74,667 451
</TABLE>
The results of the voting on the following additional items were as follows:
Amendments to the Certificate of Incorporation:
(a) Change the corporate name to Regions Financial Corporation
<TABLE>
<C> <C> <C>
For Against Abstain
35,580,319 1,010,975 283,250
</TABLE>
(b) Increase Authorized Common Stock to 120,000,000 shares
<TABLE>
<C> <C> <C>
For Against Abstain
34,480,738 2,116,528 277,278
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
undersigned thereunto duly authorized.
Regions Financial Corporation
DATE: May 13,1994 /s/ Robert P. Houston
Robert P. Houston
Executive Vice President and
Comptroller
(Chief Accounting Officer and
Duly Authorized Officer)
