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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K405
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-6159
REGIONS FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 63-0589368
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
417 North 20th Street, Birmingham, Alabama 35203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (334) 832-8450
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK - PAR VALUE $.625
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].
State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 8, 1995.
Common Stock, $.625 Par Value--$1,487,790,688*
*Excludes as shares held by affiliates only shares held by the registrant's
Employee Stock Purchase Plan, Employees' Stock Ownership Plan, Directors' Stock
Investment Plan and executive officers who are directors without prejudice to a
determination of control.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of March 8, 1995.
Common Stock, $.625 Par Value--46,499,705 shares issued and 44,679,126
shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual proxy statement dated March 16, 1995 are
incorporated by reference into Part III.
Portions of the annual report to stockholders for the year ended
December 31, 1994, are incorporated by reference into Parts I and II.
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PART I
ITEM 1. Business
(a) The Registrant, Regions Financial Corporation (the
"Registrant" or "Regions"), is a regional bank holding company headquartered in
Birmingham, Alabama, which operated 270 banking offices in Alabama, Florida,
Georgia, Louisiana and Tennessee as of December 31, 1994. At that date,
Regions had total consolidated assets of approximately $12.8 billion, total
consolidated deposits of approximately $10.1 billion, and total consolidated
stockholders' equity of approximately $1.0 billion.
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. 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.
At March 20, 1995, Regions operated six state-chartered commercial
bank subsidiaries (collectively, the "Subsidiary Banks") in Alabama, Florida,
Georgia, Louisiana and Tennessee and various 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
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December 31, 1994 (including the amounts for Union Bank & Trust Company, which
was subsequently merged into First Alabama Bank in January 1995), had total
consolidated assets of approximately $9.8 billion, total consolidated deposits
of approximately $7.7 billion, and total consolidated stockholders' equity of
approximately $785 million. First Alabama Bank operates 176 banking offices
throughout Alabama.
In Florida, Regions operates through Regions Bank of Florida, which
at December 31, 1994, had total consolidated assets of approximately $519
million, total consolidated deposits of approximately $464 million, and total
consolidated stockholders' equity of approximately $51 million. Regions Bank
of Florida operates 27 banking office in the panhandle region of Florida.
In Georgia, Regions operates through (i) Regions Bank of Georgia and
(ii) First Rome Bank, which at December 31, 1994, had total combined assets of
approximately $242 million, total combined deposits of approximately $216
million, and total combined stockholders' equity of approximately $20 million.
Regions Bank of Georgia operates three banking offices in Columbus, Georgia,
and First Rome Bank operates two banking offices in Rome, Georgia.
In Louisiana, Regions operates through Regions Bank of Louisiana
which at December 31, 1994, including the amounts for Bank of New Roads which
was subsequently merged into Regions Bank of Louisiana in March 1995, had total
consolidated assets of approximately $2.0 billion, total
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consolidated deposits of approximately $1.4 billion, and total consolidated
stockholders' equity of approximately $199 million. Regions Bank of Louisiana
operates 38 banking offices in Louisiana.
In Tennessee, Regions operates through Regions Bank of Tennessee,
which at December 31, 1994, had total consolidated assets of approximately $462
million, total consolidated deposits of approximately $401 million, and total
consolidated stockholders' equity of approximately $40 million. Regions Bank
of Tennessee operates 24 banking offices in Tennessee.
In addition to the Subsidiary Banks, Regions provides additional
banking services through various banking-related subsidiaries, the most
significant of which provide mortgage banking, credit life insurance, and
securities brokerage activities.
Real Estate Financing, Inc., a subsidiary of First Alabama Bank, is
engaged in mortgage banking with its primary business and source of income
being the origination and servicing of mortgage loans for long-term investors.
Real Estate Financing, Inc. serviced approximately $9.2 billion in real estate
mortgages at December 31, 1994, and operates loan production offices in
Alabama, Florida, Georgia, Mississippi, South Carolina, and Tennessee.
FAB Agency, Inc., a subsidiary of Regions, acts as an insurance
agent or broker with respect to credit life and accident and health insurance
and other types of insurance relating to extensions of credit by the Subsidiary
Banks or banking-related subsidiaries.
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Regions Life Insurance Company, a subsidiary of Regions, acts as a
re-insurer of credit life and accident and health insurance in connection with
the activities of certain affiliates of Regions.
First Alabama Investments, Inc., a subsidiary of First Alabama Bank,
engages in securities underwriting and brokerage activities and operates
offices in Alabama, Florida, Georgia, Louisiana and Tennessee.
A substantial portion of the growth of Regions since commencing
operations in 1971 has been through the acquisition of other financial
institutions, including commercial banks and thrift institutions, and the
assets and deposits thereof. Since it began operations as a bank holding
company, Regions has completed 51 acquisitions of other financial institutions
representing in aggregate (at the time the acquisitions were completed)
approximately $6.7 billion in assets. As part of its ongoing strategic plan,
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. Recent business combinations in the banking
industry have typically involved the payment of a premium over book and market
values.
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This practice could result in dilution of book value and net income per share
for the acquirer.
Reference is made to pages 20 through 49 and 76 through 79 of the
annual report to stockholders for the year ended December 31, 1994, included as
Exhibit 13 hereto, for certain statistical (Guide 3) and other information.
(b) The primary business conducted by Registrant's banking
affiliates is banking, which includes provision of commercial and retail
banking services and, in some cases, trust services. Registrant's bank-related
subsidiaries perform services incidental to the business of banking.
Consequently, Registrant's only industry segment is the business of banking and
the information required for industry segments is not applicable.
Reference is made to pages 20 through 49 of the annual report to
stockholders for the year ended December 31, 1994, included as Exhibit 13
hereto, for information required by this item.
(c)(1) General. The Registrant is a bank holding company,
registered with the Board of Governors of the Federal Reserve System ("Federal
Reserve") under the Bank Holding Company Act of 1956, as amended ("BHC Act").
As such, the Registrant and its subsidiaries are subject to the supervision,
examination, and reporting requirements of the BHC Act and the regulations of
the Federal Reserve.
The BHC Act requires every bank holding company to obtain the prior
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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.
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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 the Registrant), 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 the provisions of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "Interstate Banking Act"), which was
signed into law on September 29, 1994, the existing restrictions on interstate
acquisitions of banks by bank holding companies, including the regional
interstate banking legislation adopted by the state of Alabama, will be
repealed one year following enactment such that the Registrant and any other
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 Interstate Banking Act also
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generally provides that, after June 1, 1997, national and state-chartered banks
may branch interstate through acquisitions of banks in other states. By
adopting legislation prior to that date, a state has the ability either to "opt
in" and accelerate the date after which interstate branching is permissible or
"opt out" and prohibit interstate branching altogether. Assuming no state
action prior to June 1, 1997, the Registrant would be able to consolidate all
of its Subsidiary Banks into a single bank with interstate branches following
that date.
The BHC Act generally prohibits the Registrant 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
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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
nonbanking activities of bank holding companies. Despite prior approval, the
Federal Reserve has the power to order a bank 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 Banks of the Registrant is a member of the
Federal Deposit Insurance Corporation ("FDIC"), and as such, their deposits are
insured by the FDIC to the extent provided by law. Each Subsidiary Bank is
also subject to numerous state and federal statutes and regulations that affect
its business, activities, and operations, and each is supervised and examined
by one or more state or federal bank regulatory agencies.
Because each of the 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. The FDIC regularly examines the
operations of the Subsidiary Banks and is given authority to approve or
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disapprove mergers, consolidations, the establishment of branches, and similar
corporate actions. The FDIC also has the power to prevent the continuance or
development of unsafe or unsound banking practices or other violations of law.
The Subsidiary Banks 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 depository
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 subsidiary
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
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institutions on the nature and extent of their CRA obligations and the methods
by which those obligations would be assessed and enforced. In response to
widespread criticisms of the December 1993 proposal, the agencies on September
26, 1994, issued a revised proposal. Under the new proposal, the current
process-based CRA assessment factors would be replaced with a new evaluation
system that would rate institutions based on their actual performance in
meeting community credit needs. The evaluation system used to judge an
institution's CRA performance will consist of three tests: a lending test; an
investment test; and a service test. Each of these tests would be applied by
the institution's federal regulator in an assessment context that would take
into account such factors as: (i) demographic data about the community; (ii)
the institution's capacity and constraints; (iii) the institutions product
offerings and business strategy; and (iv) data on the prior performance of the
institution and similarly situated lenders.
The proposed lending test--the most important of the three tests for
all institutions other than wholesale and limited purpose (e.g., credit card)
banks--would evaluate an institution's lending activities as measured by its
home mortgage loans, small business and farm loans, community development
loans, and, at the option of the institution, its consumer loans. The
institution's regulator would weigh each of these lending categories to reflect
their relative importance to the institution's overall business and, in the
case of community development loans, the
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characteristics and needs of the institution's service area and the
opportunities available for this type of lending. Assessment criteria for the
lending test would include: (i) geographic distribution of the institution's
lending; (ii) distribution of the institution's home mortgage and consumer
loans among different economic segments of the community; (iii) the number and
amount of small business and small farm loans made by the institution; (iv) the
number and amount of community development loans outstanding; and (v) the
institution's use of innovative or flexible lending practices to meet the needs
of low- to moderate-income individuals and neighborhoods. At the election of
an institution, or if particular circumstances so warrant, the banking agencies
will take in account in making their assessments lending by the institution's
affiliates as well as community development loans made by lending consortia and
other lenders in which the institution has invested. As part of the proposal,
all financial institutions would be required to report data on their small
business and small farm loans as well as their home mortgage loans, which are
currently required to be reported under the Home Mortgage Disclosure Act.
The focus of the investment test would be the degree to which the
institution is helping to meet the needs of its service area through qualified
investments that: (i) benefit low- to moderate-income individuals and small
business or farms; (ii) address affordable housing needs; or (iii) involve
donations of branch offices to minority or women's depository institutions.
Assessment of an institution's performance under the
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investment test would be based upon the dollar amount of the institution's
qualified investments, its use of innovative or complex techniques to support
community development initiatives, and its responsiveness to credit and
community development needs. The service test would evaluate an institution's
systems for delivering retail banking services, taking into account such
factors as: (i) the geographic distribution of the institution's branch offices
and automated teller machines ("ATMs"); (ii) the institution's record of
opening and closing branch offices and ATMs; and (iii) the availability of
alternative product delivery systems such as home banking and loan production
offices in low- to moderate-income areas. The federal regulators would also
consider an institution's community development services as part of the service
test. A separate community development test would be applied to wholesale or
limited purpose financial institutions.
Smaller institutions (those having total assets of less than $250
million) would be evaluated under more streamlined criteria. In addition, a
financial institution would have the option of having its CRA performance
evaluated based on a strategic plan of up to five years in length that it had
developed in cooperation with local community groups. In order to be rated
under a strategic plan, the institution would be required to obtain the prior
approval of its federal regulator.
The joint agency CRA proposal provides that an institution evaluated
under a given test would receive one of five ratings for that
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test: outstanding; high satisfactory; low satisfactory; needs to improve; or
substantial noncompliance. An institution would then receive a certain number
of points for its rating on each test, and the points would be combined to
produce an overall composite rating of either outstanding, satisfactory, needs
to improve, or substantial noncompliance. Under the agencies' proposed rating
guidelines, an institution's rating on the lending test would count for at
least 50% of its overall rating, and no institution can receive an overall
rating of "satisfactory" unless it receives a rating of at least "low
satisfactory" on its lending test. The proposed guidelines also provide that
if an institution received no better than a "needs to improve" rating on its
previous two CRA exams, a "needs to improve" rating on the third exam would be
downgraded to "substantial noncompliance." In any situation, evidence of
discriminatory or other illegal credit practices would adversely affect an
institution's overall rating.
Under the proposal, an institution's CRA rating will continue to be
taken into account by a regulator in considering various types of applications.
In addition, an institution receiving a rating of "substantial noncompliance"
would be subject to civil money penalties or a cease and desist order under
Section 8 of the Federal Deposit Insurance Act (the "FDIA").
Payment of Dividends. The Registrant is a legal entity separate and
distinct from its banking and other subsidiaries. The principal source
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of cash flow of the Registrant, including cash flow to pay dividends to its
stockholders, is dividends from the Subsidiary Banks. There are statutory and
regulatory limitations on the payment of dividends by the Subsidiary Banks to
the Registrant as well as the Registrant to its stockholders.
As state nonmember banks, the Subsidiary Banks are subject to the
respective laws and regulations of the states of Alabama, Florida, Georgia,
Louisiana, and Tennessee and to the regulations of the FDIC as to the payment
of dividends.
If, in the opinion of a federal regulatory agency, 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 agency may require,
after notice and hearing, that such institution cease and desist from such
practice. The Federal Reserve and the FDIC have indicated that paying
dividends that deplete an institution's capital base to an inadequate level
would be unsafe and unsound banking practice. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), an insured
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is 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 pay dividends only out of current operating earnings.
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At December 31, 1994, under dividend restrictions imposed under
federal and state laws, the Subsidiary Banks, without obtaining governmental
approvals, could declare aggregate dividends to the Registrant of approximately
$202 million.
The payment of dividends by the Registrant and the Subsidiary Banks
may also be affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines.
Transactions with Affiliates. There are various restrictions on the
extent to which the Registrant and its nonbank subsidiaries can borrow or
otherwise obtain credit from the Subsidiary Banks. Each Subsidiary Bank (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 Bank and its subsidiaries may not exceed
10% of the capital stock and surplus of such Subsidiary Bank; and (ii) in the
case of all affiliates, the aggregate amount of covered transactions of the
Subsidiary Bank and its subsidiaries may not exceed 20% of the capital stock
and surplus of such Subsidiary Bank. "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, acceptance,
or
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letter of credit on behalf of an affiliate. Covered transactions are also
subject to certain collateralization requirements. Further, a bank holding
company and its 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. The Registrant and the Subsidiary Banks are
required to comply with the capital adequacy standards established by the
Federal Reserve in the case of the Registrant and the FDIC in the case of the
Subsidiary Banks. 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
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Total Capital must be composed of common equity, undivided profits, 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. The minimum guideline for
Tier I Capital is 4.0%. At December 31, 1994, the Registrant's consolidated
Tier 1 Capital and Total Capital ratios were 10.69% and 14.29%, 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. The Registrant's Leverage Ratio at December 31, 1994, was
8.21%. 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
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intangibles) and other indicators of capital strength in evaluating proposals
for expansion or new activities.
Each of the Registrant's Subsidiary Banks is subject to risk-based
and leverage capital requirements adopted by the FDIC, which are substantially
similar to those adopted by the Federal Reserve. Each of the Registrant's
Subsidiary Banks was in compliance with applicable minimum capital requirements
as of December 31, 1994. Neither the Registrant nor any of the Subsidiary
Banks 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 and the FDIC 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.
Support of Subsidiary Banks. Under Federal Reserve policy, the
Registrant is expected to act as a source of financial strength to, and to
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commit resources to support, each of the Subsidiary Banks. This support may be
required at times when, absent such Federal Reserve policy, the Registrant may
not be inclined to provide it. In addition, any capital loans by a bank
holding company to any of the Subsidiary Banks are subordinate in right of
payment to deposits and to certain other indebtedness of such Subsidiary Bank.
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 Bank 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
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insured depository institution. The Subsidiary Banks are subject to these
cross-guarantee provisions. As a result, any loss suffered by the FDIC in
respect of any of the Subsidiary Banks would likely result in assertion of the
cross-guarantee provisions, the assessment of such estimated losses against the
Registrant's other Subsidiary Banks, and a potential loss of the Registrant's
investment in such other Subsidiary Banks.
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, 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
21
<PAGE> 23
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.
An institution that is categorized as undercapitalized,
significantly undercapitalized, or critically undercapitalized is required
22
<PAGE> 24
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 meet is 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 is given authority with respect to any undercapitalized depository
institution to take any of the actions it is required to or may 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 significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or 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
23
<PAGE> 25
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 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, without 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 December 31, 1994, all of the Registrant's Subsidiary Banks had
the requisite capital levels to qualify as well capitalized.
24
<PAGE> 26
Brokered Deposits. The FDIC has adopted regulations governing the
receipt of brokered deposits. Under the regulations, a depository institution
cannot accept, rollover, 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 Banks of the Registrant had at
December 31, 1994, the requisite capital levels to qualify as well capitalized,
the Registrant believes the brokered deposits regulation will have no material
effect on the funding or liquidity of any of the Subsidiary Banks.
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 capitalized; (ii) adequately capitalized; and (iii) undercapitalized.
These three categories are
25
<PAGE> 27
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, ranged 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
26
<PAGE> 28
(BIF) and the Savings Association Insurance Fund (SAIF) are designed to
increase the reserve ratios (i.e., the ratios of reserves to insured deposits)
for both funds to a designated ratio (i.e., 1.25%) within a specified period of
time. Once the designated ratio is reached, the FDIC is to set future
assessment rates at such levels that will maintain a fund's reserve ratio at
the designated level.
Recently the FDIC has proposed significant reductions in the
assessment rate on BIF deposits that could become effective in the latter half
of 1995. A reduction in BIF assessment rates could result in a reduction in
Regions' FDIC insurance expense in the future.
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
27
<PAGE> 29
prescribed policies; (ii) effective risk management; (iii) timely and accurate
financial, operational, and regulatory reporting, (iv) safeguarding and
managing assets; (v) compliance with applicable laws and regulations; and
requirements that (a) those performing internal audits be qualified and
independent, (b) internal controls and information systems be tested and
reviewed, (c) corrective actions be adequately documented, and (d) 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 enable the institution to
make informed lending decisions 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
28
<PAGE> 30
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 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 in the "liquidation or other resolution" of such an institution by
any receiver.
Other. Because of concerns relating to the competitiveness and the
safety and soundness of the industry, the United States Congress continues to
consider a number of wide-ranging proposals for altering the structure,
regulation, and competitive relationships of the nation's financial
institutions. Among such bills are proposals to prohibit depository
institutions and bank holding companies from conducting certain types of
activities, to subject depository institutions to increased disclosure and
reporting requirements, to alter the statutory separation of commercial and
investment banking, and to further expand the powers of depository
institutions, bank holding companies, and competitors of depository
institutions. It cannot be predicted whether or in what form any of these
proposals will be adopted or the extent to which the business of Regions
29
<PAGE> 31
may be affected thereby.
Registrant's broker/dealer subsidiary, First Alabama Investments,
Inc., is subject to regulation by the Securities and Exchange Commission, the
National Association of Securities Dealers, and certain state securities
commissions.
(i) The following chart shows for the last three years
the percentage of total operating income contributed by each of the major
categories of income.
30
<PAGE> 32
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest and fees on loans 64.9% 61.3% 59.1%
Interest on securities 17.4 16.9 19.6
Interest on mortgage loans held for sale 2.0 2.3 2.1
Interest on federal funds sold 0.2 0.2 1.0
Other interest income 0.0 0.1 0.0
Trust department income 2.1 2.7 2.6
Service charges on deposit accounts 5.4 6.2 6.4
Mortgage servicing and origination fees 4.5 6.4 5.7
Other non-interest income 3.5 3.9 3.5
----- ----- -----
Total Operating Income 100.0% 100.0% 100.0 %
===== ===== =====
</TABLE>
(ii) There has been no public announcement, and no
information otherwise has become public, about a material new product or line
of business.
(iii) The monetary policies of the Federal Reserve affect
the operations of Registrant's Subsidiary Banks. Through changes in the
reserve requirements against bank and thrift deposits, open market operations
in U.S. Government securities and changes in the discount rate on borrowings,
the Federal Reserve influences the cost and availability of funds obtained for
lending and investing.
31
<PAGE> 33
The monetary policies of the Federal Reserve have had a significant
effect on the operating results of financial institutions in the past and are
expected to do so in the future. The impact of such policies on the future
business and earnings of the Registrant cannot be predicted.
(iv) The Registrant does not have any material patents,
trademarks, licenses, franchises, or concessions.
(v) No material portion of the Registrant's business is
of a seasonal nature.
(vi) The primary sources of funds for the Subsidiary
Banks are deposits and borrowed funds. The Registrant's primary sources of
operating funds are service fees, dividends, and interest which it receives
from bank and bank-related subsidiaries.
(vii) No material part of the business of the Registrant
is dependent upon a single customer or a few customers. No single customer or
affiliated group of customers accounts for 10% or more of Registrant's
consolidated revenues.
(viii) Information concerning backlog orders is not relevant
to an understanding of the business of the Registrant.
(ix) No material portion of the business of the
Registrant is subject to renegotiation of profits or termination of contracts
or subcontracts by governmental authorities.
(x) All aspects of the Registrant's business are highly
competitive. The Registrant's subsidiaries compete with other financial
32
<PAGE> 34
institutions located in Alabama, northwest Florida, Columbus and Rome, Georgia,
Louisiana, Tennessee, and other adjoining states, as well as large banks in
major financial centers and other financial intermediaries, such as savings and
loan associations, credit unions, consumer finance companies, brokerage firms,
insurance companies, investment companies, mutual funds, other mortgage
companies and financial service operations of major commercial and retail
corporations.
As of December 31, 1994, the Registrant was the third largest bank
holding company headquartered in Alabama based on assets. For information with
respect to the Registrant's markets and the size of the Subsidiary Banks
operating in such markets, see the information provided under subsection (a) of
this Item 1.
Customers for banking services are generally influenced by
convenience, quality of service, personal contacts, price of services, and
availability of products. Although the ranking of Registrant's position varies
in different markets, Registrant believes that its affiliates effectively
compete with other banks and thrifts in their relevant market areas.
Under the provisions of the Interstate Banking Act, which was signed
into law on September 29, 1994, the existing restrictions on interstate
acquisitions of banks by bank holding companies, including the regional
interstate banking legislation adopted in 1987 by the state of Alabama
permitting interstate acquisitions of banks and bank holding
33
<PAGE> 35
companies generally in certain southeastern states, will be repealed one year
following enactment such that the Registrant and any other 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 Interstate Banking Act also generally provides that,
after June 1, 1997, national and state-chartered banks may branch interstate
through acquisitions of banks in other states. By adopting legislation prior
to that date, a state has the ability either to "opt in" and accelerate the
date after which interstate branching is permissible or "opt out" and prohibit
interstate branching altogether. To the extent that large bank holding
companies that previously were not permitted to make acquisitions in the
markets in which Regions operates do effect acquisitions pursuant to the
Interstate Banking Act, competition in the Registrant's markets could further
intensify.
(xi) There were no material expenditures during the last
three fiscal years on research and development activities by the Registrant.
(xii) Regulations of any governmental authority
concerning the discharge of materials into the environment are expected to have
no material effect on the Registrant or any of its subsidiaries.
(xiii) As of December 31, 1994, Registrant, its affiliate
banks and other subsidiaries had a total of 6,007 full-time-equivalent
employees.
(d) Registrant neither engages in foreign operations nor derives
a significant portion of its business from customers in foreign countries.
34
<PAGE> 36
ITEM 2. Properties
The corporate headquarters of the Registrant occupy several floors
of the main Birmingham banking facility of First Alabama Bank, located at 417
North 20th Street, Birmingham, Alabama 35203.
The Registrant and its subsidiaries, including the Subsidiary Banks,
operate through 288 office facilities, of which 194 are owned by the Registrant
or one of its subsidiaries and 94 are subject to building or ground leases. Of
the 270 branch office facilities operated by the Subsidiary Banks at December
31, 1994, 76 are subject to building or ground leases and 194 are wholly owned
by the Subsidiary Banks.
For offices in premises leased by the Registrant and its
subsidiaries, annual rentals totaled approximately $4,783,000 as of December
31, 1994. During 1994, the Registrant and its subsidiaries received
approximately $3,118,000 in rentals for space leased to others. At December
31, 1994, encumbrances on the offices, equipment and other operational
facilities owned by the Registrant and its subsidiaries totaled approximately
$4,500,000 with a weighted average interest rate of 8.7%.
ITEM 3. Legal Proceedings
"Note L. Commitments and Contingencies" on pages 65 and 66 of the
annual report to stockholders for the year ended December 31, 1994, is
incorporated herein by reference.
35
<PAGE> 37
ITEM 4. Submission of Matters to a Vote of Security Holders
Registrant did not submit any matters to a vote of security holders during the
fourth quarter of 1994.
36
<PAGE> 38
PART II
ITEM 5. Market for the Registrant's Common Stock
and Related Security Holder Matters
"Common Stock Market Prices and Dividends" on page 49 of the annual
report to stockholders for the year ended December 31, 1994, is incorporated
herein by reference.
ITEM 6. Selected Financial Data
"Historical Financial Summary" on pages 76 through 79 of the annual
report to stockholders for the year ended December 31, 1994, is incorporated
herein by reference.
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 20 through 49 of the annual report to
stockholders for the year ended December 31, 1994, is incorporated herein by
reference.
ITEM 8. Financial Statements and Supplementary Data
The report of independent auditors and the consolidated financial
statements of the Registrant and its subsidiaries, included in the annual
report to stockholders for the year ended December 31, 1994, are incorporated
herein by reference.
"Summary of Quarterly Results of Operations" on page 49 and "Effects
of Inflation" on page 48 of the annual report to stockholders for the year
37
<PAGE> 39
ended December 31, 1994, are incorporated herein by reference.
ITEM 9. Changes in and Disagreements with Accountants
On Accounting and Financial Disclosure
There have been no disagreements on accounting and financial
disclosure between Registrant and Ernst & Young LLP.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
"Information on Directors" from pages 3 through 7 and "Section 16
Transactions" on page 7 of the Registrant's proxy statement dated March 16,
1995, are incorporated herein by reference.
Executive officers of the Registrant as of December 31, 1994, are as
follows:
38
<PAGE> 40
<TABLE>
<CAPTION>
Position and
Offices Held with Officer
Executive Officer Age Registrant and Subsidiaries Since
- ----------------- --- ---------------------------- -------
<S> <C> <C> <C>
J. Stanley Mackin 62 Chairman, Director and Chief 1983*
Executive Officer, Registrant and
First Alabama Bank; Director,
Regions Bank of Louisiana, Real
Estate Financing, Inc., FAB
Agency, Inc., Regions Agency, and
Regions Life Insurance Company.
Richard D. Horsley 52 Vice Chairman, Director and 1972
Executive Financial Officer,
Registrant and First Alabama
Bank; Director and Vice
President, Regions Agency, Inc.;
Director, FAB Agency, Inc.,
Regions Bank of Louisiana,
Regions Life Insurance Company,
Regions Financial Building Corp.
and Real Estate Financing, Inc.
Sam P. Faucett 60 President/Western Region and 1983*
Florida Region; Chairman and
Chief Executive Officer, First
Alabama Bank - Tuscaloosa;
Director, Regions Bank of Florida
and Real Estate Financing, Inc.
Joe M. Hinds, Jr. 57 President/Northern Region and 1983*
Tennessee Region; Chairman and
Chief Executive Officer, First
Alabama Bank - Huntsville.
Wilbur B. Hufham 57 President/Southeastern Region; 1983*
Chairman, President and Chief
Executive Officer, First Alabama
Bank - Montgomery.
</TABLE>
39
<PAGE> 41
<TABLE>
<CAPTION>
Position and
Offices Held with Officer
Executive Officer Age Registrant and Subsidiaries Since
- ----------------- --- ---------------------------- -------
<S> <C> <C> <C>
Carl E. Jones, Jr. 54 President/Southern Region and 1983*
Louisiana Region; Chairman and
Chief Executive Officer, First
Alabama Bank - Mobile. Director,
Regions Bank of Louisiana.
William E. Jordan 60 President/Central Region; 1990*
Chairman and Chief Executive
Officer, First Alabama Bank -
Birmingham.
William E. Askew 45 Executive Vice President - Retail 1987
Banking Division, Registrant and
First Alabama Bank.
Delmar F. Epton 61 Executive Vice President - 1986*
Operations Group, Registrant and
First Alabama Bank.
Robert P. Houston 50 Executive Vice President and 1974
Comptroller, Registrant and First
Alabama Bank; Director and
Treasurer, Regions Financial
Building Corp.; Director,
Secretary and Treasurer, FAB
Agency, Inc., Regions Life
Insurance Company and Regions
Agency, Inc.
Charles S.
Northen, III 58 Senior Vice President - 1993
Investments, Registrant and First
Alabama Bank; Director, First
Alabama Investments, Inc.
E. Cris Stone 52 Executive Vice President - 1988
Corporate Banking, Registrant and
First Alabama Bank; Director and
Vice President, Regions Financial
Leasing, Inc.
</TABLE>
40
<PAGE> 42
<TABLE>
<CAPTION>
Position and
Offices Held with Officer
Executive Officer Age Registrant and Subsidiaries Since
- ----------------- --- ---------------------------- -------
<S> <C> <C> <C>
Richard E. Wambsganss 54 Executive Vice President - Trust 1987
Group, Registrant and First
Alabama Bank.
Samuel E. Upchurch Jr. 43 General Counsel and Corporate 1994
Secretary, Registrant and First
Alabama Bank; Director First
Alabama Investments, Inc.
</TABLE>
*The years indicated are those in which the individual was first deemed to be
an executive officer of Registrant, although in every case the individual had
been an executive officer of a subsidiary of Registrant for a number of years.
ITEM 11. Executive Compensation
"Executive Compensation and Other Transactions" on pages 7 through
10, excluding the information on page 10 under the sub-headings "Compensation
and Stock Option Determinations" and "Personnel Committee Executive
Compensation Report" of the Registrant's proxy statement dated March 16, 1995,
are incorporated herein by reference. All information on pages 11 through 13,
of the Registrant's proxy statement dated March 16, 1995, are specifically not
incorporated by reference herein.
41
<PAGE> 43
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
"Voting Securities and Principal Holders Thereof" on page 2 and
"Information on Directors" on pages 3 through 5 of the Registrant's proxy
statement dated March 16, 1995, are incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions
"Other Transactions," on page 14 of the Registrant's proxy statement
dated March 16, 1995, are incorporated herein by reference.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K
14(a)(1) and (2) The lists called for by this portion of Item 14
are submitted as a separate part of this report.
14(a)(3) Listing of Exhibits:
<TABLE>
<CAPTION>
SEC Assigned
Exhibit Number Description of Exhibit
- -------------- ----------------------
<S> <C>
3. Bylaws as last amended on April 28, 1993, incorporated herein
by reference from the Exhibits to the Registration Statement
filed with the Commission and assigned file number 33-50577.
Certificate of Incorporation as last amended on May 2, 1994,
incorporated herein by reference from the Exhibits to the
Registration Statement filed with the Commission and assigned
file number 33-54231.
4. a. Debenture Purchase Agreement dated October 15, 1973,
incorporated by reference from the Exhibits to the
Registration Statement filed with the Commission and
assigned file number 2-49702.
</TABLE>
42
<PAGE> 44
<TABLE>
<S> <C>
b. Subordinated Notes Indenture Agreement dated as of
December 1, 1992, incorporated by reference from the
Exhibits to the Registration Statement filed with the
Commission and assigned registration number 33-45714.
10. *a. Regions 1991 Long-Term Incentive Plan incorporated by
reference from the Exhibit to the Registrant's proxy
statement filed with the Commission and dated
March 22, 1991.
13. Annual Report to Stockholders for the year ended December 31,
1994.
21. List of Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
27. Financial Data Schedule (for SEC use only).
99. a. Form 11-K, Annual Report of Employee Stock Purchase
Plan of Regions Financial Corporation for the year
ended December 31, 1994.
b. Form 11-K, Annual Report of Directors' Stock
Investment Plan of Regions Financial Corporation for
the year ended December 31, 1994.
*- Represents a compensatory plan agreement that is
required to be filed under this item.
14(b) Reports on Form 8-K filed in the fourth quarter of 1994:
In a report filed on Form 8-K, under items 5 and 7, dated
November 23, 1994, the Registrant filed pro forma financial
statements reflecting certain aspects of its recently
completed and pending acquisitions. Included in the report are
the unaudited pro forma combined condensed statement of
condition as of September 30, 1994, and the unaudited pro
forma combined condensed statements of income for the periods
ended September 30, 1994, December 31, 1993, 1992 and 1991.
</TABLE>
43
<PAGE> 45
<TABLE>
<S> <C>
14(c) The Exhibits not incorporated herein by reference are
submitted as a separate part of this report.
NOTE: Copies of the aforementioned exhibits are available to
stockholders upon request to:
Stockholder Assistance
44 First Alabama Plaza
P. O. Box 1448
Montgomery, Alabama 36102-1448
14(d) Financial statement schedules: None.
</TABLE>
44
<PAGE> 46
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
REGIONS FINANCIAL CORPORATION
/s/ Samuel E. Upchurch, Jr. 3/16/95
---------------------------------------------
Samuel E. Upchurch, Jr. Date
General Counsel
and Corporate Secretary
/s/ Robert P. Houston 3/16/95
---------------------------------------------
Robert P. Houston Date
Executive Vice President
and Comptroller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ J. Stanley Mackin 3/16/95 /s/ William R. Boles, Sr. 3/16/95
- ----------------------------------------- ----------------------------------------
J. Stanley Mackin Date William R. Boles, Sr. Date
Chairman, Chief Executive Director
Officer and Director
/s/ Richard D. Horsley 3/16/95 /s/ Albert P. Brewer 3/16/95
- ----------------------------------------- ----------------------------------------
Richard D. Horsley Date Albert P. Brewer Date
Vice Chairman, Executive Director
Financial Officer and Director
/s/ Sheila S. Blair 3/16/95 /s/ James S. M. French 3/16/95
- ----------------------------------------- ----------------------------------------
Sheila S. Blair Date James S. M. French Date
Director Director
/s/ James B. Boone, Jr. 3/16/95 /s/ Catesby ap C. Jones 3/16/95
- ----------------------------------------- ----------------------------------------
James B. Boone, Jr. Date Catesby ap C. Jones Date
Director Director
</TABLE>
45
<PAGE> 47
<TABLE>
<S> <C>
/s/ Olin B. King 3/16/95 /s/ Robert E. Steiner, III 3/16/95
- ----------------------------------------- ----------------------------------------
Olin B. King Date Robert E. Steiner, III Date
Director Director
/s/ H. M. McPhillips, Jr. 3/16/95 /s/ Lee J. Styslinger, Jr. 3/16/95
- ----------------------------------------- ----------------------------------------
H. Manning McPhillips, Jr. Date Lee J. Styslinger, Jr. Date
Director Director
/s/ Henry E. Simpson 3/16/95
- -----------------------------------------
Henry E. Simpson Date
Director
</TABLE>
46
<PAGE> 48
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) AND (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1994
REGIONS FINANCIAL CORPORATION
BIRMINGHAM, ALABAMA
<PAGE> 49
FORM 10-K - ITEM 14(a)(1) AND (2)
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and report of
independent auditors of Regions Financial Corporation and subsidiaries,
included in the annual report of the registrant to its stockholders for the
year ended December 31, 1994, are incorporated by reference in Item 8:
Report of Independent Auditors
Consolidated Statement of Condition - December 31, 1994 and 1993
Consolidated Statement of Income - Years ended December 31, 1994, 1993
and 1992
Consolidated Statement of Cash Flows - Years ended December 31, 1994,
1993 and 1992
Consolidated Statement of Changes in Stockholders' Equity - Years ended
December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements - December 31, 1994
Schedules to the consolidated financial statements required by Article 9
of Regulation S-X are not required under the related instructions or are
inapplicable, and therefore have been omitted.
<PAGE> 50
ANNUAL REPORT ON FORM 10-K
ITEM 14(c)
EXHIBITS
<PAGE> 51
EXHIBITS INDEX
<TABLE>
<CAPTION>
SEC Assigned
Exhibit Number Description of Exhibit
- -------------- ----------------------
<S> <C>
3. Bylaws as last amended on April 28, 1993, incorporated herein
by reference from the Exhibits to the Registration Statement
filed with the Commission and assigned file number 33-50577.
Certificate of Incorporation as last amended on May 2, 1994,
incorporated herein by reference from the Exhibits to the
Registration Statement filed with the Commission and assigned
file number 33-54231.
4. a. Debenture Purchase Agreement dated October 15, 1973,
incorporated by reference from the Exhibits to the
Registration Statement filed with the Commission and
assigned file number 2-49702.
b. Subordinated Notes Indenture Agreement dated as of
December 1, 1992, incorporated by reference from the
Exhibits to the Registration Statement filed with the
Commission and assigned registration number 33-45714.
10. a. Regions 1991 Long-Term Incentive Plan incorporated by
reference from the Exhibit to the Registrant's proxy
statement filed with the Commission and dated
March 22, 1991.
13. Annual Report to Stockholders for the year ended December 31,
1994.
21. List of Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
27. Financial Data Schedule (for SEC use only).
99. a. Form 11-K, Annual Report of Employee Stock Purchase
Plan of Regions Financial Corporation for the year
ended December 31, 1994.
b. Form 11-K, Annual Report of Directors' Stock
Investment Plan of Regions Financial Corporation for
the year ended December 31, 1994.
</TABLE>
<PAGE> 1
EXHIBIT 13
ANNUAL REPORT
<PAGE> 2
MANAGEMENT'S DISCUSSION &
ANALYSIS OF FINANCIAL
CONDITION & OPERATING RESULTS
INTRODUCTION
The following discussion and financial information is presented to aid in
understanding Regions Financial Corporation's (Regions) current financial
position and results of operations. The emphasis of this discussion will be on
the years 1994, 1993 and 1992; however, financial information for prior years
will also be presented when appropriate. This discussion supplements the
historical financial summary on pages 76 to 79 and should be read in
conjunction therewith.
Regions' primary business is banking. In 1994, Regions' affiliate banks
contributed approximately $143 million to consolidated net income. Selected
information as of December 31, 1994, on Regions' affiliate banks is as follows:
<TABLE>
<CAPTION>
Full-Service
Name of Bank Assets Loans Deposits Offices
- ------------------------------------------------------------------------------------------------------------------
(dollar amounts in thousands)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Alabama Bank (a) $9,836,192 $6,873,327 $7,719,070 176
- ------------------------------------------------------------------------------------------------------------------
Regions Bank of Louisiana 1,881,914 1,364,144 1,296,025 32
- ------------------------------------------------------------------------------------------------------------------
Bank of New Roads (Louisiana) 139,782 66,325 121,982 6
- ------------------------------------------------------------------------------------------------------------------
Regions Bank of Florida 519,148 339,814 463,957 27
- ------------------------------------------------------------------------------------------------------------------
Regions Bank of Tennessee 461,735 376,640 401,188 24
- ------------------------------------------------------------------------------------------------------------------
Regions Bank of Georgia 109,163 29,535 98,123 3
- ------------------------------------------------------------------------------------------------------------------
First Rome Bank (Georgia) 132,684 81,790 117,825 2
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes amounts for Union Bank & Trust Company, which was acquired
December 30, 1994, and merged with First Alabama Bank in January 1995.
Supplementing the Company's bank operations are a mortgage banking
company, credit life insurance related companies and a registered broker/dealer
firm. Regions has no foreign operations, although it has an International
Department to assist customers with their foreign transactions. The mortgage
banking company services approximately $9.2 billion in mortgage loans and in
1994 contributed approximately $6.5 million to net income.
The Company's principal market areas are all of Alabama, parts of
Louisiana, middle Tennessee, northwest Florida, and Columbus and Rome, Georgia.
In addition, real estate mortgage loan origination offices are located in other
market areas in Tennessee, and in the states of Mississippi and South Carolina.
Through acquisitions during the last three years, Regions expanded into
new markets and strengthened its presence in several existing markets. In
December 1992, Regions entered the Tennessee banking market for the first time
through the acquisition of Security Federal Savings and Loan Association, with
assets of $383 million and twenty offices in the middle Tennessee market. In
June 1993, Regions strengthened its middle Tennessee market presence through
the acquisition of the Franklin County Bank, of Winchester, Tennessee, which
added $68 million in assets and four offices. The Security Federal and Franklin
County banks merged in 1994 to form Regions Bank of Tennessee.
In the fourth quarter of 1993, Regions acquired First Federal Savings Bank
of DeFuniak Springs, Florida and First Federal Savings Bank of Marianna,
Florida. These two thrifts in northwest Florida, with eight offices and $190
million in assets, were merged into Regions Bank of Florida. Regions added to
its Florida banking presence in 1994 by acquiring from the Resolution Trust
Corporation (RTC) approximately $22 million in deposits and four branch offices
in Panama City, Florida.
Regions entered the Louisiana banking market through the December 31,
1993, purchase of Secor Bank, which added $1.8 billion in assets. Secor's
fifteen offices in Louisiana, with approximately $789 million in deposits,
provided Regions with a retail banking franchise in New Orleans and northern
Louisiana. Secor's banking offices in Alabama, with approximately $429 million
in deposits, were merged into First Alabama Bank in early 1994.
Regions expanded its Louisiana banking presence in 1994 through the
acquisitions of Guaranty Bank and
20
<PAGE> 3
Trust of Baton Rouge, the Bank of New Roads, and First American Bank and Trust
of Monroe. Together these banks added $626 million in assets and 22 offices.
Guaranty Bank and First American Bank, along with Secor Bank, were merged in
late 1994 to form Regions Bank of Louisiana. The Bank of New Roads is expected
to be merged into Regions Bank of Louisiana in 1995.
In 1994, Regions strengthened its market presence in Alabama through the
acquisitions of First Bank of Fayette, Union Bank & Trust Company of Montgomery
and two banking offices in south Alabama purchased from the RTC. These banks,
which were merged into First Alabama Bank, added approximately $523 million in
assets and resulted in First Alabama Bank becoming the largest bank in Alabama.
Also in 1994, Regions expanded its presence in Georgia through the
acquisition of First Rome Bank with assets of $125 million and two offices.
This acquisition, along with Regions' existing bank in Columbus, Georgia,
provides a presence in two important Georgia markets.
FINANCIAL CONDITION
Regions' financial condition depends primarily on the quality and nature
of its assets, its liabilities and capital structure, the market and economic
conditions, and the quality of its personnel.
LOANS AND ALLOWANCE FOR LOAN LOSSES
As a financial institution, Regions' primary investment is loans. At
December 31, 1994, loans represented 76% of Regions' earning assets.
Over the last four years loans increased a total of $4.9 billion, a
compound growth rate of 22%. Loans acquired in connection with acquisitions
over the last four years contributed $2.2 billion of this growth. The most
significant growth in the loan portfolio occurred in 1992, 1993 and 1994, with
loans increasing $868 million, $1.7 billion, and $2.2 billion, respectively.
Approximately $289 million of the 1992 growth resulted from the acquisition of
Security Federal, including $234 million in single-family residential mortgage
loans. The acquisitions of Secor, Franklin County Bank and the two Florida
thrifts in 1993 added $1.2 billion in loans. The acquisition of six banks in
1994 added $671 million in loans. The growth of $183 million, or 4%, in 1991
was below the other years due primarily to weaker economic conditions and
little loan growth from acquisitions.
All major categories of loans shared in this growth, with the strongest
growth occurring in real estate mortgages (primarily single-family residential
mortgages) and consumer loans. Over the last four years, commercial, financial
and agricultural loans increased $497 million or 36%. Real estate construction
loans increased $192 million or 124% over the same period. Real estate mortgage
loans increased $3.2 billion or 228% and consumer loans increased $1.1 billion
or 91% over the last four years.
Regions' real estate mortgage portfolio includes $1.7 billion of mortgage
loans secured by single-family residences that were originated by Regions'
mortgage subsidiary. The majority of these loans are secured by homes in
Alabama, Georgia and Florida. These loans increased approximately $100 million
in 1992, $214 million in 1993 and $982 million in 1994, accounting for
approximately 12%, 13% and 45%, respectively, of the growth in total loans in
1992, 1993 and 1994. Eighty-eight percent of the overall balance is comprised
of adjustable-rate mortgages (ARM's) that have rates approximately 275 basis
points above one of several money market indices when fully priced.
Regions' real estate portfolio also includes $741 million of single-family
mortgage loans obtained in the Secor acquisition. Fixed-rate single-family
mortgages with original terms greater than 15 years comprise 35% of the overall
balance of these loans. Fixed-rate single-family mortgages with original terms
of 15 years or less comprise 31% of the overall balance of these loans.
Single-family ARM's, which have rates approximately 267 basis points above one
of several money market indices when fully priced, comprise the remaining 34%
of the overall balance of these loans.
A sound credit policy and careful, consistent credit review are vital to
a successful lending program. All affiliates of Regions operate under written
loan policies which attempt to maintain a consistent lending philosophy, provide
sound traditional credit decisions, provide an adequate return and render
service to the communities in which the banks are located. Regions' lending
policy generally confines loans to local customers or to national firms doing
business locally. Credit reviews and loan examinations
21
<PAGE> 4
help confirm that affiliates are adhering to these loan policies.
Every loan carries some degree of risk. This risk is reflected in the
consolidated financial statements by the size of the allowance for loan losses,
the amount of loans charged off and the provision for loan losses charged to
operating expense. It is Regions' policy that when a loss is identified, it is
charged against the loan allowance in the current period. The policy regarding
recognition of losses requires immediate recognition of a loss if significant
doubt exists as to principal repayment. In addition, consumer installment
credit is generally recognized as a loss when it becomes 90 days or more past
due, unless the underlying security or the customer's financial position makes
a loss improbable.
Regions' provision for loan losses is a reflection of actual losses
experienced during the year and management's judgment as to the adequacy of the
allowance for loan losses to absorb future losses. Some of the factors
considered by management in determining the amount of the provision and
resulting allowance include: (1) credit reviews of individual loans; (2) gross
and net loan charge-offs in the current year; (3) growth in the loan portfolio;
(4) the current level of the allowance in relation to total loans and to
historical loss levels; (5) past due and non-accruing loans; (6) collateral
values of properties securing loans; (7) the composition of the loan portfolio
(types of loans); and (8) management's estimate of future economic conditions
and the resulting impact on Regions.
Lending at Regions is generally organized along three functional lines:
commercial loans (including industrial and agricultural), real estate loans,
and consumer loans. The composition of the portfolio by these major categories
is presented below (with real estate loans further broken down between
construction and mortgage loans):
<TABLE>
<CAPTION>
(in thousands, net of unearned income) December 31
- ------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $1,865,065 $1,491,165 $1,437,036 $1,319,424 $1,368,476
- ------------------------------------------------------------------------------------------------------------------
Real estate-construction 347,431 262,918 255,923 194,306 154,964
- ------------------------------------------------------------------------------------------------------------------
Real estate-mortgage 4,539,286 3,308,528 2,028,279 1,533,086 1,383,962
- ------------------------------------------------------------------------------------------------------------------
Consumer 2,266,020 1,770,635 1,421,293 1,228,142 1,184,860
- ------------------------------------------------------------------------------------------------------------------
Total $9,017,802 $6,833,246 $5,142,531 $4,274,958 $4,092,262
==================================================================================================================
</TABLE>
The amounts of total gross loans (excluding residential mortgages on 1-4
family residences and consumer loans) outstanding at December 31, 1994, based
on remaining scheduled repayments of principal, due in (1) one year or less,
(2) more than one year but less than five years and (3) more than five years,
are shown in the following table. The amounts due after one year are classified
according to sensitivity to changes in interest rates.
<TABLE>
<CAPTION>
(in thousands) Loans Maturing
- --------------------------------------------------------------------------------------------------------------------
Within After One But After
One Year Within Five Years Five Years Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial
and agricultural $1,016,361 $ 577,343 $277,607 $1,871,311
- --------------------------------------------------------------------------------------------------------------------
Real estate-construction 265,123 34,553 47,755 347,431
- --------------------------------------------------------------------------------------------------------------------
Real estate-mortgage 251,275 482,417 518,759 1,252,451
- --------------------------------------------------------------------------------------------------------------------
Total $1,532,759 $1,094,313 $844,121 $3,471,193
====================================================================================================================
</TABLE>
22
<PAGE> 5
<TABLE>
<CAPTION>
(in thousands) Sensitivity to Changes in Interest Rates
- -------------------------------------------------------------------------------------------------------------
Predetermined Variable
Rate Rate
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due after one year but within five years $522,023 $ 572,290
- -------------------------------------------------------------------------------------------------------------
Due after five years 265,398 578,723
- -------------------------------------------------------------------------------------------------------------
$787,421 $1,151,013
=============================================================================================================
</TABLE>
A coordinated effort is undertaken to identify risks in the loan portfolio
for management purposes and to establish the loan loss provision and resulting
allowance for accounting purposes. A regular, formal and ongoing loan review is
conducted to identify loans with unusual risks or possible losses. The primary
responsibility for this review rests with the management of the individual
banking offices. Their work is supplemented with reviews by Regions' internal
audit staff and corporate loan examiners. Bank regulatory agencies and the
Company's independent auditors provide additional levels of review. This
process provides information which helps in assessing the quality of the
portfolio, assists in the prompt identification of problems and potential
problems and aids in deciding if a loan represents a probable loss which should
be recognized or a risk for which an allowance should be maintained.
If, as a result of Regions' loan review and evaluation procedures, it is
determined that payment of interest on a commercial or real estate loan is
questionable, it is Regions' policy to reverse interest previously accrued on
the loan against interest income. Interest on such loans is thereafter recorded
on a "cash basis" and is included in earnings only when actually received in
cash and when full payment of principal is no longer doubtful.
Although it is Regions' policy to immediately charge off as loss all loan
amounts judged to be uncollectible, historical experience indicates that
certain losses exist in the loan portfolio which have not been specifically
identified. To anticipate and provide for these unidentifiable losses, the
allowance for loan losses is established by charging the provision for loan
losses expense against current earnings. No portion of the resulting allowance
is in any way allocated or restricted to any individual loan or group of loans.
The entire allowance is available to absorb losses from any and all loans.
The year-end allowance for loan losses as a percentage of loans ranged
from a low of 1.10% in 1990 to a high of 1.47% in 1993. At December 31, 1994,
the allowance for loan losses as a percentage of loans was 1.30%. The ratio of
non-performing assets (including loans past due ninety days or more and other
real estate) to loans and other real estate increased to 1.12% in 1990, then
declined to 1.01% in 1991, and to 0.81% in 1992. This ratio increased to 1.03%
in 1993 due to non-performing assets added by the thrift acquisitions in 1993.
As non-performing assets declined in 1994, this ratio improved to 0.58% at
December 31, 1994.
The allowance for loan losses as a percentage of non-performing loans
(including loans past due ninety days or more) was 252% at December 31, 1994,
compared to 178% at December 31, 1993, and to 244% at December 31, 1992.
Management considers the current level of the allowance for loan losses
adequate to absorb possible losses from loans in the portfolio. Management's
determination of the adequacy of the allowance for loan losses, which is based
on the factors and risk identification procedures previously discussed,
requires the use of judgments and estimations that may change in the future.
Unfavorable changes in the factors used by management to determine the adequacy
of the reserve, or the availability of new information, could cause the
allowance for loan losses to be increased or decreased in future periods. In
addition, bank regulatory agencies, as part of their examination process, may
require that additions be made to the allowance for loan losses based on their
judgments and estimates.
The analysis of loan loss experience on page 27 shows that net loan losses
ranged from a high of $16.4 million in 1990 to a low of $10.4 million in 1993.
Net loan losses in 1994 were $12.7 million. Over the last five years net loan
losses averaged 0.26% of average loans and were 0.17% in 1994. Regions'
relatively low
23
<PAGE> 6
level of net loan losses is due to favorable economic conditions relative to
some other sections of the country, quality control efforts in the underwriting
and monitoring of loans, a substantial amount of recoveries of previously
charged-off loans, and an increase in single-family residential mortgage loans
as a percentage of the loan portfolio, which historically have had lower net
loan losses than other categories of loans.
In order to assess the risk characteristics of the loan portfolio at
December 31, 1994, it is appropriate to consider the three major categories of
loans--commercial, real estate and consumer.
Regions' commercial loan portfolio is highly diversified within the
markets served by the Company. Geographically, the largest concentration is the
26% of the portfolio held by banking offices in the Birmingham MSA
(metropolitan statistical area). Approximately 16% is held within the Mobile
MSA, 9% within the Montgomery MSA, 4% within the Tuscaloosa MSA and 4% within
the Huntsville MSA. The remaining 41% of the portfolio is geographically
dispersed among the other offices. A small portion of these loans are secured
by properties outside Regions' banking market areas.
The Birmingham MSA, with civilian employment of approximately 445,000, is
Alabama's largest metropolitan area. Service industries, such as health care
and finance, and retail trade play a key role in the local economy. Steel, coal
and manufacturing are still important to the Birmingham economy, but service
industries have diversified the city's economic base.
The Mobile MSA, with civilian employment of approximately 252,000, is
diversified in heavy industry, forest products, shipbuilding, tourism, oil and
gas production, agriculture and international trade.
The Montgomery MSA, with civilian employment of approximately 153,000, is
stabilized by government and military payrolls. The business community in
Montgomery is very diversified and consists mainly of light industry and
facilities specializing in transportation and distribution. The city is a
retail trade center for central and south Alabama and agriculture also plays an
important role in the economy.
The Tuscaloosa MSA, with civilian employment of approximately 77,000, is
diversified among education, health care and mining activities. Stability in
the Tuscaloosa market is provided by the large employment base of a state
university and two state hospitals, which are not as susceptible to economic
downturns as other industries. The construction of a Mercedes-Benz automobile
manufacturing facility between Birmingham and Tuscaloosa is expected to have a
favorable impact on the economies of both areas.
[Figure 1]
Composition of Loans
(Graph)
<TABLE>
<CAPTION>
($ in Billions) 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Commercial 1.4 1.3 1.4 1.5 1.9
Real Estate Mortgage 1.4 1.6 2.0 3.3 4.5
Real Estate Construction .1 .2 .3 .3 .3
Consumer 1.2 1.2 1.4 1.8 2.3
--- --- --- --- ---
Total 4.1 4.3 5.1 6.9 9.0
=== === === === ===
</TABLE>
The Huntsville MSA, with civilian employment of approximately 162,000, has
a large number of high technology companies. Government and military payrolls
related to the space program are also important.
During the last five years, net losses on commercial loans ranged from a
low of 0.26% in 1993 to a high of 0.51% in 1990. In 1994, net losses on
commercial loans were 0.28%. Future losses are a function of many variables, of
which general economic conditions are the most important. If economic
conditions weaken in 1995, net commercial loan losses will likely exceed the
1994 level. A continuation of moderate economic growth during 1995 in Regions'
market areas
24
<PAGE> 7
could result in 1995 net commercial loan losses near the 1994 level.
Regions' real estate loan portfolio is comprised of construction and land
development loans, loans to businesses for long-term financing of land and
buildings, loans on one-to-four family residential properties, loans to
mortgage banking companies (which are secured primarily by loans on one-to-four
family residential properties and are known as warehoused mortgage loans) and
various other loans secured by real estate.
Real estate construction loans increased $85 million in 1994 to $347
million. At December 31, 1994, these loans represented 3.9% of Regions' total
loan portfolio, compared to 3.8% at the end of 1990. Most of the construction
loans relate to shopping centers, apartment complexes, commercial buildings and
residential property development. These loans are normally secured by land and
buildings and are generally backed by commitments for long-term financing from
other financial institutions. Real estate construction loans are closely
monitored by management, since these loans are generally considered riskier
than other types of loans and are particularly vulnerable in economic downturns
and in periods of high interest rates. Regions has not been an active lender to
speculative real estate developers or to developers outside its market areas.
The loans to businesses for long-term financing of land and buildings are
primarily to commercial customers within Regions' markets. Total loans secured
by non-farm, non-residential properties totaled $1.0 billion at December 31,
1994. Although some risk is inherent in this type of lending, the Company
attempts to minimize this risk by generally making such loans only on
owner-occupied properties, and by requiring collateral values which exceed the
loan amount, adequate cash flow to service the debt, and in most cases, the
personal guaranties of the borrowers.
Generally, Regions' most significant market areas have not experienced
rapid increases in real estate property values or significant overbuilding.
Therefore, in management's opinion, real estate loan collateral values in
Regions' market areas should not be as vulnerable to significant deterioration,
as would other market areas which have experienced rapidly increasing property
values and significant overbuilding. However, collateral values are difficult
to estimate and are subject to change depending on economic conditions, the
supply of and demand for properties and other factors. Regions attempts to
mitigate the risks of real estate lending by adhering to strict loan
underwriting policies and by diversifying the portfolio both geographically
within its market area and within industry groups.
Loans on one-to-four family residential properties, which total
approximately 73% of Regions' real estate mortgage portfolio, compared to
approximately 54% in 1992, are principally on single-family residences. These
loans are geographically dispersed throughout the southeastern states and some
are guaranteed by government agencies or private mortgage insurers.
Historically, this category of loans has not produced sizable loan losses;
however, it is subject to some of the same risks as other real estate lending.
Warehoused mortgage loans, since they are secured primarily by loans on
one-to-four family residential properties, are similar to these loans in terms
of risk.
During the past five years, real estate loan net losses ranged from a high
of 0.15% of real estate loans
[Figure 2]
LOANS AS PERCENT OF AVERAGE ASSETS
(Graph)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C>
66.2 64.2 63.4 67.3 67.3
</TABLE>
[Figure 3]
NON-PERFORMING ASSETS AS A PERCENT
OF LOANS AND OTHER REAL ESTATE
(Graph)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C>
1.12 1.01 .81 1.03 .58
</TABLE>
25
<PAGE> 8
in 1990, to a low of 0.08% of real estate loans in 1991. In 1992, 1993 and
1994, net losses were 0.09% of real estate loans. These losses depend, to a
large degree, on the level of interest rates, economic conditions and
collateral values, and thus, are very difficult to predict. Management's
current estimate of 1995 net real estate loan losses is near the level of the
last three years.
Regions' consumer loan portfolio consists of $1.9 billion of consumer
loans, $274 million in personal lines of credit (including home equity loans)
and $91 million in credit card loans. Consumer loans are primarily borrowings
of individuals for home improvements, automobiles and other personal and
household purposes. Regions' consumer loan portfolio includes $920 million in
indirect installment loans at December 31, 1994, compared to $623 million at
December 31, 1993. Periods of economic recession tend to increase consumer loan
losses. During the past five years, the ratio of net consumer loan losses to
consumer loans ranged from the current low of 0.23% in 1994 to a high of 0.74%
in 1990. Management expects net consumer loan losses in 1995 to be near the
lower end of this range.
The following table presents information on non-performing loans and real
estate acquired in settlement of loans:
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS
(dollar amounts in thousands) December 31
- ------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-performing loans:
Loans accounted for on a
non-accrual basis $38,035 $39,519 $21,771 $25,013 $31,288
- ------------------------------------------------------------------------------------------------------------------
Loans contractually past due ninety
days or more as to principal or interest
payments (exclusive of non-accrual loans) 5,622 13,028 5,622 5,036 5,648
- ------------------------------------------------------------------------------------------------------------------
Loans whose terms have been
renegotiated to provide a reduction
or deferral of interest or principal
because of a deterioration in the
financial position of the borrower
(exclusive of non-accrual loans and
loans past due ninety days or more) 2,818 4,169 2,777 1,396 1,225
- ------------------------------------------------------------------------------------------------------------------
Real estate acquired in settlement of
loans ("other real estate") 6,267 13,720 11,678 11,911 7,657
- ------------------------------------------------------------------------------------------------------------------
Total $52,742 $70,436 $41,848 $43,356 $45,818
==================================================================================================================
Non-performing assets as a percentage of
loans and other real estate 0.58% 1.03% 0.81% 1.01% 1.12%
==================================================================================================================
</TABLE>
26
<PAGE> 9
The following analysis presents a five year history of the allowance for
loan losses and loan loss data:
<TABLE>
<CAPTION>
(dollar amounts in thousands) 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for loan losses:
Balance at beginning of year $ 100,762 $ 73,619 $ 54,769 $ 44,984 $ 37,136
- -----------------------------------------------------------------------------------------------------------------
Loans charged off:
Commercial 8,958 7,980 8,425 8,197 8,158
- -----------------------------------------------------------------------------------------------------------------
Real estate 5,409 4,404 2,655 2,437 2,656
- -----------------------------------------------------------------------------------------------------------------
Installment 8,733 7,684 8,528 10,177 11,132
- -----------------------------------------------------------------------------------------------------------------
Total 23,100 20,068 19,608 20,811 21,946
- -----------------------------------------------------------------------------------------------------------------
Recoveries:
Commercial 4,241 4,346 3,160 2,713 2,180
- -----------------------------------------------------------------------------------------------------------------
Real estate 1,909 2,195 986 1,162 623
- -----------------------------------------------------------------------------------------------------------------
Installment 4,218 3,138 2,878 2,716 2,783
- -----------------------------------------------------------------------------------------------------------------
Total 10,368 9,679 7,024 6,591 5,586
- -----------------------------------------------------------------------------------------------------------------
Net loans charged off:
Commercial 4,717 3,634 5,265 5,484 5,978
- -----------------------------------------------------------------------------------------------------------------
Real estate 3,500 2,209 1,669 1,275 2,033
- -----------------------------------------------------------------------------------------------------------------
Installment 4,515 4,546 5,650 7,461 8,349
- -----------------------------------------------------------------------------------------------------------------
Total 12,732 10,389 12,584 14,220 16,360
- -----------------------------------------------------------------------------------------------------------------
Allowance of acquired banks 9,955 15,999 4,362 -0- -0-
- -----------------------------------------------------------------------------------------------------------------
Provision charged to expense 19,003 21,533 27,072 24,005 24,208
- -----------------------------------------------------------------------------------------------------------------
Balance at end of year $ 116,988 $ 100,762 $ 73,619 $ 54,769 $ 44,984
=================================================================================================================
Average loans outstanding:
Commercial $1,665,019 $1,409,945 $1,339,788 $1,292,634 $1,178,601
- -----------------------------------------------------------------------------------------------------------------
Real estate 3,957,005 2,418,740 1,842,422 1,587,833 1,399,010
- -----------------------------------------------------------------------------------------------------------------
Installment 1,978,147 1,547,823 1,306,429 1,199,019 1,125,147
- -----------------------------------------------------------------------------------------------------------------
Total $7,600,171 $5,376,508 $4,488,639 $4,079,486 $3,702,758
- -----------------------------------------------------------------------------------------------------------------
Net charge-offs as percent of
average loans outstanding:
Commercial .28% .26% .39% .42% .51%
- -----------------------------------------------------------------------------------------------------------------
Real estate .09 .09 .09 .08 .15
- -----------------------------------------------------------------------------------------------------------------
Installment .23 .29 .43 .62 .74
- -----------------------------------------------------------------------------------------------------------------
Total .17 .19 .28 .35 .44
- -----------------------------------------------------------------------------------------------------------------
Net charge-offs as percent of:
Provision for loan losses 67.0% 48.2% 46.5% 59.2% 67.6%
- -----------------------------------------------------------------------------------------------------------------
Allowance for loan losses 10.9 10.3 17.1 26.0 36.4
- -----------------------------------------------------------------------------------------------------------------
Allowance as percentage of:
5-year moving average of net charge-offs 586% 583% 446% 346% 306%
- -----------------------------------------------------------------------------------------------------------------
Loans, net of unearned income 1.30 1.47 1.43 1.28 1.10
- -----------------------------------------------------------------------------------------------------------------
Provision for loan losses (net of
tax effect) as percentage of net income 8.1% 12.0% 17.9% 19.3% 22.1%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 10
[Figure 4]
NET LOAN LOSSES AS PERCENT OF AVERAGE LOANS
(Graph)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C>
.44 .35 .28 .19 .17
</TABLE>
[Figure 5]
ALLOWANCE FOR LOAN LOSSES AS A PERCENT OF LOANS
(Graph)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C>
1.10 1.28 1.43 1.47 1.30
</TABLE>
At December 31, 1994, non-accrual loans totaled $38.0 million or 0.42% of
loans, compared to $39.5 million or 0.58% of loans at December 31, 1993.
Commercial loans comprised $10.5 million of the 1994 total, with real estate
loans accounting for $23.6 million and consumer loans $3.9 million. Non-accrual
loans increased in 1993, primarily in real estate loans, as a result of the
Secor acquisition. The table on page 29 provides additional information on
non-accruing loans based on the customer's Standard Industrial Classification
Code.
Loans contractually past due 90 days or more were 0.06% of total loans at
December 31, 1994, compared to 0.19% of total loans at December 31, 1993. Loans
past due 90 days or more at December 31, 1994, consisted of $1.8 million in
commercial and real estate loans, $3.1 million in installment loans and $0.7
million in personal lines of credit and credit card loans.
Renegotiated loans decreased to $2.8 million (0.03% of loans) at December
31, 1994, as a result of paydowns and payoffs on renegotiated loans which were
added by acquisitions over the last three years.
Other real estate declined to $6.3 million at December 31, 1994, compared
to $13.7 million at December 31, 1993. Increased sales of parcels of other real
estate in 1994, combined with fewer additions, accounted for the decline in
other real estate in 1994. Other real estate increased in 1993, primarily due
to foreclosed properties added by the Secor acquisition. Other real estate is
recorded at the lower of (1) the recorded investment in the loan or (2) the
estimated net realizable value of the collateral. Although Regions does not
anticipate material loss upon disposition of other real estate, sustained
periods of adverse economic conditions, substantial declines in real estate
values in Regions' markets, actions by bank regulatory agencies, or other
factors, could result in additional loss from other real estate.
The amount of interest income earned in 1994 on the $38.0 million of
non-accruing loans outstanding at year end was approximately $924,000. If these
loans had been current in accordance with their original terms, approximately
$4.1 million would have been earned on these loans in 1994. Approximately
$360,000 in interest income would have been earned in 1994 under the original
terms of the $2.8 million in renegotiated loans outstanding at December 31,
1994. Approximately $303,000 in interest income was actually earned in 1994 on
these loans.
In the normal course of business, Regions makes commitments under various
terms to lend funds to its customers. These commitments include (among others)
revolving credit agreements, term loan agreements and short-term borrowing
arrangements, which are usually for working capital needs. Letters of credit
are also issued, which under certain conditions could result in loans. See Note
L to the consolidated financial statements for additional information on
commitments.
INTEREST-BEARING DEPOSITS IN OTHER BANKS
Interest-bearing deposits in other banks are used primarily as temporary
investments. These assets generally have short-term maturities. This category
of earning assets increased from $342,000 at December 31, 1992, to $11.0
million at December 31, 1993, and then declined to $630,000 at December 31,
1994.
28
<PAGE> 11
The commercial, real estate and consumer loan portfolios are highly
diversified in terms of industry concentrations. The following table shows the
largest concentrations in terms of the customer's Standard Industrial
Classification Code (SIC) at December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
(dollar amounts in millions) December 31
- -------------------------------------------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
% of % Non- % of % Non- % of % Non-
SIC Classification Amount Total Accrual Amount Total Accrual Amount Total Accrual
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Individuals $5,378.0 59.5% 0.4% $3,936.4 57.4% 0.5% $2,506.6 48.2% 0.4%
- -------------------------------------------------------------------------------------------------------------------
Services:
Physicians 60.2 0.7 0.0 55.7 0.8 0.0 47.7 0.9 0.0
- -------------------------------------------------------------------------------------------------------------------
Business services 63.8 0.7 0.0 48.0 0.7 0.0 53.1 1.0 0.0
- -------------------------------------------------------------------------------------------------------------------
Religious organizations 87.7 1.0 0.0 78.5 1.1 0.0 78.5 1.5 0.0
- -------------------------------------------------------------------------------------------------------------------
Legal services 41.0 0.5 0.0 32.6 0.5 0.0 32.9 0.6 0.1
- -------------------------------------------------------------------------------------------------------------------
All other services 454.6 5.0 0.3 330.6 4.8 0.6 351.4 6.8 0.9
- -------------------------------------------------------------------------------------------------------------------
Total services 707.3 7.9 0.4 545.4 7.9 0.7 563.6 10.8 0.7
- -------------------------------------------------------------------------------------------------------------------
Manufacturing:
Electrical equipment 48.5 0.5 0.0 29.5 0.4 0.0 34.5 0.7 0.0
- -------------------------------------------------------------------------------------------------------------------
Food and kindred products 24.0 0.3 0.0 14.5 0.2 0.0 19.8 0.4 0.0
- -------------------------------------------------------------------------------------------------------------------
Rubber and plastic products 16.2 0.2 0.0 16.9 0.2 0.0 17.0 0.3 0.0
- -------------------------------------------------------------------------------------------------------------------
Lumber and wood products 56.7 0.6 0.0 48.4 0.7 0.0 22.5 0.4 0.0
- -------------------------------------------------------------------------------------------------------------------
Fabricated metal products 63.5 0.7 0.1 60.9 0.9 0.0 69.4 1.3 0.1
- -------------------------------------------------------------------------------------------------------------------
All other manufacturing 225.9 2.5 0.2 201.4 2.9 0.0 192.2 3.7 0.1
- -------------------------------------------------------------------------------------------------------------------
Total manufacturing 434.8 4.8 0.3 371.6 5.3 0.0 355.4 6.8 0.2
- -------------------------------------------------------------------------------------------------------------------
Wholesale trade 236.1 2.6 0.2 181.8 2.6 0.1 186.9 3.6 0.1
- -------------------------------------------------------------------------------------------------------------------
Finance, insurance and
real estate:
Real estate 497.6 5.5 0.3 454.2 6.6 1.9 317.5 6.1 0.3
- -------------------------------------------------------------------------------------------------------------------
Banks and credit agencies 78.2 0.9 0.0 81.8 1.2 0.0 65.1 1.3 0.0
- -------------------------------------------------------------------------------------------------------------------
All other finance, insurance
and real estate 90.6 1.0 0.0 87.1 1.3 0.0 89.0 1.7 0.0
- -------------------------------------------------------------------------------------------------------------------
Total finance, insurance
and real estate 666.4 7.4 0.3 623.1 9.1 1.9 471.6 9.1 0.3
- -------------------------------------------------------------------------------------------------------------------
Construction:
Residential building
construction 93.5 1.1 0.1 76.1 1.1 0.1 57.3 1.1 0.2
- -------------------------------------------------------------------------------------------------------------------
General contractors
and builders 67.2 0.7 0.1 54.0 0.8 0.0 41.3 0.8 0.2
- -------------------------------------------------------------------------------------------------------------------
All other construction 65.6 0.7 0.7 86.5 1.3 0.1 92.5 1.8 0.8
- -------------------------------------------------------------------------------------------------------------------
Total construction 226.3 2.5 0.9 216.6 3.2 0.2 191.1 3.7 1.2
- -------------------------------------------------------------------------------------------------------------------
Retail trade:
Automobile dealers 147.7 1.6 0.0 144.9 2.1 0.0 102.7 2.0 0.0
- -------------------------------------------------------------------------------------------------------------------
All other retail trade 209.7 2.3 0.4 155.6 2.3 0.3 167.1 3.2 0.3
- -------------------------------------------------------------------------------------------------------------------
Total retail trade 357.4 3.9 0.4 300.5 4.4 0.3 269.8 5.2 0.3
- -------------------------------------------------------------------------------------------------------------------
Agriculture, forestry
and fishing 120.1 1.3 0.5 111.8 1.6 0.4 109.1 2.1 0.8
- -------------------------------------------------------------------------------------------------------------------
Transportation,
communication,
electrical, gas and sanitary 159.5 1.8 0.7 161.4 2.4 1.0 145.7 2.8 0.2
- -------------------------------------------------------------------------------------------------------------------
Mining (including oil and gas
extraction) 10.0 0.1 0.0 9.1 0.1 0.0 10.5 0.2 0.0
- -------------------------------------------------------------------------------------------------------------------
Public administration 63.9 0.7 5.5 15.2 0.2 0.0 9.0 0.2 0.0
- -------------------------------------------------------------------------------------------------------------------
Revolving credit loans 365.5 4.0 0.0 338.1 4.9 0.0 276.4 5.3 0.0
- -------------------------------------------------------------------------------------------------------------------
Other 318.2 3.5 0.6 58.5 0.9 0.0 104.6 2.0 0.0
- -------------------------------------------------------------------------------------------------------------------
Total $9,043.5 100.0% 0.4% $6,869.5 100.0% 0.6% $5,200.3 100.0% 0.4%
===================================================================================================================
</TABLE>
29
<PAGE> 12
SECURITIES
Effective January 1, 1994, Regions adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS 115). SFAS 115 requires that debt securities, which
the Company has both the positive intent and ability to hold to maturity,
should be carried at amortized cost. These securities are classified as
investment securities in the consolidated financial statements. Debt
securities, which the Company does not have the positive intent and ability to
hold to maturity and all marketable equity securities, are carried at estimated
fair value and are included in securities available for sale in the
consolidated financial statements, exclusive of any such securities that are
included in trading securities. Unrealized holding gains and losses on
securities available for sale, net of taxes, are carried as a separate
component of stockholders' equity.
The following table shows the carrying values of securities as follows:
<TABLE>
<CAPTION>
(in thousands) December 31
- -------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------
<S> <C> <C>
Investment securities:
U.S. Treasury &
Federal agency
securities $1,903,390 $ 963,398 $ 930,094
- -------------------------------------------------------
Obligations of
states and
political
subdivisions 253,106 223,673 170,302
- -------------------------------------------------------
Mortgage-backed
securities 791,443 1,097,935 519,553
- -------------------------------------------------------
Other securities 736 32,883 26,794
- -------------------------------------------------------
Equity securities -0- 50,556 23,427
- -------------------------------------------------------
TOTAL $1,948,675 $2,368,445 $1,670,170
=======================================================
Securities available for sale:
U.S. Treasury &
Federal agency
securities $413,674
- -------------------------------
Obligations of
states and political
subdivisions 2,420
- -------------------------------
Mortgage-backed
securities 205,957
- -------------------------------
Other securities 10
- -------------------------------
Equity securities 38,452
- -------------------------------
TOTAL $660,513
===============================
</TABLE>
Total securities increased $241 million or 10% in 1994. U. S. Treasury and
Federal agency securities increased $353.7 million or 37%. Mortgage-backed
securities decreased $100.5 million or 9% due to maturities and paydowns.
Obligations of states and political subdivisions increased $31.9 million or
14%.
In 1993, investment securities increased $698.2 million or 42% principally
as a result of the Secor acquisition, which added $639.7 million in investment
securities. U. S. Treasury and Federal agency securities increased $33.3
million or 4%. Mortgage-backed securities increased $578.4 million or 111% as a
result of the Secor acquisition. Obligations of states and political
subdivisions increased by $53.3 million or 31% in 1993. Other securities
increased $6.1 million or 23%. Equity securities increased $27.1 million or
116% as a result of Federal Home Loan Bank stock acquired in acquisitions
during 1993.
Regions' investment portfolio policy stresses quality and liquidity. At
December 31, 1994, the average maturity of U.S. Treasury and Federal agency
securities was 2.8 years and that of obligations of states and political
subdivisions was 6.8 years. The average maturity of mortgage-backed securities
was 14.3 years and other securities had an average maturity of 8.7 years.
Overall, the average maturity of the portfolio was 7.7 years using contractual
maturities and 3.5 years using expected maturities. Expected maturities differ
from contractual maturities because borrowers have the right to call or prepay
obligations with or without call or prepayment penalties. Securities purchased
during the last several years have primarily short to intermediate term
maturities.
The estimated fair market value of Regions' investment securities
portfolio at December 31, 1994, was 3.8% ($74.6 million) below the amount
carried on Regions' books. Regions' securities available for sale portfolio at
December 31, 1994, included unrealized losses of $17.1 million. Regions'
investment securities and securities available for sale portfolios included
gross unrealized gains of $15.2 million and gross unrealized losses of $106.8
million at December 31, 1994. Market values of these portfolios vary
significantly as interest rates change; however, management expects normal
maturities from the securities portfolios to meet liquidity needs.
Of Regions' tax-free securities rated by Moody's Investors Service, Inc.,
98% are rated "A" or better.
30
<PAGE> 13
Twelve percent of the tax-free bond portfolio is non-rated. The portfolio is
carefully monitored to assure no unreasonable concentration of securities in
the obligations of a single debtor and current credit reviews are conducted on
each security holding.
The following table shows the maturities of securities (excluding equity
securities) at December 31, 1994, the weighted average yields and the taxable
equivalent adjustment used in calculating the yields:
<TABLE>
<CAPTION>
(in thousands)
Securities Maturing
- ---------------------------------------------------------------------------------------------------------
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years Total
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment securities:
U.S. Treasury and Federal
agency securities $164,118 $599,048 $140,224 $ -0- $ 903,390
- ---------------------------------------------------------------------------------------------------------
Obligations of states and political
subdivisions 18,051 58,498 108,586 67,971 253,106
- ---------------------------------------------------------------------------------------------------------
Mortgage-backed securities 1 125,873 110,893 554,676 791,443
- ---------------------------------------------------------------------------------------------------------
Other securities -0- 200 516 20 736
- ---------------------------------------------------------------------------------------------------------
TOTAL $182,170 $783,619 $360,219 $ 622,667 $1,948,675
=========================================================================================================
Weighted average yield 7.03% 6.95% 7.33% 6.15% 6.77%
- --------------------------------------------------------------------------------------------------------
Securities available for sale:
U.S. Treasury and Federal
agency securities $116,411 $286,804 $ 10,459 $ -0- $ 413,674
- --------------------------------------------------------------------------------------------------------
Obligations of states and political
subdivisions 1,486 934 -0- -0- 2,420
- --------------------------------------------------------------------------------------------------------
Mortgage-backed securities -0- 43,777 17,557 144,623 205,957
- --------------------------------------------------------------------------------------------------------
Other securities 10 -0- -0- -0- 10
- --------------------------------------------------------------------------------------------------------
TOTAL $117,907 $331,515 $ 28,016 $144,623 $ 622,061
========================================================================================================
Weighted average yield 7.72% 7.14% 7.91% 15.55% 8.83%
- --------------------------------------------------------------------------------------------------------
Taxable equivalent adjustment
for calculation of yield $608 $ 1,871 $ 3,415 $ 1,934 $ 7,828
- --------------------------------------------------------------------------------------------------------
</TABLE>
Note: The weighted average yields are calculated on the basis of the yield to
maturity based on the book value of each security. Weighted average
yields on tax-exempt obligations have been computed on a fully taxable
equivalent basis using a tax rate of 35%. Yields on tax-exempt
obligations have not been adjusted for the non-deductible portion of
interest expense used to finance the purchase of tax-exempt obligations.
31
<PAGE> 14
LIQUIDITY
Liquidity is an important factor in the financial condition of Regions and
affects Regions' ability to meet the borrowing needs and deposit withdrawal
requirements of its customers. Assets, consisting principally of loans and
securities, are funded by customer deposits, purchased funds, borrowed funds
and stockholders' equity.
The securities portfolio is one of Regions' primary sources of liquidity.
Maturities of securities provide a constant flow of funds which are available
for cash needs (see table on Securities Maturing on page 31). Maturities in the
loan portfolio also provide a steady flow of funds (see table on Loans Maturing
on page 22). At December 31, 1994, commercial loans, real estate construction
loans and commercial mortgage loans with an aggregate balance of $1.5 billion,
as well as securities of $300 million, were due to mature in one year or less.
Additional funds are provided from payments on consumer loans and one-to-four
family residential mortgage loans. Historically, the Company's high levels of
net operating earnings also contribute to cash flow. In addition, liquidity
needs can be met by the purchase of funds in state and national money markets.
Regions' liquidity also continues to be enhanced by a relatively stable deposit
base.
The loan to deposit ratio has increased from 77.91% at December 31, 1993,
to 89.35% at December 31, 1994, as earning asset growth has outpaced the growth
in deposits, generating the need to increase purchased funds.
As shown in the Consolidated Statement of Cash Flows on page 55, operating
activities provided significant levels of funds in all three years. Higher net
income in 1994, combined with the decrease in mortgages held for sale, resulted
in a significant increase in cash provided by operating activities in 1994.
Investing activities, primarily in loans and securities, were a net user of
funds in all three years. Strong loan growth over the last three years has
required a significant amount of funds for investing activities. Funds needed
for investing activities were provided primarily by deposits, purchased funds,
borrowings and equity. Financing activities provided less funds in 1993 due to
slower growth in deposits and less use of borrowing than in 1992. In 1994, the
Company was more dependent on short- and long-term borrowings in providing
funds for investing activities. The open-market purchase of the Company's
common stock, which was reissued in connection with specific acquisitions, also
required funds in 1993 and 1994.
First Alabama Bank's short-term certificates of deposit are rated "A-1+"
by Standard & Poor's Corporation. This is the highest rating available for any
company. First Alabama Bank's long-term certificates of deposit are rated
"AA-", which is higher than any other Alabama bank and among the highest in the
Southeast.
Moody's Investors Service has also given similar quality ratings to First
Alabama Bank's short- and long-term debt and certificates of deposit.
Short-term debt and certificates of deposit are rated "P-1" and long-term debt
and certificates of deposit are rated "Aa2".
In addition, First Alabama Bank received the highest issuer rating
available ("A") from the internationally recognized bank rating organization,
Thomson BankWatch. This organization also assigned its highest short-term
rating of "TBW-1" to First Alabama Bank's certificates of deposit.
Regions Financial Corporation's (the parent company) commercial paper has
also been assigned a rating of "TBW-1" by Thomson BankWatch. Regions Financial
Corporation has also received Thomson BankWatch's highest issuer rating of "A".
The $200 million in subordinated debt issued by Regions is rated "A" by
Standard & Poor's Corporation, "A2" by Moody's Investors Service, and "AA-" by
Thomson BankWatch.
Regions' two largest banking subsidiaries, First Alabama Bank and Regions
Bank of Louisiana, have taken the necessary steps for the possible issuance of
up to $250 million in bank notes to institutional investors. The notes can have
maturities ranging from thirty days to thirty years and fixed or variable
interest rates. The proceeds from issuance of the bank notes can be used in the
ordinary course of business and provide an additional source of funding. No
bank notes were outstanding at December 31, 1994. First Alabama Bank's notes
were rated "A-1+/AA-" by Standard & Poor's Corporation and "P-1/Aa2" by Moody's
Investors Service. Regions Bank of Louisiana's notes were rated "A-1+/AA-" by
Standard & Poor's Corporation and "P-1/Aa3" by Moody's Investors Service.
Regions' and its banking subsidiaries' high quality ratings from
nationally recognized rating agencies
32
<PAGE> 15
enhance the Company's ability to raise funds in national money markets. The
high ratings also help to attract both loan and deposit customers in local
markets.
Historically, Regions has found short- and intermediate-term credit
readily available on reasonable terms from money center or regional banks.
Regions' management places constant emphasis on the maintenance of adequate
liquidity to meet conditions which might reasonably be expected to occur.
DEPOSITS
Deposits are Regions' primary funding source. Deposits accounted for 94%
of the funding for earning assets in 1993 and 88% of the funding for earning
assets in 1994. During the period 1991 through 1993, when market interest rates
dropped to historically low levels, a significant shift in the composition of
Regions' deposit base took place. As market interest rates dropped and pricing
spreads (the difference between rates paid on different deposit products)
narrowed, customers began moving funds out of term deposits, such as
certificates of deposit, and into more liquid types of deposits. During 1994,
as market interest rates increased and pricing spreads expanded, this trend
began to reverse. Customers began moving funds out of liquid types of deposits
and into time deposits, such as certificates of deposit, to take advantage of
higher rates. Management expects a continuation of this trend as long as market
interest rates remain at current or higher levels and pricing spreads remain
wide.
During the last four years, average total deposits grew at a compound
annual rate of 18%. Average deposits grew $728 million or 15% in 1991, $637
million or 11% in 1992, $686 million or 11% in 1993 and $2.4 billion or 34% in
1994. Acquisitions, net of branch sales, contributed average deposit balance
growth of $384 million in 1991, $216 million in 1992, $392 million in 1993 and
$2.0 billion in 1994.
Savings accounts continue to be one of Regions' fastest growing deposit
products. Savings accounts increased 25% in 1992, 26% in 1993 and 32% in 1994.
Since 1990, this category of deposits increased $474 million, at a compound
annual growth rate of 25%. As mentioned above, this growth occurred as market
interest rates fell, making the rates paid on these accounts more attractive
relative to other investment alternatives. Management expects the growth rate
for savings accounts to slow, as more customers shift funds into time deposits.
In 1994, savings accounts accounted for 9% of average total deposits compared
to 7% of average total deposits in 1990.
Interest-bearing transaction accounts continue to be an important source
of funds for Regions. Interest-bearing transaction accounts increased 11% in
1993 and 19% in 1994. Since 1990, this category of deposits increased $637
million, at a compound annual growth rate of 18%. Interest-bearing transaction
accounts are also a significant funding source for Regions, accounting for 16%
of average total deposits in 1993 and 14% of average total deposits in 1994.
Money market savings products have been Regions' fastest growing deposit
products, increasing at a compound annual rate of 29% since 1990. As market
interest rates declined during 1991, 1992 and 1993, customers began moving from
certificates of deposit to money market savings accounts, resulting in
increases in average balances of 36% in 1992 and 19% in 1993. As market
interest rates moved up in 1994, customers responded to Regions' innovative,
competitive money market savings products by continuing to invest in these
accounts, resulting in increases in average balances of 23%. Money market
savings products are also a significant funding source for Regions, accounting
for 17% of average total deposits in 1993 and 15% of average total deposits in
1994.
Certificates of deposit of $100,000 or more declined less than 1% in 1993,
due to the use of alternative funding sources. During 1994, certificates of
deposit of $100,000 or more increased 86%, due to their renewed use as a
funding source. Since 1990, certificates of deposit of $100,000 or more have
increased at a compound annual rate of 6%, and in 1994 accounted for 9% of
average total deposits, down from a high of 13% in 1990.
Other interest-bearing deposits (certificates of deposit of less than
$100,000 and time open accounts) increased 4% in 1992, 5% in 1993 and 44% in
1994. This category of deposits continues to be Regions' primary funding
source; it accounted for 39% of average total deposits in 1994, compared to 36%
of average total deposits in 1993. Regions has successfully marketed a special
certificate of deposit product that provides customers with an attractive
interest rate and
33
<PAGE> 16
an early redemption option. This and other innovative deposit products have
helped Regions continue to grow deposits and increase market share in the
Company's major markets.
The sensitivity of Regions' deposits over the last five years to changes
in market interest rates is reflected in the Company's average interest rate
paid on interest-bearing deposits (see table below on Rates Paid). Beginning in
the second quarter of 1989 and continuing through 1993, market interest rates
generally declined. Beginning in early 1994 and continuing throughout the year,
market interest rates rose. Regions' average interest rate paid on
interest-bearing deposits reflects this trend. This rate decreased from 6.95%
in 1990, to 5.88% in 1991, to 4.06% in 1992 and to 3.40% in 1993 and increased
to 3.70% in 1994.
A detail of interest-bearing deposit balances at December 31, 1994, and
1993, and the interest expense on these deposits for the three years ended
December 31, 1994, is presented in Note H to the consolidated financial
statements.
The following table presents the detail of interest-bearing deposits and
maturities of the larger time deposits:
<TABLE>
<CAPTION>
(in thousands) December 31
- ----------------------------------------------------
1994 1993
- ----------------------------------------------------
<S> <C> <C>
Interest-bearing
deposits of
less than $100,000 $7,089,120 $6,570,014
- ----------------------------------------------------
Time certificates of
deposit of $100,000 or
more, maturing in:
3 months or less 677,844 150,274
- ----------------------------------------------------
over 3 through 6 months 112,031 84,208
- ----------------------------------------------------
over 6 through 12 months 72,693 109,107
- ----------------------------------------------------
over 12 months 312,916 230,903
- ----------------------------------------------------
Total 1,175,484 574,492
- ----------------------------------------------------
Other time deposits of
$100,000 or more maturing
in 3 months or less 378,201 429,503
- ----------------------------------------------------
Total $8,642,805 $7,574,009
====================================================
</TABLE>
The following table presents the average amounts of deposits outstanding by
category for the five years ended December 31, 1994:
<TABLE>
<CAPTION>
(in thousands) Average Amounts Outstanding
- -----------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-interest-bearing demand deposits $1,260,696 $1,053,111 $ 896,847 $ 786,243 $ 764,945
- -----------------------------------------------------------------------------------------------------------------
Interest-bearing transaction accounts 1,336,831 1,120,768 1,007,570 844,295 699,956
- -----------------------------------------------------------------------------------------------------------------
Savings accounts 798,327 603,012 477,880 382,736 324,329
- -----------------------------------------------------------------------------------------------------------------
Money market savings accounts 1,421,045 1,159,824 977,881 718,518 519,162
- -----------------------------------------------------------------------------------------------------------------
Certificates of deposit of $100,000 or more 814,153 438,039 439,815 531,378 640,798
- -----------------------------------------------------------------------------------------------------------------
Other interest-bearing deposits 3,603,674 2,505,565 2,394,547 2,294,559 1,880,380
- -----------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 7,974,030 5,827,208 5,297,693 4,771,486 4,064,625
- -----------------------------------------------------------------------------------------------------------------
Total deposits $9,234,726 $6,880,319 $6,194,540 $5,557,729 $4,829,570
=================================================================================================================
</TABLE>
The following table presents the average rates paid on deposits by category for
the five years ended December 31, 1994:
<TABLE>
<CAPTION>
Rates Paid
- -----------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest-bearing transaction accounts 2.81% 2.53% 2.86% 4.51% 5.66%
- -----------------------------------------------------------------------------------------------------------------
Savings accounts 2.86 2.96 3.47 4.87 4.98
- -----------------------------------------------------------------------------------------------------------------
Money market savings accounts 2.93 2.82 3.30 4.86 5.81
- -----------------------------------------------------------------------------------------------------------------
Certificates of deposit of $100,000 or more 4.75 4.34 4.98 6.70 8.01
- -----------------------------------------------------------------------------------------------------------------
Other interest-bearing deposits 4.30 4.01 4.83 6.69 7.73
- -----------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 3.70% 3.40% 4.06% 5.88% 6.95%
=================================================================================================================
</TABLE>
34
<PAGE> 17
BORROWED FUNDS
Regions' short-term borrowings consist of federal funds purchased and
security repurchase agreements, commercial paper and other short-term
borrowings.
Federal funds purchased and security repurchase agreements are used to
satisfy daily funding needs and, when advantageous, for rate arbitrage. Federal
funds purchased and security repurchase agreements increased from $184.6
million at December 31, 1993, to $991.2 million at December 31, 1994. Balances
in these accounts can fluctuate significantly on a day-to-day basis. The
average daily balance of federal funds purchased and security repurchase
agreements, net of federal funds sold and security reverse repurchase
agreements, increased $27.5 million in 1993 and $300.8 million in 1994. The
larger increase in 1994 resulted from increased reliance on purchased funds to
support earning asset growth and the need to replace approximately $177 million
in deposits sold in connection with the sale of five branch offices. The higher
level of net purchased funds is expected to continue unless alternative funding
sources are utilized or unless earning asset growth rates moderate.
At December 31, 1994, $18.6 million in commercial paper was outstanding,
compared to $17.2 million at December 31, 1993. The Company issues commercial
paper through its private placement commercial paper program. The Company's
retail commercial paper program was discontinued in 1993 since the private
placement program was meeting the Company's needs at a lower cost. Company
policy limits total commercial paper outstanding, at any time, to $75 million.
The level of commercial paper outstanding depends on the funding requirements
of the Company and the cost of commercial paper compared to alternative
borrowing sources.
Other short-term borrowings at December 31, 1994, and 1993, consisted
primarily of a short sale liability at Regions' broker/dealer subsidiary. Short
sales are frequently used by the broker/dealer subsidiary to offset other
market risks which are undertaken in the normal course of business.
Regions' long-term borrowings consist primarily of subordinated notes,
Federal Home Loan Bank borrowings and other long-term notes payable.
Subordinated notes increased from $80.6 million at December 31, 1993, to
$205.2 million at December 31, 1994. During 1994, Regions issued $125 million
in additional subordinated notes, which qualify as Tier II capital under
Federal Reserve guidelines. The proceeds of these notes are being used for
general corporate purposes, including the repurchase in the open market of
shares of Regions' Common Stock, which were, or will be, issued in connection
with specific acquisitions accounted for as purchases. Issuance of the
subordinated notes improved the Company's total capital ratios and provided an
additional source of financing growth of the Company.
Federal Home Loan Bank borrowings decreased $61.4 million in 1994, after
increasing $301.5 million in 1993. The increase in 1993 related to Federal Home
Loan Bank borrowings assumed in connection with the acquisition of Secor at
year-end 1993. As a portion of these borrowings matured and were paid off in
1994, the balance outstanding on Federal Home Loan Bank borrowings declined.
Membership in the Federal Home Loan Bank system provides access to an
additional source of lower-cost funds. These borrowings can be used to
partially hedge against the effect future interest rate changes may have on the
Company's real estate mortgage portfolio.
Other long-term notes payable consist of mortgages payable on certain of
the Company's buildings and low-income housing partnership investments, medium
term notes assumed in connection with the Secor acquisition and miscellaneous
notes payable. Other long-term borrowings declined $6.8 million in 1994, due to
scheduled maturities on these borrowings.
STOCKHOLDERS' EQUITY
Over the past five years, stockholders' equity has increased at a compound
annual growth rate of 14.1%. Stockholders' equity has grown from $573 million
at the beginning of 1992 to $1.0 billion at year-end 1994. Internally generated
retained earnings contributed $221 million of this growth, equity issued in
connection with acquisitions accounted for $202 million, and $18 million was
attributable to the exercise of stock options and the issuance of stock to
employees under Regions' incentive plan. The internal capital generation rate
(net income less dividends as a percentage of average stockholders' equity) was
10.5% in 1994, compared to 10.6% in 1993 and 10.2% in 1992.
Regions and its subsidiaries are required to
35
<PAGE> 18
comply with capital adequacy standards established by banking regulatory
agencies. Currently, there are two basic measures of capital adequacy: a
risk-based measure and a leverage measure.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles 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 specified risk-weighting
factors. The resulting capital ratios represent capital as a percentage of
total risk-weighted assets and off-balance sheet items. The banking regulatory
agencies have adopted initiatives to begin considering interest rate risk in
computing risk-based capital ratios, although such requirements have not yet
been implemented.
The minimum standard for the ratio of total capital to risk-weighted
assets is 8%. At least 50% of that capital level must consist of common equity,
undivided profits and non-cumulative perpetual preferred stock, less goodwill
and certain other intangibles ("Tier I capital"). The remainder ("Tier II
capital") may consist of a limited amount of other preferred stock, mandatory
convertible securities, subordinated debt and a limited amount of the allowance
for loan losses. The sum of Tier I capital and Tier II capital is "total
risk-based capital."
The banking regulatory agencies also have adopted regulations which
supplement the risk-based guidelines to include a minimum ratio of 3% of Tier I
capital to average assets less goodwill (the "leverage ratio"). Depending upon
the risk profile of the institution and other factors, the regulatory agencies
may require a leverage ratio of 1% to 2% above the minimum 3% level.
Regions' ratio of stockholders' equity to total assets was 7.90% at
December 31, 1994, compared to 8.12% at December 31, 1993, and 8.33% at
December 31, 1992. Although this ratio has declined over the past three years
due to acquisitions, the Company's capital level, as measured by the leverage
ratio, is significantly above industry averages.
The following chart summarizes the applicable bank regulatory capital
requirements. Regions' capital ratios at December 31, 1994, substantially
exceeded all regulatory requirements.
BANK REGULATORY CAPITAL REQUIREMENTS
<TABLE>
<CAPTION>
Minimum Regions
Regulatory at
Requirement December 31, 1994
- ----------------------------------------------------------
<S> <C> <C>
Tier I capital to
risk-adjusted assets 4.00% 10.69%
- ----------------------------------------------------------
Total risk-based
capital to risk-
adjusted assets 8.00% 14.29%
- ----------------------------------------------------------
Tier I leverage ratio 3.00% 8.21%
- ----------------------------------------------------------
</TABLE>
Total capital at the affiliate banks also has an important effect on the
amount of FDIC insurance premiums paid. Institutions not considered well
capitalized can be subject to higher rates for FDIC insurance. As of December
31, 1994, all of Regions' affiliate banks had the requisite capital levels to
qualify as well capitalized.
Regions attempts to balance the return to stockholders through the payment
of dividends, with the need to maintain strong capital levels for future growth
opportunities. In 1994, Regions returned 34% of earnings to its stockholders in
the form of dividends. Total dividends declared in 1994, were $50.3 million or
$1.20 per share, an increase of 15% from the $1.04 per share in 1993.
In January 1995, the Board of Directors declared an increase in the
quarterly cash dividend from $.30 to $.33 per share, a 10% increase. This is
the twenty-fourth consecutive year that Regions has increased cash dividends.
36
<PAGE> 19
The following table shows the percentage distribution of Regions' consolidated
average balances of assets, liabilities and stockholders' equity for the five
years ended December 31, 1994:
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Taxable securities 20.3% 18.1% 20.7% 20.8% 17.6%
- --------------------------------------------------------------------------------------------------------------------
Non-taxable securities 2.1 2.4 2.3 2.7 3.0
- --------------------------------------------------------------------------------------------------------------------
Federal funds sold 0.5 0.7 2.5 1.5 0.9
- --------------------------------------------------------------------------------------------------------------------
Loans (net of unearned income):
Commercial 14.7 17.7 19.0 20.3 21.1
- --------------------------------------------------------------------------------------------------------------------
Real estate 35.0 30.3 26.0 25.0 25.0
- --------------------------------------------------------------------------------------------------------------------
Installment 17.5 19.4 18.5 18.9 20.1
- --------------------------------------------------------------------------------------------------------------------
Total loans 67.2 67.4 63.5 64.2 66.2
- --------------------------------------------------------------------------------------------------------------------
Allowance for loan losses (1.0) (1.1) (0.9) (0.8) (0.7)
- --------------------------------------------------------------------------------------------------------------------
Net loans 66.2 66.3 62.6 63.4 65.5
- --------------------------------------------------------------------------------------------------------------------
Other earning assets 2.5 3.1 2.6 2.1 2.5
- --------------------------------------------------------------------------------------------------------------------
Total earning assets 91.6 90.6 90.7 90.5 89.5
- --------------------------------------------------------------------------------------------------------------------
Cash and due from banks 4.0 4.9 4.6 4.6 5.7
- --------------------------------------------------------------------------------------------------------------------
Other non-earning assets 4.4 4.5 4.7 4.9 4.8
- --------------------------------------------------------------------------------------------------------------------
Total assets 100.0% 100.0% 100.0% 100.0% 100.0%
====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing 11.2% 13.2% 12.7% 12.4% 13.7%
- --------------------------------------------------------------------------------------------------------------------
Interest-bearing 70.6 73.0 74.8 75.1 72.7
- --------------------------------------------------------------------------------------------------------------------
Total deposits 81.8 86.2 87.5 87.5 86.4
- --------------------------------------------------------------------------------------------------------------------
Borrowed funds:
Short-term 4.1 1.8 1.8 2.3 2.9
- --------------------------------------------------------------------------------------------------------------------
Long-term 4.6 1.8 0.7 0.3 0.4
- --------------------------------------------------------------------------------------------------------------------
Total borrowed funds 8.7 3.6 2.5 2.6 3.3
- --------------------------------------------------------------------------------------------------------------------
Other liabilities 1.4 1.5 1.4 1.3 1.3
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 91.9 91.3 91.4 91.4 91.0
- --------------------------------------------------------------------------------------------------------------------
Stockholders' equity 8.1 8.7 8.6 8.6 9.0
- --------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity 100.0% 100.0% 100.0% 100.0% 100.0%
====================================================================================================================
</TABLE>
37
<PAGE> 20
OPERATING RESULTS
Net income increased 30% in 1994 and 18% in 1993. The accompanying table
presents the dollar amount and percentage change in the important components of
income that occurred in 1994 and 1993.
SUMMARY OF CHANGES IN OPERATING RESULTS
<TABLE>
<CAPTION>
(dollar amounts in thousands) Increase (Decrease)
- ----------------------------------------------------------
1994 Compared 1993 Compared
to 1993 to 1992
Amount % Amount %
<S> <C> <C>
NET INTEREST
INCOME $93,587 27% $29,374 9%
- ---------------------------------------------------------
Provision for
loan losses (2,530) (12) (5,539) (20)
- ---------------------------------------------------------
Net interest income
after provision for
loan losses 96,117 30 34,913 12
- ---------------------------------------------------------
NON-INTEREST INCOME:
Trust department
income 1,087 6 1,579 9
- ---------------------------------------------------------
Service charges on
deposit accounts 7,377 17 838 2
- ---------------------------------------------------------
Mortgage servicing
and origination
fees (2,590) (6) 7,031 19
- ---------------------------------------------------------
Securities transactions 549 704 131 NM
- ---------------------------------------------------------
Other 4,958 19 3,371 15
- ---------------------------------------------------------
Total non-interest
income 11,381 9 12,950 11
- ---------------------------------------------------------
NON-INTEREST EXPENSE:
Salaries and
employee benefits 24,572 16 16,239 12
- ---------------------------------------------------------
Net occupancy
expense 5,809 39 1,118 8
- ---------------------------------------------------------
Furniture and equip-
ment expense 4,133 22 920 5
- ---------------------------------------------------------
FDIC insurance
expense 6,094 42 479 3
- ---------------------------------------------------------
Other 15,433 18 3,611 4
- ---------------------------------------------------------
Total non-interest
expense 56,041 20 22,367 8
- ---------------------------------------------------------
Income before
income taxes 51,457 31 25,496 18
- ---------------------------------------------------------
Applicable income
taxes 17,618 33 8,499 19
- ---------------------------------------------------------
NET INCOME $33,839 30% $16,997 18%
=========================================================
</TABLE>
NET INTEREST INCOME
Net interest income (interest income less interest expense) is Regions'
principal source of income. Net interest income increased 27% in 1994 and 9% in
1993. On a taxable equivalent basis, net interest income increased 26% in 1994
and 9% in 1993. The table on page 43 analyzes the changes in net interest
income.
In 1994, increases in the volume of interest-earning assets and
interest-bearing liabilities contributed to the increase in net interest
income. During 1994, average earning assets grew 43% and average
interest-bearing liabilities grew 46%. However, unfavorable changes in earning
asset yields and interest-bearing liability rates partially offset the increase
in net interest income attributable to volume changes. The results for 1993
were similar to 1994, in that increased net interest income attributable to
volume changes was partially offset by unfavorable changes in earning asset
yields and interest-bearing liability rates. During 1993, average earning
assets grew 13%, while interest-bearing liabilities grew 12%. Volume changes of
equal amounts in earning assets and interest-bearing liabilities typically
increase net interest income due to the positive spread between earning asset
yields and interest-bearing liability rates.
Regions measures its ability to produce net interest income with a ratio
called the interest margin. The interest margin is net interest income (on a
taxable equivalent basis) as a percentage of earning assets. The interest
margin declined from 4.98% in 1992 to 4.82% in 1993 and to 4.26% in 1994.
Changes in the interest margin occur primarily due to four factors: (1) the
interest rate spread (taxable equivalent yield on earning assets less the rate
on interest-bearing liabilities), (2) the percentage of earning assets funded
by interest-bearing liabilities, (3) changes in market interest rates and (4)
changes in the statutory federal income tax rate. Year-to-year comparisons of
the interest margin ratio are affected by acquisitions that occurred in late
1993. The acquired institutions generally had earning asset yields that were
lower, interest-bearing liability rates that were higher, and a larger
percentage of earning assets funded by interest-bearing liabilities than did
Regions. Although these institutions added significantly to net interest
income, they did have an adverse impact on the interest margin
38
<PAGE> 21
ratio by negatively affecting items (1) and (2) above.
The first factor affecting Regions' interest margin is the interest rate
spread. Regions' average interest rate spread was 4.35% in 1992, 4.25% in 1993
and 3.70% in 1994. The interest rate spread contracted in 1994 because the
average yield on earning assets declined 13 basis points while the average rate
paid on interest-bearing liabilities increased 42 basis points. As mentioned
above, the 1994 interest rate spread was adversely affected by acquisitions. In
addition, during 1994 Regions added substantially to the ARM loan portfolio to
help position the balance sheet for the possibility of rising market interest
rates. To attract borrowers, ARMs typically carry relatively low initial rates
for the first year. Thereafter, the rates adjust annually based on a market
rate index plus a spread. Consequently, ARMs typically reduce the average
earning asset yield and reduce the interest rate spread in their first year.
During 1994, Regions also issued an additional $125 million in subordinated
notes (see Note I to the consolidated financial statements). These notes have
higher rates and longer maturities than Regions' primary funding sources. As a
result, these notes have the effect of increasing the average rate paid on
interest-bearing liabilities and reducing the interest rate spread.
The mix of earning assets can also affect the interest rate spread. During
1994, loans, which are typically Regions' highest yielding earning asset,
contracted as a percentage of earning assets -- increasing the effects of
contracting spreads. Average loans as a percentage of earning assets were 74%
in 1993 and 73% in 1994.
The second factor affecting the interest margin is the percentage of
earning assets funded by interest-bearing liabilities. Funding for Regions'
earning assets comes from interest-bearing liabilities, non-interest-bearing
liabilities and stockholders' equity. The net spread on earning assets funded
by non-interest-bearing liabilities and stockholders' equity is higher than the
net spread on earning assets funded by interest-bearing liabilities. The
percentage of earning assets funded by interest-bearing liabilities increased
from 84% in both 1992 and 1993 to 86% in 1994. The changes in the percentage of
earning assets funded by interest-bearing liabilities had no effect on net
interest income in 1993, but had a negative effect on net interest income in
1994. The trend has been for a greater percentage of new funding for earning
assets to come from interest-bearing sources. Management expects this trend to
continue. As mentioned above, during 1994, the percentage of earning assets
funded by interest-bearing liabilities increased, at least partially, as a
result of acquisitions that occurred in late 1993.
The third factor affecting the interest margin is changes in market
interest rates. Market interest rates, both the level of rates and the slope of
the yield curve (the spread between short-term rates and longer-term rates),
strongly influence the pricing on most categories of Regions' earning assets
and interest-bearing liabilities. The level of market interest rates generally
declined from 1990 through 1993, reaching historically low levels in late 1993.
As a result of declining market rates during this period, the yield on earning
assets and the rate on interest-bearing
[Figure 6]
NET INTEREST INCOME IN THOUSANDS
(TAXABLE EQUIVALENT)
(Graph)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Interest Income 533,174 569,117 547,007 566,162 796,419
Interest Expense 297,613 292,017 224,068 213,614 350,139
------- ------- ------- ------- -------
Net Interest Income 235,561 277,100 322,939 352,548 446,280
======= ======= ======= ======= =======
</TABLE>
[Figure 7]
INTEREST RATE SPREAD
(TAXABLE EQUIVALENT)
(Graph)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Average Interest Rate Earned 10.6 9.8 8.4 7.7 7.6
Average Interest Rate Paid 7.0 5.9 4.1 3.5 3.9
---- --- --- --- ---
Interest Rate Spread 3.6 3.9 4.3 4.2 3.7
==== === === === ===
</TABLE>
39
<PAGE> 22
liabilities declined. In February 1994, the Federal Reserve began increasing
short-term interest rates and in a series of six steps occurring over less than
twelve months, increased the Federal Funds rate 250 basis points from 3.00% to
5.50%. Long-term interest rates also increased during 1994, but much less than
did short-term rates. The combination of movements in short-term and long-term
interest rates caused the slope of the yield curve to flatten by over 147 basis
points from January 31, 1994, to December 31, 1994. As market rates moved
higher during 1994, Regions' earning asset yields and interest-bearing
liability rates reacted by also moving higher. However, the flattening yield
curve tended to cause interest-bearing liability rates to increase slightly
faster than earning asset yields. Between the first quarter of 1994 and the
fourth quarter of 1994, Regions' earning asset yields increased 45 basis points
while interest-bearing liability rates increased 67 basis points.
The pricing of interest-bearing transaction accounts, money market savings
accounts and regular savings accounts proved to be relatively insensitive to
the latest changes in market interest rates. Over the last three years, as
market rates dropped to historically low levels, the rates paid on these
products were reduced. However, as market rates increased during 1994, the
rates paid on these products remained relatively stable. The relative stability
of the rates paid on these products during 1994 provided a low cost funding
source for earning assets.
The last factor, changes in the statutory federal income tax rate,
affected the interest margin in 1993. The marginal federal tax rate was
constant at 34% from 1988 through 1992, but was increased to 35% in 1993.
Comparisons of the interest margin to years prior to 1993 are affected by the
change in this rate. The higher tax rate in 1993 increased the taxable
equivalent value of interest income on tax-free loans and securities and thus
increased the interest margin by 1 basis point in 1993. This increase is
"artificial" since it reflects increased tax expense resulting from the tax
rate change.
INTEREST RATE SENSITIVITY
The primary objective of Asset/Liability Management at Regions is to
achieve reasonable stability in net interest income throughout interest rate
cycles. This is achieved by maintaining the proper balance of rate sensitive
earning assets, rate sensitive liabilities and off-balance sheet interest rate
hedges. The relationship of rate sensitive earning assets to rate sensitive
liabilities, adjusted for the effect of off-balance sheet hedges, (interest
rate sensitivity) is the principal factor in determining the effect that
fluctuating interest rates will have on future net interest income. Rate
sensitive earning assets and interest-bearing liabilities are those that can be
repriced to current market rates within a relatively short time period.
Management monitors the rate sensitivity of earning assets and interest-bearing
liabilities over periods of up to ten years, but places particular emphasis on
the first year. At December 31, 1994, approximately 45% of earning assets and
70% of the funding for these earning assets were scheduled to be repriced to
current market rates at least once during 1995.
The accompanying table shows Regions' rate sensitive position at December
31, 1994, as measured by gap analysis (the difference between the earning asset
and interest-bearing liability amounts scheduled to be repriced to current
market rates in subsequent periods). Over the next twelve months approximately
$2.9 billion more interest-bearing liabilities than earning assets can be
repriced to current market rates at least once. As a result, the one-year
cumulative gap (the ratio of rate sensitive assets to rate sensitive
liabilities) at December 31, 1994, was 0.65, indicating a "liability sensitive"
position. However, management does not believe that this ratio adequately
measures Regions' rate sensitivity.
Historically, Regions has not experienced the level of net interest income
volatility indicated by the cumulative one-year gap ratio. The primary reason
for the lack of volatility is that Regions has a relatively large base of
deposit products that do not reprice on a contractual basis. These deposit
products include regular savings, interest-bearing transaction accounts and a
portion of money market savings accounts. Balances for these accounts are
reported in the one to three month repricing category and comprise 28% of
interest-bearing deposits. The rates paid on these accounts are
40
<PAGE> 23
typically sensitive to changes in market interest rates only under certain
conditions, such as those prevailing in the last two quarters of 1991 and
continuing through 1993, when market interest rates fell to historically low
levels. As market interest rates moved up 250 basis points during 1994,
competitive pressures allowed the rates paid on these accounts to remain
stable.
Another reason for the lack of volatility in net interest income is that
Regions' loan and security portfolios contain fixed-rate mortgage-related
products, including whole loans, mortgage-backed securities and collateralized
mortgage obligations having amortization and cash flow characteristics that
vary with the level of market interest rates. These earning assets are
generally reported in the non-sensitive category. In fact, a significant
portion of these balances may amortize or mature within one year or less,
because these instruments' actual cash flows will vary from their contractual
maturities, due principally to refinancing activity. If fixed-rate
mortgage-related products, regular savings, a portion of money market savings
and a portion of interest-bearing transaction accounts were redistributed based
on expected cash flows and probable repricing intervals, Regions' one-year
cumulative gap ratio would be 0.93 -- indicating a significantly less
"liability sensitive" position than that reported above.
Interest rate swap agreements entered into by Secor prior to its
acquisition by Regions, totaled $27.9 million in notional principal amount at
December 31, 1994 (see Note M to the consolidated financial statements). Secor
used these swap agreements to control its interest sensitivity position. As
part of the purchase accounting treatment of the Secor acquisition, these swap
agreements were "marked-to-market" and a liability was recorded on the balance
sheet. This liability is being amortized over the remaining term of the swap
agreements to offset net interest expense generated by these swaps. These swap
agreements have no material effect on Regions' rate sensitivity.
In addition to gap analysis, Regions also uses simulation analysis to
monitor and manage interest rate sensitivity. Simulation analysis is the
primary method of estimating future earnings streams under varying interest
rate conditions. Simulation analysis is used to test the sensitivity of
Regions' net interest income to both the level of interest rates and the slope
of the yield curve. Simulation analysis uses a more detailed version of the
information shown in the table on page 42 that includes adjustments for the
expected timing and magnitude of asset and liability cash flows, as well as the
expected timing and magnitude of repricings of deposits that do not reprice on
a contractual basis. In addition, simulation analysis includes adjustments for
the lag between movements in market interest rates and the movement of
administered rates on prime rate loans, interest-bearing transaction accounts,
regular savings and money market savings accounts. These adjustments are made
to reflect more accurately possible future cash flows, repricing behavior and
ultimately net interest income. Simulation analysis also indicates that Regions
is slightly "liability sensitive."
41
<PAGE> 24
INTEREST RATE SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
December 31, 1994
- --------------------------------------------------------------------------------------------------------------------
(dollar amounts in millions) Rate Sensitive Period
- --------------------------------------------------------------------------------------------------------------------
1-3 4-6 7-12 Over 1 year or
Months Months Months Total Non-Sensitive Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans, net of unearned income $ 3,427.8 $ 428.5 $ 674.2 $ 4,530.5 $ 4,487.3 $ 9,017.8
- --------------------------------------------------------------------------------------------------------------------
Investment securities 198.5 64.0 173.7 436.2 1,512.5 1,948.7
- --------------------------------------------------------------------------------------------------------------------
Securities available for sale 125.5 49.8 43.4 218.7 441.8 660.5
- --------------------------------------------------------------------------------------------------------------------
Interest bearing deposits
in other banks .6 -- -- .6 -- .6
- --------------------------------------------------------------------------------------------------------------------
Federal funds sold and securities
purchased under agreements to resell 45.1 -- -- 45.1 -- 45.1
- --------------------------------------------------------------------------------------------------------------------
Mortgage loans held for sale 104.5 -- -- 104.5 -- 104.5
- --------------------------------------------------------------------------------------------------------------------
Trading account assets 24.9 -- -- 24.9 -- 24.9
- --------------------------------------------------------------------------------------------------------------------
Total earning assets $ 3,926.9 $ 542.3 $ 891.3 $ 5,360.5 $ 6,441.6 $11,802.1
- --------------------------------------------------------------------------------------------------------------------
Percent of total earning assets 33.3% 4.6% 7.5% 45.4% 54.6% 100.0%
- --------------------------------------------------------------------------------------------------------------------
FUNDING SOURCES:
Non-interest-bearing deposits -- -- -- -- $ 1,450.3 $ 1,450.3
- --------------------------------------------------------------------------------------------------------------------
Savings deposits $ 822.9 -- -- $ 822.9 -- 822.9
- --------------------------------------------------------------------------------------------------------------------
Other time deposits 4,623.7 $ 680.1 $ 1,027.9 6,331.7 1,488.2 7,819.9
- --------------------------------------------------------------------------------------------------------------------
Short-term borrowings 1,001.2 10.3 -- 1,011.5 -- 1,011.5
- --------------------------------------------------------------------------------------------------------------------
Long-term borrowings 38.8 6.0 17.3 62.1 457.1 519.2
- --------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 6,486.6 696.4 1,045.2 8,228.2 1,945.3 10,173.5
- --------------------------------------------------------------------------------------------------------------------
Stockholders' equity -- -- -- -- 178.3 178.3
- --------------------------------------------------------------------------------------------------------------------
Total funding sources $ 6,486.6 $ 696.4 $ 1,045.2 $ 8,228.2 $ 3,573.9 $11,802.1
- --------------------------------------------------------------------------------------------------------------------
Percent of total funding sources 55.0% 5.9% 8.8% 69.7% 30.3% 100.0%
- --------------------------------------------------------------------------------------------------------------------
Interest sensitive gap $(2,559.7) $ (154.1) $ (153.9) $(2,867.7) $ 2,867.7 --
- --------------------------------------------------------------------------------------------------------------------
Cumulative interest sensitive gap $(2,559.7) $(2,713.8) $(2,867.7) $(2,867.7) -- --
- --------------------------------------------------------------------------------------------------------------------
As percent of total earning assets (21.7)% (23.0)% (24.3)% (24.3)% -- --
- --------------------------------------------------------------------------------------------------------------------
Ratio of earning assets
to funding sources 0.61 0.78 0.85 0.65 1.80 1.00
- --------------------------------------------------------------------------------------------------------------------
Cumulative ratio 0.61 0.62 0.65 0.65 1.00 1.00
====================================================================================================================
</TABLE>
42
<PAGE> 25
ANALYSIS OF CHANGES IN NET INTEREST INCOME
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- -----------------------------------------------------------------------------------------------------------------
1994 over 1993 1993 over 1992
- -----------------------------------------------------------------------------------------------------------------
Volume Yield/Rate TOTAL Volume Yield/Rate Total
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN:
Interest income on:
Loans $176,395 $ 5,081 $181,476 $71,862 $(37,874) $ 33,988
- -----------------------------------------------------------------------------------------------------------------
Federal funds sold 279 271 550 (4,147) (1,005) (5,152)
- -----------------------------------------------------------------------------------------------------------------
Taxable securities 55,869 (12,465) 43,404 (1,355) (11,459) (12,814)
- -----------------------------------------------------------------------------------------------------------------
Non-taxable securities 2,396 (475) 1,921 1,736 (682) 1,054
- -----------------------------------------------------------------------------------------------------------------
Other earning assets 2,253 508 2,761 4,359 (2,515) 1,844
- -----------------------------------------------------------------------------------------------------------------
Total 237,192 (7,080) 230,112 72,455 (53,535) 18,920
- -----------------------------------------------------------------------------------------------------------------
Interest expense on:
Savings deposits 5,612 (606) 5,006 3,935 (2,664) 1,271
- -----------------------------------------------------------------------------------------------------------------
Other interest-bearing
deposits 72,770 19,708 92,478 15,748 (33,998) (18,250)
- -----------------------------------------------------------------------------------------------------------------
Borrowed funds 38,445 596 39,041 5,830 695 6,525
- -----------------------------------------------------------------------------------------------------------------
Total 116,827 19,698 136,525 25,513 (35,967) (10,454)
- -----------------------------------------------------------------------------------------------------------------
INCREASE IN NET
INTEREST INCOME $120,365 $(26,778) $ 93,587 $46,942 $(17,568) $ 29,374
=================================================================================================================
</TABLE>
Note: The change in interest due to both rate and volume has been allocated to
change due to volume and change due to rate in proportion to the absolute
dollar amounts of the change in each.
PROVISION FOR LOAN LOSSES
This expense is used to fund the allowance for loan losses. Actual loan
losses, net of recoveries, are charged directly to the allowance. The expense
recorded each year is a reflection of actual losses experienced during the year
and management's judgment as to the adequacy of the allowance to absorb future
losses. For an analysis and discussion of the allowance for loan losses, refer
to the section on page 21 entitled "Loans and Allowance for Loan Losses." In
1992, the provision for loan losses was increased primarily because of growth
in the loan portfolio. Due primarily to improving economic conditions and to
improving loan portfolio quality indicators in 1993 and 1994, the loan loss
provision was reduced to $21.5 million in 1993 and $19.0 million in 1994.
TRUST INCOME
Trust income increased 16% in 1992, 9% in 1993 and 6% in 1994. An
aggressive sales program has been the primary means of increasing trust
revenue. A significant focus has been placed on cross-selling trust services to
existing customers and employee incentive programs have been used to give
consistency to sales efforts. A trust sales staff has been active in assisting
regional trust offices in achieving their sales goals. In addition to increased
sales efforts, trust income is also affected by the securities markets, since
most trust fees are calculated as a percentage of trust asset values. The
strength of the securities markets in 1992 and 1993, had a more favorable
impact on trust income in those years than in 1994.
SERVICE CHARGES ON DEPOSIT ACCOUNTS
Service charge income increased 9% in 1992, 2% in 1993, and 17% in 1994,
due to increases in the number of deposit accounts, primarily because of
acquisitions, and changes in the pricing of certain deposit accounts and
related services.
43
<PAGE> 26
MORTGAGE SERVICING AND ORIGINATION FEES
The source of this income is Regions' mortgage banking affiliate--Real
Estate Financing, Inc. (REF). REF's primary business and source of income is
the origination and servicing of mortgage loans for long-term investors.
Mortgage servicing and origination fees decreased 6% in 1994. Origination
fees decreased 21% due to a decline in the number of loans closed, primarily as
a result of higher mortgage interest rates in 1994. Servicing fees, which
comprised approximately 76% of total mortgage servicing and origination fees in
1994, increased less than 1%. At December 31, 1994, REF's servicing portfolio
totaled $9.2 billion and included approximately 154,000 loans. At December 31,
1993, the servicing portfolio totaled $8.5 billion, compared to $6.3 billion at
December 31, 1992. The reduced rate of growth in servicing fees in 1994,
resulted primarily from (1) a slower rate of growth in the servicing portfolio
than in prior years and (2) an increased amount of mortgages in REF's servicing
portfolio owned by Regions' subsidiary banks; servicing fees from these
mortgages are eliminated in consolidation as intercompany transactions.
Purchased mortgage servicing rights, which are included in other assets
in the consolidated statement of condition, represent amounts paid, less
accumulated amortization and valuation adjustments, for the right to service
mortgage loans that are owned by other investors. An increase in prepayments of
these mortgages, due primarily to lower mortgage interest rates, resulted in
increased valuation adjustments in 1993. With higher mortgage interest rates
during most of 1994, which resulted in prepayments returning to more normal
levels, no valuation adjustments were necessary in 1994. An increase in
prepayments of mortgages in the servicing portfolio in the future could result
in additional valuation adjustments. An analysis of purchased mortgage
servicing rights is summarized as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
- ----------------------------------------------------
<S> <C> <C>
Balance at beginning of year $50,581 $37,847
- ----------------------------------------------------
Additions 7,449 26,783
- ----------------------------------------------------
Amortization (10,424) (7,080)
- ----------------------------------------------------
Valuation adjustments -0- (6,969)
- ----------------------------------------------------
Balance at end of year $47,606 $50,581
====================================================
</TABLE>
The Financial Accounting Standards Board has proposed changes, which have
not yet been finalized, in the accounting rules for mortgage servicing rights
that would eliminate the accounting inconsistencies that exist between mortgage
servicing rights that are derived from loan origination activities and those
acquired through purchase transactions. The proposed standard would require the
recognition of a separate asset for mortgage servicing rights, regardless of
how they are derived. The proposed changes also specify how mortgage servicing
rights should be evaluated for impairment. It is expected that the proposed
changes would be applied prospectively in fiscal years beginning after December
15, 1995, to transactions in which an entity acquires mortgage servicing rights
and to impairment evaluations of all capitalized mortgage servicing rights.
Because of the complexities involved in the proposed changes and because they
have not yet been finalized, management has not determined the effect of the
proposed changes on Regions.
In 1993, mortgage servicing and origination fees increased 19%. Servicing
fees increased 14% due to a 36% increase in the dollar volume of loans serviced
and a 24% increase in the number of loans serviced. These increases resulted
from growth in the servicing portfolio due to the retention of servicing on
most mortgages originated in-house and the purchase of servicing rights to
mortgages originated by other companies. Origination fees increased 35% in
1993, due to increases in the number and dollar amount of loans closed. Lower
interest rates in 1993 resulted in increased volumes for new loan closings and
refinancings.
In 1992, mortgage servicing and origination fees increased 31%. Servicing
fees increased 18% due to a 9% increase in the dollar volume of loans serviced
and a 3% increase in the number of loans serviced. Origination fees increased
92% in 1992 due to increases in the number and dollar amount of loans closed.
44
<PAGE> 27
REF, through its retail and wholesale operations, produced mortgage loans
totaling $1.9 billion, $1.9 billion, and $1.4 billion in 1994, 1993 and 1992,
respectively. REF produces loans from 18 branch offices in Alabama, Georgia,
Florida, Mississippi, Tennessee and South Carolina, and from other
correspondent offices located primarily in the Southeast.
SECURITIES GAINS (LOSSES)
In 1992, net losses from the sale of securities totaled $53,000. These
sales resulted primarily from credit quality concerns of two securities.
In 1993, net gains from the sale of investment securities were $78,000,
resulting from sales of several securities due to credit quality concerns.
The $627,000 net gain in 1994 from the sale of available for sale
securities resulted primarily from dispositions of small blocks of securities
acquired in connection with acquisitions and sales of several securities due to
credit quality concerns.
OTHER INCOME
Refer to Note O to the consolidated financial statements for an analysis
of the significant components of other income. Increases in fee and commission
income over the last three years resulted primarily from revisions in charges
for certain services, an increased emphasis on charging customers for services
performed and an increased customer base due to internal growth and
acquisitions. Increases in safe deposit fees, international department income,
automated teller machine fees and other customer charges accounted for growth
in fees and commissions over the last three years.
Insurance premium and commission income increased in 1994 and 1993, after
declining in 1992. This income originates primarily from the sale of credit
life and accident and health insurance to consumer loan customers. Increased
consumer loan volume resulted in increased income in 1993 and 1994. The decline
in insurance income in 1992 resulted from declining volumes of credit life
insurance written for customers, coupled with lower premium rates in 1992.
Trading account income increased in 1993 and 1992, primarily because of
additional volume, increased fees from the underwriting of public finance
obligations, and larger profits from trading in the portfolio. In 1994, trading
account income decreased 2% because of slightly lower volumes and a small
decline in profits from trading in the portfolio.
In the first quarter of 1994, Regions recognized pre-tax gains of $2.4
million from the sale of servicing rights on approximately $121 million of
mortgage loans.
SALARIES AND EMPLOYEE BENEFITS
Total salaries and benefits increased 16% in 1992, 12% in 1993 and 16% in
1994. These increases resulted from normal merit and promotional adjustments,
increased incentive payments tied to performance, the effects of inflation and
increases in the number of employees due to increased business activity and
acquisitions.
At December 31, 1994, Regions had 6,007 full-time equivalent employees. Of
these, 5,358 are employed by either a banking affiliate, the investment
subsidiary or the parent company. Since the beginning of 1992, the number of
banking, investment subsidiary and parent company employees has increased by
1,446 employees, due primarily to employees added as a result of acquisitions.
Regions' remaining 649 employees at December 31, 1994, are employed by the
mortgage banking
[Figure 8]
DEPOSITS PER EMPLOYEE
(Graph)
($ in millions)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C>
1.398 1.513 1.639 1.865 1.884
</TABLE>
45
<PAGE> 28
affiliate. During 1992 and 1993, due to strong growth in mortgage servicing and
origination activity, the mortgage banking company added 182 employees.
Employment levels were reduced by 86 full-time equivalent employees in 1994 due
to a slowdown in mortgage banking activity.
Salaries, excluding benefits, totaled $92.5 million in 1992, compared to
$101.9 million in 1993 and $124.7 million in 1994. These increases resulted
from increased employment levels, due to acquisitions and increased business
activity, and normal merit and promotional adjustments.
Employee productivity indicators improved significantly over the last
three years. Net income per employee increased 44% and deposits per employee
increased 29%.
Regions provides all employees who meet established employment
requirements with a benefits package which includes pension, profit sharing,
stock purchase, and medical, life and disability insurance plans. The total
cost to Regions for fringe benefits, including payroll taxes, equals
approximately 29% of salaries.
The contribution to the profit sharing plan increased in each of the last
three years and was equal to approximately 10% of after-tax income in 1992 and
1993 and 9% in 1994.
The contribution to the employee stock ownership plan (ESOP) equaled
approximately 1% of after-tax income in each of the last three years. The ESOP
was approved by the Board of Directors in 1991, and the 1992 contribution
commenced operation of the plan.
Commissions and incentives expense increased from $21.8 million in 1992,
to $25.3 million in 1993, and declined to $19.2 million in 1994. Incentives are
being used increasingly to reward employees for selling products and services,
for productivity improvements and for achievement of other corporate goals. In
1991 Regions' stockholders approved a long-term incentive plan that provides
for the granting of stock options, stock appreciation rights, restricted stock
and performance shares. The long-term incentive plan is intended to assist the
Company in attracting, retaining, motivating and rewarding employees who make a
significant contribution to the Company's long-term success, and to encourage
employees to acquire and maintain an equity interest in the Company. Regions
also uses cash incentive plans to reward employees for achievement of various
goals.
Payroll taxes increased 9% in 1992, 12% in 1993 and 20% in 1994. Increases
in the Social Security tax rate and tax base, combined with increased salary
levels and additional employees due to growth and acquisitions, were the
primary reasons for increased payroll taxes.
Group insurance expense increased 11% in 1992, 7% in 1993 and 26% in 1994
primarily because of increases in medical claims due to increased employment
levels associated with increased business activity and acquisitions, and
continued rising health care costs.
In 1993, Regions adopted Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
See Note J to the consolidated financial statements for additional information.
NET OCCUPANCY EXPENSE
Net occupancy expense includes rents,
depreciation and amortization, utilities, maintenance, insurance, taxes and
other expenses of premises occupied by Regions and its affiliates. Regions'
affiliates operate offices throughout Alabama and parts of Louisiana, Florida,
Georgia, Tennessee, Mississippi and South Carolina.
Net occupancy expense increased 5% in 1992, 8% in 1993, and 39% in 1994
due to new and acquired branch offices, rising price levels, and increased
business activity. Increased acquisitions during the last two years were the
primary reason for the larger 1994 increase. Excluding acquisitions, the 1994
increase would have been approximately 10%.
FURNITURE AND EQUIPMENT EXPENSE
Furniture and equipment expense increased 2% in 1992, 5% in 1993, and 22%
in 1994. These increases resulted from acquisitions (particularly during the
last two years) rising price levels, expenses related to equipment for new
branch offices, and increased depreciation and service contract expenses
associated with branch automation equipment and other computer equipment.
Excluding acquisitions, the 1994 increase would have been approximately 4%.
46
<PAGE> 29
FDIC INSURANCE EXPENSE
FDIC insurance expense increased 20% in 1992, 3% in 1993, and 42% in 1994
as a result of increased deposits from acquisitions and growth, combined with
increased premium rates in 1992. The FDIC premium rate increased from $.12 per
$100 of insured deposits in 1990, to $.195 effective January 1, 1991, and then
to $.23 effective July 1, 1991. The FDIC implemented a risk-based deposit
insurance assessment schedule in 1993, which did not result in a significant
increase in Regions' FDIC insurance expense. Recently, the FDIC has proposed
significant reductions in FDIC insurance premium rates that could become
effective in the later half of 1995. If the FDIC rate on Bank Insurance Fund
(BIF) deposits (which represents approximately 74% of Regions' total deposits)
is reduced from $.23 to $.04 as proposed, Regions' annual FDIC insurance
expense would be reduced by approximately $13.4 million.
OTHER EXPENSES
Refer to Note O to the consolidated financial statements for an analysis
of the significant components of other expense. Increases in this category of
expense generally resulted from acquisitions, expanded programs, increased
business activity and rising price levels.
Reductions in write-downs in the carrying values of foreclosed properties
and associated costs of these properties, contributed to the lower non-credit
losses in 1993. Higher miscellaneous losses in 1994, offset the benefit of
lower foreclosed property costs, resulting in higher non-credit losses for
1994.
Expansion of mortgage servicing activities, including additional purchased
servicing rights, and accelerated prepayments of mortgages in the servicing
portfolio in 1993, resulted in increased amortization of mortgage servicing
rights in 1993 and 1992. As prepayment activity slowed in 1994, amortization
expense was reduced accordingly.
Gains or losses on sales of mortgages by the affiliate mortgage company
result from changes in the fair market value of mortgages held in inventory
while awaiting sale to long-term investors. Purchased commitments covering the
sale of mortgages held in inventory are used to mitigate market losses. (See
Note M to the consolidated financial statements for additional information.) In
1994, market losses increased to $2.2 million primarily due to increasing
interest rates during the year.
APPLICABLE INCOME TAX
Regions' provision for income taxes increased 33% in 1994. This increase
was caused primarily by a 31% increase in income before taxes. Also
contributing to the larger provision for income taxes was a decline in Regions'
tax exempt income, as a percentage of total income. For 1992, 1993 and 1994,
the Company's tax exempt income as a percentage of income before income taxes
was 15.5%, 12.9% and 10.3%, respectively. Management expects this trend to
continue. Federal income tax laws that limit banks' deductions of interest
expense related to carrying tax exempt assets acquired after 1982 adversely
affect yields on new tax exempt assets and are the primary reason for the
relative decline in Regions' tax exempt income. Note P to the consolidated
financial statements provides more information about the provision for income
taxes.
Federal income tax laws require corporations to pay a minimum level of
income tax on their economic income. Corporations must pay the greater of their
normal federal income tax or alternative minimum tax. Alternative minimum tax
is 20% of alternative minimum taxable income. Alternative minimum taxable
income is calculated by adding to taxable income certain tax preference items
which are deducted in calculating taxable income. Regions' regular income taxes
exceeded its alternative minimum taxes by $15.4 million, $16.4 million and
$23.5 million in 1992, 1993 and 1994, respectively.
Management's determination of the realization of the deferred tax asset is
based upon management's judgment of various future events and uncertainties,
including the timing and amount of future income earned by certain
subsidiaries and the implementation of various tax planning strategies to
maximize realization of the deferred tax asset. Management believes that the
subsidiaries may be able to generate sufficient operating earnings to realize
the deferred tax benefits. In addition, a portion of the amount of the
deferred tax asset that can be realized in any year is subject to certain
statutory federal income tax limitations. Because of these uncertainties, a
valuation allowance has been established. Management intends to evaluate the
realizability of the deferred tax asset and adjust, if necessary, the valuation
allowance accordingly.
47
<PAGE> 30
EFFECTS OF INFLATION
The majority of assets and liabilities of a financial institution are
monetary in nature; therefore, a financial institution differs greatly from
most commercial and industrial companies which have significant investments in
fixed assets or inventories. However, inflation does have an important impact
on the growth of total assets in the banking industry and the resulting need to
increase equity capital at higher than normal rates in order to maintain an
appropriate equity to assets ratio. Inflation also affects other expenses which
tend to rise during periods of general inflation.
Management believes the most significant impact of inflation on financial
results is the Company's ability to react to changes in interest rates. As
discussed previously, management is attempting to maintain an essentially
balanced position between rate sensitive assets and liabilities in order to
protect net interest income from being affected by wide interest rate
fluctuations.
[Figure 9]
CATEGORIES OF NON-INTEREST EXPENSE
(Graph)
($ in thousands)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Salaries and Employee Benefits 102,407 119,115 138,355 154,594 179,166
Net Occupancy Expense 12,612 13,105 13,759 14,877 20,686
Furniture and Equipment Expense 16,214 17,339 17,684 18,604 22,737
FDIC Insurance 5,647 11,803 14,105 14,584 20,678
Other 58,731 68,978 80,756 84,367 99,800
------- ------- ------- ------- -------
195,611 230,340 264,659 287,026 343,067
======= ======= ======= ======= =======
</TABLE>
48
<PAGE> 31
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS, COMMON STOCK MARKET PRICES AND
DIVIDENDS
<TABLE>
<CAPTION>
(in thousands, except per share amounts) Three Months Ended
- ---------------------------------------------------------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1994
Total interest income $178,794 $187,146 $202,418 $217,421
- ---------------------------------------------------------------------------------------------------------------
Total interest expense 76,469 79,497 90,328 103,845
- ---------------------------------------------------------------------------------------------------------------
Net interest income 102,325 107,649 112,090 113,576
- ---------------------------------------------------------------------------------------------------------------
Provision for loan losses 4,674 4,763 4,367 5,199
- ---------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 97,651 102,886 107,723 108,377
- ---------------------------------------------------------------------------------------------------------------
Total non-interest income, excluding
securities gains (losses) 37,304 36,050 35,198 34,229
- ---------------------------------------------------------------------------------------------------------------
Securities gains (losses) 280 88 76 183
- ---------------------------------------------------------------------------------------------------------------
Total non-interest expense 83,526 84,203 86,647 88,691
- ---------------------------------------------------------------------------------------------------------------
Income taxes 17,036 18,284 18,923 16,851
- ---------------------------------------------------------------------------------------------------------------
Net income $ 34,673 $ 36,537 $ 37,427 $ 37,247
===============================================================================================================
Per share:
Net income $.80 $.84 $.88 $.88
- ---------------------------------------------------------------------------------------------------------------
Cash dividends declared .30 .30 .30 .30
- ---------------------------------------------------------------------------------------------------------------
Market price:
Low 30 1/8 30 1/2 34 5/8 29 3/4
- ---------------------------------------------------------------------------------------------------------------
High 33 1/2 36 1/8 36 3/4 35
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(in thousands, except per share amounts) Three Months Ended
- ---------------------------------------------------------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993
Total interest income $135,719 $137,871 $139,853 $142,224
- ---------------------------------------------------------------------------------------------------------------
Total interest expense 51,875 52,896 53,748 55,095
- ---------------------------------------------------------------------------------------------------------------
Net interest income 83,844 84,975 86,105 87,129
- ---------------------------------------------------------------------------------------------------------------
Provision for loan losses 7,300 6,000 4,101 4,132
- ---------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 76,544 78,975 82,004 82,997
- ---------------------------------------------------------------------------------------------------------------
Total non-interest income, excluding
securities gains (losses) 30,582 32,573 33,810 34,984
- ---------------------------------------------------------------------------------------------------------------
Securities gains (losses) 47 (5) 34 2
- ---------------------------------------------------------------------------------------------------------------
Total non-interest expense 66,091 69,005 74,536 77,394
- ---------------------------------------------------------------------------------------------------------------
Income taxes 13,656 14,601 12,689 12,530
- ---------------------------------------------------------------------------------------------------------------
Net income $ 27,426 $ 27,937 $ 28,623 $ 28,059
===============================================================================================================
Per share:
Net income $.74 $.75 $.77 $.75
- ---------------------------------------------------------------------------------------------------------------
Cash dividends declared .26 .26 .26 .26
- ---------------------------------------------------------------------------------------------------------------
Market price:
Low 31 1/4 30 1/4 31 1/4 29 5/8
- ---------------------------------------------------------------------------------------------------------------
High 38 3/8 38 1/4 35 1/4 35
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The Common Stock of Regions is traded on the NASDAQ National Market System. The
NASDAQ stock quotation symbol is RGBK. Market prices shown represent sales
prices as reported in the NASD Monthly Statistical Report, after adjusting for
a 10% stock dividend paid on April 1, 1993. At December 31, 1994, there were
23,622 shareholders of record of Regions Financial Corporation Common Stock.
49
<PAGE> 32
Intentionally Left Blank
50
<PAGE> 33
FINANCIAL
STATEMENTS
& NOTES
51
<PAGE> 34
Intentionally Left Blank
52
<PAGE> 35
CONSOLIDATED STATEMENT OF CONDITION
REGIONS FINANCIAL CORPORATION & SUBSIDIARIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
ASSETS DECEMBER 31
- -----------------------------------------------------------------------------------------------------------------
(dollar amounts in thousands) 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 551,084 $ 462,032
- -----------------------------------------------------------------------------------------------------------------
Interest-bearing deposits in other banks 630 11,031
- -----------------------------------------------------------------------------------------------------------------
Investment securities (aggregate estimated market value of $1,874,117 in 1994
and $2,457,987 in 1993) 1,948,675 2,368,445
- -----------------------------------------------------------------------------------------------------------------
Securities available for sale 660,513 -0-
- -----------------------------------------------------------------------------------------------------------------
Trading account assets 24,853 20,368
- -----------------------------------------------------------------------------------------------------------------
Mortgage loans held for sale 104,471 285,665
- -----------------------------------------------------------------------------------------------------------------
Federal funds sold and securities purchased under agreements to resell 45,074 106,724
- -----------------------------------------------------------------------------------------------------------------
Loans 9,043,467 6,869,497
- -----------------------------------------------------------------------------------------------------------------
Unearned income (25,665) (36,251)
- -----------------------------------------------------------------------------------------------------------------
Loans, net of unearned income 9,017,802 6,833,246
- -----------------------------------------------------------------------------------------------------------------
Allowance for loan losses (116,988) (100,762)
- -----------------------------------------------------------------------------------------------------------------
Net loans 8,900,814 6,732,484
- -----------------------------------------------------------------------------------------------------------------
Premises and equipment 160,801 140,206
- -----------------------------------------------------------------------------------------------------------------
Interest receivable 88,339 67,488
- -----------------------------------------------------------------------------------------------------------------
Due from customers on acceptances 110,520 75,913
- -----------------------------------------------------------------------------------------------------------------
Other assets 243,546 205,992
- -----------------------------------------------------------------------------------------------------------------
$12,839,320 $10,476,348
=================================================================================================================
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------
Deposits:
Non-interest-bearing $ 1,450,330 $ 1,196,685
- -----------------------------------------------------------------------------------------------------------------
Interest-bearing 8,642,805 7,574,009
- -----------------------------------------------------------------------------------------------------------------
Total deposits 10,093,135 8,770,694
- -----------------------------------------------------------------------------------------------------------------
Borrowed funds:
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase 991,214 184,566
- -----------------------------------------------------------------------------------------------------------------
Commercial paper 18,600 17,201
- -----------------------------------------------------------------------------------------------------------------
Other short-term borrowings 1,727 1,994
- -----------------------------------------------------------------------------------------------------------------
Total short-term borrowings 1,011,541 203,761
- -----------------------------------------------------------------------------------------------------------------
Long-term borrowings 519,238 462,862
- -----------------------------------------------------------------------------------------------------------------
Total borrowed funds 1,530,779 666,623
- -----------------------------------------------------------------------------------------------------------------
Bank acceptances outstanding 110,520 75,913
- -----------------------------------------------------------------------------------------------------------------
Other liabilities 91,016 112,153
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 11,825,450 9,625,383
- -----------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, par value $.625 a share: Authorized 120,000,000 shares
Issued, 46,482,811 shares in 1994 and 42,520,025 shares in 1993 29,052 26,575
- -----------------------------------------------------------------------------------------------------------------
Surplus 430,981 375,983
- -----------------------------------------------------------------------------------------------------------------
Undivided profits 577,901 462,280
- -----------------------------------------------------------------------------------------------------------------
Treasury stock, at cost-1,474,579 shares in 1994 and 1,470,700 shares in 1993 (12,441) (12,320)
- -----------------------------------------------------------------------------------------------------------------
Unearned restricted stock (966) (1,553)
- -----------------------------------------------------------------------------------------------------------------
Unrealized (loss) on securities available for sale, net of taxes (10,657) -0-
- -----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,013,870 850,965
- -----------------------------------------------------------------------------------------------------------------
$12,839,320 $10,476,348
=================================================================================================================
</TABLE>
See notes to consolidated financial statements.
( ) Indicates deduction.
53
<PAGE> 36
CONSOLIDATED STATEMENT OF INCOME
REGIONS FINANCIAL CORPORATION & SUBSIDIARIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
(amounts in thousands, except per share data) Year Ended December 31
- ------------------------------------------------------------------------------------------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $603,092 $421,616 $387,628
- ------------------------------------------------------------------------------------------------------------------
Interest on securities:
Taxable interest income 148,148 104,744 117,558
- ------------------------------------------------------------------------------------------------------------------
Tax-exempt interest income 13,629 11,708 10,654
- ------------------------------------------------------------------------------------------------------------------
Total interest on securities 161,777 116,452 128,212
- ------------------------------------------------------------------------------------------------------------------
Interest on mortgage loans held for sale 18,619 15,767 13,976
- ------------------------------------------------------------------------------------------------------------------
Income on federal funds sold and
securities purchased under agreements to resell 2,041 1,491 6,643
- ------------------------------------------------------------------------------------------------------------------
Interest on time deposits in other banks 75 197 148
- ------------------------------------------------------------------------------------------------------------------
Interest on trading account assets 175 144 140
- ------------------------------------------------------------------------------------------------------------------
Total interest income 785,779 555,667 536,747
- ------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 295,785 198,301 215,280
- ------------------------------------------------------------------------------------------------------------------
Interest on short-term borrowings 21,514 4,554 4,679
- ------------------------------------------------------------------------------------------------------------------
Interest on long-term borrowings 32,840 10,759 4,109
- ------------------------------------------------------------------------------------------------------------------
Total interest expense 350,139 213,614 224,068
- ------------------------------------------------------------------------------------------------------------------
Net interest income 435,640 342,053 312,679
- ------------------------------------------------------------------------------------------------------------------
Provision for loan losses 19,003 21,533 27,072
- ------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 416,637 320,520 285,607
- ------------------------------------------------------------------------------------------------------------------
Non-interest income:
Trust department income 19,386 18,299 16,720
- ------------------------------------------------------------------------------------------------------------------
Service charges on deposit accounts 50,332 42,955 42,117
- ------------------------------------------------------------------------------------------------------------------
Mortgage servicing and origination fees 41,489 44,079 37,048
- ------------------------------------------------------------------------------------------------------------------
Securities gains (losses) 627 78 (53)
- ------------------------------------------------------------------------------------------------------------------
Other 31,574 26,616 23,245
- ------------------------------------------------------------------------------------------------------------------
Total non-interest income 143,408 132,027 119,077
- ------------------------------------------------------------------------------------------------------------------
Non-interest expense:
Salaries and employee benefits 179,166 154,594 138,355
- ------------------------------------------------------------------------------------------------------------------
Net occupancy expense 20,686 14,877 13,759
- ------------------------------------------------------------------------------------------------------------------
Furniture and equipment expense 22,737 18,604 17,684
- ------------------------------------------------------------------------------------------------------------------
FDIC insurance expense 20,678 14,584 14,105
- ------------------------------------------------------------------------------------------------------------------
Other 99,800 84,367 80,756
- ------------------------------------------------------------------------------------------------------------------
Total non-interest expense 343,067 287,026 264,659
- ------------------------------------------------------------------------------------------------------------------
Income before income taxes 216,978 165,521 140,025
- ------------------------------------------------------------------------------------------------------------------
Applicable income taxes 71,094 53,476 44,977
- ------------------------------------------------------------------------------------------------------------------
Net income $145,884 $112,045 $ 95,048
==================================================================================================================
Average number of shares outstanding 42,906 37,205 36,532
- ------------------------------------------------------------------------------------------------------------------
Per share:
Net income $ 3.40 $ 3.01 $ 2.60
- ------------------------------------------------------------------------------------------------------------------
Cash dividends declared 1.20 1.04 .91
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
54
<PAGE> 37
CONSOLIDATED STATEMENT OF CASH FLOWS
REGIONS FINANCIAL CORPORATION & SUBSIDIARIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
(amounts in thousands) Year Ended December 31
- ------------------------------------------------------------------------------------------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $ 145,884 $ 112,045 $ 95,048
- ------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net cash provided by operating activities:
Depreciation and amortization of premises and equipment 17,946 14,547 14,218
- ------------------------------------------------------------------------------------------------------------------
Provision for loan losses 19,003 21,533 27,072
- ------------------------------------------------------------------------------------------------------------------
Net amortization (accretion) of securities 12,819 (479) (268)
- ------------------------------------------------------------------------------------------------------------------
Amortization of loans and other assets 16,625 19,043 13,455
- ------------------------------------------------------------------------------------------------------------------
Amortization of deposits and borrowings (6,719) -0- -0-
- ------------------------------------------------------------------------------------------------------------------
Provision for losses on other real estate (333) 531 3,710
- ------------------------------------------------------------------------------------------------------------------
Deferred income taxes (918) (2,004) (10,387)
- ------------------------------------------------------------------------------------------------------------------
Loss (gain) on sale of premises and equipment 66 (133) 80
- ------------------------------------------------------------------------------------------------------------------
Realized security (gains) losses (627) (78) 53
- ------------------------------------------------------------------------------------------------------------------
(Increase) in trading account assets (4,485) (8,279) (7,517)
- ------------------------------------------------------------------------------------------------------------------
Decrease (increase) in mortgages held for sale 181,194 (78,053) (86,769)
- ------------------------------------------------------------------------------------------------------------------
(Increase) decrease in interest receivable (11,011) (3,040) 3,875
- ------------------------------------------------------------------------------------------------------------------
(Increase) in other assets (1,296) (22,057) (28,981)
- ------------------------------------------------------------------------------------------------------------------
(Decrease) increase in other liabilities (32,302) 228 36,273
- ------------------------------------------------------------------------------------------------------------------
Stock issued to employees under incentive plan 1,191 5,675 4,384
- ------------------------------------------------------------------------------------------------------------------
Other 702 1,750 1,975
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 337,739 61,229 66,221
- ------------------------------------------------------------------------------------------------------------------
Investing activities:
Net (increase) in loans (1,526,748) (512,835) (868,143)
- ------------------------------------------------------------------------------------------------------------------
Proceeds from sale of securities available for sale 156,429 -0- -0-
- ------------------------------------------------------------------------------------------------------------------
Proceeds from sale of investment securities -0- 1,646 769
- ------------------------------------------------------------------------------------------------------------------
Proceeds from maturity of investment securities 810,220 528,624 423,737
- ------------------------------------------------------------------------------------------------------------------
Proceeds from maturity of securities available for sale 57,223 -0- -0-
- ------------------------------------------------------------------------------------------------------------------
Purchase of investment securities (792,903) (534,192) (518,736)
- ------------------------------------------------------------------------------------------------------------------
Purchase of securities available for sale (120,560) -0- -0-
- ------------------------------------------------------------------------------------------------------------------
Net decrease (increase) in interest-bearing deposits in other banks 10,501 (10,689) 30,788
- ------------------------------------------------------------------------------------------------------------------
Proceeds from sale of premises and equipment 3,409 222 764
- ------------------------------------------------------------------------------------------------------------------
Purchase of premises and equipment (19,653) (17,273) (19,246)
- ------------------------------------------------------------------------------------------------------------------
Net (increase) in customers' acceptance liability (34,607) (48,735) (4,349)
- ------------------------------------------------------------------------------------------------------------------
Net cash received in acquisitions 250,926 144,404 -0-
- ------------------------------------------------------------------------------------------------------------------
Net cash (used) by investing activities (1,205,763) (448,828) (954,416)
- ------------------------------------------------------------------------------------------------------------------
Financing activities:
Net increase in deposits 166,163 439,775 784,114
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in short-term borrowings 766,578 (49,398) 119,732
- ------------------------------------------------------------------------------------------------------------------
Proceeds from long-term borrowings 373,496 5,521 121,691
- ------------------------------------------------------------------------------------------------------------------
Payments on long-term borrowings (314,875) (2,907) (3,483)
- ------------------------------------------------------------------------------------------------------------------
Net increase in bank acceptance liability 34,607 48,735 4,349
- ------------------------------------------------------------------------------------------------------------------
Proceeds from stock issue -0- -0- 14,367
- ------------------------------------------------------------------------------------------------------------------
Cash dividends (50,273) (38,792) (33,253)
- ------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (81,081) (16,393) -0-
- ------------------------------------------------------------------------------------------------------------------
Proceeds from exercise of stock options 811 973 1,163
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 895,426 387,514 1,008,680
- ------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 27,402 (85) 120,485
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 568,756 568,841 448,356
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 596,158 $ 568,756 $ 568,841
==================================================================================================================
</TABLE>
See notes to consolidated financial statements.
55
<PAGE> 38
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
REGIONS FINANCIAL CORPORATION & SUBSIDIARIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
(amounts in thousands, except per share data)
- -------------------------------------------------------------------------------------------------------------------
Unrealized
Gain(Loss)
from
Securities Treasury Unearned
Common Undivided Available Stock, Restricted
Stock Surplus Profits for Sale At Cost Stock
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1992 $21,490 $111,150 $454,353 $(12,320) $(1,702)
- -------------------------------------------------------------------------------------------------------------------
Net income for the year 95,048
- -------------------------------------------------------------------------------------------------------------------
Cash dividends declared--
$.91 per share (33,253)
- -------------------------------------------------------------------------------------------------------------------
Stock issued for acquisition 277 14,090
- -------------------------------------------------------------------------------------------------------------------
Stock issued to employees
under incentive plan 151 7,635 (3,402)
- -------------------------------------------------------------------------------------------------------------------
Stock options exercised 95 1,068
- -------------------------------------------------------------------------------------------------------------------
Amortization of unearned
restricted stock 1,975
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 22,013 133,943 516,148 (12,320) (3,129)
- -------------------------------------------------------------------------------------------------------------------
Net income for the year 112,045
- -------------------------------------------------------------------------------------------------------------------
Cash dividends declared--
$1.04 per share (38,792)
- -------------------------------------------------------------------------------------------------------------------
Stock dividend 2,203 126,022 (128,225)
- -------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (16,393)
- -------------------------------------------------------------------------------------------------------------------
Stock issued for acquisitions 2,210 110,447 16,393
- -------------------------------------------------------------------------------------------------------------------
Stock issued to employees
under incentive plan 99 4,648 1,104 (176)
- -------------------------------------------------------------------------------------------------------------------
Stock options exercised 50 923
- -------------------------------------------------------------------------------------------------------------------
Amortization of unearned
restricted stock 1,752
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 26,575 375,983 462,280 (12,320) (1,553)
- -------------------------------------------------------------------------------------------------------------------
Equity from immaterial
acquisitions accounted for
as poolings of interests 1,387 15,441 18,890
- -------------------------------------------------------------------------------------------------------------------
Adjustment for change in
accounting method, net of
income taxes of $3,607 $ 6,189
- -------------------------------------------------------------------------------------------------------------------
Change in unrealized gains
and (losses), net of
income taxes of ($10,028) (16,846)
- -------------------------------------------------------------------------------------------------------------------
Net income for the year 145,884
- -------------------------------------------------------------------------------------------------------------------
Cash dividends declared--
$1.20 per share (50,273)
- -------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (81,081)
- -------------------------------------------------------------------------------------------------------------------
Stock issued for acquisitions 962 38,803 80,960
- -------------------------------------------------------------------------------------------------------------------
Stock issued to employees
under incentive plan 1 70 1,120
- -------------------------------------------------------------------------------------------------------------------
Stock options exercised 127 684
Amortization of unearned
restricted stock 587
- -------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 $29,052 $430,981 $577,901 $(10,657) $(12,441) $ (966)
===================================================================================================================
</TABLE>
See notes to consolidated financial statements.
( ) Indicates deduction.
56
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Regions Financial Corporation
(Regions or Company), conform with generally accepted accounting principles and
with general financial service industry practices. Regions provides a full
range of banking and bank-related services to individual and corporate
customers through its subsidiaries and branch offices located primarily in
Alabama, Florida, Georgia, Louisiana and Tennessee. The Company is subject to
intense competition from other financial institutions and is also subject to
the regulations of certain government agencies and undergoes periodic
examinations by those regulatory authorities.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Regions and
its subsidiaries. Significant intercompany balances and transactions have been
eliminated. In preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the balance sheet dates and revenues and expenses for the
periods shown. Actual results could differ from the estimates and assumptions
used in the consolidated financial statements.
SECURITIES
Effective January 1, 1994, Regions adopted the provisions of Statement of
Financial Accounting Standards No. 115 (SFAS 115), "Accounting for Certain
Investments in Debt and Equity Securities" (see Note C). Accordingly, the
Company's policies for investments in debt and equity securities are as
follows.
Management determines the appropriate classification of debt and equity
securities at the time of purchase and reevaluates such designations as of the
date of each statement of condition.
Debt securities are classified as investment securities when the Company
has the positive intent and ability to hold the securities to maturity.
Investment securities are stated at amortized cost.
Debt securities not classified as investment securities or trading account
assets, and marketable equity securities not classified as trading account
assets, are classified as securities available for sale. Securities available
for sale are stated at estimated fair value, with unrealized gains and losses,
net of taxes, reported as a separate component of stockholders' equity.
The amortized cost of debt securities classified as investment securities
or securities available for sale is adjusted for amortization of premiums and
accretion of discounts to maturity, or in the case of mortgage-backed
securities, over the estimated life of the security, using the effective yield
method. Such amortization or accretion is included in interest on securities.
Realized gains and losses are included in securities gains (losses). The cost
of the securities sold is based on the specific identification method.
Trading account assets, which are held for the purpose of selling at a
profit, consist of debt and marketable equity securities and are carried at
estimated market value. Gains and losses, both realized and unrealized, are
included in other income.
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are carried at the lower of aggregate cost or
estimated market value. Gains and losses on mortgages held for sale are
included in other expense.
LOANS
Interest on loans is accrued based upon the principal amount outstanding
except for interest on discounted installment loans and leases, which is
generally credited to income based upon the sum-of-the-digits method and
generally approximates the interest method of income recognition.
Through provisions charged directly to operating expense, Regions has
established an allowance for loan losses. This allowance is reduced by actual
loan losses and increased by subsequent recoveries, if any.
The allowance for loan losses is maintained at a level believed adequate
by management to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio, past loan loss experience, current economic conditions, collateral
values of properties securing loans, volume, growth, quality and composition of
the loan portfolio and other
57
<PAGE> 40
relevant factors. Unfavorable changes in any of these, or other factors, or the
availability of new information, could require that the allowance for loan
losses be increased in future periods.
PREMISES AND EQUIPMENT
Premises and equipment and leasehold improvements are stated at cost, less
accumulated depreciation and amortization. The provision for depreciation is
computed using the straight-line and declining-balance methods over the
estimated useful lives of the assets. Leasehold improvements are amortized
using the straight-line method over the estimated useful lives of the
improvements (or the terms of the leases if shorter). Estimated useful lives
generally are as follows:
Premises and leasehold improvements 10-40 years
Furniture and equipment 3-12 years
PENSION, PROFIT-SHARING AND EMPLOYEE STOCK OWNERSHIP PLANS
Regions has pension, profit-sharing and employee stock ownership plans
covering substantially all employees. Annual contributions to the
profit-sharing and employee stock ownership plans are determined at the
discretion of the Board of Directors. Pension expense is computed using the
projected unit credit (service prorate) actuarial cost method and the plan is
funded using the aggregate actuarial cost method. Annual contributions to all
the plans do not exceed the maximum amounts allowable for federal income tax
purposes.
INCOME TAXES
Regions and its subsidiaries file a consolidated federal income tax
return. The consolidated financial statements (including the provision for
income taxes) are prepared on the accrual basis. Temporary differences occur
when income and expenses are recognized in different periods for financial
reporting purposes and for purposes of computing income taxes currently
payable. Deferred taxes are provided as a result of such temporary differences.
PER SHARE AMOUNTS
Earnings per share computations are based upon the weighted average number
of shares outstanding during the periods. The dilutive effect of shares
issuable under stock options and stock performance awards granted by the
Company is immaterial.
TREASURY STOCK
The purchase of the Company's common stock is recorded at cost. At the
date of subsequent reissue, the treasury stock account is reduced by the cost
of such stock.
INSURANCE SUBSIDIARIES
Insurance premium and commission income and acquisition costs are
recognized over the terms of the related policies. Losses are recognized as
incurred.
STATEMENT OF CASH FLOWS
Cash equivalents include cash and due from banks and federal funds sold
and securities purchased under agreements to resell. Regions paid $337,970,000
in 1994, $207,301,000 in 1993, and $228,797,000 in 1992 for interest on
deposits and borrowings. Income tax payments totaled $72,018,000 for 1994,
$61,170,000 for 1993, and $52,126,000 for 1992. Loans transferred to other real
estate totaled $5,336,000 in 1994, $6,179,000 in 1993, and $6,860,000 in 1992.
NOTE B.
RESTRICTIONS ON CASH AND DUE FROM BANKS
Regions' subsidiary banks are required to maintain reserve balances with
the Federal Reserve Bank. The average amount of the reserve balances maintained
for the year ended December 31, 1994, was approximately $111,833,000.
NOTE C.
SECURITIES
In accordance with SFAS 115, prior period financial statements have not
been restated to reflect the change in accounting principle. The cumulative
effect as of January 1, 1994, of adopting SFAS 115 increased stockholders'
equity by $6,189,000 (net of $3,607,000 in deferred income taxes) to reflect
the net unrealized holding gains on securities classified as available for
sale, previously carried at amortized cost.
58
<PAGE> 41
The amortized cost and estimated fair value of investment securities and
securities available for sale at December 31, 1994, are as follows:
<TABLE>
<CAPTION>
(in thousands) December 31, 1994
- -----------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES:
U.S. Treasury and Federal agency securities $ 903,390 $ 8,466 $(28,075) $ 883,781
- -----------------------------------------------------------------------------------------------------------------
Obligations of states and political subdivisions 253,106 3,246 (7,235) 249,117
- -----------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 791,443 501 (51,471) 740,473
- -----------------------------------------------------------------------------------------------------------------
Other securities 736 16 (6) 746
- -----------------------------------------------------------------------------------------------------------------
TOTAL $1,948,675 $12,229 $(86,787) $1,874,117
=================================================================================================================
SECURITIES AVAILABLE fOR SALE:
U.S. Treasury and Federal agency securities $ 415,347 $ 2,910 $ (4,583) $ 413,674
- -----------------------------------------------------------------------------------------------------------------
Obligations of states and political subdivisions 2,445 15 (40) 2,420
- -----------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 221,337 56 (15,436) 205,957
- -----------------------------------------------------------------------------------------------------------------
Other securities 10 -0- -0- 10
- -----------------------------------------------------------------------------------------------------------------
Equity securities 38,452 -0- -0- 38,452
- -----------------------------------------------------------------------------------------------------------------
TOTAL $ 677,591 $ 2,981 $(20,059) $ 660,513
=================================================================================================================
</TABLE>
The cost and estimated fair value of investment securities and securities
available for sale at December 31, 1994, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
(in thousands) December 31, 1994
- ----------------------------------------------------
Estimated
Fair
Cost Value
- ----------------------------------------------------
<S> <C> <C>
INVESTMENT SECURITIES:
Due in one year or less $ 182,169 $ 182,461
- ----------------------------------------------------
Due after one year through
five years 657,746 644,407
- ----------------------------------------------------
Due after five years through
ten years 249,326 242,904
- ----------------------------------------------------
Due after ten years 67,991 63,872
- ----------------------------------------------------
Mortgage-backed
securities 791,443 740,473
- ----------------------------------------------------
TOTAL $1,948,675 $1,874,117
====================================================
<CAPTION>
(in thousands) December 31, 1994
- ----------------------------------------------------
Estimated
Fair
Cost Value
- ----------------------------------------------------
<S> <C> <C>
SECURITIES AVAILABLE FOR SALE:
Due in one year or less $ 117,338 $ 117,907
- ----------------------------------------------------
Due after one year through
five years 290,485 287,738
- ----------------------------------------------------
Due after five years through
ten years 9,978 10,459
- ----------------------------------------------------
Due after ten years -0- -0-
- ----------------------------------------------------
Mortgage-backed
securities 221,338 205,957
- ----------------------------------------------------
Equity securities 38,452 38,452
- ----------------------------------------------------
TOTAL $ 677,591 $ 660,513
====================================================
</TABLE>
Proceeds from sales of securities available for sale in 1994, were
$156,429,000. Gross realized gains and losses were $2,711,000 and $2,084,000,
respectively. Proceeds from sales of investment securities in 1993 and 1992,
were $1,646,000 and $769,000, respectively.
59
<PAGE> 42
The cost and estimated fair value of investment securities at December 31,
1993, are as follows:
<TABLE>
<CAPTION>
(in thousands) December 31, 1993
- -----------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and Federal agency securities $ 963,398 $71,939 $ (123) $1,035,214
- -----------------------------------------------------------------------------------------------------------------
Obligations of states and political subdivisions 223,673 15,000 (393) 238,280
- -----------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 1,097,935 4,712 (1,717) 1,100,930
- -----------------------------------------------------------------------------------------------------------------
Other securities 32,883 117 -0- 33,000
- -----------------------------------------------------------------------------------------------------------------
Equity securities 50,556 7 -0- 50,563
- -----------------------------------------------------------------------------------------------------------------
Total $2,368,445 $91,775 $(2,233) $2,457,987
=================================================================================================================
</TABLE>
Investment securities with carrying values of $1,311,035,000 and
$1,171,676,000 at December 31, 1994, and 1993, respectively, were pledged to
secure public funds, trust deposits and certain borrowing arrangements.
NOTE D.
LOANS
The loan portfolio at December 31, 1994, and 1993, consisted of the
following:
<TABLE>
<CAPTION>
(in thousands) December 31
- -------------------------------------------------------
1994 1993
- -------------------------------------------------------
<S> <C> <C>
Commercial $1,871,311 $1,497,502
- -------------------------------------------------------
Real estate-construction 347,431 262,918
- -------------------------------------------------------
Real estate-mortgage 4,546,178 3,315,843
- -------------------------------------------------------
Consumer 2,278,547 1,793,234
- -------------------------------------------------------
9,043,467 6,869,497
- -------------------------------------------------------
Unearned income (25,665) (36,251)
- -------------------------------------------------------
TOTAL $9,017,802 $6,833,246
======================================================
</TABLE>
Directors and executive officers of Regions and its principal
subsidiaries, including the directors' and officers' families and affiliated
companies, are loan and deposit customers and have other transactions with
Regions in the ordinary course of business. Total loans to these persons
(excluding loans which in the aggregate do not exceed $60,000 to any such
person) at December 31, 1994, and 1993, were approximately $79,000,000 and
$77,000,000, respectively. During 1994, $167,000,000 of new loans were made,
repayments totaled $164,000,000 and reductions for changes in the composition
of related parties totaled $1,000,000. These loans were made in the ordinary
course of business and on substantially the same terms, including interest
rates and collateral, as those prevailing at the same time for comparable
transactions with other persons and involve no unusual risk of collectibility.
Loans sold with recourse totaled $36.2 million and $19.6 million at
December 31, 1994, and 1993, respectively.
The loan portfolio is diversified geographically, primarily within
Alabama, northwest Florida, middle Tennessee, and Louisiana.
The Company will adopt the provisions of Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan" (SFAS
114) effective January 1, 1995. SFAS 114 requires that, beginning in fiscal
1995, certain impaired loans be measured at the present value of expected
future cash flows discounted at the loan's effective interest rate or at the
loan's observable market price, or the fair value of the collateral if the loan
is collateral dependent. Management believes that the adoption of SFAS 114 will
not have a material impact on the Company's financial statements.
60
<PAGE> 43
NOTE E.
ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses follows:
<TABLE>
<CAPTION>
(in thousands)
- --------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------
<S> <C> <C> <C>
Balance at
beginning of year $100,762 $ 73,619 $ 54,769
- --------------------------------------------------------
Allowance of purchased
institutions at
acquisition date 9,955 15,999 4,362
- --------------------------------------------------------
Provision charged to
operating expense 19,003 21,533 27,072
- --------------------------------------------------------
Loan losses:
Charge-offs (23,100) (20,068) (19,608)
- --------------------------------------------------------
Recoveries 10,368 9,679 7,024
- --------------------------------------------------------
Net loan losses (12,732) (10,389) (12,584)
- --------------------------------------------------------
BALANCE AT END
OF YEAR $116,988 $100,762 $ 73,619
========================================================
</TABLE>
NOTE F.
PREMISES AND EQUIPMENT
A summary of premises and equipment follows:
<TABLE>
<CAPTION>
(in thousands) December 31
- -------------------------------------------------------
1994 1993
- -------------------------------------------------------
<S> <C> <C>
Land $ 33,960 $ 29,393
- -------------------------------------------------------
Premises 152,510 139,418
- -------------------------------------------------------
Furniture and equipment 133,591 115,612
- -------------------------------------------------------
Leasehold improvements 27,172 23,590
- -------------------------------------------------------
347,233 308,013
- -------------------------------------------------------
Allowances for depreciation
and amortization (186,432) (167,807)
- -------------------------------------------------------
TOTAL $160,801 $140,206
=======================================================
</TABLE>
Net occupancy expense is summarized as follows:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- -------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------
<S> <C> <C> <C>
Gross occupancy
expense $23,804 $18,466 $16,591
- -------------------------------------------------------
Less rental income 3,118 3,589 2,832
- -------------------------------------------------------
Net occupancy
expense $20,686 $14,877 $13,759
- -------------------------------------------------------
</TABLE>
NOTE G.
OTHER REAL ESTATE
Other real estate acquired in satisfaction of indebtedness ("foreclosure")
is carried in other assets at the lower of the recorded investment in the loan
or the estimated net realizable value of the collateral. Other real estate
totaled $6,267,000 at December 31, 1994, and $13,720,000 at December 31, 1993.
Gain or loss on the sale of other real estate is included in other expense.
NOTE H.
DEPOSITS
The following schedule presents the detail of interest-bearing deposits:
<TABLE>
<CAPTION>
(in thousands) December 31
- ------------------------------------------------------
1994 1993
- ------------------------------------------------------
<S> <C> <C>
Interest-bearing
transaction accounts $1,430,592 $1,326,469
- ------------------------------------------------------
Savings accounts 822,946 751,862
- ------------------------------------------------------
Money market savings
accounts 1,375,209 1,426,048
- ------------------------------------------------------
Certificates of deposit
($100,000 or more) 1,175,484 574,492
- ------------------------------------------------------
Time deposits
($100,000 or more) 378,201 429,503
- ------------------------------------------------------
Other interest-bearing
deposits 3,460,373 3,065,635
- ------------------------------------------------------
TOTAL $8,642,805 $7,574,009
======================================================
</TABLE>
The following schedule details interest expense on deposits:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- ------------------------------------------------------
1994 1993 1992
- ------------------------------------------------------
<S> <C> <C>
Interest-bearing
transaction
accounts $ 37,628 $ 28,336 $ 28,862
- ------------------------------------------------------
Savings accounts 22,867 17,861 16,590
- ------------------------------------------------------
Money market
savings accounts 41,633 32,673 32,296
- ------------------------------------------------------
Certificates of deposit
($100,000 or more) 38,652 19,011 21,898
- ------------------------------------------------------
Other interest-
bearing deposits 155,005 100,420 115,634
- ------------------------------------------------------
TOTAL $295,785 $198,301 $215,280
======================================================
</TABLE>
61
<PAGE> 44
NOTE I.
BORROWED FUNDS
Following is a summary of short-term borrowings:
<TABLE>
<CAPTION>
(in thousands) December 31
- ----------------------------------------------------
1994 1993 1992
- ----------------------------------------------------
<S> <C> <C> <C>
Federal funds
purchased $ 866,720 $125,615 $156,015
- ----------------------------------------------------
Securities sold
under agreements
to repurchase 124,494 58,951 75,945
- ----------------------------------------------------
Commercial paper 18,600 17,201 19,289
- ----------------------------------------------------
Treasury tax and
loan note 400 -0- -0-
- ----------------------------------------------------
Short sale liability 1,327 1,994 1,910
- ----------------------------------------------------
TOTAL $1,011,541 $203,761 $253,159
====================================================
</TABLE>
<TABLE>
<CAPTION>
(in thousands) December 31
- -----------------------------------------------------
1994 1993 1992
- -----------------------------------------------------
<S> <C> <C> <C>
Maximum amount outstanding at any month-end:
Federal funds
purchased and
securities sold
under agreements
to repurchase $ 991,214 $232,682 $271,332
- -----------------------------------------------------
Aggregate short-
term borrowings 1,011,541 252,577 294,266
- -----------------------------------------------------
Average amount
outstanding (based
on average of daily
balances) 458,737 145,778 123,622
- -----------------------------------------------------
Weighted average
interest rate
at year end 6.0% 3.1% 3.1%
- -----------------------------------------------------
Weighted average interest
rate on amounts
outstanding during
the year (based on
average of daily balances) 4.7% 3.1% 3.7%
=====================================================
</TABLE>
Federal funds purchased had weighted average maturities of three, two and
four days, respectively, at December 31, 1994, 1993 and 1992. Weighted average
rates on these dates were 6.1%, 3.1% and 3.0%, respectively.
Securities sold under agreements to repurchase had weighted average
maturities of four, nine and thirty-five days, respectively, at December 31,
1994, 1993 and 1992. Weighted average rates on these dates were 5.2%, 2.8% and
3.2%, respectively.
Commercial paper maturities ranged from 4 to 167 days at December 31,
1994, from 4 to 167 days at December 31, 1993 and from 4 to 183 days at
December 31, 1992. Weighted average maturities were 101, 101 and 96 days,
respectively, at December 31, 1994, 1993 and 1992. The weighted average
interest rates on these dates were 5.7%, 3.5% and 3.6%, respectively.
The short-sale liability represents Regions' trading obligation to deliver
certain government securities at a predetermined date and price. These
securities had weighted average interest rates of 2.5%, 4.0% and 3.6%,
respectively, at December 31, 1994, 1993 and 1992.
Regions has an unsecured short-term credit agreement with an unaffiliated
bank that provides for maximum borrowings of $25 million. No borrowings were
outstanding under this agreement at December 31, 1994 or 1993. No compensating
balances or commitment fees are required by this agreement.
Long-term borrowings consist of the following:
<TABLE>
<CAPTION>
(in thousands) December 31
- ----------------------------------------------------
1994 1993
- ----------------------------------------------------
<S> <C> <C>
7.80% subordinated notes $ 75,000 $ 75,000
- ----------------------------------------------------
7.65% subordinated notes 25,000 -0-
- ----------------------------------------------------
7.75% subordinated notes 100,000 -0-
- ----------------------------------------------------
8.75% debentures 5,200 5,600
- ----------------------------------------------------
Federal Home Loan
Bank notes 285,031 346,457
- ----------------------------------------------------
Mortgage notes payable 4,500 5,543
- ----------------------------------------------------
Medium term notes 11,344 27,031
- ----------------------------------------------------
Other notes payable 13,163 3,231
- ----------------------------------------------------
TOTAL $519,238 $462,862
====================================================
</TABLE>
In July 1994, Regions issued $25 million of 7.65% subordinated notes, due
August 15, 2001, and in September 1994, Regions issued $100 million of 7.75%
subordinated notes, due September 15, 2024. The $100 million of 7.75%
subordinated notes may be redeemed in whole or in part at the option of the
holders thereof on September 15, 2004, at 100% of the principal
62
<PAGE> 45
amount to be redeemed, together with accrued interest. In December 1992,
Regions issued $75 million of 7.80% subordinated notes, due December 1, 2002.
All issuances of these notes are subordinated and subject in right of payment
of principal and interest to the prior payment in full of all senior
indebtedness of the Company, generally defined as all indebtedness and other
obligations of the Company to its creditors, except subordinated indebtedness.
Payment of the principal of the notes may be accelerated only in the case of
certain events involving bankruptcy, insolvency proceedings or reorganization
of the Company. The notes qualify as "Tier II capital" under Federal Reserve
guidelines.
The 8.75% debentures are due as follows (principal amount only): $400,000
in each of the years 1995-1997 and $4,000,000 in 1998.
Federal Home Loan Bank notes represent borrowings from Federal Home Loan
Banks. Interest on these borrowings is at fixed rates ranging from 4.7% to 9.5%
with maturities of one to fifteen years. These borrowings are secured by
Federal Home Loan Bank stock (carried at $38.5 million) and by first mortgage
loans on one-to-four family dwellings held by certain bank subsidiaries
(approximately $3,356.8 million at December 31, 1994). The maximum amount that
could be borrowed from Federal Home Loan Banks under the current borrowing
agreements and without further investment in Federal Home Loan Bank stock is
approximately $342 million.
The mortgage notes payable at December 31, 1994, had a weighted average
interest rate of 8.7% and were collateralized by premises and equipment carried
at $8,325,000.
The medium term notes were issued by Secor Bank, FSB, (Secor) prior to
acquisition by Regions. The notes are scheduled to mature within one year and
had an interest rate of 9.63% at December 31, 1994.
Other notes payable at December 31, 1994, had a weighted average interest
rate of 7.4% and a weighted average maturity of 11.8 years.
The aggregate amount of maturities of all long-term debt in each of the
next five years is as follows: 1995-$59,383,000; 1996-$40,235,000;
1997-$73,284,000; 1998-$61,046,000; 1999-$11,398,000.
The debenture agreement contains certain restrictions on indebtedness,
disposition of affiliate banks, creation of liens on property, sales of assets,
maintenance of capital levels, and the payment of dividends. Under the most
restrictive covenant, approximately $805 million was available for the payment
of dividends at December 31, 1994.
Substantially all of the consolidated net assets are owned by the
subsidiaries and dividends paid by Regions are substantially provided by
dividends from the subsidiaries. Statutory limits are placed on the amount of
dividends the subsidiaries can pay without prior regulatory approval. In
addition, regulatory authorities require the maintenance of minimum capital to
asset ratios at bank subsidiaries. At December 31, 1994, the bank subsidiaries
could pay approximately $202 million in dividends without prior approval.
Management believes that none of these dividend restrictions will
materially affect Regions' dividend policy. In addition to dividend
restrictions, federal statutes also prohibit unsecured loans from bank
subsidiaries to the parent company. Because of these limitations, substantially
all of the net assets of Regions' subsidiaries are restricted, except for the
amount which can be paid to the parent in the form of dividends.
NOTE J.
EMPLOYEE BENEFIT PLANS
Regions has a defined benefit pension plan covering substantially all
employees. The benefits are based on years of service and the employee's highest
five years of compensation during the last ten years of employment. Regions'
funding policy is to contribute annually the maximum amount that can be deducted
for federal income tax purposes, which was zero for 1994, 1993 and 1992.
Contributions are intended to provide not only for benefits attributed to
service to date, but also for those expected to be earned in the future.
63
<PAGE> 46
The following table sets forth the plan's funded status and amounts
recognized in the consolidated statement of condition:
<TABLE>
<CAPTION>
(in thousands) December 31
- -----------------------------------------------------
1994 1993
- -----------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
including vested benefits
of $57,263 in 1994 and
$58,472 in 1993 $(58,216) $(59,429)
=====================================================
Projected benefit obligation for
service rendered to date $(70,558) $(73,502)
- -----------------------------------------------------
Plan assets at fair value, primarily
listed stocks and bonds, and U.S.
Treasury and agency
obligations 85,599 90,403
- -----------------------------------------------------
Plan assets in excess of projected
benefit obligation 15,041 16,901
- -----------------------------------------------------
Unrecognized net loss from
past experience different
from that assumed 4,041 2,671
- -----------------------------------------------------
Unrecognized prior service cost (938) (338)
- -----------------------------------------------------
Unrecognized net asset (3,940) (5,909)
- -----------------------------------------------------
Prepaid pension cost
included in other assets $ 14,204 $ 13,325
=====================================================
</TABLE>
Net pension cost included the following components:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- -----------------------------------------------------
1994 1993 1992
- -----------------------------------------------------
<S> <C> <C>
Service cost-benefits
earned during the
period $ 3,677 $ 2,832 $ 2,609
- -----------------------------------------------------
Interest cost on projected
benefit obligation 5,487 4,966 4,496
- -----------------------------------------------------
Actual loss (return)
on plan assets 1,473 (5,602) (5,474)
- -----------------------------------------------------
Net amortization and
deferral (11,516) (3,615) (3,494)
- -----------------------------------------------------
Net periodic pension
income $ (879) $(1,419) $(1,863)
- -----------------------------------------------------
</TABLE>
The weighted average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 8.5% and 4.5%, respectively, at December 31,
1994, 7.5% and 4.5%, respectively, at December 31, 1993, and 8.5% and 5.5%,
respectively at December 31, 1992. The expected long-term rate of return on
plan assets was 9% in all years.
The Company also sponsors a supplemental executive retirement program,
which is a non-qualified plan that provides certain senior executive officers
defined pension benefits in relation to their compensation, as is provided to
other employees by the qualified pension plan. The projected benefit obligation
for this plan totaled $4,365,000 at December 31, 1994, and $3,048,000 at
December 31, 1993. The accumulated benefit obligation, all of which was vested
and accrued at December 31, 1994 and 1993, totaled $3,382,000 and $2,294,000,
respectively. Pension expense for this plan totaled $440,000 in 1994, $20,000
in 1993, and $1,000,000 in 1992. The reduced expense in 1993 resulted primarily
from changes in future funding of the projected plan obligations.
Contributions to the employee profit sharing plan totaled $12,475,000,
$11,100,000 and $9,473,000 for 1994, 1993 and 1992, respectively.
The 1994 contribution to the employee stock ownership plan totaled
$1,417,000, compared to $1,120,000 in 1993, and $951,000 in 1992. Contributions
are used to purchase Regions common stock for the benefit of participating
employees.
Contributions to the employee stock purchase plan in 1994, 1993 and 1992
were $888,000, $905,000 and $733,000, respectively.
Regions sponsors a defined benefit postretirement health care plan that
covers certain retired employees. Currently the Company pays a portion of the
costs of certain health care benefits for all eligible employees that retired
before January 1, 1989. No health care benefits are provided for employees
retiring at normal retirement age after December 31, 1988. For employees
retiring before normal retirement age, the Company currently pays a portion
(based upon length of active service at the time of retirement) of the costs of
certain health care benefits until the retired employee becomes eligible for
Medicare. The plan is contributory and contains other cost-sharing features
such as deductibles and co-payments. Retiree health care benefits, as well as
similar benefits for active employees, are provided through a group insurance
program in which premiums are based on the amount of benefits paid. The
Company's policy is to fund the Company's share of the cost of health care
benefits in amounts determined at the discretion of management.
64
<PAGE> 47
The following table sets forth the plan's funded status and amounts
recognized in the consolidated statement of condition:
<TABLE>
<CAPTION>
(in thousands) December 31
- -----------------------------------------------------
1994 1993
- -----------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation,
including retiree benefits
of $4,371 in 1994 and $4,579
in 1993 $(9,847) $(11,784)
- -----------------------------------------------------
Unrecognized transition
obligation 8,740 9,226
- -----------------------------------------------------
Unrecognized net (gain) loss
from past experience
different from that assumed (1,643) 1,145
- -----------------------------------------------------
Accrued postretirement benefit
obligation $(2,750) $ (1,413)
- -----------------------------------------------------
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- -------------------------------------------------------
1994 1993
- -------------------------------------------------------
<S> <C> <C>
Service cost-benefits
earned during the period $ 521 $ 511
- -------------------------------------------------------
Interest cost on
benefit obligation 736 810
- -------------------------------------------------------
Net amortization and deferral 486 485
- -------------------------------------------------------
Net periodic postretirement
benefit cost $1,743 $1,806
- -------------------------------------------------------
</TABLE>
The assumed health care cost trend rate was 12.4% for 1995 and is assumed
to decrease gradually to 6% by 2007 and remain at that level thereafter.
Increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation at
December 31, 1994, by $1,024,000 and the aggregate of the service and interest
cost components of net periodic postretirement benefit cost for 1994 by
$157,000. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 8.5% at December 31, 1994,
and 7.5% at December 31, 1993.
NOTE K.
LEASES
Rental expense for all leases amounted to approximately $5,474,000,
$4,233,000 and $3,322,000 for 1994, 1993 and 1992, respectively. The
approximate future minimum rental commitments as of December 31, 1994, for all
noncancelable leases with initial or remaining terms of one year or more are
shown in the following table. Included in these amounts are all renewal options
reasonably assured of being exercised.
<TABLE>
<CAPTION>
(in thousands) Equipment Premises Total
- ----------------------------------------------------
<S> <C> <C> <C>
1995 $234 $ 3,494 $ 3,728
- ----------------------------------------------------
1996 186 3,333 3,519
- ----------------------------------------------------
1997 168 2,878 3,046
- ----------------------------------------------------
1998 148 2,395 2,543
- ----------------------------------------------------
1999 68 2,197 2,265
- ----------------------------------------------------
2000-2004 -0- 6,297 6,297
- ----------------------------------------------------
2005-2009 -0- 3,023 3,023
- ----------------------------------------------------
2010-2014 -0- 1,558 1,558
- ----------------------------------------------------
2015-End -0- 747 747
- ----------------------------------------------------
TOTAL $804 $25,922 $26,726
====================================================
</TABLE>
NOTE L.
COMMITMENTS AND CONTINGENCIES
To accommodate the financial needs of its customers, Regions makes
commitments under various terms to lend funds to consumers, businesses and
other entities. These commitments include (among others) revolving credit
agreements, term loan commitments and short-term borrowing agreements. Many of
these loan commitments have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of these commitments are expected
to expire without being funded, the total commitment amounts do not necessarily
represent future liquidity requirements. Standby letters of credit are also
issued, which commit Regions to make payments on behalf of customers if certain
specified future events occur. Historically, a large percentage of standby
letters of credit also expire without being funded.
Both loan commitments and standby letters of credit have credit risk
essentially the same as that
65
<PAGE> 48
involved in extending loans to customers and are subject to normal credit
approval procedures and policies. Collateral is obtained based on management's
assessment of the customer's credit.
Loan commitments totaled $2.0 billion at December 31, 1994, and $1.8
billion at December 31, 1993. Standby letters of credit were $284.8 million at
December 31, 1994, and $331.4 million at December 31, 1993. Commitments under
commercial letters of credit used to facilitate customers' trade transactions
were $23.6 million at December 31, 1994, and $15.9 million at December 31,
1993.
The Company and its affiliates are defendants in litigation and claims
arising from the normal course of business. Based on consultation with legal
counsel, management is of the opinion that the outcome of litigation will not
have a material effect on Regions' consolidated financial statements.
NOTE M.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
Regions has entered into several types of financial instrument agreements
to help manage its exposure to interest rate fluctuations.
Forward contracts represent commitments to sell money market instruments
at a future date at a specified price or yield. The Company is subject to the
market risk associated with changes in the value of the underlying financial
instrument as well as the risk that the other party will fail to perform. The
gross contract amount of forward contracts, which totaled $27 million and $267
million at December 31, 1994, and 1993, respectively, represents the extent of
Regions' involvement. However, those amounts significantly exceed the future
cash requirements, as the Company intends to close out open positions prior to
settlement, and thus is subject only to the change in the value of the
instruments. The gross amount of contracts represents the Company's maximum
exposure to credit risk.
Written call and put options represent agreements to buy and sell certain
money market instruments at a specified price within a specified period of
time. Written options expose the Company to market risk associated with changes
in the value of the underlying financial instrument, but do not expose the
Company to credit risk. The gross contract amount of written options totaled
$15 million and $7 million at December 31, 1994, and 1993, respectively.
Interest rate swap agreements, which were entered into by Secor prior to
its acquisition by Regions, totaled $27.9 million in notional principal amount
at December 31, 1994. Interest rate swap transactions, which Secor used to
assist in managing interest rate exposure, generally involve the exchange of
fixed and floating rate interest payment obligations without the exchange of
the underlying notional principal amounts. Interest rate swap agreements
subject the Company to market risk associated with changes in interest rates,
as well as the risk that another party will fail to perform. Notional principal
amounts often are used to express the volume of these transactions, but the
amounts potentially subject to credit risk are substantially less.
Regions operates a broker-dealer subsidiary, which in the normal course of
trading inventory and clearing customers' securities transactions, is a party
to certain financial instruments with off-balance-sheet risk. The aggregate
off-balance-sheet risk from these financial instruments is not material to the
consolidated financial statements.
NOTE N.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments.
Cash and cash equivalents: The carrying amount reported in the
consolidated statement of cash flows approximates the estimated fair value.
Interest-bearing deposits in other banks: The carrying amount reported in
the consolidated statement of condition approximates the estimated fair value.
Investment securities: Estimated fair values are based on quoted market
prices, where available. If quoted market prices are not available, estimated
fair values are based on quoted market prices of comparable instruments.
Securities available for sale: Estimated fair values, which are the
amounts recognized in the consolidated statement of condition, are based on
quoted market prices, where available. If quoted market prices are not
available, estimated fair values are based on quoted market prices of
comparable instruments.
66
<PAGE> 49
Trading account assets: Estimated fair values, which are the amounts
recognized in the consolidated statement of condition, are based on quoted
market prices, where available. If quoted market prices are not available,
estimated fair values are based on quoted market prices of comparable
instruments.
Mortgage loans held for sale: Estimated fair values, which are the amounts
recognized in the consolidated statement of condition, are based on quoted
market prices of comparable instruments.
Loans: Estimated fair values for variable rate loans, which reprice
frequently and have no significant credit risk, are based on carrying value.
Estimated fair values for all other loans are estimated using discounted cash
flow analyses, based on interest rates currently offered on loans with similar
terms to borrowers of similar credit quality. The carrying amount of accrued
interest reported in the consolidated statement of condition approximates the
fair value.
Deposit liabilities: The fair value of non-interest bearing demand
accounts, interest-bearing transaction accounts, savings accounts, money market
accounts and certain other time open accounts is the amount payable on demand
at the reporting date (i.e., the carrying amount). Fair values for certificates
of deposit are estimated by using discounted cash flow analyses, using the
interest rates currently offered for deposits of similar maturities.
Short-term borrowings: The carrying amount reported in the consolidated
statement of condition approximates the estimated fair value.
Long-term borrowings: Fair values are estimated using discounted cash flow
analyses, based on the current rates offered for similar borrowing
arrangements.
Loan commitments, standby and commercial letters of credit: Estimated fair
values for these off-balance sheet instruments are based on standard fees
currently charged to enter into similar agreements.
Forward contracts, call options and interest rate swaps: Estimated fair
values are based on dealer quotes. These values represent the estimated amount
the Company would pay to terminate the agreements.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31, 1994 December 31, 1993
- -----------------------------------------------------------------------------------------------------------------
CARRYING ESTIMATED Carrying Estimated
AMOUNT FAIR VALUE Amount Fair Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 596,158 $ 596,158 $ 568,756 $ 568,756
- -----------------------------------------------------------------------------------------------------------------
Interest-bearing deposits in other banks 630 630 11,031 11,031
- -----------------------------------------------------------------------------------------------------------------
Investment securities 1,948,675 1,874,117 2,368,445 2,457,987
- -----------------------------------------------------------------------------------------------------------------
Securities available for sale 660,513 660,513 -0- -0-
- -----------------------------------------------------------------------------------------------------------------
Trading account assets 24,853 24,853 20,368 20,368
- -----------------------------------------------------------------------------------------------------------------
Mortgage loans held for sale 104,471 104,471 285,665 285,665
- -----------------------------------------------------------------------------------------------------------------
Loans (excluding leases) 8,801,948 8,396,042 6,645,592 6,724,651
- -----------------------------------------------------------------------------------------------------------------
Financial liabilities:
Deposits 10,093,135 9,957,484 8,770,694 8,773,196
- -----------------------------------------------------------------------------------------------------------------
Short-term borrowings 1,011,541 1,011,541 203,761 203,761
- -----------------------------------------------------------------------------------------------------------------
Long-term borrowings 519,238 438,670 462,862 468,761
- -----------------------------------------------------------------------------------------------------------------
Off-balance-sheet instruments:
Loan commitments -0- (17,383) -0- (15,206)
- -----------------------------------------------------------------------------------------------------------------
Standby letters of credit -0- (4,273) -0- (4,971)
- -----------------------------------------------------------------------------------------------------------------
Commercial letters of credit -0- (59) -0- (40)
- -----------------------------------------------------------------------------------------------------------------
Forward contracts, call options
and interest rate swaps (783) 150 (2,405) (2,405)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE> 50
NOTE O.
OTHER INCOME AND EXPENSE
Other income consists of the following:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- ------------------------------------------------------
1994 1993 1992
- ------------------------------------------------------
<S> <C> <C> <C>
Fees and commissions $11,962 $10,257 $10,029
- ------------------------------------------------------
Insurance premiums
and commissions 5,094 4,797 4,660
- ------------------------------------------------------
Trading account income 7,184 7,344 6,848
- ------------------------------------------------------
Gain on sale of mortgage
servicing rights 2,416 -0- -0-
- ------------------------------------------------------
Other miscellaneous
income 4,918 4,218 1,708
- ------------------------------------------------------
TOTAL $31,574 $26,616 $23,245
======================================================
</TABLE>
Other expense consists of the following:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- ------------------------------------------------------
1994 1993 1992
- ------------------------------------------------------
<S> <C> <C> <C>
Stationery, printing
and supplies $ 6,937 $ 5,354 $ 4,638
- ------------------------------------------------------
Advertising and business
development 8,944 6,155 5,240
- ------------------------------------------------------
Postage and freight 7,308 6,294 5,983
- ------------------------------------------------------
Telephone 6,965 5,508 5,087
- ------------------------------------------------------
Legal and other
professional fees 7,563 4,416 3,896
- ------------------------------------------------------
Other non-credit losses 7,408 6,188 10,075
- ------------------------------------------------------
Outside computer
services 5,181 4,856 4,330
- ------------------------------------------------------
Amortization of mort-
gage servicing rights 10,424 14,049 8,281
- ------------------------------------------------------
Loss (gain) on sale of
mortgages by affiliate
mortgage company 2,216 (476) 729
- ------------------------------------------------------
Other miscellaneous
expenses 36,854 32,023 32,497
- ------------------------------------------------------
Total $99,800 $84,367 $80,756
======================================================
</TABLE>
NOTE P.
INCOME TAXES
Effective January 1, 1993, Regions changed its method of accounting for
income taxes from the deferred method to the liability method as required by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). The cumulative effect of adopting SFAS 109 did not have a
significant impact on Regions' provision for income taxes. As permitted under
the new rules, prior years financial statements have not been restated.
At December 31, 1994, Regions had net operating loss carryforwards for
federal tax purposes of $86.6 million that expire in years 2002 through 2008.
Those carryforwards resulted from the Company's acquisition of Secor in
December 1993. For financial reporting purposes, a valuation allowance of
approximately $11.7 million has been established to offset a portion of the
deferred taxes related to those carryforwards.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The change in the
valuation allowance represents amounts utilized in the current year, for which
an allowance had been established at the time of the purchase of Secor. A
corresponding reduction has been made to excess purchase price. Significant
components of Regions' deferred tax assets and liabilities as of December 31,
1994, and 1993, are listed below.
<TABLE>
<CAPTION>
(in thousands) December 31
- ----------------------------------------------------
1994 1993
- ----------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Book over tax depreciation $ 1,765 $ -0-
- ----------------------------------------------------
Loan loss reserve 36,884 40,615
- ----------------------------------------------------
Net operating loss
carryforwards 32,292 26,120
- ----------------------------------------------------
Other 46,049 38,224
- ----------------------------------------------------
Total deferred tax assets 116,990 104,959
- ----------------------------------------------------
</TABLE>
68
<PAGE> 51
<TABLE>
<CAPTION>
(in thousands) December 31
- ----------------------------------------------------
1994 1993
<S> <C>
Deferred tax liabilities:
Tax over book depreciation $ -0- $ 2,224
- ----------------------------------------------------
Accretion of bond discount 2,838 3,938
- ----------------------------------------------------
Direct lease financing 11,758 11,061
- ----------------------------------------------------
Pension 6,020 5,044
- ----------------------------------------------------
Other 16,786 28,197
- ----------------------------------------------------
Total deferred tax liabilities 37,402 50,464
- ----------------------------------------------------
Net deferred tax assets before
valuation allowance 79,588 54,495
- ----------------------------------------------------
Valuation allowance (17,653) (26,310)
- ----------------------------------------------------
Net deferred tax asset $ 61,935 $ 28,185
====================================================
</TABLE>
Applicable income taxes for financial reporting purposes differs from the
amount computed by applying the statutory federal income tax rate of 35% for
1994 and 1993, and 34% for 1992, for the reasons below:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- ----------------------------------------------------
1994 1993 1992
- ----------------------------------------------------
LIABILITY Liability Deferred
METHOD Method Method
- ----------------------------------------------------
<S> <C> <C> <C>
Tax computed at
statutory federal
income tax rate $75,942 $57,932 $47,609
- ----------------------------------------------------
Increases (decreases)
in taxes resulting
from:
Obligations of states
and political
subdivisions:
Tax exempt
income (7,706) (7,448) (7,422)
- ----------------------------------------------------
Tax on preference
item 1,024 878 961
- ----------------------------------------------------
State income tax,
net of federal
tax benefit 3,857 3,309 3,153
- ----------------------------------------------------
Subsidiary purchase
accounting
adjustments (47) (50) (76)
- ----------------------------------------------------
Other, net (1,976) (1,145) 752
- ----------------------------------------------------
TOTAL $71,094 $53,476 $44,977
====================================================
Effective Tax Rate 32.8% 32.3% 32.1%
- ----------------------------------------------------
</TABLE>
The provisions for income taxes included in the consolidated statement of
income are summarized below. Included in these amounts are income taxes of
$219,000, $27,000 and $(18,000), in 1994, 1993 and 1992, respectively, related
to securities transactions.
<TABLE>
<CAPTION>
(in thousands) Current Deferred Total
- ------------------------------------------------------
<S> <C> <C> <C>
1994 (Liability method)
Federal $65,588 $ (428) $65,160
- ------------------------------------------------------
State 6,424 (490) 5,934
- ------------------------------------------------------
TOTAL $72,012 $ (918) $71,094
======================================================
1993 (Liability method)
Federal $50,272 $ (1,886) $48,386
- ------------------------------------------------------
State 5,208 (118) 5,090
- ------------------------------------------------------
Total $55,480 $ (2,004) $53,476
======================================================
1992 (Deferred method)
Federal $49,389 $ (9,190) $40,199
- ------------------------------------------------------
State 5,975 (1,197) 4,778
- ------------------------------------------------------
Total $55,364 $(10,387) $44,977
======================================================
</TABLE>
Following is a listing of the estimated amounts of deferred taxes for the
year ended December 31, 1992. These result from items of income or expense
being reported for tax purposes in different years than they are reflected in
the financial statements.
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31, 1992
- ------------------------------------------------------
<S> <C>
Tax effect of timing
differences related to:
Depreciation $ (700)
- ------------------------------------------------------
Provision for loan losses (5,042)
- ------------------------------------------------------
Direct lease financing (2,725)
- ------------------------------------------------------
Pension contribution 683
- ------------------------------------------------------
Other (2,603)
- ------------------------------------------------------
TOTAL $(10,387)
======================================================
</TABLE>
69
<PAGE> 52
NOTE Q.
ACQUISITIONS
During 1994 Regions completed the following acquisitions:
<TABLE>
<CAPTION>
Total Assets Accounting
Date Company Acquired Headquarters Location (in thousands) Treatment
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
May Guaranty Bancorp Inc. Baton Rouge, Louisiana $186,879 Pooling
July First Fayette Bancshares Inc. Fayette, Alabama 76,586 Purchase
August BNR Bancshares Inc. New Roads, Louisiana 136,799 Pooling
September First Community Bancshares Inc. Rome, Georgia 125,090 Pooling
November American Bancshares Inc. Monroe, Louisiana 302,674 Purchase
December Union Bank & Trust Company Montgomery, Alabama 417,903 Purchase
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
In addition to the above acquisitions, Regions acquired $114 million in
deposits during 1994 in connection with three transactions with the Resolution
Trust Corporation.
The total consideration paid for all the 1994 acquisitions was
approximately $22.4 million in cash and notes, and 6,121,761 shares of Regions'
common stock (including options assumed and treasury stock reissued) valued at
$153.1 million. Total intangible assets recorded in connection with these
transactions totaled approximately $69.1 million.
During 1993 Regions completed the following acquisitions:
<TABLE>
<CAPTION>
Total Assets Accounting
Date Company Acquired Headquarters Location (in thousands) Treatment
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
June Franklin County Bank Winchester, Tennessee $ 68,034 Purchase
October First Federal Savings Bank of DeFuniak Springs DeFuniak Springs, Florida 89,295 Purchase
December First Federal Savings Bank Marianna, Florida 101,084 Purchase
December Secor Bank, Federal Savings Bank Birmingham, Alabama 1,831,937 Purchase
</TABLE>
Because certain of the 1994 and 1993 acquisitions were accounted for as
purchases, Regions' consolidated financial statements include the results of
operations of those companies only from their respective dates of acquisition.
The following unaudited summary information presents the consolidated results
of operations of Regions on a pro forma basis, as if all the above companies
had been acquired on January 1, 1993. The pro forma summary information does
not necessarily reflect the results of operations as they actually would have
been, if the acquisitions had occurred at the beginning of the periods
presented.
<TABLE>
<CAPTION>
(in thousands,
except per share data) Year Ended December 31
- ------------------------------------------------------
1994 1993
- ------------------------------------------------------
<S> <C> <C>
Interest income $830,120 $787,834
- ------------------------------------------------------
Interest expense 375,327 348,781
- ------------------------------------------------------
Net interest income 454,793 439,053
- ------------------------------------------------------
Provision for loan losses 18,294 27,792
- ------------------------------------------------------
Non-interest income 155,211 153,886
- ------------------------------------------------------
Non-interest expense 372,464 384,078
- ------------------------------------------------------
Income before income taxes 219,246 181,069
- ------------------------------------------------------
Applicable income taxes 72,910 58,489
- ------------------------------------------------------
Net income $146,336 $122,580
- ------------------------------------------------------
Net income per share $3.37 $2.82
- ------------------------------------------------------
</TABLE>
70
<PAGE> 53
Regions' prior period financial statements have not been restated to
include the effect of the 1994 acquisitions which were accounted for as
poolings of interests, since the effect is not material.
The following chart summarizes the assets acquired and liabilities assumed
in connection with acquisitions in 1994 and 1993. Approximately $102 million of
the 1994 "Cash and due from banks" amount, represent funds received from the
Resolution Trust Corporation, as an offset to liabilities assumed by Regions in
the 1994 purchase and assumption transactions.
<TABLE>
<CAPTION>
(in thousands) 1994 1993
- ------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 173,595 $ 46,701
- ------------------------------------------------------
Federal funds sold 60,815 109,163
- ------------------------------------------------------
Investment securities 172,180 693,796
- ------------------------------------------------------
Securities available for sale 208,241 -0-
- ------------------------------------------------------
Loans, net 661,155 1,172,896
- ------------------------------------------------------
Other assets 84,184 67,794
- ------------------------------------------------------
Deposits 1,160,667 1,629,777
- ------------------------------------------------------
Borrowings 41,287 323,259
- ------------------------------------------------------
Other liabilities 18,504 24,366
- ------------------------------------------------------
</TABLE>
Regions has entered into an agreement to acquire Fidelity Federal Savings
Bank (Fidelity) of Dalton, Georgia, in exchange for approximately 946,109
shares of Regions common stock. This transaction is subject to approval by the
stockholders of Fidelity and by various regulatory authorities. At December 31,
1994, Fidelity had assets of approximately $310 million and operated four
banking offices. Regions expects to account for this transaction as a pooling
of interests.
Regions has also entered into an agreement to acquire First Commercial
Bancshares Inc. (First Commercial) of Chalmette, Louisiana. The agreement calls
for each of First Commercial's 226,396 outstanding shares of common stock to be
exchanged, at the option of the holder thereof, into either (1) a cash payment
in the amount of $40.77 and 1.444 shares of Regions' common stock, or (2) 2.626
shares of Regions' common stock. The stock portion of the consideration is
subject to adjustment under certain circumstances. This transaction is subject
to approval by the stockholders of First Commercial. At December 31, 1994,
First Commercial had assets of approximately $115 million and operated five
banking offices. Regions expects to account for this acquisition as a purchase.
Included in other assets on the consolidated statement of condition are
amounts representing the excess of cost over fair value of net assets acquired.
At December 31, 1994, and 1993, these amounts totaled approximately
$102,187,000 and $48,891,000, respectively. These amounts are generally being
amortized over periods of 12 to 25 years, principally using the straight-line
method of amortization.
NOTE R.
STOCK OPTION AND LONG-TERM INCENTIVE PLANS
Regions has stock option plans for certain key employees that provide for
the granting of options to purchase up to 2,860,000 shares of Regions' common
stock at the fair market value at the time the options are granted. The terms
of options granted are determined by the personnel committee of the Board of
Directors; however, no options may be granted after ten years from the plans'
adoption and no options may be exercised beyond ten years from the date
granted. The plans also permit the granting of stock appreciation rights to
holders of stock options. Stock appreciation rights were attached to 204,060;
331,755 and 378,873 of the shares under option at December 31, 1994, 1993 and
1992, respectively.
71
<PAGE> 54
Activity in the plans is summarized as follows:
<TABLE>
<CAPTION>
Shares Under Option Price
Option Per Share
- ------------------------------------------------------
<S> <C> <C>
Balance at
January 1, 1992 1,066,390 $12.33 - $19.83
- ------------------------------------------------------
Granted 233,750 26.31
- ------------------------------------------------------
Exercised (262,580) 12.33 - 19.83
- ------------------------------------------------------
Canceled (42,898) 12.33 - 19.49
- ------------------------------------------------------
Outstanding at
December 31, 1992 994,662 12.33 - 26.31
- ------------------------------------------------------
Granted 302,229 32.31 - 35.44
- ------------------------------------------------------
Exercised (101,193) 14.38 - 26.31
- ------------------------------------------------------
Canceled (11,047) 12.33 - 19.49
- ------------------------------------------------------
Outstanding at
December 31, 1993 1,184,651 12.33 - 35.44
- ------------------------------------------------------
Granted 447,129 31.88 - 32.69
- ------------------------------------------------------
Exercised (222,853) 13.07 - 26.31
- ------------------------------------------------------
Canceled (37,298) 14.66 - 32.31
- ------------------------------------------------------
Outstanding at
December 31, 1994 1,371,629 $12.33 - $35.44
======================================================
Exercisable at
December 31, 1994 888,346 $12.33 - $35.44
======================================================
</TABLE>
In 1991, stockholders approved the Regions 1991 Long-Term Incentive Plan.
This plan provides for the granting of up to 2,750,000 shares of common stock
in the form of stock options, stock appreciation rights, performance awards or
restricted stock awards. A maximum of 825,000 shares of restricted stock and
1,375,000 shares of performance awards, may be granted. During 1993 and 1992,
Regions granted 5,500 and 129,294 shares, respectively, as restricted stock and
during 1994, 1993, and 1992, granted 125,000; 187,750 and 249,948 shares,
respectively, as performance awards. Grantees of restricted stock must remain
employed with Regions for certain periods from the date of the grant at the
same or a higher level in order for the shares to be released. However, during
this period the grantee is eligible to receive dividends and exercise voting
privileges on such restricted shares. In 1994, 1993, and 1992, 1,650; 75,034
and 54,789 restricted shares, respectively, were released. Issuance of
performance shares is dependent upon achievement of certain performance
criteria and is, therefore, deferred until the end of the performance period.
In 1994, 1993, and 1992, 3,897; 196,743 and 136,824 performance shares,
respectively, were issued. Total expense for restricted stock was $587,000 in
1994, $1,752,000 in 1993, and $1,975,000 in 1992. Total expense for performance
shares was $6,666,000 in 1994, $9,908,000 in 1993, and $7,825,000 in 1992.
NOTE S.
PARENT COMPANY ONLY FINANCIAL STATEMENTS
Presented below are condensed financial statements of Regions Financial
Corporation:
STATEMENT OF CONDITION
<TABLE>
<CAPTION>
(in thousands) December 31
- ----------------------------------------------------
1994 1993
- ----------------------------------------------------
<S> <C> <C>
ASSETS
- ----------------------------------------------------
Cash due from banks $ 7,055 $ 2,552
- ----------------------------------------------------
Securities purchased
under agreements to resell 35,000 29,834
- ----------------------------------------------------
Dividends receivable from
subsidiaries -0- 11,200
- ----------------------------------------------------
Loans to subsidiaries 2,424 2,920
- ----------------------------------------------------
Investment securities 5,165 5,181
- ----------------------------------------------------
Premises and equipment 1,198 888
- ----------------------------------------------------
Investment in subsidiaries:
Banks 1,172,490 773,145
- ----------------------------------------------------
Non-banks 50,479 168,131
- ----------------------------------------------------
1,222,969 941,276
- ----------------------------------------------------
Other assets 14,550 10,592
- ----------------------------------------------------
$1,288,361 $1,004,443
====================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------
Commercial paper $ 18,600 $ 17,201
- ----------------------------------------------------
Long-term borrowings 215,742 82,249
- ----------------------------------------------------
Other liabilities 40,149 54,028
- ----------------------------------------------------
Total liabilities 274,491 153,478
- ----------------------------------------------------
Stockholders' Equity:
Common stock 29,052 26,575
- ----------------------------------------------------
Surplus 430,981 375,983
- ----------------------------------------------------
Undivided profits 567,244 462,280
- ----------------------------------------------------
Treasury stock (12,441) (12,320)
- ----------------------------------------------------
Unearned restricted stock (966) (1,553)
- ----------------------------------------------------
Total stockholders' equity 1,013,870 850,965
- ----------------------------------------------------
$1,288,361 $1,004,443
====================================================
</TABLE>
72
<PAGE> 55
STATEMENT OF INCOME
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- ------------------------------------------------------
1994 1993 1992
- ------------------------------------------------------
<S> <C> <C>
Income:
Dividends received
from subsidiaries:
Banks $ 43,300 $ 44,800 $39,500
- ------------------------------------------------------
Non-banks -0- 400 1,350
- ------------------------------------------------------
43,300 45,200 40,850
- ------------------------------------------------------
Service fees from
subsidiaries 19,886 20,869 20,772
- ------------------------------------------------------
Interest from
subsidiaries 1,844 2,680 1,417
- ------------------------------------------------------
Other 398 273 243
- ------------------------------------------------------
65,428 69,022 63,282
- ------------------------------------------------------
Expenses:
Salaries and employee
benefits 13,089 16,225 15,662
- ------------------------------------------------------
Interest 11,297 7,284 2,178
- ------------------------------------------------------
Net occupancy expense 527 536 544
- ------------------------------------------------------
Furniture and equipment
expense 342 303 314
- ------------------------------------------------------
Legal and other
professional fees 1,874 1,474 808
- ------------------------------------------------------
Amortization of excess
purchase price 3,278 2,759 2,888
- ------------------------------------------------------
Other expenses 5,071 2,508 5,813
- ------------------------------------------------------
35,478 31,089 28,207
- ------------------------------------------------------
Income before income
taxes and equity in
undistributed earnings
of subsidiaries 29,950 37,933 35,075
- ------------------------------------------------------
Applicable income taxes
(credit) (5,293) (1,726) (984)
- ------------------------------------------------------
Income before equity
in undistributed
earnings of
subsidiaries 35,243 39,659 36,059
- ------------------------------------------------------
Equity in undistributed
earnings of subsidiaries:
Banks 107,544 70,659 58,167
- ------------------------------------------------------
Non-banks 3,097 1,727 822
- ------------------------------------------------------
110,641 72,386 58,989
- ------------------------------------------------------
NET INCOME $145,884 $112,045 $95,048
======================================================
</TABLE>
Aggregate maturities of long-term borrowings (excluding demand notes to
affiliates of $542,000) in each of the next five years for the parent company
only are as follows: $400,000 due in each of the years 1995-1997 and $4,000,000
due in 1998. Standby letters of credit issued by the parent company totaled
$11.7 million at December 31, 1994. This amount is included in total standby
letters of credit disclosed in Note L.
73
<PAGE> 56
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- ------------------------------------------------------
1994 1993 1992
- ------------------------------------------------------
<S> <C> <C>
Operating activities:
Net income $ 145,884 $ 112,045 $ 95,048
- ------------------------------------------------------
Adjustments to reconcile
net cash provided by
operating activities:
Equity in undistributed
earnings of
subsidiaries (110,641) (72,386) (58,989)
- ------------------------------------------------------
Provision for depreciation
and amortization 5,089 4,473 5,579
- ------------------------------------------------------
(Decrease) increase in
other liabilities (13,879) 29,729 6,717
- ------------------------------------------------------
Decrease (increase) in
dividends receivable
from subsidiaries 11,200 (1,700) -0-
- ------------------------------------------------------
(Increase) in other
assets (4,897) (505) (4,683)
- ------------------------------------------------------
Stock issued to
employees under
incentive plan 1,191 5,675 4,384
- ------------------------------------------------------
Net cash provided by
operating activities 33,947 77,331 48,056
- ------------------------------------------------------
Investing activities:
Investment in
subsidiaries (28,536) (77,478) (25,603)
- ------------------------------------------------------
Principal payments
on loans to
subsidiaries 496 419 424
- ------------------------------------------------------
Purchases and sales
of premises and
equipment (587) (118) (257)
- ------------------------------------------------------
Purchase of investment
securities -0- (3,082) -0-
- ------------------------------------------------------
Net cash (used) by
investing activities (28,627) (80,259) (25,436)
- ------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS (CONTINUED)
(in thousands) Year Ended December 31
- ------------------------------------------------------
1994 1993 1992
- ------------------------------------------------------
<S> <C> <C> <C>
Financing activities:
Increase (decrease) in
commercial paper
borrowings 1,399 (2,088) 243
- ------------------------------------------------------
Cash dividends (50,273) (38,792) (33,253)
- ------------------------------------------------------
Purchase of
treasury stock (81,081) (16,393) -0-
- ------------------------------------------------------
Proceeds from
long-term
borrowings 141,188 2,167 76,117
- ------------------------------------------------------
Principal payments
on long-term
borrowings (7,695) (3,472) (3,336)
- ------------------------------------------------------
Net (decrease) in
short-term borrowings -0- -0- (5,000)
- ------------------------------------------------------
Proceeds from
stock issue -0- -0- 14,367
- ------------------------------------------------------
Proceeds from
exercise of stock
options 811 973 1,163
- ------------------------------------------------------
Net cash provided
(used) by financing
activities 4,349 (57,605) 50,301
- ------------------------------------------------------
Increase (decrease)
in cash and cash
equivalents 9,669 (60,533) 72,921
- ------------------------------------------------------
Cash and cash
equivalents at
beginning of year 32,386 92,919 19,998
- ------------------------------------------------------
Cash and cash
equivalents at
end of year $42,055 $32,386 $92,919
======================================================
</TABLE>
74
<PAGE> 57
AUDITORS'
REPORT
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Regions Financial Corporation
We have audited the accompanying consolidated statements of condition of
Regions Financial Corporation and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Regions
Financial Corporation and subsidiaries at December 31, 1994 and 1993 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Notes A and C to the consolidated financial statements, in
1994 the Company changed its method of accounting for securities.
/s/ Ernst & Young LLP
Birmingham, Alabama
February 6, 1995
75
<PAGE> 58
HISTORICAL FINANCIAL SUMMARY
REGIONS FINANCIAL CORPORATION & SUBSIDIARIES
<TABLE>
<CAPTION>
(in thousands, except ratios, yields, and per share amounts)
- -----------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATING RESULTS 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income
Interest and fees on loans $603,092 $421,616 $387,628 $414,879 $407,596
- -----------------------------------------------------------------------------------------------------------------
Income on federal funds sold 2,041 1,491 6,643 5,044 4,159
- -----------------------------------------------------------------------------------------------------------------
Taxable interest on securities 148,148 104,744 117,558 113,706 83,366
- -----------------------------------------------------------------------------------------------------------------
Tax-free interest on securities 13,629 11,708 10,654 11,803 11,641
- -----------------------------------------------------------------------------------------------------------------
Other interest income 18,869 16,108 14,264 11,389 12,991
- -----------------------------------------------------------------------------------------------------------------
Total interest income 785,779 555,667 536,747 556,821 519,753
- -----------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 295,785 198,301 215,280 280,732 282,572
- -----------------------------------------------------------------------------------------------------------------
Interest on short-term borrowings 21,514 4,554 4,679 9,202 12,754
- -----------------------------------------------------------------------------------------------------------------
Interest on long-term borrowings 32,840 10,759 4,109 2,083 2,287
- -----------------------------------------------------------------------------------------------------------------
Total interest expense 350,139 213,614 224,068 292,017 297,613
- -----------------------------------------------------------------------------------------------------------------
Net interest income 435,640 342,053 312,679 264,804 222,140
- -----------------------------------------------------------------------------------------------------------------
Provision for loan losses 19,003 21,533 27,072 24,005 24,208
- -----------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 416,637 320,520 285,607 240,799 197,932
- -----------------------------------------------------------------------------------------------------------------
Non-interest income:
Trust department income 19,386 18,299 16,720 14,443 13,502
- -----------------------------------------------------------------------------------------------------------------
Service charges on deposit accounts 50,332 42,955 42,117 38,753 32,918
- -----------------------------------------------------------------------------------------------------------------
Mortgage servicing and origination fees 41,489 44,079 37,048 28,250 20,595
- -----------------------------------------------------------------------------------------------------------------
Securities gains (losses) 627 78 (53) (507) (982)
- -----------------------------------------------------------------------------------------------------------------
Other 31,574 26,616 23,245 20,518 27,715
- -----------------------------------------------------------------------------------------------------------------
Total non-interest income 143,408 132,027 119,077 101,457 93,748
- -----------------------------------------------------------------------------------------------------------------
Non-interest expense:
Salaries and employee benefits 179,166 154,594 138,355 119,115 102,407
- -----------------------------------------------------------------------------------------------------------------
Net occupancy expense 20,686 14,877 13,759 13,105 12,612
- -----------------------------------------------------------------------------------------------------------------
Furniture and equipment expense 22,737 18,604 17,684 17,339 16,214
- -----------------------------------------------------------------------------------------------------------------
Other 120,478 98,951 94,861 80,781 64,378
- -----------------------------------------------------------------------------------------------------------------
Total non-interest expense 343,067 287,026 264,659 230,340 195,611
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes 216,978 165,521 140,025 111,916 96,069
- -----------------------------------------------------------------------------------------------------------------
Applicable income taxes 71,094 53,476 44,977 33,660 27,175
- -----------------------------------------------------------------------------------------------------------------
Net income $145,884 $112,045 $ 95,048 $ 78,256 $ 68,894
=================================================================================================================
Average number of shares outstanding 42,906 37,205 36,532 36,191 36,097
- -----------------------------------------------------------------------------------------------------------------
Per share:
Net income $ 3.40 $ 3.01 $ 2.60 $ 2.16 $ 1.91
- -----------------------------------------------------------------------------------------------------------------
Cash dividends declared 1.20 1.04 .91 .87 .84
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
YIELDS AND COSTS (TAXABLE EQUIVALENT BASIS)
- -----------------------------------------------------------------------------------------------------------------
Earning assets:
Taxable securities 6.44% 7.25% 8.05% 8.64% 8.53%
- -----------------------------------------------------------------------------------------------------------------
Tax-free securities 8.89 9.17 9.60 9.97 9.99
- -----------------------------------------------------------------------------------------------------------------
Federal funds sold 3.55 3.04 3.69 5.36 8.06
- -----------------------------------------------------------------------------------------------------------------
Loans (net of unearned income) 7.99 7.92 8.75 10.33 11.21
- -----------------------------------------------------------------------------------------------------------------
Other earning assets 6.63 6.44 7.66 8.73 9.21
- -----------------------------------------------------------------------------------------------------------------
Total earning assets 7.61 7.74 8.44 9.82 10.56
- -----------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Interest-bearing deposits 3.70 3.40 4.06 5.88 6.95
- -----------------------------------------------------------------------------------------------------------------
Short-term borrowings 4.69 3.12 3.78 6.24 7.98
- -----------------------------------------------------------------------------------------------------------------
Long-term borrowings 6.32 7.67 7.80 10.88 9.63
- -----------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 3.91 3.49 4.09 5.91 7.01
- -----------------------------------------------------------------------------------------------------------------
Net yield on interest earning assets 4.26 4.82 4.98 4.78 4.67
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RATIOS
- -----------------------------------------------------------------------------------------------------------------
Net income to:
Average stockholders' equity 15.97% 16.14% 15.64% 14.27% 13.64%
- -----------------------------------------------------------------------------------------------------------------
Average total assets 1.29 1.40 1.34 1.23 1.23
- -----------------------------------------------------------------------------------------------------------------
Dividend payout 35.29 34.55 35.00 40.28 43.98
- -----------------------------------------------------------------------------------------------------------------
Average loans to average deposits 82.30 78.14 72.46 73.40 76.67
- -----------------------------------------------------------------------------------------------------------------
Average stockholders' equity
to average total assets 8.09 8.70 8.59 8.63 9.03
- -----------------------------------------------------------------------------------------------------------------
Average interest-bearing deposits
to average total deposits 86.35 84.69 85.52 85.85 84.16
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
76
<PAGE> 59
<TABLE>
<CAPTION>
Ten Year
Annual Compound
Change Growth Rate
- ----------------------------------------------------------------------------------------------------------------
1989 1988 1987 1986 1985 1984 1993-1994 1984-1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$379,292 $299,200 $248,500 $234,194 $232,139 $216,279 43.04% 10.80%
- ----------------------------------------------------------------------------------------------------------------
6,816 11,990 7,893 18,573 20,196 25,550 36.89 -22.33
- ----------------------------------------------------------------------------------------------------------------
84,050 73,447 69,563 64,090 71,723 77,441 41.44 6.70
- ----------------------------------------------------------------------------------------------------------------
11,658 13,074 16,933 20,395 21,903 23,274 16.41 -5.21
- ----------------------------------------------------------------------------------------------------------------
14,576 6,914 5,096 6,241 3,679 3,213 17.14 19.37
- ----------------------------------------------------------------------------------------------------------------
496,392 404,625 347,985 343,493 349,640 345,757 41.41 8.56
- ----------------------------------------------------------------------------------------------------------------
266,162 202,592 161,636 161,566 163,758 181,258 49.16 5.02
- ----------------------------------------------------------------------------------------------------------------
22,470 12,624 13,512 14,462 17,086 18,448 372.42 1.55
- ----------------------------------------------------------------------------------------------------------------
4,055 4,726 3,091 3,160 3,533 3,262 205.23 25.98
- ----------------------------------------------------------------------------------------------------------------
292,687 219,942 178,239 179,188 184,377 202,968 63.91 5.60
- ----------------------------------------------------------------------------------------------------------------
203,705 184,683 169,746 164,305 165,263 142,789 27.36 11.80
- ----------------------------------------------------------------------------------------------------------------
15,800 10,790 8,605 9,361 10,029 7,616 -11.75 9.57
- ----------------------------------------------------------------------------------------------------------------
187,905 173,893 161,141 154,944 155,234 135,173 29.99 11.91
- ----------------------------------------------------------------------------------------------------------------
12,701 12,134 11,515 11,153 10,199 8,801 5.94 8.22
- ----------------------------------------------------------------------------------------------------------------
26,041 25,188 24,838 24,007 22,382 19,895 17.17 9.73
- ----------------------------------------------------------------------------------------------------------------
16,029 14,178 12,037 11,209 8,780 9,241 -5.88 16.20
- ----------------------------------------------------------------------------------------------------------------
506 48 700 2,852 812 66 703.85 25.25
- ----------------------------------------------------------------------------------------------------------------
17,205 19,021 17,972 15,482 14,342 12,008 18.63 10.15
- ----------------------------------------------------------------------------------------------------------------
72,482 70,569 67,062 64,703 56,515 50,011 8.62 11.11
- ----------------------------------------------------------------------------------------------------------------
93,327 87,267 80,869 78,924 76,159 69,226 15.89 9.98
- ----------------------------------------------------------------------------------------------------------------
11,857 11,078 10,298 9,974 9,658 10,340 39.05 7.18
- ----------------------------------------------------------------------------------------------------------------
15,664 14,494 12,982 13,957 13,362 13,304 22.22 5.51
- ----------------------------------------------------------------------------------------------------------------
55,859 55,817 50,778 47,720 46,631 38,345 21.76 12.13
- ----------------------------------------------------------------------------------------------------------------
176,707 168,656 154,927 150,575 145,810 131,215 19.52 10.09
- ----------------------------------------------------------------------------------------------------------------
83,680 75,806 73,276 69,072 65,939 53,969 31.09 14.93
- ----------------------------------------------------------------------------------------------------------------
21,046 17,571 17,070 14,161 12,184 7,797 32.95 24.74
- ----------------------------------------------------------------------------------------------------------------
$ 62,634 $ 58,235 $ 56,206 $ 54,911 $ 53,755 $ 46,172 30.20% 12.19%
================================================================================================================
36,331 36,281 36,243 36,163 36,010 35,993 15.32% 1.77%
- ----------------------------------------------------------------------------------------------------------------
$1.72 $1.61 $1.55 $1.52 $1.49 $1.28 12.90% 10.26%
- ----------------------------------------------------------------------------------------------------------------
.76 .73 .69 .58 .51 .45 15.38 10.31
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
8.26% 7.82% 7.66% 8.93% 10.81% 10.99%
- ----------------------------------------------------------------------------------------------------------------
9.49 9.83 10.91 12.24 12.22 12.83
- ----------------------------------------------------------------------------------------------------------------
9.32 7.54 6.73 6.86 8.06 10.46
- ----------------------------------------------------------------------------------------------------------------
11.83 10.92 10.41 11.13 12.68 13.78
- ----------------------------------------------------------------------------------------------------------------
9.41 8.93 8.61 9.69 11.33 11.07
- ----------------------------------------------------------------------------------------------------------------
10.85 10.01 9.65 10.44 11.88 12.71
- ----------------------------------------------------------------------------------------------------------------
7.37 6.38 5.83 6.39 7.44 8.86
- ----------------------------------------------------------------------------------------------------------------
8.90 7.34 6.35 6.55 7.92 9.92
- ----------------------------------------------------------------------------------------------------------------
9.63 8.67 9.77 10.05 10.56 10.50
- ----------------------------------------------------------------------------------------------------------------
7.49 6.46 5.91 6.44 7.53 8.97
- ----------------------------------------------------------------------------------------------------------------
4.65 4.79 5.01 5.47 6.16 5.89
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
13.25% 13.29% 13.81% 14.63% 15.77% 14.99%
- ----------------------------------------------------------------------------------------------------------------
1.20 1.24 1.31 1.36 1.47 1.37
- ----------------------------------------------------------------------------------------------------------------
44.19 45.34 44.52 38.16 34.23 35.16
- ----------------------------------------------------------------------------------------------------------------
75.23 71.33 69.98 67.49 65.03 59.77
- ----------------------------------------------------------------------------------------------------------------
9.06 9.31 9.48 9.31 9.32 9.16
- ----------------------------------------------------------------------------------------------------------------
82.51 79.84 77.36 75.68 73.15 73.49
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
77
<PAGE> 60
HISTORICAL FINANCIAL SUMMARY--CONTINUED
REGIONS FINANCIAL CORPORATION & SUBSIDIARIES
<TABLE>
<CAPTION>
(average daily balances)
- ------------------------------------------------------------------------------------------------------------------
ASSETS 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earning assets:
Taxable securities $ 2,292,651 $ 1,444,288 $1,461,313 $1,319,108 $ 982,952
- ------------------------------------------------------------------------------------------------------------------
Tax-exempt securities 233,503 192,720 164,630 173,601 170,222
- ------------------------------------------------------------------------------------------------------------------
Federal funds sold 57,485 49,036 179,940 94,133 51,591
- ------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income 7,600,171 5,376,508 4,488,639 4,079,486 3,702,758
- ------------------------------------------------------------------------------------------------------------------
Other earning assets 285,300 251,048 186,957 131,642 141,871
- ------------------------------------------------------------------------------------------------------------------
Total earning assets 10,469,110 7,313,600 6,481,479 5,797,970 5,049,394
- ------------------------------------------------------------------------------------------------------------------
Allowance for loan losses (111,535) (83,504) (63,012) (49,732) (40,182)
- ------------------------------------------------------------------------------------------------------------------
Cash and due from banks 446,119 389,657 325,085 294,795 316,158
- ------------------------------------------------------------------------------------------------------------------
Other non-earning assets 491,753 363,681 334,447 311,178 267,909
- ------------------------------------------------------------------------------------------------------------------
Total assets $11,295,447 $ 7,983,434 $7,077,999 $6,354,211 $5,593,279
==================================================================================================================
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------
Deposits:
Non-interest-bearing $ 1,260,696 $ 1,053,111 $ 896,847 $ 786,243 $ 764,945
- ------------------------------------------------------------------------------------------------------------------
Interest-bearing 7,974,030 5,827,208 5,297,693 4,771,486 4,064,625
- ------------------------------------------------------------------------------------------------------------------
Total deposits 9,234,726 6,880,319 6,194,540 5,557,729 4,829,570
- ------------------------------------------------------------------------------------------------------------------
Borrowed funds:
Short-term 458,737 145,778 123,622 147,418 159,873
- ------------------------------------------------------------------------------------------------------------------
Long-term 519,644 140,196 52,661 19,142 23,742
- ------------------------------------------------------------------------------------------------------------------
Total borrowed funds 978,381 285,974 176,283 166,560 183,615
- ------------------------------------------------------------------------------------------------------------------
Other liabilities 169,053 122,949 99,295 81,663 74,927
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 10,382,160 7,289,242 6,470,118 5,805,952 5,088,112
- ------------------------------------------------------------------------------------------------------------------
Stockholders' equity 913,287 694,192 607,881 548,259 505,167
- ------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $11,295,447 $ 7,983,434 $7,077,999 $6,354,211 $5,593,279
==================================================================================================================
- ------------------------------------------------------------------------------------------------------------------
YEAR-END BALANCES
- ------------------------------------------------------------------------------------------------------------------
Assets $12,839,320 $10,476,348 $7,881,026 $6,745,053 $6,344,406
- ------------------------------------------------------------------------------------------------------------------
U.S. Treasury and agency securities 2,314,318 2,063,509 1,440,550 1,347,785 1,246,913
- ------------------------------------------------------------------------------------------------------------------
Obligations of states and
political subdivisions 255,526 221,328 170,302 170,497 173,074
- ------------------------------------------------------------------------------------------------------------------
Other securities 39,344 83,608 59,318 57,443 69,213
- ------------------------------------------------------------------------------------------------------------------
Total securities 2,609,188 2,368,445 1,670,170 1,575,725 1,489,200
- ------------------------------------------------------------------------------------------------------------------
Loans 9,017,802 6,833,246 5,142,531 4,274,958 4,092,262
- ------------------------------------------------------------------------------------------------------------------
Non-interest-bearing deposits 1,450,330 1,196,685 1,041,987 874,671 851,870
- ------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits 8,642,805 7,574,009 5,659,155 5,042,357 4,501,341
- ------------------------------------------------------------------------------------------------------------------
Total deposits 10,093,135 8,770,694 6,701,142 5,917,028 5,353,211
- ------------------------------------------------------------------------------------------------------------------
Stockholders' equity 1,013,870 850,965 656,655 572,971 524,132
- ------------------------------------------------------------------------------------------------------------------
Stockholders' equity per share 22.53 20.73 17.62 15.76 14.54
- ------------------------------------------------------------------------------------------------------------------
Market price per share of common stock 31.00 32.38 32.63 26.89 15.98
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes to Historical Financial Summary:
(1) All per share amounts give retroactive recognition to the effect of stock
dividends and stock splits.
(2) Non-accruing loans, of an immaterial amount, are included in earning
assets. No adjustment has been made for these loans in the calculation of
yields.
(3) Fees in the amount of $14,350,000; $14,530,000; $15,967,000; $11,923,000;
$11,161,000; $11,054,000; $9,250,000; $8,962,000; $8,858,000; $6,697,000;
and $6,134,000 are included in interest and fees on loans in the years
1994, 1993, 1992, 1991, 1990, 1989, 1988, 1987, 1986, 1985, and
1984,respectively.
(4) Yields are computed on a taxable equivalent basis, net of interest
disallowance, using marginal federal income tax rates of 35% for 1994 and
1993, 34% for 1992-1988, 40% for 1987 and 46% for 1986-1984.
(5) This summary should be read in conjunction with the related financial
statements and notes thereto on pages 53 to 74.
78
<PAGE> 61
<TABLE>
<CAPTION>
Ten Year
Annual Compound
Change Growth Rate
- ---------------------------------------------------------------------------------------------------------------
1989 1988 1987 1986 1985 1984 1993-1994 1984-1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$1,028,177 $ 942,729 $ 908,140 $ 717,585 $ 663,689 $ 704,793 58.74% 12.52%
- ---------------------------------------------------------------------------------------------------------------
168,690 191,499 247,528 297,603 321,595 332,535 21.16 -3.47
- ---------------------------------------------------------------------------------------------------------------
73,140 159,093 117,229 270,933 250,570 244,202 17.23 -13.47
- ---------------------------------------------------------------------------------------------------------------
3,293,290 2,837,856 2,508,591 2,256,053 1,956,351 1,664,062 41.36 16.40
- ---------------------------------------------------------------------------------------------------------------
155,618 78,557 59,358 64,770 32,779 29,156 13.64 25.62
- ---------------------------------------------------------------------------------------------------------------
4,718,915 4,209,734 3,840,846 3,606,944 3,224,984 2,974,748 43.15 13.41
- ---------------------------------------------------------------------------------------------------------------
(37,188) (35,307) (34,614) (33,201) (29,419) (26,085) 33.57 15.64
- ---------------------------------------------------------------------------------------------------------------
298,334 305,586 286,249 263,529 272,917 238,900 14.49 6.44
- ---------------------------------------------------------------------------------------------------------------
234,654 225,464 203,770 191,332 189,938 174,751 35.22 10.90
- ---------------------------------------------------------------------------------------------------------------
$5,214,715 $4,705,477 $4,296,251 $4,028,604 $3,658,420 $3,362,314 41.49% 12.88%
===============================================================================================================
$ 765,398 $ 802,286 $ 811,573 $ 813,135 $ 807,723 $ 737,956 19.71% 5.50%
- ---------------------------------------------------------------------------------------------------------------
3,612,024 3,176,418 2,773,207 2,529,762 2,200,470 2,046,090 36.84 14.57
- ---------------------------------------------------------------------------------------------------------------
4,377,422 3,978,704 3,584,780 3,342,897 3,008,193 2,784,046 34.22 12.74
- ---------------------------------------------------------------------------------------------------------------
252,475 171,975 212,627 220,875 215,643 185,927 214.68 9.45
- ---------------------------------------------------------------------------------------------------------------
42,119 54,518 31,637 31,433 33,445 31,069 270.66 32.54
- ---------------------------------------------------------------------------------------------------------------
294,594 226,493 244,264 252,308 249,088 216,996 242.12 16.25
- ---------------------------------------------------------------------------------------------------------------
69,988 61,997 60,119 58,150 60,309 53,165 37.50 12.26
- ---------------------------------------------------------------------------------------------------------------
4,742,004 4,267,194 3,889,163 3,653,355 3,317,590 3,054,207 42.43 13.02
- ---------------------------------------------------------------------------------------------------------------
472,711 438,283 407,088 375,249 340,830 308,107 31.56 11.48
- ---------------------------------------------------------------------------------------------------------------
$5,214,715 $4,705,477 $4,296,251 $4,028,604 $3,658,420 $3,362,314 41.49% 12.88%
===============================================================================================================
$5,549,612 $5,173,609 $4,390,861 $4,456,557 $3,919,682 $3,711,750 22.56% 13.21%
- ---------------------------------------------------------------------------------------------------------------
929,212 996,902 855,990 804,012 649,569 695,341 12.15 12.78
- ---------------------------------------------------------------------------------------------------------------
171,813 175,796 216,033 287,863 308,724 335,626 10.91 -3.08
- ---------------------------------------------------------------------------------------------------------------
32,062 49,670 5,535 11,638 2,051 3,203 -40.91 31.47
- ---------------------------------------------------------------------------------------------------------------
1,133,087 1,222,368 1,077,558 1,103,513 960,344 1,034,170 10.16 9.70
- ---------------------------------------------------------------------------------------------------------------
3,552,082 3,123,331 2,675,240 2,486,039 2,166,810 1,863,314 31.97 17.08
- ---------------------------------------------------------------------------------------------------------------
836,270 840,277 891,538 973,267 879,829 847,699 21.20 5.52
- ---------------------------------------------------------------------------------------------------------------
3,908,094 3,491,438 2,837,062 2,803,829 2,357,376 2,188,003 14.11 14.73
- ---------------------------------------------------------------------------------------------------------------
4,744,364 4,331,715 3,728,600 3,777,096 3,237,205 3,035,702 15.08 12.77
- ---------------------------------------------------------------------------------------------------------------
489,441 455,595 417,814 392,679 356,857 320,916 19.14 12.19
- ---------------------------------------------------------------------------------------------------------------
13.48 12.54 11.64 10.83 9.90 8.92 8.68 9.71
- ---------------------------------------------------------------------------------------------------------------
15.64 13.84 12.38 19.47 14.63 9.79 -4.26 12.22
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
79
<PAGE> 1
Exhibit 21 - List of Subsidiaries at December 31, 1994:
First Alabama Bank (1)
Union Bank & Trust Company(2)
Regions Bank of Florida(3)
Regions Bank of Georgia(4)
First Rome Bank(4)
Regions Bank of Tennessee(5)
Regions Bank of Louisiana(6)
Bank of New Roads(7)
FAB Agency, Inc. (8)
Regions Financial Leasing, Inc. (8)
Regions Agency, Inc. (8)
Regions Financial Building Corporation (8)
First Alabama Investments, Inc. (8)
Real Estate Financing, Inc. (8)
Regions Life Insurance Company (9)
The Georgia Company (10)
Regions Title Company (11)
Regions Corporation (12)
First Insurance Corporation (13)
Secor Realty and Investment (8)
Secor Insurance Agency, Inc. Alabama(8)
Secor Insurance Agency, Inc. Louisiana(13)
Secor Credit Corporation (8)
(1) Affiliate state bank in Alabama chartered under the banking laws of
Alabama.
(2) Affiliate state bank in Alabama chartered under the banking laws of
Alabama which was merged into First Alabama Bank in January of 1995.
(3) Affiliate state bank in Florida chartered under the banking laws of
Florida.
(4) Affiliate state bank in Georgia chartered under the banking laws of
Georgia.
(5) Affiliate state bank in Tennessee chartered under the banking laws of
Tennessee
(6) Affiliate state bank in Louisiana chartered under the banking laws of
Louisiana.
(7) Affiliate state bank in Louisiana chartered under the banking laws of
Louisiana which was merged into Regions Bank of Louisiana in March of
1995.
<PAGE> 2
(8) Bank-related subsidiary organized under the Business Corporation Act
of the state of Alabama.
(9) Bank-related subsidiary incorporated under the laws of the state of
Arizona and doing business principally in the state of Alabama.
(10) Bank-related subsidiary (inactive) incorporated under the laws of the
state of Georgia.
(11) Bank-related subsidiary incorporated under the laws of the state of
Tennessee.
(12) Second tier holding company incorporated in the state of Delaware.
(13) Bank-related subsidiary incorporated under the laws of the state of
Louisiana.
<PAGE> 1
EXHIBIT 23 - CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Regions Financial Corporation and subsidiaries of our report dated February
6, 1995, included in the 1994 Annual Report to Stockholders of Regions
Financial Corporation.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-36936) pertaining to the Employee Stock Purchase Plan of
Regions Financial Corporation, in the Registration Statement (Form S-8 No.
33-41784) pertaining to the Directors' Stock Investment Plan of Regions
Financial Corporation, in Post Effective Amendment No. 1 to the Registration
Statement (Form S-8 No. 2-95291) pertaining to the 1983 Stock Option Plan, in
the Registration Statement (Form S-8 No. 33-24370) pertaining to the 1988 Stock
Option Plan, in the Registration Statement (Form S-8 No. 33-40728) pertaining
to the 1991 Long-Term Incentive Plan and in the Registration Statement (Form
S-3 No. 33-45714), and their related Prospectuses of our report dated February
6, 1995, with respect to the consolidated financial statements of Regions
Financial Corporation and subsidiaries incorporated by reference in the Annual
Report (Form 10-K) for the year ended December 31, 1994.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-36936) pertaining to the Employee Stock Purchase Plan of
Regions Financial Corporation and in the related Prospectus of our report dated
March 22, 1995, with respect to the financial statements of the Regions
Financial Corporation Employee Stock Purchase Plan included in the Annual
Report (Form 11-K), filed as an exhibit to Form 10-K, for the year ended
December 31, 1994.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-41784) pertaining to the Directors' Stock Investment Plan of
Regions Financial Corporation and in the related Prospectus of our report dated
March 22, 1995, with respect to the financial statements of the Regions
Financial Corporation Directors' Stock Investment Plan included in the Annual
Report (Form 11-K), filed as an exhibit to Form 10-K, for the year ended
December 31, 1994.
/s/ ERNST & YOUNG LLP
Birmingham, Alabama
March 24, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF REGIONS FINANCIAL CORPORATION FOR THE YEAR ENDED
DECEMBER 31, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 551,084,000
<INT-BEARING-DEPOSITS> 630,000
<FED-FUNDS-SOLD> 45,074,000
<TRADING-ASSETS> 24,853,000
<INVESTMENTS-HELD-FOR-SALE> 660,513,000
<INVESTMENTS-CARRYING> 1,948,675,000
<INVESTMENTS-MARKET> 1,874,117,000
<LOANS> 9,017,802,000
<ALLOWANCE> 116,988,000
<TOTAL-ASSETS> 12,839,320,000
<DEPOSITS> 10,093,135,000
<SHORT-TERM> 1,011,541,000
<LIABILITIES-OTHER> 201,536,000
<LONG-TERM> 519,238,000
<COMMON> 29,052,000
0
0
<OTHER-SE> 984,818,000
<TOTAL-LIABILITIES-AND-EQUITY> 12,839,320,000
<INTEREST-LOAN> 603,092,000
<INTEREST-INVEST> 161,777,000
<INTEREST-OTHER> 20,910,000
<INTEREST-TOTAL> 785,779,000
<INTEREST-DEPOSIT> 295,785,000
<INTEREST-EXPENSE> 350,139,000
<INTEREST-INCOME-NET> 435,640,000
<LOAN-LOSSES> 19,003,000
<SECURITIES-GAINS> 627,000
<EXPENSE-OTHER> 343,067,000
<INCOME-PRETAX> 216,978,000
<INCOME-PRE-EXTRAORDINARY> 216,978,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 145,884,000
<EPS-PRIMARY> 3.40
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.26
<LOANS-NON> 38,035,000
<LOANS-PAST> 5,622,000
<LOANS-TROUBLED> 2,818,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 100,762,000
<CHARGE-OFFS> 23,100,000
<RECOVERIES> 10,368,000
<ALLOWANCE-CLOSE> 116,988,000
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 116,988,000
</TABLE>
<PAGE> 1
Exhibit 99 a.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
COMMISSION FILE NUMBER 33-36936
A. Full title of the plan and address, if different from that of the issuer
named below:
EMPLOYEE STOCK PURCHASE PLAN
OF
REGIONS FINANCIAL CORPORATION
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
REGIONS FINANCIAL CORPORATION
P. O. BOX 10247
BIRMINGHAM, ALABAMA 35202
<PAGE> 2
EMPLOYEE STOCK PURCHASE PLAN OF
REGIONS FINANCIAL CORPORATION
The following report of independent auditors and financial statements of the
registrant are submitted herewith:
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Report of Independent Auditors 1
Statements of Financial Condition - December 31, 1994 and 1993 2
Statements of Income and Changes in Plan Equity for the Years
Ended December 31, 1994, 1993, and 1992 3
Notes to Financial Statements 4
</TABLE>
All schedules (Nos. I, II and III) for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
inapplicable or the required disclosures have been made elsewhere in the
financial statements and notes thereto. These schedules have therefore been
omitted.
i
<PAGE> 3
Report of Independent Auditors
Benefits Committee
Employee Stock Purchase Plan of
Regions Financial Corporation
We have audited the accompanying statements of financial condition of the
Employee Stock Purchase Plan of Regions Financial Corporation as of December
31, 1994 and 1993, and the related statements of income and changes in plan
equity for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Plan's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Plan at December 31, 1994
and 1993, and the income and changes in plan equity for each of the three years
in the period ended December 31, 1994 in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
Birmingham, Alabama
March 22, 1995
1
<PAGE> 4
STATEMENTS OF FINANCIAL CONDITION
EMPLOYEE STOCK PURCHASE PLAN OF
REGIONS FINANCIAL CORPORATION
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Assets held by First Alabama Bank
as trustee and custodian:
Common Stock of Regions Financial
Corporation
at market value - 353,483 shares
in 1994 and 349,039 shares
in 1993 (cost $9,414,643
in 1994 and $8,357,050 in 1993) $ 10,957,973 $ 11,300,157
Cash 0 111
Dividends receivable 104,944 89,907
------------ ------------
Total Assets $ 11,062,917 $ 11,390,175
============ ============
PLAN EQUITY
Plan equity (2,954 and 2,822
participants in 1994
and 1993, respectively) $ 11,062,917 $ 11,390,175
------------ ------------
Total Plan Equity $ 11,062,917 $ 11,390,175
============ ============
</TABLE>
See notes to financial statements.
2
<PAGE> 5
STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
EMPLOYEE STOCK PURCHASE PLAN OF
REGIONS FINANCIAL CORPORATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Dividend income $ 404,049 $ 343,797 $ 282,840
Gain realized on distribution of common
stock of Regions Financial
Corporation to participants upon
withdrawal 868,405 995,345 801,873
Unrealized (depreciation) appreciation
of Common Stock of Regions Financial
Corporation (1,399,777) (1,198,108) 1,001,764
Contributions received:
From participants 2,579,395 2,450,959 1,969,476
From participating companies 884,578 901,966 731,658
Withdrawals by participants (3,663,908) (3,038,815) (2,371,471)
----------- ----------- -----------
Income and changes in plan equity (327,258) 455,144 2,416,140
Plan equity at beginning of period 11,390,175 10,935,031 8,518,891
----------- ----------- -----------
PLAN EQUITY AT DECEMBER 31 $11,062,917 $11,390,175 $10,935,031
=========== =========== ===========
</TABLE>
( ) Indicates deduction
See notes to financial statements.
3
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
EMPLOYEE STOCK PURCHASE PLAN OF
REGIONS FINANCIAL CORPORATION
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Formation of the Plan: First Alabama Bancshares, Inc. which is now Regions
Financial Corporation (Regions or the Company) formed the Employee Stock
Purchase Plan of Regions Financial Corporation (the Plan) effective September
1, 1978. Subsequent to December 31, 1994, the name of the Plan has been
changed from the Employee Stock Purchase Plan of First Alabama Bancshares, Inc.
to the Employee Stock Purchase Plan of Regions Financial Corporation; these
financial statements reflect the change in the name of the Plan.
Investments: The investment in Common Stock of the Company is stated at market
value. The NASDAQ quoted market price of Regions Financial Corporation Common
Stock was $31.00 per share at December 31, 1994 and $32.375 per share at
December 31, 1993. The average cost of the shares distributed is used to
compute gain or loss.
Income: Dividend income is accrued on the ex-dividend date.
Contributions: Contributions of participants and participating companies (see
Notes B and C) are accounted for on the accrual basis.
Income Taxes: The Plan is not subject to income tax. Participants must treat
as ordinary income their pro rata share of contributions to the Plan by the
participating companies. Cash dividends paid on stock purchased under the Plan
will be taxed to the participants on a pro rata basis for federal and state, as
applicable, income tax purposes.
Expenses of the Plan: All expenses incurred in the administration of the Plan,
other than brokerage fees, are paid by the participating companies. Brokerage
fees are included in the price of shares purchased.
NOTE B - PROVISIONS OF THE PLAN
The Plan is a voluntary contribution plan to which Regions and subsidiaries
contribute monthly, from 25% to 50% of the employees' monthly contributions.
Participating employees may contribute a maximum of 6% of their monthly salary
with a minimum monthly contribution of $5.00. Participation in the Plan is
open to those employees at least 21 years of age who have been employed with
the Company at least one year. Employees are immediately vested upon
contribution to the Plan to the extent of the employee's and the employer's
contribution to date. In the event the Plan terminates, or the employee
terminates either his or her employment with the Company or participation in
the Plan, the employee will receive a certificate for all whole shares owned in
the Plan, cash for any additional fractional shares owned, and cash for any
remaining balance in such participant's cash account.
4
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED
Contributions by participating companies or divisions of Regions and
participants' contributions are as follows:
<TABLE>
<CAPTION>
Contributions Received
------------------------------------------------
Participating Company or Division Company Employee Total
- --------------------------------- ---------- ----------- ---------
<S> <C> <C> <C>
Year ended December 31, 1994:
Regions Financial Corporation $ 41,132 $ 108,677 $ 149,809
First Alabama Bank, Montgomery 78,791 218,481 297,272
First Alabama Bank, Birmingham 93,362 257,507 350,869
First Alabama Bank, Huntsville 49,765 128,906 178,671
First Alabama Bank, Tuscaloosa 29,290 79,265 108,555
First Alabama Bank, Lee County 3,691 11,595 15,286
First Alabama Bank, Dothan 24,728 62,258 86,986
First Alabama Bank, Selma 4,102 11,567 15,669
First Alabama Bank, Gadsden 8,837 21,615 30,452
First Alabama Bank, Athens 14,663 37,021 51,684
First Alabama Bank, Baldwin County 5,584 16,573 22,157
First Alabama Bank, Phenix City 2,790 8,813 11,603
First Alabama Bank, Cullman 5,681 16,296 21,977
First Alabama Bank, Mobile 89,910 264,407 354,317
First Alabama Bank, Sumter County 4,581 13,722 18,303
First Alabama Bank, Talladega County 7,457 21,257 28,714
First Alabama Bank, Chilton County 5,716 18,434 24,150
First Alabama Bank, Troy 7,441 21,613 29,054
First Alabama Bank, Anniston 13,072 41,618 54,690
First Alabama Bank, South Baldwin 9,964 32,535 42,499
First Alabama Bank, Centre 3,729 12,240 15,969
First Alabama Bank, Covington County 7,839 24,712 32,551
First Alabama Bank, Shelby County 5,419 18,338 23,757
First Alabama Bank, Decatur 14,934 48,689 63,623
First Alabama Bank, Oneonta 5,733 19,627 25,360
First Alabama Bank, Enterprise 3,817 12,296 16,113
First Alabama Bank, Albertville 6,211 18,524 24,735
First Alabama Bank, Choctaw 4,201 14,218 18,419
First Alabama Bank, Fayette 2,162 8,244 10,406
Regions Bank of Louisiana 20,916 80,848 101,764
Bank of New Roads 1,191 4,768 5,959
Regions Bank of Florida 19,036 67,384 86,420
Regions Bank of Georgia 4,875 16,043 20,918
First Rome Bank 1,336 5,345 6,681
Real Estate Financing, Inc. 75,184 235,458 310,642
Regions Bank of Tennessee 40,394 113,594 153,988
First Alabama Investments, Inc. 19,591 64,131 83,722
Regions Title Co. 253 765 1,018
</TABLE>
5
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
-------------------------------------------------
Participating Company or Division Company Employee Total
- --------------------------------- -------- ---------- ----------
<S> <C> <C> <C>
Year ended December 31, 1994 continued:
Corporate 122,334 350,742 473,076
First Alabama Bank, Operations 24,866 71,269 96,135
-------- ---------- ----------
TOTALS $884,578 $2,579,395 $3,463,973
======== ========== ==========
</TABLE>
6
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
------------------------------------------------
Participating Company or Division Company Employee Total
- --------------------------------- -------- ---------- ----------
<S> <C> <C> <C>
Year ended December 31, 1993:
Regions Financial Corporation $ 42,411 $ 104,656 $ 147,067
First Alabama Bank, Montgomery 83,406 217,520 300,926
First Alabama Bank, Birmingham 126,793 332,553 459,346
First Alabama Bank, Huntsville 53,045 129,362 182,407
First Alabama Bank, Tuscaloosa 28,968 76,053 105,021
First Alabama Bank, Lee County 4,512 13,835 18,347
First Alabama Bank, Dothan 26,806 65,981 92,787
First Alabama Bank, Selma 4,199 11,204 15,403
First Alabama Bank, Gadsden 9,086 22,602 31,688
First Alabama Bank, Athens 14,523 36,732 51,255
First Alabama Bank, Baldwin County 6,469 17,765 24,234
First Alabama Bank, Phenix City 3,421 10,299 13,720
First Alabama Bank, Cullman 6,043 16,461 22,504
First Alabama Bank, Mobile 94,982 260,302 355,284
First Alabama Bank, Sumter County 4,864 13,622 18,486
First Alabama Bank, Talladega County 7,765 20,881 28,646
First Alabama Bank, Chilton County 5,324 16,419 21,743
First Alabama Bank, Troy 7,727 21,294 29,021
First Alabama Bank, Anniston 14,382 42,986 57,368
First Alabama Bank, South Baldwin 11,684 35,087 46,771
First Alabama Bank, Centre 3,846 11,640 15,486
First Alabama Bank, Covington County 7,820 23,221 31,041
First Alabama Bank, Shelby County 5,568 17,690 23,258
First Alabama Bank, Decatur 17,575 52,667 70,242
First Alabama Bank, Oneonta 5,745 18,409 24,154
First Alabama Bank, Enterprise 4,094 12,011 16,105
First Alabama Bank, Albertville 7,047 19,795 26,842
First Alabama Bank, Choctaw 4,781 14,897 19,678
Regions Bank of Florida 15,346 50,087 65,433
First Alabama Bank, Columbus, Georgia 4,087 13,163 17,250
Real Estate Financing, Inc. 80,902 238,590 319,492
First Security Bank of Tennessee 41,806 103,878 145,684
Franklin County Bank 2,176 8,703 10,879
First Alabama Investments, Inc. 19,342 59,345 78,687
Corporate 125,421 341,249 466,670
-------- ---------- ----------
TOTALS $901,966 $2,450,959 $3,352,925
======== ========== ==========
</TABLE>
7
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
---------------------------------------------
Participating Company or Division Company Employee Total
- --------------------------------- --------- --------- ----------
<S> <C> <C> <C>
Year ended December 31, 1992:
Regions Financial Corporation $ 36,469 $ 89,626 $ 126,095
First Alabama Bank, Montgomery 73,609 188,557 262,166
First Alabama Bank, Birmingham 103,791 270,164 373,955
First Alabama Bank, Huntsville 50,891 121,913 172,804
First Alabama Bank, Tuscaloosa 25,472 65,920 91,392
First Alabama Bank, Lee County 3,978 11,621 15,599
First Alabama Bank, Dothan 20,649 51,674 72,323
First Alabama Bank, Selma 4,707 11,637 16,344
First Alabama Bank, Gadsden 7,114 17,609 24,723
First Alabama Bank, Athens 13,099 32,546 45,645
First Alabama Bank, Baldwin County 6,796 18,181 24,977
First Alabama Bank, Phenix City 2,441 7,122 9,563
First Alabama Bank, Cullman 4,622 13,794 18,416
First Alabama Bank, Mobile 87,160 235,638 322,798
First Alabama Bank, Sumter County 3,570 9,980 13,550
First Alabama Bank, Talladega County 8,260 22,022 30,282
First Alabama Bank, Chilton County 3,730 10,681 14,411
First Alabama Bank, Troy 6,811 20,284 27,095
First Alabama Bank, Anniston 10,953 34,674 45,627
First Alabama Bank, South Baldwin 8,306 25,248 33,554
First Alabama Bank, Centre 3,206 9,422 12,628
First Alabama Bank, Covington County 6,542 18,710 25,252
First Alabama Bank, Shelby County 5,116 16,032 21,148
First Alabama Bank, Decatur 15,982 47,115 63,097
First Alabama Bank, Oneonta 3,947 12,381 16,328
First Alabama Bank, Enterprise 3,215 9,616 12,831
First Alabama Bank, Albertville 5,206 15,307 20,513
First Alabama Bank, Choctaw 3,752 11,890 15,642
Sunshine Bank 11,029 35,413 46,442
First Alabama Bank, Columbus, Georgia 2,202 6,124 8,326
Real Estate Financing, Inc. 62,439 180,022 242,461
First Alabama Investments, Inc. 16,319 50,355 66,674
Corporate 110,275 298,198 408,473
--------- ---------- ----------
TOTALS $ 731,658 $1,969,476 $2,701,134
========= ========== ==========
</TABLE>
8
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - UNREALIZED APPRECIATION OF COMMON STOCK OF REGIONS FINANCIAL
CORPORATION
The unrealized appreciation of Common Stock of Regions Financial Corporation is
as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------ ------------
<S> <C> <C> <C>
Unrealized appreciation at beginning
of year $ 2,943,107 $ 4,141,215 $ 3,139,451
Unrealized appreciation at end of
year 1,543,330 2,943,107 4,141,215
------------ ------------ ------------
(DECREASE) INCREASE IN UNREALIZED
APPRECIATION $ (1,399,777) $ (1,198,108) $ 1,001,764
============ ============ ============
</TABLE>
NOTE E - GAIN REALIZED ON DISTRIBUTION OF COMMON STOCK OF REGIONS FINANCIAL
CORPORATION TO PARTICIPANTS UPON WITHDRAWAL
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- ------------
<S> <C> <C> <C>
Market value of shares distributed $ 3,651,704 $ 3,029,892 $ 2,365,464
Cost of shares distributed 2,783,299 2,034,547 1,563,591
-------------- -------------- ------------
TOTAL REALIZED GAIN $ 868,405 $ 995,345 $ 801,873
============= ============= ============
</TABLE>
9
<PAGE> 12
ITEM 9b. Exhibits
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Employee Stock Purchase Plan Benefits Committee has duly caused the annual
report to be signed by the undersigned thereunto duly authorized.
EMPLOYEE STOCK PURCHASE PLAN
REGIONS FINANCIAL CORPORATION
Date: March 22, 1995 By: /s/ Douglas W. Graham
---------------------------------
Douglas W. Graham
Senior Vice President - Personnel
Regions Financial Corporation
10
<PAGE> 1
Exhibit 99 b.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
COMMISSION FILE NUMBER 33-41784
A. Full title of the plan and address, if different from that of the
issuer named below:
DIRECTORS' STOCK INVESTMENT PLAN
OF
REGIONS FINANCIAL CORPORATION
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
REGIONS FINANCIAL CORPORATION
P. O. BOX 10247
BIRMINGHAM, ALABAMA 35202
<PAGE> 2
DIRECTORS' STOCK INVESTMENT PLAN OF
REGIONS FINANCIAL CORPORATION
The following report of independent auditors and financial statements of the
registrant are submitted herewith:
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Report of Independent Auditors 1
Statements of Financial Condition - December 31, 1994 and 1993 2
Statements of Income and Changes in Plan Equity for the Years
Ended December 31, 1994, 1993, and 1992 3
Notes to Financial Statements 4
</TABLE>
All schedules (Nos. I, II and III) for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
inapplicable or the required disclosures have been made elsewhere in the
financial statements and notes thereto. These schedules have therefore been
omitted.
i
<PAGE> 3
Report of Independent Auditors
Benefits Committee
Directors' Stock Investment Plan of
Regions Financial Corporation
We have audited the accompaning statements of financial condition of the
Directors' Stock Investment Plan of Regions Financial Corporation as of
December 31, 1994 and 1993, and the related statements of income and changes
in plan equity for each of the three years in the period ended December 31,
1994. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Plan at December 31, 1994
and 1993, and the income and changes in plan equity for each of the three years
in the period ended December 31, 1994 in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
Birmingham, Alabama
March 22, 1995
1
<PAGE> 4
STATEMENTS OF FINANCIAL CONDITION
DIRECTORS' STOCK INVESTMENT PLAN OF
REGIONS FINANCIAL CORPORATION
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------
1994 1993
---------- ----------
ASSETS
<S> <C> <C>
Assets held by First Alabama Bank as
trustee and custodian:
Common Stock of Regions Financial
Corporation at market value
317,013 shares in 1994 and
303,229 shares in 1993 (cost
$7,109,084 in 1994 and $6,242,718
in 1993) $9,827,403 $9,817,013
Cash 0 72
Dividends receivable 94,669 77,955
---------- ----------
Total Assets $9,922,072 $9,895,040
========== ==========
LIABILITIES AND PLAN EQUITY
Payable to participants for
withdrawals $ 0 $ 713
Plan equity (274 and 266 participants
in 1994 and 1993, respectively) 9,922,072 9,894,327
---------- ----------
Total Liabilities and Plan Equity $9,922,072 $9,895,040
========== ==========
</TABLE>
See notes to financial statements.
2
<PAGE> 5
STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
DIRECTORS' STOCK INVESTMENT PLAN OF
REGIONS FINANCIAL CORPORATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Dividend income $ 370,395 $ 314,999 $ 261,773
Gain recognized on distribution of
Common Stock of Regions Financial
Corporation to participants upon
withdrawal 407,960 692,983 191,613
Unrealized (depreciation) appreciation
of Common Stock of Regions Financial
Corporation (855,976) (847,239) 1,542,304
Contributions received:
From participants 987,856 970,438 993,040
From participating companies 246,969 242,609 248,260
Withdrawals by participants (1,129,459) (1,665,646) (497,341)
------------ ------------ ------------
Income and changes in plan equity 27,745 (291,856) 2,739,649
Plan equity at beginning of period 9,894,327 10,186,183 7,446,534
----------- ----------- -----------
PLAN EQUITY AT DECEMBER 31 $ 9,922,072 $ 9,894,327 $10,186,183
=========== =========== ===========
</TABLE>
( ) Indicates deduction
See notes to financial statements.
3
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
DIRECTORS' STOCK INVESTMENT PLAN OF
REGIONS FINANCIAL CORPORATION
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Formation of the Plan: First Alabama Bancshares, Inc. which is now Regions
Financial Corporation (Regions or the Company) formed the Directors' Stock
Investment Plan of Regions Financial Corporation (the Plan) effective May 1,
1984. Subsequent to December 31, 1994, the name of the Plan has been changed
from the Directors' Stock Investment Plan of First Alabama Bancshares, Inc. to
the Directors' Stock Investment Plan of Regions Financial Corporation; these
financial statements reflect the change in the name of the Plan.
Investments: The investment in Common Stock of the Company is stated at market
value. The NASDAQ quoted market price of Regions Financial Corporation Common
Stock was $31.00 per share at December 31, 1994 and $32.375 per share at
December 31, 1993. The average cost of the shares distributed is used to
compute gain or loss.
Income: Dividend income is accrued on the ex-dividend date.
Contributions: Contributions of participants and participating companies (see
Notes B and C) are accounted for on the accrual basis.
Income Taxes: The Plan is not subject to income tax. Participants must treat
as ordinary income their pro rata share of contributions to the Plan by the
participating companies. Cash dividends paid on stock purchased under the plan
will be taxed to the participants on a pro rata basis for federal and state, as
applicable, income tax purposes.
Expenses of the Plan: All expenses incurred in the administration of the Plan,
other than brokerage fees, are paid by the participating companies. Brokerage
fees are included in the price of shares purchased.
NOTE B - PROVISIONS OF THE PLAN
The Plan is a voluntary contribution plan to which the Company contributes 25%
of actual contributions made by participants. Participating directors may
contribute all or any part of their directors' fees. Participation in the
Plan is open to any person who is a director of Regions Financial Corporation,
any subsidiary or any body designated as a local division's Board of Directors
who is not an employee of Regions Financial Corporation, any subsidiary or
local division. Directors are immediately vested upon contribution to the Plan
to the extent of the director's and the Company's contribution to date. In the
event the Plan terminates, or the director terminates either his or her
position with the Company or participation in the Plan, the director will
receive a certificate for all whole shares owned in the Plan, cash for any
additional fractional shares owned, and cash for any remaining balance in such
participant's cash account.
4
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED
Contributions by participating companies or divisions of Regions and
participants' contributions are as follows:
<TABLE>
<CAPTION>
Contributions Received
--------------------------------------------------
Participating Company or Division Company Director Total
- --------------------------------- -------- ---------- ----------
<S> <C> <C> <C>
Year ended December 31, 1994:
Regions Financial Corporation $ 36,738 $ 146,950 $ 183,688
First Alabama Bank, Montgomery 11,600 46,400 58,000
First Alabama Bank, Birmingham 21,425 85,700 107,125
First Alabama Bank, Huntsville 12,238 48,950 61,188
First Alabama Bank, Tuscaloosa 10,488 41,950 52,438
First Alabama Bank, Dothan 7,738 30,950 38,688
First Alabama Bank, Selma 4,125 16,500 20,625
First Alabama Bank, Gadsden 6,431 25,724 32,155
First Alabama Bank, Athens 3,344 13,374 16,718
First Alabama Bank, Baldwin County 3,825 15,300 19,125
First Alabama Bank, Guntersville 3,225 12,900 16,125
First Alabama Bank, Phenix City 2,550 10,200 12,750
First Alabama Bank, Mobile 28,675 114,700 143,375
First Alabama Bank, Lee County 4,200 16,800 21,000
First Alabama Bank, Cullman 4,300 17,200 21,500
First Alabama Bank, Lauderdale County 2,188 8,750 10,938
First Alabama Bank, Conecuh County 1,719 6,874 8,593
First Alabama Bank, Sumter County 1,500 6,000 7,500
First Alabama Bank, Talladega County 7,550 30,200 37,750
First Alabama Bank, Chilton County 1,500 6,000 7,500
First Alabama Bank, Troy 2,956 11,824 14,780
First Alabama Bank, Anniston 11,263 45,050 56,313
First Alabama Bank, South Baldwin 2,938 11,750 14,688
First Alabama Bank, Centre 1,650 6,600 8,250
First Alabama Bank, Covington County 3,250 13,000 16,250
First Alabama Bank, Shelby County 2,800 11,200 14,000
First Alabama Bank, Decatur 4,450 17,800 22,250
First Alabama Bank, Oneonta 5,881 23,525 29,406
First Alabama Bank, Enterprise 3,750 15,000 18,750
First Alabama Bank, Choctaw 700 2,800 3,500
First Alabama Bank, Albertville 2,800 11,200 14,000
First Alabama Bank, Fayette 338 1,350 1,688
Regions Bank of Louisiana 6,088 24,350 30,438
Regions Bank of Florida 9,590 38,360 47,950
Regions Bank of Georgia 3,600 14,400 18,000
</TABLE>
5
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
--------------------------------------------------
Participating Company or Division Company Director Total
- --------------------------------- -------- -------- ----------
<S> <C> <C> <C>
Year ended December 31, 1994 continued:
Regions Bank of Tennessee 9,331 37,325 46,656
Real Estate Financing, Inc. 225 900 1,125
-------- -------- ----------
TOTALS $246,969 $987,856 $1,234,825
======== ======== ==========
</TABLE>
6
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
-------------------------------------------
Participating Company or Division Company Director Total
- --------------------------------- -------- --------- ---------
<S> <C> <C> <C>
Year ended December 31, 1993:
Regions Financial Corporation $ 53,671 $ 214,700 $ 268,371
First Alabama Bank, Montgomery 9,125 36,500 45,625
First Alabama Bank, Birmingham 20,405 81,620 102,025
First Alabama Bank, Huntsville 13,244 52,975 66,219
First Alabama Bank, Tuscaloosa 10,938 43,750 54,688
First Alabama Bank, Dothan 7,900 31,600 39,500
First Alabama Bank, Selma 5,250 21,000 26,250
First Alabama Bank, Gadsden 6,000 24,000 30,000
First Alabama Bank, Athens 2,625 10,500 13,125
First Alabama Bank, Baldwin County 3,628 14,513 18,141
First Alabama Bank, Guntersville 3,050 12,200 15,250
First Alabama Bank, Phenix City 3,356 13,425 16,781
First Alabama Bank, Mobile 24,575 98,300 122,875
First Alabama Bank, Lee County 3,000 12,000 15,000
First Alabama Bank, Cullman 4,550 18,200 22,750
First Alabama Bank, Lauderdale County 2,063 8,250 10,313
First Alabama Bank, Conecuh County 1,875 7,500 9,375
First Alabama Bank, Sumter County 1,950 7,800 9,750
First Alabama Bank, Talladega County 7,556 30,225 37,781
First Alabama Bank, Chilton County 1,463 5,850 7,313
First Alabama Bank, Troy 4,000 16,000 20,000
First Alabama Bank, Anniston 10,513 42,050 52,563
First Alabama Bank, South Baldwin 2,938 11,750 14,688
First Alabama Bank, Centre 1,925 7,700 9,625
First Alabama Bank, Covington County 3,250 13,000 16,250
First Alabama Bank, Shelby County 3,500 14,000 17,500
First Alabama Bank, Decatur 4,363 17,450 21,813
First Alabama Bank, Oneonta 5,438 21,750 27,188
First Alabama Bank, Enterprise 3,625 14,500 18,125
First Alabama Bank, Choctaw 700 2,800 3,500
First Alabama Bank, Albertville 2,750 11,000 13,750
Regions Bank of Florida 3,901 15,600 19,501
First Alabama Bank of Columbus, Georgia 2,569 10,275 12,844
</TABLE>
7
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
-------------------------------------------
Participating Company or Division Company Director Total
- --------------------------------- -------- -------- ----------
<S> <C> <C> <C>
Year ended December 31, 1993 continued:
First Security Bank of Tennessee 4,868 19,475 24,343
Franklin County Bank 1,920 7,680 9,600
Real Estate Financing, Inc. 125 500 625
-------- -------- ----------
TOTALS $242,609 $970,438 $1,213,047
======== ======== ==========
</TABLE>
8
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
----------------------------------------------
Participating Company or Division Company Director Total
- --------------------------------- -------- -------- ----------
<S> <C> <C> <C>
Year ended December 31, 1992:
Regions Financial Corporation $ 56,194 $224,775 $ 280,969
First Alabama Bank, Montgomery 11,650 46,600 58,250
First Alabama Bank, Birmingham 17,435 69,740 87,175
First Alabama Bank, Huntsville 12,012 48,050 60,062
First Alabama Bank, Conecuh 2,188 8,750 10,938
First Alabama Bank, Tuscaloosa 11,425 45,700 57,125
First Alabama Bank, Lee County 4,500 18,000 22,500
First Alabama Bank, Dothan 9,562 38,250 47,812
First Alabama Bank, Selma 6,219 24,875 31,094
First Alabama Bank, Gadsden 5,969 23,875 29,844
First Alabama Bank, Athens 3,937 15,750 19,687
First Alabama Bank, Baldwin County 3,531 14,125 17,656
First Alabama Bank, Lauderdale County 2,188 8,750 10,938
First Alabama Bank, Guntersville 2,700 10,800 13,500
First Alabama Bank, Phenix City 6,300 25,200 31,500
First Alabama Bank, Cullman 4,775 19,100 23,875
First Alabama Bank, Mobile 27,950 111,800 139,750
First Alabama Bank, Sumter County 1,350 5,400 6,750
First Alabama Bank, Talladega County 8,700 34,800 43,500
First Alabama Bank, Chilton County 2,175 8,700 10,875
First Alabama Bank, Troy 3,088 12,350 15,438
First Alabama Bank, Anniston 12,425 49,700 62,125
First Alabama Bank, South Baldwin 3,000 12,000 15,000
First Alabama Bank, Centre 1,250 5,000 6,250
First Alabama Bank, Covington County 3,250 13,000 16,250
First Alabama Bank, Shelby County 2,500 10,000 12,500
First Alabama Bank, Decatur 5,487 21,950 27,437
First Alabama Bank, Oneonta 6,112 24,450 30,562
First Alabama Bank, Enterprise 3,750 15,000 18,750
First Alabama Bank, Choctaw 850 3,400 4,250
First Alabama Bank, Albertville 2,550 10,200 12,750
Sunshine Bank 3,013 12,050 15,063
Real Estate Financing, Inc. 225 900 1,125
-------- -------- -----------
TOTALS $248,260 $993,040 $1,241,300
======== ======== ===========
</TABLE>
9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - UNREALIZED APPRECIATION OF COMMON STOCK OF REGIONS FINANCIAL
CORPORATION
The unrealized appreciation of Common Stock of Regions Financial Corporation is
as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Unrealized appreciation at beginning
of year $3,574,295 $4,421,534 $2,879,230
Unrealized appreciation at end of year 2,718,319 3,574,295 4,421,534
---------- ---------- ----------
(DECREASE) INCREASE IN UNREALIZED
APPRECIATION $ (855,976) $ (847,239) $1,542,304
========== ========== ==========
</TABLE>
NOTE E - GAIN REALIZED ON DISTRIBUTION OF COMMON STOCK OF REGIONS FINANCIAL
CORPORATION TO PARTICIPANTS UPON WITHDRAWAL
<TABLE>
c<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Market value of shares distributed $1,125,631 $1,658,765 $ 497,106
Cost of shares distributed 717,671 965,782 305,493
---------- ---------- ----------
TOTAL REALIZED GAIN $ 407,960 $ 692,983 $ 191,613
========== ========== ==========
</TABLE>
10
<PAGE> 13
ITEM 9b. Exhibits
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Directors' Stock Investment Plan Benefits Committee has duly caused the annual
report to be signed by the undersigned thereunto duly authorized.
DIRECTORS' STOCK INVESTMENT PLAN
REGIONS FINANCIAL CORPORATION
Date: March 22, 1995 By: /s/ Douglas W. Graham
----------------- ---------------------
Douglas W. Graham
Senior Vice President - Personnel
Regions Financial Corporation
11
