<PAGE> 1
As filed with the Securities and Exchange Commission on December 21, 1995
Registration No.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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Regions Financial Corporation
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
Delaware 6711 63-0589368
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
417 North 20th Street
Birmingham, AL 35203
(205) 326-7100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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Samuel E. Upchurch, Jr.
General Counsel and Corporate Secretary
417 North 20th Street
Birmingham, AL 35203
(205) 326-7860
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
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Copies to:
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CHARLES C. PINCKNEY FRANK M. CONNER III CHARLES M. FLICKINGER
LANGE, SIMPSON, ROBINSON & ALSTON & BIRD SUTHERLAND, ASBILL & BRENNAN
SOMERVILLE SUITE 350 999 PEACHTREE STREET, N.E.
417 NORTH 20TH STREET, SUITE 1700 700 THIRTEENTH STREET, NW ATLANTA, GEORGIA 30309-3996
BIRMINGHAM, AL 35203 WASHINGTON, D.C. 20005 (404) 853-8278
(205) 250-5000 (202) 508-3303
</TABLE>
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Approximate date of commencement of proposed sale of securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /
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CALCULATION OF REGISTRATION FEE
Title of each Proposed maximum Proposed maximum
class of securities Amount to be offering price aggregate Amount of
to be registered registered per unit* offering price* registration fee
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Common Stock 388,678 $ 32.088512 $12,472,099 $4,300.72
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*Calculated in accordance with Rule 457(f).
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a),
shall determine.
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REGIONS FINANCIAL CORPORATION
CROSS-REFERENCE SHEET
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CAPTION OR LOCATION IN
FORM S-4 ITEM PROXY STATEMENT/PROSPECTUS
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1. Forepart of registration statement and outside front
cover page of prospectus.............................. Outside Front Cover of Proxy
Statement/Prospectus; Facing Page of
Registration Statement; Cross-Reference Sheet.
2. Inside front and outside back cover of prospectus..... Available Information; Documents
Incorporated by Reference; Table of
Contents.
3. Risk factors, ratio of earnings to fixed charges and
other information..................................... Summary; Comparative Market Prices and Dividends.
4. Terms of the transaction.............................. Summary; Description of the Transaction;
Effect of the Merger on Rights of
Stockholders; Description of Regions
Common Stock.
5. Pro forma financial information....................... Summary; Pro Forma Financial Information.
6. Material contacts with the company being acquired..... Summary; Description of the Transaction.
7. Additional information required for re-offering by
persons and parties deemed to be underwriters......... Not applicable.
8. Interest of named experts and counsel................. Opinions.
9. Disclosure of Commission position on indemnification
for Securities Act liabilities........................ Not Applicable (See Part II, Item 20).
10. Information with respect to S-3 registrants........... Documents Incorporated by Reference;
Summary; Business of Regions.
11. Incorporation of certain information by reference..... Documents Incorporated by Reference.
12. Information with respect to S-2 or S-3 registrants.... Not Applicable.
13. Incorporation of certain information by reference..... Not Applicable.
14. Information with respect to registrants other than S-2
or S-3 registrants.................................... Not Applicable.
15. Information with respect to S-3 companies............. Not Applicable.
16. Information with respect to S-2 or S-3 companies...... Not Applicable.
17. Information with respect to companies other than S-2
or S-3 companies...................................... First Federal Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business of First Federal; Certain Holders of First Federal
Voting Securities; Index to First Federal Financial
Statements.
18. Information if proxies, consents, or authorizations
are to be solicited................................... Documents Incorporated by Reference; Summary;
The Annual Meeting; Description of the Transaction;
Description of Regions Common Stock.
19. Information if proxies, consents, or authorizations
are not to be solicited or in an exchange offer....... Not Applicable.
</TABLE>
<PAGE> 3
Dear First Federal Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
First Federal Bank of Northwest Georgia, Federal Savings Bank ("First Federal")
to be held at First Federal's main office, 120 North Main Street, Cedartown,
Georgia, 30125 on , 1996, at 00 p.m., local time, notice of which is
enclosed.
At the Annual Meeting, you will be asked to consider and vote on a proposal
to approve an Agreement and Plan of Reorganization (the "Agreement"), entered
into with Regions Financial Corporation ("Regions") pursuant to which a
newly-formed, interim savings bank subsidiary of Regions will merge with and
into First Federal (the "Merger"), and First Federal will become a subsidiary
of Regions. Upon consummation of the Merger, each share of First Federal common
stock issued and outstanding (except for certain shares held by First Federal
or Regions and shares held by stockholders who perfect their dissenters' rights
of appraisal) will be converted into 1.293 shares of Regions common stock,
subject to possible adjustment.
The accompanying Proxy Statement/Prospectus includes a description of the
proposed Merger and provides other specific information concerning the Annual
Meeting. Please read these materials carefully and consider thoughtfully the
information set forth in them.
The Merger has been approved unanimously by your Board of Directors and is
recommended by the Board to you for approval. Each member of the Board of
Directors of First Federal has agreed to vote those First Federal shares over
which such member has voting authority (other than in a fiduciary capacity) in
favor of the Merger. Consummation of the Merger is subject to certain
conditions, including approval of the Merger by First Federal stockholders and
approval of the Merger by various regulatory agencies.
Stockholders of First Federal who perfect their dissenters' rights of
appraisal prior to the proposed Merger and comply with applicable law will be
entitled to receive the fair value of their First Federal shares in cash, as
provided by applicable law.
It is important to understand that approval of the Merger requires the
affirmative vote of at least two-thirds of the common stock of First Federal
entitled to vote at the Annual Meeting, not just two-thirds of the votes cast.
Consequently, a failure to vote will have the same effect as a vote against the
Agreement.
Accordingly, whether or not you plan to attend the Annual Meeting, you are
urged to complete, sign, and return promptly the enclosed proxy card. If you
attend the Annual Meeting, you may vote in person if you wish, even if you
previously have returned your proxy card. The proposed Merger with Regions is a
significant step for First Federal, and your vote on this matter is of great
importance. On behalf of the Board of Directors, I urge you to vote for
approval of the Merger by marking the enclosed proxy card "FOR" Item One.
Sincerely,
Larry W. Dooley
President
<PAGE> 4
FIRST FEDERAL BANK OF NORTHWEST GEORGIA, FEDERAL SAVINGS BANK
120 NORTH MAIN STREET, CEDARTOWN, GEORGIA, 30125
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD , 1996
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of First Federal Bank of Northwest Georgia, Federal Savings Bank
("First Federal"), a federal savings bank, will be held at First Federal's main
office, 120 North Main Street, Cedartown, Georgia, 30125 on , 1996, at
:00 .m., local time, for the following purposes:
1. Merger. To consider and vote on a proposal to approve the Agreement and
Plan of Reorganization, dated as of September 29, 1995 (the "Agreement"), by
and between First Federal and Regions Financial Corporation ("Regions"), and
the related Plan of Merger and Combination (the "Plan of Merger"), pursuant to
which (i) Regions will acquire all of the issued and outstanding common stock
of First Federal through the merger (the "Merger") of a newly-formed, interim
federal savings bank subsidiary of Regions with and into First Federal, (ii)
each share of First Federal common stock (except for certain shares held by
First Federal or Regions and shares held by stockholders who perfect their
dissenters' rights of appraisal) will be converted into 1.293 shares of Regions
common stock, subject to possible adjustment, and (iii) each First Federal
stockholder will receive cash in lieu of any remaining fractional share
interest, all as described more fully in the accompanying Proxy
Statement/Prospectus;
2. Amendment of the Charter. To consider and vote on an amendment to the
Charter of First Federal in order to facilitate the Merger by deleting Section
8A thereof, which restricts acquisition by any person of First Federal's
capital stock amounting to 10% or more of any class of equity security
outstanding;
3. Election of Directors. To elect the three nominees named in the Proxy
Statement/Prospectus as directors of First Federal to serve three-year terms or
until their successors are duly elected and qualified;
4. Ratification of Appointment of Independent Auditors. To ratify the
selection by the Board of Directors of Read, Martin, Slickman & Sheats as First
Federal's independent auditors; and
5. Other Business. To transact such other business as may properly come
before the Annual Meeting, including adjourning the Annual Meeting to permit,
if necessary, further solicitation of proxies.
Only stockholders of record at the close of business on December 15, 1995,
are entitled to receive notice of and to vote at the Annual Meeting or any
adjournment or postponement thereof.
Stockholders of First Federal have a right to dissent from the Merger and
obtain payment of the fair value of their shares in cash by complying with the
applicable provisions of applicable law, which are attached to the accompanying
Proxy Statement/Prospectus as Appendix D.
The Board of Directors of First Federal unanimously recommends that holders
of First Federal common stock vote to approve the proposals listed above.
We urge you to sign and return the enclosed proxy as promptly as possible,
whether or not you plan to attend the Annual Meeting in person. The proxy may
be revoked by the person executing the proxy by filing with the Secretary of
First Federal an instrument of revocation or a duly executed proxy bearing a
later date or by electing to vote in person at the Annual Meeting.
By Order of the Board of Directors
Bettie C. Bridges
Secretary
, 1995
<PAGE> 5
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FIRST FEDERAL BANK OF NORTHWEST REGIONS FINANCIAL CORPORATION
GEORGIA, FEDERAL SAVINGS BANK PROSPECTUS
PROXY STATEMENT COMMON STOCK
FOR ANNUAL MEETING OF STOCKHOLDERS (PAR VALUE $.625)
TO BE HELD , 1996
</TABLE>
This Prospectus of Regions Financial Corporation, a regional bank holding
company organized and existing under the laws of the state of Delaware
("Regions"), relates to the shares of its common stock, par value $.625 per
share ("Regions Common Stock"), which are issuable to the stockholders of First
Federal Bank of Northwest Georgia, Federal Savings Bank ("First Federal") upon
consummation of the proposed merger (the "Merger") described herein, by which
an interim subsidiary of Regions will merge with and into First Federal
pursuant to the terms of an Agreement and Plan of Reorganization, dated as of
September 29, 1995 (the "Agreement"), by and between Regions and First Federal,
and the related Plan of Merger and Combination (the "Plan of Merger").
On the effective date of the Merger (the "Effective Date"), except as
described herein, (i) a newly-formed, interim federal savings bank subsidiary
of Regions will merge with and into First Federal, (ii) each outstanding share
of the $.01 par value common stock of First Federal ("First Federal Common
Stock") will be converted into 1.293 shares of Regions Common Stock, subject to
possible adjustment, and (iii) each holder of First Federal Common Stock will
receive cash in lieu of any remaining fractional interest. A copy of the
Agreement and the Plan of Merger are attached to this Proxy
Statement/Prospectus as Appendices A and B, respectively.
As a result of the Merger, First Federal will become a subsidiary of
Regions. For a further description of the terms of the Merger, see "Description
of the Transaction."
This Prospectus also constitutes a Proxy Statement of First Federal and is
being furnished to the stockholders of First Federal in connection with the
solicitation of proxies by the Board of Directors of First Federal for use at
its annual meeting of stockholders, including any adjournment or postponement
thereof (the "Annual Meeting"), to be held on , 1996, to consider and
vote on the proposed Merger and related matters, the election of three persons
as directors of First Federal, and other matters. See "The Annual Meeting."
This Proxy Statement/Prospectus and the accompanying proxy card are first being
mailed to stockholders of First Federal on or about , 1995.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is , 1995.
<PAGE> 6
AVAILABLE INFORMATION
Regions is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and, in accordance therewith,
files reports, proxy statements, and other information with the Securities and
Exchange Commission (the "SEC"). Copies of such reports, proxy statements, and
other information can be obtained, at prescribed rates, from the SEC by
addressing written requests for such copies to the Public Reference Section at
the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In
addition, such reports, proxy statements, and other information can be
inspected at the public reference facilities referred to above and at the
regional offices of the SEC at 7 World Trade Center, 13th Floor, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Pursuant to requirements of the Exchange Act, First
Federal files reports, proxy statements, and other information with the Office
of Thrift Supervision (the "OTS"), and copies of such reports, proxy statements
and other information can be obtained from the OTS, Information Services
Division, 1700 G Street, N.W., Washington, D.C. 20552.
This Proxy Statement/Prospectus constitutes part of the Registration
Statement on Form S-4 of Regions (including any exhibits and amendments
thereto, the "Registration Statement") filed with the SEC under the Securities
Act of 1933, as amended (the "Securities Act"), relating to the securities
offered hereby. This Proxy Statement/Prospectus does not include all of the
information in the Registration Statement, certain portions of which have been
omitted pursuant to the rules and regulations of the SEC. For further
information about Regions and the securities offered hereby, reference is made
to the Registration Statement. The Registration Statement may be inspected and
copied, at prescribed rates, at the SEC's public reference facilities at the
addresses set forth above. Regions Common Stock is traded in the Nasdaq
National Market. Reports, proxy statements, and other information concerning
Regions may be inspected at the offices of the National Association of
Securities Dealers, Inc. (the "NASD"), 1735 K Street, N.W., Washington, D.C.
20006.
No person is authorized to give any information or to make any
representations other than those included in this Proxy Statement/Prospectus,
and if given or made, such information or representations must not be relied
upon as having been authorized by Regions or First Federal. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to buy, the securities offered hereby in any jurisdiction to or from
any person to or from whom it is unlawful to make such an offer or
solicitation. Neither the delivery of this Proxy Statement/Prospectus nor any
distribution of securities made hereunder shall under any circumstances create
an implication that there has been no change in the affairs of Regions or First
Federal since the date hereof or that the information herein is correct as of
any time subsequent to the date hereof.
All information included or incorporated by reference in this Proxy
Statement/Prospectus with respect to Regions was supplied by Regions, and all
information included or incorporated by reference herein with respect to First
Federal was supplied by First Federal.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by Regions pursuant
to the Exchange Act are hereby incorporated by reference herein:
1. Regions' Annual Report on Form 10-K for the fiscal year ended
December 31, 1994;
2. Regions' Quarterly Reports on Form 10-Q for the three months ended
March 31, June 30, and September 30, 1995;
2
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3. Regions' Current Reports on Form 8-K dated as of October 24 and
November 22, 1995; and
4. The description of Regions Common Stock under the heading "Item 1.
Capital Stock to be Registered" in the registration statement on Form 8-A
of Regions relating to Regions Common Stock and in any amendment or report
filed for the purpose of updating such description.
Regions' Annual Report on Form 10-K for the year ended December 31, 1994,
incorporates by reference specific portions of Regions' Annual Report to
Stockholders for that year (the "Regions Annual Report to Stockholders"), but
does not incorporate other portions of the Regions Annual Report to
Stockholders. Only those portions of the Regions Annual Report to Stockholders
captioned "Financial Summary & Review 1994," "Financial Statements and Notes,"
and "Historical Financial Summary" are incorporated herein. Other portions of
the Annual Report to Stockholders are NOT incorporated herein and are not a
part of the Registration Statement.
All documents filed by Regions pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to the date of the Annual Meeting shall be deemed to be incorporated by
reference in this Proxy Statement/Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein or in any subsequently filed document which also is,
or is deemed to be, incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed to constitute a part hereof, except as so modified or superseded.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THOSE DOCUMENTS ARE AVAILABLE
UPON REQUEST, WITHOUT CHARGE (EXCEPT FOR THE EXHIBITS THERETO), FROM RONALD C.
JACKSON, STOCKHOLDER ASSISTANCE, REGIONS FINANCIAL CORPORATION, P.O. BOX 1448,
MONTGOMERY, ALABAMA 36102 (TELEPHONE (334) 832-8401). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1996.
3
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TABLE OF CONTENTS
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AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DOCUMENTS INCORPORATED BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Annual Meeting of First Federal Stockholders . . . . . . . . . . . . . . . . . . . 6
Record Date; Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Merger; Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Reasons for the Merger; Recommendation of First Federal's Board
of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Opinion of First Federal's Financial Advisor . . . . . . . . . . . . . . . . . . . 8
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Exchange of Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Regulatory Approvals and Other Conditions . . . . . . . . . . . . . . . . . . . . 9
Waiver, Amendment, and Termination of the Agreement . . . . . . . . . . . . . . . 9
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . 9
Certain Federal Income Tax Consequences of the Merger . . . . . . . . . . . . . . 9
Certain Differences in Stockholders' Rights . . . . . . . . . . . . . . . . . . . 9
Comparative Market Prices of Common Stock . . . . . . . . . . . . . . . . . . . . 10
Comparative Per Share Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Summary Pro Forma Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . 15
THE ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Record Date; Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
DESCRIPTION OF THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Possible Adjustment of Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . 19
Background of and Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . 21
Opinion of First Federal's Financial Advisor . . . . . . . . . . . . . . . . . . . 23
Effective Date of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Distribution of Regions Stock Certificates and
Payment for Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . 26
Conditions to Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . 27
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Waiver, Amendment, and Termination of the Agreement . . . . . . . . . . . . . . . 28
Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . 29
Management Following the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 30
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . 30
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Certain Federal Income Tax Consequences of the Merger . . . . . . . . . . . . . . 31
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Expenses and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Resales of the Regions Common Stock . . . . . . . . . . . . . . . . . . . . . . . 33
AMENDMENT TO THE CHARTER OF FIRST FEDERAL . . . . . . . . . . . . . . . . . . . . . . . 33
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . 33
Antitakeover Provisions Generally . . . . . . . . . . . . . . . . . . . . . . . . 33
Authorized Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Amendment of Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . 35
Classified Board of Directors and Absence of Cumulative Voting . . . . . . . . . . 35
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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Limitations on Director Liability . . . . . . . . . . . . . . . . . . . . . . . . 36
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Annual Meetings of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . 37
Actions by Stockholders Without a Meeting . . . . . . . . . . . . . . . . . . . . 38
Stockholder Nominations and Proposals . . . . . . . . . . . . . . . . . . . . . . 38
Business Combinations with Certain Persons . . . . . . . . . . . . . . . . . . . . 38
Mergers, Consolidations, and Sales of Assets Generally . . . . . . . . . . . . . . 39
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Stockholders' Rights to Examine Books and Records . . . . . . . . . . . . . . . . 40
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
COMPARATIVE MARKET PRICES AND DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . 41
BUSINESS OF REGIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
FIRST FEDERAL MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . 64
BUSINESS OF FIRST FEDERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Executive Officers and Executive Compensation . . . . . . . . . . . . . . . . . . 66
CERTAIN HOLDERS OF FIRST FEDERAL VOTING SECURITIES . . . . . . . . . . . . . . . . . . 68
ELECTION OF DIRECTORS OF FIRST FEDERAL. . . . . . . . . . . . . . . . . . . . . . . . . 68
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Information as to Nominees and Other Directors . . . . . . . . . . . . . . . . . . 69
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Meetings and Committees of the Board of Directors . . . . . . . . . . . . . . . . 70
Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Certain Relationships and Related Transactions. . . . . . . . . . . . . . . . . . . 71
RATIFICATION OF APPOINTMENT OF FIRST FEDERAL'S INDEPENDENT AUDITORS . . . . . . . . . . 72
CERTAIN REGULATORY CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Payment of Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Support of Subsidiary Institutions. . . . . . . . . . . . . . . . . . . . . . . . . 76
Prompt Corrective Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
FDIC Insurance Assessments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Safety and Soundness Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Depositor Preferenc.e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
DESCRIPTION OF REGIONS COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . 80
STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
INDEX TO FIRST FEDERAL FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . F-1
APPENDIX A--Agreement and Plan of Reorganization . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B--Plan of Merger and Combination. . . . . . . . . . . . . . . . . . . . . . . B-1
APPENDIX C--Opinion of The Robinson-Humphrey Company, Inc. . . . . . . . . . . . . . . C-1
APPENDIX D--Copy of 12 C.F.R. Section 552.14 (pertaining to dissenters' rights) . . . D-1
</TABLE>
5
<PAGE> 10
SUMMARY
The following is a summary of certain information relating to the Annual
Meeting, the proposed Merger, and the offering of shares of Regions Common
Stock to be issued upon consummation thereof. This summary does not purport to
be complete and is qualified in its entirety by the more detailed information
appearing elsewhere or incorporated by reference in this Proxy
Statement/Prospectus. Stockholders are urged to read carefully the entire Proxy
Statement/Prospectus, including the Appendices. As used in this Proxy
Statement/Prospectus, the terms "Regions" and "First Federal" refer to those
entities, respectively, and, where the context requires, to those entities and
their respective subsidiaries.
THE PARTIES
First Federal. First Federal is a federal stock savings bank organized
under the laws of the United States, with its principal executive offices
located in Cedartown, Georgia. First Federal provides a range of retail banking
services through two offices in Polk County, Georgia. At September 30, 1995,
First Federal had total consolidated assets of approximately $90.4 million,
total consolidated deposits of approximately $77.0 million, and total
consolidated stockholders' equity of approximately $12.5 million. First
Federal's principal executive office is located at 120 North Main Street,
Cedartown, Georgia, 30125 and its telephone number at such address is (770)
748-1820.
Regions. Regions is a regional bank holding company organized and existing
under the laws of the state of Delaware and headquartered in Birmingham,
Alabama, with approximately 288 banking offices located in Alabama, Florida,
Georgia, Louisiana, and Tennessee. As of September 30, 1995, Regions had total
consolidated assets of approximately $13.8 billion, total consolidated deposits
of approximately $10.7 billion, and total consolidated stockholders' equity of
approximately $1.1 billion. Regions is the third largest bank holding company
headquartered in Alabama in terms of assets, based on September 30, 1995
information. Regions operates banking subsidiaries in Alabama, Florida,
Georgia, Louisiana, and Tennessee and 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.
During the 1995 fiscal year, Regions has completed the acquisitions of two
financial institutions, one in each of Georgia and Louisiana, an accounts
receivable factoring company in Alabama, and a branch banking operation in
Georgia (referred to as the "Recently Completed Acquisitions"). Regions also
has entered into definitive agreements or letters of intent to acquire, in
addition to First Federal, six additional financial institutions, four of which
are located in Georgia and one of which is located in Louisiana (referred to as
the "Other Pending Acquisitions"), and one of which is located in Tennessee.
For information with respect to the Recently Completed Acquisitions and the
Other Pending Acquisitions , see "Documents Incorporated by Reference"
"--Summary Pro Forma Financial Data," "Business of Regions--Recent
Developments," and "Pro Forma Financial Information."
Regions commenced operations in 1971 as a registered bank holding company
under the Bank Holding Company Act of 1956, as amended (the "BHC Act").
Regions' principal executive offices are located at 417 North 20th Street,
Birmingham, Alabama 35203, and its telephone number at such address is (205)
326-7100.
Additional information with respect to Regions and its subsidiaries is
included in documents incorporated by reference in this Proxy
Statement/Prospectus. See "Available Information," "Documents Incorporated by
Reference," and "Business of Regions."
ANNUAL MEETING OF FIRST FEDERAL STOCKHOLDERS
The Annual Meeting will be held at :00 p.m., local time, on ,
1996, at First Federal's main office, 120 North Main Street, Cedartown,
Georgia, 30125, for the purpose of considering and voting on
6
<PAGE> 11
approval of the Agreement and related matters, the amendment of the Charter of
First Federal, the election of three persons as directors of First Federal, and
the ratification of the appointment of First Federal's independent auditors.
See "The Annual Meeting."
RECORD DATE; VOTE REQUIRED
Only holders of record of First Federal Common Stock at the close of
business on December 15, 1995 (the "Record Date"), will be entitled to vote at
the Annual Meeting. The affirmative vote of at least two-thirds of the First
Federal Common Stock entitled to vote at the Annual Meeting will be required to
approve the Agreement. As of the Record Date, there were 300,601 shares of
First Federal Common Stock outstanding and entitled to be voted.
The directors and executive officers of First Federal and their affiliates
beneficially owned, as of the Record Date, 101,535 shares (or approximately
33.8% of the outstanding shares) of First Federal Common Stock. Each member of
the Board of Directors of First Federal has agreed to vote those First Federal
shares over which such member has voting authority (other than in a fiduciary
capacity) in favor of the Merger. The directors and executive officers of
Regions and their affiliates beneficially owned, as of the Record Date, no
shares of First Federal Common Stock. As of that date, neither First Federal
nor Regions held any shares of First Federal Common Stock in a fiduciary
capacity for others. See "The Annual Meeting--Record Date; Vote Required."
THE MERGER; EXCHANGE RATIO
The Agreement provides for the acquisition of First Federal by Regions
pursuant to the Merger of a newly-formed, interim federal savings bank
subsidiary of Regions with and into First Federal. On the Effective Date, each
share of First Federal Common Stock then issued and outstanding (excluding any
shares held by stockholders who perfect their dissenters' rights of appraisal
and shares held by First Federal, Regions, or their respective subsidiaries,
other than shares held in a fiduciary capacity or in satisfaction of debts
previously contracted) will be converted into 1.293 shares of Regions Common
Stock, subject to possible adjustment (the "Exchange Ratio"). See "Description
of the Transaction--Possible Adjustment of Exchange Ratio." No fractional
shares of Regions Common Stock will be issued. Rather, cash will be paid in
lieu of any fractional share interest to which any First Federal stockholder
would be entitled upon consummation of the Merger, based on the closing price
of Regions Common Stock on the Nasdaq National Market (as reported by The Wall
Street Journal, or, if not reported thereby, by another authoritative source
selected by Regions) on the last trading day immediately preceding the
Effective Date. See "Description of the Transaction--General."
DISSENTING STOCKHOLDERS
Holders of First Federal Common Stock entitled to vote on approval of the
Merger have the right to dissent from the Merger and, upon consummation of the
Merger and the satisfaction of certain specified procedures and conditions, to
receive the fair value of such holders' shares of First Federal Common Stock in
cash in accordance with the applicable provisions of Section 552.14 of Title 12
of the Code of Federal Regulations ("12 C.F.R. Section 552.14"). The
procedures to be followed by dissenting stockholders are summarized under
"Description of the Transaction--Dissenters' Rights," and 12 C.F.R. Section
552.14 is reproduced as Appendix D to this Proxy Statement/Prospectus.
REASONS FOR THE MERGER; RECOMMENDATION OF FIRST FEDERAL'S BOARD OF DIRECTORS
First Federal's Board of Directors has unanimously approved the Merger and
the Agreement and has determined that the Merger is fair to, and in the best
interests of, First Federal and its stockholders. Accordingly, First Federal's
Board unanimously recommends that First Federal's stockholders vote FOR
approval of the Merger. EACH MEMBER OF THE BOARD OF DIRECTORS OF FIRST FEDERAL
HAS AGREED TO VOTE THOSE SHARES OF FIRST FEDERAL COMMON STOCK OVER WHICH SUCH
MEMBER HAS VOTING AUTHORITY (OTHER THAN IN A FIDUCIARY CAPACITY) IN FAVOR OF
THE MERGER. In approving the Merger, First Federal's directors considered
7
<PAGE> 12
First Federal's financial condition, the financial terms and the income tax
consequences of the Merger, the likelihood of the Merger being approved by
regulatory authorities without undue conditions or delay, legal advice
concerning the proposed Merger, and the opinion of The Robinson-Humphrey
Company, Inc. ("Robinson-Humphrey") that, as of the date of its opinion, the
consideration to be received in the Merger was fair, from a financial point of
view, to the stockholders of First Federal. See "Description of the
Transaction-- Background of and Reasons for the Merger."
OPINION OF FIRST FEDERAL'S FINANCIAL ADVISOR
Robinson-Humphrey has rendered an opinion to First Federal that, based on
and subject to the procedures, matters, and limitations described in its
opinion and such other matters as it considered relevant, as of the date of its
opinion, the consideration to be received in the Merger was fair, from a
financial point of view, to the stockholders of First Federal. The opinion of
Robinson-Humphrey is attached as Appendix C to this Proxy Statement/Prospectus.
First Federal stockholders are urged to read the opinion in its entirety for a
description of the procedures followed, matters considered, and limitations on
the reviews undertaken in connection therewith. See "Description of the
Transaction--Opinion of First Federal's Financial Advisor."
EFFECTIVE DATE
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time that the
Articles of Combination relating to the Merger are filed and declared effective
with the OTS. Unless otherwise agreed upon by Regions and First Federal, and
subject to the conditions to the obligations of the parties to effect the
Merger, the parties will use their reasonable efforts to cause the Effective
Date to occur on the first business day following the last to occur of: (i) the
effective date (including the expiration of any applicable waiting period) of
the last federal or state regulatory approval required for the Merger and (ii)
the date on which the Agreement is approved by the requisite vote of First
Federal stockholders; or such later date within 30 days thereof as specified by
Regions. The parties expect that all conditions to consummation of the Merger
will be satisfied so that the Merger can be consummated during the first
quarter of 1996, although there can be no assurance as to whether or when the
Merger will occur. See "Description of the Transaction--Effective Date of the
Merger," "-- Conditions to Consummation of the Merger," and "-- Waiver,
Amendment, and Termination of the Agreement."
Notwithstanding the foregoing, the parties have agreed to cooperate in
selecting the Effective Date to ensure that, with respect to the quarterly
period in which the Effective Date occurs, the holders of First Federal Common
Stock do not receive both a dividend in respect of their First Federal Common
Stock and a dividend in respect of Regions Common Stock or fail to receive any
dividend. See "Description of Transaction--Conduct of Business Pending the
Merger."
No assurance can be provided that the necessary stockholder and regulatory
approvals can be obtained or that the other conditions precedent to the Merger
can or will be satisfied. First Federal and Regions anticipate that all
conditions to the consummation of the Merger will be satisfied so that the
Merger can be consummated during the first quarter of 1996. However, delays in
the consummation of the Merger could occur.
EXCHANGE OF STOCK CERTIFICATES
Promptly after the Effective Date, Regions will cause First Alabama Bank,
acting in its capacity as exchange agent for Regions (the "Exchange Agent"), to
mail to the former stockholders of First Federal a form letter of transmittal,
together with instructions for the exchange of such stockholders' certificates
representing shares of First Federal Common Stock for certificates representing
shares of Regions Common Stock. FIRST FEDERAL STOCKHOLDERS SHOULD NOT SEND IN
THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE THE FORM LETTER OF TRANSMITTAL AND
INSTRUCTIONS. See "Description of the Transaction--Distribution of Regions
Stock Certificates and Payment for Fractional Shares."
8
<PAGE> 13
REGULATORY APPROVALS AND OTHER CONDITIONS
The Merger is subject to approval by the Board of Governors of the Federal
Reserve System (the "Federal Reserve"), the OTS, and the Department of Banking
and Finance of the state of Georgia (the "Georgia Department"). Applications
for the requisite approvals have been filed with these agencies, each of which
has yet to issue its approval of the Merger. There can be no assurance that the
approvals of these agencies will be given or as to the timing or conditions of
such approvals.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of First Federal stockholders,
receipt of an opinion of counsel as to the tax-free nature of certain aspects
of the Merger, and certain other customary conditions. See "Description of the
Transaction--Conditions to Consummation of the Merger."
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Date by mutual action of the Boards of Directors of both
First Federal and Regions, or by action of the Board of Directors of either
company under certain circumstances, including if the Merger is not consummated
by July 31, 1996, unless the failure to consummate by such time is due to a
breach of the Agreement by the party seeking to terminate. If for any reason
the Merger is not consummated, First Federal will continue to operate as a
federal stock savings bank under its present management. See "Description of
the Transaction--Waiver, Amendment, and Termination of the Agreement."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of First Federal's management and Board of Directors have
interests in the Merger in addition to their interests as stockholders of First
Federal generally. Those interests relate to, among other things, provisions in
the Agreement regarding indemnification and eligibility for certain Regions
employee benefits. See "Description of the Transaction-- Interests of Certain
Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Consummation of the Merger is conditioned on the receipt of an opinion of
counsel to the effect that, among other things, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the exchange in the Merger of First
Federal Common Stock for Regions Common Stock will not give rise to gain or
loss to First Federal stockholders, except to the extent of any cash received
in lieu of fractional share interests. Gain recognition, if any, will not be in
excess of the amount of cash received. Subject to the provisions and
limitations of Section 302(a) of the Code, gain or loss will be recognized upon
the receipt of cash in lieu of fractional share interests. See "Description of
the Transaction--Certain Federal Income Tax Consequences of the Merger."
DUE TO THE INDIVIDUAL NATURE OF THE TAX CONSEQUENCES OF THE MERGER, FIRST
FEDERAL STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE
THE SPECIFIC EFFECT OF THE MERGER ON THEM UNDER FEDERAL, STATE, LOCAL, AND
FOREIGN TAX LAWS.
CERTAIN DIFFERENCES IN STOCKHOLDERS' RIGHTS
On the Effective Date, First Federal stockholders, whose rights are
governed by First Federal's Charter and Bylaws and by federal law, will
automatically become Regions stockholders, and their rights as Regions
stockholders will be determined by the Delaware General Corporation Law (the
"Delaware GCL") and by Regions' Certificate of Incorporation and Bylaws.
The rights of Regions stockholders differ from the rights of First Federal
stockholders in certain important respects, some of which constitute additional
antitakeover provisions provided for in Regions' governing
9
<PAGE> 14
documents. See "Effect of the Merger on Rights of Stockholders."
COMPARATIVE MARKET PRICES OF COMMON STOCK
Regions Common Stock is traded in the over-the-counter market and quoted on
the Nasdaq National Market. First Federal Common Stock is not traded in any
established market. The following table sets forth, as of the indicated dates,
(i) the last sale price of Regions Common Stock and the sale price in the last
known transaction of purchase and sale of First Federal Common Stock, which
occurred on August 10, 1995, and (ii) the equivalent per share price (as
explained below) of First Federal Common Stock. The indicated dates of
September 28, 1995, and , 1995 represent, respectively, the
last trading day immediately preceding public announcement of the proposed
acquisition of First Federal by Regions and the latest practicable date prior
to the mailing of this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
EQUIVALENT
PER
SHARE PRICE
REGIONS FIRST FEDERAL OF FIRST FEDERAL
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK COMMON STOCK
- -------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
September 28, 1995 $ 40.25 $ 15.00(1) $ 52.04
, 1995 . . .
- ----------------
</TABLE>
(1) The last transaction of purchase and sale of First Federal Common Stock
known to First Federal occurred on August 10, 1995.
The equivalent per share price of First Federal Common Stock at each
specified date represents the last sale price of a share of Regions Common
Stock on such date multiplied by the Exchange Ratio of 1.293. Stockholders are
advised to obtain current market quotations for Regions Common Stock and First
Federal Common Stock. No assurance can be given as to the market price of
Regions Common Stock at or after the Effective Date.
COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data relating
to net income, cash dividends, and book value on (i) an historical basis for
Regions and First Federal, (ii) a pro forma combined basis per share of Regions
Common Stock, giving effect to the Merger, (iii) an equivalent pro forma basis
per share of First Federal Common Stock, giving effect to the Merger, (iv) a
pro forma combined basis per share of Regions Common Stock, giving effect to
the Merger and the Other Pending Acquisitions (as defined under "Business of
Regions--Recent Developments"), and (v) an equivalent pro forma basis per share
of First Federal Common Stock, giving effect to the Merger and the Other
Pending Acquisitions. The Regions and First Federal pro forma combined
information and the First Federal pro forma Merger equivalent information give
effect to the Merger on a purchase accounting basis and assume an Exchange
Ratio of 1.293. The Regions, Merger, and Other Pending Acquisitions pro forma
combined information and the First Federal pro forma Merger and Other Pending
Acquisitions equivalent information give effect to (i) the Merger as described
in the preceding sentence and (ii) the Other Pending Acquisitions as described
under "Summary Pro Forma Financial Information--Selected Pro Forma Combined
Data for Regions, First Federal, and Other Pending Acquisitions." See
"Description of the Transaction--Accounting Treatment." The pro forma data are
presented for information purposes only and are not necessarily indicative of
the results of operations or combined financial position that would have
resulted had the Merger or the Other Pending Acquisitions been consummated at
the dates or during the periods indicated, nor are they necessarily indicative
of future results of operations or combined financial position.
10
<PAGE> 15
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical financial statements of Regions
and First Federal, including the respective notes thereto, and the pro forma
financial information included or incorporated by reference herein. See
"Documents Incorporated by Reference," "--Selected Financial Data," "Business
of Regions--Recent Developments," "--Summary Pro Forma Financial Data," and
"Pro Forma Financial Information."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,(1)
----------------------- -------------------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(Unaudited)
(Unaudited except Regions historical)
<S> <C> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Regions historical . . . . . . . . . . . . . . $ 2.77 $ 2.52 $ 3.40 $ 3.01 $ 2.60
First Federal historical . . . . . . . . . . . 2.77 3.75 4.64 5.41 3.63
Regions and First Federal pro forma combined(2) 2.78 3.41
First Federal pro forma Merger equivalent(3) . 3.59 4.41
Regions, First Federal, and Other Pending
Acquisitions pro forma combined(4) . . . . 2.49 3.08
First Federal pro forma Merger and Other Pending
Acquisitions equivalent(3) . . . . . . . . 3.22 3.98
DIVIDENDS DECLARED PER
COMMON SHARE
Regions historical . . . . . . . . . . . . . . $ 0.99 $ 0.90 $ 1.20 $ 1.04 $ 0.91
First Federal historical . . . . . . . . . . . 1.45 0.45 0.60 1.55 0.40
First Federal pro forma Merger equivalent(5) . 1.28 1.16 1.55 1.34 1.18
BOOK VALUE PER COMMON
SHARE (PERIOD END)
Regions historical . . . . . . . . . . . . . . $ 24.19 $ 21.46 $ 22.53 $ 20.73 $ 17.62
First Federal historical. . . . . . . . . . . . 41.78 39.10 39.28 37.61 33.91
Regions and First Federal pro forma
combined(2) . . . . . . . . . . . . . . . . 24.19
First Federal pro forma Merger equivalent(3) . 31.28
Regions, First Federal, and Other Pending
Acquisitions pro forma combined(4) . . . . 22.89
First Federal pro forma Merger and Other
Pending Acquisitions equivalent(3) . . . . 29.60
</TABLE>
_____________________
(1) In the case of First Federal historical and pro form combined information,
reflects information for First Federal for the four quarters ended December
31.
(2) Represents the combined results of Regions and First Federal as if the
Merger were consummated on January 1, 1994, and were accounted for as a
purchase.
(3) Represents pro forma combined information multiplied by the Exchange Ratio
of 1.293 shares of Regions Common Stock for each share of First Federal
Common Stock.
(4) Represents the combined results of Regions, First Federal, and the Other
Pending Acquisitions as if the Merger were consummated at the time and
pursuant to the accounting basis described in note (2) and the Other
Pending Acquisitions were consummated at the time and pursuant to the
accounting bases described under "Summary Pro Forma Financial Data
-- Selected Pro Forma Combined Data for Regions, First Federal, and Other
Pending Acquisitions."
(5) Represents historical dividends declared per share by Regions multiplied by
the assumed Exchange Ratio of 1.293 shares of Regions Common Stock for each
share of First Federal Common Stock.
11
<PAGE> 16
SELECTED FINANCIAL DATA
The following tables present certain selected historical financial
information for Regions and First Federal. The data should be read in
conjunction with the historical financial statements, related notes, and other
financial information concerning Regions and First Federal incorporated by
reference or included herein. See "Documents Incorporated by Reference."
12
<PAGE> 17
Selected Historical Financial Data of Regions
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ---------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(Unaudited)
(In thousands except per share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income . . . . . . . . . . $ 757,460 $ 568,358 $ 785,779 $ 555,667 $ 536,747 $ 556,821 $ 519,753
Total interest expense . . . . . . . . . 387,112 246,294 350,139 213,614 224,068 292,017 297,613
Net interest income . . . . . . . . . . . 370,348 322,064 435,640 342,053 312,679 264,804 222,140
Provision for loan losses . . . . . . . . 15,312 13,804 19,003 21,533 27,072 24,005 24,208
Net interest income after
loan loss provision . . . . . . . . 355,036 308,260 416,637 320,520 285,607 240,799 197,932
Total noninterest income
excluding security gains (losses) . 117,419 108,552 142,781 131,949 119,130 101,964 94,730
Security gains (losses) . . . . . . . . . 16 444 627 78 (53) (507) (982)
Total noninterest expense . . . . . . . . 278,363 254,376 343,067 287,026 264,659 230,340 195,611
Income tax expense . . . . . . . . . . . 66,007 54,243 71,094 53,476 44,977 33,660 27,175
Net income . . . . . . . . . . . . . . . $ 128,101 $ 108,637 $ 145,884 $ 112,045 $ 95,048 $ 78,256 $ 68,894
PER SHARE DATA:
Net income . . . . . . . . . . . . . . . $ 2.77 $ 2.52 $ 3.40 $ 3.01 $ 2.60 $ 2.16 $ 1.91
Cash dividends . . . . . . . . . . . . . 0.99 0.90 1.20 1.04 0.91 0.87 0.84
Book value . . . . . . . . . . . . . . . 24.19 21.46 22.53 20.73 17.62 15.76 14.54
OTHER INFORMATION:
Average number of shares outstanding . . 46,212 43,029 42,906 37,205 36,532 36,191 36,097
STATEMENT OF CONDITION DATA (PERIOD END):
Total assets . . . . . . . . . . . . . . $13,847,910 $11,669,957 $12,839,320 $10,476,348 $7,881,026 $6,745,053 $6,344,406
Securities . . . . . . . . . . . . . . . 3,033,200 2,484,835 2,609,188 2,368,445 1,670,170 1,575,725 1,489,200
Loans, net of unearned income . . . . . . 9,596,673 8,037,888 9,017,802 6,833,246 5,142,531 4,274,958 4,092,262
Total deposits . . . . . . . . . . . . . 10,742,187 9,269,856 10,093,135 8,770,694 6,701,142 5,917,028 5,353,211
Long-term debt . . . . . . . . . . . . . 573,790 612,198 519,238 462,862 136,990 18,782 19,707
Stockholders' equity . . . . . . . . . . 1,113,790 901,533 1,013,870 850,965 656,655 572,971 524,132
PERFORMANCE RATIOS:
Return on average assets (1) . . . . . . 1.29% 1.31% 1.29% 1.40% 1.34% 1.23% 1.23%
Return on average stockholders'
equity (1) . . . . . . . . . . . . . 15.87 15.99 15.97 16.14 15.64 14.27 13.64
Net interest margin (1) . . . . . . . . . 4.11 4.30 4.26 4.82 4.98 4.78 4.67
Efficiency (2) . . . . . . . . . . . . . 56.17 57.99 58.24 59.24 59.87 60.77 59.22
Dividend payout . . . . . . . . . . . . . 35.74 35.71 35.29 34.55 35.00 40.28 43.98
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income (1) . . . . . 0.08% 0.11% 0.17% 0.19% 0.28% 0.35% 0.44%
Problem assets to net loans and
other real estate (3) . . . . . . . 0.48 0.60 0.52 0.84 0.70 0.89 0.98
Nonperforming assets to net loans
and other real estate (4) . . . . . 0.55 0.67 0.58 1.03 0.81 1.01 1.12
Allowance for loan losses to loans,
net of unearned income . . . . . . . 1.37 1.40 1.30 1.47 1.43 1.28 1.10
Allowance for loan losses to
nonperforming assets (4) . . . . . . 250.72 209.18 221.81 143.05 175.92 126.32 98.18
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets . . . . . . . . . . . 8.14% 8.21% 8.09% 8.70% 8.59% 8.63% 9.03%
Average loans to average deposits . . . . 89.82 80.17 82.30 78.14 72.46 73.40 76.67
Tier 1 risk-based capital (5) . . . . . . 10.82 10.93 10.69 11.13 11.68 11.85 11.31
Total risk-based capital (5) . . . . . . 14.28 14.79 14.29 13.48 14.44 13.19 12.51
Tier 1 leverage (5) . . . . . . . . . . . 7.25 7.71 8.21 10.11 8.44 8.40 7.65
</TABLE>
__________________________
(1) Interim period ratios are annualized.
(2) Noninterest expense divided by the sum of net interest income
(taxable-equivalent basis) and noninterest income net of gains
(losses) from security transactions.
(3) Problem assets include loans on a nonaccrual basis, restructured
loans, and foreclosed properties.
(4) Nonperforming assets include loans on a nonaccrual basis, restructured
loans, loans 90 days or more past due, and foreclosed properties.
(5) The required minimum Tier 1 and total risk-based capital ratios are
4.0% and 8.0%, respectively. The minimum leverage ratio of Tier 1
capital to total adjusted assets is 3.0% to 5.0%, depending on the
risk profile of the institution and other factors.
13
<PAGE> 18
Selected Historical Financial Data of First Federal
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(In thousands except per share data and ratios)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income . . . . $ 6,056 $ 5,388 $ 5,517 $ 6,031 $ 6,151
Total interest expense . . . 3,471 2,603 2,775 3,402 4,247
Net interest income . . . . . 2,585 2,785 2,742 2,629 1,904
Provision for loan losses . . -- (77) (67) 158 25
Net interest income after
loan loss provision . . 2,585 2,862 2,809 2,471 1,879
Total noninterest income
excluding security gains (losses) 552 397 279 289 212
Security gains (losses) . . . -- -- 482 60 --
Total noninterest expense . . 1,576 1,201 1,266 1,335 1,330
Income tax expense . . . . . 467 649 813 538 113
Net income . . . . . . . . . 1,094 1,410 1,491 947 648
PER SHARE DATA:
Net income . . . . . . . . . $ 3.66 $ 4.72 $ 5.29 $ 3.40 n/a
Cash dividends . . . . . . . 1.60 1.60 .45 .40 n/a
Book value . . . . . . . . .
41.78 39.10 39.27 33.48 n/a
OTHER INFORMATION:
Average number of shares outstanding 299 299 282 278 n/a
BALANCE SHEET DATA (PERIOD END):
Total assets . . . . . . . . $90,397 $78,078 $75,004 $70,220 $67,770
Securities . . . . . . . . .
19,415 14,218 11,182 8,272 7,101
Loans, net of unearned income
62,320 60,146 59,091 57,469 55,079
Total deposits . . . . . . .
76,975 65,244 62,832 59,624 58,219
Long-term debt . . . . . . . -- -- -- -- --
Stockholders' equity . . . .
12,472 11,673 11,056 9,307 8,466
PERFORMANCE RATIOS:
Return on average assets . .
1.30% 1.84% 2.85% 1.37% .98%
Return on average stockholders'
equity . . . . . . . . 9.06 12.40 14.64 10.66 9.72
Net interest margin . . . . 3.18 3.78 3.95 3.92 2.95
Efficiency (1) . . . . . . .
44.02 34.28 38.32 41.66 53.65
Dividend payout . . . . . . .
43.68 33.89 6.54 11.75 n/a
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income .03% --% --% --% --%
Problem assets to net loans and
other real estate (2) . 1.04 2.22 2.68 2.49 3.68
Nonperforming assets to net loans
and other real estate (3) 1.03 2.22 2.68 2.49 3.68
Allowance for loan losses to loans,
net of unearned income . 1.04 1.16 1.20 1.38 1.16
Allowance for loan losses to
nonperforming assets (3) 43.05 38.08 53.01 49.91 30.43
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets . . . . . 14.33% 14.95% 14.74% 13.13% 12.26%
Average loans to average deposits 86.11 93.10 95.19 95.51 93.86
Core capital (4) . . . . . . 13.68 14.74 14.74 13.13 12.28
Risk-based capital (4) . . . 26.17 26.49 31.85 22.12 20.77
Tangible capital (4) . . . . 13.68 14.74 14.74 13.13 12.28
</TABLE>
__________________________
(1) Noninterest expense divided by the sum of net interest income
(taxable-equivalent basis) and noninterest income net of gains
(losses) from security transactions.
(2) Problem assets include loans on a nonaccrual basis, restructured
loans, and foreclosed properties.
(3) Nonperforming assets include loans on a nonaccrual basis, restructured
loans, loans 90 days or more past due, and foreclosed properties.
(4) Under applicable OTS regulations, the minimum required core,
risk-based, and tangible capital ratios as of September 30, 1995, were
3.0% to 5.0%, 8.0%, and 1.5% respectively.
14
<PAGE> 19
SUMMARY PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data give effect, as
appropriate, to the acquisitions of First Federal, the Recently Completed
Acquisitions, and the Other Pending Acquisitions as of the dates and for the
periods indicated and pursuant to the accounting bases described below. The
unaudited pro forma financial data are presented for informational purposes
only and are not necessarily indicative of the combined financial position or
results of operation which actually would have occurred if the transactions had
been consummated at the date and for the periods indicated or which may be
obtained in the future. The information should be read in conjunction with the
unaudited pro forma financial information included in Regions' Current Report
on Form 8-K dated November 22, 1995. For additional information relating to
specific transactions within the scope of the Other Pending Acquisitions, see
"Business of Regions--Recent Developments."
Selected Pro Forma Combined Data for Regions and First Federal
The following unaudited pro forma combined data give effect to the
acquisition of First Federal as of the date or at the beginning of the periods
indicated, assuming such acquisition is treated as a purchase.
<TABLE>
<CAPTION>
As of
September 30,
1995
----
(In thousands
except per
share data)
<S> <C>
Statement of Condition Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,925,835
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,036,933
Loans, net of unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,659,641
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,819,162
Other borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 624,715
Stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,113,790
Book value per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.19
</TABLE>
15
<PAGE> 20
<TABLE>
<CAPTION>
Nine Months Twelve Months
Ended Ended
September 30, December 31,
1995 1994(1)
---- -------
(In thousands except per share data)
<S> <C> <C>
Income Statement Data:
Total interest income . . . . . . . . . . . . . $ 761,408 $ 790,287
Total interest expense . . . . . . . . . . . . . 389,869 352,792
-------- --------
Net interest income . . . . . . . . . . . . . . 371,539 437,495
Provision for loan losses . . . . . . . . . . . 15,416 18,926
-------- --------
Net interest income after loan loss
provision . . . . . . . . . . . . . . . . . . . 356,123 418,569
Total noninterest income . . . . . . . . . . . 117,848 143,823
Total noninterest expense . . . . . . . . . . . 279,600 344,600
Income tax expense . . . . . . . . . . . . . . .
66,089 71,365
--------- ---------
Net income . . . . . . . . . . . . . . . . . . . $ 128,282 $ 146,427
======== =========
Net income per share . . . . . . . . . . . . . . $ 2.78 $ 3.41
======== =========
Average common shares outstanding . . . . . . . . 46,212 42,906
</TABLE>
__________
(1) Reflects the combined information of Regions for the fiscal year ended
December 31, 1994, and First Federal for the four quarters ended December
31, 1994.
Selected Pro Forma Combined Data for Regions, First Federal, and Other Pending
Acquisitions
The following unaudited pro forma combined data as of September 30, 1995,
and for the nine months ended September 30, 1995, and the year ended December
31, 1994, give effect to (i) the acquisition of First Federal by Regions,
assuming such acquisition is accounted for as a purchase, and (ii) the Other
Pending Acquisitions, assuming three of such acquisitions are treated as
purchases for accounting purposes and two of such acquisitions are treated as
poolings of interests for accounting purposes, as if all such transactions had
been consummated on September 30, 1995, in the case of the data included under
"Statement of Condition Data," and on January 1, 1994, in the case of the data
included under "Income Statement Data." The following unaudited pro forma
financial data for the years ended December 31, 1993, and 1992, give effect to
the acquisitions of First National Bancorp and Delta Bank and Trust Company by
Regions, assuming such acquisitions are accounted for as poolings of interests
and had been consummated on January 1, 1992.
16
<PAGE> 21
<TABLE>
<CAPTION>
As of
September 30,
1995
----
(In thousands
except per
share data)
<S> <C>
Statement of Condition Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,581,247
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,959,874
Loans, net of unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,950,292
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,914,550
Other borrowed money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 724,095
Stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,430,325
Book value per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.89
</TABLE>
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended December 31,
September 30, ---------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
(In thousands except per share data)
<S> <C> <C> <C> <C>
Income Statement Data:
Total interest income . . . . . . . . . . . . . $ 968,527 $ 1,027,388 $ 760,157 $ 748,414
Total interest expense . . . . . . . . . . . . . 488,041 451,868 300,143 328,421
------- ------- ------- -------
Net interest income . . . . . . . . . . . . . . 480,486 575,520 460,014 419,993
Provision for loan losses . . . . . . . . . . . . 17,670 21,349 25,315 39,937
------- ------- ------- -------
Net interest income after loan loss
provision . . . . . . . . . . . . . . . . . . . 462,816 554,171 434,699 380,056
Total noninterest income . . . . . . . . . . . . 143,483 176,061 167,164 151,843
Total noninterest expense . . . . . . . . . . . . 372,044 463,570 387,234 349,006
Income tax expense . . . . . . . . . . . . . . . 78,446 84,922 67,690 57,116
------- ------- ------- -------
Income before cumulative effect of
change in accounting principle
and extraordinary item . . . . . . . . . . . . $ 155,809 $ 181,740 $ 146,939 $ 125,777
======= ======= ======= =======
Income before cumulative effect of
change in accounting principle and
extraordinary item per share . . . . . . . . . $ 2.49 $ 3.08 $ 2.77 $ 2.42
==== ==== ==== ====
Average common shares outstanding . . . . . . . 62,610 59,051 52,998 52,049
</TABLE>
17
<PAGE> 22
THE ANNUAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of First
Federal Common Stock in connection with the solicitation by the First Federal
Board of Directors of proxies for use at the Annual Meeting, at which First
Federal stockholders will be asked to vote upon a proposal to approve the
Agreement. The Annual Meeting will be held at :00 .m., local time, on
, 1996, at the main offices of First Federal, located at 120 North Main Street,
Cedartown, Georgia, 30125.
First Federal stockholders are requested promptly to sign, date, and return
the accompanying proxy card to First Federal in the enclosed postage-paid,
addressed envelope. A stockholder's failure to return a properly executed proxy
card or to vote at the Annual Meeting will have the same effect as a vote
against the Agreement.
Any First Federal stockholder who has delivered a proxy may revoke it at
any time before it is voted by giving notice of revocation in writing or
submitting to First Federal a signed proxy card bearing a later date, provided
that such notice or proxy card is actually received by First Federal before the
vote of stockholders or in open meeting prior to the taking of the stockholder
vote at the Annual Meeting. Any notice of revocation should be sent to First
Federal Bank of Northwest Georgia, Federal Savings Bank, 120 North Main Street,
Cedartown, Georgia, 30125, Attention: Bettie C. Bridges, Corporate Secretary.
A proxy will not be revoked by death or supervening incapacity of the
stockholder executing the proxy unless, before the vote, notice of such death
or incapacity is filed with the Secretary. The shares of First Federal Common
Stock represented by properly executed proxies received at or prior to the
Annual Meeting and not subsequently revoked will be voted as directed in such
proxies. IF INSTRUCTIONS ARE NOT GIVEN, SHARES REPRESENTED BY PROXIES RECEIVED
WILL BE VOTED FOR APPROVAL OF THE MERGER, IN FAVOR OF THE PROPOSED AMENDMENT TO
THE CHARTER, FOR ELECTION TO THE BOARD OF DIRECTORS OF FIRST FEDERAL OF THE
THREE NOMINEES NAMED IN THIS PROXY STATEMENT/PROSPECTUS, TO RATIFY THE
APPOINTMENT OF FIRST FEDERAL'S INDEPENDENT AUDITORS, AND IN THE DISCRETION OF
THE PROXY HOLDER AS TO ANY OTHER MATTERS THAT PROPERLY MAY COME BEFORE THE
ANNUAL MEETING. IF NECESSARY, AND UNLESS CONTRARY INSTRUCTIONS ARE GIVEN, THE
PROXY HOLDER ALSO MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE ANNUAL MEETING
TO PERMIT FURTHER SOLICITATION OF PROXIES IN ORDER TO OBTAIN SUFFICIENT VOTES
TO APPROVE THE AGREEMENT. As of the date of this Proxy Statement/Prospectus,
First Federal is unaware of any other matter to be presented at the Annual
Meeting.
Solicitation of proxies will be made by mail but also may be made by
telephone or telegram or in person by the directors, officers, and employees of
First Federal, who will receive no additional compensation for such
solicitation but may be reimbursed for out-of-pocket expenses. Brokerage
houses, nominees, fiduciaries, and other custodians will be requested to
forward solicitation materials to beneficial owners and will be reimbursed for
their reasonable out-of-pocket expenses.
First Federal stockholders should not forward any stock certificates with
their proxy cards.
RECORD DATE; VOTE REQUIRED
First Federal's Board of Directors has established the close of business on
December 15, 1995, as the Record Date for determining the First Federal
stockholders entitled to notice of and to vote at the Annual Meeting. Only
First Federal stockholders of record as of the Record Date will be entitled to
vote at the Annual Meeting. The affirmative vote of the holders of at least
two-thirds of the First Federal Common Stock entitled to vote at the Annual
Meeting is required in order to approve the Agreement. Therefore, an abstention
or failure to return a properly executed proxy card will have the same effect
as a vote against the Agreement, as will a broker's submitting a proxy card
without exercising discretionary voting authority with respect to the
Agreement. As of the Record Date, there were approximately 380 holders of
300,601 shares of First Federal Common Stock outstanding and entitled to vote
at the Annual Meeting, with each share entitled to
18
<PAGE> 23
one vote. For information as to persons known by First Federal to beneficially
own more than 5.0% of the outstanding shares of First Federal Common Stock as
of the Record Date, see "Certain Holders of First Federal Voting Securities."
The presence, in person or by proxy, of a majority of the outstanding
shares of First Federal Common Stock is necessary to constitute a quorum of the
stockholders in order to take action at the Annual Meeting. For these purposes,
shares of First Federal Common Stock that are present, or represented by proxy,
at the Annual Meeting will be counted for quorum purposes regardless of whether
the holder of the shares or proxy fails to vote on the Agreement or whether a
broker with discretionary authority fails to exercise its discretionary voting
authority with respect to the Agreement. Once a quorum is established, approval
of the Merger requires the affirmative vote of the holders of at least
two-thirds of the First Federal Common Stock entitled to vote at the Annual
Meeting. In the election of directors, the three nominees receiving the largest
number of votes are elected. Approval of the proposed amendment to the Charter
requires the affirmative vote of a majority of the outstanding shares of First
Federal Common Stock. Ratification of the selection of First Federal's
independent auditors requires the affirmative vote of a majority of the shares
of First Federal Common Stock voted at the meeting, provided a quorum has been
established.
The directors and executive officers of First Federal and their affiliates
beneficially owned, as of the Record Date, 101,535 shares (or approximately
33.8% of the outstanding shares) of First Federal Common Stock. The directors
and executive officers of Regions and their affiliates beneficially owned, as
of the Record Date, no shares of First Federal Common Stock. As of that date,
no subsidiary of either First Federal or Regions held any shares of First
Federal Common Stock in a fiduciary capacity for others.
DESCRIPTION OF THE TRANSACTION
The following material describes certain aspects of the Merger. This
description does not purport to be complete and is qualified in its entirety by
reference to the Appendices hereto, including the Agreement, which is attached
as Appendix A to this Proxy Statement/Prospectus and incorporated herein by
reference. All stockholders are urged to read the Appendices in their entirety.
GENERAL
Each share of First Federal Common Stock (excluding any shares held by
First Federal, Regions, or their respective subsidiaries, other than shares
held in a fiduciary capacity or in satisfaction of debts previously contracted,
and shares held by stockholders who perfect their dissenters' rights of
appraisal) issued and outstanding at the Effective Date will be converted into
1.293 shares of Regions Common Stock, subject to possible adjustment as
described below under the caption "-- Possible Adjustment of Exchange Ratio."
Each share of Regions Common Stock outstanding immediately prior to the
Effective Date will remain outstanding and unchanged as a result of the Merger.
No fractional shares of Regions Common Stock will be issued in connection
with the Merger. In lieu of issuing fractional shares, Regions will make a cash
payment equal to the fractional interest which a First Federal stockholder
would otherwise receive multiplied by the closing price of Regions Common Stock
on the Nasdaq National Market (as reported by The Wall Street Journal, or, if
not reported thereby, by another authoritative source selected by Regions), on
the last full trading day prior to the Effective Date.
POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
Under certain circumstances, the Exchange Ratio could be adjusted pursuant
to certain provisions in the agreement. For purposes of the description of
these provisions and their operation, the following definitions apply.
"Average Closing Price" means the average closing price of Regions Common
Stock as reported on the
19
<PAGE> 24
Nasdaq National Market (as reported by The Wall Street Journal, or, if not
reported thereby, by another authoritative source selected by Regions) during
the ten consecutive full trading days in which such shares are traded on the
Nasdaq National Market, ending on the date on which the approval of the Merger
by the Federal Reserve is received. "Determination Date" means the date on
which the approval of the Merger by the Federal Reserve is received. "Index
Ratio" means the quotient obtained by dividing the weighted average of the
closing prices (the "Index Price") of 20 designated bank holding companies (the
"Index Group") on the Determination Date by the Index Price on September 25,
1995, less 15%. "Regions Ratio" means the quotient obtained by dividing the
Average Closing Price by $41.00.
If both (i) the Average Closing Price is less than $36.00, and (ii) the
Regions Ratio is less than the Index Ratio, then First Federal may elect not to
effect the Merger at the original Exchange Ratio of 1.293.
In such case, First Federal has the right to terminate the Agreement
during the ten-day period commencing two days after the Determination Date by
giving Regions prompt notice of that decision. First Federal may withdraw its
termination notice at any time during that ten-day period. During the five-day
period after receipt of such notice, Regions has the option to increase the
consideration payable to First Federal stockholders by increasing the Exchange
Ratio to equal the lesser of (i) the quotient obtained by dividing (1) the
product of $36.00 and the Exchange Ratio (as then in effect) by (2) the Average
Closing Price, and (ii) the quotient obtained by dividing (1) the product of
the Index Ratio and the Exchange Ratio (as then in effect) by (2) the Regions
Ratio. REGIONS IS UNDER NO OBLIGATION TO ADJUST THE EXCHANGE RATIO. If Regions
elects to adjust the Exchange Ratio, it must give First Federal prompt notice
of that election and of the adjusted Exchange Ratio, in which case First
Federal must proceed with the Merger.
These conditions reflect the parties' agreement that First Federal's
stockholders will assume the risk of declines in the value of Regions Common
Stock to $36.00 per share. If the value of Regions Common Stock were to decline
to an amount below $36.00 per share but the price of Regions Common Stock did
not decline more than 15% in comparison to the stock prices of the group of
comparable bank holding company stocks (the Index Group referenced above), then
First Federal's stockholders would continue to assume the risk of decline in
the value of Regions Common Stock. First Federal has the right to terminate the
Agreement only when the price of Regions Common Stock declines to an amount
below $36.00 per share and such decline exceeds by more than 15% the decline in
value for the group of comparable bank holding companies over the same period.
The operation of the adjustment mechanism can be illustrated by three
scenarios. (For purposes of the numerical examples, the Exchange Ratio is 1.293
and the Index Price is, as of September 25, 1995, $100.)
(a) The first scenario occurs if the Average Closing Price is not less
than $36.00. Under this scenario, regardless of any comparison between the
Regions Ratio and the Index Ratio, there would be no right on the part of First
Federal to terminate the Agreement and therefore no potential adjustment to the
Exchange Ratio, even though the consideration to be received by First Federal
stockholders would have fallen from a pro forma $51.72 per share to as little
as pro forma $46.55 per share.
(b) The second scenario occurs if the Average Closing Price is less than
$36.00, but does not decline by significantly more (i.e., by more than 15%)
than the decline in the Index Group. Under this scenario, there again would be
no right on the part of First Federal to terminate the Agreement and therefore
no potential adjustment to the Exchange Ratio, even though the consideration
received by First Federal stockholders would have fallen from a pro forma
$51.72 per share to something less than pro forma $46.55 per share.
(c) The third scenario arises where the Average Closing Price is below
$36.00 and the Regions Ratio is below the Index Ratio (i.e., Regions' stock
price has declined by more than 15% relative to the price of shares of the
Index Group). Under this scenario, First Federal would have the right to
terminate the Agreement and
20
<PAGE> 25
Regions would have the right, but not the obligation, to remove such
termination right by adjusting the Exchange Ratio. In this case, the potential
adjustment in the Exchange Ratio is designed to ensure that the First Federal
stockholders receive shares of Regions Common Stock having a value (based upon
the Average Closing Price) that corresponds to not more than either a
decline in the Regions Common Stock price to $36.00 per share or a 15% decline
from the stock performance reflected by the Index Group.
For example, if the Average Closing Price were $30.00, and the Index Price
on the Determination Date were $93, the Regions Ratio would be 0.75 and would
be below the Index Ratio (0.78, or 0.93 - 0.15). In such a case, First Federal
could terminate the Agreement unless Regions elected within five days to
increase the Exchange Ratio to equal 1.345, which represents the lesser of (a)
1.552 [the result of dividing $46.548 (the product of $36.00 and the 1.293
Exchange Ratio) by the Average Closing Price ($30.00), and (b) 1.345 [the
result of dividing the Index Ratio (0.78) times 1.293 by the Regions Ratio
(0.75)]. Based upon the assumed $30.00 Average Closing Price, the new Exchange
Ratio would represent a value to the First Federal stockholders of pro forma
$40.35 per share.
If the Average Closing Price were $30.00, and the ending Index Price were
$110, the Regions Ratio would be 0.75 and would be below the Index Ratio (0.95,
or 1.1 - 0.15). In such a case, First Federal could terminate the Agreement
unless Regions elected within five days to increase the Exchange Ratio to equal
1.552, which represents the lesser of (a) 1.552 [the result of dividing $46.548
(the product of $36.00 and the 1.293 Exchange Ratio) by the Average Closing
Price ($30.00)] and (b) 1.638 [the result of dividing the Index Ratio (0.95)
times 1.293 by the Regions Ratio (0.75)]. Based upon the assumed $30.00 Average
Closing Price, the new Exchange Ratio would represent a value to the First
Federal stockholders of pro forma $46.56 per share.
First Federal stockholders should be aware that the actual market value of
a share of Regions Common Stock at the Effective Date and at the time
certificates for those shares are delivered following surrender and exchange of
certificates for shares of First Federal Common Stock may be more or less than
the Average Closing Price. First Federal stockholders are urged to obtain
information on the trading value of Regions Common Stock that is more recent
than that provided in this Proxy Statement/Prospectus. See "Comparative Market
Prices and Dividends."
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER. During the last several years, there have been
significant developments in the banking and financial services industry. These
developments have included the increased emphasis and dependence on automation,
specialization of products and services, increased competition from other
financial institutions, and a trend toward consolidation and geographic
expansion, coupled with a relaxation of regulatory restrictions on interstate
conduct of business of financial institutions.
First Federal and its Board of Directors concluded that it could best
serve its stockholders, employees, customers and community by combining with a
regional banking organization, provided that First Federal could obtain a fair
price for its stockholders.
In December 1994, First Federal engaged Robinson-Humphrey as its advisor
for providing financial advisory services to First Federal, including
identifying potential offers and opportunities for the possible sale of First
Federal. As its advisor, Robinson-Humphrey developed valuation information for
First Federal, assisted First Federal in identifying and soliciting several
southeastern financial institutions concerning possible sale opportunities, and
reviewed with the Board of Directors expressions of interest regarding a
possible sale. In addition, Robinson-Humphrey consulted with and advised the
Board of Directors, and participated in sale negotiations on behalf of First
Federal.
Regions was one of several financial institutions from whom
Robinson-Humphrey solicited indications of interest. In response to an
information package about First Federal which Regions received from Robinson-
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Humphrey, Regions expressed an interest in pursuing further discussions
concerning a possible transaction. First Federal's management and the executive
committee of First Federal's Board of Directors also desired to enter into
substantive discussions, and in September, 1995 a representative of First
Federal invited Regions to make a concrete acquisition proposal.
Regions then formulated a specific offer for acquiring all of the
outstanding stock of First Federal. On September 25, First Federal's management
advisors met with Regions to discuss the terms of an offer and Regions made an
offer to acquire First Federal. On September 26, 1995 the First Federal Board
met to consider the Regions offer, and approved the offer subject to certain
revisions to and final negotiation of the definitive Agreement. On September
29, 1995, the First Federal Board met again and approved the definitive
Agreement.
FIRST FEDERAL'S REASONS FOR THE MERGER. In approving the Merger, the
directors of First Federal considered a number of factors. Without assigning
any relative or specific weights to the factors, the First Federal Board of
Directors considered the following material factors:
(a) the information presented to the directors by the management of First
Federal concerning the business, operations, earnings, asset quality, and
financial condition of First Federal, including compliance with regulatory
capital requirements on an historical and prospective basis;
(b) the financial terms of the Merger, including the relationship of the
merger price to the market value, tangible book value, and earnings per share
of First Federal Common Stock, the partial protection against a decline in the
market value of Regions Common Stock, and the partial participation in any
appreciation in value of Regions Common Stock;
(c) the nonfinancial terms of the Merger, including the treatment of the
Merger as a tax-free exchange of First Federal Common Stock for Regions Common
Stock for federal and state income tax purposes;
(d) the likelihood of the Merger being approved by applicable regulatory
authorities without undue conditions or delay;
(e) the report of First Federal's financial advisor reviewing a comparison
of First Federal to selected peer banks, premiums paid in other merger
transactions, a mark-to-market analysis of First Federal, and a discounted
cash-flow analysis of First Federal; and
(f) the opinion rendered by First Federal's financial advisor to the effect
that, from a financial point of view, the exchange of First Federal Common
Stock for Regions Common Stock on the terms and conditions set forth in the
Agreement is fair to the holders of First Federal Common Stock.
The terms of the Merger were the result of arms-length negotiations between
representatives of First Federal and representatives of Regions. Based upon the
consideration of the foregoing factors, the Board of Directors of First Federal
unanimously approved the Merger as being in the best interests of First Federal
and its stockholders. Each member of the Board of Directors of First Federal
has agreed to vote those shares of First Federal Common Stock over which such
member has voting authority (other than in a fiduciary capacity) in favor of
the Merger.
FIRST FEDERAL'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FIRST
FEDERAL STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER.
REGIONS' REASONS FOR THE MERGER. The Regions Board of Directors has
approved the Agreement and determined that the Merger is in the best interests
of Regions and its stockholders. In approving the Agreement, the Regions Board
considered a number of factors. Without assigning any relative or specific
weights to the factors, the Regions Board of Directors considered the following
material factors:
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(a) a review, based in part on a presentation by Regions management, of (i)
the business, operations, earnings, and financial condition, including the
capital levels and asset quality, of First Federal on an historical,
prospective, and pro forma basis and in comparison to other financial
institutions in the area, (ii) the demographic, economic, and financial
characteristics of the markets in which First Federal operates, including
existing competition, history of the market areas with respect to financial
institutions, and average demand for credit, on an historical and prospective
basis, and (iii) the results of Regions' due diligence review of First Federal;
and
(b) a variety of factors affecting and relating to the overall strategic
focus of Regions, including Regions' desire to expand into markets in the
general vicinity of its core markets.
OPINION OF FIRST FEDERAL'S FINANCIAL ADVISOR
General. First Federal retained Robinson-Humphrey to act as its financial
adviser in connection with the Merger. Robinson-Humphrey has rendered an
opinion to First Federal's Board of Directors that, based on the matters set
forth therein, consideration to be given pursuant to the Merger is fair, from a
financial point of view, to the First Federal stockholders. The text of such
opinion is set forth in Appendix C to this Proxy Statement and should be read
in its entirety by the stockholders of First Federal.
The consideration to be given to First Federal stockholders in the Merger
was determined by First Federal and Regions in their negotiations. No
limitations were imposed by the Board of Directors or management of First
Federal upon Robinson-Humphrey with respect to the investigations made or the
procedures followed by Robinson-Humphrey in rendering its opinion.
In connection with rendering its opinion to First Federal's Board of
Directors, Robinson-Humphrey performed a variety of financial analyses.
However, the preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances, and, therefore,
such an opinion is not readily susceptible to summary description.
Robinson-Humphrey, in conducting its analysis and in arriving at its opinion,
has not conducted a physical inspection of any of the properties or assets of
Regions, and has not made or obtained any independent valuation or appraisals
of any properties, assets or liabilities of Regions. Robinson-Humphrey has
assumed and relied upon the accuracy and completeness of the financial and
other information that was provided to it by Regions or that was publicly
available. Its opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to it as of the
date of, its analyses.
Valuation Methodologies. In connection with its opinion on the Merger and
the presentation of that opinion to First Federal's Board of Directors,
Robinson-Humphrey performed three valuation analyses with respect to First
Federal: (i) a comparison with comparable publicly traded companies; (ii) an
analysis of comparable prices and terms of recent transactions involving
financial institutions buying thrifts; and (iii) a discounted cash flow
analysis. For purposes of the comparable company and comparable transaction
analyses, Regions' stock was valued at $40.125 per share, which was the trading
price on September 29, 1995. Based on the Exchange Ratio of 1.293 Regions
shares for each First Federal share outstanding, the implied purchase price per
share for First Federal is $51.88.
For the Comparable Company Analysis and the Comparable Transaction
Analysis, Robinson-Humphrey examined, among other things, the implied $51.88
purchase price to adjusted book value and adjusted tangible book value of First
Federal. In its analysis, Robinson-Humphrey normalized the equity to assets
ratio of First Federal from approximately 13.7% at June 30, 1995 to 8.0%. The
adjusted book value multiple calculation assumes that the company is paid a
multiple on just the stockholders' equity that equates to 8.0% of assets, and
receives dollar for dollar on the amount in excess of 8.0%. The valuation
methodologies are discussed briefly below.
Comparable Company Analysis. In performing its comparable company
analysis, Robinson-Humphrey
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analyzed the market trading of First Federal Common Stock relative to
publicly traded thrifts that had total assets comparable to First Federal.
The institutions included in the comparison to First Federal consisted of:
Southeastern thrifts, nationwide thrifts and Georgia thrifts, all with
assets less than $200 million.
Among the market trading information compared was market price to book
value, tangible book value and the latest 12 months earnings per share.
Robinson-Humphrey calculated the average multiples for the comparable
companies and then applied the average 1995 takeover premium (takeover
price compared to trading price) for public thrifts to those multiples. The
average trading multiples to book value for Southeastern thrifts,
nationwide thrifts and Georgia thrifts are 1.09x, .98x and 1.13x,
respectively, compared to the multiple of approximately 1.27x book value
and 1.47x adjusted book value represented by the consideration to be
received by First Federal stockholders in the Merger. The average trading
multiples to tangible book value per share for Southeastern thrifts,
nationwide thrifts and Georgia thrifts are 1.10x, .99x and 1.23x,
respectively, compared to a multiple of approximately 1.27x tangible book
value and 1.47x adjusted book value in the Merger. The average trading
multiples to latest 12 months earnings for Southeastern thrifts, nationwide
thrifts and Georgia thrifts are 12.42x, 15.08x and 8.70x, respectively,
compared to 12.07x for the Merger. Applying the average 1995 takeover
premium for public thrifts of 21.2% to these multiples would imply a
takeover price for First Federal of $56.93 per share, compared to $51.88 as
implied by the Merger. Adjusted book value is defined as 8.0%
equity/assets, as compared to First Federal's 13.7% equity/assets level at
June 30, 1995.
Comparable Transaction Analysis. Robinson-Humphrey performed three
analyses of premiums paid for selected thrifts with comparable
characteristics to First Federal. Comparable transactions were considered
to be (i) a total of 14 transactions since January 1, 1995, where the
seller was a Southeastern thrift with assets under $200 million; (ii) a
total of 42 transactions since January 1, 1995, where the seller was a
nationwide thrift with assets under $200 million; and (iii) a total of 8
transaction since January 1, 1995 where the seller was a Georgia thrift
with assets under $200 million. When determining if a transaction is fair,
from a financial point of view, to an institution's stockholders,
Robinson-Humphrey compares the proposed transaction with other transactions
in the marketplace with similar characteristics. Four ratios that are
considered by Robinson-Humphrey the most determinative in this fairness
analysis are price/book value, price/tangible book value, price/earnings
per share, and price as a percentage of total assets. No one ratio,
however, is determinative on its own, but rather the performance of the
other ratio analyses must be reviewed.
Based on the first of the foregoing transactions, merger agreements since
January 1, 1995 where the seller was a Southeastern thrift with assets
under $200 million, the analysis yielded a range of transaction values to
book value of .88x to 2.09x, with a mean of 1.47x and a median of 1.46x.
These compare to a transaction value for the Merger of approximately 1.27x
of First Federal book value and 1.47x adjusted book value as of June 30,
1995.
In addition, the analysis yielded a range of transaction values as a
percentage of tangible book value for the comparable transactions ranging
from .88x to 3.82x, with a mean of 1.65x and a median of 1.46x. These
compare to a transaction value to tangible book value and adjusted book
value at June 30, 1995 of approximately 1.27x and 1.47x for the Merger.
Furthermore, the analysis yielded a range of transaction values as a
multiple of trailing 12 months earnings per share. These values ranged from
7.67 times to 20.06 times, with a mean of 14.44 times and a median of 15.35
times. These compare to a transaction value to the June 30, 1995 trailing
12 months earnings per share of 12.07 times for the Merger.
Lastly, the analysis yielded a range of transaction values as a percentage
of total assets for the comparable transactions ranging from 3.87 percent
to 25.28 percent, with a mean of 10.80 percent and a median of 9.67
percent. These compare to a transaction value to total assets at June 30,
1995 of approximately 17.42 percent for the Merger.
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Based on the second of the foregoing transactions, merger agreements since
January 1, 1995, where the seller was a nationwide thrift with assets under
$200 million, the analysis yielded a range of transaction values to book
value of .72x to 2.09x, with a mean of 1.35x and a median of 1.35x. These
compare to a transaction value for the Merger of approximately 1.27x First
Federal book value and 1.47x adjusted book value as of June 30, 1995.
In addition, the analysis yielded a range of transaction values as a
percentage of tangible book value for the comparable transactions ranging
from .72x to 3.82x, with a mean of 1.42x and a median of 1.35x. These
compare to a transaction value to tangible book value and adjusted tangible
book value at June 30, 1995 of approximately 1.27x and 1.47x for the
Merger.
Furthermore, the analysis yielded a range of transaction values as a
multiple of trailing 12 months earnings per share. These values ranged from
7.67x to 60.26x, with a mean of 16.69x and a median of 16.49x. These
compare to a transaction value to the June 30, 1995 trailing 12 months
earnings per share of 12.07x for the Merger.
Lastly, the analysis yielded a range of transaction values as a percentage
of total assets for the comparable transactions ranging from 3.05 percent
to 31.96 percent, with a mean of 13.57 percent and a median of 13.59
percent. These compare to a transaction value to total assets at June 30,
1995 of approximately 17.42 percent for the Merger.
Based on transactions since January 1, 1995, where the seller was a Georgia
thrift, the analysis yielded a range of transaction values to book value of
1.32x to 1.86x, with a mean of 1.65x and a median of 1.67x. These compare
to a transaction value for the Merger of approximately 1.27x of First
Federal book value and 1.47x adjusted book value as of June 30, 1995.
In addition, the analysis yielded a range of transaction values as a
percentage of tangible book value for the inspection comparable
transactions ranging from 1.32x to 1.86x, with a mean of 1.68x and a median
of 1.74x. These compare to a transaction value to tangible book value and
adjusted tangible book value at June 30, 1995 of approximately 1.27x and
1.47x for the Merger.
Furthermore, the analysis yielded a range of transaction values as a
multiple of trailing 12 months earnings per share. These values ranged from
7.67 times to 16.91 times, with a mean of 13.07 times and a median of 12.69
times. These compare to a transaction value to the June 30, 1995 trailing
12 months earnings per share of 12.07 times for the Merger.
Lastly, the analysis yielded a range of transaction values as a percentage
of total assets for the comparable transactions ranging from 9.28 percent
to 18.84 percent, with a mean of 13.58 percent and a median of 12.78
percent. These compare to a transaction value to tangible book value at
June 30, 1995 of approximately 17.42 percent for the Merger.
No company or transaction used in the or comparable transaction analyses is
identical to First Federal. Accordingly, an analysis of the foregoing
necessarily involves complex considerations and judgments, as well as other
factors that affect the public trading value or the acquisition value of
the company to which it is being compared.
Discounted Cash Flow Analysis. Using discounted cash flow analysis,
Robinson-Humphrey estimated the present value of the future stream of
after-tax cash flows that First Federal could produce through 1999, under
various circumstances, assuming that First Federal performed in accordance
with the earnings/return projections of management. Robinson-Humphrey
estimated the terminal value for First Federal at the end of the period by
applying multiples of earnings ranging from 8.0 to 10.0x and then
discounting the cash flow streams, dividends paid to stockholders and
terminal value using differing discount rates (ranging from 10.0 percent to
12.0 percent) chosen to reflect different assumptions regarding the
required rates
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of return of First Federal and the inherent risk surrounding the underlying
projections. This discounted cash flow analysis indicated a reference range
of $14.1 million to $15.9 million, or $47.31 to $53.31 per share, for First
Federal. These values compare to the value implied by the Exchange Ratio
$51.88, based on the market value of Regions Common Stock as of September
29, 1995. This fact, among others, contributes to Robinson-Humphrey's
opinion that the Merger is fair from a financial point of view to the First
Federal stockholders.
Compensation of Robinson-Humphrey. Pursuant to an engagement letter dated
December 1, 1994 between First Federal and Robinson-Humphrey, First Federal
agreed to pay Robinson-Humphrey a $30,000 Fairness Opinion Fee and a total
Success Fee of 1.25% of the total consideration received by First Federal
stockholders. The $30,000 Fairness Opinion Fee will be credited against the
Success Fee. First Federal has also agreed to indemnify and hold harmless
Robinson-Humphrey and its officers and employees against certain liabilities in
connection with its services under the engagement letter, except for
liabilities resulting from the negligence of Robinson-Humphrey.
As part of its investment banking business, Robinson-Humphrey is regularly
engaged in the valuation of securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. First Federal's Board of Directors decided to retain
Robinson-Humphrey based on its experience as a financial advisor in mergers and
acquisitions of financial institutions, particularly transactions in the
Southeastern region of the U.S., and its knowledge of financial institutions
and First Federal in particular.
EFFECTIVE DATE OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time that the
Articles of Combination relating to the Merger are filed and declared effective
with the OTS. Unless otherwise agreed upon by Regions and First Federal, and
subject to the conditions to the obligations of the parties to effect the
Merger, the parties will use their reasonable efforts to cause the Effective
Date to occur on the last business day of the month in which the last of the
following events occur: (i) the effective date (including the expiration of any
applicable waiting period) of the last regulatory approval required for the
Merger and (ii) the date on which the Agreement is approved by the requisite
vote of First Federal stockholders; or such later date within 30 days thereof
as specified by Regions.
No assurance can be provided that the necessary stockholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger can
or will be satisfied. Regions and First Federal anticipate that all conditions
to consummation of the Merger will be satisfied so that the Merger can be
consummated during the first quarter of 1996. However, delays in the
consummation of the Merger could occur.
The Board of Directors of either Regions or First Federal generally may
terminate the Agreement if the Merger is not consummated by July 31, 1996,
unless the failure to consummate by that date is the result of a breach of the
Agreement by the party seeking termination. See " - - Conditions to
Consummation of the Merger" and "--Waiver, Amendment, and Termination of the
Agreement."
DISTRIBUTION OF REGIONS STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES
Promptly after the Effective Date, Regions will cause First Chicago Trust
Company of New York, acting in the capacity of Exchange Agent, to mail to the
former stockholders of First Federal a form letter of transmittal, together
with instructions for the exchange of such stockholders' certificates
representing shares of First Federal Common Stock for certificates representing
shares of Regions Common Stock.
FIRST FEDERAL STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE THE FORM LETTER OF TRANSMITTAL AND INSTRUCTIONS. Upon surrender to
the Exchange Agent of certificates for First Federal Common
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Stock, together with a properly completed letter of transmittal, there will be
issued and mailed to each holder of First Federal Common Stock surrendering
such items a certificate or certificates representing the number of shares of
Regions Common Stock to which such holder is entitled, if any, and a check for
the amount to be paid in lieu of any fractional share interest, without
interest. After the Effective Date, to the extent permitted by law, First
Federal stockholders of record as of the Effective Date will be entitled to
vote at any meeting of holders of Regions Common Stock the number of whole
shares of Regions Common Stock into which their First Federal Common Stock has
been converted, regardless of whether such stockholders have surrendered their
First Federal Common Stock certificates. No dividend or other distribution
payable after the Effective Date with respect to Regions Common Stock, however,
will be paid to the holder of any unsurrendered First Federal certificate until
the holder duly surrenders such certificate. Upon such surrender, all
undelivered dividends and other distributions and, if applicable, a check for
the amount to be paid in lieu of any fractional share interest will be
delivered to such stockholder, in each case without interest.
After the Effective Date, there will be no transfers of shares of First
Federal Common Stock on First Federal's stock transfer books. If certificates
representing shares of First Federal Common Stock are presented for transfer
after the Effective Date, they will be canceled and exchanged for the shares of
Regions Common Stock and a check for the amount due in lieu of fractional
shares, if any, deliverable in respect thereof.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to a number of conditions, including,
but not limited to:
(a) approval from the Federal Reserve, the OTS, and the Georgia Department
without any conditions or restrictions that would, in the reasonable judgment
of Regions' Board of Directors, so materially adversely impact the economic
benefits of the transactions contemplated by the Agreement as to render
inadvisable the consummation of the Merger, and the expiration of applicable
waiting periods under the BHC Act;
(b) the approval by the holders of at least two-thirds of the First Federal
Common Stock issued and outstanding;
(c) the absence of any action by any court or governmental authority
restraining or prohibiting the Merger;
(d) the receipt of a satisfactory opinion of counsel that the Merger
qualifies for federal income tax treatment as a reorganization under Section
368(a) of the Code and that the exchange of First Federal Common Stock for
Regions Common Stock will not give rise to recognition of gain or loss to First
Federal stockholders, except to the extent of any cash received; and
(e) notification for listing on the Nasdaq National Market of the shares of
Regions Common Stock to be issued in the Merger.
Consummation of the Merger also is subject to the satisfaction or waiver of
various other conditions specified in the Agreement, including, among others:
(i) the delivery by Regions and First Federal of opinions of their respective
counsel and certificates executed by their respective Chief Executive Officers
and Chief Financial Officers as to compliance with the Agreement and (ii) as of
the Effective Date, the accuracy of certain representations and warranties and
the compliance in all material respects with the agreements and covenants of
each party.
REGULATORY APPROVALS
The Merger may not proceed in the absence of receipt of the requisite
regulatory approvals. There can be no assurance that such regulatory approvals
will be obtained or as to the timing of such approvals. There also can be no
assurance that such approvals will not be accompanied by a conditional
requirement which causes such approvals to fail to satisfy the conditions set
forth in the Agreement. Applications for the
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approvals described below have been submitted to the appropriate regulatory
agencies.
Regions and First Federal are not aware of any material governmental
approvals or actions that are required for consummation of the Merger, except
as described below. Should any other approval or action be required, it
presently is contemplated that such approval or action would be sought.
The Merger requires the prior approval of the Federal Reserve, pursuant to
Section 3 of the BHC Act. In granting its approval under Section 3 of the BHC
Act, the Federal Reserve must take into consideration, among other factors, the
financial and managerial resources and future prospects of the institutions and
the convenience and needs of the communities to be served. The relevant
statutes prohibit the Federal Reserve from approving the Merger (i) if it would
result in a monopoly or be in furtherance of any combination or conspiracy to
monopolize or attempt to monopolize the business of banking in any part of the
United States or (ii) if its effect in any section of the country may be to
substantially lessen competition or to tend to create a monopoly, or if it
would be a restraint of trade in any other manner, unless the Federal Reserve
finds that any anticompetitive effects are outweighed clearly by the public
interest and the probable effect of the transaction in meeting the convenience
and needs of the communities to be served. Under the BHC Act, the Merger may
not be consummated until the 15th day or the 30th day following the date of
Federal Reserve approval, during which time the United States Department of
Justice may challenge the transaction on antitrust grounds. The commencement of
any antitrust action would stay the effectiveness of the Federal Reserve's
approval, unless a court specifically orders otherwise.
The Merger also is subject to the approval of the OTS and the Georgia
Department.
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
Prior to the Effective Date, and to the extent permitted by law, any
provision of the Agreement generally may be (i) waived by the party benefitted
by the provision or (ii) amended by a written agreement between Regions and
First Federal approved by their respective Boards of Directors; provided,
however, that after approval by the First Federal stockholders, no amendment
decreasing the consideration to be received by First Federal stockholders may
be made without the further approval of such stockholders.
The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Date, either before or after approval by First Federal
stockholders, under certain circumstances, including:
(a) by the Board of Directors of either party upon final denial of any
required regulatory approval, provided that the terminating party is not then
in material breach of any provision of the Agreement, or by the Board of
Directors of Regions if any required regulatory approval is conditioned or
restricted in the manner described under "-- Conditions to Consummation of the
Merger" above;
(b) by the Board of Directors of either party, if the holders of at least
two-thirds of the shares of First Federal Common Stock issued and outstanding
shall not have approved the Agreement, provided that the terminating party is
not then in material breach of any provision of the Agreement;
(c) by mutual agreement of the Boards of Directors of Regions and First
Federal;
(d) by the Board of Directors of either party, in the event of a breach of
any provision of the Agreement which meets certain standards specified in the
Agreement; or
(e) by the Board of Directors of either party if the Merger shall not have
been consummated by July 31, 1996, but only if the failure to consummate the
Merger by such date has not been caused by the terminating party's breach of
the Agreement.
If the Agreement is terminated, the parties will have no further
obligations, except with respect to certain
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provisions, including those providing for payment of expenses and restricting
disclosure of confidential information. Further, termination will not relieve
the parties from the consequences of any uncured willful breach of the
Agreement giving rise to such termination.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of First Federal and Regions generally has agreed, unless the prior
consent of the other party is obtained, and except as otherwise contemplated by
the Agreement, to operate its business only in the ordinary course, preserve
intact its business organizations and assets, maintain its rights and
franchises, and take no action that would affect, adversely and materially, the
ability of either party to perform its covenants and agreements under the
Agreement or to obtain any consent or approval required for the consummation of
the transactions contemplated by the Agreement. In addition, the Agreement
contains certain other restrictions applicable to the conduct of the business
of either First Federal or Regions prior to consummation of the Merger, as
described below.
FIRST FEDERAL. First Federal has agreed not to take certain action
relating to the operation of its business pending consummation of the Merger
without the prior approval of Regions. Those actions generally include, without
limitation: (i) amending its Charter or Bylaws; (ii) becoming
responsible for any obligation for borrowed money in excess of an aggregate of
$100,000 (except in the ordinary course of business consistent with past
practices); (iii) acquiring or exchanging any shares of its capital stock or
paying any dividend or other distribution in respect of its capital stock,
except that First Federal may, but is not obligated to, declare and pay to the
extent it is legally able an annual cash dividend in January, 1996 not to
exceed $1.00 per share on First Federal Common Stock, and quarterly cash
dividends not to exceed $.15 per share, all in accordance with past practice;
(iv) issuing or selling any additional shares of any First Federal capital
stock, any rights to acquire any such stock, or any security convertible into
such stock (except as set forth in the Agreement); (v) adjusting or
reclassifying any of its capital stock; (vi) acquiring control over any other
entity; (vii) granting any increase in compensation or benefits to employees or
officers (except as previously disclosed to Regions or as required by law),
paying any bonus (except as previously disclosed to Regions or in accordance
with any existing program or plan), entering into or amending any severance
agreements with officers (except as previously disclosed to Regions), or
granting any increase in compensation or other benefits to directors; (viii)
entering into or amending any employment contract that it does not have the
unconditional right to terminate (except as previously disclosed to Regions and
except for any amendment required by law); (ix) adopting any new employee
benefit plan or program, or materially changing any existing plan or program
(except as previously disclosed to Regions and except for any change required
by law or advisable to maintain the tax qualified status of any such plan); (x)
making any significant change in any tax or accounting methods or systems of
internal accounting controls (except in conformity to changes in tax laws or
generally accepted accounting principles ("GAAP")); (xi) commencing any
litigation (except in accordance with past practices); or (xii) modifying or
terminating any material contract.
In addition, First Federal has agreed not to solicit, directly or
indirectly, any acquisition proposal from any other person or entity. First
Federal also has agreed not to negotiate with respect to any such proposal,
provide nonpublic information to any party making such a proposal, or enter
into any agreement with respect to any such proposal, except in compliance with
the fiduciary obligations of its Board of Directors. In addition, First Federal
has agreed to use reasonable efforts to cause its advisors and other
representatives not to engage in any of the foregoing activities.
REGIONS. The Agreement prohibits Regions, prior to the earlier of the
Effective Date or the termination of the Agreement, from taking any action that
would materially adversely affect the ability of either party to obtain the
requisite governmental approvals or to perform its covenants and agreements
under the Agreement.
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MANAGEMENT FOLLOWING THE MERGER
Consummation of the Merger will not alter the present officers and
directors of Regions. Information concerning the management of Regions is
included in the documents incorporated herein by reference. See "Documents
Incorporated by Reference."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement provides that Regions will, and will cause First Federal to,
maintain all rights of indemnification existing in favor of each person
entitled to indemnification from First Federal or any of its subsidiaries on
terms no less favorable than the rights provided in the Charter or Bylaws of
First Federal or its subsidiaries, as the case may be, or the rights otherwise
in effect on the date of the Agreement, and that such rights will continue in
full force and effect for six years from the Effective Date with respect to
matters occurring at or prior to the Effective Date.
The Agreement also provides that, after the Effective Date, Regions will
provide generally to officers and employees of First Federal and its
subsidiaries who become officers or employees of Regions or its subsidiaries,
employee benefits under employee benefit plans (other than stock option or
other plans involving the potential issuance of Regions Common Stock) on terms
and conditions that, taken as a whole, are substantially similar to those
currently provided by Regions and its subsidiaries to their similarly situated
officers and employees. For purposes of participation and vesting (but not
benefit accrual) under such employee benefit plans, service with First Federal
or its subsidiaries prior to the Effective Date will be treated as service with
Regions or its subsidiaries. The Agreement further provides that Regions will
cause First Federal to honor all employment, severance, consulting, and other
compensation contracts previously disclosed to Regions between First Federal or
its subsidiaries and any current or former director, officer, or employee, and
all provisions for vested amounts earned or accrued through the Effective Date
under First Federal's benefit plans.
As of the Record Date, directors and executive officers of First Federal
owned no shares of Regions Common Stock.
DISSENTERS' RIGHTS
If the Merger is consummated, pursuant to regulations of the OTS, any
stockholder of record of First Federal Common Stock who (i) objects to the
Merger, (ii) does not vote any of such holder's shares in favor of the Merger,
and (iii) fully complies with all of the provisions of 12 C.F.R. Section
552.14 will be entitled to demand and receive payment in an amount equal to the
fair or appraised value of such holder's shares of First Federal Common Stock.
For the purpose of determining the amount to be received in connection with the
exercise of dissenters' rights pursuant to regulations of the OTS, the fair
value of a dissenting stockholder's First Federal Common Stock equals the fair
market value of the shares as of the Effective Date, exclusive of any element
of value arising from the accomplishment or expectation of the Merger.
Any First Federal stockholder desiring to receive payment of the fair or
appraised value of such holder's First Federal Common Stock in accordance with
the requirements of 12 C.F.R. Section 552.14 must (i) deliver to First
Federal, prior to voting on the Merger, a writing identifying such holder and
stating such holder's intention to demand appraisal of and payment for such
holder's shares and (ii) not vote such holder's shares of First Federal Common
Stock in favor of the Merger. Any written notice of intent to demand appraisal
of and payment for shares of First Federal Common Stock should be sent to:
Larry W. Dooley, President, First Federal Bank of Northwest Georgia, Federal
Savings Bank, 120 North Main Street, Cedartown, Georgia, 30125. A vote against
the Merger alone will not satisfy the requirements for the separate written
notice of intent to demand appraisal of and payment for shares of First Federal
Common Stock referred to in condition (i) above. Rather, such demand must be
prior and in addition to and separate from any proxy or vote against the Merger
by the dissenting stockholder.
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Within ten days after the Effective Date, First Federal must give written
notice of the Effective Date by mail to any stockholder who complied with the
provisions above and did not vote in favor of the Merger and make a written
offer to each such stockholder to pay for such holder's shares at a price First
Federal estimates to be the fair value of the shares. Such notice and offer
must be accompanied by First Federal's balance sheet and statement of income
for a fiscal year ending not more than 16 months before the date of notice and
offer, together with the latest available interim financial statements and a
statement of the procedures that must be followed if the stockholder elects
under 12 C.F.R. Section 552.14(c)(5) and (6) to demand appraisal and payment
of a different amount than that offered by First Federal.
If within 60 days of the Effective Date the dissenting stockholder accepts
First Federal's offer of the fair value for such holder's shares, or the fair
value is otherwise agreed upon between First Federal and the dissenting
stockholder, First Federal must make payment for the dissenting stockholder's
shares within 90 days of the Effective Date. At any time within 60 days of the
Effective Date, a dissenting stockholder may withdraw a demand for appraisal
and accept the terms of the Merger, and such shares of First Federal Common
Stock will become shares of Regions Common Stock in accordance with the terms
of the Agreement.
If the dissenting stockholder and First Federal do not agree as to the fair
value of the dissenting stockholder's shares within 60 days of the Effective
Date, the dissenting stockholder may file a petition with the OTS, with a copy
by registered or certified mail to First Federal, demanding a determination of
the fair market value of the shares of all such stockholders. Each stockholder
demanding appraisal of and payment for such holder's shares of First Federal
Common Stock in compliance with 12 C.F.R. Section 552.14 must deliver such
holder's shares of First Federal Common Stock to First Chicago Trust Company of
New York, as transfer agent, for notation thereon that an appraisal proceeding
is pending. If a dissenting stockholder fails to file a petition with the OTS
demanding a determination of fair value within 60 days of the Effective Date or
fails to deliver such holder's shares of First Federal Common Stock to the
transfer agent within 60 days of the Effective Date, such dissenting
stockholder will be deemed to have accepted the terms of the Merger, and such
stockholder's shares of First Federal Common Stock will become shares of
Regions Common Stock in accordance with the terms of the Agreement.
The director of the OTS (the "Director") shall appoint either appropriate
OTS staff or one or more independent persons to appraise the shares of a
dissenting stockholder who has complied fully with 12 C.F.R. Section 552.14.
Appraisals prepared by independent persons will be subject to review by OTS
staff. If the Director concurs in the final valuation of the shares, the
Director will instruct First Federal to pay the appraised fair market value,
together with accrued interest from the Effective Date, upon the surrender of
the dissenting stockholder's First Federal Common Stock. The Director, at his
or her discretion, may apportion or assess the cost of the appraisal proceeding
against some or all of the parties to the proceeding. From and after the
Effective Date, dissenting stockholders who receive the appraised value of
their shares of First Federal Common Stock are not entitled to receive
dividends or to exercise voting rights with respect to either First Federal
Common Stock or Regions Common Stock.
The foregoing does not purport to be a complete statement of the provisions
of the OTS regulations relating to dissenter and appraisal rights and is
qualified in its entirety by reference to the dissenter and appraisal rights
provisions of 12 C.F.R. Section 552.14, which section is reproduced in
Appendix D to this Proxy Statement/Prospectus and which hereby is incorporated
by reference herein.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A SUMMARY OF CERTAIN ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. THIS SUMMARY IS BASED ON THE FEDERAL INCOME TAX
LAWS NOW IN EFFECT AND AS CURRENTLY INTERPRETED; IT DOES NOT TAKE INTO ACCOUNT
POSSIBLE CHANGES IN SUCH LAWS OR INTERPRETATIONS, INCLUDING AMENDMENTS TO
APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN JUDICIAL OR ADMINISTRATIVE
RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT. THIS SUMMARY DOES NOT
PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. IN PARTICULAR,
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AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT ADDRESS THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO STOCKHOLDERS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES OR STATUS (FOR EXAMPLE, AS FOREIGN PERSONS, TAX-EXEMPT
ENTITIES, DEALERS IN SECURITIES, INSURANCE COMPANIES, AND CORPORATIONS, AMONG
OTHERS). NOR DOES THIS SUMMARY ADDRESS ANY CONSEQUENCES OF THE MERGER UNDER ANY
STATE, LOCAL, ESTATE, OR FOREIGN TAX LAWS. STOCKHOLDERS, THEREFORE, ARE URGED
TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM
OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICATION AND
EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL, AND OTHER TAX LAWS, AND THE
IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
A federal income tax ruling with respect to this transaction was not
requested from the Internal Revenue Service. Instead, Alston & Bird, special
counsel to Regions, has rendered an opinion to Regions and First Federal
concerning certain federal income tax consequences of the proposed Merger under
federal income tax law. It is such firm's opinion that:
(a) The acquisition by Regions of all the stock of First Federal solely in
exchange for shares of Regions Common Stock in the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code. Each of First
Federal and Regions will be "a party to the reorganization" within the meaning
of Section 368(b) of the Code.
(b) No gain or loss will be recognized by the First Federal stockholders
upon the receipt of Regions Common Stock solely in exchange for their shares of
First Federal Common Stock.
(c) The basis of Regions Common Stock to be received by First Federal
stockholders will be the same as the basis of First Federal Common Stock
surrendered in exchange therefor.
(d) The holding period of Regions Common Stock to be received by First
Federal stockholders will include the holding period of First Federal Common
Stock surrendered in exchange therefor, provided that the First Federal Common
Stock was held as a capital asset on the date of the exchange.
(e) The payment of cash to a First Federal stockholder in lieu of issuing
a fractional share interest in Regions will be treated for federal income tax
purposes as if the fractional share was distributed as part of the exchange and
then was redeemed by Regions. This cash payment will be treated as having been
received as a distribution in full payment in exchange for the stock redeemed
as provided in Section 302(a) of the Code.
(f) When solely cash is received by a First Federal stockholder in
exchange for such holder's shares of First Federal Common Stock pursuant to the
exercise of dissenters' rights of appraisal, such cash will be treated as
having been received in redemption of such holder's shares of First Federal
Common Stock, subject to the provisions and limitations of Section 302 of the
Code.
THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, OR OTHER TAX
CONSEQUENCES OF THE MERGER. FIRST FEDERAL STOCKHOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE PROPOSED TRANSACTION
TO THEM INDIVIDUALLY, INCLUDING TAX CONSEQUENCES UNDER STATE OR LOCAL LAW.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a "purchase," as
that term is used pursuant to GAAP, for accounting and financial reporting
purposes. Under the purchase method of accounting, the assets and liabilities
of First Federal as of the Effective Date will be recorded at their estimated
respective fair values and added to those of Regions. Financial statements of
Regions issued after the Effective Date will reflect such values and will not
be restated retroactively to reflect the historical financial position or
results of operations of First Federal. See "Summary--Comparative Per Share
Data."
EXPENSES AND FEES
The Agreement provides, in general, that each of the parties will bear and
pay its own expenses in connection with the transactions contemplated by the
Agreement, including fees and expenses of its own
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financial or other consultants, investment bankers, accountants, and counsel,
except that Regions will bear and pay the filing fees and printing costs in
connection with this Proxy Statement/Prospectus.
RESALES OF THE REGIONS COMMON STOCK
The Regions Common Stock to be issued to First Federal stockholders in the
Merger has been registered under the Securities Act, but that registration does
not cover resales of those shares by persons who control, are controlled by, or
are under common control with, First Federal (such persons are referred to
hereinafter as "affiliates" and generally include executive officers,
directors, and 10% stockholders) at the time of the Annual Meeting. Affiliates
may not sell shares of Regions Common Stock acquired in connection with the
Merger, except pursuant to an effective registration statement under the
Securities Act or in compliance with SEC Rule 145 or another applicable
exemption from the Securities Act registration requirements.
Each person who First Federal reasonably believes will be an affiliate of
First Federal has delivered to Regions a written agreement providing that such
person generally will not sell, pledge, transfer, or otherwise dispose of any
Regions Common Stock to be received by such person upon consummation of the
Merger, except in compliance with the Securities Act and the rules and
regulations of the SEC promulgated thereunder.
AMENDMENT TO THE CHARTER OF FIRST FEDERAL
(PROPOSAL 2)
Section 8A of First Federal's Charter currently provides that no person may
directly or indirectly offer to acquire or acquire beneficial ownership of more
than 10% of any class of an equity security of First Federal. In the event
shares are acquired in violation of section 8A, all shares beneficially owned
by any person in excess of 10% are considered "excess shares" and are not
counted as shares entitled to vote in connection with any matters submitted to
the stockholders for a vote. Section 8A expires on March 18, 1996, five years
from the completion of the First Federal mutual to stock conversion.
To facilitate the Merger, First Federal's Board of Directors, subject to
approval by the stockholders, has approved the amendment of First Federal's
Charter to delete Section 8A in its entirety.
Approval of the proposed Amendment to the Charter will require the
affirmative vote of a majority of the Bank's outstanding shares of Common
Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE CHARTER.
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of First Federal Common Stock will be
exchanging their shares of a federally-chartered, stock savings bank governed
by federal law, OTS regulations, and First Federal's Federal Stock Charter (the
"Charter") and Bylaws, for shares of Regions, a Delaware corporation governed
by the Delaware General Corporation Law, as amended (the "Delaware GCL"), and
Regions' Certificate of Incorporation (the "Certificate") and Bylaws. Certain
significant differences exist between the rights of First Federal stockholders
and those of Regions stockholders. The differences deemed material by First
Federal and Regions are summarized below. In particular, Regions' Certificate
and Bylaws contain several provisions that may be deemed to have an
antitakeover effect in that they could impede or prevent an acquisition of
Regions unless the potential acquirer has obtained the approval of Regions'
Board of Directors. The following discussion is necessarily general; it is not
intended to be a complete statement of all differences affecting the rights of
stockholders and their respective entities, and it is qualified in its entirety
by reference to the United States Code, the regulations of the OTS, and the
Delaware GCL, as well as to Regions' Certificate and Bylaws
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and First Federal's Charter and Bylaws.
ANTITAKEOVER PROVISIONS GENERALLY
The provisions of Regions' Certificate and Bylaws described below under the
headings, "Authorized Capital Stock," "Amendment of Certificate of
Incorporation and Bylaws," "Classified Board of Directors and Absence of
Cumulative Voting," "Removal of Directors," "Director Exculpation," "Special
Meetings of Stockholders," "Actions by Stockholders Without a Meeting,"
"Stockholder Nominations and Proposals," and "Mergers, Consolidations, and
Sales of Assets Generally," and the provisions of the Delaware GCL described
under the heading "Business Combinations With Certain Persons," are referred to
herein as the "Protective Provisions." In general, one purpose of the
Protective Provisions is to assist Regions' Board of Directors in playing a
role in connection with attempts to acquire control of Regions, so that the
Board can further and protect the interests of Regions and its stockholders as
appropriate under the circumstances, including, if the Board determines that a
sale of control is in their best interests, by enhancing the Board's ability to
maximize the value to be received by the stockholders upon such a sale.
Although Regions' management believes the Protective Provisions are,
therefore, beneficial to Regions' stockholders, the Protective Provisions also
may tend to discourage some takeover bids. As a result, Regions' stockholders
may be deprived of opportunities to sell some or all of their shares at prices
that represent a premium over prevailing market prices. On the other hand,
defeating undesirable acquisition offers can be a very expensive and
time-consuming process. To the extent that the Protective Provisions discourage
undesirable proposals, Regions may be able to avoid those expenditures of time
and money.
The Protective Provisions also may discourage open market purchases by a
potential acquirer. Such purchases may increase the market price of Regions
Common Stock temporarily, enabling stockholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the Protective
Provisions may decrease the market price of Regions Common Stock by making the
stock less attractive to persons who invest in securities in anticipation of
price increases from potential acquisition attempts. The Protective Provisions
also may make it more difficult and time consuming for a potential acquirer to
obtain control of Regions by replacing the Board of Directors and management.
Furthermore, the Protective Provisions may make it more difficult for Regions'
stockholders to replace the Board of Directors or management, even if a
majority of the stockholders believe such replacement is in the best interests
of Regions. As a result, the Protective Provisions may tend to perpetuate the
incumbent Board of Directors and management.
AUTHORIZED CAPITAL STOCK
Regions. The Certificate authorizes the issuance of up to 120,000,000
shares of Regions Common Stock, of which 47,526,707 shares were issued,
including 1,474,579 treasury shares, at September 30, 1995. Regions' Board of
Directors may cause additional shares of Regions Common Stock to be issued (up
to the amount authorized) without further action by Regions' stockholders,
unless such action is required in a particular case by applicable laws or
regulations or by any stock exchange upon which Regions' capital stock may be
listed.
The authority to issue additional shares of Regions Common Stock provides
Regions with the flexibility necessary to meet its future needs without the
delay resulting from seeking stockholder approval. The authorized but unissued
shares of Regions Common Stock will be issuable from time to time for any
corporate purpose, including, without limitation, stock splits, stock
dividends, employee benefit and compensation plans, acquisitions, and public or
private sales for cash as a means of raising capital. Such shares could be used
to dilute the stock ownership of persons seeking to obtain control of Regions.
In addition, the sale of a substantial number of shares of Regions Common Stock
to persons who have an understanding with Regions concerning the voting of such
shares, or the distribution or declaration of a dividend of shares of Regions
Common Stock (or the right to receive Regions Common Stock) to Regions'
stockholders, may have the effect of discouraging or increasing the cost of
unsolicited attempts to acquire control of Regions.
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First Federal. First Federal's authorized capital stock consists of
10,000,000 shares of First Federal Common Stock, of which 300,601 shares were
issued and outstanding as of the Record Date, and 10,000,000 shares of First
Federal preferred stock, of which no shares have been issued.
Pursuant to federal law and First Federal's Charter, First Federal's Board
of Directors may authorize the issuance of additional authorized shares of
First Federal capital stock without further action by First Federal's
stockholders. First Federal's Charter does not provide to the stockholders of
First Federal preemptive rights to purchase or subscribe to any unissued
authorized shares of First Federal capital stock or any option or warrant for
the purchase thereof.
Under First Federal's Charter, no shares of capital stock may be issued to
officers, directors or controlling persons of First Federal other than as part
of a general public offering or as qualifying shares to a director, unless the
issuance or the plan under which such shares would be issued is approved by a
majority of the outstanding shares of First Federal.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
Regions. The Delaware GCL generally provides that the approval of a
corporation's board of directors and the affirmative vote of a majority of (i)
all outstanding shares entitled to vote thereon and (ii) the outstanding shares
of each class of stock entitled to vote thereon as a class, are required to
amend a corporation's certificate of incorporation, unless the certificate
specifies a greater voting requirement. The Certificate states that its
provisions regarding authorized capital stock, election, classification, and
removal of directors, the approval required for certain business combinations,
meetings of stockholders, and amendment of the Certificate and Bylaws may be
amended or repealed only by the affirmative vote of the holders of at least 75%
of the outstanding shares of Regions voting stock, voting together as a single
class.
The Certificate also provides that the Board of Directors has the power to
adopt, amend, or repeal the Bylaws. Any action taken by the stockholders with
respect to adopting, amending, or repealing any Bylaws may be taken only upon
the affirmative vote of the holders of at least 75% of the outstanding shares
of Regions' voting stock.
First Federal. Under OTS regulations and First Federal's Charter, subject
to certain exceptions, no amendment or repeal thereof may be made unless first
proposed by the Board of Directors and then preliminarily approved by the OTS,
which preliminary approval may be granted by the OTS pursuant to regulations
specifying pre-approved charter amendments. Under First Federal's Charter, any
amendment or repeal of the First Federal Charter must be approved by First
Federal stockholders by a majority of the total votes eligible to be cast at a
legal meeting. First Federal's Bylaws provide that they may be amended at any
time by a majority vote of the full Board of Directors or by a majority of the
votes cast by First Federal stockholders at any legal meeting. Certain
amendments to First Federal's Bylaws also must be approved by the OTS.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
Regions. The Certificate provides that Regions' Board of Directors is
divided into three classes, with each class to be as nearly equal in number as
possible. The directors in each class serve three-year terms of office.
The effect of Regions' having a classified Board of Directors is that only
approximately one-third of the members of the Board is elected each year, which
effectively requires two annual meetings for Regions' stockholders to change a
majority of the members of the Board.
Pursuant to the Certificate, each stockholder generally is entitled to one
vote for each share of Regions Common Stock held and is not entitled to
cumulative voting rights in the election of directors. With cumulative voting,
a stockholder has the right to cast a number of votes equal to the total number
of such
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holder's shares multiplied by the number of directors to be elected. The
stockholder has the right to cast all of such holder's votes in favor of one
candidate or to distribute such holder's votes in any manner among any number
of candidates. Directors are elected by a plurality of the total votes cast by
all stockholders. With cumulative voting, it may be possible for minority
stockholders to obtain representation on the Board of Directors. Without
cumulative voting, the holders of more than 50% of the shares of Regions Common
Stock generally have the ability to elect 100% of the directors. As a result,
the holders of the remaining Regions Common Stock effectively may not be able
to elect any person to the Board of Directors. The absence of cumulative voting
thus could make it more difficult for a stockholder who acquires less than a
majority of the shares of Regions Common Stock to obtain representation on
Regions' Board of Directors.
First Federal. Under First Federal's Bylaws, First Federal's Board of
Directors is divided into three classes, with each class as nearly equal in
number as possible. The directors in each class serve a three-year term, and
one class is elected by ballot annually. The effect of the classified Board of
Directors is that only approximately one-third of the members of the Board are
elected each year, which effectively requires two annual meetings for First
Federal stockholders to change a majority of the members of the Board. Pursuant
to First Federal's Charter, each holder of First Federal Common Stock generally
is entitled to one vote for each share of First Federal Common Stock held.
First Federal's Charter and Bylaws to not provide to holders of First Federal
Common Stock cumulative voting rights with respect to the election of
directors.
REMOVAL OF DIRECTORS
Regions. Under the Certificate, any director or the entire Board of
Directors may be removed only for cause and only by the affirmative vote of the
holders of at least 75% of the outstanding shares of Regions' voting stock.
First Federal. Pursuant to OTS regulations and First Federal's Charter,
any director may be removed for cause by a vote of the holders of the majority
of the shares then entitled to vote in an election of directors at a meeting of
stockholders called expressly for that purpose.
LIMITATIONS ON DIRECTOR LIABILITY
Regions. The Certificate provides that a director of Regions will have no
personal liability to Regions or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability for (i) any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) the payment of certain unlawful dividends and
the making of certain unlawful stock purchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit.
Although this provision does not affect the availability of injunctive or
other equitable relief as a remedy for a breach of duty by a director, it does
limit the remedies available to a stockholder who has a valid claim that a
director acted in violation of his duties, if the action is among those as to
which liability is limited. This provision may reduce the likelihood of
stockholder derivative litigation against directors and may discourage or deter
stockholders or management from bringing a lawsuit against directors for breach
of their duties, even though such action, if successful, might have benefitted
Regions and its stockholders. The SEC has taken the position that similar
provisions added to other corporations' certificates of incorporation would not
protect those corporations' directors from liability for violations of the
federal securities laws.
First Federal. OTS regulations and First Federal's Charter do not provide
any limitations on a director's liability.
INDEMNIFICATION
Regions. The Certificate provides that Regions will indemnify its
officers, directors, employees, and
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agents to the full extent permitted by the Delaware GCL. Under Section 145 of
the Delaware GCL as currently in effect, other than in actions brought by or in
the right of Regions, such indemnification would apply if it were determined in
the specific case that the proposed indemnitee acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of Regions and, with respect to any criminal proceeding, if such
person had no reasonable cause to believe that the conduct was unlawful. In
actions brought by or in the right of Regions, such indemnification probably
would be limited to reasonable expenses (including attorneys' fees) and would
apply if it were determined in the specific case that the proposed indemnitee
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of Regions, except that no indemnification
may be made with respect to any matter as to which such person is adjudged
liable to Regions, unless, and only to the extent that, the court determines
upon application that, in view of all the circumstances of the case, the
proposed indemnitee is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper. To the extent that any director, officer,
employee, or agent of Regions has been successful on the merits or otherwise in
defense of any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, such person must be indemnified against
reasonable expenses incurred by him in connection therewith.
First Federal. OTS regulations provide that First Federal will indemnify
any person against whom an action is brought or threatened because that person
is or was a director, officer, or employee of First Federal for: (i) any amount
for which that person becomes liable under a judgment in such action and (ii)
reasonable costs and expenses, including reasonable attorneys' fees, actually
paid or incurred by that person in defending or settling such action, or in
enforcing such person's right to indemnification if such person attains a
favorable judgment in such enforcement action; provided, however, that any such
person will be indemnified only if: (a) a final judgment on the merits is
rendered in such person's favor or (b) in case of (1) a settlement, (2) a final
judgment against such person, or (3) a final judgment in such person's favor,
other than on the merits, if a majority of the disinterested directors of First
Federal determines that such person was acting in good faith within the scope
of such person's employment or authority as such person reasonably could have
perceived it under the circumstances and for a purpose which such person
reasonably could have believed under the circumstances was in the best
interests of First Federal or its stockholders; and provided, further, that no
such indemnification will be made by First Federal unless First Federal gives
the OTS at least 60 days' prior notice and the OTS does not object in writing
to such indemnification.
In addition, under OTS regulations, if a majority of the directors of First
Federal concludes that, in connection with any action, any person ultimately
may become entitled to indemnification, the directors may authorize payment of
reasonable costs and expenses, including reasonable attorneys' fees, arising
from the defense or settlement of such action. The directors of First Federal
may impose such conditions on a payment of expenses as they deem warranted and
in the interests of First Federal. Before making any advance payment of
expenses, however, First Federal must obtain an agreement that First Federal
will be repaid if the person on whose behalf the payment is made is later
determined not to be entitled to such indemnification.
SPECIAL MEETINGS OF STOCKHOLDERS
Regions. Regions' Certificate and Bylaws provide that special meetings of
stockholders may be called at any time, but only by the Chief Executive
Officer, the Secretary, or the Board of Directors of Regions. Regions
stockholders do not have the right to call a special meeting or to require that
Regions' Board of Directors call such a meeting. This provision, combined with
other provisions of the Certificate and the restriction on the removal of
directors, would prevent a substantial stockholder from compelling stockholder
consideration of any proposal (such as a proposal for a business combination)
over the opposition of Regions' Board of Directors by calling a special meeting
of stockholders at which such stockholder could replace the entire Board with
nominees who were in favor of such proposal.
First Federal. Under First Federal's Bylaws, special meetings of the
stockholders of First Federal may be called at any time by the Chairman of the
Board, the President, or a majority of the Board of Directors and shall be
called by the Chairman of the Board, the President, or the Secretary upon the
written request of
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the holders of not less than one-tenth of all outstanding shares of capital
stock entitled to vote at the meeting. In addition, however, the Section 8 of
the Charter provides that a special meeting of stockholders relating to changes
in control of First Federal or amendment of the Charter may be called only by
the Board of Directors.
ACTIONS BY STOCKHOLDERS WITHOUT A MEETING
Regions. The Certificate provides that any action required or permitted to
be taken by Regions stockholders must be effected at a duly called meeting of
stockholders and may not be effected by any written consent by the
stockholders. These provisions would prevent stockholders from taking action,
including action on a business combination, except at an annual or special
meeting called by the Board of Directors, even if a majority of the
stockholders were in favor of such action.
First Federal. First Federal's Bylaws provide that action required or
permitted to be taken at a meeting of stockholders may be taken without a
meeting by consent in writing, setting forth the action to be taken, of all
stockholders entitled to vote on the matter.
STOCKHOLDER NOMINATIONS AND PROPOSALS
Regions. Regions' Certificate and Bylaws provide that any nomination by
stockholders of individuals for election to the Board of Directors must be made
by delivering written notice of such nomination (the "Nomination Notice") to
the Secretary of Regions not less than 14 days nor more than 50 days before any
meeting of the stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given to
stockholders, the Nomination Notice must be delivered to the Secretary of
Regions not later than the seventh day following the day on which notice of the
meeting was mailed to stockholders. The Nomination Notice must set forth
certain background information about the persons to be nominated, including
information concerning (i) the name, age, business, and, if known, residential
address of each nominee, (ii) the principal occupation or employment of each
such nominee, and (iii) the number of shares of Regions capital stock
beneficially owned by each such nominee. The Board of Directors is not required
to nominate in the annual proxy statement any person so proposed; however,
compliance with this procedure would permit a stockholder to nominate the
individual at the stockholders' meeting, and any stockholder may vote such
holder's shares in person or by proxy for any individual such holder desires.
First Federal. Nominations of directors shall be made by the Board of
Directors not later than 20 days prior to the meeting, and may be made by any
stockholder entitled to vote in an election of directors by written notice
delivered to First Federal at least five days prior to the meeting date. No
other nominations may be made and voted upon at the meeting, unless the Board
of Directors shall have failed to act at least 20 days prior to the meeting, in
which case nominations may be made at the meeting by any stockholder entitled
to vote, and such nominations shall be voted on.
BUSINESS COMBINATIONS WITH CERTAIN PERSONS
Regions. Section 203 of the Delaware GCL ("Section 203") places certain
restrictions on "business combinations" (as defined in Section 203, generally
including mergers, sales and leases of assets, issuances of securities, and
similar transactions) by Delaware corporations with an "interested stockholder"
(as defined in Section 203, generally the beneficial owner of 15% or more of
the corporation's outstanding voting stock). Section 203 generally applies to
Delaware corporations, such as Regions, that have a class of voting stock
listed on a national securities exchange, authorized for quotation on an
interdealer quotation system of a registered national securities association,
or held of record by more than 2,000 stockholders, unless the corporation
expressly elects in its certificate of incorporation or bylaws not to be
governed by Section 203.
Regions has not specifically elected to avoid the application of Section
203. As a result, Section 203 generally would prohibit a business combination
by Regions or a subsidiary with an interested stockholder within three years
after the person or entity becomes an interested stockholder, unless (i) prior
to the time
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<PAGE> 43
when the person or entity becomes an interested stockholder, Regions' Board of
Directors approved either the business combination or the transaction pursuant
to which such person or entity became an interested stockholder, (ii) upon
consummation of the transaction in which the person or entity became an
interested stockholder, the interested stockholder held at least 85% of the
outstanding Regions voting stock (excluding shares held by persons who are both
officers and directors and shares held by certain employee benefit plans), or
(iii) once the person or entity becomes an interested stockholder, the business
combination is approved by Regions' Board of Directors and by the holders of at
least two-thirds of the outstanding Regions voting stock, excluding shares
owned by the interested stockholder.
First Federal. For the period ending March 18, 1996, First Federal's
Charter provides that no person may directly or indirectly offer to acquire or
acquire beneficial ownership of more than 10% of First Federal Common Stock. In
the event shares are acquired in violation of this provision, all shares
beneficially owned by any person in excess of 10% are considered "excess
shares" and are not counted as shares entitled to vote in connection with any
matters submitted to the stockholders for a vote. The Board of Directors has
proposed and recommends that the stockholders approve an amendment to the
Charter deleting this provision in its entirety. See "Amendment to the
Charter of First Federal."
MERGERS, CONSOLIDATIONS, AND SALES OF ASSETS GENERALLY
Regions. The Certificate generally requires the affirmative vote of the
holders of at least 75% of the outstanding shares of Regions voting stock to
effect (i) any merger or consolidation with or into any other corporation or
(ii) any sale or lease of any substantial part of the assets of Regions to any
party that beneficially owns 5.0% or more of the outstanding shares of Regions
voting stock, unless the transaction was approved by Regions' Board of
Directors before the other party became a 5.0% beneficial owner or is approved
by 75% or more of the full Board after the party becomes such a 5.0% beneficial
owner. In addition, the Delaware GCL generally requires the approval of a
majority of the outstanding voting stock of Regions to effect (i) any merger or
consolidation with or into any other corporation, (ii) any sale, lease, or
exchange of all or substantially all of Regions property and assets, or (iii)
the dissolution of Regions. However, pursuant to the Delaware GCL, Regions may
enter into a merger transaction without stockholder approval if (i) Regions is
the surviving corporation, (ii) the agreement of merger does not amend in any
respect Regions' Certificate, (iii) each share of Regions stock outstanding
immediately prior to the effective date of the merger is to be an identical
outstanding or treasury share of Regions after the effective date of the
merger, and (iv) either no shares of Regions Common Stock and no shares,
securities, or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized unissued shares or the
treasury shares of Regions Common Stock to be issued or delivered under the
plan of merger plus those initially issuable upon conversion of any other
shares, securities, or obligations to be issued or delivered under such plan do
not exceed 20% of the shares of Regions Common Stock outstanding immediately
prior to the effective date of the merger.
First Federal. OTS regulations provide that most mergers to which First
Federal is a party require the approval of the holders of two-thirds of the
outstanding shares of First Federal, except that the affirmative vote of a
majority of First Federal stockholders is required to approve a merger with an
interim thrift for the purpose of forming a thrift holding company.
DISSENTERS' RIGHTS
Regions. The rights of appraisal of dissenting stockholders of Regions are
governed by the Delaware GCL. Pursuant thereto, except as described below, any
stockholder has the right to dissent from any merger of which Regions could be
a constituent corporation. No appraisal rights are available, however, for (i)
the shares of any class or series of stock that is either listed on a national
securities exchange, quoted on the Nasdaq National Market, or held of record by
more than 2,000 stockholders or (ii) any shares of stock of the constituent
corporation surviving a merger if the merger did not require the approval of
the surviving corporation's stockholders, unless, in either case, the holders
of such stock are required by an agreement of
39
<PAGE> 44
merger or consolidation to accept for that stock something other than: (a)
shares of stock of the corporation surviving or resulting from the merger or
consolidation; (b) shares of stock of any other corporation that will be listed
at the effective date of the merger on a national securities exchange, quoted
on the Nasdaq National Market, or held of record by more than 2,000
stockholders; (c) cash in lieu of fractional shares of stock described in
clause (a) or (b) immediately above; or (d) any combination of the shares of
stock and cash in lieu of fractional shares described in clauses (a) through
(c) immediately above. Because Regions Common Stock is quoted on the Nasdaq
National Market and is held of record by more than 2,000 stockholders, unless
the exception described immediately above applies, holders of Regions Common
Stock do not have dissenters' rights of appraisal.
First Federal. The rights of appraisal of dissenting stockholders under
OTS regulations, while generally similar to those afforded under the Delaware
GCL, differ in certain details. For a full description of the rights of
dissenting stockholders under applicable law, see "Description of the
Transaction--Dissenters' Rights." The applicable OTS regulation is reproduced
as Appendix D to this Proxy Statement/Prospectus.
STOCKHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
Regions. The Delaware GCL provides that a stockholder may inspect books
and records upon written demand under oath stating the purpose of the
inspection, if such purpose is reasonably related to such person's interest as
a stockholder.
First Federal. OTS regulations applicable to First Federal provide that
any stockholder or group of stockholders holding of record (i) voting shares
having a cost of at least $100,000 or constituting at least 1.0% of the total
outstanding voting shares, provided, in either case, that such stockholder or
group has held those shares of record for at least six months, or (ii) at least
5.0% of the total outstanding voting shares, has the right to examine, with
certain exceptions, books and records of account, minutes, and records of
stockholders, upon written demand stating a proper purpose. Any First Federal
stockholder may inspect a list of the stockholders entitled to vote at an
annual or special meeting at any time within the 20 days prior to the meeting
or during the meeting. Pursuant to OTS regulations, First Federal may require
that the stockholder or stockholders requesting examination furnish First
Federal or its transfer agent or registrar with an affidavit to the effect that
the examination will not be conducted for any purpose other than the business
of First Federal and that the stockholder or stockholders have not offered for
sale or helped anyone else sell, and do not intend to sell or help any other
person sell, any list of stockholders of First Federal or any other
corporation. No stockholder has a right to obtain or review any portion of the
books or records of First Federal containing information concerning individual
depositors.
DIVIDENDS
Regions. The Delaware GCL provides that, subject to any restrictions in
the corporation's certificate of incorporation, dividends may be declared from
the corporation's surplus, or, if there is no surplus, from its net profits for
the fiscal year in which the dividend is declared and the preceding fiscal
year. Dividends may not be declared, however, if the corporation's capital has
been diminished to an amount less than the aggregate amount of all capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. Substantially all of the funds
available for the payment of dividends by Regions are derived from its
subsidiary banks. There are various statutory limitations on the ability of
Regions' subsidiary banks to pay dividends to Regions. See "Certain Regulatory
Considerations--Payment of Dividends."
First Federal. OTS regulations permit First Federal to pay dividends on
its capital stock only from net income, earned surplus, or undivided profits
and do not permit First Federal to pay dividends if its capital would thereby
be reduced below specified levels, including the amount established by First
Federal for a liquidation account in connection with its conversion from mutual
to stock form and the capital requirements imposed on First Federal. In
addition, the OTS may prohibit any capital distribution that would otherwise be
permitted under the regulations, if the OTS determines that such a capital
distribution would constitute an
40
<PAGE> 45
unsafe and unsound practice.
COMPARATIVE MARKET PRICES AND DIVIDENDS
Regions Common Stock is quoted on the Nasdaq National Market under the
symbol "RGBK." First Federal Common Stock is not traded in any established
market. The following table sets forth, for the indicated periods, the high and
low closing sale prices for Regions Common Stock as reported on the Nasdaq
National Market and the cash dividends declared per share of Regions Common
Stock and First Federal Common Stock for the indicated periods. The stock
prices and historical dividends for Regions have been adjusted to reflect a 10%
stock dividend paid by Regions on April 1, 1993.
Based on actual transactions of which First Federal management is aware,
the transactions of purchase and sale of First Federal Common Stock since
January 1, 1993, have occurred in a price range of $13.13 to $15.00 per share.
However, over such period there has been only a very limited number of
transactions and all such transactions have involved limited numbers of shares
in First Federal Common Stock, and no assurance can be given that the stated
price range represents the actual market value of the First Federal Common
Stock.
<TABLE>
<CAPTION>
REGIONS
PRICE RANGE FIRST FEDERAL
----------- CASH DIVIDENDS CASH DIVIDENDS
DECLARED DECLARED
HIGH LOW PER SHARE PER SHARE
---- --- --------- ---------
<S> <C> <C> <C> <C>
1993
First Quarter . . . . . . . $38.38 $31.25 $.26 $ .10
Second Quarter . . . . . . 38.25 30.25 .26 .10
Third Quarter . . . . . . . 35.25 31.25 .26 .15
Fourth Quarter . . . . . . 35.00 29.63 .26 .15
1994
First Quarter . . . . . . 33.50 30.13 .30 1.15
Second Quarter . . . . . . 36.13 30.50 .30 .15
Third Quarter . . . . . . 36.75 34.63 .30 .15
Fourth Quarter . . . . . . 35.00 29.75 .30 .15
1995
First Quarter . . . . . . 36.50 31.63 .33 1.15
Second Quarter . . . . . . 37.44 34.50 .33 .15
Third Quarter . . . . . . . 41.25 37.00 .33 .15
Fourth Quarter (through
) . . . . . . . . . .33 .15
</TABLE>
On , 1995, the last reported sale price of Regions Common Stock as
reported on the Nasdaq National Market, and the price of First Federal Common
Stock in the last known transaction, which occurred in ,
were $ and $ , respectively. On September 28, 1995, the last
business day prior to public announcement of the proposed Merger, the last
reported sale price of Regions Common Stock as reported on the Nasdaq National
Market, and the price of First Federal Common Stock, in the last known
transaction, which occurred on August 10, 1995, were $40.25 and $15.00,
respectively.
The holders of Regions Common Stock are entitled to receive dividends when
and if declared by the Board of Directors out of funds legally available
therefor. Regions has paid regular quarterly cash dividends since 1971.
Although Regions currently intends to continue to pay quarterly cash dividends
on the Regions Common Stock, there can be no assurance that Regions' dividend
policy will remain unchanged after completion of the Merger. The declaration
and payment of dividends thereafter will depend upon business conditions,
operating results, capital and reserve requirements, and the Board of
Directors' consideration of
41
<PAGE> 46
other relevant factors.
Regions is a legal entity separate and distinct from its subsidiaries and
its revenues depend in significant part on the payment of dividends from its
subsidiary financial institutions, particularly First Alabama Bank. Regions'
subsidiary depository institutions are subject to certain legal restrictions on
the amount of dividends they are permitted to pay. See "Certain Regulatory
Considerations--Payment of Dividends."
It has been First Federal's recent practice to pay quarterly cash dividends
of $.15 per share and a special annual cash dividend of $1.00 per share. First
Federal is not aware of any circumstances that would cause an immediate change
in its current practice to pay cash dividends if the Merger is not consummated.
However, First Federal's future dividend policy would depend on its results of
operations, capital needs, and other factors, and there can be no assurance
that First Federal would pay cash dividends indefinitely into the future or as
to the amount of cash dividends to be paid.
BUSINESS OF REGIONS
GENERAL
Regions is a regional bank holding company headquartered in Birmingham,
Alabama with approximately 288 banking offices in Alabama, Florida, Georgia,
Louisiana, and Tennessee. As of September 30, 1995, Regions had total
consolidated assets of approximately $13.8 billion, total consolidated deposits
of approximately $10.7 billion, and total consolidated stockholders' equity of
approximately $1.1 billion. Regions operates commercial bank subsidiaries in
Alabama, Florida, Georgia, Louisiana, and Tennessee, a federal stock savings
bank subsidiary in Georgia, and 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 September
30, 1995, had total consolidated assets of approximately $10.4 billion, total
consolidated deposits of approximately $7.8 billion, and total consolidated
stockholders' equity of approximately $837 million. First Alabama Bank
operates 183 banking offices throughout Alabama.
In Florida, Regions operates through Regions Bank of Florida, which at
September 30, 1995, had total consolidated assets of approximately $553
million, total consolidated deposits of approximately $491 million, and total
consolidated stockholders' equity of approximately $58 million. Regions Bank of
Florida operates 28 banking offices in the panhandle region of Florida.
In Georgia, Regions operates through (i) Regions Bank of Georgia, (ii)
Regions Bank of Rome, and (iii) Regions Bank, FSB, which at September 30, 1995,
had total combined assets of approximately $624 million, total combined
deposits of approximately $560 million, and total combined stockholders' equity
of approximately $49 million. Regions Bank of Georgia operates three banking
offices in Columbus, Georgia; Regions Bank of Rome operates two banking offices
in Rome, Georgia, and Regions Bank, FSB operates five banking offices in Dalton
and Cartersville, Georgia.
In Louisiana, Regions operates through Regions Bank of Louisiana. At
September 30, 1995, Regions Bank of Louisiana had total consolidated assets of
approximately $2.2 billion, total consolidated deposits of approximately $1.6
billion, and total consolidated stockholders' equity of approximately $208
million. Regions Bank of Louisiana operates 43 banking offices in Louisiana.
In Tennessee, Regions operates through Regions Bank of Tennessee, which at
September 30, 1995, had total consolidated assets of approximately $491
million, total consolidated deposits of approximately $427 million, and total
consolidated stockholders' equity of approximately $44 million. Regions Bank of
Tennessee
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<PAGE> 47
operates 24 banking offices in middle Tennessee.
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.
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. This practice could result in dilution of book value and net
income per share for the acquirer.
Additional information about Regions and its subsidiaries is included in
documents incorporated by reference in this Proxy Statement/Prospectus. See
"Available Information" and "Documents Incorporated by Reference."
RECENT DEVELOPMENTS
Recently Completed Acquisitions. During the first nine months of 1995,
Regions acquired (i) Fidelity Federal Savings Bank, located in Dalton, Georgia,
and (ii) First Commercial Bancshares, Inc., located in Chalmette, Louisiana,
contributing an aggregate of approximately $479 million in assets, $392 million
in loans, and $427 million in deposits to Regions' consolidated balance sheet.
Also during such period, Regions acquired Interstate Billing Service, Inc., an
accounts receivable factoring company in Decatur, Alabama, with total assets as
of the acquisition date of approximately $30 million. For additional
information with respect to these acquisitions, see Regions' Quarterly Reports
on Form 10-Q for the quarters ended March 31, June 30, and September 30, 1995,
incorporated herein by reference.
Since September 30, 1995, Regions acquired from The Prudential Savings Bank
a branch banking operation in Cartersville, Georgia (the "Cartersville
Acquisition,") in which transaction Regions assumed approximately $57 million
in deposits.
Other Pending Acquisitions. As of the date of this Proxy
Statement/Prospectus, Regions has pending five acquisitions in addition to
First Federal, certain aspects of which transactions are set forth below:
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<PAGE> 48
<TABLE>
<CAPTION>
Consideration
-------------------------
Approximate
---------------------
Accounting
Institution Asset Size Value Type Treatment
----------- ---------- ----- ---- ---------
(In millions)
<S> <C> <C> <C> <C>
Enterprise National Bank, located in Atlanta, $ 54 $ 8 Cash Purchase
Georgia (the "Enterprise Acquisition")
Metro Financial Corporation, located in Atlanta, 197 28 Regions Purchase
Georgia (the "Metro Acquisition") Common
Stock
First National Bancorp, located in Gainesville, 3,112 630 Regions Pooling
Georgia (the "FNB Acquisition") Common of
Stock Interests
First Gwinnett Bancshares, Inc., located in 63 13 Regions Purchase
Norcross, Georgia (the "First Gwinnett Acquisition") Common
Stock
Delta Bank and Trust Company, located in Belle 198 34 Regions Pooling
----- ----- Common of
Chasse, Louisiana (the "Delta Acquisition") Stock Interests
Totals $3,624 $713
====== ====
</TABLE>
The Enterprise Acquisition, the Metro Acquisition, the FNB
Acquisition, the First Gwinnett Acquisition, and the Delta Acquisition are
referred to in this Proxy Statement/Prospectus as the "Other Pending
Acquisitions." Consummation of the Other Pending Acquisitions is subject to the
approval of certain regulatory agencies, and of the stockholders of the
institutions to be acquired. Moreover, the closing of each transaction is
subject to various contractual conditions precedent. No assurance can be given
that the conditions precedent to consummating the transactions will be
satisfied in a manner that will result in their consummation.
On December 5, 1995, Regions announced the execution of a definitive
agreement to acquire American City Bancorp, Inc. of Tullahoma, Tennessee, and
its majority-owned subsidiary American City Bank. This acquisition, which
remains subject to Regions' due diligence review and other contingencies, would
add approximately $80 million in assets to Regions' consolidated statement of
condition and would result in the issuance of shares of Regions Common Stock
having an approximate value of $8.8 million, computed as of the date of public
announcement of the proposed transaction. Giving effect to this transaction
would not have a material effect on the pro forma financial information
included in and incorporated by reference in this Proxy Statement/Prospectus.
Registration of Subordinated Debt Securities. Regions has filed with
the SEC a registration statement relating to $200 million of Regions'
subordinated debt securities. Under this registration statement, which became
effective in July, 1995, Regions may issue on a delayed or continuous basis its
subordinated debt
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<PAGE> 49
securities up to such amount, bearing such interest rates and having such terms
as Regions may determine. The net proceeds from the sale of subordinated debt
securities, if any, may be used for such general corporate purposes as Regions
may determine, including future acquisitions and the repurchase of outstanding
shares of Regions Common Stock in the open market.
PRO FORMA FINANCIAL INFORMATION
PRO FORMA COMBINED CONDENSED STATEMENT OF CONDITION
SEPTEMBER 30, 1995
(UNAUDITED)
The following unaudited pro forma combined condensed statement of
condition presents (i) the historical unaudited consolidated statement of
condition of Regions and First Federal at September 30, 1995, (ii) the pro
forma combined condensed statement of condition of Regions at September 30,
1995, giving effect to the Merger, assuming such acquisition is accounted for
as a purchase, and (iii) the pro forma combined condensed statement of
condition of Regions at September 30, 1995, giving effect to the Merger,
assuming such acquisition is accounted for as a purchase, and the Other Pending
Acquisitions, assuming three of such acquisitions are treated as purchases for
accounting purposes and two of such acquisitions are treated as a poolings of
interests for accounting purposes. The unaudited pro forma combined condensed
statement of condition should be read in conjunction with the historical
consolidated financial statements of Regions and First Federal, including the
respective notes thereto, which are incorporated by reference or included in
this Proxy Statement/Prospectus, and the unaudited pro forma financial
information appearing elsewhere in this Proxy Statement/Prospectus and included
in Regions' Current Report on Form 8-K dated November 22, 1995. See "Documents
Incorporated by Reference," "Summary -- Comparative Per Share Data," and "--
Summary Pro Forma Financial Data." The pro forma combined condensed statement
of condition is not necessarily indicative of the combined condensed financial
position that actually would have occurred if the Merger or the Other Pending
Acquisitions had been consummated at the date indicated or which may be
obtained in the future.
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<PAGE> 50
<TABLE>
<CAPTION>
REGIONS,
FIRST FEDERAL,
AND OTHER
REGIONS AND PENDING
FIRST FEDERAL OTHER ACQUISITIONS
COMBINING PRO FORMA PENDING COMBINING PRO FORMA
REGIONS FIRST FEDERAL ADJUSTMENTS COMBINED ACQUISITIONS ADJUSTMENTS COMBINED
(In thousands)
<S> <C> <C> <C>
ASSETS
Cash and due from
banks . . . . . . . . . $ 636,158 $ 803 $ 636,961 $ 151,504 $ 788,465
Interest-bearing
deposits in other
banks . . . . . . . . . 14,922 5,116 20,038 13,066 $ (8,474) c 24,630
Investment
securities . . . . . . 2,145,891 2,145,891 240,455 2,386,346
Securities available
for sale . . . . . . . 887,309 19,415 $(15,682) a 891,042 723,849 (41,363) a 1,573,528
Trading account
assets . . . . . . . . 17,942 17,942 17,942
Mortgage loans held
for sale . . . . . . . 98,046 98,046 14,177 112,223
Federal fund sold and
securities
purchased under
agreements to
resell . . . . . . . . 1,639 1,639 99,482 101,121
Loans, net of
unearned income . . . . 9,596,673 62,968 9,659,641 2,290,651 11,950,292
Allowance for loan
losses . . . . . . . . (131,426) (648) (132,074) (29,691) (161,765)
Premises and
equipment, net . . . . 188,054 936 188,990 77,889 266,879
Other real estate . . . . 5,537 860 6,397 10,000 16,397
Excess purchase
price . . . . . . . . . 105,002 3,210 b 108,212 13,295 24,417 c 145,924
Due from customers on
acceptances . . . . . . 15,561 15,561 15,561
Other assets . . . . . . 266,602 947 267,549 76,155 343,704
------- ----- ------ --------- --------- ------ -------
Total
assets . . . . $13,847,910 $90,397 $(12,472) $13,925,835 $3,680,832 $(25,420) $17,581,247
=========== ======= ========= =========== ========== ========= ===========
</TABLE>
46
<PAGE> 51
<TABLE>
<CAPTION>
REGIONS,
FIRST FEDERAL,
AND OTHER
REGIONS AND PENDING
FIRST FEDERAL OTHER ACQUISITIONS
COMBINING PRO FORMA PENDING COMBINING PRO FORMA
REGIONS FIRST FEDERAL ADJUSTMENTS COMBINED ACQUISITIONS ADJUSTMENTS COMBINED
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Non-interest bearing
deposits . . . . . . . $ 1,461,775 $ 441 $ 1,462,216 $ 420,492 $ 1,882,708
Interest-bearing
deposits . . . . . . . 9,280,412 76,534 9,356,946 2,674,896 12,031,842
Federal funds
purchased and
securities sold
under agreements to
repurchase . . . . . . 1,216,763 1,216,763 85,899 1,302,662
Other borrowed
funds . . . . . . . . . 624,240 475 624,715 99,380 724,095
Bank acceptances
outstanding . . . . . . 15,561 15,561 15,561
Other liabilities . . . . 135,369 475 135,844 52,610 $ 5,600 e 194,054
------- ------- --------- -------- ------- -------
Total liabilities . . . . 12,734,120 77,925 12,812,045 3,333,277 5,600 16,150,922
Common stock . . . . . . 29,704 3 $ (3) b 29,704 27,800 (5,383) c 39,999
(10,778) d
(1,344) f
Surplus . . . . . . . . . 418,453 2,703 (2,703) b 418,453 112,039 (20,476) c 522,138
10,778 d
1,344 f
Undivided profits . . . . 676,285 9,743 (9,743) b 676,285 205,606 7 c 876,298
(5,600) e
Less: Treasury and
unearned restricted
stock . . . . . . . . . (14,239) (15,682) a (14,239) (36) (41,363) a (14,239)
15,682 b 41,399 c
Unrealized gain
(loss) on
securities
available for sale,
net of tax . . . . . . 3,587 23 (23) b 3,587 2,146 396 c 6,129
----- ----- ------ ------- ------ ------ -----
Total stockholders'
equity . . . . . . . . 1,113,790 12,472 (12,472) 1,113,790 347,555 (31,020) 1,430,325
--------- --------- --------- ---------- -------- ------- ---------
Total liabilities and
stockholders'
equity . . . . . . . . $13,847,910 $90,397 $(12,472) $13,925,835 $3,680,832 $(25,420) $17,581,247
=========== ======= ========= =========== ========== ========= ===========
</TABLE>
_______________
(a) To reflect the purchase, in the open market, of 1,404,180 shares of
Regions Common Stock, at $40.625 per share, to be reissued in the Metro
Acquisition, the First Federal Acquisition, and the First Gwinnett
Acquisition.
(b) To reflect the elimination of First Federal's capital accounts in
accordance with purchase accounting, and corresponding exchange of
386,014 shares of Regions Common Stock for all the outstanding shares of
First Federal Common Stock, assuming a market price of $40.625 per share
for Regions Common Stock. The Regions Common Stock exchanged is
47
<PAGE> 52
reflected as being issued from treasury stock. Approximately $3.2 million
of excess purchase price will be added as a result of this transaction
and is expected to be amortized over 18 years.
(c) To reflect the elimination of the capital accounts of Enterprise, Metro,
and First Gwinnett in accordance with purchase accounting, and
corresponding exchange of 1,043,937 shares of Regions Common Stock and
$8,474,000 for all the outstanding shares of Enterprise, Metro and First
Gwinnett common stock, assuming a market price of $40.625 per share for
Regions Common Stock. The Regions Common Stock exchanged is reflected as
being issued from treasury stock. Approximately $24.4 million of excess
purchase price will be added as a result of these transactions and is
expected to be amortized over 18 years.
(d) To reflect the issuance of 15,602,040 shares of Regions Common Stock to
effect the First National Acquisition. The First National Acquisition
will be accounted for as a pooling of interests, therefore the effect
upon stockholders' equity will be to increase Regions stockholders'
equity by the total equity of First National. The unaudited pro forma
financial statements have been prepared assuming Regions will issue
15,602,040 shares of Regions Common Stock in exchange for all the
outstanding shares of First National Common Stock. A reclassification
from common stock to surplus results from the issuance of the shares.
(e) In connection with its merger with Regions, it is anticipated that First
National will take a one-time restructuring charge estimated for purposes
of the pro forma financial statements of approximately $6.6 million ($5.6
million net of taxes), prior to or at the time of consummation of the
merger. The restructuring charge results from data processing contract
termination costs, reductions in the carrying value of unnecessary
equipment, severance costs for anticipated staff reductions, additional
income taxes related to the recapture of savings and loan bad debt
reserves, and other one-time costs directly related to the merger. The
effect of the anticipated restructuring charge has been reflected in the
pro forma combined condensed statement of condition; however, since the
anticipated restructuring charge is nonrecurring, it has not been
reflected in the pro forma combined condensed statements of income.
(f) To reflect the issuance of 844,991 shares of Regions Common Stock to
effect the Delta Acquisition. The Delta Acquisition will be accounted for
as a pooling of interests, therefore the effect upon stockholders' equity
will be to increase Regions stockholders' equity by the total equity of
Delta. The unaudited pro forma financial statements have been prepared
assuming Regions will issue 844,991 shares of Regions Common Stock in
exchange for all the outstanding shares of Delta common stock. A
reclassification from common stock to surplus results from the issuance
of the shares.
PRO FORMA COMBINED CONDENSED STATEMENTS OF
INCOME FOR REGIONS AND FIRST FEDERAL
(UNAUDITED)
The following unaudited pro forma combined condensed statements of
income have been prepared for the nine months ended September 30, 1995, and for
the year ended December 31, 1994, and give effect to the Merger, assuming such
acquisition is accounted for as a purchase. The unaudited pro forma combined
condensed statements of income should be read in conjunction with the
historical consolidated financial statements of Regions and First Federal,
including the respective notes thereto, which are incorporated by reference or
included in this Proxy Statement/Prospectus, and the unaudited consolidated
historical and other pro forma financial information, including the notes
thereto, appearing elsewhere in this Proxy Statement/Prospectus and included in
Regions' Current Report on Form 8-K dated November 22, 1995. See "Documents
Incorporated by Reference," "Summary -- Comparative Per Share Data," and "--
Summary Pro Forma Financial Data." The pro forma combined condensed statements
of income are not necessarily indicative of the results that actually would
have occurred if the Merger had been consummated at the dates indicated or which
may be obtained in the future.
48
<PAGE> 53
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
1995 1994(1)
---- ----
(In thousands except per share data)
<S> <C> <C>
Income Statement Data:
Total interest income . . . . . . . . . . . . . $ 761,408 $ 790,287
Total interest expense . . . . . . . . . . . . . 389,869 352,792
------- -------
Net interest income . . . . . . . . . . . . . . 371,539 437,495
Provision for loan losses . . . . . . . . . . . 15,416 18,926
------- -------
Net interest income after loan loss
provision . . . . . . . . . . . . . . . . . . . 356,123 418,569
Total noninterest income . . . . . . . . . . . 117,848 143,823
Total noninterest expense . . . . . . . . . . . 279,600 344,600
Income tax expense . . . . . . . . . . . . . . . 66,089 71,365
-------- --------
Net income . . . . . . . . . . . . . . . . . . . $ 128,282 $ 146,427
======== =========
Net income per share . . . . . . . . . . . . . . $ 2.78 $ 3.41
======== ========
Average common shares outstanding . . . . . . . . 46,212 42,906
</TABLE>
______________
(1) Reflects the combined information of Regions for the fiscal year ended
December 31, 1994, and First Federal for the four quarters ended
December 31, 1994.
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME FOR REGIONS,
FIRST FEDERAL, AND OTHER PENDING ACQUISITIONS
(UNAUDITED)
The following unaudited pro forma combined condensed statements of income
for the nine months ended September 30, 1995, and for the year ended December
31, 1994, give effect to the Merger, assuming such acquisition is accounted for
as a purchase, and the Other Pending Acquisitions, assuming three of such
acquisitions are treated as purchases and two of such acquisitions are treated
as poolings of interests for accounting purposes and assuming each of such
acquisitions had been consummated on January 1, 1994. The following unaudited
pro forma combined condensed statements of income for the years ended December
31, 1993 and 1992 give effect to the First National Acquisition and the Delta
Acquisition, assuming such acquisitions are treated as poolings of interests
for accounting purposes and had been consummated on January 1, 1992. The
unaudited pro forma combined condensed statements of income should be read in
conjunction with the historical consolidated financial statements of Regions
and First Federal, including the respective notes thereto, which are
incorporated by reference in this Proxy Statement/Prospectus, and the unaudited
consolidated historical and other pro forma financial information, including
the notes thereto, appearing elsewhere in this Proxy Statement/Prospectus and
included in Regions' current Report on Form 8-K dated November 22, 1995. See
"Documents Incorporated by Reference," "Summary -- Comparative Per Share Data,"
and "-- Summary Pro Forma Financial Data." The pro forma combined condensed
statements of income are not necessarily indicative of the results that
actually would have occurred if the Merger had been consummated at the dates
indicated or which may be obtained in the future.
49
<PAGE> 54
<TABLE>
<CAPTION>
Nine Months Year Ended December 31,
Ended ---------------------------------------
September 30,
1995 1994 1993 1992
---- ---- ---- ----
(In thousands except per share data)
<S> <C> <C> <C> <C>
Income Statement Data:
Total interest income . . . . . . . . . . . . . $ 968,527 $ 1,027,388 $ 760,157 $ 748,414
Total interest expense . . . . . . . . . . . . . 488,041 451,868 300,143 328,421
------- ------- ------- -------
Net interest income . . . . . . . . . . . . . . 480,486 575,520 460,014 419,993
Provision for loan losses . . . . . . . . . . . . 17,670 21,349 25,315 39,937
------- ------- ------- -------
Net interest income after loan loss
provision . . . . . . . . . . . . . . . . . . . 462,816 554,171 434,699 380,056
Total noninterest income . . . . . . . . . . . . 143,483 176,061 167,164 151,843
Total noninterest expense . . . . . . . . . . . . 372,044 463,570 387,234 349,006
Income tax expense . . . . . . . . . . . . . . . 78,446 84,922 67,690 57,116
------ ------ ------ ------
Income before cumulative effect of
change in accounting principle
and extraordinary item . . . . . . . . . . . . $ 155,809 $ 181,740 $ 146,939 $ 125,777
======= ======= ======= =======
Income before cumulative effect of
change in accounting principle and
extraordinary item per share . . . . . . . . . $ 2.49 $ 3.08 $ 2.77 $ 2.42
==== ==== ==== ====
Average common shares outstanding . . . . . . . 62,610 59,051 52,998 52,049
</TABLE>
50
<PAGE> 55
FIRST FEDERAL MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
First Federal (or the "Bank") was chartered in 1956 as a federally
chartered mutual savings and loan association. In March, 1991, the Bank
converted to a federally chartered stock savings bank. This report describes
the operations of First Federal for the twelve months period ended September
30, 1995. First Federal's principal office is located in Cedartown, Georgia.
The Bank also operates a full service branch in Rockmart, Georgia. Since 1956,
First Federal's deposits have been insured to the applicable limits by the
Federal Savings and Loan Insurance Corporation, now the Savings Association
Insurance Fund which is managed by the Federal Deposit Insurance Corporation.
First Federal is primarily engaged in the business of attracting deposits
from the general public and making loans secured by residential real estate.
The Bank, to a lesser extent, also makes consumer, construction, commercial and
residential real estate development loans. In addition, a portion of its assets
are invested in government securities.
On September 29, 1995, First Federal's Board of Directors and Regions
Financial Corporation entered into a definitive agreement by which Regions will
acquire all of the outstanding stock of First Federal in a tax-free exchange of
stock. The transaction is subject to approval by First Federal stockholders and
by regulatory authorities.
First Federal's results of operations are primarily dependent upon its net
interest income, which is the difference between its interest income from its
assets, chiefly loans and investments, and its interest expense on its
liabilities, primarily deposits and borrowings. Interest income is a function
of the average balances of loans and investments outstanding during the period
and average rates paid on such deposits and borrowings. To a lesser extent,
First Federal's profitability is also affected by the level of other income and
expenses. Other income consists principally of loan fees and service charges on
deposit accounts. Other expenses consist of compensation and related benefits,
occupancy related expenses, data processing, deposit insurance premiums and
other operating expenses. The operations of First Federal are influenced
significantly by general economic conditions and by policies of financial
institution regulatory agencies. First Federal's cost of funds is influenced by
interest rates in competing investments and general market interest rates.
Lending activities are affected by the demand for financing of real estate and
other types of loans, which in turn are affected by the interest rates at which
such financing may be offered.
MARKET AREA
The primary market area for First Federal consists of Polk County and the
cities of Cave Spring and Taylorsville located in northwest Georgia. The home
office of the Bank is in Cedartown, Polk County, Georgia, which is
approximately 60 miles northwest of Atlanta, Georgia. The latest United States
Census listed the population of Polk County to be 33,815; Cave Springs to be
950; and Taylorsville to be 269 representing, within the trade area, a 10.5%
increase in population since the 1980 census. First Federal's market area is
susceptible to general industrial, manufacturing and agricultural downturns.
Polk County's population has remained relatively stable in recent years.
51
<PAGE> 56
FINANCIAL CONDITION
At September 30, 1995, the net worth of First Federal totaled $12,472,099.
First Federal continues to be in compliance with regulatory capital
requirements with tangible, core and risk-based capital exceeding the Bank's
current regulatory capital requirements by approximately $11,031,377,
$9,673,046 and $9,111,923, respectively.
Total assets increased by $12,319,590 from $78,077,646 at September 30,
1994 to $90,397,236 at September 30, 1995. This increase was due in part by the
increase in loans receivable plus normal cash flows which were utilized in part
to fund the acquisition of interest-bearing instruments including bonds, notes
and debentures backed by U. S. Government and Federal agencies, municipal
bonds, and mortgage-backed securities which increased from $14,218,425 as of
September 30, 1994 to $19,414,957 as of September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
First Federal's principal sources of funds are cash receipts from savings
deposits, loan repayments by borrowers and net income. First Federal has an
agreement with the Federal Home Loan Bank of Atlanta to provide cash advances,
should the need for additional funds be required. First Federal has no
outstanding borrowed funds at this time.
For regulatory purposes, liquidity is measured as a ratio of cash and
certain investments to withdrawable savings. The minimum level of liquidity
required by regulation is presently 5%. The liquidity ratio of First Federal at
September 30, 1995 was approximately 22.48%.
First Federal's goals with respect to liquidity are to insure that
sufficient funds are available to meet current operating requirements and to
provide reserves against unforeseen liquidity requirements. Management of First
Federal continually reviews its liquidity position.
At September 30, 1995, First Federal had approximately $1,117,800 in loan
commitments outstanding.
OTS minimum regulatory capital standards for savings institutions are: (a)
tangible capital (principally retained earnings and excluding most intangible
assets) of 1.5% of adjusted total assets; (b) core capital of 3% of adjusted
total assets; and (c) a risk-based capital requirement similar to that adopted
by the Office of the Comptroller of the Currency for national banks consisting
of 8% of the value of total risk-weighted assets.
The following table represents the regulatory capital positions of First
Federal at September 30, 1995:
<TABLE>
<CAPTION>
% OF
AMOUNT ASSETS
<S> <C> <C>
Core Capital $12,389,709. 13.71%
Minimum core capital requirement 2,716,663. 3.00
---------- ----
Excess 9,673,046. 10.71
Tangible Capital 12,389,709. 13.71
Minimum tangible capital requirement 1,358,332. 1.50
---------- ----
Excess 11,031,377. 12.21
Risk-based Capital 12,902,120. 27.23
Minimum risk-based capital requirement 3,790,197. 8.00
--------- ----
Excess $ 9,111,923. 19.23%
</TABLE>
52
<PAGE> 57
ASSET/LIABILITY MANAGEMENT
First Federal manages its interest rate sensitivity and
asset/liability products through the Executive Committee, comprised of four
members of the Board of Directors. The Executive Committee determines
asset/liability composition and pricing strategies and monitors the potential
impact of the interest rate risk and earnings consequences of such strategies
and makes recommendations to the Board of Directors. First Federal's principal
strategies to reduce its interest rate risks are (i) the origination of
adjustable rate loans and (ii) competitive and rational pricing of deposit
products.
Since, 1983, First Federal has originated one-year adjustable rate
mortgages ("ARMs") secured by one to four family residential real estate and
the origination of consumer and other loans with greater interest rate
sensitivities than long-term fixed rate residential mortgage loans. Because
interest rates on ARMs adjust at specified intervals in accordance with
contractual terms and market interest rates frequently change, the interest
rates on ARMs do not always directly correspond with market interest rates. The
earnings of the bank are sensitive to significant interest rate changes because
the Bank maintains approximately 11.03% of its mortgage portfolio in fixed rate
mortgages.
Liability management, in the form of adjusting interest rates and
deposit terms to prevailing market conditions, also plays a significant role in
First Federal's asset/liability management policy. During periods of high
interest rates, management believes it is prudent to offer competitive rates on
long-term deposits and less competitive rates for short-term deposits. This
posture allows First Federal to place deposit liabilities in less interest rate
sensitive products.
The following table summarizes the amounts of interest-earning assets
and interest-bearing liabilities outstanding as of September 30, 1995 which are
expected to mature, prepay or reprice in each of the future time periods shown.
Except as stated below, the amounts of assets and liabilities shown which
mature or reprice during a particular period were determined in accordance with
the contractual terms of the asset or liability. Adjustable rate loans are
primarily included in the period in which interest rates are next scheduled to
adjust rather than in the period in which they are due, and fixed rate loans
and mortgage-backed securities are included in the periods in which they are
anticipated to be repaid based on scheduled maturities and information prepared
on a basis consistent with the OTS's September 30, 1995 estimated projected
repayments of loans and mortgage-backed securities with specified
characteristics. First Federal's passbook accounts, checking accounts and money
market deposit accounts, which generally are subject to immediate withdrawal,
are included in the various categories based upon the OTS's Report Assumptions
for September 30, 1995.
Certain shortcomings are inherent in the method of analysis presented
in the foregoing table. For example, although certain assets and liabilities
may have similar maturities or periods of repricing, they may react in
different degrees or at different points in time to changes in market interest
rates. Additionally, certain assets, such as ARMs, have features which restrict
changes in interest rates both on a short-term basis or over the life of the
asset. Moreover, prepayment rates, early withdrawal levels and the ability of
borrowers to service their debt, among other factors, may change significantly
from the assumptions used in the table in the event of a change in interest
rates.
53
<PAGE> 58
At September 30, 1995
Maturing or Repricing in
<TABLE>
<CAPTION>
1 Year 10 or
or less 1-3 Years 3-5 Years 5-10 Years More Years TOTAL
------- --------- --------- ---------- ---------- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
First mortgage loans:
Adjustable and
balloon $42,483 $ 5,221 $2,812 $ 48 - $50,564
Fixed-rate 239 349 677 2,790 1,602 5,657
Construction 808 - - - - 808
Mortgage-backed
securities 183 680 --- 1,832 2,646 5,341
Commercial and
consumer loans 1,441 1,133 1,089 370 46 4,079
Other loans 2,325 222 - - - 2,547
Investment securities 3,405 5,442 4,508 - - 13,355
Other interest earning assets 5,836 - - - - 5,836
------- ------- ------ ------ ----- -------
Total interest-
earning assets 56,720 13,047 9,086 5,040 4,294 88,187
------- ------- ------ ------ ----- -------
Interest-bearing
liabilities:
Deposits:
Passbook 3,885 - - - - 3,885
NOW, super
NOW, checking
and money
market 12,268 - - - - 12,268
Time deposits 35,004 22,778 3,040 - - 60,822
Borrowings:
FHLB advances - - - - - -
------- ------- ------ ------ ----- -------
Total interest-bearing
liabilities 51,157 22,778 3,040 - - 76,975
------- ------- ------ ------ ----- -------
Interest sensitivity
gap period 5,563 (9,731) 6,046 5,040 4,294 11,212
------- ------- ------ ------ ----- -------
Cumulative interest
sensitivity gap 5,563 (,168) 1,878 6,918 11,212 11,212
------- ------- ------ ------ ----- -------
Cumulative gap
to total assets 7.12% -5.34% 2.41% 8.86% 14.36% 14.36%
------- ------- ------ ------ ----- -------
</TABLE>
54
<PAGE> 59
Average Balance Sheet
The following table sets forth for the fiscal years indicated information
regarding: (i) the total dollar amounts of interest income from
interest-earning assets and the resulting average yields; (ii) the total dollar
amounts of interest expense from interest-bearing liabilities and the resulting
average costs; (iii) net interest income; (iv) interest rate spread; (v) net
interest-earning assets; (vi) the net yield earned on interest-earning assets;
and (vii) the ratio of total interest-earning assets to total interest-bearing
liabilities. Average balances have been calculated on a monthly basis.
Management does not believe that the use of month-end balances instead of daily
average balances has caused any material differences in the information
presented.
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1994
------------------ ------------------
Average Annual Yield/ Average Annual Yield/
Interest-earning assets: Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Loans receivable, including
mortgage-backed securities, net $61,233 $4,908 8.02% $59,618 $4,690 7.87%
Investment securities 19,930 1,148 5.76 14,062 698 4.96
-------- -------- -------- --------
Total interest-earning assets 81,163 6,056 7.46 73,680 5,388 7.24
Non-interest-earning assets 3,075 - 2,861 -
-------- -------- -------- --------
Total assets $84,238 $6,056 $76,541 $5,388
======== ======== ======== ========
Interest-bearing liabilities:
Deposits $71,110 $3,471 4.88% $64,038 $2,603 4.06%
FHLB advances - - - -
-------- -------- -------- --------
Total interest-bearing
liabilities 71,110 3,471 4.88 64,038 2,603 4.06
Non-interest-bearing liabilities 1,055 - 1,139 -
-------- -------- -------- --------
Total liabilities 72,165 3,471 65,177 2,603
Retained earnings 12,073 - 11,364 -
-------- -------- -------- --------
Total liabilities and
retained earnings $84,238 $3,471 $76,541 $2,603
======== ======== ======== ========
Net interest income/interest
rate spread 2,585 2.58% 2,785 3.18%
Net interest-earning assets/net
yield on interest-earning assets 10,053 3.19% 9,642 3.78%
Ratio of average interest-earning
assets to average interest-
bearing liabilities 114.14% 115.06%
<CAPTION>
September 30, 1993
------------------
Average Annual Yield/
Interest-earning assets: Balance Interest Cost
------- -------- ----
<S> <C> <C>
Loans receivable, including
mortgage-backed securities, net $62,517 $5,188 8.30%
Investment securities 7,020 330 4.69
-------- --------
Total interest-earning assets 69,537 5,518 7.94
Non-interest-earning assets 2,787 -
-------- ---------
Total assets $72,324 $5,518
======== ========
Interest-bearing liabilities:
Deposits $61,137 $2,775 4.54%
FHLB advances - -
-------- ----------
Total interest-bearing
liabilities 61,137 2,775 4.54
Non-interest-bearing liabilities 1,238 -
-------- ----------
Total liabilities 62,375 2,775
Retained earnings 9,949 -
-------- ----------
Total liabilities and
retained earnings $72,324 $2,775
======== ========
Net interest income/interest
rate spread 2,743 3.40%
Net interest-earning assets/net
yield on interest-earning assets 8,400 3.94%
Ratio of average interest-earning
assets to average interest-
bearing liabilities 113.74%
</TABLE>
55
<PAGE> 60
Rate/Volume Analysis
The following table describes the extent to which changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities
have affected First Federal's interest income and expense during the periods
indicated. For each category of interest-earning asset and interest-bearing
liability, information is provided on changes attributable to (1) change in
volume (change in volume multiplied by old rate); (2) change in rate (change in
rate multiplied by old volume); and (3) change in rate-volume (change in rate
multiplied by change in volume).
<TABLE>
<CAPTION>
Fiscal Years Ended September 30,
1994 vs. 1995 1993 vs. 1994
Attributable to Change in Attributable to Change in
Rate/ Rate/
Volume Rate Volume Total Volume Rate Volume Total
Changes in:
------ ----- ------ ----- ------ ---- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loan portfolio $171 $ 42 $ 2 $215 $ 87 ($319) ($6) ($238)
Investments and interest-
bearing deposits 420 20 12 452 116 (6) (1) 109
---- ---- --- ---- ---- ----- --- ----
Total interest
income 591 62 14 667 203 (325) (7) (129)
Interest expense:
Deposits 467 339 61 867 107 (269) (10) (172)
FHLB advances - - - - - - - -
---- ---- --- ---- ---- ----- --- ----
Total interest
expense 467 339 61 867 107 (269) (10) (172)
Net interest
income (expense) $124 ($277) ($47) ($200) $96 ($56) $ 3 $ 43
==== ==== === ==== ==== ===== === ====
</TABLE>
56
<PAGE> 61
Yields Earned and Rates Paid
The following table sets forth consolidated information for First Federal with
respect to yields on loans and investments and cost of funds on deposits, FHLB
advances and borrowings during the periods indicated. Loan origination and
commitment fees are excluded. Weighted average computations utilize month-end
balances.
<TABLE>
<CAPTION>
During Fiscal Years
Ended September 30,
---------------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Weighted average yield on loans . . . . . . . . . . . . . . . . . 7.74 % 7.60 % 8.36 %
Weighted average yield on investments . . . . . . . . . . . . . . 5.91 5.46 5.36
Weighted average yield on mortgage-
backed securities . . . . . . . . . . . . . . . . . . . . . . . . 5.76 4.75 6.88
Combined weighted average yield on loans,
investments and mortgage-backed securities . . . . . . . . . . . 7.38 7.20 8.02
Weighted average rate paid on deposits . . . . . . . . . . . . . 4.90 4.09 4.79
Weighted average rate paid on FHLB advances
and other borrowings . . . . . . . . . . . . . . . . . . . . . . - - -
Combined weighted average rate paid on
deposits, FHLB advances and other borrowings . . . . . . . . . . 4.90 4.09 4.79
Interest rate spread (spread between combined
weighted average yield on loans, investments
and mortgage-backed securities and combined
weighted average rate paid on deposits, FHLB
advances and other borrowings) . . . . . . . . . . . . . . . . . 2.48 3.11 3.23
Net yield on average interest-earning assets
(net interest income as a percentage of average
interest-earning assets) . . . . . . . . . . . . . . . . . . . . 3.22 3.71 3.96
</TABLE>
ASSET QUALITY
First Federal's collection procedures provide that notices are sent to
borrowers when the loan becomes delinquent 15 days. A series of collection
letters and/or phone calls are used to contact the borrower once the loan
becomes delinquent 30 days. If the delinquency continues, subsequent efforts
are made to contact and request payment from the delinquent borrower. In
certain instances, First Federal may develop a repayment schedule with the
borrower to enable the borrower to restructure his or her financial affairs.
If the loan continues in a delinquent status, First Federal will initiate
foreclosures proceedings. All property acquired as the result of foreclosure or
by deed in lieu of foreclosure is classified as "real estate owned", a
component of non-performing assets, until such time as it is sold or otherwise
disposed of by First
57
<PAGE> 62
Federal. At September 30, 1995, First Federal had $859,704 in real estate owned
as a result of foreclosure and in-substance foreclosure. The properties include
two office buildings and vacant land located in Macon, Georgia; a shopping
center located in Warner Robins, Georgia; and a strip shopping center located
in Milledgeville, Georgia. These properties were foreclosed through Empire
Financial Services, Inc. and were participation loans.
Regulations of the OTS require that each insured institution classify its
own assets on a regular basis. In addition, in connection with examinations of
insured institutions, OTS examiners have authority to identify problem assets,
and, if appropriate, classify them. If an institution does not agree with an
examiner's classification of an asset, it may appeal this determination to its
Supervisory Examiner. Problem assets may be classified as "substandard,"
"doubtful" or "loss." An asset will be classified as substandard if it is
determined to involve a distinct possibility that the insured institution may
sustain some loss if deficiencies associated with a loan, such as inadequate
documentation, are not corrected. An asset will be classified as doubtful if
full collection is highly questionable or improbable. An asset will be
classified as loss if it is considered uncollectible, even if a partial
recovery may be expected in the future. There is also a "special mention"
category, described as assets which do not currently expose an insured
institution to a sufficient degree of risk to warrant classification but which
do possess credit deficiencies or potential weaknesses deserving management's
close attention. Assets classified as substandard or doubtful require the
institution to establish general allowances for loan losses. If an asset or
portion thereof is classified as loss, then an insured institution must either
establish specific allowances for loan losses in the amount of 100% of the
portion of the asset classified as loss or charge off such amount.
As required by current regulation discussed above, First Federal has in
place a classification of assets policy which requires the Board of Directors
to review the adequacy of the general and specific valuation allowances at
least quarterly. The purpose of the review is primarily to ascertain the
reasonableness and adequacy of First Federal's reserve for loan losses. The
general valuation allowance is provided to properly reflect the collectability
of the loan portfolio as a whole. The general allowance is based on such
factors as First Federal's historical loan loss experience, trends in loan
portfolio volume and composition, an evaluation of economic conditions and
regular monthly reviews of loan delinquencies. The specific valuation allowance
includes 100% of the amount of First Federal's assets, including loans,
classified as loss or for the assets to be charged off First Federal's books
and interest on loans that are contractually past due 90 days or more. All
delinquent assets are reviewed by the Board of Directors at their regular
monthly meeting. At September 30, 1995, First Federal had charged off two loans
totaling $2,319. There were no loans classified as loss. Loans classified as
substandard totaled $671,139. The amount of $663,105 is made up of loans that
are secured by 1-4 family dwelling units located in Polk County. The remaining
$8,034 is made up of home improvement loans or loans secured by automobiles.
58
<PAGE> 63
Delinquent Loans
At September 30, 1993, 1994, 1995, delinquencies in First Federal's loan
portfolio were as follows:
<TABLE>
<CAPTION>
Delinquent As a Percentage
Loans of Total Loans
--------------- --------------
(Dollars in thousands)
At September 30,
1995
<S> <C> <C>
60-89 Days
----------
Number of loans . . . . . . . . . . . . . . . . . . . . . . . 29
Principal balance of loans . . . . . . . . . . . . . . . . . $580 0.90%
90 Days or more
---------------
Number of loans . . . . . . . . . . . . . . . . . . . . . . . 40
Principal balance of loans . . . . . . . . . . . . . . . . . $650 1.00
1994
60-89 Days
----------
Number of loans . . . . . . . . . . . . . . . . . . . . . . . 27
Principal balance of loans . . . . . . . . . . . . . . . . . $429 0.71
90 Days or more
---------------
Number of loans . . . . . . . . . . . . . . . . . . . . . . . 36
Principal balance of loans . . . . . . . . . . . . . . . . . $1,708 2.84
1993
60-89 Days
----------
Number of loans . . . . . . . . . . . . . . . . . . . . . . . 37
Principal balance of loans . . . . . . . . . . . . . . . . . $758 1.28
90 Days or more
---------------
Number of loans . . . . . . . . . . . . . . . . . . . . . . . 42
Principal balance of loans . . . . . . . . . . . . . . . . . $1,372 2.32
</TABLE>
59
<PAGE> 64
The table below sets forth the aggregate amount of loans that were
contractually past due 60 days or more as to principal or interest payments,
restructured loans and nonperforming assets as of the dates indicated.
<TABLE>
<CAPTION>
At September 30,
1995 1994
---- ----
(Dollars in thousands)
<S> <C> <C>
Delinquent loans (90 days or more
due and nonaccruing) . . . . . . . . . . . . . . . . . . . $ 650 $ 1,708
Delinquent loans (60-89 days due) . . . . . . . . . . . . . . 580 429
Restructured loans . . . . . . . . . . . . . . . . . . . . . - 628
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,230 2,765
------- -------
Nonperforming assets:
Nonperforming loans . . . . . . . . . . . . . . . . . . . . . $ 650 $ 1,708
Real estate acquired
through foreclosure . . . . . . . . . . . . . . . . . . . . 860 25
------- -------
Total nonperforming assets . . . . . . . . . . . . . . . . . $ 1,510 $ 1,733
======= =======
Interest due on nonaccruing loans
(90 days or more past due) . . . . . . . . . . . . . . . . $ 22 $ 138
======= =======
Ratio of nonperforming assets to total
gross loans and real estate
acquired through foreclosure . . . . . . . . . . . . . . . 1.03% 2.77%
======= =======
Ratio of allowance for loan
losses to nonperforming loans . . . . . . . . . . . . . . . . 99.69% 38.08%
======= =======
</TABLE>
<TABLE>
<CAPTION>
At September 30, At September 30,
1995 1994
-------------- ----------------
% Loans % Loans
to Gross to Gross
Loans Amount Loans Amount
-------- ------ -------- --------
<S> <C> <C> <C> <C>
Allocation of allowance for (Dollars in thousands)
loan losses:
Permanent residential mortgage
loans . . . . . . . . . . . . . . . . . . . . . . . $493 76.08% $330 50.93%
Real estate construction loans . . . . . . . . . . 17 2.62% - 0.00%
Commercial real estate loans . . . . . . . . . . . 79 12.19% 288 44.44%
Home equity and consumer loans . . . . . . . . . . 59 9.10% 32 4.94%
Unallocated allowances . . . . . . . . . . . . . . - - - -
---------- ---------- ---------- ----------
Total allowance for loan losses . . . . . . . . . . $648 100.00% $650 100.00%
========== ========== ========== ==========
</TABLE>
60
<PAGE> 65
The following table sets forth an analysis of First Federal's allowance for
loan losses for the periods indicated:
<TABLE>
<CAPTION>
At September 30,
(Dollars in thousands)
1995 1994 1993
---- ---- ----
Amount Amount Amount
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of year . . . . . . . . . . . . $ 650 $ 727 $ 794
Loan charge-offs:
Mortgage . . . . . . . . . . . . . . . . . . . . . . - - -
Commercial . . . . . . . . . . . . . . . . . . . . . - - -
Consumer . . . . . . . . . . . . . . . . . . . . . . 2 - -
---- ---- ----
Total charge-offs . . . . . . . . . . . . . . . . . . 2 - -
Recoveries
Mortgage . . . . . . . . . . . . . . . . . . . . . . - - -
Commercial . . . . . . . . . . . . . . . . . . . . . - - -
Consumer . . . . . . . . . . . . . . . . . . . . . . - - -
---- ---- ----
Total recoveries . . . . . . . . . . . . . . . . . . - - -
Net loans charged off . . . . . . . . . . . . . . . . 2 - -
Provision for loan losses . . . . . . . . . . . . . . - (77) (67)
---- ----- ---
Balance at end of year . . . . . . . . . . . . . . . $ 648 $ 650 $ 727
=== === ===
Ratio of net charge-offs to
average loans outstanding
during the year . . . . . . . . . . . . . . . . . . . 0.03% 0.00% 0.00%
Ratio of allowance for loan
losses to total loans outstanding
at the end of the year . . . . . . . . . . . . . . . 1.04% 1.16% 1.20%
</TABLE>
COMPARISON OF THE FISCAL YEARS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994
NET INCOME
First Federal's net income was $1,093,635 for the year ended September 30,
1995, a decrease of $315,870 from $1,409,505 for the year ended September 30,
1994. This decrease was due principally to an increase in interest expense
which was $3,470,714 at September 30, 1995 as compared to $2,602,855 at
September 30, 1994. There was also an increase in non-interest expense of
$375,249 from $1,200,925 to $1,576,174 at September 30, 1995.
NET INTEREST INCOME
Net interest income decreased by $200,583 from $2,785,374 for the year
ended September 30, 1994 to $2,584,791 for the year ended September 30, 1995.
The decrease was due primarily to an increase in interest
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<PAGE> 66
paid on deposits.
PROVISION FOR LOAN LOSSES
In establishing its provision for loan losses, management reviews loans for
which full collectability may not be reasonably assured and considers, among
other matters, the estimated net realizable value of the underlying collateral.
In accordance with the Bank's Classification of Assets Policy, management
performs a detailed monthly review and critical analysis which determines the
percentage of risk and the amount needed in loan loss provisions. Based upon
this review and these calculations, the loan loss reserve balance was
determined to be adequate for the fiscal year ended September 30, 1995. The
balance of the loan loss reserve at September 30, 1995 was $648,103 which was
1.04% of outstanding loans.
OTHER INCOME
Non-interest income increased by $155,103 from $396,892 for the year ended
September 30, 1994 to $551,995 for the year ended September 30, 1995. The
increase was principally due to a gain which resulted from the sale of
foreclosed real estate in the amount of $69,872, an increase of $60,585 from
the $9,287 at September 30, 1994.
OTHER EXPENSES
Non-interest expenses increased by $375,249 from $1,200,925 for the year
ended September 30, 1994 to $1,576,174 for the year ended September 30, 1995.
This increase was partly due to an increase in compensation and benefits from
$450,220 at September 30, 1994 to $608,718 at September 30, 1995. Other
non-interest expense also showed an increase of $158,588 from $399,522 at
September 30, 1994 to $558,110 at September 30, 1995. This increase was partly
attributable to approximately $55,000 in expenses incurred involving First
Federal's merger agreement with Regions Financial Corporation.
INCOME TAXES
Income tax expense decreased from $648,847 for the year ended September 30,
1994 to $466,977 for the year ended September 30, 1995 due to a lower taxable
income.
COMPARISON OF THE FISCAL YEARS ENDED SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1993
NET INCOME
First Federal's net income was $1,409,505 for the year ended September 30,
1994, a decrease of $54,495 from $1,464,000 for the year ended September 30,
1993. This decrease was due principally to non-interest income which was
$396,892 at September 30, 1994 as compared to $760,751 at September 30, 1993. A
gain resulted during fiscal year ended September 30, 1993 from the sale of
9,552 shares of Federal Home Loan Mortgage Corporation Stock in the amount of
$482,000.
62
<PAGE> 67
NET INTEREST INCOME
Net interest income increased by $43,173 from $2,742,201 for the year ended
September 30, 1993 to $2,785,374 for the year ended September 30, 1994. The
increase was due primarily to an increase in interest bearing investments and
mortgage-backed securities and also because of the decrease in interest expense
on deposits.
PROVISION FOR LOAN LOSSES
In establishing its provision for loan losses, management reviews loans for
which full collectability may not be reasonably assured and considers, among
other matters, the estimated net realizable value of the underlying collateral.
In accordance with the Bank's Classification of Assets Policy, management
performs a detailed monthly review and critical analysis which determines the
percentage of risk and the amount needed in loan loss provisions. Based upon
this review and these calculations, the loan loss reserve balance was
determined to be more than necessary and was decreased $77,000 during the
fiscal year ended September 30, 1994. The balance of the loan loss reserve at
September 30, 1994 was $650,422, which was 1.16% of outstanding loans.
OTHER INCOME
Non-interest income decreased by $363,859 from $760,751 for the year ended
September 30, 1993 to $396,892 for the year ended September 30, 1994. The
decrease was principally due to the sale of 9,552 shares of Federal Home Loan
Mortgage Stock which resulted in a gain of $482,000 during fiscal year ended
September 30, 1993 while there were no securities sold in fiscal year ended
September 30, 1994.
OTHER EXPENSES
Non-interest expenses decreased by $65,333 from $1,266,258 for the year
ended September 30, 1993 to $1,200,925 for the year ended September 30, 1994.
This decrease was partly due to a decrease in compensation and benefits from
$534,340 at September 30, 1993 to $450,220 at September 30, 1994. The decrease
in compensation and benefits was due to the movement from an underfunded
pension plan at September 30, 1993 to an overfunded pension plan at fiscal year
ended September 30, 1994. Expense on occupancy and equipment and other
non-interest expense also showed a slight decrease.
INCOME TAXES
Income tax expense decreased from $813,194 for the year ended September 30,
1993 to $648,847 for the year ended September 30, 1994 due to a lower taxable
income.
63
<PAGE> 68
BUSINESS OF FIRST FEDERAL
GENERAL
First Federal is a federal stock savings bank organized under the laws of
the United States, with its principal executive office located in Cedartown,
Georgia. First Federal provides a range of retail banking services through two
offices in Polk County, Georgia. At September 30, 1995, First Federal had total
consolidated assets of approximately $90.4 million, total consolidated deposits
of approximately $77.0 million, and total consolidated stockholders' equity of
approximately $12.5 million. First Federal's principal executive office is
located at 120 North Main Street, Cedartown, Georgia, 30125 and its telephone
number at such address is (770) 748-1820.
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
The following table sets forth for the fiscal year ended September 30, 1995
certain information as to the total cash compensation received by the executive
officer of First Federal. No officer of First Federal received compensation in
excess of $100,000 during fiscal year 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------------
Annual Compensation Awards Payouts All
------------------------------------------- ------------------------------ ------- Other
Bonus Other Annual Restricted Stock Options/SAR LTIP Compensation
Name and Principal Position Year Salary ($)(1) ($) Compensation ($)(2) Awards ($) (No.) payouts($) ($)(3)
- --------------------------- ---- -------------- ------- ------------------- ---------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Larry W. Dooley 1995 $81,868 -0- $5,165 n/a 0 n/a $3,166
President 1994 80,269 -0- 5,055 n/a 0 n/a 2,982
and Director 1993 78,173 -0- 4,782 n/a 0 n/a 2,543
</TABLE>
___________________________
(1) Includes director's fees and committee fees.
(2) Car Allowance, and Optimist Club and Cherokee Golf and Country Club
dues.
(3) Contributions to defined benefit pension plan.
Pension Plan. First Federal maintains a tax-qualified defined benefit
pension plan (the "Pension Plan"). All regular employees of First Federal are
eligible to participate upon meeting certain age and service requirements. The
Pension Plan is administered by a committee appointed by the Board of
Directors. Contributions made by First Federal are determined using the entry
age normal cost method.
Benefits under the Pension Plan are paid upon retirement or, under
certain circumstances, upon disability or death. The Pension Plan also provides
for payment of accrued benefits to an employee who terminates employment before
retirement, when the employee has a vested interest in the accrued benefit.
Benefits are fully vested upon completion of seven years of service. Benefits
are payable monthly in amounts based on an employee's average monthly
compensation and years of service and are not integrated with the
64
<PAGE> 69
employee's Social Security benefits. Under the Pension Plan, the normal form of
benefit for a single participant is a lifetime annuity and, for those who are
married at the time the participant's benefits begin, a lifetime annuity for
the participant and the participant's spouse after the death of the
participant. Alternate forms of payment are available if the employee makes
such an election in writing to the Plan Administrator.
The Pension Plan provides for normal retirement at age 65. The Pension
Plan also provides that an employee may retire and begin receiving reduced
payments when the employee has attained age 55 and has accumulated at least 15
years of service. An employee who elects early retirement receives a reduced
benefit.
Larry Dooley, the only named executive officer participating in the
Pension Plan, has 26 credited years of service under the Pension Plan and, as
of May 31, 1995, the end of the most recent Plan Year, Mr. Dooley had estimated
accrued annual benefits of $22,749 upon retirement.
The following table illustrates estimated annual pension benefits
payable upon retirement in fiscal year 1995 to participants at normal
retirement age in the compensation and service classifications specified.
<TABLE>
<CAPTION>
Years of Credited Service(1)
----------------------------------------------------------------------
Salary(2) 5 10 15 20 25
----------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
$ 10,000 $ 750 $ 1,500 $ 2,250 $ 3,000 $ 3,750
$ 20,000 1,500 3,000 4,500 6,000 7,500
$ 30,000 2,250 4,500 6,750 9,000 11,250
$ 40,000 3,000 6,000 9,000 12,000 15,000
$ 60,000 4,500 9,000 13,500 18,000 22,500
$ 80,000 6,000 12,000 18,000 24,000 30,000
$100,000 7,500 15,000 22,500 30,000 37,500
</TABLE>
___________________________
(1) Full retirement benefits are earned with 7 or more years of
credited service at age 65. Benefits are payable for life.
(2) Final average base salary upon which retirement plan benefits are
based.
Stock Option Plan. Under First Federal's Stock Option Plan, Messrs.
York, Goss, Dooley, Dean, Henderson and LeGrande were granted options to
purchase Common Stock at the time of First Federal's mutual to stock
conversion. Each option provided for an exercise price of $10.00 per share,
which was 100 percent of the fair market value of a share of First Federal's
Common Stock at the time of the grant. Except for Mr. Dean, each of the
directors exercised their options prior to the fiscal year ended September 30,
1995. Mr. Dean exercised his options on November 1, 1995.
First Federal granted no additional options during the fiscal year
ended September 30, 1995, and as of November 15, 1995 there were no outstanding
options.
Deferred Compensation Agreement. On December 14, 1982, First Federal
entered into an agreement with Mr. Tom B. Goss, former President of First
Federal, to provide Mr. Goss retirement benefits for a period of seven years.
The agreement terminated on December 15, 1989. On January 12, 1990, First
Federal entered into a second deferred compensation agreement (the
"Compensation Agreement") with Mr. Goss to provide him retirement benefits for
an additional seven year term. The Compensation Agreement provides for
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<PAGE> 70
84 monthly payments of $850 each, commencing January 15, 1990. In the event Mr.
Goss dies before receiving the amounts due under the Compensation Agreement,
the obligation of First Federal to make payments under the Compensation
Agreement will terminate.
CERTAIN HOLDERS OF FIRST FEDERAL VOTING SECURITIES
The following table sets forth, as of December 15, 1995, the only
group, persons or other entities known by First Federal to be beneficial
owners, as defined in Rule 13d-3 promulgated by the SEC under the Exchange Act,
of more than 5.0% of the outstanding shares of First Federal Common Stock:
<TABLE>
<CAPTION>
Number of Percent of
Name and Address Shares Common Stock
- ---------------- ---------- ------------
<S> <C> <C>
Larry W. Dooley 25,175 8.37%
636 Cherokee Rd.
Cedartown, GA 30125
A. Y. Henderson, Jr. 20,000 6.65%
215 Lakeview Dr.
Cedartown, GA 30125
T. L. Mullen 27,600 9.18%
P. O. Box 365
N. College Street
Cedartown, GA 30125
Glenn T. York, Jr. 21,800 7.25%
406 Woodlawn Dr.
Cedartown, GA 30125
</TABLE>
66
<PAGE> 71
The following table sets forth the names and certain information, as
of December 15, 1995, concerning the beneficial ownership of Common Stock by
all directors and executive officers, and by all executive officers and
directors as a group.
<TABLE>
<CAPTION>
Amount and Nature
Positions with of Beneficial Percent of Outstanding
Name First Federal Ownership Common Stock(1)
---- --------------------- ----------------- ------------
<S> <C> <C> <C>
Glenn T. York, Jr. Chairman of the Board 21,800(2) 7.25%
and Director
Larry W. Dooley President and 25,175(3) 8.37%
Director
Horace L. Cline Director 200 *
James B. Croker Director 500 *
Nathan Dean Director 8,860 2.95%
Tom B. Goss Vice Chairman of the 7,100 2.36%
Board and Director
A. Y. Henderson, Jr. Director 20,000 6.65%
Ernest LeGrande Director 13,400 4.46%
All executive
officers and
directors as a group 101,535 33.78%
(9 persons)
</TABLE>
________________________________
(1) Percentages marked by an asterisk (*) indicate less than one percent (1%)
of the outstanding Common Stock.
(2) Includes 1,800 shares owned by Mr. York's spouse.
(3) Includes 3,391 shares owned by Mr. Dooley's spouse.
Section 16(a) of the Exchange Act requires First Federal's officers and
directors, and persons who own more than ten percent of Common Stock, to file
reports of ownership and changes in ownership with the OTS. Officers, directors
and greater than ten percent stockholders are required to furnish First Federal
with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to First
Federal, or written representations that no Forms 5 were required, First
Federal believes that during the 1995 fiscal year its officers, directors and
greater than ten percent beneficial owners complied with all applicable Section
16(a) filing requirements.
67
<PAGE> 72
ELECTION OF DIRECTORS OF FIRST FEDERAL
(PROPOSAL 3)
GENERAL
Directors of First Federal are elected for staggered terms of three
years each. The number of Directors is currently set at eight. At the Annual
Meeting, three Directors will be elected for three-year terms expiring in 1999.
Each stockholder of First Federal is entitled to one vote for each share of
First Federal's Common Stock held. There is no cumulative voting rights in the
election of Directors.
The nominees of the Board of Directors for reelection as Directors of
First Federal are Messrs. James B. ("Billy") Croker, Nathan Dean and Larry W.
Dooley, each of whom currently serves as a director of First Federal. There are
no arrangements or understandings between First Federal and any person pursuant
to which such person has been or will be elected a director.
It is intended that each Proxy solicited on behalf of the Board of
Directors will be voted only for the election of the designated nominees. At
this time, the Board of Directors knows of no reason why any nominee might be
unable to serve, but, if that should occur before the Annual Meeting, it is
intended that the Proxies will be voted for the election of such other person
or persons as the Board of Directors may recommend.
INFORMATION AS TO NOMINEES AND OTHER DIRECTORS
The following table sets forth the names and certain information with
respect to each of the three nominees and for those Directors who will continue
to serve as Directors after the Annual Meeting.
<TABLE>
<CAPTION>
Term as Director of First
Name Age Director Expires Federal Since
---- --- ---------------- -------------------
<S> <C> <C> <C>
NOMINEES FOR 3 YEAR TERMS
ENDING IN 1999:
James B. Croker 60 1996 1995
Nathan Dean 61 1996 1969
Larry W. Dooley 52 1996 1974
CONTINUING DIRECTORS:
Horace L. Cline 72 1998 1991
Tom B. Goss 80 1997 1963
A.Y. Henderson, Jr. 74 1998 1976
Ernest LeGrande 82 1998 1956
Glenn T. York, Jr. 71 1997 1956
</TABLE>
NOMINEES:
James B. "Billy" Croker was nominated and elected to the Board of
Directors of First Federal on July
68
<PAGE> 73
11, 1995 and presently serves on the Loan Committee. He retired as owner and
operator of Croker Hardware in Cedartown after more than 40 years. Mr. Croker
also serves as Chairman of the Polk County Board of Commissioners.
Nathan Dean has been the owner of the Nathan Dean Agency located in
Rockmart, Georgia since 1975. Mr. Dean has served on the Board of Directors
since 1969 and has served on the Loan Committee since 1980. He also serves on
the Retirement Plan Advisory Committee.
Larry W. Dooley is President and Chief Executive Officer of First
Federal, a position he has held since 1983. Mr. Dooley has served as a Director
of First Federal since 1974 and presently serves on the Executive Committee and
Retirement Plan Advisory Committee of First Federal. Mr. Dooley also serves as
a Director and Chairman of Empire Financial Services, Inc., a 50 percent owned
subsidiary of First Federal and as Secretary/Treasurer of Polk County Service
Corporation, a wholly owned subsidiary of First Federal.
CONTINUING DIRECTORS:
Horace L. Cline is President of and has operated Cline Pharmacy, Inc.
located in Cave Springs, Georgia since 1953. Mr. Cline has been a director of
First Federal since 1991 and serves on the Personnel Committee and Loan
Committee.
Tom B. Goss is currently the Vice-Chairman of the Board of First
Federal and has served in that position since January, 1983. Mr. Goss retired
in 1983 from First Federal after 27 years of service. Mr. Goss presently serves
on the Executive Committee, Loan Committee and Budget Committee. Mr. Goss
additionally serves as President of Polk County Service Corporation.
A. Y. Henderson, Jr. retired in 1980 after 43 years of service with
Wright & Lopez, Cedartown, Georgia. Mr. Henderson currently serves on the
Retirement Plan Advisory Committee, Executive Committee, Loan Committee, Budget
Committee and Personnel Committee. In addition, Mr. Henderson serves as a
Director of Polk County Service Corporation, a wholly owned subsidiary of First
Federal.
Ernest LeGrande has been the co-owner and operator of Piedmont
Furniture Company located in Rockmart, Georgia since 1933. Mr. LeGrande serves
on the Loan Committee and Budget Committee of First Federal.
Glenn T. York, Jr. is currently the Chairman of the Board of First
Federal and has held that position since 1980. In addition to serving as
Chairman of the Board, Mr. York is a member of the Retirement Plan Advisory
Committee, Executive Committee and Personnel Committee. Mr. York has served as
a Director of First Federal since 1956 and also serves as Director of Polk
County Service Corporation. Mr. York is and has been a partner in the law firm
of York, McRae and York located in Cedartown, Georgia since 1950.
REQUIRED VOTE
Election of each of the three nominees named above will require the
presence of a quorum and the affirmative vote of a majority of the shares of
First Federal's Common Stock voting at the Annual Meeting.
69
<PAGE> 74
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
ELECTION OF THE THREE PERSONS NAMED ABOVE.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors conducts business through meetings of the Board
and through its committees. During the fiscal year ended September 30, 1995,
the Board of Directors held 15 meetings. No Director attended less than 75
percent of the aggregate of the meetings of the Board of Directors and meetings
of the committees on which the Director served.
The Board of Directors has seven active standing committees consisting
of the Executive Committee, the Loan Committee, the Budget Committee, the
Personnel Committee, the Asset/Liability Management Committee, the Option
Committee and the Retirement Plan Advisory Committee.
The Executive Committee generally meets from two to four times a month
and consists of Messrs. York, Dooley, Goss and Henderson. This Committee has
the responsibility to act for the Board on an interim basis between regularly
established Board meeting dates. The Executive Committee held 34 meetings in
fiscal 1995.
The Personnel Committee recommends to the Board of Directors the
compensation of the employees of First Federal. The Personnel Committee
consists of Messrs. York, Cline, Goss and Henderson.
The Loan Committee consists of Messrs. Cline, Croker, Goss, Dean,
Henderson and LeGrande. This committee meets as needed, generally two or three
times a month, and is charged with the responsibility of establishing and
maintaining policies and procedures relating to the lending activities and the
composition of the loan portfolio of First Federal and with reviewing and
approving all potential loans made by First Federal other than consumer loans.
The Loan Committee held 17 meetings during fiscal 1995.
The Budget Committee consists of Messrs. Goss, Henderson and LeGrande.
This committee meets annually to review the budget of First Federal.
The Asset/Liability Management Committee consists of the Chairman of
the Board, the Vice Chairman of the Board, the President and one outside
director, currently Messrs. York, Dooley, Goss and Henderson. The committee's
objective is to determine asset/liability composition and pricing strategies.
This committee holds its meetings in conjunction with the Executive Committee
meetings.
The Retirement Plan Advisory Committee consists of Messrs. York, Dean,
Dooley, Henderson and Ms. Bridges, Secretary/Treasurer of First Federal. This
committee considers and reviews the investment of retirement funds held in
First Federal's defined benefit pension plan.
The Option Committee administers the Stock Option Plan of First
Federal. The Option Committee consists of Messrs. Cline, Dean and LeGrande.
The full Board of Directors acts as a Nominating Committee for
selecting the management nominees for election as directors. No nominations for
directors except those made by the nominating committee shall be voted upon at
the annual meeting unless other nominations by stockholders are made in writing
and delivered to the secretary of First Federal at least five days prior to the
date of the annual meeting.
DIRECTOR COMPENSATION
Directors of First Federal receive a fee of $600 per monthly meeting
of the Board of Directors.
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Directors of First Federal also receive $150 per meeting for attendance at
Executive Committee meetings and $100 per meeting for attendance at Loan
Committee meetings. Directors of First Federal received an aggregate of $73,000
in fees during the fiscal year ended September 30, 1995.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following table sets forth certain information at September 30,
1995 with respect to the directors and executive officers of First Federal and
their immediate families and affiliates, whose aggregate indebtedness to First
Federal was in an amount in excess of $60,000 at any time during the fiscal
year ended September 30, 1995.
There are additional loans of less than $60,000 outstanding to members
of the immediate families of Messrs. Dooley and Goss not reflected in the table
below, consisting of loans to the daughter of Larry W. Dooley and to the
daughter Mr. Goss. Also, Messrs. Dooley and Goss have loans less than $60,000
currently outstanding. All of the loans listed in the table below and the loans
discussed in the previous sentence were made in the ordinary course of business
and were substantially on the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
non-affiliated persons. In the opinion of First Federal, such loans do not
involve more than the normal risk of collectibility or present other
unfavorable features.
<TABLE>
<CAPTION>
Largest
Outstanding
Balance
During
Original Balance as Fiscal Year Interest
Name(s) Type of Loan Date of Loan Balance of 09-30-95 1995 Rate
------- ------------ ------------ --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Glenn T. York, Jr., Mortgage 04-17-85 $ 80,000 $ 36,992 $ 43,407 7.87%
Chairman of the Board
Michael H. York(1) Loan on Savings 03-18-87 24,945 -0- 32,730 7.49
Loan on Savings 05-11-95 2,005 -0- 3,737 7.49
Mortgage 11-10-93 148,000 142,753 145,808 5.25
Car 06-08-93 13,973 8,856 11,390 10.5
Tommy York(1) Loan on Savings 02-01-92 4,000 -0- 2,154 7.49
Lisa York and Stan Loan on Savings 02-26-85 20,469 -0- 13,382 7.49
Fowler(2)
James B. Croker Commercial 08-31-95 125,000 45,432 45,784 9.75
Director
Horace L. Cline, Commercial 10-22-91 350,000 246,809 275,132 9.75
Director Commercial 10-22-91 100,000 70,529 78,610 9.75
Nathan Dean, Commercial 02-24-92 50,131 56,788 56,788 7.09
Director Commercial 02-24-92 24,787 26,084 26,084 7.87
Commercial 08-23-94 29,715 29,715 29,715 7.40
Carol Goss Stroup and Mortgage 12-07-93 43,000 38,371 41,244 5.25
Dennis Stroup(3) Consumer-Auto 12-27-94 20,585 18,294 20,585 7.80
Consumer-Auto 02-25-91 7,035 -0- 1,058 11.90
</TABLE>
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__________________
(1) Michael H. York is the son of Glenn T. York, Jr.
(2) Lisa York Fowler is the daughter of Glenn T. York, Jr. and Mr.
Fowler is Mr. York's son-in-law.
(3) Carol Goss Stroup is the daughter of Tom B. Goss and Dennis Stroup
is Mr. Goss's son-in-law.
Pursuant to the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA"), Section 22(h) of the Federal Reserve Act,
governing extensions of credit to a member bank's executive officers, directors
and principal stockholders, now applies to savings and loan institutions in the
same manner and to the same extent as if the institutions were member banks of
the Federal Reserve System. Regulation O, the regulation implementing Section
22(h) of the Federal Reserve Act, provides that no member bank may extend
credit to any of its executive officers, directors, or principal stockholders
unless the extension of credit is made on substantially the same terms as those
prevailing at the time for comparable transactions by First Federal with other
persons who are not employed by First Federal, and does not involve more than
the normal risk of repayment or present other unfavorable features. First
Federal does not offer favorable rates to its executive officers, directors,
and principal stockholders in violation of Regulation O. Any loan which was
originally made to directors and executive officers under preferential terms
will continue under the then applicable terms. However, any line of credit
which comes up for renewal must be renewed under the requirements of Regulation
O and any new loans made to an executive officer, director or principal
stockholder will be made on the same terms as to an unrelated person.
Glenn T. York, Jr., the Chairman of the Board of First Federal, a
partner in the law firm of York, McRae and York, provides a variety of legal
services to First Federal and acts as closing counsel with respect to loans
made by First Federal. It is anticipated that First Federal will employ York,
McRae and York in the future to provide necessary legal services.
During the fiscal year ended September 30, 1995, First Federal paid
York, McRae and York $93,165 for legal services. Included in the above amount
is $80,063 paid to York, McRae and York in 1995 by borrowers from First Federal
for such firm's services as loan closing counsel and includes sums paid by
York, McRae and York to third parties. The terms and conditions of transactions
involving the firm of York, McRae and York are considered by First Federal to
be the same as with unrelated parties rendering similar services.
RATIFICATION OF APPOINTMENT OF FIRST FEDERAL'S INDEPENDENT AUDITORS
(PROPOSAL 4)
The Board of Directors has selected Read, Martin, Slickman and Sheats
as independent accountants for First Federal for its fiscal year ending
September 30, 1996, subject to stockholder approval. Read, Martin, Slickman and
Sheats has been independent public accountants for First Federal or its
predecessor since 1965. The Board of Directors anticipates that Read, Martin,
Slickman & Sheats will act as independent public accountants for First Federal
only until the Effective Date of the Merger.
Representatives of Read, Martin, Slickman and Sheats are expected to
be present at the Annual Meeting and will have an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
APPOINTMENT OF READ, MARTIN, SLICKMAN AND SHEATS AS INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE 1996 FISCAL YEAR.
CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth certain of the material elements
of the regulatory framework applicable to banks and bank holding companies and
provides certain specific information related to Regions and First Federal.
Additional information is available in Regions' Annual Report on Form 10-K for
the fiscal year ended December 31, 1994. See "Documents Incorporated by
Reference."
GENERAL
Regions is a bank holding company registered with the Federal Reserve
under the BHC Act. As such, Regions and its non-bank subsidiaries are subject
to the supervision, examination, and reporting requirements of the BHC Act and
the regulations of the Federal Reserve. In addition, as a savings and loan
holding company, Regions is also registered with the OTS and is subject to
regulation, supervision, examination, and reporting requirements of the OTS.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or
control more than 5.0% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company. Similar federal statutes require savings and loan holding
companies and other companies to obtain the prior approval of the OTS before
acquiring direct or indirect ownership or control of a savings association.
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, which is discussed below.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"), which became effective on September 29, 1995,
repealed the prior statutory restrictions on interstate acquisitions of banks
by bank holding companies, such that Regions, and any other bank holding
company located in Alabama may now acquire a bank located in any other state,
and any bank holding company located outside Alabama may lawfully acquire any
Alabama-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements, 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
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altogether. As of the date of this Proxy Statement/Prospectus, neither Alabama,
Georgia, nor any other state in which the banking subsidiaries of Regions are
located have "opted in" or "opted out." Assuming no state action prior to June
1, 1997, Regions would be able to consolidate all of its bank subsidiaries into
a single bank with interstate branches following that date.
The BHC Act generally prohibits Regions from engaging in activities
other than banking or managing or controlling banks or other permissible
subsidiaries and from acquiring or retaining direct or indirect control of any
company engaged in any activities other than those activities determined by the
Federal Reserve to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. In determining whether a particular
activity is permissible, the Federal Reserve must consider whether the
performance of such an activity reasonably can be expected to produce benefits
to the public, such as greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest, or
unsound banking practices. For example, factoring accounts receivable,
acquiring or servicing loans, leasing personal property, conducting discount
securities brokerage activities, performing certain data processing services,
acting as agent or broker in selling credit life insurance and certain other
types of insurance in connection with credit transactions, and performing
certain insurance underwriting activities all have been determined by the
Federal Reserve to be permissible activities of bank holding companies. The BHC
Act does not place territorial limitations on permissible non-banking
activities of bank holding companies. Despite prior approval, the Federal
Reserve has the power to order a holding company or its subsidiaries to
terminate any activity or to terminate its ownership or control of any
subsidiary when it has reasonable cause to believe that continuation of such
activity or such ownership or control constitutes a serious risk to the
financial safety, soundness, or stability of any bank subsidiary of that bank
holding company.
Each of the subsidiary depository institutions of Regions is a member
of the Federal Deposit Insurance Corporation (the "FDIC"), and as such, its
deposits are insured by the FDIC to the maximum extent provided by law. Each
such subsidiary 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.
The regulatory agencies having supervisory jurisdiction over the
subsidiary institutions of Regions (the FDIC and the applicable state authority
in the case of state- chartered nonmember banks, and the OTS in the case of
federally chartered thrift institutions) regularly examine the operations of
such institutions and have authority to approve or disapprove mergers,
consolidations, the establishment of branches, and similar corporate actions.
Such regulatory agencies also have the power to prevent the continuance or
development of unsafe or unsound banking practices or other violations of law.
As a federal stock savings bank, First Federal is subject to extensive
regulation by the OTS. The lending activities and other investments of First
Federal must comply with various federal regulatory requirements. The OTS
periodically examines First Federal for compliance with various regulatory
requirements, and First Federal must file reports with the OTS describing its
activities and financial condition. First Federal is also subject to certain
reserve requirements promulgated by the Federal Reserve. This supervision and
regulation is intended primarily for the protection of depositors.
PAYMENT OF DIVIDENDS
Regions is a legal entity separate and distinct from its banking,
thrift, and other subsidiaries. The principal sources of cash flow of Regions,
including cash flow to pay dividends to its stockholders, are dividends from
its subsidiary depository institutions. There are statutory and regulatory
limitations on the payment of dividends by these subsidiary depository
institutions to Regions, as well as by Regions to its
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stockholders.
All of Regions' banking subsidiaries are subject to the respective
laws and regulations of the states of Alabama, Florida, Georgia, Louisiana, and
Tennessee as to the payment of dividends. If, in the opinion of the federal
banking regulator, a depository 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 depository institution, could include the
payment of dividends), such authority may require, after notice and hearing,
that such institution cease and desist from such practice. The federal banking
agencies have indicated that paying dividends that deplete a depository
institution's capital base to an inadequate level would be an unsafe and
unsound banking practice. Under the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), a depository 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
agencies have issued policy statements that provide that bank holding companies
and insured banks should generally only pay dividends out of current operating
earnings.
At September 30, 1995, under dividend restrictions imposed under
federal and state laws, the subsidiary depository institutions of Regions,
without obtaining governmental approvals, could declare aggregate dividends to
Regions of approximately $264 million.
The payment of dividends by Regions and its subsidiary depository
institutions may also be affected or limited by other factors, such as the
requirement to maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
Regions and and its subsidiary depository institutions are required
to comply with the capital adequacy standards established by the Federal
Reserve in the case of Regions and the appropriate federal banking regulator in
the case of each of its subsidiary depository institutions. 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 (the "Total Risk-Based Capital
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 Total Capital must comprise common stock, minority interests
in the equity accounts of consolidated subsidiaries, noncumulative perpetual
preferred stock, and a limited amount of cumulative perpetual preferred stock,
less goodwill and certain other intangible assets ("Tier 1 Capital"). The
remainder may consist of subordinated debt, other preferred stock, and a
limited amount of loan loss reserves ("Tier 2 Capital"). At September 30, 1995,
Regions' consolidated Total Risk-Based Capital Ratio and its Tier 1 Risk-Based
Capital Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted assets) were
14.28% and 10.82%, respectively.
In addition, the Federal Reserve has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less
goodwill and certain other intangible assets, of 3.0% for bank holding
companies that meet certain specified criteria, including having the highest
regulatory rating. All other bank holding companies generally
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are required to maintain a Leverage Ratio of at least 3.0%, plus an additional
cushion of 100 to 200 basis points. Regions' Leverage Ratio at September 30,
1995, was 7.25%. The guidelines also provide that bank holding companies
experiencing internal growth or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. Furthermore, the
Federal Reserve has indicated that it will consider a "tangible Tier 1 Capital
Leverage Ratio" (deducting all intangibles) and other indicia of capital
strength in evaluating proposals for expansion or new activities.
Similarly, OTS' regulatory capital regulations specify capital
standards for thrifts consisting of three components, a "core capital"
requirement, a "tangible capital" requirement and a "risk-based capital"
requirement. These regulations require thrifts to maintain core capital in an
amount not less than 3.0% of adjusted total assets and to maintain tangible
capital in an amount not less than 1.5% of adjusted total assets. Under the
OTS' regulatory capital regulations, thrifts are required to maintain capital
equal to 8.0% of risk-weighted assets. The OTS requires assets to be weighed
on the basis of risk and assigned a weighting factor of between 0% and 100%.
Approximately one-half of risk-based capital must consist of core capital and
one-half may consist of other preferred stock, a portion of general loan loss
reserves and other hybrid capital instruments such as convertible and
subordinated debentures.
In determining compliance with the new capital standards, all of a
thrift's investments in and extensions of credit to any subsidiary engaged in
activities not permissible for a national bank are deducted from the savings
association's capital. The required deduction from capital for investments in
subsidiaries engaged in activities not permitted for a national bank is phased
in through July 1, 1996.
Each of Regions' subsidiary depository institutions is subject to
risk-based and leverage capital requirements adopted by its federal banking
regulator, which are substantially similar to those adopted by the Federal
Reserve for bank holding companies. First Federal and each of Regions'
subsidiary depository institutions was in compliance with applicable minimum
capital requirements as of September 30, 1995. Neither Regions, nor any of its
subsidiary depository institutions has been advised by any federal banking
agency of any specific minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank (or thrift) to
a variety of enforcement remedies, including issuance of a capital directive,
the termination of deposit insurance by the FDIC, a prohibition on the taking
of brokered deposits, and certain other restrictions on its business. As
described below, substantial additional restrictions can be imposed upon
FDIC-insured depository institutions that fail to meet applicable capital
requirements. See "--Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve, the OCC, and the FDIC have,
pursuant to FDICIA, proposed an amendment to the risk-based capital standards
that 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. The OTS has already included an
interest-rate risk component in its risk-based capital guidelines for savings
associations that it regulates.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, Regions is expected to act as sources of
financial strength for, and to commit resources to support, each of its banking
subsidiaries. This support may be required at times when, absent such Federal
Reserve policy, Regions may not be inclined to provide it. In addition, any
capital loans by a bank holding company to any of its banking subsidiaries are
subordinate in right of payment to deposits and to certain other indebtedness
of such banks. In the event of a bank holding company's bankruptcy, any
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commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a banking subsidiary will be assumed by the bankruptcy
trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution "in danger of default."
"Default" is defined generally as the appointment of a conservator or receiver,
and "in danger of default" is defined generally as the existence of certain
conditions indicating that a default is likely to occur in the absence of
regulatory assistance. The FDIC's claim for damages is superior to claims of
stockholders of the insured depository institution or its holding company, but
is subordinate to claims of depositors, secured creditors, and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institution. The subsidiary depository institutions of Regions are
subject to these cross-guarantee provisions. As a result, any loss suffered by
the FDIC in respect of any of these subsidiaries would likely result in
assertion of the cross-guarantee provisions, the assessment of such estimated
losses against the depository institution's banking or thift affiliates, and a
potential loss of Regions' investments in such other subsidiary depository
institutions.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to
a narrow exception, 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 rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Risk-Based Capital Ratio of 10%
or greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, and a
Leverage Ratio of 5.0% or greater and (ii) is not subject to any written
agreement, order, capital directive, or prompt corrective action directive
issued by the appropriate federal banking agency is deemed to be well
capitalized. An institution with a Total Risk-Based Capital Ratio of 8.0% or
greater, a Tier 1 Risk-Based 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 Risk-Based Capital Ratio of less than
8.0%, a Tier 1 Risk-Based 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 Risk-Based Capital Ratio of less than 6.0%, a
Tier 1 Risk-Based 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 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
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its capital restoration plan, subject to certain limitations. The obligation of
a controlling bank holding company under FDICIA to fund a capital restoration
plan is limited to the lesser of 5.0% of an undercapitalized subsidiary's
assets or 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
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
non-bank 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.
At September 30, 1995, all of the subsidiary depository institutions
of Regions had the requisite capital levels to qualify as well capitalized.
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 replaced 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
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 members of both
the Bank Insurance Fund ("BIF") and the SAIF for the first half of 1995, as
they had been during 1994,
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ranged from 23 basis points (0.23% of deposits) for an institution in the
highest category (i.e., "well capitalized" and "healthy") to 31 basis points
(0.31% of deposits) for an institution in the lowest category (i.e.,
"undercapitalized" and "substantial supervisory concern"). These rates were
established for both funds to achieve a designated ratio of reserves to insured
deposits (i.e., 1.25%) within a specified period of time.
Once the designated ratio for the BIF was reached, which appears to
have occurred some time during May 1995, the FDIC was authorized to reduce the
minimum assessment rate below 23 basis points and to set future assessment
rates at such levels that would maintain a fund's reserve ratio at the
designated level. In August 1995, the FDIC adopted final regulations reducing
the assessment rates for BIF-member banks. Under the revised schedule,
BIF-member banks, starting with the second half of 1995, will now pay
assessments ranging from 4.0 basis points to 31 basis points, with an average
assessment rate of 4.5 basis points. Refunds, with interest, were paid for
assessments for the month(s) after the month in which the designated reserve
ratio for the BIF was reached, as well as for the quarterly payment made on
September 30, 1995, assuming that the designated reserve ratio was achieved
prior to June 30, 1995. At the same time, the FDIC elected to retain the
existing assessment rate of 23 to 31 basis points for SAIF members for the
foreseeable future given the undercapitalized nature of that insurance fund.
More recently, on November 14, 1995, the FDIC announced that, beginning in
1996, it would further reduce the deposit insurance premiums for 92% of all BIF
members that are in the highest capital and supervisory categories to $2,000
per year, regardless of deposit size.
On July 28, 1995, the FDIC, the Treasury Department, and the OTS
released statements outlining a proposed plan to recapitalize the SAIF certain
features of which were subsequently agreed upon by members of the Banking
Committees of the U.S. House of Representatives and the Senate on November 7,
1995 in negotiations to reconcile differences in bills on the issue that had
been introduced or partially adopted by each body. Under the agreement, all
SAIF-member institutions will pay a special assessment to the SAIF of
approximately 80 basis points, the amount that would enable the SAIF to attain
its designated reserve ratio of 1.25%. The special assessment would be payable
on January 1, 1996, based on the amount of deposits held as of March 31, 1995.
BIF-insured institutions holding SAIF-assessed deposits would receive a 20%
reduction in the assessment rate and would pay a one-time assessment of 64
basis points. The agreement also provides that the assessment base for the
bonds issued in the late 1980s by the Financing Corporation to recapitalize the
now defunct Federal Savings and Loan Insurance Corporation would be expanded to
include deposits of both BIF- and SAIF-insured institutions, with BIF members
paying approximately 75% of the interest on such obligations. The committee
members further agreed that the BIF and SAIF should be merged on January 1,
1998, with such merger being conditioned upon the prior elimination of the
thrift charter. At this time, Regions is not able to predict the timing or
exact amount of any SAIF special assessment that might be required. However, if
an 80 basis point assessment were levied against the existing SAIF deposits of
Regions and First Federal, the aggregate SAIF assessments of Regions and First
Federal (on a pre-tax basis) would be approximately $24 million and $596,000,
respectively.
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
The FDIA, as amended by FDICIA and the Riegle Community Development
and Regulatory Improvement Act of 1994, requires the federal bank regulatory
agencies to prescribe standards, by regulations or guidelines, relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset growth,
asset quality, earnings, stock valuation and compensation, fees and benefits,
and such other operational and managerial standards as the agencies deem
appropriate. The federal bank regulatory agencies have adopted, effective
August 9, 1995, a set of guidelines prescribing safety and soundness standards
pursuant to FDICIA, as amended. The guidelines establish general standards
relating to internal controls and information systems, internal audit systems,
loan documentation,
79
<PAGE> 84
credit underwriting, interest rate exposure, asset growth and compensation,
fees, and benefits. In general, the guidelines require, among other things,
appropriate systems and practices to identify and manage the risks and
exposures specified in the guidelines. The guidelines prohibit excessive
compensation as an unsafe and unsound practice and describe compensation as
excessive when the amounts paid are unreasonable or disproportionate to the
services performed by an executive officer, employee, director, or principal
stockholders. The federal banking agencies determined that stock valuation
standards were not appropriate. In addition, the agencies adopted regulations
that authorize, but do not require, an agency to order an institution that has
been given notice by an agency that it is not satisfying any of such safety and
soundness standards to submit a compliance plan. If, after being so notified,
an institution fails to submit an acceptable compliance plan or fails in any
material respect to implement an accepted compliance plan or fails in any
material respect to implement an accepted compliance plan, the agency must
issue an order directing action to correct the deficiency and may issue an
order directing other actions of the types to which an undercapitalized
association is subject under the "prompt corrective action" provisions of
FDICIA. See "--Prompt Corrective Action." If an institution fails to comply
with such an order, the agency may seek to enforce such order in judicial
proceedings and to impose civil money penalties. The federal bank regulatory
agencies also proposed guidelines for asset quality and earnings standards.
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.
DESCRIPTION OF REGIONS COMMON STOCK
Regions is authorized to issue 120,000,000 shares of Regions Common Stock,
of which 47,526,707 shares were issued, including 1,474,579 treasury shares,
at September 30, 1995. No other class of stock is authorized.
Holders of Regions Common Stock are entitled to receive such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. The ability of Regions to pay dividends is affected by the ability of
its Subsidiary Institutions to pay dividends, which is limited by applicable
regulatory requirements and capital guidelines. At September 30, 1995, under
such requirements and guidelines, the Regions' subsidiary depository
institutions had $264 million of undivided profits legally available for the
payment of dividends. See "Certain Regulatory Considerations--Payment of
Dividends."
For a further description of Regions Common Stock, see "Effect of the
Merger on Rights of Stockholders."
STOCKHOLDER PROPOSALS
Regions expects to hold its next annual meeting of stockholders after the
Merger during April 1996. Under SEC rules, proposals of Regions stockholders
intended to be presented at that meeting must have been received by Regions at
its principal executive offices no later than November 17, 1995, for
consideration by Regions for possible inclusion in such proxy materials.
Proposals with respect to Regions' 1997 annual meeting of stockholders may be
submitted until the date specified in Regions' 1996 annual meeting proxy
statement.
80
<PAGE> 85
EXPERTS
The consolidated financial statements of Regions, incorporated by
reference in Regions Annual Report (Form 10-K) for the year ended December 31,
1994, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon incorporated by reference therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of First Federal, included in this
Registration Statement, have been audited by Read, Martin, Slickman & Sheats,
independent auditors, for the periods indicated in their report thereon which
is included herein. The financial statements audited by Read, Martin, Slickman
& Sheats have been included herein in reliance on their report given on their
authority as experts in accounting and auditing.
OPINIONS
The legality of the shares of Regions Common Stock to be issued in the
Merger will be passed upon by Lange, Simpson, Robinson & Somerville,
Birmingham, Alabama. Henry E. Simpson, partner in the law firm of Lange,
Simpson, Robinson & Somerville, is a member of the Board of Directors of
Regions. As of December 4, 1995, attorneys in the law firm of Lange, Simpson,
Robinson & Somerville owned an aggregate of 118,595 shares of Regions Common
Stock.
Certain tax consequences of the transaction have been passed upon by Alston &
Bird, Atlanta, Georgia.
81
<PAGE> 86
INDEX TO FIRST FEDERAL FINANCIAL STATEMENTS
Independent Auditor's Report .................................... F-2
Consolidated Financial Statements
Consolidated statements of financial statements .............. F-3
Consolidated statements of income ............................ F-4
Consolidated statements of changes in stockholders' equity ... F-5
Consolidated statements of cash flows ........................ F-6
Notes to consolidated financial statements ................... F-8
F-1
<PAGE> 87
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
First Federal Bank of Northwest Georgia,
Federal Savings Bank and Subsidiary
Cedartown, Georgia
We have audited the accompanying consolidated statements of financial
condition of First Federal Bank of Northwest Georgia, Federal Savings Bank and
Subsidiary, as of September 30, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the years
in the three year period ended September 30, 1995. These consolidated financial
statements are the responsibility of the Savings Bank's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
Federal Bank of Northwest Georgia, Federal Savings Bank and Subsidiary, as of
September 30, 1995 and 1994, and the results of their operations and their cash
flows for each of the years in the three year period ended September 30, 1995,
in conformity with generally accepted accounting principles.
Read, Martin & Slickman, CPA's
Rome, Georgia
October 17, 1995
F-2
<PAGE> 88
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
CEDARTOWN, GEORGIA
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................... $ 803,311 $ 649,318
Other interest-bearing deposits..................................... 2,246,036 720,562
Certificates of deposit............................................. 2,870,000 390,000
Investment securities, at market value (Note 2)..................... 19,414,957 14,218,425
Loans receivable, net (Note 3)...................................... 62,320,014 60,145,537
Accrued interest receivable (Note 4)................................ 554,238 452,838
Foreclosed real estate (less allowance of $49,418 and $0,
respectively) (Note 5)............................................ 859,704 24,913
Investment in unconsolidated subsidiary (Note 6).................... 147,474 147,791
Premises and equipment (Note 7)..................................... 935,882 953,690
Deferred tax asset (Note 9)......................................... 80,653 171,264
Prepaid tax asset (Note 9).......................................... 2,858 --
Other assets........................................................ 162,109 203,308
----------- -----------
$90,397,236 $78,077,646
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits (Note 8)................................................... $76,975,299 $65,243,766
Advances from borrowers for taxes and insurance..................... 474,773 576,640
Federal and state income taxes (Note 9):
Current........................................................... -- 185,271
Deferred tax liability (Note 9)................................... 57,171 41,941
Accrued expenses and other liabilities.............................. 417,894 356,667
----------- -----------
77,925,137 66,404,285
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock -- $.01 par value, 10,000,000 shares authorized;
none issued.................................................... -- --
Common stock -- $.01 par value, 10,000,000 shares authorized,
298,541 issued and outstanding (Note 14)....................... 2,985 2,985
Additional paid-in capital........................................ 2,702,787 2,702,787
Retained earnings, substantially restricted (Notes 9, 11, 12 and
13)............................................................ 9,743,000 9,127,031
Unrealized gains (losses) on investment securities available for
sale (Note 2).................................................. 23,327 (159,442)
----------- -----------
12,472,099 11,673,361
----------- -----------
Total liabilities and stockholder's equity................ $90,397,236 $78,077,646
========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE> 89
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Interest income:
Loans receivable:
First mortgage loans................................ $4,591,152 $4,432,333 $4,657,064
Consumer and other loans............................ 316,382 258,200 272,033
Investment and mortgage-backed and related
securities.......................................... 811,815 632,085 543,474
Other interest-earning assets.......................... 336,156 65,611 44,745
---------- ---------- ----------
Total interest income.......................... 6,055,505 5,388,229 5,517,316
---------- ---------- ----------
Interest expense:
Deposits (Note 8)...................................... 3,470,714 2,602,855 2,775,115
---------- ---------- ----------
Total interest expense......................... 3,470,714 2,602,855 2,775,115
---------- ---------- ----------
Net interest income............................ 2,584,791 2,785,374 2,742,201
Provision for loan losses (Note 3)....................... -- (77,011) (66,801)
---------- ---------- ----------
Net interest income after provision for loan
losses....................................... 2,584,791 2,862,385 2,809,002
---------- ---------- ----------
Non-interest income:
Realized gain on foreclosed real estate................ 69,872 9,287 15,162
Income from real estate operations..................... 21,315 38,965 50,775
Gain on securities sold................................ -- -- 482,485
Equity in earnings of unconsolidated subsidiary (Note
6).................................................. 167,628 150,844 39,843
Other.................................................. 293,180 197,796 172,486
---------- ---------- ----------
Total non-interest income...................... 551,995 396,892 760,751
---------- ---------- ----------
Non-interest expense:
General and administrative:
Compensation and benefits (Notes 10 and 11)......... 608,718 450,220 534,340
Occupancy and equipment............................. 176,895 174,446 179,369
Federal insurance premium........................... 183,033 169,501 137,288
Loss on assets...................................... -- 7,236 --
Provision for loss on foreclosed real estate........ 49,418 -- --
Other............................................... 558,110 399,522 415,261
---------- ---------- ----------
Total non-interest expense..................... 1,576,174 1,200,925 1,266,258
---------- ---------- ----------
Income before tax expense...................... 1,560,612 2,058,352 2,303,495
Income tax expense (Note 9).............................. 466,977 648,847 813,194
---------- ---------- ----------
Net income before cumulative effect of change
in accounting principles..................... 1,093,635 1,409,505 1,490,301
Cumulative effect of change in accounting principle, net
of tax effects (Note 11)............................... -- -- (26,010)
---------- ---------- ----------
Net income..................................... $1,093,635 $1,409,505 $1,464,291
========= ========= =========
Earnings per share before cumulative effect of change in
accounting principle (Note 11)......................... $ 3.66 $ 4.72 $ 5.29
Cumulative effect of change in accounting principle...... -- -- (.09)
---------- ---------- ----------
Earnings per share....................................... $ 3.66 $ 4.72 $ 5.20
========= ========= =========
Weighted average shares outstanding...................... 298,541 298,541 281,505
========= ========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 90
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
UNREALIZED
NUMBER ADDITIONAL GAIN (LOSSES)
OF PAID-IN RETAINED ON
SHARES COMMON STOCK CAPITAL EARNINGS INVESTMENTS TOTAL
------- ------------ ---------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1992,
before restatement............ 278,341 $2,783 $2,476,341 $6,828,320 $ -- $ 9,307,444
Issuance of 20,200 shares for
exercise of stock options..... 20,200 202 201,798 -- -- 202,000
Tax benefit arising from
exercise of stock options..... -- -- 24,648 -- -- 24,648
Net income...................... -- -- -- 1,464,291 -- 1,464,291
Adjustment for SFAS 115 adoption
to present investment
securities at market value,
net of deferred
taxes......................... -- -- -- -- 154,586 154,586
Dividends paid.................. -- -- -- (97,419) -- (97,419)
------- ------------ ---------- ---------- ------------- -----------
Balance at September 30, 1993... 298,541 2,985 2,702,787 8,195,192 154,586 11,055,550
Net income...................... -- -- -- 1,409,505 -- 1,409,505
Change in net unrealized gain
(losses) on investment
securities (Note 2)........... -- -- -- -- (314,028) (314,028)
Dividends paid.................. -- -- -- (477,666) -- (477,666)
------- ------------ ---------- ---------- ------------- -----------
Balance at September 30, 1994... 298,541 2,985 2,702,787 9,127,031 (159,442) 11,673,361
Net Income...................... -- -- -- 1,093,635 -- 1,093,635
Change in net unrealized gain
(losses) on investment
securities (Note 2)........... -- -- -- -- 182,769 182,769
Dividends paid.................. -- -- -- (477,666) -- (477,666)
------- ------------ ---------- ---------- ------------- -----------
Balance at September 30, 1995... 298,541 $2,985 $2,702,787 $9,743,000 $ 23,327 $12,472,099
======== ============== ========== ========== ============= ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE> 91
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................... $ 1,093,635 $ 1,409,505 $ 1,464,291
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 101,460 98,262 95,335
Amortization of investment premiums.............. 11,146 28,713 11,581
Deferred income taxes............................ (16,004) 174,132 76,645
Amortization of deferred loan fees............... (143,619) (206,668) (110,566)
Increase in allowance for loan losses............ -- (77,011) (66,801)
Income of unconsolidated subsidiary from equity
method......................................... (167,629) (150,844) (39,843)
Loss on disposal of assets....................... -- 12,058 312
Gain on sale of investment and mortgage-backed
securities..................................... -- -- (482,485)
(Increase) decrease in:
Certificates of deposit........................ (2,480,000) (390,000) 300,000
Accrued interest receivable.................... (101,400) 32,926 (16,340)
Prepaid tax asset.............................. (2,858) -- --
Other assets................................... 41,199 (112,342) (17,711)
Increase (decrease) in:
Accrued expenses and other liabilities......... 61,229 (38,835) 3,537
Income taxes payable........................... (185,273) (65,066) (259,556)
Loss (gain) on sale of foreclosed real estate.... (15,699) (9,287) (6,933)
----------- ----------- -----------
Net cash (used in) provided by operating
activities................................ (1,803,813) 705,543 951,466
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment and mortgage-backed
securities....................................... (7,368,500) (6,412,286) (4,181,282)
Increase in loans, net.............................. (3,508,136) (1,061,963) (1,615,825)
Proceeds from sales and maturities of investment and
mortgage-backed securities....................... 2,465,438 2,827,830 2,039,234
Increase in deferred loan fees...................... 127,484 290,687 171,958
Proceeds from sales of real estate held for
investment....................................... 60,237 60,000 10,000
Proceeds from sales of foreclosed real estate....... 551,423 636,048 38,500
Acquisition of foreclosed real estate............... (80,960) -- --
Acquisition of premises and equipment............... (80,705) (113,616) (35,742)
Proceeds from sale of equipment..................... -- -- 46
Dividends received from unconsolidated subsidiary... 165,000 120,000 45,000
Acquisition of FHLB stock........................... -- (17,700) (39,600)
----------- ----------- -----------
Net cash used in investing activities....... (7,668,719) (3,671,000) (3,567,711)
----------- ----------- -----------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE> 92
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, savings
accounts, and certificates of deposit................ $11,731,532 $2,412,077 $3,208,108
Payments of dividends................................... (477,666) (477,666) (97,419)
Increase (decrease) in advances from borrowers for taxes
and insurance........................................ (101,867) 110,568 (18,214)
Net proceeds from issuance of stock..................... -- -- 226,648
----------- ---------- ----------
Net cash provided by financing activities....... 11,151,999 2,044,979 3,319,123
----------- ---------- ----------
CASH AND CASH EQUIVALENTS:
(Decrease) increase in cash and cash equivalents........ 1,679,467 (920,478) 702,878
Cash and cash equivalents at beginning of year.......... 1,369,880 2,290,358 1,587,480
----------- ---------- ----------
Cash and cash equivalents at end of year................ $ 3,049,347 $1,369,880 $2,290,358
========== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest on deposits and borrowed funds.............. $ 3,420,035 $2,602,631 $2,695,003
Income taxes......................................... $ 627,111 $ 474,836 $ 504,166
NON-CASH TRANSACTIONS:
Transfers from loans to foreclosed real estate.......... $ 1,349,792 $ -- $ --
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-7
<PAGE> 93
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995, 1994 AND 1993
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of First Federal
Bank of Northwest Georgia, Federal Savings Bank and its wholly owned subsidiary,
Polk County Service Corporation, after elimination of all significant
inter-company account balances and transactions.
CASH FLOWS
For purposes of the statements of cash flows, the Savings Bank considers
all highly liquid instruments with original maturities when purchased of three
months or less to be cash equivalents.
INVESTMENT SECURITIES
In May 1993, the Financial Accounting Standards Board issued SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities" which the
Savings Bank adopted as of September 30, 1993. The effect of Statement 115 is
the recognition of changing market values of certain investments in debt and
equity securities. The Savings Bank is required to classify for financial
statement purposes its investments into one of three categories, 1) trading, 2)
available-for-sale, and 3) held-to-maturity.
The Savings Bank has classified for financial statement purposes all its
securities as being available-for-sale and has reflected its unrealized gains
and losses on such securities as of September 30, 1994 and 1995 as a separate
component of stockholders equity, net of income taxes, as required by Statement
115.
Gains and losses on the sale of investment securities are determined using
the specific-identification method.
LOANS RECEIVABLE
Loans receivable are stated at unpaid principal balances, less the
allowance for loan losses, and net deferred loan origination fees and discounts.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic evaluation
of the adequacy of the allowance is based on the Savings Bank's past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay, estimated value of any underlying
collateral, and current economic conditions.
Uncollectible interest on loans that are contractually past due is charged
off or an allowance is established based on management's periodic evaluation.
The allowance is established by a charge to interest income equal to all
interest previously accrued, and income is subsequently recognized only to the
extent cash payments are received until, in management's judgment, the
borrower's ability to make periodic interest and principal payments is back to
normal, in which case the loan is returned to accrual status.
LOAN ORIGINATION FEES AND DISCOUNTS
The Savings Bank accounts for loan origination fees and discounts as
required by Statement of Financial Accounting Standards No. 91, "Accounting for
Non-refundable Fees and Costs Associated with Originating or Acquiring Loans and
Initial Direct Cost of Leases." This standard requires the Savings Bank to defer
and amortize loan origination fees net of certain direct origination costs.
These net deferred fees (or costs) are amortized using the interest method over
the lives of the underlying assets adjusted for anticipated prepayment rates.
F-8
<PAGE> 94
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REAL ESTATE HELD FOR INVESTMENT AND FORECLOSED REAL ESTATE
Real estate properties acquired through loan foreclosure are initially
recorded at the lower of cost or fair market value at the date of foreclosure.
Real estate properties held for investment are carried at the lower of cost,
including cost of improvements and amenities incurred subsequent to acquisition,
or current fair value. Costs relating to development and improvements of
property are capitalized, whereas costs relating to holding property are
expensed. Interest costs incurred during the construction process are
capitalized. No interest was capitalized for the years ended September 30, 1995
and 1994.
Valuations are periodically performed by management, and an allowance for
losses is established by a charge to operations if the carrying value of a
property exceeds its estimated current fair value.
DEFERRED GROSS PROFIT ON SALE OF REAL ESTATE OWNED
Deferred gross profit arising from the sale of foreclosed real estate is
accounted for under the installment method using the computed gross profit
percentage.
PREMISES AND EQUIPMENT
Land is carried at cost. Building, leasehold improvements, and furniture,
fixtures, and equipment are carried at cost, less accumulated depreciation and
amortization. Buildings and furniture, fixtures, and equipment are depreciated
using the straight-line and accelerated methods over the estimated useful lives
of the assets.
INCOME TAXES
Deferred income taxes result from timing differences between tax and
financial recognition of income and expense. The principal items causing timing
differences are accelerated depreciation, earnings of an unconsolidated
subsidiary, bad debt provisions and unrealized gain and losses on investment
securities.
The Savings Bank adopted the provisions of the Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" for the period
ending September 30, 1993. Statement 109 requires deferred tax assets and
liabilities to be established based on temporary differences between financial
reporting basis and the tax basis of assets and liabilities.
EARNINGS PER SHARE
Earnings per share have been computed on the basis of the weighted-average
number of shares of common stock outstanding during the fiscal year.
CONCENTRATION OF CREDIT RISK
The Savings Bank primarily grants residential loans to customers in Polk
County. Although the Savings Bank has a diversified loan portfolio, a
substantial portion of its debtors' ability to honor their contracts is
dependent upon the Polk County economy.
The Savings Bank has cash in excess of $100,000 on deposit in an individual
bank. The Federal Deposit Insurance Corporation (FDIC) insures only the first
$100,000 of funds at member banks.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Savings Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest
F-9
<PAGE> 95
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
rates. These financial instruments can include commitments to extend credit,
options written, standby letters of credit and financial guarantees,
interest-rate caps and floors written, interest-rate swaps, and forward and
futures contracts. Those instruments involve, to varying degrees, elements of
credit and interest-rate risk in excess of the amount recognized in the
statement of financial position. The contract or notional amounts of those
instruments reflect the extent of the Savings Bank's involvement in particular
classes of financial instruments and the Savings Bank's exposure to credit loss
in the event of nonperformance by the other party to the financial instrument.
At September 30, 1995 the Savings Bank was a party to certain commitments to
lend (see Note 3).
RECLASSIFICATION
Certain reclassification of 1993 and 1994 amounts have been made to conform
to those classifications adopted in 1995.
NOTE 2. INVESTMENT SECURITIES
The Savings Bank adopted SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities" as of the year ended September 30, 1993. As a result
of its adoption management has classified its investments in bonds, notes,
debentures and equity securities as being available-for-sale. The FASB statement
requires that the Savings Bank present in its statement of financial condition
the fair market value of its securities and that its equity be adjusted, net of
the income tax effect, for any unrealized gains or losses. As of September 30,
1995, the Savings Bank had $117,388 in unrealized gains and $78,509 in
unrealized losses and has adjusted equity as of September 30, 1995 for the after
tax effect of such gains and losses by $23,327.
The following are the major types of securities being held as of September
30, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------------------- -------------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Equity securities:
Stock in FHLB..................... $ 720,200 $ 720,200 $ 720,200 $ 720,200
Bonds, notes and debentures:
U.S. government and federal
agencies....................... 13,006,492 13,033,423 8,249,519 8,137,113
Obligations of states and
political subdivisions......... 320,000 320,361 520,000 518,310
----------- ----------- ----------- -----------
14,046,692 14,073,984 9,489,719 9,375,623
----------- ----------- ----------- -----------
Mortgage-backed and related
securities:
FHLMC certificates................ 1,677,742 1,664,350 1,401,752 1,370,479
GNMA certificates................. 544,036 554,996 609,634 597,552
FNMA certificates................. 1,626,480 1,647,422 1,506,572 1,475,581
FNMA REMICS....................... 497,200 487,800 496,419 467,940
FHLMC REMICS...................... 983,928 986,405 980,066 931,250
----------- ----------- ----------- -----------
5,329,386 5,340,973 4,994,443 4,842,802
----------- ----------- ----------- -----------
Total investments
available-for-sale...... $19,376,078 $19,414,957 $14,484,162 $14,218,425
========== ========== ========== ==========
</TABLE>
F-10
<PAGE> 96
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The cost and market value of debt securities at September 30, 1995 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>
AMORTIZED MARKET
COST VALUE
----------- -----------
<S> <C> <C>
Due within one year................................................. $ 3,588,824 $ 3,587,773
Due after one year through five years............................... 10,602,882 10,629,744
Due after five years through ten years.............................. 1,840,952 1,831,521
After ten years..................................................... 2,623,220 2,645,719
----------- -----------
$18,655,878 $18,694,757
========== ==========
</TABLE>
Unamortized premiums and discounts on investment securities at September
30, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
PREMIUMS DISCOUNT PREMIUMS DISCOUNT
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Bonds, notes, and debentures..................... $ 7,297 $ 805 $ 2,201 $ 2,682
Mortgage-backed securities....................... 33,006 34,461 50,045 33,084
</TABLE>
Investment securities and overnight deposits with a carrying value of
$3,070,060 and $370,000 at September 30, 1995 and 1994, respectively, were
pledged to secure public deposits.
NOTE 3. LOANS RECEIVABLE
Loans receivable at September 30 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
First mortgage loans:
Principal balances:
Secured by one to four family residences............... $44,227,219 $45,677,665
Secured by five or more dwelling units................. 6,283,508 6,515,843
Secured by other properties............................ 4,398,199 5,412,885
Construction loans..................................... 1,843,247 1,376,800
Lines of credit loans secured by real estate........... 1,872,121 --
----------- -----------
58,624,294 58,983,193
Less:
Undisbursed portion of construction loans................. 1,034,869 1,027,887
Deferred loan fees........................................ 684,806 668,671
----------- -----------
Total first mortgage loans........................ 56,904,619 57,286,635
----------- -----------
Consumer and other loans:
Principal balances:
Consumer............................................... 2,829,937 2,059,802
Commercial............................................. 2,174,458 415,957
Loans on savings....................................... 1,059,103 1,033,565
----------- -----------
6,063,498 3,509,324
Less unearned interest...................................... -- --
----------- -----------
Total consumer and other loans.................... 6,063,498 3,509,324
----------- -----------
Less allowance for loan losses.............................. 648,103 650,422
----------- -----------
$62,320,014 $60,145,537
========== ==========
</TABLE>
F-11
<PAGE> 97
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Activity in the allowance for loan losses is summarized as follows for the
years ended September 30:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year........................... $650,422 $727,433 $794,234
Provision charged to income............................ -- (77,011) (66,801)
Loan charge-offs....................................... 2,319 -- --
Loan recoveries........................................ -- -- --
-------- -------- --------
Balance at end of year....................... $648,103 $650,422 $727,433
======== ======== ========
</TABLE>
The Savings Bank had loans outstanding to executive officers, directors,
and their associates in an aggregate amount greater than $60,000 of $634,245 at
September 30, 1995 and $750,993 at September 30, 1994. These loans are made in
the ordinary course of business and are made on the same terms and collateral as
those of comparable transactions prevailing at the time. The Savings Bank
believes these loans do not involve more than the normal risk of collectibility
or contain other unfavorable features. The following summarizes the activity for
loans to executive officers, directors, and their associates in the aggregate
amount greater than $60,000 for the years ended September 30:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Balance, beginning............................................. $ 750,993 $ 748,614
New loans...................................................... 45,432 29,700
Repayments..................................................... (162,180) (27,321)
--------- ---------
Balance, ending................................................ $ 634,245 $ 750,993
========= =========
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Savings Bank evaluates each customer's
credit-worthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Savings Bank upon extension of credit is based on
management's credit evaluation of the party. Collateral held varies but may
include accounts receivable, inventory, property, plant and equipment, and
income-producing commercial properties.
Total commitments to lend were $1,117,800 there was no real estate held for
investment at September 30, 1995. All commitments were at adjustable rates.
NOTE 4. ACCRUED INTEREST RECEIVABLE
Accrued interest receivable at September 30 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Interest-bearing deposits...................................... $ 40,681 $ 2,601
Investment securities.......................................... 151,699 123,745
Loans receivable............................................... 361,858 326,492
-------- --------
$554,238 $452,838
======== ========
</TABLE>
F-12
<PAGE> 98
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. FORECLOSED REAL ESTATE
The Savings Bank and its wholly owned subsidiary from time to time have
direct investments in real estate projects engaged primarily in acquiring,
developing, and constructing residential housing units and commercial property.
There was no real estate held for investment at September 30, 1995 and 1994.
The foreclosed real estate consists of a 42.909% to 50% interest in various
commercial real estate properties.
Summaries of assets, liabilities, and stockholders' equity of the Savings
Bank's wholly-owned subsidiary at September 30, 1995 and 1994, and income for
the years September 30, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Cash........................................................... $ 276 $ 276
Real estate held for development and sale...................... -- --
Allowance for unrealized loss on real estate................... -- --
Other assets................................................... 8,452 8,452
-------- --------
Total assets......................................... $ 8,728 $ 8,728
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Notes payable to parent...................................... $ -- $ --
Accrued expenses and other liabilities....................... -- --
-------- --------
Total liabilities.................................... -- --
-------- --------
Stockholders' deficit:
Capital stock, common, $100 par value; 20,000 shares
authorized; 200 shares issued and outstanding............. 20,000 20,000
Accumulated deficit.......................................... (11,272) (11,272)
-------- --------
8,728 8,728
-------- --------
Total liabilities and stockholders' deficit.......... $ 8,728 $ 8,728
======== ========
</TABLE>
F-13
<PAGE> 99
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Income:
Sale of lots and homes.......................................... $ -- $61,568 $12,000
------- ------- -------
Less construction and development costs as follows:
Cost of lots and homes....................................... -- 61,568 11,286
Selling expenses............................................. -- -- --
------- ------- -------
-- 61,568 11,286
------- ------- -------
Profit (loss) on sale of lots and homes........................... -- -- 714
Debt forgiven by parent........................................... -- -- 9,956
Interest.......................................................... -- -- --
------- ------- -------
-- -- 10,670
------- ------- -------
Legal and accounting.............................................. -- -- --
Taxes............................................................. -- 15 25
------- ------- -------
-- 15 25
------- ------- -------
Net income (loss) for the year before income tax
benefit............................................... -- (15) 10,645
------- ------- -------
Provision for income taxes:
Current benefit................................................. -- -- --
------- ------- -------
-- -- --
------- ------- -------
Net income (loss) for the year.......................... $ -- $ (15) $10,645
======= ======= =======
</TABLE>
Activity in the allowance for losses for real estate foreclosed and held
for investment for the years ended September 30, is as follows:
<TABLE>
<CAPTION>
REAL ESTATE
FORECLOSED HELD FOR
REAL ESTATE INVESTMENT TOTAL
----------- ----------- ---------
<S> <C> <C> <C>
Balance at September 30, 1992........................ $ 200,000 $ 22,318 $ 222,318
Provision charged to income.......................... -- -- --
Charge-offs, net of recoveries....................... -- (7,666) (7,666)
----------- ----------- ---------
Balance at September 30, 1993........................ 200,000 14,652 214,652
Provision charged to income.......................... -- -- --
Charge-offs, net of recoveries....................... (200,000) (14,652) (214,652)
----------- ----------- ---------
Balance at September 30, 1994........................ -- -- --
Provision charged to income.......................... 49,418 -- --
Charge-offs, net of recoveries....................... -- -- --
----------- ----------- ---------
Balance at September 30, 1995........................ $ 49,418 $ -- $ --
========= ======== =========
</TABLE>
NOTE 6. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
The Savings Bank owned 50% of the outstanding stock of Empire Financial
Services, Inc. as of September 30, 1995 and 1994. The primary purpose of the
service corporation is the origination and servicing of commercial real estate
loans. The Savings Bank began accounting for its interest in the unconsolidated
subsidiary under the equity method for the year ended September 30, 1992 when
the equity investment increased from 33 1/3% to 50%.
F-14
<PAGE> 100
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The investment in Empire Financial Services, Inc. made in 1992, exceeded
the Company's share of the underlying net assets by $73,645 and is being
amortized on the straight-line method over twenty-five years.
Following is a summary of unaudited financial condition at September 30,
1995 and 1994 and unaudited results of operations of Empire Financial Services,
Inc. for the years ended September 30, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C> <C>
Current assets.................................................... $326,481 $165,281
Property, plant and equipment..................................... 331,849 78,658
-------- --------
Total assets............................................ $658,330 $243,939
======== ========
Current liabilities............................................... $481,197 $ 72,064
Stockholders' equity.............................................. 177,133 171,875
-------- --------
Total liabilities and stockholders' equity.............. $658,330 $243,939
======== ========
1995 1994 1993
---------- -------- --------
Total revenue......................................... $1,152,789 $975,798 $538,065
========= ======== ========
Net income............................................ $ 335,256 $301,688 $ 77,197
========= ======== ========
Bank's proportionate share of earnings................ $ 167,628 $150,844 $ 38,598
========= ======== ========
</TABLE>
NOTE 7. PREMISES AND EQUIPMENT
Premises and equipment at September 30, stated at cost, are summarized by
major classification as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Land and improvements......................................... $ 155,986 $ 155,986
Buildings..................................................... 963,045 949,425
Furniture and equipment....................................... 599,700 532,614
---------- ----------
1,718,731 1,638,025
Less accumulated depreciation................................. 782,849 684,335
---------- ----------
$ 935,882 $ 953,690
========= =========
</TABLE>
Depreciation expense was $92,626 and $89,424 for the years ended September
30, 1995 and 1994, respectively.
F-15
<PAGE> 101
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. DEPOSITS
Deposits at September 30, are as follows:
<TABLE>
<CAPTION>
1995 1994
--------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT
WEIGHTED ----------- ------- ----------- -------
AVERAGE
RATE AT
SEPTEMBER
30,
1995
------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Demand and NOW accounts
including non-interest bearing
deposits of $441,459 in 1995
and $115,158 in 1994.......... 3.01% $ 3,697,552 4.80% $ 2,782,782 4.27%
Money market.................... 3.41 8,624,668 11.20 10,259,090 15.72
Passbook savings................ 3.28 3,830,877 4.98 4,227,358 6.48
----------- ------- ----------- -------
16,153,097 20.98 17,269,230 26.47
----------- ------- ----------- -------
Certificates of deposit:
Fixed rates 7% and over......... 7.85 61,348 .08 282,342 .43
Variable rates.................. 5.83 60,760,854 78.94 47,692,194 73.10
----------- ------- ----------- -------
60,822,202 79.02 47,974,536 73.53
----------- ------- ----------- -------
$76,975,299 100.00% $65,243,766 100.00%
========== ====== ========== ======
</TABLE>
The aggregate amount of short-term (maturities of one year or less) jumbo
certificates of deposit with a minimum denomination of $100,000 was
approximately $10,041,735 at September 30, 1995.
At September 30, 1995, scheduled maturities of certificates of deposit are
approximately as follows:
<TABLE>
<S> <C>
1 year or less.............................................. $35,004,000
1 - 3 years................................................. 22,778,000
3 - 5 years................................................. 3,040,000
5 - 10 years................................................ --
-----------
$60,822,000
==========
</TABLE>
Interest expense on deposits for the years ended September 30, is
summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Money market..................................... $ 303,003 $ 334,418 $ 324,661
Passbook savings................................. 122,411 106,173 100,515
NOW.............................................. 83,454 78,128 54,245
Certificates of deposit.......................... 2,961,846 2,084,136 2,295,694
---------- ---------- ----------
$3,470,714 $2,602,855 $2,775,115
========= ========= =========
</TABLE>
NOTE 9. INCOME TAXES
Through September 30, 1995, the Savings Bank has incurred approximately
$2,112,049 in tax deductions for loan losses that have not been utilized for
provisions on the books. These excess tax deductions are the result of certain
conditions that were met in determining taxable income. These conditions when
met, provide for a special bad debt deduction based on a percentage of taxable
income (presently 8%) or on specified experience formulas. The Savings Bank used
the percentage of taxable income method in 1995, 1994, and
F-16
<PAGE> 102
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1993. If the amounts that qualify as deductions for federal income tax purposes
are later used for purposes other than bad debt losses, they will be subject to
federal income tax at the current corporate rate.
The components of income tax expense for the years ended September 30,
1995, 1994 and 1993 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Federal:
Current.............................................. $449,423 $539,902 $621,452
Deferred............................................. (13,604) 37,875 77,815
-------- -------- --------
435,819 577,777 699,267
-------- -------- --------
State:
Current.............................................. 33,559 64,444 96,190
Deferred............................................. (2,401) 6,626 17,737
-------- -------- --------
31,158 71,070 113,927
-------- -------- --------
Total income tax expense..................... $466,977 $648,847 $813,194
======== ======== ========
</TABLE>
The difference between the provision for income tax and the amount computed
by applying the federal income tax rate to earnings before income taxes are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Expected income tax expense at federal tax rate........ $530,609 $699,840 $783,188
Increase (decrease) in expense resulting from:
Statutory bad debt deduction......................... -- -- (53,857)
Provision for loan losses not deductible for income
tax purposes...................................... -- (26,184) (22,712)
Write down of real estate owned not deductible for
income tax purposes............................... (19,767) -- --
Stock dividends...................................... -- (6,018) (12,988)
Income from equity investments....................... (56,994) (51,282) (20,551)
State taxes based on income.......................... 93,637 123,501 138,210
Realized gain (loss) on real estate.................. (31,378) (4,941) 4,608
Dividend received deduction.......................... (56,100) (56,100) (15,300)
Restatement of deferred tax liability................ -- -- 3,468
Stock option deduction............................... -- -- 20,686
Other, net........................................... 6,970 (29,969) (11,558)
-------- -------- --------
$466,977 $648,847 $813,194
======== ======== ========
</TABLE>
F-17
<PAGE> 103
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following summarizes the source and expected tax consequence of future
taxable deductions (income) which comprise the deferred tax asset and liability.
<TABLE>
<CAPTION>
1995 1994
------- --------
<S> <C> <C>
Deferred tax asset:
Difference in recognition of unrealized gain or loss of
investment securities........................................ $ -- $106,295
Difference in recognition of unrealized loss on write down to
fair market value of real estate owned....................... 19,764 --
Difference between financial statement and tax bad debt
deduction.................................................... 55,789 55,789
Accrued post retirement benefit deferred for tax purposes....... 5,100 9,180
------- --------
$80,653 $171,264
======= ========
Deferred tax liability:
Difference in recognition of unrealized gain or loss of
investment securities........................................ $15,552 $ --
Difference between financial statement and tax depreciation..... 12,088 12,282
Difference in recognition of earnings in unconsolidated
subsidiary................................................... 29,531 29,659
------- --------
$57,171 $ 41,941
======= ========
</TABLE>
NOTE 10. PENSION PLAN
The Savings Bank sponsors a defined benefit pension plan that covers
substantially all employees meeting age and service requirements. The plan calls
for benefits to be paid to eligible employees at retirement based primarily upon
years of service with the company and compensation rates near retirement.
Contributions to the plan reflect benefits attributed to employees' services to
date, as well as services expected to be earned in the future. Plan assets
consist of primarily investment-grade corporate bonds, U.S. government
obligations, certificates of deposits and guaranteed investment contracts.
Effective October 1, 1989, the Savings Bank adopted Statement of Financial
Accounting Standards No. 87 (SFAS 87), "Employers' Accounting for Pensions".
Pension expense for September 30 includes the following components:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Service cost of the current period............................. $ 27,892 $ 27,875
Interest cost on the projected benefit obligation.............. 23,785 20,216
Expected return on assets held in the plan..................... (30,525) (27,269)
Net amortization of prior service cost, transition liability,
and net gain................................................. 3,575 6,236
-------- --------
Pension expense, included in compensation and benefits......... $ 24,727 $ 27,058
======== ========
</TABLE>
F-18
<PAGE> 104
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following sets forth the funded status of the plan at September 30:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits.............................................. $294,986 $256,803
Nonvested.................................................... 1,499 2,261
-------- --------
Accumulated benefit obligation............................... 296,485 259,064
Effect of anticipated future compensation levels and other
events.................................................... 86,135 93,309
-------- --------
Projected benefit obligation................................. 382,620 352,373
Fair value of assets held in the plan........................ 402,414 381,565
-------- --------
Projected benefit obligation over (under) funded plan
assets.................................................... $(19,794) $(29,192)
======== ========
</TABLE>
The funded excess consists of the following:
<TABLE>
<CAPTION>
1995 1994
-------- ---------
<S> <C> <C>
Unrecognized net obligation..................................... $ 5,147 $ 5,719
Net unrecognized loss (gain) from past experience different than
assumed....................................................... 68,452 83,207
(Prepaid) accrued pension cost included in (other assets) or
accrued expenses and other liabilities on the balance sheet at
September 30.................................................. (93,393) (118,120)
-------- ---------
$ 19,794 $ 29,194
======== =========
</TABLE>
Assumptions used to develop the net periodic pension cost were:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Discount rate........................................................ 7.00% 6.75%
Expected long-term rate of return on assets.......................... 8.00% 8.00%
Rate of increase in compensation levels.............................. 3.00% 3.00%
</TABLE>
The Savings Bank uses straight-line method of amortization for prior
service cost and unrecognized gains and losses.
NOTE 11. DEFERRED COMPENSATION AGREEMENT
The Savings Bank has a deferred compensation agreement with a retired
officer. The agreement was renewed in January, 1990. Among other provisions, the
Savings Bank will provide monthly compensation of $850 per month for a period
not exceeding eighty-four months. The total commitment was accrued into expense
in the year the amount due was fixed. No current expense has been recorded for
September 30, 1995, 1994 and 1993.
During 1993 the Savings Bank adopted the Financial Accounting Standard
Board, Statement 106, "Accounting for Post Retirement Benefits". The statement
provides for post retirement benefits to be recorded as a liability when such
benefits are determinable and the liability is to be charged into income over
the service period of the employee. The liability at September 30, 1995 and 1994
of $12,750 and 22,950, respectively, net of the benefit of the deferred tax
asset, is being amortized over the period of payments.
NOTE 12. FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT
("FIRREA") OF 1989
FIRREA was signed into law on August 9, 1989; regulations for savings
institutions' minimum capital requirements went into effect on December 7, 1989.
In addition to its capital requirements, FIRREA includes provisions for changes
in the Federal regulatory structure for institutions including a new deposit
insurance system, increased deposit insurance premiums, and restricted
investment activities with respect to noninvest-
F-19
<PAGE> 105
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ment-grade corporate debt and certain other investments. FIRREA also increases
the required ratio of housing-related assets in order to qualify as a savings
institution.
The regulations require institutions to have a minimum regulatory tangible
capital equal to 1.5 percent of adjusted total assets, a minimum regulatory core
capital equal to 3 percent of adjusted total assets and for September 30, 1995,
a risk-based capital ratio of 8.0 percent of risk-weighted assets. The ability
to include qualifying supervisory goodwill for purposes of the leverage capital
ratio requirement will be phased out by January 1, 1995.
The Savings Bank, at September 30, 1995, meets the regulatory tangible
capital, core capital, and risk-based capital requirements, as defined by
FIRREA. At September 30, 1995, the Savings Bank's required regulatory tangible
capital was $1,358,332 or 1.5% of total assets; required core capital was
$2,716,667 or 3% of total assets and the required risk-based capital was
$3,787,667 or 8% of total risk weighted assets, as defined by FIRREA.
The Savings Bank expects to continue meeting the minimum capital
requirements in the foreseeable future. However, events beyond the control of
the Savings Bank, such as increased interest rates or a downturn in the economy
in areas where the Savings Bank has most of its loans, could adversely affect
future earnings and, consequently, the ability of the Savings Bank to meet its
future minimum capital requirements.
Reconciliation of GAAP capital to regulatory capital:
<TABLE>
<CAPTION>
TANGIBLE TOTAL
GAAP CAPITAL CAPITAL CORE CAPITAL CAPITAL
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
GAAP capital, as reported to OTS before
adjustments............................... $ 12,406,058 $12,406,058 $ 12,406,058 $12,406,058
Audit adjustments:
Write down of real estate owned........... (49,418) (49,418) (49,418)
Income tax expense........................ 115,459 115,459 115,459
----------- ------------ -----------
GAAP capital, as reported to OTS adjusted... 12,472,099 12,472,099 12,472,099
Nonallowable assets:
Goodwill -- total......................... (58,908) (58,908) (58,908)
Deferred tax asset, net................... (23,482) (23,482) (23,482)
----------- ------------ -----------
Regulatory capital, computed................ 12,389,709 12,389,709 12,389,709
Minimum capital requirements................ 1,358,332 2,716,663 4,074,995
----------- ------------ -----------
Regulatory capital -- excess (deficiency)... $11,031,377 $ 9,673,046 $ 8,314,714
========== ========== ==========
</TABLE>
NOTE 13. STOCKHOLDERS' EQUITY
On March 18, 1991, the Savings Bank completed its conversion from a
depositor-owned institution to a stockholder-owned institution by selling
278,341 shares of common stock at $10 a share. The cost of conversion was
$304,285.
Federal regulations permit the Savings Bank to pay dividends only from net
earnings and retained earnings and do not permit the Savings Bank to pay cash
dividends on common stock if its net worth would be reduced below the level
required by the regulations or the amount required for the liquidation account
established by the Plan of Conversion. In order to grant a priority to eligible
account holders (as defined in the Plan of Conversion) in the event of future
liquidation, the Savings Bank, at the time of conversion, established a
liquidation account in an amount equal to its net worth as of September 30,
1990, adjusted as described below. In the event of future liquidation of the
Savings Bank, eligible account holders who continue to
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<PAGE> 106
FIRST FEDERAL BANK OF NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
maintain their deposit accounts shall be entitled to receive a distribution from
the liquidation account based on their proportionate share of the then total
remaining qualifying deposits. The total amount of the liquidation account will
be decreased as the balances of eligible account holders are reduced on annual
determination dates subsequent to the conversion. No dividends may be paid to
stockholders if such dividends reduce the stockholders' equity of the Savings
Bank below the amount required for the liquidation account.
The Savings Bank may not, for a period of three years from the date of
conversion, repurchase any of its stock from any person, except in the event of
an offer to repurchase by the Savings Bank on a pro rata basis to all
shareholders of the Savings Bank that is approved by the OTS, and except for the
repurchase of qualifying shares of a Director. Furthermore, the Savings Bank may
not declare or pay a cash dividend on, or repurchase any of, its common stock if
the effect thereof would cause the stockholders' equity of the Savings Bank to
be reduced below either the amount required for the liquidation account or the
regulatory capital requirement imposed by the OTS. In addition, for a period of
three years after the date of conversion, the Savings Bank may not declare or
pay a cash dividend or repurchase any of its stock in an amount in excess of 50%
of the greater of its net earnings for the current year or the average of the
Savings Bank's net earnings for the current year and not more than two of the
immediately preceding years.
NOTE 14. STOCK OPTION PLAN
In connection with the Conversion, the Savings Bank's Board of Directors
adopted a stock option plan (the "Option Plan"). The Option Plan was ratified by
the shareholders of the Savings Bank on January 27, 1992. Pursuant to the Option
Plan, 25,000 shares of capital stock are reserved for future issuance by First
Federal, upon exercise of stock options to be granted, to directors, officers
and other key employees. The purpose of the Option Plan is to attract, encourage
and increase the incentive for continued service and employment of directors,
officers and key employees by facilitating their purchase of an equity interest
in First Federal. The option price may not be less than 100% of the fair market
value of the shares on the date of the grant. No option will be exercisable
after the expiration of ten years from the date it is granted unless otherwise
provided for in the terms of such option.
As of September 30, 1995, 23,040 options had been granted allowing the
individuals to purchase stock at $10 per share. These options expire March 22,
2001. As of September 30, 1995, 20,980 options had been exercised or expired.
NOTE 15. SUBSEQUENT EVENTS
On September 29, 1995, the Savings Bank entered into an agreement with
Regions Financial Corporation providing for Regions Financial Corporation to
purchase all of the outstanding shares of First Federal Bank of Northwest
Georgia, Federal Savings Bank. The purchase will result in an exchange of 1.293
shares of Regions Financial Corporation for each share of First Federal Bank of
Northwest Georgia, Federal Savings Bank stock.
The merger and other transactions contained in the merger agreement shall
become effective the earlier of:
1. When the OTS declares the merger effective or
2. the date of endorsement of the Articles of Combination filed with
the OTS.
Subsequent to September 30, 1995, the Savings Bank issued 2,060 shares of
its common stock under the Option Plan. Estimate fair market value of one share
of common stock based on the most recent trade is approximately $15. Had the
stock issuance occurred by October 1, 1994, net earnings per share would have
approximated $3.64 for 1995.
F-21
<PAGE> 107
FINAL AGREEMENT
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
FIRST FEDERAL BANK OF NORTHWEST GEORGIA, FEDERAL SAVINGS
BANK
AND
REGIONS FINANCIAL CORPORATION
DATED AS OF SEPTEMBER 29, 1995
A-1
<PAGE> 108
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Parties................................................................................ A-5
Preamble............................................................................... A-5
ARTICLE ONE -- TRANSACTIONS AND TERMS OF MERGER........................................ A-5
1.1 Merger....................................................................... A-5
1.2 Time and Place of Closing.................................................... A-5
1.3 Effective Time............................................................... A-6
ARTICLE TWO -- TERMS OF MERGER......................................................... A-6
2.1 Business of Surviving Association............................................ A-6
2.2 Assumption of Rights......................................................... A-6
2.3 Assumption of Liabilities.................................................... A-6
2.4 Charter...................................................................... A-6
2.5 Bylaws....................................................................... A-6
2.6 Directors and Officers....................................................... A-6
ARTICLE THREE -- MANNER OF CONVERTING SHARES........................................... A-7
3.1 Conversion of Shares......................................................... A-7
3.2 Anti-Dilution Provisions..................................................... A-7
3.3 Shares Held by First Federal or Regions...................................... A-7
3.4 Dissenting Stockholders...................................................... A-7
3.5 Fractional Shares............................................................ A-7
3.6 Conversion of Stock Options; Restricted Stock................................ A-8
ARTICLE FOUR -- EXCHANGE OF SHARES..................................................... A-8
4.1 Exchange Procedures.......................................................... A-8
4.2 Rights of Former First Federal Stockholders.................................. A-9
ARTICLE FIVE -- REPRESENTATIONS AND WARRANTIES OF FIRST FEDERAL........................ A-9
5.1 Organization, Standing, and Power............................................ A-9
5.2 Authority; No Breach By Agreement............................................ A-9
5.3 Capital Stock................................................................ A-10
5.4 First Federal Subsidiaries................................................... A-10
5.5 Financial Statements......................................................... A-11
5.6 Absence of Undisclosed Liabilities........................................... A-11
5.7 Absence of Certain Changes or Events......................................... A-11
5.8 Adequacy of Reserves......................................................... A-11
5.9 Tax Matters.................................................................. A-12
5.10 Assets....................................................................... A-12
5.11 Environmental Matters........................................................ A-12
5.12 Compliance With Laws......................................................... A-13
5.13 Labor Relations.............................................................. A-13
5.14 Employee Benefit Plans....................................................... A-14
5.15 Material Contracts........................................................... A-15
5.16 Legal Proceedings............................................................ A-16
5.17 Reports...................................................................... A-16
5.18 Statements True and Correct.................................................. A-16
5.19 Tax and Regulatory Matters................................................... A-17
5.20 State Takeover Laws.......................................................... A-17
5.21 Charter Provisions........................................................... A-17
5.22 Support Agreements........................................................... A-17
ARTICLE SIX -- REPRESENTATIONS AND WARRANTIES OF REGIONS............................... A-17
6.1 Organization, Standing, and Power............................................ A-17
6.2 Authority; No Breach By Agreement............................................ A-17
6.3 Capital Stock................................................................ A-18
6.4 Regions Subsidiaries......................................................... A-18
6.5 Financial Statements......................................................... A-18
6.6 Absence of Undisclosed Liabilities........................................... A-19
</TABLE>
A-2
<PAGE> 109
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.7 Absence of Certain Changes or Events......................................... A-19
6.8 Compliance With Laws......................................................... A-19
6.9 Legal Proceedings............................................................ A-19
6.10 Reports...................................................................... A-19
6.11 Statements True and Correct.................................................. A-20
6.12 Authority of First Federal Interim........................................... A-20
6.13 Tax and Regulatory Matters................................................... A-20
ARTICLE SEVEN -- CONDUCT OF BUSINESS PENDING CONSUMMATION.............................. A-21
7.1 Covenants of Both Parties.................................................... A-21
7.2 Covenants of First Federal................................................... A-21
7.3 Covenants of Regions......................................................... A-22
7.4 Adverse Changes in Condition................................................. A-23
7.5 Reports...................................................................... A-23
ARTICLE EIGHT -- ADDITIONAL AGREEMENTS................................................. A-23
8.1 Registration Statement; Proxy Statement; Stockholder Approval................ A-23
8.2 Nasdaq/NMS Listing........................................................... A-23
8.3 Applications................................................................. A-23
8.4 Agreement as to Efforts to Consummate........................................ A-24
8.5 Investigation and Confidentiality............................................ A-24
8.6 Press Releases............................................................... A-24
8.7 Certain Actions.............................................................. A-24
8.8 Tax Matters.................................................................. A-24
8.9 Agreements of Affiliates..................................................... A-25
8.10 Employee Benefits and Contracts.............................................. A-25
8.11 Indemnification.............................................................. A-25
ARTICLE NINE -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE...................... A-26
9.1 Conditions to Obligations of Each Party...................................... A-26
9.2 Conditions to Obligations of Regions......................................... A-27
9.3 Conditions to Obligations of First Federal................................... A-27
ARTICLE TEN -- TERMINATION............................................................. A-28
10.1 Termination.................................................................. A-28
10.2 Effect of Termination........................................................ A-31
10.3 Non-Survival of Representations and Covenants................................ A-31
ARTICLE ELEVEN -- MISCELLANEOUS........................................................ A-31
11.1 Definitions.................................................................. A-31
11.2 Expenses..................................................................... A-36
11.3 Brokers and Finders.......................................................... A-36
11.4 Entire Agreement............................................................. A-36
11.5 Amendments................................................................... A-36
11.6 Waivers...................................................................... A-36
11.7 Assignment................................................................... A-36
11.8 Notices...................................................................... A-37
11.9 Governing Law................................................................ A-37
11.10 Counterparts................................................................. A-37
11.11 Captions..................................................................... A-37
11.12 Severability................................................................. A-37
Signatures............................................................................. A-38
</TABLE>
A-3
<PAGE> 110
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------
<C> <C> <S> <C>
1. -- Form of Support Agreement. (sec. 11.1).
2. -- Form of Plan of Merger and Combination between First Federal and First
Federal Interim. (sec.sec. 1.1, 11.1).
3. -- Form of agreement of affiliates of First Federal. (sec. 8.9).
4. -- Form of Claims Letter. (sec. 9.2).
5. -- Form of Opinion Letter of First Federal's Counsel. (sec. 9.2).
6. -- Form of Opinion Letter of Regions' Counsel. (sec. 9.3).
</TABLE>
A-4
<PAGE> 111
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of September 29, 1995, by and between FIRST FEDERAL BANK OF
NORTHWEST GEORGIA, FEDERAL SAVINGS BANK ("First Federal"), a federal stock
savings bank organized and existing under the laws of the United States, with
its principal office located in Cedartown, Georgia; and REGIONS FINANCIAL
CORPORATION ("Regions"), a corporation organized and existing under the laws of
the State of Delaware, with its principal office located in Birmingham, Alabama.
PREAMBLE
The Boards of Directors of First Federal and Regions are of the opinion
that the transactions described herein are in the best interests of the parties
and their respective stockholders. This Agreement provides for the acquisition
of First Federal by Regions pursuant to the merger of a newly formed first tier,
interim federal savings bank subsidiary of Regions ("First Federal Interim")
with and into First Federal. At the effective time of such merger, the
outstanding shares of the common stock of First Federal shall be converted into
the right to receive shares of the common stock of Regions (except as provided
herein). As a result, stockholders of First Federal shall become stockholders of
Regions, and First Federal shall continue to conduct its business and operations
as a wholly-owned, first tier subsidiary of Regions. The transactions described
in this Agreement are subject to the approvals of the stockholders of First
Federal, the Office of Thrift Supervision, the Board of Governors of the Federal
Reserve System, appropriate state regulatory authorities, and the satisfaction
of certain other conditions described in this Agreement. It is the intention of
the parties to this Agreement that the Merger for federal income tax purposes
shall qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code, and that the exchange of First Federal common stock, to
the extent exchanged for Regions common stock, will not give rise to gain or
loss to the holders of First Federal common stock with respect to such exchange.
Simultaneously with the execution and delivery of this Agreement, as a
condition and inducement to Region's willingness to enter into this Agreement,
each of First Federal's directors and executive officers are executing and
delivering to Regions an agreement (each a "Support Agreement"), in
substantially the form of Exhibit 1 to this Agreement.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
ARTICLE ONE
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement, at the
Effective Time, First Federal Interim shall be merged with and into First
Federal in accordance with and with the effect provided in Title 12, United
States Code, Section 1467a(t) (the "Merger"). First Federal shall be the
Surviving Association resulting from the Merger and shall be a wholly-owned,
first tier Subsidiary of Regions and shall continue to be governed by the Laws
of the United States. The Merger shall be consummated pursuant to the terms of
this Agreement, which has been approved and adopted by the respective Boards of
Directors of First Federal and Regions, and the terms of a Plan of Merger to be
entered into by First Federal and First Federal Interim.
1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 9:00 A.M. on
the date that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their chief executive officers or chief financial officers, may
mutually agree. The place of Closing shall be at the offices of Regions, or such
other place as may be mutually agreed upon by the Parties.
A-5
<PAGE> 112
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated by this
Agreement shall become effective on the date and at the time of endorsement of
the Articles of Combination filed with the OTS or on such other date and at such
other time as the OTS declares the Merger effective (the "Effective Time").
Subject to the terms and conditions hereof, unless otherwise mutually agreed
upon in writing by the chief executive officers or chief financial officers of
each Party, the Parties shall use their reasonable efforts to cause the
Effective Time to occur on the first business day following the last to occur of
(i) the effective date (including expiration of any applicable waiting period)
of the last required Consent of any Regulatory Authority having authority over
and approving or exempting the Merger, and (ii) the date on which the
stockholders of First Federal approve this Agreement to the extent such approval
is required by applicable Law; or such later date within thirty (30) days of
such date as may be specified by Regions; provided that Regions may not delay
the Effective Time pursuant to the immediately preceding clause if such delay
would cause the record date for payment of the quarterly dividend to holders of
Regions Common Stock for the quarter in which the Effective Time to occur prior
to the Effective Time that, absent such delay, would have occurred subsequent to
the Effective Time.
ARTICLE TWO
TERMS OF MERGER
2.1 BUSINESS OF SURVIVING ASSOCIATION. The business of the Surviving
Association from and after the Effective Time shall continue to be that of a
federal stock savings bank organized under the laws of the United States. The
business shall be conducted from its main office located in such place as
Regions may determine and at its legally established branches, which shall also
include the main office and all branches, whether in operation or approved but
unopened, at the Effective Time.
2.2 ASSUMPTION OF RIGHTS. At the Effective Time, the separate existence
and corporate organization of First Federal Interim shall be merged into and
continued in the Surviving Association. All rights, franchises, and interests of
both First Federal and First Federal Interim in and to every type of property
(real, personal, and mixed), and all choses in action of both First Federal and
First Federal Interim shall be transferred to and vested in the Surviving
Association without any deed or other transfer. The Surviving Association, upon
consummation of the Merger and without any order or other action on the part of
any court or otherwise, shall hold and enjoy all rights of property, franchises,
and interests, including appointments, designations, and nominations, and all
other rights and interests as trustee, executor, administrator, registrar of
stocks and bonds, guardian of estates, assignee, receiver, and committee of
estates of incompetent persons, and in every other fiduciary capacity, in the
same manner and to the same extent as such rights, franchises, and interests
were held or enjoyed by either First Federal or First Federal Interim at the
Effective Time.
2.3 ASSUMPTION OF LIABILITIES. All liabilities and obligations of both
First Federal and First Federal Interim of every kind and description (including
without limitation the liquidation account established by First Federal in
connection with its conversion to the stock form of organization, as in
existence at the Effective Time) shall be assumed by the Surviving Association,
and the Surviving Association shall be bound thereby in the same manner and to
the same extent that First Federal and First Federal Interim were so bound at
the Effective Time.
2.4 CHARTER. The Charter of First Federal in effect immediately prior to
the Effective Time shall be the Charter of the Surviving Association until
otherwise amended or repealed.
2.5 BYLAWS. The Bylaws of First Federal in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Association until otherwise
amended or repealed.
2.6 DIRECTORS AND OFFICERS. The directors of First Federal in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the directors of the Surviving
Association from and after the Effective Time in accordance with the Bylaws of
the Surviving Association. The officers of First Federal in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the officers of the Surviving Association
from and after the Effective Time in accordance with the Bylaws of the Surviving
Association.
A-6
<PAGE> 113
ARTICLE THREE
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article Three,
at the Effective Time, by virtue of the Merger and without any action on the
part of the holders thereof, the shares of the constituent corporations or
associations shall be converted as follows:
(a) Each share of Regions Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of First Federal Interim Common Stock issued and
outstanding at the Effective Time shall be converted into and exchanged for
one share of First Federal Common Stock.
(c) Each share of First Federal Common Stock (excluding shares held by
any First Federal Company or by any Regions Company, which shares shall be
canceled as provided in Section 3.3 of this Agreement, in each case other
than in a fiduciary capacity or in satisfaction of debts previously
contracted) issued and outstanding at the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for 1.293 of a share
of Regions Common Stock, subject to adjustment as provided in Section
10.1(g) of this Agreement (the "Exchange Ratio").
3.2 ANTI-DILUTION PROVISIONS. In the event First Federal or Regions
changes the number of shares of First Federal Common Stock or Regions Common
Stock, respectively, issued and outstanding prior to the Effective Time as a
result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor shall be prior to the
Effective Time, the Exchange Ratio shall be proportionately adjusted.
3.3 SHARES HELD BY FIRST FEDERAL OR REGIONS. Each of the shares of First
Federal Common Stock held by any First Federal Company or by any Regions
Company, in each case other than in a fiduciary capacity or in satisfaction of
debts previously contracted, shall be canceled and retired at the Effective
Time, and no consideration shall be issued in exchange therefor.
3.4 DISSENTING STOCKHOLDERS. Any holder of shares of First Federal Common
Stock who perfects such holder's dissenters' rights of appraisal in accordance
with and as contemplated by 12 C.F.R. sec. 552.14 shall be entitled to receive
the value of such shares in cash as determined pursuant to such provision of
Law; provided, however, that no such payment shall be made to any dissenting
stockholder unless and until such dissenting stockholder has complied with the
applicable provisions of 12 C.F.R. sec. 552.14 and surrendered to the Surviving
Association the certificate or certificates representing the shares for which
payment is being made. In the event that after the Effective Time a dissenting
stockholder of First Federal fails to perfect, or effectively withdraws or
loses, such holder's right to appraisal and of payment for such holder's shares,
Regions shall issue and deliver the consideration to which such holder of shares
of First Federal Common Stock is entitled under this Article Three (without
interest) upon surrender by such holder of the certificate or certificates
representing shares of First Federal Common Stock held by such holder. First
Federal will establish an escrow account with an amount sufficient to satisfy
the maximum aggregate payment that may be required to be paid to dissenting
stockholders. Upon satisfaction of all claims of dissenting stockholders, the
remaining escrowed amount, reduced by payment of the fees and expenses of the
escrow agent, will be returned to First Federal.
3.5 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of First Federal Common Stock exchanged
pursuant to the Merger, or of options to purchase shares of First Federal Common
Stock, who would otherwise have been entitled to receive a fraction of a share
of Regions Common Stock (after taking into account all certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of Regions Common Stock
multiplied by the market value of one share of Regions Common Stock at the
Effective Time, in the case of shares exchanged pursuant to the Merger, or the
date of exercise, in the case of options. The market value of one share of
Regions Common Stock at the Effective Time or the date of exercise, as the case
may be, shall be the last sale price of such common stock on the Nasdaq/NMS (as
reported by The Wall Street
A-7
<PAGE> 114
Journal or, if not reported thereby, any other authoritative source) on the last
trading day preceding the Effective Time, in the case of shares exchanged
pursuant to the Merger, and the date of exercise, in the case of options. No
such holder will be entitled to dividends, voting rights, or any other rights as
a shareholder in respect of any fractional shares.
3.6 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK. (a) At the Effective
Time, all rights with respect to First Federal Common Stock pursuant to stock
options or stock appreciation rights ("First Federal Options") granted by First
Federal under the First Federal Stock Plans, which are outstanding at the
Effective Time, whether or not exercisable, shall be converted into and become
rights with respect to Regions Common Stock, and Regions shall assume each First
Federal Option, in accordance with the terms of the First Federal Stock Plan and
stock option agreement by which it is evidenced. From and after the Effective
Time, (i) each First Federal Option assumed by Regions may be exercised solely
for shares of Regions Common Stock (or cash in the case of stock appreciation
rights), (ii) the number of shares of Regions Common Stock subject to such First
Federal Option shall be equal to the number of shares of First Federal Common
Stock subject to such First Federal Option immediately prior to the Effective
Time multiplied by the Exchange Ratio, and (iii) the per share exercise price
under each such First Federal Option shall be adjusted by dividing the per share
exercise price under each such First Federal Option by the Exchange Ratio and
rounding down to the nearest cent. It is intended that the foregoing assumption
shall be undertaken in a manner that will not constitute a "modification" as
defined in Section 424 of the Internal Revenue Code, as to any stock option
which is an "incentive stock option." First Federal agrees to take all necessary
steps to effectuate the foregoing provisions of this Section 3.6.
(b) All restrictions or limitations on transfer with respect to First
Federal Common Stock awarded under the First Federal Stock Plans or any other
plan, program, or arrangement of any First Federal Company, to the extent that
such restrictions or limitations shall not have already lapsed, and except as
otherwise expressly provided in such plan, program, or arrangement, shall remain
in full force and effect with respect to shares of Regions Common Stock into
which such restricted stock is converted pursuant to Section 3.1 of this
Agreement.
ARTICLE FOUR
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, Regions shall
cause First Alabama Bank acting as the exchange agent (the "Exchange Agent") to
mail to the former stockholders of First Federal appropriate transmittal
materials (which shall specify that delivery shall be effected, and risk of loss
and title to the certificates theretofore representing shares of First Federal
Common Stock shall pass, only upon proper delivery of such certificates to the
Exchange Agent). After the Effective Time, each holder of shares of First
Federal Common Stock (other than shares to be canceled pursuant to Section 3.3
of this Agreement) issued and outstanding at the Effective Time shall surrender
the certificate or certificates representing such shares to the Exchange Agent
and shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2 of this Agreement. To the extent
required by Section 3.5 of this Agreement, each holder of shares of First
Federal Common Stock issued and outstanding at the Effective Time also shall
receive, upon surrender of the certificate or certificates representing such
shares, cash in lieu of any fractional share of Regions Common Stock to which
such holder may be otherwise entitled (without interest). Regions shall not be
obligated to deliver the consideration to which any former holder of First
Federal Common Stock is entitled as a result of the Merger until such holder
surrenders such holder's certificate or certificates representing the shares of
First Federal Common Stock for exchange as provided in this Section 4.1. The
certificate or certificates of First Federal Common Stock so surrendered shall
be duly endorsed as the Exchange Agent may require. Any other provision of this
Agreement notwithstanding, neither Regions, the Surviving Association, nor the
Exchange Agent shall be liable to a holder of First Federal Common Stock for any
amounts paid or property delivered in good faith to a public official pursuant
to any applicable abandoned property Law.
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<PAGE> 115
4.2 RIGHTS OF FORMER FIRST FEDERAL STOCKHOLDERS. At the Effective Time,
the stock transfer books of First Federal shall be closed as to holders of First
Federal Common Stock immediately prior to the Effective Time, and no transfer of
First Federal Common Stock by any such holder shall thereafter be made or
recognized. Until surrendered for exchange in accordance with the provisions of
Section 4.1 of this Agreement, each certificate theretofore representing shares
of First Federal Common Stock (other than shares to be canceled pursuant to
Section 3.3 of this Agreement or as to which the holder thereof has perfected
dissenters' rights of appraisal as contemplated by Section 3.4 of this
Agreement) shall from and after the Effective Time represent for all purposes
only the right to receive the consideration provided in Sections 3.1 and 3.5 of
this Agreement in exchange therefor. To the extent permitted by Law, former
stockholders of record of First Federal shall be entitled to vote after the
Effective Time at any meeting of Regions stockholders the number of whole shares
of Regions Common Stock into which their respective shares of First Federal
Common Stock are converted, regardless of whether such holders have exchanged
their certificates representing First Federal Common Stock for certificates
representing Regions Common Stock in accordance with the provisions of this
Agreement. Whenever a dividend or other distribution is declared by Regions on
the Regions Common Stock, the record date for which is at or after the Effective
Time, the declaration shall include dividends or other distributions on all
shares of Regions Common Stock issuable pursuant to this Agreement, but no
dividend or other distribution payable to the holders of record of Regions
Common Stock as of any time subsequent to the Effective Time shall be delivered
to the holder of any certificate representing shares of First Federal Common
Stock issued and outstanding at the Effective Time until such holder surrenders
such certificate for exchange as provided in Section 4.1 of this Agreement.
However, upon surrender of such First Federal Common Stock certificate, both the
Regions Common Stock certificate (together with all such undelivered dividends
or other distributions without interest) and any undelivered cash payments to be
paid for fractional share interests (without interest) shall be delivered and
paid with respect to each share represented by such certificate.
ARTICLE FIVE
REPRESENTATIONS AND WARRANTIES OF FIRST FEDERAL
First Federal hereby represents and warrants to Regions as follows:
5.1 ORGANIZATION, STANDING, AND POWER. First Federal is a federal stock
savings bank duly organized, validly existing, and in good standing under the
Laws of the United States, and has the corporate power and authority to carry on
its business as now conducted and to own, lease, and operate its Assets. First
Federal is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on First Federal.
5.2 AUTHORITY; NO BREACH BY AGREEMENT. (a) First Federal has the corporate
power and authority necessary to execute, deliver, and perform its obligations
under this Agreement and the Plan of Merger and to consummate the transactions
contemplated hereby and thereby, subject to the approval of this Agreement by
the holders of two-thirds of the outstanding shares of First Federal Common
Stock. The execution, delivery, and performance of this Agreement and the Plan
of Merger and the consummation of the transactions contemplated herein and
therein, including the Merger, have been or will be duly and validly authorized
by all necessary corporate action in respect thereof on the part of First
Federal, subject to the approval of this Agreement and the Plan of Merger by the
holders of two-thirds of the outstanding shares of First Federal Common Stock.
Subject to such requisite approval, this Agreement represents, and, when
executed and delivered, the Plan of Merger will represent, legal, valid, and
binding obligations of First Federal, enforceable against First Federal in
accordance with their respective terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific
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performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement and the Plan of
Merger by First Federal, nor the consummation by First Federal of the
transactions contemplated hereby or thereby, nor compliance by First Federal
with any of the provisions hereof or thereof, will (i) conflict with or result
in a breach of any provision of First Federal's Charter or Bylaws, or (ii)
except as disclosed in Section 5.2(b) of the First Federal Disclosure
Memorandum, constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any First
Federal Company under, any Contract or Permit of any First Federal Company, or
(iii) subject to receipt of the requisite approvals referred to in Section
9.1(b) of this Agreement, violate any Law or Order applicable to any First
Federal Company or any of their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
and other than Consents, filings, or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on First Federal, no notice to, filing with, or Consent
of, any public body or authority is necessary for the consummation by First
Federal of the Merger and the other transactions contemplated in this Agreement
or the Plan of Merger.
5.3 CAPITAL STOCK. (a) The authorized capital stock of First Federal
consists of (i) 10,000,000 shares of First Federal Common Stock, of which
298,541 shares are issued and outstanding as of the date of this Agreement and
not more than 300,601 shares will be issued and outstanding at the Effective
Time, and (ii) 10,000,000 shares of First Federal Preferred Stock, of which no
shares are issued and outstanding as of the date of this Agreement and no shares
will be issued and outstanding at the Effective Time. All of the issued and
outstanding shares of First Federal Common Stock are duly and validly issued and
outstanding and are fully paid and nonassessable. None of the outstanding shares
of First Federal Common Stock has been issued in violation of any preemptive
rights of the current or past stockholders of First Federal.
(b) Except as set forth in Section 5.3(a) of this Agreement, or as
disclosed in Section 5.3(b) of the First Federal Disclosure Memorandum, there
are no shares of capital stock or other equity securities of First Federal
outstanding and no outstanding options, warrants, scrip, rights to subscribe to,
calls, or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of
First Federal or contracts, commitments, understandings, or arrangements by
which First Federal is or may be bound to issue additional shares of First
Federal capital stock or options, warrants, or rights to purchase or acquire any
additional shares of its capital stock.
5.4 FIRST FEDERAL SUBSIDIARIES. First Federal has disclosed in Section 5.4
of the First Federal Disclosure Memorandum all of the First Federal Subsidiaries
as of the date of this Agreement. Except as disclosed, First Federal or one of
its Subsidiaries owns all of the issued and outstanding shares of capital stock
of each First Federal Subsidiary. No equity securities of any First Federal
Subsidiary are or may become required to be issued (other than to a First
Federal Company) by reason of any options, warrants, scrip, rights to subscribe
to, calls, or commitments of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock of
any such Subsidiary, and there are no Contracts by which any First Federal
Subsidiary is bound to issue (other than to a First Federal Company) additional
shares of its capital stock or options, warrants, or rights to purchase or
acquire any additional shares of its capital stock or by which any First Federal
Company is or may be bound to transfer any shares of the capital stock of any
First Federal Subsidiary (other than to a First Federal Company). There are no
Contracts relating to the rights of any First Federal Company to vote or to
dispose of any shares of the capital stock of any First Federal Subsidiary. All
of the shares of capital stock of each First Federal Subsidiary held by a First
Federal Company are duly authorized, validly issued, and fully paid and
nonassessable under the applicable corporation Law of the jurisdiction in which
such Subsidiary is incorporated or organized and are owned by the First Federal
Company free and clear of any Lien. Each First Federal Subsidiary is a
corporation, and is duly organized,
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validly existing, and in good standing under the Laws of the jurisdiction in
which it is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease, and operate its Assets and to carry on its
business as now conducted. Each First Federal Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Federal.
5.5 FINANCIAL STATEMENTS. First Federal has disclosed in Section 5.5 of
the First Federal Disclosure Memorandum, and has delivered to Regions copies of,
all First Federal Financial Statements prepared for periods ended prior to the
date hereof and will deliver to Regions copies of all First Federal Financial
Statements prepared subsequent to the date hereof. The First Federal Financial
Statements (as of the dates thereof and for the periods covered thereby) (i) are
or, if dated after the date of this Agreement, will be in accordance with the
books and records of the First Federal Companies, which are or will be, as the
case may be, complete and correct and which have been or will have been, as the
case may be, maintained in accordance with good business practices, and (ii)
present or will present, as the case may be, fairly the consolidated financial
position of the First Federal Companies as of the dates indicated and the
consolidated results of operations, changes in stockholders' equity, and cash
flows of the First Federal Companies for the periods indicated, in accordance
with GAAP (subject to any exceptions as to consistency specified therein or as
may be indicated in the notes thereto or, in the case of interim financial
statements, to normal recurring year-end adjustments that are not material).
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in Section 5.6
of the First Federal Disclosure Memorandum, and to the Knowledge of First
Federal, no First Federal Company has any Liabilities that are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on First
Federal, except Liabilities which are accrued or reserved against in the
consolidated balance sheets of First Federal as of September 30, 1994 included
in the First Federal Financial Statements or reflected in the notes thereto.
Except as disclosed in Section 5.6 of the First Federal Disclosure Memorandum,
no First Federal Company has incurred or paid any Liability since September 30,
1994, except for such Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
First Federal.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1994, except
as disclosed in the First Federal Financial Statements filed with the OTS after
such date and prior to the date of this Agreement, (i) there have been no
events, changes, or occurrences which have had, or are reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on First
Federal, and (ii) the First Federal Companies have not taken any action, or
failed to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result in
a material breach or violation of any of the covenants and agreements of First
Federal provided in Article Seven of this Agreement.
5.8 ADEQUACY OF RESERVES. (a) The allowance for possible loan or credit
losses (the "Allowance") shown on the consolidated balance sheets of First
Federal included in the most recent First Federal Financial Statements dated
prior to the date of this Agreement was, and the Allowance shown on the
consolidated balance sheets of First Federal included in the First Federal
Financial Statements as of dates subsequent to the execution of this Agreement
will be, as of the dates thereof, adequate (within the meaning of GAAP and
applicable regulatory requirements or guidelines) to provide for losses relating
to or inherent in the loan and lease portfolios (including accrued interest
receivables) of the First Federal Companies and other extensions of credit
(including letters of credit and commitments to make loans or extend credit) by
the First Federal Companies as of the dates thereof.
(b) The reserve for losses on real estate owned ("REO Reserve") shown on
the consolidated balance sheets of First Federal included in the most recent
First Federal Financial Statements dated prior to the date of this Agreement
was, and the REO Reserve shown on the consolidated balance sheets of First
Federal included in the First Federal Financial Statements as of dates
subsequent to the execution of this Agreement will be, as of the dates thereof,
adequate (within the meaning of GAAP and applicable regulatory
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requirements or guidelines) to provide for losses relating to or inherent in the
other real estate owned portfolios of the First Federal Companies as of the
dates thereof.
(c) The reserves for losses in respect of Litigation ("Litigation
Reserves") shown on the consolidated balance sheets of First Federal included in
the most recent First Federal Financial Statements dated prior to the date of
this Agreement was, and the Litigation Reserves shown on the consolidated
balance sheets of First Federal included in the First Federal Financial
Statements as of dates subsequent to the execution of this Agreement will be, as
of the dates thereof, adequate (within the meaning of GAAP and applicable
regulatory requirements or guidelines) to provide for losses relating to or
arising out of Litigation of the First Federal Companies as of the dates
thereof.
5.9 TAX MATTERS. (a) All Tax returns required to be filed by or on behalf
of any of the First Federal Companies have been timely filed, or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before September 30, 1994 and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time, except to the
extent that all such failures to file, taken together, are not reasonably likely
to have a Material Adverse Effect on First Federal, and all such returns filed
are complete and accurate in all material respects. All Taxes shown on filed
returns have been paid. There is no audit examination, deficiency, or refund
Litigation with respect to any Taxes that is reasonably likely to result in a
determination that would have, individually or in the aggregate, a Material
Adverse Effect on First Federal, except to the extent reserved against in the
First Federal Financial Statements dated prior to the date of this Agreement.
All Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid.
(b) Except as disclosed in Section 5.9(b) of the First Federal Disclosure
Memorandum, none of the First Federal Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due (excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable Taxing authorities) that is
currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of the
First Federal Companies for the period or periods through and including the date
of the respective First Federal Financial Statements has been made and is
reflected on such First Federal Financial Statements.
(d) Effective for the fiscal year ended September 30, 1994, First Federal
adopted Financial Accounting Standards Board Statement 109, "Accounting for
Income Taxes."
5.10 ASSETS. Except as disclosed or reserved against in the First Federal
Financial Statements, the First Federal Companies have good and marketable
title, free and clear of all Liens, to all of their respective Assets that are
material to the business of the First Federal Companies. All material tangible
properties used in the businesses of the First Federal Companies are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with First Federal's past practices. All Assets
which are material to the business of the First Federal Companies, held under
leases or subleases by any of the First Federal Companies, are held under valid
Contracts enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect.
5.11 ENVIRONMENTAL MATTERS. (a) To the Knowledge of First Federal, each
First Federal Company, its Participation Facilities, and its Loan Properties
are, and have been, in compliance with all Environmental Laws, except for
violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Federal.
(b) To the Knowledge of First Federal, there is no Litigation pending or
threatened before any court, governmental agency, or authority, or other forum
in which any First Federal Company or any of its Participation Facilities has
been or, with respect to threatened Litigation, may be named as a defendant (i)
for alleged noncompliance (including by any predecessor) with any Environmental
Law or (ii) relating to the release into the environment of any Hazardous
Material (as defined below) or oil, whether or not occurring at,
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on, under, or involving a site owned, leased, or operated by any First Federal
Company or any of its Participation Facilities, except for such Litigation
pending or threatened that is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on First Federal.
(c) To the Knowledge of First Federal, there is no Litigation pending or
threatened before any court, governmental agency, or board, or other forum in
which any of its Loan Properties (or First Federal in respect of such Loan
Property) has been or, with respect to threatened Litigation, may be named as a
defendant or potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release into the environment of any Hazardous Material or oil, whether or
not occurring at, on, under, or involving a Loan Property, except for such
Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First Federal.
(d) To the Knowledge of First Federal, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c), except such as is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on First Federal.
(e) To the Knowledge of First Federal, during the period of (i) any First
Federal Company's ownership or operation of any of their respective current
properties, (ii) any First Federal Company's participation in the management of
any Participation Facility, or, (iii) any First Federal Company's holding of a
security interest in a Loan Property, there have been no releases of Hazardous
Material or oil in, on, under, or affecting such properties, except such as are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on First Federal. Prior to the period of (i) any First Federal
Company's ownership or operation of any of their respective current properties,
(ii) any First Federal Company's participation in the management of any
Participation Facility, or (iii) any First Federal Company's holding of a
security interest in a Loan Property, to the Knowledge of First Federal, there
were no releases of Hazardous Material or oil in, on, under, or affecting any
such property, Participation Facility, or Loan Property, except such as are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on First Federal.
5.12 COMPLIANCE WITH LAWS. First Federal is an "insured depository
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder. Each First Federal Company has in effect all Permits
necessary for it to own, lease, or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on First Federal, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First Federal.
Except as disclosed in Section 5.12 of the First Federal Disclosure Memorandum,
none of the First Federal Companies:
(a) Is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on First Federal; and
(b) Has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any First Federal Company
is not in compliance with any of the material Laws or material Orders which
such governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Federal, (ii) threatening to
revoke any material Permits the revocation of which is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on First
Federal, or (iii) requiring any First Federal Company (x) to enter into or
consent to the issuance of a cease and desist order, formal agreement,
directive, commitment, or memorandum of understanding, or (y) to adopt any
Board resolution or similar undertaking which restricts materially the
conduct of its business, or in any manner relates to its capital adequacy,
its management, or the payment of dividends.
5.13 LABOR RELATIONS. No First Federal Company is the subject of any
Litigation asserting that it or any other First Federal Company has committed an
unfair labor practice (within the meaning of the National
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Labor Relations Act or comparable state law) or seeking to compel it or any
other First Federal Company to bargain with any labor organization as to wages
or conditions of employment, nor is any First Federal Company a party to or
bound by any collective bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization, nor is there any strike
or other labor dispute involving any First Federal Company, pending or
threatened, or to its Knowledge, is there any activity involving any First
Federal Company's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS. (a) First Federal has disclosed in Section
5.14 of the First Federal Disclosure Memorandum, and has delivered or made
available to Regions prior to the execution of this Agreement correct and
complete copies in each case of, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other written employee programs or
agreements, all medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including, without limitation, "employee benefit plans" as that term is defined
in Section 3(3) of ERISA, currently or previously adopted, maintained by,
sponsored in whole or in part by, or contributed to by any First Federal Company
for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "First Federal
Benefit Plans"). Any of the First Federal Benefit Plans which is an "employee
welfare benefit plan," as that term is defined in Section 3(l) of ERISA, or an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, is referred to herein as a "First Federal ERISA Plan." Any First Federal
ERISA Plan which is also a "defined benefit plan" (as defined in Section 414(j)
of the Internal Revenue Code or Section 3(35) of ERISA) is referred to herein as
a "First Federal Pension Plan." On or after September 26, 1980, neither First
Federal nor any First Federal Company has had an "obligation to contribute" (as
defined in ERISA Section 4212) to a "multiemployer plan" (as defined in ERISA
Sections 4001(a)(3) and 3(37)(A)).
(b) First Federal has delivered or made available to Regions prior to the
execution of this Agreement correct and complete copies of the following
documents: (i) all trust agreements or other funding arrangements for such First
Federal Benefit Plans (including insurance contracts), and all amendments
thereto, (ii) with respect to any such First Federal Benefit Plans or
amendments, all determination letters, rulings, opinion letters, information
letters, or advisory opinions issued by the Internal Revenue Service, the United
States Department of Labor, or the Pension Benefit Guaranty Corporation after
December 31, 1974, (iii) annual reports or returns, audited or unaudited
financial statements, actuarial valuations and reports, and summary annual
reports prepared for any First Federal Benefit Plan with respect to the most
recent three plan years, and (iv) the most recent summary plan descriptions and
any material modifications thereto.
(c) Except as disclosed in Section 5.14(c) of the First Federal Disclosure
Memorandum, all First Federal Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First Federal.
Except as disclosed in Section 5.14(c) of the First Federal Disclosure
Memorandum, each First Federal ERISA Plan which is intended to be qualified
under Section 401(a) of the Internal Revenue Code has received a favorable
determination letter from the Internal Revenue Service, and First Federal is not
aware of any circumstances which will or could result in revocation of any such
favorable determination letter. Except as disclosed in Section 5.14(c) of the
First Federal Disclosure Memorandum, each trust created under any First Federal
ERISA Plan has been determined to be exempt from Tax under Section 501(a) of the
Internal Revenue Code and First Federal is not aware of any circumstance which
will or could result in revocation of such exemption. With respect to each First
Federal Benefit Plan, except as disclosed in Section 5.14(c) of the First
Federal Disclosure Memorandum, no event has occurred which will or could give
rise to a loss of any intended Tax consequences under the Internal Revenue Code
or to any Tax under Section 511 of the Internal Revenue Code. There is no
material pending or threatened Litigation relating to any First Federal ERISA
Plan. Except as disclosed in Section 5.14(c) of the First Federal Disclosure
Memorandum, no First Federal Company has engaged in a transaction with respect
to any First Federal Benefit Plan that, assuming the taxable period of such
transaction expired as of the date
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hereof, would subject any First Federal Company to a tax or penalty imposed by
either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA in
amounts which are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on First Federal.
(d) No First Federal Pension Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value
of the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan terminated in accordance with all
applicable legal requirements. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position of
any First Federal Pension Plan, (ii) no change in the actuarial assumptions with
respect to any First Federal Pension Plan, and (iii) no increase in benefits
under any First Federal Pension Plan as a result of plan amendments or changes
in applicable Law which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Federal or materially adversely
affect the funding status of any such plan. Neither any First Federal Pension
Plan nor any "single-employer plan," within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by any First Federal Company, or the
single-employer plan of any entity which is considered one employer with First
Federal under Section 4001 of ERISA or Section 414 of the Internal Revenue Code
or Section 302 of ERISA (whether or not waived) (an "ERISA Affiliate") has an
"accumulated funding deficiency" within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA. No First Federal Company has
provided, or is required to provide, security to a First Federal Pension Plan or
to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29)
of the Code.
(e) No liability under Title IV of ERISA has been or is expected to be
incurred by any First Federal Company with respect to any defined benefit plan
currently or formerly maintained by any of them or by any ERISA Affiliate).
(f) Except as disclosed in Section 5.14(f) of the First Federal Disclosure
Memorandum, no First Federal Company has any obligations for retiree health and
life benefits under any of the First Federal Benefit Plans.
(g) Except as disclosed in Section 5.14(g) of the First Federal Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute, or otherwise) becoming due to any director or any employee of
any First Federal Company from any First Federal Company under any First Federal
Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under
any First Federal Benefit Plan, or (iii) result in any acceleration of the time
of payment or vesting of any such benefit.
(h) Except as disclosed in Section 5.14(h) of the First Federal Disclosure
Memorandum, no oral or written representation or communication with respect to
any aspect of the First Federal Benefit Plans has been made to employees of any
of the First Federal Companies prior to the date hereof which is not in
accordance with the written or otherwise preexisting terms and provisions of
such plans. Except as disclosed in Section 5.14(h) of the First Federal
Disclosure Memorandum, all First Federal Benefit Plan documents and annual
reports or returns, audited or unaudited financial statements, actuarial
valuations, summary annual reports, and summary plan descriptions issued with
respect to the First Federal Benefit Plans are correct and complete and there
have been no changes in the information set forth therein.
5.15 MATERIAL CONTRACTS. Except as disclosed in Section 5.15 of the First
Federal Disclosure Memorandum, none of the First Federal Companies, nor any of
their respective Assets, businesses, or operations, is a party to, or is bound
or affected by, or receives benefits under (i) any employment, severance,
termination, consulting, or retirement Contract providing for aggregate payments
to any Person in any calendar year in excess of $50,000, (ii) any Contract
relating to the borrowing of money by any First Federal Company or the guarantee
by any First Federal Company of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds, fully-secured
repurchase agreements, and Federal Home Loan Bank advances, trade payables, and
Contracts relating to borrowings or guarantees made in the ordinary course of
business), (iii) any Contracts between or among First Federal Companies; and
(iv) any other Contract or
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amendment thereto that would be required to be filed as an exhibit to a Form
10-K filed by First Federal with the OTS as of the date of this Agreement that
has not been filed as an exhibit to First Federal's Form 10-K for the fiscal
year ended September 30, 1994, (together with all Contracts referred to in
Sections 5.10 and 5.14(a) of this Agreement, the "First Federal Contracts").
None of the First Federal Companies is in Default under any First Federal
Contract which, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on First Federal.
5.16 LEGAL PROCEEDINGS. Except to the extent specifically reserved against
in the First Federal Financial Statements dated prior to the date of this
Agreement, there is no Litigation instituted or pending, or, to the Knowledge of
First Federal, threatened (or unasserted but considered probable of assertion
and which if asserted would have at least a reasonable probability of an
unfavorable outcome) against any First Federal Company, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First Federal,
nor are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any First Federal Company, that
are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on First Federal. First Federal has disclosed in Section 5.16 of
the First Federal Disclosure Memorandum all Litigation pending or, to the
Knowledge of First Federal, threatened as of the date of this Agreement where
there are claims against First Federal.
5.17 REPORTS. Since January 1, 1990, or the date of organization if later,
each First Federal Company has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with (i) the OTS, including, but not limited to, Forms 10-K,
Forms 10-Q, Forms 8-K, and proxy statements, (ii) other Regulatory Authorities,
and (iii) any applicable state securities or banking authorities (except, in the
case of state securities authorities, failures to file which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
First Federal). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its respective
date, each such report and document did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
5.18 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument,
or other writing furnished or to be furnished by any First Federal Company or
any Affiliate thereof to Regions pursuant to this Agreement or any other
document, agreement, or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by any First Federal Company or any Affiliate thereof for inclusion in
the Registration Statement to be filed by Regions with the SEC will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or contain any untrue statement of a material fact, or omit
to state any material fact required to be stated thereunder or necessary to make
the statements therein not misleading. None of the information supplied or to be
supplied by any First Federal Company or any Affiliate thereof for inclusion in
the Proxy Statement to be mailed to First Federal's stockholders in connection
with the Stockholders' Meeting, and any other documents to be filed by a First
Federal Company or any Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the Proxy
Statement, when first mailed to the stockholders of First Federal, be false or
misleading with respect to any material fact, or contain any misstatement of
material fact, or omit to state any material fact required to be stated
thereunder or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto, at the time of
the Stockholders' Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact required to be stated thereunder or
necessary to correct any material statement in any earlier communication with
respect to the solicitation of any proxy for the Stockholders' Meeting. All
documents that any First Federal Company or any Affiliate thereof is responsible
for filing with any
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Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
5.19 TAX AND REGULATORY MATTERS. No First Federal Company or any Affiliate
thereof has taken any action, or agreed to take any action, or has any Knowledge
of any fact or circumstance that is reasonably likely to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying for
treatment as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) of this
Agreement. To the Knowledge of First Federal, there exists no fact,
circumstance, or reason why the requisite Consents referred to in Section 9.1(b)
of this Agreement cannot be received in a timely manner without imposition of
any condition of the type described in the second sentence of such Section
9.1(b).
5.20 STATE TAKEOVER LAWS. No fair price, control share, business
combination, supermajority voting, or similar Law is applicable to the
transactions contemplated by this Agreement.
5.21 CHARTER PROVISIONS. Each First Federal Company has taken all action
so that the entering into of this Agreement and the consummation of the Merger
and the other transactions contemplated by this Agreement do not and will not
result in the grant of any rights to any Person (other than a Regions Company)
under the Charter, Bylaws, or other governing instruments of any First Federal
Company or restrict or impair the ability of Regions to vote, or otherwise to
exercise the rights of a shareholder with respect to, shares of any First
Federal Company that may be acquired or controlled by it.
5.22 SUPPORT AGREEMENTS. Each of the directors and executive officers of
First Federal has executed and delivered to Regions an agreement in
substantially the form of Exhibit 1 to this Agreement.
ARTICLE SIX
REPRESENTATIONS AND WARRANTIES OF REGIONS
Regions hereby represents and warrants to First Federal as follows:
6.1 ORGANIZATION, STANDING, AND POWER. Regions is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business as
now conducted and to own, lease, and operate its Assets. Regions is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Regions.
6.2 AUTHORITY; NO BREACH BY AGREEMENT. (a) Regions has the corporate power
and authority necessary to execute, deliver, and perform its obligations under
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Regions. This Agreement represents a legal, valid, and binding
obligation of Regions, enforceable against Regions in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Regions, nor
the consummation by Regions of the transactions contemplated hereby, nor
compliance by Regions with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of Region's Certificate of Incorporation
or Bylaws, or (ii) constitute or result in a Default under, or require any
Consent pursuant to, or result in the creation of any Lien on any Asset of any
Regions Company under, any Contract or Permit of any Regions Company, or (iii)
subject to receipt of the requisite approvals referred to in Section 9.1(b) of
this Agreement, violate any Law or Order applicable to any Regions Company or
any of their respective Assets.
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(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans
and other than Consents, filings, or notifications which, if not obtained or
made, is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions, no notice to, filing with, or Consent of,
any public body or authority is necessary for the consummation by Regions or
First Federal Interim of the Merger and the other transactions contemplated in
this Agreement.
6.3 CAPITAL STOCK. The authorized capital stock of Regions consists of
120,000,000 shares of Regions Common Stock, of which 45,397,944 shares were
issued and outstanding and 1,474,579 shares were held as treasury shares as of
June 30, 1995. All of the issued and outstanding shares of Regions Common Stock
are, and all of the shares of Regions Common Stock to be issued in exchange for
shares of First Federal Common Stock upon consummation of the Merger, when
issued in accordance with the terms of this Agreement, will be, duly and validly
issued and outstanding and fully paid and nonassessable under the Delaware GCL.
None of the outstanding shares of Regions Common Stock has been, and none of the
shares of Regions Common Stock to be issued in exchange for shares of First
Federal Common Stock upon consummation of the Merger will be, issued in
violation of any preemptive rights of the current or past stockholders of
Regions.
6.4 REGIONS SUBSIDIARIES. Regions has disclosed in Section 6.4 of the
Regions Disclosure Memorandum all of the Regions Subsidiaries as of the date of
this Agreement. Except as disclosed, Regions or one of its Subsidiaries owns all
of the issued and outstanding shares of capital stock of each Regions
Subsidiary. No equity securities of any Regions Subsidiary are or may become
required to be issued (other than to an Regions Company) by reason of any
options, warrants, scrip, rights to subscribe to, calls, or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of any such Subsidiary, and there
are no Contracts by which any Regions Subsidiary is bound to issue (other than
to an Regions Company) additional shares of its capital stock or options,
warrants, or rights to purchase or acquire any additional shares of its capital
stock or by which any Regions Company is or may be bound to transfer any shares
of the capital stock of any Regions Subsidiary (other than to an Regions
Company). There are no Contracts relating to the rights of any Regions Company
to vote or to dispose of any shares of the capital stock of any Regions
Subsidiary. All of the shares of capital stock of each Regions Subsidiary held
by an Regions Company are duly authorized, validly issued, and fully paid and
(except pursuant to 12 U.S.C. Section 55, in the case of national banks)
nonassessable under the applicable corporation Law of the jurisdiction in which
such Subsidiary is incorporated or organized and are owned by the Regions
Company free and clear of any Lien. Each Regions Subsidiary is either a bank or
a corporation, and is duly organized, validly existing, and (as to corporations)
in good standing under the Laws of the jurisdiction in which it is incorporated
or organized, and has the corporate power and authority necessary for it to own,
lease, and operate its Assets and to carry on its business as now conducted.
Each Regions Subsidiary is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions. Each Regions Subsidiary that is a depository institution is
an "insured institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder, and the deposits in which are insured by the
Bank Insurance Fund or the Savings Association Insurance Fund.
6.5 FINANCIAL STATEMENTS. Regions has disclosed in Section 6.5 of the
Regions Disclosure Memorandum and has delivered to First Federal copies of all
Regions Financial Statements prepared for periods ended prior to the date hereof
and will deliver to First Federal copies of all Regions Financial Statements
prepared subsequent to the date hereof. The Regions Financial Statements (as of
the dates thereof and for the periods covered thereby) (i) are or, if dated
after the date of this Agreement, will be in accordance with the books and
records of the Regions Companies, which are or will be, as the case may be,
complete and correct and which have been or will have been, as the case may be,
maintained in accordance with good business practices, and (ii) present or will
present, as the case may be, fairly the consolidated financial position of the
Regions
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Companies as of the dates indicated and the consolidated results of operations,
changes in stockholders' equity, and cash flows of the Regions Companies for the
periods indicated, in accordance with GAAP (subject to exceptions as to
consistency specified therein or as may be indicated in the notes thereto or, in
the case of interim financial statements, to normal recurring year-end
adjustments that are not material).
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Regions Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Regions as of
June 30, 1995 included in the Regions Financial Statements or reflected in the
notes thereto. Except as disclosed in Section 6.6 of the Regions Disclosure
Memorandum, no Regions Company has incurred or paid any Liability since June 30,
1995, except for such Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Regions.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1995, except as
disclosed in the Regions Financial Statements filed with the SEC after such date
and prior to the date of this Agreement or in Section 6.7 of the Regions
Disclosure Memorandum, there have been no events, changes, or occurrences which
have had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions.
6.8 COMPLIANCE WITH LAWS. Regions is duly registered as a bank holding
company under the BHC Act. Each Regions Company has in effect all Permits
necessary for it to own, lease, or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions, and there has occurred no Default under any such Permit,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Regions. None of the Regions
Companies:
(a) Is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions; and
(b) Has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any Regions Company is
not in compliance with any of the material Laws or material Orders which
such governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions, (ii) threatening to revoke
any Permits, the revocation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Regions, or
(iii) requiring any Regions Company (x) to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or (y) to adopt any Board
resolution or similar undertaking which restricts materially the conduct of
its business, or in any manner relates to its capital adequacy, its
management, or the payment of dividends.
6.9 LEGAL PROCEEDINGS. Except to the extent specifically reserved against
in the Regions Financial Statements dated prior to the date of this Agreement,
there is no Litigation instituted or pending, or, to the Knowledge of Regions,
threatened (or unasserted but considered probable of assertion and which if
asserted would have at least a reasonable probability of an unfavorable outcome)
against any Regions Company, or against any Asset, interest, or right of any of
them, that is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
any Regions Company, that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions.
6.10 REPORTS. Since January 1, 1990, or the date of organization if later,
Regions has filed all reports and statements, together with any amendments
required to be made with respect thereto, that it was required to file with (i)
the SEC, including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and
proxy statements, (ii) other Regulatory Authorities, and (iii) any applicable
state securities or banking authorities
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(except, in the case of state securities authorities, failures to file which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Regions). As of their respective dates, each of such reports
and documents, including the financial statements, exhibits, and schedules
thereto, complied in all material respects with all applicable Laws. As of its
respective date, each such report and document did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
6.11 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument,
or other writing furnished or to be furnished by any Regions Company or any
Affiliate thereof to First Federal pursuant to this Agreement or any other
document, agreement, or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by any Regions Company or any Affiliate thereof for inclusion in the
Registration Statement to be filed by Regions with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or contain any untrue statement of a material fact, or omit
to state any material fact required to be stated thereunder or necessary to make
the statements therein not misleading. None of the information supplied or to be
supplied by any Regions Company or any Affiliate thereof for inclusion in the
Proxy Statement to be mailed to First Federal's stockholders in connection with
the Stockholders' Meeting, and any other documents to be filed by any Regions
Company or any Affiliate thereof with the SEC or any other Regulatory Authority
in connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the stockholders of First Federal, be false or misleading with
respect to any material fact, or contain any misstatement of material fact, or
omit to state any material fact required to be stated thereunder or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or, in the case of the Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Stockholders' Meeting, be
false or misleading with respect to any material fact, or omit to state any
material fact required to be stated thereunder or necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Stockholders' Meeting. All documents that any Regions Company or
any Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
6.12 AUTHORITY OF FIRST FEDERAL INTERIM. First Federal Interim is, or
prior to the Effective Time will be, a federal stock savings bank duly
organized, validly existing, and in good standing under the Laws of the United
States as a wholly owned, first tier Subsidiary of Regions. First Federal
Interim has, or will have, the corporate power and authority necessary to
execute, deliver, and perform its obligations under the Plan of Merger and to
consummate the transactions contemplated thereby. The execution, delivery, and
performance of the Plan of Merger and the consummation of the transactions
contemplated therein, including the Merger, will be duly and validly authorized
by all necessary corporate action in respect thereof on the part of First
Federal Interim. When executed and delivered, the Plan of Merger will represent
a legal, valid, and binding obligation of First Federal Interim, enforceable
against First Federal Interim in accordance with its terms (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
6.13 TAX AND REGULATORY MATTERS. No Regions Company or any Affiliate
thereof has taken any action, or agreed to take any action, or has any Knowledge
of any fact or circumstance that is reasonably likely to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying for
treatment as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) of this
Agreement. To the Knowledge of Regions, there exists no fact, circumstance, or
reason why the requisite Consents referred to
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in Section 9.1(b) of this Agreement cannot be received in a timely manner
without imposition of any condition of the type described in the second sentence
of such Section 9.1(b).
ARTICLE SEVEN
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 COVENANTS OF BOTH PARTIES. Unless the prior written consent of the
other Party shall have been obtained, and except as otherwise expressly
contemplated herein, each Party shall and shall cause each of its Subsidiaries
to (i) operate its business only in the usual, regular, and ordinary course,
(ii) preserve intact its business organizations and Assets and maintain its
rights and franchises, and (iii) take no action which would materially adversely
affect the ability of any Party to (a) obtain any Consents required for the
transactions contemplated hereby, or (b) perform its covenants and agreements
under this Agreement in all material respects and to consummate the Merger;
provided, that the foregoing shall not prevent any Regions Company from
discontinuing or disposing of any of its Assets or business, or from acquiring
or agreeing to acquire any other Person or any Assets thereof, if such action
is, in the judgment of Regions, desirable in the conduct of the business of
Regions and its Subsidiaries.
7.2 COVENANTS OF FIRST FEDERAL. Except as specifically contemplated or
permitted by this Agreement, from the date of this Agreement until the earlier
of the Effective Time or the termination of this Agreement, First Federal
covenants and agrees that it will not do or agree or commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior written consent of the chief executive officer or chief financial
officer of Regions:
(a) amend the Charter, Bylaws, or other governing instruments of any
First Federal Company; or
(b) incur, guarantee, or otherwise become responsible for, any
additional debt obligation or other obligation for borrowed money (other
than indebtedness of a First Federal Company to another First Federal
Company) in excess of an aggregate of $100,000 (for the First Federal
Companies on a consolidated basis) except in the ordinary course of the
business of First Federal Companies consistent with past practices (which
shall include, for First Federal, creation of deposit liabilities,
purchases of federal funds, advances from the Federal Home Loan Bank or the
Federal Reserve Bank, and entry into repurchase agreements fully secured by
U.S. government or agency securities), or, except as disclosed in Section
7.2(b) of the First Federal Disclosure Memorandum, forgive any such
indebtedness of any Person to any First Federal Company (in excess of an
aggregate of $25,000), or impose, or suffer the imposition, on any share of
stock held by any First Federal Company of any Lien or permit any such Lien
to exist; or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any First Federal Company, or declare or pay any
dividend or make any other distribution in respect of any First Federal
Common Stock; provided that First Federal may (to the extent legally able
to do so), but shall not be obligated to, declare and pay (i) regular
quarterly cash dividends at a rate not in excess of $.15 per share and (ii)
a regular annual cash dividend for the 1995 calendar year (to be paid in
January 1996) at a rate not in excess of $1.00 per share on the shares of
First Federal Common Stock with usual and regular record and payment dates
in accordance with past practice disclosed in Section 7.2(c) of the First
Federal Disclosure Memorandum; and provided further, that any dividend
declared or payable on the shares of First Federal Common Stock for the
quarter during which the Effective Time occurs shall, unless otherwise
agreed upon in writing by Regions and First Federal, be declared only if
the record date for payment of the quarterly dividend to holders of Regions
Common Stock for the quarter in which the Effective Time occurs is prior to
the Effective Time; or
(d) except pursuant to the exercise of stock options outstanding as of
the date hereof and pursuant to the terms thereof in existence on the date
hereof, issue, sell, pledge, encumber, authorize the issuance of, enter
into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of, or otherwise
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permit to become outstanding, any additional shares of First Federal Common
Stock or any other capital stock of any First Federal Company, or any stock
appreciation rights, or any option, warrant, conversion, or other right to
acquire any such stock, or any security convertible into any such stock; or
(e) adjust, split, combine, or reclassify any capital stock of any
First Federal Company or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of First Federal
Common Stock or sell, lease, mortgage, or otherwise dispose of or otherwise
encumber any shares of capital stock of any First Federal Subsidiary
(unless any such shares of stock are sold or otherwise transferred to
another First Federal Company) or any Assets having in the aggregate a book
value in excess of $100,000 other than in the ordinary course of business
for reasonable and adequate consideration; or
(f) acquire direct or indirect control over, or invest in equity
securities of, any Person, other than in connection with (i) foreclosures
in the ordinary course of business, or (ii) acquisitions of control by
First Federal in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees or
officers of any First Federal Company except as disclosed in Section 7.2(g)
of the First Federal Disclosure Memorandum or as required by Law; pay any
bonus except pursuant to the provisions of any applicable program or plan
adopted by its Board of Directors prior to the date of this Agreement and
disclosed in Section 7.2(g) of the First Federal Disclosure Memorandum;
enter into or amend any severance agreements with officers of any First
Federal Company except as disclosed in Section 7.2(g) of the First Federal
Disclosure Memorandum; grant any increase in fees or other increases in
compensation or other benefits to directors of any First Federal Company;
or
(h) except as disclosed in Section 7.2(h) of the First Federal
Disclosure Memorandum, enter into or amend any employment Contract between
any First Federal Company and any Person (unless such amendment is required
by Law) that the First Federal Company does not have the unconditional
right to terminate without Liability (other than Liability for services
already rendered), at any time on or after the Effective Time; or
(i) except as disclosed in Section 7.2(i) of the First Federal
Disclosure Memorandum, adopt any new employee benefit plan or program of
any First Federal Company or make any material change in or to any existing
employee benefit plans or programs of any First Federal Company other than
any such change that is required by Law or that, in the opinion of counsel,
is necessary or advisable to maintain the tax qualified status of any such
plan; or
(j) make any significant change in any accounting methods, principles,
or practices or systems of internal accounting controls, except as may be
necessary to conform to changes in regulatory accounting requirements or
GAAP; or
(k) commence or settle any Litigation other than in accordance with
past practice; provided that, except to the extent specifically reserved
against in the First Federal Financial Statements dated prior to the date
of this Agreement, no First Federal Company shall settle any Litigation
involving any Liability of any First Federal Company for money damages in
excess of $25,000 or restrictions upon the operations of any First Federal
Company; or
(l) except in the ordinary course of business, enter into or terminate
any material Contract or make any change in any material lease or Contract,
other than renewals of leases and Contracts without material adverse
changes of terms or as disclosed pursuant to Sections 7.2(g), (h), or (i)
of the First Federal Disclosure Memorandum.
7.3 COVENANTS OF REGIONS. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Regions
covenants and agrees that it will not, without the prior written consent of the
chief executive officer or chief financial officer of First Federal amend the
Certificate of Incorporation or Bylaws of Regions, in each case, in any manner
which is adverse to, and discriminates against, the holders of First Federal
Common Stock.
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7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) is reasonably likely to cause
or constitute a material breach of any of its representations, warranties, or
covenants contained herein, and to use its reasonable efforts to prevent or
promptly to remedy the same.
7.5 REPORTS. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and First Federal shall deliver to Regions
copies of all such reports filed by First Federal promptly after the same are
filed. If financial statements are contained in any such reports filed with the
SEC, in the case of Regions, or the OTS, in the case of First Federal, such
financial statements will fairly present the consolidated financial position of
the entity filing such statements as of the dates indicated and the consolidated
results of operations, changes in stockholders' equity, and cash flows for the
periods then ended in accordance with GAAP (subject in the case of interim
financial statements to normal recurring year-end adjustments that are not
material). As of their respective dates, such reports filed with the SEC or the
OTS, as the case may be, will comply in all material respects with the
Securities Laws and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Any financial statements contained in any other
reports to another Regulatory Authority shall be prepared in accordance with
Laws applicable to such reports.
ARTICLE EIGHT
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; STOCKHOLDER APPROVAL. As soon
as reasonably practicable after the execution of this Agreement, Regions shall
file the Registration Statement with the SEC, provided First Federal has
provided, on a reasonably timely basis, all information concerning First Federal
necessary for inclusion in the Registration Statement, and shall use its
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act as soon as reasonably practicable after the filing thereof and take
any action required to be taken under the applicable state Blue Sky or
securities Laws in connection with the issuance of the shares of Regions Common
Stock upon consummation of the Merger. First Federal shall promptly furnish all
information concerning it and the holders of its capital stock as Regions may
reasonably request in connection with such action. First Federal shall call a
Stockholders' Meeting, to be held within forty-five (45) days after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of (i) this Agreement and the Plan of Merger, (ii) such
other related matters as it deems appropriate. In connection with the
Stockholders' Meeting, (i) First Federal shall, if required, file the Proxy
Statement (which shall be included in the Registration Statement) with the OTS
and mail it to its stockholders, (ii) the Parties shall furnish to each other
all information concerning them that they may reasonably request in connection
with such Proxy Statement, (iii) the Board of Directors of First Federal shall
recommend (subject to compliance with their fiduciary duties as advised in
writing by counsel to such Board) to its stockholders the approval of this
Agreement and the Plan of Merger, and (iv) the Board of Directors and officers
of First Federal shall use their reasonable efforts to obtain such stockholders'
approval (subject to compliance with their fiduciary duties as advised in
writing by counsel to such Board).
8.2 NASDAQ/NMS LISTING. Regions shall file with the NASD a notification
for the listing on the Nasdaq/NMS relating to the proposed issuance of the
shares of Regions Common Stock to be issued to the holders of First Federal
Common Stock pursuant to the Merger.
8.3 APPLICATIONS. As soon as reasonably practicable after execution of
this Agreement, Regions shall prepare and file, and First Federal shall
cooperate in the preparation and, where appropriate, filing of, applications
with all Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement seeking the requisite Consents necessary to
consummate the transactions contemplated by this
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Agreement. Regions shall use all reasonable efforts to obtain the requisite
Consents of all Regulatory Authorities as soon as reasonably practicable after
the filing of the appropriate applications.
8.4 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including, without limitation, using its reasonable efforts to
lift or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
applicable to such Party referred to in Article Nine of this Agreement. Each
Party shall use, and shall cause each of its Subsidiaries to use, its reasonable
efforts to obtain all Consents necessary or desirable for the consummation of
the transactions contemplated by this Agreement.
8.5 INVESTIGATION AND CONFIDENTIALITY. (a) Prior to the Effective Time,
each Party will keep the other Party advised of all material developments
relevant to its business and to consummation of the Merger and shall permit the
other Party to make or cause to be made such investigation of the business and
properties of it and its Subsidiaries and of their respective financial and
legal conditions as the other Party reasonably requests, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unreasonably with normal operations. No
investigation by a Party shall affect the representations and warranties of the
other Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the other
Party concerning its and its Subsidiaries' businesses, operations, and financial
positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return all documents and copies thereof, and all work papers containing
confidential information received from the other Party.
(c) First Federal shall use its reasonable efforts to exercise its rights
under confidentiality agreements entered into with Persons which were
considering an acquisition transaction with First Federal to preserve the
confidentiality of the information relating to First Federal provided to such
parties.
8.6 PRESS RELEASES. Prior to the Effective Time, First Federal and Regions
shall consult with each other as to the form and substance of any press release
or other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, however, that nothing in this Section
8.6 shall be deemed to prohibit any Party from making any disclosure which its
counsel advises as necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.7 CERTAIN ACTIONS. Except with respect to this Agreement and the
transactions contemplated hereby, no First Federal Company nor any Affiliate
thereof nor any investment banker, attorney, accountant, or other representative
(collectively, "Representatives") retained by any First Federal Company shall
directly or indirectly solicit any Acquisition Proposal by any Person. Except to
the extent necessary to comply with the fiduciary duties of First Federal's
Board of Directors as advised in writing by counsel to such Board of Directors,
no First Federal Company or any Affiliate or Representative thereof shall
furnish any non-public information that it is not legally obligated to furnish,
negotiate with respect to, or enter into any Contract with respect to, any
Acquisition Proposal, and shall direct and use its reasonable efforts to cause
all of its Representatives not to engage in any of the foregoing, but First
Federal may communicate information about such an Acquisition Proposal to its
stockholders if and to the extent that it is required to do so in order to
comply with its legal obligations. First Federal shall promptly notify Regions
orally and in writing in the event that it receives any inquiry or proposal
relating to any such transaction. First Federal shall immediately cease and
cause to be terminated as of the date of this Agreement any existing activities,
discussions, or negotiations with any Persons conducted heretofore with respect
to any of the foregoing.
8.8 TAX MATTERS. The Parties agree to use their reasonable efforts to
obtain written opinions of Alston & Bird to the effect that (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, (ii) the exchange in the Merger of First Federal Common Stock for
Regions
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Common Stock will not give rise to gain or loss to the stockholders of First
Federal with respect to such exchange (except to the extent of any cash
received), (iii) the exchange or conversion by the stockholders of First Federal
of their First Federal Options for options with respect to Regions Common Stock,
as contemplated by Section 3.6 of this Agreement, will not give rise to any gain
or loss to such stockholders with respect to such exchange, and (iv) each of
First Federal, Regions, and First Federal Interim will be a party to that
reorganization within the meaning of Section 368(b) of the Internal Revenue Code
("Tax Opinions"). In rendering such Tax Opinions, counsel shall be entitled to
rely upon representations of officers of First Federal and Regions reasonably
satisfactory in form and substance to such counsel. Each of the Parties
undertakes and agrees to use its reasonable efforts to cause the Merger, and to
take no action which would cause the Merger not, to qualify for treatment as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code for Federal income tax purposes.
8.9 AGREEMENTS OF AFFILIATES. First Federal has disclosed in Section 8.9
of the First Federal Disclosure Memorandum all Persons whom it reasonably
believes is an "affiliate" of First Federal for purposes of Rule 145 under the
1933 Act. First Federal shall use its reasonable efforts to cause each such
Person to deliver to Regions not later than thirty (30) days prior to the
Effective Time, a written agreement, substantially in the form of Exhibit 3 to
this Agreement, providing that such Person will not sell, pledge, transfer, or
otherwise dispose of the shares of First Federal Common Stock held by such
Person except as contemplated by such agreement or by this Agreement and will
not sell, pledge, transfer, or otherwise dispose of the shares of Regions Common
Stock to be received by such Person upon consummation of the Merger except in
compliance with applicable provisions of the 1933 Act and the rules and
regulations thereunder (and Regions shall be entitled to place restrictive
legends upon certificates for shares of Regions Common Stock issued to
affiliates of First Federal pursuant to this Agreement to enforce the provisions
of this Section 8.9). Regions shall not be required to maintain the
effectiveness of the Registration Statement under the 1933 Act for the purposes
of resale of Regions Common Stock by such affiliates.
8.10 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Time,
Regions shall provide generally to officers and employees of the First Federal
Companies, who at or after the Effective Time become employees of a Regions
Company, employee benefits under employee benefit plans (other than stock option
or other plans involving the potential issuance of Regions Common Stock except
as set forth in this Section 8.10), on terms and conditions which when taken as
a whole are substantially similar to those currently provided by the Regions
Companies to their similarly situated officers and employees. For purposes of
participation and vesting (but not accrual of benefits) under such employee
benefit plans, (i) service under any qualified defined benefit plans of First
Federal should be treated as service under Regions' qualified defined benefit
plans, (ii) service under any qualified defined contribution plans of First
Federal shall be treated as service under Regions' qualified defined
contribution plans, and (iii) service under any other employee benefit plans of
First Federal shall be treated as service under any similar employee benefit
plans maintained by Regions. Regions also shall cause First Federal and its
Subsidiaries to honor on terms reasonably agreed upon by the Parties all
employment, severance, consulting, and other compensation Contracts disclosed in
Section section 8.10 of the First Federal Disclosure Memorandum to Regions
between any First Federal Company and any current or former director, officer,
or employee thereof, and all provisions for vested benefits or other vested
amounts earned or accrued through the Effective Time under the First Federal
Benefit Plans.
8.11 INDEMNIFICATION. (a) Subject to the conditions set forth in paragraph
(b) below, for a period of six (6) years after the Effective Time, Regions
shall, and shall cause the Surviving Association to, indemnify, defend, and hold
harmless each person entitled to indemnification from a First Federal Company
(each, an "Indemnified Party") against all Liabilities arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement) to the same extent
and subject to the conditions set forth in applicable regulations of the OTS
(including all official interpretations thereof) and First Federal's Charter and
Bylaws, in each case as in effect on the date hereof, including provisions
relating to advances of expenses incurred in the defense of any Litigation.
Without limiting the foregoing, in any case in which approval by the Surviving
Association is required to effectuate any indemnification, Regions shall cause
the Surviving Association to direct, at the election of the Indemnified
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Party, that the determination of any such approval shall be made by independent
counsel mutually agreed upon between Regions and the Indemnified Party.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a), upon learning of any such Liability or Litigation, shall promptly notify
Regions thereof. In the event of any such Litigation (whether arising before or
after the Effective Time), (i) Regions or the Surviving Association shall have
the right to assume the defense thereof and Regions shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if Regions or the Surviving Association elects
not to assume such defense or counsel for the Indemnified Parties advises that
there are substantive issues which raise conflicts of interest between Regions
or the Surviving Association and the Indemnified Parties, the Indemnified
Parties may retain counsel satisfactory to them, and Regions or the Surviving
Association shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that Regions shall be obligated pursuant to this paragraph (b) to pay
for only one firm of counsel for all Indemnified Parties in any jurisdiction,
(ii) the Indemnified Parties will cooperate in the defense of any such
Litigation, and (iii) Regions shall not be liable for any settlement effected
without its prior written consent; and provided further that the Surviving
Association shall not have any obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law.
ARTICLE NINE
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of
each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
(a) Stockholder Approval. The stockholders of First Federal shall have
approved this Agreement and the Plan of Merger and the consummation of the
transactions contemplated hereby and thereby, including the Merger, as and
to the extent required by Law or by the provisions of any governing
instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent so obtained which is necessary to consummate the
transactions as contemplated hereby shall be conditioned or restricted in a
manner which in the reasonable good faith judgment of the Board of
Directors of Regions would so materially adversely impact the economic
benefits of the transaction as contemplated by this Agreement so as to
render inadvisable the consummation of the Merger.
(c) Consents and Approvals. Each Party shall have obtained any and
all other Consents required for consummation of the Merger (other than
those referred to in Section 9.1(b) of this Agreement) or for the
preventing of any Default under any Contract or Permit of such Party which,
if not obtained or made, is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on such Party.
(d) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
preliminary, or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of the transactions contemplated
by this Agreement.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action,
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suit, proceeding, or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities Laws or the 1933 Act or 1934 Act relating
to the issuance or trading of the shares of Regions Common Stock issuable
pursuant to the Merger shall have been received.
(f) Nasdaq/NMS Listing. The shares of Regions Common Stock issuable
pursuant to the Merger shall have been approved for listing on the
Nasdaq/NMS.
(g) Tax Matters. Each Party shall have received a copy of the Tax
Opinions referred to in Section 8.8 of this Agreement. Each Party shall
have delivered to the other a Certificate, dated as of the Effective Time,
signed by its chief executive officer and chief financial officer, to the
effect that, to the best knowledge and belief of such officers, the
statement of facts and representations made on behalf of the management of
such Party, presented to the legal counsel delivering the Tax Opinions were
at the date of such presentation, true, correct, and complete, and are on
the date of such Certificate, to the extent contemplated by the
presentation, true, correct, and complete, as though such presentation had
been made on the date of such Certificate.
9.2 CONDITIONS TO OBLIGATIONS OF REGIONS. The obligations of Regions to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Regions pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of First Federal
set forth in this Agreement shall be assessed as of the date of this
Agreement and as of the Effective Time with the same effect as though all
such representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties which are
confined to a specified date shall speak only as of such date). The
representations and warranties of First Federal set forth in Section 5.3 of
this Agreement shall be true and correct (except for inaccuracies which are
de minimus in amount). The representations and warranties of First Federal
set forth in Sections 5.19, 5.20, 5.21, and 5.22 of this Agreement shall be
true and correct in all material respects. There shall not exist
inaccuracies in the representations and warranties of First Federal set
forth in this Agreement (including the representations and warranties set
forth in Sections 5.3, 5.19, 5.20, 5.21, and 5.22) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a
Material Adverse Effect on First Federal; provided that, for purposes of
this sentence only, those representations and warranties which are
qualified by references to "material" or "Material Adverse Effect" shall be
deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of First Federal to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(c) Certificates. First Federal shall have delivered to Regions (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Sections 9.2(a) and 9.2(b)
of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by First Federal's Board of Directors and
stockholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery, and performance of this Agreement, and
the consummation of the transactions contemplated hereby, all in such
reasonable detail as Regions and its counsel shall request.
(d) Claims Letters. Each of the directors and officers of First
Federal shall have executed and delivered to Regions letters in
substantially the form of Exhibit 4 to this Agreement.
(e) Legal Opinion. Regions shall have received a written opinion,
dated as of the Effective Time, of counsel to First Federal, in
substantially the form of Exhibit 5 to this Agreement.
9.3 CONDITIONS TO OBLIGATIONS OF FIRST FEDERAL. The obligations of First
Federal to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the
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satisfaction of the following conditions, unless waived by First Federal
pursuant to Section 11.6(b) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of Regions set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of Regions set forth in Section 6.3 of this Agreement shall be
true and correct (except for inaccuracies which are de minimus in amount).
The representations and warranties of Regions set forth in Section 6.13 of
this Agreement shall be true and correct in all material respects. There
shall not exist inaccuracies in the representations and warranties of
Regions set forth in this Agreement (including the representations and
warranties set forth in Sections 6.3 and 6.13) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a
Material Adverse Effect on Regions; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material" or "Material Adverse Effect" shall be deemed not
to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Regions to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(c) Certificates. Regions shall have delivered to First Federal (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Sections 9.3(a) and 9.3(b)
of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Region's Board of Directors and First Federal
Interim's Board of Directors and stockholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery, and
performance of this Agreement and the Plan of Merger, as appropriate, and
the consummation of the transactions contemplated hereby, all in such
reasonable detail as First Federal and its counsel shall request.
(d) Fairness Opinion. First Federal shall have received a letter from
The Robinson-Humphrey Company, Inc. or another financial adviser selected
by First Federal dated not more than ten (10) days subsequent to the date
of this Agreement and to be updated to a date not more than five (5) days
prior to the date of the Proxy Statement, to the effect that in the opinion
of such firm, the consideration to be received in the Merger by the
stockholders of First Federal is fair to the stockholders of First Federal
from a financial point of view.
(e) Legal Opinion. First Federal shall have received a written
opinion, dated as of the Effective Time, of counsel to Regions, in
substantially the form of Exhibit 6 to this Agreement.
ARTICLE TEN
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this Agreement
and the Plan of Merger, and notwithstanding the approval of this Agreement by
the stockholders of First Federal, this Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of Regions and the
Board of Directors of First Federal; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of First Federal and Section
9.3(a) in the case of Regions or in material breach of any covenant or
other agreement contained in this Agreement) in the event of an inaccuracy
of any representation or warranty of the other Party contained in this
Agreement
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which cannot be or has not been cured within thirty (30) days after the
giving of written notice to the breaching Party of such inaccuracy and
which inaccuracy would provide the terminating Party the ability to refuse
to consummate the Merger under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of First Federal and Section 9.3(a) of
this Agreement in the case of Regions; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of First Federal and Section
9.3(a) in the case of Regions or in material breach of any covenant or
other agreement contained in this Agreement) in the event of a material
breach by the other Party of any covenant or agreement contained in this
Agreement which cannot be or has not been cured within thirty (30) days
after the giving of written notice to the breaching Party of such breach;
or
(d) By the Board of Directors of either Party in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger
and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
shareholders of First Federal fail to vote their approval of this Agreement
and the Plan of Merger and the transactions contemplated hereby and thereby
as required by the HOLA and the regulations of the OTS at the First Federal
Stockholders' Meeting where the transactions were presented to such
shareholders for approval and voted upon; or
(e) By the Board of Directors of First Federal or by the Board of
Directors of Regions in the event that the Merger shall not have been
consummated by July 31, 1996, in each case only if the failure to
consummate the transactions contemplated hereby on or before such date is
not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of First Federal and Section
9.3(a) in the case of Regions or in material breach of any covenant or
other agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the
Merger (other than as contemplated by Section 10.1(d) of this Agreement)
cannot be satisfied or fulfilled by the date specified in Section 10.1(e)
of this Agreement as the date after which such Party may terminate this
Agreement; or
(g) By First Federal, if its Board of Directors determines by a vote
of a majority of the members of its entire Board, at any time during the
ten-day period commencing two days after the Determination Date, if both of
the following conditions are satisfied:
(1) the Average Closing Price on the Determination Date of shares
of Regions Common Stock shall be less than $36.00; and
(2) (i) the quotient obtained by dividing the Average Closing Price
on the Determination Date by $41.00 (such number being referred to
herein as the "Regions Ratio") shall be less than (ii) the quotient
obtained by dividing the Index Price on the Determination Date by the
Index Price on the Starting Date and subtracting 0.15 from the quotient
in this clause (x)(2)(ii) (such number being referred to herein as the
"Index Ratio").
subject, however, to the following three sentences. If First Federal
refuses to consummate the Merger pursuant to this Section 10.1(g), it shall
give prompt written notice thereof to Regions; provided, that such notice
of election to terminate may be withdrawn at any time within the
aforementioned ten-day period. During the five-day period commencing with
its receipt of such notice, Regions shall have the option to elect to
increase the Exchange Ratio to equal the lesser of (i) the quotient
obtained by dividing (1) the product of $36.00 and the Exchange Ratio (as
then in effect) by (2) the Average Closing Price, and (ii) the quotient
obtained by dividing (1) the product of the Index Ratio and the Exchange
Ratio (as then in effect) by (2) the Regions Ratio. If Regions makes an
election contemplated by the preceding sentence, within such five-day
period, it shall give prompt written notice to First Federal of such
election
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and the revised Exchange Ratio, whereupon no termination shall have
occurred pursuant to this Section 10.1(g) and this Agreement shall remain
in effect in accordance with its terms (except as the Exchange Ratio shall
have been so modified), and any references in this Agreement to "Exchange
Ratio" shall thereafter be deemed to refer to the Exchange Ratio as
adjusted pursuant to this Section 10.1(g).
For purposes of this Section 10.1(g), the following terms shall have
the meanings indicated:
"Average Closing Price" shall mean the average of the daily closing
sales prices of Regions Common Stock as reported on the Nasdaq/NMS (as
reported by The Wall Street Journal or, if not reported thereby, another
authoritative source as chosen by Regions) for the ten consecutive full
trading days in which such shares are traded on the Nasdaq/NMS ending at
the close of trading on the Determination Date.
"Determination Date" shall mean the date on which the Consent of
the Board of Governors of the Federal Reserve System shall be received.
"Index Group" shall mean the 20 bank holding companies listed
below, the common stocks of all of which shall be publicly traded and as
to which there shall not have been, since the Starting Date and before
the Determination Date, any public announcement of a proposal for such
company to be acquired or for such company to acquire another company or
companies in transactions with a value exceeding 25% of the acquiror's
market capitalization. In the event that any such company or companies
are removed from the Index Group, the weights (which have been
determined based upon the number of outstanding shares of common stock)
redistributed proportionately for purposes of determining the Index
Price. The 20 bank holding companies and the weights attributed to them
are as follows:
<TABLE>
<CAPTION>
BANK HOLDING COMPANIES WEIGHTING
------------------------------------------------------------------- ---------
<S> <C>
AmSouth Bancorporation............................................. 4.73%
Barnett Banks, Inc................................................. 7.80
Central Fidelity Banks, Inc........................................ 3.23
Compass Bancshares, Inc............................................ 3.09
Crestar Financial Corporation...................................... 3.05
Deposit Guaranty Corporation....................................... 1.52
First American Corporation......................................... 2.06
First Commerce Corporation......................................... 2.35
First Maryland Bancorp............................................. 1.37
First Tennessee National Corporation............................... 2.72
First Union Corporation............................................ 13.91
First Virginia Banks, Inc.......................................... 2.75
Hibernia Corporation............................................... 9.65
Mercantile Bankshares Corporation.................................. 3.84
National Commerce Bancorporation................................... 2.00
SouthTrust Corporation............................................. 6.75
SunTrust Banks, Inc................................................ 9.24
Trustmark Corporation.............................................. 2.83
Union Planters Corporation......................................... 3.31
Wachovia Corporation............................................... 13.80
---------
TOTAL.................................................... 100.00%
</TABLE>
"Index Price" on a given date shall mean the weighted average
(weighted in accordance with the factors listed above) of the closing
prices of the companies composing the Index Group.
"Starting Date" shall mean September 25, 1995.
If any company belonging to the Index Group or Regions declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares, or similar transaction between
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the Starting Date and the Determination Date, the prices for the common
stock of such company or Regions shall be appropriately adjusted for the
purposes of applying this Section 10.1(g).
10.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 10.1 of this Agreement, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article Eleven and Section 8.5(b) of this Agreement shall survive any
such termination, and (ii) a termination pursuant to Sections 10.1(b), 10.1(c),
or 10.1(f) of this Agreement shall not relieve the breaching Party from
Liability for an uncured willful breach of a representation, warranty, covenant,
or agreement giving rise to such termination. Each of the Support Agreements
shall be governed by its own terms as to its termination.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles Two, Three, Four, and Eleven and Sections 8.9, 8.10, and 8.11 of this
Agreement.
ARTICLE ELEVEN
MISCELLANEOUS
11.1 DEFINITIONS. Except as otherwise provided herein, the capitalized
terms set forth below (in their singular and plural forms as applicable) shall
have the following meanings:
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, such Party or any
of its Subsidiaries.
"Affiliate" of a Person shall mean (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by,
or under common control with such Person, (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any ten
percent (10%) or greater equity or voting interest of such Person, or (iii)
any other Person for which a Person described in clause (ii) acts in any
such capacity.
"Agreement" shall mean this Agreement and Plan of Reorganization,
including the Plan of Merger and each of the Support Agreements and the
other Exhibits delivered pursuant hereto and incorporated herein by
reference.
"Allowance" shall have the meaning provided in Section 5.8 of this
Agreement.
"Articles of Combination" shall mean the Articles of Combination to be
filed with the OTS relating to the Merger as contemplated by Section 1.3 of
this Agreement.
"Assets" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character, and
description, whether real, personal, or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Business Combination" shall mean an acquisition of, merger or
combination with, share exchange involving any class of voting stock of,
sale of more than fifty percent (50%) of the consolidated assets by, or
other business combination involving, or tender offer for or sale or
issuance of any equity securities involving an acquisition by a third-party
of more than fifty percent (50%) of the voting stock of, First Federal,
other than the formation of a newly organized holding company for First
Federal in which the shares of First Federal Common Stock are exchanged for
shares of the holding company on a basis that does not cause the respective
beneficial interests of each stockholder to change or transactions with a
Regions Company.
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"Closing" shall mean the closing of the transactions contemplated
hereby, as described in Section 1.2 of this Agreement.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets, or business.
"Default" shall mean (i) any breach or violation of or default under
any Contract, Order, or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order, or Permit.
"Delaware GCL" shall mean the Delaware General Corporation Law.
"Effective Time" shall mean the date and time at which the Merger
becomes effective as defined in Section 1.3 of this Agreement.
"Environmental Laws" shall mean all Laws which are administered,
interpreted, or enforced by the United States Environmental Protection
Agency and state and local agencies with jurisdiction over pollution or
protection of the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Plan" shall have the meaning provided in Section 5.13 of this
Agreement.
"Exchange Agent" shall have the meaning provided in Section 4.1 of
this Agreement.
"Exchange Ratio" shall have the meaning provided in Section 3.1(c) of
this Agreement.
"Exhibits" 1 through 6, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"First Federal Benefit Plans" shall have the meaning set forth in
Section 5.13 of this Agreement.
"First Federal Common Stock" shall mean the $.01 par value common
stock of First Federal.
"First Federal Companies" shall mean, collectively, First Federal and
all First Federal Subsidiaries.
"First Federal Disclosure Memorandum" shall mean the written
information entitled "First Federal Savings Bank Disclosure Memorandum"
delivered prior to the date of this Agreement to Regions describing in
reasonable detail the matters contained therein and, with respect to each
disclosure made therein, specifically referencing each Section of this
Agreement under which such disclosure is being made. Information disclosed
with respect to one Section shall not be deemed to be disclosed for
purposes of any other Section not specifically referenced with respect
thereto.
"First Federal Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of First
Federal as of June 30, 1995, and as of September 30, 1994 and 1993, and the
related statements of income, changes in shareholders' equity, and cash
flows (including related notes and schedules, if any) for the six months
ended June 30, 1995, and for each of the three fiscal years ended September
30, 1994, 1993, and 1992, as filed by First Federal in SEC Documents, and
(ii) the consolidated balance sheets of First Federal (including related
notes and
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schedules, if any) and related statements of income, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to periods
ended subsequent to June 30, 1995.
"First Federal Interim Common Stock" shall mean the $1.00 par value
common stock of First Federal Interim.
"First Federal Preferred Stock" shall mean the preferred stock, par
value $.01 per share, of First Federal.
"First Federal Subsidiaries" shall mean the Subsidiaries of First
Federal, which shall include the First Federal Subsidiaries described in
Section 5.4 of this Agreement and any corporation, bank, savings
association, or other organization acquired as a Subsidiary of First
Federal in the future and owned by First Federal at the Effective Time.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"Hazardous Material" shall mean any pollutant, contaminant, or
hazardous substance within the meaning of the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. sec. 9601 et seq., or
any similar federal, state, or local Law.
"HOLA" shall mean the Home Owners' Loan Act of 1933, as amended.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"Knowledge" as used with respect to a Person shall mean the knowledge
after due inquiry of the chairman, president, chief financial officer,
chief accounting officer, chief credit officer, general counsel, any
assistant or deputy general counsel, or any senior or executive vice
president of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting, or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities, or business, including, without limitation, those
promulgated, interpreted, or enforced by any of the Regulatory Authorities.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including,
without limitation, costs of investigation, collection, and defense),
claim, deficiency, guaranty, or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection
or deposit in the ordinary course of business) of any type, whether
accrued, absolute, or contingent, liquidated or unliquidated, matured or
unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention, or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, (ii) for depository institutions, pledges to
secure deposits and other Liens incurred in the ordinary course of the
banking business, and (iii) Liens which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on a Party.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative or
other proceeding, or notice (written or oral) by any Person alleging
potential Liability, but shall not include regular, periodic examinations
of depository institutions and their Affiliates by Regulatory Authorities.
"Loan Property" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner
or operator of such property, but only with respect to such property.
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"Material" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"Material Adverse Effect" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change, or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries,
taken as a whole, or (ii) the ability of such Party to perform its
obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that "material
adverse effect" shall not be deemed to include the impact of (a) changes in
banking and similar Laws of general applicability or interpretations
thereof by courts or governmental authorities, (b) changes in GAAP or
regulatory accounting principles generally applicable to banks and savings
associations and their holding companies, (c) actions and omissions of a
Party (or any of its Subsidiaries) taken with the prior informed consent of
the other Party in contemplation of the transactions contemplated hereby,
or (d) the Merger and compliance with the provisions of this Agreement on
the operating performance of the Parties.
"Merger" shall mean the merger of First Federal Interim with and into
First Federal referred to in Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq/NMS" shall mean the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"OTS" shall mean the Office of Thrift Supervision (including its
predecessor, the Federal Home Loan Bank Board).
"Participation Facility" shall mean any facility in which the Party in
question or any of its Subsidiaries participates in the management and,
where required by the context, includes the owner or operator or such
property, but only with respect to such property.
"Party" shall mean either First Federal or Regions and "Parties" shall
mean both First Federal and Regions.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, or business.
"Person" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"Plan of Merger" shall mean the Plan of Merger and Combination, in
substantially the form of Exhibit 2 to this Agreement, to be entered into
by First Federal and, upon its organization, First Federal Interim setting
forth the terms of the Merger.
"Proxy Statement" shall mean the proxy statement used by First Federal
to solicit the approval of its stockholders of the transactions
contemplated by this Agreement and the Plan of Merger and shall include the
prospectus of Regions relating to the shares of Regions Common Stock to be
issued to the stockholders of First Federal.
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"Regions Common Stock" shall mean the $.625 par value common stock of
Regions. "Regions Companies" shall mean, collectively, Regions and all
Regions Subsidiaries.
"Regions Disclosure Memorandum" shall mean the written information
entitled "Regions Financial Corporation Disclosure Memorandum" delivered
prior to the date of this Agreement to First Federal describing in
reasonable detail the matters contained therein and, with respect to each
disclosure made therein, specifically referencing each Section of this
Agreement under which such disclosure is being made. Information disclosed
with respect to one Section shall not be deemed to be disclosed for
purposes of any other Section not specifically referenced with respect
thereto.
"Regions Financial Statements" shall mean (i) the consolidated
statements of condition (including related notes and schedules, if any) of
Regions as of June 30, 1995, and as of December 31, 1994 and 1993, and the
related statements of income, changes in stockholders' equity, and cash
flows (including related notes and schedules, if any) for the nine months
ended June 30, 1995, and each of the three years ended December 31, 1994,
1993, and 1992, as filed by Regions in SEC Documents and (ii) the
consolidated statements of condition of Regions (including related notes
and schedules, if any) and related statements of income, changes in
stockholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to periods
ended subsequent to June 30, 1995.
"Regions Subsidiaries" shall mean the Subsidiaries of Regions.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, filed with the SEC by Regions under the
1933 Act in connection with the transactions contemplated by this
Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the OTS, the Office of the
Comptroller of the Currency, the FDIC, all state regulatory agencies having
jurisdiction over the Parties and their respective Subsidiaries, the NASD,
and the SEC.
"SEC Documents" shall mean all reports and registration statements
filed, or required to be filed, by a Party or any of its Subsidiaries with
any Regulatory Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder
including the regulations of the OTS included in 12 C.F.R. Part 563g.
"Stockholders' Meeting" shall mean the meeting of the stockholders of
First Federal to be held pursuant to Section 8.1 of this Agreement,
including any adjournment or adjournments thereof.
"Subsidiary" or collectively "Subsidiaries" shall mean all those
corporations, banks, associations, or other entities of which the entity in
question owns or controls fifty percent (50%) or more of the outstanding
equity securities either directly or through an unbroken chain of entities
as to each of which fifty percent (50%) or more of the outstanding equity
securities is owned directly or indirectly by its Regions; provided,
however, there shall not be included any such entity acquired through
foreclosure or any such entity the equity securities of which are owned or
controlled in a fiduciary capacity.
"Support Agreements" shall mean the various Support Agreements, each
in substantially the form of Exhibit 1 to this Agreement.
"Surviving Association" shall mean First Federal, as the surviving
savings association resulting from the Merger.
"Tax" or "Taxes" shall mean any federal, state, county, local or
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other taxes,
assessments, charges, fares, or impositions, of any nature whatsoever,
including interest, penalties, and additions imposed thereon or with
respect thereto.
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11.2 EXPENSES. (a) Except as otherwise provided in this Section 11.2, each
of the Parties shall bear and pay all direct costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, except that Regions shall bear and pay the filing fees
payable in connection with the Registration Statement and the Proxy Statement
and printing costs incurred in connection with the printing of the Registration
Statement and the Proxy Statement.
(b) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.
11.3 BROKERS AND FINDERS. Except for The Robinson-Humphrey Company, Inc.
as to First Federal, each of the Parties represents and warrants that neither it
nor any of its officers, directors, employees, or Affiliates has employed any
broker or finder or incurred any Liability for any financial advisory fees,
investment bankers' fees, brokerage fees, commissions, or finders' fees in
connection with this Agreement or the transactions contemplated hereby. In the
event of a claim by any broker or finder based upon his or its representing or
being retained by or allegedly representing or being retained by First Federal
or Regions, each of First Federal and Regions, as the case may be, agrees to
indemnify and hold the other Party harmless of and from any Liability in respect
of any such claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement,
expressed or implied, is intended to, or shall, confer upon any Person, other
than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, other than as
provided in Sections 8.9 and 8.11 of this Agreement.
11.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties; provided, however, that after
any such approval by the holders of First Federal Common Stock, there shall be
made no amendment decreasing the consideration to be received by First Federal
stockholders without the further approval of such stockholders.
11.6 WAIVERS. (a) Prior to or at the Effective Time, Regions, acting
through its Board of Directors, chief executive officer, vice chairman, or other
authorized officer, shall have the right to waive on behalf of it and First
Federal Interim any Default in the performance of any term of this Agreement by
First Federal, to waive or extend the time for the compliance or fulfillment by
First Federal of any and all of its obligations under this Agreement, and to
waive any or all of the conditions precedent to the obligations of Regions under
this Agreement, except any condition which, if not satisfied, would result in
the violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of Regions.
(b) Prior to or at the Effective Time, First Federal, acting through its
Board of Directors, chief executive officer, or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by Regions, to waive or extend the time for the compliance or
fulfillment by Regions or First Federal Interim of any and all of their
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of First Federal under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of First Federal.
11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the Parties and their respective successors and assigns.
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11.8 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage prepaid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so received:
<TABLE>
<S> <C>
First Federal: First Federal Bank of Northwest
Georgia, Federal Savings Bank
120 Main Street
Cedartown, Georgia 30125-2694
Telecopy Number: (404) 748-1820
Attention: Larry W. Dooley
President and Managing Officer
Copy to Counsel: Sutherland, Asbill & Brennan
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
Telecopy Number: (404) 853-8053
Attention: B. Knox Dobbins
Regions: Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7571
Attention: Richard D. Horsley
Vice Chairman and Executive Financial Officer
Copy to Counsel: Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7099
Attention: Samuel E. Upchurch, Jr.
General Counsel and Corporate Secretary
</TABLE>
11.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws, except to the extent that the federal laws of the
United States may apply to the Merger.
11.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 CAPTIONS. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.12 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
<TABLE>
<S> <C>
ATTEST: FIRST FEDERAL BANK OF
NORTHWEST GEORGIA,
FEDERAL SAVINGS BANK
By: /s/ BETTIE C. BRIDGES By: /s/ LARRY W. DOOLEY
Bettie C. Bridges Larry W. Dooley
Secretary President
[SAVINGS BANK SEAL]
ATTEST: REGION FINANCIAL CORPORATION
By: /s/ SAMUEL E. UPCHURCH, JR. By: /s/ WILLIAM E. JORDAN
Samuel E. Upchurch, Jr. William E. Jordan
Corporate Secretary Regional President
[CORPORATE SEAL]
</TABLE>
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APPENDIX B
PLAN OF MERGER AND COMBINATION
THIS PLAN OF MERGER AND COMBINATION (this "Plan of Merger") is made and
entered into as of the day of , 1995, by and between FIRST
FEDERAL BANK OF NORTHWEST GEORGIA, FEDERAL SAVINGS BANK ("First Federal"), a
federal stock savings bank organized and existing under the laws of the United
States, with its principal office located in Cedartown, Georgia, and FIRST
FEDERAL INTERIM FEDERAL SAVINGS BANK ("First Federal Interim"), an interim
federal stock savings bank organized and existing under the laws of the United
States, with its principal office located in Cedartown, Georgia.
PREAMBLE
Each of the Boards of Directors of First Federal and First Federal Interim
deems it advisable and in the best interests of their respective institutions
and the stockholders thereof for First Federal Interim to be merged into First
Federal (the "Merger") on the terms and conditions provided in this Plan of
Merger. This Plan of Merger is made and entered into pursuant to an Agreement
and Plan of Reorganization, dated as of September 29, 1995, by and between First
Federal and Regions Financial Corporation ("Regions"). At the Effective Time of
the Merger, the outstanding shares of the common stock of First Federal shall be
converted into the right to receive shares of the common stock of Regions
(subject to certain exceptions as set forth in the Agreement). As a result,
stockholders of First Federal shall become stockholders of Regions and First
Federal shall continue to conduct its business and operations as a wholly-owned
first tier subsidiary of Regions. It is intended that the Merger for federal
income tax purposes shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code, and that the exchange of First
Federal Common Stock (as defined herein), to the extent exchanged for Regions
Common Stock (as defined herein), will not give rise to gain or loss to the
holders of First Federal Common Stock with respect to such exchange.
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, First Federal and First Federal
Interim hereby make, adopt, and approve this Plan of Merger in order to set
forth the terms and conditions of the merger of First Federal Interim into First
Federal.
ARTICLE ONE
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth below
(in their singular and plural forms, as applicable) shall have the following
meanings:
"Agreement" shall mean the Agreement and Plan of Reorganization, dated
as of September 29, 1995, by and between First Federal and Regions,
including each of the supporting agreements and the other exhibits
delivered pursuant thereto and incorporated therein by reference.
"Articles of Combination" shall mean the Articles of Combination to be
executed by First Federal and First Federal Interim and filed with the OTS
in accordance with Section 5.2 of this Plan of Merger.
"Closing" shall mean the closing of the transactions contemplated
hereunder, as described in Section 5.1 of this Plan of Merger.
"Effective Time" shall mean the date and time on which the Merger
contemplated by this Plan of Merger becomes effective pursuant to the laws
of the United States, as defined in Section 5.2 of this Plan of Merger.
"Exchange Agent" shall have the meaning specified in Section 4.1 of
this Plan of Merger.
"Exchange Ratio" shall have the meaning specified in Section 3.1(c) of
this Plan of Merger.
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"First Federal Common Stock" shall mean the $0.01 par value common
stock of First Federal.
"First Federal Companies" shall mean, collectively, First Federal and
all First Federal subsidiaries.
"First Federal Interim Common Stock" shall mean the $1.00 par value
common stock of First Federal Interim.
"First Federal Preferred Stock" shall mean the preferred stock, par
value $0.01 per share, of First Federal.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended.
"Merger" shall mean the merger of First Federal Interim with and into
First Federal, as provided in Article Two of this Plan of Merger.
"Nasdaq/NMS" shall mean the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System.
"OTS" shall mean the Office of Thrift Supervision (including its
predecessor, the Federal Home Loan Bank Board).
"Party" shall mean either First Federal or First Federal Interim and
"Parties" shall mean both First Federal or First Federal Interim.
"Regions Common Stock" shall mean the $.625 par value common stock of
Regions.
"Regions Companies" shall mean, collectively, Regions and all Regions
subsidiaries.
"Surviving Association" shall mean First Federal, as the surviving
savings association resulting from the Merger.
ARTICLE TWO
TERMS OF MERGER
2.1 MERGER. Subject to the terms of this Plan of Merger and the Agreement,
at the Effective Time, First Federal Interim shall be merged with and into First
Federal in accordance with and with the effect provided in Title 12, United
States Code, Section 1467a(t). First Federal shall be the Surviving Association
resulting from the Merger and shall be a wholly-owned, first-tier subsidiary of
Regions and shall continue to be governed by the laws of the United States as a
federal stock savings bank operating under the name of "First Federal Bank of
Northwest Georgia, Federal Savings Bank." The Merger shall be consummated
pursuant to the terms of this Plan.
2.2 SURVIVING ASSOCIATION. The business of the Surviving Association from
and after the Effective Time shall continue to be that of a federal stock
savings association organized under the laws of the United States. The business
shall be conducted from its main office located in Cedartown, Georgia and its
legally established branches, which shall also include the main office and all
branches, whether in operation or approved but unopened, at the Effective Time.
2.3 ASSUMPTION OF RIGHTS. At the Effective Time, the separate existence
and corporate organization of First Federal Interim shall be merged into and
continued in the Surviving Association. All rights, franchises, and interests of
both First Federal and First Federal Interim in and to every type of property
(real, personal, and mixed), and all choses in action of both First Federal and
First Federal Interim shall be transferred to and vested in the Surviving
Association without any deed or other transfer. The Surviving Association, upon
consummation of the Merger and without any order or other action on the part of
any court or otherwise, shall hold and enjoy all rights of property, franchises,
and interests, including appointments, designations, and nominations, and all
other rights and interests as trustee, executor, administrator, registrar of
stocks and bonds, guardian of estates, assignee, receiver, and committee of
estates of incompetent persons, and in every other fiduciary capacity, in the
same manner and to the same extent as such rights, franchises, and interests
were held or enjoyed by either First Federal or First Federal Interim at the
Effective Time.
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2.4 ASSUMPTION OF LIABILITIES. All liabilities and obligations of both
First Federal and First Federal Interim of every kind and description (including
without limitation the liquidation account established by First Federal in
connection with its conversion to the stock form of organization, as in
existence at the Effective Time) shall be assumed by the Surviving Association,
and the Surviving Association shall be bound thereby in the same manner and to
the same extent that First Federal and First Federal Interim were so bound at
the Effective Time.
2.5 SAVINGS ACCOUNTS AND DEPOSITS. All savings accounts and deposits of
First Federal and First Federal Interim shall be and continue to be savings
accounts and deposits of the Surviving Association, without change in their
respective terms, maturity, minimum required balances or withdrawal value. As of
the Effective Time, each savings account or deposit of First Federal or First
Federal Interim shall be considered for dividend or interest purposes as a
savings account or deposit of the Surviving Association from the time said
savings account or deposit was opened in First Federal and First Federal Interim
and at all times thereafter until such account or deposit ceases to be a savings
account or deposit of the Surviving Association.
2.6 CHARTER. The Charter of First Federal in effect immediately prior to
the Effective Time shall be the Charter of the Surviving Association until
otherwise amended or repealed.
2.7 BYLAWS. The Bylaws of First Federal in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Association until otherwise
amended or repealed.
2.8 BOARD OF DIRECTORS. Upon the Effective Time, the Board of Directors of
the Surviving Association shall consist initially of the following eight (8)
individuals, who shall include the directors of First Federal in office
immediately prior to the Effective Time and shall continue to serve for the
terms to which such directors are elected prior to the Effective Time:
<TABLE>
<CAPTION>
NAME RESIDENCE ADDRESS
- ---------------------------- -----------------------------------------------
<S> <C>
James B. Choker.............
Horace L. Cline.............
Nathan Dean.................
Larry W. Dooley............. 636 Cherokee Road
Cedartown, Georgia 30125
Tom B. Goss.................
A. Y. Henderson, Jr......... 215 Lakeview Drive
Cedartown, Georgia 30125
Ernest LeGrande.............
Glenn T. York, Jr........... 406 Woodlawn Drive
Cedartown, Georgia 30125
</TABLE>
2.9 OFFICES. The main office of the Surviving Association after the
Effective Time will be located at the main office of the Surviving Association
in Georgia. The Surviving Association's offices will after the Effective Time be
located at the locations set forth in Exhibit A to this Plan of Merger.
ARTICLE THREE
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article Three,
at the Effective Time, by virtue of the Merger and without any action on the
part of the holders thereof, the shares of the constituent corporations shall be
converted as follows:
(a) Each share of Regions Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
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(b) Each share of First Federal Interim Common Stock issued and
outstanding at the Effective Time shall be converted into and exchanged for
one share of First Federal Common Stock.
(c) Each share of First Federal Common Stock (excluding shares held by
any First Federal Company or by any Regions Company, which shares shall be
canceled pursuant to Section 3.3 of this Plan of Merger, in each case other
than in a fiduciary capacity or in satisfaction of debts previously
contracted) issued and outstanding at the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for 1.293 shares of
Regions Common Stock, subject to adjustment as provided in Section 10.1(g)
of the Agreement ("Exchange Ratio").
3.2 ANTI-DILUTION PROVISIONS. In the event First Federal or Regions
changes the number of shares of First Federal Common Stock or Regions Common
Stock, respectively, issued and outstanding prior to the Effective Time as a
result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor shall be prior to the
Effective Time, the Exchange Ratio shall be proportionately adjusted.
3.3 SHARES HELD BY FIRST FEDERAL OR REGIONS. Each of the shares of First
Federal Common Stock held by any First Federal Company or by any Regions
Company, in each case other than in a fiduciary capacity or in satisfaction of
debts previously contracted, shall be canceled and retired at the Effective Time
and no consideration shall be issued in exchange therefor.
3.4 DISSENTING STOCKHOLDERS. Any holder of shares of First Federal Common
Stock who perfects such holder's dissenters' rights of appraisal in accordance
with and as contemplated by 12 C.F.R. sec. 552.14 shall be entitled to receive
the value of such shares in cash as determined pursuant to such provision of
law; provided, however, that no such payment shall be made to any dissenting
stockholder unless and until such dissenting stockholder has complied with the
applicable provisions of 12 C.F.R. sec. 552.14 and surrendered to the Surviving
Association the certificate or certificates representing the shares for which
payment is being made. In the event that after the Effective Time a dissenting
stockholder of First Federal fails to perfect, or effectively withdraws or
loses, such holder's right to appraisal and of payment for such holder's shares,
Regions shall issue and deliver the consideration to which such holder of shares
of First Federal Common Stock is entitled under this Article Three (without
interest) upon surrender by such holder of the certificate or certificates
representing shares of First Federal Common Stock held by such holder. First
Federal will establish an escrow account with an amount sufficient to satisfy
the maximum aggregate payment that may be required to be paid to dissenting
stockholders. Upon satisfaction of all claims of dissenting stockholders, the
remaining escrowed amount, reduced by payment of the fees and expenses of the
escrow agent, will be returned to First Federal.
3.5 FRACTIONAL SHARES. Notwithstanding any other provision of this Plan of
Merger, each holder of shares of First Federal Common Stock exchanged pursuant
to the Merger, or of options to purchase shares of First Federal Common Stock,
who would otherwise have been entitled to receive a fraction of a share of
Regions Common Stock (after taking into account all certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of Regions Common Stock
multiplied by the market value of one share of Regions Common Stock at the
Effective Time, in the case of shares exchanged pursuant to the Merger, or the
date of exercise, in the case of options. The market value of one share of
Regions Common Stock at the Effective Time or the date of exercise, as the case
may be, shall be the last sale price of such common stock on the Nasdaq/NMS (as
reported by The Wall Street Journal, or, if not reported thereby, any other
authoritative source) on the last trading day preceding the Effective Time, in
the case of shares exchanged pursuant to the Merger, and the date of exercise,
in the case of options. No such holder will be entitled to dividends, voting
rights, or any other rights as a shareholder in respect of any fractional
shares.
3.6 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK. (a) At the Effective
Time, all rights with respect to First Federal Common Stock pursuant to stock
options or stock appreciation rights ("First Federal Options") granted by First
Federal under the First Federal Stock Plans (as defined in the Agreement), which
are outstanding at the Effective Time, whether or not exercisable, shall be
converted into and become rights with respect to Regions Common Stock, and
Regions shall assume each First Federal Option, in accordance
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with the terms of the First Federal Stock Plan and stock option agreement by
which it is evidenced. From and after the Effective Time, (i) each First Federal
Option assumed by Regions may be exercised solely for shares of Regions Common
Stock (or cash in the case of stock appreciation rights), (ii) the number of
shares of Regions Common Stock subject to such First Federal Option shall be
equal to the number of shares of First Federal Common Stock subject to such
First Federal Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, and (iii) the per share exercise price under each such First
Federal Option shall be adjusted by dividing the per share exercise price under
each such First Federal Option by the Exchange Ratio and rounding down to the
nearest cent. It is intended that the foregoing assumption shall be undertaken
in a manner that will not constitute a "modification" as defined in Section 424
of the Internal Revenue Code, as to any stock option which is an "incentive
stock option." First Federal agrees to take all necessary steps to effectuate
the foregoing provisions of this Section 3.6.
(b) All restrictions or limitations on transfer with respect to First
Federal Common Stock awarded under the First Federal Stock Plans or any other
plan, program, or arrangement of any First Federal Company, to the extent that
such restrictions or limitations shall not have already lapsed, and except as
otherwise expressly provided in such plan, program, or arrangement, shall remain
in full force and effect with respect to shares of Regions Common Stock into
which such restricted stock is converted pursuant to Section 3.1 of this Plan of
Merger.
ARTICLE FOUR
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, Regions shall
cause First Alabama Bank as the exchange agent (the "Exchange Agent") to mail to
the former stockholders of First Federal appropriate transmittal materials
(which shall specify that delivery shall be effected, and risk of loss and title
to the certificates theretofore representing shares of First Federal Common
Stock shall pass, only upon proper delivery of such certificates to the Exchange
Agent). After the Effective Time, each holder of shares of First Federal Common
Stock (other than shares to be canceled pursuant to Section 3.3 of this Plan of
Merger) issued and outstanding at the Effective Time shall surrender the
certificate or certificates or warrant representing such shares, to the Exchange
Agent and shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1 of this Plan of Merger, together with all
undelivered dividends or distributions in respect to such shares (without
interest thereon) pursuant to Section 4.2 of this Plan of Merger. To the extent
required by Section 3.5 of this Plan of Merger, each holder of shares of First
Federal Common Stock issued and outstanding at the Effective Time also shall
receive, upon surrender of the certificate or certificates representing such
shares, cash in lieu of any fractional share of Regions Common Stock to which
such holder may be otherwise entitled (without interest). Regions shall not be
obligated to deliver the consideration to which any former holder of First
Federal Common Stock is entitled as a result of the Merger until such holder
surrenders his certificates of First Federal Common Stock for exchange as
provided in this Section 4.1. The certificate of First Federal Common Stock so
surrendered shall be duly endorsed as the Exchange Agent may require. Any other
provision of this Plan of Merger notwithstanding, neither Regions, the Surviving
Association, nor the Exchange Agent shall be liable to a holder of First Federal
Common Stock for any amounts paid or property delivered in good faith to a
public official pursuant to any applicable abandoned property law.
4.2 RIGHTS OF FORMER FIRST FEDERAL STOCKHOLDERS. At the Effective Time,
the stock transfer books of First Federal shall be closed as to holders of First
Federal Common Stock immediately prior to the Effective Time, and no transfer of
First Federal Common Stock by any such holder shall thereafter be made or
recognized. Until surrendered for exchange in accordance with the provisions of
Section 4.1 of this Plan of Merger, each certificate theretofore representing
shares of First Federal Common Stock (other than shares to be canceled pursuant
to Section 3.3 of this Plan of Merger or as to which the holder thereof has
perfected dissenters' rights of appraisal as contemplated by Section 3.4 of this
Plan of Merger) shall from and after the Effective Time represent for all
purposes only the right to receive the consideration provided in Sections 3.1
and 3.5 of this Plan of Merger in exchange therefor. To the extent permitted by
law, former stockholders of
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record of First Federal shall be entitled to vote after the Effective Time at
any meeting of Regions stockholders the number of whole shares of Regions Common
Stock into which their respective shares of First Federal Common Stock are
converted, regardless of whether such holders have exchanged their certificates
representing First Federal Common Stock for certificates representing Regions
Common Stock in accordance with the provisions of this Plan of Merger. Whenever
a dividend or other distribution is declared by Regions on the Regions Common
Stock, the record date for which is at or after the Effective Time, the
declaration shall include dividends or other distributions on all shares of
Regions Common Stock issuable pursuant to this Plan of Merger, but no dividend
or other distribution payable to the holders of record of Regions Common Stock
as of any time subsequent to the Effective Time shall be delivered to the holder
of any certificate representing shares of First Federal Common Stock issued and
outstanding at the Effective Time until such holder surrenders such certificate
for exchange as provided in Section 4.1 of this Plan of Merger. However, upon
surrender of such First Federal Common Stock certificate, both the Regions
Common Stock certificate (together with all such undelivered dividends or other
distributions without interest) and any undelivered cash payments to be paid for
fractional share interests (without interest) shall be delivered and paid with
respect to each share represented by such certificate.
ARTICLE FIVE
CLOSING AND EFFECTIVE TIME
5.1 TIME AND PLACE OF CLOSING. The Closing will take place at 9:00 A.M. on
the date that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their chief executive officers or chief financial officers, may
mutually agree. The place of Closing shall be at the offices of Regions, or such
other place as may be mutually agreed upon by the Parties.
5.2 EFFECTIVE TIME. The Merger and other transactions contemplated by this
Plan of Merger shall become effective on the date and at the time of endorsement
of the Articles of Combination filed with the OTS or on such other date and at
such other time as the OTS declares the Merger effective (the "Effective Time").
ARTICLE SIX
EFFECTIVENESS
6.1 CONDITIONS PRECEDENT. Consummation of the Merger is conditioned upon
the approval of the Merger by the stockholders of First Federal and the sole
stockholder of First Federal Interim, as and to the extent required by law, and
the receipt of the requisite regulatory approvals as set forth in the Agreement.
The Merger shall not be consummated unless and until approved by the OTS.
Additionally, consummation of the Merger is conditioned upon the fulfillment of
the conditions precedent set forth in Article Nine of the Agreement or the
waiver of such conditions as provided in Section 11.6 of the Agreement.
6.2 TERMINATION. This Plan of Merger may be terminated at any time prior
to the Effective Time by the Parties hereto at any time after termination of the
Agreement as provided in Article Ten of the Agreement.
6.3 AMENDMENTS. To the extent permitted by law, this Plan of Merger may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties; provided, however, that after
any such approval by the holders of First Federal Common Stock, there shall be
made no amendment decreasing the consideration to be received by First Federal
stockholders without the further approval of such stockholders.
ARTICLE SEVEN
MISCELLANEOUS
7.1 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage
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pre-paid, or by courier or overnight carrier, to the persons at the addresses
set forth in Section 11.8 of the Agreement (or at such other address as may be
provided hereunder), and shall be deemed to have been delivered as of the date
so personally delivered or mailed; provided, however, that notice of termination
of this Plan of Merger shall be effective only upon actual delivery of such
notice to the Party entitled to the same.
7.2 GOVERNING LAW. This Plan of Merger shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to any
applicable conflicts of law, except to the extent that the federal laws of the
United States may apply to the Merger.
7.3 COUNTERPARTS. This Plan of Merger may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
7.4 INCONSISTENT PROVISIONS. The Parties agree that, to the extent any of
the provisions of this Plan of Merger shall conflict or be inconsistent with any
provision of the Agreement, the provisions of the Agreement shall control and
prevail and the Parties hereto agree to execute such amendments to this Plan of
Merger to conform the provisions hereof to the provisions of the Agreement.
IN WITNESS WHEREOF, each of the Parties has caused this Plan of Merger to
be executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto duly authorized all as of the day and year first
above written.
<TABLE>
<S> <C>
FIRST FEDERAL BANK OF NORTHWEST
GEORGIA, FEDERAL SAVINGS BANK
[SAVINGS BANK SEAL]
By:
Larry W. Dooley
President
ATTEST:
Bettie C. Bridges
Secretary
FIRST FEDERAL INTERIM FEDERAL
SAVINGS BANK
[SAVINGS BANK SEAL]
By:
William E. Jordan
Regional President
ATTEST:
Samuel E. Upchurch, Jr.
General Counsel and
Corporate Secretary
</TABLE>
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EXHIBIT A
Main Office
120 North Main Street
Cedartown, Georgia 30125
Branch Office
110 S. Piedmont Avenue
Rockmart, Georgia 30153
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APPENDIX C
THE ROBINSON-HUMPHREY COMPANY, INC.
CORPORATE FINANCE INVESTMENT BANKERS
DEPARTMENT SINCE 1894
September 29, 1995
Board of Directors
First Federal Bank of Northwest Georgia, FSB
120 North Main Street
Cedartown, Georgia 30125
Gentlemen:
In connection with the proposed acquisition of First Federal Bank of
Northwest Georgia, FSB ("First Federal") by Regions Financial Corporation.
("RGBK") (the "Merger"), you have asked us to render an opinion as to whether
the financial terms of the Merger, as provided in the Agreement and Plan of
Reorganization dated September 29, 1995 among such parties (the "Merger
Agreement"), are fair, from a financial point of view, to the stockholders of
FIRST FEDERAL. Under the terms of the Merger, holders of all outstanding shares
of FIRST FEDERAL stock will receive consideration equal to 1.293 RGBK common
shares for each FIRST FEDERAL share held.
Our firm, as part of its investment banking business, is frequently
involved in the valuation of securities as related to public underwritings,
private placements, mergers, acquisitions, recapitalizations and other purposes.
In connection with our study for rendering this opinion, we have reviewed
the Merger Agreement, FIRST FEDERAL's financial results for fiscal years 1990
through 1994 and for the period ended June 30, 1995 and certain documents and
information we deem relevant to our analysis. We have also held discussions with
senior management of FIRST FEDERAL for the purpose of reviewing the historical
and current operations of, and outlook for FIRST FEDERAL, industry trends, the
terms of the proposed Merger, and related matters.
We have also studied published financial data concerning certain other
publicly traded savings and loans which we deem comparable to FIRST FEDERAL as
well as certain financial data relating to acquisitions of other savings and
loans that we deem relevant or comparable. In addition, we have reviewed other
published information, performed certain financial analyses and considered other
factors and information which we deem relevant.
We have reviewed similar information and data relating to RGBK including
its historical financial statements, from fiscal 1990 up through and including
the quarter ended June 30, 1995.
In rendering this opinion, we have relied upon the accuracy of the Merger
Agreement, the financial information listed above, and other information
furnished to us by FIRST FEDERAL and RGBK. We have not separately verified this
information nor have we made an independent evaluation of any of the assets or
liabilities of FIRST FEDERAL and RGBK.
ATLANTA FINANCIAL CENTER
3333 PEACHTREE ROAD, NE - ATLANTA, GEORGIA 30326
(404) 266-6000
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<PAGE> 154
Board of Directors
First Federal Bank of Northwest Georgia, FSB
September 29, 1995
Page 2
- -------------------------------------------------
Based upon the foregoing and upon current market and economic conditions,
we are of the opinion that, from financial point of view, the terms of the
Merger as provided in the Merger Agreement are fair to the stockholders of FIRST
FEDERAL.
Very truly yours,
/s/ THE ROBINSON-HUMPHREY COMPANY, INC.
--------------------------------------------
THE ROBINSON-HUMPHREY COMPANY, INC.
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APPENDIX D
DISSENTER AND APPRAISAL RIGHTS
Dissenter and appraisal rights for holders of stock in a federal stock
savings bank are governed by Section 552.14 of Title 12 of the Code of Federal
Regulations, the text of which is reproduced below.
SEC. 552.14 DISSENTER AND APPRAISAL RIGHTS.
(a) Right to demand payment of fair or appraised value. Except as provided
in paragraph (b) of this section, any stockholder of a Federal stock association
combining in accordance with sec. 552.13 of this part shall have the right to
demand payment of the fair or appraised value of his stock: Provided, That such
stockholder has not voted in favor of the combination and complies with the
provisions of paragraph (c) of this section.
(b) Exceptions. No stockholder required to accept only qualified
consideration for his or her stock shall have the right under this section to
demand payment of the stock's fair or appraised value, if such stock was listed
on a national securities exchange or quoted on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") on the date of the
meeting at which the combination was acted upon or stockholder action is not
required for a combination made pursuant to # 552.13(h)(2) of this part.
"Qualified consideration" means cash, shares of stock of any association or
corporation which at the effective date of the combination will be listed on a
national securities exchange or quoted on NASDAQ or any combination of such
shares of stock and cash.
(c) Procedure.
(1) NOTICE. Each constituent Federal stock association shall notify all
stockholders entitled to rights under this section, not less that twenty days
prior to the meeting at which the combination agreement is to be submitted for
stockholder approval, of the right to demand payment of appraised value of
shares, and shall include in such notice a copy of this section. Such written
notice shall be mailed to stockholders of record and may be part of the
management's proxy solicitation for such meeting.
(2) DEMAND FOR APPRAISAL AND PAYMENT. Each stockholder electing to make a
demand under this section shall deliver to the Federal stock association, before
voting on the combination, a writing identifying himself or herself and stating
his or her intention thereby to demand appraisal of and payment for his or her
shares. Such demand must be in addition to and separate from any proxy or vote
against the combination by the stockholder.
(3) NOTIFICATION OF EFFECTIVE DATE AND WRITTEN OFFER. Within ten days
after the effective date of the combination, the resulting association shall;
(i) Give written notice by mail to stockholders of constituent Federal
stock associations who have complied with the provisions of paragraph
(c)(2) of this section and have not voted in favor of the combination, of
the effective date of the combination;
(ii) Make a written offer to each stockholder to pay for dissenting
shares at a specified price deemed by the resulting association to be the
fair value thereof; and
(iii) Inform them that, within sixty days of such date, the respective
requirements of paragraphs (c)(5) and (6) of this section (set out in the
notice) must be satisfied.
The notice and offer shall be accompanied by a balance sheet and
statement of income of the association the shares of which the dissenting
stockholder holds, for a fiscal year ending not more than sixteen months
before the date of notice and offer, together with the latest available
interim financial statements.
(4) ACCEPTANCE OF OFFER. If within sixty days of the effective date of the
combination the fair value is agreed upon between the resulting association and
any stockholder who has complied with the
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provisions of paragraph (c)(2) of this section, payment therefor shall be made
within ninety days of the effective date of the combination.
(5) PETITION TO BE FILED IF OFFER NOT ACCEPTED. If within sixty days of
the effective, date of the combination the resulting association and any
stockholder who has complied with the provisions of paragraph (c)(2) of this
section do not agree as to the fair value, then any such stockholder may file a
petition with the Office, with a copy by registered or certified mail to the
resulting association, demanding a determination of the fair market value of the
stock of all such stockholders. A stockholder entitled to file a petition under
this section who fails to file such petition within sixty days of the effective
date of the combination shall be deemed to have accepted the terms offered under
the combination.
(6) STOCK CERTIFICATES TO BE NOTED. Within sixty days of the effective
date of the combination, each stockholder demanding appraisal and payment under
this section shall submit to the transfer agent his certificates of stock for
notation thereon that an appraisal and payment have been demanded with respect
to such stock and that appraisal proceedings are pending. Any stockholder who
fails to submit his stock certificates for such notation shall no longer be
entitled to appraisal rights under this section and shall be deemed to have
accepted the terms offered under the combination.
(7) WITHDRAWAL OF DEMAND. Notwithstanding the foregoing, at any time
within sixty days after the effective date of the combination, any stockholder
shall have the right to withdraw his or her demand for appraisal and to accept
the terms offered upon the combination.
(8) VALUATION AND PAYMENT. The Director shall, as he or she may elect,
either appoint one or more independent persons or direct appropriate staff of
the Office to appraise the shares to determine their fair market value, as of
the effective date of the combination, exclusive of any element of value arising
from the accomplishment or expectation of the combination. Appropriate staff of
the Office shall review and provide an opinion on appraisals prepared by
independent persons as to the suitability of the appraisal methodology and the
adequacy of the analysis and supportive data. The Director after consideration
of the appraisal report and the advice of the appropriate staff shall, if he or
she concurs in the valuation of the shares, direct payment by the resulting
association of the appraised fair market value of the shares, upon surrender of
the certificates representing such stock. Payment shall be made, together with
interest from the effective date of the combination, at a rate deemed equitable
by the Director.
(9) COSTS AND EXPENSES. The costs and expenses of any proceeding under
this section maybe apportioned and assessed by the Director as he or she may
deem equitable against all or some of the parties. In making this determination
the Director shall consider whether any party has acted arbitrarily,.
vexatiously, or not in good faith in respect to the rights provided by this
section.
(10) VOTING AND DISTRIBUTION. Any stockholder who has demanded appraisal
rights as provided in paragraph (c)(2) of this section shall thereafter neither
be entitled to vote such stock for any purpose nor be entitled to the payment of
dividends or other distributions on the stock (except dividends or other
distributions payable to, or a vote to be taken by stockholders of record at a
date which is on or prior to, the effective date of the combination: Provided,
That if any stockholder becomes unentitled to appraisal and payment of appraised
value with respect to such stock and accepts or is deemed to have accepted the
terms offered upon the combination, such stockholder shall thereupon be entitled
to vote and receive the distributions described above.
(11) STATUS. Shares of the resulting association into which shares of the
stockholders demanding appraisal rights would have been converted or exchanged
had they assented to the combination, shall have the status of authorized and
unissued shares of the resulting association.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Tenth of the Certificate of Incorporation of the Registrant
provides:
"(a) The corporation shall indemnify its officers, directors,
employees, and agents to the full extent permitted by the General
Corporation Law of Delaware. (b) No director of the corporation shall be
personally liable to the corporation or its stockholders for monetary
damages, for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the corporation or
its stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derived an improper personal benefit."
Section 145 of the Delaware General Corporation law empowers the Company
to indemnify its officers and directors under certain circumstances. The
pertinent provisions of that statute read as follows:
"(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
"(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
"(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
"(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
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<PAGE> 158
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or (2) if
there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (3) by the
stockholders.
"(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such
expenses (including attorneys' fees) incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
"(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
"(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
"(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
"(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
"(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
"(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court
of Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees)."
II-2
<PAGE> 159
The Company has purchased a directors' and officers' liability insurance
contract which provides, within stated limits, reimbursement either to a
director or officer whose actions in his capacity result in liability, or to
the Registrant, in the event it has indemnified the director or officer. Major
exclusions from coverage include libel, slander, personal profit based on
inside information, illegal payments, dishonesty, accounting of securities
profits in violation of Section 16(b) of the Securities Exchange Act of 1934
and acts within the scope of the Pension Reform Act of 1974.
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -------------------------------------------------------------
<S> <C> <C>
2.1 -- Agreement and Plan of Reorganization, dated as of September 29, 1995 by and between First Federal Bank of Northwest
Georgia, Federal Savings Bank and Regions Financial Corporation -- included as Appendix A to the Proxy Statement/
Prospectus.
2.2 -- Plan of Merger and Combination -- included as Appendix B to the Proxy Statement/Prospectus.
4.1 -- Certificate of Incorporation of Regions Financial Corporation -- incorporated by reference from S-4 Registration
Statement of Regions Financial Corporation, file no. 33-54231.
4.2 -- By-laws of Regions Financial Corporation -- incorporated by reference from S-4 Registration Statement of Regions
Financial Corporation, file no. 33-54231.
5. -- Form of Opinion re: legality.
8. -- Form of Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Read, Martin, Slickman & Sheats.
23.3 -- Consent of KPMG Peat Marwick LLP -- to be added by amendment.
23.4 -- Consent of Hacker, Johnson, Cohen & Grieb.
23.5 -- Consent of The Robinson-Humphrey Company, Inc.
23.6 -- Consent of Lange, Simpson, Robinson & Somerville -- to be included in Exhibit 5.
23.7 -- Consent of Alston & Bird -- to be included in Exhibit 8.
24. -- Power of Attorney -- the manually signed power of attorney is set forth in the signature page of the registration
statement.
</TABLE>
ITEM 22. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
C.(1) The undersigned Registrant hereby undertakes as follows: that prior
II-3
<PAGE> 160
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
D. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
E. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 161
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Birmingham, State of
Alabama on this the 20 day of December, 1995.
REGISTRANT:
REGIONS FINANCIAL CORPORATION
/s/ Richard D. Horsley
BY: --------------------------------
Richard D. Horsley
Vice Chairman of the Board and
Executive Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard D. Horsley and Samuel E. Upchurch, Jr.
and each of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments to this
registration statement, and to file the same with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agents, or their substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- ------------------------------ ------------------
<S> <C> <C>
/s/ J. Stanley Mackin
- -------------------------- Chairman of the Board and December 20, 1995
J. Stanley Mackin Chief Executive Officer and
Director
/s/ Richard D. Horsley
- -------------------------- Vice Chairman of the Board and December 20, 1995
Richard D. Horsley Executive Financial Officer
and Director
/s/ Robert P. Houston
- -------------------------- Executive Vice President and December 20, 1995
Robert P. Houston Comptroller
/s/ Shelia S. Blair
- -------------------------- Director December 20, 1995
Sheila S. Blair
/s/ William B. Boles, Sr.
- -------------------------- Director December 20, 1995
William B. Boles, Sr.
/s/ James B. Boone, Jr.
- -------------------------- Director December 20, 1995
James B. Boone, Jr.
/s/ Albert P. Brewer
- -------------------------- Director December 20, 1995
Albert P. Brewer
</TABLE>
II-5
<PAGE> 162
<TABLE>
<S> <C> <C>
/s/ James S.M. French
- -------------------------- Director December 20, 1995
James S.M. French
/s/ Catesby ap C. Jones
- -------------------------- Director December 20, 1995
Catesby ap C. Jones
- -------------------------- Director December 20, 1995
Olin B. King
/s/ Henry E. Simpson
- -------------------------- Director December 20, 1995
Henry E. Simpson
/s/ Robert E. Steiner, III
- -------------------------- Director December 20, 1995
Robert E. Steiner, III
/s/ Lee J. Styslinger, Jr.
- -------------------------- Director December 20, 1995
Lee J. Styslinger, Jr.
</TABLE>
II-6
<PAGE> 163
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------- ------------
<S> <C> <C>
2.1 -- Agreement and Plan of Reorganization, dated as of September 29, 1995 by and between First Federal Bank of Northwest
Georgia, Federal Savings Bank and Regions Financial Corporation -- included as Appendix A to the Proxy Statement/
Prospectus.
2.2 -- Plan of Merger and Combination -- included as Appendix B to the Proxy Statement/Prospectus.
4.1 -- Certificate of Incorporation of Regions Financial Corporation -- incorporated by reference from S-4 Registration
Statement of Regions Financial Corporation, file no. 33-54231.
4.2 -- By-laws of Regions Financial Corporation -- incorporated by reference from S-4 Registration Statement of Regions
Financial Corporation, file no. 33-54231.
5. -- Form of Opinion re: legality.
8. -- Form of Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Read, Martin, Slickman & Sheats.
23.3 -- Consent of KPMG Peat Marwick LLP -- to be added by amendment.
23.4 -- Consent of Hacker, Johnson, Cohen & Grieb.
23.5 -- Consent of The Robinson-Humphrey Company, Inc.
23.6 -- Consent of Lange, Simpson, Robinson & Somerville -- to be included in Exhibit 5.
23.7 -- Consent of Alston & Bird -- to be included in Exhibit 8.
24. -- Power of Attorney -- the manually signed power of attorney is set forth in the signature page of the registration
statement.
</TABLE>
<PAGE> 1
EXHIBIT 5
LANGE, SIMPSON, ROBINSON & SOMERVILLE
ATTORNEYS AND COUNSELORS
417 20th Street North, Suite 1700
Birmingham, Alabama 35203-3272
Telephone: (205) 250-5000
Facsimile: (205) 250-5034
December , 1995
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Re: Regions Financial Corporation--S4 Registration
Statement
Ladies and Gentlemen:
We have acted as counsel for Regions Financial Corporation, a Delaware
corporation ("Regions") in connection with the merger (the "Merger") between a
wholly owned subsidiary of Regions and First Federal Bank of Northwest Georgia,
Federal Savings Bank ("First Federal") and in connection with the registration
of shares of common stock of Regions, par value $.625 per share ("Regions
Common Stock"), on Form S-4 under the Securities Act of 1933. The merger
provides for issuance of shares of Regions Common Stock to the stockholders of
First Federal upon consummation of the Merger. Upon consummation of the Merger,
each share of First Federal common stock issued and outstanding, with certain
exceptions, will be converted into 1.293 shares of Regions common stock.
We have examined and are familiar with the registration statement on Form
S-4 filed with the Securities and Exchange Commission. We have examined and
are familiar with the records relating to the organization of Regions and the
documents and records as we have deemed relevant for purposes of rendering this
opinion.
<PAGE> 2
Regions Financial Corporation
December, 1995
Page 2
Based on the foregoing it is our opinion that upon satisfaction of the
conditions precedent to consummation of the Merger, or waiver of such conditions
capable of being waived, and upon consummation of the Merger, the shares of
Regions Common Stock issued pursuant to the Merger will be duly authorized,
validly issued and outstanding, fully paid and non-assessable, with no
personal liability attaching to the ownership thereof.
We hereby consent to the filing of this opinion as an exhibit to the
registration statement and to the reference to Lange, Simpson, Robinson &
Somerville under the caption "Opinions" in the proxy statement/prospectus
forming a part of the registration statement.
Very truly yours,
<PAGE> 1
EXHIBIT 8
ALSTON & BIRD
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
404-881-7000
Fax: 404-881-7777
[FORM OF TAX OPINION]
December __, 1995
Regions Financial Corporation
417 N. 20th Street
Birmingham, Alabama 35203
First Federal Bank of Northwest Georgia, Federal Savings Bank
120 N. Main Street
Cedartown, Georgia 30125-2699
Re: Proposed Agreement and Plan of Reorganization by and Between
Regions Financial Corporation and First Federal Bank of
Northwest Georgia, Federal Savings Bank
Ladies and Gentlemen:
We have acted as counsel to Regions Financial Corporation ("Regions"),
a corporation organized and existing under the laws of the State of Delaware, in
connection with the proposed merger of First Federal Interim, Federal Savings
Bank, a wholly-owned subsidiary of Regions ("First Federal Interim"), with and
into First Federal Bank of Northwest Georgia, Federal Savings Bank ("First
Federal"), a federal stock savings bank organized and existing under the laws of
the United States, with First Federal as the Surviving Association (the
"Merger"). The Merger will be effected pursuant to the Agreement and Plan of
Reorganization by and between First Federal and Regions dated as of September
29, 1995 (the "Agreement"). In our capacity as counsel to Regions, our opinion
has been requested with respect to certain of the federal income tax
consequences of the proposed Merger.
In rendering this opinion, we have examined (i) the Internal Revenue
Code of 1986, as amended (the "Code") and Treasury regulations, (ii) the
legislative history of applicable sections of the Code, and (iii) appropriate
Internal Revenue Service and court decisional authority. In addition, we have
relied upon certain information made known to us as more fully described below.
All capitalized terms used herein without definition shall have the respective
meanings specified in the Agreement, and unless otherwise specified, all
section references herein are to the Code.
601 Pennsylvania Avenue, N.W.
North Building, Suite 250
Washington, D.C. 20004-2601
<PAGE> 2
December 20, 1995
Page 2
INFORMATION RELIED UPON
In rendering the opinions expressed herein, we have examined such
documents as we have deemed appropriate, including:
(1) the Agreement;
(2) the Registration Statement on Form S-4 filed by
Regions with the Securities and Exchange Commission
under the Securities Act of 1933, on December __,
1995, including the Proxy Statement/Prospectus for
the meeting of the stockholders of First Federal.
(3) such additional documents as we have considered
relevant.
In our examination of such documents, we have assumed, with your
consent, that all documents submitted to us as photocopies faithfully reproduce
the originals thereof, that such originals are authentic, that all such
documents have been or will be duly executed to the extent required, and that
all statements set forth in such documents are accurate.
We have also obtained such additional information and representations
as we have deemed relevant and necessary through consultation with various
officers and representatives of Regions and First Federal and through
certificates provided by the management of Regions and the management of First
Federal.
You have advised us that the proposed transaction will enable the
combined organization to realize certain economies of scale, yield a wider
array of banking and banking-related services to consumers and businesses, and
provide for a stronger market position and for greater financial resources to
meet competitive challenges within the Cedartown, Georgia market area. To
achieve these goals, the following will occur pursuant to the Agreement:
(1) Subject to the terms and conditions of the Agreement, at
the Effective Time, First Federal Interim shall be merged with and into First
Federal in accordance with and with the effect provided in Title 12, United
States Code, Section 1467a(t). First Federal shall be the Surviving
Association resulting from the Merger and shall be a wholly-owned, first-tier
subsidiary of Regions and shall continue to be governed by the Laws of the
United States. The Merger shall be consummated pursuant to the terms of the
Agreement, which has been approved and adopted by the respective Boards of
Directors
<PAGE> 3
December 20, 1995
Page 3
of First Federal and Regions, and the Plan of Merger which has been approved by
the respective Boards of Directors of First Federal and Regions.
(2) At the Effective Time, by virtue of the Merger, and
without any action on the part of the holders thereof, the shares of the
constituent corporations or associations shall be converted as follows:
(a) Each share of Regions Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(b) Each share of First Federal Interim Common Stock
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one share of First Federal Common Stock.
(c) Each share of First Federal Common Stock
(excluding shares held by any First Federal Company or by any Regions Company,
which shares be canceled as provided in Section 3.3 of the Agreement, in each
case other than in a fiduciary capacity or in satisfaction of debts previously
contracted) issued and outstanding at the Effective Time shall cease to be
outstanding and shall converted into and exchanged for 1.293 shares of Regions
Common Stock, subject to adjustment as provided in Section 10.1(g) of the
Agreement (the "Exchange Ratio").
(3) In the event First Federal or Regions changes the number
of shares of First Federal Common Stock or Regions Common Stock, respectively,
issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend, or similar recapitalization with respect to such stock
and the record date therefor shall be prior to the Effective Time, the Exchange
Ratio shall be proportionately adjusted.
(4) Each of the shares of First Federal Common Stock held by
any First Federal Company or by any Regions Company, in each case other than in
a fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time, and no consideration shall be
issued in exchange therefor.
(5) Any holder of shares of First Federal Common Stock who
perfects such holder's dissenter's rights of appraisal in accordance with and
as contemplated by 12 C.F.R. Section 552.14 shall be entitled to receive the
value of such shares in cash as determined pursuant to such provision of Law
and in accordance with the terms of the Agreement.
(6) Notwithstanding any other provision of the Agreement,
each holder of shares of First Federal Common Stock exchanged pursuant to the
Merger, or of options to
<PAGE> 4
December 20, 1995
Page 4
purchase shares of First Federal Common Stock, who would otherwise have been
entitled to receive a fraction of a share of Regions Common Stock (after taking
into account all certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of
a share of Regions Common Stock multiplied by the market value of one share of
Regions Common Stock at the Effective Time, in the case of shares exchanged
pursuant to the Merger, or the date of exercise, in the case of option. The
market value of one share of Regions Common Stock at the Effective Time or the
date of exercise, as the case may be, shall be determined pursuant to Section
3.5 of the Agreement.
(7) At the Effective Time, all rights with respect to First
Federal Common Stock pursuant to stock options or stock appreciation rights
("First Federal Options") granted by First Federal under the First Federal
Stock Plans, which are outstanding at the Effective Time, whether or not
exercisable, shall be converted into and become rights with respect to Regions
Common Stock and Regions shall assume each First Federal Option, in accordance
with the terms of the First Federal Stock Plan and stock option agreement by
which it is evidenced on substantially the same terms and conditions.
(8) All restrictions or limitations on transfer with respect
to First Federal Common Stock awarded under the First Federal Stock Plans or
any other plan, program, or arrangement of any First Federal Company, to the
extent that such restrictions or limitations shall not have already lapsed, and
except as otherwise expressly provided in such plan, program, or arrangement,
shall remain in full force and effect with respect to shares of Regions Common
Stock into which such restricted stock is converted pursuant to Section 3.1 of
the Agreement.
With your consent, we have also assumed that the following
statements are true on the date hereof and will be true on the date on which
the Merger is consummated:
(1) The fair market value of the Regions stock received
by each stockholder of First Federal will, in each instance, be approximately
equal to the fair market value of the First Federal stock surrendered in
exchange therefor.
(2) There is no plan or intention by any of the
stockholders of First Federal who own one percent (1%) or more of the
outstanding First Federal Common Stock, and to the best of the knowledge of the
management of First Federal, there is no plan or intention on the part of the
remaining stockholders of First Federal to sell, exchange, or otherwise dispose
of a number of shares of Regions Common Stock received in the Merger that would
reduce the First Federal stockholders' ownership of Regions Common Stock to a
number of shares having a value, as of the date of the Merger, of less than
fifty percent (50%) of the value of all of the formerly outstanding stock of
First
<PAGE> 5
December 20, 1995
Page 5
Federal immediately prior to the Merger. For purposes of this representation,
shares of First Federal Common Stock exchanged for cash or other property,
surrendered by dissenters, or exchanged for cash in lieu of fractional shares
of Regions Common Stock will be treated as outstanding First Federal Common
Stock on the date of the Merger. Moreover, shares of First Federal stock and
shares of Regions stock held by First Federal stockholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the Merger will be considered
in making this representation.
(3) Following the Merger, First Federal will hold at
least ninety percent (90%) of the fair market value of its net assets and at
least seventy percent (70%) of the fair market value of its gross assets held
immediately prior to the Merger and at least ninety percent (90%) of the fair
market value of First Federal Interim's net assets and at least seventy percent
(70%) of the fair market value of First Federal Interim's gross assets held
immediately prior to the Merger. For purposes of this representation, amounts
paid by First Federal or First Federal Interim to dissenters, amounts paid by
First Federal or First Federal Interim to stockholders who receive cash or other
property, amounts used by First Federal or First Federal Interim to pay
reorganization expenses, and all redemptions and distributions (except for
regular, normal dividends) made by First Federal will be included as assets of
First Federal or First Federal Interim, respectively, immediately prior to the
Merger. In addition, assets disposed of in contemplation of the Merger will be
considered as assets held by First Federal immediately prior to the Merger.
(4) Prior to the Agreement, Regions will be in control of
First Federal Interim. For purposes of this representation and those set forth
below in paragraph (5), (12), and (13), "control" means ownership of eighty
percent (80%) of the total combined voting power of all classes of stock
entitled to vote and at least eighty percent (80%) of the total number of all
other classes of stock.
(5) First Federal has no plan or intention to issue
additional shares of its stock that would result in Regions losing control of
First Federal.
(6) Regions has no plan or intention to reacquire any of
its Common Stock issued in the Merger, except for purchases in the open market
in the normal course of business executed through an independent broker in which
Regions is not aware of the identity of any seller or in private placement
transactions in which the sellers are not former First Federal stockholders.
(7) Regions will not liquidate First Federal; merge
First Federal with or into another corporation; sell or otherwise dispose of
the stock of First Federal; or cause First Federal to sell or otherwise dispose
of any of its assets or of any of the assets acquired from First Federal
Interim, except for dispositions made in the ordinary course of
<PAGE> 6
December 20, 1995
Page 6
business, unless either the Internal Revenue Service issues a letter ruling or
Alston & Bird opines that this Merger will continue to qualify as a
reorganization under Section 368(a) of the Code notwithstanding such
liquidation, merger, sale or disposition.
(8) First Federal Interim will have no liabilities
assumed by First Federal, and will not transfer to First Federal any assets
subject to liabilities, in the Merger.
(9) Following the Agreement, First Federal will continue
its historic business or use a significant portion of its historic business
assets in a business.
(10) Regions , First Federal Interim, First Federal , and
the stockholders of First Federal will pay their respective expenses, if any,
incurred in connection with the Agreement, except that Regions shall bear and
pay the filing fees payable in connection with the Registration Statement and
the Proxy Statement and printing costs incurred in connection with the printing
of the Registration Statement and the Proxy Statement.
(11) There is no intercorporate indebtedness existing
between Regions and First Federal or between First Federal Interim and First
Federal that was issued, acquired, or will be settled at a discount.
(12) In the Agreement, shares of First Federal Common
Stock representing control of First Federal will be exchanged solely for voting
Common Stock of Regions. For purposes of this representation, shares of First
Federal Common Stock exchanged for cash or other property originating with
Regions will be treated as outstanding First Federal Common Stock on the date
of the Agreement.
(13) At the time of the Agreement, First Federal will not
have outstanding any warrants, options, convertible securities, or any other
type of right pursuant to which any person could acquire stock in First Federal
that, if exercised or converted, would affect Regions' acquisition or retention
of control of First Federal.
(14) Regions does not own, nor has it owned during the
past five years, any shares of the stock of First Federal.
(15) None of Regions, First Federal Interim and First
Federal are investment companies as defined in Code Section 368(a)(2)(F).
(16) On the date of the Agreement, the fair market value
of the assets of First Federal will exceed the sum of its liabilities, plus the
amount of liabilities, if any, to which the assets are subject.
<PAGE> 7
December 20, 1995
Page 7
(17) First Federal is not under the jurisdiction of a
court in a case under Title 11 of the United States Code or a receivership,
foreclosure or similar proceeding in a federal or state court.
(18) The payment of cash to First Federal stockholders in
lieu of fractional shares of Regions Common Stock is solely for the purpose of
avoiding the expense and inconvenience of issuing and transferring fractional
shares and does not represent separately bargained for consideration. The
total cash consideration that will be paid to First Federal stockholders in
lieu of fractional shares of Regions Common Stock will not exceed one percent
(1%) of the total consideration issued in the Merger to the stockholders of
First Federal in exchange for their shares of First Federal Common Stock. The
fractional share interest of each First Federal stockholder will be aggregated,
and no stockholder of First Federal will receive cash in an amount equal to or
greater than the value of one full share of Regions Common Stock.
(19) None of the compensation received by any
stockholder-employees of First Federal will be separate consideration for, or
allocable to, any of their shares of First Federal stock. None of the shares
of Regions Common Stock received by any stockholder-employees will be separate
consideration for, or allocable to, any employment agreement. Any compensation
paid to a First Federal stockholder-employee who continues as an employee of
Regions subsequent to the Merger will be for services actually rendered and
will be commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
(20) In the case of an incentive stock option granted
under the First Federal Stock Plans:
(a) Immediately after the substitution for such
option of rights with respect to Regions Common Stock, the excess of the
aggregate fair market value of the Regions Common Stock subject to the
substituted rights over the aggregate option price for such stock, in each
instance, will not be more than the excess of the aggregate fair market value
of all First Federal Common Stock subject to the option immediately before its
substitution over the aggregate option price for such stock.
(b) A holder of the option will not receive any
additional benefits as a result of the substitution of rights with respect to
Regions Common Stock for the option to purchase First Federal Common Stock.
(c) The spread between the aggregate option price
and the aggregate fair market value of the Regions Common Stock subject to the
substituted
<PAGE> 8
December 20, 1995
Page 8
rights immediately after the substitution will be no greater than the spread
between the aggregate option price and the aggregate fair market value of the
First Federal Common Stock subject to the option immediately before the
substitution.
(d) On a share-by-share comparison, the ratio of the
option price to the fair market value of the Regions Common Stock subject to
the substituted rights immediately after the substitution will not be more
favorable to the optionee than the ratio of the option price to the fair market
value of the First Federal Common Stock subject to the option immediately
before the substitution.
(21) The non-incentive stock options granted under the
First Federal Stock Plans do not have a readily ascertainable fair market
value. These options are not actively traded on an established market and are
not transferable by the optionee other than by will or the laws of descent and
distribution.
(22) The Agreement represents the entire understanding of
Regions, First Federal, and First Federal Interim with respect to the Merger.
OPINIONS
Based solely on the information submitted and the representations set
forth above, we are of the opinion that:
(1) The acquisition by Regions of all the stock of First
Federal solely in exchange for shares of Regions Common Stock in the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code. Each of First Federal and Regions will be "a party to a reorganization"
within the meaning of Section 368(b) of the Code.
(2) No gain or loss will be recognized by the First
Federal stockholders upon the receipt of Regions Common Stock solely in exchange
for their shares of First Federal Common Stock.
(3) The basis of Regions Common Stock to be received by
First Federal stockholders will be the same as the basis of First Federal
Common Stock surrendered in exchange therefor.
(4) The holding period of Regions Common Stock to be
received by First Federal stockholders will include the holding period of First
Federal Common Stock surrendered in exchange therefor, provided that the First
Federal Common Stock was held as a capital asset on the date of the exchange.
<PAGE> 9
December 20, 1995
Page 9
(5) The payment of cash to a First Federal stockholder in
lieu of issuing a fractional share interest in Regions will be treated for
federal income tax purposes as if the fractional shares were distributed as
part of the exchange and then were redeemed by Regions. These cash payments
will be treated as having been received as distributions in full payment in
exchange for the stock redeemed. Generally, any gain or loss recognized upon
such exchange will be a capital gain or loss, provided the fractional share
would constitute a capital asset in the hands of the exchanging stockholder.
(6) Where solely cash is received by a First Federal
stockholder in exchange for such holder's shares of First Federal Common Stock
pursuant to the exercise of dissenters' rights of appraisal, such cash will be
treated as having been received in redemption of such holder's shares of First
Federal Common Stock, subject to the provisions and limitations of Section 302
of the Code.
(7) The exchange or conversion by the holders of First
Federal Options of their options for rights with respect to Regions Common
Stock, pursuant to the Merger, will not result in any gain or loss to such
holders with respect to such exchange or conversion.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time
with retroactive effect. In addition, our opinions are based solely on the
documents that we have examined, the additional information that we have
obtained, and the statements set out herein, which we have assumed are true on
the date the Merger is consummated. Our opinions cannot be relied upon if any
of the facts contained in such documents or if such additional information is,
or later becomes, inaccurate, or if any of the statements set out herein is, or
later becomes, inaccurate. Finally, our opinions are limited to the tax
matters specifically covered thereby, and we have not been asked to address,
nor have we addressed, any other tax consequences of the proposed Merger.
This opinion is being provided solely for the use of Regions Financial
Corporation, First Federal Bank of Northwest Georgia, Federal Savings Bank, and
the stockholders of First Federal Bank of Northwest Georgia, Federal Savings
Bank.
<PAGE> 10
December 20, 1995
Page 10
We hereby consent to the use of this opinion and to the references
made to the firm under the captions "Description of the Transaction -- Certain
Federal Income Tax Consequences of the Merger" and "Opinions" in the Proxy
Statement/Prospectus constituting part of the Registration Statement on Form
S-4 of Regions.
Very truly yours,
ALSTON & BIRD
By:________________________
Philip C. Cook
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Regions Financial
Corporation for the registration of up to 388,678 shares of its common stock
and to the incorporation by reference therein of our report dated February 6,
1995, with respect to the consolidated financial statements of Regions Financial
Corporation included in its Annual Report to Stockholders which is incorporated
by reference in its Annual Report (Form 10-K) for the year ended December 31,
1994, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Birmingham, Alabama
December 20, 1995
<PAGE> 1
EXHIBIT 23.2
First Federal Bank of Northwest Georgia,
Federal Savings Bank and Subsidiary
Cedartown, Georgia
Dear Sirs:
We hereby consent to the use in the Prospectus constituting part of
this Registration Statement on Form S-4 of our report dated October 17, 1995,
relating to the financial statements of First Federal Bank of Northwest
Georgia, Federal Savings Bank and Subsidiary, Cedartown, Georgia, which appears
in such Prospectus. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ Read, Martin, Slickman & Sheats
Rome, Georgia
December 19, 1995
<PAGE> 1
Exhibit 23.4
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Regions Financial Corporation:
We consent to the use of our report dated January 27, 1995, with respect to the
consolidated balance sheets of FF Bancorp, Inc. and subsidiaries as of December
31, 1994 and 1993, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1994, which report appears in the Form 8-K of Regions
Financial Corporation dated November 22, 1995 incorporated in this Form S-4 of
Regions Financial Corporation, pertaining to the business combination with
First Federal Bank of Northwest Georgia, by reference.
Our report refers to a change in the method of accounting for income taxes in
1993 to adopt the provisions of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," and a change in the method of
accounting for investment securities to adopt the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," at December 31, 1993.
/s/ Hacker, Johnson, Cohen & Grieb
- ----------------------------------
HACKER, JOHNSON, COHEN & GRIEB
Tampa, Florida
December 20, 1995
<PAGE> 1
EXHIBIT 23.5
CONSENT OF THE ROBINSON-HUMPHREY COMPANY, INC.
----------------------------------------------
We consent to the inclusion in this Registration Statement on Form S-4
of our opinion, dated September 29, 1995, as set forth as Appendix C to the
Proxy Statement/Prospectus and to the summarization thereof in the Proxy
Statement/Prospectus under the caption "Opinion of First Federal's Financial
Advisor." In giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the Rules and Regulations of the Securities and
Exchange Commission thereunder.
/s/ THE ROBINSON-HUMPHREY COMPANY, INC.
---------------------------------------
THE ROBINSON-HUMPHREY COMPANY, INC.
Atlanta, Georgia
December 20, 1995
ATLANTA FINANCIAL CENTER
3333 PEACHTREE ROAD, NE - ATLANTA, GEORGIA 30326
(404) 266-6000
