<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1996 COMMISSION FILE NUMBER
0-6159
REGIONS FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 63-0589368
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
417 North 20th Street, Birmingham, Alabama 35202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 326-7100
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to the filing requirements for at least
the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common Stock, $.625 Par Value-62,581,354 shares outstanding
as of October 31, 1996
<PAGE>
REGIONS FINANCIAL CORPORATION
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statement of Condition -
September 30, 1996, December 31, 1995
and September 30, 1995 2
Consolidated Statement of Income -
Three months ended September 30, 1996 and
September 30, 1995 and Nine months ended
September 30, 1996 and September 30, 1995 3
Consolidated Statement of Cash Flows -
Nine months ended September 30, 1996 and
September 30, 1995 4
Notes to Consolidated Financial Statements -
September 30, 1996 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CONDITION
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
September 30 December 31 September 30
1996 1995 1995
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 791,284 $ 587,161 $ 734,402
Interest-bearing deposits in other
banks 46,187 56,477 25,630
Investment securities 2,125,025 1,589,106 2,298,203
Securities available for sale 1,880,650 2,274,675 1,550,415
Trading account assets 14,693 28,870 17,942
Mortgage loans held for sale 126,862 117,087 98,046
Federal funds sold and securities
purchased under agreement to resell 78,085 66,339 93,291
Loans 13,056,662 11,569,551 11,588,273
Unearned income (24,424) (27,240) (20,946)
Loans, net of unearned income 13,032,238 11,542,311 11,567,327
Allowance for loan losses (178,435) (159,487) (157,442)
Net Loans 12,853,803 11,382,824 11,409,885
Premises and equipment 273,278 254,992 255,263
Interest receivable 139,110 120,950 101,923
Due from customers on acceptances 11,662 51,286 15,561
Other assets 390,785 322,007 359,224
$18,731,424 $16,851,774 $16,959,785
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing $ 2,111,852 $ 1,864,970 $ 1,797,216
Interest-bearing 13,075,098 11,632,642 11,532,094
Total Deposits 15,186,950 13,497,612 13,329,310
Borrowed funds:
Short-term borrowings:
Federal funds purchased and
securities sold under agreement
to repurchase 1,342,771 1,031,957 1,300,672
Commercial paper 21,200 21,100 48,100
Other short-term borrowings 1,765 15,540 13,523
Total Short-term Borrowings 1,365,736 1,068,597 1,362,295
Long-term borrowings 447,959 632,019 653,431
Total Borrowed Funds 1,813,695 1,700,616 2,015,726
Bank acceptances outstanding 11,662 51,286 15,561
Other liabilities 164,377 173,007 181,132
Total Liabilities 17,176,684 15,422,521 15,541,729
Stockholders' Equity:
Common Stock, par value $.625 a share:
Authorized - 120,000,000 shares
Issued, including treasury stock -
62,810,998; 61,733,185; and
63,128,894 shares, respectively 39,257 38,583 39,456
Surplus 519,144 505,350 515,698
Undivided profits 1,012,331 895,755 871,016
Treasury stock, at cost - 260,000;
614,000; and 1,474,579 shares,
respectively (12,356) (25,085) (12,441)
Unearned restricted stock (2,854) (1,582) ( 1,798)
Unrealized gain(loss) on securities available
for sale, net of taxes (782) 16,232 6,125
Total Stockholders' Equity 1,554,740 1,429,253 1,418,056
$18,731,424 $16,851,774 $16,959,785
</TABLE>
See notes to consolidated financial statements.
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<TABLE>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $280,853 $256,911 $813,671 $753,372
Interest on securities:
Taxable interest income 58,780 54,393 179,443 149,903
Tax-exempt interest income 5,718 6,441 16,655 18,833
Total Interest on Securities 64,498 60,834 196,098 168,736
Interest on mortgage loans held for sale 4,286 2,944 12,055 6,878
Income on federal funds sold
and securities purchased under
agreement to resell 314 1,645 2,154 5,930
Interest on time deposits in other banks 913 636 4,377 2,003
Interest on trading account assets 376 122 796 261
Total Interest Income 351,240 323,092 1,029,151 937,180
Interest Expense:
Interest on deposits 149,594 137,968 435,022 396,971
Interest on short-term borrowings 17,408 16,372 48,561 42,513
Interest on long-term borrowings 7,307 11,264 24,990 32,622
Total Interest Expense 174,309 165,604 508,573 472,106
Net Interest Income 176,931 157,488 520,578 465,074
Provision for loan losses 7,418 6,414 21,734 17,275
Net Interest Income After Provision
for Loan Losses 169,513 151,074 498,844 447,799
Non-Interest Income:
Trust department income 6,852 6,344 21,009 19,531
Service charges on deposit accounts 22,237 18,762 63,490 53,416
Mortgage servicing and origination fees 12,496 13,049 38,721 34,069
Securities gains (losses) 105 85 259 307
Other 13,404 11,023 39,539 31,903
Total Non-Interest Income 55,094 49,263 163,018 139,226
Non-Interest Expense:
Salaries and employee benefits 68,992 65,614 208,271 192,310
Net occupancy expense 8,983 7,526 24,454 21,472
Furniture and equipment expense 8,540 7,664 25,580 22,627
SAIF assessment and merger expenses 21,010 0 29,795 0
Other 42,823 38,118 127,855 119,325
Total Non-Interest Expense 150,348 118,922 415,955 355,734
Income Before Income Taxes 74,259 81,415 245,907 231,291
Applicable income taxes 23,680 27,616 81,022 77,339
Net Income $ 50,579 $ 53,799 $164,885 $153,952
Average number of shares outstanding 61,760 61,619 61,980 61,765
Per share:
Net income $0.82 $0.87 $2.66 $2.49
Cash dividends declared $0.35 $0.33 $1.05 $0.99
</TABLE>
See notes to consolidated financial statements.
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
Nine Months Ended
September 30
1996 1995
<S> <C> <C>
Operating Activities:
Net income $ 164,885 $ 153,952
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization of premises
and equipment 20,502 19,206
Provision for loan losses 21,734 17,275
Net (accretion) amortization of securities (1,386) (5,726)
Amortization of loans and other assets 17,140 16,016
Amortization of deposits and borrowings (1,232) (4,867)
Provision for losses on other real estate 598 896
Deferred income taxes (9,298) (5,734)
(Gain) on sale of premises and equipment (724) (334)
Realized security losses (gains) (259) (307)
Decrease in trading account assets 14,177 6,911
(Increase) in mortgages held for sale (9,775) (5,151)
(Increase) in interest receivable (16,112) (11,262)
(Increase) in other assets (74,593) (21,484)
Increase in other liabilities 5,572 36,124
Stock issued to employees 5,723 0
Other 1,867 14,228
Net Cash Provided By Operating Activities 138,819 209,743
Investing Activities:
Net (increase) in loans (1,000,837) (275,253)
Proceeds from sale of securities 163,704 64,134
Proceeds from maturity of investment securities 421,761 243,354
Proceeds from maturity of securities available
for sale 348,674 346,597
Purchase of investment securities (452,286) (437,700)
Purchase of securities available for sale (443,808) (653,114)
Net decrease (increase) in interest-bearing
deposits in other banks 17,448 (347)
Proceeds from sale of premises and equipment 7,223 1,804
Purchase of premises and equipment (31,228) (34,231)
Net decrease in customers' acceptance liability 39,624 94,959
Acquisitions net of cash acquired 133,825 17,157
Net Cash (Used) By Investing Activities (795,900) (632,640)
Financing Activities:
Net increase in deposits 951,328 363,460
Net increase in short-term borrowings 293,455 214,424
Proceeds from long-term borrowings 8,416 112,847
Payments on long-term borrowings (191,244) (65,391)
Net (decrease) in bank acceptance liability (39,624) (94,959)
Cash dividends (65,529) (56,305)
Purchase of treasury stock for acquisitions (87,621) (36,797)
Proceeds from exercise of stock options 3,769 2,931
Net Cash Provided By Financing Activities 872,950 440,210
Increase In Cash And Cash Equivalents 215,869 17,313
Cash and Cash Equivalents, Beginning of Period 653,500 810,380
Cash And Cash Equivalents, End of Period $ 869,369 $ 827,693
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE A -- Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions for Form 10-Q,
and, therefore, do not include all information and footnotes
necessary for a fair presentation of financial position, results
of operations and cash flows in conformity with generally accepted
accounting principles. For a summary of significant accounting
policies that have been consistently followed, see NOTE A to the
Consolidated Financial Statements included in the 1995 Annual Re-
port to Stockholders previously filed as Exhibit 13 to Form 10-K
and Note A to the Supplemental Consolidated Financial Statements
previously filed as Exhibit 99.c to the Form 10-K. It is manage-
ment's opinion that all adjustments, consisting of only normal and
recurring items necessary for a fair presentation, have been
included.
Certain amounts in prior periods have been reclassified to conform
to the current period presentation or restated for acquisitions
accounted for as poolings of interests.
NOTE B -- Completed Acquisitions
On August 8, 1996, Regions issued 844,991 shares of common stock
in exchange for all the outstanding common stock of Delta Bank &
Trust Company. The Delta transaction, accounted for as a purchase,
added $191 million in assets.
On August 15, 1996, Regions issued 330,767 shares of common stock
in exchange for all the outstanding common stock of First Gwinnett
Bancshares Inc. The First Gwinnett transaction, accounted for as a
purchase, added $68 million in assets.
Also on August 15, 1996, Regions issued 269,722 shares of common
stock in exchange for all the outstanding common stock of Rockdale
Community Bank. The Rockdale transaction, accounted for as a
purchase, added $47 million in assets.
On September 12, 1996, Regions issued 381,077 shares of common
stock in exchange for all the outstanding common stock of American
Bancshares of Houma, Inc. The American transaction, accounted for
as a purchase, added $89 million in assets.
NOTE C - Pending Acquisitions at September 30, 1996
Regions' pending acquisitions are summarized in the following
table. The Florida First and GulfSouth transactions are expected
to be accounted for as purchases. The Allied and West Carroll
transactions are expected to be accounted for as poolings of
interests. The Florida First, Allied, West Carroll and Gulf South
transactions are subject to applicable shareholder and regulatory
approvals.
Expected
Number of
Shares of
Approximate Regions to
Asset Size Type of Exchange be issued
Institution (in millions) Consideration Ratio (in 000's)
Florida First
Bancorp,
Inc., of
Panama City,
Florida $304 Cash N/A N/A
Allied
Bankshares,
Inc., of Regions
Thomson, Common
Georgia 562 Stock 0.226 2,852
West Carroll
Bancshares,
Inc., of Oak Regions
Grove, Common
Louisiana 121 Stock 4.0 608
GulfSouth
Bancshares,
Inc., of Regions
Gretna, Common
Louisiana 54 Stock .4817 188
NOTE D - New Accounting Standards
Effective January 1, 1996, Regions adopted Statement of Financial
Accounting Standards No. 121 (Statement 121) 'Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of.' Statement 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the
assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed
of. The adoption of Statement 121 did not have a material impact
on the Company's financial statements.
Effective January 1, 1996, Regions adopted Statement of Financial
Accounting Standards No. 122 (Statement 122) 'Accounting for
Mortgage Servicing Rights, an Amendment of FASB No. 65.' Statement
122 requires companies that originate mortgage loans to capitalize
the cost of mortgage servicing rights separate from the cost of
originating the loan when a definitive plan to sell or securitize
those loans and retain the mortgage servicing rights exists.
Statement 122 also requires that capitalized mortgage servicing
rights be assessed for impairment based on the fair value of those
rights. The adoption of Statement 122 did not have a material
impact on Regions' financial statements.
In June 1996, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 125
'Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities' (Statement 125). Statement 125
provides accounting and reporting standards for transfers of
financial assets and extinguishments of liabilities which will
effect the rules for determining whether a transfer represents a
sale and, if so, the calculation of the gain or loss resulting
from the sale. Statement 125 supersedes FASB Statement No. 76 and
77, and is effective for transfers of assets after December 31,
1996. Management has not determined the impact Statement 125 will
have on the consolidated financial statements of Regions.
NOTE E - Saving Association Insurance Fund (SAIF) Assessment
On September 30, 1996, legislation authorizing the
recapitalization of the SAIF became effective. This legislation
required Regions, and all other depository institutions having
SAIF-insured deposits, to pay a one-time special assessment of
65.7 basis points on SAIF-insured deposits. Regions' third quarter
net income was reduced by a $21.0 million pre-tax charge ($13.1
million or $0.21 per share after tax) for the SAIF assessment.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Regions' total assets at September 30, 1996, were $18.7 bil-
lion--an increase of 10% over a year earlier. This increase was
due to growth in almost all categories of assets, particularly
loans, due to acquisition activity and internal growth. Since
year-end 1995, total assets have increased 11%.
Comparisons with the prior year are significantly affected by
seven acquisitions shown below, which were accounted for as
purchases, and by the First Federal Bank of Northwest Georgia
(First Federal) acquisition, which was accounted for as a pooling
of interests. Prior year financial information has not been
restated to give effect to the First Federal transaction since the
effect is not material, but has been restated to reflect the First
National Bancorp transaction. Relevant 1995 and 1996 acquisitions
are summarized as follows:
<TABLE>
<S> <C> <C> <C> <C>
Date Headquarters Total Assets Accounting
Acquired Company Acquired Location (in thousands) Treatment
November 1995 Branch Office of
Prudential Cartersville,
Savings Bank Georgia $59,933 Purchase
January 1996 Metro Financial Atlanta,
Corporation Georgia 210,487 Purchase
February 1996 Enterprise
National Bank of Atlanta,
Atlanta Georgia 54,263 Purchase
March 1996 First National Gainesville,
Bancorp Georgia 3,198,634 Pooling
April 1996 First Federal
Bank of Northwest
Georgia, Federal Cedartown,
Savings Bank Georgia 93,584 Pooling
August 1996 Delta Bank & Belle Chasse,
Trust Company Louisiana 190,547 Purchase
August 1996 First Gwinnett Norcross,
Bancshares, Inc. Georgia 68,364 Purchase
August 1996 Rockdale Conyers,
Community Bank Georgia 47,457 Purchase
September 1996 American
Bancshares of Houma,
Houma, Inc. Louisiana 88,743 Purchase
</TABLE>
Loans have increased 13% since a year ago. Loans added as a
result of the seven purchase acquisitions and the First Federal
transaction, were partially offset by the securitization, in the
fourth quarter of 1995, of $102 million of single-family
residential mortgage loans, resulting in a 4% increase in loans.
Internal growth accounted for a 9% increase in loans, which
occurred primarily in commercial and real estate loans. Since
year end, total loans have increased 13%, due to $476 million in
loans added by acquisitions and $1.0 billion in internal growth.
The average yield on loans during the first nine months of 1996
was 8.95%, compared to 8.88% during the same period in 1995. This
increase primarily resulted from acquisitions and a more favorable
product mix.
Non-performing assets were as follows (in thousands):
<TABLE>
<S> <C> <C> <C>
Sept. 30, Dec. 31, Sept. 30,
1996 1995 1995
Non-accruing loans $ 56,819 $ 54,132 $ 56,742
Loans past due 90
days or more 25,161 10,238 6,583
Renegotiated loans 3,643 4,235 4,202
Other real estate 9,853 10,137 14,670
Total $ 95,476 $ 78,742 $ 82,197
Non-performing assets
as a percentage of
loans and other real
estate .73% .68% .71%
</TABLE>
Non-accruing loans have been stable since September of last year.
At September 30, 1996, real estate loans comprised $36.0 million
of total non-accruing loans, with commercial loans accounting for
$11.6 million and installment loans $9.2 million. Other real
estate decreased $284,000 since year end, and decreased $4.8
million since September 1995, due primarily to the disposition of
several parcels of other real estate.
Activity in the allowance for loan losses is summarized as follows
(in thousands):
<TABLE>
<S> <C> <C>
September 30
1996 1995
Balance at beginning of year $159,487 $143,464
Net loans charged-off (recovered):
Commercial (1,187) 1,815
Real estate (1,323) 854
Installment 11,432 5,635
Total 8,922 8,304
Allowance of acquired banks 6,136 5,007
Provision charged to expense 21,734 17,275
Balance at end of period $178,435 $157,442
</TABLE>
Net loan losses in the first nine months of 1996 and 1995 were
0.10% of loans (annualized). Higher installment charge-offs in
the first nine months of 1996, offset by recoveries of prior
period real estate and commercial loans charge-offs, resulted in
stable net loan losses in 1996. At September 30, 1996, the
allowance for loan losses stood at 1.37% of loans, compared to
1.36% a year ago and 1.38% at year end. The allowance for loan
losses as a percentage of non-performing loans and non-performing
assets was 208% and 187%, respectively, at September 30, 1996,
compared to 233% and 192%, respectively, at September 30, 1995.
The allowance for loan losses is maintained at a level deemed ade-
quate by management to absorb possible losses from loans in the
portfolio. In determining the adequacy of the allowance for loan
losses, management considers numerous factors, including but not
limited to: (1) management's estimate of future economic
conditions and the resulting impact on Regions, (2) management's
estimate of the financial condition and liquidity of certain loan
customers, and (3) management's estimate of collateral values of
property securing certain loans. Because all of these factors and
others involve the use of management's estimation and judgment,
the allowance for loan losses is inherently subject to adjustment
at future dates. At September 30, 1996, it is management's
opinion that the allowance for loan losses is adequate. However,
unfavorable changes in any of the above factors or other factors
could require additional provisions, in excess of normal
provisions, to the allowance for loan losses in future periods.
Total securities have increased 4% since a year ago and 4% since
year end, as a result of securities added by acquisitions and the
securitization of $102 million of single-family residential
mortgage loans, which were added to the available for sale
portfolio in the fourth quarter of 1995.
Mortgage loans held for sale increased $28.8 million since
September 30, 1995, and $9.8 million since year end, as a result
of higher levels of residential mortgage loan production at
Regions' mortgage banking subsidiary during the first nine months
of 1996, compared to the same time period in 1995.
Interest-bearing deposits in other banks at September 30, 1996
totaled $46.2 million, an increase of $20.6 million over a year
ago but a decrease of $10.3 million over year end. The decrease
resulted primarily from placing funds in alternative investments.
Net federal funds purchased and security repurchase agreements
totaled $1.3 billion at September 30, 1996, $965.6 million at year
end and $1.2 billion at September 30, 1995. The level of federal
funds and security agreements can fluctuate significantly on a
day-to-day basis, depending on funding needs and which sources of
funds are used to satisfy those needs. During the first nine
months of 1996, net funds purchased averaged $1.1 billion,
compared to $765.7 million in the first nine months of 1995,
indicating more reliance on purchased funds to support earning
assets in the first nine months of 1996 than in the same period
last year.
Premises and equipment have increased $18.3 million since year end
and $18.0 million since September 30, 1995. These increases were
due primarily to the addition of premises and equipment obtained
through acquisitions since September 1995.
Other assets have increased $68.8 million since year end and $31.6
million since the third quarter of last year due primarily to
increased excess purchase price and mortgage servicing rights,
partially offset by a decrease in other real estate and prepaid
expenses.
Total deposits have increased 14% since September of last year.
The deposits acquired in connection with acquisitions resulted in
a 6% increase, with the remaining 8% increase attributable to
internal growth. The internal growth resulted primarily from
increases in certificates of deposit and money market accounts.
Since year end, total deposits have increased 7%, after adjusting
for the deposits acquired in connection with acquisitions during
the first nine months of 1996.
Long-term borrowings have decreased $184.1 million since year end
and $205.5 million since September 30, 1995. These decreases
resulted from payments and maturities of Federal Home Loan Bank
advances, Senior Bank notes and other notes payable.
Regions currently has a shelf-registration statement outstanding
pursuant to which it may offer up to $200 million of its
unsecured, subordinated notes, debentures, bonds or other
evidences of indebtedness. The amounts, dates and terms of any
offering will be determined at a later date. Any offering will be
made only by means of a prospectus.
Regions is concerned about the general trend in litigation in
Alabama state courts involving large damage awards against
financial service company defendants. Regions directly or through
its subsidiaries is party to approximately 78 cases in Alabama in
the ordinary course of business, some of which seek class action
treatment or punitive damages. The damage exposure in Alabama in
any case and in the aggregate is difficult to estimate because the
jury has broad discretion as to the amount of damages awarded. The
United States Supreme Court recently overturned an Alabama case,
holding that the punitive damage award was so grossly excessive as
to violate due process. Subsequently the Court has returned
several cases to the Alabama courts for reconsideration in light
of its ruling.
Notwithstanding these concerns, Regions believes, based on
consultation with legal counsel, that the outcome of pending
litigation will not have a material effect on Regions'
consolidated financial position.
Stockholders' equity was $1.6 billion at September 30, 1996, an
increase of 10% over last year and an increase of 9% since year
end. These increases resulted primarily from internally generated
capital and equity added in connection with acquisitions since
September 1995. During the third quarter of 1996, $84.6 million
of treasury stock was reissued in connection with the four
acquisitions accounted for as purchases. The unrealized loss on
securities available for sale (net of taxes) totaled $782,000 at
September 30, 1996, compared to an unrealized gain of $16.2
million at year end. Regions' ratio of equity to total assets was
8.30% at September 30, 1996, compared to 8.36% a year ago and
8.48% at year end.
Regions' primary sources of liquidity are maturities from its loan
and securities portfolios. In addition to these sources of
liquidity, Regions has access to purchased funds in the state and
national money markets. Liquidity is further enhanced by a
relatively stable source of deposits. At September 30, 1996, the
loan to deposit ratio was 85.81%, compared to 86.78% a year ago
and 85.51% at year end. Regions' management places constant
emphasis on the maintenance of adequate liquidity to meet
conditions that might reasonably be expected to occur.
Net interest income for the first nine months of 1996 increased
$55.5 million or 12%, compared to the same period in 1995. The
increased net interest income resulted from a higher level of
earning assets and slightly higher spreads on those earning
assets. The net yield on interest-earning assets (taxable
equivalent basis) was 4.29% in the first nine months of 1996,
compared to 4.22% in the same period in 1995. For the third
quarter of 1996, net interest income increased $19.4 million or
12%, over the third quarter of 1995, due to increased earning
assets and higher spreads on those assets.
Total non-interest income increased $23.8 million or 17% over the
first nine months of 1995 and $5.8 million or 12% over the third
quarter of 1995. Trust department income increased $1.5 million
or 8% on a year-to-year comparison and $508,000 or 8% on a
quarterly comparison. This resulted from growth in trust assets,
due to acquisitions and internal growth, and increases in
personal, corporate, and employee benefit trust fees. Increased
charges for selected deposit account services, coupled with an
increase in the number of deposit accounts due to acquisitions and
internal growth, resulted in service charges on deposit accounts
increasing $10.1 million or 19% in the first nine months of 1996,
compared to the same period in 1995 and $3.5 million or 19% over
the third quarter of 1995. Mortgage servicing and origination
fees increased $4.7 million or 14% in the first nine months of
1996 compared to the same period in 1995 but decreased $553,000 or
4% compared to the third quarter of 1995. Mortgage origination
fees were up significantly due to increased volume of new loan
production in the first nine months of 1996. Mortgage servicing
fees increased 15% on a year-to-year comparison. The mortgage
company's servicing portfolio totaled $12.4 billion at September
30, 1996. Other non-interest income increased $7.6 million or 24%
in the first nine months of 1996, over the comparable year ago
period primarily due to increased automated teller machine fees,
increased trading account income and a $6.0 million benefit
resulting from the capitalization of originated mortgage servicing
rights upon adoption of Statement 122 (See Note D to the
consolidated financial statements).
Total non-interest expense increased $60.2 million or 17% in the
first nine months of 1996, compared to the same period in 1995 and
$31.4 million or 26% in the third quarter of 1996 compared to the
same period in 1995. Excluding the non-recurring merger expenses
in the first quarter of 1996, and the special SAIF assessment in
the third quarter, total non-interest expense was up $30.4 million
or 9%. Salaries and employee benefits were up 8% in the first nine
months of 1996 compared to the same period in 1995 and 5% in the
third quarter compared to the comparable 1995 period, due to an
increase in the number of employees because of acquisitions,
coupled with normal merit increases and higher benefit costs. Net
occupancy expense and furniture and equipment expense increased
13% in the first nine months of 1996 and 15% in the third quarter
of 1996 over the same periods in 1995, primarily because of
additional expenses associated with branch offices and equipment
added by the 1995 and 1996 acquisitions. A non-recurring pre-tax
merger charge of $8.8 million was taken in the first quarter of
1996 related to the merger of First National Bancorp with Regions.
This charge consisted primarily of investment banking and other
professional fees, severance costs, data processing contract
buyouts and obsolete equipment write-downs. Due to the special
assessment on SAIF insured deposits, a non-recurring pretax charge
of $21.0 million was taken in the third quarter of 1996. Other
non-interest expense increased $8.5 million or 7% in the first
nine months of 1996 and $4.7 million in the third quarter of 1996
over comparable 1995 periods, primarily because of increases in
excess purchase price amortization and professional fees and
increased losses from the sale or holding of residential mortgages
originated by the mortgage company, partially offset by lower FDIC
premiums related to the lower assessment rates on Bank Insurance
Fund insured deposits in 1996. Other non-interest expense in the
first nine months of 1995 was reduced because of a $1.8 million
recovery on a lawsuit settlement.
Income tax expense increased $3.7 million (5%) over the first nine
months of 1995 but decreased $3.9 million (14%) compared to the
third quarter of 1995. On a yearly comparison, an increase in
federal taxable income and an increase in taxable income as
percentage of total income, resulted in higher income tax expense,
but on a quarterly basis, federal taxable income decreased
resulting in lower income tax expense.
Net income for the third quarter was $50.6 million--down 6% over
the third quarter of last year. Year-to-date net income totaled
$164.9 million or $2.66 per share, an increase of 7% on a per share
basis compared to the first nine months of 1995. Annualized return
on stockholders' equity decreased to 14.83%, compared to 15.06% in
the first nine months of last year. Annualized return on assets
also decreased to 1.25% in the first nine months of 1996, compared
to 1.26% for the same period in 1995. Excluding the non-recurring
merger expenses and SAIF assessment in the first nine months of
1996, net income was $183.5 million--up 19% over the first nine
months of last year. Annualized return on stockholders' equity and
return on assets were 16.51% and 1.39%, respectively, in the first
nine months of 1996, excluding the non-recurring merger expenses
and SAIF assessment.
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27) Financial Data Schedule (SEC use only)
(b) Reports on Form 8-K:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by undersigned thereunto duly authorized.
Regions Financial Corporation
DATE: November 13, 1996 /s/ Robert P. Houston
Robert P. Houston
Executive Vice President and
Comptroller
(Chief Accounting Officer and
Duly Authorized Officer)
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
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<INT-BEARING-DEPOSITS> 46,187,000
<FED-FUNDS-SOLD> 78,085,000
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<INVESTMENTS-HELD-FOR-SALE> 1,880,650,000
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