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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
COMMISSION FILE NUMBER 0-6159
REGIONS FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 63-0589368
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
417 North 20th Street, Birmingham, Alabama 35203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 326-7100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK - PAR VALUE $.625
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].
State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 18, 1996.
Common Stock, $.625 Par Value--$2,700,273,982*
*Excludes as shares held by affiliates only shares held by the registrant's
Employee Stock Purchase Plan, Employees' Stock Ownership Plan, Directors' Stock
Investment Plan and executive officers who are directors without prejudice to a
determination of control.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of March 18, 1996.
Common Stock, $.625 Par Value--62,182,540 shares issued and
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual proxy statement dated April 1, 1996 are
incorporated by reference into Part III.
Portions of the annual report to stockholders for the year ended
December 31, 1995, are incorporated by reference into Parts I and II.
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PART I
ITEM 1. Business
(a) The Registrant, Regions Financial Corporation (the
"Registrant" or "Regions"), is a regional bank holding company headquartered in
Birmingham, Alabama, which operated 281 banking offices in Alabama, Florida,
Georgia, Louisiana and Tennessee as of December 31, 1995. At that date,
Regions had total consolidated assets of approximately $13.7 billion, total
consolidated deposits of approximately $10.9 billion, and total consolidated
stockholders' equity of approximately $1.1 billion.
Regions was organized under the laws of the state of Delaware and
commenced operations in 1971 under the name First Alabama Bancshares, Inc. On
May 2, 1994, the name of First Alabama Bancshares, Inc. was changed to Regions
Financial Corporation. Regions' principal executive offices are located at 417
North 20th Street, Birmingham, Alabama 35203, and its telephone number at such
address is (205) 326-7100.
At December 31, 1995, Regions operated six state-chartered commercial
bank subsidiaries and one federal savings bank (collectively, the "Subsidiary
Banks") in Alabama, Florida, Georgia, Louisiana and Tennessee and various
banking-related subsidiaries engaged in mortgage banking, credit life
insurance, leasing, commercial accounts receivable factoring, and securities
brokerage activities with offices in various southeastern states. Through its
subsidiaries, Regions offers a broad range of banking and banking-related
services.
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In Alabama, Regions operates through First Alabama Bank, which at
December 31, 1995, had total consolidated assets of approximately $10.3
billion, total consolidated deposits of approximately $7.9 billion, and total
consolidated stockholders' equity of approximately $850 million. First Alabama
Bank operates 179 banking offices throughout Alabama.
In Florida, Regions operates through Regions Bank of Florida, which at
December 31, 1995, had total consolidated assets of approximately $579 million,
total consolidated deposits of approximately $515 million, and total
consolidated stockholders' equity of approximately $61 million. Regions Bank
of Florida operates 27 banking office in the panhandle region of Florida.
In Georgia, Regions operates through (i) Regions Bank of Georgia,
(ii) Regions Bank of Rome and (iii) Regions Bank, FSB, which at December 31,
1995, had total combined assets of approximately $675 million, total combined
deposits of approximately $610 million, and total combined stockholders' equity
of approximately $51 million. Regions Bank of Georgia operates four 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, Chatsworth, and Cartersville, Georgia.
In Louisiana, Regions operates through Regions Bank of Louisiana which
at December 31, 1995, had total consolidated assets of approximately $2.1
billion, total consolidated deposits of approximately $1.6 billion,
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and total consolidated stockholders' equity of approximately $201 million.
Regions Bank of Louisiana operates 41 banking offices in Louisiana.
In Tennessee, Regions operates through Regions Bank of Tennessee,
which at December 31, 1995, had total consolidated assets of approximately $481
million, total consolidated deposits of approximately $430 million, and total
consolidated stockholders' equity of approximately $33 million. Regions Bank
of Tennessee operates 23 banking offices in Tennessee.
In addition to the Subsidiary Banks, Regions provides additional
banking services through various banking-related subsidiaries, the most
significant of which provide mortgage banking, credit life insurance,
securities brokerage activities and commercial accounts receivable factoring.
Regions Mortgage Inc. (RMI), a subsidiary of First Alabama Bank, is
engaged in mortgage banking with its primary business and source of income
being the origination and servicing of mortgage loans for long-term investors.
RMI serviced approximately $10.6 billion in real estate mortgages at December
31, 1995, and operates loan production offices in Alabama, Florida, Georgia,
Mississippi, South Carolina, and Tennessee.
Regions Agency, Inc., a subsidiary of Regions, acts as an insurance
agent or broker with respect to credit life and accident and health insurance
and other types of insurance relating to extensions of credit by the Subsidiary
Banks or banking-related subsidiaries.
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Regions Life Insurance Company, a subsidiary of Regions, acts as a
re-insurer of credit life and accident and health insurance in connection with
the activities of certain affiliates of Regions.
Regions Investment Company, Inc., a subsidiary of First Alabama Bank,
engages in securities underwriting and brokerage activities and operates
offices in Alabama, Florida, Georgia, Louisiana and Tennessee.
Interstate Billing Service Inc. (IBS), a subsidiary of Regions,
factors commercial accounts receivable and performs billing and collection
services. IBS primarily serves clients related to the automotive service
industry.
A substantial portion of the growth of Regions since commencing
operations in 1971 has been through the acquisition of other financial
institutions, including commercial banks and thrift institutions, and the
assets and deposits thereof. Since it began operations as a bank holding
company, Regions has completed 54 acquisitions of other financial institutions
representing in aggregate (at the time the acquisitions were completed)
approximately $7.2 billion in assets. As part of its ongoing strategic plan,
Regions continually evaluates business combination opportunities and frequently
conducts due diligence activities in connection with possible business
combinations. As a result, business combination discussions and, in some
cases, negotiations frequently take place, and future business combinations
involving cash, debt, or equity securities can be expected. Any future
business combination or series of
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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.
Reference is made to pages 25 through 50 and 76 through 79 of the
annual report to stockholders for the year ended December 31, 1995, included as
Exhibit 13 hereto, for certain statistical (Guide 3) and other information.
(b) The primary business conducted by Registrant's banking
affiliates is banking, which includes provision of commercial and retail
banking services and, in some cases, trust services. Registrant's bank-related
subsidiaries perform services incidental to the business of banking.
Consequently, Registrant's only industry segment is the business of banking and
the information required for industry segments is not applicable.
Reference is made to pages 25 through 50 of the annual report to
stockholders for the year ended December 31, 1995, included as Exhibit 13
hereto, for information required by this item.
(c)(1) General. The Registrant is a bank holding company, registered
with the Board of Governors of the Federal Reserve System ("Federal Reserve")
under the Bank Holding Company Act of 1956, as amended
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("BHC Act"). As such, the Registrant and its subsidiaries are subject to the
supervision, examination, and reporting requirements of the BHC Act and the
regulations of the Federal Reserve. In addition, as a savings and loan holding
company, the Registrant is also registered with the OTS and is subject to the
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 the bank; or (iii) it may merge or consolidate with any other bank
holding company.
The BHC Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a monopoly in
any section of the country, or that in any other manner would be in restraint
of trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The
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Federal Reserve is also required to consider the financial and managerial
resources and future prospects of the bank holding companies and banks
concerned and the convenience and needs of the community to be served.
Consideration of financial resources generally focuses on capital adequacy, and
consideration of convenience and needs issues includes the parties' performance
under the Community Reinvestment Act of 1977 (the "CRA"), both of which are
discussed below.
The BHC Act, 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 the Registrant, 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 altogether. As of the date hereof, none of the states in which the
banking subsidiaries of
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the Registrant are located has either moved up the date after which interstate
branching will be permissible or "opted-out." Assuming no state action prior
to June 1, 1997, the Registrant would be able to consolidate all of its
Subsidiary Banks into a single bank with interstate branches following that
date.
The BHC Act generally prohibits the Registrant from engaging in
activities other than banking or managing or controlling banks or other
permissible subsidiaries and from acquiring or retaining direct or indirect
control of any company engaged in any activities other than those activities
determined by the Federal Reserve to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. In
determining whether a particular activity is permissible, the Federal Reserve
must consider whether the performance of such an activity reasonably can be
expected to produce benefits to the public, such as greater convenience,
increased competition, or gains in efficiency, that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices. For example,
factoring accounts receivable, acquiring or servicing loans, leasing personal
property, conducting discount securities brokerage activities, performing
certain data 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
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have been determined by the Federal Reserve to be permissible activities of
bank holding companies. The BHC Act does not place territorial limitations on
permissible nonbanking activities of bank holding companies. Despite prior
approval, the Federal Reserve has the power to order a bank holding company or
its subsidiaries to terminate any activity or to terminate its ownership or
control of any subsidiary when it has reasonable cause to believe that
continuation of such activity or such ownership or control constitutes a
serious risk to the financial safety, soundness, or stability of any bank
subsidiary of that bank holding company.
Each of the Subsidiary Banks of the Registrant is a member of the
Federal Deposit Insurance Corporation ("FDIC"), and as such, their deposits are
insured by the FDIC to the extent provided by law. Each Subsidiary Bank is
also subject to numerous state and federal statutes and regulations that affect
its business, activities, and operations, and each is supervised and examined
by one or more state or federal bank regulatory agencies.
All of the Subsidiary Banks that are state-chartered banks that are
not members of the Federal Reserve System are subject to supervision and
examination by the FDIC and the state banking authorities of the states in
which they are located. The one subsidiary bank that is a federal savings bank
is subject to regulation, supervision, and examination by the OTS and the FDIC.
The federal banking regulator for each of the Subsidiary Banks, as well as the
appropriate state banking authorities for each of the
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Subsidiary Banks that is a state chartered bank, regularly examine the
operations of the Subsidiary Banks and are given authority to approve or
disapprove mergers, consolidations, the establishment of branches, and similar
corporate actions. The federal and state banking regulators also have the
power to prevent the continuance or development of unsafe or unsound banking
practices or other violations of law.
The Subsidiary Banks are subject to the provisions of the CRA. Under
the terms of the CRA, the Subsidiary Banks have a continuing and affirmative
obligation consistent with their safe and sound operation to help meet the
credit needs of their entire communities, including low- and moderate-income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires each appropriate federal bank regulatory agency, in connection with
its examination of a subsidiary depository institution, to assess such
institution's record in assessing and meeting the credit needs of the community
served by that institution, including low- and moderate-income neighborhoods.
The regulatory agency's assessment of the institution's record is made
available to the public. Further, such assessment is required of any
institution which has applied to: (i) charter a national bank; (ii) obtain
deposit insurance coverage for a newly chartered institution; (iii) establish a
new branch office that will accept
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deposits; (iv) relocate an office; or (v) merge or consolidate with, or acquire
the assets or assume the liabilities of, a federally regulated financial
institution. In the case of a bank holding company applying for approval to
acquire a bank or other bank holding company, the Federal Reserve will assess
the records of each subsidiary depository institution of the applicant bank
holding company, and such records may be the basis for denying the application.
All of the Subsidiary Banks received at least a "Satisfactory" CRA rating in
their most recent examinations.
In April 1995, the federal banking agencies adopted amendments
revising their CRA regulations, with a phase-in schedule applicable to various
provisions. Among other things, the amended CRA regulations, when fully
implemented on July 1, 1997, will substitute for the prior process-based
assessment factors a new evaluation system that will rate an institution based
on its actual performance in meeting community needs. In particular, the system
will focus on three tests; (i) a lending test, to evaluate the institution's
record of making loans in its service areas; (ii) an investment test, to
evaluate the institution's record of investing in community development
projects; and (iii) a service test, to evaluate the institution's delivery of
services through its branches, ATM's and other offices. The amended CRA
regulations also clarify how an institution's CRA performance will be
considered in the application process.
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Payment of Dividends. The Registrant is a legal entity separate and
distinct from its banking and other subsidiaries. The principal source of cash
flow of the Registrant, including cash flow to pay dividends to its
stockholders, is dividends from the Subsidiary Banks. There are statutory and
regulatory limitations on the payment of dividends by the Subsidiary Banks to
the Registrant as well as the Registrant to its stockholders.
As all of the Subsidiary Banks that are state nonmember banks are
subject to the respective laws and regulations of the states of Alabama,
Florida, Georgia, Louisiana, and Tennessee and to the regulations of the FDIC
as to the payment of dividends. The one Subsidiary Bank that is a federal
savings bank is subject to the OTS' capital distributions regulation.
If, in the opinion of a federal regulatory agency, an institution
under its jurisdiction is engaged in or is about to engage in an unsafe or
unsound practice (which, depending on the financial condition of the
institution, could include the payment of dividends), such agency may require,
after notice and hearing, that such institution cease and desist from such
practice. The federal banking agencies have indicated that paying dividends
that deplete an institution's capital base to an inadequate level would be an
unsafe and unsound banking practice. Under the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), an insured institution may not
pay any dividend if payment would cause it to become undercapitalized or if it
already is
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undercapitalized. See "Prompt Corrective Action." Moreover, the Federal
Reserve and the FDIC have issued policy statements which provide that bank
holding companies and insured banks should generally pay dividends only out of
current operating earnings.
At December 31, 1995, under dividend restrictions imposed under
federal and state laws, the Subsidiary Banks, without obtaining governmental
approvals, could declare aggregate dividends to the Registrant of approximately
$178 million.
The payment of dividends by the Registrant and the Subsidiary Banks
may also be affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines.
Capital Adequacy. The Registrant and the Subsidiary Banks are
required to comply with the capital adequacy standards established by the
Federal Reserve in the case of the Registrant and the FDIC and the OTS in the
case of the Subsidiary Banks. There are two basic measures of capital adequacy
for bank holding companies that have been promulgated by the Federal Reserve:
a risk-based measure and a leverage measure. All applicable capital standards
must be satisfied for a bank holding company to be considered in compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among banks
and bank holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets
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and off-balance sheet items are assigned to broad risk categories, each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance sheet items.
The minimum guideline for the ratio of total capital ("Total Capital")
to risk-weighted assets (including certain off-balance-sheet items, such as
standby letters of credit) is 8.0%. At least half of the Total Capital must be
composed of common equity, undivided profits, minority interests in the equity
accounts of consolidated subsidiaries, noncumulative perpetual preferred stock,
and a limited amount of cumulative perpetual preferred stock, less goodwill and
certain other intangible assets ("Tier 1 Capital"). The remainder may consist
of subordinated debt, other preferred stock, and a limited amount of loan loss
reserves. The minimum guideline for Tier 1 Capital is 4.0%. At December 31,
1995, the Registrant's consolidated Tier 1 Capital and Total Capital ratios
were 11.14% and 14.61%, respectively.
In addition, the Federal Reserve has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio of Tier 1 Capital to average assets, less goodwill and certain
other intangible assets (the "Leverage Ratio"), of 3.0% for bank holding
companies that meet certain specified criteria, including having the highest
regulatory rating. All other bank holding companies generally are required to
maintain a Leverage Ratio of at least 3.0%, plus an additional cushion of 100
to 200 basis points. The Registrant's Leverage
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Ratio at December 31, 1995, was 7.49%. 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
indicators of capital strength in evaluating proposals for expansion or new
activities.
Each of the Registrant's Subsidiary Banks is subject to risk-based and
leverage capital requirements adopted by the FDIC or the OTS, which are
substantially similar to those adopted by the Federal Reserve. Each of the
Registrant's Subsidiary Banks was in compliance with applicable minimum capital
requirements as of December 31, 1995. Neither the Registrant nor any of the
Subsidiary Banks has been advised by any federal banking agency of any specific
minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank to a variety
of enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business. See "Prompt Corrective
Action."
Support of Subsidiary Banks. Under Federal Reserve policy, the
Registrant is expected to act as a source of financial strength to, and to
commit resources to support, each of the Subsidiary Banks. This support may be
required at times when, absent such Federal Reserve policy, the
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Registrant may not be inclined to provide it. In addition, any capital loans
by a bank holding company to any of the Subsidiary Banks are subordinate in
right of payment to deposits and to certain other indebtedness of such
Subsidiary Bank. In the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a Subsidiary Bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment.
Under the 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 Banks are subject to these
cross-guarantee provisions. As a
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result, any loss suffered by the FDIC in respect of any of the Subsidiary Banks
would likely result in assertion of the cross-guarantee provisions, the
assessment of such estimated losses against the Registrant's other Subsidiary
Banks, and a potential loss of the Registrant's investment in such other
Subsidiary Banks.
Prompt Corrective Action. FDICIA establishes a system of prompt
corrective action to resolve the problems of undercapitalized institutions.
Under this system, which became effective in December 1992, the federal banking
regulators are required to establish five capital categories ("well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized") and to take certain
mandatory supervisory actions, and are authorized to take other discretionary
actions, with respect to institutions in the three undercapitalized categories,
the severity of which will depend upon the capital category in which the
institution is placed. Generally, subject to a narrow exception, FDICIA
requires the banking regulator to appoint a receiver or conservator for an
institution that is critically undercapitalized. The federal banking agencies
have specified by regulation the relevant capital level for each category.
Under the final agency rule implementing the prompt corrective action
provisions, an institution that (i) has a Total Capital ratio of 10% or
greater, a Tier 1 Capital ratio of 6.0% or greater, and a Leverage Ratio of
5.0% or greater and (ii) is not subject to any written agreement, order,
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capital directive, or prompt corrective action directive issued by the
appropriate federal banking agency is deemed to be "well capitalized." An
institution with a Total Capital ratio of 8.0% or greater, a Tier 1 Capital
ratio of 4.0% or greater, and a Leverage Ratio of 4.0% or greater is considered
to be "adequately capitalized." A depository institution that has a Total
Capital ratio of less than 8.0%, a Tier 1 Capital ratio of less than 4.0%, or a
Leverage Ratio of less than 4.0% is considered to be "undercapitalized." A
depository institution that has a Total Capital ratio of less than 6.0%, a Tier
1 Capital ratio of less than 3.0%, or a Leverage Ratio of less than 3.0% is
considered to be "significantly undercapitalized," and an institution that has
a tangible equity capital to assets ratio equal to or less than 2.0% is deemed
to be "critically undercapitalized." For purposes of the regulation, the term
"tangible equity" includes core capital elements counted as Tier 1 Capital for
purposes of the risk-based capital standards plus the amount of outstanding
cumulative perpetual preferred stock (including related surplus), minus all
intangible assets with certain exceptions. A depository institution may be
deemed to be in a capitalization category that is lower than is indicated by
its actual capital position if it receives an unsatisfactory examination
rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal
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banking agency. Under FDICIA, a bank holding company must guarantee that a
subsidiary depository institution meet is capital restoration plan, subject to
certain limitations. The obligation of a controlling bank holding company
under FDICIA to fund a capital restoration plan is limited to the lesser of
5.0% of an undercapitalized subsidiary's assets and the amount required to meet
regulatory capital requirements. An undercapitalized institution is also
generally prohibited from increasing its average total assets, making
acquisitions, establishing any branches, or engaging in any new line of
business, except in accordance with an accepted capital restoration plan or
with the approval of the FDIC. In addition, the appropriate federal banking
agency is given authority with respect to any undercapitalized depository
institution to take any of the actions it is required to or may take with
respect to a significantly undercapitalized institution as described below if
it determines "that those actions are necessary to carry out the purpose" of
FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions: (i) sell enough shares, including voting shares, to become
adequately capitalized; (ii) merge with (or be sold to) another institution (or
holding company), but only if grounds exist for appointing a conservator or
receiver; (iii) restrict certain
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transactions with banking affiliates as if the "sister bank" exception to the
requirements of Section 23A of the Federal Reserve Act did not exist; (iv)
otherwise restrict transactions with bank or nonbank affiliates; (v) restrict
interest rates that the institution pays on deposits to "prevailing rates" in
the institution's "region"; (vi) restrict asset growth or reduce total assets;
(vii) alter, reduce, or terminate activities; (viii) hold a new election of
directors; (ix) dismiss any director or senior executive officer who held
office for more than 180 days immediately before the institution became
undercapitalized, provided that in requiring dismissal of a director or senior
officer, the agency must comply with certain procedural requirements, including
the opportunity for an appeal in which the director or officer will have the
burden of proving his or her value to the institution; (x) employ "qualified"
senior executive officers; (xi) cease accepting deposits from correspondent
depository institutions; (xii) divest certain nondepository affiliates which
pose a danger to the institution; or (xiii) be divested by a parent holding
company. In addition, without the prior approval of the appropriate federal
banking agency, a significantly undercapitalized institution may not pay any
bonus to any senior executive officer or increase the rate of compensation for
such an officer without regulatory approval.
At December 31, 1995, all of the Registrant's Subsidiary Banks had the
requisite capital levels to qualify as well capitalized.
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FDIC Insurance Assessments. Pursuant to FDICIA, 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
21
<PAGE> 23
of capital groups and supervisory subgroups) to which different assessment
rates are applied. Assessment rates for both the Bank Insurance Fund (BIF) and
the Savings Association Insurance Fund (SAIF) for the first half of 1995, as
they had been during 1994, ranged from 23 basis points for an institution in
the highest category (i.e., "well capitalized" and "healthy") to 31 basis
points 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 in May 1995, the
FDIC was authorized to reduce the minimum assessment rate below the 23 basis
points and to set future assessment rates at such levels that would maintain
the 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, would 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. At the same time, the FDIC
elected to retain the existing assessment rate of 23 to 31 basis points for the
SAIF members for the foreseeable future given the undercapitalized nature of
that insurance
22
<PAGE> 24
fund. Subsequently, 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. At the same time, the FDIC elected to
retain the existing assessment range of 23 to 31 basis points for SAIF members
for the foreseeable future given the undercapitalized nature of that insurance
fund.
By virtue of the BIF assessments being reduced, the Subsidiary Banks
realized savings of approximately $7.9 million pre-tax, during the second half
of 1995, and anticipate annual savings of approximately $16.3 million pre-tax,
with respect to their deposits that are assessed at BIF rates. However, given
that approximately 30% of the total deposits of the Subsidiary Banks as of
December 31, 1995 were (and are now being) assessed at the much higher SAIF
premium rates, the Registrant is now paying substantially more in insurance
premium costs than it would be if the Subsidiary Banks did not hold any
SAIF-assessed deposits.
Recognizing that the disparity between the SAIF and BIF premium rates
have adverse consequences for SAIF-insured institutions and other banks with
SAIF assessed deposits, including reduced earnings and an impaired ability to
raise funds in capital markets and to attract deposits, on July 28, 1995, the
FDIC, the Treasury Department, and the OTS released statements outlining a
proposed plan (the "Proposed Plan") to recapitalize the SAIF, certain features
of which were subsequently approved by the House
23
<PAGE> 25
of Representatives and the Senate of the United States in bills that provided
for different resolutions of the BIF-SAIF disparity. Under the Proposed Plan,
as approved by the members of the Banking Committees of the House and Senate,
all SAIF-member institutions were to pay a special assessment to recapitalize
the SAIF, and the assessment base for the payments on the FICO bonds would have
been expanded to include the deposits of both BIF- and SAIF-insured
institutions. As a result of the SAIF becoming fully capitalized, it was
anticipated that insurance premium rates for SAIF members shortly thereafter
would have been reduced to the same levels as those currently paid by BIF
members.
The amount of the special assessment required to recapitalize the SAIF
was estimated to be approximately 78 to 85 basis points. Under the latest
version of the Proposed Plan, banks that had acquired SAIF-insured deposits
would have paid a special assessment of approximately 64 basis points - 20%
less than SAIF-member institutions. The special assessment would have been
payable some time in 1996 based on deposits held on March 31, 1995. If the
applicable 85 and 64 point assessments had been assessed against the Subsidiary
Banks' deposits as of March 31, 1995, the Subsidiary Banks would have been
required to pay an aggregate special assessment of $23.6 million pre-tax.
However, the special assessments paid by the Subsidiary Banks would have been
at least partially offset by a reduction in insurance premiums paid if, as
expected, the FDIC were to have reduced
24
<PAGE> 26
SAIF premiums to BIF levels following payment of the special assessment and
recapitalization of the SAIF.
Congress adopted the Proposed Plan as part of a budget bill. However,
on December 6, 1995, President Clinton vetoed the balanced budget legislation
passed by Congress that contained the proposed provisions of the Proposed Plan.
With no prospect of a budget agreement between the Administration and Congress,
as well as significant opposition to the Proposed Plan now coming from many
BIF-insured banks, the fate of the SAIF special assessment provisions of the
legislation is uncertain, and it now appears possible that a significant
disparity between SAIF and BIF insurance premium rates could continue to exist
for some time.
In view of the legislative uncertainty that currently exist, the
Registrant cannot predict whether the Proposed Plan or any other legislative
proposal will be enacted as described above or, if enacted, the amount of any
special SAIF assessment, whether ongoing SAIF premiums will be reduced to a
level equal to that of BIF premiums, or whether such legislation, if enacted,
may contain other provisions, for example, requiring all federally-chartered
thrifts to convert to bank charters. A significant increase in SAIF insurance
premiums, either absolutely relative to BIF premiums, a significant one-time
fee to recapitalize the SAIF, or a significant tax liability associated with
the recapture of the bad debt reserve could have a potentially adverse effect
on the operating expenses and results of operations of the Registrant.
25
<PAGE> 27
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, 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 risk 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
26
<PAGE> 28
unreasonable or disproportionate to the services performed by an executive
officer, employee, director, or principle stockholder. 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
acceptable 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 institution is subject under the "prompt
correction 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.
27
<PAGE> 29
Other. Because of concerns relating to the competitiveness and the
safety and soundness of the industry, the United States Congress continues to
consider a number of wide-ranging proposals for altering the structure,
regulation, and competitive relationships of the nation's financial
institutions. Among such bills are proposals to prohibit depository
institutions and bank holding companies from conducting certain types of
activities, to subject depository institutions to increased disclosure and
reporting requirements, to alter the statutory separation of commercial and
investment banking, to require federal savings banks to convert to commercial
bank charters and to further expand the powers of depository institutions, bank
holding companies, and competitors of depository institutions. It cannot be
predicted whether or in what form any of these proposals will be adopted or the
extent to which the business of the Registrant may be affected thereby.
Registrant's broker/dealer subsidiary, Regions Investment Company,
Inc., is subject to regulation by the Securities and Exchange Commission, the
National Association of Securities Dealers, and certain state securities
commissions.
(i) The following chart shows for the last three years the
percentage of total operating income contributed by each of the major
categories of income.
28
<PAGE> 30
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Interest and fees on loans 70.3% 64.9% 61.3%
Interest on securities 15.2 17.4 16.9
Interest on mortgage loans held for sale 0.7 2.0 2.3
Interest on federal funds sold 0.1 0.2 0.2
Other interest income 0.2 0.0 0.1
Trust department income 2.0 2.1 2.7
Service charges on deposit accounts 5.2 5.4 6.2
Mortgage servicing and origination fees 3.4 4.5 6.4
Other non-interest income 2.9 3.5 3.9
----- ----- -----
Total Operating Income 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
(ii) There has been no public announcement, and no
information otherwise has become public, about a material new product or line
of business.
(iii) The monetary policies of the Federal Reserve affect
the operations of Registrant's Subsidiary Banks. Through changes in the
reserve requirements against bank and thrift deposits, open market operations
in U.S. Government securities and changes in the discount rate on borrowings,
the Federal Reserve influences the cost and availability of funds obtained for
lending and investing.
29
<PAGE> 31
The monetary policies of the Federal Reserve have had a significant
effect on the operating results of financial institutions in the past and are
expected to do so in the future. The impact of such policies on the future
business and earnings of the Registrant cannot be predicted.
(iv) The Registrant does not have any material patents,
trademarks, licenses, franchises, or concessions.
(v) No material portion of the Registrant's business is of a
seasonal nature.
(vi) The primary sources of funds for the Subsidiary Banks
are deposits and borrowed funds. The Registrant's primary sources of operating
funds are service fees, dividends, and interest which it receives from bank and
bank-related subsidiaries.
(vii) No material part of the business of the Registrant is
dependent upon a single customer or a few customers. No single customer or
affiliated group of customers accounts for 10% or more of Registrant's
consolidated revenues.
(viii) Information concerning backlog orders is not relevant
to an understanding of the business of the Registrant.
(ix) No material portion of the business of the Registrant
is subject to renegotiation of profits or termination of contracts or
subcontracts by governmental authorities.
(x) All aspects of the Registrant's business are highly
competitive. The Registrant's subsidiaries compete with other financial
30
<PAGE> 32
institutions located in Alabama, northwest Florida, Columbus, Dalton,
Chatsworth and Rome, Georgia, Louisiana, Tennessee, and other adjoining states,
as well as large banks in major financial centers and other financial
intermediaries, such as savings and loan associations, credit unions, consumer
finance companies, brokerage firms, insurance companies, investment companies,
mutual funds, other mortgage companies and financial service operations of
major commercial and retail corporations.
As of December 31, 1995, the Registrant was the third largest bank
holding company headquartered in Alabama based on assets. For information with
respect to the Registrant's markets and the size of the Subsidiary Banks
operating in such markets, see the information provided under subsection (a) of
this Item 1.
Customers for banking services are generally influenced by
convenience, quality of service, personal contacts, price of services, and
availability of products. Although the ranking of Registrant's position varies
in different markets, Registrant believes that its affiliates effectively
compete with other banks and thrifts in their relevant market areas.
Under the provisions of the Interstate Banking Act, the existing
restrictions on interstate acquisitions of banks by bank holding companies,
including the regional interstate banking legislation adopted in 1987 by the
state of Alabama permitting interstate acquisitions of banks and bank holding
companies generally in certain southeastern states, were repealed
31
<PAGE> 33
effective September 29, 1995, such that the Registrant and any other bank
holding company located in Alabama are now able to acquire a bank located in
any other state, and a bank holding company located outside Alabama could
acquire any Alabama-based bank, in either case subject to certain deposit
percentage and other restrictions. The Interstate Banking Act also generally
provides that, after June 1, 1997, national and state-chartered banks may
branch interstate through acquisitions of banks in other states. By adopting
legislation prior to that date, a state has the ability either to "opt in" and
accelerate the date after which interstate branching is permissible or "opt
out" and prohibit interstate branching altogether. To the extent that large
bank holding companies that previously were not permitted to make acquisitions
in the markets in which Regions operates do effect acquisitions pursuant to the
Interstate Banking Act, competition in the Registrant's markets could further
intensify.
(xi) There were no material expenditures during the last
three fiscal years on research and development activities by the Registrant.
(xii) Regulations of any governmental authority concerning
the discharge of materials into the environment are expected to have no
material effect on the Registrant or any of its subsidiaries.
(xiii) As of December 31, 1995, Registrant, its affiliate
banks and other subsidiaries had a total of 6,273 full-time-equivalent
employees.
(d) Registrant neither engages in foreign operations nor derives a
significant portion of its business from customers in foreign countries.
32
<PAGE> 34
ITEM 2. Properties
The corporate headquarters of the Registrant occupy several floors of
the main Birmingham banking facility of First Alabama Bank, located at 417
North 20th Street, Birmingham, Alabama 35203.
The Registrant and its subsidiaries, including the Subsidiary Banks,
operate through 314 office facilities, of which 206 are owned by the Registrant
or one of its subsidiaries and 108 are subject to building or ground leases. Of
the 281 branch office facilities operated by the Subsidiary Banks at December
31, 1995, 75 are subject to building or ground leases and 206 are wholly owned
by the Subsidiary Banks.
For offices in premises leased by the Registrant and its subsidiaries,
annual rentals totaled approximately $4,572,000 as of December 31, 1995.
During 1995, the Registrant and its subsidiaries received approximately
$3,311,000 in rentals for space leased to others. At December 31, 1995,
encumbrances on the offices, equipment and other operational facilities owned
by the Registrant and its subsidiaries totaled approximately $3,833,000 with a
weighted average interest rate of 8.7%.
ITEM 3. Legal Proceedings
"Note L. Commitments and Contingencies" on page 65 of the annual
report to stockholders for the year ended December 31, 1995, is incorporated
herein by reference.
The Registrant is becoming more concerned about the general trend in
litigation in Alabama state courts involving large damage awards against
33
<PAGE> 35
financial service company defendants. Registrant directly or through its
subsidiaries is party to approximately 76 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.
Notwithstanding these concerns, Registrant believes, based on
consultation with legal counsel, that the outcome of pending litigation will
not have a material effect on Registrant's consolidated financial position.
ITEM 4. Submission of Matters to a Vote of Security Holders
At a special meeting of the stockholders held on January 11, 1996,
(the "Special Meeting"), the Board of Directors of the Registrant solicited
proxies in favor of a proposal to approve the issuance of shares of Registrant
common stock in connection with the proposed combination of First National
Bancorp ("First National") with the Registrant, pursuant to the merger of First
National with and into a newly formed subsidiary of the Registrant in
accordance with the terms of the Agreement and Plan of Reorganization, dated
October 22, 1995, by and between the Registrant and First National. At the
special meeting, 28,052,926 shares of Registrant common stock were voted in
favor of the proposal, 239,298 shares voted against, and 348,150 shares
abstained.
34
<PAGE> 36
PART II
ITEM 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
"Common Stock Market Prices and Dividends" on page 50 of the annual
report to stockholders for the year ended December 31, 1995, is incorporated
herein by reference.
ITEM 6. Selected Financial Data
"Historical Financial Summary" on pages 76 through 79 of the annual
report to stockholders for the year ended December 31, 1995, is incorporated
herein by reference.
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 25 through 50 of the annual report to
stockholders for the year ended December 31, 1995, is incorporated herein by
reference.
ITEM 8. Financial Statements and Supplementary Data
The report of independent auditors and the consolidated financial
statements of the Registrant and its subsidiaries, included in the annual
report to stockholders for the year ended December 31, 1995, are incorporated
herein by reference.
35
<PAGE> 37
"Summary of Quarterly Results of Operations" on page 50 and "Effects
of Inflation" on page 49 of the annual report to stockholders for the year
ended December 31, 1995, are incorporated herein by reference.
ITEM 9. Changes in and Disagreements with Accountants On Accounting
and Financial Disclosure
There have been no disagreements on accounting and financial
disclosure between Registrant and Ernst & Young LLP.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
"Information on Directors" from pages 3 through 6 and "Section 16
Transactions" on page 7 of the Registrant's proxy statement dated April 1,
1996, are incorporated herein by reference.
Executive officers of the Registrant as of December 31, 1995, are as
follows:
<TABLE>
<CAPTION>
Position and
Offices Held with Officer
Executive Officer Age Registrant and Subsidiaries Since
- ---------------------- --- ---------------------------- -------
<S> <C> <C> <C>
J. Stanley Mackin 63 Chairman, Director and Chief Executive Officer, 1983*
Registrant and First Alabama Bank; Director,
Regions Bank of Louisiana, Regions Mortgage,
Inc., Trinity Risk Management, Inc., Regions
Agency, and Regions Life Insurance Company.
</TABLE>
36
<PAGE> 38
<TABLE>
<CAPTION>
Position and
Offices Held with Officer
Executive Officer Age Registrant and Subsidiaries Since
- ---------------------- --- ---------------------------- -------
<S> <C> <C> <C>
Richard D. Horsley 53 Vice Chairman, Director and Executive Financial 1972
Officer, Registrant and First Alabama Bank;
Director and Vice President, Regions Agency,
Inc.; Director, Trinity Risk Management, Inc.,
Regions Bank of Louisiana, Regions Life Insurance
Company, Regions Financial Building Corp. and
Regions Mortgage, Inc.
Sam P. Faucett 61 President/Western Region and Florida Region; 1983*
Chairman and Chief Executive Officer, First
Alabama Bank - Tuscaloosa; Director, Regions Bank
of Florida and Regions Mortgage, Inc.
Joe M. Hinds, Jr. 58 President/Northern Region and Tennessee Region; 1983*
Chairman and Chief Executive Officer, First
Alabama Bank - Huntsville.
Wilbur B. Hufham 58 President/Southeastern Region; Chairman, 1983*
President and Chief Executive Officer, First
Alabama Bank - Montgomery.
Carl E. Jones, Jr. 55 President/Southern Region and Louisiana Region; 1983*
Chairman and Chief Executive Officer, First
Alabama Bank - Mobile; Director, Regions Bank of
Louisiana.
</TABLE>
37
<PAGE> 39
<TABLE>
<CAPTION>
Position and
Offices Held with Officer
Executive Officer Age Registrant and Subsidiaries Since
- ---------------------- --- ---------------------------- -------
<S> <C> <C> <C>
William E. Jordan 61 President/Central Region; Chairman and Chief 1990*
Executive Officer, First Alabama Bank -
Birmingham.
William E. Askew 46 Executive Vice President - Retail Banking 1987
Division, Registrant and First Alabama Bank.
Delmar F. Epton 62 Executive Vice President - Product Development, 1986*
Registrant and First Alabama Bank.
Robert P. Houston 51 Executive Vice President and Comptroller, 1974
Registrant and First Alabama Bank; Director and
Treasurer, Regions Financial Building Corp.;
Director, Secretary and Treasurer, Trinity Risk
Management, Inc., Regions Life Insurance Company
and Regions Agency, Inc.
E. Cris Stone 53 Executive Vice President - Corporate Banking, 1988
Registrant and First Alabama Bank; Director and
Vice President, Regions Financial Leasing, Inc.
Richard E. Wambsganss 55 Executive Vice President - Trust Group, 1987
Registrant and First Alabama Bank.
</TABLE>
38
<PAGE> 40
<TABLE>
<CAPTION>
Position and
Offices Held with Officer
Executive Officer Age Registrant and Subsidiaries Since
- ----------------------- --- ---------------------------- -------
<S> <C> <C> <C>
Samuel E. Upchurch Jr. 44 General Counsel and Corporate Secretary, 1994
Registrant and First Alabama Bank; Director
Regions Investment Company, Inc.
</TABLE>
*The years indicated are those in which the individual was first deemed to be
an executive officer of Registrant, although in every case the individual had
been an executive officer of a subsidiary of Registrant for a number of years.
ITEM 11. Executive Compensation
"Executive Compensation and Other Transactions" on pages 7 through 11,
excluding the information on page 11 under the sub-headings "Compensation and
Stock Option Determinations" and "Personnel Committee Executive Compensation
Report" of the Registrant's proxy statement dated April 1, 1996, are
incorporated herein by reference. "Executive Compensation Report" on pages 11
through 14, of the Registrant's proxy statement dated April 1, 1996, are
specifically not incorporated by reference herein.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
"Voting Securities and Principal Holders Thereof" on page 2 and
"Information on Directors" on pages 3 through 5 of the Registrant's proxy
statement dated April 1, 1996, are incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions
"Other Transactions," on page 15 of the Registrant's proxy statement
dated April 1, 1996, are incorporated herein by reference.
39
<PAGE> 41
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K
14(a) (1) and (2) The lists called for by this portion of Item 14 are
submitted as a separate part of this report.
14(a) (3) Listing of Exhibits:
<TABLE>
<CAPTION>
SEC Assigned
Exhibit Number Description of Exhibit
-------------- ----------------------
<S> <C>
3. Bylaws as last amended on April 28, 1993, incorporated herein by reference from the Exhibits to
the Registration Statement filed with the Commission and assigned file number 33-50577.
Certificate of Incorporation as last amended on May 2, 1994, incorporated herein by reference
from the Appendix to the Registration Statement filed with the Commission and assigned file
number 33-54231.
4. a. Subordinated Notes Indenture Agreement dated as of December 1, 1992, incorporated by
reference from the Exhibits to the Registration Statement filed with the Commission
and assigned registration number 33-45714.
10. *a. Regions Amended and Restated 1991 Long-Term Incentive Plan incorporated by reference
from Appendix B to the Registrant's proxy statement filed with the Commission and dated
March 16, 1995.
*b. Regions Management Incentive Plan Amended and Restated as of January 1, 1995,
incorporated by reference from Appendix A to the Registrant's proxy statement
filed with the Commission and dated March 16, 1995.
</TABLE>
40
<PAGE> 42
<TABLE>
<S> <C>
13. Annual Report to Stockholders for the year ended December 31, 1995.
21. List of Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
27. Financial Data Schedule (for SEC use only).
99. a. Form 11-K, Annual Report of Employee Stock Purchase Plan of Regions Financial
Corporation for the year ended December 31, 1995.
b. Form 11-K, Annual Report of Directors' Stock Investment Plan of Regions Financial
Corporation for the year ended December 31, 1995.
c. Supplemental financial statements restated to reflect the business combination of the
Registrant and First National Bancorp.
*- Represents a compensatory plan agreement that is required to be filed under this item.
14(b) Reports on Form 8-K filed in the fourth quarter of 1995:
In a report filed on Form 8-K, under item 5, dated October 22, 1995, the Registrant announced a
business combination with First National Bancorp of Gainesville, Georgia.
In a report filed on Form 8-K, under items 5 and 7, dated November 22, 1995, the Registrant
filed pro forma financial statements reflecting certain aspects of its recently completed and
pending acquisitions and historical financial statements of First National Bancorp, with which
Regions had a pending combination. Included in the report are the unaudited pro forma combined
condensed statement of condition as of September 30, 1995, and unaudited pro
</TABLE>
41
<PAGE> 43
<TABLE>
<S> <C>
forma combined condensed statements of income for the periods ended September 30, 1995,
December 31, 1994, 1993 and 1992.
14(c) The Exhibits not incorporated herein by reference are submitted as a separate part of this
report.
</TABLE>
42
<PAGE> 44
NOTE: Copies of the aforementioned exhibits are available
to stockholders upon request to:
Stockholder Assistance
44 First Alabama Plaza
P. O. Box 1448
Montgomery, Alabama 36102-1448
14(d) Financial statement schedules: None.
43
<PAGE> 45
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
REGIONS FINANCIAL CORPORATION
/s/ Samuel E. Upchurch, Jr. 3/20/96
-----------------------------------
Samuel E. Upchurch, Jr. Date
General Counsel
and Corporate Secretary
/s/ Robert P. Houston 3/20/96
-----------------------------------
Robert P. Houston Date
Executive Vice President
and Comptroller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ J. Stanley Mackin 3/20/96 /s/ William R. Boles, Sr. 3/20/96
- ----------------------------------------- -----------------------------------------
J. Stanley Mackin Date William R. Boles, Sr. Date
Chairman, Chief Executive Director
Officer and Director
/s/ Richard D. Horsley 3/20/96 /s/ James B. Boone, Jr. 3/20/96
- ----------------------------------------- -----------------------------------------
Richard D. Horsley Date James B. Boone, Jr. Date
Vice Chairman, Executive Director
Financial Officer and Director
/s/ Sheila S. Blair 3/20/96 /s/ Albert P. Brewer 3/20/96
- ----------------------------------------- -----------------------------------------
Sheila S. Blair Date Albert P. Brewer Date
Director Director
</TABLE>
44
<PAGE> 46
<TABLE>
<S> <C>
- -----------------------------------------
James S. M. French Date
Director
/s/ Catesby ap C. Jones 3/20/96
- -----------------------------------------
Catesby ap C. Jones Date
Director
- -----------------------------------------
Olin B. King Date
Director
/s/ Henry E. Simpson 3/20/96 /s/ Lee J. Styslinger, Jr. 3/20/96
- ----------------------------------------- -----------------------------------------
Henry E. Simpson Date Lee J. Styslinger, Jr. Date
Director Director
/s/ Robert E. Steiner, III 3/20/96 /s/ Robert J. Williams 3/20/96
- ----------------------------------------- -----------------------------------------
Robert E. Steiner, III Date Robert J. Williams Date
Director Director
</TABLE>
45
<PAGE> 47
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) AND (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1995
REGIONS FINANCIAL CORPORATION
BIRMINGHAM, ALABAMA
<PAGE> 48
FORM 10-K - ITEM 14(a)(1) AND (2)
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and report of
independent auditors of Regions Financial Corporation and subsidiaries,
included in the annual report of the registrant to its stockholders for the
year ended December 31, 1995, are incorporated by reference in Item 8:
Report of Independent Auditors
Consolidated Statements of Condition - December 31, 1995 and 1994
Consolidated Statements of Income - Years ended December 31, 1995,
1994 and 1993
Consolidated Statements of Cash Flows - Years ended December 31, 1995,
1994 and 1993
Consolidated Statements of Changes in Stockholders' Equity - Years
ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements - December 31, 1995
Schedules to the consolidated financial statements required by Article
9 of Regulation S-X are not required under the related instructions or are
inapplicable, and therefore have been omitted.
On March 1, 1996, Regions entered into a business combination with
First National Bancorp. Because the combination occurred subsequent to December
31, 1995, the financial statements and Management's Discussion and Analysis of
the Financial Condition and Results of Operations included in this Form 10-K do
not give effect to the restatement to include First National's financial
results. The Supplemental Consolidated Financial Statements, presented in
Exhibit 99.c., restate the Registrants' 1995 and prior years' financial
statements, giving effect to the combination with First National.
<PAGE> 49
ANNUAL REPORT ON FORM 10-K
ITEM 14(c)
EXHIBITS
<PAGE> 50
EXHIBITS INDEX
<TABLE>
<CAPTION>
SEC Assigned
Exhibit Number Description of Exhibit
- -------------- ----------------------
<S> <C>
3. Bylaws as last amended on April 28, 1993, incorporated herein by reference from the Exhibits to the
Registration Statement filed with the Commission and assigned file number 33-50577.
Certificate of Incorporation as last amended on May 2, 1994, incorporated herein by reference from the
Exhibits to the Registration Statement filed with the Commission and assigned file number 33-54231.
4. a. Subordinated Notes Indenture Agreement dated as of December 1, 1992, incorporated by reference
from the Exhibits to the Registration Statement filed with the Commission and assigned
registration number 33-45714.
10. a. Regions Amended and Restated 1991 Long-Term Incentive Plan incorporated by reference from
Appendix B to the Registrant's proxy statement filed with the Commission and dated March 16,
1995.
b. Regions Management Incentive Plan Amended and Restated as of January 1, 1995,
incorporated by reference from Appendix A to the Registrant's proxy statement
filed with the Commission and dated March 16, 1995.
13. Annual Report to Stockholders for the year ended December 31, 1995.
21. List of Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
27. Financial Data Schedule (for SEC use only).
99. a. Form 11-K, Annual Report of Employee Stock Purchase Plan of Regions Financial Corporation for
the year ended December 31, 1995.
b. Form 11-K, Annual Report of Directors' Stock Investment Plan of Regions Financial Corporation
for the year ended December 31, 1995.
c. Supplemental financial statements restated to reflect the business combination of the
Registrant and First National Bancorp.
</TABLE>
<PAGE> 1
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND OPERATING RESULTS
INTRODUCTION
The following discussion and financial information is presented to aid
in understanding Regions Financial Corporation's (Regions or the Company)
financial position and results of operations. The emphasis of this discussion
will be on the years 1995, 1994 and 1993; however, financial information for
prior years will also be presented when appropriate. This discussion
supplements the historical financial summary on pages 76 to 79 and should be
read in conjunction therewith.
Regions' primary business is banking. In 1995, Regions' banking
affiliates contributed approximately $171 million to consolidated net income.
Selected information as of December 31, 1995, on Regions' banking affiliates is
as follows:
<TABLE>
<CAPTION>
Name of Bank Assets Loans Deposits Full-Service Offices
- --------------------------------------------------------------------------------------------------------------------------------
(dollar amounts in thousands)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Alabama Bank $10,280,106 $7,151,050 $7,850,521 179
- --------------------------------------------------------------------------------------------------------------------------------
Regions Bank of Louisiana 2,148,256 1,464,821 1,619,793 41
- --------------------------------------------------------------------------------------------------------------------------------
Regions Bank of Florida 578,805 365,841 514,983 27
- --------------------------------------------------------------------------------------------------------------------------------
Regions Bank of Tennessee 481,463 396,467 430,016 23
- --------------------------------------------------------------------------------------------------------------------------------
Regions Bank of Georgia 110,733 31,310 97,295 4
- --------------------------------------------------------------------------------------------------------------------------------
Regions Bank of Rome (Georgia) 174,827 95,006 160,607 2
- --------------------------------------------------------------------------------------------------------------------------------
Regions Bank, FSB (Georgia) 389,583 323,814 351,640 5
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Supplementing the Company's banking operations are a mortgage banking
company, credit life insurance related companies, a registered broker/dealer
firm and a commercial accounts receivable financing, billing and collection
company. Regions has no foreign operations, although it maintains an
International Department to assist customers with their foreign transactions.
The mortgage banking company services approximately $10.6 billion in mortgage
loans and in 1995 contributed approximately $9.3 million to net income.
The Company's principal market areas are all of Alabama, parts of
Louisiana, middle Tennessee, northwest Florida, and Columbus, Rome and
Dalton, Georgia. In addition, real estate mortgage loan origination offices are
located in other market areas in Tennessee, and in the states of Mississippi and
South Carolina.
The acquisitions of other banks and related institutions have
contributed significantly to Regions' growth during the last three years.
Regions has expanded into new markets and strengthened its presence in existing
markets.
In 1993, Regions entered the Louisiana banking market for the first time
through the acquisition of Secor Bank, Federal Savings Bank, which added $1.8
billion in assets. Secor's 15 offices in Louisiana, with approximately $789
million in deposits, provided Regions with a retail banking franchise in New
Orleans and northern Louisiana. Secor's banking offices in Alabama, with
approximately $429 million in deposits, strengthened Regions' market presence in
several major Alabama market areas.
Also in 1993, Regions expanded its northwest Florida franchise through
the acquisition of two thrifts with $190 million in assets and expanded its
Tennessee franchise through the acquisition of the Franklin County Bank with $68
million in assets.
During 1994, acquisitions strengthened Regions' franchise in Alabama,
Louisiana and Georgia. In Alabama, Regions added $494 million in assets through
two acquisitions--Union Bank & Trust Company and First Fayette Bancshares, Inc.
Louisiana acquisitions in Baton Rouge, New Roads and Monroe added $626 million
in assets. These banks, along with Secor Bank, were merged to form
state-chartered Regions Bank of Louisiana. In Georgia, the addition of First
Community Bancshares, Inc. (now Regions Bank of Rome) in September 1994 enabled
Regions to establish a market presence in Rome, Georgia.
Regions' acquisition activity in 1995 included increasing its New
Orleans area presence through the purchase of First Commercial Bancshares, Inc.
and its affiliate bank, the First National Bank of St. Bernard Parish, which was
merged into Regions Bank of Louisiana. The addition of Fidelity Federal Savings
Bank of Dalton, Georgia and the Cartersville, Georgia office of Prudential
Savings Bank (both now Regions Bank, FSB) added $393 million in assets and
enhanced Regions' market coverage in northwestern Georgia.
Regions expanded its line of businesses in 1995 through the acquisition
of Interstate Billing Service, Inc., headquartered in Decatur, Alabama.
Interstate Billing factors commercial accounts receivables and performs billing
and collection services for its clients. Interstate Billing currently does
business in more than 25 states, primarily serving clients related to the
automotive service industry.
25
<PAGE> 2
Regions' acquisitions over the last three years are summarized in the
following chart.
<TABLE>
<CAPTION>
HEADQUARTERS TOTAL ASSETS ACCOUNTING
DATE COMPANY ACQUIRED LOCATION (in thousands) TREATMENT
- -----------------------------------------------------------------------------------------------------------------
1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March First Commercial Bancshares, Inc. Chalmette, Louisiana $ 112,968 Purchase
May Fidelity Federal Savings Bank Dalton, Georgia 333,336 Pooling
July Interstate Billing Service, Inc. Decatur, Alabama 30,521 Pooling
November Branch Office of Prudential Savings Bank Cartersville, Georgia 59,933 Purchase
1994
- -----------------------------------------------------------------------------------------------------------------
May Guaranty Bancorp Inc. Baton Rouge, Louisiana 186,879 Pooling
July First Fayette Bancshares Inc. Fayette, Alabama 76,586 Purchase
August BNR Bancshares Inc. New Roads, Louisiana 136,799 Pooling
September First Community Bancshares, Inc. Rome, Georgia 125,090 Pooling
November American Bancshares, Inc. Monroe, Louisiana 302,674 Purchase
December Union Bank & Trust Company Montgomery, Alabama 417,903 Purchase
1993
- -----------------------------------------------------------------------------------------------------------------
June Franklin County Bank Winchester, Tennessee 68,034 Purchase
October First Federal Savings Bank of DeFuniak Springs DeFuniak Springs, Florida 89,295 Purchase
December First Federal Savings Bank Marianna, Florida 101,084 Purchase
December Secor Bank, Federal Savings Bank Birmingham, Alabama 1,831,937 Purchase
</TABLE>
As of December 31, 1995, Regions had six pending acquisitions, five in
Georgia and one in Louisiana. These acquisitions have combined assets of
approximately $3.8 billion and would increase Regions' asset size to $17.5
billion. See Note Q to the consolidated financial statements for additional
information regarding pending acquisitions.
FINANCIAL CONDITION
Regions' financial condition depends primarily on the quality and nature
of its assets, liabilities and capital structure, the market and economic
conditions, and the quality of its personnel.
LOANS AND ALLOWANCE FOR LOAN LOSSES
As a financial institution, Regions' primary investment is loans. At
December 31, 1995, loans represented 75% of Regions' earning assets.
Over the last four years loans increased a total of $5.3 billion, a
compound growth rate of 22%. Loans acquired in connection with acquisitions over
the last four years contributed $2.6 billion of this growth. The most
significant growth in the loan portfolio occurred in 1992, 1993 and 1994, with
loans increasing $868 million, $1.7 billion, and $2.2 billion, respectively.
Approximately $289 million of the 1992 growth resulted from the acquisition of
Security Federal (now Regions Bank of Tennessee), including $234 million in
single-family residential mortgage loans. The acquisitions of Secor Bank,
Franklin County Bank and the two Florida thrifts in 1993 added $1.2 billion in
loans. The acquisition of six banks in 1994 added $671 million in loans and the
four acquisitions in 1995 added $443 million in loans.
During 1995, Regions securitized $396 million in single-family
residential mortgage loans. These assets were transferred from the loan
portfolio to the available for sale securities portfolio. The securitization of
these loans gives Regions additional flexibility for funding purposes and
results in a lower risk-weighted capital allocation for these assets. After
adjusting for the effect of the securitization, loans would have increased $924
million or 10% in 1995.
All major categories of loans have shared in the growth in the loan
portfolio over the last four years, with the strongest growth occurring in real
estate mortgages (primarily single-family residential mortgages) and consumer
loans. Over the last four years, commercial, financial and agricultural loans
increased $663 million or 50%. Real estate construction loans increased $219
million or 113% over the same period. Real estate mortgage loans increased $3.0
billion or 197% and consumer loans increased $1.4 billion or 111% over the last
four years.
Regions' real estate mortgage portfolio includes $1.6 billion of
mortgage loans secured by single-family residences that were originated by
Regions' mortgage subsidiary. The majority of these loans are secured by homes
in Alabama, Georgia and Florida. These loans increased approximately $214
million in 1993 and $982 million in 1994, accounting for approximately 13% and
45%, respectively, of the growth in total loans in 1993 and 1994.
26
<PAGE> 3
The securitization in 1995 of the $396 million in single-family residential
mortgages resulted in this portfolio declining $123 million in 1995. Eighty-six
percent of the overall balance consists of adjustable-rate mortgages (ARM's)
that have rates approximately 275 basis points above one of several money
market indices when fully priced.
Regions' real estate portfolio also includes $647 million of
single-family mortgage loans obtained in the Secor Bank acquisition. Fixed-rate
single-family mortgages with original terms greater than 15 years comprise 36%
of the overall balance of these loans. Fixed-rate single-family mortgages with
original terms of 15 years or less comprise 31% of the overall balance of these
loans. Single-family ARM's, which have rates approximately 268 basis points
above one of several money market indices when fully priced, comprise the
remaining 33% of the overall balance of these loans.
A sound credit policy and careful, consistent credit review are vital to
a successful lending program. All affiliates of Regions operate under written
loan policies which attempt to maintain a consistent lending philosophy, provide
sound traditional credit decisions, provide an adequate return and render
service to the communities in which the banks are located. Regions' lending
policy generally confines loans to local customers or to national firms doing
business locally. Credit reviews and loan examinations help confirm that
affiliates are adhering to these loan policies.
Every loan carries some degree of credit risk. This risk is reflected in
the consolidated financial statements by the size of the allowance for loan
losses, the amount of loans charged off and the provision for loan losses
charged to operating expense. It is Regions' policy that when a loss is
identified, it is charged against the allowance for loan losses in the current
period. The policy regarding recognition of losses requires immediate
recognition of a loss if significant doubt exists as to principal repayment. In
addition, consumer installment credit is generally recognized as a loss when it
becomes 90 days or more past due, unless the underlying security or the
customer's financial position makes a loss improbable.
Regions' provision for loan losses is a reflection of actual losses
experienced during the year and management's judgment as to the adequacy of the
allowance for loan losses to absorb future losses. Some of the factors
considered by management in determining the amount of the provision and
resulting allowance include: (1) credit reviews of individual loans; (2) gross
and net loan charge-offs in the current year; (3) growth in the loan portfolio;
(4) the current level of the allowance in relation to total loans and to
historical loss levels; (5) past due and non-accruing loans; (6) collateral
values of properties securing loans; (7) the composition of the loan portfolio
(types of loans); and (8) management's estimate of future economic conditions
and the resulting impact on Regions.
Lending at Regions is generally organized along three functional lines:
commercial loans (including industrial and agricultural), real estate loans, and
consumer loans. The composition of the portfolio by these major categories is
presented below (with real estate loans further broken down between construction
and mortgage loans):
<TABLE>
<CAPTION>
(in thousands, net of unearned income) December 31
- -------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $1,982,823 $1,865,065 $1,491,165 $1,437,036 $1,319,424
- -------------------------------------------------------------------------------------------------------------------------
Real estate-construction 413,212 347,431 262,918 255,923 194,306
- -------------------------------------------------------------------------------------------------------------------------
Real estate-mortgage 4,557,532 4,539,286 3,308,528 2,028,279 1,533,086
- -------------------------------------------------------------------------------------------------------------------------
Consumer 2,592,133 2,266,020 1,770,635 1,421,293 1,228,142
- -------------------------------------------------------------------------------------------------------------------------
TOTAL $9,545,700 $9,017,802 $6,833,246 $5,142,531 $4,274,958
=========================================================================================================================
</TABLE>
The amounts of total gross loans (excluding residential mortgages on 1-4
family residences and consumer loans) outstanding at December 31, 1995, based on
remaining scheduled repayments of principal, due in (1) one year or less, (2)
more than one year but less than five years and (3) more than five years, are
shown in the following table. The amounts due after one year are classified
according to sensitivity to changes in interest rates.
<TABLE>
<CAPTION>
(in thousands) Loans Maturing
- -------------------------------------------------------------------------------------------------------------------
Within After One But After
One Year Within Five Years Five Years Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $1,036,966 $ 628,267 $326,462 $1,991,695
- -------------------------------------------------------------------------------------------------------------------
Real estate-construction 254,413 75,065 83,734 413,212
- -------------------------------------------------------------------------------------------------------------------
Real estate-mortgage 202,776 611,882 573,650 1,388,308
- -------------------------------------------------------------------------------------------------------------------
TOTAL $1,494,155 $1,315,214 $983,846 $3,793,215
===================================================================================================================
</TABLE>
27
<PAGE> 4
<TABLE>
<CAPTION>
(in thousands) Sensitivity of Loans
to Changes in Interest Rates
- ----------------------------------------------------------
Predetermined Variable
Rate Rate
- ----------------------------------------------------------
<S> <C> <C>
Due after one year but
within five years $ 742,766 $ 572,448
- ----------------------------------------------------------
Due after five years 345,835 638,011
- ----------------------------------------------------------
$1,088,601 $1,210,459
==========================================================
</TABLE>
A coordinated effort is undertaken to identify credit risks in the loan
portfolio for management purposes and to establish the loan loss provision and
resulting allowance for accounting purposes. A regular, formal and ongoing loan
review is conducted to identify loans with unusual risks or possible losses. The
primary responsibility for this review rests with the management of the
individual banking offices. Their work is supplemented with reviews by Regions'
internal audit staff and corporate loan examiners. Bank regulatory agencies and
the Company's independent auditors provide additional levels of review. This
process provides information which helps in assessing the quality of the
portfolio, assists in the prompt identification of problems and potential
problems and aids in deciding if a loan represents a probable loss which should
be recognized or a risk for which an allowance should be maintained.
If, as a result of Regions' loan review and evaluation procedures, it
is determined that payment of interest on a commercial or real estate
loan is questionable, it is Regions' policy to reverse interest previously
accrued on the loan against interest income. Interest on such loans is
thereafter recorded on a "cash basis" and is included in earnings only when
actually received in cash and when full payment of principal is no longer
doubtful.
Although it is Regions' policy to immediately charge off as a loss all
loan amounts judged to be uncollectible, historical experience indicates that
certain losses exist in the loan portfolio which have not been specifically
identified. To anticipate and provide for these unidentifiable losses, the
allowance for loan losses is established by charging the provision for loan
losses expense against current earnings. No portion of the resulting allowance
is in any way allocated or restricted to any individual loan or group of loans.
The entire allowance is available to absorb losses from any and all loans.
The year-end allowance for loan losses as a percentage of loans ranged
from a low of 1.28% in 1991 to a high of 1.47% in 1993. At December 31, 1995,
the allowance for loan losses as a percentage of loans was 1.36%. The ratio of
non-performing assets (including loans past due 90 days or more and other real
estate) to loans and other real estate declined to 1.01% in 1991, and to 0.81%
in 1992. This ratio increased to 1.03% in 1993 due to non-performing assets
added by the thrift acquisitions in 1993. As non-performing assets declined in
1994, this ratio improved to 0.58% at December 31, 1994 and remained at the
0.58% level at December 31, 1995.
The allowance for loan losses as a percentage of non-performing loans
(including loans past due 90 days or more) was 248% at December 31, 1995,
compared to 252% at December 31, 1994, and to 178% at December 31, 1993.
Management considers the current level of the allowance for loan losses adequate
to absorb possible losses from loans in the portfolio. Management's
determination of the adequacy of the allowance for loan losses, which is based
on the factors and risk identification procedures previously discussed, requires
the use of judgments and estimations that may change in the future. Unfavorable
changes in the factors used by management to determine the adequacy of the
reserve, or the availability of new information, could cause the allowance for
loan losses to be increased or decreased in future periods. In addition, bank
regulatory agencies, as part of their examination process, may require that
additions be made to the allowance for loan losses based on their judgments and
estimates.
The analysis of loan loss experience on page 31 shows that net loan
losses ranged from a high of $14.2 million in 1991 to a low of $10.4 million in
1993. Net loan losses were $12.8 million in 1995 and $12.7 million in 1994. Over
the last five years net loan losses averaged 0.20% of average loans and were
0.13% in 1995. Regions' relatively low level of net loan losses is due to
favorable economic conditions relative to some other sections of the country,
quality control efforts in the underwriting and monitoring of loans, a
substantial amount of recoveries of previously charged-off loans, and an
increase in single-family residential mortgage loans as a percentage of the loan
portfolio, which historically have had lower net loan losses than other
categories of loans.
In order to assess the risk characteristics of the loan portfolio at
December 31, 1995, it is appropriate to consider the three major categories of
loans--commercial, real estate and consumer.
Regions' commercial loan portfolio is highly diversified within the
markets served by the Company. Geographically, the largest concentration is the
23% of the portfolio held by banking offices in the Birmingham MSA (metropolitan
statistical area). Approximately 14% is held within the Mobile MSA, 11% within
the Montgomery MSA, 5% within the Tuscaloosa MSA and 4% within the Huntsville
MSA. The remaining 43% of the portfolio is geographically dispersed among the
other offices. A small portion of these loans is secured by properties outside
Regions' banking market areas.
The Birmingham MSA, with civilian employment of approximately 448,000,
is Alabama's largest metropolitan area. Service industries, such as health care
and finance, and retail trade play a key role in the local economy. Steel, coal
and manufacturing are still important to the Birmingham economy, but service
industries have helped diversify the city's economic base.
The Mobile MSA, with civilian employment of approximately 262,000, is
diversified in heavy industry, forest products, shipbuilding, tourism, oil and
gas production, agriculture and international trade.
28
<PAGE> 5
The Montgomery MSA, with civilian employment of approximately 154,000,
is stabilized by government and military payrolls. The business community in
Montgomery is diversified and consists mainly of light industry and facilities
specializing in transportation and distribution. The city is a retail trade
center for central and south Alabama and agriculture also plays an important
role in the economy.
The Tuscaloosa MSA, with civilian employment of approximately 78,000, is
diversified among education, health care and mining activities. Stability in the
Tuscaloosa market is provided by the large employment base of a state university
and two state hospitals, which are not as susceptible to economic downturns as
other industries. The construction of a Mercedes-Benz automobile manufacturing
facility between Birmingham and Tuscaloosa is having a favorable impact on the
economies of both areas.
The Huntsville MSA, with civilian employment of approximately 163,000,
has a large number of high technology companies. Government and military
payrolls related to the space program are also important.
During the last five years, net losses on commercial loans ranged from a
low of 0.18% in 1995 to a high of 0.42% in 1991. Future losses are a function of
many variables, of which general economic conditions are the most important. If
economic conditions weaken in 1996, net commercial loan losses will likely
exceed the 1995 level. A continuation of moderate economic growth during 1996 in
Regions' market areas could result in 1996 net commercial loan losses
approximating the 1995 level.
Regions' real estate loan portfolio consists of construction and land
development loans, loans to businesses for long-term financing of land and
buildings, loans on one-to-four family residential properties, loans to mortgage
banking companies (which are secured primarily by loans on one-to-four family
residential properties and are known as warehoused mortgage loans) and various
other loans secured by real estate.
Real estate construction loans increased $66 million in 1995 to $413
million. At December 31, 1995, these loans represented 4.3% of Regions' total
loan portfolio, compared to 4.5% at the end of 1991. Most of the construction
loans relate to shopping centers, apartment complexes, commercial buildings and
residential property development. These loans are normally secured by land and
buildings and are generally backed by commitments for long-term financing from
other financial institutions. Real estate construction loans are closely
monitored by management, since these loans are generally considered riskier than
other types of loans and are particularly vulnerable in economic downturns and
in periods of high interest rates. Regions has not been an active lender to
speculative real estate developers or to developers outside its market areas.
The loans to businesses for long-term financing of land and buildings
are primarily to commercial customers within Regions' markets. Total loans
secured by non-farm, non-residential properties totaled $1.2 billion at December
31, 1995. Although some risk is inherent in this type of lending, the Company
attempts to minimize this risk by generally making such loans only on
owner-occupied properties, and by requiring collateral values which exceed the
loan amount, adequate cash flow to service the debt, and in most cases, the
personal guaranties of principals of the borrowers.
Generally, Regions' most significant market areas have not experienced
rapid increases in real estate property values or significant overbuilding.
Therefore, in management's opinion, real estate loan collateral values in
Regions' market areas should not be as vulnerable to significant deterioration,
as would other market areas which have experienced rapidly increasing property
values and significant overbuilding. However, collateral values are difficult to
estimate and are subject to change depending on economic conditions, the supply
of and demand for properties and other factors. Regions attempts to mitigate the
risks of real estate lending by adhering to strict loan underwriting policies
and by diversifying the portfolio both geographically within its market area and
within industry groups.
Loans on one-to-four family residential properties, which total
approximately 70% of Regions' real estate mortgage portfolio, compared to
approximately 54% in 1992, are principally on single-family residences. These
loans are geographically dispersed throughout the southeastern states and some
are guaranteed by government agencies or private mortgage insurers.
Historically,
COMPOSITION OF LOANS
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
($ In millions)
Commercial 1,983 1,865 1,491 1,437 1,320
Real Estate Mortgage 4,558 4,539 3,308 2,028 1,533
Real Estate Construction 413 348 263 256 194
Consumer 2,592 2,266 1,771 1,422 1,228
----- ----- ----- ----- -----
Total 9,546 9,018 6,833 5,143 4,275
</TABLE>
[GRAPH]
29
<PAGE> 6
LOANS AS A PERCENTAGE OF AVERAGE ASSETS
[GRAPH]
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------------------------------------
<S> <C> <C> <C> <C>
71.20% 67.20% 67.40% 63.50% 64.20%
</TABLE>
NON-PERFORMING ASSETS AS A
PERCENTAGE OF LOANS
AND OTHER REAL ESTATE
[GRAPH]
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------------------------------------
<S> <C> <C> <C> <C>
0.58% 0.58% 1.03% 0.81% 1.01%
</TABLE>
this category of loans has not produced sizable loan losses; however, it
is subject to some of the same risks as other real estate lending. Warehoused
mortgage loans, since they are secured primarily by loans on one-to-four family
residential properties, are similar to these loans in terms of risk.
During the past five years, real estate loan net losses ranged from a
high of 0.09% of real estate loans in 1994, 1993 and 1992, to a low of 0.01% of
real estate loans in 1995. These losses depend, to a large degree, on the level
of interest rates, economic conditions and collateral values, and thus, are very
difficult to predict. Management's current estimate of 1996 net real estate loan
losses approximates the level experienced in 1992 through 1994.
Regions' consumer loan portfolio consists of $2.2 billion of consumer
loans, $287 million in personal lines of credit (including home equity loans)
and $104 million in credit card loans. Consumer loans are primarily borrowings
of individuals for home improvements, automobiles and other personal and
household purposes. Regions' consumer loan portfolio includes $1.1 billion in
indirect installment loans at December 31, 1995, compared to $920 million at
December 31, 1994. Periods of economic recession tend to increase consumer loan
losses. During the past five years, the ratio of net consumer loan losses to
consumer loans ranged from a low of 0.23% in 1994 to a high of 0.62% in 1991. In
1995 net consumer loan losses were 0.36%. Management expects net consumer loan
losses in 1996 to be slightly higher than the 1995 level.
The following table presents information on non-performing loans and
real estate acquired in settlement of loans:
NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
(dollar amounts in thousands) December 31
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Non-performing loans:
Loans accounted for on a
non-accrual basis $39,424 $38,035 $39,519 $21,771 $25,013
- -----------------------------------------------------------------------------------------------------------------------------------
Loans contractually past due 90
days or more as to principal or interest
payments (exclusive of non-accrual
loans) 9,717 5,622 13,028 5,622 5,036
- -----------------------------------------------------------------------------------------------------------------------------------
Loans whose terms have been
renegotiated to provide a reduction
or deferral of interest or principal
because of a deterioration in the
financial position of the borrower
(exclusive of non-accrual loans and
loans past due 90 days or more) 3,183 2,818 4,169 2,777 1,396
- -----------------------------------------------------------------------------------------------------------------------------------
Real estate acquired in settlement of
loans ("other real estate") 3,108 6,267 13,720 11,678 11,911
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL $55,432 $52,742 $70,436 $41,848 $43,356
===================================================================================================================================
Non-performing assets as a percentage of
loans and other real estate 0.58% 0.58% 1.03% 0.81% 1.01%
===================================================================================================================================
</TABLE>
30
<PAGE> 7
The following analysis presents a five year history of the allowance for
loan losses and loan loss data:
<TABLE>
<CAPTION>
(dollar amounts in thousands) 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for loan losses:
Balance at beginning of year $ 116,988 $ 100,762 $ 73,619 $ 54,769 $ 44,984
- -----------------------------------------------------------------------------------------------------------------------------------
Loans charged off:
Commercial 10,366 8,958 7,980 8,425 8,197
- -----------------------------------------------------------------------------------------------------------------------------------
Real estate 2,297 5,409 4,404 2,655 2,437
- -----------------------------------------------------------------------------------------------------------------------------------
Installment 14,061 8,733 7,684 8,528 10,177
- -----------------------------------------------------------------------------------------------------------------------------------
Total 26,724 23,100 20,068 19,608 20,811
- -----------------------------------------------------------------------------------------------------------------------------------
Recoveries:
Commercial 6,958 4,241 4,346 3,160 2,713
- -----------------------------------------------------------------------------------------------------------------------------------
Real estate 1,854 1,909 2,195 986 1,162
- -----------------------------------------------------------------------------------------------------------------------------------
Installment 5,071 4,218 3,138 2,878 2,716
- -----------------------------------------------------------------------------------------------------------------------------------
Total 13,883 10,368 9,679 7,024 6,591
- -----------------------------------------------------------------------------------------------------------------------------------
Net loans charged off:
Commercial 3,408 4,717 3,634 5,265 5,484
- -----------------------------------------------------------------------------------------------------------------------------------
Real estate 443 3,500 2,209 1,669 1,275
- -----------------------------------------------------------------------------------------------------------------------------------
Installment 8,990 4,515 4,546 5,650 7,461
- -----------------------------------------------------------------------------------------------------------------------------------
Total 12,841 12,732 10,389 12,584 14,220
- -----------------------------------------------------------------------------------------------------------------------------------
Allowance of acquired banks 4,760 9,955 15,999 4,362 -0-
- -----------------------------------------------------------------------------------------------------------------------------------
Provision charged to expense 20,652 19,003 21,533 27,072 24,005
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 129,559 $ 116,988 $ 100,762 $ 73,619 $ 54,769
===================================================================================================================================
Average loans outstanding:
Commercial $1,899,533 $1,665,019 $1,409,945 $1,339,788 $1,292,634
- -----------------------------------------------------------------------------------------------------------------------------------
Real estate 5,130,414 3,957,005 2,418,740 1,842,422 1,587,833
- -----------------------------------------------------------------------------------------------------------------------------------
Installment 2,483,867 1,978,147 1,547,823 1,306,429 1,199,019
- -----------------------------------------------------------------------------------------------------------------------------------
Total $9,513,814 $7,600,171 $5,376,508 $4,488,639 $4,079,486
- -----------------------------------------------------------------------------------------------------------------------------------
Net charge-offs as percent of average
loans outstanding:
Commercial .18% .28% .26% .39% .42%
- -----------------------------------------------------------------------------------------------------------------------------------
Real estate .01 .09 .09 .09 .08
- -----------------------------------------------------------------------------------------------------------------------------------
Installment .36 .23 .29 .43 .62
- -----------------------------------------------------------------------------------------------------------------------------------
Total .13 .17 .19 .28 .35
- -----------------------------------------------------------------------------------------------------------------------------------
Net charge-offs as percent of:
Provision for loan losses 62.2% 67.0% 48.2% 46.5% 59.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses 9.9 10.9 10.3 17.1 26.0
- -----------------------------------------------------------------------------------------------------------------------------------
Allowance as percentage of:
5-year moving average of net charge-offs 674% 586% 583% 446% 346%
- -----------------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income 1.36 1.30 1.47 1.43 1.28
- -----------------------------------------------------------------------------------------------------------------------------------
Provision for loan losses (net of tax effect) as
percentage of net income 7.5% 8.1% 12.0% 17.9% 19.3%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 8
NET LOAN LOSSES AS A
PERCENTAGE OF AVERAGE LOANS
(GRAPH)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------------------------------------------------
<S> <C> <C> <C> <C>
0.13% 0.17% 0.19% 0.28% 0.35%
</TABLE>
ALLOWANCE FOR LOAN LOSSES AS A
PERCENTAGE OF LOANS
(GRAPH)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------------------------------------------------------
<S> <C> <C> <C> <C>
1.36% 1.30% 1.47% 1.43% 1.28%
</TABLE>
At December 31, 1995, non-accrual loans totaled $39.4 million or 0.41%
of loans, compared to $38.0 million or 0.42% of loans at December 31, 1994.
Commercial loans comprised $9.9 million of the 1995 total, with real estate
loans accounting for $24.2 million and consumer loans $5.3 million. The table
on page 33 provides additional information on non-accruing loans based on the
customer's Standard Industrial Classification Code.
Loans contractually past due 90 days or more were 0.10% of total loans
at December 31, 1995, compared to 0.06% of total loans at December 31, 1994.
Loans past due 90 days or more at December 31, 1995, consisted of $3.8 million
in commercial and real estate loans, $4.4 million in installment loans and $1.5
million in personal lines of credit and credit card loans.
Renegotiated loans were 0.03% of loans at December 31, 1995 and 1994.
Renegotiated loans have declined since year-end 1993, as a result of paydowns
and payoffs on renegotiated loans which were added by acquisitions.
Other real estate declined to $3.1 million at December 31, 1995,
compared to $6.3 million at December 31, 1994. Increased sales of parcels of
other real estate in 1995, combined with fewer additions, accounted for the
decline in other real estate in 1995. Other real estate is recorded at the lower
of (1) the recorded investment in the loan or (2) the estimated net realizable
value of the collateral. Although Regions does not anticipate material loss upon
disposition of other real estate, sustained periods of adverse economic
conditions, substantial declines in real estate values in Regions' markets,
actions by bank regulatory agencies, or other factors, could result in
additional loss from other real estate.
The amount of interest income earned in 1995 on the $39.4 million of
non-accruing loans outstanding at year end was approximately $2.4 million. If
these loans had been current in accordance with their original terms,
approximately $4.4 million would have been earned on these loans in 1995.
Approximately $337,000 in interest income would have been earned in 1995 under
the original terms of the $3.2 million in renegotiated loans outstanding at
December 31, 1995. Approximately $298,000 in interest income was actually
earned in 1995 on these loans.
In the normal course of business, Regions makes commitments under
various terms to lend funds to its customers. These commitments include (among
others) revolving credit agreements, term loan agreements and short-term
borrowing arrangements, which are usually for working capital needs. Letters of
credit are also issued, which under certain conditions could result in loans.
See Note L to the consolidated financial statements for additional information
on commitments.
32
<PAGE> 9
The commercial, real estate and consumer loan portfolios are highly
diversified in terms of industry concentrations. The following table shows the
largest concentrations in terms of the customer's Standard Industrial
Classification Code (SIC) at December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
(dollar amounts in millions) December 31
- ----------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
% OF % NON- % of % Non- % of % Non
SIC CLASSIFICATION AMOUNT TOTAL ACCRUAL Amount Total Accrual Amount Total Accrual
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Individuals $5,672.4 59.3% 0.5% $5,378.0 59.5% 0.4% $3,936.4 57.4% 0.5%
- ----------------------------------------------------------------------------------------------------------------------------
Services:
Physicians 60.2 0.6 0.0 60.2 0.7 0.0 55.7 0.8 0.0
- ----------------------------------------------------------------------------------------------------------------------------
Business services 45.9 0.5 0.0 63.8 0.7 0.0 48.0 0.7 0.0
- ----------------------------------------------------------------------------------------------------------------------------
Religious organizations 99.5 1.0 0.0 87.7 1.0 0.0 78.5 1.1 0.0
- ----------------------------------------------------------------------------------------------------------------------------
Legal services 44.4 0.5 0.0 41.0 0.5 0.0 32.6 0.5 0.0
- ----------------------------------------------------------------------------------------------------------------------------
All other services 551.7 5.8 0.3 454.6 5.0 0.3 330.6 4.8 0.6
- ----------------------------------------------------------------------------------------------------------------------------
Total services 801.7 8.4 0.3 707.3 7.9 0.4 545.4 7.9 0.7
- ----------------------------------------------------------------------------------------------------------------------------
Manufacturing:
Electrical equipment 39.0 0.4 0.0 48.5 0.5 0.0 29.5 0.4 0.0
- ----------------------------------------------------------------------------------------------------------------------------
Food and kindred products 23.3 0.2 0.0 24.0 0.3 0.0 14.5 0.2 0.0
- ----------------------------------------------------------------------------------------------------------------------------
Rubber and plastic products 17.7 0.2 0.0 16.2 0.2 0.0 16.9 0.2 0.0
- ----------------------------------------------------------------------------------------------------------------------------
Lumber and wood products 71.7 0.7 0.0 56.7 0.6 0.0 48.4 0.7 0.0
- ----------------------------------------------------------------------------------------------------------------------------
Fabricated metal products 63.5 0.7 0.1 63.5 0.7 0.1 60.9 0.9 0.0
- ----------------------------------------------------------------------------------------------------------------------------
All other manufacturing 261.7 2.8 0.1 225.9 2.5 0.2 201.4 2.9 0.0
- ----------------------------------------------------------------------------------------------------------------------------
Total manufacturing 476.9 5.0 0.2 434.8 4.8 0.3 371.6 5.3 0.0
- ----------------------------------------------------------------------------------------------------------------------------
Wholesale trade 262.8 2.7 0.1 236.1 2.6 0.2 181.8 2.6 0.1
- ----------------------------------------------------------------------------------------------------------------------------
Finance, insurance and real estate:
Real estate 491.2 5.1 0.1 497.6 5.5 0.3 454.2 6.6 1.9
- ----------------------------------------------------------------------------------------------------------------------------
Banks and credit agencies 89.1 0.9 0.0 78.2 0.9 0.0 81.8 1.2 0.0
- ----------------------------------------------------------------------------------------------------------------------------
All other finance, insurance
and real estate 88.9 1.0 0.0 90.6 1.0 0.0 87.1 1.3 0.0
- ----------------------------------------------------------------------------------------------------------------------------
Total finance, insurance
and real estate 669.2 7.0 0.1 666.4 7.4 0.3 623.1 9.1 1.9
- ----------------------------------------------------------------------------------------------------------------------------
Construction:
Residential building construction 98.0 1.0 0.1 93.5 1.1 0.1 76.1 1.1 0.1
- ----------------------------------------------------------------------------------------------------------------------------
General contractors and builders 82.1 0.9 0.0 67.2 0.7 0.1 54.0 0.8 0.0
- ----------------------------------------------------------------------------------------------------------------------------
All other construction 90.4 0.9 0.8 65.6 0.7 0.7 86.5 1.3 0.1
- ----------------------------------------------------------------------------------------------------------------------------
Total construction 270.5 2.8 0.9 226.3 2.5 0.9 216.6 3.2 0.2
- ----------------------------------------------------------------------------------------------------------------------------
Retail trade:
Automobile dealers 202.2 2.1 0.1 147.7 1.6 0.0 144.9 2.1 0.0
- ----------------------------------------------------------------------------------------------------------------------------
All other retail trade 205.0 2.2 0.1 209.7 2.3 0.4 155.6 2.3 0.3
- ----------------------------------------------------------------------------------------------------------------------------
Total retail trade 407.2 4.3 0.2 357.4 3.9 0.4 300.5 4.4 0.3
- ----------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry and fishing 139.1 1.5 0.4 120.1 1.3 0.5 111.8 1.6 0.4
- ----------------------------------------------------------------------------------------------------------------------------
Transportation, communication,
electrical, gas and sanitary 162.8 1.7 0.6 159.5 1.8 0.7 161.4 2.4 1.0
- ----------------------------------------------------------------------------------------------------------------------------
Mining (including oil and gas
extraction) 13.8 0.1 0.0 10.0 0.1 0.0 9.1 0.1 0.0
- ----------------------------------------------------------------------------------------------------------------------------
Public administration 63.3 0.7 4.8 63.9 0.7 5.5 15.2 0.2 0.0
- ----------------------------------------------------------------------------------------------------------------------------
Revolving credit loans 391.1 4.1 0.0 365.5 4.0 0.0 338.1 4.9 0.0
- ----------------------------------------------------------------------------------------------------------------------------
Other 233.6 2.4 0.1 318.2 3.5 0.6 58.5 0.9 0.0
- ----------------------------------------------------------------------------------------------------------------------------
Total $9,564.4 100.0% 0.4% $9,043.5 100.0% 0.4% $6,869.5 100.0% 0.6%
============================================================================================================================
</TABLE>
<PAGE> 10
INTEREST-BEARING DEPOSITS IN OTHER BANKS
Interest-bearing deposits in other banks are used primarily as temporary
investments. These assets generally have short-term maturities. This category of
earning assets declined from $11.0 million at December 31, 1993, to $630,000 at
December 31, 1994, as alternative investments became more attractive.
Interest-bearing deposits in other banks, acquired in connection with
acquisitions in 1995, was the primary reason for this asset increasing to $47.0
million at December 31, 1995.
SECURITIES
Effective January 1, 1994, Regions adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS 115). SFAS 115 requires that debt securities, which the
Company has both the positive intent and ability to hold to maturity, should be
carried at amortized cost. These securities are classified as investment
securities in the consolidated financial statements. Debt securities, which the
Company does not have the positive intent and ability to hold to maturity and
all marketable equity securities, are carried at estimated fair value and are
included in securities available for sale in the consolidated financial
statements, exclusive of any such securities that are included in trading
securities. Unrealized holding gains and losses on securities available for
sale, net of taxes, are carried as a separate component of stockholders' equity.
The following table shows the carrying values of securities as follows:
<TABLE>
<CAPTION>
(in thousands) December 31
1995 1994 1993
---------------------------------------------------------------------------------
Investment securities:
---------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury & Federal
agency securities $ 894,606 $ 903,390 $ 963,398
---------------------------------------------------------------------------------
Obligations of states and
political subdivisions 281,761 253,106 223,673
---------------------------------------------------------------------------------
Mortgage-backed
securities 268,926 791,443 1,097,935
---------------------------------------------------------------------------------
Other securities 118 736 32,883
---------------------------------------------------------------------------------
Equity securities -0- -0- 50,556
---------------------------------------------------------------------------------
TOTAL $1,445,411 $1,948,675 $2,368,445
=================================================================================
Securities available for sale:
U.S. Treasury & Federal
agency securities $ 530,786 $ 413,674
---------------------------------------------------------------
Obligations of states and
political subdivisions 2,407 2,420
---------------------------------------------------------------
Mortgage-backed securities 1,012,600 205,957
---------------------------------------------------------------
Other securities 687 10
---------------------------------------------------------------
Equity securities 33,910 38,452
---------------------------------------------------------------
TOTAL $1,580,390 $ 660,513
===============================================================
</TABLE>
In 1995, total securities increased $417 million or 16%. U. S. Treasury
and Federal agency securities accounted for $108 million of this increase, with
mortgage-backed securities increasing $284 million or 28%. During 1995, $396
million of single-family residential mortgage loans were securitized and
transferred from the loan portfolio to mortgage-backed securities in the
available for sale securities portfolio. Excluding the effect of
securitizations, mortgage-backed securities would have decreased $112 million in
1995, due to maturities and paydowns. Obligations of states and political
subdivisions increased $29 million or 11%.
In December 1995, Regions reclassified $644 million of investment
securities to securities available for sale in accordance with the Financial
Accounting Standards Board Implementation Guide for SFAS 115. This
reclassification gives Regions additional flexibility in managing its securities
portfolios.
Total securities increased $241 million or 10% in 1994. U. S. Treasury
and Federal agency securities increased $353.7 million or 37%. Mortgage-backed
securities decreased $100.5 million or 9% due to maturities and paydowns.
Obligations of states and political subdivisions increased $31.9 million or 14%.
In 1993, investment securities increased $698.2 million or 42%
principally as a result of the Secor Bank acquisition, which added $639.7
million in investment securities. U. S. Treasury and Federal agency securities
increased $33.3 million or 4%. Mortgage-backed securities increased $578.4
million or 111% as a result of the Secor Bank acquisition. Obligations of states
and political subdivisions increased by $53.3 million or 31% in 1993. Other
securities increased $6.1 million or 23%. Equity securities increased $27.1
million or 116% as a result of Federal Home Loan Bank stock acquired in
acquisitions during 1993.
Regions' investment portfolio policy stresses quality and liquidity. At
December 31, 1995, the average maturity of U.S. Treasury and Federal agency
securities was 2.9 years and that of obligations of states and political
subdivisions was 7.5 years. The average maturity of mortgage-backed securities
was 18.0 years and other securities had an average maturity of 7.6 years.
Overall, the average maturity of the portfolio was 9.9 years using contractual
maturities and 4.3 years using expected maturities. Expected maturities differ
from contractual maturities because borrowers have the right to call or prepay
obligations with or without call or prepayment penalties. Securities purchased
during the last several years have primarily short to intermediate term
maturities.
The estimated fair market value of Regions' investment securities
portfolio at December 31, 1995, was 2.1% ($30.7 million) above the amount
carried on Regions' books. Regions' securities available for sale portfolio at
December 31, 1995, included unrealized gains of $15.6 million. Regions'
investment securities and securities available for sale portfolios included
gross unrealized gains of $56.0 million and gross unrealized losses of $9.8
million at December 31, 1995. Market values of these portfolios vary
significantly as interest rates change; however, management expects normal
maturities from the securities portfolios to meet liquidity needs.
34
<PAGE> 11
Of Regions' tax-free securities rated by Moody's Investors Service,
Inc., 99% are rated "A" or better. Eleven percent of the tax-free bond portfolio
is non-rated. The portfolio is carefully monitored to assure no unreasonable
concentration of securities in the obligations of a single debtor and current
credit reviews are conducted on each security holding.
The following table shows the maturities of securities (excluding equity
securities) at December 31, 1995, the weighted average yields and the taxable
equivalent adjustment used in calculating the yields:
<TABLE>
<CAPTION>
(in thousands) Securities Maturing
- --------------------------------------------------------------------------------------------------------------------
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment securities:
- --------------------------------------------------------------------------------------------------------------------
U.S. Treasury and Federal agency securities $152,343 $700,947 $ 41,316 $ -0- $ 894,606
- --------------------------------------------------------------------------------------------------------------------
Obligations of states and political subdivisions 8,974 66,486 114,322 91,979 281,761
- --------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities -0- 69,637 30,978 168,311 268,926
- --------------------------------------------------------------------------------------------------------------------
Other securities 100 -0- -0- 18 118
- --------------------------------------------------------------------------------------------------------------------
TOTAL $161,417 $837,070 $186,616 $260,308 $1,445,411
====================================================================================================================
Weighted average yield 6.37% 7.40% 7.65% 6.57% 7.17%
- --------------------------------------------------------------------------------------------------------------------
Securities available for sale:
U.S. Treasury and Federal agency securities $150,797 $379,989 $ -0- $ -0- $ 530,786
- --------------------------------------------------------------------------------------------------------------------
Obligations of states and political subdivisions 156 1,613 540 98 2,407
- --------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 3,588 73,321 155,707 779,984 1,012,600
- --------------------------------------------------------------------------------------------------------------------
Other securities -0- -0- 687 -0- 687
- --------------------------------------------------------------------------------------------------------------------
TOTAL $154,541 $454,923 $156,934 $780,082 $1,546,480
====================================================================================================================
Weighted average yield 6.10% 6.61% 5.70% 6.46% 6.25%
- --------------------------------------------------------------------------------------------------------------------
Taxable equivalent adjustment for
calculation of yield $ 245 $ 2,221 $ 3,447 $ 2,581 $ 8,494
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: The weighted average yields are calculated on the basis of the
yield to maturity based on the book value of each security. Weighted
average yields on tax-exempt obligations have been computed on a fully
taxable equivalent basis using a tax rate of 35%. Yields on tax-exempt
obligations have not been adjusted for the non-deductible portion of
interest expense used to finance the purchase of tax-exempt obligations.
LIQUIDITY
Liquidity is an important factor in the financial condition of Regions
and affects Regions' ability to meet the borrowing needs and deposit withdrawal
requirements of its customers. Assets, consisting principally of loans and
securities, are funded by customer deposits, purchased funds, borrowed funds and
stockholders' equity.
The securities portfolio is one of Regions' primary sources of
liquidity. Maturities of securities provide a constant flow of funds which are
available for cash needs (see table on Securities Maturing above). Maturities in
the loan portfolio also provide a steady flow of funds (see table on Loans
Maturing on page 27). At December 31, 1995, commercial loans, real estate
construction loans and commercial mortgage loans with an aggregate balance of
$1.5 billion, as well as securities of $316 million, were due to mature in one
year or less. Additional funds are provided from payments on consumer loans and
one-to-four family residential mortgage loans. Historically, the Company's high
levels of net operating earnings also contribute to cash flow. In addition,
liquidity needs can be met by the purchase of funds in state and national money
markets. Regions' liquidity also continues to be enhanced by a relatively stable
deposit base.
The loan to deposit ratio increased from 77.91% at December 31, 1993, to
89.35% at December 31, 1994, as earning asset growth outpaced the growth in
deposits, generating the need to increase purchased funds. At December 31, 1995,
the loan to deposit ratio declined to 87.61%, primarily as a result of the
securitization of approximately $396 million in loans and the subsequent
transfer of these assets to the available for sale securities portfolio. The
securitization of these loans improved Regions' liquidity position, since these
assets are now more easily salable;
35
<PAGE> 12
however, Regions currently has no plans to sell these securities. In
addition, these securities can be used as collateral for securitized borrowings.
As shown in the Consolidated Statement of Cash Flows on page 55,
operating activities, provided significant levels of funds in all three years,
due primarily to high levels of net income. A decrease in mortgages held for
sale in 1994, resulted in a significant increase in cash provided by operating
activities in that year. Investing activities, primarily in loans and
securities, were a net user of funds in all three years. Strong loan growth over
the last three years, particularly in 1994, has required a significant amount of
funds for investing activities. Funds needed for investing activities were
provided primarily by deposits, purchased funds, and borrowings. Financing
activities provided more funds in 1994 due to more reliance on short- and
long-term borrowings. Increases in deposits provided more funds in 1993 and
1995. Cash dividends and the open-market purchase of the Company's
common stock, which was reissued in connection with specific purchase
acquisitions, also required funds in 1993, 1994 and 1995.
First Alabama Bank's short-term certificates of deposit are rated "A-1+"
by Standard & Poor's Corporation. This is the highest rating available for any
company. First Alabama Bank's long-term certificates of deposit are rated "AA-",
which is higher than any other Alabama bank and among the highest in the
Southeast.
Moody's Investors Service has also given similar quality ratings to
First Alabama Bank's short- and long-term debt and certificates of deposit.
Short-term debt and certificates of deposit are rated "P-1" and long-term debt
and certificates of deposit are rated "Aa2".
In addition, First Alabama Bank received the highest issuer rating
available ("A") from the internationally recognized bank rating organization,
Thomson BankWatch. This organization also assigned its highest short-term rating
of "TBW-1" to First Alabama Bank's certificates of deposit.
Regions Financial Corporation's (the parent company) commercial paper
has also been assigned a rating of "TBW-1" by Thomson BankWatch. Regions
Financial Corporation has also received Thomson BankWatch's highest issuer
rating of "A".
The $200 million in subordinated debt issued by Regions is rated "A" by
Standard & Poor's Corporation, "A2" by Moody's Investors Service, and "AA-" by
Thomson BankWatch.
Regions has a shelf-registration statement outstanding pursuant to which
it may offer up to an additional $200 million of its unsecured, subordinated
notes, debentures, bonds or other evidences of indebtedness. The proceeds from
any issuances of these securities can be used for general corporate purposes and
represents an additional funding source for Regions.
Regions' two largest banking subsidiaries, First Alabama Bank and
Regions Bank of Louisiana, have taken the necessary steps for the possible
issuance of up to $250 million in bank notes to institutional investors. The
notes can have maturities ranging from 30 days to 30 years and fixed or variable
interest rates. The proceeds from issuance of the bank notes can be used in the
ordinary course of business and provide an additional source of funding. At
December 31, 1995, $75 million in senior bank notes, issued by Regions Bank of
Louisiana, were outstanding. First Alabama Bank's notes were rated "A-1+/AA-" by
Standard & Poor's Corporation and "P-1/Aa2" by Moody's Investors Service.
Regions Bank of Louisiana's notes were rated "A-1+/AA-" by Standard & Poor's
Corporation and "P-1/Aa3" by Moody's Investors Service.
Regions' and its banking subsidiaries' high quality ratings from
nationally recognized rating agencies enhance the Company's ability to raise
funds in national money markets. The high ratings also help to attract both loan
and deposit customers in local markets.
Historically, Regions has found short-and intermediate-term credit
readily available on reasonable terms from money center or regional banks.
Regions' management places constant emphasis on the maintenance of adequate
liquidity to meet conditions which might reasonably be expected to occur.
DEPOSITS
Deposits are Regions' primary funding source. Deposits accounted for 88%
of the funding for earning assets in 1994 and 86% of the funding for earning
assets in 1995. During the period 1991 through 1993, interest rates dropped to
historically low levels and pricing spreads (the difference between rates paid
on different deposit products) narrowed considerably. This caused a significant
shift in the composition of Regions' deposit base. Since very little pricing
spread existed, rate sensitive customers moved funds out of term deposits, such
as certificates of deposits, into liquid, short-term deposits. During 1994,
interest rates increased rapidly causing customers to take advantage of higher
rates and resulting wider pricing spreads by moving funds out of liquid,
short-term deposits back into time deposits. The rapid increase in interest
rates was short-lived, as interest rates peaked in early 1995 and moved lower
for the remainder of the year. As interest rates moved lower during 1995,
pricing spreads remained fairly wide. As a result, customers continued moving
funds out of liquid, short-term deposits into time deposits and money market
accounts. Management expects a continuation of this trend as long as pricing
spreads remain wide. The trends mentioned above can be seen by examining
Regions' deposit composition and by comparing the relative growth rates of
Regions' deposit products over the last four years.
During the last four years, average total deposits grew at a compound
annual rate of 18%. Average deposits grew $637 million or 11% in 1992, $686
million or 11% in 1993, $2.4 billion or 34% in 1994 and $1.4 billion or 15% in
1995. Acquisitions, net of branch sales, contributed average deposit growth of
$216 million in 1992, $392 million in 1993, $2.0 billion in 1994 and $827
million in 1995.
36
<PAGE> 13
Savings account growth slowed considerably during 1995 because of the
trends mentioned above. Savings accounts increased 25% in 1992, 26% in 1993, 32%
in 1994 but only 2% in 1995. Since 1991, this category of deposits increased
$435 million, at a compound annual growth rate of 21%. As mentioned above,
growth in the 1992 through 1994 period occurred as market interest rates fell,
making the rates paid on these accounts more attractive relative to other
investment alternatives. During 1995, the rate paid on savings accounts became
less attractive relative to other investment alternatives.
Management expects savings accounts to continue growing slowly, as rate
sensitive customers shift funds out of savings accounts into money market
accounts and time deposits. In 1995, savings accounts accounted for 8% of
average total deposits compared to 9% of average total deposits in 1994.
Interest-bearing transaction accounts increased 19% in 1994. During
1995, Regions reclassified a portion of interest-bearing transaction accounts to
money market savings accounts, resulting in a 28% decline. Nevertheless,
interest-bearing transaction accounts continue to be an important source of
funds for Regions, accounting for 14% of average total deposits in 1994 but
declining to 9% of average total deposits in 1995. Since 1991, this category of
deposits increased $125 million, at a compound annual growth rate of 4%. Regions
values interest-bearing transaction accounts as a stable funding source. This is
evidenced by the introduction of an innovative interest-bearing transaction
product called Regions Management Account. Management regards the Regions
Management Account, introduced in early 1995, as a highly competitive product.
Money market savings products continue to be Regions' fastest growing
deposit products, increasing at a compound annual rate of 34% since 1991. As
market interest rates declined during 1991, 1992 and 1993, customers moved from
certificates of deposit to money market savings accounts, resulting in average
balance increases of 36% in 1992 and 19% in 1993. As market interest rates
increased in 1994 and decreased in 1995, customers responded to Regions'
innovative, competitive money market savings products by continuing to invest in
these accounts, resulting in average balance increases of 23% in 1994 and 65% in
1995. As mentioned above, a reclassification from interest-bearing transaction
accounts to money market savings inflated the 1995 money market savings growth
rate. Money market savings products are a significant funding source for
Regions, accounting for 15% of average total deposits in 1994 and 22% of average
total deposits in 1995.
Certificates of deposit of $100,000 or more increased 86% in 1994 and
52% in 1995, due to their increased use as a funding source. Since 1991,
certificates of deposit of $100,000 or more have increased at a compound annual
rate of 24%, and in 1995 accounted for 12% of average total deposits, up from a
five year low of 6% in 1993.
Other interest-bearing deposits (certificates of deposit of less than
$100,000 and time open accounts) increased 5% in 1993, 44% in 1994 and 8% in
1995. This category of deposits continues to be Regions' primary funding source;
it accounted for 36% of average total deposits in 1995, down from 39% of average
total deposits in 1994. Rising interest rates and wider pricing spreads over the
last two years have made this category of deposits attractive relative to other
investment alternatives. In addition, Regions has successfully marketed a
special certificate of deposit product that provides customers with an
attractive interest rate and an early redemption option. This and other
innovative deposit products have helped Regions continue to grow deposits and
maintain market share in the Company's major markets.
The sensitivity of Regions' deposits over the last five years to changes
in market interest rates is reflected in the Company's average interest rate
paid on interest-bearing deposits (see table following on Average Rates Paid).
Beginning in the second quarter of 1989 and continuing through 1993, market
interest rates generally declined. Beginning in early 1994 and continuing
throughout the year, market interest rates rose. Beginning in early 1995 and
continuing throughout the year, market interest rates again began to decline.
Regions' average interest rate paid on interest-bearing deposits reflects this
trend. The rate paid on interest-bearing deposits decreased from 5.88% in 1991,
to 4.06% in 1992 and to 3.40% in 1993, increased to 3.70% in 1994 and to 4.66%
in 1995.
A detail of interest-bearing deposit balances at December 31, 1995, and
1994, and the interest expense on these deposits for the three years ended
December 31, 1995, is presented in Note H to the consolidated financial
statements.
The following table presents the detail of interest-bearing deposits and
maturities of the larger time deposits:
<TABLE>
<CAPTION>
(in thousands) December 31
- --------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------
<S> <C> <C>
Interest-bearing deposits
of less than $100,000 $8,135,834 $7,098,120
- --------------------------------------------------------------------------
Time certificates of deposit of
$100,000 or more, maturing in:
3 months or less 501,122 668,844
- --------------------------------------------------------------------------
over 3 through 6 months 160,454 112,031
- --------------------------------------------------------------------------
over 6 through 12 months 183,800 72,693
- --------------------------------------------------------------------------
over 12 months 273,578 312,916
- --------------------------------------------------------------------------
Total 1,118,954 1,166,484
- --------------------------------------------------------------------------
Other time deposits of $100,000
or more maturing in 3 months or less 106,402 378,201
- --------------------------------------------------------------------------
TOTAL $9,361,190 $8,642,805
==========================================================================
</TABLE>
37
<PAGE> 14
The following table presents the average amounts of deposits outstanding by
category for the five years ended December 31, 1995:
<TABLE>
<CAPTION>
(in thousands) Average Amounts Outstanding
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-interest-bearing demand deposits $ 1,419,536 $1,260,696 $1,053,111 $ 896,847 $ 786,243
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Interest-bearing transaction accounts 969,155 1,336,831 1,120,768 1,007,570 844,295
- ------------------------------------------------------------------------------------------------------------------------------------
Savings accounts 817,308 798,327 603,012 477,880 382,736
- ------------------------------------------------------------------------------------------------------------------------------------
Money market savings accounts 2,337,911 1,421,045 1,159,824 977,881 718,518
- ------------------------------------------------------------------------------------------------------------------------------------
Certificates of deposit of $100,000 or more 1,237,038 814,153 438,039 439,815 531,378
- ------------------------------------------------------------------------------------------------------------------------------------
Other interest-bearing deposits 3,880,423 3,603,674 2,505,565 2,394,547 2,294,559
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 9,241,835 7,974,030 5,827,208 5,297,693 4,771,486
- ------------------------------------------------------------------------------------------------------------------------------------
Total deposits $10,661,371 $9,234,726 $6,880,319 $6,194,540 $5,557,729
====================================================================================================================================
</TABLE>
The following table presents the average rates paid on deposits by category for
the five years ended December 31, 1995:
<TABLE>
<CAPTION>
Average Rates Paid
- --------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest-bearing transaction accounts 2.76% 2.81% 2.53% 2.86% 4.51%
- --------------------------------------------------------------------------------------------------------
Savings accounts 2.73 2.86 2.96 3.47 4.87
- --------------------------------------------------------------------------------------------------------
Money market savings accounts 4.01 2.93 2.82 3.30 4.86
- --------------------------------------------------------------------------------------------------------
Certificates of deposit of $100,000 or more 5.90 4.75 4.34 4.98 6.70
- --------------------------------------------------------------------------------------------------------
Other interest-bearing deposits 5.54 4.30 4.01 4.83 6.69
- --------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 4.66% 3.70% 3.40% 4.06% 5.88%
========================================================================================================
</TABLE>
BORROWED FUNDS
Regions' short-term borrowings consist of federal funds purchased and
security repurchase agreements, commercial paper and other short-term
borrowings.
Federal funds purchased and security repurchase agreements are used to
satisfy daily funding needs and, when advantageous, for rate arbitrage. Federal
funds purchased and security repurchase agreements decreased from $991.2 million
at December 31, 1994, to $923.0 million at December 31, 1995. Balances in these
accounts can fluctuate significantly on a day-to-day basis. The average daily
balance of federal funds purchased and security repurchase agreements, net of
federal funds sold and security reverse repurchase agreements, increased $300.8
million in 1994 and $428.2 million in 1995. These increases resulted from
increased reliance on purchased funds to support earning asset growth and the
need to replace approximately $177 million in deposits sold in connection with
the sale of five branch offices in 1994. The higher level of net purchased funds
is expected to continue unless alternative funding sources are utilized or
unless earning assets grow slower than interest-bearing liabilities.
At December 31, 1995, $21.1 million in commercial paper was
outstanding, compared to $18.6 million at December 31, 1994. The Company issues
commercial paper through its private placement commercial paper program. The
Company's retail commercial paper program was discontinued in 1993 since the
private placement program was meeting the Company's needs at a lower cost.
Company policy limits total commercial paper outstanding, at any time, to $75
million. The level of commercial paper outstanding depends on the funding
requirements of the Company and the cost of commercial paper compared to
alternative borrowing sources.
Other short-term borrowings increased $8.5 million from December 31,
1995 to December 31, 1994. At December 31, 1994, no borrowings were outstanding
on the Company's short-term borrowing arrangement with an unaffiliated bank,
compared to $10.0 million outstanding at December 31, 1995. The remaining amount
of other short-term borrowings consists primarily of a short sale liability at
Regions' broker/dealer subsidiary. Short sales are frequently used by the
broker/dealer subsidiary to offset other market risks which are undertaken in
the normal course of business.
Regions' long-term borrowings consist primarily of subordinated notes,
Federal Home Loan Bank borrowings, senior bank notes and other long-term notes
payable.
Subordinated notes and debentures decreased $5.2 million in 1995, after
increasing $124.6 million in 1994. The decrease in 1995 resulted from the early
pay off of the parent company's 8.75% debentures, which were originally issued
in 1973. In 1994, Regions issued $125 million in subordinated notes, which
qualify as Tier 2 capital under Federal Reserve (Fed) guidelines. The proceeds
of these notes were used for general corporate purposes,
38
<PAGE> 15
including the repurchase in the open market of shares of Regions' Common Stock,
which were issued in connection with specific acquisitions accounted for as
purchases. Issuance of the subordinated notes improved the Company's total
capital ratios and provided an additional source of financing growth of the
Company. As previously mentioned, Regions has a shelf-registration statement
outstanding which authorizes the issuance of up to an additional $200 million
in indebtedness.
Federal Home Loan Bank borrowings decreased $23.2 million in 1995 and
$61.4 million in 1994, after increasing $301.5 million in 1993. The increase in
1993 related to Federal Home Loan Bank borrowings assumed in connection with the
acquisition of Secor Bank at year-end 1993. As a portion of these borrowings
matured and were paid off in 1994 and 1995, the balance outstanding on Federal
Home Loan Bank borrowings declined. Membership in the Federal Home Loan Bank
system provides access to an additional source of lower-cost funds. These
borrowings can be used to partially hedge against the effect future interest
rate changes may have on the Company's real estate mortgage portfolio.
In April 1995, Regions Bank of Louisiana, Regions' Louisiana bank
subsidiary, issued $100 million in unsecured senior bank notes under its bank
note program. Currently, up to $250 million can be outstanding under this
program. The bank note program provides Regions with another source of funding
and offers flexibility in structuring the terms of the notes. Of the total $100
million issued in 1995, $25 million matured prior to year end.
Other long-term notes payable consist of mortgages payable on certain of
the Company's buildings and low-income housing partnership investments, notes
issued to former stockholders of acquired banks and miscellaneous notes payable.
Other long-term borrowings declined $13.2 million in 1995, due to scheduled
maturities on these borrowings.
STOCKHOLDERS' EQUITY
Over the past three years, stockholders' equity has increased at a
compound annual growth rate of 19.7%. Stockholders' equity has grown from $657
million at the beginning of 1993 to $1.1 billion at year-end 1995. Internally
generated retained earnings contributed $293 million of this growth, equity
issued in connection with acquisitions accounted for $164 million, and $11
million was attributable to the exercise of stock options and the issuance of
stock to employees under Regions' incentive plan. The internal capital
generation rate (net income less dividends as a percentage of average
stockholders' equity) was 10.3% in 1995, compared to 10.5% in 1994 and 10.6% in
1993.
Regions' ratio of stockholders' equity to total assets increased to
8.21% at December 31, 1995, compared to 7.90% at December 31, 1994, and 8.12% at
December 31, 1993. Regions' capital level is a source of strength and provides
flexibility for future growth.
Regions and its subsidiaries are required to comply with capital
adequacy standards established by banking regulatory agencies. Currently, there
are two basic measures of capital adequacy: a risk-based measure and a leverage
measure.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance sheet exposure and to minimize
disincentives for holding liquid assets. Assets and off-balance sheet items are
assigned to broad risk categories, each with specified risk-weighting factors.
The resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance sheet items. The banking regulatory
agencies have adopted initiatives to begin considering interest rate risk in
computing risk-based capital ratios, although such requirements have not yet
been implemented.
The minimum standard for the ratio of total capital to risk-weighted
assets is 8%. At least 50% of that capital level must consist of common equity,
undivided profits and non-cumulative perpetual preferred stock, less goodwill
and certain other intangibles ("Tier 1 capital"). The remainder ("Tier 2
capital") may consist of a limited amount of other preferred stock, mandatory
convertible securities, subordinated debt and a limited amount of the allowance
for loan losses. The sum of Tier 1 capital and Tier 2 capital is "total
risk-based capital."
The banking regulatory agencies also have adopted regulations which
supplement the risk-based guidelines to include a minimum ratio of 3% of Tier 1
capital to average assets less goodwill (the "leverage ratio"). Depending upon
the risk profile of the institution and other factors, the regulatory agencies
may require a leverage ratio of 1% to 2% above the minimum 3% level.
The following chart summarizes the applicable bank regulatory capital
requirements. Regions' capital ratios at December 31, 1995, substantially
exceeded all regulatory requirements.
<TABLE>
BANK REGULATORY CAPITAL REQUIREMENTS
Minimum REGIONS AT
Regulatory DECEMBER 31,
Requirement 1995
------------------------------------------------------------------------
<S> <C> <C>
Tier 1 capital to risk-adjusted assets 4.00% 11.14%
------------------------------------------------------------------------
Total risk-based capital to
risk-adjusted assets 8.00 14.61
------------------------------------------------------------------------
Tier 1 leverage ratio 3.00 7.49
========================================================================
</TABLE>
Total capital at the banking affiliates also has an important effect on
the amount of FDIC insurance premiums paid. Institutions not considered well
capitalized can be subject to higher rates for FDIC insurance. As of December
31, 1995, all of Regions' banking affiliate had the requisite capital levels to
qualify as well capitalized.
Regions attempts to balance the return to stockholders through the
payment of dividends, with the need to maintain strong capital levels for future
growth opportunities. In 1995,
39
<PAGE> 16
Regions returned 35% of earnings to its stockholders in the form of dividends.
Total dividends declared in 1995, were $60.1 million or $1.32 per share, an
increase of 10% from the $1.20 per share in 1994.
In January 1996, the Board of Directors declared an increase in the
quarterly cash dividend from $.33 to $.35 per share, a 6% increase. This is the
twenty-fifth consecutive year that Regions has increased cash dividends.
The following table shows the percentage distribution of Regions' consolidated
average balances of assets, liabilities and stockholders' equity for the five
years ended December 31, 1995:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C>
Earning assets:
Taxable securities 18.6% 20.3% 18.1% 20.7% 20.8%
- ------------------------------------------------------------------------------------
Non-taxable securities 1.9 2.1 2.4 2.3 2.7
- ------------------------------------------------------------------------------------
Federal funds sold 0.1 0.5 0.7 2.5 1.5
- ------------------------------------------------------------------------------------
Loans (net of unearned income):
Commercial 14.2 14.7 17.7 19.0 20.3
- ------------------------------------------------------------------------------------
Real estate 38.4 35.0 30.3 26.0 25.0
- ------------------------------------------------------------------------------------
Installment 18.6 17.5 19.4 18.5 18.9
- ------------------------------------------------------------------------------------
Total loans 71.2 67.2 67.4 63.5 64.2
- ------------------------------------------------------------------------------------
Allowance for loan losses (1.0) (1.0) (1.1) (0.9) (0.8)
- ------------------------------------------------------------------------------------
Net loans 70.2 66.2 66.3 62.6 63.4
- ------------------------------------------------------------------------------------
Other earning assets 1.0 2.5 3.1 2.6 2.1
- ------------------------------------------------------------------------------------
Total earning assets 91.8 91.6 90.6 90.7 90.5
- ------------------------------------------------------------------------------------
Cash and due from banks 3.5 4.0 4.9 4.6 4.6
- ------------------------------------------------------------------------------------
Other non-earning assets 4.7 4.4 4.5 4.7 4.9
- ------------------------------------------------------------------------------------
Total assets 100.0% 100.0% 100.0% 100.0% 100.0%
====================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing 10.6% 11.2% 13.2% 12.7% 12.4%
- ------------------------------------------------------------------------------------
Interest-bearing 69.2 70.6 73.0 74.8 75.1
- ------------------------------------------------------------------------------------
Total deposits 79.8 81.8 86.2 87.5 87.5
- ------------------------------------------------------------------------------------
Borrowed funds:
Short-term 6.4 4.1 1.8 1.8 2.3
- ------------------------------------------------------------------------------------
Long-term 4.3 4.6 1.8 0.7 0.3
- ------------------------------------------------------------------------------------
Total borrowed funds 10.7 8.7 3.6 2.5 2.6
- ------------------------------------------------------------------------------------
Other liabilities 1.3 1.4 1.5 1.4 1.3
- ------------------------------------------------------------------------------------
Total liabilities 91.8 91.9 91.3 91.4 91.4
- ------------------------------------------------------------------------------------
Stockholders' equity 8.2 8.1 8.7 8.6 8.6
- ------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity 100.0% 100.0% 100.0% 100.0% 100.0%
====================================================================================
</TABLE>
40
<PAGE> 17
Operating Results
Net income increased 18% in 1995 and 30% in 1994. The accompanying table
presents the dollar amount and percentage change in the important components of
income that occurred in 1995 and 1994.
<TABLE>
<CAPTION>
SUMMARY OF CHANGES IN OPERATING RESULTS
(dollar amounts in thousands) Increase (Decrease)
- ----------------------------------------------------------------------
1995 COMPARED 1994 Compared
TO 1994 to 1993
- ----------------------------------------------------------------------
AMOUNT % Amount %
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INTEREST INCOME $61,684 14% $93,587 27%
- ----------------------------------------------------------------------
Provision for loan losses 1,649 9 (2,530) (12)
- ----------------------------------------------------------------------
Net interest income
after provision for
loan losses 60,035 14 96,117 30
- ----------------------------------------------------------------------
NON-INTEREST INCOME:
Trust department income 3,902 20 1,087 6
- ----------------------------------------------------------------------
Service charges on
deposit accounts 10,390 21 7,377 17
- ----------------------------------------------------------------------
Mortgage servicing
and origination fees (223) (1) (2,590) (6)
- ----------------------------------------------------------------------
Securities transactions (544) (87) 549 704
- ----------------------------------------------------------------------
Other 2,907 9 4,958 19
- ----------------------------------------------------------------------
Total non-interest
income 16,432 11 11,381 9
- ----------------------------------------------------------------------
NON-INTEREST EXPENSE:
Salaries and
employee benefits 25,464 14 24,572 16
- ----------------------------------------------------------------------
Net occupancy
expense 2,375 11 5,809 39
- ----------------------------------------------------------------------
Furniture and equip-
ment expense 1,684 7 4,133 22
- ----------------------------------------------------------------------
FDIC insurance
expense (5,958) (29) 6,094 42
- ----------------------------------------------------------------------
Other 11,389 11 15,433 18
- ----------------------------------------------------------------------
Total non-interest
expense 34,954 10 56,041 20
- ----------------------------------------------------------------------
Income before
income taxes 41,513 19 51,457 31
- ----------------------------------------------------------------------
Applicable income
taxes 14,573 20 17,618 33
- ----------------------------------------------------------------------
Net income $26,940 18% $33,839 30%
======================================================================
</TABLE>
NET INTEREST INCOME
Net interest income (interest income less interest expense) is Regions'
principal source of income. Net interest income increased 14% in 1995 and 27% in
1994. On a taxable equivalent basis, net interest income increased 14% in 1995
and 26% in 1994. The table on page 45 analyzes the changes in net interest
income.
In 1995, increases in the volume of interest-earning assets and
interest-bearing liabilities contributed to the increase in net interest income.
During 1995, average earning assets grew 18% and average interest-bearing
liabilities grew 16%. However, unfavorable changes in earning asset yields and
interest-bearing liability rates partially offset the increase in net interest
income attributable to volume changes. Volume increases in earning assets
typically increase net interest income due to the positive spread between
earning asset yields and interest-bearing liability rates.
In 1994, increases in the volume of interest-earning assets and
interest-bearing liabilities also contributed to the increase in net interest
income. During 1994, average earning assets grew 43% and average
interest-bearing liabilities grew 46%. As was the case in 1995, unfavorable
changes in earning asset yields and interest-bearing liability rates partially
offset the increase in net interest income attributable to volume changes.
Regions measures its ability to produce net interest income with a ratio
called the interest margin. The interest margin is net interest income (on a
taxable equivalent basis) as a percentage of earning assets. The interest margin
declined from 4.98% in 1992 to 4.82% in 1993 to 4.26% in 1994 and to 4.10% in
1995. Changes in the interest margin occur primarily due to four factors: (1)
the interest rate spread (taxable equivalent yield on earning assets less the
rate on interest-bearing liabilities), (2) the percentage of earning assets
funded by interest-bearing liabilities, (3) changes in market interest rates and
(4) changes in the statutory federal income tax rate. Year-to-year comparisons
of the interest margin ratio are affected by acquisitions that occurred in late
1993 and in late 1994. Even though these institutions added significantly to net
interest income, they generally had an adverse impact on the interest margin
ratio by negatively affecting items (1) and (2) above.
The first factor affecting Regions' interest margin is the interest rate
spread. Regions' average interest rate spread was 4.35% in 1992, 4.25% in 1993,
3.70% in 1994 and 3.42% in 1995. The interest rate spread contracted in 1995
because interest-bearing liability rates increased 28 basis points more than did
earning asset yields. Recently, growth in Regions' earning asset portfolios has
come primarily from lower spread business. This is the result of both the
competitive financial services environment and a strategic decision to pursue
this type business. Although lower spread business reduces the average interest
rate spread, effectively managed it provides an efficient method of leveraging
the Company's capital base, thereby adding substantially to earnings per share
and
41
<PAGE> 18
return on stockholders' equity. With the rapid run-up in interest rates that
occurred during 1994, followed by the decline in interest rates during 1995,
the average rate on the certificate of deposit (CD) portfolio remained
considerably above current market interest rates. The CD portfolio reprices to
prevailing market interest rates more gradually than do other interest-bearing
liabilities. As a result, the average rate paid on the CD portfolio did not
fall as fast as other interest-bearing liability rates, causing a reduction in
the interest rate spread. During 1995, Regions issued $100 million in senior
bank notes, of which $25 million matured by year-end 1995. Bank notes carry
higher interest rates and longer-terms than Regions' primary funding sources,
resulting in an increase in the average rate paid on interest-bearing
liabilities and a reduction in the interest rate spread. Regions also purchased
a large block of securities and funded the purchase with market rate
borrowings. Although this transaction created substantial earnings, it also
reduced the interest rate spread.
The interest rate spread contracted in 1994 because earning asset yields
declined 13 basis points while interest-bearing liability rates increased 42
basis points. As mentioned above, 1994 earning asset yields and interest-bearing
liability rates were adversely affected by acquisitions. During 1994, Regions
added substantially to its adjustable rate mortgage (ARM) portfolio. To attract
borrowers, ARMs start with low initial rates. Consequently, ARMs typically
reduce the average earning asset yield during their initial repricing period.
Regions funded the ARM growth with relatively expensive market rate funding.
This had the effect of increasing the rates paid on interest-bearing
liabilities. During 1994, Regions also issued an additional $125 million in
subordinated notes (see Note I to the consolidated financial statements). These
notes typically carry higher rates and longer maturities than Regions' primary
funding sources. As a result, these notes have the effect of increasing the
average rate paid on interest-bearing liabilities.
The mix of earning assets can also affect the interest rate spread.
During 1995, loans, which are typically Regions' highest yielding earning asset,
increased as a percentage of earning assets -- partially offsetting the effects
of contracting spreads. Average loans as a percentage of earning assets were 73%
in 1994 and 77% in 1995.
The second factor affecting the interest margin is the percentage of
earning assets funded by interest-bearing liabilities. Funding for Regions'
earning assets comes from interest-bearing liabilities, non-interest-bearing
liabilities and stockholders' equity. The net spread on earning assets funded by
non-interest-bearing liabilities and stockholders' equity is higher than the net
spread on earning assets funded by interest-bearing liabilities. The percentage
of earning assets funded by interest-bearing liabilities increased from 84% in
1993 to 86% in both 1994 and 1995. The changes in the percentage of earning
assets funded by interest-bearing liabilities had a negative effect on net
interest income in 1994, but had no effect on net interest income in 1995. The
trend has been for a greater percentage of new funding for earning assets to
come from interest-bearing sources. Management expects this trend to
continue. As mentioned above, during 1994, the percentage of earning assets
funded by interest-bearing liabilities increased, at least partially, as a
result of acquisitions that occurred late in 1993.
The third factor affecting the interest margin is market interest rates.
Market interest rates, both the level of rates and the slope of the yield curve
(the spread between short-term rates and longer-term rates), strongly influence
the pricing on most categories of Regions' earning assets and interest-bearing
liabilities. The level of market interest rates generally declined from 1990
through 1993, reaching historically low levels in late 1993. As a result of
declining market rates during this period, the yield on earning assets and the
rate on interest-bearing liabilities declined. Beginning in February 1994, the
Fed began to change interest rates significantly over a relatively short period
of time. In a series of six steps occurring over less than 12 months, the Fed
increased the Federal Funds rate 250 basis points from 3.00% to 5.50%. In
February 1995, the Fed increased the Fed Funds rate an additional 50 basis
points to 6.00% -- making the total increase 300 basis points over 12 months. In
July 1995, the Fed reversed course and began lowering the Federal Funds rate. In
two separate moves, the
NET INTEREST INCOME IN THOUSANDS
(TAXABLE EQUIVALENT)
(GRAPH)
<TABLE>
<CAPTION>
($ in thousands) 1991 1992 1993 1994 1995
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income 569,117 547,007 566,162 796,419 1,027,759
Interest expense 292,017 224,068 213,614 350,139 519,983
Net interest income 277,100 322,939 352,548 446,280 507,776
</TABLE>
INTEREST RATE SPREAD (TAXABLE EQUIVALENT)
(GRAPH)
<TABLE>
<CAPTION>
($ in thousands) 1991 1992 1993 1994 1995
------------------------------------------
<S> <C> <C> <C> <C> <C>
Average Interest Rate Earned 9.80% 8.40% 7.70% 7.60% 8.30%
Average Interest Rate Paid 5.90% 4.10% 3.50% 3.90% 4.90%
Interest Rate Spread 3.90% 4.30% 4.20% 3.70% 3.40%
</TABLE>
42
<PAGE> 19
Fed lowered the Federal Funds rate to 5.50%. As market rates moved higher
during 1994, Regions' earning asset yields and interest-bearing liability rates
reacted by also moving higher. However, the flattening yield curve tended to
cause interest-bearing liability rates to increase slightly faster than earning
asset yields. During the first half of 1995, earning asset yields and
interest-bearing liability rates continued to increase, with interest-bearing
liability rates increasing slightly faster than earning asset yields. During
the last half of 1995, with market interest rates falling, earning asset yields
and interest-bearing liability rates began to fall. During this period, earning
asset yields fell slightly faster than did interest-bearing liability rates.
The last factor, changes in the statutory federal income tax rate,
affected the interest margin in 1993. The marginal federal tax rate was constant
at 34% from 1988 through 1992, but was increased to 35% in 1993. Comparisons of
the interest margin to years prior to 1993 are affected by the change in this
rate. The higher tax rate in 1993 increased the taxable equivalent value of
interest income on tax-free loans and securities and thus increased the interest
margin by 1 basis point in 1993. This increase is "artificial" since it reflects
increased tax expense resulting from the tax rate change.
INTEREST RATE SENSITIVITY
The primary objective of Asset/Liability Management at Regions is to
achieve reasonable stability in net interest income throughout interest rate
cycles. This is achieved by maintaining the proper balance of rate sensitive
earning assets, rate sensitive liabilities and off-balance sheet interest rate
hedges. The relationship of rate sensitive earning assets to rate sensitive
liabilities, adjusted for the effect of off-balance sheet hedges, (interest rate
sensitivity) is the principal factor in determining the effect that fluctuating
interest rates will have on future net interest income. Rate sensitive earning
assets and interest-bearing liabilities are those that can be repriced to
current market rates within a relatively short time period. Management monitors
the rate sensitivity of earning assets and interest-bearing liabilities over
periods of up to ten years, but places particular emphasis on the first year. At
December 31, 1995, approximately 46% of earning assets and 71% of the funding
for these earning assets were scheduled to be repriced to current market rates
at least once during 1996.
The accompanying table shows Regions' rate sensitive position at
December 31, 1995, as measured by gap analysis (the difference between the
earning asset and interest-bearing liability amounts scheduled to be repriced to
current market rates in subsequent periods). Over the next 12 months
approximately $3.1 billion more interest-bearing liabilities than earning assets
can be repriced to current market rates at least once. As a result, the one-year
cumulative gap (the ratio of rate sensitive assets to rate sensitive
liabilities) at December 31, 1995, was 0.65, indicating a "liability sensitive"
position. However, this ratio is only one of the tools that management uses to
measure rate sensitivity.
Historically, Regions has not experienced the level of net interest
income volatility indicated by gap analysis. The primary reason for the lack of
volatility is that Regions has a relatively large base of core deposit products
that do not reprice on a contractual basis. These deposit products include
regular savings, interest-bearing transaction accounts and a portion of money
market savings accounts. Balances for these accounts are reported in the one to
three month repricing category and comprise 24% of interest-bearing deposits.
However, the rates paid on these accounts are typically not rate sensitive and
can be adjusted at management's discretion. Over the last five years, Regions
has used these accounts to effectively manage its interest rate sensitivity.
Another reason for the lack of volatility in net interest income is that
Regions' loan and security portfolios contain fixed-rate mortgage-related
products, including whole loans, mortgage-backed securities and collateralized
mortgage obligations having amortization and cash flow characteristics that vary
with the level of market interest rates. These earning assets are generally
reported in the non-sensitive category. In fact, a significant portion of these
earning assets may pay-off within one year or less, because their cash flow
characteristics are materially impacted by mortgage refinancing activity. If
regular savings, a portion of money market savings and a portion of
interest-bearing transaction accounts were redistributed based on expected cash
flows and probable repricing intervals, Regions' one-year cumulative gap ratio
would be 0.87 -- indicating a significantly less "liability sensitive" position
than that reported above.
At December 31, 1995, Regions owned one interest rate swap with a $7.9
million notional principal amount, in which it is receiving a fixed interest
payment (see Note M to the consolidated financial statements). This swap
agreement was entered into by Secor Bank prior to its acquisition by Regions.
Secor Bank used this swap to control interest sensitivity. This swap matures in
May 1996, and has no material effect on Regions' rate sensitivity.
As mentioned above, Regions uses additional tools to monitor and manage
interest rate sensitivity. One of the primary tools used is simulation analysis.
Simulation analysis is the primary method of estimating future earnings streams
under varying interest rate conditions. Simulation analysis is used to test the
sensitivity of Regions' net interest income to both the level of interest rates
and the slope of the yield curve. Simulation analysis uses a more detailed
version of the information shown in the table on page 44 that includes
adjustments for the expected timing and magnitude of asset and liability cash
flows, as well as the expected timing and magnitude of repricings of deposits
that do not reprice on a contractual basis. In addition, simulation analysis
includes adjustments for the lag between movements in market interest rates and
the movement of administered rates on prime rate loans, interest-bearing
transaction accounts, regular savings and money market savings accounts. These
adjustments are made to reflect more accurately possible future cash flows,
repricing behavior and ultimately net interest income. Simulation analysis also
indicates that Regions is slightly "liability sensitive."
43
<PAGE> 20
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY ANALYSIS
(dollar amounts in millions) December 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Rate Sensitive Period
- ----------------------------------------------------------------------------------------------------------------------------------
1-3 4-6 7-12 Over 1 year or
Months Months Months Total Non-Sensitive Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans, net of unearned income $ 3,387.3 $ 477.4 $ 964.3 $4,829.0 $4,716.7 $ 9,545.7
- ----------------------------------------------------------------------------------------------------------------------------------
Investment securities 189.3 231.4 117.2 537.9 907.5 1,445.4
- ----------------------------------------------------------------------------------------------------------------------------------
Securities available for sale 130.8 69.0 176.9 376.7 1,203.7 1,580.4
- ----------------------------------------------------------------------------------------------------------------------------------
Interest bearing deposits in other banks 47.0 -- -- 47.0 -- 47.0
- ----------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and securities
purchased under agreements to resell .6 -- -- .6 -- .6
- ----------------------------------------------------------------------------------------------------------------------------------
Mortgage loans held for sale 92.3 -- -- 92.3 -- 92.3
- ----------------------------------------------------------------------------------------------------------------------------------
Trading account assets 28.9 -- -- 28.9 -- 28.9
- ----------------------------------------------------------------------------------------------------------------------------------
Total earning assets $ 3,876.2 $ 777.8 $ 1,258.4 $5,912.4 $6,827.9 $12,740.3
- ----------------------------------------------------------------------------------------------------------------------------------
Percent of total earning assets 30.4% 6.1% 9.9% 46.4% 53.6% 100.0%
- ----------------------------------------------------------------------------------------------------------------------------------
FUNDING SOURCES:
Non-interest-bearing deposits -- -- -- -- $1,534.9 $ 1,534.9
- ----------------------------------------------------------------------------------------------------------------------------------
Savings deposits $ 806.2 -- -- $ 806.2 -- 806.2
- ----------------------------------------------------------------------------------------------------------------------------------
Other time deposits 4,879.2 $ 975.6 $ 1,259.8 7,114.6 1,440.4 8,555.0
- ----------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 863.7 90.6 -- 954.3 -- 954.3
- ----------------------------------------------------------------------------------------------------------------------------------
Long-term borrowings 115.9 46.2 14.2 176.3 376.3 552.6
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 6,665.0 1,112.4 1,274.0 9,051.4 1,816.7 10,868.1
- ----------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity -- -- -- -- 337.3 337.3
- ----------------------------------------------------------------------------------------------------------------------------------
Total funding sources $ 6,665.0 $1,112.4 $ 1,274.0 $9,051.4 $3,688.9 $12,740.3
- ----------------------------------------------------------------------------------------------------------------------------------
Percent of total funding sources 52.3% 8.7% 10.0% 71.0% 29.0% 100.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Interest sensitive gap $(2,788.8) $ (334.6) $ (15.6) $(3,139.0) $3,139.0 --
- ----------------------------------------------------------------------------------------------------------------------------------
Cumulative interest sensitive gap $(2,788.8) $(3,123.4) $(3,139.0) $(3,139.0) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
As percent of total earning assets (21.9)% (24.5)% (24.6)% (24.6)% -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of earning assets
to funding sources 0.58 0.70 0.99 0.65 1.85% 1.00%
- ----------------------------------------------------------------------------------------------------------------------------------
Cumulative ratio 0.58 0.60 0.65 0.65 1.00 1.00
==================================================================================================================================
</TABLE>
44
<PAGE> 21
<TABLE>
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(in thousands) Year Ended December 31
- ---------------------------------------------------------------------------------------------------------------------------
1995 OVER 1994 1994 over 1993
- ---------------------------------------------------------------------------------------------------------------------------
VOLUME YIELD/RATE TOTAL Volume Yield/Rate Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN:
Interest income on:
Loans $162,436 $ 62,175 $224,611 $176,395 $ 5,081 $181,476
- --------------------------------------------------------------------------------------------------------------------------
Federal funds sold (1,908) 706 (1,202) 279 271 550
- --------------------------------------------------------------------------------------------------------------------------
Taxable securities 12,294 3,806 16,100 55,869 (12,465) 43,404
- --------------------------------------------------------------------------------------------------------------------------
Non-taxable securities 798 (46) 752 2,396 (475) 1,921
- --------------------------------------------------------------------------------------------------------------------------
Other earning assets (10,654) 1,920 (8,734) 2,253 508 2,761
- --------------------------------------------------------------------------------------------------------------------------
Total 162,966 68,561 231,527 237,192 (7,080) 230,112
- --------------------------------------------------------------------------------------------------------------------------
Interest expense on:
Savings deposits 535 (1,052) (517) 5,612 (606) 5,006
- --------------------------------------------------------------------------------------------------------------------------
Other interest-bearing
deposits 52,557 82,921 135,478 72,770 19,708 92,478
- --------------------------------------------------------------------------------------------------------------------------
Borrowed funds 27,496 7,386 34,882 38,445 596 39,041
- --------------------------------------------------------------------------------------------------------------------------
Total 80,588 89,255 169,843 116,827 19,698 136,525
- --------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET INTEREST INCOME $ 82,378 $(20,694) $ 61,684 $120,365 $(26,778) $ 93,587
==========================================================================================================================
</TABLE>
Note: The change in interest due to both rate and volume has been allocated to
change due to volume and change due to rate in proportion to the absolute
dollar amounts of the change in each.
PROVISION FOR LOAN LOSSES
This expense is used to fund the allowance for loan losses. Actual loan
losses, net of recoveries, are charged directly to the allowance. The expense
recorded each year is a reflection of actual losses experienced during the year
and management's judgment as to the adequacy of the allowance to absorb future
losses. For an analysis and discussion of the allowance for loan losses, refer
to the section on page 26 entitled "Loans and Allowance for Loan Losses." In
1993 and 1994, the provision for loan losses was reduced to $21.5 million and
$19.0 million, respectively, due primarily to improving economic conditions and
to improving loan portfolio quality indicators. In 1995, the provision for loan
losses was increased slightly to $20.7 million due to growth in the loan
portfolio and the estimated impact on Regions of higher consumer debt levels.
TRUST INCOME
Trust income increased 9% in 1993, 6% in 1994 and 20% in 1995. An
aggressive sales program has been an important means of increasing trust
revenue. Combined with employee incentives for referring trust business, the
sales program has produced good results over the last several years. In
addition to increased sales efforts, trust income is also affected by the
securities markets, since most trust fees are calculated as a percentage of
trust asset values. The strength of the securities markets in 1993 and 1995,
had a more favorable impact on trust income in those years than in 1994.
Increased trust assets, primarily due to acquisitions, also contributed to the
higher growth rate in trust income in 1995.
SERVICE CHARGES ON DEPOSIT ACCOUNTS
Service charge income increased 2% in 1993, 17% in 1994, and 21% in
1995, due to increases in the number of deposit accounts, primarily because of
acquisitions, and changes in the pricing of certain deposit accounts and related
services.
MORTGAGE SERVICING AND ORIGINATION FEES
The source of this income is Regions' mortgage banking
affiliate--Regions Mortgage, Inc. (RMI). RMI's primary business and source of
income is the origination and servicing of mortgage loans for long-term
investors.
In 1995, mortgage servicing and origination fees decreased less than 1%,
from $41.5 million in 1994 to $41.3 million in 1995. Origination fees decreased
24% due to a decline in the number and dollar amount of loans closed. Servicing
fees, which comprised approximately 82% of total mortgage servicing and
origination fees in 1995, increased 7% in 1995. At December 31, 1995, RMI's
servicing portfolio totaled $10.6 billion and included approximately 167,000
loans. At December 31, 1994, the servicing portfolio totaled $9.2 billion,
compared to $8.5 billion at December 31, 1993. Growth in the servicing portfolio
resulted
45
<PAGE> 22
from retention of servicing on most mortgages originated in-house and the
purchase of servicing rights to mortgages originated by other companies.
Mortgage servicing and origination fees decreased 6% in 1994.
Origination fees decreased 21% due to a decline in the number of loans closed,
primarily as a result of higher mortgage interest rates in 1994. Servicing fees,
which comprised approximately 76% of total mortgage servicing and origination
fees in 1994, increased less than 1%. The reduced rate of growth in servicing
fees in 1994, resulted primarily from (1) a slower rate of growth in the
servicing portfolio than in prior years and (2) an increased amount of mortgages
in RMI's servicing portfolio owned by Regions' subsidiary banks; servicing fees
from these mortgages are eliminated in consolidation as intercompany
transactions.
In 1993, mortgage servicing and origination fees increased 19%.
Servicing fees increased 14% due to a 36% increase in the dollar volume of loans
serviced and a 24% increase in the number of loans serviced. Origination fees
increased 35% in 1993, due to increases in the number and dollar amount of loans
closed. Lower interest rates in 1993 resulted in increased volumes for new loan
closings and refinancings.
RMI, through its retail and wholesale operations, produced mortgage
loans totaling $954 million, $1.9 billion, and $1.9 billion in 1995, 1994 and
1993, respectively. RMI produces loans from 26 offices in Alabama, Georgia,
Florida, Mississippi, Tennessee and South Carolina, and from other correspondent
offices located primarily in the Southeast.
Purchased mortgage servicing rights, which are included in other assets
in the consolidated statement of condition, represent amounts paid, less
accumulated amortization and valuation adjustments, for the right to service
mortgage loans that are owned by other investors. An increase in prepayments of
these mortgages, due primarily to lower mortgage interest rates, resulted in
increased valuation adjustments in 1993. With higher mortgage interest rates
during most of 1994 and 1995, which resulted in prepayments returning to more
normal levels, no valuation adjustments were necessary in 1994 or 1995. An
increase in prepayments of mortgages in the servicing portfolio in the future
could result in additional valuation adjustments. An analysis of purchased
mortgage servicing rights is summarized as follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $47,606 $50,581 $37,847
- -------------------------------------------------------------
Additions 24,412 7,449 26,783
- -------------------------------------------------------------
Amortization (9,774) (10,424) (7,080)
- -------------------------------------------------------------
Valuation adjustments -0- -0- (6,969)
- -------------------------------------------------------------
Balance at end of year $62,244 $47,606 $50,581
=============================================================
</TABLE>
In May 1995, the Financial Accounting Standards Board issued 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 exist. Currently only mortgage servicing rights that are
purchased from other parties are capitalized and recorded as an asset.
Therefore, Statement 122 eliminates the accounting inconsistencies that
currently exist between mortgage servicing rights that are derived from loan
origination activities and those acquired through purchase transactions.
Statement 122 also requires that capitalized mortgage servicing rights be
assessed for impairment based on the fair value of those rights. Statement 122
is effective for fiscal years beginning after December 15, 1995, and the Company
will adopt the statement in the first quarter of 1996. Management believes that
the adoption of Statement 122 will not have a material impact on Regions'
financial statements.
SECURITIES GAINS (LOSSES)
In 1993, net gains from the sale of investment securities were $78,000,
resulting from sales of several securities due to credit quality concerns.
The $627,000 net gain in 1994 from the sale of available for sale
securities resulted primarily from dispositions of small blocks of securities
acquired in connection with acquisitions and sales of several securities due to
credit quality concerns.
The $83,000 in net gains recognized in 1995 from the sale of available
for sale securities with a book value of $7.6 million resulted primarily from
sales of securities acquired in connection with acquisitions in which the
securities were not consistent with Regions' portfolio strategy.
OTHER INCOME
Refer to Note O to the consolidated financial statements for an analysis
of the significant components of other income. Increases in fee and commission
income over the last three years resulted primarily from revisions in charges
for certain services, an increased emphasis on charging customers for services
performed and an increased customer base due to internal growth and
acquisitions. Increases in safe deposit fees, international department income,
automated teller machine fees and other customer charges accounted for growth in
fees and commissions over the last three years.
Insurance premium and commission income declined in 1995, after
increasing in 1994 and 1993. This income originates primarily from the sale of
credit life and accident and health insurance to consumer loan customers.
Increased consumer loan volumes resulted in increased income in 1993 and 1994.
The
46
<PAGE> 23
additional income associated with increased consumer loan volume in 1995, was
offset by decreased commissions from collateral protection insurance coverage,
resulting in a decline in insurance premium and commission income in 1995.
Trading account income decreased in 1995 and 1994, primarily because of
lower volumes and a decline in profits from trading in the portfolio. Trading
account income increased in 1993 due to increased fees from underwriting public
finance obligations and larger profits from trading in the portfolio.
The $2.4 million gain on the sale of servicing rights in 1994 resulted
from the sale during the first quarter of 1994 of servicing rights on
approximately $121 million of mortgage loans.
SALARIES AND EMPLOYEE BENEFITS
Total salaries and benefits increased 12% in 1993, 16% in 1994 and 14%
in 1995. These increases resulted from normal merit and promotional adjustments,
increased incentive payments tied to performance, the effects of inflation, and
increases in the number of employees due to increased business activity and
acquisitions.
At December 31, 1995, Regions had 6,273 full-time equivalent employees,
compared to 6,007 at December 31, 1994 and 5,439 at December 31, 1993. Employees
added as a result of acquisitions accounted for most of these increases. The
number of employees at RMI has declined from a high of 735 at December 31, 1993
to 617 at December 31, 1995, primarily due to lower mortgage origination
activity over the last two years.
Employee productivity indicators improved significantly over the last
three years. Net income per employee increased 30% and deposits per employee
increased 21%.
Salaries, excluding benefits, totaled $101.9 million in 1993, compared
to $124.7 million in 1994 and $143.7 million in 1995. These increases resulted
from increased employment levels, due to acquisitions and increased business
activity, and normal merit and promotional adjustments.
DEPOSITS PER EMPLOYEE
(GRAPH)
<TABLE>
<CAPTION>
($ in thousands) 1991 1992 1993 1994 1995
--------------------------------------------------
<S> <C> <C> <C> <C>
1,513 1,639 1,865 1,884 1,926
</TABLE>
Regions provides all employees who meet established employment
requirements with a benefits package which includes pension, profit sharing,
stock purchase, and medical, life and disability insurance plans. The total cost
to Regions for fringe benefits, including payroll taxes, equals approximately
27% of salaries.
The contribution to the profit sharing plan increased in each of the
last three years and was equal to approximately 10% of after-tax income in 1993
and 9% in 1994 and 1995.
The contribution to the employee stock ownership plan (ESOP) equaled
approximately 1% of after-tax income in each of the last three years.
Commissions and incentives expense decreased from $25.3 million in 1993,
to $19.2 million in 1994, and then increased to $21.5 million in 1995.
Incentives are being used increasingly to reward employees for selling products
and services, for productivity improvements and for achievement of other
corporate goals. In 1991 Regions' stockholders approved a long-term incentive
plan that provides for the granting of stock options, stock appreciation rights,
restricted stock and performance shares. The long-term incentive plan is
intended to assist the Company in attracting, retaining, motivating and
rewarding employees who make a significant contribution to the Company's
long-term success, and to encourage employees to acquire and maintain an equity
interest in the Company. Regions also uses cash incentive plans to reward
employees for achievement of various goals.
Payroll taxes increased 12% in 1993, 20% in 1994 and 13% in 1995.
Increases in the Social Security tax rate and tax base, combined with increased
salary levels and additional employees due to growth and acquisitions, were the
primary reasons for increased payroll taxes.
Group insurance expense increased 7% in 1993, 26% in 1994 and 19% in
1995 primarily because of increases in medical claims due to increased
employment levels associated with increased business activity and acquisitions,
and continued rising health care costs.
NET OCCUPANCY EXPENSE
Net occupancy expense includes rents, depreciation and amortization,
utilities, maintenance, insurance, taxes and other expenses of premises occupied
by Regions and its affiliates. Regions' affiliates operate offices throughout
Alabama and parts of Louisiana, Florida, Georgia, Tennessee, Mississippi and
South Carolina.
Net occupancy expense increased 8% in 1993, 39% in 1994, and 11% in 1995
due to new and acquired branch offices, rising price levels, and increased
business activity. Increased acquisitions during 1993 and 1994 were the primary
reason for the larger 1994 increase.
47
<PAGE> 24
FURNITURE AND EQUIPMENT EXPENSE
Furniture and equipment expense increased 5% in 1993, 22% in 1994, and
7% in 1995. These increases resulted from acquisitions (particularly during
1993 and 1994) rising price levels, expenses related to equipment for new
branch offices, and increased depreciation and service contract expenses
associated with other new equipment.
FDIC INSURANCE EXPENSE
FDIC insurance expense decreased 29% in 1995, compared to 1994, due to
lower premium rates during the last seven months of 1995. For Bank Insurance
Fund (BIF) deposits, insurance premium rates were decreased from $0.23 per $100
of insured deposits to $0.04 per $100 of insured deposits. Savings Association
Insurance Fund (SAIF) deposits remained subject to the $0.23 rate.
Approximately 30% of Regions' assessable deposits are considered SAIF deposits.
FDIC insurance expense increased 3% in 1993 and 42% in 1994, as a result of
increased deposits from acquisitions and growth.
Beginning in 1996, the FDIC announced that it would further reduce deposit
insurance premiums applicable to BIF deposits to $2,000 per year per
institution for institutions that are in the highest capital and supervisory
categories. If this reduced rate were applicable for a full year, Regions' FDIC
insurance expense would be reduced by approximately $2.9 million.
Furthermore, the U. S. Congress is considering enacting legislation to
recapitalize the SAIF through a special assessment applicable to SAIF deposits.
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 a 79 basis point
assessment were levied against Regions' SAIF deposits (with a 20% reduction for
SAIF deposits in institutions where SAIF deposits account for less than 50% of
total assessable deposits), Regions would incur a pre-tax charge of
approximately $22 million.
OTHER EXPENSES
Refer to Note O to the consolidated financial statements for an
analysis of the significant components of other expense. Increases in this
category of expense generally resulted from acquisitions, expanded programs,
increased business activity and rising price levels.
A recovery from a litigation matter resulted in lower non-credit losses in
1995. Higher miscellaneous losses in 1994, offset the benefit of lower
foreclosed property costs, resulting in higher non-credit losses for 1994.
Reductions in write-downs in the carrying values of foreclosed properties and
associated costs of these properties, contributed to the lower non-credit
losses in 1993.
Expansion of mortgage servicing activities, including additional
purchased servicing rights, and accelerated prepayments of mortgages in the
servicing portfolio in 1993, resulted in higher amortization of mortgage
servicing rights in 1993. As prepayment activity slowed in 1994 and 1995,
amortization expense was reduced accordingly.
Gains or losses on sales of mortgages by RMI result from changes in the
fair market value of mortgages held in inventory while awaiting sale to
long-term investors. Purchased commitments covering the sale of mortgages held
in inventory are used to mitigate market losses (See Note M to the consolidated
financial statements for additional information). Losses of $2.8 million and
$2.2 million, respectively, were recognized in 1995 and 1994, compared to a
gain of $476,000 in 1993.
The increase in other miscellaneous expenses resulted primarily from
increases in amortization of excess purchase price, donations and state shares
tax assessments.
APPLICABLE INCOME TAX
Regions' provision for income taxes increased 20% in 1995. This
increase was caused primarily by a 19% increase in income before taxes. Also
contributing to the larger provision for income taxes was a decline in Regions'
tax exempt income, as a percentage of total income. For 1993, 1994 and 1995,
the Company's tax exempt income as a percentage of income before income taxes
was 12.9%, 10.1% and 8.9%, respectively. Management expects this trend to
continue. Federal income tax laws that limit banks' deductions of interest
expense related to carrying tax exempt assets acquired after 1982 adversely
affect yields on new tax exempt assets and are the primary reason for the
relative decline in Regions' tax exempt income. Note P to the consolidated
financial statements provides more information about the provision for income
taxes.
Federal income tax laws require corporations to pay a minimum level of
income tax on their economic income. Corporations must pay the greater of their
normal federal income tax or alternative minimum tax. Alternative minimum tax
is 20% of alternative minimum taxable income. Alternative minimum taxable
income is calculated by adding to taxable income certain tax preference items
which are deducted in calculating taxable income. Regions' regular income taxes
exceeded its alternative minimum taxes by $16.4 million, $23.5 million and
$24.3 million in 1993, 1994 and 1995, respectively.
Management's determination of the realization of the deferred tax asset
is based upon management's judgment of various future events and uncertainties,
including the timing and amount of future income earned by certain subsidiaries
and the implementation of various tax planning strategies to maximize
realization of the deferred tax asset. Management believes that the
subsidiaries may be able to generate sufficient operating earnings to realize
the deferred tax benefits. In addition, a portion of the amount of the deferred
tax asset that can be realized in any year is subject to certain statutory
48
<PAGE> 25
federal income tax limitations. Because of these uncertainties, a valuation
allowance has been established. Management evaluates the realizability of the
deferred tax asset and adjusts, if necessary, the valuation allowance
accordingly. In 1995 the valuation allowance was reduced approximately $2
million, which had the effect of reducing income tax expense by a like amount.
EFFECTS OF INFLATION
The majority of assets and liabilities of a financial institution are
monetary in nature; therefore, a financial institution differs greatly from
most commercial and industrial companies which have significant investments in
fixed assets or inventories. However, inflation does have an important impact
on the growth of total assets in the banking industry and the resulting need to
increase equity capital at higher than normal rates in order to maintain an
appropriate equity to assets ratio. Inflation also affects other expenses which
tend to rise during periods of general inflation.
Management believes the most significant impact of inflation on
financial results is the Company's ability to react to changes in interest
rates. As discussed previously, management is attempting to maintain an
essentially balanced position between rate sensitive assets and liabilities in
order to protect net interest income from being affected by wide interest rate
fluctuations.
CATEGORIES OF NON-INTEREST EXPENSE
[GRAPH]
<TABLE>
<CAPTION>
($ in thousands) 1991 1992 1993 1994 1995
---------------------------------------------
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits 119,115 138,355 154,594 179,166 204,630
Net occupancy expense 13,105 13,759 14,877 20,686 23,061
Furniture and equipment expense 17,339 17,684 18,604 22,737 24,421
FDIC insurance 11,803 14,105 14,584 20,678 14,720
Other 68,978 80,756 84,367 99,800 111,189
Total 230,340 264,659 287,026 343,067 378,021
</TABLE>
49
<PAGE> 26
<TABLE>
<CAPTION>
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS, COMMON STOCK MARKET PRICES AND DIVIDENDS
(in thousands, except per share amounts) THREE MONTHS ENDED
- ----------------------------------------------------------------------------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31
1995
<S> <C> <C> <C> <C>
Total interest income $242,842 $253,628 $260,990 $259,846
- ----------------------------------------------------------------------------------------------------------
Total interest expense 121,568 130,135 135,409 132,870
- ----------------------------------------------------------------------------------------------------------
Net interest income 121,274 123,493 125,581 126,976
- ----------------------------------------------------------------------------------------------------------
Provision for loan losses 4,571 5,247 5,494 5,340
- ----------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 116,703 118,246 120,087 121,636
- ----------------------------------------------------------------------------------------------------------
Total non-interest income, excluding
securities gains 37,245 38,383 41,791 42,338
- ----------------------------------------------------------------------------------------------------------
Securities gains 0 0 16 67
- ----------------------------------------------------------------------------------------------------------
Total non-interest expense 90,266 93,222 94,875 99,658
- ----------------------------------------------------------------------------------------------------------
Income taxes 21,439 21,543 23,025 19,660
- ----------------------------------------------------------------------------------------------------------
Net income $ 42,243 $ 41,864 $ 43,994 $ 44,723
==========================================================================================================
Per share:
Net income $ .91 $ .91 $ .96 $ .98
- ----------------------------------------------------------------------------------------------------------
Cash dividends declared .33 .33 .33 .33
- ----------------------------------------------------------------------------------------------------------
Market price:
Low 31 34 1/2 36 7/8 39 5/8
- ----------------------------------------------------------------------------------------------------------
High 36 1/2 37 1/2 41 3/8 45
- ----------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts) Three Months Ended
- ----------------------------------------------------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
- ----------------------------------------------------------------------------------------------------------
1994
Total interest income $178,794 $187,146 $202,418 $217,421
- ----------------------------------------------------------------------------------------------------------
Total interest expense 76,469 79,497 90,328 103,845
- ----------------------------------------------------------------------------------------------------------
Net interest income 102,325 107,649 112,090 113,576
- ----------------------------------------------------------------------------------------------------------
Provision for loan losses 4,674 4,763 4,367 5,199
- ----------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 97,651 102,886 107,723 108,377
- ----------------------------------------------------------------------------------------------------------
Total non-interest income, excluding
securities gains 37,304 36,050 35,198 34,229
- ----------------------------------------------------------------------------------------------------------
Securities gains 280 88 76 183
- ----------------------------------------------------------------------------------------------------------
Total non-interest expense 83,526 84,203 86,647 88,691
- ----------------------------------------------------------------------------------------------------------
Income taxes 17,036 18,284 18,923 16,851
- ----------------------------------------------------------------------------------------------------------
Net income $ 34,673 $ 36,537 $ 37,427 $ 37,247
==========================================================================================================
Per share:
Net income $ .80 $ .84 $ .88 $ .88
- ----------------------------------------------------------------------------------------------------------
Cash dividends declared .30 .30 .30 .30
- ----------------------------------------------------------------------------------------------------------
Market price:
Low 30 1/8 30 1/2 34 5/8 29 3/4
- ----------------------------------------------------------------------------------------------------------
High 33 1/2 36 1/8 36 3/4 35
==========================================================================================================
</TABLE>
The Common Stock of Regions is traded on the NASDAQ National Market System. The
NASDAQ stock quotation symbol is RGBK. Market prices shown represent sales
prices as reported in the NASD Monthly Statistical Report. At December 31,
1995, there were 33,400 shareholders of record of Regions Financial Corporation
Common Stock.
50
<PAGE> 27
CONSOLIDATED STATEMENTS OF CONDITION
Regions Financial Corporation & Subsidiaries
<TABLE>
<CAPTION>
Assets December 31
- -----------------------------------------------------------------------------------------------------------------
(dollar amounts in thousands, except per share data) 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 484,081 $ 551,084
- -----------------------------------------------------------------------------------------------------------------
Interest-bearing deposits in other banks 46,957 630
- -----------------------------------------------------------------------------------------------------------------
Investment securities (aggregate estimated market value
of $1,476,093 in 1995 and $1,874,117 in 1994) 1,445,411 1,948,675
- -----------------------------------------------------------------------------------------------------------------
Securities available for sale 1,580,390 660,513
- -----------------------------------------------------------------------------------------------------------------
Trading account assets 28,870 24,853
- -----------------------------------------------------------------------------------------------------------------
Mortgage loans held for sale 92,293 104,471
- -----------------------------------------------------------------------------------------------------------------
Federal funds sold and securities purchased under agreements to resell 613 45,074
- -----------------------------------------------------------------------------------------------------------------
Loans 9,564,438 9,043,467
- -----------------------------------------------------------------------------------------------------------------
Unearned income (18,738) (25,665)
- -----------------------------------------------------------------------------------------------------------------
Loans, net of unearned income 9,545,700 9,017,802
- -----------------------------------------------------------------------------------------------------------------
Allowance for loan losses (129,559) (116,988)
- -----------------------------------------------------------------------------------------------------------------
Net loans 9,416,141 8,900,814
- -----------------------------------------------------------------------------------------------------------------
Premises and equipment 188,262 160,801
- -----------------------------------------------------------------------------------------------------------------
Interest receivable 99,076 88,339
- -----------------------------------------------------------------------------------------------------------------
Due from customers on acceptances 51,286 110,520
- -----------------------------------------------------------------------------------------------------------------
Other assets 275,180 243,546
- -----------------------------------------------------------------------------------------------------------------
$13,708,560 $12,839,320
=================================================================================================================
Liabilities and Stockholders' Equity
Deposits:
Non-interest-bearing $ 1,534,951 $ 1,450,330
- -----------------------------------------------------------------------------------------------------------------
Interest-bearing 9,361,190 8,642,805
- -----------------------------------------------------------------------------------------------------------------
Total deposits 10,896,141 10,093,135
- -----------------------------------------------------------------------------------------------------------------
Borrowed funds:
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase 922,957 991,214
- -----------------------------------------------------------------------------------------------------------------
Commercial paper 21,100 18,600
- -----------------------------------------------------------------------------------------------------------------
Other short-term borrowings 10,215 1,727
- -----------------------------------------------------------------------------------------------------------------
Total short-term borrowings 954,272 1,011,541
- -----------------------------------------------------------------------------------------------------------------
Long-term borrowings 552,616 519,238
- -----------------------------------------------------------------------------------------------------------------
Total borrowed funds 1,506,888 1,530,779
- -----------------------------------------------------------------------------------------------------------------
Bank acceptances outstanding 51,286 110,520
- -----------------------------------------------------------------------------------------------------------------
Other liabilities 129,126 91,016
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 12,583,441 11,825,450
- -----------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, par value $.625 a share: Authorized 120,000,000 shares
Issued, 46,074,362 shares in 1995 and 46,482,811 shares in 1994 28,796 29,052
- -----------------------------------------------------------------------------------------------------------------
Surplus 406,982 430,981
- -----------------------------------------------------------------------------------------------------------------
Undivided profits 706,300 577,901
- -----------------------------------------------------------------------------------------------------------------
Treasury stock, at cost-614,000 shares in 1995 and 1,474,579 shares in 1994 (25,085) (12,441)
- -----------------------------------------------------------------------------------------------------------------
Unearned restricted stock (1,582) (966)
- -----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) on securities available for sale, net of taxes 9,708 (10,657)
- -----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,125,119 1,013,870
- ----------------------------------------------------------------------------------------------------------------
$13,708,560 $12,839,320
=================================================================================================================
</TABLE>
See notes to consolidated financial statements.
( ) Indicates deduction.
53
<PAGE> 28
CONSOLIDATED STATEMENTS OF INCOME
Regions Financial Corporation & Subsidiaries
<TABLE>
<CAPTION>
(amounts in thousands, except per share data) Year Ended December 31
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 827,703 $603,092 $421,616
- ----------------------------------------------------------------------------------------------------------
Interest on securities:
Taxable interest income 164,248 148,148 104,744
- ----------------------------------------------------------------------------------------------------------
Tax-exempt interest income 14,381 13,629 11,708
- ----------------------------------------------------------------------------------------------------------
Total interest on securities 178,629 161,777 116,452
- ----------------------------------------------------------------------------------------------------------
Interest on mortgage loans held for sale 7,769 18,619 15,767
- ----------------------------------------------------------------------------------------------------------
Income on federal funds sold and securities purchased
under agreements to resell 839 2,041 1,491
- ----------------------------------------------------------------------------------------------------------
Interest on time deposits in other banks 1,894 75 197
- ----------------------------------------------------------------------------------------------------------
Interest on trading account assets 472 175 144
- ----------------------------------------------------------------------------------------------------------
Total interest income 1,017,306 785,779 555,667
- ----------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 430,746 295,785 198,301
- ----------------------------------------------------------------------------------------------------------
Interest on short-term borrowings 51,672 21,514 4,554
- ----------------------------------------------------------------------------------------------------------
Interest on long-term borrowings 37,564 32,840 10,759
- ----------------------------------------------------------------------------------------------------------
Total interest expense 519,982 350,139 213,614
- ----------------------------------------------------------------------------------------------------------
Net interest income 497,324 435,640 342,053
- ----------------------------------------------------------------------------------------------------------
Provision for loan losses 20,652 19,003 21,533
- ----------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 476,672 416,637 320,520
- ----------------------------------------------------------------------------------------------------------
Non-interest income:
Trust department income 23,288 19,386 18,299
- ----------------------------------------------------------------------------------------------------------
Service charges on deposit accounts 60,722 50,332 42,955
- ----------------------------------------------------------------------------------------------------------
Mortgage servicing and origination fees 41,266 41,489 44,079
- ----------------------------------------------------------------------------------------------------------
Securities gains 83 627 78
- ----------------------------------------------------------------------------------------------------------
Other 34,481 31,574 26,616
- ----------------------------------------------------------------------------------------------------------
Total non-interest income 159,840 143,408 132,027
- ----------------------------------------------------------------------------------------------------------
Non-interest expense:
Salaries and employee benefits 204,630 179,166 154,594
- ----------------------------------------------------------------------------------------------------------
Net occupancy expense 23,061 20,686 14,877
- ----------------------------------------------------------------------------------------------------------
Furniture and equipment expense 24,421 22,737 18,604
- ----------------------------------------------------------------------------------------------------------
FDIC insurance expense 14,720 20,678 14,584
- ----------------------------------------------------------------------------------------------------------
Other 111,189 99,800 84,367
- ----------------------------------------------------------------------------------------------------------
Total non-interest expense 378,021 343,067 287,026
- ----------------------------------------------------------------------------------------------------------
Income before income taxes 258,491 216,978 165,521
- ----------------------------------------------------------------------------------------------------------
Applicable income taxes 85,667 71,094 53,476
- ----------------------------------------------------------------------------------------------------------
Net income $ 172,824 $145,884 $112,045
==========================================================================================================
Average number of shares outstanding 46,097 42,906 37,205
- ----------------------------------------------------------------------------------------------------------
Per share:
Net income $ 3.75 $ 3.40 $ 3.01
- ----------------------------------------------------------------------------------------------------------
Cash dividends declared 1.32 1.20 1.04
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
54
<PAGE> 29
CONSOLIDATED STATEMENTS OF CASH FLOWS
Regions Financial Corporation & Subsidiaries
<TABLE>
<CAPTION>
(amounts in thousands) Year Ended December 31
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $ 172,824 $ 145,884 $ 112,045
- ------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net cash provided by operating activities:
Depreciation and amortization of premises and equipment 20,175 17,946 14,547
- ------------------------------------------------------------------------------------------------------------
Provision for loan losses 20,652 19,003 21,533
- ------------------------------------------------------------------------------------------------------------
Net (accretion) amortization of securities (1,284) 12,819 (479)
- ------------------------------------------------------------------------------------------------------------
Amortization of loans and other assets 21,771 16,625 19,043
- ------------------------------------------------------------------------------------------------------------
Amortization of deposits and borrowings (5,643) (6,719) -0-
- ------------------------------------------------------------------------------------------------------------
Provision for (gains) losses on other real estate (614) (333) 531
- ------------------------------------------------------------------------------------------------------------
Deferred income taxes 7,263 1,593 (2,004)
- ------------------------------------------------------------------------------------------------------------
(Gain) loss on sale of premises and equipment (27) 66 (133)
- ------------------------------------------------------------------------------------------------------------
Realized security (gains) (83) (627) (78)
- ------------------------------------------------------------------------------------------------------------
(Increase) in trading account assets (4,017) (4,485) (8,279)
- ------------------------------------------------------------------------------------------------------------
Decrease (increase) in mortgages held for sale 12,178 181,194 (78,053)
- ------------------------------------------------------------------------------------------------------------
(Increase) in interest receivable (8,415) (11,011) (3,040)
- ------------------------------------------------------------------------------------------------------------
(Increase) in other assets (41,588) (1,296) (22,057)
- ------------------------------------------------------------------------------------------------------------
Increase (decrease) in other liabilities 11,536 (34,813) 228
- ------------------------------------------------------------------------------------------------------------
Stock issued to employees under incentive plan 253 1,191 5,675
- ------------------------------------------------------------------------------------------------------------
Other 1,073 702 1,750
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 206,054 337,739 61,229
- ------------------------------------------------------------------------------------------------------------
Investing activities:
Net (increase) in loans (99,658) (1,526,748) (512,835)
- ------------------------------------------------------------------------------------------------------------
Proceeds from sale of securities available for sale 7,680 156,429 -0-
- ------------------------------------------------------------------------------------------------------------
Proceeds from sale of investment securities -0- -0- 1,646
- ------------------------------------------------------------------------------------------------------------
Proceeds from maturity of investment securities 480,134 810,220 528,624
- ------------------------------------------------------------------------------------------------------------
Proceeds from maturity of securities available for sale 151,570 57,223 -0-
- ------------------------------------------------------------------------------------------------------------
Purchase of investment securities (604,513) (792,903) (534,192)
- ------------------------------------------------------------------------------------------------------------
Purchase of securities available for sale (403,836) (120,560) -0-
- ------------------------------------------------------------------------------------------------------------
Net (increase) decrease in interest-bearing deposits in other banks (37,933) 10,501 (10,689)
- ------------------------------------------------------------------------------------------------------------
Proceeds from sale of premises and equipment 2,890 3,409 222
- ------------------------------------------------------------------------------------------------------------
Purchase of premises and equipment (35,640) (19,653) (17,273)
- ------------------------------------------------------------------------------------------------------------
Net decrease (increase) in customers' acceptance liability 59,234 (34,607) (48,735)
- ------------------------------------------------------------------------------------------------------------
Net cash received in acquisitions 50,908 250,926 144,404
- ------------------------------------------------------------------------------------------------------------
Net cash (used) by investing activities (429,164) (1,205,763) (448,828)
- ------------------------------------------------------------------------------------------------------------
Financing activities:
Net increase in deposits 353,181 166,163 439,775
- ------------------------------------------------------------------------------------------------------------
Net (decrease) increase in short-term borrowings (88,470) 766,578 (49,398)
- ------------------------------------------------------------------------------------------------------------
Proceeds from long-term borrowings 115,851 373,496 5,521
- ------------------------------------------------------------------------------------------------------------
Payments on long-term borrowings (88,561) (314,875) (2,907)
- ------------------------------------------------------------------------------------------------------------
Net (decrease) increase in bank acceptance liability (59,234) 34,607 48,735
- ------------------------------------------------------------------------------------------------------------
Cash dividends (60,075) (50,273) (38,792)
- ------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (61,882) (81,081) (16,393)
- ------------------------------------------------------------------------------------------------------------
Proceeds from exercise of stock options 836 811 973
- ------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 111,646 895,426 387,514
- ------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents (111,464) 27,402 (85)
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 596,158 568,756 568,841
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 484,694 $ 596,158 $ 568,756
============================================================================================================
</TABLE>
See notes to consolidated financial statements.
55
<PAGE> 30
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Regions Financial Corporation & Subsidiaries
<TABLE>
<CAPTION>
(amounts in thousands, except per share data)
Unrealized
Gain (Loss) from
Securities Treasury Unearned
Common Undivided Available Stock, Restricted
Stock Surplus Profits for Sale At Cost Stock
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 $22,013 $133,943 $516,148 $(12,320) $(3,129)
- ---------------------------------------------------------------------------------------------------------------------------------
Net income for the year 112,045
- ---------------------------------------------------------------------------------------------------------------------------------
Cash dividends declared--$1.04 per share (38,792)
- ---------------------------------------------------------------------------------------------------------------------------------
Stock dividend 2,203 126,022 (128,225)
- ---------------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (16,393)
- ---------------------------------------------------------------------------------------------------------------------------------
Stock issued for acquisition 2,210 110,447 16,393
- ---------------------------------------------------------------------------------------------------------------------------------
Stock issued to employees under incentive plan 99 4,648 1,104 (176)
- ----------------------------------------------------------------------------------------------------------------------------------
Stock options exercised 50 923
- ----------------------------------------------------------------------------------------------------------------------------------
Amortization of unearned restricted stock 1,752
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 26,575 375,983 462,280 (12,320) (1,553)
- ----------------------------------------------------------------------------------------------------------------------------------
Equity from immaterial acquisitions
accounted for as poolings of interests 1,387 15,441 18,890
- ----------------------------------------------------------------------------------------------------------------------------------
Adjustment for change in accounting method,
net of income taxes of $3,607 $ 6,189
- ----------------------------------------------------------------------------------------------------------------------------------
Change in unrealized gains and (losses),
net of income taxes of ($10,028) (16,846)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income for the year 145,884
- ----------------------------------------------------------------------------------------------------------------------------------
Cash dividends declared--$1.20 per share (50,273)
- ----------------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (81,081)
- ----------------------------------------------------------------------------------------------------------------------------------
Stock issued for acquisitions 962 38,803 80,960
- ----------------------------------------------------------------------------------------------------------------------------------
Stock issued to employees under incentive plan 1 70 1,120
- ----------------------------------------------------------------------------------------------------------------------------------
Stock options exercised 127 684
- ----------------------------------------------------------------------------------------------------------------------------------
Amortization of unearned restricted stock 587
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 29,052 430,981 577,901 (10,657) (12,441) (966)
- ----------------------------------------------------------------------------------------------------------------------------------
Equity from immaterial acquisitions accounted
for as poolings of interests 984 7,306 15,412
- ----------------------------------------------------------------------------------------------------------------------------------
Change in unrealized gains and (losses), net of
income taxes of $5,896 20,365
- ----------------------------------------------------------------------------------------------------------------------------------
Net income for the year 172,824
- ----------------------------------------------------------------------------------------------------------------------------------
Cash dividends declared--$1.32 per share (60,075)
- ----------------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock (61,882)
- ----------------------------------------------------------------------------------------------------------------------------------
Treasury stock retired and reissued relating to
acquisitions accounted for as purchases (408) (22,236) 36,797
- ----------------------------------------------------------------------------------------------------------------------------------
Retirement of treasury stock purchased in
prior years (922) (11,519) 12,441
- ----------------------------------------------------------------------------------------------------------------------------------
Stock issued to employees under incentive plan 32 1,672 238 (1,716)
- ----------------------------------------------------------------------------------------------------------------------------------
Stock options exercised 58 778
- ----------------------------------------------------------------------------------------------------------------------------------
Amortization of unearned restricted stock 1,100
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 $28,796 $406,982 $706,300 $ 9,708 $(25,085) $(1,582)
==================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
( ) Indicates deduction.
56
<PAGE> 31
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE A.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Regions Financial Corporation
(Regions or the Company), conform with generally accepted accounting principles
and with general financial service industry practices. Regions provides a full
range of banking and bank-related services to individual and corporate customers
through its subsidiaries and branch offices located primarily in Alabama,
Florida, Georgia, Louisiana and Tennessee. The Company is subject to intense
competition from other financial institutions and is also subject to the
regulations of certain government agencies and undergoes periodic examinations
by those regulatory authorities.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Regions
and its subsidiaries. Significant intercompany balances and transactions have
been eliminated. In preparing the financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the statement of condition dates and revenues and expenses for
the periods shown. Actual results could differ from the estimates and
assumptions used in the consolidated financial statements.
Certain amounts in prior year financial statements have been reclassified
to conform to the current year presentation.
SECURITIES
Effective January 1, 1994, Regions adopted the provisions of Statement of
Financial Accounting Standards No. 115 (SFAS 115), "Accounting for Certain
Investments in Debt and Equity Securities" (See Note C). Accordingly, the
Company's policies for investments in debt and equity securities are as
follows.
Management determines the appropriate classification of debt and equity
securities at the time of purchase and reevaluates such designations as of the
date of each statement of condition.
Debt securities are classified as investment securities when the Company
has the positive intent and ability to hold the securities to maturity.
Investment securities are stated at amortized cost.
Debt securities not classified as investment securities or trading account
assets, and marketable equity securities not classified as trading account
assets, are classified as securities available for sale. Securities available
for sale are stated at estimated fair value, with unrealized gains and losses,
net of taxes, reported as a separate component of stockholders' equity.
The amortized cost of debt securities classified as investment
securities or securities available for sale is adjusted for amortization of
premiums and accretion of discounts to maturity, or in the case of
mortgage-backed securities, over the estimated life of the security, using the
effective yield method. Such amortization or accretion is included in interest
on securities. Realized gains and losses are included in securities gains
(losses). The cost of the securities sold is based on the specific
identification method.
Trading account assets, which are held for the purpose of selling at a
profit, consist of debt and marketable equity securities and are carried at
estimated market value. Gains and losses, both realized and unrealized, are
included in other income.
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are carried at the lower of aggregate cost
or estimated market value. Gains and losses on mortgages held for sale are
included in other expense.
LOANS
Interest on loans is accrued based upon the principal amount outstanding
except for interest on discounted installment loans and leases, which is
generally credited to income based upon the sum-of-the-digits method and
generally approximates the interest method of income recognition.
Through provisions charged directly to operating expense, Regions has
established an allowance for loan losses. This allowance is reduced by actual
loan losses and increased by subsequent recoveries, if any.
The allowance for loan losses is maintained at a level believed adequate by
management to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio, historical loan loss experience, current economic conditions,
collateral values of properties securing loans, volume, growth, quality and
composition of the loan portfolio and other relevant factors. Unfavorable
changes in any of these, or other factors, or the availability of new
information, could require that the allowance for loan losses be increased in
future periods.
PREMISES AND EQUIPMENT
Premises and equipment and leasehold improvements are stated at cost, less
accumulated depreciation and amortization. The provision for depreciation is
computed using the straight-line and declining-balance methods over the
estimated useful lives of the assets. Leasehold improvements are amortized
using the straight-line method over the estimated useful lives of the
improvements (or the terms of the leases if shorter). Estimated useful lives
generally are as follows:
Premises and leasehold improvements 10-40 years
Furniture and equipment 3-12 years
57
<PAGE> 32
INTANGIBLE ASSETS
Intangible assets, consisting of the excess of cost over the fair value
of net assets of acquired businesses and premiums paid to purchase servicing
rights of mortgage loans, are included in other assets. The excess of cost over
the fair value of net assets of acquired businesses, which totaled $107,010,000
at December 31, 1995, and $102,187,000 at December 31, 1994, are being amortized
over periods of 12 to 25 years, principally using the straight-line method of
amortization. Premiums paid to purchase servicing rights of mortgage loans,
which totaled $62,244,000 at December 31, 1995 and $47,606,000 at December 31,
1994, are being amortized over the estimated remaining servicing life of the
loans. Intangible assets are evaluated periodically for impairment.
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of,"(Statement 121) which 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
Company will adopt Statement 121 in the first quarter of 1996 and, based on
current circumstances, does not believe the effect of adoption will be material
to the consolidated financial statements.
In May 1995, the FASB issued Statement of Financial Accounting Standards
No. 122 "Accounting for Mortgage Servicing Rights, an Amendment of FASB No. 65"
(Statement 122). 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 exist. Currently only mortgage
servicing rights that are purchased from other parties are capitalized and
recorded as an asset. Therefore, Statement 122 eliminates the accounting
inconsistencies that currently exist between mortgage servicing rights that are
derived from loan origination activities and those acquired through purchase
transactions. Statement 122 also requires that capitalized mortgage servicing
rights be assessed for impairment based on the fair value of those rights.
Statement 122 is effective for fiscal years beginning after December 15, 1995,
and the Company will adopt the statement in the first quarter of 1996.
Management believes that the adoption of Statement 122 will not have a material
impact on Regions' financial statements.
PENSION, PROFIT-SHARING AND EMPLOYEE STOCK
OWNERSHIP PLANS
Regions has pension, profit-sharing and employee stock ownership plans
covering substantially all employees. Annual contributions to the profit-sharing
and employee stock ownership plans are determined at the discretion of the Board
of Directors. Pension expense is computed using the projected unit credit
(service prorate) actuarial cost method and the plan is funded using the
aggregate actuarial cost method. Annual contributions to all the plans do not
exceed the maximum amounts allowable for federal income tax purposes.
INCOME TAXES
Regions and its subsidiaries file a consolidated federal income tax
return. The consolidated financial statements (including the provision for
income taxes) are prepared on the accrual basis. Temporary differences occur
when income and expenses are recognized in different periods for financial
reporting purposes and for purposes of computing income taxes currently payable.
Deferred taxes are provided as a result of such temporary differences.
PER SHARE AMOUNTS
Earnings per share computations are based upon the weighted average
number of shares outstanding during the periods. The dilutive effect of shares
issuable under stock options and stock performance awards granted by the Company
is immaterial.
TREASURY STOCK
The purchase of the Company's common stock is recorded at cost. At the
date of retirement or subsequent reissue, the treasury stock account is reduced
by the cost of such stock.
INSURANCE SUBSIDIARIES
Insurance premium and commission income and acquisition costs are
recognized over the terms of the related policies. Losses are recognized as
incurred.
STATEMENT OF CASH FLOWS
Cash equivalents include cash and due from banks and federal funds sold
and securities purchased under agreements to resell. Regions paid $503,344,000
in 1995, $337,970,000 in 1994, and $207,301,000 in 1993 for interest on deposits
and borrowings. Income tax payments totaled $78,565,000 for 1995, $72,018,000
for 1994, and $61,170,000 for 1993. Loans transferred to other real estate
totaled $6,524,000 in 1995, $5,336,000 in 1994, and $6,179,000 in 1993. During
1995 investment securities of $643,976,000 were transferred to securities
available for sale, as permitted by the Financial Accounting Standard Board's
November 1995 special report. The securitization of loans during 1995 resulted
in the transfer of $396,130,000 from loans to securities available for sale.
58
<PAGE> 33
NOTE B.
RESTRICTIONS ON CASH AND DUE FROM BANKS
Regions' subsidiary banks are required to maintain reserve balances with
the Federal Reserve Bank. The average amount of the reserve balances maintained
for the year ended December 31, 1995, was approximately $78,798,000.
NOTE C. SECURITIES
The amortized cost and estimated fair value of investment securities and
securities available for sale at December 31, 1995, are as follows:
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES:
U.S. Treasury and Federal agency securities $ 894,606 $22,745 $ (604) $ 916,747
- -----------------------------------------------------------------------------------------------------------------------------
Obligations of states and political subdivisions 281,761 10,658 (373) 292,046
- -----------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 268,926 590 (2,334) 267,182
- -----------------------------------------------------------------------------------------------------------------------------
Other securities 118 -0- -0- 118
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL $1,445,411 $33,993 $(3,311) $1,476,093
=============================================================================================================================
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury and Federal agency securities $ 517,216 $14,958 $(1,388) $ 530,786
- -----------------------------------------------------------------------------------------------------------------------------
Obligations of states and political subdivisions 2,304 118 (15) 2,407
- -----------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 1,010,795 6,878 (5,073) 1,012,600
- -----------------------------------------------------------------------------------------------------------------------------
Other securities 561 126 -0- 687
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities 33,910 -0- -0- 33,910
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL $1,564,786 $22,080 $(6,476) $1,580,390
=============================================================================================================================
</TABLE>
The cost and estimated fair value of investment securities and securities
available for sale at December 31, 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>
(in thousands) December 31, 1995
- -------------------------------------------------------------------------------
Estimated
Fair
Cost Value
- -------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT SECURITIES:
Due in one year or less $ 161,417 $ 162,808
- -------------------------------------------------------------------------------
Due after one year through
five years 767,433 791,792
- -------------------------------------------------------------------------------
Due after five years through
ten years 155,638 160,275
- -------------------------------------------------------------------------------
Due after ten years 91,997 94,037
- -------------------------------------------------------------------------------
Mortgage-backed securities 268,926 267,181
- -------------------------------------------------------------------------------
TOTAL $1,445,411 $1,476,093
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
(in thousands) December 31, 1995
- -------------------------------------------------------------------------------
Estimated
Fair
Cost Value
- -------------------------------------------------------------------------------
<S> <C> <C>
SECURITIES AVAILABLE FOR SALE:
Due in one year or less $ 150,549 $ 150,953
- -------------------------------------------------------------------------------
Due after one year through
five years 368,374 381,602
- -------------------------------------------------------------------------------
Due after five years through
ten years 1,061 1,227
- -------------------------------------------------------------------------------
Due after ten years 98 98
- -------------------------------------------------------------------------------
Mortgage-backed securities 1,010,794 1,012,600
- -------------------------------------------------------------------------------
Equity securities 33,910 33,910
- -------------------------------------------------------------------------------
TOTAL $1,564,786 $1,580,390
===============================================================================
</TABLE>
Proceeds from sales of securities available for sale in 1995, were
$7,680,000. Gross realized gains and losses were $139,000 and $56,000,
respectively. Proceeds from sales of securities available for sale in 1994 were
$156,429,000, with gross realized gains and losses of $2,711,000 and
$2,084,000, respectively. Proceeds from sales of investment securities in 1993
were $1,646,000, with gross realized gains and losses of $97,000 and $19,000,
respectively.
59
<PAGE> 34
The amortized cost and estimated fair value of investment securities and
securities available for sale at December 31, 1994, are as follows:
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES:
U.S. Treasury and Federal agency securities $ 903,390 $ 8,466 $(28,075) $ 883,781
- -----------------------------------------------------------------------------------------------------------------------------------
Obligations of states and political subdivisions 253,106 3,246 (7,235) 249,117
- -----------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 791,443 501 (51,471) 740,473
- -----------------------------------------------------------------------------------------------------------------------------------
Other securities 736 16 (6) 746
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL $1,948,675 $12,229 $(86,787) $1,874,117
===================================================================================================================================
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury and Federal agency securities $ 415,347 $ 2,910 $ (4,583) $ 413,674
- -----------------------------------------------------------------------------------------------------------------------------------
Obligations of states and political subdivisions 2,445 15 (40) 2,420
- -----------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 221,337 56 (15,436) 205,957
- -----------------------------------------------------------------------------------------------------------------------------------
Other securities 10 -0- -0- 10
- -----------------------------------------------------------------------------------------------------------------------------------
Equity securities 38,452 -0- -0- 38,452
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 677,591 $ 2,981 $(20,059) $ 660,513
===================================================================================================================================
Securities with carrying values of $1,366,811,000 and $1,311,035,000 at December 31, 1995, and 1994, respectively, were pledged to
secure public funds, trust deposits and certain borrowing arrangements.
</TABLE>
NOTE D. LOANS
The loan portfolio at December 31, 1995, and 1994, consisted of the
following:
<TABLE>
<CAPTION>
(in thousands) December 31
- -----------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
Commercial $1,991,695 $1,871,311
- -----------------------------------------------------------------
Real estate-construction 413,212 347,431
- -----------------------------------------------------------------
Real estate-mortgage 4,563,355 4,546,178
- -----------------------------------------------------------------
Consumer 2,596,176 2,278,547
- -----------------------------------------------------------------
9,564,438 9,043,467
- -----------------------------------------------------------------
Unearned income (18,738) (25,665)
- -----------------------------------------------------------------
TOTAL $9,545,700 $9,017,802
=================================================================
</TABLE>
Directors and executive officers of Regions and its principal
subsidiaries, including the directors' and officers' families and affiliated
companies, are loan and deposit customers and have other transactions with
Regions in the ordinary course of business. Total loans to these persons
(excluding loans which in the aggregate do not exceed $60,000 to any such
person) at December 31, 1995, and 1994, were approximately $95,000,000 and
$79,000,000, respectively. During 1995, $246,000,000 of new loans were made,
repayments totaled $224,000,000 and reductions for changes in the composition
of related parties totaled $6,000,000. These loans were made in the ordinary
course of business and on substantially the same terms, including interest
rates and collateral, as those prevailing at the same time for comparable
transactions with other persons and involve no unusual risk of collectibility.
Loans sold with recourse totaled $31.2 million and $36.2 million at
December 31, 1995, and 1994, respectively.
The loan portfolio is diversified geographically, primarily within
Alabama, northwest Florida, middle Tennessee, and Louisiana.
The Company adopted Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan," as amended by Statement of
Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures" (SFAS 114) effective January 1,
1995. SFAS 114 requires that certain impaired loans be measured at the present
value of expected future cash flows discounted at the loan's effective interest
rate or at the loan's observable market price, or the fair value of the
collateral if the loan is collateral dependent. A loan is considered impaired
if, based on current information and events, it is probable that Regions will
be unable to collect the scheduled payments of principal or interest when due
according to the contractual terms of the loan agreement. At December 31, 1995,
the recorded investment in impaired loans under SFAS 114 was $15 million. The
adoption of SFAS 114 resulted in no material impact on the Company's financial
statements.
60
<PAGE> 35
NOTE E. ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $116,988 $100,762 $ 73,619
- ------------------------------------------------------------------------------------------------
Allowance of purchased
institutions at acquisition
date 4,760 9,955 15,999
- ------------------------------------------------------------------------------------------------
Provision charged to
operating expense 20,652 19,003 21,533
- ------------------------------------------------------------------------------------------------
Loan losses:
Charge-offs (26,724) (23,100) (20,068)
- ------------------------------------------------------------------------------------------------
Recoveries 13,883 10,368 9,679
- ------------------------------------------------------------------------------------------------
Net loan losses (12,841) (12,732) (10,389)
- ------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $129,559 $116,988 $100,762
================================================================================================
</TABLE>
NOTE F. PREMISES AND EQUIPMENT
A summary of premises and equipment follows:
<TABLE>
<CAPTION>
(in thousands) December 31
- -----------------------------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 39,804 $ 33,960
- -----------------------------------------------------------------------------------------------
Premises 182,253 152,510
- -----------------------------------------------------------------------------------------------
Furniture and equipment 152,288 133,591
- -----------------------------------------------------------------------------------------------
Leasehold improvements 30,494 27,172
- -----------------------------------------------------------------------------------------------
404,839 347,233
- -----------------------------------------------------------------------------------------------
Allowances for depreciation
and amortization (216,577) (186,432)
- -----------------------------------------------------------------------------------------------
TOTAL $188,262 $160,801
===============================================================================================
</TABLE>
Net occupancy expense is summarized as follows:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- ---------------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross occupancy expense $26,372 $23,804 $18,466
- ---------------------------------------------------------------------------------------
Less rental income 3,311 3,118 3,589
- ---------------------------------------------------------------------------------------
Net occupancy expense $23,061 $20,686 $14,877
- ---------------------------------------------------------------------------------------
</TABLE>
Note G. Other Real Estate
Other real estate acquired in satisfaction of indebtedness
("foreclosure") is carried in other assets at the lower of the recorded
investment in the loan or the estimated net realizable value of the collateral.
Other real estate totaled $3,108,000 at December 31, 1995, and $6,267,000 at
December 31, 1994. Gain or loss on the sale of other real estate is included
in other expense.
NOTE H. DEPOSITS
<TABLE>
<CAPTION>
The following schedule presents the detail of interest-bearing deposits:
(in thousands) December 31
- ---------------------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Interest-bearing
transaction accounts $ 247,140 $1,430,592
- ---------------------------------------------------------------------
Interest-bearing accounts in
foreign office 435,871 9,000
- ---------------------------------------------------------------------
Savings accounts 806,159 822,946
- ---------------------------------------------------------------------
Money market savings
accounts 2,718,144 1,375,209
- ---------------------------------------------------------------------
Certificates of deposit
($100,000 or more) 1,118,954 1,166,484
- ---------------------------------------------------------------------
Time deposits
($100,000 or more) 106,402 378,201
- ---------------------------------------------------------------------
Other interest-bearing
deposits 3,928,520 3,460,373
- ---------------------------------------------------------------------
TOTAL $9,361,190 $8,642,805
=====================================================================
</TABLE>
The following schedule details interest expense on deposits:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31
- ------------------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest-bearing
transaction accounts $ 26,795 $ 37,628 $ 28,336
- ------------------------------------------------------------------------------------------------------
Interest-bearing accounts in
foreign office 18,107 80 -0-
- ------------------------------------------------------------------------------------------------------
Savings accounts 22,350 22,867 17,861
- ------------------------------------------------------------------------------------------------------
Money market savings
accounts 75,630 41,633 32,673
- ------------------------------------------------------------------------------------------------------
Certificates of deposit
($100,000 or more) 72,958 38,572 19,011
- ------------------------------------------------------------------------------------------------------
Other interest-bearing
deposits 214,906 155,005 100,420
- ------------------------------------------------------------------------------------------------------
TOTAL $430,746 $295,785 $198,301
======================================================================================================
</TABLE>
61
<PAGE> 36
NOTE I. BORROWED FUNDS
Following is a summary of short-term borrowings:
<TABLE>
<CAPTION>
(in thousands) December 31
- ---------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Federal funds purchased $572,185 $ 866,720 $125,615
- ---------------------------------------------------------------------------
Securities sold
under agreements
to repurchase 350,772 124,494 58,951
- ---------------------------------------------------------------------------
Commercial paper 21,100 18,600 17,201
- ---------------------------------------------------------------------------
Notes payable to an
unaffiliated bank 10,000 -0- -0-
- ---------------------------------------------------------------------------
Treasury tax and loan note 106 400 -0-
- ---------------------------------------------------------------------------
Short sale liability 109 1,327 1,994
- ---------------------------------------------------------------------------
Total $954,272 $1,011,541 $203,761
===========================================================================
(in thousands) December 31
- ----------------------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------
Maximum amount
outstanding at any
month-end:
Federal funds purchased
and securities sold
under agreements
to repurchase $1,216,763 $991,214 $232,682
- ----------------------------------------------------------------------------
Aggregate short-
term borrowings 1,265,078 1,011,541 252,577
- ----------------------------------------------------------------------------
Average amount
outstanding (based
on average of daily
balances) 859,073 458,737 145,778
- ----------------------------------------------------------------------------
Weighted average
interest rate at year end 5.7% 6.0% 3.1
- ----------------------------------------------------------------------------
Weighted average interest
rate on amounts
outstanding during the
year (based on average of
daily balances) 6.0% 4.7% 3.1
- ----------------------------------------------------------------------------
</TABLE>
Federal funds purchased had weighted average maturities of three, three
and two days, respectively, at December 31, 1995, 1994 and 1993. Weighted
average rates on these dates were 5.7%, 6.1% and 3.1%, respectively.
Securities sold under agreements to repurchase had weighted average
maturities of twenty-two, four and nine days, respectively, at December 31,
1995, 1994 and 1993. Weighted average rates on these dates were 5.8%, 5.2% and
2.8%, respectively.
Commercial paper maturities ranged from 4 to 166 days at December 31,
1995, from 4 to 167 days at December 31, 1994 and from 4 to 167 days at
December 31, 1993. Weighted average maturities were 113, 101 and 101 days,
respectively, at December 31, 1995, 1994 and 1993. The weighted average
interest rates on these dates were 5.7%, 5.7% and 3.5%, respectively.
Regions has an unsecured short-term credit agreement with an unaffiliated
bank that provides for maximum borrowings of $25 million. At December 31, 1995,
$10 million was outstanding under this agreement. No borrowings were outstanding
under this agreement at December 31, 1994. No compensating balances or
commitment fees are required by this agreement.
The short-sale liability represents Regions' trading obligation to deliver
certain government securities at a predetermined date and price. These
securities had weighted average interest rates of 6.9%, 2.5% and 4.0%,
respectively, at December 31, 1995, 1994 and 1993.
Long-term borrowings consist of the following:
<TABLE>
<CAPTION>
(in thousands) December 31
- ----------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C>
7.80% subordinated notes $ 75,000 $ 75,000
- ----------------------------------------------------------------------------------------
7.65% subordinated notes 25,000 25,000
- ----------------------------------------------------------------------------------------
7.75% subordinated notes 100,000 100,000
- ----------------------------------------------------------------------------------------
8.75% debentures -0- 5,200
- ----------------------------------------------------------------------------------------
Federal Home Loan Bank notes 261,831 285,031
- ----------------------------------------------------------------------------------------
Senior bank notes 75,000 -0-
- ----------------------------------------------------------------------------------------
Mortgage notes payable 3,833 4,500
- ----------------------------------------------------------------------------------------
Medium term notes -0- 11,344
- ----------------------------------------------------------------------------------------
Other notes payable 11,952 13,163
- ----------------------------------------------------------------------------------------
TOTAL $552,616 $519,238
========================================================================================
</TABLE>
In July 1994, Regions issued $25 million of 7.65% subordinated notes, due
August 15, 2001, and in September 1994, Regions issued $100 million of 7.75%
subordinated notes, due September 15, 2024. The $100 million of 7.75%
subordinated notes may be redeemed in whole or in part at the option of the
holders thereof on September 15, 2004, at 100% of the principal amount to be
redeemed, together with accrued interest. In December 1992, Regions issued $75
million of 7.80% subordinated notes, due December 1, 2002. All issuances of
these notes are subordinated and subject in right of payment of principal and
interest to the prior payment in full of all senior indebtedness of the
Company, generally defined as all indebtedness and other obligations of the
Company to its creditors, except subordinated indebtedness. Payment of the
principal of the notes may be accelerated only in the case of certain events
involving bankruptcy, insolvency proceedings or reorganization of the Company.
The subordinated notes qualify as "Tier 2 capital" under Federal Reserve
guidelines.
The 8.75% debentures, which were outstanding at December 31, 1994, were
paid off in 1995.
Federal Home Loan Bank notes represent borrowings from Federal Home Loan
Banks. Interest on these borrowings is at fixed rates ranging from 5.0% to
9.3% with maturities of one to fifteen years. These borrowings are secured by
Federal Home Loan Bank stock (carried at cost of $33.7 million) and by first
mortgage loans on one-to-four family dwellings held by certain banking
62
<PAGE> 37
subsidiaries (approximately $3.4 billion at December 31, 1995). The
maximum amount that could be borrowed from Federal Home Loan Banks under the
current borrowing agreements and without further investment in Federal Home
Loan Bank stock is approximately $299 million.
At December 31, 1995, Regions Bank of Louisiana had outstanding $75
million in senior bank notes. $35 million is at an interest rate of 6.71% and
$40 million is at an interest rate of 7.06%. These notes are unsecured and
mature in 1996. Regions banking subsidiaries are currently authorized to issue
up to $250 million in bank notes to institutional investors.
The mortgage notes payable at December 31, 1995, had a weighted average
interest rate of 8.7% and were collateralized by premises and equipment carried
at $8,185,000.
The medium term notes were issued by Secor Bank, FSB, (Secor) prior to
acquisition by Regions. These notes matured in 1995.
Other notes payable at December 31, 1995, had a weighted average interest
rate of 6.4% and a weighted average maturity of 11.6 years.
The aggregate amount of maturities of all long-term debt in each of the
next five years is as follows: 1996-$74,083,000; 1997-$113,776,000;
1998-$58,836,000; 1999-$12,198,000; 2000-$51,918,000.
Regions has a shelf-registration outstanding pursuant to which it may
offer up to an additional $200 million of its unsecured, subordinated notes,
debentures, bonds or other evidences of indebtedness. The proceeds from any
issuances of these securities can be used for general corporate purposes.
Substantially all of the consolidated net assets are owned by the
subsidiaries and dividends paid by Regions are substantially provided by
dividends from the subsidiaries. Statutory limits are placed on the amount of
dividends the subsidiaries can pay without prior regulatory approval. In
addition, regulatory authorities require the maintenance of minimum capital to
asset ratios at banking subsidiaries. At December 31, 1995, the banking
subsidiaries could pay approximately $178 million in dividends without prior
approval.
Management believes that none of these dividend restrictions will
materially affect Regions' dividend policy. In addition to dividend
restrictions, federal statutes also prohibit unsecured loans from banking
subsidiaries to the parent company. Because of these limitations, substantially
all of the net assets of Regions' subsidiaries are restricted, except for the
amount which can be paid to the parent in the form of dividends.
NOTE J. EMPLOYEE BENEFIT PLANS
Regions has a defined benefit pension plan covering substantially all
employees. The benefits are based on years of service and the employee's
highest five years of compensation during the last ten years of employment.
Regions' funding policy is to contribute annually at least the amount required
by IRS minimum funding standards. Contributions are intended to provide not
only for benefits attributed to service to date, but also for those expected to
be earned in the future.
The following table sets forth the plan's funded status and amounts
recognized in the consolidated statement of condition:
<TABLE>
<CAPTION>
(in thousands) December 31
- ----------------------------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation,
including vested benefits
of $77,623 in 1995 and
$57,263 in 1994 $(78,880) $(58,216)
- ----------------------------------------------------------------------------------------------------------
Projected benefit obligation for
service rendered to date $(97,452) $(70,558)
- ----------------------------------------------------------------------------------------------------------
Plan assets at fair value, primarily
listed stocks and bonds, and U.S.
Treasury and agency obligations 103,567 85,599
- ----------------------------------------------------------------------------------------------------------
Plan assets in excess of projected
benefit obligation 6,115 15,041
- ----------------------------------------------------------------------------------------------------------
Unrecognized net loss from
past experience different
from that assumed 12,287 4,041
- ----------------------------------------------------------------------------------------------------------
Unrecognized prior service cost (1,886) (938)
- ----------------------------------------------------------------------------------------------------------
Unrecognized net asset (1,969) (3,940)
- ----------------------------------------------------------------------------------------------------------
Prepaid pension cost
included in other assets $ 14,547 $ 14,204
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Net pension cost included the following components:
(in thousands) Year Ended December 31
- ----------------------------------------------------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during the
period $ 3,501 $3,677 $ 2,832
- ----------------------------------------------------------------------------------------------------------
Interest cost on projected
benefit obligation 6,411 5,487 4,966
- ----------------------------------------------------------------------------------------------------------
Actual (return) loss on
plan assets (16,577) 1,473 (5,602)
- ----------------------------------------------------------------------------------------------------------
Net amortization and
deferral 6,323 (11,516) (3,615)
- ----------------------------------------------------------------------------------------------------------
Net periodic pension
income $ (342) $ (879) $(1,419)
==========================================================================================================
</TABLE>
The weighted average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.25% and 4.5%, respectively, at December 31,
1995, 8.5% and 4.5%, respectively at December 31, 1994, and 7.5% and 4.5%,
respectively, at December 31, 1993. The expected long-term rate of return on
plan assets was 9% in all years.
The Company also sponsors a supplemental executive
63
<PAGE> 38
retirement program, which is a non-qualified plan that provides certain senior
executive officers defined pension benefits in relation to their compensation,
as is provided to other employees by the qualified pension plan. The projected
benefit obligation for this plan totaled $4,144,000 at December 31, 1995, and
$4,365,000 at December 31, 1994. The accumulated benefit obligation, all of
which was vested and accrued at December 31, 1995 and 1994, totaled $3,379,317
and $3,029,000, respectively. Pension expense for this plan totaled $440,000 in
1995 and 1994, and $20,000 in 1993. The reduced expense in 1993 resulted
primarily from changes in future funding of the projected plan obligations.
Contributions to the employee profit sharing plan totaled $14,792,000,
$12,475,000 and $11,100,000 for 1995, 1994 and 1993, respectively.
The 1995 contribution to the employee stock ownership plan totaled
$1,690,000, compared to $1,417,000 in 1994, and $1,120,000 in 1993.
Contributions are used to purchase Regions common stock for the benefit of
participating employees.
Contributions to the employee stock purchase plan in 1995, 1994 and 1993
were $1,004,000, $888,000 and $905,000, respectively.
Regions sponsors a defined benefit postretirement health care plan that
covers certain retired employees. Currently the Company pays a portion of the
costs of certain health care benefits for all eligible employees that retired
before January 1, 1989. No health care benefits are provided for employees
retiring at normal retirement age after December 31, 1988. For employees
retiring before normal retirement age, the Company currently pays a portion
(based upon length of active service at the time of retirement) of the costs of
certain health care benefits until the retired employee becomes eligible for
Medicare. The plan is contributory and contains other cost-sharing features
such as deductibles and co-payments. Retiree health care benefits, as well as
similar benefits for active employees, are provided through a group insurance
program in which premiums are based on the amount of benefits paid. The
Company's policy is to fund the Company's share of the cost of health care
benefits in amounts determined at the discretion of management.
The following table sets forth the plan's funded status and amounts
recognized in the consolidated statement of condition:
<TABLE>
<CAPTION>
(in thousands) December 31
- --------------------------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation,
including retiree benefits
of $4,060 in 1995 and $4,371
in 1994 $(9,109) $(9,847)
- --------------------------------------------------------------------------------------------------
Unrecognized transition
obligation 8,255 8,740
- --------------------------------------------------------------------------------------------------
Unrecognized net (gain) from
past experience different
from that assumed (2,773) (1,643)
- --------------------------------------------------------------------------------------------------
Accrued postretirement benefit
obligation $(3,627) $(2,750)
==================================================================================================
</TABLE>
Net periodic postretirement benefit cost included the
following components:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
(in thousands) Year Ended December 31
- ------------------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during the period $ 373 $ 521 $ 511
- ------------------------------------------------------------------------------------------------------
Interest cost on
benefit obligation 622 736 810
- ------------------------------------------------------------------------------------------------------
Net amortization and deferral 486 486 485
- ------------------------------------------------------------------------------------------------------
Unrecognized (gain) (205) -0- -0-
- ------------------------------------------------------------------------------------------------------
Net periodic postretirement
benefit cost $1,276 $1,743 $1,806
======================================================================================================
</TABLE>
The assumed health care cost trend rate was 11.0% for 1995 and is assumed
to decrease gradually to 5% by 2007 and remain at that level thereafter.
Increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation at
December 31, 1995, by $911,000 and the aggregate of the service and interest
cost components of net periodic postretirement benefit cost for 1995 by
$120,000. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.25% at December 31, 1995,
and 8.5% at December 31, 1994.
64
<PAGE> 39
NOTE K. LEASES
Rental expense for all leases amounted to approximately $5,193,753,
$5,474,000 and $4,233,000 for 1995, 1994 and 1993, respectively. The approximate
future minimum rental commitments as of December 31, 1995, for all noncancelable
leases with initial or remaining terms of one year or more are shown in the
following table. Included in these amounts are all renewal options reasonably
assured of being exercised.
<TABLE>
<CAPTION>
(in thousands) Equipment Premises Total
- -------------------------------------------
<S> <C> <C> <C>
1996 $140 $ 4,328 $ 4,468
- -------------------------------------------
1997 124 3,639 3,763
- -------------------------------------------
1998 96 2,995 3,091
- -------------------------------------------
1999 55 2,729 2,784
- -------------------------------------------
2000 23 2,263 2,286
- -------------------------------------------
2001-2005 58 7,023 7,081
- -------------------------------------------
2006-2010 -0- 3,920 3,920
- -------------------------------------------
2011-2015 -0- 2,265 2,265
- -------------------------------------------
2016-End -0- 786 786
- -------------------------------------------
TOTAL $496 $29,948 $30,444
===========================================
</TABLE>
NOTE L. COMMITMENTS AND CONTINGENCIES
To accommodate the financial needs of its customers, Regions makes
commitments under various terms to lend funds to consumers, businesses and other
entities. These commitments include (among others) revolving credit agreements,
term loan commitments and short-term borrowing agreements. Many of these loan
commitments have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of these commitments are expected to expire
without being funded, the total commitment amounts do not necessarily represent
future liquidity requirements. Standby letters of credit are also issued, which
commit Regions to make payments on behalf of customers if certain specified
future events occur. Historically, a large percentage of standby letters of
credit also expire without being funded.
Both loan commitments and standby letters of credit have credit risk
essentially the same as that involved in extending loans to customers and are
subject to normal credit approval procedures and policies. Collateral is
obtained based on management's assessment of the customer's credit.
Loan commitments totaled $2.4 billion at December 31, 1995, and $2.0
billion at December 31, 1994. Standby letters of credit were $360.5 million at
December 31, 1995, and $284.8 million at December 31, 1994. Commitments under
commercial letters of credit used to facilitate customers' trade transactions
were $42.1 million at December 31, 1995, and $23.6 million at December 31, 1994.
The Company and its affiliates are defendants in litigation and claims
arising from the normal course of business. Based on consultation with legal
counsel, management is of the opinion that the outcome of pending and threatened
litigation will not have a material effect on Regions' consolidated financial
statements.
NOTE M. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
In the normal course of business, Regions enters into financial
instrument transactions with off-balance sheet risk. These financial instrument
agreements help the Company manage its exposure to interest rate fluctuations
and help customers manage exposure to currency fluctuations.
Forward contracts represent commitments to sell money market instruments
at a future date at a specified price or yield. These contracts are utilized by
the Company to hedge interest rate risk positions associated with the
origination of mortgage loans held for sale. The amount of hedging gains and
losses deferred, which is reflected in gains and losses on mortgage loans held
for sale as realized, was not material to the results of operations for the
years ended December 31, 1995 or 1994. The Company is subject to the market risk
associated with changes in the value of the underlying financial instrument as
well as the risk that the other party will fail to perform. The gross contract
amount of forward contracts, which totaled $25 million and $10 million at
December 31, 1995, and 1994, respectively, represents the extent of Regions'
involvement. However, those amounts significantly exceed the future cash
requirements, as the Company intends to close out open positions prior to
settlement, and thus is subject only to the change in the value of the
instruments. The gross amount of contracts represents the Company's maximum
exposure to credit risk.
The Company utilizes put and call option contracts to hedge mortgage
loan originations in process. Option contracts represent rights to purchase or
sell securities or other money market instruments at a specified price and
within a specified period of time at the option of the holder. The notional
amount of option contracts totaled $30 million and $15 million at December 31,
1995, and 1994, respectively. The commitment fees paid for option contracts
reflect the maximum exposure to the Company.
Interest rate swap agreements, which were entered into by Secor Bank
prior to its acquisition by Regions, totaled $7.9 million and $27.9 million in
notional principal amount at December 31, 1995, and 1994, respectively. Interest
rate swap transactions, which Secor Bank used to assist in managing interest
rate exposure, generally involve the exchange of fixed and floating rate
interest payment obligations without the exchange of the underlying notional
principal amounts. Interest rate swap agreements subject the Company to market
risk associated with changes in interest rates, as well as the risk that another
party will fail to perform. Notional principal amounts often are used to express
the volume of these transactions, but the amounts potentially subject to credit
risk are substantially less.
65
<PAGE> 40
Foreign currency exchange contracts involve the trading of one currency
for another on a specified date and at a specified rate. These contracts are
executed on behalf of the Company's customers and are used to facilitate the
management of fluctuations in foreign exchange rates. The notional amount of
forward foreign exchange contracts totaled $36 million at December 31, 1995. The
Company is subject to the risk that another party will fail to perform and the
gross amount of the contracts represents the Company's maximum exposure to
credit risk.
Regions operates a broker-dealer subsidiary, which in the normal course
of trading inventory and clearing customers' securities transactions, is a party
to certain financial instruments with off-balance-sheet risk. The aggregate
off-balance-sheet risk from these financial instruments is not material to the
consolidated financial statements.
NOTE N. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments.
CASH AND CASH EQUIVALENTS: The carrying amount reported in the
consolidated statements of condition and of cash flows approximates the
estimated fair value.
INTEREST-BEARING DEPOSITS IN OTHER BANKS: The carrying amount reported
in the consolidated statement of condition approximates the estimated fair
value.
INVESTMENT SECURITIES: Estimated fair values are based on quoted market
prices, where available. If quoted market prices are not available, estimated
fair values are based on quoted market prices of comparable instruments.
SECURITIES AVAILABLE FOR SALE: Estimated fair values, which are the
amounts recognized in the consolidated statement of condition, are based on
quoted market prices, where available. If quoted market prices are not
available, estimated fair values are based on quoted market prices of comparable
instruments.
TRADING ACCOUNT ASSETS: Estimated fair values, which are the amounts
recognized in the consolidated statement of condition, are based on quoted
market prices, where available. If quoted market prices are not available,
estimated fair values are based on quoted market prices of comparable
instruments.
MORTGAGE LOANS HELD FOR SALE: Estimated fair values, which are the
amounts recognized in the consolidated statement of condition, are based on
quoted market prices of comparable instruments.
LOANS: Estimated fair values for variable rate loans, which reprice
frequently and have no significant credit risk, are based on carrying value.
Estimated fair values for all other loans are estimated using discounted cash
flow analyses, based on interest rates currently offered on loans with similar
terms to borrowers of similar credit quality. The carrying amount of accrued
interest reported in the consolidated statement of condition approximates the
fair value.
DEPOSIT LIABILITIES: The fair value of non-interest bearing demand
accounts, interest-bearing transaction accounts, savings accounts, money market
accounts and certain other time open accounts is the amount payable on demand at
the reporting date (i.e., the carrying amount). Fair values for certificates of
deposit are estimated by using discounted cash flow analyses, using the interest
rates currently offered for deposits of similar maturities.
SHORT-TERM BORROWINGS: The carrying amount reported in the consolidated
statement of condition approximates the estimated fair value.
LONG-TERM BORROWINGS: Fair values are estimated using discounted cash
flow analyses, based on the current rates offered for similar borrowing
arrangements.
LOAN COMMITMENTS, STANDBY AND COMMERCIAL LETTERS OF CREDIT: Estimated
fair values for these off-balance-sheet instruments are based on standard fees
currently charged to enter into similar agreements.
FORWARD CONTRACTS, CALL OPTIONS AND INTEREST RATE SWAPS: Estimated fair
values are based on dealer quotes. These values represent the estimated amount
the Company would pay to terminate the agreements.
66
<PAGE> 41
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
The estimated fair values of the Company's financial instruments are as follows:
(in thousands) DECEMBER 31, 1995 December 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------
CARRYING ESTIMATED FAIR Carrying Estimated Fair
AMOUNT VALUE Amount Value
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and cash equivalents $ 484,694 $ 484,694 $ 596,158 $ 596,158
- -----------------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits in other banks 46,957 46,957 630 630
- -----------------------------------------------------------------------------------------------------------------------------
Investment securities 1,445,411 1,476,093 1,948,675 1,874,117
- -----------------------------------------------------------------------------------------------------------------------------
Securities available for sale 1,580,390 1,580,390 660,513 660,513
- -----------------------------------------------------------------------------------------------------------------------------
Trading account assets 28,870 28,870 24,853 24,853
- -----------------------------------------------------------------------------------------------------------------------------
Mortgage loans held for sale 92,293 92,293 104,471 104,471
- -----------------------------------------------------------------------------------------------------------------------------
Loans (excluding leases) 9,306,344 9,398,300 8,801,948 8,396,042
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL LIABILITIES:
Deposits 10,896,141 10,926,779 10,093,135 9,957,484
- -----------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 954,272 954,272 1,011,541 1,011,541
- -----------------------------------------------------------------------------------------------------------------------------
Long-term borrowings 552,616 543,342 519,238 438,670
- -----------------------------------------------------------------------------------------------------------------------------
OFF-BALANCE-SHEET INSTRUMENTS:
Loan commitments - 0 - (20,574) - 0 - (17,383)
- -----------------------------------------------------------------------------------------------------------------------------
Standby letters of credit - 0 - (5,408) - 0 - (4,273)
- -----------------------------------------------------------------------------------------------------------------------------
Commercial letters of credit - 0 - (105) - 0 - (59)
- -----------------------------------------------------------------------------------------------------------------------------
Forward contracts, options and interest (500) 75 (783) 150
rate swaps
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE O. OTHER INCOME AND EXPENSE
Other income consists of the following:
(in thousands) Year Ended December 31
- --------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fees and commissions $15,925 $11,962 $10,257
- --------------------------------------------------------------------
Insurance premiums
and commissions 4,459 5,094 4,797
- --------------------------------------------------------------------
Trading account income 6,696 7,184 7,344
- --------------------------------------------------------------------
Gain on sale of mortgage
servicing rights 30 2,416 -0-
- --------------------------------------------------------------------
Other miscellaneous income 7,371 4,918 4,218
- --------------------------------------------------------------------
TOTAL $34,481 $31,574 $26,616
====================================================================
</TABLE>
Other expense consists of the following:
(in thousands) Year Ended December 31
- ----------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Stationery, printing
and supplies $ 8,216 $ 6,937 $ 5,354
- ----------------------------------------------------------------
Advertising and business
development 8,144 8,944 6,155
- ----------------------------------------------------------------
Postage and freight 8,855 7,308 6,294
- ----------------------------------------------------------------
Telephone 7,792 6,965 5,508
- ----------------------------------------------------------------
Legal and other
professional fees 8,198 7,563 4,416
- ----------------------------------------------------------------
Other non-credit losses 2,559 7,408 6,188
- ----------------------------------------------------------------
Outside computer services 5,319 5,181 4,856
- ----------------------------------------------------------------
Amortization of mortgage
servicing rights 9,774 10,424 14,049
- ----------------------------------------------------------------
Loss (gain) on sale of
mortgages by affiliate
mortgage company 2,799 2,216 (476)
- ----------------------------------------------------------------
Other miscellaneous
expenses 49,533 36,854 32,023
- ----------------------------------------------------------------
TOTAL $111,189 $99,800 $84,367
================================================================
</TABLE>
67
<PAGE> 42
NOTE P. INCOME TAXES
Regions accounts for income taxes using the liability method pursuant to
Financial Accounting Standards Board Statement 109, "Accounting for Income
Taxes." Under this method the Company's deferred tax assets and liabilities were
determined by applying federal and state tax rates currently in effect to its
cumulative temporary book/tax differences.
At December 31, 1995 Regions has net operating loss carryforwards for
federal tax purposes of $67.7 million that expire in years 2003 through 2008.
The majority of these carryforwards resulted from the Company's acquisition of
Secor Bank on December 31, 1993. For financial reporting purposes, a valuation
allowance of approximately $13 million has been recognized to offset a portion
of the deferred tax assets related to those carryforwards.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of Regions' deferred tax assets and liabilities as of December 31,
1995 and 1994 are listed below.
(in thousands) December 31
- -------------------------------------------------------------
1995 1994
- -------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Deferred tax assets:
Book over tax depreciation $ 523 $ 1,208
- -------------------------------------------------------------
Loan loss reserve 40,391 36,239
- -------------------------------------------------------------
Net operating loss
carryforwards 24,890 30,787
- -------------------------------------------------------------
Other 39,165 50,900
- -------------------------------------------------------------
Total deferred tax assets 104,969 119,134
- -------------------------------------------------------------
Deferred tax liabilities:
Tax over book depreciation -0- -0-
- -------------------------------------------------------------
Accretion of bond discount 3,641 2,566
- -------------------------------------------------------------
Direct lease financing 14,203 11,967
- -------------------------------------------------------------
Pension 6,467 5,445
- -------------------------------------------------------------
Other 22,393 21,756
- -------------------------------------------------------------
Total deferred tax liabilities 46,704 41,734
- -------------------------------------------------------------
Net deferred tax assets
before valuation allowance 58,265 77,400
- -------------------------------------------------------------
Valuation allowance (17,042) (18,612)
- -------------------------------------------------------------
Net deferred tax asset $ 41,223 $ 58,788
=============================================================
</TABLE>
Applicable income taxes for financial reporting purposes differs from the
amount computed by applying the statutory federal income tax rate of 35% for
the reasons below:
(in thousands) Year ended December 31
- -----------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Tax computed at statutory
federal income tax rate $90,472 $75,942 $57,932
- -----------------------------------------------------------------
Increases (decreases) in
taxes resulting from:
Obligations of states and
political subdivisions:
Tax exempt income (8,080) (7,706) (7,448)
- -----------------------------------------------------------------
Tax on preference item 1,353 1,020 878
- -----------------------------------------------------------------
State income tax, net
of federal tax benefit 5,168 4,226 3,309
- -----------------------------------------------------------------
Subsidiary purchase
accounting adjustments (51) (47) (50)
- -----------------------------------------------------------------
Other, net (3,195) (2,341) (1,145)
- -----------------------------------------------------------------
TOTAL $85,667 $71,094 $53,476
=================================================================
Effective Tax Rate 33.1% 32.8% 32.3%
- -----------------------------------------------------------------
</TABLE>
The provisions for income taxes included in the consolidated statement of
income are summarized below. Included in these amounts are income taxes of
$31,000, $219,000 and $27,000 in 1995, 1994 and 1993, respectively, related to
securities transactions.
(in thousands) Current Deferred Total
- --------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1995
Federal $71,195 $ 6,520 $77,715
- --------------------------------------------------------------
State 7,209 743 7,952
- --------------------------------------------------------------
Total $78,404 $ 7,263 $85,667
==============================================================
1994
Federal $63,056 $ 1,393 $64,449
- --------------------------------------------------------------
State 6,445 200 6,645
- --------------------------------------------------------------
Total $69,501 $ 1,593 $71,094
==============================================================
1993
Federal $50,272 $(1,886) $48,386
- --------------------------------------------------------------
State 5,208 (118) 5,090
- --------------------------------------------------------------
Total $55,480 $(2,004) $53,476
==============================================================
</TABLE>
68
<PAGE> 43
NOTE Q. BUSINESS COMBINATIONS
During 1995 Regions completed the following business combinations:
<TABLE>
<CAPTION>
Total Assets Accounting
Date Company Headquarters Location (in thousands) Treatment
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March First Commercial Bancshares, Inc. Chalmette, Louisiana $112,968 Purchase
- ------------------------------------------------------------------------------------------------------------------------
May Fidelity Federal Savings Bank Dalton, Georgia 333,336 Pooling
- ------------------------------------------------------------------------------------------------------------------------
July Interstate Billing Service, Inc. Decatur, Alabama 30,521 Pooling
- ------------------------------------------------------------------------------------------------------------------------
November Branch Office of Prudential Savings Bank Cartersville, Georgia 59,933 Purchase
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The total consideration paid for all the 1995 business combinations was
approximately $11.1 million in cash and 1,978,292 shares of Regions' common
stock (including options assumed and treasury stock reissued) valued at
$37.9 million. Total intangible assets recorded in connection with the purchase
transactions totaled approximately $15.6 million.
- --------------------------------------------------------------------------------
During 1994 Regions completed the following business combinations:
<TABLE>
<CAPTION>
Total Assets Accounting
Date Company Headquarters Location (in thousands) Treatment
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
May Guaranty Bancorp Inc. Baton Rouge, Louisiana $186,879 Pooling
- -------------------------------------------------------------------------------------------------------------
July First Fayette Bancshares Inc. Fayette, Alabama 76,586 Purchase
- -------------------------------------------------------------------------------------------------------------
August BNR Bancshares Inc. New Roads, Louisiana 136,799 Pooling
- -------------------------------------------------------------------------------------------------------------
September First Community Bancshares Inc. Rome, Georgia 125,090 Pooling
- -------------------------------------------------------------------------------------------------------------
November American Bancshares Inc. Monroe, Louisiana 302,674 Purchase
- -------------------------------------------------------------------------------------------------------------
December Union Bank & Trust Company Montgomery, Alabama 417,903 Purchase
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Because certain of the 1995 and 1994 business combinations were accounted for
as purchases, Regions' consolidated financial statements include the results of
operations of those companies only from their respective dates of acquisition.
The following unaudited summary information presents the consolidated results
of operations of Regions on a pro forma basis, as if all the above companies
had been acquired on January 1, 1994. The pro forma summary information does
not necessarily reflect the results of operations as they actually would have
been, if the acquisitions had occurred at the beginning of the periods
presented or of results which may occur in the future.
<TABLE>
<CAPTION>
(in thousands, except per share data) Year Ended December 31
1995 1994
- ------------------------------------------------------------------
<S> <C> <C>
Interest income $1,019,072 $867,459
- ------------------------------------------------------------------
Interest expense 520,626 389,915
- ------------------------------------------------------------------
Net interest income 498,446 477,544
- ------------------------------------------------------------------
Provision for loan losses 20,652 18,789
- ------------------------------------------------------------------
Non-interest income 159,979 162,447
- ------------------------------------------------------------------
Non-interest expense 379,244 391,477
- ------------------------------------------------------------------
Income before income taxes 258,529 229,725
- ------------------------------------------------------------------
Applicable income taxes 85,667 74,407
- ------------------------------------------------------------------
Net income $ 172,862 $155,318
- ------------------------------------------------------------------
Net income per share $ 3.72 $ 3.42
- ------------------------------------------------------------------
</TABLE>
Regions' prior period financial statements have not been restated to include
the effect of the 1995 acquisitions which were accounted for as poolings of
interests, since the effect is not material to Regions' consolidated financial
statements.
The following chart summarizes the assets acquired and liabilities
assumed in connection with business combinations in 1995 and 1994. Approximately
$102 million of the 1994 "Cash and due from banks" amount, represent funds
received from the Resolution Trust Corporation, as an offset to liabilities
assumed by Regions in the 1994 purchase and assumption transactions.
(in thousands) 1995 1994
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 58,453 $ 173,595
- -----------------------------------------------------------
Federal funds sold -0- 60,815
- -----------------------------------------------------------
Investment securities 13,600 172,180
- -----------------------------------------------------------
Securities available for sale -0- 208,241
- -----------------------------------------------------------
Loans, net 438,222 661,155
- -----------------------------------------------------------
Other assets 26,483 84,184
- -----------------------------------------------------------
Deposits 453,481 1,160,667
- -----------------------------------------------------------
Borrowings 39,276 41,287
- -----------------------------------------------------------
Other liabilities 6,994 18,504
- -----------------------------------------------------------
</TABLE>
69
<PAGE> 44
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
During 1993 Regions completed the following business combinations:
Headquarters Total Assets Accounting
Date Company Location (in thousands) Treatment
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
June Franklin County Bank Winchester, Tennessee $ 68,034 Purchase
October First Federal Savings Bank of DeFuniak Springs, Florida 89,295 Purchase
DeFuniak Springs
December First Federal Savings Bank Marianna, Florida 101,084 Purchase
December Secor Bank, Federal Savings Bank Birmingham, Alabama 1,831,937 Purchase
- -----------------------------------------------------------------------------------------------------------------------------
As of December 31, 1995, Regions had the following pending business combinations:
(In millions)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Approximate Anticipated Accounting
Institution Asset Size Value(1) Consideration Treatment
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First National Bancorp,
located in Gainesville, Georgia $3,143 $630 Regions Common Stock Pooling
- -----------------------------------------------------------------------------------------------------------------------------
Metro Financial Corporation and its subsidiary,
Metro Bank, located in Atlanta, Georgia 206 28 Regions Common Stock Purchase
- -----------------------------------------------------------------------------------------------------------------------------
Enterprise National Bank,
located in Atlanta, Georgia 50 8 Cash Purchase
- -----------------------------------------------------------------------------------------------------------------------------
First Federal Bank of Northwest Georgia, Federal Savings
Bank, located in Cedartown, Georgia 90 16 Regions Common Stock Purchase
- -----------------------------------------------------------------------------------------------------------------------------
First Gwinnett Bankshares, Inc. and its subsidiary,
First Gwinnett Bank, located in Atlanta, Georgia 66 13 Regions Common Stock Purchase
- -----------------------------------------------------------------------------------------------------------------------------
Delta Bank and Trust Company,
located in Belle Chasse, Louisiana 206 34 Regions Common Stock Pooling
- -----------------------------------------------------------------------------------------------------------------------------
Totals $3,761 $729
=============================================================================================================================
</TABLE>
(1) Computed as of the date of announcement of each transaction.
At December 31, 1995, the Company held 614,000 shares of common stock in
treasury, which were acquired for purposes of reissuance in the Metro
transaction. The First National, Metro and Enterprise transactions were
consummated in the first quarter of 1996. The other pending acquisitions remain
subject to applicable approvals by regulatory agencies and by stockholders of
the institutions to be acquired.
On March 1, 1996, First National Bancorp of Gainesville, Georgia, merged with
and into Regions. Under the terms of the transaction, Regions issued
approximately 15,918,000 shares of its common stock for all of First National's
outstanding common stock (based on an exchange ratio of 0.76 shares of Regions
common stock for each share of First National common stock). The transaction
was accounted for as a pooling of interests.
The following table represents net interest income, net income and net income
per common share as reported by Regions, First National and on a combined
basis.
<TABLE>
<CAPTION>
(in thousands except per share data) Year Ended December 31
- ---------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net interest income:
Regions $497,324 $435,640 $342,053
- ---------------------------------------------------------------------------
First National 126,940 119,896 108,296
- ---------------------------------------------------------------------------
Combined $624,264 $555,536 $450,349
===========================================================================
Net income:
Regions $172,824 $145,884 $112,045
- ---------------------------------------------------------------------------
First National 25,005 34,636 34,459
- ---------------------------------------------------------------------------
Combined $197,829 $180,520 $146,504
===========================================================================
Net income per common share:
Regions $ 3.75 $ 3.40 $ 3.01
- ---------------------------------------------------------------------------
First National 1.22 1.72 1.75
- ---------------------------------------------------------------------------
Combined $ 3.21 $ 3.10 $ 2.81
===========================================================================
</TABLE>
70
<PAGE> 45
NOTE R. STOCK OPTION AND LONG-TERM INCENTIVE PLANS
Regions has stock option plans for certain key employees that provide
for the granting of options to purchase up to 2,860,000 shares of Regions'
common stock. The terms of options granted are determined by the personnel
committee of the Board of Directors; however, no options may be granted after
ten years from the plans' adoption and no options may be exercised beyond ten
years from the date granted. The option price per share of incentive stock
options can not be less than the fair market value of the common stock on the
date of the grant; however, the option price of non-qualified options may be
less than the fair market value of the common stock on the date of the grant.
The plans also permit the granting of stock appreciation rights to holders of
stock options. Stock appreciation rights were attached to 166,975; 204,060 and
331,755 of the shares under option at December 31, 1995, 1994 and 1993,
respectively.
Regions' long-term incentive plan provides for the granting of up to
5,000,000 shares of common stock in the form of stock options, stock
appreciation rights, performance awards or restricted stock awards. The terms
of stock options granted under the long-term incentive plan are generally
subject to the same terms as options granted under Regions' stock option plans.
A maximum of 1,500,000 shares of restricted stock and 2,500,000 shares of
performance awards, may be granted. During 1995 and 1993, Regions granted
51,998 and 5,500 shares, respectively, as restricted stock and during 1995,
1994, and 1993, granted 131,900; 125,000 and 187,750 shares, respectively, as
performance awards. Grantees of restricted stock must remain employed with
Regions for certain periods from the date of the grant at the same or a higher
level in order for the shares to be released. However, during this period the
grantee is eligible to receive dividends and exercise voting privileges on such
restricted shares. In 1995, 1994, and 1993, 4,325; 1,650 and 75,034 restricted
shares, respectively, were released. Issuance of performance shares is
dependent upon achievement of certain performance criteria and is, therefore,
deferred until the end of the performance period. In 1995, no performance
shares were issued. In 1994 and 1993, 3,897 and 196,743 performance shares,
respectively, were issued. Total expense for restricted stock was $1,074,000 in
1995, $587,000 in 1994, and $1,752,000 in 1993. Total expense for performance
shares was $9,118,000 in 1995, $6,666,000 in 1994, and $9,908,000 in 1993.
Stock option activity over the last three years is summarized
as follows:
<TABLE>
<CAPTION>
Shares Under Option Price
Option Per Share
- ----------------------------------------------------------------
<S> <C> <C>
Balance at
January 1, 1993 994,662 $12.33-$26.31
- ----------------------------------------------------------------
Granted 302,229 32.31-35.44
- ----------------------------------------------------------------
Exercised (101,193) 14.38-26.31
- ----------------------------------------------------------------
Canceled (11,047) 12.33-19.49
- ----------------------------------------------------------------
Outstanding at
December 31, 1993 1,184,651 12.33-35.44
- ----------------------------------------------------------------
Granted 447,129 31.88-32.69
- ----------------------------------------------------------------
Exercised (222,853) 13.07-26.31
- ----------------------------------------------------------------
Canceled (37,298) 14.66-32.31
- ----------------------------------------------------------------
Outstanding at
December 31, 1994 1,371,629 12.33-35.44
- ----------------------------------------------------------------
Granted 465,900 32.00-36.00
- ----------------------------------------------------------------
Exercised (143,947) 12.33-32.69
- ----------------------------------------------------------------
Canceled (3,348) 15.00-31.88
- ----------------------------------------------------------------
Outstanding at
December 31, 1995 1,690,234 $13.07-$36.00
================================================================
Exercisable at
December 31, 1995 1,189,427 $13.07-$35.44
================================================================
</TABLE>
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 "Accounting and Disclosure of Stock-Based Compensation"
(Statement 123). Statement 123 is effective for fiscal years beginning after
December 15, 1995, and allows for the option of continuing to follow Accounting
Principles Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to
Employees" and the related Interpretations or selecting the fair value method
of expense recognition as described in Statement 123. The Company has elected
to follow APB 25 in accounting for its employee stock options because the
alternative fair value accounting provided for in Statement 123 requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
71
<PAGE> 46
NOTE S. PARENT COMPANY ONLY FINANCIAL STATEMENTS
Presented below are condensed financial statements of
Regions Financial Corporation:
<TABLE>
<CAPTION>
STATEMENTS OF CONDITION
(in thousands) December 31
- ------------------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Cash due from banks $ 5,837 $ 7,055
- ------------------------------------------------------------------------------------------
Securities purchased under
agreements to resell 0 35,000
- ------------------------------------------------------------------------------------------
Dividends receivable from
subsidiaries 30,000 0
- ------------------------------------------------------------------------------------------
Loans to subsidiaries 29,294 2,424
- ------------------------------------------------------------------------------------------
Investment securities 4,609 5,165
- ------------------------------------------------------------------------------------------
Premises and equipment 1,091 1,198
- ------------------------------------------------------------------------------------------
Investment in subsidiaries:
Banks 1,251,785 1,172,490
- ------------------------------------------------------------------------------------------
Non-banks 86,093 50,479
- ------------------------------------------------------------------------------------------
1,337,878 1,222,969
- -------------------------------------------------------------------------------------------
Other assets 18,179 14,550
- ------------------------------------------------------------------------------------------
$1,426,888 $1,288,361
===========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------
Commercial paper $ 21,100 $ 18,600
- ------------------------------------------------------------------------------------------
Short-term borrowings 10,000 0
- ------------------------------------------------------------------------------------------
Long-term borrowings 223,532 215,742
- ------------------------------------------------------------------------------------------
Other liabilities 47,137 40,149
- -------------------------------------------------------------------------------------------
Total liabilities 301,769 274,491
- ------------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock 28,796 29,052
- -----------------------------------------------------------------------------------------
Surplus 406,982 430,981
- ------------------------------------------------------------------------------------------
Undivided profits 716,008 567,244
- ------------------------------------------------------------------------------------------
Treasury stock (25,085) (12,441)
- ------------------------------------------------------------------------------------------
Unearned restricted stock (1,582) (966)
- ------------------------------------------------------------------------------------------
Total stockholders' equity 1,125,119 1,013,870
- ------------------------------------------------------------------------------------------
$1,426,888 $1,288,361
==========================================================================================
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
(in thousands) Year Ended December 31
- ------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends received
from subsidiaries:
Banks $ 136,500 $ 43,300 $44,800
- ------------------------------------------------------------------------------------------
Non-banks 0 0 400
- ------------------------------------------------------------------------------------------
136,500 43,300 45,200
Service fees from
subsidiaries 24,819 19,886 20,869
- ------------------------------------------------------------------------------------------
Interest from
subsidiaries 2,132 1,844 2,680
- -------------------------------------------------------------------------------------------
Other 440 398 273
- -------------------------------------------------------------------------------------------
163,891 65,428 69,022
- -------------------------------------------------------------------------------------------
Expenses:
Salaries and employee
benefits 16,903 13,089 16,225
- -------------------------------------------------------------------------------------------
Interest 19,443 11,297 7,284
- -------------------------------------------------------------------------------------------
Net occupancy expense 647 527 536
- -------------------------------------------------------------------------------------------
Furniture and equipment
expense 364 342 303
- -------------------------------------------------------------------------------------------
Legal and other
professional fees 2,510 1,874 1,474
- -------------------------------------------------------------------------------------------
Amortization of excess
purchase price 5,505 3,278 2,759
- -------------------------------------------------------------------------------------------
Other expenses 4,713 5,071 2,508
- -------------------------------------------------------------------------------------------
50,085 35,478 31,089
- -------------------------------------------------------------------------------------------
Income before income
taxes and equity in
undistributed earnings
of subsidiaries 113,806 29,950 37,933
- --------------------------------------------------------------------------------------------
Applicable income taxes
(credit) (6,973) (5,293) (1,726)
- --------------------------------------------------------------------------------------------
Income before equity
in undistributed earnings
of subsidiaries 120,779 35,243 39,659
- --------------------------------------------------------------------------------------------
Equity in undistributed
earnings of subsidiaries:
Banks 43,980 107,544 70,659
- --------------------------------------------------------------------------------------------
Non-banks 8,065 3,097 1,727
- -------------------------------------------------------------------------------------------
52,045 110,641 72,386
- -------------------------------------------------------------------------------------------
Net Income $ 172,824 $145,884 $112,045
===========================================================================================
</TABLE>
Aggregate maturities of long-term borrowings (excluding demand notes to
affiliates of $13,532,000) in the next five years for the parent company total
$430,000 due in 2000. Standby letters of credit issued by the parent company
totaled $10.0 million at December 31, 1995. This amount is included in total
standby letters of credit disclosed in Note L.
72
<PAGE> 47
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(in thousands) Year Ended December 31
- --------------------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $ 172,824 $ 145,884 $ 112,045
- ---------------------------------------------------------------------------------------------------
Adjustments to reconcile
net cash provided by
operating activities:
Equity in undistributed
earnings of subsidiaries (52,045) (110,641) (72,386)
- ---------------------------------------------------------------------------------------------------
Provision for depreciation
and amortization 7,049 5,089 4,473
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in other
liabilities 6,988 (13,879) 29,729
- ---------------------------------------------------------------------------------------------------
(Increase) decrease in dividends
receivable from subsidiaries (30,000) 11,200 (1,700)
- ---------------------------------------------------------------------------------------------------
(Increase) in other assets (3,813) (4,897) (505)
- ---------------------------------------------------------------------------------------------------
Stock issued to employees under
incentive plan 253 1,191 5,675
- ---------------------------------------------------------------------------------------------------
Net cash provided by
operating activities 101,256 33,947 77,331
- ---------------------------------------------------------------------------------------------------
Investing activities:
Investment in subsidiaries (10,139) (28,536) (77,478)
- ---------------------------------------------------------------------------------------------------
Principal (advances) payments
on loans to subsidiaries (26,870) 496 419
- ---------------------------------------------------------------------------------------------------
Purchases and sales of
premises and equipment (184) (587) (118)
- ---------------------------------------------------------------------------------------------------
Maturity (purchase) of investment
securities 550 0 (3,082)
- ---------------------------------------------------------------------------------------------------
Net cash (used) by
investing activities (36,643) (28,627) (80,259)
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (CONTINUED)
(in thousands) Year Ended December 31
- -------------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Financing activities:
Increase (decrease) in
commercial paper borrowings 2,500 1,399 (2,088)
- ---------------------------------------------------------------------------------------------
Cash dividends (60,075) (50,273) (38,792)
- ---------------------------------------------------------------------------------------------
Purchase of treasury stock (61,882) (81,081) (16,393)
- ---------------------------------------------------------------------------------------------
Proceeds from long-term
borrowings 12,990 141,188 2,167
- --------------------------------------------------------------------------------------------
Principal payments on
long-term borrowings (5,200) (7,695) (3,472)
- --------------------------------------------------------------------------------------------
Net increase in short-term
borrowings 10,000 0 0
- --------------------------------------------------------------------------------------------
Proceeds from exercise of
stock options 836 811 973
- --------------------------------------------------------------------------------------------
Net cash (used) provided by
financing activities (100,831) 4,349 (57,605)
- --------------------------------------------------------------------------------------------
(Decrease) increase in cash
and cash equivalents (36,218) 9,669 (60,533)
- --------------------------------------------------------------------------------------------
Cash and cash equivalents at
beginning of year 42,055 32,386 92,919
- ---------------------------------------------------------------------------------------------
Cash and cash equivalents at
end of year $ 5,837 $ 42,055 $ 32,386
============================================================================================
</TABLE>
73
<PAGE> 48
Auditors' Report
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Regions Financial Corporation
We have audited the accompanying consolidated statements of condition of
Regions Financial Corporation and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Regions Financial Corporation and subsidiaries at December 31, 1995 and 1994
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Birmingham, Alabama
February 2, 1996,
except for the last two paragraphs
of Note Q as to which the
date is March 1, 1996.
74
<PAGE> 49
<TABLE>
<CAPTION>
HISTORICAL FINANCIAL SUMMARY
REGIONS FINANCIAL CORPORATION & SUBSIDIARIES
(in thousands-except ratios, yields, and per share amounts)
SUMMARY OF OPERATING RESULTS 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $827,703 $603,092 $421,616 $387,628 $414,879
- ------------------------------------------------------------------------------------------------------------------------------
Income on federal funds sold 839 2,041 1,491 6,643 5,044
- ------------------------------------------------------------------------------------------------------------------------------
Taxable interest on securities 164,248 148,148 104,744 117,558 113,706
- ------------------------------------------------------------------------------------------------------------------------------
Tax-free interest on securities 14,381 13,629 11,708 10,654 11,803
- ------------------------------------------------------------------------------------------------------------------------------
Other interest income 10,135 18,869 16,108 14,264 11,389
- ------------------------------------------------------------------------------------------------------------------------------
Total interest income 1,017,306 785,779 555,667 536,747 556,821
- ------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 430,746 295,785 198,301 215,280 280,732
- ------------------------------------------------------------------------------------------------------------------------------
Interest on short-term borrowings 51,672 21,514 4,554 4,679 9,202
- ------------------------------------------------------------------------------------------------------------------------------
Interest on long-term borrowings 37,564 32,840 10,759 4,109 2,083
- ------------------------------------------------------------------------------------------------------------------------------
Total interest expense 519,982 350,139 213,614 224,068 292,017
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income 497,324 435,640 342,053 312,679 264,804
- ------------------------------------------------------------------------------------------------------------------------------
Provision for loan losses 20,652 19,003 21,533 27,072 24,005
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses 476,672 416,637 320,520 285,607 240,799
- ------------------------------------------------------------------------------------------------------------------------------
Non-interest income:
Trust department income 23,288 19,386 18,299 16,720 14,443
- ------------------------------------------------------------------------------------------------------------------------------
Service charges on deposit accounts 60,722 50,332 42,955 42,117 38,753
- ------------------------------------------------------------------------------------------------------------------------------
Mortgage servicing and origination fees 41,266 41,489 44,079 37,048 28,250
- ------------------------------------------------------------------------------------------------------------------------------
Securities gains (losses) 83 627 78 (53) (507)
- ------------------------------------------------------------------------------------------------------------------------------
Other 34,481 31,574 26,616 23,245 20,518
- ------------------------------------------------------------------------------------------------------------------------------
Total non-interest income 159,840 143,408 132,027 119,077 101,457
- ------------------------------------------------------------------------------------------------------------------------------
Non-interest expense:
Salaries and employee benefits 204,630 179,166 154,594 138,355 119,115
- ------------------------------------------------------------------------------------------------------------------------------
Net occupancy expense 23,061 20,686 14,877 13,759 13,105
- ------------------------------------------------------------------------------------------------------------------------------
Furniture and equipment expense 24,421 22,737 18,604 17,684 17,339
- ------------------------------------------------------------------------------------------------------------------------------
Other 125,909 120,478 98,951 94,861 80,781
- ------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 378,021 343,067 287,026 264,659 230,340
- ------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 258,491 216,978 165,521 140,025 111,916
- ------------------------------------------------------------------------------------------------------------------------------
Applicable income taxes 85,667 71,094 53,476 44,977 33,660
- ------------------------------------------------------------------------------------------------------------------------------
Net income $172,824 $145,884 $112,045 $95,048 $78,256
==============================================================================================================================
Average number of shares outstanding 46,097 42,906 37,205 36,532 36,191
- ------------------------------------------------------------------------------------------------------------------------------
Per share:
Net income $3.75 $3.40 $3.01 $2.60 $2.16
- ------------------------------------------------------------------------------------------------------------------------------
Cash dividends declared 1.32 1.20 1.04 .91 .87
- ------------------------------------------------------------------------------------------------------------------------------
YIELDS AND COSTS (TAXABLE EQUIVALENT BASIS)
Earning assets:
Taxable securities 6.61% 6.44% 7.25% 8.05% 8.64%
- ------------------------------------------------------------------------------------------------------------------------------
Tax-free securities 8.70 8.89 9.17 9.60 9.97
- ------------------------------------------------------------------------------------------------------------------------------
Federal funds sold 5.28 3.55 3.04 3.69 5.36
- ------------------------------------------------------------------------------------------------------------------------------
Loans (net of unearned income) 8.74 7.99 7.92 8.75 10.33
- ------------------------------------------------------------------------------------------------------------------------------
Other earning assets 7.41 6.63 6.44 7.66 8.73
- ------------------------------------------------------------------------------------------------------------------------------
Total earning assets 8.29 7.61 7.74 8.44 9.82
- ------------------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Interest-bearing deposits 4.66 3.70 3.40 4.06 5.88
- ------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 6.02 4.69 3.12 3.78 6.24
- ------------------------------------------------------------------------------------------------------------------------------
Long-term borrowings 6.58 6.32 7.67 7.80 10.88
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 4.87 3.91 3.49 4.09 5.91
- ------------------------------------------------------------------------------------------------------------------------------
Net yield on interest earning assets 4.10 4.26 4.82 4.98 4.78
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS
Net income to:
Average stockholders' equity 15.81% 15.97% 16.14% 15.64% 14.27%
- ------------------------------------------------------------------------------------------------------------------------------
Average total assets 1.29 1.29 1.40 1.34 1.23
- ------------------------------------------------------------------------------------------------------------------------------
Dividend payout 35.20 35.29 34.55 35.00 40.28
- ------------------------------------------------------------------------------------------------------------------------------
Average loans to average deposits 89.24 82.30 78.14 72.46 73.40
- ------------------------------------------------------------------------------------------------------------------------------
Average stockholders' equity to average
total assets 8.18 8.09 8.70 8.59 8.63
- ------------------------------------------------------------------------------------------------------------------------------
Average interest-bearing deposits to average
total deposits 86.69 86.35 84.69 85.52 85.85
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
76
<PAGE> 50
<TABLE>
<CAPTION>
1990 1989 1988 1987 1986 1985
<S> <S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $407,596 $379,292 $299,200 $248,500 $234,194 $232,139
- ----------------------------------------------------------------------------------------------------------------------------------
Income on federal funds sold 4,159 6,816 11,990 7,893 18,573 20,196
- ----------------------------------------------------------------------------------------------------------------------------------
Taxable interest on securities 83,366 84,050 73,447 69,563 64,090 71,723
- ----------------------------------------------------------------------------------------------------------------------------------
Tax-free interest on securities 11,641 11,658 13,074 16,933 20,395 21,903
- ----------------------------------------------------------------------------------------------------------------------------------
Other interest income 12,991 14,576 6,914 5,096 6,241 3,679
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest income 519,753 496,392 404,625 347,985 343,493 349,640
- ----------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 282,572 266,162 202,592 161,636 161,566 163,758
- ----------------------------------------------------------------------------------------------------------------------------------
Interest on short-term borrowings 12,754 22,470 12,624 13,512 14,462 17,086
- ----------------------------------------------------------------------------------------------------------------------------------
Interest on long-term borrowings 2,287 4,055 4,726 3,091 3,160 3,533
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 297,613 292,687 219,942 178,239 179,188 184,377
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income 222,140 203,705 184,683 169,746 164,305 165,263
- ----------------------------------------------------------------------------------------------------------------------------------
Provision for loan losses 24,208 15,800 10,790 8,605 9,361 10,029
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses 197,932 187,905 173,893 161,141 154,944 155,234
- ----------------------------------------------------------------------------------------------------------------------------------
Non-interest income:
Trust department income 13,502 12,701 12,134 11,515 11,153 10,199
- ----------------------------------------------------------------------------------------------------------------------------------
Service charges on deposit accounts 32,918 26,041 25,188 24,838 24,007 22,382
- ----------------------------------------------------------------------------------------------------------------------------------
Mortgage servicing and origination fees 20,595 16,029 14,178 12,037 11,209 8,780
- ----------------------------------------------------------------------------------------------------------------------------------
Securities gains (losses) (982) 506 48 700 2,852 812
- ----------------------------------------------------------------------------------------------------------------------------------
Other 27,715 17,205 19,021 17,972 15,482 14,342
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest income 93,748 72,482 70,569 67,062 64,703 56,515
- ----------------------------------------------------------------------------------------------------------------------------------
Non-interest expense:
Salaries and employee benefits 102,407 93,327 87,267 80,869 78,924 76,159
- ----------------------------------------------------------------------------------------------------------------------------------
Net occupancy expense 12,612 11,857 11,078 10,298 9,974 9,658
- ----------------------------------------------------------------------------------------------------------------------------------
Furniture and equipment expense 16,214 15,664 14,494 12,982 13,957 13,362
- ----------------------------------------------------------------------------------------------------------------------------------
Other 64,378 55,859 55,817 50,778 47,720 46,631
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 195,611 176,707 168,656 154,927 150,575 145,810
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 96,069 83,680 75,806 73,276 69,072 65,939
- ----------------------------------------------------------------------------------------------------------------------------------
Applicable income taxes 27,175 21,046 17,571 17,070 14,161 12,184
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 68,894 $ 62,634 $ 58,235 $ 56,206 $ 54,911 $ 53,755
==================================================================================================================================
Average number of shares outstanding 36,097 36,331 36,281 36,243 36,163 36,010
- ----------------------------------------------------------------------------------------------------------------------------------
Per share:
Net income $ 1.91 $ 1.72 $ 1.61 $ 1.55 $ 1.52 $ 1.49
- ----------------------------------------------------------------------------------------------------------------------------------
Cash dividends declared .84 .76 .73 .69 .58 .51
- ----------------------------------------------------------------------------------------------------------------------------------
YIELDS AND COSTS (TAXABLE EQUIVALENT BASIS)
Earning assets:
Taxable securities 8.53% 8.26% 7.82% 7.66% 8.93% 10.81%
- ----------------------------------------------------------------------------------------------------------------------------------
Tax-free securities 9.99 9.49 9.83 10.91 12.24 12.22
- ----------------------------------------------------------------------------------------------------------------------------------
Federal funds sold 8.06 9.32 7.54 6.73 6.86 8.06
- ----------------------------------------------------------------------------------------------------------------------------------
Loans (net of unearned income) 11.21 11.83 10.92 10.41 11.13 12.68
- ----------------------------------------------------------------------------------------------------------------------------------
Other earning assets 9.21 9.41 8.93 8.61 9.69 11.33
- ----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 10.56 10.85 10.01 9.65 10.44 11.88
- ----------------------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Interest-bearing deposits 6.95 7.37 6.38 5.83 6.39 7.44
- ----------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 7.98 8.90 7.34 6.35 6.55 7.92
- ----------------------------------------------------------------------------------------------------------------------------------
Long-term borrowings 9.63 9.63 8.67 9.77 10.05 10.56
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 7.01 7.49 6.46 5.91 6.44 7.53
- ----------------------------------------------------------------------------------------------------------------------------------
Net yield on interest earning assets 4.67 4.65 4.79 5.01 5.47 6.16
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS
Net income to:
Average stockholders' equity 13.64% 13.25% 13.29% 13.81% 14.63% 15.77%
- ----------------------------------------------------------------------------------------------------------------------------------
Average total assets 1.23 1.20 1.24 1.31 1.36 1.47
- ----------------------------------------------------------------------------------------------------------------------------------
Dividend payout 43.98 44.19 45.34 44.52 38.16 34.23
- ----------------------------------------------------------------------------------------------------------------------------------
Average loans to average deposits 76.67 75.23 71.33 69.98 67.49 65.03
- ----------------------------------------------------------------------------------------------------------------------------------
Average stockholders' equity to average
total assets 9.03 9.06 9.31 9.48 9.31 9.32
- ----------------------------------------------------------------------------------------------------------------------------------
Average interest-bearing deposits to average
total deposits 84.16 82.51 79.84 77.36 75.68 73.15
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TEN YEAR
ANNUAL COMPOUND
CHANGE GROWTH RATE
1994-1995 1985-1995
<S> <C> <C>
Interest income:
Interest and fees on loans 37.24% 13.56%
- -------------------------------------------------------------------------------------------------------
Income on federal funds sold -58.89 -27.25
- -------------------------------------------------------------------------------------------------------
Taxable interest on securities 10.87 8.64
- -------------------------------------------------------------------------------------------------------
Tax-free interest on securities 5.52 -4.12
- -------------------------------------------------------------------------------------------------------
Other interest income -46.29 10.66
- -------------------------------------------------------------------------------------------------------
Total interest income 29.46 11.27
- -------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 45.63 10.15
- -------------------------------------------------------------------------------------------------------
Interest on short-term borrowings 140.18 11.70
- -------------------------------------------------------------------------------------------------------
Interest on long-term borrowings 14.38 26.67
- -------------------------------------------------------------------------------------------------------
Total interest expense 48.51 10.92
- -------------------------------------------------------------------------------------------------------
Net interest income 14.16 11.65
- -------------------------------------------------------------------------------------------------------
Provision for loan losses 8.68 7.49
- -------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses 14.41 11.87
- -------------------------------------------------------------------------------------------------------
Non-interest income:
Trust department income 20.13 8.61
- -------------------------------------------------------------------------------------------------------
Service charges on deposit accounts 20.64 10.50
- -------------------------------------------------------------------------------------------------------
Mortgage servicing and origination fees -0.54 16.74
- -------------------------------------------------------------------------------------------------------
Securities gains (losses) -86.76 -20.39
- -------------------------------------------------------------------------------------------------------
Other 9.21 9.17
- -------------------------------------------------------------------------------------------------------
Total non-interest income 11.46 10.96
- -------------------------------------------------------------------------------------------------------
Non-interest expense:
Salaries and employee benefits 14.21 10.39
- -------------------------------------------------------------------------------------------------------
Net occupancy expense 11.48 9.09
- -------------------------------------------------------------------------------------------------------
Furniture and equipment expense 7.41 6.22
- -------------------------------------------------------------------------------------------------------
Other 4.51 10.44
- -------------------------------------------------------------------------------------------------------
Total non-interest expense 10.19 9.99
- -------------------------------------------------------------------------------------------------------
Income before income taxes 19.13 14.64
- -------------------------------------------------------------------------------------------------------
Applicable income taxes 20.50 21.54
- -------------------------------------------------------------------------------------------------------
Net income 18.47% 12.39%
=======================================================================================================
Average number of shares outstanding 7.44% 2.50%
- -------------------------------------------------------------------------------------------------------
Per share:
Net income 10.29% 9.67%
- -------------------------------------------------------------------------------------------------------
Cash dividends declared 10.00 10.00
- -------------------------------------------------------------------------------------------------------
YIELDS AND COSTS (TAXABLE EQUIVALENT BASIS)
Earning assets:
Taxable securities
- -------------------------------------------------------------------------------------------------------
Tax-free securities
- -------------------------------------------------------------------------------------------------------
Federal funds sold
- -------------------------------------------------------------------------------------------------------
Loans (net of unearned income)
- -------------------------------------------------------------------------------------------------------
Other earning assets
- -------------------------------------------------------------------------------------------------------
Total earning assets
- -------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Interest-bearing deposits
- -------------------------------------------------------------------------------------------------------
Short-term borrowings
- -------------------------------------------------------------------------------------------------------
Long-term borrowings
- -------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities
- -------------------------------------------------------------------------------------------------------
Net yield on interest earning assets
- -------------------------------------------------------------------------------------------------------
RATIOS
Net income to:
Average stockholders' equity
- -------------------------------------------------------------------------------------------------------
Average total assets
- -------------------------------------------------------------------------------------------------------
Dividend payout
- -------------------------------------------------------------------------------------------------------
Average loans to average deposits
- -------------------------------------------------------------------------------------------------------
Average stockholders' equity to average
total assets
- -------------------------------------------------------------------------------------------------------
Average interest-bearing deposits to average
total deposits
- -------------------------------------------------------------------------------------------------------
</TABLE>
77
<PAGE> 51
HISTORICAL FINANCIAL SUMMARY--CONTINUED
REGIONS FINANCIAL CORPORATION & SUBSIDIARIES
<TABLE>
<CAPTION>
(average daily balances)
ASSETS 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Earning assets:
Taxable securities $2,479,311 $2,292,651 $1,444,288 $1,461,313 $1,319,108
- ------------------------------------------------------------------------------------------------------------------------------
Tax-exempt securities 247,224 233,503 192,720 164,630 173,601
- ------------------------------------------------------------------------------------------------------------------------------
Federal funds sold 15,877 57,485 49,036 179,940 94,133
- ------------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income 9,513,814 7,600,171 5,376,508 4,488,639 4,079,486
- ------------------------------------------------------------------------------------------------------------------------------
Other earning assets 137,797 285,300 251,048 186,957 131,642
- ------------------------------------------------------------------------------------------------------------------------------
Total earning assets 12,394,023 10,469,110 7,313,600 6,481,479 5,797,970
- ------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses (128,049) (111,535) (83,504) (63,012) (49,732)
- ------------------------------------------------------------------------------------------------------------------------------
Cash and due from banks 465,845 446,119 389,657 325,085 294,795
- ------------------------------------------------------------------------------------------------------------------------------
Other non-earning assets 625,203 491,753 363,681 334,447 311,178
- ------------------------------------------------------------------------------------------------------------------------------
Total assets $13,357,022 $11,295,447 $7,983,434 $7,077,999 $6,354,211
==============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing $ 1,419,536 $ 1,260,696 $1,053,111 $ 896,847 $ 786,243
- ------------------------------------------------------------------------------------------------------------------------------
Interest-bearing 9,241,835 7,974,030 5,827,208 5,297,693 4,771,486
- ------------------------------------------------------------------------------------------------------------------------------
Total deposits 10,661,371 9,234,726 6,880,319 6,194,540 5,557,729
- ------------------------------------------------------------------------------------------------------------------------------
Borrowed funds:
Short-term 858,495 458,737 145,778 123,622 147,418
- ------------------------------------------------------------------------------------------------------------------------------
Long-term 570,809 519,644 140,196 52,661 19,142
- ------------------------------------------------------------------------------------------------------------------------------
Total borrowed funds 1,429,304 978,381 285,974 176,283 166,560
- ------------------------------------------------------------------------------------------------------------------------------
Other liabilities 173,202 169,053 122,949 99,295 81,663
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 12,263,877 10,382,160 7,289,242 6,470,118 5,805,952
- ------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 1,093,145 913,287 694,192 607,881 548,259
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $13,357,022 $11,295,447 $ 7,983,434 $7,077,999 $6,354,211
==============================================================================================================================
YEAR-END BALANCES
Assets $13,708,560 $12,839,320 $10,476,348 $7,881,026 $6,745,053
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury and agency securities 2,707,176 2,314,318 2,063,509 1,440,550 1,347,785
- ------------------------------------------------------------------------------------------------------------------------------
Obligations of states and
political subdivisions 275,740 255,526 221,328 170,302 170,497
- ------------------------------------------------------------------------------------------------------------------------------
Other securities 42,885 39,344 83,608 59,318 57,443
- ------------------------------------------------------------------------------------------------------------------------------
Total securities 3,025,801 2,609,188 2,368,445 1,670,170 1,575,725
- ------------------------------------------------------------------------------------------------------------------------------
Loans 9,545,700 9,017,802 6,833,246 5,142,531 4,274,958
- ------------------------------------------------------------------------------------------------------------------------------
Non-interest-bearing deposits 1,534,951 1,450,330 1,196,685 1,041,987 874,671
- ------------------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits 9,361,190 8,642,805 7,574,009 5,659,155 5,042,357
- ------------------------------------------------------------------------------------------------------------------------------
Total deposits 10,896,141 10,093,135 8,770,694 6,701,142 5,917,028
- ------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 1,125,119 1,013,870 850,965 656,655 572,971
- ------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity per share 24.75 22.53 20.73 17.62 15.76
- ------------------------------------------------------------------------------------------------------------------------------
Market price per share of common stock 43.00 31.00 32.38 32.63 26.89
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes to Historical Financial Summary:
(1) All per share amounts give retroactive recognition to the effect of stock
dividends and stock splits.
(2) Non-accruing loans, of an immaterial amount, are included in earning
assets. No adjustment has been made for these loans in the calculation of
yields.
(3) Fees in the amount of $9,410,000; $14,350,000; $14,530,000; $15,967,000;
$11,923,000; $11,161,000; $11,054,000; $9,250,000; $8,962,000; $8,858,000;
and $6,697,000; are included in interest and fees on loans in the years
1995, 1994, 1993, 1992, 1991, 1990, 1989, 1988, 1987, 1986, and 1985,
respectively.
(4) Yields are computed on a taxable equivalent basis, net of interest
disallowance, using marginal federal income tax rates of 35% for
1995-1993, 34% for 1992-1988, 40% for 1987 and 46% for 1986-1985.
(5) This summary should be read in conjunction with the related financial
statements and notes thereto on pages 53 to 73.
78
<PAGE> 52
<TABLE>
<CAPTION>
(average daily balances)
ASSETS 1990 1989 1988 1987 1986 1985
<S> <S> <C> <C> <C> <C> <C>
Earning assets:
Taxable securities $ 982,952 $1,028,177 $ 942,729 $ 908,140 $ 717,585 $ 663,689
- -----------------------------------------------------------------------------------------------------------------------------------
Tax-exempt securities 170,222 168,690 191,499 247,528 297,603 321,595
- -----------------------------------------------------------------------------------------------------------------------------------
Federal funds sold 51,591 73,140 159,093 117,229 270,933 250,570
- -----------------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income 3,702,758 3,293,290 2,837,856 2,508,591 2,256,053 1,956,351
- -----------------------------------------------------------------------------------------------------------------------------------
Other earning assets 141,871 155,618 78,557 59,358 64,770 32,779
- -----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 5,049,394 4,718,915 4,209,734 3,840,846 3,606,944 3,224,984
- -----------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses (40,182) (37,188) (35,307) (34,614) (33,201) (29,419)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and due from banks 316,158 298,334 305,586 286,249 263,529 272,917
- -----------------------------------------------------------------------------------------------------------------------------------
Other non-earning assets 267,909 234,654 225,464 203,770 191,332 189,938
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $5,593,279 $5,214,715 $4,705,477 $4,296,251 $4,028,604 $3,658,420
===================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing $ 764,945 $ 765,398 $ 802,286 $ 811,573 $ 813,135 $ 807,723
- -----------------------------------------------------------------------------------------------------------------------------------
Interest-bearing 4,064,625 3,612,024 3,176,418 2,773,207 2,529,762 2,200,470
- -----------------------------------------------------------------------------------------------------------------------------------
Total deposits 4,829,570 4,377,422 3,978,704 3,584,780 3,342,897 3,008,193
- -----------------------------------------------------------------------------------------------------------------------------------
Borrowed funds:
Short-term 159,873 252,475 171,975 212,627 220,875 215,643
- -----------------------------------------------------------------------------------------------------------------------------------
Long-term 23,742 42,119 54,518 31,637 31,433 33,445
- -----------------------------------------------------------------------------------------------------------------------------------
Total borrowed funds 183,615 294,594 226,493 244,264 252,308 249,088
- -----------------------------------------------------------------------------------------------------------------------------------
Other liabilities 74,927 69,988 61,997 60,119 58,150 60,309
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 5,088,112 4,742,004 4,267,194 3,889,163 3,653,355 3,317,590
- -----------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 505,167 472,711 438,283 407,088 375,249 340,830
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $5,593,279 $5,214,715 $4,705,477 $4,296,251 $4,028,604 $3,658,420
===================================================================================================================================
YEAR-END BALANCES
Assets $6,344,406 $5,549,612 $5,173,609 $4,390,861 $4,456,557 $3,919,682
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury and agency securities 1,246,913 929,212 996,902 855,990 804,012 649,569
- -----------------------------------------------------------------------------------------------------------------------------------
Obligations of states and
political subdivisions 173,074 171,813 175,796 216,033 287,863 308,724
- -----------------------------------------------------------------------------------------------------------------------------------
Other securities 69,213 32,062 49,670 5,535 11,638 2,051
- -----------------------------------------------------------------------------------------------------------------------------------
Total securities 1,489,200 1,133,087 1,222,368 1,077,558 1,103,513 960,344
- -----------------------------------------------------------------------------------------------------------------------------------
Loans 4,092,262 3,552,082 3,123,331 2,675,240 2,486,039 2,166,810
- -----------------------------------------------------------------------------------------------------------------------------------
Non-interest-bearing deposits 851,870 836,270 840,277 891,538 973,267 879,829
- -----------------------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits 4,501,341 3,908,094 3,491,438 2,837,062 2,803,829 2,357,376
- -----------------------------------------------------------------------------------------------------------------------------------
Total deposits 5,353,211 4,744,364 4,331,715 3,728,600 3,777,096 3,237,205
- -----------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 524,132 489,441 455,595 417,814 392,679 356,857
- -----------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity per share 14.54 13.48 12.54 11.64 10.83 9.90
- -----------------------------------------------------------------------------------------------------------------------------------
Market price per share of common stock 15.98 15.64 13.84 12.38 19.47 14.63
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ten Year
Annual Compound
(average daily balances) Change Growth Rate
ASSETS 1994-1995 1985-1995
<S> <C> <C>
Earning assets:
Taxable securities 8.14% 14.09%
- -------------------------------------------------------------------
Tax-exempt securities 5.88 -2.60
- -------------------------------------------------------------------
Federal funds sold -72.38 -24.11
- -------------------------------------------------------------------
Loans, net of unearned income 25.18 17.14
- -------------------------------------------------------------------
Other earning assets -51.70 15.44
- -------------------------------------------------------------------
Total earning assets 18.39 14.41
- -------------------------------------------------------------------
Allowance for loan losses 14.81 15.84
- -------------------------------------------------------------------
Cash and due from banks 4.42 5.49
- -------------------------------------------------------------------
Other non-earning assets 27.14 12.65
- -------------------------------------------------------------------
Total assets 18.25% 13.83%
===================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing 12.60% 5.80%
- -------------------------------------------------------------------
Interest-bearing 15.90 15.43
- -------------------------------------------------------------------
Total deposits 15.45 13.49
- -------------------------------------------------------------------
Borrowed funds:
Short-term 87.14 14.82
- -------------------------------------------------------------------
Long-term 9.85 32.81
- -------------------------------------------------------------------
Total borrowed funds 46.09 19.09
- -------------------------------------------------------------------
Other liabilities 2.45 11.13
- -------------------------------------------------------------------
Total liabilities 18.12 13.97
- -------------------------------------------------------------------
Stockholders' equity 19.69 12.36
- -------------------------------------------------------------------
Total liabilities and
stockholders' equity 18.25% 13.83%
===================================================================
YEAR-END BALANCES
Assets 6.77% 13.34%
- -------------------------------------------------------------------
U.S. Treasury and agency securities 16.98 15.34
- -------------------------------------------------------------------
Obligations of states and
political subdivisions 7.91 -1.12
- -------------------------------------------------------------------
Other securities 9.00 35.53
- -------------------------------------------------------------------
Total securities 15.97 12.16
- -------------------------------------------------------------------
Loans 5.85 15.98
- -------------------------------------------------------------------
Non-interest-bearing deposits 5.83 5.72
- -------------------------------------------------------------------
Interest-bearing deposits 8.31 14.79
- -------------------------------------------------------------------
Total deposits 7.96 12.90
- -------------------------------------------------------------------
Stockholders' equity 10.97 12.17
- -------------------------------------------------------------------
Stockholders' equity per share 9.85 9.60
- -------------------------------------------------------------------
Market price per share of common stock 38.71 11.38
- -------------------------------------------------------------------
</TABLE>
79
<PAGE> 1
Exhibit 21 - List of Subsidiaries at December 31, 1995:
First Alabama Bank (1)
Regions Bank of Florida(2)
Regions Bank of Georgia(3)
Regions Bank of Rome(3)
Regions Bank, FSB(4)
Regions Bank of Tennessee(5)
Regions Bank of Louisiana(6)
Trinity Risk Management, Inc. (7)
Regions Financial Leasing, Inc. (7)
Mortgage Guaranty Title Company (7)
Regions Agency, Inc. (7)
Regions Financial Building Corporation (7)
Regions Investment Company, Inc. (7)
Regions Mortgage, Inc. (7)
Regions Life Insurance Company (8)
The Georgia Company (9)
Regions Title Company, Inc. (10)
Secor Realty and Investment Corporation(7)
Secor Insurance Agency, Inc. Alabama(7)
Secor Insurance Agency, Inc. Louisiana(11)
Regions Credit Corporation (7)
Interstate Billing Service, Inc. (7)
(1) Affiliate state bank in Alabama chartered under the banking laws of
Alabama.
(2) Affiliate state bank in Florida chartered under the banking laws of
Florida.
(3) Affiliate state bank in Georgia chartered under the banking laws of
Georgia.
(4) Thrift incorporated under the laws of the United States.
(5) Affiliate state bank in Tennessee chartered under the banking laws of
Tennessee
(6) Affiliate state bank in Louisiana chartered under the banking laws of
Louisiana.
<PAGE> 2
(7) Bank-related subsidiary organized under the Business Corporation Act
of the state of Alabama.
(8) Bank-related subsidiary incorporated under the laws of the state of
Arizona and doing business principally in the state of Alabama.
(9) Bank-related subsidiary (inactive) incorporated under the laws of the
state of Georgia.
(10) Bank-related subsidiary incorporated under the laws of the state of
Tennessee.
(11) Bank-related subsidiary incorporated under the laws of the state of
Louisiana.
<PAGE> 1
EXHIBIT 23--CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Regions Financial Corporation and subsidiaries of our report dated February
2, 1996, except for the last two paragraphs of Note Q as to which the date is
March 1, 1996, included in the 1995 Annual Report to Stockholders of Regions
Financial Corporation.
We also consent to the incorporation by reference of our report dated February
2, 1996, except for the last two paragraphs of Note Q as to which the date is
March 1, 1996, with respect to the consolidated financial statements of Regions
Financial Corporation and subsidiaries incorporated by reference in the Annual
Report (Form 10-K) for the year ended December 31, 1995 and our report dated
March 25, 1996 with respect to the supplemental consolidated financial
statements of Regions Financial Corporation and subsidiaries included as an
exhibit to the Annual Report (Form 10-K) for the year ended December 31, 1995
in the following Registration Statements and in the related Prospectuses:
Form S-8 No. 33-36936 pertaining to the Employee Stock Purchase Plan of
Regions Financial Corporation;
Post Effective Amendment No. 1 to Form S-8 No. 33-41784 pertaining to the
Directors' Stock Investment Plan of Regions Financial Corporation;
Form S-8 No. 2-95291 pertaining to the 1983 Stock Option Plan;
Form S-8 No. 33-40728 pertaining to the 1991 Long-Term Incentive Plan;
Form S-8 No. 33-58469 pertaining to the Stock Options Assumed in the
acquisition of First Community Bancshares, Inc. and the Stock Options
Assumed in the acquisition of Union Bank and Trust Company;
Form S-8 No. 33-58979 pertaining to the 1991 Long-Term Incentive Plan; and
Form S-3 No. 33-59735 pertaining to the registration of $200,000,000
Subordinated Debt Securities.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-36936) pertaining to the Employee Stock Purchase Plan of
Regions Financial Corporation and in the related Prospectus of our report dated
March 22, 1996, with respect to the financial statements of the Employee Stock
Purchase Plan of Regions Financial Corporation included in the Annual Report
(Form 11-K), filed as an exhibit to Form 10-K, for the year ended December 31,
1995.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-41784) pertaining to the Directors' Stock Investment Plan of
Regions Financial Corporation and in the related Prospectus of our report dated
March 22, 1996, with respect to the financial statements of the Directors'
Stock Investment Plan of Regions Financial Corporation included in the Annual
Report (Form 11-K), filed as an exhibit to Form 10-K, for the year ended
December 31, 1995.
/s/ Ernst & Young LLP
Birmingham, Alabama
March 25, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF REGIONS FINANCIAL CORPORATION FOR THE YEAR ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 484,081,000
<INT-BEARING-DEPOSITS> 46,957,000
<FED-FUNDS-SOLD> 613,000
<TRADING-ASSETS> 28,870,000
<INVESTMENTS-HELD-FOR-SALE> 1,580,390,000
<INVESTMENTS-CARRYING> 1,445,441,000
<INVESTMENTS-MARKET> 1,476,093,000
<LOANS> 9,545,700,000
<ALLOWANCE> 129,559,000
<TOTAL-ASSETS> 13,708,560,000
<DEPOSITS> 10,896,141,000
<SHORT-TERM> 954,272,000
<LIABILITIES-OTHER> 180,412,000
<LONG-TERM> 552,616,000
0
0
<COMMON> 28,796,000
<OTHER-SE> 1,096,323,000
<TOTAL-LIABILITIES-AND-EQUITY> 13,708,560,000
<INTEREST-LOAN> 827,703,000
<INTEREST-INVEST> 178,629,000
<INTEREST-OTHER> 10,974,000
<INTEREST-TOTAL> 1,017,306,000
<INTEREST-DEPOSIT> 430,746,000
<INTEREST-EXPENSE> 519,982,000
<INTEREST-INCOME-NET> 497,324,000
<LOAN-LOSSES> 20,652,000
<SECURITIES-GAINS> 83,000
<EXPENSE-OTHER> 378,021,000
<INCOME-PRETAX> 258,491,000
<INCOME-PRE-EXTRAORDINARY> 258,491,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 172,824,000
<EPS-PRIMARY> 3.75
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.10
<LOANS-NON> 39,424,000
<LOANS-PAST> 9,717,000
<LOANS-TROUBLED> 3,163,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 116,988,000
<CHARGE-OFFS> 26,724,000
<RECOVERIES> 13,883,000
<ALLOWANCE-CLOSE> 129,559,000
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 129,559,000
</TABLE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
COMMISSION FILE NUMBER 33-36936
A. Full title of the plan and address, if different from that of the
issuer named below:
REGIONS FINANCIAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
REGIONS FINANCIAL CORPORATION
P. O. BOX 10247
BIRMINGHAM, ALABAMA 35202
Exhibit 99 a.
<PAGE> 2
REGIONS FINANCIAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
The following report of independent auditors and financial statements of the
registrant are submitted herewith:
Page Number
-----------
Report of Independent Auditors 1
Statements of Financial Condition - December 31, 1995 and 1994 2
Statements of Income and Changes in Plan Equity for the Years
Ended December 31, 1995, 1994, and 1993 3
Notes to Financial Statements 4
All schedules (Nos. I, II and III) for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
inapplicable or the required disclosures have been made elsewhere in the
financial statements and notes thereto. These schedules have therefore been
omitted.
i
<PAGE> 3
REPORT OF INDEPENDENT AUDITORS
Benefits Committee
Regions Financial Corporation
Employee Stock Purchase Plan
We have audited the accompanying statements of financial condition of the
Regions Financial Corporation Employee Stock Purchase Plan as of December 31,
1995 and 1994, and the related statements of income and changes in plan equity
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Regions Financial
Corporation Employee Stock Purchase Plan at December 31, 1995 and 1994, and the
income and changes in plan equity for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Birmingham, Alabama
March 22, 1996
1
<PAGE> 4
STATEMENTS OF FINANCIAL CONDITION
REGIONS FINANCIAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
<TABLE>
DECEMBER 31
--------------------------
1995 1994
----------- ------------
<S> <C> <C>
ASSETS
Common Stock of Regions
Financial Corporation
at market value - 379,275
shares in 1995 and 353,483
shares in 1994 (cost
$11,258,096 in 1995 and
$9,414,643 in 1994) $16,308,825 $10,957,973
Dividends receivable 124,588 104,944
------------ ------------
Total Assets $16,433,413 $11,062,917
============ ============
PLAN EQUITY
Plan equity (3,759 and 2,954
participants in 1995
and 1994, respectively) $16,433,413 $11,062,917
- ----------------------- ------------ ------------
Total Plan Equity $16,433,413 $11,062,917
============ ============
</TABLE>
See notes to financial statements.
2
<PAGE> 5
STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
REGIONS FINANCIAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Dividend income $476,463 $404,049 $343,797
Gain realized on distribution of
common stock of Regions Financial
Corporation to participants upon
withdrawal 787,988 868,405 995,345
Unrealized appreciation
(depreciation) of Common Stock of
Regions Financial Corporation 3,507,399 (1,399,777) (1,198,108)
Contributions received:
From participants 2,956,862 2,579,395 2,450,959
From participating companies 993,611 884,578 901,966
Withdrawals by participants (3,351,827) (3,663,908) (3,038,815)
----------- ----------- -----------
Income and changes in plan equity 5,370,496 (327,258) 455,144
Plan equity at beginning of period 11,062,917 11,390,175 10,935,031
----------- ----------- -----------
PLAN EQUITY AT DECEMBER 31 $16,433,413 $11,062,917 $11,390,175
=========== =========== ===========
( ) Indicates deduction
</TABLE>
See notes to financial statements.
3
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
REGIONS FINANCIAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Formation of the Plan: Regions Financial Corporation (Regions or the Company)
formed the Regions Financial Corporation Employee Stock Purchase Plan (the
Plan) effective September 1, 1978.
Investments: The investment in Common Stock of the Company is stated at
market value. The NASDAQ quoted market price of Regions Financial Corporation
Common Stock was $43.00 per share at December 31, 1995 and $31.00 per share at
December 31, 1994. The average cost of the shares distributed is used to
compute gain or loss.
Income: Dividend income is accrued on the ex-dividend date.
Contributions: Contributions of participants and participating companies (see
Notes B and C) are accounted for on the accrual basis.
Income Taxes: The Plan is not subject to income tax. Participants must treat
as ordinary income their pro rata share of contributions to the Plan by the
participating companies. Cash dividends paid on stock purchased under the
Plan will be taxed to the participants on a pro rata basis for federal and
state, as applicable, income tax purposes.
Expenses of the Plan: All expenses incurred in the administration of the
Plan, other than brokerage fees, are paid by the participating companies.
Brokerage fees are included in the price of shares purchased.
NOTE B - PROVISIONS OF THE PLAN
The Plan is a voluntary contribution plan to which Regions and subsidiaries
contribute monthly, from 25% to 50% of the employees' monthly contributions.
Participating employees may contribute a maximum of 6% of their monthly salary
with a minimum monthly contribution of $5.00. Participation in the Plan is
open to those employees at least 21 years of age who have been employed with
the Company at least one year. Employees are immediately vested upon
contribution to the Plan to the extent of the employee's and the employer's
contribution to date. In the event the Plan terminates, or the employee
terminates either his or her employment with the Company or participation in
the Plan, the employee will receive a certificate for all whole shares owned
in the Plan, cash for any additional fractional shares owned, and cash for any
remaining balance in such participant's cash account.
NOTE C - PLAN AMENDMENT
Effective January 3, 1996 the Plan was amended to eliminate the requirement
for a trust and terminate the trust agreement. The amendment also eliminated
the Plan Trustee and established a Plan Administrator with the authority to
appoint an investment manager to assume the administration and investment of
Plan assets.
4
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - CONTRIBUTIONS RECEIVED
Contributions by participating companies or divisions of Regions and
participants' contributions are as follows:
<TABLE>
<CAPTION>
Contributions Received
----------------------------
Participating Company or Division Company Employee Total
- --------------------------------- -------- -------- --------
Year ended December 31, 1995:
<S> <C> <C> <C>
Regions Financial Corporation $33,760 $99,146 $132,906
First Alabama Bank, Montgomery 93,841 261,476 355,317
First Alabama Bank, Birmingham 104,649 288,905 393,554
First Alabama Bank, Huntsville 51,735 126,694 178,429
First Alabama Bank, Tuscaloosa 31,297 75,577 106,874
First Alabama Bank, Lee County 3,903 11,676 15,579
First Alabama Bank, Dothan 25,385 66,502 91,887
First Alabama Bank, Selma 4,336 11,817 16,153
First Alabama Bank, Gadsden 10,092 25,112 35,204
First Alabama Bank, Athens 15,840 42,338 58,178
First Alabama Bank, Baldwin County 7,202 21,082 28,284
First Alabama Bank, Phenix City 2,584 7,686 10,270
First Alabama Bank, Cullman 5,431 15,622 21,053
First Alabama Bank, Mobile 91,778 266,356 358,134
First Alabama Bank, Sumter County 4,771 14,188 18,959
First Alabama Bank, Talladega
County 8,280 26,012 34,292
First Alabama Bank, Chilton County 5,433 17,455 22,888
First Alabama Bank, Troy 5,665 16,792 22,457
First Alabama Bank, Anniston 12,417 39,839 52,256
First Alabama Bank, South Baldwin 9,564 30,801 40,365
First Alabama Bank, Centre 4,844 15,261 20,105
First Alabama Bank, Covington
County 8,078 25,259 33,337
First Alabama Bank, Shelby County 6,030 20,944 26,974
First Alabama Bank, Decatur 15,891 50,864 66,755
First Alabama Bank, Oneonta 5,826 20,102 25,928
First Alabama Bank, Enterprise 4,256 13,574 17,830
First Alabama Bank, Albertville 6,274 19,173 25,447
First Alabama Bank, Butler 4,014 13,975 17,989
First Alabama Bank, Fayette 4,372 17,911 22,283
Regions Bank of Louisiana 50,166 201,762 251,928
Regions Bank of Florida 26,956 95,891 122,847
Regions Bank of Georgia 5,523 17,816 23,339
Regions Bank of Rome 6,436 26,550 32,986
Regions Bank, FSB 7,398 30,516 37,914
Regions Mortgage Inc. 77,391 243,085 320,476
Regions Bank of Tennessee 42,046 123,195 165,241
Mortgage Guaranty Title Company 38 154 192
Regions Investment Company, Inc. 21,509 70,141 91,650
Regions Title Co. 23 62 85
</TABLE>
5
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
-------------------------------
Participating Company or Division Company Employee Total
- --------------------------------- -------- -------- --------
Year ended December 31, 1995 continued:
<S> <C> <C> <C>
Corporate 142,252 409,313 551,565
First Alabama Bank, Operations 26,325 76,238 102,563
-------- ---------- ----------
TOTALS $993,611 $2,956,862 $3,950,473
======== ========== ==========
</TABLE>
6
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
Contributions Received
-------------------------------
Participating Company or Division Company Employee Total
- --------------------------------- -------- -------- --------
Year ended December 31, 1994:
<S> <C> <C> <C>
Regions Financial Corporation $41,132 $108,677 $149,809
First Alabama Bank, Montgomery 78,791 218,481 297,272
First Alabama Bank, Birmingham 93,362 257,507 350,869
First Alabama Bank, Huntsville 49,765 128,906 178,671
First Alabama Bank, Tuscaloosa 29,290 79,265 108,555
First Alabama Bank, Lee County 3,691 11,595 15,286
First Alabama Bank, Dothan 24,728 62,258 86,986
First Alabama Bank, Selma 4,102 11,567 15,669
First Alabama Bank, Gadsden 8,837 21,615 30,452
First Alabama Bank, Athens 14,663 37,021 51,684
First Alabama Bank, Baldwin County 5,584 16,573 22,157
First Alabama Bank, Phenix City 2,790 8,813 11,603
First Alabama Bank, Cullman 5,681 16,296 21,977
First Alabama Bank, Mobile 89,910 264,407 354,317
First Alabama Bank, Sumter County 4,581 13,722 18,303
First Alabama Bank, Talladega
County 7,457 21,257 28,714
First Alabama Bank, Chilton County 5,716 18,434 24,150
First Alabama Bank, Troy 7,441 21,613 29,054
First Alabama Bank, Anniston 13,072 41,618 54,690
First Alabama Bank, South Baldwin 9,964 32,535 42,499
First Alabama Bank, Centre 3,729 12,240 15,969
First Alabama Bank, Covington
County 7,839 24,712 32,551
First Alabama Bank, Shelby County 5,419 18,338 23,757
First Alabama Bank, Decatur 14,934 48,689 63,623
First Alabama Bank, Oneonta 5,733 19,627 25,360
First Alabama Bank, Enterprise 3,817 12,296 16,113
First Alabama Bank, Albertville 6,211 18,524 24,735
First Alabama Bank, Choctaw 4,201 14,218 18,419
First Alabama Bank, Fayette 2,162 8,244 10,406
Regions Bank of Louisiana 20,916 80,848 101,764
Bank of New Roads 1,191 4,768 5,959
Regions Bank of Florida 19,036 67,384 86,420
Regions Bank of Georgia, formerly First
Alabama Bank, Columbus, Georgia 4,875 16,043 20,918
Regions Bank of Rome, formerly First
Rome Bank 1,336 5,345 6,681
Regions Mortgage Inc., formerly Real
Estate Financing, Inc. 75,184 235,458 310,642
First Security Bank of Tennessee 40,394 113,594 153,988
</TABLE>
7
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
------------------------------
Participating Company or Division Company Employee Total
- --------------------------------- -------- -------- --------
Year ended December 31, 1994 continued:
<S> <C> <C> <C>
Regions Investment Company, Inc.,
formerly
First Alabama Investments, Inc. 19,591 64,131 83,722
Regions Title Co. 253 765 1,018
Corporate 122,334 350,742 473,076
First Alabama Bank, Operations 24,866 71,269 96,135
-------- ---------- ----------
TOTALS $884,578 $2,579,395 $3,463,973
======== ========== ==========
</TABLE>
8
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
Contributions Received
--------------------------------
Participating Company or Division Company Employee Total
- --------------------------------- ------- -------- ----------
Year ended December 31, 1993:
<S> <C> <C> <C>
Regions Financial Corporation $42,411 $104,656 $147,067
First Alabama Bank, Montgomery 83,406 217,520 300,926
First Alabama Bank, Birmingham 126,793 332,553 459,346
First Alabama Bank, Huntsville 53,045 129,362 182,407
First Alabama Bank, Tuscaloosa 28,968 76,053 105,021
First Alabama Bank, Lee County 4,512 13,835 18,347
First Alabama Bank, Dothan 26,806 65,981 92,787
First Alabama Bank, Selma 4,199 11,204 15,403
First Alabama Bank, Gadsden 9,086 22,602 31,688
First Alabama Bank, Athens 14,523 36,732 51,255
First Alabama Bank, Baldwin County 6,469 17,765 24,234
First Alabama Bank, Phenix City 3,421 10,299 13,720
First Alabama Bank, Cullman 6,043 16,461 22,504
First Alabama Bank, Mobile 94,982 260,302 355,284
First Alabama Bank, Sumter County 4,864 13,622 18,486
First Alabama Bank, Talladega
County 7,765 20,881 28,646
First Alabama Bank, Chilton County 5,324 16,419 21,743
First Alabama Bank, Troy 7,727 21,294 29,021
First Alabama Bank, Anniston 14,382 42,986 57,368
First Alabama Bank, South Baldwin 11,684 35,087 46,771
First Alabama Bank, Centre 3,846 11,640 15,486
First Alabama Bank, Covington
County 7,820 23,221 31,041
First Alabama Bank, Shelby County 5,568 17,690 23,258
First Alabama Bank, Decatur 17,575 52,667 70,242
First Alabama Bank, Oneonta 5,745 18,409 24,154
First Alabama Bank, Enterprise 4,094 12,011 16,105
First Alabama Bank, Albertville 7,047 19,795 26,842
First Alabama Bank, Choctaw 4,781 14,897 19,678
Regions Bank of Florida 15,346 50,087 65,433
Regions Bank of Georgia, formerly First
Alabama Bank, Columbus, Georgia 4,087 13,163 17,250
Regions Mortgage Inc., formerly Real
Estate Financing, Inc. 80,902 238,590 319,492
First Security Bank of Tennessee 41,806 103,878 145,684
Franklin County Bank 2,176 8,703 10,879
Regions Investment Company, Inc.,
formerly First Alabama
Investments, Inc. 19,342 59,345 78,687
Corporate 125,421 341,249 466,670
-------- ---------- ----------
TOTALS $901,966 $2,450,959 $3,352,925
======== ========== ==========
</TABLE>
9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE E - UNREALIZED APPRECIATION OF COMMON STOCK OF REGIONS FINANCIAL
CORPORATION
The unrealized appreciation of Common Stock of Regions Financial Corporation
is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ------------ -------------
<S> <C> <C> <C>
Unrealized appreciation at
beginning of year $1,543,330 $ 2,943,107 $ 4,141,215
Unrealized appreciation at end of
year 5,050,729 1,543,330 2,943,107
---------- ------------ ------------
INCREASE (DECREASE) IN UNREALIZED
APPRECIATION $3,507,399 $ (1,399,777) $ (1,198,108)
========== ============= =============
</TABLE>
NOTE F - GAIN REALIZED ON DISTRIBUTION OF COMMON STOCK OF REGIONS FINANCIAL
CORPORATION TO PARTICIPANTS UPON WITHDRAWAL
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Market value of shares distributed $3,350,619 $3,651,704 $3,029,892
Cost of shares distributed 2,562,631 2,783,299 2,034,547
------------- ------------- -------------
TOTAL REALIZED GAIN $787,988 $868,405 $995,345
============= ============= =============
</TABLE>
10
<PAGE> 13
ITEM 9b. Exhibits
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Employee Stock Purchase Plan Benefits Committee has duly caused the annual
report to be signed by the undersigned thereunto duly authorized.
REGIONS FINANCIAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Date: March 26, 1996 By: /s/ Douglas W. Graham
---------------- ---------------------------------
Douglas W. Graham
Senior Vice President - Personnel
Regions Financial Corporation
11
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
COMMISSION FILE NUMBER 33-41784
A. Full title of the plan and address, if different from that of the issuer
named below:
REGIONS FINANCIAL CORPORATION
DIRECTORS' STOCK INVESTMENT PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
REGIONS FINANCIAL CORPORATION
P. O. BOX 10247
BIRMINGHAM, ALABAMA 35202
Exhibit 99 b.
<PAGE> 2
REGIONS FINANCIAL CORPORATION
DIRECTORS' STOCK INVESTMENT PLAN
The following report of independent auditors and financial statements of the
registrant are submitted herewith:
<TABLE>
Page Number
-----------
<S> <C>
Report of Independent Auditors 1
Statements of Financial Condition - December 31, 1995 and 1994 2
Statements of Income and Changes in Plan Equity for the Years
Ended December 31, 1995, 1994, and 1993 3
Notes to Financial Statements 4
</TABLE>
All schedules (Nos. I, II and III) for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
inapplicable or the required disclosures have been made elsewhere in the
financial statements and notes thereto. These schedules have therefore been
omitted.
i
<PAGE> 3
REPORT OF INDEPENDENT AUDITORS
Benefits Committee
Regions Financial Corporation
Directors' Stock Investment Plan
We have audited the accompanying statements of financial condition of the
Regions Financial Corporation Directors' Stock Investment Plan as of December
31, 1995 and 1994, and the related statements of income and changes in plan
equity for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Plan's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Regions Financial
Corporation Directors' Stock Investment Plan at December 31, 1995 and 1994, and
the income and changes in plan equity for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Birmingham, Alabama
March 22, 1996
1
<PAGE> 4
STATEMENTS OF FINANCIAL CONDITION
REGIONS FINANCIAL CORPORATION
DIRECTORS' STOCK INVESTMENT PLAN
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1995 1994
---------- ---------
<S> <C> <C>
ASSETS
Common Stock of Regions Financial
Corporation at market value -
336,573 shares in 1995 and
317,013 shares in 1994 (cost
$8,260,988 in 1995 and $7,109,084
in 1994) $14,472,639 $9,827,403
Dividends receivable 110,109 94,669
----------- ----------
Total Assets $14,582,748 $9,922,072
=========== ==========
LIABILITIES AND PLAN EQUITY
Plan equity (327 and 274
participants in 1995 and 1994,
respectively) $14,582,748 $9,922,072
----------- ----------
Total Liabilities and Plan Equity $14,582,748 $9,922,072
=========== ==========
</TABLE>
See notes to financial statements.
2
<PAGE> 5
STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
REGIONS FINANCIAL CORPORATION
DIRECTORS' STOCK INVESTMENT PLAN
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Dividend income $431,936 $370,395 $314,999
Gain recognized on distribution of
Common Stock of Regions Financial
Corporation to participants upon
withdrawal 426,631 407,960 692,983
Unrealized appreciation(depreciation)
of Common Stock of Regions
Financial Corporation 3,493,332 (855,976) (847,239)
Contributions received:
From participants 1,150,116 987,856 970,438
From participating companies 287,529 246,969 242,609
Withdrawals by participants (1,128,868) (1,129,459) (1,665,646)
----------- ------------ -------------
Income and changes in plan equity 4,660,676 27,745 (291,856)
Plan equity at beginning of
period 9,922,072 9,894,327 10,186,183
----------- ------------ -------------
PLAN EQUITY AT DECEMBER 31 $14,582,748 $9,922,072 $9,894,327
=========== ============ =============
( ) Indicates deduction
</TABLE>
See notes to financial statements.
3
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
REGIONS FINANCIAL CORPORATION
DIRECTORS' STOCK INVESTMENT PLAN
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Formation of the Plan: Regions Financial Corporation (Regions or the Company)
formed the Regions Financial Corporation Directors' Stock Investment Plan (the
Plan) effective May 1, 1984.
Investments: The investment in Common Stock of the Company is stated at market
value. The NASDAQ quoted market price of Regions Financial Corporation Common
Stock was $43.00 per share at December 31, 1995 and $31.00 per share at
December 31, 1994. The average cost of the shares distributed is used to
compute gain or loss.
Income: Dividend income is accrued on the ex-dividend date.
Contributions: Contributions of participants and participating companies (see
Notes B and C) are accounted for on the accrual basis.
Income Taxes: The Plan is not subject to income tax. Participants must treat
as ordinary income their pro rata share of contributions to the Plan by the
participating companies. Cash dividends paid on stock purchased under the plan
will be taxed to the participants on a pro rata basis for federal and state, as
applicable, income tax purposes.
Expenses of the Plan: All expenses incurred in the administration of the Plan,
other than brokerage fees, are paid by the participating companies. Brokerage
fees are included in the price of shares purchased.
NOTE B - PROVISIONS OF THE PLAN
The Plan is a voluntary contribution plan to which the Company contributes 25%
of actual contributions made by participants. Participating directors may
contribute all or any part of their directors' fees. Participation in the
Plan is open to any person who is a director of Regions Financial Corporation,
any subsidiary or any body designated as a local division's Board of Directors
who is not an employee of Regions Financial Corporation, or any subsidiary or
local division. Directors are immediately vested upon contribution to the Plan
to the extent of the director's and the Company's contribution to date. In the
event the Plan terminates, or the director terminates either his or her
position with the Company or participation in the Plan, the director will
receive a certificate for all whole shares owned in the Plan, cash for any
additional fractional shares owned, and cash for any remaining balance in such
participant's cash account.
NOTE C - PLAN AMENDMENT
Effective January 3, 1996 the Plan was amended to eliminate the requirement for
a trust and terminate the trust agreement. The amendment also eliminated the
Plan Trustee and established a Plan Administrator with the authority to appoint
an investment manager to assume the administration and investment of Plan
assets.
4
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - CONTRIBUTIONS RECEIVED
Contributions by participating companies or divisions of Regions and
participants' contributions are as follows:
<TABLE>
Contributions Received
--------------------------------
Participating Company or Division Company Director Total
- --------------------------------- -------- -------- --------
Year ended December 31, 1995:
<S> <C> <C> <C>
Regions Financial Corporation $42,460 $169,841 $212,301
First Alabama Bank, Montgomery 16,150 64,600 80,750
First Alabama Bank, Birmingham 17,600 70,400 88,000
First Alabama Bank, Huntsville 12,300 49,200 61,500
First Alabama Bank, Tuscaloosa 10,462 41,850 52,312
First Alabama Bank, Dothan 8,162 32,650 40,812
First Alabama Bank, Selma 6,124 24,500 30,624
First Alabama Bank, Gadsden 6,800 27,200 34,000
First Alabama Bank, Athens 3,000 12,000 15,000
First Alabama Bank, Baldwin County 3,825 15,300 19,125
First Alabama Bank, Guntersville 3,125 12,500 15,625
First Alabama Bank, Phenix City 2,081 8,325 10,406
First Alabama Bank, Mobile 28,650 114,600 143,250
First Alabama Bank, Lee County 3,600 14,400 18,000
First Alabama Bank, Cullman 3,900 15,600 19,500
First Alabama Bank, Lauderdale
County 2,594 10,375 12,969
First Alabama Bank, Conecuh County 2,406 9,625 12,031
First Alabama Bank, Sumter County 2,475 9,900 12,375
First Alabama Bank, Talladega
County 7,981 31,925 39,906
First Alabama Bank, Chilton County 1,763 7,050 8,813
First Alabama Bank, Troy 3,369 13,475 16,844
First Alabama Bank, Anniston 12,100 48,400 60,500
First Alabama Bank, South Baldwin 2,625 10,500 13,125
First Alabama Bank, Centre 1,650 6,600 8,250
First Alabama Bank, Covington
County 3,625 14,500 18,125
First Alabama Bank, Shelby County 3,200 12,800 16,000
First Alabama Bank, Decatur 4,794 19,175 23,969
First Alabama Bank, Oneonta 5,725 22,900 28,625
First Alabama Bank, Enterprise 3,750 15,000 18,750
First Alabama Bank, Butler 700 2,800 3,500
First Alabama Bank, Albertville 2,250 9,000 11,250
First Alabama Bank, Fayette 563 2,250 2,813
Regions Bank of Louisiana 29,553 118,210 147,763
Regions Bank of Florida 6,898 27,590 34,488
Regions Bank of Georgia 3,431 13,725 17,156
Regions Bank of Rome 3,225 12,900 16,125
</TABLE>
5
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
-------------------------------
Participating Company or Division Company Director Total
------- -------- ---------
Year ended December 31, 1995 continued:
<S> <C> <C> <C>
Regions Bank, FSB 6,300 25,200 31,500
Regions Bank of Tennessee 8,138 32,550 40,688
Regions Mortgage Inc. 175 700 875
-------- ---------- ----------
TOTALS $287,529 $1,150,116 $1,437,645
======== ========== ==========
</TABLE>
6
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
----------------------------
Participating Company or Division Company Director Total
- --------------------------------- -------- -------- --------
Year ended December 31, 1994:
<S> <C> <C> <C>
Regions Financial Corporation $36,738 $146,950 $183,688
First Alabama Bank, Montgomery 11,600 46,400 58,000
First Alabama Bank, Birmingham 21,425 85,700 107,125
First Alabama Bank, Huntsville 12,238 48,950 61,188
First Alabama Bank, Tuscaloosa 10,488 41,950 52,438
First Alabama Bank, Dothan 7,738 30,950 38,688
First Alabama Bank, Selma 4,125 16,500 20,625
First Alabama Bank, Gadsden 6,431 25,724 32,155
First Alabama Bank, Athens 3,344 13,374 16,718
First Alabama Bank, Baldwin County 3,825 15,300 19,125
First Alabama Bank, Guntersville 3,225 12,900 16,125
First Alabama Bank, Phenix City 2,550 10,200 12,750
First Alabama Bank, Mobile 28,675 114,700 143,375
First Alabama Bank, Lee County 4,200 16,800 21,000
First Alabama Bank, Cullman 4,300 17,200 21,500
First Alabama Bank, Lauderdale County 2,188 8,750 10,938
First Alabama Bank, Conecuh County 1,719 6,874 8,593
First Alabama Bank, Sumter County 1,500 6,000 7,500
First Alabama Bank, Talladega County 7,550 30,200 37,750
First Alabama Bank, Chilton County 1,500 6,000 7,500
First Alabama Bank, Troy 2,956 11,824 14,780
First Alabama Bank, Anniston 11,263 45,050 56,313
First Alabama Bank, South Baldwin 2,938 11,750 14,688
First Alabama Bank, Centre 1,650 6,600 8,250
First Alabama Bank, Covington County 3,250 13,000 16,250
First Alabama Bank, Shelby County 2,800 11,200 14,000
First Alabama Bank, Decatur 4,450 17,800 22,250
First Alabama Bank, Oneonta 5,881 23,525 29,406
First Alabama Bank, Enterprise 3,750 15,000 18,750
First Alabama Bank, Choctaw 700 2,800 3,500
First Alabama Bank, Albertville 2,800 11,200 14,000
First Alabama Bank, Fayette 338 1,350 1,688
Regions Bank of Louisiana 6,088 24,350 30,438
Regions Bank of Florida 9,590 38,360 47,950
Regions Bank of Georgia, formerly
First Alabama Bank, Columbus, Georgia 3,600 14,400 18,000
</TABLE>
7
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
---------------------------------
Participating Company or Division Company Director Total
------- -------- -------
Year ended December 31, 1994 continued:
<S> <C> <C> <C>
Regions Bank of Tennessee 9,331 37,325 46,656
Regions Mortgage Inc., formerly Real
Estate Financing, Inc. 225 900 1,125
-------- -------- ----------
TOTALS $246,969 $987,856 $1,234,825
======== ======== ==========
</TABLE>
8
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - CONTRIBUTIONS RECEIVED (CONTINUED)
<TABLE>
<CAPTION>
Contributions Received
----------------------------
Participating Company or Division Company Director Total
- --------------------------------- ------- -------- --------
Year ended December 31, 1993:
<S> <C> <C> <C>
Regions Financial Corporation $53,671 $214,700 $268,371
First Alabama Bank, Montgomery 9,125 36,500 45,625
First Alabama Bank, Birmingham 20,405 81,620 102,025
First Alabama Bank, Huntsville 13,244 52,975 66,219
First Alabama Bank, Tuscaloosa 10,938 43,750 54,688
First Alabama Bank, Dothan 7,900 31,600 39,500
First Alabama Bank, Selma 5,250 21,000 26,250
First Alabama Bank, Gadsden 6,000 24,000 30,000
First Alabama Bank, Athens 2,625 10,500 13,125
First Alabama Bank, Baldwin County 3,628 14,513 18,141
First Alabama Bank, Guntersville 3,050 12,200 15,250
First Alabama Bank, Phenix City 3,356 13,425 16,781
First Alabama Bank, Mobile 24,575 98,300 122,875
First Alabama Bank, Lee County 3,000 12,000 15,000
First Alabama Bank, Cullman 4,550 18,200 22,750
First Alabama Bank, Lauderdale County 2,063 8,250 10,313
First Alabama Bank, Conecuh County 1,875 7,500 9,375
First Alabama Bank, Sumter County 1,950 7,800 9,750
First Alabama Bank, Talladega 7,556 30,225 37,781
First Alabama Bank, Chilton County 1,463 5,850 7,313
First Alabama Bank, Troy 4,000 16,000 20,000
First Alabama Bank, Anniston 10,513 42,050 52,563
First Alabama Bank, South Baldwin 2,938 11,750 14,688
First Alabama Bank, Centre 1,925 7,700 9,625
First Alabama Bank, Covington County 3,250 13,000 16,250
First Alabama Bank, Shelby County 3,500 14,000 17,500
First Alabama Bank, Decatur 4,363 17,450 21,813
First Alabama Bank, Oneonta 5,438 21,750 27,188
First Alabama Bank, Enterprise 3,625 14,500 18,125
First Alabama Bank, Choctaw 700 2,800 3,500
First Alabama Bank, Albertville 2,750 11,000 13,750
Regions Bank of Florida 3,901 15,600 19,501
Regions Bank of Georgia, formerly
First Alabama Bank, Columbus, Georgia 2,569 10,275 12,844
First Security Bank of Tennessee 4,868 19,475 24,343
Franklin County Bank 1,920 7,680 9,600
Regions Mortgage Inc., formerly Real
Estate Financing, Inc. 125 500 625
-------- -------- ----------
TOTALS $242,609 $970,438 $1,213,047
======== ======== ==========
</TABLE>
9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE E - UNREALIZED APPRECIATION OF COMMON STOCK OF REGIONS FINANCIAL
CORPORATION
The unrealized appreciation of Common Stock of Regions Financial Corporation is
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ -----------
<S> <C> <C> <C>
Unrealized appreciation at beginning
of year $ 2,718,319 $ 3,574,295 $ 4,421,534
Unrealized appreciation at end
of year 6,211,651 2,718,319 3,574,295
----------- ----------- -----------
INCREASE (DECREASE) IN UNREALIZED
APPRECIATION $ 3,493,332 $ (855,976) $ (847,239)
=========== =========== ===========
</TABLE>
NOTE F - GAIN REALIZED ON DISTRIBUTION OF COMMON STOCK OF REGIONS FINANCIAL
CORPORATION TO PARTICIPANTS UPON WITHDRAWAL
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Market value of shares distributed $1,128,868 $1,125,631 $1,658,765
Cost of shares distributed 702,237 717,671 965,782
---------- ---------- ----------
TOTAL REALIZED GAIN $ 426,631 $ 407,960 $ 692,983
========== ========== ==========
</TABLE>
10
<PAGE> 13
ITEM 9b. Exhibits
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Directors' Stock Investment Plan Benefits Committee has duly caused the annual
report to be signed by the undersigned thereunto duly authorized.
DIRECTORS' STOCK INVESTMENT PLAN
REGIONS FINANCIAL CORPORATION
Date: March 26, 1996 By: /s/ Douglas W. Graham
---------------- ------------------------------------
Douglas W. Graham
Senior Vice President - Personnel
Regions Financial Corporation
11
<PAGE> 1
EXHIBIT 99c
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CONDITION
Regions Financial Corporation & Subsidiaries
<TABLE>
<CAPTION>
(dollar amounts in thousands, except per share data) DECEMBER 31
- -------------------------------------------------------------------------------------------------
ASSETS 1995 1994
<S> <C> <C>
Cash and due from banks $ 587,161 $ 647,517
Interest-bearing deposits in other banks 56,477 16,889
Investment securities (aggregate estimated
market value of $1,626,775 in 1995 and
$2,030,161 in 1994) 1,589,106 2,106,242
Securities available for sale 2,274,675 1,240,049
Trading account assets 28,870 24,853
Mortgage loans held for sale 117,087 117,990
Federal funds sold and securities purchased
under agreements to resell 66,339 162,863
Loans 11,569,551 10,893,136
Unearned income (27,240) (37,941)
Loans, net of unearned income 11,542,311 10,855,195
Allowance for loan losses (159,487) (143,464)
Net loans 11,382,824 10,711,731
Premises and equipment 254,992 227,774
Interest receivable 120,950 105,869
Due from customers on acceptances 51,286 110,520
Other assets 322,007 337,779
$16,851,774 $15,810,076
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing $ 1,864,970 $ 1,799,451
Interest-bearing 11,632,642 10,776,142
Total deposits 13,497,612 12,575,593
Borrowed funds:
Short-term borrowings:
Federal funds purchased and securities
sold under agreements to repurchase 1,031,957 1,089,916
Commercial paper 21,100 18,600
Other short-term borrowings 15,540 8,154
Total short-term borrowings 1,068,597 1,116,670
Long-term borrowings 632,019 599,476
Total borrowed funds 1,700,616 1,716,146
Bank acceptances outstanding 51,286 110,520
Other liabilities 173,007 121,495
Total liabilities 15,422,521 14,523,754
Stockholders' equity:
Common stock, par value $.625 a share:
Authorized 120,000,000 shares
Issued, 61,733,185 shares in 1995
and 61,988,510 shares in 1994 38,583 38,743
Surplus 505,350 526,156
Undivided profits 895,755 759,296
Treasury stock, at cost-614,000 shares
in 1995 and 1,474,579 shares in 1994 (25,085) (12,441)
Unearned restricted stock (1,582) (1,052)
Unrealized gain (loss) on securities
available for sale, net of taxes 16,232 (24,380)
Total stockholders' equity 1,429,253 1,286,322
$16,851,774 $15,810,076
</TABLE>
See notes to supplemental consolidated financial statements.
() Indicates deduction.
<PAGE> 2
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
Regions Financial Corporation & Subsidiaries
<TABLE>
<CAPTION>
(amounts in thousands, except per share data) YEAR ENDED DECEMBER 31
- ------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $1,009,783 $757,078 $559,850
Interest on securities:
Taxable interest income 204,194 181,517 136,007
Tax-exempt interest income 25,304 23,803 20,733
Total interest on securities 229,498 205,320 156,740
Interest on mortgage loans held for sale 9,335 20,363 22,205
Income on federal funds sold and
securities purchased under agreements
to resell 7,761 7,016 4,658
Interest on time deposits in other banks 2,751 1,741 2,947
Interest on trading account assets 472 175 144
Total interest income 1,259,600 991,693 746,544
Interest expense:
Interest on deposits 535,880 374,533 275,455
Interest on short-term borrowings 57,429 24,766 7,859
Interest on long-term borrowings 42,027 36,858 12,881
Total interest expense 635,336 436,157 296,195
Net interest income 624,264 555,536 450,349
Provision for loan losses 30,271 20,580 24,695
Net interest income after
provision for loan losses 593,993 534,956 425,654
Non-interest income:
Trust department income 25,656 21,731 20,549
Service charges on deposit accounts 73,100 62,096 52,382
Mortgage servicing and origination fees 43,608 45,365 47,148
Securities (losses) gains (424) 344 831
Other 45,466 42,513 49,239
Total non-interest income 187,406 172,049 170,149
Non-interest expense:
Salaries and employee benefits 261,066 228,199 199,178
Net occupancy expense 29,005 27,212 20,790
Furniture and equipment expense 30,890 28,861 24,432
FDIC insurance expense 18,271 26,177 19,832
Other 148,229 131,927 118,898
Total non-interest expense 487,461 442,376 383,130
Income before income taxes 293,938 264,629 212,673
Applicable income taxes 96,109 84,109 66,169
Net income $ 197,829 $180,520 $146,504
Average number of shares outstanding 61,670 58,206 52,153
Per share:
Net income $ 3.21 $ 3.10 $ 2.81
Cash dividends declared 1.32 1.20 1.04
</TABLE>
See notes to supplemental consolidated financial statements.
<PAGE> 3
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
Regions Financial Corporation & Subsidiaries
<TABLE>
<CAPTION>
(amounts in thousands) YEAR ENDED DECEMBER 31
- -----------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $ 197,829 $ 180,520 $ 146,504
Adjustments to reconcile net cash provided by
operating activities:
Depreciation and amortization of premises and
equipment 26,232 24,558 20,233
Provision for loan losses 30,271 20,580 24,695
Net (accretion) amortization of securities (6,644) 7,392 (1,722)
Amortization of loans and other assets 21,073 18,621 23,793
Amortization of deposits and borrowings (5,643) (6,719) -0-
Provision for losses on other real estate 2,726 687 2,016
Deferred income taxes 5,990 1,500 (4,311)
(Gain) loss on sale of premises and equipment (27) 163 (143)
Realized security losses (gains) 424 (344) (831)
(Increase) in trading account assets (4,017) (4,485) (8,279)
Decrease (increase) in mortgages held for sale 903 233,036 (65,210)
(Increase) in interest receivable (12,759) (15,527) (1,192)
(Increase) in other assets (15,158) (3,386) (21,173)
Increase (decrease) in other liabilities 24,938 (35,985) 2,100
Stock issued to employees under incentive plan 601 1,502 5,910
Other 14,556 9,859 8,528
Net cash provided by operating activities 281,295 431,972 130,918
Investing activities:
Net (increase) in loans (268,167) (1,633,251) (599,774)
Proceeds from sale of securities available for sale 50,638 201,343 -0-
Proceeds from sale of investment securities -0- -0- 48,295
Proceeds from maturity of investment securities 503,811 834,546 694,159
Proceeds from maturity of securities available for
sale 510,201 243,816 -0-
Purchase of investment securities (617,913) (823,969) (765,919)
Purchase of securities available for sale (880,753) (472,840) -0-
Net (increase) decrease in interest-bearing
deposits in other banks (31,194) 62,995 (11,965)
Proceeds from sale of premises and equipment 4,555 3,769 2,156
Purchase of premises and equipment (43,186) (26,785) (28,425)
Net decrease (increase) in customers' acceptance
liability 59,234 (34,607) (48,735)
Net cash received in acquisitions 50,908 278,441 144,398
Net cash (used) by investing activities (661,866) (1,366,542) (565,810)
Financing activities:
Net increase in deposits 472,194 195,805 471,588
Net (decrease) increase in short-term borrowings (79,274) 794,521 (62,010)
Proceeds from long-term borrowings 125,851 406,496 55,576
Payments on long-term borrowings (99,395) (330,825) (4,473)
Net (decrease) increase in bank acceptance liability (59,234) 34,607 48,735
Cash dividends (77,020) (65,307) (51,578)
Purchase of treasury stock (61,882) (82,265) (16,688)
Proceeds from exercise of stock options 2,451 4,688 3,323
Net cash provided by financing activities 223,691 957,720 444,473
(Decrease) increase in cash and cash equivalents (156,880) 23,150 9,581
Cash and cash equivalents at beginning of year 810,380 787,230 777,649
Cash and cash equivalents at end of year $ 653,500 $ 810,380 $ 787,230
</TABLE>
See notes to supplemental consolidated financial statements.
<PAGE> 4
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Regions Financial Corporation & Subsidiaries
<TABLE>
<CAPTION>
(amounts in thousands, except per share data)
- ----------------------------------------------------------------------------------------------------------------
UNREALIZED
GAIN(LOSS)
FROM
SECURITIES TREASURY UNEARNED
COMMON UNDIVIDED AVAILABLE STOCK, RESTRICTED
STOCK SURPLUS PROFITS FOR SALE AT COST STOCK
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 $ 22,013 $133,943 $ 516,148 $(12,320) $ (3,129)
Adjusted for pooling of
interests transaction:
First National Bancorp 9,038 74,452 146,230 (259)
Balance at January 1,
1993, as restated 31,051 208,395 662,378 (12,320) (3,388)
Net income for the year 146,504
Cash dividends declared--
Regions-$1.04 per share (38,792)
Pooled company (12,786)
Stock dividend 2,203 126,022 (128,225)
Purchase of treasury stock (16,393)
Stock issued for
acquisitions 2,240 111,435 16,393
Stock issued to employees
under incentive plans 99 4,797 1,104 (90)
Stock options exercised 141 3,182
Amortization of unearned
restricted stock 1,752
Retirement of common stock
by pooled company (9) (286)
Issuance of common stock
by pooled company for
dividend reinvestment
plan 22 932
Balance at December 31,
1993 35,747 454,477 630,183 (12,320) (1,726)
Equity from immaterial
acquisitions accounted
for as poolings of
interests 1,387 15,441 18,890
Adjustment for change in
accounting method, net
of income taxes of
$6,698 $ 11,129
Change in unrealized gains
and (losses), net of
income taxes of
($20,127) (35,509)
Net income for the year 180,520
Cash dividends declared--
Regions-$1.20 per share (50,273)
Pooled company (15,034)
Stock dividend of pooled
company 167 5,943 (6,110)
Retirement of common stock
by pooled company (38) (1,146)
Purchase of treasury stock (81,081)
Stock issued for
acquisitions 1,116 44,916 80,960
Stock issued to employees
under incentive plans 1 294 1,120 87
Stock options exercised 319 4,369
Amortization of unearned
restricted stock 587
Issuance of common stock
by pooled company for
dividend reinvestment
plan 44 1,862
Balance at December 31,
1994 38,743 526,156 759,296 (24,380) (12,441) (1,052)
Equity from immaterial
acquisitions accounted
for as poolings of
interests 984 7,306 15,412
Change in unrealized gains
and (losses), net of
income taxes of $14,890 40,612
Net income for the year 197,829
Cash dividends declared--
Regions-$1.32 per share (60,075)
Pooled company (16,945)
Purchase of treasury stock (61,882)
Treasury stock retired and
reissued relating to
acquisitions accounted
for as purchases (408) (22,236) 36,797
Retirement of treasury
stock purchased in
prior years (922) (11,519) 12,441
Stock issued for
acquisition by pooled
company 9 391
Stock issued to employees
under incentive plans 32 1,961 238 (1,630)
Stock options exercised 125 2,326
Amortization of unearned
restricted stock 1,100
Issuance of common stock
by pooled company for
dividend reinvestment
plan 20 965
BALANCE AT DECEMBER 31,
1995 $ 38,583 $505,350 $ 895,755 $ 16,232 $(25,085) $ (1,582)
</TABLE>
See notes to supplemental consolidated financial statements.
() Indicates deduction.
<PAGE> 5
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Regions Financial Corporation
(Regions or the Company), conform with generally accepted accounting principles
and with general financial service industry practices. Regions provides a full
range of banking and bank-related services to individual and corporate
customers through its subsidiaries and branch offices located primarily in
Alabama, Florida, Georgia, Louisiana and Tennessee. The Company is subject to
intense competition from other financial institutions and is also subject to
the regulations of certain government agencies and undergoes periodic
examinations by those regulatory authorities.
On March 1, 1996, First National Bancorp (First National) of Gainesville,
Georgia, merged with and into Regions. The merger was accounted for as a
pooling of interests and, accordingly, financial information for all prior
periods has been restated to present the combined financial condition and
results of operations of both companies as if the merger had been in effect for
all periods presented. Further details of the merger are presented in Note Q.
Business Combinations.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The supplemental consolidated financial statements include the accounts of
Regions and its subsidiaries. Significant intercompany balances and
transactions have been eliminated. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the statement of condition
dates and revenues and expenses for the periods shown. Actual results could
differ from the estimates and assumptions used in the supplemental consolidated
financial statements.
Certain amounts in prior year financial statements have been reclassified
to conform to the current year presentation.
SECURITIES
Effective January 1, 1994, Regions adopted the provisions of Statement of
Financial Accounting Standards No. 115 (SFAS 115), "Accounting for Certain
Investments in Debt and Equity Securities" (See Note C). Accordingly, the
Company's policies for investments in debt and equity securities are as
follows.
Management determines the appropriate classification of debt and equity
securities at the time of purchase and reevaluates such designations as of the
date of each statement of condition.
Debt securities are classified as investment securities when the Company
has the positive intent and ability to hold the securities to maturity.
Investment securities are stated at amortized cost.
Debt securities not classified as investment securities or trading account
assets, and marketable equity securities not classified as trading account
assets, are classified as securities available for sale. Securities available
for sale are stated at estimated fair value, with unrealized gains and losses,
net of taxes, reported as a separate component of stockholders' equity.
The amortized cost of debt securities classified as investment securities
or securities available for sale is adjusted for amortization of premiums and
accretion of discounts to maturity, or in the case of mortgage-backed
securities, over the estimated life of the security, using the effective yield
method. Such amortization or accretion is included in interest on securities.
Realized gains and losses are included in securities gains (losses). The cost
of the securities sold is based on the specific identification method.
Trading account assets, which are held for the purpose of selling at a
profit, consist of debt and marketable equity securities and are carried at
estimated market value. Gains and losses, both realized and unrealized, are
included in other income.
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are carried at the lower of aggregate cost or
estimated market value. Gains and losses on mortgages held for sale are
included in other expense.
LOANS
Interest on loans is accrued based upon the principal amount outstanding
except for interest on discounted installment loans and leases, which is
generally credited to income based upon the sum-of-the-digits method and
generally approximates the interest method of income recognition.
Through provisions charged directly to operating expense, Regions has
established an allowance for loan losses. This allowance is reduced by actual
loan losses and increased by subsequent recoveries, if any.
The allowance for loan losses is maintained at a level believed adequate
by management to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio, historical loan loss experience, current economic conditions,
collateral values of properties securing loans, volume, growth, quality and
composition of the loan portfolio and other relevant factors. Unfavorable
changes in any of these, or other factors, or the availability of new
information, could require that the allowance for loan losses be increased in
future periods.
PREMISES AND EQUIPMENT
Premises and equipment and leasehold improvements are stated at cost, less
accumulated depreciation and amortization. The provision for depreciation is
computed using the straight-line and declining-balance methods over the
estimated useful lives of the assets. Leasehold improvements are amortized
using the straight-line method over the estimated useful lives of the
improvements (or the terms of the leases if shorter).
Estimated useful lives generally are as follows:
Premises and leasehold improvements 10-40 years
Furniture and equipment 3-12 years
INTANGIBLE ASSETS
Intangible assets, consisting of the excess of cost over the fair value of
net assets of acquired businesses and premiums paid to purchase servicing
rights of mortgage loans, are included in other assets. The excess of cost
over the fair value of net assets of acquired businesses, which totaled
$115,792,000 at December 31, 1995, and $111,411,000 at December 31, 1994, is
being amortized over periods of 12 to 25 years, principally using the
straight-line method of amortization. Premiums paid to purchase servicing
rights of mortgage loans, which totaled $64,269,000 at December 31, 1995 and
$64,381,000 at December 31, 1994, are being amortized over the estimated
remaining servicing life of the loans. Intangible assets are evaluated
periodically for impairment.
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
(Statement 121), which 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 amounts. Statement 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company will adopt
Statement 121 in the first quarter of 1996 and, based on current circumstances,
does not believe the effect of adoption will be material to the consolidated
financial statements.
In May 1995, FASB issued Statement of Financial Accounting Standards No.
122 "Accounting for Mortgage Servicing Rights, an Amendment of FASB No. 65"
(Statement 122). 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. Currently only mortgage
servicing rights that are purchased from other parties are capitalized and
recorded as an asset. Therefore, Statement 122 eliminates the accounting
inconsistencies that currently exist between mortgage servicing rights that are
derived from loan origination activities and those acquired through purchase
transactions. Statement 122 also requires that capitalized mortgage servicing
rights be assessed for impairment based on the fair value of those rights.
Statement 122 is effective for fiscal years beginning after December 15, 1995,
and the Company will adopt the statement in the first quarter of 1996.
Management believes that the adoption of Statement 122 will not have a material
impact on Regions' financial statements.
PENSION, PROFIT-SHARING AND EMPLOYEE STOCK OWNERSHIP PLANS
Regions has profit-sharing and employee stock ownership plans covering
substantially all employees. Annual contributions to the profit-sharing and
employee stock ownership plans are determined at the discretion of the Board of
Directors. Regions also has a defined benefit pension plan covering
substantially all employees, except for substantially all employees which joined
the Company through the First National merger. Pension expense is computed
using the projected unit credit (service prorate) actuarial cost method and the
plan is funded using the aggregate actuarial cost method. Annual contributions
to all the plans do not exceed the maximum amounts allowable for federal income
tax purposes.
INCOME TAXES
Regions and First National each file consolidated federal income tax
returns for the periods presented. The consolidated financial statements
(including the provision for income taxes) are prepared on the accrual basis.
Temporary differences occur when income and expenses are recognized in
different periods for financial reporting purposes and for purposes of
computing income taxes currently payable. Deferred taxes are provided as a
result of such temporary differences.
PER SHARE AMOUNTS
Earnings per share computations are based upon the weighted average number
of shares outstanding during the periods. The dilutive effect of shares
issuable under stock options and stock performance awards granted by the
Company is immaterial.
TREASURY STOCK
The purchase of the Company's common stock is recorded at cost. At the
date of retirement or subsequent reissue, the treasury stock account is reduced
by the cost of such stock.
INSURANCE SUBSIDIARIES
Insurance premium and commission income and acquisition costs are
recognized over the terms of the related policies. Losses are recognized as
incurred.
STATEMENT OF CASH FLOWS
Cash equivalents include cash and due from banks and federal funds sold
and securities purchased under agreements to resell. Regions paid $617,952,000
in 1995, $422,893,000 in 1994, and $288,604,000 in 1993 for interest on
deposits and borrowings. Income tax payments totaled $89,380,000 for 1995,
$88,085,000 for 1994, and $76,136,000 for 1993. Loans transferred to other real
estate totaled $13,686,000 in 1995, $13,195,000 in 1994, and $15,989,000 in
1993. During 1995 investment securities of $643,976,000 were transferred to
securities available for sale, as permitted by the Financial Accounting
Standard Board's November 1995 Special Report. The securitization of loans
during 1995 resulted in the transfer of $396,130,000 from loans to securities
available for sale.
<PAGE> 6
NOTE B. RESTRICTIONS ON CASH AND DUE FROM BANKS
Regions' subsidiary banks are required to maintain reserve balances with
the Federal Reserve Bank. The average amount of the reserve balances maintained
for the year ended December 31, 1995, was approximately $85,376,000.
NOTE C. SECURITIES
The amortized cost and estimated fair value of investment securities and
securities available for sale at December 31, 1995, are as follows:
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31, 1995
- --------------------------------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES:
U.S. Treasury
and Federal
agency
securities $ 894,606 $22,745 $ (604) $ 916,747
Obligations
of states
and political
subdivisions 425,456 17,842 (570) 442,728
Mortgage backed
securities 268,926 590 (2,334) 267,182
Other securities 118 -0- -0- 118
TOTAL $ 1,589,106 $41,177 $(3,508) $1,626,775
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury
and Federal
agency
securities $ 783,999 $16,703 $(1,512) $ 799,190
Obligations
of states
and political
subdivisions 20,051 183 (15) 20,219
Mortgage backed
securities 1,397,634 14,797 (6,167) 1,406,264
Other securities 14,933 159 -0- 15,092
Equity securities 33,910 -0- -0- 33,910
TOTAL $ 2,250,527 $31,842 $(7,694) $2,274,675
</TABLE>
The cost and estimated fair value of investment securities and securities
available for sale at December 31, 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>
(in thousands) DECEMBER 31, 1995
- ----------------------------------------------------------------
ESTIMATED
FAIR
COST VALUE
- ----------------------------------------------------------------
<S> <C> <C>
INVESTMENT SECURITIES:
Due in one year or less $ 174,257 $ 175,900
Due after one year through
five years 798,209 824,303
Due after five years through
ten years 169,556 175,150
Due after ten years 178,158 184,241
Mortgage backed
securities 268,926 267,181
TOTAL $1,589,106 $1,626,775
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31, 1995
- ---------------------------------------------------------------
ESTIMATED
FAIR
COST VALUE
- ----------------------------------------------------------------
<S> <C> <C>
SECURITIES AVAILABLE FOR SALE:
Due in one year or less $ 213,981 $ 214,529
Due after one year through
five years 537,798 552,381
Due after five years through
ten years 36,435 36,805
Due after ten years 30,770 30,787
Mortgage-backed
securities 1,397,633 1,406,263
Equity securities 33,910 33,910
TOTAL $2,250,527 $2,274,675
</TABLE>
Proceeds from sales of securities available for sale in 1995, were
$50,638,000. Gross realized gains and losses were $809,000 and $1,233,000,
respectively. Proceeds from sales of securities available for sale in 1994 were
$201,343,000, with gross realized gains and losses of $3,131,000 and
$2,787,000, respectively. Proceeds from sales of securities in 1993 were
$48,295,000, with gross realized gains and losses of $856,000 and $25,000,
respectively.
The amortized cost and estimated fair value of investment securities and
securities available for sale at December 31, 1994, are as follows:
<TABLE>
(in thousands) DECEMBER 31, 1994
- ------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES:
U.S. Treasury
and Federal
agency
securities $ 903,390 $ 8,466 $(28,075) $ 883,781
Obligations
of states
and political
subdivisions 410,673 7,585 (13,097) 405,161
Mortgage-backed
securities 791,443 501 (51,471) 740,473
Other securities 736 16 (6) 746
TOTAL $2,106,242 $16,568 $(92,649) $2,030,161
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury
and Federal
agency
securities $ 633,103 $2,948 $ (8,066) $ 627,985
Obligations
of states
and political
subdivisions 3,439 83 (40) 3,482
Mortgage-backed
securities 593,087 236 (33,819) 559,504
Other securities 11,476 1,245 (2,095) 10,626
Equity securities 38,452 -0- -0- 38,452
TOTAL $1,279,557 $4,512 $(44,020) $1,240,049
</TABLE>
Securities with carrying values of $1,732,010,000 and $1,662,414,000 at
December 31, 1995, and 1994, respectively, were pledged to secure public funds,
trust deposits and certain borrowing arrangements.
<PAGE> 8
NOTE D. LOANS
The loan portfolio at December 31, 1995, and 1994, consisted of the
following:
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31
- ---------------------------------------------------
1995 1994
<S> <C> <C>
- ---------------------------------------------------
Commercial $2,569,032 $2,354,427
Real estate-construction 629,888 493,027
Real estate-mortgage 5,386,638 5,391,233
Consumer 2,983,993 2,654,449
11,569,551 10,893,136
Unearned income (27,240) (37,941)
Total $11,542,311 $10,855,195
</TABLE>
Directors and executive officers of Regions and its principal
subsidiaries, including the directors' and officers' families and affiliated
companies, are loan and deposit customers and have other transactions with
Regions in the ordinary course of business. Total loans to these persons
(excluding loans which in the aggregate do not exceed $60,000 to any such
person) at December 31, 1995, and 1994, were approximately $95,000,000 and
$79,000,000, respectively. During 1995, $246,000,000 of new loans were made,
repayments totaled $224,000,000 and reductions for changes in the composition
of related parties totaled $6,000,000. These loans were made in the ordinary
course of business and on substantially the same terms, including interest
rates and collateral, as those prevailing at the same time for comparable
transactions with other persons and involve no unusual risk of collectibility.
Directors and executive officers of First National and its principal
subsidiaries, including the directors' and officers' families and affiliated
companies, are loan and deposit customers and have other transactions with
First National in the ordinary course of business. Total loans to these persons
at December 31, 1995, and 1994, were approximately $17,000,000 and $15,000,000,
respectively. During 1995, $11,000,000 of new loans were made and repayments
totaled $9,000,000. These loans were made in the ordinary course of business
and on substantially the same terms, including interest rates and collateral,
as those prevailing at the same time for comparable transactions with other
persons and involve no unusual risk of collectibility.
Loans sold with recourse totaled $31.2 million and $36.2 million at
December 31, 1995, and 1994, respectively.
The loan portfolio is diversified geographically, primarily within
Alabama, Louisiana, northern Georgia, northwest and central Florida, and middle
Tennessee.
The Company adopted Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan," as amended by Statement of
Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures" (SFAS 114) effective January 1,
1995. SFAS 114 requires that certain impaired loans be measured at the present
value of expected future cash flows discounted at the loan's effective interest
rate or at the loan's observable market price, or the fair value of the
collateral if the loan is collateral dependent. A loan is considered impaired
if, based on current information and events, it is probable that Regions will
be unable to collect the scheduled payments of principal or interest when due
according to the contractual terms of the loan agreement. At December 31, 1995,
the recorded investment in impaired loans under SFAS 114 was $30 million. The
adoption of SFAS 114 resulted in no material impact on the Company's financial
statements.
<PAGE> 9
NOTE E. ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(in thousands) 1995 1994 1993
- ---------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $143,464 $125,027 $100,248
Allowance of purchased
institutions at acquisition
date 4,721 15,853 15,999
Provision charged to
operating expense 30,271 20,580 24,695
Loan losses:
Charge-offs (35,211) (31,015) (27,505)
Recoveries 16,242 13,019 11,590
Net loan losses (18,969) (17,996) (15,915)
Balance at end of year $159,487 $143,464 $125,027
</TABLE>
NOTE F. PREMISES AND EQUIPMENT
A summary of premises and equipment follows:
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31
- -----------------------------------------------------------
1995 1994
- -----------------------------------------------------------
<S> <C> <C>
Land $ 52,389 $ 45,684
Premises 242,251 211,593
Furniture and equipment 195,052 174,581
Leasehold improvements 30,761 27,586
520,453 459,444
Allowances for depreciation
and amortization (265,461) (231,670)
TOTAL $ 254,992 $ 227,774
</TABLE>
Net occupancy expense is summarized as follows:
<TABLE>
<CAPTION>
(in thousands) YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Gross occupancy expense $32,660 $30,575 $24,577
Less rental income 3,655 3,363 3,787
Net occupancy expense $29,005 $27,212 $20,790
</TABLE>
NOTE G. OTHER REAL ESTATE
Other real estate acquired in satisfaction of indebtedness ("foreclosure")
is carried in other assets at the lower of the recorded investment in the loan
or the estimated net realizable value of the collateral. Other real estate
totaled $10,137,000 at December 31, 1995, and $18,718,000 at December 31, 1994.
Gain or loss on the sale of other real estate is included in other expense.
<PAGE> 10
NOTE H. DEPOSITS
The following schedule presents the detail of interest-bearing deposits:
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31
- -------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Interest-bearing
transaction accounts $707,006 $1,907,746
Interest-bearing accounts
in foreign office 435,871 9,000
Savings accounts 980,374 1,025,167
Money market savings
accounts 2,826,907 1,506,064
Certificates of deposit
($100,000 or more) 1,383,849 1,390,015
Time deposits
($100,000 or more) 257,046 541,699
Other interest-bearing
deposits 5,041,589 4,396,451
Total $11,632,642 $10,776,142
</TABLE>
The following schedule details interest expense on deposits:
<TABLE>
<CAPTION>
(in thousands) YEAR ENDED DECEMBER 31
- -------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------
<C> <C> <C> <C>
Interest-bearing
transaction accounts $ 40,926 $ 50,426 $ 39,089
Interest-bearing accounts
in foreign office 18,107 80 -0-
Savings accounts 27,358 28,739 22,072
Money market savings
accounts 78,307 44,202 35,007
Certificates of deposit
($100,000 or more) 83,103 46,938 28,871
Other interest-bearing
deposits 288,079 204,148 150,416
Total $535,880 $374,533 $275,455
</TABLE>
<PAGE> 11
NOTE I. BORROWED FUNDS
Following is a summary of short-term borrowings:
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31
- -------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal funds purchased $ 635,842 $ 911,205 $169,850
Securities sold
under agreements
to repurchase 396,115 178,711 78,095
Commercial paper 21,100 18,600 17,201
Notes payable to an
unaffiliated bank 10,000 -0- -0-
Treasury tax and loan note 5,431 6,827 13,807
Short sale liability 109 1,327 1,994
Total $1,068,597 $1,116,670 $280,947
(in thousands) DECEMBER 31
- -------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum amount
outstanding at any
month-end:
Federal funds
purchased and
securities sold
under agreements
to repurchase $1,383,505 $1,089,916 $386,041
Aggregate short-
term borrowings 1,441,505 1,116,743 419,736
Average amount
outstanding (based
on average of daily
balances) 957,433 534,797 241,414
Weighted average
interest rate
at year end 5.6% 5.7% 3.6%
Weighted average interest
rate on amounts
outstanding during
the year (based on
average of daily balances) 6.0% 4.6% 3.2%
</TABLE>
Federal funds purchased and securities sold under agreements to repurchase
had weighted average maturities of nine, three and four days, respectively, at
December 31, 1995, 1994 and 1993. Weighted average rates on these dates were
5.7%, 5.7% and 3.5%, respectively.
Commercial paper maturities ranged from 4 to 166 days at December 31,
1995, from 4 to 167 days at December 31, 1994 and from 4 to 167 days at
December 31, 1993. Weighted average maturities were 113, 101 and 101 days,
respectively, at December 31, 1995, 1994 and 1993. The weighted average
interest rates on these dates were 5.7%, 5.7% and 3.5%, respectively.
Regions has an unsecured short-term credit agreement with an unaffiliated
bank that provides for maximum borrowings of $25 million. At December 31,
1995, $10 million was outstanding under this agreement. No borrowings were
outstanding under this agreement at December 31, 1994. No compensating
balances or commitment fees are required by this agreement. In addition to this
short-term credit agreement, a subsidiary of Regions has a $3 million revolving
credit line with an unaffiliated bank that is subject to renewal on an
annual basis. No amounts were outstanding on this agreement at December 31,
1995 or 1994.
The short-sale liability represents Regions' trading obligation to
deliver certain government securities at a predetermined date and price. These
securities had weighted average interest rates of 6.9%, 2.5% and 4.0%,
respectively, at December 31, 1995, 1994 and 1993.
Long-term borrowings consist of the following:
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31
- --------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------
1995 1994
7.80% subordinated notes $75,000 $75,000
7.65% subordinated notes 25,000 25,000
7.75% subordinated notes 100,000 100,000
8.75% debentures -0- 5,200
Federal Home Loan Bank notes 331,831 355,031
Senior bank notes 75,000 -0-
Mortgage notes payable 3,833 4,500
Medium term notes -0- 11,344
Industrial development revenue bond 3,400 3,500
Other notes payable 17,955 19,901
Total $632,019 $599,476
</TABLE>
In July 1994, Regions issued $25 million of 7.65% subordinated notes, due
August 15, 2001, and in September 1994, Regions issued $100 million of 7.75%
subordinated notes, due September 15, 2024. The $100 million of 7.75%
subordinated notes may be redeemed in whole or in part at the option of the
holders thereof on September 15, 2004, at 100% of the principal amount to be
redeemed, together with accrued interest. In December 1992, Regions issued $75
million of 7.80% subordinated notes, due December 1, 2002. All issuances of
these notes are subordinated and subject in right of payment of principal and
interest to the prior payment in full of all senior indebtedness of the
Company, generally defined as all indebtedness and other obligations of the
Company to its creditors, except subordinated indebtedness. Payment of the
principal of the notes may be accelerated only in the case of certain events
involving bankruptcy, insolvency proceedings or reorganization of the Company.
The subordinated notes qualify as "Tier 2 capital" under Federal Reserve
guidelines.
The 8.75% debentures, which were outstanding at December 31, 1994, were
paid off in 1995.
Federal Home Loan Bank notes represent borrowings from Federal Home Loan
Banks. Interest on these borrowings is at fixed rates ranging from 4.6% to
9.3% with maturities of one to fifteen years. These borrowings are secured by
Federal Home Loan Bank stock (carried at cost of $44.6 million) and by first
mortgage loans on one-to-four family dwellings held by certain banking
subsidiaries (approximately $3.4 billion at December 31, 1995). The maximum
amount that could be borrowed from Federal Home Loan Banks under the current
borrowing agreements and without further investment in Federal Home Loan Bank
stock is approximately $396 million.
At December 31, 1995, Regions Bank of Louisiana had outstanding $75
million in senior bank notes. $35 million is at an interest rate of 6.71% and
$40 million is at an interest rate of 7.06%. These notes are unsecured and
mature in 1996. Regions banking subsidiaries are currently authorized to issue
up to $250 million in bank notes to institutional investors.
The mortgage notes payable at December 31, 1995, had a weighted average
interest rate of 8.7% and were collateralized by premises and equipment carried
at $8,185,000.
The medium term notes were issued by Secor Bank, FSB, (Secor) prior to
acquisition by Regions. These notes matured in 1995.
The industrial development revenue bonds mature on July 1, 2008, with
principal of $100,000 payable annually and interest at a tax effected prime
rate payable monthly.
Other notes payable at December 31, 1995, had a weighted average interest
rate of 6.3% and a weighted average maturity of 10.2 years.
The aggregate amount of maturities of all long-term debt in each of the
next five years is as follows: 1996-$99,503,000; 1997-$124,196,000;
1998-$74,256,000; 1999-$22,618,000; 2000-$62,338,000.
Regions has a shelf-registration outstanding pursuant to which it may
offer up to an additional $200 million of its unsecured, subordinated notes,
debentures, bonds or other evidences of indebtedness. The proceeds from any
issuances of these securities can be used for general corporate purposes.
Substantially all of the consolidated net assets are owned by the
subsidiaries and dividends paid by Regions are substantially provided by
dividends from the subsidiaries. Statutory limits are placed on the amount of
dividends the subsidiaries can pay without prior regulatory approval. In
addition, regulatory authorities require the maintenance of minimum capital to
asset ratios at banking subsidiaries. At December 31, 1995, the banking
subsidiaries could pay approximately $223 million in dividends without prior
approval.
Management believes that none of these dividend restrictions will
materially affect Regions' dividend policy. In addition to dividend
restrictions, federal statutes also prohibit unsecured loans from banking
subsidiaries to the parent company. Because of these limitations, substantially
all of the net assets of Regions' subsidiaries are restricted, except for the
amount which can be paid to the parent in the form of dividends.
<PAGE> 12
NOTE J. EMPLOYEE BENEFIT PLANS
Regions has a defined benefit pension plan covering substantially all
employees, except for substantially all employees which joined the Company
through the First National merger. The benefits are based on years of service
and the employee's highest five years of compensation during the last ten years
of employment. Regions' funding policy is to contribute annually at least the
amount required by IRS minimum funding standards. Contributions are intended to
provide not only for benefits attributed to service to date, but also for those
expected to be earned in the future.
The following table sets forth the plan's funded status and amounts
recognized in the consolidated statement of condition:
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31
- -----------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
including vested benefits
of $77,623 in 1995 and
$57,263 in 1994 $(78,880) $(58,216)
Projected benefit obligation for
service rendered to date $(97,452) $(70,558)
Plan assets at fair value, primarily
listed stocks and bonds, and U.S.
Treasury and agency obligations 103,567 85,599
Plan assets in excess of projected
benefit obligation 6,115 15,041
Unrecognized net loss from
past experience different
from that assumed 12,287 4,041
Unrecognized prior service cost (1,886) (938)
Unrecognized net asset (1,969) (3,940)
Prepaid pension cost
included in other assets $14,547 $14,204
</TABLE>
<PAGE> 13
Net pension cost included the following components:
<TABLE>
<CAPTION>
(in thousands) YEAR ENDED DECEMBER 31
- ------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during the
period $ 3,501 $ 3,677 $ 2,832
Interest cost on projected
benefit obligation 6,411 5,487 4,966
Actual (return) loss on
plan assets (16,577) 1,473 (5,602)
Net amortization and
deferral 6,323 (11,516) (3,615)
Net periodic pension
income $ (342) $ (879) $(1,419)
</TABLE>
The weighted average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.25% and 4.5%, respectively, at December 31,
1995, 8.5% and 4.5%, respectively at December 31, 1994, and 7.5% and 4.5%,
respectively, at December 31, 1993. The expected long-term rate of return on
plan assets was 9% in all years.
The Company also sponsors a supplemental executive retirement program,
which is a non-qualified plan that provides certain senior executive officers
defined pension benefits in relation to their compensation, as is provided to
other employees by the qualified pension plan. The projected benefit obligation
for this plan totaled $4,144,000 at December 31, 1995, and $4,365,000 at
December 31, 1994. The accumulated benefit obligation, all of which was vested
and accrued at December 31, 1995 and 1994, totaled $3,379,317 and $3,029,000,
respectively. Pension expense for this plan totaled $440,000 in 1995 and 1994,
and $20,000 in 1993. The reduced expense in 1993 resulted primarily from
changes in future funding of the projected plan obligations.
Contributions to employee profit sharing plans totaled $17,084,000,
$14,347,000 and $12,893,000 for 1995, 1994 and 1993, respectively.
The 1995 contribution to the employee stock ownership plan totaled
$1,690,000, compared to $1,417,000 in 1994, and $1,120,000 in 1993.
Contributions are used to purchase Regions common stock for the benefit of
participating employees.
Contributions to the employee stock purchase plan in 1995, 1994 and 1993
were $1,472,000, $1,305,000 and $1,253,000, respectively.
Regions sponsors a defined benefit postretirement health care plan that
covers certain retired employees. Currently the Company pays a portion of the
costs of certain health care benefits for all eligible employees that retired
before January 1, 1989. No health care benefits are provided for employees
retiring at normal retirement age after December 31, 1988. For employees
retiring before normal retirement age, the Company currently pays a portion
(based upon length of active service at the time of retirement) of the costs of
certain health care benefits until the retired employee becomes eligible for
Medicare. The plan is contributory and contains other cost-sharing features
such as deductibles and co-payments. Retiree health care benefits, as well as
similar benefits for active employees, are provided through a group insurance
program in which premiums are based on the amount of benefits paid. The
Company's policy is to fund the Company's share of the cost of health care
benefits in amounts determined at the discretion of management.
<PAGE> 14
The following table sets forth the plan's funded status and amounts
recognized in the consolidated statement of condition:
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31
- ---------------------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation,
including retiree benefits
of $4,060 in 1995 and $4,371
in 1994 $(9,109) $(9,847)
Unrecognized transition
obligation 8,255 8,740
Unrecognized net (gain) from
past experience different
from that assumed (2,773) (1,643)
Accrued postretirement benefit
obligation $(3,627) $(2,750)
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
(in thousands) YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during the
period $ 373 $ 521 $ 511
Interest cost on
benefit obligation 622 736 810
Net amortization and
deferral 486 486 485
Unrecognized (gain) loss (205) -0- -0-
Net periodic postretirement
benefit cost $1,276 $1,743 $1,806
</TABLE>
The assumed health care cost trend rate was 11.0% for 1995 and is assumed
to decrease gradually to 5% by 2007 and remain at that level thereafter.
Increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation at
December 31, 1995, by $911,000 and the aggregate of the service and interest
cost components of net periodic postretirement benefit cost for 1995 by
$120,000. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.25% at December 31, 1995,
and 8.5% at December 31, 1994.
<PAGE> 15
First National, which merged with Regions on March 1, 1996, sponsors a
defined benefit healthcare plan that provides postretirement medical benefits
to full-time employees who meet minimum age and service requirements. First
National's policy is to fund the cost of medical benefits in amounts determined
at the discretion of management. The plan provides retirees under age 65 with
medical benefits up to $5,600 per year through a traditional indemnity plan.
For retirees over age 65, the plan provides benefits up to $3,600 per year.
Once the benefit cap is met, retirees are required to contribute any excess
towards the cost of coverage. The following table sets forth the plan's funded
status and amounts recognized in the consolidated statement of condition:
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31
- --------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation,
including retiree benefits
of $1,579 in 1995 and $1,684
in 1994 $(3,020) $(2,980)
Unrecognized transition
obligation 1,862 2,128
Unrecognized net loss from
past experience different
from that assumed 171 342
Accrued postretirement benefit
obligation $ (987) $ (510)
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
(in thousands) YEAR ENDED DECEMBER 31
- -----------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during the
period $144 $157 $113
Interest cost on
benefit obligation 218 234 183
Net amortization and
deferral 118 122 118
Net periodic postretirement
benefit cost $480 $513 $414
</TABLE>
For measurement purposes, a 13.80% annual rate of increase in the per
capita cost of covered benefits is assumed for 1996 and 14.40% was assumed for
1995, for those covered individuals under the age of 65. For those covered
individuals over 65, 10.40% is assumed for 1996 and 10.60% was assumed for
1995. The rate was assumed to decrease gradually through 1998 (when the
premium caps are expected to be reached) after such time no increases are
assumed. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 8.0% at December 31, 1995 and
7.5% at December 31, 1994.
<PAGE> 16
NOTE K. LEASES
Rental expense for all leases amounted to approximately $5,830,000,
$6,133,000 and $4,674,000 for 1995, 1994 and 1993, respectively. The
approximate future minimum rental commitments as of December 31, 1995, for all
noncancelable leases with initial or remaining terms of one year or more are
shown in the following table. Included in these amounts are all renewal options
reasonably assured of being exercised.
<TABLE>
<CAPTION>
(in thousands) Equipment Premises Total
- --------------------------------------------
<S> <C> <C> <C>
1996 $140 $ 4,328 $ 4,468
1997 124 3,639 3,763
1998 96 2,995 3,091
1999 55 2,729 2,784
2000 23 2,263 2,286
2001-2005 58 7,023 7,081
2006-2010 -0- 3,920 3,920
2011-2015 -0- 2,265 2,265
2016-End -0- 786 786
TOTAL $496 $29,948 $30,444
</TABLE>
NOTE L. COMMITMENTS AND CONTINGENCIES
To accommodate the financial needs of its customers, Regions makes
commitments under various terms to lend funds to consumers, businesses and
other entities. These commitments include (among others) revolving credit
agreements, term loan commitments and short-term borrowing agreements. Many of
these loan commitments have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of these commitments are expected
to expire without being funded, the total commitment amounts do not necessarily
represent future liquidity requirements. Standby letters of credit are also
issued, which commit Regions to make payments on behalf of customers if certain
specified future events occur. Historically, a large percentage of standby
letters of credit also expire without being funded.
Both loan commitments and standby letters of credit have credit risk
essentially the same as that involved in extending loans to customers and are
subject to normal credit approval procedures and policies. Collateral is
obtained based on management's assessment of the customer's credit.
Loan commitments totaled $2.9 billion at December 31, 1995, and $2.4
billion at December 31, 1994. Standby letters of credit were $378.9 million at
December 31, 1995, and $305.4 million at December 31, 1994. Commitments under
commercial letters of credit used to facilitate customers' trade transactions
were $44.1 million at December 31, 1995, and $26.3 million at December 31,
1994.
The Company and its affiliates are defendants in litigation and claims
arising from the normal course of business. Based on consultation with legal
counsel, management is of the opinion that the outcome of pending and
threatened litigation will not have a material effect on Regions' consolidated
financial statements.
NOTE M. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
In the normal course of business, Regions enters into financial instrument
transactions with off-balance sheet risk. These financial instrument agreements
help the Company manage its exposure to interest rate fluctuations and help
customers manage exposure to foreign currency fluctuations.
Forward contracts represent commitments to sell money market
instruments at a future date at a specified price or yield. These contracts
are utilized by the Company to hedge interest rate risk positions associated
with the origination of mortgage loans held for sale. The amount of hedging
gains and losses deferred, which is reflected in gains and losses on mortgage
loans held for sale as realized, was not material to the results of operations
for the years ended December 31, 1995 or 1994. The Company is subject to the
market risk associated with changes in the value of the underlying financial
instrument as well as the risk that the other party will fail to perform. The
gross contract amount of forward contracts, which totaled $25.0 million and
$32.4 million at December 31, 1995, and 1994, respectively, represents the
extent of Regions' involvement. However, those amounts significantly exceed
the future cash requirements, as the Company intends to close out open
positions prior to settlement, and thus is subject only to the change in the
value of the instruments. The gross amount of contracts represents the
Company's maximum exposure to credit risk.
The Company utilizes put and call option contracts to hedge mortgage loan
originations in process. Option contracts represent rights to purchase or sell
securities or other money market instruments at a specified price and within a
specified period of time at the option of the holder. The notional amount of
option contracts totaled $31.0 million and $15.5 million at December 31, 1995,
and 1994, respectively. The commitment fees paid for option contracts reflect
the maximum exposure to the Company.
Interest rate swap agreements, which were entered into by Secor Bank prior
to its acquisition by Regions, totaled $7.9 million and $27.9 million in
notional principal amount at December 31, 1995, and 1994, respectively.
Interest rate swap transactions, which Secor Bank used to assist in managing
interest rate exposure, generally involve the exchange of fixed and floating
rate interest payment obligations without the exchange of the underlying
notional principal amounts. Interest rate swap agreements subject the Company
to market risk associated with changes in interest rates, as well as the risk
that another party will fail to perform. Notional principal amounts often are
used to express the volume of these transactions, but the amounts potentially
subject to credit risk are substantially less.
Foreign currency exchange contracts involve the trading of one currency
for another on a specified date and at a specified rate. These contracts are
executed on behalf of the Company's customers and are used to facilitate the
management of fluctuations in foreign exchange rates. The notional amount of
forward foreign exchange contracts totaled $36 million at December 31, 1995.
The Company is subject to the risk that another party will fail to perform and
the gross amount of the contracts represents the Company's maximum exposure to
credit risk.
Regions operates a broker-dealer subsidiary, which in the normal course of
trading inventory and clearing customers' securities transactions, is a party
to certain financial instruments with off-balance-sheet risk. The aggregate
off-balance-sheet risk from these financial instruments is not material to the
consolidated financial statements.
NOTE N. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments.
CASH AND CASH EQUIVALENTS: The carrying amount reported in the
supplemental consolidated statements of condition and cash flows approximates
the estimated fair value.
INTEREST-BEARING DEPOSITS IN OTHER BANKS: The carrying amount reported in
the supplemental consolidated statement of condition approximates the estimated
fair value.
INVESTMENT SECURITIES: Estimated fair values are based on quoted market
prices, where available. If quoted market prices are not
available, estimated fair values are based on quoted market prices of
comparable instruments.
SECURITIES AVAILABLE FOR SALE: Estimated fair values, which are the
amounts recognized in the supplemental consolidated statement of condition, are
based on quoted market prices, where available. If quoted market prices are
not available, estimated fair values are based on quoted market prices of
comparable instruments.
TRADING ACCOUNT ASSETS: Estimated fair values, which are the amounts
recognized in the supplemental consolidated statement of condition, are based
on quoted market prices, where available. If quoted market prices are not
available, estimated fair values are based on quoted market prices of
comparable instruments.
MORTGAGE LOANS HELD FOR SALE: Estimated fair values, which are the amounts
recognized in the supplemental consolidated statement of condition, are based
on quoted market prices of comparable instruments.
LOANS: Estimated fair values for variable rate loans, which reprice
frequently and have no significant credit risk, are based on carrying value.
Estimated fair values for all other loans are estimated using discounted cash
flow analyses, based on interest rates currently offered on loans with similar
terms to borrowers of similar credit quality. The carrying amount of accrued
interest reported in the supplemental consolidated statement of condition
approximates the fair value.
DEPOSIT LIABILITIES: The fair value of non-interest bearing demand
accounts, interest-bearing transaction accounts, savings accounts, money market
accounts and certain other time open accounts is the amount payable on demand
at the reporting date (i.e., the carrying amount). Fair values for certificates
of deposit are estimated by using discounted cash flow analyses, using the
interest rates currently offered for deposits of similar maturities.
SHORT-TERM BORROWINGS: The carrying amount reported in the supplemental
consolidated statement of condition approximates the estimated fair value.
LONG-TERM BORROWINGS: Fair values are estimated using discounted cash flow
analyses, based on the current rates offered for similar borrowing
arrangements.
LOAN COMMITMENTS, STANDBY AND COMMERCIAL LETTERS OF CREDIT: Estimated fair
values for these off-balance-sheet instruments are based on standard fees
currently charged to enter into similar agreements.
<PAGE> 17
FORWARD CONTRACTS, CALL OPTIONS AND INTEREST RATE SWAPS: Estimated fair
values are based on dealer quotes. These values represent the estimated amount
the Company would pay to terminate the agreements.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
(in thousands) DECEMBER 31, 1995 DECEMBER 31, 1994
- ----------------------------------------------------------------------------------------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 653,500 $ 653,500 $ 810,380 $ 810,380
Interest-bearing deposits
in other banks 56,477 56,477 16,889 16,889
Investment securities 1,589,106 1,626,775 2,106,242 2,030,161
Securities available for sale 2,274,675 2,274,675 1,240,049 1,240,049
Trading account assets 28,870 28,870 24,853 24,853
Mortgage loans held for sale 117,087 117,087 117,990 117,990
Loans (excluding leases) 11,273,027 11,360,434 10,612,865 10,167,556
Financial liabilities:
Deposits 13,497,612 13,538,435 12,575,593 12,425,366
Short-term borrowings 1,068,597 1,068,597 1,116,670 1,116,670
Long-term borrowings 632,019 623,699 599,476 514,801
Off-balance-sheet instruments:
Loan commitments - 0 - (20,574) - 0 - (17,383)
Standby letters of credit - 0 - (5,408) - 0 - (4,273)
Commercial letters of credit - 0 - (105) - 0 - (59)
Forward contracts, options
and interest rate swaps (500) 75 (783) 150
</TABLE>
NOTE O. OTHER INCOME AND EXPENSE
Other income consists of the following:
<TABLE>
<CAPTION>
(in thousands) YEAR ENDED DECEMBER 31
- ---------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Fees and commissions $19,550 $14,279 $13,592
Insurance premiums
and commissions 5,686 6,250 5,830
Trading account income 6,696 7,184 7,344
Gain on sale of mortgage
servicing rights 150 4,629 10,811
Other miscellaneous income 13,384 10,171 11,662
Total $45,466 $42,513 $49,239
</TABLE>
<PAGE> 18
Other expense consists of the following:
<TABLE>
<CAPTION>
(in thousands) YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Stationery, printing
and supplies $ 10,670 $ 9,129 $ 7,122
Advertising and business
development 10,564 11,408 7,983
Postage and freight 10,997 8,882 7,563
Telephone 9,869 8,893 7,063
Legal and other
professional fees 13,380 11,426 7,193
Other non-credit losses 8,006 9,491 7,460
Outside computer services 9,326 8,695 8,046
Amortization of mort-
gage servicing rights 11,577 13,186 17,443
Loss on sale of
mortgages by affiliate
mortgage companies 1,093 1,289 2,525
Other miscellaneous
expenses 62,747 49,528 46,500
Total $148,229 $131,927 $118,898
</TABLE>
NOTE P. INCOME TAXES
Regions accounts for income taxes using the liability method pursuant to
Financial Accounting Standards Board Statement 109, "Accounting for Income
Taxes." Under this method the Company's deferred tax assets and liabilities
were determined by applying federal and state tax rates currently in effect to
its cumulative temporary book/tax differences.
At December 31, 1995 Regions has net operating loss carryforwards for
federal tax purposes of $72.6 million that expire in years 2003 through 2008.
The majority of these carryforwards resulted from the Company's acquisition of
Secor Bank on December 31, 1993. For financial reporting purposes, a valuation
allowance of approximately $13 million has been recognized to offset a portion
of the deferred tax assets related to those carryforwards.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of Regions' deferred tax assets and liabilities as of December 31, 1995 and
1994 are listed below.
<TABLE>
<CAPTION>
(in thousands) December 31
- ----------------------------------------------------------
1995 1994
- ----------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Book over tax depreciation $ 523 $ 1,208
Loan loss allowance 50,483 44,858
Net operating loss
carryforwards 27,231 33,093
Other 44,221 64,810
Total deferred tax assets 122,458 143,969
Deferred tax liabilities:
Tax over book depreciation 1,038 1,097
Accretion of bond discount 3,641 2,566
Direct lease financing 14,203 11,967
Pension 6,467 5,445
Other 30,289 25,444
Total deferred tax liabilities 55,638 46,519
Net deferred tax assets
before valuation allowance 66,820 97,450
Valuation allowance (17,042) (18,612)
Net deferred tax asset $ 49,778 $ 78,838
</TABLE>
<PAGE> 19
Applicable income taxes for financial reporting purposes differs from the
amount computed by applying the statutory federal income tax rate of 35% for
the reasons below:
<TABLE>
<CAPTION>
(in thousands) Year ended December 31
- --------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Tax computed at
statutory federal income
tax rate $102,878 $ 92,620 $ 74,435
Increases(decreases) in
taxes resulting from:
Obligations of states and
political subdivisions:
Tax exempt income (11,530) (11,121) (10,573)
Tax on preference item 1,353 1,020 878
State income tax, net
of federal tax benefit 5,552 4,718 4,080
Subsidiary purchase
accounting adjustments (51) (47) (50)
Other, net (2,094) (3,081) (2,601)
Total $ 96,108 $ 84,109 $ 66,169
Effective Tax Rate 32.7% 31.8% 31.1%
</TABLE>
The provisions for income taxes included in the supplemental consolidated
statement of income are summarized below. Included in these amounts are income
taxes (credit) of $(146,000), $120,000 and $290,000 in 1995, 1994 and 1993,
respectively, related to securities transactions.
<TABLE>
<CAPTION>
- --------------------------------------------
(in thousands) Current Deferred Total
- --------------------------------------------
<S> <C> <C> <C>
1995
Federal $81,861 $5,247 $87,108
State 8,258 743 9,001
TOTAL $90,119 $5,990 $96,109
1994
Federal $75,392 $1,315 $76,707
State 7,217 185 7,402
Total $82,609 $1,500 $84,109
1993
Federal $63,667 $(3,774) $59,893
State 6,813 (537) 6,276
Total $70,480 $(4,311) $66,169
</TABLE>
<PAGE> 20
NOTE Q. BUSINESS COMBINATIONS
On March 1, 1996, First National Bancorp of Gainesville, Georgia, with
approximately $3.1 billion in assets merged with and into Regions. Under the
terms of the transaction, Regions issued approximately 15,918,000 shares of its
common stock for all of First National's outstanding common stock (based on an
exchange ratio of 0.76 shares of Regions common stock for each share of First
National common stock). The transaction was accounted for as a pooling of
interests.
The following table presents net interest income, net income and net
income per common share as reported by Regions, First National and on a
combined basis.
<TABLE>
<CAPTION>
(in thousands, except per share data) Year Ended December 31
- -------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------
<S> <C> <C> <C>
Net interest income:
Regions $497,324 $435,640 $342,053
First National 126,940 119,896 108,296
Combined $624,264 $555,536 $450,349
Net income:
Regions $172,824 $145,884 $112,045
First National 25,005 34,636 34,459
Combined $197,829 $180,520 $146,504
Net income per common share:
Regions $3.75 $3.40 $3.01
First National 1.22 1.72 1.75
Combined 3.21 3.10 2.81
</TABLE>
The following table presents recent acquisitions of the pooled subsidiary:
<TABLE>
<CAPTION>
Total Assets Accounting
Date Company Headquarters Location (in thousands) Treatment
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
July 1995 FF Bancorp, Inc. New Smyrna Beach, $631,168 Pooling
Florida
July 1994 Barrow Bancshares, Winder, Georgia 54,687 Pooling
Inc.
February 1994 Metro Bancorp, Inc. Douglasville, Georgia 145,482 Purchase
August 1993 The Community Bank Carollton, Georgia 36,503 Pooling
of Carrollton
May 1993 Villa Rica Bancorp, Villa Rica, Georgia 55,553 Pooling
Inc.
</TABLE>
During 1995 Regions completed the following business combinations:
<TABLE>
<CAPTION>
Total Assets Accounting
Date Company Headquarters Location (in thousands) Treatment
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March First Commercial Chalmette, Louisiana $112,968 Purchase
Bancshares, Inc.
May Fidelity Federal Dalton, Georgia 333,336 Pooling
Savings Bank
July Interstate Billing Decatur, Alabama 30,521 Pooling
Service, Inc.
November Branch Office of Cartersville, Georgia 59,933 Purchase
Prudential Savings
Bank
</TABLE>
The total consideration paid for all the 1995 business combinations was
approximately $11.1 million in cash and 1,978,292 shares of Regions' common
stock (including options assumed and treasury stock reissued) valued at $37.9
million. Total intangible assets recorded in connection with the purchase
transactions totaled approximately $15.6 million.
<PAGE> 21
During 1994 Regions completed the following business combinations:
<TABLE>
<CAPTION>
Total Assets Accounting
Date Company Headquarters Location (in thousands) Treatment
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
May Guaranty Bancorp Inc. Baton Rouge, Louisiana $186,879 Pooling
July First Fayette Fayette, Alabama 76,586 Purchase
Bancshares Inc.
August BNR Bancshares Inc. New Roads, Louisiana 136,799 Pooling
September First Community Rome, Georgia 125,090 Pooling
Bancshares Inc.
November American Bancshares Monroe, Louisiana 302,674 Purchase
Inc.
December Union Bank & Trust Montgomery, Alabama 417,903 Purchase
Company
</TABLE>
Because certain of the 1995 and 1994 business combinations were accounted
for as purchases, Regions' supplemental consolidated financial statements
include the results of operations of those companies only from their respective
dates of acquisition. The following unaudited summary information presents the
consolidated results of operations of Regions on a pro forma basis, as if all
the above companies had been acquired on January 1, 1994. The pro forma
summary information does not necessarily reflect the results of operations as
they actually would have been, if the acquisitions had occurred at the
beginning of the periods presented or of results which may occur in the future.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
(in thousands, except per share data) Year Ended December 31
- ----------------------------------------------------------------
1995 1994
<S> <C> <C>
Interest income $1,261,366 $1,073,373
Interest expense 635,980 475,933
---------- ----------
Net interest income 625,386 597,440
Provision for loan losses 30,271 20,366
Non-interest income 187,545 191,088
Non-interest expense 488,684 490,786
---------- ----------
Income before income taxes 293,976 277,376
Applicable income taxes 96,109 87,422
---------- ----------
Net income $197,867 $189,954
Net income per share $3.19 $3.13
</TABLE>
Regions' prior period financial statements have not been restated to
include the effect of the 1995 acquisitions which were accounted for as
poolings of interests, since the effect is not material to Regions'
supplemental consolidated financial statements.
The following chart summarizes the assets acquired and liabilities assumed
in connection with business combinations in 1995 and 1994. Approximately $102
million of the 1994 "Cash and due from banks" amount, represent funds received
from the Resolution Trust Corporation, as an offset to liabilities assumed by
Regions in the 1994 purchase and assumption transactions.
<TABLE>
<CAPTION>
(in thousands) 1995 1994
- -------------------------------------------------
<S> <C> <C>
Cash and due from banks $58,453 $185,755
Federal funds sold -0- 79,525
Investment securities 13,600 172,180
Securities available for sale -0- 218,569
Loans, net 438,222 748,277
Other assets 26,483 101,346
Deposits 453,481 1,292,713
Borrowings 39,276 41,287
Other liabilities 6,994 20,687
</TABLE>
<PAGE> 22
During 1993 Regions completed the following business combinations:
<TABLE>
<CAPTION>
Headquarters Total Assets Accounting
Date Company Location (in thousands) Treatment
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
June Franklin County Bank Winchester, Tennessee $ 68,034 Purchase
October First Federal DeFuniak Springs, 89,295 Purchase
Savings Bank of Florida
DeFuniak Springs
December First Federal Marianna, Florida 101,084 Purchase
Savings Bank
December Secor Bank, Federal Birmingham, Alabama 1,831,937 Purchase
Savings Bank
</TABLE>
As of December 31, 1995, Regions and pooled subsidiaries had the following
pending business combinations:
<TABLE>
<CAPTION>
Approximate
(In millions)
-------------
Anticipated
Institution Asset Consid- Accounting
Size Value(1) eration Treatment
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bank of Heard County, located $46 $7 First Pooling
in Franklin County, Georgia National
Common
Stock
Converted
to
0.76
shares
of
Regions
Common
Stock
Metro Financial Corporation 206 28 Regions Purchase
and its subsidiary, Metro Common
Bank, located in Atlanta, Stock
Georgia
Enterprise National Bank, 50 8 Cash Purchase
located in Atlanta, Georgia
First Federal Bank of 90 16 Regions Purchase
Northwest Georgia, Federal Common
Savings Bank, located in Stock
Cedartown, Georgia
First Gwinnett Bankshares, 66 13 Regions Purchase
Inc. and its subsidiary, Common
First Gwinnett Bank, located Stock
in Atlanta, Georgia
Delta Bank and Trust Company, 206 34 Regions Pooling
located in Belle Chasse, Common
Louisiana Stock
Totals $664 $106
</TABLE>
- --------------------------------
(1) Computed as of the date of announcement of each transaction.
At December 31, 1995, the Company held 614,000 shares of common stock in
treasury, which were acquired for purposes of reissuance in the Metro
transaction. The Heard County, Metro and Enterprise transactions were
consummated in the first quarter of 1996. The other pending acquisitions remain
subject to applicable approvals by regulatory agencies and by stockholders of
the institutions to be acquired.
NOTE R. STOCK OPTION AND LONG-TERM INCENTIVE PLANS
Regions has stock option plans for certain key employees that provide for
the granting of options to purchase up to 2,860,000 shares of Regions' common
stock. The terms of options granted are determined by the personnel committee
of the Board of Directors; however, no options may be granted after ten years
from the plans' adoption and no options may be exercised beyond ten years from
the date granted. The option price per share of incentive stock options can
not be less than the fair market value of the common stock on the date of the
grant; however, the option price of non-qualified options may be less than the
fair market value of the common stock on the date of the grant. The plans also
permit the granting of stock appreciation rights to holders of stock options.
Stock appreciation rights were attached to 166,975; 204,060 and 331,755 of the
shares under option at December 31, 1995, 1994 and 1993, respectively.
Regions' long-term incentive plan provides for the granting of up to
5,000,000 shares of common stock in the form of stock options, stock
appreciation rights, performance awards or restricted stock awards. The terms
of stock options granted under the long-term incentive plan are generally
subject to the same terms as options granted under Regions' stock option plans.
A maximum of 1,500,000 shares of restricted stock and 2,500,000 shares of
performance awards, may be granted. During 1995 and 1993, Regions granted
51,998 and 5,500 shares, respectively, as restricted stock and during 1995,
1994, and 1993, granted 131,900; 125,000 and 187,750 shares, respectively, as
performance awards. Grantees of restricted stock must remain employed with
Regions for certain periods from the date of the grant at the same or a higher
level in order for the shares to be released. However, during this period the
grantee is eligible to receive dividends and exercise voting privileges on such
restricted shares. In 1995, 1994, and 1993, 4,325; 1,650 and 75,034 restricted
shares, respectively, were released. Issuance of performance shares is
dependent upon achievement of certain performance criteria and is, therefore,
deferred until the end of the performance period. In 1995, no performance
shares were issued. In 1994 and 1993, 3,897 and 196,743 performance shares,
respectively, were issued. Total expense for restricted stock was $1,074,000
in 1995, $587,000 in 1994, and $1,752,000 in 1993. Total expense for
performance shares was $9,118,000 in 1995, $6,666,000 in 1994, and $9,908,000
in 1993.
In connection with the business combination with First National, Regions
assumed stock options which were previously granted by First National and
converted those options, at the exchange ratio of 0.76, into options to
acquire Regions' common stock. The common stock for such options will be
registered by Regions and will not be included in the maximum number of shares
that may be granted by Regions under its existing stock option plans.
<PAGE> 23
Stock option activity (including assumed First National options based on
the 0.76 exchange ratio) over the last three years is summarized as follows:
<TABLE>
<CAPTION>
Shares Under Option Price
Option Per Share
- ---------------------------------------------------------------
<S> <C> <C> <C>
Balance at
January 1, 1993 994,662 $12.33 - $26.31
Assumed from pooled
company 340,844
Balance at January 1,
1993, as restated 1,335,506 12.33 - 26.31
Granted 401,219 24.67 - 35.44
Exercised (199,486) 14.38 - 26.31
Canceled (13,707) 12.33 - 24.67
Outstanding at
December 31, 1993 1,523,532 12.33 - 35.44
Granted 542,927 27.63 - 32.69
Exercised (318,990) 13.07 - 26.31
Canceled (47,276) 14.66 - 32.31
Outstanding at
December 31, 1994 1,700,193 12.33 - 35.44
Granted 617,711 6.04 - 36.00
Exercised (233,197) 12.33 - 32.69
Canceled (18,198) 15.00 - 31.88
Outstanding at
December 31, 1995 2,066,509 $ 6.04 - $36.00
Exercisable at
December 31, 1995 1,342,516 $13.07 - $35.44
</TABLE>
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 "Accounting and Disclosure of Stock-Based Compensation"
(Statement 123). Statement 123 is effective for fiscal years beginning after
December 15, 1995, and allows for the option of continuing to follow Accounting
Principles Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to
Employees" and the related Interpretations or selecting the fair value method
of expense recognition as described in Statement 123. The Company has elected
to follow APB 25 in accounting for its employee stock options because the
alternative fair value accounting provided for in Statement 123 requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of underlying stock on the date
of grant, no compensation expense is recognized.
NOTE S. PARENT COMPANY ONLY FINANCIAL STATEMENTS
Presented below are supplemental condensed financial statements of Regions
Financial Corporation:
<TABLE>
<CAPTION>
SUPPLEMENTAL STATEMENTS OF CONDITION
(in thousands) DECEMBER 31
- --------------------------------------------------------------
1995 1994
- --------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash due from banks $ 5,837 $ 7,055
Securities purchased under
agreements to resell -0- 35,000
Dividends receivable from
subsidiaries 30,000 -0-
Loans to subsidiaries 29,294 2,424
Investment securities 4,609 5,165
Premises and equipment 1,091 1,198
Investment in subsidiaries:
Banks 1,555,919 1,444,942
Non-banks 86,093 50,479
1,642,012 1,495,421
Other assets 18,179 14,550
$1,731,022 $1,560,813
Liabilities and Stockholders' Equity
Commercial paper $21,100 $18,600
Short-term borrowings 10,000 -0-
Long-term borrowings 223,532 215,742
Other liabilities 47,137 40,149
Total liabilities 301,769 274,491
Stockholders' Equity:
Common stock 38,583 38,743
Surplus 505,350 526,156
Undivided profits 911,987 734,916
Treasury stock (25,085) (12,441)
Unearned restricted stock (1,582) (1,052)
Total stockholders' equity 1,429,253 1,286,322
$1,731,022 $1,560,813
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
SUPPLEMENTAL STATEMENTS OF INCOME
(in thousands) YEAR ENDED DECEMBER 31
- -------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends received
from subsidiaries:
Banks $136,500 $ 43,300 $ 44,800
Non-banks -0- -0- 400
136,500 43,300 45,200
Service fees from
subsidiaries 24,819 19,886 20,869
Interest from
subsidiaries 2,132 1,844 2,680
Other 440 398 273
163,891 65,428 69,022
Expenses:
Salaries and employee
benefits 16,903 13,089 16,225
Interest 19,443 11,297 7,284
Net occupancy expense 647 527 536
Furniture and equipment
expense 364 342 303
Legal and other
professional fees 2,510 1,874 1,474
Amortization of excess
purchase price 5,505 3,278 2,759
Other expenses 4,713 5,071 2,508
50,085 35,478 31,089
Income before income
taxes and equity in
undistributed earnings
of subsidiaries 113,806 29,950 37,933
Applicable income taxes
(credit) (6,973) (5,293) (1,726)
Income before equity
in undistributed earnings
of subsidiaries 120,779 35,243 39,659
Equity in undistributed
earnings of subsidiaries:
Banks 68,985 142,180 105,118
Non-banks 8,065 3,097 1,727
77,050 145,277 106,845
NET INCOME $197,829 $180,520 $146,504
</TABLE>
Aggregate maturities of long-term borrowings (excluding demand notes to
affiliates of $13,532,000) in the next five years for the parent company total
$430,000 due in 2000. Standby letters of credit issued by the parent company
totaled $10.0 million at December 31, 1995. This amount is included in total
standby letters of credit disclosed in Note L.
<PAGE> 25
<TABLE>
<CAPTION>
SUPPLEMENTAL STATEMENTS OF CASH FLOWS
(in thousands) YEAR ENDED DECEMBER 31
- ---------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $197,829 $ 180,520 $ 146,504
Adjustments to reconcile
net cash provided by
operating activities:
Equity in undistributed
earnings of subsidiaries (77,050) (145,277) (106,845)
Provision for depreciation
and amortization 7,049 5,089 4,473
Increase (decrease) in other
liabilities 6,988 (13,879) 29,729
(Increase) decrease in dividends
receivable from subsidiaries (30,000) 11,200 (1,700)
(Increase) in other assets (3,813) (4,897) (505)
Stock issued to employees under
incentive plan 253 1,191 5,675
Net cash provided by
operating activities 101,256 33,947 77,331
Investing activities:
Investment in subsidiaries (10,139) (28,536) (77,478)
Principal (advances) payments on
loans to subsidiaries (26,870) 496 419
Purchases and sales of
premises and equipment (184) (587) (118)
Maturity (purchase) of investment
securities 550 -0- (3,082)
Net cash (used) by investing activities (36,643) (28,627) (80,259)
Financing activities:
Increase (decrease) in
commercial paper borrowings 2,500 1,399 (2,088)
Cash dividends (60,075) (50,273) (38,792)
Purchase of treasury stock (61,882) (81,081) (16,393)
Proceeds from long-term borrowings 12,990 141,188 2,167
Principal payments on
long-term borrowings (5,200) (7,695) (3,472)
Net increase in short-term
borrowings 10,000 -0- -0-
Proceeds from exercise of
stock options 836 811 973
Net cash (used) provided by
financing activities (100,831) 4,349 (57,605)
(Decrease) increase in cash and cash
equivalents (36,218) 9,669 (60,533)
Cash and cash equivalents at
beginning of year 42,055 32,386 92,919
Cash and cash equivalents at
end of year $ 5,837 $ 42,055 $ 32,386
</TABLE>
<PAGE> 26
Report of Independent Auditors
Board of Directors
Regions Financial Corporation
We have audited the supplemental consolidated statements of condition of
Regions Financial Corporation and subsidiaries (formed as a result of the
consolidation of Regions Financial Corporation and First National Bancorp) as
of December 31, 1995 and 1994 and the related supplemental consolidated
statements of income, changes in stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1995. The supplemental
consolidated financial statements give retroactive effect to the merger of
Regions Financial Corporation and First National Bancorp on March 1, 1996,
which has been accounted for using the pooling of interests method as
described in the notes to the supplemental consolidated financial statements.
These supplemental financial statements are the responsibility of the
management of Regions Financial Corporation. Our responsibility is to express
an opinion on these supplemental financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in 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 supplemental financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Regions
Financial Corporation and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, after giving retroactive
effect to the merger of First National Bancorp, as described in the notes to
the supplemental consolidated financial statements, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Birmingham, Alabama
March 25, 1996
