<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1997 COMMISSION FILE NUMBER
0-6159
REGIONS FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 63-0589368
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
417 North 20th Street, Birmingham, Alabama 35202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 326-7100
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to the filing requirements for at least
the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common Stock, $.625 Par Value-136,728,737 shares outstanding
as of July 31, 1997
<PAGE>
REGIONS FINANCIAL CORPORATION
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statement of Condition -
June 30, 1997, December 31, 1996
and June 30, 1996 2
Consolidated Statement of Income -
Three months ended June 30, 1997 and
June 30, 1996 and Six months ended
June 30, 1997 and June 30, 1996 3
Consolidated Statement of Cash Flows -
Six months ended June 30, 1997 and
June 30, 1996 4
Notes to Consolidated Financial Statements -
June 30, 1997 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CONDITION
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
June 30 December 31 June 30
1997 1996 1996
ASSETS
Cash and due from banks $ 626,943 $ 774,849 $ 677,250
Interest-bearing deposits in
other banks 27,326 33,191 60,337
Investment securities 2,434,760 2,102,750 2,103,436
Securities available for sale 1,857,240 1,767,845 1,864,209
Trading account assets 20,474 29,648 11,691
Mortgage loans held for sale 190,630 169,861 183,402
Federal funds sold and securities
purchased under agreement
to resell 127,861 20,842 66,637
Loans 15,178,876 13,335,450 12,389,999
Unearned income (29,292) (24,278) (18,032)
Loans, net of unearned income 15,149,584 13,311,172 12,371,967
Allowance for loan losses (195,941) (175,548) (171,436)
Net Loans 14,953,643 13,135,624 12,200,531
Premises and equipment 308,147 276,890 263,427
Interest receivable 159,642 139,333 135,404
Due from customers on acceptances 47,115 78,108 16,400
Other assets 461,161 401,234 337,884
$21,214,942 $18,930,175 $17,920,608
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing $ 2,170,630 $ 1,909,174 $ 1,968,463
Interest-bearing 14,653,759 13,139,162 12,646,253
Total Deposits 16,824,389 15,048,336 14,614,716
Borrowed funds:
Short-term borrowings:
Federal funds purchased and
securities sold under agreement
to repurchase 1,868,521 1,549,729 1,247,127
Commercial paper 22,384 40,367 21,700
Other short-term borrowings 17,669 21,831 6,752
Total Short-term Borrowings 1,908,574 1,611,927 1,275,579
Long-term borrowings 419,513 447,269 457,189
Total Borrowed Funds 2,328,087 2,059,196 1,732,768
Bank acceptances outstanding 47,115 78,108 16,400
Other liabilities 198,123 145,809 113,941
Total Liabilities 19,397,714 17,331,449 16,477,825
Stockholders' Equity:
Common Stock, par value $.625 a share:
Authorized - 240,000,000 shares
Issued, including treasury stock -
136,722,982; 62,914,750; and
62,676,642 shares, respectively 85,452 39,322 39,173
Surplus 598,824 520,571 518,512
Undivided profits 1,133,107 1,050,606 976,709
Treasury stock, at cost - 0;
260,000; and 1,800,000 shares,
respectively -0- (12,356) (84,622)
Unearned restricted stock (4,580) (3,121) (3,146)
Unrealized gain(loss) on securities
available for sale,
net of taxes 4,425 3,704 (3,843)
Total Stockholders' Equity 1,817,228 1,598,726 1,442,783
$21,214,942 $18,930,175 $17,920,608
</TABLE>
See notes to consolidated financial statements.
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
Interest Income:
Interest and fees on loans $329,063 $273,798 $640,140 $532,818
Interest on securities:
Taxable interest income 64,275 61,602 126,559 120,663
Tax-exempt interest income 7,409 5,021 15,110 10,937
Total Interest on Securities 71,684 66,623 141,669 131,600
Interest on mortgage loans held for sale 2,486 5,418 6,857 7,769
Income on federal funds sold
and securities purchased under
agreement to resell 1,534 496 2,953 1,840
Interest on time deposits in other banks 440 2,338 1,173 3,464
Interest on trading account assets 268 233 468 420
Total Interest Income 405,475 348,906 793,260 677,911
Interest Expense:
Interest on deposits 169,045 145,395 331,964 285,428
Interest on short-term borrowings 24,256 15,893 43,935 31,153
Interest on long-term borrowings 7,135 7,857 15,293 17,683
Total Interest Expense 200,436 169,145 391,192 334,264
Net Interest Income 205,039 179,761 402,068 343,647
Provision for loan losses 10,150 7,442 20,557 14,316
Net Interest Income After Provision
for Loan Losses 194,889 172,319 381,511 329,331
Non-Interest Income:
Trust department income 6,970 7,017 14,259 14,157
Service charges on deposit accounts 26,506 20,883 52,285 41,253
Mortgage servicing and origination fees 13,230 13,539 26,712 26,225
Securities gains (losses) 37 23 501 154
Other 15,701 10,780 29,891 26,135
Total Non-Interest Income 62,444 52,242 123,648 107,924
Non-Interest Expense:
Salaries and employee benefits 81,953 69,505 163,235 139,279
Net occupancy expense 9,395 7,804 18,391 15,471
Furniture and equipment expense 9,535 8,787 18,393 17,040
Merger expenses 0 0 0 8,785
Other 47,413 44,503 90,013 85,032
Total Non-Interest Expense 148,296 130,599 290,032 265,607
Income Before Income Taxes 109,037 93,962 215,127 171,648
Applicable income taxes 35,632 32,450 71,392 57,342
Net Income $ 73,405 $ 61,512 $143,735 $114,306
Average number of shares outstanding 136,683 124,394 136,536 124,182
Per share:
Net income $0.54 $0.49 $1.05 $0.92
Cash dividends declared $0.20 $0.175 $0.40 $0.35
</TABLE>
See notes to consolidated financial statements.
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
<S> <C> <C>
Six Months Ended
June 30
1997 1996
Operating Activities:
Net income $ 143,735 $ 114,306
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization of premises and
equipment 15,319 13,430
Provision for loan losses 20,557 14,316
Net (accretion) amortization of securities (821) (747)
Amortization of loans and other assets 16,854 11,196
Amortization of deposits and borrowings (821) (822)
Provision for losses on other real estate 736 219
Deferred income taxes (5,972) (6,273)
(Gain) loss on sale of premises and equipment (411) (532)
Realized security (gains) losses (501) (154)
Decrease in trading account assets 9,174 17,179
Decrease (increase) in mortgages held for sale 16,951 (66,315)
(Increase) in interest receivable (14,884) (14,454)
(Increase) in other assets (64,871) (28,179)
Increase (decrease) in other liabilities 20,632 (44,752)
Stock issued to employees 8,537 5,723
Other 899 1,382
Net Cash Provided By Operating Activities 165,113 15,523
Investing Activities:
Net (increase) in loans (886,003) (831,136)
Proceeds from sale of securities
available for sale 8,792 7,560
Proceeds from maturity of investment securities 233,270 341,700
Proceeds from maturity of securities available
for sale 170,947 240,691
Purchase of investment securities (304,382) (392,732)
Purchase of securities available for sale (45,537) (325,916)
Net decrease (increase) in interest-bearing
deposits in other banks 40,475 (3,860)
Proceeds from sale of premises and equipment 3,818 2,173
Purchase of premises and equipment (18,854) (23,506)
Net decrease in customers' acceptance liability 30,993 34,886
Net cash received in acquisitions 170,646 42,667
Net Cash (Used) By Investing Activities (595,835) (907,473)
Financing Activities:
Net increase in deposits 305,340 1,117,104
Net increase in short-term borrowings 254,582 206,982
Proceeds from long-term borrowings 2,165 2,717
Payments on long-term borrowings (74,046) (176,725)
Net (decrease) in bank acceptance liability (30,993) (34,886)
Cash dividends (54,377) (43,567)
Purchase of treasury stock for acquisitions (14,959) (91,932)
Proceeds from exercise of stock options 2,123 2,644
Net Cash Provided By Financing Activities 389,835 982,337
(Decrease) Increase In Cash And Cash Equivalents (40,887) 90,387
Cash and Cash Equivalents, Beginning of Period 795,691 653,500
Cash And Cash Equivalents, End of Period $ 754,804 $ 743,887
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE A -- Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions for Form 10-Q,
and, therefore, do not include all information and footnotes
necessary for a fair presentation of financial position, results
of operations and cash flows in conformity with generally accepted
accounting principles. For a summary of significant accounting
policies that have been consistently followed, see NOTE A to the
Consolidated Financial Statements included in the 1996 Annual Re-
port to Stockholders previously filed as Exhibit 13 to Form 10-K.
It is management's opinion that all adjustments, consisting of
only normal and recurring items necessary for a fair presentation,
have been included.
Certain amounts in prior periods have been reclassified to conform
to the current period presentation.
NOTE B -- Completed Acquisitions
On May 15, 1997, Regions paid $18 million in exchange for all the
outstanding stock of First Mercantile National Bank of Longwood,
Florida. This transaction, accounted for as a purchase, added $157
million in assets.
On May 31, 1997, Regions issued 2,159,922 shares of common stock
in exchange for all the outstanding stock of The New Iberia
Bancorp, Inc. of New Iberia, Louisiana. The New Iberia
transaction, accounted for as a pooling of interests, added
approximately $313 million in assets.
On June 1, 1997, Regions issued 677,032 shares of common stock in
exchange for all the outstanding common stock of First Bankshares,
Inc. of Hapeville, Georgia. The First Bankshares transaction,
accounted for as a pooling of interests, added $127 million in
assets.
On June 13, 1997, Regions issued 1,022,844 shares of common stock
in exchange for all the outstanding common stock of SB&T
Corporation of Smyrna, Georgia. The SB&T transaction, accounted
for as a pooling of interests, added $148 million in assets.
Prior year financial information has not been restated to give
effect to the acquisitions accounted for as poolings of interests
since they are not material.
NOTE C - Pending Acquisition
Regions currently has only one pending acquisition which is
summarized in the following table. The GF transaction is expected
to be accounted for as a purchase and is subject to applicable
shareholder and regulatory approvals.
<TABLE>
<S> <C> <C> <C> <C>
Expected
Number of
Shares of
Approximate Regions to
Asset Size Type of Exchange be issued(2)
Institution (in millions) Consideration Ratio (in 000's)
GF Bancshares
Inc., of Regions
Griffin, Common
Georgia $97 Stock 0.58776(1) 556
</TABLE>
(1) - Subject to adjustment based on the average of the last sales
price of Regions common stock on the Nasdaq National Market
over a specified period.
(2) - Based on the number of shares of outstanding stock of the
institution as of the announcement date, and without
adjustment in the exchange ratio.
NOTE D - New Accounting Standard
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share", which is required to be
adopted on December 31, 1997. At that time, the Company will be
required to change the method used to compute earnings per share
and to restate all prior periods. Under the new requirements for
calculating basic earnings per share, the dilutive effect of stock
options will be excluded. The impact of Statement 128 on the
calculation of earnings per share in the first and second quarters
of 1996 and 1997, is not expected to be material.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Regions' total assets at June 30, 1997, were $21.2 billion--an
increase of 18% over a year earlier. This increase was due to
growth in almost all categories of assets, particularly loans, due
to acquisition activity and internal growth. Since year-end 1996,
total assets have increased 12%, due primarily to acquisition
activity.
Comparisons with the prior year are affected by acquisition
activity. Prior year financial information has not been restated
to give effect to acquisitions accounted for as poolings of
interest since the effect is not material. Relevant 1996 and 1997
acquisitions are summarized as follows:
<TABLE>
<S> <C> <C> <C> <C>
Date Company Headquarters Total Assets Accounting
Acquired Acquired Location (in thousands) Treatment
August Delta Bank & Belle Chasse,
1996 Trust Company Louisiana $190,547 Purchase
August First Gwinnett
1996 Bancshares, Norcross,
Inc. Georgia 68,364 Purchase
August Rockdale Conyers,
1996 Community Bank Georgia 47,457 Purchase
September American
1996 Bancshares of Houma,
Houma, Inc. Louisiana 88,743 Purchase
January Florida First Panama City,
1997 Bancorp, Inc. Florida 286,515 Purchase
January Allied
1997 Bankshares, Thomson,
Inc. Georgia 559,815 Pooling
March West Carroll
1997 Bancshares, Oak Grove,
Inc. Louisiana 127,145 Pooling
April Gulf South
1997 Bancshares, Gretna,
Inc. Louisiana 55,363 Purchase
May First
1997 Mercantile Longwood
National Bank Florida 157,434 Purchase
May The New Iberia New Iberia,
1997 Bancorp, Inc. Louisiana 313,494 Pooling
June First
1997 Bankshares Hapeville,
Inc. Georgia 126,826 Pooling
June SB&T Smyrna,
1997 Corporation Georgia 147,709 Pooling
</TABLE>
Loans have increased 22% since a year ago. Loans added from the
seven purchase acquisitions, combined with the five pooling
transactions, accounted for a 9% increase in loans. The remaining
13% increase was attributable to internal growth, primarily in
commercial, consumer and real estate loans. Since year-end, total
loans have increased 14%, due to $953 million in loans added by
acquisitions and $885 million in internal growth. The average
yield on loans during the first six months of 1997 was 8.89%,
compared to 9.01% during the same period in 1996. This decrease
was primarily the result of lower average base lending rates.
Non-performing assets were as follows (in thousands):
<TABLE>
<S> <C> <C> <C>
June 30, Dec. 31, June 30,
1997 1996 1996
Non-accruing loans $ 85,049 $ 60,202 $ 49,533
Loans past due 90
days or more 21,612 26,532 18,326
Renegotiated loans 5,644 3,625 6,152
Other real estate 12,015 10,736 9,810
Total $124,320 $101,095 $ 83,821
Non-performing assets
as a percentage of
loans and other real
estate .82% .76% .68%
</TABLE>
Non-accruing loans have increased $35.5 million since June of last
year and $24.8 million since year end. These increases were mainly
in the real estate and installment categories. At June 30, 1997,
real estate loans comprised $43.8 million of total non-accruing
loans, with commercial loans accounting for $16.8 million and
installment loans $24.5 million. Other real estate increased $1.3
million since year end, and $2.2 million since June 1996, due
primarily due to acquisition activity.
Activity in the allowance for loan losses is summarized as follows
(in thousands):
June 30, June 30,
1997 1996
Balance at beginning of year $175,548 $159,487
Net loans charged-off (recovered):
Commercial (3,771) (1,552)
Real estate (419) (209)
Installment 18,108 6,966
Total 13,918 5,205
Allowance of acquired banks 13,754 2,838
Provision charged to expense 20,557 14,316
Balance at end of period $195,941 $171,436
Net loan losses in the first six months of 1997 were 0.19% of
loans (annualized), compared to 0.09% of loans (annualized) in the
first six months of 1996. Higher installment charge-offs in the
first half of 1997, partially offset by recoveries of prior period
real estate and commercial loans charge-offs, resulted in higher
net loan losses in 1997. At June 30, 1997, the allowance for loan
losses stood at 1.29% of loans, compared to 1.39% a year ago and
1.32% at year end. The allowance for loan losses as a percentage
of non-performing loans and non-performing assets was 174% and
158%, respectively, at June 30, 1997, compared to 232% and 205%,
respectively, at June 30, 1996.
The allowance for loan losses is maintained at a level deemed ade-
quate by management to absorb possible losses from loans in the
portfolio. In determining the adequacy of the allowance for loan
losses, management considers numerous factors, including but not
limited to: (1) management's estimate of future economic
conditions and the resulting impact on Regions, (2) management's
estimate of the financial condition and liquidity of certain loan
customers, and (3) management's estimate of collateral values of
property securing certain loans. Because all of these factors and
others involve the use of management's estimation and judgment,
the allowance for loan losses is inherently subject to adjustment
at future dates. At June 30, 1997, it is management's opinion
that the allowance for loan losses is adequate. However,
unfavorable changes in the factors used by management to determine
the adequacy of the allowance, including increased loan
delinquencies and subsequent charge-offs, or the availability of
new information, could require additional provisions, in excess of
normal provisions, to the allowance for loan losses in future
periods.
Total securities have increased 8% since a year ago and 11% since
year end, as a result of securities added in the first half of
1997 by acquisitions.
Mortgage loans held for sale have increased $7.2 million since
June 30, 1996 and $20.8 million since year end as a result of
higher levels of residential mortgage loan production at Regions'
mortgage banking subsidiary during the first half of 1997.
Residential mortgage loan production at Regions' mortgage banking
subsidiary was approximately $933 million during the first half of
1997, compared to $895 million during the same time period in
1996.
Interest-bearing deposits in other banks at June 30, 1997 totaled
$27.3 million, a decrease of $33.0 million compared to a year ago
and $5.9 compared to year end. These decreases resulted primarily
from placing funds in alternative investments.
Net federal funds purchased and security repurchase agreements
totaled $1.7 billion at June 30, 1997, $1.5 billion at year end
and $1.2 billion at June 30, 1996. The level of federal funds and
security agreements can fluctuate significantly on a day-to-day
basis, depending on funding needs and which sources of funds are
used to satisfy those needs. During the first six months of 1997,
net funds purchased averaged $1.4 billion, compared to $1.0
billion in the first six months of 1996, indicating more reliance
on purchased funds to support earning assets in the first half of
1997 than in the same period last year.
Premises and equipment have increased $31.3 million since year end
and $44.7 million since June 30, 1996. These increases were due
primarily to the addition of premises and equipment obtained
through acquisitions since June 1996.
Other assets have increased $59.9 million since year end and
$123.3 million since the second quarter of last year, due
primarily to increased excess purchase price resulting from
acquisitions, and increased mortgage servicing rights added by
purchases of several mortgage servicing portfolios and the
capitalization of mortgage servicing rights in accordance with
Financial Accounting Standards Board Statement No. 122.
Total deposits have increased 15% since June of last year. The
deposits acquired in connection with acquisitions resulted in a
12% increase, with the remaining 3% increase attributable to
internal growth. The internal growth resulted primarily from
increases in certificates of deposit accounts. Since year end,
total deposits have increased 2%, after adjusting for the deposits
acquired in connection with acquisitions during the first half of
1997.
Long-term borrowings have decreased $27.8 million since year end,
and $37.7 million since June 30, 1996. These decreases resulted
primarily from the paydown of Senior Bank Notes issued by Regions'
Louisiana banking affiliate and scheduled payments on other long-
term borrowings .
Regions continues to be concerned about the general trend in
litigation in Alabama state courts involving large damage awards
against financial service company defendants. Regions directly or
through its subsidiaries is party to approximately 77 cases in
Alabama in the ordinary course of business, some of which seek
class action treatment or punitive damages. The damage exposure in
Alabama in any case and in the aggregate is difficult to estimate
because the jury has broad discretion as to the amount of damages
awarded. The U.S. Supreme Court overturned an Alabama case
involving a large jury award, holding that the punitive damage
award was so grossly excessive as to violate due process.
Subsequently, the U.S. Supreme Court has returned several cases to
the Alabama courts for reconsideration in light of its ruling. In
addition, the Alabama Supreme Court has reduced several large
damage awards against defendants that were awarded by lower court
juries. In March of 1997, the Alabama Supreme Court reversed a
precedent set in 1989 regarding reliance by plaintiffs on verbal
representations which are not in agreement with written contracts.
The 1989 ruling had been the source of significant litigation
losses in the state and its reversal is viewed as a positive
event.
Notwithstanding these concerns, Regions believes, based on
consultation with legal counsel, that the outcome of pending
litigation will not have a material effect on Regions'
consolidated financial position.
Stockholders' equity was $1.8 billion at June 30, 1997, an in-
crease of 26% over last year and an increase of 14% since year
end. These increases resulted primarily from internally generated
capital and equity added in connection with acquisitions since
June 1996. The unrealized gain on securities available for sale
(net of taxes) totaled $4.4 million at June 30, 1997, and of $3.7
million at year end. Regions' ratio of equity to total assets was
8.57% at June 30, 1997, compared to 8.05% a year ago and 8.45% at
year end.
Regions' primary sources of liquidity are maturities from its loan
and securities portfolios. In addition to these sources of
liquidity, Regions has access to purchased funds in the state and
national money markets. Liquidity is further enhanced by a
relatively stable source of deposits. At June 30, 1997, the loan
to deposit ratio was 90.05%, compared to 84.65% a year ago and
88.46% at year end. Regions' management places constant emphasis
on the maintenance of adequate liquidity to meet conditions that
might reasonably be expected to occur.
Net interest income for the first six months of 1997 increased
$58.4 million or 17%, compared to the same period in 1996. The
increased net interest income resulted from a higher level of
earning assets, combined with higher spreads on those earning
assets. The net yield on interest-earning assets (taxable
equivalent basis) was 4.32% in the first six months of 1997,
compared to 4.31% in the same period in 1996. For the second
quarter of 1997, net interest income increased $25.3 million or
14%, over the second quarter of 1996, due to increased earning
assets and higher spreads on those assets.
Total non-interest income increased $15.7 million or 15% over the
first half of 1996 and $10.2 million or 20% over the second
quarter of 1996. Trust department income increased $102,000 or 1%
on a year-to-year comparison but decreased $47,000 on a quarterly
comparison. Increased charges for selected deposit account
services, coupled with an increase in the number of deposit ac-
counts due to acquisitions and internal growth, resulted in
service charges on deposit accounts increasing $11.0 million or
27% in the first half of 1997, compared to the same period in 1996
and $5.6 million or 27% over the second quarter of 1996. Mortgage
servicing and origination fees increased $487,000 or 2% in the
first six months of 1997 compared to the same period in 1996 but
for the second quarter of 1997 decreased $309,000 or 2% compared
to the second quarter of 1996. Mortgage origination fees were
down 1% due to differences in product mixes and competitive
pricing pressures. Mortgage servicing fees increased 1% on a
year-to-year comparison. The mortgage company's servicing
portfolio totaled $12.8 billion at June 30, 1997. Other
non-interest income increased $3.8 million or 14% in the first six
months of 1997, compared to the first six months of 1996, and $4.9
million or 46% compared to the second quarter of 1996, primarily
due to increased automated teller machine fees and increased
trading account income.
Total non-interest expense increased $24.4 million or 9% in the
first six months of 1997, compared to the same period in 1996 and
$17.7 million or 14% in the second quarter compared to the same
period in 1996. Excluding the non-recurring merger expenses in
1996, total non-interest expense was up $33.2 million or 13%.
Salaries and employee benefits were up 17% in the first six months
of 1997, and 18% in the second quarter of 1997 compared to the
same periods in 1996 due to an increase in the number of employees
because of acquisitions, coupled with normal merit increases and
higher benefit costs. Net occupancy expense and furniture and
equipment expense increased 13% in the first six months of 1997
over the same period in 1996 and 14% over the second quarter of
1996, primarily because of additional expenses associated with
branch offices and equipment added by the 1996 and 1997
acquisitions. A non-recurring pre-tax merger charge of $8.8
million was taken in the first quarter of 1996 related to the
merger of First National Bancorp with Regions. This charge
consisted primarily of investment banking and other professional
fees, severance costs, data processing contract buyouts and
obsolete equipment write-downs. Other non-interest expense
increased $5.0 million or 6% in the first six months of 1997 and
$2.9 million or 7% in the second quarter over comparable 1996
periods, primarily because of increases in excess purchase price
and mortgage servicing rights amortization, partially offset by
lower FDIC premiums related to the lower assessment rates on
insured deposits, and lower professional fees, computer services
fees and stationery and printing costs.
Income tax expense increased $14.1 (25%) million over the first
six months of 1996 and $3.2 million (10%) over the second quarter
of 1996, due to an increase in federal taxable income, and an
increase in taxable income as a percentage of total income.
Net income for the first half of 1997 was $143.7 million--up 26%
over the same period last year. Net income for the second quarter
was $73.4 million--up 19% over the second quarter of last year.
Annualized return on stockholders' equity increased to 16.22%,
compared to 15.53% in the first six months of last year.
Annualized return on assets also increased to 1.41% in the first
six months of 1997, compared to 1.32% for the same period in 1996.
First six months of 1996 income, excluding the non-recurring merger
expenses, was $119.8 million. Annualized return on stockholders'
equity and return on assets were 16.27% and 1.38%, respectively, in
the first half of 1996, excluding the non-recurring merger
expenses.
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on May 14,
1997, five nominees were elected as directors of Regions
to serve three year terms, and the terms of seven
directors continued beyond the meeting. The directors
elected at the 1997 Annual Meeting were James B. Boone,
Jr. (59,526,728 votes in favor and 747,208 votes
withheld), Albert P. Brewer (59,516,196 votes in favor and
757,740 votes withheld), James S. M. French (59,524,379
votes in favor and 749,557 votes withheld), Richard D.
Horsley (59,525,303 votes in favor and 748,633 votes
withheld), and J. Stanley Mackin (59,483,158 votes in
favor and 790,778 votes withheld).
In addition, the stockholders approved an amendment to
Article IV of the Certificate of Incorporation to increase
the number of authorized shares of common stock from
120,000,000 to 240,000,000 (58,311,048 votes in favor,
1,583,659 votes against, 379,229 votes abstained, and
3,412,481 broker nonvotes).
At an adjournment of the Annual Meeting reconvened on June
13, 1997, the stockholders approved an amendment to
Article IV of the Certificate of Incorporation to
authorize a class of 5,000,000 shares of preferred stock
(49,971,564 votes in favor, 5,704,831 votes against,
1,185,060 votes abstained, and 3,412,481 broker nonvotes).
Under the terms of Article IV as so amended, the board of
directors has the authority to divide such preferred
shares into series and to establish the relative voting
powers, designations, preferences, rights and
qualifications, limitations, or restrictions with respect
to each series, in accordance with the General Corporation
Law of the State of Delaware.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27) Financial Data Schedule (SEC use only)
(b) Reports on Form 8-K:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by undersigned thereunto duly authorized.
Regions Financial Corporation
DATE: August 13, 1997 /s/ Robert P. Houston
Robert P. Houston
Executive Vice President and
Comptroller
(Chief Accounting Officer and
Duly Authorized Officer)
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