<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 MARCH 31, 1998 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 35203
(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-149,856,064 shares outstanding
as of April 30, 1998
<PAGE>
REGIONS FINANCIAL CORPORATION
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Condition -
March 31, 1998, December 31, 1997
and March 31, 1997 2
Consolidated Statements of Income -
Three months ended March 31, 1998 and
March 31, 1997 3
Consolidated Statement of Stockholders' Equity
Three months ended March 31, 1998 4
Consolidated Statements of Cash Flows -
Three months ended March 31, 1998 and
March 31, 1997 5
Notes to Consolidated Financial Statements -
March 31, 1998 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CONDITION
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
March 31 December 31 March 31
1998 1997 1997
ASSETS
Cash and due from banks $ 879,877 $ 780,203 $ 571,753
Interest-bearing deposits in
other banks 75,347 48,162 26,856
Investment securities 2,652,718 2,929,596 2,459,366
Securities available for sale 2,379,360 1,667,690 2,037,689
Trading account assets 24,213 50,676 13,623
Mortgage loans held for sale 427,088 383,840 220,335
Federal funds sold and securities
purchased under agreement
to resell 180,796 118,395 142,937
Loans 18,081,491 17,607,840 15,550,091
Unearned income (36,113) (44,451) (46,380)
Loans, net of unearned income 18,045,378 17,563,389 15,503,711
Allowance for loan losses (221,998) (210,604) (207,096)
Net Loans 17,823,380 17,352,785 15,296,615
Premises and equipment 351,229 333,953 328,498
Interest receivable 189,368 175,844 148,363
Due from customers on acceptances 141,948 157,262 85,158
Other assets 503,741 541,929 488,690
$25,629,065 $24,540,335 $21,819,883
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing $ 2,657,245 $ 2,521,538 $ 2,225,185
Interest-bearing 17,632,030 16,541,981 15,447,155
Total Deposits 20,289,275 19,063,519 17,672,340
Borrowed funds:
Short-term borrowings:
Federal funds purchased and
securities sold under
agreement to repurchase 1,454,417 1,948,582 1,377,686
Commercial paper 54,750 52,750 42,367
Other short-term borrowings 924,034 502,834 6,701
Total Short-term Borrowings 2,433,201 2,504,166 1,426,754
Long-term borrowings 373,811 440,426 557,723
Total Borrowed Funds 2,807,012 2,944,592 1,984,477
Bank acceptances outstanding 141,948 157,262 85,158
Other liabilities 259,103 337,301 190,044
Total Liabilities 23,497,338 22,502,674 19,932,019
Stockholders' Equity:
Common Stock, par value $.625 a share:
Authorized - 240,000,000 shares
Issued, including treasury stock -
149,797,609; 146,712,761; and
72,153,445 shares, respectively 93,624 91,695 45,096
Surplus 681,703 656,651 659,294
Undivided profits 1,356,314 1,300,962 1,193,909
Treasury stock, at cost - 0;
363,279; and 0 shares,
respectively -0- (13,855) -0-
Unearned restricted stock (8,548) (9,410) (5,816)
Accumulated other comprehensive
income 8,634 11,618 (4,619)
Total Stockholders' Equity 2,131,727 2,037,661 1,887,864
$25,629,065 $24,540,335 $21,819,883
See notes to consolidated financial statements.
</TABLE>
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended
March 31
1998 1997
<TABLE>
<S> <C> <C>
Interest Income:
Interest and fees on loans $394,756 $337,216
Interest on securities:
Taxable interest income 71,713 65,742
Tax-exempt interest income 7,744 8,037
Total Interest on Securities 79,457 73,779
Interest on mortgage loans held for sale 8,133 4,371
Income on federal funds sold
and securities purchased under
agreement to resell 2,089 1,565
Interest on time deposits in other banks 975 866
Interest on trading account assets 306 200
Total Interest Income 485,716 417,997
Interest Expense:
Interest on deposits 201,260 175,717
Interest on short-term borrowings 31,722 19,765
Interest on long-term borrowings 7,328 9,427
Total Interest Expense 240,310 204,909
Net Interest Income 245,406 213,088
Provision for loan losses 12,119 11,194
Net Interest Income After Provision
for Loan Losses 233,287 201,894
Non-Interest Income:
Trust department income 8,995 7,590
Service charges on deposit accounts 31,125 27,734
Mortgage servicing and origination fees 17,369 13,482
Securities gains (losses) (69) 464
Other 19,891 15,225
Total Non-Interest Income 77,311 64,495
Non-Interest Expense:
Salaries and employee benefits 98,955 88,331
Net occupancy expense 10,297 11,062
Furniture and equipment expense 10,893 8,858
Other 58,492 45,962
Total Non-Interest Expense 178,637 154,213
Income Before Income Taxes 131,961 112,176
Applicable income taxes 45,758 37,880
Net Income $ 86,203 $ 74,296
Average number of shares outstanding 149,556 145,847
Average number of shares outstanding--
assuming dilution 152,571 149,014
Per share:
Net income $0.58 $0.51
Net income--assuming dilution $0.57 $0.50
Cash dividends declared $0.23 $0.20
See notes to consolidated financial statements.
</TABLE>
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Unearned Accumulated
Common Undivided Treasury Compensa- Other
Stock Surplus Profits Stock tion Comprehen- Total
sive Income
BALANCE AT JANUARY 1, 1998 $91,695 $656,651 $1,300,962 $(13,855) $(9,410) $11,618 $2,037,661
Treasury stock of pooled company (41) (1,424) 1,465
Comprehensive Income:
Net Income 86,203 86,203
Other comprehensive income,
net of tax
Unrealized gains(losses)
on AFS securities, net of
reclassification
adjustment (2,984) (2,984)
Comprehensive income 86,203 (2,984) 83,219
Equity from acquisitions
accounted for as poolings
of interest 1,672 12,234 4,037 12,390 30,333
Cash dividends declared
($0.23 per common share) (34,888) (34,888)
Common stock transactions:
Stock issued to employees
under incentive plans 214 13,046 13,620
incentive plan
Stock options exercised 84 1,196 1,280
Amortization of unearned
restricted stock 862 862
BALANCE AT MARCH 31, 1998 $93,624 $681,703 $1,356,314 $-- $(8,548) $8,634 $2,131,727
</TABLE>
<TABLE>
<S> <C>
Disclosure of
reclassification amount:
Unrealized holding
gains(losses) on AFS
securities arising during
period $(3,029)
Reclassification adjustment,
net of
tax, for gains and losses
realized in
net income 45
Net unrealized losses on AFS
securities, net of tax $(2,984)
</TABLE>
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
Three Months Ended
March 31
1998 1997
<TABLE>
<S> <C> <C>
Operating Activities:
Net income $ 86,203 $ 74,296
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization of premises and
equipment 8,862 8,375
Provision for loan losses 12,119 11,194
Net (accretion) of securities (261) (469)
Amortization of loans and other assets 10,924 8,092
Amortization of deposits and borrowings 46 (411)
Provision for losses on other real estate 34 71
Deferred income taxes (2,817) (4,582)
(Gain) on sale of premises and equipment (380) (702)
Realized security losses (gains) 69 (464)
Decrease in trading account assets 26,463 29,040
(Increase) in mortgages held for sale (43,248) (6)
(Increase) in interest receivable (9,900) (2,567)
Decrease (increase) in other assets 28,844 (38,406)
(Decrease) increase in other liabilities (74,019) 6,318
Stock issued to employees 14,717 8,537
Other 862 (32)
Net Cash Provided By Operating Activities 58,518 98,284
Investing Activities:
Net (increase) in loans (168,144) (292,143)
Proceeds from sale of securities available
for sale 27,969 15,699
Proceeds from maturity of investment securities 443,715 150,956
Proceeds from maturity of securities available
for sale 140,363 134,927
Purchase of investment securities (190,664) (197,881)
Purchase of securities available for sale (788,976) (71,602)
Net decrease in interest-bearing deposits
in other banks 15,532 50,708
Proceeds from sale of premises and equipment 1,135 2,961
Purchase of premises and equipment (16,782) (11,715)
Net decrease (increase) in customers'
acceptance liability 15,314 (7,050)
Net cash received in acquisitions 9,820 156,785
Net Cash (Used) By Investing Activities (510,718) (68,355)
Financing Activities:
Net increase in deposits 810,371 89,026
Net (decrease) in short-term borrowings (71,392) (217,840)
Proceeds from long-term borrowings 13,890 46,516
Payments on long-term borrowings (90,389) (80,022)
Net (decrease) increase in bank acceptance
liability (15,314) 7,050
Cash dividends (34,171) (27,311)
Proceeds from exercise of stock options 1,280 1,855
Net Cash Provided (Used) By Financing
Activities 614,275 (180,726)
Increase (Decrease) In Cash And Cash
Equivalents 162,075 (150,797)
Cash and Cash Equivalents, Beginning of Period 898,598 865,487
Cash And Cash Equivalents, End of Period $1,060,673 $714,690
See notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
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 1997 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.
Prior period financial information has been restated for business
combinations with PALFED, Inc., First United Bancorporation and
First State Corporation, which were consummated in the first
quarter of 1998 and accounted for as poolings of interests
according to Generally Accepted Accounting Principles.
Certain amounts in prior periods have been reclassified to conform
to the current period presentation.
NOTE B -- Business Combinations
On February 12, 1998, Regions issued 3,790,747 shares of common
stock in exchange for all the outstanding stock of PALFED, Inc.,
of Aiken, South Carolina. This transaction, accounted for as a
pooling of interests, added $665 million in assets.
On February 13, 1998, Regions issued 966,027 shares of common
stock in exchange for all the outstanding stock of Greenville
Financial Corporation of Greenville, South Carolina. The
Greenville transaction, accounted for as a pooling of interests,
added approximately $143 million in assets.
On March 14, 1998, Regions issued 2,148,950 shares of common stock
in exchange for all the outstanding stock of First United
Bancorporation of Anderson, South Carolina. This transaction,
accounted for as a pooling of interests, added approximately $305
million in assets.
On March 19, 1998, Regions issued 1,037,927 shares of common stock
in exchange for all the outstanding stock of Key Florida Bancorp,
Inc. of Bradenton, Florida. This transaction, accounted for as a
pooling of interests, added approximately $207 million in assets.
Also on March 19, 1998, Regions issued 828,492 shares of common
stock in exchange for all the outstanding stock of St. Mary
Holding Corporation of Franklin, Louisiana. This transaction,
accounted for as a pooling of interests, added approximately $110
million in assets.
On March 31, 1998, Regions issued 3,853,298 shares of common stock
in exchange for all the outstanding stock of First State
Corporation of Albany, Georgia. This transaction, accounted for
as a pooling of interests, added approximately $536 million in
assets.
As explained in Note A Regions restated prior period financial
information for the PALFED, First United and First State
transactions. The following table presents net interest income,
net income, net income per share and net income per share
assuming dilution as reported by Regions, PALFED, First United,
First State and on a combined basis for the three months ended
March 31, 1997.
Net interest income:
Regions $197,029
PALFED 6,034
First United 5,932
First State 4,093
Combined $213,088
Net income:
Regions $70,330
PALFED 1,350
First United 1,797
First State 819
Combined $74,296
Net income per share:
Regions $.52
PALFED .26
First United .26
First State .21
Combined $.51
Net income per share assuming dilution:
Regions $.51
PALFED .25
First United .25
First State .20
Combined $.50
NOTE C - Pending Acquisitions
Regions' pending acquisitions are summarized in the following
table. All are expected to be accounted for as poolings of
interests and are 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(1)
Institution (in millions) Consideration Ratio (in 000's)
First
Commercial
Corporation,
of Little Regions
Rock, Common
Arkansas $7,382 Stock 1.70 63,884
Etowah Bank, Regions
of Canton, Common
Georgia 432 Stock 3.20 2,915
First
Community
Banking
Services,
Inc. of Regions
Peachtree Common
City, Georgia 131 Stock .625 850
Jacobs Bank,
of Regions
Scottsboro, Common
Alabama 190 Stock 13.50 1,350
Village
Bankshares,
Inc., of Regions
Tampa, Common
Florida 199 Stock 1.34 1,339
</TABLE>
(1) - Based on the number of shares of outstanding stock of each
institution as of the announcement date.
NOTE D - New Accounting Standard
As of January 1, 1998, Regions adopted Financial Accounting
Standards Statement No. 130 (Statement 130), 'Reporting
Comprehensive Income'. Statement 130 establishes new rules for the
reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on net
income or shareholders' equity. Statement 130 requires unrealized
gains and losses from available for sale securities, which prior
to adoption were reported separately in shareholders' equity to be
included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements
of Statement 130. Comprehensive income for the three months ended
March 31, 1997, was $66.6 million.
By December 31, 1998, Regions will adopt Financial Accounting
Standards Statement No. 131 (Statement 131), 'Disclosures about
Segments of an Enterprise and Related Information'. Statement 131
superceding FASB Statement 114, 'Financial Reporting for Segment
of a Business Enterprise', establishes standards for the way
public business enterprises reports information about operating
segments in annual financial statements and requires those
enterprises to report selected information about operating
segments in interim financial reports. The adoption of Statement
131 will have no effect on the results of operations or financial
position of Regions.
NOTE E - Year 2000 Compliance
Regions is preparing its computer systems and applications for the
Year 2000. This process involves modifying or replacing certain
hardware and software maintained by Regions as well as
communicating with external service providers to ensure that they
are taking the appropriate action to remedy any Year 2000 issues.
The majority of applications used by Regions are products of
established national vendors. Management expects to have
substantially all of the system and application changes completed
by December 31, 1998, and believes that its level of preparedness
is appropriate. However, there can be no assurance that the
systems of other companies on which Regions' systems rely will be
converted and would not have an adverse impact on the Company's
systems.
Regions estimates that the cumulative cost of the project will be
approximately $15 million. This cost includes personnel cost
related to the modification of systems and applications as well as
the cost to purchase or lease certain hardware and software. In
1998, Region expects to incur approximately $10 million of the
total anticipated amount for the project. The purchase of hardware
and software will be capitalized according to normal policy. Cost
associated with personnel will be expensed in the period incurred.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Regions' total assets at March 31, 1998, were $25.6 billion--an
increase of 17% 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 1997,
total assets have increased 4%, due primarily to acquisition
activity.
Comparisons with the prior year are significantly affected by the
following acquisitions accounted for as purchases, and by The New
Iberia Bancorp, Inc., First Bankshares, Inc., SB&T Corporation,
Greenville Financial Corporation, St. Mary Holding Company, and
Key Florida Bancorp, Inc. acquisitions, which were accounted for
as poolings of interests. Prior year financial information has
not been restated to give effect to the New Iberia, First
Bankshares, SB&T, Greenville, Key and St. Mary transactions since
the effect is not material. Prior period financial information has
been restated for the business combinations with PALFED, Inc.,
First United Bancorporation and First State Corporation, which
were closed in the first quarter of 1998. Relevant 1997 and 1998
acquisitions (excluding the three business combinations for which
prior period financial information has been restated) are
summarized as follows:
<TABLE>
<S> <C> <C> <C> <C>
Date Headquarters Total Assets Accounting
Acquired Company Acquired Location (in thousands) Treatment
April Gulf South Gretna, $ 55,363 Purchase
1997 Bancshares, Inc. Louisiana
May First Mercantile Longwood, 157,434 Purchase
1997 National Bank Florida
May The New Iberia New Iberia, 313,494 Pooling
1997 Bancorp, Inc. Louisiana
June First Bankshares, Hapeville, 126,826 Pooling
1997 Inc. Georgia
June SB&T Corporation Smyrna, 147,709 Pooling
1997 Georgia
December GF Bancshares, Griffin, 98,446 Purchase
1997 Inc. Georgia
February Greenville Greenville, 143,331 Pooling
1998 Financial South
Corporation Carolina
March Key Florida Bradenton, 207,193 Pooling
1998 Bancorp, Inc. Florida
March St. Mary Holding Franklin, 110,216 Pooling
1998 Corporation Louisiana
</TABLE>
Loans have increased 16% since a year ago. Loans added from the
three purchase acquisitions, combined with the six pooling
transactions, accounted for a 5% increase in loans. The remaining
11% increase was attributable to internal growth, primarily in
commercial and real estate loans. Since year-end, total loans
have increased 3%, due to $320 million in loans added by
acquisitions and $162 million in internal growth. The average
yield on loans during the first three months of 1998 was 8.99%,
compared to 8.95% during the same period in 1997. This increase
was primarily the result of higher average base lending rates.
Non-performing assets were as follows (in thousands):
<TABLE>
<S> <C> <C> <C>
March 31, Dec. 31, March 31,
1998 1997 1997
Non-accruing loans $117,427 $103,588 $ 86,002
Loans past due 90
days or more 17,296 19,179 30,972
Renegotiated loans 1,759 6,543 11,392
Other real estate 15,034 15,247 17,506
Total $151,516 $144,557 $145,872
Non-performing assets
as a percentage of
loans and other real
estate .84% .82% .94%
</TABLE>
Non-accruing loans have increased $31.4 million since March of
last year and $13.8 million since year end. These increases were
mainly in the consumer category combined with the effect of
acquisitions and two commercial credits which were transferred
to non-accrual status. At March 31, 1998, real estate
loans comprised $49.1 million of total non-accruing loans,
with commercial loans accounting for $30.2 million and consumer
loans $38.1 million. Other real estate decreased $213,000 since
year end, and $2.5 million since March 1997, due primarily to the
writedown and disposition of several parcels of other real estate.
Activity in the allowance for loan losses is summarized as follows
(in thousands):
March 31, March 31,
1998 1997
<TABLE>
<S> <C> <C>
Balance at beginning of period $210,604 $190,753
Net loans charged-off (recovered):
Commercial (836) (2,234)
Real estate 276 (141)
Installment 9,910 9,497
Total 9,350 7,122
Allowance of acquired banks 8,625 12,271
Provision charged to expense 12,119 11,194
Balance at end of period $221,998 $207,096
</TABLE>
Net loan losses in the first three months of 1998 were 0.21% of
average loans (annualized), compared to 0.19% of average loans
(annualized) in the first three months of 1997. Slightly higher
installment and real estate net charge-offs in the first three
months of 1998, partially offset by recoveries of prior period
commercial loan net charge-offs, resulted in higher net loan
losses in 1998. At March 31, 1998, the allowance for loan losses
stood at 1.23% of loans, compared to 1.34% a year ago and 1.20% at
year end. The allowance for loan losses as a percentage of
non-performing loans and non-performing assets was 163% and 147%,
respectively, at March 31, 1998, compared to 161% and 142%,
respectively, at March 31, 1997.
The allowance for loan losses is maintained at a level deemed
adequate 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 March 31, 1998, 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 consumer 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 12% since a year ago and 9% since
year end, as a result of securities added by acquisitions in the
second quarter of 1997 and in the first quarter of 1998.
Mortgage loans held for sale have increased $207 million since
March 31, 1997 and $43 million since year end as a result of
increased levels of residential mortgage loan production at
Regions' mortgage banking subsidiary. Residential mortgage loan
production at Regions' mortgage banking subsidiary was
approximately $874 million during the first three months of 1998,
compared to $418 million during the same time period in 1997.
Interest-bearing deposits in other banks at March 31, 1998 totaled
$75.3 million, an increase of $48.5 million compared to a year ago
and $27.2 compared to year end. These increases resulted from
interest bearing deposits added by acquisitions.
Net federal funds purchased and security repurchase agreements
totaled $1.3 billion at March 31, 1998, $1.8 billion at year end
and $1.2 billion at March 31, 1997. 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 three months of
1998 and 1997, net funds purchased averaged $1.3 billion,
indicating the utilization of alternative sources of funds to
support earning asset growth since the first quarter of 1997.
Premises and equipment have increased $17.3 million since year end
and $22.7 million since March 31, 1997. These increases were due
primarily to the addition of premises and equipment obtained
through acquisitions since March 1997.
Other assets have decreased $38.2 million since year end, but
increased $15.1 million since the first quarter of last year. The
year to year increase was due primarily to increased excess
purchase price resulting from acquisitions, increased investment
in low-income housing partnerships, and increased mortgage
servicing rights due to the capitalization of mortgage servicing
rights in accordance with Financial Accounting Standards Board
Statement No. 122. The decrease since year end was due to
amortization of excess purchase price and decreases in accounts
receivable and overdrafts.
Total deposits have increased 15% since March of last year. The
deposits acquired in connection with acquisitions resulted in a 7%
increase, with the remaining 8% increase attributable to internal
growth. The internal growth resulted primarily from increases in
certificates of deposit and interest-bearing checking accounts.
Since year end, total deposits have increased 4%, after adjusting
for the deposits acquired in connection with acquisitions during
the first quarter of 1998.
Other short-term borrowings increased $917 million since March 1997
and $421 million since year end. These increases are the result of
Regions' utilization of Federal Home Loan Bank structured notes as
a short-term funding source in late 1997 and throughout the first
quarter of 1998.
Long-term borrowings have decreased $66.6 million since year end,
and $183.9 million since March 31, 1997. The decrease in long-
term borrowings since year end and the first quarter of 1997
resulted primarily from the payoff of Senior Bank Notes issued by
Regions' banking affiliate and maturities of Federal Home Loan
Bank advances.
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 52 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 $2.1 billion at March 31, 1998, an
increase of 13% over last year and an increase of 5% since year end.
These increases resulted primarily from internally generated
capital and equity added in connection with acquisitions since March
1997. The accumulated other comprehensive income totaled $8.6
million at March 31, 1998, compared to $11.6 million at year end
and $(4.6) million at March of 1997. Regions' ratio of equity to
total assets was 8.32% at March 31, 1998, compared to 8.65% a year
ago and 8.30% 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 March 31, 1998, the loan
to deposit ratio was 88.94%, compared to 87.73% a year ago and
92.13% 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 three months of 1998 increased
$32.3 million or 15%, compared to the same period in 1997. 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 4.34% in the first three months of 1998,
compared to 4.36% in the same period in 1997. This ratio
decreased due primarily to changes in the product mix, both in
interest-earning assets and interest-bearing liabilities and
higher funding costs in the first quarter of 1998.
Total non-interest income increased $12.8 million or 20% over the
first three months of 1997. Trust department income increased
$1.4 million or 19% on a year-to-year comparison. This resulted
from growth in trust assets, due to internal growth, changes in
fee structures and increases in personal and employee benefit trust
fees. Increased charges for selected deposit account services,
coupled with an increase in the number of deposit accounts due to
acquisitions and internal growth, resulted in service charges on
deposit accounts increasing $3.4 million or 12% in the first three
months of 1998, compared to the same period in 1997. Mortgage
servicing and origination fees increased $3.9 million or 29% in
the first three months of 1998 compared to the same period in
1997. Mortgage origination fees were up significantly due to
increased volume of new loan production in the first quarter of
1998. Mortgage servicing fees increased 12% on a year-to-year
comparison. The mortgage company's servicing portfolio totaled
$14.1 billion at March 31, 1998. Other non-interest income
increased $4.7 million or 31% in the first three months of 1998,
compared to the first three months of 1997, primarily due to
higher capitalization of originated mortgage servicing rights,
increased automated teller machine fees, increased trading account
income and increased insurance premiums and commissions.
Total non-interest expense increased $24.4 million or 16% in the
first three months of 1998, compared to the same period in 1997.
Salaries and employee benefits were up 12% in the first three
months of 1998, 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 6% in the first three months of 1998
over the same period in 1997, primarily because of additional
expenses associated with branch offices and equipment added by the
1997 and 1998 acquisitions. Other non-interest expense increased
$12.5 million or 27% in the first three months of 1998, primarily
because of losses on mortgage loans held for sale and increases in
amortization of excess purchase price, amortization of mortgage
servicing rights, professional fees, postage and stationery and
printing costs.
Income tax expense increased $7.9 million or 21% over the first
three months of 1997, 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 quarter was $86.2 million--up 16% over the
first quarter of last year. Annualized return on stockholders'
equity increased to 16.65%, compared to 16.01% in the first three
months of last year. Annualized return on assets also increased to
1.39% in the first three months of 1998, compared to 1.38% for the
same period in 1997.
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27) Financial Data Schedule (SEC use only)
(b) Reports on Form 8-K:
A report on Form 8-K, dated February 8, 1998, was
filed under item 5. The report related to the
Registrant's proposed acquisition of First Commercial
Corporation headquartered in Little Rock, Arkansas.
<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: May 14, 1998 /s/ Robert P. Houston
Robert P. Houston
Executive Vice President and
Comptroller
(Chief Accounting Officer and
Duly Authorized Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 879,877,000 571,753,000
<INT-BEARING-DEPOSITS> 75,347,000 26,856,000
<FED-FUNDS-SOLD> 180,796,000 142,937,000
<TRADING-ASSETS> 24,213,000 13,623,000
<INVESTMENTS-HELD-FOR-SALE> 2,379,360,000 2,037,689,000
<INVESTMENTS-CARRYING> 2,652,718,000 2,459,366,000
<INVESTMENTS-MARKET> 2,657,043,000 2,448,750,000
<LOANS> 18,045,378,000 15,503,711,000
<ALLOWANCE> 221,998,000 207,096,000
<TOTAL-ASSETS> 25,629,065,000 21,819,883,000
<DEPOSITS> 20,289,275,000 17,672,340,000
<SHORT-TERM> 2,433,201,000 1,426,754,000
<LIABILITIES-OTHER> 401,051,000 275,202,000
<LONG-TERM> 373,811,000 557,723,000
<COMMON> 93,624,000 45,096,000
0 0
0 0
<OTHER-SE> 2,038,103,000 1,842,768,000
<TOTAL-LIABILITIES-AND-EQUITY> 25,629,065,000 21,819,883,000
<INTEREST-LOAN> 394,756,000 337,216,000
<INTEREST-INVEST> 79,457,000 73,779,000
<INTEREST-OTHER> 11,503,000 7,002,000
<INTEREST-TOTAL> 485,716,000 417,997,000
<INTEREST-DEPOSIT> 201,260,000 175,717,000
<INTEREST-EXPENSE> 240,310,000 204,909,000
<INTEREST-INCOME-NET> 245,406,000 213,088,000
<LOAN-LOSSES> 12,119,000 11,194,000
<SECURITIES-GAINS> (69,000) 464,000
<EXPENSE-OTHER> 178,637,000 154,213,000
<INCOME-PRETAX> 131,961,000 112,176,000
<INCOME-PRE-EXTRAORDINARY> 131,961,000 112,176,000
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 86,203,000 74,296,000
<EPS-PRIMARY> .58 .51
<EPS-DILUTED> .57 .50
<YIELD-ACTUAL> 4.34 4.36
<LOANS-NON> 117,427,000 86,002,000
<LOANS-PAST> 17,296,000 30,972,000
<LOANS-TROUBLED> 1,759,000 11,392,000
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 210,604,000 190,753,000
<CHARGE-OFFS> 15,366,000 14,237,000
<RECOVERIES> 6,016,000 7,115,000
<ALLOWANCE-CLOSE> 221,998,000 207,096,000
<ALLOWANCE-DOMESTIC> 221,998,000 207,096,000
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 221,998,000 207,096,000
</TABLE>
