<PAGE> 1
As filed with the Securities and Exchange Commission on January 28, 1998
Registration No.
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
----------------------
Regions Financial Corporation
(Exact Name of Registrant as Specified in its Charter)
----------------------
<TABLE>
<S> <C> <C>
Delaware 6711 63-0589368
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
417 North 20th Street
Birmingham, AL 35203
(205) 326-7100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
----------------------
Samuel E. Upchurch, Jr.
General Counsel and Corporate Secretary
417 North 20th Street
Birmingham, AL 35203
(205) 326-7860
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
----------------------
Copies to:
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<S> <C> <C>
CHARLES C. PINCKNEY FRANK M. CONNER III LOUIS Y. FISHMAN
LANGE, SIMPSON, ROBINSON & ALSTON & BIRD CORRERO FISHMAN HAYGOOD PHELPS
SOMERVILLE 601 PENNSYLVANIA AVENUE, N.W. WEISS WALMSLEY & CASTEIX, L.L.P.
417 NORTH 20TH STREET, SUITE 1700 NORTH BUILDING, SUITE 250 201 ST. CHARLES AVENUE
BIRMINGHAM, AL 35203 WASHINGTON, D.C. 20004 46TH FLOOR
(205) 250-5000 (202) 508-3303 NEW ORLEANS, LOUISIANA 70170-4600
(504) 586-5252
</TABLE>
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Approximate date of commencement of proposed sale of securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each Proposed maximum Proposed maximum
class of securities Amount to be offering price aggregate Amount of to be
registered registered per unit* offering price* registration fee
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<S> <C> <C> <C> <C>
Common Stock 828,492 $14.81969651 $12,278,000 $3,622.01
========================================================================================================================
</TABLE>
*Calculated in accordance with Rule 457(f), based on the total stockholders'
equity of the company being acquired as of September 30, 1997.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), shall
determine.
<PAGE> 2
REGIONS FINANCIAL CORPORATION
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN
FORM S-4 ITEM PROXY STATEMENT/PROSPECTUS
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<S> <C> <C>
1. Forepart of registration statement and outside front
cover page of prospectus.............................. Outside Front Cover of Proxy
Statement/Prospectus; Facing Page of
Registration Statement; Cross-Reference Sheet.
2. Inside front and outside back cover of prospectus..... Available Information; Documents
Incorporated by Reference; Table of
Contents.
3. Risk factors, ratio of earnings to fixed charges and
other information..................................... Summary; Comparative Market Prices and Dividends.
4. Terms of the transaction.............................. Summary; Description of the Transaction;
Effect of the Merger on Rights of
Stockholders; Description of Regions
Common Stock.
5. Pro forma financial information....................... Summary.
6. Material contacts with the company being acquired..... Summary; Description of the Transaction.
7. Additional information required for re-offering by
persons and parties deemed to be underwriters......... Not applicable.
8. Interest of named experts and counsel................. Opinions.
9. Disclosure of Commission position on indemnification
for Securities Act liabilities........................ Not Applicable (See Part II, Item 20).
10. Information with respect to S-3 registrants........... Documents Incorporated by Reference;
Summary; Business of Regions.
11. Incorporation of certain information by reference..... Documents Incorporated by Reference.
12. Information with respect to S-2 or S-3 registrants.... Not Applicable.
13. Incorporation of certain information by reference..... Not Applicable.
14. Information with respect to registrants other than S-2
or S-3 registrants.................................... Not Applicable.
15. Information with respect to S-3 companies............. Business of SMHC; Voting Securities and
Principal Stockholders of SMHC
16. Information with respect to S-2 or S-3 companies...... Not Applicable.
17. Information with respect to companies other than S-2
or S-3 companies...................................... Not Applicable.
18. Information if proxies, consents, or authorizations
are to be solicited................................... Documents Incorporated by Reference; Summary;
The Special Meeting; Description of the Transaction;
Description of Regions Common Stock.
19. Information if proxies, consents, or authorizations
are not to be solicited or in an exchange offer....... Not Applicable.
</TABLE>
<PAGE> 3
Dear St. Mary Holding Corporation Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
St. Mary Holding Corporation ("SMHC") to be held at SMHC's downtown Franklin
office, 614 Main Street, 3rd Floor, Franklin, Louisiana, 70538 on _______, 1998,
at _______:00 p.m., local time, notice of which is enclosed.
At the Special Meeting, you will be asked to consider and vote on a
proposal to approve an Agreement and Plan of Merger, dated as of November 3,
1997 (the "Agreement"), entered into with Regions Financial Corporation
("Regions") pursuant to which SMHC will merge (the "Merger") with and into
Regions, and The St. Mary Bank & Trust Co. (the "Bank"), a wholly owned
subsidiary of SMHC, will become a wholly owned subsidiary of Regions. Upon
consummation of the Merger, each share of SMHC common stock issued and
outstanding (except for certain shares held by SMHC, Regions, or their
respective subsidiaries and shares held by stockholders who perfect their
dissenters' rights) will be converted into and exchanged for 2.1 shares of
Regions common stock, subject to possible adjustment.
The accompanying Proxy Statement/Prospectus includes a description of the
proposed Merger and provides other specific information concerning the Special
Meeting. Please read these materials carefully and consider thoughtfully the
information set forth in them.
The Merger has been approved unanimously by your Board of Directors and is
recommended by the Board to you for approval. Each member of the Board of
Directors of SMHC has agreed to vote those SMHC shares beneficially owned by
such member in favor of the Merger. Consummation of the Merger is subject to
certain conditions, including approval of the Agreement by SMHC stockholders and
approval of the Merger by various regulatory agencies.
Unless the Merger is effected upon the approval of 80% or more of SMHC's
total voting power, stockholders of SMHC who perfect their dissenters' rights
prior to the proposed Merger and comply with applicable law will be entitled to
receive the fair value of their SMHC shares in cash, as provided by applicable
law.
Approval of the Agreement requires the affirmative vote of the greater of
(i) a majority of the total shares of SMHC Common Stock outstanding (in which
case a failure to vote will have the same effect as a vote against the
Agreement) and (ii) at least two-thirds of the shares of SMHC Common Stock
represented in person or by proxy at the Special Meeting.
Whether or not you plan to attend the Special Meeting, you are urged to
complete, sign, and return promptly the enclosed proxy card. If you attend the
Special Meeting, you may vote in person if you wish, even if you previously have
returned your proxy card. The proposed Merger with Regions is a significant step
for SMHC, and your vote on this matter is of great importance. On behalf of the
Board of Directors, I urge you to vote for approval of the Merger by marking the
enclosed proxy card "FOR" Proposal 1.
Sincerely,
James J. Bailey III
Chairman of the Board
<PAGE> 4
ST. MARY HOLDING CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD _______, 1998
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of St. Mary Holding Corporation ("SMHC"), a bank holding company, will
be held at SMHC's downtown Franklin office, 614 Main Street, 3rd Floor,
Franklin, Louisiana, 70538 on _______, 1998, at _______:00 p.m., local time, for
the following purposes:
1. Merger. To consider and vote on the Agreement and Plan of Merger, dated
as of November 3, 1997 (the "Agreement"), by and between SMHC and Regions
Financial Corporation ("Regions") pursuant to which (i) Regions will acquire
SMHC through the merger of SMHC with and into Regions (the "Merger"), (ii) each
share of SMHC common stock (except for certain shares held by SMHC, Regions, or
their respective subsidiaries and shares held by stockholders who perfect their
dissenters' rights) will be converted into and exchanged for 2.1 shares of
Regions common stock, and (iii) each SMHC stockholder will receive cash in lieu
of any remaining fractional share interest, all as described more fully in the
accompanying Proxy Statement/Prospectus; and
2. Other Business. To transact such other business as may properly come
before the Special Meeting, including adjourning the Special Meeting to permit,
if necessary, further solicitation of proxies.
Only stockholders of record at the close of business on _______, 1998, are
entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof.
Stockholders of SMHC have a right to dissent from the Merger and obtain
payment of the fair value of their shares in cash by complying with the
applicable provisions of applicable law, which are attached to the accompanying
Proxy Statement/Prospectus as Appendix C. DISSENTING STOCKHOLDERS WHO COMPLY
WITH THE PROCEDURAL REQUIREMENTS OF THE BUSINESS CORPORATION LAW OF LOUISIANA
WILL BE ENTITLED TO RECEIVE PAYMENT OF THE FAIR CASH VALUE OF THEIR SHARES IF
THE MERGER IS EFFECTED UPON APPROVAL BY LESS THAN 80% OF THE CORPORATION'S TOTAL
VOTING POWER.
The Board of Directors of SMHC unanimously recommends that holders of SMHC
common stock vote FOR Proposal 1. above to approve the Agreement and the Merger.
We urge you to sign and return the enclosed proxy as promptly as possible,
whether or not you plan to attend the Special Meeting in person. The proxy may
be revoked by the person executing the proxy by filing with the Secretary of
SMHC an instrument of revocation or a duly executed proxy bearing a later date
or by electing to vote in person at the Special Meeting.
By Order of the Board of Directors
Y. George Ramirez, Jr.
Corporate Secretary
_______, 1998
<PAGE> 5
ST. MARY HOLDING CORPORATION REGIONS FINANCIAL CORPORATION
PROXY STATEMENT PROSPECTUS
FOR SPECIAL MEETING OF STOCKHOLDERS COMMON STOCK
TO BE HELD _______, 1998 (PAR VALUE $.625)
_______ SHARES
This Prospectus of Regions Financial Corporation, a regional bank holding
company organized and existing under the laws of the state of Delaware
("Regions"), relates to the shares of its common stock, par value $.625 per
share ("Regions Common Stock"), which are issuable to the stockholders of St.
Mary Holding Corporation, a bank holding company organized and existing under
the laws of the state of Louisiana ("SMHC") upon consummation of the proposed
merger (the "Merger") described herein, by which SMHC will merge with and into
Regions pursuant to the terms of an Agreement and Plan of Merger, dated as of
November 3, 1997, by and between Regions and SMHC (the "Agreement").
On the effective date of the Merger (the "Effective Date"), except as
otherwise described herein, (i) SMHC will merge with and into Regions, (ii) each
outstanding share of the $5.00 par value common stock of SMHC ("SMHC Common
Stock") will be converted into and exchanged for 2.1 shares of Regions Common
Stock, subject to possible adjustment (the "Exchange Ratio"),and (iii) each
holder of SMHC Common Stock will receive cash in lieu of any remaining
fractional share interest. A copy of the Agreement is attached to this
Proxy Statement/Prospectus as Appendix A.
As a result of the Merger, the separate existence of SMHC will cease, and
The St. Mary Bank & Trust Co., a wholly owned subsidiary of SMHC (the "Bank"),
will become a wholly owned subsidiary of Regions. Regions anticipates combining
the Bank with its principal banking subsidiary as soon as reasonably practical.
For a further description of the terms of the Merger, see "Description of the
Transaction."
The Exchange Ratio is subject to possible upward adjustment, but only if
certain conditions are met concerning the quoted price of Regions Common Stock,
and then only with the concurrence of both SMHC and Regions. The Board of
Directors of SMHC would likely invoke the adjustment mechanism in the Agreement
if the conditions permit, in which case Regions must determine whether to
proceed with the Merger at a higher Exchange Ratio. In making this
determination, the principal factors Regions will consider include the projected
effect of the Merger on Regions' pro forma earnings per share and whether
Regions' assessment of SMHC's earning potential as part of Regions justifies the
issuance of a higher number of Regions' shares. If Regions declines to adjust
the Exchange Ratio, SMHC may elect to proceed without the adjustment. In making
such determination, the Board of Directors of SMHC will consider whether the
Merger remains in the best interest of SMHC and its stockholders, despite a
decline in Regions' stock price, and whether the consideration to be received by
the holders of SMHC Common Stock remains fair from a financial point of view.
SMHC intends to resolicit approval of the Merger from holders of SMHC Common
Stock if its Board of Directors determines to proceed with the Merger under
circumstances such that the value of the consideration to be received by such
holders in the Merger is below $67.20 per share as of the Determination Date
(as defined in the Agreement.) If SMHC terminates the Merger based on the quoted
price, and Regions does not elect to adjust the Exchange Ratio, SMHC is
obligated to pay Regions $250,000, to compensate Regions for certain direct and
indirect costs and expenses incurred by Regions in connection with the
transactions contemplated by the Agreement. See "Description of the
Transaction--Possible Adjustment of Exchange Ratio."
<PAGE> 6
This Prospectus also constitutes a Proxy Statement of SMHC and is being
furnished to the stockholders of SMHC in connection with the solicitation of
proxies by the Board of Directors of SMHC for use at its special meeting of
stockholders, including any adjournment or postponement thereof (the "Special
Meeting"), to be held on _______, 1998, to consider and vote on the Agreement
and the Merger. This Proxy Statement/Prospectus and the accompanying proxy card
are first being mailed to stockholders of SMHC on or about _______, 1998.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is _______, 1998.
<PAGE> 7
AVAILABLE INFORMATION
Regions is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements, and other information with the Securities and
Exchange Commission (the "SEC"). Copies of such reports, proxy statements, and
other information can be obtained, at prescribed rates, from the SEC by
addressing written requests for such copies to the Public Reference Section at
the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In
addition, such reports, proxy statements, and other information can be inspected
at the public reference facilities referred to above and at the regional offices
of the SEC at 7 World Trade Center, 13th Floor, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The SEC also maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
This Proxy Statement/Prospectus constitutes part of the Registration
Statement on Form S-4 of Regions (including any exhibits and amendments thereto,
the "Registration Statement") filed with the SEC under the Securities Act of
1933, as amended (the "Securities Act"), relating to the securities offered
hereby. This Proxy Statement/Prospectus does not include all of the information
in the Registration Statement, certain portions of which have been omitted
pursuant to the rules and regulations of the SEC. For further information about
Regions and the securities offered hereby, reference is made to the Registration
Statement. The Registration Statement may be inspected and copied, at prescribed
rates, at the SEC's public reference facilities at the addresses set forth
above. Regions Common Stock is traded in the Nasdaq National Market. Reports,
proxy statements, and other information concerning Regions may be inspected at
the offices of the National Association of Securities Dealers, Inc. (the
"NASD"), 1735 K Street, N.W., Washington, D.C. 20006.
No person is authorized to give any information or to make any
representations other than those included in this Proxy Statement/Prospectus,
and if given or made, such information or representations must not be relied
upon as having been authorized by Regions or SMHC. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to buy, the securities offered hereby in any jurisdiction to or from
any person to or from whom it is unlawful to make such an offer or solicitation.
Neither the delivery of this Proxy Statement/Prospectus nor any distribution of
securities made hereunder shall under any circumstances create an implication
that there has been no change in the affairs of Regions or SMHC since the date
hereof or that the information herein is correct as of any time subsequent to
the date hereof.
All information included or incorporated by reference in this Proxy
Statement/Prospectus with respect to Regions was supplied by Regions, and all
information included or incorporated by reference herein with respect to SMHC
was supplied by SMHC.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by Regions pursuant
to the Exchange Act are hereby incorporated by reference herein:
1. Regions' Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
2. Regions' Quarterly Reports on Form 10-Q for the three months ended
March 31, June 30, and September 30, 1997;
3
<PAGE> 8
3. Regions' Report of Form 10-C filed June 20, 1997; and
4. The description of Regions Common Stock under the heading "Item 1.
Capital Stock to be Registered" in the registration statement on Form 8-A
of Regions relating to Regions Common Stock and in any amendment or report
filed for the purpose of updating such description.
Regions' Annual Report on Form 10-K for the year ended December 31, 1996,
incorporates by reference specific portions of Regions' Annual Report to
Stockholders for that year (the "Regions Annual Report to Stockholders"), but
does not incorporate other portions of the Regions Annual Report to
Stockholders. Only those portions of the Regions Annual Report to Stockholders
captioned "Financial Summary & Review 1996," "Financial Statements and Notes,"
and "Historical Financial Summary" are incorporated herein. Other portions of
the Annual Report to Stockholders are NOT incorporated herein and are not a part
of the Registration Statement.
All documents filed by Regions pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference in this Proxy Statement/Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein or in any subsequently filed document which also is,
or is deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THOSE DOCUMENTS ARE AVAILABLE
UPON REQUEST, WITHOUT CHARGE (EXCEPT FOR THE EXHIBITS THERETO), FROM RONALD C.
JACKSON, STOCKHOLDER ASSISTANCE, REGIONS FINANCIAL CORPORATION, 417 NORTH 20TH
STREET, BIRMINGHAM, ALABAMA 35203 (TELEPHONE (205) 326-7090). IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY _______, 1998.
4
<PAGE> 9
TABLE OF CONTENTS
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AVAILABLE INFORMATION..............................................................................................
DOCUMENTS INCORPORATED BY REFERENCE................................................................................
SUMMARY............................................................................................................
The Parties...................................................................................................
Special Meeting of SMHC Stockholders.......................................................................... 8
Record Date; Vote Required.................................................................................... 8
The Merger; Exchange Ratio.................................................................................... 8
Dissenting Stockholders....................................................................................... 8
Reasons for the Merger; Recommendation of SMHC's Board
of Directors................................................................................................. 9
Opinion of SMHC's Financial Advisor........................................................................... 9
Effective Date................................................................................................ 9
Exchange of Stock Certificates................................................................................ 9
Regulatory Approvals and Other Conditions..................................................................... 10
Waiver, Amendment, and Termination of the Agreement........................................................... 10
Interests of Certain Persons in the Merger.................................................................... 10
Certain Federal Income Tax Consequences of the Merger......................................................... 10
Certain Differences in Stockholders' Rights................................................................... 11
Comparative Market Prices of Common Stock..................................................................... 11
Comparative Per Share Data.................................................................................... 11
Selected Financial Data....................................................................................... 12
THE SPECIAL MEETING................................................................................................ 16
General....................................................................................................... 16
Record Date; Vote Required.................................................................................... 16
DESCRIPTION OF THE TRANSACTION..................................................................................... 17
General....................................................................................................... 17
Possible Adjustment of Exchange Ratio ........................................................................ 18
Background of and Reasons for the Merger...................................................................... 19
Opinion of SMHC's Financial Advisor........................................................................... 20
Effective Date of the Merger.................................................................................. 23
Distribution of Regions Stock Certificates and
Payment for Fractional Shares............................................................................... 24
Conditions to Consummation of the Merger...................................................................... 24
Regulatory Approvals.......................................................................................... 25
Waiver, Amendment, and Termination of the Agreement........................................................... 25
Conduct of Business Pending the Merger........................................................................ 26
Management Following the Merger............................................................................... 29
Interests of Certain Persons in the Merger.................................................................... 29
Dissenting Stockholders....................................................................................... 29
Certain Federal Income Tax Consequences of the Merger......................................................... 31
Accounting Treatment.......................................................................................... 32
Expenses and Fees............................................................................................. 32
Resales of Regions Common Stock............................................................................... 33
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS..................................................................... 34
Antitakeover Provisions Generally............................................................................. 34
Authorized Capital Stock...................................................................................... 35
Amendment of Certificate or Articles of Incorporation and Bylaws.............................................. 35
</TABLE>
5
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<TABLE>
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Classified Board of Directors and Absence of Cumulative Voting................................................ 36
Removal of Directors.......................................................................................... 36
Limitations on Director Liability............................................................................. 37
Indemnification............................................................................................... 37
Special Meetings of Stockholders.............................................................................. 38
Actions by Stockholders Without a Meeting..................................................................... 38
Stockholder Nominations....................................................................................... 38
Mergers, Consolidations, and Sales of Assets Generally........................................................ 39
Business Combinations with Certain Persons.................................................................... 39
Dissenters' Rights............................................................................................ 41
Stockholders' Rights to Examine Books and Records............................................................. 41
Dividends..................................................................................................... 41
COMPARATIVE MARKET PRICES AND DIVIDENDS............................................................................ 42
SMHC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS........................................................................... 43
BUSINESS OF SMHC .............................................................................................. 44
General....................................................................................................... 44
Properties.................................................................................................... 44
Competition................................................................................................... 44
Legal Proceedings............................................................................................. 45
Management.................................................................................................... 45
Transactions with Management.................................................................................. 46
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF SMHC............................................................... 46
BUSINESS OF REGIONS................................................................................................ 47
General....................................................................................................... 47
Recent Developments........................................................................................... 48
CERTAIN REGULATORY CONSIDERATIONS.................................................................................. 50
General....................................................................................................... 50
Payment of Dividends.......................................................................................... 50
Capital Adequacy.............................................................................................. 52
Support of Subsidiary Institutions............................................................................ 53
Prompt Corrective Action...................................................................................... 54
FDIC Insurance Assessments.................................................................................... 55
DESCRIPTION OF REGIONS COMMON STOCK................................................................................ 55
STOCKHOLDER PROPOSALS.............................................................................................. 56
EXPERTS............................................................................................................ 56
OPINIONS........................................................................................................... 56
INDEX TO SMHC FINANCIAL STATEMENTS................................................................................ F-1
APPENDIX A--Agreement and Plan of Merger.......................................................................... A-1
APPENDIX B--Opinion of Chaffe & Associates, Inc. ................................................................. B-1
APPENDIX C--Copy of Section 131 of the Louisiana Business Corporation Act......................................... C-1
</TABLE>
6
<PAGE> 11
SUMMARY
The following is a summary of certain information relating to the Special
Meeting, the proposed Merger, and the offering of shares of Regions Common Stock
to be issued upon consummation thereof. This summary does not purport to be
complete and is qualified in its entirety by the more detailed information
appearing elsewhere or incorporated by reference in this Proxy
Statement/Prospectus. Stockholders are urged to read carefully the entire Proxy
Statement/Prospectus, including the Appendices. As used in this Proxy
Statement/Prospectus, the terms "Regions" and "SMHC" refer to those entities,
respectively, and, where the context requires, to those entities and their
respective subsidiaries.
THE PARTIES
SMHC. SMHC is a bank holding company organized and existing under the laws
of the state of Louisiana, headquartered in Franklin, Louisiana. SMHC operates
principally through the Bank, which is a wholly owned subsidiary of SMHC and a
state-chartered commercial bank and which provides a range of consumer and
commercial banking services through a total of five banking offices in Franklin
(two offices), Baldwin, Houma, and Morgan City, Louisiana. At September 30,
1997, SMHC had total consolidated assets of approximately $112.6 million, total
consolidated deposits of approximately $99.2 million, and total consolidated
stockholders' equity of approximately $12.3 million. SMHC's principal executive
office is located at 1504 Hospital Avenue, Franklin, Louisiana, 70538 and its
telephone number at such address is (318) 828- 0560.
Regions. Regions is a regional bank holding company organized and existing
under the laws of the state of Delaware and headquartered in Birmingham,
Alabama, with approximately 435 banking offices located in Alabama, Florida,
Georgia, Louisiana, and Tennessee as of September 30, 1997. At that date,
Regions had total consolidated assets of approximately $22.2 billion, total
consolidated deposits of approximately $17.6 billion, and total consolidated
stockholders' equity of approximately $1.9 billion. Regions is the second
largest bank holding company headquartered in Alabama in terms of assets, based
on September 30, 1997 information. Regions has banking operations in Alabama,
Florida, Georgia, Louisiana, and Tennessee and banking-related subsidiaries
engaged in mortgage banking, credit life insurance, leasing, and securities
brokerage activities with offices in various Southeastern states. Through its
subsidiaries, Regions offers a broad range of banking and banking-related
services.
Since December 31, 1996, Regions has completed the acquisitions of nine
financial institutions, two of which are located in Florida, four in Georgia,
and three in Louisiana. In addition to the Merger, Regions has entered into
definitive agreements or letters of intent to acquire six financial
institutions, three of which are located in South Carolina, two in Georgia, and
one in Florida. For information with respect to the completed and pending
transactions, see "Documents Incorporated by Reference" and "Business of
Regions--Recent Developments."
Regions commenced operations in 1971, under its former name First Alabama
Bancshares, Inc., as a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). Regions' principal executive
offices are located at 417 North 20th Street, Birmingham, Alabama 35203, and its
telephone number at such address is (205) 326-7100.
Additional information with respect to Regions and its subsidiaries is
included in documents incorporated by reference in this Proxy
Statement/Prospectus. See "Available Information," "Documents Incorporated by
Reference," and "Business of Regions."
7
<PAGE> 12
SPECIAL MEETING OF SMHC STOCKHOLDERS
The Special Meeting will be held at _______:00 p.m., local time, on
_______, 1998, at SMHC's downtown Franklin office, 614 Main Street, 3rd Floor,
Franklin, Louisiana, 70538, for the purpose of considering and voting on
approval of the Agreement and to transact such other business as may properly
come before the meeting. See "The Special Meeting."
RECORD DATE; VOTE REQUIRED
Only holders of record of SMHC Common Stock at the close of business on
_______, 1998 (the "Record Date"), will be entitled to vote at the Special
Meeting. Approval of the Agreement requires the affirmative vote of the greater
of (i) a majority of the shares of SMHC Common Stock outstanding (in which case
a failure to vote will have the same effect as a vote against the Agreement) and
(ii) at least two-thirds of the shares of SMHC Common Stock represented in
person or by proxy at the Special Meeting. As of the Record Date, there were
394,520 shares of SMHC Common Stock outstanding.
The directors and executive officers of SMHC and their affiliates
beneficially owned, as of the Record Date, _______ shares (or approximately
_______% of the outstanding shares) of SMHC Common Stock. Each member of the
Board of Directors of SMHC has agreed to vote those SMHC shares beneficially
owned by such member in favor of the Merger. The directors and executive
officers of Regions and their affiliates beneficially owned, as of the Record
Date, no shares of SMHC Common Stock. As of that date, neither SMHC nor Regions
held any shares of SMHC Common Stock in a fiduciary capacity for others. See
"The Special Meeting--Record Date; Vote Required."
THE MERGER; EXCHANGE RATIO
The Agreement provides for the acquisition of SMHC by Regions pursuant to
the Merger of SMHC with and into Regions. On the Effective Date, each share of
SMHC Common Stock then issued and outstanding (except for shares held by SMHC,
Regions, or their respective subsidiaries, in each case other than shares held
in a fiduciary capacity or as a result of debts previously contracted, and
shares held by stockholders who perfect their dissenters' rights) will be
converted into and exchanged for 2.1 shares of Regions Common Stock, subject to
possible adjustment. No fractional shares of Regions Common Stock will be
issued. Rather, cash will be paid in lieu of any fractional share interest to
which any SMHC stockholder would be entitled upon consummation of the Merger,
based on the last sale price of Regions Common Stock on the Nasdaq National
Market (as reported by The Wall Street Journal, or, if not reported thereby, by
another authoritative source selected by Regions) on the last trading day
preceding the Effective Date. See "Description of the Transaction--General."
DISSENTING STOCKHOLDERS
Holders of SMHC Common Stock entitled to vote on approval of the Agreement
have the right to dissent from the Merger and, upon consummation of the Merger
upon approval by less than 80% of SMHC's total voting power, and the
satisfaction of certain specified procedures and conditions, to receive fair
value of such holders' shares of SMHC Common Stock in cash in accordance with
the applicable provisions of the Louisiana Business Corporation Law (the
"Louisiana Act"). The procedures to be followed by dissenting stockholders are
summarized under "Description of the Transaction--Dissenters' Rights," and the
applicable provisions of the Louisiana Act are included as Appendix C.
8
<PAGE> 13
REASONS FOR THE MERGER; RECOMMENDATION OF SMHC'S BOARD OF DIRECTORS
SMHC's Board of Directors has unanimously approved the Merger and the
Agreement and has determined that the Merger is fair to, and in the best
interests of, SMHC and its stockholders. Accordingly, SMHC's Board unanimously
recommends that SMHC's stockholders vote FOR approval of the Agreement and the
Merger. EACH MEMBER OF THE BOARD OF DIRECTORS OF SMHC HAS AGREED TO VOTE SUCH
MEMBER'S SHARES OF SMHC COMMON STOCK IN FAVOR OF THE AGREEMENT. In approving the
Agreement, SMHC's directors considered SMHC's financial condition, the financial
terms and the income tax consequences of the Merger, the likelihood of the
Merger being approved by regulatory authorities without undue conditions or
delay, and legal and financial advice concerning the proposed Merger, including
the report of Chaffe & Associates, Inc. ("Chaffe") that the consideration to be
received in the Merger was fair, from a financial point of view, to the
stockholders of SMHC. See "Description of the Transaction--Background of and
Reasons for the Merger."
OPINION OF SMHC'S FINANCIAL ADVISOR
Chaffe has rendered an opinion to SMHC that, based on and subject to the
procedures, matters, and limitations described in its opinion and such other
matters as it considered relevant, as of the date of its opinion, the
consideration to be received in the Merger was fair, from a financial point of
view, to the stockholders of SMHC. The opinion of Chaffe is attached as Appendix
B to this Proxy Statement/Prospectus. SMHC stockholders are urged to read the
opinion in its entirety for a description of the procedures followed, matters
considered, and limitations on the reviews undertaken in connection therewith.
See "Description of the Transaction--Opinion of SMHC's Financial Advisor."
EFFECTIVE DATE
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time that the
Delaware Certificate of Merger and the Louisiana Certificate of Merger become
effective with, respectively, the Delaware Secretary of State and the Louisiana
Secretary of State. Unless otherwise agreed upon by Regions and SMHC, and
subject to the conditions set forth in the Agreement, the parties will use their
reasonable efforts to cause the Effective Date to occur on the fifth business
day following the last of the following events to occur: (i) the effective date
(including the expiration of any applicable waiting period) of the last federal
or state regulatory approval required for the Merger and (ii) the date on which
the Agreement is approved by the requisite vote of SMHC stockholders; or such
later date within 30 days thereof as specified by Regions. The parties expect
that all conditions to consummation of the Merger will be satisfied so that the
Merger can be consummated during the first quarter of 1998, although there can
be no assurance as to whether or when the Merger will occur. See "Description of
the Transaction--Effective Date of the Merger," "--Conditions to Consummation of
the Merger," and "--Waiver, Amendment, and Termination of the Agreement."
EXCHANGE OF STOCK CERTIFICATES
Promptly after the Effective Date, Regions will cause an exchange agent
selected by Regions (the "Exchange Agent"), to mail to the stockholders of SMHC
a form letter of transmittal, together with instructions for the exchange of
such stockholders' certificates representing shares of SMHC Common Stock for
certificates representing shares of Regions Common Stock. SMHC STOCKHOLDERS
SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE THE FORM LETTER
OF TRANSMITTAL AND INSTRUCTIONS. See "Description of the
Transaction--Distribution of Regions Stock Certificates and Payment for
Fractional Shares."
9
<PAGE> 14
REGULATORY APPROVALS AND OTHER CONDITIONS
The Merger is subject to approval by the Board of Governors of the Federal
Reserve System (the "Federal Reserve") and the Commissioner of Financial
Institutions of the State of Louisiana (the "Louisiana Commissioner").
Applications for the requisite approvals have been filed with these agencies,
each of which has yet to issue its approval of the Merger. There can be no
assurance that the approvals of the Louisiana Commissioner and the Federal
Reserve will be given or as to the timing or conditions of such approvals.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of SMHC stockholders, receipt of an
opinion of counsel as to the tax-free nature of certain aspects of the Merger,
and certain other customary conditions. See "Description of the
Transaction--Conditions to Consummation of the Merger."
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Date by mutual consent of the Boards of Directors of both
SMHC and Regions, or by action of the Board of Directors of either company under
certain circumstances, including if the Merger is not consummated by September
30, 1998, unless the failure to consummate by such date is due to a breach by
the party seeking to terminate of its obligation to consummate the closing. If
for any reason the Merger is not consummated, SMHC will continue to operate as a
bank holding company under its present management, unless and until other
alternatives are followed. See "Description of the Transaction--Waiver,
Amendment, and Termination of the Agreement."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of SMHC's management and Board of Directors have interests
in the Merger in addition to their interests as stockholders of SMHC generally.
Those interests relate to, among other things, provisions in the Agreement
regarding indemnification and eligibility for certain Regions employee benefits.
See "Description of the Transaction--Interests of Certain Persons in the
Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Consummation of the Merger is conditioned on the receipt of an opinion of
counsel to the effect that, among other things, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and the exchange in the Merger of SMHC Common
Stock for Regions Common Stock will not give rise to gain or loss to SMHC
stockholders, except to the extent of any cash received in lieu of fractional
share interests or as a result of exercise of dissenters' rights. Gain
recognition, if any, will not be in excess of the amount of cash received.
Subject to the provisions and limitations of Section 302(a) of the Code, gain or
loss will be recognized upon the receipt of cash in lieu of fractional share
interests and cash received by dissenters. See "Description of the
Transaction--Certain Federal Income Tax Consequences of the Merger."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCE OF EACH STOCKHOLDER AND OTHER CIRCUMSTANCES, EACH SMHC
STOCKHOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE MERGER (INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS).
10
<PAGE> 15
CERTAIN DIFFERENCES IN STOCKHOLDERS' RIGHTS
On the Effective Date, SMHC stockholders, whose rights are governed by the
Louisiana Act and by SMHC's Articles of Incorporation and Bylaws, will
automatically become Regions stockholders, and their rights as Regions
stockholders will be determined by the Delaware General Corporation Law (the
"Delaware GCL") and by Regions' Certificate of Incorporation and Bylaws.
The rights of Regions stockholders differ from the rights of SMHC
stockholders in certain important respects, some of which constitute
antitakeover provisions provided for in Regions' governing documents. See
"Effect of the Merger on Rights of Stockholders."
COMPARATIVE MARKET PRICES OF COMMON STOCK
Regions Common Stock is traded in the over-the-counter market and quoted on
the Nasdaq National Market. SMHC Common Stock is not traded in any established
market. The following table sets forth, as of the indicated dates, (i) the last
sale price of Regions Common Stock and the sale price in the last known
transaction of purchase and sale of SMHC Common Stock, which occurred in
_______, and (ii) the equivalent per share price (as explained below) of SMHC
Common Stock. The indicated dates of November 3, 1997, and _______, 1998
represent, respectively, the last trading day immediately preceding public
announcement of the proposed acquisition of SMHC by Regions and the latest
practicable date prior to the mailing of this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
EQUIVALENT
PER
SHARE PRICE
REGIONS SMHC OF SMHC
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK COMMON STOCK
- -------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
November 3, 1997 $ 37.72 $30.00 $ 79.21
_______, 1998
</TABLE>
The equivalent per share price of SMHC Common Stock at each specified date
represents the last sale price of a share of Regions Common Stock on such date
multiplied by the Exchange Ratio of 2.1. Stockholders are advised to obtain
current market quotations for Regions Common Stock and SMHC Common Stock. No
assurance can be given as to the market price of Regions Common Stock at or
after the Effective Date.
COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data relating
to net income, cash dividends, and book value on (i) an historical basis for
Regions and SMHC, (ii) a pro forma combined basis per share of Regions Common
Stock, giving effect to the Merger, and (iii) an equivalent pro forma basis per
share of SMHC Common Stock, giving effect to the Merger. The Regions and SMHC
pro forma combined information and the SMHC pro forma Merger equivalent
information give effect to the Merger on a pooling-of-interests accounting basis
and assume an Exchange Ratio of 2.1. See "Description of the
Transaction--Accounting Treatment." The pro forma data are presented for
information purposes only and are not necessarily indicative of the results of
operations or combined financial position that would have resulted had the
Merger been consummated at the dates or during the periods indicated, nor are
they necessarily indicative of future results of operations or combined
financial position.
11
<PAGE> 16
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical financial statements of Regions and
SMHC, including the respective notes thereto. Historical information has been
adjusted to reflect a 2-for-1 stock split effected by Regions on June 13, 1997
and a 100% stock dividend, accounted for as a 2-for-1 stock split, effected by
SMHC on March 31, 1995. See "Documents Incorporated by Reference," "--Selected
Financial Data," and "Index to SMHC Financial Statements."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- ------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(Unaudited) (Unaudited except Regions
and SMHC historical)
<S> <C> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Regions historical....................................... $ 1.62 $ 1.33 $ 1.85 $ 1.60 $ 1.55
SMHC historical ......................................... 2.82 2.60 3.51 3.66 2.29
Regions and SMHC pro forma combined(1)................... 1.61 1.85 1.61 1.55
SMHC pro forma Merger equivalent(2)...................... 3.38 3.89 3.38 3.26
DIVIDENDS DECLARED PER COMMON SHARE
Regions historical....................................... .60 .525 .70 .66 .60
SMHC historical.......................................... 1.50 .80 1.36 1.04 1.00
SMHC pro forma Merger equivalent(3)...................... 1.26 1.10 1.47 1.39 1.26
BOOK VALUE PER COMMON SHARE (PERIOD END)
Regions historical....................................... 13.58 12.43 12.76 11.69 10.63
SMHC historical.......................................... 31.12 29.31 29.73 27.90 23.41
Regions and SMHC pro forma combined(1)................... 13.59
SMHC pro forma Merger equivalent(2)...................... 28.54
</TABLE>
(1) Represents the combined results of Regions and SMHC as if the Merger were
consummated on January 1, 1994 (or September 30, 1997, in the case of Book
Value Per Common Share Data), and were accounted for as a pooling of
interests.
(2) Represents pro forma combined information multiplied by the Exchange Ratio
of 2.1 shares of Regions Common Stock for each share of SMHC Common Stock.
(3) Represents historical dividends declared per share by Regions multiplied by
the Exchange Ratio of 2.1 shares of Regions Common Stock for each share of
SMHC Common Stock.
(4) The Exchange Ratio is subject to upward adjustment if the average of the
closing sales prices of Regions Common Stock over a specified period is
less than $32.00. See "Description of the Transaction--Possible Adjustment
of Exchange Ratio." The presentation of pro forma Merger equivalent
information would be affected by any increase in the Exchange Ratio.
SELECTED FINANCIAL DATA
The following tables present certain selected historical financial
information for Regions and SMHC. The per share data of Regions have been
adjusted to reflect a 2-for-1 stock split effected by Regions on June 13, 1996.
The per share data of SMHC have been adjusted to reflect a 100% stock dividend
accounted for as a 2-for-1 stock split, effected by SMHC on March 31, 1995. The
data should be read in conjunction with the historical financial statements,
related notes, and other financial information concerning Regions and SMHC
incorporated by reference or included herein. Interim unaudited data for the
nine months ended September 30, 1997 and 1996 of Regions and SMHC reflect, in
the opinion of the respective managements of Regions and SMHC, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such data. Results for the nine months ended September 30, 1997,
are not necessarily indicative of results which may be expected for any other
interim period or for the year as a whole. See "Documents Incorporated by
Reference."
12
<PAGE> 17
Selected Historical Financial Data of Regions
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------------------------- --------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- -----------
(Unaudited) (In thousands except per share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income .............. $ 1,217,085 $ 1,029,151 $ 1,386,122 $ 1,259,600 $ 991,693 $ 746,544 $ 737,094
Total interest expense ............. 603,046 508,573 685,656 635,336 436,157 296,195 324,420
Net interest income ................ 614,039 520,578 700,466 624,264 555,536 450,349 412,674
Provision for loan losses .......... 31,449 21,734 29,041 30,271 20,580 24,695 39,367
Net interest income after
loan loss provision ........... 582,590 498,844 671,425 593,993 534,956 425,654 373,307
Total noninterest income excluding
security gains (losses) ....... 189,852 162,759 217,624 187,830 171,705 169,318 147,943
Security gains (losses) ............ 541 259 3,115 (424) 344 831 2,417
Total noninterest expense .......... 441,688 415,955 553,801 487,461 442,376 383,130 343,279
Income tax expense ................. 110,592 81,022 108,677 96,109 84,109 66,169 56,405
Net income ......................... 220,703 164,885 229,686 197,829 180,520 146,504 123,983
PER SHARE DATA:
Net income ......................... $ 1.62 $ 1.33 $ 1.85 $ 1.60 $ 1.55 $ 1.40 $ 1.21
Cash dividends ..................... .60 .525 .70 .66 .60 .52 .46
Book value ......................... 13.58 12.43 12.76 11.69 10.63 9.93 8.57
OTHER INFORMATION:
Average number of shares outstanding 136,526 123,960 124,272 123,340 116,412 104,306 102,384
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets ....................... $22,241,897 $18,731,424 $18,930,175 $16,851,774 $15,810,076 $13,163,161 $10,457,676
Securities ......................... 4,386,163 4,005,675 3,870,595 3,863,781 3,346,291 2,993,417 2,255,732
Loans, net of unearned income ...... 15,823,660 13,032,238 13,311,172 11,542,311 10,855,195 8,430,931 6,657,557
Total deposits ..................... 17,623,742 15,186,950 15,048,336 13,497,612 12,575,593 11,025,376 8,923,801
Long-term debt ..................... 402,627 447,959 447,269 632,019 599,476 525,820 151,460
Stockholders' equity ............... 1,851,493 1,554,740 1,598,726 1,429,253 1,286,322 1,106,361 886,116
PERFORMANCE RATIOS:
Return on average assets(1)(6) ..... 1.41% 1.25% 1.29% 1.21% 1.27% 1.38% 1.29%
Return on average stockholders'
equity(1)(6) .................. 16.26 14.83 15.19 14.29 15.26 15.76 15.04
Net interest margin ................ 4.30 4.29 4.27 4.21 4.37 4.77 4.85
Efficiency (2)(6) .................. 54.06 59.97 59.44 58.79 59.44 60.23 59.62
Dividend payout .................... 37.04 39.47 37.84 41.12 38.71 37.01 37.60
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income(1) ..... .22% .10% .15% .17% .19% .23% .36%
Problem assets to net loans and
other real estate (3) ......... .69 .54 .56 .59 .75 1.12 1.29
Nonperforming assets to net loans
and other real estate (4) ..... .81 .73 .76 .68 .80 1.28 1.39
Allowance for loan losses to loans,
net of unearned income ........ 1.24 1.37 1.32 1.38 1.32 1.48 1.51
Allowance for loan losses to
nonperforming assets (4) ...... 153.38 186.89 173.65 202.55 164.48 115.88 107.97
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets ................ 8.66% 8.41% 8.49% 8.44% 8.35% 8.76% 8.60%
Average loans to average deposits .. 88.43 85.01 85.90 86.12 79.90 76.41 71.59
Tier 1 risk-based capital (5) ...... 9.85 10.71 10.81 11.14 10.69 11.13 11.68
Total risk-based capital (5) ....... 12.24 13.53 13.59 14.61 14.29 13.48 14.44
Tier 1 leverage (5) ................ 7.35 7.65 7.44 7.49 8.21 10.11 8.44
</TABLE>
(1) Interim period ratios are annualized.
(2) Noninterest expense divided by the sum of net interest income
(taxable-equivalent basis) and noninterest income net of gains (losses)
from security transactions.
(3) Problem assets include loans on a nonaccrual basis, restructured loans, and
foreclosed properties.
(4) Nonperforming assets include loans on a nonaccrual basis, restructured
loans, loans 90 days or more past due, and foreclosed properties.
(5) The required minimum Tier 1 and total capital ratios are 4% and 8%,
respectively. The minimum leverage ratio of Tier 1 capital to total assets
is 3% to 5%. The ratios for periods prior to 1996 have not been restated to
reflect the combination with First National Bancorp effected March 1, 1996,
and accounted for as a pooling of interests, or any other
pooling-of-interests transactions.
(6) Ratios for 1996 excluding $19.0 million (after-tax) charged for SAIF
assessment and merger expenses are as follows: Return on average
stockholders' equity - 16.45%, Return on average total assets - 1.40%, and
Efficiency - 56.16%.
<PAGE> 18
Selected Historical Financial Data of SMHC
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------------
1997(1) 1996(1) 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(Unaudited)
(In thousands except per share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income .................... $ 6,728 $ 6,152 $ 8,314 $ 7,236 $ 6,909 $ 6,985 $ 7,965
Total interest expense ................... 2,391 2,303 3,063 2,594 2,327 2,227 3,110
Net interest income ...................... 4,337 3,849 5,251 4,642 4,582 4,758 4,855
Provision for loan losses ................ 551 376 336 365 60 91 277
Net interest income after
loan loss provision ................. 3,786 3,473 4,915 4,277 4,522 4,667 4,578
Total noninterest income
excluding security gains (losses) 943 975 1,326 2,125 1,316 1,158 1,079
Security gains (losses) .................. 0 3 3 (187) (29) 15 78
Total noninterest expense ................ 3,112 2,900 4,179 3,894 4,406 4,248 3,992
Income tax expense ....................... 503 443 599 671 343 440 492
Cumulative effect of a change in
accounting principle ................... 0 0 0 0 0 0 254
Net income ............................... $ 1,114 $ 1,108 $ 1,466 $ 1,650 $ 1,060 $ 1,152 $ 1,505
PER SHARE DATA:
Net income ............................... $ 2.82 $ 2.60 $ 3.51 $ 3.66 $ 2.29 $ 2.49 $ 3.25
Cash dividends ........................... 1.50 0.80 1.36 1.04 1.00 0.88 3.35
Book value ............................... 31.12 29.31 29.73 27.90 23.41 23.78 22.18
OTHER INFORMATION:
Average number of shares outstanding ..... 395 426 418 450 463 463 463
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets ............................. $112,586 $105,037 $106,548 $100,570 $103,288 $ 99,642 $106,164
Securities held to maturity .............. 0 0 0 0 0 35,073 42,068
Securities available for sale ............ 15,748 18,772 17,701 20,741 35,109 0 0
Loans, net of unearned income ............ 82,559 72,325 72,159 59,748 47,529 37,483 40,997
Total deposits ........................... 99,222 88,066 92,770 83,793 79,295 87,857 94,336
Stockholders' equity ..................... 12,278 11,629 11,730 12,053 10,842 11,016 10,272
PERFORMANCE RATIOS:
Return on average assets (2) ............. 1.36% 1.41% 1.40% 1.72% 1.02% 1.14% 1.46%
Return on average stockholders'
equity (2) .......................... 12.22 12.17 12.18 13.71 9.44 10.79 14.01
Net interest margin (2)(3) ............... 5.81 5.41 5.53 5.40 4.88 5.15 5.17
Efficiency (4) ........................... 58.94 60.08 63.51 59.18 75.07 71.62 66.40
Dividend payout .......................... 53.19 30.77 38.75 28.42 43.67 35.34 103.08
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income .............. .32% .16% .35% .47% (.12)% .70% .43%
Problem assets to net loans and
other real estate (5) ............... 1.86 .92 .77 .52 .84 1.58 1.67
Nonperforming assets to net loans
and other real estate (6) ........... 2.10 .96 .78 .56 .85 1.58 1.69
Allowance for loan losses to total
loans at end of period .............. 1.44 1.26 1.23 1.32 1.42 1.52 1.82
Allowance for loan losses to
nonperforming assets (6) ............ 69.90 133.14 160.21 237.39 170.65 96.97 108.75
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets ...................... 11.13% 11.57% 11.47% 12.55% 10.84% 10.56% 10.41%
Average loans to average deposits ........ 80.22 74.91 76.21 68.77 46.97 43.67 45.89
Tier 1 risk-based capital (7) ............ 14.84 16.15 15.80 18.05 20.63 23.04 20.90
Total risk-based capital (7) ............. 16.09 17.40 17.03 19.26 21.85 24.24 22.15
Tier 1 leverage (7) ...................... 11.12 11.05 11.05 12.43 11.22 10.91 9.97
</TABLE>
(1) In the opinion of management, financial information at September 30, 1997
and for the nine months ended September 30, 1997 and 1996 reflects all
adjustments ( consisting only of normal recurring accruals) which are
necessary to present fairly the results of such interim periods.
(2) Interim period ratios are annualized.
(3) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities, and net interest margin represents net
interest income as a percentage of average interest-earning assets.
(4) The efficiency ratio represents noninterest expense as a percentage of the
sum of net interest income and noninterest income.
(5) Problem assets include loans on a nonaccrual basis, restructured loans, and
foreclosed properties.
(6) Nonperforming assets include loans on a nonaccrual basis, restructured
loans, loans 90 days or more past due, and foreclosed properties.
(7) The risk-based capital ratios are based upon 1992 risk-based capital
guidelines. Under the 1992 rules, the required minimum Tier 1 and total
capital ratios are 4% and 8%, respectively. The minimum leverage ratio of
Tier 1 capital to total assets is 3% to 5%.
15
<PAGE> 19
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of SMHC
Common Stock in connection with the solicitation by the SMHC Board of Directors
of proxies for use at the Special Meeting, at which SMHC stockholders will be
asked to vote upon a proposal to approve the Agreement. The Special Meeting will
be held at _______:00 p.m., local time, on _______, 1998, at the downtown
Franklin office of SMHC, located at 614 Main Street, 3rd Floor, Franklin,
Louisiana, 70538.
SMHC stockholders are requested promptly to sign, date, and return the
accompanying proxy card to SMHC in the enclosed postage-paid, addressed
envelope.
Any SMHC stockholder who has delivered a proxy may revoke it at any time
before it is voted by giving notice of revocation in writing or submitting to
SMHC a signed proxy card bearing a later date, provided that such notice or
proxy card is actually received by SMHC before the vote of stockholders, or by
voting in person at the Special Meeting. Any notice of revocation should be sent
to St. Mary Holding Corporation, 1504 Hospital Avenue, Franklin, Louisiana,
70538, Attention: Y. George Ramirez, Jr., Corporate Secretary. A proxy will not
be revoked by death or supervening incapacity of the stockholder executing the
proxy unless, before the vote, notice of such death or incapacity is filed with
the Secretary. The shares of SMHC Common Stock represented by properly executed
proxies received at or prior to the Special Meeting and not subsequently revoked
will be voted as directed in such proxies. IF INSTRUCTIONS ARE NOT GIVEN, SHARES
REPRESENTED BY PROXIES RECEIVED WILL BE VOTED FOR APPROVAL OF THE AGREEMENT AND
THE MERGER AND IN THE DISCRETION OF THE PROXY HOLDER AS TO ANY OTHER MATTERS
THAT PROPERLY MAY COME BEFORE THE SPECIAL MEETING. IF NECESSARY, AND UNLESS
CONTRARY INSTRUCTIONS ARE GIVEN, THE PROXY HOLDER ALSO MAY VOTE IN FAVOR OF A
PROPOSAL TO ADJOURN THE SPECIAL MEETING TO PERMIT FURTHER SOLICITATION OF
PROXIES IN ORDER TO OBTAIN SUFFICIENT VOTES TO APPROVE THE AGREEMENT AND THE
MERGER. As of the date of this Proxy Statement/Prospectus, SMHC is unaware of
any other matter to be presented at the Special Meeting.
Solicitation of proxies will be made by mail but also may be made by
telephone or telegram or in person by the directors, officers, and employees of
SMHC, who will receive no additional compensation for such solicitation but may
be reimbursed for out-of-pocket expenses. Brokerage houses, nominees,
fiduciaries, and other custodians will be requested to forward solicitation
materials to beneficial owners and will be reimbursed for their reasonable
out-of-pocket expenses.
SMHC stockholders should not forward any stock certificates with their
proxy cards.
RECORD DATE; VOTE REQUIRED
SMHC's Board of Directors has established the close of business on
_______, 1998, as the Record Date for determining the SMHC stockholders entitled
to notice of and to vote at the Special Meeting. Only SMHC stockholders of
record as of the Record Date will be entitled to vote at the Special Meeting. As
of the Record Date, there were approximately _______ holders of 394,520 shares
of SMHC Common Stock outstanding and entitled to vote at the Special Meeting,
with each share entitled to one vote. For information as to persons known by
SMHC to beneficially own more than 5.0% of the outstanding shares of SMHC Common
Stock as of the Record Date, see "Voting Securities and Principal Stockholders
of SMHC."
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<PAGE> 20
The presence, in person or by proxy, of a majority of the outstanding
shares of SMHC Common Stock is necessary to constitute a quorum of the
stockholders in order to take action at the Special Meeting. For these purposes,
shares of SMHC Common Stock that are present, or represented by proxy, at the
Special Meeting will be counted for quorum purposes regardless of whether the
holder of the shares or proxy fails to vote at the Special Meeting for any
reason, including broker nonvotes.
Once a quorum is established, approval of the Agreement requires the
affirmative vote of the holders of the greater of (i) a majority of the total
shares of SMHC Common Stock outstanding (in which case a failure to vote will
have the same effect as a vote against the Agreement) and (ii) at least
two-thirds of the shares of SMHC Common Stock represented in person or by proxy
at the Special Meeting.
The directors and executive officers of SMHC and their affiliates
beneficially owned, as of the Record Date, _______ shares (or approximately
_______% of the outstanding shares) of SMHC Common Stock. The directors and
executive officers of Regions and their affiliates beneficially owned, as of the
Record Date, no shares of SMHC Common Stock. As of that date, no subsidiary of
either SMHC or Regions held any shares of SMHC Common Stock in a fiduciary
capacity for others.
DESCRIPTION OF THE TRANSACTION
The following material describes certain aspects of the Merger. This
description does not purport to be complete and is qualified in its entirety by
reference to the Appendices hereto, including the Agreement, which is attached
as Appendix A to this Proxy Statement/Prospectus and incorporated herein by
reference. All stockholders are urged to read the Appendices in their entirety.
GENERAL
Each share of SMHC Common Stock (excluding any shares held by SMHC,
Regions, or their respective subsidiaries, other than shares held in a fiduciary
capacity or as a result of debts previously contracted, and shares held by
stockholders who perfect their dissenters' rights) issued and outstanding at the
Effective Date will be converted into and exchanged for 2.1 shares of Regions
Common Stock, subject to possible adjustment as described below under the
caption "--Possible Adjustment of Exchange Ratio." Each share of Regions Common
Stock outstanding immediately prior to the Effective Date will remain
outstanding and unchanged as a result of the Merger.
No fractional shares of Regions Common Stock will be issued in connection
with the Merger. In lieu of issuing fractional shares, Regions will make a cash
payment equal to the fractional part of a share which a SMHC stockholder would
otherwise receive multiplied by the last sale price of Regions Common Stock on
the Nasdaq National Market (as reported by The Wall Street Journal, or, if not
reported thereby, by another authoritative source selected by Regions), on the
last trading day preceding the Effective Date.
POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
Under certain circumstances, the Exchange Ratio could be adjusted upward
pursuant to certain provisions in the Agreement. Such an adjustment could occur
only if SMHC's Board of Directors elects by a vote of a majority of all of its
directors to terminate the Agreement pursuant to the provisions of the Agreement
described
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<PAGE> 21
below, and if Regions then elects to avoid termination by adjusting the Exchange
Ratio. For purposes of the description of these provisions and their operation,
the following definitions apply.
"Average Closing Price" means the average of the daily last sales prices of
Regions Common Stock as reported on the Nasdaq National Market (as reported by
The Wall Street Journal, or, if not reported thereby, by another authoritative
source selected by Regions) for the ten consecutive full trading days in which
such shares are traded on the Nasdaq National Market, ending on the close of
trading on the Determination Date. "Determination Date" means the date that is
seven business days before the date on which the closing of the Merger occurs.
If the Average Closing Price is less than $32.00, then SMHC may elect not
to effect the Merger at the original Exchange Ratio of 2.1. In such case, SMHC
has the right to terminate the Agreement during the period commencing on the
Determination Date and ending at the conclusion of the closing by giving Regions
written notice of that decision. SMHC may withdraw its termination notice at any
time during such period. During the seven-day period commencing upon its receipt
of such notice, Regions has the option to increase the Exchange Ratio to equal
the quotient obtained by dividing (1) the product of $32.00 and the Exchange
Ratio (as then in effect) by (2) the Average Closing Price. REGIONS IS UNDER NO
OBLIGATION TO ADJUST THE EXCHANGE RATIO. If Regions elects to adjust the
Exchange Ratio, it must give SMHC prompt written notice of that election and of
the revised Exchange Ratio, whereupon no termination shall have occurred
pursuant to the Agreement and the Agreement shall remain in effect in accordance
with its terms (except as the Exchange Ratio shall have been so modified and, if
a previously scheduled closing did not occur due to the intervention of such
seven-day period, then the closing shall be rescheduled on the second business
day following Regions giving notice of the exercise of its option). If SMHC
terminates the Agreement based on an Average Closing Price of less than $32.00,
and Regions does not elect to adjust the Exchange Ratio, SMHC will pay Regions
$250,000, which sum represents certain direct and indirect costs and expenses
incurred by Regions in connection with the transactions contemplated by the
Agreement.
These conditions reflect the parties' agreement that SMHC's stockholders
will assume the risk of declines in the value of Regions Common Stock (as
measured by the Average Closing Price) to $32.00 per share. SMHC has the right
to terminate the Agreement based on the Average Closing Price only when the
price of Regions Common Stock, as represented by the Average Closing Price,
declines to an amount below $32.00 per share as of the Determination Date.
The operation of the adjustment mechanism can be illustrated by the
following two scenarios. (For purposes of the numerical examples, the Exchange
Ratio is 2.1).
(a) The first scenario occurs if the Average Closing Price is not less than
$32.00. Under this scenario, there would be no right on the part of SMHC to
terminate the Agreement and therefore no potential adjustment to the Exchange
Ratio, even though the consideration to be received by SMHC stockholders would
have fallen from a pro forma $79.21 per share (as of November 3, 1997, the date
immediately preceding public announcement of the proposed Merger) to as little
as pro forma $67.20 per share (as of the Determination Date and based on the
Average Closing Price.)
(b) The second scenario arises where the Average Closing Price is less than
$32.00. Under this scenario, SMHC would have the right to terminate the
Agreement and Regions would have the right, but not the obligation, to remove
such termination right by adjusting the Exchange Ratio. In this case, the
potential adjustment in the Exchange Ratio is designed to ensure that the SMHC
stockholders receive for each share of SMHC Common Stock that number of shares
of Regions Common Stock having a value (based upon the Average Closing Price) of
at least $67.20 per share, which corresponds to a decline in the Regions Common
Stock price to $32.00 per share.
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<PAGE> 22
For example, if the Average Closing Price were $28.00, in such a case,
SMHC could terminate the Agreement unless Regions elected within seven business
days of Regions' receipt of SMHC's termination notice to increase the Exchange
Ratio to equal 2.4, which represents the quotient obtained by dividing (x) the
product of $32.00 and 2.1 (the Exchange Ratio as then effect) by (y) $28.00 (the
Average Closing Price). Based upon the assumed $28.00 Average Closing Price,
the new Exchange Ratio would represent a value to the SMHC stockholders of pro
forma $67.20 per share.
SMHC stockholders should be aware that the actual market value of a share
of Regions Common Stock at the Effective Date or at the time certificates
representing shares of Regions Common Stock are delivered following
surrender and exchange of certificates representing shares of SMHC Common Stock
may be more or less than the Average Closing Price. The Average Closing Price
is not determined as of the Effective Date or the date when certificates are
delivered, but rather is an average price over ten trading days ended seven
business days prior to the closing of the Merger. SMHC stockholders are urged
to obtain information on the market price of Regions Common Stock that is more
recent than that provided in this Proxy Statement/Prospectus. See "Comparative
Market Prices and Dividends."
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. During the last several years, there have been
significant developments in the banking and financial services industry. These
developments have included the increased emphasis and dependence on automation,
specialization of products and services, increased competition from other
financial institutions, and a trend toward consolidation and geographic
expansion, coupled with a relaxation of regulatory restrictions on interstate
conduct of business of financial institutions.
In the fall of 1992, a major Louisiana bank holding company inquired
whether SMHC had an interest in being acquired. SMHC's Board of Directors
employed Chaffe to advise the Board in connection with the inquiry by this
holding company, which ultimately offered to acquire SMHC for $33.57 per share
(adjusted to reflect the 100% stock dividend accounted for as a 2-for-1 stock
split, effected by SMHC on March 31, 1995) provided that a community bank that
competed with SMHC also agreed to be acquired by the same holding company, or
a lesser price if the community bank did not agree to be so acquired. A
preliminary proposal to acquire SMHC and the competing bank was made by a
second major bank holding company. SMHC's Board of Directors turned down the
proposals in April 1993 by a 14-to-three vote. Thereafter, stockholders of SMHC
who had apparently favored a sale of SMHC acted to reduce the number of
Directors of SMHC to five (from 17) and to elect as Directors the three persons
who had voted in favor of selling SMHC, one who had not, and one who had not
previously served as a director.
In May 1993, following the change in SMHC's Board of Directors, SMHC
engaged Chaffe to seek a buyer for SMHC. The process that followed ultimately
resulted in but one offer, that being from the second holding company
mentioned above at a price of $25.91 per share (adjusted for the stock split).
That offer was rejected by SMHC as being inadequate.
In January 1994, SMHC engaged a regional investment banking firm to
assist SMHC in finding a buyer at a price of at least $36.50 per share
(adjusted for the stock split). The investment banking firm did not
find any buyers interested at that price level, and its efforts were
discontinued in May 1994, at which time SMHC's Board of Directors determined to
abandon its efforts to solicit a buyer for SMHC and to concentrate on improving
SMHC's operations and profitability, while at the same time remaining open to
consider any unsolicited proposal that might be made to buy SMHC.
In September 1996, a Louisiana bank holding company, which was much
smaller than the first two, inquired whether SMHC had an interest in being
acquired and requested certain information from SMHC. Additionally, an
investment banker who had previously been with the regional firm mentioned
above suggested that SMHC engage his new firm's services in connection with
this inquiry. SMHC responded that, while open-minded concerning proposals of
this nature, it preferred not to consider any such proposals during the Bank's
centennial year, which was then being celebrated. No proposal was made.
Following the centennial year, SMHC began discussions with Chaffe as to
whether it was an opportune time to find a buyer for SMHC at an acceptable
price. The result of these discussions was that Chaffe, in March 1997, contacted
five prospective buyers, including Regions, that Chaffe believed might have a
serious interest in acquiring SMHC. At the conclusion of this process SMHC's
Board of Directors narrowed its interest to two proposals, one by a
second relatively small Louisiana holding company and the other by Regions.
Although the Regions proposal was somewhat higher, the Board on August 13,
1997, determined to proceed with the competing proposal because it offered
price protection in the event of a decline in the buyer's stock price, whereas
the Regions proposal did not include such protection despite SMHC's request
for it.
SMHC then began negotiations with the Louisiana holding company. Shortly
thereafter, a Regions representative had a telephone conversation with a Chaffe
representative on a different transaction. At the conclusion of the
conversation, the Regions representative pointed out that, because of a market
increase, the Regions proposal to SMHC was now significantly higher than it had
been. Further, the Regions representative offered for the first time a form of
the protection that had been sought by SMHC against stock price declines. The
Chaffe representative reported this conversation to SMHC's Board of Directors,
which concluded that the Regions proposal, which was at a higher price and had
downside protection without limitation of the upside potential, was more
favorable to stockholders of SMHC and, on September 23, 1997, unanimously
determined to accept it in principle. SMHC notified Regions and the Louisiana
holding company accordingly and, although SMHC was not legally required to do
so, reimbursed that holding company $14,426 of expenses the holding company had
incurred in negotiating with SMHC.
SMHC then commenced negotiations with Regions, resulting in the
execution of the Agreement on November 3, 1997. Those negotiations were
conducted by Chaffe and SMHC's legal counsel.
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<PAGE> 23
SMHC's Reasons for the Merger. In approving the Merger, the directors of
SMHC considered a number of factors. Without assigning any relative or specific
weights to the factors, the SMHC Board of Directors considered the following
material factors:
(a) the information presented to the directors by the management of SMHC
and Chaffe concerning the business, operations, earnings, asset quality, and
financial condition of SMHC, including compliance with regulatory capital
requirements on an historical and prospective basis;
(b) the financial terms of the Merger, including the relationship of the
merger price to the market value, tangible book value, and earnings per share of
SMHC Common Stock, and the partial protection against a decline in the market
value of Regions Common Stock;
(c) the nonfinancial terms of the Merger, including the treatment of the
Merger as a tax-free exchange of SMHC Common Stock for Regions Common Stock for
federal and state income tax purposes;
(d) the likelihood of the Merger being approved by applicable regulatory
authorities without undue conditions or delay;
(e) the report rendered by SMHC's financial advisor to the effect that,
from a financial point of view, the exchange of SMHC Common Stock for Regions
Common Stock on the terms and conditions set forth in the Agreement is fair to
the holders of SMHC Common Stock.
The terms of the Merger were the result of arms-length negotiations between
representatives of SMHC and representatives of Regions. Based upon the
consideration of the foregoing factors, the Board of Directors of SMHC
unanimously approved the Merger as being in the best interests of SMHC and its
stockholders. Each member of the Board of Directors of SMHC has agreed to vote
such member's shares in favor of the Merger.
20
<PAGE> 24
SMHC's Board of Directors unanimously recommends that SMHC stockholders
vote for approval of the Agreement.
Regions' Reasons for the Merger. The Regions Board of Directors has
approved the Agreement and determined that the Merger is in the best interests
of Regions and its stockholders. In approving the Agreement, the Regions Board
considered a number of factors. Without assigning any relative or specific
weights to the factors, the Regions Board of Directors considered the following
material factors:
(a) a review, based in part on a presentation by Regions management, of (i)
the business, operations, earnings, and financial condition, including the
capital levels and asset quality, of SMHC on an historical, prospective, and pro
forma basis and in comparison to other financial institutions in the area, (ii)
the demographic, economic, and financial characteristics of the markets in which
SMHC operates, including existing competition, history of the market areas with
respect to financial institutions, and average demand for credit, on an
historical and prospective basis, and (iii) the results of Regions' due
diligence review of SMHC; and
(b) a variety of factors affecting and relating to the overall strategic
focus of Regions, including Regions' desire to expand into markets in the
general vicinity of its core markets.
OPINION OF SMHC'S FINANCIAL ADVISOR
Chaffe has been retained as financial advisor by SMHC on its proposed
Merger with Regions to provide various services, including rendering an opinion
on the fairness of the transaction (the "Fairness Opinion") to the stockholders
of SMHC. The following discussion is a summary of the analysis underlying the
conclusion expressed in that fairness opinion.
Analysis of Selected Financial Data. Chaffe reviewed the financial
performance of SMHC and the Bank used several valuation models to examine
fairness. These valuation models are based on a public peer group, the
discounted cash flow model (DCF) and three merger peer groups with various
pricing multiples. In the process of valuation, Chaffe gave the most weight to
the values derived from the merger peer group model. The circumstances of this
valuation are more directly in line with these specific valuation models than
the public peer group models, which indicate marketable, minority value and must
be adjusted for a control value. The valuation emphasizes earnings, as they are
more indicative of value than other pricing parameters.
The Bank's 1996 net income was $1,566,000, compared to $1,696,000 in 1995
and $1,300,000 in 1994. Net income for the nine months ended September 30, 1997,
was $1,297,000. The Bank's annualized return on average assets ("ROAA") as of
September 30, 1997 was 1.58%, compared to 1.33% for the UBPR peer group. The
Bank's figure was up from 1.49% at December 31, 1996. The Bank's return on
average equity ("ROAE") increased from 13.11% in 1996 to 14.45% in September
1997. The Bank's Uniform Bank Performance Report ("UBPR") peer group's ROAE
increased from 13.92% in 1996 to 13.93% in September 1997. The Bank's net
interest income as of September 30, 1997 was 5.41% of average assets versus
4.40% for the peer group. The Bank's noninterest income was 1.15% of assets
compared to 0.68% for the peer group. Also, the Bank's personnel expense was
1.67% of average assets compared with 1.49% for its peer group, and the Bank's
average annual personnel expense per employee is $30,890 compared with $31,910
for its peer group.
The Bank's asset quality declined with a nonperforming assets
("NPA")-to-asset ratio of 1.53% as of September 30, 1997, compared with 0.51% as
of December 31,1996. The NPA-to-asset ratio as of December 31, 1995, 1994, and
1993 was 0.32%, 0.35%, and 0.55%, respectively. September 1997 nonperforming
loans to loan loss reserve ratio was 142.07% versus 53.83% for its UBPR peer
group, up from 60.75% at December 31, 1996. Historically, the nonperforming
loans to loan loss reserve ratio was 40.00%, 52.77%, and 67.42% as of December
31, 1995, 1994, and 1993, respectively. Net loss to average total loans at
September 30, 1997, was 0.42% for the Bank
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<PAGE> 25
and 0.13% for its peer group. Historically, net loss to average total loans was
0.46%, 0.12%, and 0.69%, respectively, in 1995, 1994, and 1993.
The Bank is well capitalized with a Tier 1 leverage capital ratio of 10.99%
as of September 30, 1997, compared to 11.07% as of December 31, 1996.
Stock Price and Dividend Review. Chaffe reviewed certain historical market
information concerning Regions common stock and noted that these shares are
traded in the Nasdaq National Market System under the symbol RGBK. Chaffe noted
that Regions' stock closed at $39.125 on January 12, 1998, had a 52-week high
closing price of $45.00 on December 16, 1997, a 52-week low closing price of
$26.00 on January 14, 1997, and a 200 day average daily trading volume of
218,736 shares.
Chaffe reviewed the dividend histories and current dividend levels of SMHC
and Regions, and noted that SMHC's and Regions' annual dividend per share were
$2.00 and $0.80, respectively, as of September 30, 1997. According to the Merger
Agreement, each outstanding share of SMHC shall be converted into 2.1 shares of
Regions' common stock. Based on this, each outstanding share of SMHC stock
should receive an equivalent cash dividend of $1.68. (On January 21, 1998,
Regions announced it will increase its quarterly dividend to $0.23 per share,
or $0.92 annually. Based on this, each outstanding share of SMHC Common Stock
would receive an equivalent cash dividend of $1.93.)
Earnings Estimates. Chaffe reviewed earnings estimates for Regions provided
by both Zack's and First Call, and noted that First Call estimates a median five
year earnings growth of 10%, while Zack's estimates a mean five year growth of
10%.
Analysis of Selected Merger Transactions. In order to obtain a valuation
range for SMHC, Chaffe performed an analysis of prices paid for selected banks
with characteristics comparable to SMHC, although Chaffe noted no transaction
was identical to the transaction proposed. Comparable transactions were
considered to be those announced in the United States for the period January 6,
1997 to January 5, 1998, in which the sellers had total assets of between $75
million and $225 million, a tangible equity-to-assets ratio between 9% and 13%,
and return on average assets between 1.20% and 1.75%. In addition, Chaffe
performed an analysis of prices paid for a similar group of selected banks,
limited in geographic area to twelve states in the southern United States.
Finally, Chaffe performed an analysis of prices paid for substantially all
Louisiana banks sold during the period January 6, 1997 to January 5, 1998. With
respect to each of these groups of transactions and the proposed Merger, Chaffe
compared the prices to be received by the peer groups as a multiple of their
tangible equity, their earnings per share for the four quarters prior to the
announcement of the transaction, their premium over tangible equity to core
deposits, and their total assets. The following table summarizes certain results
of this analysis:
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<PAGE> 26
<TABLE>
<CAPTION>
REGIONS/ U.S. PEER SOUTHERN LOUISIANA
BANK GROUP PEER GROUP PEER GROUP
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Seller Total Assets (000's)
Mean $111,494 $127,255 $849,425
Median $112,566 $ 99,412 $124,002 $ 80,449
Seller Tangible Equity/Assets 10.79% 10.42% 10.41% 8.54%
Seller YTD ROAA 1.58% 1.37% 1.40% 1.20%
Seller YTD ROAE 14.49% 13.34% 13.31% 14.04%
Seller NPA/Assets 1.53% 0.43% 0.26% 0.29%
Price/Tangible Equity 2.67x 2.21x 2.40x 2.50x
Price/4-Quarter EPS 19.40x 18.10x 21.58x 19.85x
Tang. Book Premium/Core Deposits 24.61x 15.37% 22.96% 15.95%
Price/Assets 28.80% 23.72% 27.10% 22.20%
</TABLE>
Discounted Cash Flow Analysis. Using the discounted cash flow analysis of
the Bank, Chaffe determined a range of net present values for the Bank's common
stock based on the stream of after-tax cash flows of the Bank and 2% perpetual
annual growth projected by Chaffe after reviewing the Bank's historical growth.
Chaffe noted that the Bank's annual compound earnings growth from December 1992
through September 1997 was 1.80%. Chaffe reviewed these forecasts and assessed
the likelihood of the Bank achieving such forecasts. Chaffe then discounted
these cash flow streams assuming an estimated required rate of return for the
Bank of 12.60%, based on Ibbotson and Associates Cost of Capital Quarterly 1997
Yearbook for SIC code 6022, and adjusted for the change in the risk-free rate.
The DCF model resulted in a lower value than most other values derived from
public and merger peer groups. This is understandable because the DCF value
represented the total value of the Bank on an independent basis, without any
benefit from cost savings/revenue enhancements that an acquiror may otherwise
realize. We gave substantial weight to the value derived from merger peer groups
to reach our conclusion.
Summary. In arriving at its fairness opinion, Chaffe did not rely on any
single analysis, but relied on a combination of factors derived from all of the
analytical procedures employed. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Conclusions based on these analyses are not necessarily
mathematical. Chaffe believes that the summary set forth above and Chaffe's
analysis must be considered as a whole and that selecting portions of the
analyses performed by Chaffe are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, analyses relating to the value of
businesses do not purport to be appraisals or necessarily reflect the prices at
which businesses actually may be sold. The fact that any specific analysis has
been referred to in the summary above is not meant to indicate that such
analysis was given greater weight than any other analysis.
Neither Chaffe nor any of its officers or employees has any interest in any
securities of SMHC or Regions. Through its experience in the securities
industry, in investment analysis and appraisal, and in related corporate finance
and investment banking activities, Chaffe & Associates, Inc. states that it is
competent to perform a fair market value of this transaction. SMHC selected
Chaffe because of its experience in advising on mergers and acquisitions of and
by financial institutions. SMHC has agreed to pay Chaffe a fee of $50,000, plus
out-of-pocket
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<PAGE> 27
expenses, for the Fairness Opinion. Further, SMHC has agreed to pay Chaffe for
certain other services (the "Advisory Services"), on an hourly basis, pertaining
both to the Merger in general and the Fairness Opinion in particular. The fees
received by Chaffe in connection with its services to SMHC were not dependent or
contingent upon the occurrence or lack thereof of any transaction.
SMHC has agreed to indemnify and hold harmless Chaffe, its subsidiaries and
affiliates, and its officers, directors, stockholders, employees, attorneys,
agents and representatives, and the successors and assigns of each of the
foregoing parties from and against any person claiming to have relied on
Chaffe's advice or services, or the performance or nonperformance thereof, or
claiming to have been entitled to some benefit therefrom, or claiming that such
services were not adequately performed, and all related damage, claim, demand,
expense or cost of any kind or nature, including reasonable attorney fees and
expenses, arising directly or indirectly, from or in any way related to, the
opinions or any other services performed by Chaffe, provided that Chaffe has not
been negligent or guilty of reckless or willful misconduct in connection with
the opinions, or any other services.
The proposed transaction of 2.1 Regions' shares per SMHC share implies a
value of $32,414,750, or $82.16 per SMHC share, based on Regions' closing price
on January 5, 1998 of $39.125. This value compares favorably to the range of
control value determined for SMHC. Based on the financial information as of
September 30,1997, this offer represented a price/earnings ratio of 19.40, price
to tangible book value ratio of 2.67, price to deposits ratio of 32.60%, price
to core deposits ratio of 39.36%, a tangible book premium/core deposit of
24.61%, and price-to-assets ratio of 28.80%.
In summary, based on the updated information, it is Chaffe's opinion that
the proposed transaction is fair, from a financial point of view, to the
Stockholders of SMHC.
EFFECTIVE DATE OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time that the
Delaware Certificate of Merger and the Louisiana Certificate of Merger relating
to the Merger become effective with, respectively, the Delaware Secretary of
State and the Louisiana Secretary of State. Unless otherwise agreed upon by
Regions and SMHC, and subject to the terms and conditions set forth in the
Agreement the parties will use their reasonable efforts to cause the Effective
Date to occur on the fifth business day following the last of the following
events to occur: (i) the effective date (including the expiration of any
applicable waiting period) of the last federal or state regulatory approval
required for the Merger and (ii) the date on which the Agreement is approved by
the requisite vote of SMHC stockholders; or such later date within 30 days
thereof as specified by Regions. The parties expect that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated during the first quarter of 1998, although there can be no assurance
as to whether or when the Merger will occur. See "--Conditions to Consummation
of the Merger" and "--Waiver, Amendment, and Termination of the Agreement."
No assurance can be provided that the necessary stockholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger can
or will be satisfied.
The Board of Directors of either Regions or SMHC generally may terminate
the Agreement if the Merger is not consummated by September 30, 1998, unless the
failure to consummate by that date is the result of a breach of the Agreement by
the party seeking termination. See "--Conditions to Consummation of the Merger"
and "--Waiver, Amendment, and Termination of the Agreement."
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<PAGE> 28
DISTRIBUTION OF REGIONS STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES
Promptly after the Effective Date, Regions will cause an exchange agent
selected by Regions to mail to the former stockholders of SMHC a form letter of
transmittal, together with instructions for the exchange of such stockholders'
certificates representing shares of SMHC Common Stock for certificates
representing shares of Regions Common Stock.
SMHC STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
THE FORM LETTER OF TRANSMITTAL AND INSTRUCTIONS. Upon surrender to the Exchange
Agent of certificates for SMHC Common Stock, together with a properly completed
letter of transmittal, there will be issued and mailed to each holder of SMHC
Common Stock surrendering such items a certificate or certificates representing
the number of shares of Regions Common Stock to which such holder is entitled,
if any, and a check for the amount to be paid in lieu of any fractional share
interest, without interest. After the Effective Date, to the extent permitted by
law, former SMHC stockholders of record as of the Effective Date will be
entitled to vote at any meeting of holders of Regions Common Stock the number of
whole shares of Regions Common Stock into which their SMHC Common Stock has been
converted, regardless of whether such stockholders have surrendered their SMHC
Common Stock certificates. No dividend or other distribution payable after the
Effective Date with respect to Regions Common Stock, however, will be paid to
the holder of any unsurrendered SMHC certificate until the holder duly
surrenders such certificate. Upon such surrender, all undelivered dividends and
other distributions and, if applicable, a check for the amount to be paid in
lieu of any fractional share interest will be delivered to such stockholder, in
each case without interest.
The stock transfer books of SMHC will be closed at the effective time of
the Merger and after the Effective Date, there will be no transfers of shares of
SMHC Common Stock on SMHC's stock transfer books. If certificates representing
shares of SMHC Common Stock are presented for transfer after the Effective Date,
they will be canceled and exchanged for the shares of Regions Common Stock and a
check for the amount due in lieu of fractional shares, if any, deliverable in
respect thereof.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to a number of conditions, generally
including, but not limited to:
(a) approval from the Federal Reserve and the Louisiana Commissioner, and
the expiration of all applicable waiting periods associated with these
approvals, without any conditions or restrictions that would, in the reasonable
judgment of Regions' Board of Directors, so materially adversely impact the
economic or business benefits of the transactions contemplated by the Agreement
that, had such condition or requirement been known, Regions would not, in its
reasonable judgment, have entered into the Agreement;
(b) the approval by the holders of requisite number of shares of SMHC
Common Stock;
(c) the absence of any action by any court, governmental, or regulatory
authority of competent jurisdiction restricting, prohibiting, or making illegal
the consummation of the Merger and the other transactions contemplated by the
Agreement;
(d) the receipt of a satisfactory opinion of counsel that the Merger
qualifies for federal income tax treatment as a reorganization under Section
368(a) of the Code and that the exchange of SMHC Common Stock for Regions Common
Stock will not give rise to recognition of gain or loss to SMHC stockholders,
except to the extent of any cash received; and
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(e) notification for listing on the Nasdaq National Market of the shares of
Regions Common Stock to be issued in the Merger.
Consummation of the Merger also is subject generally to the satisfaction or
waiver of various other conditions specified in the Agreement, including, among
others: (i) the delivery by Regions and SMHC of opinions of their respective
counsel and certificates executed by their respective chief executive officers
and chief financial officers as to the satisfaction of certain conditions and
obligations set forth in the Agreement; (ii) as of the Effective Date, the
accuracy of certain representations and warranties and the compliance in all
material respects with the agreements and covenants of each party; and (iii) at
the option of SMHC, the receipt of an opinion of Chaffe, dated within five days
prior to the date of this Proxy Statement/Prospectus, that the consideration to
be received in the Merger by the stockholders of SMHC is fair to such
stockholders from a financial point of view.
REGULATORY APPROVALS
The Merger may not proceed in the absence of receipt of the requisite
regulatory approvals. There can be no assurance that such regulatory approvals
will be obtained or as to the timing of such approvals. There also can be no
assurance that such approvals will not be accompanied by a conditional
requirement which causes such approvals to fail to satisfy the conditions set
forth in the Agreement. Applications for the approvals described below have been
submitted to the appropriate regulatory agencies.
Regions and SMHC are not aware of any material governmental approvals or
actions that are required for consummation of the Merger, except as described
below. Should any other approval or action be required, such approval or action
would be sought.
The Merger requires the prior approval of the Federal Reserve, pursuant to
Section 3 of the BHC Act. In granting its approval under Section 3 of the BHC
Act, the Federal Reserve must take into consideration, among other factors, the
financial and managerial resources and future prospects of the institutions and
the convenience and needs of the communities to be served. The relevant statutes
prohibit the Federal Reserve from approving the Merger (i) if it would result in
a monopoly or be in furtherance of any combination or conspiracy to monopolize
or attempt to monopolize the business of banking in any part of the United
States or (ii) if its effect in any section of the country may be to
substantially lessen competition or to tend to create a monopoly, or if it would
be a restraint of trade in any other manner, unless the Federal Reserve finds
that any anticompetitive effects are outweighed clearly by the public interest
and the probable effect of the transaction in meeting the convenience and needs
of the communities to be served. Under the BHC Act, the Merger may not be
consummated until the 30th day following the date of Federal Reserve approval,
which may be shortened by the Federal Reserve to the 15th day, during which time
the United States Department of Justice may challenge the transaction on
antitrust grounds. The commencement of any antitrust action would stay the
effectiveness of the Federal Reserve's approval, unless a court specifically
orders otherwise.
The Merger also is subject to the approval of the Louisiana Commissioner.
In the evaluation, the Louisiana Commissioner will take into account
considerations similar to those applied by the Federal Reserve.
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
Prior to the Effective Date, and to the extent permitted by law, any
provision of the Agreement generally may be (i) waived by the party benefitted
by the provision or (ii) amended by a written agreement between Regions and SMHC
approved by their respective Boards of Directors; provided, however, that after
approval by the SMHC stockholders, no amendment that pursuant to the Louisiana
Act requires further approval of the SMHC
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stockholders, including decreasing the consideration to be received by SMHC
stockholders, may be made without the further approval of such stockholders.
The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Date, either before or after approval by SMHC
stockholders, under certain circumstances, including:
(a) by the Board of Directors of either party upon final denial of any
required consent of any regulatory authority or by the Board of Directors of
Regions if any required regulatory approval is conditioned or restricted in the
manner described under "--Conditions to Consummation of the Merger" above;
(b) by the Board of Directors of either party, if the holders of the
requisite number of shares of SMHC Common Stock shall not have approved the
Agreement;
(c) by mutual consent of the Boards of Directors of Regions and SMHC;
(d) by the Board of Directors of either party, in the event of a material
breach by the other party of any covenant or agreement contained in the
Agreement, or any representation or warranty contained in the Agreement which
meets certain standards specified in the Agreement, and which in any such case
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching party;
(e) by the Board of Directors of either party if the Merger shall not have
been consummated by September 30, 1998, except that a party that has breached
the obligation to consummate the closing and has failed to cure such breach may
not terminate for such cause;
(f) by the Board of Directors of either party in the event that certain of
the conditions precedent to the obligations of such party to consummate the
Merger cannot be satisfied or fulfilled by September 30, 1998; or
(g) by the Board of Directors of SMHC based on an Average Closing Price of
less than $32.00 per share, as described under the caption "Description of the
Transaction -- Possible Adjustment of Exchange Ratio."
In the event of the termination of the Agreement, the Agreement generally
shall become void and have no effect, and neither party shall have any claim or
legal right to redress, whether for breach of contract or otherwise, as a result
of a breach of any representation, warranty, covenant, or condition of the
Agreement, except that certain provisions shall survive a termination, including
those providing for the payment of expenses and restricting disclosure of
confidential information. Termination of the Agreement generally will not
relieve parties from liability for an uncured willful and knowing breach of a
representation, warranty, material covenant, or material agreement set forth in
the Agreement. In addition, if the Agreement is terminated under the provisions
of the Agreement that are described under the heading "Description of the
Transaction--Possible Adjustment of Exchange Ratio," SMHC will be required to
pay Regions $250,000.
CONDUCT OF BUSINESS PENDING THE MERGER
SMHC generally has agreed, unless the prior written consent of the
appropriate Regions officer has been obtained, or except as previously disclosed
to Regions, (i) to operate its business pending consummation of the Merger only
in the usual, regular, and ordinary course; (ii) to preserve intact its business
organization and assets and maintain its rights and franchises; and (iii) to
take no action which would (x) materially adversely affect the ability of any
party to obtain any consents required for the transaction contemplated by the
Agreement, without the imposition of a condition or restriction of the type
described under "--Conditions to Consummation of the Merger" or (y) materially
adversely affect the ability of any party to perform its covenants and
agreements under the Agreement and to consummate the Merger. Regions generally
has agreed that, except as previously disclosed to SMHC, pending the
consummation of the Merger it shall and shall cause each of its subsidiaries to
(x) continue its business and the business of its subsidiaries in a manner
designed in its reasonable judgment to enhance the long-term value of the
Regions Common Stock and the business prospects of Regions and its subsidiaries
and to the extent consistent therewith use all reasonable efforts to preserve
intact core businesses and goodwill of Regions
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and its subsidiaries with their respective employees and the communities they
serve, (y) take no action which would (i) materially adversely affect the
ability of any Party to obtain any consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
described under "--Conditions to Consummation of the Merger," or (ii) materially
adversely affect the ability of any Party to perform its covenants and
agreements under the Agreement. The foregoing shall not prevent Regions or any
subsidiary of Regions from discontinuing or disposing of any of its assets or
business, or from acquiring or agreeing to acquire any other entity or any
assets thereof, if such action is, in the judgment of Regions, desirable in the
conduct of the business of Regions and its subsidiaries.
In addition, the Agreement includes certain other restrictions applicable
to the conduct of the business of either SMHC or Regions prior to consummation
of the Merger, as described below.
SMHC. SMHC has agreed not to take certain actions relating to the operation
of its business pending consummation of the Merger without the prior written
consent of Regions, which Regions has agreed shall not be unreasonably withheld.
Generally, SMHC has agreed that, except as specifically contemplated by the
Agreement or previously disclosed to Regions, it will not:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of SMHC or its subsidiaries;
(b) incur any additional debt obligation or other obligation for borrowed
money (other than between SMHC and the Bank) in excess of an aggregate of
$150,000 (for SMHC and its subsidiaries on a consolidated basis) except in the
ordinary course of the business of SMHC and its subsidiaries consistent with
past practices (which shall include creation of deposit liabilities, purchases
of federal funds, advances from the Federal Home Loan Bank or the Federal
Reserve Bank, overnight borrowings to meet temporary liquidity needs, and entry
into repurchase agreements fully secured by U.S. government or agency
securities), or impose, or (with certain exceptions set forth in the Agreement)
suffer the imposition, on any assets of SMHC or its subsidiaries of any lien or
permit any such lien to exist, other than liens previously disclosed to Regions;
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of SMHC or its subsidiaries, or declare or pay any dividend or
make any other distribution in respect of SMHC Common Stock; provided that SMHC
may (to the extent legally or contractually permitted to do so), but shall not
be obligated to, declare and pay regular quarterly cash dividends on the SMHC
Common Stock at a rate not in excess of $.50 per share for any quarter, provided
that with respect to any dividend declared or payable on the shares of SMHC
Common Stock for the quarterly period during which the Effective Date occurs,
the parties shall cooperate to select a record date such that the holders of
SMHC Common Stock shall not receive both a dividend in respect of SMHC Common
Stock and a dividend in respect of Regions Common Stock, or fail to receive any
dividend;
(d) except as previously disclosed to Regions, issue, sell, pledge,
encumber, authorize the issuance of, enter into any contract to issue, sell,
pledge, encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of SMHC Common Stock or any other capital
stock of SMHC or its subsidiaries, or any stock appreciation rights, or any
option, warrant, conversion, or other right to acquire any such stock, or any
security convertible into any such stock;
(e) adjust, split, combine, or reclassify any capital stock of SMHC or its
subsidiaries or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of SMHC Common Stock or sell, lease,
mortgage, or otherwise dispose of or otherwise encumber any shares of capital
stock of SMHC's subsidiaries (unless sold or otherwise transferred to SMHC) or
any assets having in the aggregate a book value
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in excess of $100,000, other than in the ordinary course of business for
reasonable and adequate consideration and certain other dispositions in the
ordinary course of business;
(f) except for certain categories of securities, purchase any securities of
or make any material investment in any entity, or otherwise acquire direct or
indirect control of any other entity, other than in connection with foreclosures
in the ordinary course of business, or acquisitions of control by SMHC in its
fiduciary capacity;
(g) grant any increase in compensation or benefits to the employees or
officers of SMHC or its subsidiaries except in accordance with past practice or
as previously approved by the Board of Directors of SMHC, in each case, as
previously disclosed to Regions, or as required by law; except as previously
disclosed to Regions, pay any severance or termination pay or bonus except
pursuant to written policies or contracts in effect prior to the date of the
Agreement and previously disclosed to Regions; enter into or amend any severance
agreements with officers of SMHC or its subsidiaries; grant any increase in fees
or other increases in compensation or other benefits to directors of SMHC or its
subsidiaries except as previously disclosed to Regions, in accordance with past
practice; or voluntarily accelerate the vesting of any stock options or other
stock-based compensation or employee benefits;
(h) enter into or amend any employment contract between SMHC or any of its
subsidiaries and any person (unless such amendment is required by law) that SMHC
or its subsidiaries does not have the unconditional right to terminate without
liability (other than liability for services already rendered), at any time on
or after the Effective Date;
(i) adopt any new employee benefit plan or program of SMHC or any of its
subsidiaries or make any material change in or to any existing employee benefit
plans or programs of SMHC or any of its subsidiaries other than any such change
that is required by law or that, in the opinion of counsel, is necessary or
advisable to maintain the tax qualified status of any such plan;
(j) make any significant change in any tax or accounting methods or systems
of internal accounting controls, except as may be necessary to conform to
changes in tax laws or regulatory accounting requirements or generally accepted
accounting principles ("GAAP");
(k) with certain exceptions, commence any material litigation other than in
accordance with past practice or settle any litigation for money damages in
excess of $100,000; or
(l) modify, amend, or terminate any material contract (other than any loan
contract, the modification, amendment, or termination of which does not result
in SMHC and its subsidiaries recognizing a loss that exceeds $100,000) or waive,
release, compromise, or assign any material rights or claims, other than in
connection with the modification, amendment, or termination of a loan contract
described above.
In addition, SMHC has agreed not to solicit, directly or indirectly, any
acquisition proposal from any other person or entity. SMHC also has agreed not
to negotiate with respect to any such proposal, provide nonpublic information to
any party making such a proposal, or enter into any agreement with respect to
any such proposal, except in compliance with the fiduciary obligations of its
Board of Directors. In addition, SMHC has agreed to use reasonable efforts to
cause its affiliates, advisors and other representatives not to engage in any of
the foregoing activities, subject to fiduciary duties as aforesaid.
Regions. Regions has generally agreed not to amend its certificate of
incorporation or bylaws in any manner which is adverse to, and discriminates
against, the holders of SMHC Common Stock, and not, directly or indirectly, to
acquire or enter into any agreement in principle or definitive agreement to
acquire, any financial
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or other institution or business if such acquisition would be reasonably likely
to cause any consent of any regulatory authority which is necessary to
consummate the transactions contemplated hereby to be conditioned or restricted
in the manner described under "--Conditions to Consummation of the Merger,"
unless Regions waives the condition relating to the conditioning or restricting
of regulatory consents in writing in advance of the earliest of such
acquisition, agreement and agreement in principle.
MANAGEMENT FOLLOWING THE MERGER
Consummation of the Merger will not alter the present officers and
directors of Regions. Certain information pertaining to the directors and
executive officers of Regions, executive compensation, certain relationships and
related transactions, and other related matters, is included in or incorporated
by reference in Regions' Annual Report on Form 10-K for the year ended December
31, 1996, incorporated herein by reference. See "Documents Incorporated by
Reference."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement provides that Regions will indemnify, defend and hold
harmless each person entitled to indemnification from SMHC or any of its
subsidiaries, to the full extent permitted by Louisiana law and by SMHC's
Articles of Incorporation or the rights otherwise in effect on the date of the
Agreement, for ten years from the Effective Date with respect to matters
occurring at or prior to the Effective Date.
The Agreement also provides that, after the Effective Date, Regions will
provide generally to officers and employees of SMHC and its subsidiaries who, at
or after the Effective Date, become officers or employees of Regions or its
subsidiaries, employee benefits under employee benefit plans (other than stock
option or other plans involving the potential issuance of Regions Common Stock)
on terms and conditions that, taken as a whole, are substantially similar to
those currently provided by Regions and its subsidiaries to their similarly
situated officers and employees. For purposes of participation and vesting (but
not benefit accrual) under such employee benefit plans, service with SMHC or its
subsidiaries prior to the Effective Date will be treated as service with Regions
or its subsidiaries. The Agreement further provides that Regions will honor all
employment, severance, consulting, and other compensation contracts previously
disclosed to Regions between SMHC or its subsidiaries and any current or former
director, officer, or employee, and all provisions for vested benefits or other
vested amounts earned or accrued through the Effective Date under SMHC's benefit
plans.
As of the Record Date, directors and executive officers of SMHC owned no
shares of Regions Common Stock.
DISSENTING STOCKHOLDERS
Each SMHC stockholder who objects to the Merger shall be entitled to the
rights and remedies of dissenting stockholders provided in Section 131 of the
Louisiana Act, a copy of which is included as Appendix C to this Proxy
Statement/Prospectus.
The following is a summary of the steps to be taken by a SMHC stockholder
who is interested in perfecting such holder's dissenters' rights and should be
read in conjunction with the full text of Section 131 of the Louisiana Act. Each
of the steps enumerated below must be taken in strict compliance with the
applicable provisions of the statute in order for holders of SMHC Common Stock
to perfect their dissenters' rights. If the Merger is approved by 80% or more of
the total voting power of SMHC, then dissenters' rights of appraisal, in
accordance with the Louisiana Act, will not be available.
Any written objection, demand, or notice required by the Louisiana Act in
connection with the exercise of dissenters' rights should be sent to SMHC or,
following the Merger, to Regions, in either case to 1504 Hospital Avenue,
Franklin, Louisiana, 70538, Attention: Y.
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George Ramirez, Jr., Corporate Secretary. It is recommended that all required
documents to be delivered by mail be sent by registered or certified mail with
return receipt requested.
Any holder of SMHC Common Stock who disapproves of or objects to the
proposed Merger and who wishes to receive in cash the "fair value" of such
shares (determined as of the day before the Agreement is approved by the
stockholders) may elect to do so by taking all of the following steps:
(a) Such stockholder must file with SMHC, prior to or at the Special
Meeting, a written objection to the proposed Merger.
(b) Such stockholder must also vote such holder's shares of SMHC Common
Stock against the Merger. If the Merger is approved by the required vote, but by
less than 80% of the total voting power, and the Merger authorized thereby is
effected, the Corporation (referring to SMHC or, if after the Effective Date,
Regions, as the then successor to SMHC) promptly thereafter shall give written
notice thereof, by registered mail, to each stockholder who both filed such
written objection to, and voted such holder's shares against, the Merger, at
such stockholder's last address on SMHC's records.
(c) Each such stockholder, within 20 days after the mailing of such notice
to such holder, but not thereafter, must file with the Corporation a demand in
writing for the fair cash value of such holder's shares of SMHC Common Stock as
of the day before such vote was taken, and such holder must state in such demand
the value demanded and a post office address to which the reply of the
Corporation may be sent.
(d) At the same time, such stockholder must deposit in escrow in a
chartered bank or trust company located in St. Mary Parish the certificates
representing such holder's shares of SMHC Common Stock, duly endorsed and
transferred to the Corporation upon the sole condition that such certificates
shall be delivered to the Corporation upon payment of the value of the shares
determined in accordance with the provisions of Section 131 of the Louisiana
Act.
(e) With the demand, the stockholder must deliver to the Corporation the
written acknowledgment of such bank or trust company that it so holds such
holder's certificates of SMHC Common Stock.
Any stockholder who fails to take each of the required actions outlined
above in a timely manner will not be entitled to exercise the rights of a
dissenting stockholder.
Unless the objection, demand, and acknowledgment are made and delivered by
the stockholder within the required time period, such holder conclusively shall
be presumed to have acquiesced in the Merger. If the Corporation does not agree
to the value so stated and demanded, or does not agree that a payment is due,
within 20 days after receipt of such demand and acknowledgment, it shall notify
the stockholder in writing, at the designated post office address, of its
disagreement and shall state in such notice the value it will agree to pay if
any payment should be held to be due; otherwise it shall be liable for, and
shall pay to the dissatisfied stockholder, the value demanded.
In case of disagreement as to such fair cash value, or as to whether any
payment is due, after compliance by the parties with the provisions described
above, the dissatisfied stockholder, within 60 days after receipt of notice in
writing of the Corporation's disagreement, but not thereafter, may file suit
against the Corporation, in the district court of St. Mary Parish praying the
court to fix and decree the fair cash value of the dissatisfied stockholder's
shares of SMHC Common Stock as of the day before the stockholder vote on the
Agreement was taken, and the court, on such evidence as may be adduced in
relation thereto, shall determine summarily whether any payment is due and, if
so, shall determine such cash value and render judgment accordingly. Any
stockholder entitled to file
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such suit, within such 60-day period, but not thereafter, may intervene as a
plaintiff in such suit filed by another stockholder and recover therein judgment
against the Corporation for the fair cash value of such holder's shares of SMHC
Common Stock. Failure of the stockholder to bring suit, or to intervene in such
a suit, within 60 days after receipt of notice of disagreement by the
Corporation conclusively shall bind the stockholder (i) to acquiesce in, and not
contest, the Corporation's statement that no payment is due or (ii) if the
Corporation does not contend that no payment is due, to accept the value of such
holder's shares of SMHC Common Stock as fixed by the Corporation in its notice
of disagreement.
A stockholder, upon filing a demand for the value of such holder's shares,
shall cease to have any of the rights of a stockholder, except the rights
accorded by Section 131 of the Louisiana Act. Such a demand may be withdrawn by
the stockholder at any time before the Corporation gives notice of disagreement,
as provided by the Louisiana Act. After such notice of disagreement is given,
withdrawal of the demand shall require the consent of the Corporation. If a
demand is withdrawn, or the Merger is abandoned or rescinded, or a court shall
determine that the stockholder is not entitled to receive payment for such
holder's shares of SMHC Common Stock, or the stockholder shall otherwise lose
such holder's dissenters' rights, such holder shall not have the right to
receive a cash payment for such holder's shares of SMHC Common Stock, such
holder's share certificates shall be returned (and, on such holder's request,
new certificates shall be issued in exchange for the old ones endorsed to the
Corporation), and such holder shall be reinstated to all rights as a stockholder
as of the filing of such holder's demand for value, including the right to
payment of any intervening dividend or other distribution, or if any such rights
have expired or any such dividend or distribution other than in cash has been
completed, in lieu thereof, at the election of the Corporation, the fair value
thereof in cash as determined by the Corporation's Board as of the time of such
expiration or completion, but without prejudice otherwise to any corporate
proceedings that may have been taken in the interim.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A SUMMARY OF CERTAIN ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. THIS SUMMARY IS BASED ON THE FEDERAL INCOME TAX LAWS
NOW IN EFFECT AND AS CURRENTLY INTERPRETED; IT DOES NOT TAKE INTO ACCOUNT
POSSIBLE CHANGES IN SUCH LAWS OR INTERPRETATIONS, INCLUDING AMENDMENTS TO
APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN JUDICIAL OR ADMINISTRATIVE
RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT. THIS SUMMARY DOES NOT
PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. IN PARTICULAR,
AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT ADDRESS THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO STOCKHOLDERS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES OR STATUS (FOR EXAMPLE, AS FOREIGN PERSONS, TAX-EXEMPT
ENTITIES, DEALERS IN SECURITIES, AND INSURANCE COMPANIES, AMONG OTHERS). NOR
DOES THIS SUMMARY ADDRESS ANY CONSEQUENCES OF THE MERGER UNDER ANY STATE, LOCAL,
ESTATE, OR FOREIGN TAX LAWS. STOCKHOLDERS, THEREFORE, ARE URGED TO CONSULT THEIR
OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER,
INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICATION AND EFFECT OF
FEDERAL, FOREIGN, STATE, LOCAL, AND OTHER TAX LAWS, AND THE IMPLICATIONS OF ANY
PROPOSED CHANGES IN THE TAX LAWS.
A federal income tax ruling with respect to this transaction was not
requested from the Internal Revenue Service. Instead, consummation of the Merger
is conditioned upon receipt by Regions and SMHC of an opinion from Alston & Bird
LLP, special counsel to Regions, dated as of the date of closing the Merger,
concerning certain federal income tax consequences of the proposed Merger under
federal income tax law. Based upon representations made by Regions and SMHC
(including the representation that SMHC stockholders will maintain sufficient
equity ownership in Regions after the Merger), it is such firm's opinion that:
(a) Provided the Merger qualifies as a statutory merger under the Delaware
GCL and the Louisiana Act, the Merger will be a reorganization within the
meaning of Section 368(a) of the Code.
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(b) The stockholders of SMHC will recognize no gain or loss upon the
exchange of their SMHC Common Stock solely for shares of Regions Common Stock.
(c) The basis of the Regions Common Stock received by the SMHC stockholders
in the Merger will, in each instance, be the same as the basis of the SMHC
Common Stock surrendered in exchange therefor, less the basis of any fractional
share of Regions Common Stock settled by cash payment.
(d) The holding period of the Regions Common Stock received by the SMHC
stockholders will, in each instance, include the period during which the SMHC
Common Stock surrendered in exchange therefor was held, provided that the SMHC
Common Stock was held as a capital asset on the date of the exchange.
(e) The payment of cash to SMHC stockholders in lieu of fractional share
interests of Regions Common Stock will be treated for federal income tax
purposes as if the fractional shares were distributed as part of the exchange
and then were redeemed by Regions. These cash payments will be treated as having
been received as distributions in full payment in exchange for the stock
redeemed, as provided in Section 302(a) of the Code.
(f) Where solely cash is received by a SMHC stockholder in exchange for
SMHC Common Stock pursuant to the exercise of dissenters' rights, such cash will
be treated as having been received in redemption of such holder's SMHC Common
Stock, subject to the provisions and limitations of Section 302 of the Code.
THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, FOREIGN, OR OTHER TAX
CONSEQUENCES OF THE MERGER. SMHC STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE PROPOSED TRANSACTION TO
THEM INDIVIDUALLY, INCLUDING TAX CONSEQUENCES UNDER STATE, LOCAL, OR FOREIGN
LAW.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests as that term is used pursuant to GAAP, for accounting and financial
reporting purposes. Under the pooling-of-interests method of accounting, assets,
liabilities, and equity of the acquired company are carried forward to the
combined entity at their stated amounts. See "Summary--Comparative Per Share
Data."
EXPENSES AND FEES
The Agreement provides, in general, that each of the parties will bear and
pay its own expenses in connection with the transactions contemplated by the
Agreement, including fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel, except that Regions
will bear and pay the filing fees and printing costs in connection with this
Proxy Statement/Prospectus. If SMHC terminates the Agreement based on an
Average Closing Price of less than $32.00, and Regions does not elect to adjust
the Exchange Ratio, SMHC has agreed to pay Regions $250,000, which sum
represents certain direct and indirect costs and expenses incurred by Regions
in connection with the transactions contemplated by the Agreement.
RESALES OF REGIONS COMMON STOCK
The Regions Common Stock to be issued to SMHC stockholders in the Merger
has been registered under the Securities Act, but that registration does not
cover resales of those shares by persons who control, are controlled by, or are
under common control with, SMHC (such persons are referred to hereinafter as
"affiliates" and generally include executive officers, directors, and 10%
stockholders) at the time of the Special Meeting. Affiliates may not sell shares
of Regions Common Stock acquired in connection with the Merger, except pursuant
to an effective registration statement under the Securities Act or in compliance
with SEC Rule 145 or in accordance with a legal opinion satisfactory to Regions
that such sale or transfer is otherwise exempt from the Securities Act
registration requirements.
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The Agreement provides that SMHC will use its reasonable efforts to cause
each person who SMHC reasonably believes will be an affiliate of SMHC to deliver
to Regions, not later than 30 days prior to the Effective Date, a written
agreement providing that such person generally will not sell, pledge, transfer,
or otherwise dispose of any Regions Common Stock to be received by such person
upon consummation of the Merger, except in compliance with the Securities Act
and the rules and regulations of the SEC promulgated thereunder.
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EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of SMHC Common Stock will be exchanging
their shares of a Louisiana corporation governed by the Louisiana Act and SMHC's
Articles of Incorporation, as amended (the "Articles"), and Bylaws, for shares
of Regions, a Delaware corporation governed by the Delaware GCL and Regions'
Certificate of Incorporation (the "Certificate") and Bylaws. Certain significant
differences exist between the rights of SMHC stockholders and those of Regions
stockholders. The differences deemed material by SMHC and Regions are summarized
below. In particular, Regions' Certificate and Bylaws contain several provisions
that may be deemed to have an antitakeover effect in that they could impede or
prevent an acquisition of Regions unless the potential acquirer has obtained the
approval of Regions' Board of Directors. The following discussion is necessarily
general; it is not intended to be a complete statement of all differences
affecting the rights of stockholders and their respective entities, and it is
qualified in its entirety by reference to the Louisiana Act and the Delaware GCL
as well as to Regions' Certificate and Bylaws and SMHC's Articles and Bylaws.
ANTITAKEOVER PROVISIONS GENERALLY
The provisions of Regions' Certificate and Bylaws described below under the
headings, "--Authorized Capital Stock," "--Amendment of Certificate or Articles
of Incorporation and Bylaws," "--Classified Board of Directors and Absence of
Cumulative Voting," "--Removal of Directors," "--Limitations on Director
Liability," "--Special Meetings of Stockholders," "--Actions by Stockholders
Without a Meeting," "--Stockholder Nominations," and "--Mergers, Consolidations,
and Sales of Assets Generally," and the provisions of the Delaware GCL described
under the heading "--Business Combinations With Certain Persons," are referred
to herein as the "Protective Provisions." In general, one purpose of the
Protective Provisions is to assist Regions' Board of Directors in playing a role
in connection with attempts to acquire control of Regions, so that the Board can
further and protect the interests of Regions and its stockholders as appropriate
under the circumstances, including, if the Board determines that a sale of
control is in their best interests, by enhancing the Board's ability to maximize
the value to be received by the stockholders upon such a sale.
Although Regions' management believes the Protective Provisions are,
therefore, beneficial to Regions' stockholders, the Protective Provisions also
may tend to discourage some takeover bids. As a result, Regions' stockholders
may be deprived of opportunities to sell some or all of their shares at prices
that represent a premium over prevailing market prices. On the other hand,
defeating undesirable acquisition offers can be a very expensive and
time-consuming process. To the extent that the Protective Provisions discourage
undesirable proposals, Regions may be able to avoid those expenditures of time
and money.
The Protective Provisions also may discourage open market purchases by a
potential acquirer. Such purchases may increase the market price of Regions
Common Stock temporarily, enabling stockholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the Protective
Provisions may decrease the market price of Regions Common Stock by making the
stock less attractive to persons who invest in securities in anticipation of
price increases from potential acquisition attempts. The Protective Provisions
also may make it more difficult and time consuming for a potential acquirer to
obtain control of Regions through replacing the Board of Directors and
management. Furthermore, the Protective Provisions may make it more difficult
for Regions' stockholders to replace the Board of Directors or management, even
if a majority of the stockholders believes such replacement is in the best
interests of Regions. As a result, the Protective Provisions may tend to
perpetuate the incumbent Board of Directors and management.
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AUTHORIZED CAPITAL STOCK
Regions. The Certificate authorizes the issuance of up to 240,000,000
shares of Regions Common Stock, of which 136,820,461 shares were issued,
including 500,000 treasury shares as of September 30, 1997, and 5,000,000 shares
of preferred stock, none of which are outstanding. Regions' Board of Directors
may authorize the issuance of additional shares of Regions Common Stock or
preferred stock without further action by Regions' stockholders, unless such
action is required in a particular case by applicable laws or regulations or by
any stock exchange upon which Regions' capital stock may be listed. The
Certificate does not provide preemptive rights to Regions stockholders.
The authority to issue additional shares of Regions capital stock provides
Regions with the flexibility necessary to meet its future needs without the
delay resulting from seeking stockholder approval. The authorized but unissued
shares of Regions Common Stock will be issuable from time to time for any
corporate purpose, including, without limitation, stock splits, stock dividends,
employee benefit and compensation plans, acquisitions, and public or private
sales for cash as a means of raising capital. Such shares could be used to
dilute the stock ownership of persons seeking to obtain control of Regions. In
addition, the sale of a substantial number of shares of Regions Common Stock to
persons who have an understanding with Regions concerning the voting of such
shares, or the distribution or declaration of a dividend of shares of Regions
Common Stock (or the right to receive Regions Common Stock) to Regions
stockholders, may have the effect of discouraging or increasing the cost of
unsolicited attempts to acquire control of Regions. Regions has committed not to
issue shares of preferred stock for any anti-takeover purpose, including any
purpose to make a change in control of Regions more costly or difficult.
SMHC. SMHC's authorized capital stock consists of 10,000,000 shares of SMHC
Common Stock, which is the only class of capital stock authorized and of which
394,520 shares were issued and outstanding as of the Record Date.
Pursuant to the Louisiana Act, SMHC's Board of Directors may authorize the
issuance of additional shares of SMHC Common Stock without further action by
SMHC's stockholders. SMHC's Articles, as amended, provide the stockholders of
SMHC with preemptive rights to purchase or subscribe to any unissued authorized
shares of SMHC Common Stock or any option or warrant for the purchase thereof,
in accordance with the Louisiana Act.
AMENDMENT OF CERTIFICATE OR ARTICLES OF INCORPORATION AND BYLAWS
Regions. The Delaware GCL generally provides that the approval of a
corporation's board of directors and the affirmative vote of a majority of (i)
all shares entitled to vote thereon and (ii) the shares of each class of stock
entitled to vote thereon as a class is required to amend a corporation's
certificate of incorporation, unless the certificate specifies a greater voting
requirement. The Certificate states that its provisions regarding authorized
capital stock, election, classification, and removal of directors, the approval
required for certain business combinations, meetings of stockholders, and
amendment of the Certificate and Bylaws may be amended or repealed only by the
affirmative vote of the holders of at least 75% of the outstanding shares of
Regions Common Stock.
The Certificate also provides that the Board of Directors has the power to
adopt, amend, or repeal the Bylaws. Any action taken by the stockholders with
respect to adopting, amending, or repealing any Bylaws may be taken only upon
the affirmative vote of the holders of at least 75% of the outstanding shares of
Regions Common Stock.
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SMHC. The Louisiana Act generally provides that a Louisiana corporation's
articles of incorporation may be amended by the affirmative vote of two-thirds
of the voting power present at a meeting, unless the articles of incorporation
provide for a higher or lower voting requirement. The only variation provided by
SMHC's Articles is that the affirmative vote of the greater of (i) a majority of
the total shares of SMHC Common Stock outstanding and (ii) at least two-thirds
of the shares of SMHC Common Stock represented in person or by proxy at the
meeting is required to approve any amendment to Article VI of the Articles,
which establishes the same voting requirement for stockholder approval in
connection with any merger, consolidation, share exchange, transfer of assets,
or dissolution.
The Bylaws provide that the Board of Directors and the stockholders have
the power to amend or alter the Bylaws, provided that notice of the proposed
amendment be included in the notice of any stockholder meeting at which such an
amendment is to be considered.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
Regions. The Certificate provides that Regions' Board of Directors is
divided into three classes, with each class to be as nearly equal in number as
possible. The directors in each class serve three-year terms of office.
The effect of Regions having a classified Board of Directors is that only
approximately one-third of the members of the Board are elected each year;
consequently, two annual meetings are effectively required for Regions'
stockholders to change a majority of the members of the Board.
Pursuant to the Certificate, each stockholder generally is entitled to one
vote for each share of Regions stock held and is not entitled to cumulative
voting rights in the election of directors. With cumulative voting, a
stockholder has the right to cast a number of votes equal to the total number of
such holder's shares multiplied by the number of directors to be elected. The
stockholder has the right to cast all of such holder's votes in favor of one
candidate or to distribute such holder's votes in any manner among any number of
candidates. Directors are elected by a plurality of the total votes cast by all
stockholders. With cumulative voting, it may be possible for minority
stockholders to obtain representation on the Board of Directors. Without
cumulative voting, the holders of more than 50% of the shares of Regions Common
Stock generally have the ability to elect 100% of the directors. As a result,
the holders of the remaining Regions Common Stock effectively may not be able to
elect any person to the Board of Directors. The absence of cumulative voting,
therefore, could make it more difficult for a stockholder who acquires less than
a majority of the shares of Regions Common Stock to obtain representation on
Regions' Board of Directors.
SMHC. SMHC's Articles do not provide for a classified board of directors,
and provide that voting stock does not have cumulative voting rights.
REMOVAL OF DIRECTORS
Regions. Under the Certificate, any director or the entire Board of
Directors may be removed only for cause and only by the affirmative vote of the
holders of at least 75% of Regions' voting stock.
SMHC. SMHC's Articles and Bylaws do not include any provisions governing
removal of directors. The Louisiana Act permits stockholders to remove any
director, with or without cause, by vote of a majority of the total voting power
at any special meeting called for that purpose.
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LIMITATIONS ON DIRECTOR LIABILITY
Regions. The Certificate provides that a director of Regions will have no
personal liability to Regions or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability for (i) any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) the payment of certain unlawful dividends and
the making of certain unlawful stock purchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit.
Although this provision does not affect the availability of injunctive or
other equitable relief as a remedy for a breach of duty by a director, it does
limit the remedies available to a stockholder who has a valid claim that a
director acted in violation of such director's duties, if the action is among
those as to which liability is limited. This provision may reduce the likelihood
of stockholder derivative litigation against directors and may discourage or
deter stockholders or management from bringing a lawsuit against directors for
breach of their duties, even though such action, if successful, might have
benefitted Regions and its stockholders. The SEC has taken the position that
similar provisions added to other corporations' certificates of incorporation
would not protect those corporations' directors from liability for violations of
the federal securities laws.
SMHC. The Articles of SMHC include limitations on director or officer
liability that are comparable to those described above.
INDEMNIFICATION
Regions. The Certificate provides that Regions will indemnify its officers,
directors, employees, and agents to the full extent permitted by the Delaware
GCL. Under Section 145 of the Delaware GCL as currently in effect, other than in
actions brought by or in the right of Regions, such indemnification would apply
if it were determined in the specific case that the proposed indemnitee acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of Regions and, with respect to any criminal
proceeding, if such person had no reasonable cause to believe that the conduct
was unlawful. In actions brought by or in the right of Regions, such
indemnification probably would be limited to reasonable expenses (including
attorneys' fees) and would apply if it were determined in the specific case that
the proposed indemnitee acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of Regions,
except that no indemnification may be made with respect to any matter as to
which such person is adjudged liable to Regions, unless, and only to the extent
that, the court determines upon application that, in view of all the
circumstances of the case, the proposed indemnitee is fairly and reasonably
entitled to indemnification for such expenses as the court deems proper. To the
extent that any director, officer, employee, or agent of Regions has been
successful on the merits or otherwise in defense of any action, suit, or
proceeding, as discussed herein, whether civil, criminal, administrative, or
investigative, such person must be indemnified against reasonable expenses
incurred by such person in connection therewith.
SMHC. SMHC's Articles provide for mandatory indemnification of its
directors and officers with substantially the same effect as in the case of
Regions. The Louisiana Act permits, but does not require, indemnification of
employees and agents who meet specified standards of conduct except that
indemnification of directors, officers, employees, and agents is mandatory, as
is the case and to the same extent as under the Delaware GCL described above,
whenever any such person has been successful in the defense of a claim.
SPECIAL MEETINGS OF STOCKHOLDERS
Regions. Regions' Certificate and Bylaws provide that special meetings of
stockholders may be called at any time, but only by the chief executive officer,
the secretary, or the Board of Directors of Regions. Regions stockholders do not
have the right to call a special meeting or to require that Regions' Board of
Directors call such a meeting. This provision, combined with other provisions of
the Certificate and the restriction on the
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removal of directors, would prevent a substantial stockholder from compelling
stockholder consideration of any proposal (such as a proposal for a business
combination) over the opposition of Regions' Board of Directors by calling a
special meeting of stockholders at which such stockholder could replace the
entire Board with nominees who were in favor of such proposal.
SMHC. Under the Articles and Bylaws, a special meeting of SMHC stockholders
may be called by the Chairman, President, Chief Executive Officer, or Board of
Directors, and must be called by the Secretary upon written application of the
holders of a majority of the shares of SMHC Common Stock entitled to vote at a
meeting of stockholders.
ACTIONS BY STOCKHOLDERS WITHOUT A MEETING
Regions. The Certificate provides that any action required or permitted to
be taken by Regions stockholders must be effected at a duly called meeting of
stockholders and may not be effected by any written consent by the stockholders.
These provisions would prevent stockholders from taking action, including action
on a business combination, except at an annual meeting or special meeting called
by the Board of Directors, chief executive officer, or secretary, even if a
majority of the stockholders were in favor of such action.
SMHC. Under the Louisiana Act, action requiring or permitting stockholder
approval may be approved by written consent of all stockholders entitled to
vote at a meeting of stockholders. In that it would be impractical to obtain
the consent of all stockholders, the inability of stockholders to effect action
without a meeting is substantially the same as for Regions. However, a
sufficient number of SMHC stockholders are permitted to call a special meeting
of stockholders as described above, while stockholders of Regions are not.
STOCKHOLDER NOMINATIONS
Regions. Regions' Certificate and Bylaws provide that any nomination by
stockholders of individuals for election to the Board of Directors must be made
by delivering written notice of such nomination (the "Nomination Notice") to the
Secretary of Regions not less than 14 days nor more than 50 days before any
meeting of the stockholders called for the election of directors; provided,
however, that if less than 21 days notice of the meeting is given to
stockholders, the Nomination Notice must be delivered to the Secretary of
Regions not later than the seventh day following the day on which notice of the
meeting was mailed to stockholders. The Nomination Notice must set forth certain
background information about the persons to be nominated, including information
concerning (i) the name, age, business, and, if known, residential address of
each nominee, (ii) the principal occupation or employment of each such nominee,
and (iii) the number of shares of Regions capital stock beneficially owned by
each such nominee. The Board of Directors is not required to nominate in the
annual proxy statement any person so proposed; however, compliance with this
procedure would permit a stockholder to nominate the individual at the
stockholders' meeting, and any stockholder may vote such holder's shares in
person or by proxy for any individual such holder desires.
SMHC. Nominations of persons for election to the Board of Directors of SMHC
may be made at the direction of the Board of Directors or by any stockholder who
complies with special nominating procedures set forth in the Bylaws of SMHC. To
make a nomination under the Bylaws, a stockholder must submit timely notice in
writing to the Secretary of SMHC, that is, notice delivered and received not
less than 60 days nor more than 90 days prior to the meeting (unless less than
70 days notice or public disclosure of the meeting date is given, in which case
notice is timely if received not later than the 10th day following the date of
such notice or public disclosure). The nominating stockholder's notice must also
include, as to each person whom the stockholder proposes to nominate as
director, the name, age, business address and residence address, principal
occupation or employment, and number of shares of SMHC Common Stock beneficially
owned, as well as certain information concerning the nominating stockholder.
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MERGERS, CONSOLIDATIONS, AND SALES OF ASSETS GENERALLY
Regions. The Certificate generally requires the affirmative vote of the
holders of at least 75% of the outstanding voting stock of Regions to effect (i)
any merger or consolidation with or into any other corporation, or (ii) any sale
or lease of any substantial part of the assets of Regions to any party that
beneficially owns 5.0% or more of the outstanding shares of Regions voting
stock, unless the transaction was approved by Regions' Board of Directors before
the other party became a 5.0% beneficial owner or is approved by 75% or more of
the Board of Directors after the party becomes such a 5.0% beneficial owner. In
addition, the Delaware GCL generally requires the approval of a majority of the
outstanding voting stock of Regions to effect (i) any merger or consolidation
with or into any other corporation, (ii) any sale, lease, or exchange of all or
substantially all of Regions property and assets, or (iii) the dissolution of
Regions. However, pursuant to the Delaware GCL, Regions may enter into a merger
transaction without stockholder approval if (i) Regions is the surviving
corporation, (ii) the agreement of merger does not amend in any respect Regions'
Certificate, (iii) each share of Regions stock outstanding immediately prior to
the effective date of the merger is to be an identical outstanding or treasury
share of Regions after the effective date of the merger, and (iv) either no
shares of Regions Common Stock and no shares, securities, or obligations
convertible into such stock are to be issued or delivered under the plan of
merger, or the authorized unissued shares or the treasury shares of Regions
Common Stock to be issued or delivered under the plan of merger plus those
initially issuable upon conversion of any other shares, securities, or
obligations to be issued or delivered under such plan do not exceed 20% of the
shares of Regions Common Stock outstanding immediately prior to the effective
date of the merger.
SMHC. The Louisiana Act generally requires the affirmative vote of at least
two-thirds of the voting power present, or by such larger or smaller vote, but
not less than a majority of the voting power present or of the total voting
power, as the Articles of Incorporation may prescribe, to effect (i) any merger,
consolidation, or share exchange with or into any other corporation, or (ii) any
sale or lease of all or substantially all of the assets of the corporation if
the corporation is not insolvent. SMHC's Articles provide that such transactions
require the affirmative vote of the greater of (i) a majority of the total
shares of SMHC Common Stock outstanding and (ii) at least two-thirds of the
shares of SMHC Common Stock represented in person or by proxy at the meeting.
BUSINESS COMBINATIONS WITH CERTAIN PERSONS
Regions. Section 203 of the Delaware GCL ("Section 203") places certain
restrictions on "business combinations" (as defined in Section 203 to include,
generally, mergers, sales and leases of assets, issuances of securities, and
similar transactions) by Delaware corporations with an "interested stockholder"
(as defined in Section 203 to include, generally, the beneficial owner of 15% or
more of the corporation's outstanding voting stock). Section 203 generally
applies to Delaware corporations, such as Regions, that have a class of voting
stock listed on a national securities exchange, authorized for quotation on an
interdealer quotation system of a registered national securities association, or
held of record by more than 2,000 stockholders, unless the corporation expressly
elects in its certificate of incorporation or bylaws not to be governed by
Section 203.
Regions has not specifically elected to avoid the application of Section
203. As a result, Section 203 generally would prohibit a business combination by
Regions or a subsidiary with an interested stockholder within three years after
the person or entity becomes an interested stockholder, unless (i) prior to the
time when the person or entity becomes an interested stockholder, Regions' Board
of Directors approved either the business combination or the transaction
pursuant to which such person or entity became an interested stockholder, (ii)
upon consummation of the transaction in which the person or entity became an
interested stockholder, the interested stockholder held at least 85% of the
outstanding Regions voting stock (excluding shares held by persons who are both
officers and directors and shares held by certain employee benefit plans), or
(iii) once the person or entity
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becomes an interested stockholder, the business combination is approved by
Regions' Board of Directors and by the holders of at least two-thirds of the
outstanding Regions voting stock, excluding shares owned by the interested
stockholder.
SMHC. Section 133 of the Louisiana Act ("Section 133") places similar
restrictions on "business combinations" (as defined in Section 132(4) of the
Louisiana Act, generally including mergers, consolidations, share exchanges,
sales and leases of assets, issuances of securities, and similar transactions)
by Louisiana corporations with an "interested stockholder" (as defined in
Section 132(9) of the Louisiana Act, generally the beneficial owner of 10% or
more of the voting power of the then outstanding voting stock). Section 133
generally applies to business combinations of Louisiana corporations having
greater than 100 beneficial owners of its stock or which did not have an
interested stockholder on January 1, 1985, unless the articles of incorporation
expressly provide otherwise. Section 133 generally does not apply if specified
conditions are met, including a condition that the stockholders receive in the
business combination consideration for their shares of stock in the corporation
that is no less than the highest of several different standards provided for by
Section 134B, one of which is that the price must be no less than the highest
price as the interested stockholder paid for shares of stock in the corporation
acquired by such interested stockholder within two years of such business
combination.
As SMHC has not generally elected to avoid the application of Section 133,
Section 133 generally would prohibit a business combination by SMHC with an
interested stockholder unless the consideration to be received meets the
standard described in the preceding sentence or unless the business combination
is recommended by SMHC's Board and approved by the affirmative vote of at least
each of the following: (i) 80% of the votes entitled to be cast by outstanding
shares of SMHC voting stock voting together as a single voting group and (ii)
two-thirds of the votes entitled to be cast by holders of SMHC voting stock,
other than voting stock held by the interested stockholder who is a party to the
business combination with SMHC, voting together as a single voting group. As
Regions is not an "interested stockholder" with respect to SMHC, Section 133
does not apply to the Merger. Moreover, SMHC has elected not to have Section 133
apply to the Merger.
Under Sections 135 through 140.2 of the Louisiana Act (the "Control Share
Law"), a person who acquires shares in certain Louisiana corporations (including
SMHC) and as a result increases such person's voting power in the corporation to
or above any of three threshold levels (i.e., 20%, 33 1/3%, and 50%), acquires
the voting rights with respect to such shares only to the extent granted by a
majority in voting interest of the pre-existing, disinterested stockholders of
the corporation. Certain acquisitions of shares are exempted from the provisions
of the Control Share Law, including acquisitions pursuant to a merger,
consolidation, or share exchange agreement to which the corporation is a party.
Since Regions' acquisition of SMHC Common Stock is to be made pursuant to a
merger and SMHC and Regions are parties to the Agreement with respect thereto,
the Control Share Law does not apply to the Merger.
DISSENTERS' RIGHTS
Regions. The rights of dissenting stockholders of Regions are governed by
the Delaware GCL. Pursuant thereto, except as described below, any stockholder
would have the right to dissent from any merger of which Regions were to be a
constituent corporation. No appraisal rights are available, however, for (i) the
shares of any class or series of stock that is either listed on a national
securities exchange, quoted on the Nasdaq National Market, or held of record by
more than 2,000 stockholders or (ii) any shares of stock of the constituent
corporation surviving a merger if the merger did not require the approval of the
surviving corporation's stockholders, unless, in either case, the holders of
such stock are required by an agreement of merger or consolidation to accept for
that stock something other than: (a) shares of stock of the corporation
surviving or resulting from the merger or consolidation; (b) shares of stock of
any other corporation that will be listed at the effective date of the merger on
a national securities exchange, quoted on the Nasdaq National Market, or held of
record by more than 2,000 stockholders; (c) cash in lieu of fractional shares of
stock described in clause (a) or (b) immediately above; or (d) any combination
of the shares of stock and cash in lieu of fractional shares described in
clauses (a) through
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(c) immediately above. Because Regions Common Stock is quoted on the Nasdaq
National Market and is held of record by more than 2,000 stockholders, unless
the exception described immediately above applies, holders of Regions Common
Stock do not have dissenters' rights.
SMHC. The rights of dissenting stockholders under Louisiana law are
generally similar to those afforded under the Delaware GCL. See "Description of
the Transaction--Dissenting Stockholders." If the Merger is consummated,
stockholders of SMHC will have dissenters' rights as there described unless the
Merger receives the favorable vote of at least 80% of the total outstanding
shares.
STOCKHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
Regions. The Delaware GCL provides that a stockholder may inspect books and
records upon written demand under oath stating the purpose of the inspection, if
such purpose is reasonably related to such person's interest as a stockholder.
SMHC. Pursuant to the Louisiana Act, upon written notice of a demand to
inspect corporate records, one or more stockholders who have owned at least 5%
of the outstanding stock (25% in the case of a business competitor) for at least
six months are entitled to inspect specified corporate records.
DIVIDENDS
Regions. The Delaware GCL provides that, subject to any restrictions in the
corporation's certificate of incorporation, dividends may be declared from the
corporation's surplus, or, if there is no surplus, from its net profits for the
fiscal year in which the dividend is declared and the preceding fiscal year.
Dividends may not be declared, however, if the corporation's capital has been
diminished to an amount less than the aggregate amount of all capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. Substantially all of the funds
available for the payment of dividends by Regions are derived from its
subsidiary depository institutions. There are various statutory limitations on
the ability of Regions' subsidiary depository institutions to pay dividends to
Regions. See "Certain Regulatory Considerations--Payment of Dividends."
SMHC. Pursuant to the Louisiana Act, a board of directors may from time to
time make distributions out of surplus, as defined in the Louisiana Act, to its
stockholders, subject to restrictions in its articles of incorporation, except
(i) when the corporation is insolvent, or (ii) at a time when the corporation's
assets are exceeded by its liabilities, or when the net assets are less than the
aggregate amount payable on liquidation to any shares of SMHC common stock which
have preferential rights in the event of liquidation. Substantially all of the
funds available for the payment of dividends by SMHC are derived from the Bank,
which is subject to federal and state statutory limitations on its ability to
pay dividends. See "Comparative Market Prices And Dividends."
COMPARATIVE MARKET PRICES AND DIVIDENDS
Regions Common Stock is quoted on the Nasdaq National Market under the
symbol "RGBK." SMHC Common Stock is not traded in any established market. The
following table sets forth, for the indicated periods, the high and low closing
sale prices for Regions Common Stock as reported on the Nasdaq National Market,
the high and low prices for SMHC Common Stock and the cash dividends declared
per share of Regions Common Stock and SMHC Common Stock for the indicated
periods. The prices indicated for SMHC are based on actual transactions in SMHC
Common Stock of which SMHC management is aware; however, for the indicated
period there has been only a very limited number of transactions, and no
assurance can be given that the indicated prices represent the actual market
value of the SMHC Common Stock. The amounts indicated for Regions have been
adjusted to reflect a 2-for-1 stock split effected by Regions on June 13, 1997.
42
<PAGE> 46
<TABLE>
<CAPTION>
REGIONS SMHC
PRICE RANGE CASH DIVIDENDS PRICE RANGE CASH DIVIDENDS
--------------- DECLARED --------------- DECLARED
HIGH LOW PER SHARE HIGH LOW PER SHARE
----- ----- -------------- ----- ----- --------------
<S> <C> <C> <C> <C> <C> <C>
1996
First Quarter .......... 24.00 20.38 .175 $ -- $ -- .26
Second Quarter ......... 24.19 21.13 .175 30.00 30.00 .26
Third Quarter .......... 24.32 21.82 .175 30.50 30.50 .28
Fourth Quarter ......... 26.88 24.38 .175 30.00 31.00 .56
1997
First Quarter .......... 30.94 25.69 .20 -- -- .50
Second Quarter ......... 33.25 27.38 .20 32.00 32.00 .50
Third Quarter .......... 39.13 32.06 .20 30.00 30.00 .50
Fourth Quarter ......... 44.75 36.56 .20 -- -- .50
1998
First Quarter (through
_______, 1998) .....
</TABLE>
On _______, 1998, the last reported sale price of Regions Common Stock as
reported on the Nasdaq National Market, and the price of SMHC Common Stock in
the last known transaction, which occurred in _______, were $ _______ and $
_______, respectively. On November 3, 1997, the last business day prior to
public announcement of the proposed Merger, the last reported sale price of
Regions Common Stock as reported on the Nasdaq National Market, and the last
known price of SMHC Common Stock, were $37.72 and $30.00, respectively.
The holders of Regions Common Stock are entitled to receive dividends when
and if declared by the Board of Directors out of funds legally available
therefor. Regions has paid regular quarterly cash dividends since 1971. Although
Regions currently intends to continue to pay quarterly cash dividends on the
Regions Common Stock, there can be no assurance that Regions' dividend policy
will remain unchanged after completion of the Merger. The declaration and
payment of dividends thereafter will depend upon business conditions, operating
results, capital and reserve requirements, and the Board of Directors'
consideration of other relevant factors.
Regions is a legal entity separate and distinct from its subsidiaries and
its revenues depend in significant part on the payment of dividends from its
subsidiary financial institutions, particularly Regions Bank in Alabama.
Regions' subsidiary depository institutions are subject to certain legal
restrictions on the amount of dividends they are permitted to pay. See "Certain
Regulatory Considerations--Payment of Dividends."
SMHC's dividend policy has been, during 1997 and the first quarter of
1998, to pay a regular quarterly cash dividend of $.50 cents per share.
Substantially all of the funds available for the payment of dividends by SMHC
are derived from the Bank, which is subject to statutory limitations on its
ability to pay dividends.
43
<PAGE> 47
SMHC MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides certain information concerning the
financial condition and results of operations of St. Mary Holding Corporation
(SMHC) for the three years ended December 31, 1996, and as of September 30, 1997
and 1996 and for the nine months periods then ended. The financial position and
results of operations of SMHC were due primarily to its banking subsidiary, The
St. Mary Bank & Trust Co. Management's discussion should be read in conjunction
with the financial statements and accompanying notes presented elsewhere in this
Proxy Statement.
Year ended December 31, 1996 Compared to Year Ended December 31, 1995 and
Year ended December 31, 1995 Compared to Year Ended December 31, 1994
OVERVIEW
Net Income for 1996 totaled $1,466,000 compared to $1,650,000 for 1995 and
$1,060,000 for 1994. The decease in net income of $184,000 from 1995 to 1996
was caused by a decrease in other income of $609,000, and an increase in other
expenses of $285,000, which was partially offset by an increase in net interest
income of $609,000, a decrease in the provision for loan losses of $29,000, and
a decrease in income tax expense of $72,000.
Return on average assets was 1.40% and return on average equity was 12.18%
for 1996, compared to 1.72% and 13.71%, respectively, for 1995 and 1.02% and
9.44%, respectively, for 1994.
Average assets in 1996 increased by $9,113,000,or 9.51%, from 1995 caused
by an increase in customer deposits of $10,420,000, or 13.41%, which was
partially offset by a decrease of $1,291,000 in other interest bearing
liabilities. The increase in deposits was caused by increases in time deposits
of $8,371,000 and non-interest bearing demand deposits of $2,695,000, offset
partially by a decline in demand deposits of $566,000. The increase in deposits
along with the decrease in mortgage-backed and investment securities of
$6,671,000 helped to fund the increase in loans of $13,721,000 and the changes
in other asset accounts.
The net interest margin, the percentage of net interest income to average
earning assets, increased slightly in 1996, from 5.40% to 5.53%. The net
interest margin of 5.53% in 1996 is favorable to SMHC and is a reflection of
the continued low interest rates and healthy spread between rates on deposits
and yields on investments and loans. Average earning assets comprised 90.54%,
89.63% and 90.66% of total average assets in 1996, 1995, and 1994,
respectively.
RESULTS OF OPERATIONS
Net Interest Income. SMHC's primary source of revenue is net interest
income. Net interest income is the difference between interest earned on
interest earning assets and interest paid on interest bearing sources of funds.
The level of net interest income is determined primarily by the volume of
interest earning assets and the various rate spreads between the interest
earning assets and their funding sources.
Net interest income for 1996 was $5,251,000, compared to $4,642,000 for
1995 and $4,582,000 for 1994. The increase of $609,000 from 1995 to 1996 was
caused by the increase in average net interest-earning assets and the .13%
increase in the net interest margin. The increase in the net interest margin
was due to the higher percentage of average assets held in loans, which is the
highest yielding asset held by SMHC. Average non-interest bearing deposits as a
percent of total deposits remained relatively stable from 1995 to 1996.
Loans continued to be the largest component of earning assets. Average
loans for 1996 were $67,175,000, or 70.69% of average earning assets. Average
investment securities totaled $22,153,000 and
44
<PAGE> 48
comprised 23.31% of average earning assets. The remaining earning asset of SMHC
was its position in federal funds sold. The net yield on loans declined .03%
from 1995 to 1996. The net yield on investment securities also declined .03%
during that same time. The net yield on total earning assets increased .33%
from 1995 to 1996, and was partially offset by a .30% increase in the rate paid
on interest bearing liabilities, for a net increase in the net interest spread
of .03%.
The following table presents the average balance sheets, net interest
income, yields earned and rates paid for each category of assets for each of
the periods indicated by setting forth, for the periods indicated, information
regarding (i) the total dollar amount of interest income of the Bank from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average rate; (iii) net interest income; (iv) interest rate spread; and (v) net
interest margin. Information is based on average daily balances during the
indicated periods.
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------------------------------------
1996 1995 1994
---------------------------- -------------------------- ----------------------------
Average Average Average
(Dollars in thousands) Average Yield/ Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning Assets:
Loans receivable:
Commercial and Real Estate.... $ 56,479 $5,651 10.01% $43,780 $4,363 9.97% $ 33,094 $ 3,152 9.52%
Consumer and other loans...... 10,696 1,163 10.87% 9,674 1,074 11.10% 7,963 912 11.45%
-------- ------ ------- ------ -------- -------
Total loans.................. 67,175 6,814 10.14% 53,454 5,437 10.17% 41,057 4,064 9.90%
Mortgage-backed securities........ 0 0 3,542 212 5.99% 13,734 737 5.37%
Investment securities............. 22,153 1,202 5.43% 25,282 1,380 5.46% 38,191 2,075 5.43%
Other earning assets.............. 5,704 298 5.22% 3,627 207 5.71% 912 33 3.62%
-------- ------ ------- ------ -------- -------
Total interest-earning assets..... 95,032 8,314 8.75% 85,905 7,236 8.42% 93,894 6,909 7.36%
------ ------ -------
Non-interest-earning assets....... 9,930 9,944 9,679
-------- ------- -------
Total assets...................... $104,962 $95,849 $103,573
======== ======= ========
Interest-bearing liabilities:
Deposits:
Demand deposits................ $ 19,217 $ 603 3.14% $19,783 $583 2.95% $ 28,470 $ 767 2.69%
Passbook savings deposits...... 11,072 310 2.80% 11,152 310 2.78% 12,630 349 2.76%
Certificates of deposit........ 37,323 2,008 5.38% 28,952 1,471 5.08% 28,465 1,028 3.61%
-------- ------ ------- ------ -------- -------
Total interest-bearing deposits. 67,612 2,921 4.32% 59,887 2,364 3.95% 69,565 2,144 3.08%
Other Interest-bearing
liabilities.................... 3,808 142 3.73% 5,099 230 4.51% 4,097 183 4.47%
-------- ------ ------- ------ -------- -------
Total interest-bearing
liabilities.................... 71,420 3,063 4.29% 64,986 2,594 3.99% 73,662 2,327 3.16%
------ ------ -------
Noninterest-bearing demand
deposits....................... 20,537 17,842 17,843
Other noninterest-bearing
liabilities.................... 965 989 841
-------- ------- --------
Total liabilities................. 92,922 83,817 92,346
Equity............................ 12,040 12,032 11,227
-------- ------- --------
Total liabilities and
shareholders' equity .......... $104,962 $95,849 $103,573
======== ======= ========
Net interest-earning assets....... $ 23,612 $20,919 $ 20,232
======== ======= ========
Net interest income / interest
rate spread ................... $5,251 4.46% $4,642 4.43% $ 4,582 4.20%
====== ====== =======
Net interest margin .............. 5.53% 5.40% 4.88%
Ratio of average interest-earning
assets to average
interest-bearing liabilities... 133.06% 132.19% 127.47%
</TABLE>
45
<PAGE> 49
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------------------------------------
1997 1996
--------------------------- ----------------------------
.................................. Average Average
(Dollars in thousands)............ Average Yield/ Average Yield/
Balance Interest Cost(1) Balance Interest Cost(1)
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning Assets:
Loans receivable:
Commercial and Real Estate..... $ 66,129 $4,917 9.91% $ 54,933 $4,099 9.95%
Consumer and other loans....... 10,940 879 10.71% 10,643 872 10.92%
-------- ------ -------- ------
Total loans.................. 77,069 5,796 10.03% 65,576 4,971 10.11%
Mortgage-backed securities........ 0 0 0 0
Investment securities............. 17,383 726 5.57% 23,441 950 5.40%
Other earning assets.............. 5,157 206 5.33% 5,885 230 5.21%
-------- ------ -------- ------
Total interest-earning assets..... 99,609 6,728 9.01% 94,902 6,151 8.64%
------ ------
Non-interest-earning assets....... 9,654 10,072
-------- --------
Total assets...................... $109,263 $104,974
======== ========
Interest-bearing liabilities:
Deposits:
Demand deposits................ $ 20,955 $ 484 3.08% $ 19,522 $ 455 3.11%
Passbook savings deposits...... 10,713 225 2.80% 11,089 233 2.80%
Certificates of deposit........ 42,518 1,681 5.27% 36,912 1,491 5.39%
-------- ------ -------- ------
Total interest-bearing deposits 74,186 2,390 4.30% 67,523 2,179 4.30%
Other Interest-bearing
liabilities.................... 81 1 1.65% 4,332 124 3.82%
-------- ------ -------- ------
Total interest-bearing
liabilities.................... 74,267 2,391 4.29% 71,855 2,303 4.27%
------ ------
Noninterest-bearing demand
deposits....................... 21,893 20,012
Other noninterest-bearing
liabilities.................... 945 963
-------- --------
Total liabilities................. 97,105 92,830
Equity............................ 12,158 12,144
-------- --------
Total liabilities and
shareholders' equity .......... $109,263 $104,974
======== ========
Net interest-earning assets....... $ 25,342 $ 23,047
======== ========
Net interest income / interest
rate spread.................... $4,337 4.72% $3,848 4.37%
====== ======
Net interest margin .............. 5.81% 5.41%
Ratio of average interest-earning
assets to average interest-bearing
liabilities.................... 134.12% 132.07%
</TABLE>
(1)Annualized.
Rate/Volume Analysis: The following table provides the components of
changes in net interest income in the format of a rate/volume analysis and
analyzes the dollar amount of changes in interest income and interest expense
for major components of interest-earning assets and interest-bearing
liabilities. The table distinguishes between (i) changes attributable to rate
(changes in rate multiplied by the prior period's volume), (ii) changes
attributable to volume (changes in volume multiplied by the prior period's
rate), (iii) mixed change (changes in rate multiplied by changes in volume),
and (iv) total increase (decrease) (sum of the previous columns).
46
<PAGE> 50
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------------------
1996/1995 1995/1994
---------------------- ----------------------
Change Attributable To Change Attributable To
---------------------- ----------------------
(Dollars in thousands) Total Total
Rate/ Increase Rate/ Increase
Volume Rate Volume(Decrease) Volume Rate Volume (Decrease)
------ ---- ------ ---------- ------ ---- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans............................. $1,396 $ (15) $ (4) $1,377 $1,227 $ 112 $34 $1,373
Investment Securities
US Government & Agencies........ (171) (8) 1 (178) (701) 10 (4) (695)
Mortgage-backed securities...... (212) (212) 212 (212) (547) 85 (63) (525)
Other Earning Assets.............. 119 (18) (10) 91 98 19 57 174
------ ----- ---- ------ ------ ----- --- ------
Total Net Change in income on..... 1,132 (253) 199 1,078 77 226 24 327
interest-earning assets
Interest-bearing liabilities:
Interest-bearing deposits
Deposits other than time........ (19) 39 0 20 (276) 70 (17) (223)
Time deposits................... 425 87 25 537 18 418 7 443
Other interest-bearing liabilities (58) (40) 10 (88) 45 2 0 47
------ ----- ---- ------ ------ ----- --- ------
Total Net Change in expense on.... 348 86 35 469 (213) 490 (10) 267
interest-bearing liabilities ------ ----- ---- ------ ------ ----- --- ------
Net Change in net interest income $ 784 $(339) $164 $ 609 $ 290 $(264) $34 $ 60
====== ===== ==== ====== ====== ===== === ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997/1996
-------------------------------
Change Attributable To
-------------------------------
(Dollars in thousands) Total
Rate/ Increase
Volume Rate Volume (Decrease)
------ ---- ------ ----------
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans........................................ $871 $(39) $ (7) $825
Investment Securities
US Government & Agencies................... (245) 29 (8) (224)
Mortgage-backed securities................. 0 0 0 0
Other Earning Assets......................... (28) 5 (1) (24)
---- ---- ---- ----
Total Net Change in income on................ 598 (5) (16) 577
interest-earning assets
Interest-bearing liabilities:
Interest-bearing deposits
Deposits other than time................... 24 (3) 0 21
Time deposits.............................. 226 (32) (4) 190
Other interest-bearing liabilities........... (122) (71) 70 (123)
---- ---- ---- ----
Total Net Change in expense on............... 128 (106) 66 88
interest-bearing liabilities
Net Change in net interest income........... $470 $101 $(82) $489
==== ==== ==== ====
</TABLE>
Interest Rate Sensitivity. The interest rate sensitivity gap is the
difference between the amount of interest bearing assets and interest bearing
liabilities maturing in any given time frame. A primary objective of
asset/liability management is to maximize net interest margin while not
subjecting SMHC to significant interest rate risk in periods of rising or
falling interest rates. At December 31, 1996, SMHC's one year repricing gap,
defined as repricing assets minus repricing liabilities as a percentage of
total assets, was 9.42%, i.e. more of SMHC's assets than liabilities reprice
within a one year time frame. Management regularly reviews interest rate
exposure to analyze the impact of changes in market interest rates on net
interest income.
47
<PAGE> 51
The following table sets forth SMHC's interest rate sensitivity at various
time intervals as of December 31, 1996:
Interest Rate Sensitivity
<TABLE>
<CAPTION>
Within Three to More than More than Over
(Dollars in thousands) three twelve one year to three years five
months months three years to five years years Total
------ ------ ----------- ------------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Loans Receivable................. $17,122 $21,225 $20,938 $12,444 $1,332 $73,061
Investment Securities
(Market Value)................. 6,277 4,479 3,001 1,349 2,595 17,701
Federal Funds Sold............. 6,925 0 0 0 0 6,925
------- ------- ------- ------- ------ -------
Total Interest Earning Assets..... 30,324 25,704 23,939 13,793 3,927 97,687
------- ------- ------- ------- ------ -------
Interest-Bearing Liabilities:
Deposits:
Now Accounts................... 676 1,665 2,621 1,176 957 7,095
Savings Accounts............... 1,031 2,540 3,995 1,794 1,462 10,822
Money Market Deposit Accounts.. 1,058 2,606 4,099 1,840 1,500 11,103
Certificates of Deposit........ 15,906 19,422 3,065 1,502 2 39,897
Securities Sold under Agreement
to Repurchase.................... 1,087 0 0 0 0 1,087
------- ------- ------ ----- ----- ------
Total Interest-Bearing
Liabilities...................... 19,758 26,233 13,780 6,312 3,921 70,004
------- ------- ------ ----- ----- ------
Excess (deficiency) of
interest-earning assets over
interest-bearing liabilities..... 10,566 (529) 10,159 7,481 6 27,683
Cumulative excess (deficiency)
of interest-earning assets over
interest-bearing liabilities..... $10,566 $10,037 $20,196 $27,677 $27,683
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities as
a percent of total assets........ 9.92% 9.42% 18.95% 25.98% 25.98%
</TABLE>
Provision for Loan Losses. The provision for loan losses charged to
operating expense is the result of a continuing review and assessment of the
loan portfolio, taking into consideration the history of chargeoffs in the loan
portfolio by category, the current economic conditions in the lending area, the
payment history, ability to repay and strength of collateral of specific
borrowers, and other relevant factors. The 1996 provision is $336,000, compared
to $365,000 in 1995 and $60,000 in 1994. Actual chargeoffs, net of recoveries,
were $234,000 in 1996, $251,000 in 1995 and $(49,000) in 1994. Since the
provision exceeded net chargeoffs in all years the result was an increase in
the allowance for loan losses.
Non-Interest Income. Non-interest income in 1996 totaled $1,329,000
compared to $1,938,000 in 1995 and $1,287,000 in 1994. The decrease from 1995
was caused mostly by a 1995 gain of $940,000 on the sale of land, which the Bank
acquired through a then subsidiary of the Bank which has since been liquidated
which gain was partially offset by a $184,000 decrease in loss on the sale of
investment securities and a $150,000 increase in gain on the sale of loans. The
loans sold were the guaranteed portion of SBA loans originated by SMHC. The
largest component of non-interest income in 1996 was service charge income,
which accounted for 60.12% of total non-interest income.
Non-Interest Expenses. Non-interest expenses were $4,179,000 in 1996,
compared to $3,894,000 in 1995 and $4,406,000 in 1994. Salaries and related
benefits increased $51,000 from 1995 to 1996 while occupancy expense remained
virtually unchanged. Other operating expenses increased by $243,000; the
largest change from 1995 to 1996 was a Non-Recurring Loss-Morgan City Branch of
$150,000 recognized in 1996. Salaries decreased $424,000 from 1994 to 1995 as a
result of severance benefits paid in 1994 and the resulting decrease in
salaries from the reduced work staff.
Income Taxes. SMHC's effective tax rate was 29.01% in 1996, 28.91% in 1995
and 24.45% in 1994. The effective rate is less than the highest statutory rate
primarily because of tax-free income from municipal investments.
48
<PAGE> 52
ANALYSIS OF FINANCIAL CONDITION
Investment Securities. In 1996 average investment securities and
mortgage-backed securities decreased by $6,671,000 from 1995. The decrease was
used to fund the increase in loans during 1996. The total market value of
investment securities at December 31, 1996 was $17,701,000, including gross
unrealized gains of $138,000 and gross unrealized losses of $43,000. The
investment securities portfolio is used as a source of liquidity and a means of
managing interest rates and interest rate sensitivity. In addition, the
portfolio serves as a source of collateral on certain deposits. All investment
securities are classified as available for sale. All mortgage-backed securities
were sold in 1995 and SMHC has not held any since that time.
Securities Portfolio. The carrying amount of securities at the dates
indicated is set forth in the table below:
<TABLE>
<CAPTION>
December 31
September 30 -----------------------------------------------------
1997 1996 1995
------------------ ------------------------ ------------------------
(Dollars in thousands) Amount Percent Amount Percent Amount Percent
------------------ -------------- ------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government $ 3,999 25.39% $ 5,011 28.31% $ 6,895 33.24%
U.S. Agencies 6,002 38.11% 6,989 39.48% 7,001 33.76%
State and Political Subdivisions 5,747 36.50% 5,701 32.21% 6,845 33.00%
-------- ------ ----------- ------- ----------- --------
Total $ 15,748 100.00% $ 17,701 100.00% $ 20,741 100.00%
======== ====== =========== ======= =========== ========
</TABLE>
Investment Securities Maturity Distribution. The amortized cost and
estimated fair market value of debt securities available for sale (in
thousands) at December 31, 1996, 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>
One Year One to Five to Over Ten
or Less Five Years Ten Years Years Total
------- ---------- --------- -------- -----
<S> <C> <C> <C> <C> <C>
U. S. Treasury
Amount $ 5,011 $ --- $ --- $ --- $ 5,011
Yield 5.25% ---% ---% ---%
U. S. Agencies
Amount 4,996 1,993 --- --- 6,989
Yield 4.99% 5.94% ---% ---%
State and Political
Subdivisions
Amount 749 2,357 2,078 517 5,701
Yield 6.64% 6.24% 5.13% 4.79%
------- -------- -------- -------- -------
Total Investment
Securities $10,756 $ 4,350 $ 2,078 $ 517 $17,701
======= ======== ======== ======== =======
</TABLE>
49
<PAGE> 53
Loans. Net loans outstanding at December 31, 1996, totaled $72,159,000
compared to $59,748,000 in 1995, an increase of $12,411,000 or 20.77%. Total
average loans in 1996 were $67,175,000, an increase of $13,721,000 from the
average for 1995.
The following table sets forth the composition of SMHC's loan portfolio by
type of loan at the dates indicated:
<TABLE>
<CAPTION>
Loan Portfolio Composition:
(Dollars in thousands) September 30, December 31,
------------------- ------------------------------------------
1997 1996 1995
------------------- ------------------- -------------------
Percent Percent Percent
Type of Loan: Balance of Total Balance of Total Balance of Total
------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Commercial Loans.............................. $27,832 33.72% $22,244 30.82% $19,695 32.96%
Real Estate Loans - Other...................... 40,779 49.40% 38,126 52.83% 28,717 48.07%
Real Estate Loans - Construction............... 2,173 2.63% 1,472 2.04% 1,691 2.83%
Consumer Loans................................. 10,687 12.94% 10,337 14.33% 9,446 15.81%
Agricultural Loans............................. 2,257 2.73% 828 1.15% 915 1.53%
Lease Financing Receivables.................... 41 0.05% 16 0.02% 50 0.08%
------- ------ ------- ------ ------- ------
Total Loans.................................... 83,769 101.47% 73,023 101.19% 60,514 101.28%
Less:
Allowance for Loan Losses...................... (1,210) (1.47)% (902) (1.25)% (800) (1.34)%
Unearned Premium on Loans..................... (33) (0.04)% 0 0.00% 0 0.00%
Unearned Discount on Lease Financing
Receivables.................................. (8) (0.01)% (3) 0.00% (7) (0.01)%
Unamortized Loan Origination Costs............. 41 0.05% 41 0.06% 41 0.07%
------- ------ ------- ------ ------- ------
Total Loans, net............................... $82,559 100.00% $72,159 100.00% $59,748 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
December 31,
1994 1993 1992
------------------- ------------------- -------------------
Percent Percent Percent
Type of Loan: Balance of Total Balance of Total Balance of Total
------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial Loans.............................. $13,495 28.39% $8,839 23.58% $12,049 29.39%
Real Estate Loans - Other...................... 23,786 50.04% 21,384 57.05% 21,316 52.00%
Real Estate Loans - Construction............... 1,084 2.28% 296 0.79% 6 0.01%
Consumer Loans................................. 8,494 17.87% 5,788 15.44% 5,949 14.51%
Agricultural Loans............................. 1,220 2.57% 1,581 4.22% 2,266 5.53%
Lease Financing Receivables.................... 111 0.23% 156 0.42% 169 0.41%
------- ------ ------ ------- ------- ------
Total Loans.................................... 48,190 101.38% 38,044 101.50% 41,755 101.85%
Less:
Allowance for Loan Losses...................... (686) (1.44)% (577) (1.54)% (758) (1.85)%
Unearned Premium on Loans..................... 0.00% 0 0.00% 0 0.00%
Unearned Discount on Lease Financing
Receivables.................................. (16) (0.03)% (25) (0.07)% 0 0.00%
Unamortized Loan Origination Costs............. 41 0.09% 41 0.11% 0 0.00%
------- ------ ------- ------ ------- ------
Total Loans, net............................... $ 47,529 100.00% $37,483 100.00% $40,997 100.00%
======== ====== ======= ====== ======= ======
</TABLE>
Real estate loans is the largest category of loans, comprising 54.87% and
50.90% of net loans at December 31, 1996 and 1995, respectively.
At December 31, 1996 and 1995, fixed rate loans totaled $63,208,000 and
$49,568,000, respectively, and variable rate loans totaled $9,853,000 and
$10,980,000, respectively.
50
<PAGE> 54
Non-Performing Assets. Nonaccrual loans, foreclosed assets and troubled
debt restructurings are included in non-performing assets. Non-performing
assets increased $226,000 during 1996 to $563,000 at December 31, 1996. The
increase is attributable to an increase in non-performing loans.
Nonaccrual loans are loans on which the accrual of interest income has
been discontinued and previously accrued interest has been reversed because the
borrower's financial condition has deteriorated to the extent that the
collection of principal and interest is doubtful. Until the loan is returned to
performing status, generally as the result of the full payment of all past due
principal and interest, interest income is recorded on the cash basis.
The following table sets forth information with respect to non-performing
assets identified by SMHC, including non-accrual loans, other real estate owned
and troubled debt restructurings at the dates indicated:
<TABLE>
<CAPTION>
Non-Performing Assets:
September 30, December 31,
------------- ---------------------------------------------------
(Dollars in thousands) 1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual Loans:
Real Estate Loans............................. $ 652 $ 307 $ 103 $ 277 $ 221 $ 441
Installment Loans.............................. 174 146 61 41 15 21
Commercial Loans............................... 696 88 127 43 153 33
------ ------- ------- ------- ------ -------
Total Nonaccrual Loans......................... 1,522 541 291 361 389 495
------ ------- ------- ------- ------ -------
Accruing Loans Past Due Ninety Days or More
Real Estate Loans.............................. 69 0 0 0 0 0
Installment Loans.............................. 46 7 2 1 0 9
Commercial Loans............................... 82 0 27 0 0 0
------ ------- ------- ------- ------ -------
Total Accruing Loans Past Due Ninety Days or
More........................................... 197 7 29 1 0 9
------ ------- ------- ------- ------ -------
Total Non-Performing Loans..................... 1,719 548 320 362 389 504
Other Real Estate Owned........................ 0 0 0 0 163 146
------ ------- ------- ------- ------ -------
Total Non-Performing Assets, excluding Troubled
Debt Restructurings............................ 1,719 548 320 362 552 650
Performing Troubled Debt Restructuring......... 12 15 17 40 43 47
------ ------- ------- ------- ------ -------
Total Non-Performing Assets................... $1,731 $ 563 $ 337 $ 402 $ 595 $ 697
====== ======= ======= ======= ====== =======
Non-performing assets to net loans
and other real estate.......................... 2.10% 0.78% 0.56% 0.85% 1.58% 1.69%
Allowance for loan losses to total loans
at end of period............................... 1.44% 1.23% 1.32% 1.42% 1.52% 1.82%
Allowance for loan losses to non-performing
assets......................................... 69.90% 160.21% 237.39% 170.65% 96.97% 108.75%
</TABLE>
51
<PAGE> 55
Allowance for Loan Losses. Inherent in SMHC's lending activities is the
risk that loan losses will be experienced and that the risk of loss will vary
with the type of loan being made and the creditworthiness of the borrower over
the term of the loan. To reflect the currently perceived risk of loss
associated with SMHC's loan portfolio, provisions are made to the allowance for
loan losses. The allowance is created by direct charges against income and is
available for loan losses. The amount of the allowance for loan losses and the
provisions for loan losses are evaluated quarterly, based on management's
estimate of risk in the overall loan portfolio and the estimated exposure on
individual loans. In evaluating the adequacy of the allowance and the amount of
the provision, consideration is given to such factors as: management's
evaluation of specific loans; the level and composition of classified loans;
historical loss experience; results of examinations by regulatory agencies and
an internal asset review process; expectations of future national and local
economic conditions and their impact on particular industries and the
individual borrowers; the market value of collateral and strength of available
guaranties; concentrations of credit; and other judgmental factors. SMHC
maintains an allowance for loan losses which it believes is adequate to absorb
reasonably foreseeable losses in the loan portfolio.
The allowance for loan losses increased $102,000 from December 31, 1995 to
1996, to $902,000 and was 1.23% of total loans. The 1995 balance in the
allowance for loan losses was $800,000 or 1.32% of total loans.
The following table summarizes the loan loss experience for each of the
periods indicated:
<TABLE>
<CAPTION>
Allowance for Loan Losses
September 30, December 31,
------------- --------------------------------------------------
(Dollars in thousands) 1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of year.................. $902 $ 800 $ 686 $ 577 $ 758 $ 660
Provision Charged to Expense................... 551 336 365 60 91 277
Chargeoffs:
Real Estate Loans.............................. (4) (11) (167) (46) (139) (219)
Installment Loans.............................. (174) (210) (68) (44) (85) (59)
Commercial Loans............................... (96) (80) (42) (42) (205) (11)
------ ------ ------ ----- ----- ------
Total Charge-offs.............................. (274) (301) (277) (132) (429) (289)
------ ------ ------ ----- ----- ------
Recoveries:
Real Estate Loans.............................. 11 47 9 30 112 41
Installment Loans.............................. 16 15 13 23 28 52
Commercial Loans............................... 4 5 4 128 17 17
------ ------ ------ ----- ----- ------
Total Recoveries............................... 31 67 26 181 157 110
------ ------ ------ ----- ----- ------
Net Loan Charge-offs........................... (243) (234) (251) 49 (272) (179)
------ ------ ------ ----- ----- ------
Balance at end of period...................... $1,210 $ 902 $ 800 $ 686 $ 577 $ 758
====== ====== ====== ===== ===== ======
Allowance for loan losses to total loans
at end of period............................... 1.44% 1.23% 1.32% 1.42% 1.52% 1.82%
Allowance for loan losses to total non-
performing assets.............................. 69.90% 160.21% 237.39% 170.65% 96.97% 108.75%
Allowance for loan losses as a multiple of
net loan charge-offs........................... 4.98 3.85 3.19 14.00 2.12 4.23
Net loan charge-offs to average loans.......... 0.32% 0.35% 0.47% (0.12)% 0.70% 0.43%
Recoveries as a % of charge-offs............... 11.31% 22.26% 9.39% 137.12% 36.60% 38.06%
</TABLE>
52
<PAGE> 56
Deposits. Total deposits at December 31, 1996 were $92,770,000, an
increase of $8,977,000 from the December 31, 1995 total of $83,793,000. Average
deposits in 1996 increased $10,420,000 from 1995. As noted earlier, an increase
occurred in the average balance of time deposits and non-interest bearing
demand deposits and was partially offset by decreases in the average balances
of interest bearing demand deposits and savings deposits.
Time deposits of $100,000 or more were $14,988,000 at December 31, 1996,
which comprised 16.16% of total deposits. These deposits consist primarily of
deposits from local customers with which SMHC has other banking relationships.
SMHC had no brokered deposits at December 31, 1996.
Deposit Average Balances and Rates. The following table indicates the
average daily amount of deposits and rates paid on such deposits for the
periods indicated:
<TABLE>
<CAPTION>
December 31
September 30 ---------------------------------------
1997 1996 1995
------------------------- --------------------- -------------------
(Dollars in thousands) Amount Rate Amount Rate Amount Rate
---------- -------- ---------- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing demand $ 21,893 0% $ 20,537 0% 17,842 0%
Interest bearing demand 20,955 3.08% 19,217 3.14% 19,783 2.95%
Savings 10,713 2.80% 11,072 2.80% 11,152 2.78%
Time deposits 42,518 5.27% 37,323 5.38% 28,952 5.08%
--------- --------- ---------
Total $ 96,079 $ 88,149 $ 77,729
========= ========= =========
</TABLE>
Maturities of Time Deposits of $100,000 or More. The maturities of time
deposits of $100,000 or more are summarized in the table below:
<TABLE>
<CAPTION>
September 30 December 31 December 31
(Dollars in thousands) 1997 1996 1995
----------------- ----------------- -------------
<S> <C> <C> <C>
Three months or less $ 6,388 $ 6,177 $ 3,557
Over three months through six months 4,083 3,596 3,160
Over six months through twelve months 4,094 3,657 4,424
Over twelve months 1,445 1,558 900
------------- ------------ -------------
Total $ 16,010 $ 14,988 $ 12,041
============= ============ =============
</TABLE>
Liquidity. Liquidity involves SMHC's ability to raise funds to support
asset growth or to reduce assets, meet deposit withdrawals and other borrowing
needs, maintain reserve requirements and otherwise operate the company on an
ongoing basis.
As shown in the accompanying 1996 statement of cash flows, cash and cash
equivalents decreased by $2,078,000 from December 31, 1995 to December 31,
1996. Cash and cash equivalents were generated primarily by proceeds from the
sale of securities of $15,091,000, proceeds from the sale of loans of
$1,931,000 and a net increase in customer deposits of $8,977,000. In addition,
operating activities provided net cash of $3,170,000. Offsetting these
increases were purchases of investment securities of $12,094,000 and a net
increase in loans outstanding of $14,566,000.
53
<PAGE> 57
Capital Resources. SMHC maintains adequate capital for regulatory purposes
and has sufficient capital to absorb the risks inherent in the business.
Risk-based capital requirements have been established that weight different
assets according to the level of risk associated with those types of assets.
The table below summarizes SMHC's capital levels at the dates indicated:
<TABLE>
<CAPTION>
December 31
September 30 --------------------------------- Regulatory
1997 1996 1995 Minimums
------------------ --------------- -------------- ------------
<S> <C> <C> <C> <C>
Tier I Capital to Average Assets 11.12% 11.05% 12.43% 4%
Tier I Capital to Risk Weighted Assets 14.84% 15.80% 18.05% 4%
Total Capital to Risk Weighted Assets 16.09% 17.03% 19.26% 8%
</TABLE>
Nine Months Ended September 30, 1997 Compared
to Nine Months Ended September 30, 1996
The following discussion provides certain information concerning the
financial condition and results of operations of St. Mary Holding Corporation
(SMHC) as of September 30, 1997 and 1996 and for the nine month periods then
ended. The financial position and results of operations of SMHC were due
primarily to its banking subsidiary, St. Mary Bank & Trust. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
which are necessary for a fair presentation of results of operations for such
nine month periods have been made. Management's discussion should be read in
conjunction with the financial statements and accompanying notes presented
elsewhere in this Proxy Statement.
OVERVIEW
Net income for the nine months ended September 30, 1997 totaled $1,114,000
compared to $1,108,000 for the same period in 1996.
Return on average assets was 1.36% and return on average equity was 12.22%
for the nine months ended September 30, 1997 compared to 1.41% and 12.17%,
respectively, for the comparable period in 1996.
RESULTS OF OPERATIONS
Net Interest Income. SMHC's primary source of revenue is net interest
income. Net interest income is the difference between interest earned on
interest earning assets and interest paid on interest bearing sources of funds.
The level of net interest income is determined primarily by the volume of
interest earning assets and the various rate spreads between the interest
earning assets and their funding sources.
Net interest income for the nine month period ended September 30, 1997
totaled $4,337,000, an increase of $576,000 or 12.67% from the $3,849,000 total
for the comparable period in 1996. The increase in net interest income was
attributable to an increase in total interest income of $576,000, which was
partially offset by an increase in total interest expense of $88,000.
Average interest earning assets for the nine months ended September 30,
1997 were $99,609,000 and represented 91.16% of average total assets. An
increase in average loans outstanding of $11,493,000, partially offset by
decreases in average investment securities of $6,058,000 and other earning
assets of $728,000, resulted in an increase in average interest earning assets
of $4,707,000 from September 30, 1996.
As of September 30, 1997, non-interest bearing demand deposits averaged
$21,893,000 or 22.78% of deposits compared to $20,012,000 or 22.87% of deposits
at September 30, 1996. The large percentage of non-interest bearing deposits
has a positive impact on SMHC's net interest margin.
54
<PAGE> 58
Net interest margin, the ratio of net interest income to average earning
assets, for the nine months ended September 30, 1997 increased to 5.81%, an
increase of 40 basis points from September 30, 1996. The increase in net
interest margin in 1997 is a result of the higher percentage of assets invested
in loans, which is the highest yielding asset held by SMHC.
Net interest spread, the difference between the yield on earning assets
and the rate paid on interest bearing liabilities was 4.72% for the nine months
ended September 30, 1997, an increase from September 30, 1996 of 35 basis
points.
Interest Rate Sensitivity. The interest rate sensitivity gap is the
difference between the amount of interest bearing assets and interest bearing
liabilities maturing in any given time frame. A primary objective of
asset/liability management is to maximize net interest margin while not
subjecting SMHC to significant interest rate risk in periods of rising or
falling interest rates. At September 30, 1997 SMHC's one year repricing gap,
defined as repricing assets minus repricing liabilities as a percentage of
total assets, was 4.49%, i.e. more of SMHC's assets than liabilities reprice
within a one year time frame. Management regularly reviews interest rate
exposure to analyze the impact of changes in market interest rates on net
interest income. The following table details SMHC's interest rate sensitivity
position at various time intervals as of September 30, 1997.
Interest Rate Sensitivity
<TABLE>
<CAPTION>
Within Three to More than More than Over
(Dollars in thousands) three twelve one year to three years five
months months three years to five years years Total
------- ------ ----------- ------------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Loans Receivable.............................. $19,647 $23,732 $23,430 $15,755 $ 1,205 $83,769
Investment Securities (Market Value)........... 3,232 4,511 2,976 2,508 2,521 15,748
Federal Funds Sold............................. 3,900 0 0 0 0 3,900
------- ------- ------- ------- ------- -------
Total Interest Earning Assets.................. 26,779 28,243 26,406 18,263 3,726 103,417
------- ------- ------- ------- ------- -------
Interest-Bearing Liabilities
Deposits:
Now Accounts................................... 1,319 3,250 5,112 2,295 1,870 13,846
Savings Accounts............................... 1,065 2,623 4,127 1,853 1,509 11,177
Money Market Deposit Accounts.................. 972 2,395 3,767 1,691 1,378 10,203
Certificates of Deposit........................ 16,924 21,419 3,585 1,140 0 43,068
------- ------- ------- ------ ------- -------
Total Interest-Bearing Liabilities............. 20,280 29,687 16,591 6,979 4,757 78,294
------- ------- ------- ------ ------- -------
Excess (deficiency) of interest-earning assets
over interest-bearing liabilities.............. 6,499 (1,444) 9,815 11,284 (1,031) 25,123
Cumulative excess (deficiency) of interest-
earning assets over interest-bearing
liabilities.................................... $ 6,499 $ 5,055 $14,870 $26,154 $25,123
Cumulative excess (deficiency) of
interest-earning assets over interest-bearing
liabilities as a percent of total assets....... 5.77% 4.49% 13.21% 23.23% 22.31%
</TABLE>
Provision for Possible Loan Losses. The provision for possible loan losses
charged to operating expense is the result of a continuing review and
assessment of the loan portfolio, taking into consideration the impact of
economic conditions on the borrower's ability to repay, past collection
experience, the risk characteristics of the loan portfolio and such other
factors which deserve current recognition. As of September 30, 1997, the
provision for possible loan losses totaled $551,000 compared to $376,000 for
the same nine month period in 1996. The increase in the provision in the nine
months ended September 30, 1997 funded an increase in the level of the reserve
necessitated by the increase in the volume of loans.
55
<PAGE> 59
Non-Interest Income. Non-interest income for the nine month period ended
September 30, 1997 totaled $943,000 compared to $978,000 for the same period in
1996. The decrease resulted from a decrease in other income of $41,000.
Non-Interest Expenses. For the nine month period ended September 30, 1997,
total non-interest expenses increased $212,000 or 7.31% from the same period in
1996. The most significant increase occurred in the area of other operating
expenses, which increased by $138,000. The increase in other operating expenses
was mostly due to a $53,000 increase in ad valorem taxes and an $86,000
increase in other outside services. Salaries and employee benefits increased
$112,000. The increases were partially offset by a decrease in occupancy
expense of $38,000.
Income Taxes. SMHC's effective tax rate was 31.11% for the nine month
period ended September 30, 1997 compared to 28.56% for the same period in 1996.
The effective tax rate is less than the highest statutory rate primarily
because of tax-free income from municipal investments.
ANALYSIS OF FINANCIAL CONDITION
Investment Securities. Average investment securities for the nine months
ended September 30, 1997 were $17,383,000 or 17.45% of average earning assets.
Total investment securities at September 30, 1997 were $15,748,000 including
gross unrealized gains of $142,000 and gross unrealized losses of $8,000. The
investment securities portfolio is used to make investments of various
maturities in order to improve the overall earning asset yield. It also serves
as a source of liquidity and as collateral to secure certain types of deposits.
All investment securities are classified as available for sale. The composition
of the portfolio, effectively managed, limits SMHC's exposure to changes in
interest rates and economic conditions as they occur.
Securities Portfolio. The carrying amount of securities as of September 30,
1997 is included with the Securities Portfolio table in the year end comparison
subsection above.
Loans and Non-Performing Assets. The loan portfolio is the largest
component of SMHC's earning assets. For the nine months ended September 30,
1997, average loans outstanding were $77,069,000 compared to $65,576,000 for
the same period in 1996. The amounts of loans outstanding according to type of
loan as of September 30, 1997 is included in the Loan Portfolio Composition
table in the year end comparison subsection above.
The largest segment of SMHC's loan portfolio is real estate loans which
represent approximately 52.03% of net loans as of September 30, 1997. As of
September 30, 1996, real estate loans comprised 53.02% of net loans.
Nonaccrual, restructured and ninety days past due loans and other real
estate owned as of September 30, 1997 are summarized in the Non-Performing
Assets table in the year end comparison subsection above. Also, several ratios
that measure SMHC's level of non-performing assets are included in such table.
Total non-performing assets at September 30, 1997 were 1.54% of total
assets. This is a significant increase from total non-performing assets at
December 31, 1996. The increase is attributable to an increase in
non-performing loans, primarily a few large commercial credits.
Nonaccrual loans are loans on which the accrual of interest income has
been discontinued and previously accrued interest has been reversed, because
the borrower's financial condition has deteriorated to the extent that the
collection of principal and interest is doubtful. Until the loan is returned to
performing status, generally as the result of the full payment of all past due
principal and interest, interest income is recorded on the cash basis.
56
<PAGE> 60
Allowance for Loan Losses. The loan loss experience for the nine months
ended September 30, 1997 and the five years ended December 31, 1996 is
summarized in the Allowance for Loan Losses table in the year end comparison
subsection above.
At September 30, 1997 the allowance for possible loan losses was
$1,210,000 as compared to $924,000 at September 30, 1996. The allowance as a
percent of loans outstanding was 1.44% and 1.26% as of September 30, 1997 and
1996, respectively. For the nine month period ending September 30, 1997,
charge-offs exceeded recoveries by $243,000.
Deposits. Total deposits at September 30, 1997 were $99,222,000 which is
$11,156,000 or 12.67% higher than at September 30, 1996.
Time deposits of $100,000 or more were $17,063,000 at September 30, 1997.
These deposits consist primarily of deposits from local customers with which
SMHC has other banking relationships. SMHC had no brokered deposits at
September 30, 1997.
Deposit Average Balances and Rates. The average daily amount of deposits
and rates paid on such deposits as of September 30, 1997 is included with the
Deposit Average Balances and Rates table in the year end comparison subsection
above.
Maturities of Time Deposits of $100,000 or More. The maturities of time
deposits of $100,000 or more as of September 30, 1997 is included with the
Maturities of Time Deposits of $100,000 or More table in the year end
comparison subsection above.
Liquidity. Liquidity is the ability of SMHC to fund the needs of its
borrowers, depositors and creditors. SMHC's management maintains a strategy
that provides adequate liquidity and manages interest rate risk. SMHC's
liquidity sources, including cash flows from sales, maturities and paydowns of
loans and investment securities, federal funds purchased, securities sold under
agreements to repurchase and a base of core deposits, are considered adequate
to meet liquidity needs for normal operations.
Capital Resources. SMHC is required to comply with the risk-based capital
guidelines adopted by the FDIC. Those guidelines apply weighing factors which
vary according to the level of risk associated with each asset category. As of
September 30, 1997, SMHC exceeds all minimum capital ratios. SMHC's
consolidated regulatory capital ratios as of September 30, 1997 are included
with the Capital Resources table in the year end comparison subsection above.
57
<PAGE> 61
BUSINESS OF SMHC
GENERAL
SMHC is a bank holding company organized under the laws of the state of
Louisiana on September 13, 1984, with its principal executive office located in
Franklin, Louisiana. SMHC operates principally through the Bank, which is a
state-chartered commercial bank and which provides a range of consumer and
commercial banking services in St. Mary and Terrebonne Parishes through its main
office in Franklin, Louisiana and its four branch offices in Franklin, Baldwin,
Houma, and Morgan City, Louisiana. At September 30, 1997, SMHC had total
consolidated assets of approximately $112.6 million, total consolidated deposits
of approximately $99.2 million, and total consolidated stockholders' equity of
approximately $12.3 million. SMHC's principal executive office is located at
1504 Hospital Avenue, Franklin, Louisiana, 70538 and its telephone number at
such address is (318) 828-0560.
BUSINESS AND PROPERTIES
The Bank currently conducts all business activities through its main office
and four branch offices located in St. Mary and Terrebonne Parishes, Louisiana.
The popular names and addresses of these banking offices are as follows:
(1) Main Office (4) Morgan City Branch
1504 Hospital Avenue 1200 Brashear Avenue
Franklin, Louisiana 70538 Morgan City, Louisiana 70380
(2) Downtown Branch (5) Baldwin Branch
614 Main Street 606 Main Street
Franklin, Louisiana 70538 Baldwin, Louisiana 70514
(3) Houma Branch
701 Barrow Street
Houma, Louisiana 70360
The Bank does not offer trust services. As of September 30, 1997, the
Bank employed 57 persons full time and 4 persons part time.
The Bank owns the land beneath and the buildings of each of its five
locations free and clear of any liens and encumbrances. The Bank leases from
various third parties locations for nine of its thirteen automated teller
machines.
COMPETITION
SMHC encounters vigorous competition in its market areas for the provision
of depository institution financial services from a number of sources, including
bank holding companies and commercial banks, savings and loan associations and
other thrift institutions, other financial institutions, and financial
intermediaries that are domiciled in or operate in St. Mary and Terrebonne
Parishes, where most of the Bank's customers reside. Regional interstate banking
laws and other recent federal and state laws have resulted in increased
competition from both conventional banking institutions and other businesses
offering financial services and products. The Bank also competes for interest
bearing funds with a number of other financial intermediaries and nontraditional
consumer investment alternatives, including brokerage firms, consumer finance
companies, commercial finance companies, credit unions, money market funds, and
federal, state, and municipal issuers of short term obligations. Many of these
competitors have greater financial resources than the Bank. At September 30,
1997, in St. Mary Parish there were approximately seven commercial banks, two
savings banks, and no credit unions competing with the Bank, and in Terrebonne
Parish
58
<PAGE> 62
there were approximately five commercial banks, two savings banks, and one
credit union competing with the Bank.
LEGAL PROCEEDINGS
SMHC and the Bank are not parties to any material legal proceedings other
than ordinary routine litigation incidental to their business.
MANAGEMENT
The following table sets forth, as of the Record Date, certain information
with respect to the beneficial ownership of SMHC Common Stock by (i) each
director of SMHC, (ii) each of the executive officers of SMHC, and (iii) the
directors and executive officers of SMHC as a group. Unless otherwise indicated,
each person has sole voting and investment powers over the indicated shares.
Information relating to beneficial ownership of SMHC Common Stock is based upon
"beneficial ownership" concepts set forth in rules promulgated under Section 13
of the Exchange Act. Under such rules a person is deemed to be a "beneficial
owner" of a security if that person has or shares "voting power," which includes
the power to vote or to direct the voting of such security, or "investment
power," which includes the power to dispose or to direct the disposition of such
security. Under the rules, more than one person may be deemed to be a beneficial
owner of the same securities. A person is also deemed to be a beneficial owner
of any security of which that person has the right to acquire beneficial
ownership within 60 days from the record date.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP
-----------------------
TITLE OF CLASS NAME OF BENEFICIAL OWNER DIRECT INDIRECT PERCENT OF CLASS
- -------------- ----------------------------- ------ -------- ----------------
<S> <C> <C> <C> <C>
Common Stock James J. Bailey III(1)
Common Stock Randy P. Battaglio
Common Stock Don T. Caffery
Common Stock John E. Hine
Common Stock R. Douglas McElwain
Common Stock Temus J. Bonnette, Jr.
Common Stock Y. George Ramirez, Jr.
Common Stock Karen M. Maturin
Common Stock All Directors and
Officers as a group
</TABLE>
59
<PAGE> 63
TRANSACTIONS WITH MANAGEMENT
In the ordinary course of business, the Bank has loans, deposits and other
transactions with its executive officers, directors, and organizations with
which such persons are associated. Such transactions are on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with others. The aggregate amount of loans to
the aforementioned persons and company(s) in which they have a 10% or more
ownership interest as of September 30, 1997, were approximately $2,265,637.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF SMHC
The following table sets forth certain information concerning the
beneficial owners of more than 5.0% of SMHC Common Stock, as of the Record Date.
Unless otherwise indicated, each person has sole voting and investment power
over the indicated shares. For a discussion of determination of beneficial
ownership, see "Business of SMHC--Management."
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS (1)
- -------------- ------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock Marshall T. Reynolds
P. O. Box 4040
Huntington, WV 25729
Common Stock James J. Bailey III(1)
P. O. Box 842
Baton Rouge, LA 70821
Common Stock Prescott F. Bailey
P. O. Box 842
Baton Rouge, LA 70821
Common Stock Virginia Bailey Noland
1 American Place, Suite 2424
Baton Rouge, LA 70825
</TABLE>
(1) The amount in the table includes 680 shares which Mr. Bailey holds as
custodian for Mrs. Willie P. Foster.
60
<PAGE> 64
BUSINESS OF REGIONS
GENERAL
Regions is a regional bank holding company organized and existing under the
laws of the state of Delaware and headquartered in Birmingham, Alabama, with
approximately 435 banking offices located in Alabama, Florida, Georgia,
Louisiana, and Tennessee as of September 30, 1997. At that date, Regions had
total consolidated assets of approximately $22.2 billion, total consolidated
deposits of approximately $17.6 billion and total consolidated stockholders'
equity of approximately $1.9 billion. Regions has banking operations in Alabama,
Florida, Georgia, Louisiana, and Tennessee and banking-related subsidiaries
engaged in mortgage banking, credit life insurance, leasing, and securities
brokerage activities with offices in various Southeastern states. Through its
subsidiaries, Regions offers a broad range of banking and banking-related
services.
The following table presents information about Regions' banking operations
in the states in which its subsidiary depository institutions are located, based
on September 30, 1997 information:
<TABLE>
<CAPTION>
NUMBER OF TOTAL TOTAL
BANKING OFFICES ASSETS DEPOSITS
--------------- ------ --------
(In millions)
<S> <C> <C> <C>
Alabama............ 183 $8,869 $7,990
Florida............ 45 1,593 1,498
Georgia............ 107 3,998 3,489
Louisiana.......... 75 2,295 2,167
Tennessee.......... 25 526 458
Unallocated (1).... 4,171 2,000
</TABLE>
(1)Represents indirect mortgage loans, indirect auto loans, or credit card
loans of $2.5 billion, $1.5 billion, and $171 million, respectively and
negotiable certificates of deposit and certain trust and other deposits, which
in the aggregate approximate $2 billion.
Regions was organized under the laws of the state of Delaware and commenced
operations in 1971 under the name First Alabama Bancshares, Inc. In 1994, the
name of First Alabama Bancshares, Inc. was changed to Regions Financial
Corporation. Regions' principal executive offices are located at 417 North 20th
Street, Birmingham, Alabama 35203, and its telephone number at such address is
(205) 326-7100.
Regions continually evaluates business combination opportunities and
frequently conducts due diligence activities in connection with possible
business combinations. As a result, business combination discussions and, in
some cases, negotiations frequently take place, and future business combinations
involving cash, debt, or equity securities can be expected. Any future business
combination or series of business combinations that Regions might undertake may
be material, in terms of assets acquired or liabilities assumed, to Regions'
financial condition. Recent business combinations in the banking industry have
typically involved the payment of a premium over book and market values. This
practice could result in dilution of book value and net income per share for the
acquirer.
Additional information about Regions and its subsidiaries is included in
documents incorporated by reference in this Proxy Statement/Prospectus. See
"Available Information" and "Documents Incorporated by Reference."
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<PAGE> 65
RECENT DEVELOPMENTS
Recent Acquisitions. Since December 31, 1996, Regions has completed the
acquisitions of nine financial institutions (the "Recently Completed
Acquisitions"), certain aspects of which transactions are set forth in the
following table:
<TABLE>
<CAPTION>
CONSIDERATION
-------------------
APPROXIMATE
-------------------------
ACCOUNTING
INSTITUTION ASSET SIZE(1) VALUE(1) TYPE TREATMENT
----------- ------------- -------- ---- ---------
(In millions)
<S> <C> <C> <C> <C>
Florida First Bancorp, Inc., located in Panama $ 297 $ 40 Cash Purchase
City, Florida
Allied Bankshares, Inc., located in Thomson, 569 158 Regions Pooling
Georgia Common of
Stock Interests
West Carroll Bancshares, Inc., located in 127 37 Regions Pooling
Oak Grove, Louisiana Common of
Stock Interests
Gulf South Bancshares, Inc., located in Gretna, 55 10 Regions Pooling
Louisiana Common of
Stock Interests
First Mercantile National Bank, located in Longwood, 157 18 Cash Purchase
Florida
The New Iberia Bancorp, Inc., located in New Iberia, 313 65 Regions Pooling
Louisiana Common of
Stock Interests
First Bankshares, Inc., located in Hapeville, 127 20 Regions Pooling
Georgia Common of
Stock Interests
SB&T Corporation, located in Smyrna, 148 33 Regions Pooling
Georgia Common of
Stock Interests
GF Bancshares, Inc., located in Griffin, 97 19 Regions Purchase
Georgia (the "GF Acquisition") Common
Stock
--------- ------
Totals $ 1,890 $ 400
========= ======
</TABLE>
- ---------------
(1) Calculated as of the date of consummation.
Other Pending Acquisitions. As of the date of this Proxy Statement/
Prospectus, Regions has pending six acquisitions in addition to SMHC (the "Other
Pending Acquisitions"), certain aspects of which transactions are set forth
below:
62
<PAGE> 66
<TABLE>
<CAPTION>
CONSIDERATION
-------------
APPROXIMATE
-----------------------
ACCOUNTING
INSTITUTION ASSET SIZE VALUE(1) TYPE TREATMENT
----------- ---------- -------- ---- ---------
(In millions)
<S> <C> <C> <C> <C>
Greenville Financial Corporation, located in 134 34 Regions Pooling
Greenville, South Carolina Common of
Stock Interests
PALFED, Inc., located in Aiken, 665 145 Regions Pooling
South Carolina Common of
Stock Interests
First United Bancorporation, located in Anderson, South 292 80 Regions Pooling
Carolina Common of
Stock Interests
Key Florida Bancorp, Inc. located in Bradenton, Florida 212 39 Regions Pooling
Common of
Stock Interests
First State Corporation, located in Albany, Georgia 540 161 Regions Pooling
Common of
Stock Interests
Etowah Bank, located in Canton, Georgia 432 117 Regions Pooling
Common of
-- -- Stock Interests
Totals $ 2,275 $ 576
========= ======
</TABLE>
- ---------------
(1) Calculated as of the date of announcement of the transaction.
Consummation of the Other Pending Acquisitions is subject to the approval
of certain regulatory agencies, and of the stockholders of the institutions to
be acquired. Moreover, the closing of each transaction is subject to various
contractual conditions precedent. No assurance can be given that the conditions
precedent to consummating the transactions will be satisfied in a manner that
will result in their consummation.
If the GF Acquisition, the Other Pending Acquisitions, and Merger had been
consummated on September 30, 1997, Regions' total consolidated assets would have
increased by approximately $2.5 billion to approximately $24.7 billion; its
total consolidated deposits would have increased by approximately $2.2 billion
to approximately $19.8 billion; and its total consolidated stockholders' equity
would have increased by approximately $200 million to approximately $2.1
billion.
1997 Operating Results. For the fourth quarter ended December 31, 1997,
Regions reported net income of $79.0 million (or $.58 per share), representing a
22% increase in net income (and a 12% increase on a per share basis) over the
same period of 1996. For the twelve months ended December 31, 1997, Regions
reported net income of $299.7 million or $2.20 per share, representing a 19%
increase on a per-share basis in net income over 1996. The return on average
total assets for 1997 was 1.4%, and the return on average stockholders' equity
was 16.3%. At December 31, 1997, the ratio of stockholders' equity to total
assets was 8.3%. As of December 31, 1997, Regions had total consolidated assets
of approximately $23.0 billion, total consolidated deposits of approximately
$17.8 billion, and total consolidated stockholders' equity of approximately $1.9
billion.
63
<PAGE> 67
CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to banks and bank holding companies and provides
certain specific information related to Regions and SMHC. Additional information
is available in Regions' Annual Report on Form 10-K for the fiscal year ended
December 31, 1996. See "Documents Incorporated by Reference."
GENERAL
Regions and SMHC are both bank holding companies registered with the
Federal Reserve under the BHC Act. As such, Regions and its nonbank subsidiaries
and SMHC are subject to the supervision, examination, and reporting requirements
of the BHC Act and the regulations of the Federal Reserve.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before (among other things): (i) it may acquire
direct or indirect ownership or control of any voting shares of any bank if,
after such acquisition, the bank holding company will directly or indirectly own
or control more than 5.0% of the voting shares of the bank; (ii) it or any of
its subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy, and consideration of convenience and needs issues includes the
parties' performance under the Community Reinvestment Act of 1977.
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 in September 1995, repealed
the prior statutory restrictions on interstate acquisitions of banks by bank
holding companies, such that Regions, and any other bank holding company located
in Alabama may now acquire a bank located in any other state, and any bank
holding company located outside Alabama may lawfully acquire any Alabama- based
bank, regardless of state law to the contrary, in either case subject to certain
deposit-percentage, aging requirements, and other restrictions. The Interstate
Banking Act also generally provides that, after June 1, 1997, national and
state-chartered banks may branch interstate through acquisitions of banks in
other states. By adopting legislation prior to that date, a state had the
ability to "opt out" and prohibit interstate branching altogether. None of the
states in which the banking subsidiaries of Regions or SMHC are located has
"opted out." Accordingly, Regions has the ability to and intends to consolidate
all of its bank subsidiaries into a single bank with interstate branches, and
has commenced a consolidation program to that end.
The BHC Act generally prohibits Regions and SMHC 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
64
<PAGE> 68
competition, or gains in efficiency, that outweigh possible adverse effects,
such as undue concentration of resources, decreased or unfair competition,
conflicts of interest, or unsound banking practices. For example, factoring
accounts receivable, acquiring or servicing loans, leasing personal property,
conducting discount securities brokerage activities, performing certain data
processing services, acting as agent or broker in selling credit life insurance
and certain other types of insurance in connection with credit transactions, and
performing certain insurance underwriting activities all have been determined by
the Federal Reserve to be permissible activities of bank holding companies. The
BHC Act does not place territorial limitations on permissible 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 depository institutions of Regions and SMHC is a
member of the Federal Deposit Insurance Corporation (the "FDIC"), and as such,
its deposits are insured by the FDIC to the extent provided by law. Each such
subsidiary is also subject to numerous state and federal statutes and
regulations that affect its business, activities, and operations, and each is
supervised and examined by one or more state or federal bank regulatory
agencies.
The regulatory agencies having supervisory jurisdiction over the
respective subsidiary institutions of Regions and SMHC (the FDIC and the
applicable state authority in the case of state-chartered nonmember banks and
the OTS in the case of federally chartered thrift institutions) regularly
examine the operations of such institutions and have authority to approve or
disapprove mergers, consolidations, the establishment of branches, and similar
corporate actions. 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.
PAYMENT OF DIVIDENDS
Regions and SMHC are legal entities separate and distinct from their
banking, thrift, and other subsidiaries. The principal sources of cash flow of
both Regions and SMHC, including cash flow to pay dividends to their respective
stockholders, are dividends from their subsidiary depository institutions. There
are statutory and regulatory limitations on the payment of dividends by these
subsidiary depository institutions to Regions and SMHC, as well as by Regions
and SMHC to their stockholders.
As to the payment of dividends, the Bank and all of Regions'
state-chartered banking subsidiaries are subject to the respective laws and
regulations of the state in which the bank is located, and to the regulations of
the bank's primary federal regulator. Regions' subsidiaries that are thrift
institutions are subject to the OTS' capital distributions regulation.
If, in the opinion of the federal banking regulatory agency, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such 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 a depository institution's capital base to an inadequate level
would be an unsafe and unsound banking practice. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), an insured institution
may not pay any dividend if payment would cause it to become undercapitalized or
if it already is undercapitalized. See "--Prompt Corrective Action." Moreover,
the federal agencies have issued policy statements which provide that bank
holding companies and insured banks should generally pay dividends only out of
current operating earnings.
65
<PAGE> 69
At September 30, 1997, under dividend restrictions imposed under federal
and state laws, the subsidiary depository institutions of Regions and SMHC,
without obtaining governmental approvals, could declare aggregate dividends to
Regions and SMHC of approximately $138 million and $138,000 respectively.
The payment of dividends by Regions and SMHC and their subsidiary
depository institutions may also be affected or limited by other factors, such
as the requirement to maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
Regions, SMHC, and their respective subsidiary depository institutions are
required to comply with the capital adequacy standards established by the
Federal Reserve in the case of Regions and SMHC and the appropriate federal
banking regulator in the case of each of their subsidiary depository
institutions. There are two basic measures of capital adequacy for bank holding
companies that have been promulgated by the Federal Reserve: a risk-based
measure and a leverage measure. All applicable capital standards must be
satisfied for a bank holding company to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items are
assigned to broad risk categories, each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance-sheet items.
The minimum guideline for the ratio (the "Total Capital Ratio") of total
capital ("Total Capital") to risk- weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At least
half of Total Capital must 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 ("Tier 2 Capital").
At September 30, 1997, Regions' consolidated Total Capital Ratio and its Tier 1
Capital Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted assets) were
12.24% and 9.85%, respectively, and SMHC's consolidated Total Capital and Tier 1
Capital Ratios were 16.09% and 14.84%, 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. Regions' and SMHC's respective Leverage Ratios at September 30, 1997
were 7.35% and 11.12%. 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 Regions' and SMHC's subsidiary depository institutions is subject
to risk-based and leverage capital requirements adopted by its federal banking
regulator, which are substantially similar to those adopted by the Federal
Reserve. Each of the subsidiary depository institutions was in compliance with
applicable minimum capital requirements as of September 30, 1997. Neither
Regions, SMHC, nor any of their subsidiary depository
66
<PAGE> 70
institutions has been advised by any federal banking agency of any specific
minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank or thrift
institution to a variety of enforcement remedies, including issuance of a
capital directive, the termination of deposit insurance by the FDIC, a
prohibition on the taking of brokered deposits, and to certain other
restrictions on its business. As described below, substantial additional
restrictions can be imposed upon FDIC-insured depository institutions that fail
to meet applicable capital requirements. See "--Prompt Corrective Action."
The Federal Reserve, the OCC, and the FDIC have, pursuant to FDICIA,
recently adopted final regulations requiring regulators to consider interest
rate risk (when the interest rate sensitivity of an institution's assets does
not match the sensitivity of its liabilities or its off-balance-sheet position)
in the evaluation of a bank's capital adequacy. The bank regulatory agencies'
methodology for evaluating interest rate risk requires banks with excessive
interest rate risk exposure to hold additional amounts of capital against such
exposures. The OTS also includes an interest-rate risk component in its
risk-based capital guidelines for savings associations that it regulates.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, Regions and SMHC are expected to act as
sources of financial strength for, and to commit resources to support, each of
their respective banking subsidiaries. This support may be required at times
when, absent such Federal Reserve policy, Regions or SMHC may not be inclined to
provide it. In addition, any capital loans by a bank holding company to any of
its banking subsidiaries are subordinate in right of payment to deposits and to
certain other indebtedness of such banks. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain the capital of a banking subsidiary will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
(i) the default of a commonly controlled FDIC-insured depository institution or
(ii) any assistance provided by the FDIC to any commonly controlled FDIC-insured
depository institution "in danger of default." "Default" is defined generally as
the appointment of a conservator or receiver, and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance. The FDIC's
claim for damages is superior to claims of stockholders of the insured
depository institution or its holding company, but is subordinate to claims of
depositors, secured creditors, and holders of subordinated debt (other than
affiliates) of the commonly controlled insured depository institution. The
subsidiary depository institutions of Regions are subject to these
cross-guarantee provisions. As a result, any loss suffered by the FDIC in
respect of any of these subsidiaries would likely result in assertion of the
cross-guarantee provisions, the assessment of such estimated losses against the
depository institution's banking or thrift affiliates, and a potential loss of
Regions' respective investments in such other subsidiary depository
institutions.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories ("well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized") and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to a
narrow exception, FDICIA requires the banking regulator to appoint a receiver
67
<PAGE> 71
or conservator for an institution that is critically undercapitalized. The
federal banking agencies have specified by regulation the relevant capital level
for each category.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total 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, 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 banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution meet its capital restoration plan, subject to certain limitations.
The obligation of a controlling bank holding company under FDICIA to fund a
capital restoration plan is limited to the lesser of 5.0% of an undercapitalized
subsidiary's assets or the amount required to meet regulatory capital
requirements. An undercapitalized institution is also generally prohibited from
increasing its average total assets, making acquisitions, establishing any
branches, or engaging in any new line of business, except in accordance with an
accepted capital restoration plan or with the approval of the FDIC. In addition,
the appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described below if it determines "that those actions are
necessary to carry out the purpose" of FDICIA.
At September 30, 1997, all of the subsidiary depository institutions of
Regions and SMHC had the requisite capital levels to qualify as well
capitalized.
FDIC INSURANCE ASSESSMENTS
Pursuant to FDICIA, the FDIC adopted a 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
risk-based assessment system, which went into effect on January 1, 1994, 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
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<PAGE> 72
supervisory category to which it is assigned. Under the final risk-based
assessment system, there are nine assessment risk classifications (i.e.,
combinations of capital groups and supervisory subgroups) to which different
assessment rates are applied.
Pursuant to the Deposit Insurance Funds Act of 1996, the FDIC has
implemented a special one-time assessment of approximately 65.7 basis points
(0.657%) on a depository institution's deposits insured by the Savings
Association Insurance Fund ("SAIF") held as of March 31, 1995 (or approximately
52.6 basis points on SAIF deposits acquired by banks in certain qualifying
transactions), and adopted revisions to the assessment rate schedules that would
generally eliminate the disparity between assessment rates applicable to the
deposits insured by the Bank Insurance Fund ("BIF") and the SAIF. The revisions
in the assessment rate schedules reduced assessment rates on SAIF-insured
deposits and would generally equalize BIF and SAIF assessment rates by January,
2000. Regions anticipates that the net effect of the decrease in the premium
assessment rate on SAIF deposits will result in a reduction in its total deposit
insurance premium assessments for the years 1997 through 1999 as compared to
prior years, assuming no further changes in announced premium assessment rates.
Regions recorded a charge against earnings for the special assessment in the
quarter ended September 30, 1996 in the pre-tax amount of approximately $21.0
million.
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.
DESCRIPTION OF REGIONS COMMON STOCK
Regions is authorized to issue 240,000,000 shares of Regions Common Stock,
of which 136,820,461 shares were issued, including 500,000 treasury shares, at
September 30, 1997, and 5,000,000 shares of preferred stock, none of which are
outstanding. No other class of stock is authorized.
Holders of Regions Common Stock are entitled to receive such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. The ability of Regions to pay dividends is affected by the ability of
its subsidiary institutions to pay dividends, which is limited by applicable
regulatory requirements and capital guidelines. At September 30, 1997, under
such requirements and guidelines, Regions' subsidiary institutions had $138
million of undivided profits legally available for the payment of dividends. See
"Certain Regulatory Considerations--Payment of Dividends."
For a further description of Regions Common Stock, see "Effect of the
Merger on Rights of Stockholders."
STOCKHOLDER PROPOSALS
Regions expects to hold its next annual meeting of stockholders after the
Merger during May 1998. Under SEC rules, proposals of Regions stockholders
intended to be presented at that meeting must have been received by Regions at
its principal executive offices no later than December 2, 1997, for
consideration by Regions for possible inclusion in such proxy materials.
Proposals with respect to Regions' 1999 annual meeting of stockholders may be
submitted until the date specified in Regions' 1998 annual meeting proxy
statement.
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<PAGE> 73
EXPERTS
The consolidated financial statements of Regions, incorporated by reference
in this Registration Statement, have been audited by Ernst & Young LLP,
independent auditors, for the periods indicated in their report thereon which is
included in the Annual Report to Stockholders which is incorporated by reference
in its Annual Report on Form 10-K for the year ended December 31, 1996. The
financial statements audited by Ernst & Young LLP have been incorporated herein
by reference in reliance on their report given on their authority as experts in
accounting and auditing.
The consolidated financial statements of SMHC, included in this
Registration Statement, have been audited by Castaing, Hussey & Lolan, LLP,
independent auditors, for the periods indicated in their report thereon which is
included herein. The financial statements audited by Castaing, Hussey & Lolan,
LLP have been included herein in reliance on their report given on their
authority as experts in accounting and auditing.
OPINIONS
The legality of the shares of Regions Common Stock to be issued in the
Merger will be passed upon by Lange, Simpson, Robinson & Somerville LLP,
Birmingham, Alabama. Henry E. Simpson, partner in the law firm of Lange,
Simpson, Robinson & Somerville LLP, is a member of the Board of Directors of
Regions. As of _______, 1998, attorneys in the law firm of Lange, Simpson,
Robinson & Somerville LLP owned an aggregate of _______ shares of Regions Common
Stock.
Certain tax consequences of the transaction have been passed upon by Alston
& Bird LLP, Atlanta, Georgia.
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<PAGE> 74
INDEX TO SMHC FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
St. Mary Holding Corporation and Subsidiary
Report of Independent Certified Public Accountants.....................F-2
Consolidated Statements of Financial Condition as of
December 31, 1996 and 1995.............................................F-3
Consolidated Statements of Income for the Years
Ended December 31, 1996, 1995, and 1994................................F-4
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended December 31, 1996, 1995, and 1994...........F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995, and 1994................................F-6
Notes to Consolidated Financial Statements................................F-7
Consolidated Statements of Financial Condition
as of September 30, 1997 and 1996 (Unaudited)..........................F-22
Consolidated Statements of Income for the
the Nine Months Ended September 30, 1997 and 1996 (Unaudited)..........F-23
Consolidated Statements of Changes in Stockholders' Equity for
the Nine Months ended September 30, 1997 and 1996......................F-24
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1997 and 1996 (Unaudited)..............F-25
Notes to Unaudited Consolidated Interim Financial Statements..............F-26
</TABLE>
F-1
<PAGE> 75
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
St. Mary Holding Corporation
and Subsidiary
Franklin, LA
We have audited the accompanying consolidated statements of financial condition
of St. Mary Holding Corporation and Subsidiary as of December 31, 1996 and
1995, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of St. Mary Holding
Corporation and Subsidiary as of December 31, 1996 and 1995, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
CASTAING, HUSSEY & LOLAN, LLP
New Iberia, Louisiana
February 13, 1997
F-2
<PAGE> 76
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1996 and 1995
(In Thousands)
ASSETS
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Cash and Due From Banks $ 4,658 $ 5,576
Federal Funds Sold 6,925 8,085
------------ ------------
Total Cash and Cash Equivalents 11,583 13,661
Investment Securities Available for Sale, at fair value 17,701 20,741
Loans Receivable (net of allowance for loan losses of $902 and
$800, respectively) 72,159 59,748
Premises and Equipment, Net 3,979 4,029
Accrued Interest Receivable 704 764
Real Estate and Other Property Acquired in Settlement of Loans, Net 5 14
Other Assets 417 1,613
------------ ------------
TOTAL ASSETS $ 106,548 $ 100,570
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Non-Interest Bearing Deposits $ 23,853 $ 20,809
Interest Bearing Deposits 68,917 62,984
------------ ------------
Total Deposits 92,770 83,793
Securities Sold Under Agreement to Repurchase 1,087 3,613
Accrued Interest Payable 458 407
Dividends Payable 221 245
Income Taxes Payable and Deferred 225 403
Accrued Expenses 57 56
------------ ------------
TOTAL LIABILITIES 94,818 88,517
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock - Par Value $5; Authorized 10,000,000 Shares;
Issued 463,200 Shares; Outstanding 394,520 and 432,000
Shares, respectively 2,316 2,316
Treasury Stock - 68,680 and 31,200 Shares at Cost, respectively (2,048) (905)
Surplus 4,700 4,700
Undivided Profits 6,699 5,790
Unrealized Gain on Securities Available for Sale,
Net of Deferred Taxes 63 152
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 11,730 12,053
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 106,548 $ 100,570
============ ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
F-3
<PAGE> 77
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1996, 1995 and 1994
(In Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- -----------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans $ 6,814 $ 5,437 $ 4,064
Interest on Investment Securities:
U. S. Treasury Securities 434 434 751
U. S. Government Agency Securities 413 553 925
State and Municipal Securities 355 393 399
Mortgage - Backed Securities and Collateralized
Mortgage Obligations -0- 212 737
Interest on Federal Funds Sold 298 204 32
Interest on Deposits with Other Banks -0- 3 1
----------- ---------- -----------
Total Interest Income 8,314 7,236 6,909
----------- ---------- -----------
INTEREST EXPENSE:
Interest Expense on Deposits 2,921 2,364 2,144
Interest Expense on Federal Funds Purchased -0- 40 49
Interest Expense on Securities Sold Under
Agreement to Repurchase 142 190 134
----------- ---------- -----------
Total Interest Expense 3,063 2,594 2,327
----------- ---------- -----------
Net Interest Income 5,251 4,642 4,582
Provision for Loan Losses 336 365 60
----------- ---------- -----------
Net Interest Income After Provision for Loan Losses 4,915 4,277 4,522
----------- ---------- -----------
OTHER INCOME:
Service Charges 799 793 797
Victoria-St. Mary Ltd. Income, Net -0- -0- 51
Gain (Loss) on Sale of Investment Securities 3 (187) (29)
Gain on Sale of Loans 150 -0- 89
Gain on Sale of Victoria Land -0- 940 -0-
Other Income 377 392 379
----------- ---------- -----------
Total Other Income 1,329 1,938 1,287
----------- ---------- -----------
OTHER EXPENSES:
Salaries and Employee Benefits 1,698 1,647 2,071
Occupancy Expense 886 895 778
Other Operating Expenses 1,595 1,352 1,557
----------- ---------- -----------
Total Other Expenses 4,179 3,894 4,406
----------- ---------- -----------
Income Before Income Tax Expense 2,065 2,321 1,403
Income Tax Expense 599 671 343
----------- ---------- -----------
NET INCOME $ 1,466 $ 1,650 $ 1,060
=========== ========== ===========
Net income per share $ 3.51 $ 3.66 $ 2.29
=========== ========== ===========
Average shares outstanding 418 450 463
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
F-4
<PAGE> 78
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1996, 1995 and 1994
(In Thousands)
<TABLE>
<CAPTION>
Unrealized Gain
(Loss) on
Securities
Common Treasury Undivided Available
Stock Stock Surplus Profits for Sale
----------- --------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 $ 1,158 $ $ 4,100 $ 5,758 $
Net Income 1,060
Dividends (461)
Change in Unrealized Gain (Loss) on
Securities Available for Sale,
Net of Deferred Taxes (773)
----------- --------- ---------- ----------- ---------------
BALANCE, DECEMBER 31, 1994 1,158 4,100 6,357 (773)
Net Income 1,650
Dividends (459)
Transfer from Undivided
Profits to Surplus 600 (600)
Stock Dividend 1,158 (1,158)
Treasury Stock Purchased (905)
Change in Unrealized Gain (Loss) on
Securities Available for Sale,
Net of Deferred Taxes 925
----------- --------- ---------- ----------- ---------------
BALANCE, DECEMBER 31, 1995 2,316 (905) 4,700 5,790 152
Net Income 1,466
Dividends (557)
Treasury Stock Purchased (1,143)
Change in Unrealized Gain (Loss) on
Securities Available for Sale,
Net of Deferred Taxes (89)
----------- --------- ---------- ----------- ---------------
BALANCE, DECEMBER 31, 1996 $ 2,316 $ (2,048) $ 4,700 $ 6,699 $ 63
=========== ========= ========== =========== ===============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
F-5
<PAGE> 79
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995 and 1994
(In Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Exhibit C) $ 1,466 $ 1,650 $ 1,060
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 493 501 434
Net Premium Amortization and Discount Accretion (90) 29 279
Provision For Loan Losses 336 365 60
Writedown of OREO and Other Property Acquired 2 -0- 10
Provision For Deferred Income Taxes (39) (53) (16)
(Gain) Loss on Sale of Investment Securities (3) 187 29
(Gain) Loss on Disposition of Foreclosed Property and
Premise and Equipment 49 (918) (38)
Gain on Sale of Loans (150) -0- (89)
(Increase) Decrease in Accrued Interest Receivable
and Other Assets 1,146 (1,121) 1
Increase (Decrease) in Accrued Interest Payable and
Other Liabilities (40) 143 (56)
----------- ----------- -----------
Net Cash Provided By Operating Activities 3,170 783 1,674
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sales of Securities Available for Sale -0- 16,814 5,937
Proceeds from Maturities of Securities Available for Sale 15,091 15,279 16,203
Purchase of Securities Available for Sale (12,094) (6,037) (17,985)
Proceeds from Sale of Loans 1,931
Net Decrease (Increase) in Interest Bearing Deposit in
Other Banks -0- 100 (100)
Net Increase in Customer Loans (14,566) (12,626) (10,031)
Capital Expenditures (392) (343) (609)
Proceeds from Sales of Premises and Equipment 11 28 55
Proceeds from Sales of Other Real Estate Owned
and Other Assets Acquired 44 1,011 222
----------- ----------- -----------
Net Cash Provided (Used) By Investing Activities (9,975) 14,226 (6,308)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in Demand and Savings Deposits 2,895 (3,452) (5,569)
Net Increase (Decrease) in Time Deposits 6,082 7,950 (2,993)
Net (Decrease) Increase in Federal Funds Purchased -0- (2,150) 2,150
Net (Decrease) Increase in Securities Sold Under
Agreement to Repurchase (2,526) (6,985) 10,598
Dividends Paid (581) (214) (461)
Treasury Stock Purchased (1,143) (905) -0-
------------- ------------ -------------
Net Cash (Used) Provided By Financing Activities 4,727 (5,756) 3,725
------------- ------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents (2,078) 9,253 (909)
Cash and Cash Equivalents at Beginning Of Year 13,661 4,408 5,317
------------- ------------- ------------
Cash and Cash Equivalents at End of Year $ 11,583 $ 13,661 $ 4,408
============= ============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid During the Year for Interest $ 3,012 $ 2,448 $ 2,290
Cash Paid During the Year for Income Taxes $ 730 $ 647 $ 377
Income Tax Refunds Received During the Year $ -0- $ 3 $ 125
Noncash Activities:
Transfers to Other Real Estate and Other
Property Acquired from Loans $ 38 $ 46 $ 14
Transfer to Other Real Estate from Premises and Equipment $ -0- $ 81 $ -0-
Transfer to Investment Securities Available for Sale from
Other Property Acquired $ -0- $ 51 $ -0-
Loans Made to Facilitate Sales of Other
Real Estate and Other Property Acquired $ -0- $ -0- $ 74
Total Increase (Decrease) in Unrealized Gain on Securities
Available for Sale $ (136) $ 1,402 $ 1,171
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
F-6
<PAGE> 80
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
Basis of Consolidation - The accompanying consolidated financial statements
include the accounts of St. Mary Holding Corporation (a bank holding company)
("the Company"); its wholly owned subsidiary, The St. Mary Bank and Trust Co.
(a State Bank) ("the Bank"); and a wholly owned subsidiary of the Bank,
Victoria-St. Mary, Ltd., (a corporation). As detailed in Note 15, Victoria -
St. Mary, Ltd. was liquidated in December 1994. All significant intercompany
balances have been eliminated.
Nature of Operations - The Company provides financial services to individuals
and corporate customers, and is subject to competition from other financial
institutions. The Company is also subject to the regulations of certain federal
and state agencies and undergoes periodic examinations by those regulatory
authorities.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
A material estimate that is particularly susceptible to significant change
relates to the determination of the allowance for losses on loans. In
connection with the determination of the allowance for losses on loans,
management obtains independent appraisals for significant properties.
The Company grants commercial, real estate and consumer loans to customers
located primarily in St. Mary and Terrebonne Parishes. The Company's portfolio
consists of business loans extending across many industry types, as well as
loans to individuals. The Company's primary service area has some dependency on
energy and energy related industries. The primary loan collateral is
concentrated in commercial real estate.
The Company evaluates the credit risk of each customer on an individual basis
and, where deemed appropriate, collateral is obtained. Collateral varies by
individual loan customer but may include accounts receivable, inventory, real
estate, equipment, deposits, personal and government guaranties, and general
security agreements. Access to collateral is dependent upon the type of
collateral obtained. On an on-going basis, the Company monitors its collateral
and the collateral value related to the loan balance outstanding.
While management uses available information to recognize losses on loans,
future additions to the allowance may be necessary based on changes in local
economic conditions. In addition, regulatory agencies, as an integral part of
their examination process, periodically review the Company's allowance for
losses on loans. Such agencies may require the Company to recognize additions
to the allowance based on their judgments about information available to them
at the time of their examination. Because of these factors, it is reasonably
possible that the allowance for losses on loans may change materially in the
near term.
Cash and Cash Equivalents - For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from banks and federal funds
sold. Generally, federal funds are purchased and sold for one day periods.
F-7
<PAGE> 81
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued):
Investment Securities - Investment securities that are held for short-term
resale are classified as trading securities and carried at fair value. Debt
securities that management has the ability and intent to hold to maturity are
classified as held to maturity and carried at cost, adjusted for amortization
of premiums and accretion of discounts using methods approximating the interest
method. Other investment securities are classified as available for sale and
are carried at fair value. Realized and unrealized gains and losses on trading
securities are included in net income. Unrealized gains and losses on
securities available for sale are recognized as direct increases or decreases
in equity, net of applicable income taxes. All investment securities have been
classified as available for sale.
Realized gains or losses on disposition of investment securities are recorded
in other income on the trade date based on the net proceeds and the adjusted
carrying amount of the securities sold using the specific identification
method.
Loans - Loans are stated at the amount of unpaid principal, less the allowance
for loan losses, net of deferred loan fees and unearned discounts. Loan
origination fees and certain direct origination costs are capitalized and
recognized as an adjustment of the yield of the related loan. Unearned discount
on lease financing receivables is recognized as income over the terms of the
loans using the interest method. Interest on other loans is calculated using
the simple interest method on daily balances of the principal amount
outstanding.
When the payment of principal or interest on a loan (including a loan defined
as impaired under SFAS 114) is delinquent for 90 days, the loan is placed on
non-accrual status, unless the loan is in the process of collection and the
underlying collateral fully supports the carrying value of the loan. If the
decision is made to continue accruing interest on the loan, periodic reviews
are made to confirm the accruing status of the loan. When a loan is placed on
non-accrual status, interest accrued during the current year prior to the
judgment of uncollectibility is charged to operations. Interest accrued during
prior periods is charged to the allowance for loan losses. Generally, any
payments received on non-accrual loans are applied first to outstanding loan
amounts and next to the recovery of charged-off loan amounts. Any excess is
treated as recovery of lost interest.
Allowance for Loan Losses - The allowance for loan losses is maintained at a
level which, in management's judgment, is adequate to absorb credit losses
inherent in the loan portfolio. The amount of the allowance is based on
management's evaluation of the collectibility of the loan portfolio, including
the nature of the portfolio, credit concentrations, trends in historical loss
experience, specific impaired loans, and economic conditions. Allowances for
impaired loans are generally determined based on collateral values or the
present value of estimated cash flows. The allowance is increased by a
provision for loan losses, which is charged to expense, and reduced by
charge-offs, net of recoveries.
In May 1993, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for
Impairment of a Loan, which requires that impaired loans that are within the
scope of this statement be measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or at the
loan's market price or the fair value of the collateral if the loan is
collateral dependent. The Company uses the loan-by-loan measurement method for
all loans, however, consumer installment loans are considered to be groups of
smaller balance homogenous loans that are collectively evaluated for
F-8
<PAGE> 82
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued):
impairment and are not subject to SFAS 114 measurement criteria. A loan is
considered impaired when it is probable that all contractual amounts due will
not be collected in accordance with the terms of the loan. A loan is not deemed
to be impaired if a delay in receipt of payment is expected to be less than 60
days or if, during a longer period of delay, the Company expects to collect all
amounts due, including interest accrued at the contractual rate during the
period of the delay. Factors considered by management include the property
location, economic conditions and any unique circumstances affecting the loan.
Due to the composition of the Company's loan portfolio, the fair value of
collateral is utilized to measure virtually all of the Company's impaired
loans. If the fair value of an impaired loan is less than the related recorded
amount, a valuation allowance is established or the writedown is charged
against the allowance for loan losses if the impairment is considered to be
permanent.
The standard is to be adopted prospectively with the effect of initially
applying the standard to be reflected as an adjustment to the Company's
provision for loan losses in the year of adoption. The Company adopted the
standard effective January 1, 1995.
Premises and Equipment - Premises and equipment are stated at cost less an
allowance for depreciation. Depreciation is computed primarily using the
straight-line method over the useful lives of the assets which range from 5 to
30 years. Interest costs connected with the construction of major equipment or
facilities are capitalized during the period of construction activity.
Real Estate and Other Assets Acquired in Settlement of Loans - Real estate and
other property acquired in settlement of loans are recorded at the balance of
the loan or at estimated fair value minus estimated costs to sell, whichever is
less, at the date acquired, plus capital improvements made thereafter to
facilitate sale. Writedowns based on fair value at the date of acquisition are
charged to the allowance for loan losses. After foreclosure, valuations are
periodically performed by management and the real estate is carried at the
lower of cost or fair value minus estimated costs to sell. Costs of holding
real estate acquired in settlement of loans and subsequent writedowns to
reflect fair value are shown as charges against income currently. Gains on
sales of such real estate are taken into income based on the buyer's initial
and continuing investment in the property.
Advertising Costs - The Company incurred no direct-response advertising costs
and expenses all advertising costs as incurred.
Employee Benefits - SFAS 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions, which is effective for fiscal years beginning after
December 15, 1992, requires recognition of estimated future postretirement
costs over employees' periods of service. SFAS 112, Employers' Accounting for
Postemployment Benefits, which is effective for fiscal years beginning after
December 15, 1993, requires recognition of estimated future postemployment
costs over employees' periods of service. The Company offers no postretirement
health or medical benefits or postemployment benefits to any of its employees
or former employees.
F-9
<PAGE> 83
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued):
Income Taxes - Income taxes are provided for the tax effects of the
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes related primarily to differences attributable
to available for sale securities, allowance for loan losses, allowance for
losses on foreclosed real estate, accumulated depreciation, and deferred loan
fees. The deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled.
The tax liability of the consolidated group is allocated to the members of the
group on the basis of the percentage of the total tax which the tax of such
member, if computed on a separate return, would bear to the total amount of the
taxes for all members of the group so computed.
Fair Values of Financial Instruments - Statement of Financial Accounting
Standards No. 107 (SFAS 107), Disclosures about Fair Value of Financial
Instruments, requires disclosure of fair value information about financial
instruments, whether or not recognized in the statement of financial condition.
In cases where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instruments
from its disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
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 amounts reported in the statements
of financial condition for cash and cash equivalents approximate those
assets' fair values.
Investment securities: Fair values for investment securities are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments.
Loans: For variable rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying
amounts. The fair values for other loans (for example, fixed rate commercial
real estate and mortgage loans) are estimated using discounted cash flow
analysis, based on interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. Loan fair value
estimates include judgments regarding future expected loss experience and
risk characteristics. The carrying amount of accrued interest receivable
approximates its fair value.
Deposits: The fair value disclosed for demand deposits (for example,
interest bearing checking accounts and savings accounts) are, by definition,
equal to the amount payable on demand at the reporting date (that is, their
carrying amounts). The fair values for certificates of deposit are estimated
using a discounted cash flow calculation that applies interest rates
currently being offered on certificates to a schedule of aggregated
contractual maturities on such time deposits. The carrying amount of accrued
interest payable approximates fair value.
Off-Balance Sheet Items: The Company has outstanding commitments to extend
credit and stand-by letters of credit. These off-balance sheet financial
instruments are generally exerciseable at the market rate prevailing at the
date the underlying transaction will be completed and, therefore, have no
current value.
F-10
<PAGE> 84
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued):
Effects of New Accounting Pronouncements - In March 1994, the FASB issued
Statement of Financial Accounting Standards No. 121 (SFAS 121) Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed
Of. SFAS 121 is effective for fiscal years beginning after December 15, 1995.
The Company adopted SFAS 121 effective January 1, 1996. The statement requires
a company to assess whether an asset (or group of assets) that will continue to
be used is impaired and whether an adjustment to the carrying value is
required. Certain events, such as a significant decrease in the asset's market
value, a physical change in the asset or the way the asset is used, among
others, are indicators that impairment may exist. If an asset is determined to
be impaired, and the estimated cash flows from the asset are less than the
carrying value of the asset, then fair market value is calculated, and the
carrying value is adjusted if it is less than the fair market value. Assets to
be disposed of are reported at the lower of the carrying amount or fair value
less cost to sell.
In June 1996, the FASB issued SFAS 125, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities. The statement
establishes accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on the consistent
application of the financial-components approach. This approach requires the
recognition of financial assets and servicing assets that are controlled by the
reporting entity, and the derecognition of financial assets and liabilities
when control is extinguished. Liabilities and derivatives incurred or obtained
by transferors in conjunction with the transfer of financial assets are
required to be measured at fair value, if practicable.
Servicing assets and other retained interests in transferred assets are
required to be measured by allocating the previous carrying amount between the
assets sold, if any, and the interest that is retained, if any, based on the
relative fair value of the assets at the date of transfer. SFAS 125 is
effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996. SFAS 127, Deferral of the
Effective Date of Certain Provisions of FASB Statement No, 125, was issued in
December 1996 and deferred application of many of the provisions of SFAS 125
until after December 31, 1997.
Management believes adoption of SFAS 125 will not have a material effect on
financial position or the results of operations.
Reclassifications - Certain reclassifications have been made to the 1995 and
1994 consolidated financial statements in order to conform to the
classifications adopted for reporting in 1996.
NOTE 2 - CASH AND DUE FROM BANKS:
The Company is required to maintain non-interest bearing reserve balances,
which are based on a percentage of deposit liabilities, with the Federal
Reserve Bank or in cash on hand. This reserve is attained by the Company's
vault cash on hand at December 31, 1996 and 1995.
NOTE 3 - INVESTMENT SECURITIES:
Securities available for sale (in thousands) as of December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
U. S. Governments $ 5,010 $ 3 $ (2) $ 5,011
U. S. Agencies 6,999 2 (12) 6,989
State and Political Subdivisions 5,597 133 (29) 5,701
------------ ------------- ------------ ------------
Totals $ 17,606 $ 138 $ (43) $ 17,701
============ ============= ============ ============
</TABLE>
F-11
<PAGE> 85
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - INVESTMENT SECURITIES (Continued):
The amortized cost and estimated fair value of debt securities available for
sale (in thousands) at December 31, 1996, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
------------ -----------
<S> <C> <C>
Due in One Year or Less $ 10,749 $ 10,757
Due after One Year through Five Years 4,276 4,349
Due after Five Years through Ten Years 2,057 2,078
Due after Ten Years 524 517
------------ -----------
Totals $ 17,606 $ 17,701
============ ===========
</TABLE>
Securities available for sale (in thousands) as of December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ -------------- ------------- ------------
<S> <C> <C> <C> <C>
U. S. Governments $ 6,900 $ 1 $ (6) $ 6,895
U. S. Agencies 6,995 29 (23) 7,001
State and Political Subdivisions 6,614 241 (10) 6,845
------------ -------------- -------------- ------------
Totals $ 20,509 $ 271 $ (39) $ 20,741
============ ============== ============== ============
</TABLE>
Proceeds from sales and calls of securities available for sale and the gross
gains and losses (in thousands) realized on those sales for the years ended
December 31, 1996, 1995 and 1994, were as follows:
<TABLE>
<CAPTION>
Gross Gross
Sale Realized Realized
Proceeds Gains Losses
----------- ------------ -------------
<S> <C> <C> <C>
December 31, 1996 $ 419 $ 3 $ -0-
=========== ============ ==============
December 31, 1995 $ 18,128 $ 150 $ 337
=========== ============ ==============
December 31, 1994 $ 7,032 $ 10 $ 39
=========== ============ ==============
</TABLE>
Investment securities with a carrying amount of approximately $15,639,000 and
$16,611,000 at December 31, 1996 and 1995, respectively, were pledged to secure
deposits as required or permitted by law.
F-12
<PAGE> 86
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - LOANS RECEIVABLE:
Loans Receivable at December 31, 1996 and 1995 classified by major type (in
thousands) is as follows:
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C> <C>
Commercial Loans $ 22,244 $ 19,695
Real Estate Loans - Other 38,126 28,717
Real Estate Loans - Construction 1,472 1,691
Consumer Loans 10,337 9,446
Agricultural Loans 828 915
Lease Financing Receivables 16 50
----------- ------------
Total 73,023 60,514
Allowance for Loan Losses (902) (800)
Unearned Discount on Lease Financing Receivables (3) (7)
Unamortized Loan Origination Costs 41 41
----------- ------------
Total Loans $ 72,159 $ 59,748
=========== ============
</TABLE>
At December 31, 1996 and 1995, fixed rate loans totaled $ 63,208,000 and
$49,568,000 and variable rate loans totaled $9,853,000 and $10,980,000,
respectively.
The total recorded investment in impaired loans as of December 31, 1996 was
$683,000, which consisted of five loans. The total allowance for impaired loans
was $71,000 and was attributable to $389,000 of impaired loans as of December
31, 1996. Impaired loans of $294,000 did not have a related allowance for
impairment as of December 31, 1996. The average recorded investment in impaired
loans during 1996 was $627,000. The interest income recognized for the year
ended December 31, 1996 on the loans while impaired was $47,000.
The total recorded investment in impaired loans as of December 31, 1995 was
$314,000, which consisted of six loans. The total allowance for impaired loans
was $36,000 and was attributable to $113,000 of impaired loans as of December
31, 1995. Impaired loans of $201,000 did not have a related allowance for
impairment as of December 31, 1995. The average recorded investment in impaired
loans during 1995 was $397,000. The interest income recognized for the year
ended December 31, 1995 on the loans while impaired was $25,000.
Non-accrual loans not subject to the impairment provisions of SFAS 114 totaled
$316,000 and $212,000 as of December 31, 1996 and 1995, respectively. No
interest income was recognized on such non-accrual loans for the years ended
December 31, 1996 and 1995. Interest income that would have been recognized for
the years ended December 31, 1996 and 1995 had those loans been on accrual
status at contractual terms throughout the year was approximately $40,000 and
$28,000, respectively.
NOTE 5 - ALLOWANCE FOR LOAN LOSSES:
Activity in the allowance for loan losses (in thousands) for the years ended
December 31, 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- -------------
<S> <C> <C> <C>
Beginning Balance $ 800 $ 686 $ 577
Provision for Loan Losses 336 365 60
Charge-offs (301) (277) (132)
Recoveries 67 26 181
-------------- -------------- -------------
Ending Balance $ 902 $ 800 $ 686
============== ============== =============
</TABLE>
F-13
<PAGE> 87
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - PREMISES AND EQUIPMENT:
Premises and equipment stated at cost less an allowance for depreciation (in
thousands) at December 31, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
1996 1995
------------- --------------
<S> <C> <C>
Land $ 431 $ 431
Buildings and Improvements 4,522 4,558
Furniture and Fixtures 3,062 2,901
Work in Progress 184 -0-
------------- --------------
Total 8,199 7,890
Accumulated Depreciation (4,220) (3,861)
------------- --------------
Premises and Equipment, Net $ 3,979 $ 4,029
============= ==============
</TABLE>
Depreciation expense charged to operations was $383,000, $382,000, and $322,000
for the years ended December 31, 1996, 1995 and 1994, respectively.
NOTE 7 - DEPOSITS:
Deposits (in thousands) are summarized below:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Non-Interest Bearing Demand $ 23,853 $ 20,809
NOW Accounts 7,095 8,886
Money Market Accounts 11,103 9,337
Savings 10,822 10,946
Time Certificates of Deposit 39,897 33,815
------------- -------------
Total $ 92,770 $ 83,793
============= =============
</TABLE>
The Company had deposits for five customers (three of which are public
entities) which totaled $8,204,000 at December 31, 1996. This amount
represented 8.8 percent of total customer deposits. The Company had deposits
for four customers (three of which are public entities) which totaled
$7,286,000 at December 31, 1995. This amount represented 8.7 percent of total
customer deposits.
Included in interest bearing deposits are certificates of deposit in amounts of
$100,000 or more totaling $14,988,000 and $12,042,000 at December 31, 1996 and
1995, respectively.
At December 31, 1996, scheduled maturities of certificates of deposit accounts
were as follows (in thousands):
<TABLE>
<CAPTION>
Amounts
----------
<S> <C>
One year or less $ 35,328
Over one year through three years 3,065
Over three years through five years 1,502
Over five years through ten years 2
----------
Total Time Certificates of Deposit $ 39,897
==========
</TABLE>
F-14
<PAGE> 88
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - OTHER OPERATING EXPENSES:
The components of other operating expenses (in thousands) were:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Ad Valorem Taxes $ 150 $ 82 $ 83
Advertising 105 67 107
Director Fees 138 134 134
Legal 77 36 130
Other Outside Services 71 149 129
Other Real Estate Expenses, Net 5 42 19
Regulatory Assessments 54 126 219
SAIF Special Assessment 70 -0- -0-
Stationary and Supplies 106 125 114
Telephone and Data Line Service 131 112 113
Other Non-Recurring Losses - Morgan City Branch 150 -0- -0-
Other Expenses 538 479 509
----------- ---------- ----------
Total $ 1,595 $ 1,352 $ 1,557
=========== ========== ==========
</TABLE>
NOTE 9 - INCOME TAXES:
A detail of income tax expense (in thousands) is as follows:
<TABLE>
<CAPTION>
1996 1995 1993
----------- ----------- -----------
<S> <C> <C> <C>
Current Tax Provision
Federal $ 638 $ 724 $ 356
State -0- -0- 3
----------- ----------- -----------
Subtotal 638 724 359
Provision for Deferred Taxes (39) (53) (16)
----------- ----------- -----------
Income Tax Expense $ 599 $ 671 $ 343
=========== =========== ===========
</TABLE>
The reasons for the differences between the statutory federal income tax rates
and the effective rates are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ----------- ----------
<S> <C> <C> <C>
Statutory Rate 34.0% 34.0% 34.0%
Increase (Decrease) resulting from:
Effect of Tax-Exempt Income (5.9%) (5.8%) (9.5%)
Nondeductible Interest and Other Expenses 1.1% .9% 1.4%
Other (.2%) (.2%) (1.5%)
---------- ----------- -----------
Effective Rate 29.0% 28.9% 24.4%
========== =========== ===========
</TABLE>
F-15
<PAGE> 89
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - INCOME TAXES (Continued):
The tax effects of each type of significant item that gave rise to deferred
taxes are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
Deferred Tax Assets:
Unrealized Loss on Available for
Sale Securities $ -0- $ -0- $ 398
Allowance for Loan Losses 86 51 -0-
------------- ------------- ------------
Total 86 51 398
------------- ------------- ------------
Deferred Tax Liabilities:
Unrealized Gain on Available for
Sale Securities (32) (79) -0-
Allowance for Loan Losses -0- -0- (5)
Premises and Equipment (262) (263) (262)
Deferred Loan Costs (14) (14) (14)
Investment Securities (12) (15) (13)
------------- ------------- ------------
Total (320) (371) (294)
------------- ------------- ------------
Net Deferred Tax (Liability) Asset $ (234) $ (320) $ 104
============= ============= ============
</TABLE>
The likelihood of realization of the entire amount of the deferred tax asset is
considered to be more likely than not; therefore, no valuation allowance has
been provided for 1996, 1995 and 1994. The net deferred tax liability is
included in Income Taxes Payable and Deferred. There were no loss or tax credit
carryforwards at December 31, 1996, 1995 and 1994.
NOTE 10 - EMPLOYEE RETIREMENT PLAN:
The Company currently has a Profit Sharing Plan with a 401(k) provision which is
a contributory employee retirement plan. It covers substantially all employees
who meet certain age and service requirements.
Total contributions (in thousands) for the years ended December 31, 1996, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- ------------ -----------
<S> <C> <C> <C>
Employee Deferrals (401K) $ 77 $ 68 $ 74
Employer Matching (401K) 37 33 36
Employer Discretionary (Profit Sharing) -0- -0- 70
-------------- ------------ -----------
Total Contributions $ 114 $ 101 $ 180
============== =========== ===========
</TABLE>
F-16
<PAGE> 90
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
The Company is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
consolidated statement of financial condition.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual notional amount of
those instruments. The Company uses the same credit policies in extending
commitments and conditional obligations as it does for on-balance-sheet
instruments. The Company does not anticipate any material loss as a result of
these transactions.
Commitments to extend credit and standby letters of credit (in thousands) at
December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Commitments to extend credit $ 13,308 $ 9,923
Standby letters of credit $ 874 $ 719
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since the commitments may expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained if deemed necessary by
the Company upon extension of credit is based on management's credit evaluation
of the counterparty. Collateral requirements are essentially the same as those
involved in extending funded credit facilities to customers.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.
NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES:
The Company is also subject to claims and lawsuits which arise primarily in the
ordinary course of business. Based on information presently available and
advice received from legal counsel representing the Company in connection with
such claims and lawsuits, it is the opinion of management that the disposition
or ultimate determination of such claims and lawsuits will not have a material
adverse effect on the consolidated financial position of the Company.
F-17
<PAGE> 91
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - LOANS TO RELATED PARTIES:
The Company makes loans to its directors and principal officers in the ordinary
course of business. These loans are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other customers. Loans made to directors and
principal officers, including companies in which they have a significant
influence or ownership interest, amounted to $1,797,000 and $1,607,000 at
December 31, 1996 and 1995, respectively. The unfunded portion totaled $114,000
and $57,000 at December 31, 1996 and 1995, respectively. During 1996,
$1,082,000 of new loans were made and repayments totaled $892,000. There was
one letter of credit issued to a director, including companies in which he has
a significant influence or ownership interest, at December 31, 1996 and 1995
amounting to $84,000.
NOTE 14 - REGULATORY MATTERS:
The Bank is restricted under applicable laws in the payment of dividends to an
amount equal to current year earnings plus undistributed earnings for the
immediately preceding year, unless prior permission is received from the
Commissioner of Financial Institutions. For 1995 and 1996, dividends to the
Bank's parent corporation did not exceed the limit. The Company is required to
comply with similar regulatory capital requirements and was in compliance with
all regulatory capital requirements at December 31, 1996.
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory - and possibly additional discretionary - actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. The regulations require the Bank to meet specific
capital adequacy guidelines that involve quantitative measures of the Bank's
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Bank's capital classification is also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of Tier I capital (as defined in the regulations) to total average
assets (as defined), and minimum ratios of Tier I and total capital (as
defined) to risk-weighted assets (as defined). To be considered adequately
capitalized (as defined) under the regulatory framework for prompt corrective
action, the Bank must maintain minimum Tier I leverage, Tier I risk-based,
total risk-based ratios as set forth in the table. The Bank's actual capital
amounts and ratios as of December 31 are also presented in the table.
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------
Actual Required Excess
-------------- -------------- ---------------
Amount % Amount % Amount %
<S> <C> <C> <C>
Tier I Capital (to Average Assets) $ 11,617 11.1 $ 4,196 4.0 $ 7,421 7.1
Tier I Capital (to Risk Weighted Assets) $ 11,617 15.8 $ 2,935 4.0 $ 8,682 11.8
Total Capital (to Risk Weighted Assets) $ 12,519 17.1 $ 5,871 8.0 $ 6,648 9.1
<CAPTION>
December 31, 1995
----------------------------------------------------
Actual Required Excess
-------------- -------------- ---------------
Amount % Amount % Amount %
Tier I Capital (to Average Assets) $ 11,809 12.2 $ 2,905 3.0 $ 8,904 9.2
Tier I Capital (to Risk Weighted Assets) $ 11,809 17.9 $ 2,638 4.0 $ 9,171 13.9
Total Capital (to Risk Weighted Assets) $ 12,609 19.1 $ 5,276 8.0 $ 7,333 11.1
</TABLE>
Management believes that, as of December 31, 1996, the Bank meets all capital
requirements to which it is subject.
F-18
<PAGE> 92
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - VICTORIA-ST. MARY, LTD.:
Victoria-St. Mary, Ltd. (VSM), a wholly owned subsidiary of the Bank, was
liquidated into the Bank in December 1994. At the time of liquidation its
principal assets consisted of cash and approximately 2,000 acres of land that
had previously been acquired by the Bank through foreclosure and similar means.
For reasons primarily related to state banking law and regulation, the carrying
value of this land is $7. However, its fair market value is considerable.
In January 1995 the Bank sold the tracts of land formerly held by VSM for
$1,000,000. The Bank's profit after expenses was $940,000. The Bank did not
finance the sale.
For the year ended December 31, 1994, total revenues of VSM were $72,000 and
its expenses were $37,000. These amounts are included in the consolidated
statements of income.
NOTE 16 - STOCK SPLIT:
In March 1995, the Company paid a 100 percent stock dividend accounted for as a
two-for-one stock split. The split resulted in 231,600 additional shares of
common stock being issued. Undivided Profits in the amount of $1,158,000 were
transferred to common stock.
NOTE 17 - UNUSED LINES OF CREDIT:
The Company has the ability to borrow up to $1,000,000 from another financial
institution collateralized by certain securities. There were no borrowings as
of December 31, 1996. Unsecured lines of credit with a maximum of $3,100,000
have been established at two other institutions and as of December 31, 1996,
were unfunded.
NOTE 18 - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair value of the Company's financial instruments (in thousands)
as of December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------- ----------------------------
Estimated Estimated
Fair Carrying Fair Carrying
Value Value Value Value
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Assets:
Cash $ 11,583 $ 11,583 $ 13,661 $ 13,661
Investment Securities 17,701 17,701 20,741 20,741
Loans Receivable 72,009 72,159 48,619 57,748
Liabilities:
Deposits 92,974 92,770 81,740 83,793
Securities Sold Under Agreement
to Repurchase 1,087 1,087 3,613 3,613
</TABLE>
F-19
<PAGE> 93
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19 - PARENT COMPANY FINANCIAL STATEMENTS:
The following are parent company only statements of financial condition (in
thousands) as of December 31, 1996 and 1995, and statements of income (in
thousands) and cash flows (in thousands) for the years ended December 31, 1996,
1995 and 1994.
<TABLE>
<CAPTION>
Statements of Financial Condition
---------------------------------
1996 1995
------------ -------------
<S> <C> <C>
Assets
------
Cash $ 229 $ 3
Investment in Subsidiary Bank 11,703 12,006
Dividend Receivable -0- 270
Other Assets 20 20
----------- -------------
Total Assets $ 11,952 $ 12,299
=========== =============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Dividend Payable $ 221 $ 245
Other Payables -0- 1
----------- -------------
Total Liabilities 221 246
Stockholders' Equity 11,731 12,053
----------- -------------
Total Liabilities and Stockholders' Equity $ 11,952 $ 12,299
=========== =============
</TABLE>
<TABLE>
<CAPTION>
Statements of Income
--------------------
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
Operating Income:
Dividends from Subsidiary Bank $ 1,781 $ 1,434 $ 709
----------- ----------- -----------
Operating Expenses:
Salaries and Employee Benefits -0- -0- 113
Legal and Consulting Expenses 70 29 104
Other Operating Expenses 30 17 23
----------- ------------ -----------
Total Operating Expenses 100 46 240
----------- ------------ -----------
Income Before Equity in Undistributed Earnings
of Subsidiary 1,681 1,388 469
Equity in Undistributed Earnings of Subsidiary (215) 262 591
------------ ------------ -----------
Net Income $ 1,466 $ 1,650 $ 1,060
============ ============ ===========
</TABLE>
F-20
<PAGE> 94
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19 - PARENT COMPANY FINANCIAL STATEMENTS (Continued):
Statements of Cash Flows
<TABLE>
<CAPTION>
1996 1995 1993
----------- ----------- ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 1,466 $ 1,650 $ 1,060
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Equity in Undistributed Earnings 215 (262) (591)
Decrease (Increase) in Dividend Receivable 270 (270) -0-
Decrease in Other Liabilities (1) (6) (4)
----------- ----------- ------------
Net Cash Provided By Operating Activities: 1,950 1,112 465
----------- ----------- ------------
Cash Flows From Investing Activities -0- -0- -0-
----------- ----------- ------------
Cash Flows From Financing Activities:
Treasury Stock Purchased (1,143) (905) -0-
Dividends Paid (581) (214) (462)
----------- ------------ ------------
Net Cash Used by Financing Activities (1,724) (1,119) (462)
------------ ----------- ------------
Net Increase (Decrease) In Cash 226 (7) 3
Cash, Beginning of Year 3 10 7
----------- ----------- ------------
Cash, End of Year $ 229 $ 3 $ 10
=========== =========== ============
</TABLE>
F-21
<PAGE> 95
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Cash and Due From Banks $ 5,143 $ 6,055
Federal Funds Sold 3,900 2,720
-------- --------
Total Cash and Cash Equivalents 9,043 8,775
Investment Securities Available for Sale, at fair value 15,748 18,772
Loans Receivable (net of allowance for loan losses of $1,210
and $924, respectively) 82,559 72,325
Premises and Equipment, Net 4,006 3,957
Accrued Interest Receivable 808 814
Real Estate and Other Property Acquired in Settlement of
Loans, Net 9 0
Other Assets 413 394
-------- --------
Total Assets $112,586 $105,037
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Non-Interest Bearing Deposits $ 20,928 $ 19,603
Interest Bearing Deposits 78,294 68,463
-------- --------
Total Deposits 99,222 88,066
Securities Sold Under Agreement to Repurchase 0 4,373
Accrued Interest Payable 491 429
Dividends Payable 197 111
Income Taxes Payable and Deferred 121 213
Accrued Expenses 277 216
-------- --------
Total Liabilities 100,308 93,408
-------- --------
STOCKHOLDERS' EQUITY:
Common Stock -- Par Value $5; Authorized 10,000,000 Shares;
Issued 463,200 Shares; Outstanding 394,520 and 396,760
Shares, respectively 2,316 2,316
Treasury Stock -- 68,680 and 66,440 Shares at Cost,
respectively (2,048) (1,980)
Surplus 4,700 4,700
Undivided Profits 7,221 6,562
Unrealized Gain on Securities Available for Sale, Net of
Deferred Taxes 89 31
-------- --------
Total Stockholders' Equity 12,278 11,629
-------- --------
Total Liabilities and Stockholders' Equity $112,586 $105,037
======== ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
F-22
<PAGE> 96
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans $5,796 $4,972
Interest on Investment Securities:
U.S. Treasury Securities 221 358
U.S. Government Agency Securities 270 318
State and Municipal Securities 235 274
Interest on Federal Funds Sold 206 230
------ ------
Total Interest Income 6,728 6,152
------ ------
INTEREST EXPENSE:
Interest Expense on Deposits 2,391 2,179
Interest Expense on Securities Sold Under Agreement to
Repurchase 0 124
------ ------
Total Interest Expense 2,391 2,303
------ ------
Net Interest Income 4,337 3,849
Provision for Loan Losses 551 376
------ ------
Net Interest Income After Provision for Loan Losses 3,786 3,473
------ ------
OTHER INCOME:
Service Charges 610 602
Gain on Sale of Investment Securities 0 3
Gain on Sale of Loans 65 64
Other Income 268 309
------ ------
Total Other Income 943 978
------ ------
OTHER EXPENSES:
Salaries and Employee Benefits 1,367 1,255
Occupancy Expense 627 665
Other Operating Expenses 1,118 980
------ ------
Total Other Expenses 3,112 2,900
------ ------
Income Before Income Tax Expense 1,617 1,551
Income Tax Expense 503 443
------ ------
Net Income $1,114 $1,108
====== ======
Net income per share $ 2.82 $ 2.60
====== ======
Average shares outstanding 395 426
====== ======
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
F-23
<PAGE> 97
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(In Thousands)
<TABLE>
<CAPTION>
UNREALIZED GAIN
(LOSS) ON
SECURITIES
COMMON TREASURY UNDIVIDED AVAILABLE
STOCK STOCK SURPLUS PROFITS FOR SALE
------ -------- ------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $2,316 $ (905) $ 4,700 $ 5,790 $ 152
Net Income 1,108
Dividends (336)
Treasury Stock Purchased (1,075)
Change in Unrealized Gain (Loss) on
Securities Available for Sale, Net of
Deferred Taxes (121)
------ -------- ------- -------- ---------------
Balance, September 30, 1996 $2,316 $ (1,980) $ 4,700 $ 6,562 $ 31
====== ======== ======= ======== ===============
Balance, January 1, 1997 $2,316 $ (2,048) $ 4,700 $ 6,699 $ 63
Net Income 1,114
Dividends (592)
Change in Unrealized Gain (Loss) on
Securities Available for Sale, Net of
Deferred taxes 26
------ -------- ------- -------- ---------------
Balance, September 30, 1997 $2,316 $ (2,048) $ 4,700 $ 7,221 $ 89
====== ======== ======= ======== ===============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
F-24
<PAGE> 98
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30, 1997 and 1996
(In Thousands)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,114 $ 1,108
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 365 372
Net Premium Amortization and Discount Accretion (28) (94)
Provision for Loan Losses 551 376
Writedown of OREO and Other Property Acquired 0 3
Gain on Sale of Investment Securities 0 (3)
(Gain) Loss on Disposition of Foreclosed Property and
Premises and Equipment (31) 48
Gain on Sale of Loans (66) (66)
(Increase) Decrease in Accrued Interest Receivable and
Other Assets (180) 1,085
Increase in Accrued Interest Payable and Other
Liabilities 136 55
-------- --------
Net Cash Provided by Operating Activities 1,861 2,884
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Maturities of Securities Available for
Sale 11,507 11,975
Purchase of Securities Available for Sale (9,487) (10,093)
Proceeds from Sale of Loans 1,154 909
Net Increase in Customer Loans (12,265) (13,809)
Capital Expenditures (322) (276)
Proceeds from Sales of Premises and Equipment 9 12
Proceeds from Sales of Other Real Estate Owned and Other
Assets Acquired 254 24
-------- --------
Net Cash Used By Investing Activities (9,150) (11,258)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase in Demand and Savings Deposits 3,281 552
Net Increase in Time Deposits 3,171 3,721
Net (Decrease) Increase in Securities Sold Under Agreement
to Repurchase (1,087) 760
Dividends Paid (616) (470)
Treasury Stock Purchased 0 (1,075)
-------- --------
Net Cash Provided By Financing Activities 4,749 3,488
-------- --------
Net Decrease in Cash and Cash Equivalents (2,540) (4,886)
Cash and Cash Equivalents at Beginning of Period 11,583 13,661
-------- --------
Cash and Cash Equivalents at End of Period $ 9,043 $ 8,775
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid During the Period for Interest $ 2,358 $ 2,281
Cash Paid During the Period for Income Taxes $ 620 $ 570
Noncash Activities:
Transfers to Other Real Estate and Other Property
Acquired from Loans $ 226 $ 13
Total Increase (Decrease) in Unrealized Gain on
Securities Available for Sale $ 39 $ (184)
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
F-25
<PAGE> 99
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES:
Basis of Financial Statement Presentation. The accompanying consolidated
financial statements do not include information or footnotes necessary for a
complete presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles. All normal,
recurring adjustments which, in the opinion of management, are necessary for a
fair presentation of financial statements, have been included. These interim
financial statements should be read in conjunction with the audited financial
statements and the notes thereto for the year ended December 31, 1996.
NOTE 2 -- LOANS RECEIVABLE:
Loans Receivable at September 30, 1997 and 1996 classified by major type
(in thousands) is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1997 1996
------- -------
<S> <C> <C>
Commercial Loans $27,832 $21,793
Real Estate Loans -- Other 40,779 36,293
Real Estate Loans -- Construction 2,173 2,057
Consumer Loans 10,687 11,129
Agricultural Loans 2,257 1,915
Lease Financing Receivables 41 23
------- -------
Total 83,769 73,210
Allowance for Loan Losses (1,210) (924)
Unearned Premium on Loans (33) 0
Unearned Discount on Lease Financing Receivables (8) (2)
Unamortized Loan Origination costs 41 41
------- -------
Total Loans $82,559 $72,325
======= =======
</TABLE>
F-26
<PAGE> 100
ST. MARY HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - OTHER OPERATING EXPENSES:
The Components of Other Operating Expenses (in thousands) were:
<TABLE>
<CAPTION>
September 30,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Other Real Estate Expenses, Net 12 1
Regulatory Assessments 21 41
Ad Valorem Taxes 111 58
Advertising 80 88
Director Fees 123 108
Legal 80 61
Other Outside Services 180 94
Stationary & Supplies 65 73
Telephone and Data Line Service 91 97
Other Operating Expenses 355 359
---------- ----------
Total $ 1,118 $ 980
========== ==========
</TABLE>
NOTE 4 - AGREEMENT TO MERGE WITH REGIONS:
An Agreement and Plan of Merger between St. Mary Holding Corporation and Regions
Financial Corporation was signed as of November 3, 1997. The Agreement provides
for a merger of the companies in a stock for stock exchange. On the effective
date of the merger each share of St. Mary stock will be exchanged for 2.1 shares
of Regions stock, subject to adjustment. The merger is contingent upon
regulatory and shareholder approval. While it is anticipated that the merger
will be completed in the first quarter of 1998, there can be no assurance as to
whether or when the Merger will occur.
F-27
<PAGE> 101
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ST. MARY HOLDING CORPORATION
AND
REGIONS FINANCIAL CORPORATION
DATED AS OF NOVEMBER 3, 1997
A-1
<PAGE> 102
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Parties............................................................. A-5
Preamble............................................................ A-5
ARTICLE 1 -- TRANSACTIONS AND TERMS OF MERGER....................... A-5
1.1 Merger...................................................... A-5
1.2 Time and Place of Closing................................... A-5
1.3 Effective Time.............................................. A-5
ARTICLE 2 -- TERMS OF MERGER........................................ A-6
2.1 Certificate of Incorporation................................ A-6
2.2 Bylaws...................................................... A-6
2.3 Directors and Officers...................................... A-6
ARTICLE 3 -- MANNER OF CONVERTING SHARES............................ A-6
3.1 Conversion of Shares........................................ A-6
3.2 Anti-Dilution Provisions.................................... A-6
3.3 Shares Held by St. Mary or Regions.......................... A-6
3.4 Dissenting Stockholders..................................... A-7
3.5 Fractional Shares........................................... A-7
3.6 Conversion of Stock Rights.................................. A-7
ARTICLE 4 -- EXCHANGE OF SHARES..................................... A-8
4.1 Exchange Procedures......................................... A-8
4.2 Rights of Former St. Mary Stockholders...................... A-9
ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF ST. MARY............. A-9
5.1 Organization, Standing, and Power........................... A-9
5.2 Authority; No Breach By Agreement........................... A-9
5.3 Capital Stock............................................... A-10
5.4 St. Mary Subsidiaries....................................... A-10
5.5 Financial Statements........................................ A-11
5.6 Absence of Undisclosed Liabilities.......................... A-11
5.7 Absence of Certain Changes or Events........................ A-11
5.8 Tax Matters................................................. A-11
5.9 Assets...................................................... A-12
5.10 Environmental Matters....................................... A-12
5.11 Compliance With Laws........................................ A-13
5.12 Employee Benefit Plans...................................... A-13
5.13 Material Contracts.......................................... A-14
5.14 Legal Proceedings........................................... A-15
5.15 Statements True and Correct................................. A-15
5.16 Tax and Regulatory Matters.................................. A-16
5.17 State Takeover Laws......................................... A-16
5.18 Support Agreements.......................................... A-16
5.19 Articles of Incorporate Provisions.......................... A-16
5.20 Derivatives Contracts....................................... A-16
5.21 Year 2000................................................... A-16
ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF REGIONS.............. A-16
6.1 Organization, Standing, and Power........................... A-16
6.2 Authority; No Breach By Agreement........................... A-17
6.3 Capital Stock............................................... A-17
6.4 Regions Subsidiaries........................................ A-17
6.5 SEC Filings; Financial Statements........................... A-18
6.6 Absence of Undisclosed Liabilities.......................... A-18
6.7 Absence of Certain Changes or Events........................ A-18
6.8 Compliance With Laws........................................ A-19
6.9 Legal Proceedings........................................... A-19
</TABLE>
A-2
<PAGE> 103
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.10 Statements True and Correct................................. A-19
6.11 Tax and Regulatory Matters.................................. A-20
ARTICLE 7 -- CONDUCT OF BUSINESS PENDING CONSUMMATION............... A-20
7.1 Affirmative Covenants of St. Mary........................... A-20
7.2 Negative Covenants of St. Mary.............................. A-20
7.3 Covenants of Regions........................................ A-22
7.4 Adverse Changes in Condition................................ A-22
7.5 Reports..................................................... A-22
ARTICLE 8 -- ADDITIONAL AGREEMENTS.................................. A-23
Registration Statement; Proxy Statement; Stockholder
8.1 Approval.................................................... A-23
8.2 Exchange Listing............................................ A-24
8.3 Applications................................................ A-24
8.4 Filings with State Offices.................................. A-24
8.5 Agreement as to Efforts to Consummate....................... A-24
8.6 Investigation and Confidentiality........................... A-24
8.7 Press Releases.............................................. A-25
8.8 Certain Actions............................................. A-25
8.9 Tax Treatment............................................... A-25
8.10 State Takeover Laws......................................... A-25
8.11 Charter Provisions.......................................... A-25
8.12 Agreement of Affiliates..................................... A-25
8.13 Employee Benefits and Contracts............................. A-25
8.14 Indemnification............................................. A-26
ARTICLE 9 -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE...... A-27
9.1 Conditions to Obligations of Each Party..................... A-27
9.2 Obligations of Regions...................................... A-28
9.3 Conditions to Obligations of St. Mary....................... A-28
ARTICLE 10 -- TERMINATION........................................... A-29
10.1 Termination................................................. A-29
10.2 Effect of Termination....................................... A-30
10.3 Non-Survival of Representations and Covenants............... A-30
ARTICLE 11 -- MISCELLANEOUS......................................... A-31
11.1 Definitions................................................. A-31
11.2 Expenses.................................................... A-36
11.3 Brokers and Finders......................................... A-36
11.4 Entire Agreement............................................ A-37
11.5 Amendments.................................................. A-37
11.6 Waivers..................................................... A-37
11.7 Assignment.................................................. A-37
11.8 Notices..................................................... A-38
11.9 Governing Law............................................... A-38
11.10 Counterparts................................................ A-38
11.11 Captions.................................................... A-38
11.12 Interpretations............................................. A-38
11.13 Enforcement of Agreement.................................... A-38
11.14 Severability................................................ A-39
Signatures.......................................................... A-39
</TABLE>
A-3
<PAGE> 104
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1 -- Form of Support Agreement. (sec. 5.18).
-- Form of agreement of affiliates of St. Mary. (sec.sec. 8.12,
2 9.2(e)).
-- Matters as to which Correro Fishman Haygood Phelps Weiss
3 Walmsley & Casteix, L.L.P. will opine. (sec. 9.2(d)).
4 -- Form of Claims Letter (sec. 9.2(f)).
-- Matters as to which Lange, Simpson, Robinson & Somerville
5 will opine. (sec. 9.3(d)).
</TABLE>
A-4
<PAGE> 105
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of November 3, 1997, by and between ST. MARY HOLDING CORPORATION ("St.
Mary"), a corporation organized and existing under the laws of the State of
Louisiana, with its principal office located in Franklin, Louisiana; and REGIONS
FINANCIAL CORPORATION ("Regions"), a corporation organized and existing under
the laws of the State of Delaware, with its principal office located in
Birmingham, Alabama.
PREAMBLE
The Boards of Directors of St. Mary and Regions are of the opinion that the
transactions described herein are in the best interests of the parties and their
respective stockholders. This Agreement provides for the acquisition of St. Mary
by Regions pursuant to the merger of St. Mary with and into Regions. At the
effective time of such merger, the outstanding shares of the common stock of St.
Mary shall be converted into shares of the common stock of Regions (except as
provided herein). As a result, stockholders of St. Mary shall become
stockholders of Regions. Each of the subsidiaries of St. Mary shall continue to
conduct its business and operations as a wholly owned subsidiary of Regions. The
transactions described in this Agreement are subject to the approvals of the
stockholders of St. Mary, the Board of Governors of the Federal Reserve System,
and the appropriate state regulatory authorities, and the satisfaction of
certain other conditions described in this Agreement. It is the intention of the
parties to this Agreement that this Agreement constitutes a plan of
reorganization and that the merger (i) for federal income tax purposes shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, and (ii) for accounting purposes shall qualify for treatment as a
"pooling of interests."
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
As a condition and inducement to Regions' willingness to consummate the
transactions contemplated by this Agreement, immediately after the execution of
this Agreement, each of St. Mary's directors will execute and deliver to Regions
an Agreement (a "Support Agreement"), in substantially the form of Exhibit 1.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement, at the
Effective Time, St. Mary shall be merged into and with Regions in accordance
with the provisions of Section 253 of the DGCL and Section 12:112 of the LBCL
and with the effect provided in Section 259 of the DGCL and Section 12:115 of
the LBCL (the "Merger"). Regions shall be the Surviving Corporation of the
Merger and shall continue to be governed by the Laws of the State of Delaware.
The Merger shall be consummated pursuant to the terms of this Agreement, which
has been approved and adopted by the respective Boards of Directors of St. Mary
and Regions.
1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 9:00 A.M. on
the date that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their duly authorized officers, may mutually agree. The place of
Closing shall be at the offices of Regions or such other place as may be
mutually agreed upon by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated by this
Agreement shall become effective on the date and at the time the Delaware
Certificate of Merger shall become effective with the Secretary of State of the
State of Delaware and the Louisiana Certificate of Merger shall become effective
with the Secretary of State of the State of Louisiana (the "Effective Time").
Subject to the terms and conditions hereof, unless otherwise mutually agreed
upon in writing by the duly authorized officers of each
A-5
<PAGE> 106
Party, the Parties shall use their reasonable efforts to cause the Effective
Time to occur on the 5th business day following the last to occur of (i) the
effective date (including expiration of any applicable waiting period) of the
last required Consent of any Regulatory Authority having authority over and
approving or exempting the Merger, and (ii) the date on which the stockholders
of St. Mary approve this Agreement to the extent such approval is required by
applicable Law; or such later date within 30 days thereof as may be specified by
Regions.
ARTICLE 2
TERMS OF MERGER
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Regions in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation after the Effective
Time until otherwise amended or repealed.
2.2 BYLAWS. The Bylaws of Regions in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation after the
Effective Time until otherwise amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of Regions in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the directors of the Surviving Corporation
from and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation. The officers of Regions in office immediately prior to the
Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and after
the Effective Time in accordance with the Bylaws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of St. Mary, Regions or the stockholders thereof, the shares of the constituent
corporations shall be converted as follows:
(a) Each share of Regions Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of St. Mary Common Stock (excluding shares to be
cancelled as provided in Section 3.3, and excluding shares held by
stockholders who perfect their dissenters' rights of appraisal) issued and
outstanding at the Effective Time shall cease to be outstanding and shall
be converted into and exchanged for 2.1 shares of Regions Common Stock
(subject to adjustment as described below and pursuant to Section 10.1(g)
of this Agreement, the "Exchange Ratio"):
3.2 ANTI-DILUTION PROVISIONS. In the event St. Mary changes the number of
shares of St. Mary Common Stock issued and outstanding prior to the Effective
Time as a result of a stock split, stock dividend, or similar recapitalization
with respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Exchange Ratio shall be appropriately adjusted. In the
event Regions changes the number of shares of Regions Common Stock issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend, or similar recapitalization with respect to such stock and the record
date therefor (in the case of a stock dividend) or the effective date thereof
(in the case of a stock split or similar recapitalization for which a record
date is not established) shall be prior to the Effective Time, the Exchange
Ratio and the dollar amounts set forth in Section 10.1(g) shall be appropriately
adjusted.
3.3 SHARES HELD BY ST. MARY OR REGIONS. Each of the shares of St. Mary
Common Stock held by any St. Mary Company or by any Regions Company, in each
case other than in a fiduciary capacity or as a result
A-6
<PAGE> 107
of debts previously contracted, shall be canceled and retired at the Effective
Time and no consideration shall be issued in exchange therefor.
3.4 DISSENTING STOCKHOLDERS. Any holder of shares of St. Mary Common Stock
who perfects such holder's dissenters' rights of appraisal in accordance with
and as contemplated by Section 12:131 of LBCL shall be entitled to receive the
value of such shares in cash as determined pursuant to such provision of Law;
provided, that no such payment shall be made to any dissenting stockholder
unless and until such dissenting stockholder has complied with the applicable
provisions of the LBCL, including the provisions of Section 131 thereof relating
to the deposit in escrow, endorsement, and transfer of the certificate or
certificates representing the shares for which payment is being made. In the
event that a dissenting stockholder of St. Mary fails to perfect, or effectively
withdraws or loses, his right to appraisal and of payment for his shares, such
Person shall not have the right to receive payment in cash for his shares and,
instead, as of the Effective Time the shares of St. Mary Common Stock held by
such Person shall be converted into and exchanged for that number of shares of
Regions Common Stock determined under Section 3.1 and, if applicable, Section
10.1(g) of this Agreement and the delivery of certificates representing such
Regions Common Stock and any dividends or other distributions in respect thereof
to which such holder may be entitled shall be governed by Section 4.1 of this
Agreement.
3.5 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of St. Mary Common Stock exchanged pursuant to
the Merger or of options to purchase shares of St. Mary Common Stock, who would
otherwise have been entitled to receive a fraction of a share of Regions Common
Stock (after taking into account all certificates delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of Regions Common Stock multiplied by the market
value of one share of Regions Common Stock at the Effective Time, in the case of
shares exchanged pursuant to the Merger, or the date of exercise, in the case of
options. The market value of one share of Regions Common Stock at the Effective
Time or the date of exercise, as the case may be, shall be the last sale closing
price of such common stock on the Nasdaq NMS (as reported by The Wall Street
Journal or, if not reported thereby, any other authoritative source selected by
Regions) on the last trading day preceding the Effective Time, in the case of
shares exchanged pursuant to the Merger, and the date of exercise, in the case
of options. No such holder will be entitled to dividends, voting rights, or any
other rights as a stockholder in respect of any fractional shares.
3.6 CONVERSION OF STOCK RIGHTS. (a) At the Effective Time, each award,
option, or other right to purchase or acquire shares of St. Mary Common Stock
pursuant to stock options, stock appreciation rights, or stock awards ("St. Mary
Rights") granted by St. Mary under the St. Mary Stock Plans, which are
outstanding at the Effective Time, whether or not exercisable, shall be
converted into and become rights with respect to Regions Common Stock, and
Regions shall assume each St. Mary Right, in accordance with the terms of the
St. Mary Stock Plan and stock option agreement by which it is evidenced, except
that from and after the Effective Time, (i) Regions and its Compensation
Committee shall be substituted for St. Mary and the Committee of St. Mary's
Board of Directors (including, if applicable, the entire Board of Directors of
St. Mary) administering such St. Mary Stock Plan, (ii) each St. Mary Right
assumed by Regions may be exercised solely for shares of Regions Common Stock
(or cash in the case of stock appreciation rights), (iii) the number of shares
of Regions Common Stock subject to such St. Mary Right shall be equal to the
number of shares of St. Mary Common Stock subject to such St. Mary Right
immediately prior to the Effective Time multiplied by the Exchange Ratio, and
(iv) the per share exercise price (or similar threshold price, in the case of
stock awards) under each such St. Mary Right shall be adjusted by dividing the
per share exercise (or threshold) price under each such St. Mary Right by the
Exchange Ratio and rounding up to the nearest cent. Notwithstanding the
provisions of clause (iii) of the preceding sentence, Regions shall not be
obligated to issue any fraction of a share of Regions Common Stock upon exercise
of St. Mary Rights and any fraction of a share of Regions Common Stock that
otherwise would be subject to a converted St. Mary Right shall represent the
right to receive a cash payment equal to the product of such fraction and the
difference between the market value of one share of Regions Common Stock and the
per share exercise price of such Right. The market value of one share of Regions
Common Stock shall be the closing price of such common stock on the Nasdaq NMS
(as reported by The Wall Street Journal or, if not reported thereby, any other
authoritative
A-7
<PAGE> 108
source selected by Regions) on the date of exercise of such St. Mary Right. In
addition, notwithstanding the provisions of clauses (iii) and (iv) of the first
sentence of this Section 3.6, each St. Mary Right which is an "incentive stock
option" shall be adjusted as required by Section 424 of the Internal Revenue
Code, and the regulations promulgated thereunder, so as not to constitute a
modification, extension, or renewal of the option, within the meaning of Section
424(h) of the Internal Revenue Code. Regions agrees to take all necessary steps
to effectuate the foregoing provisions of this Section 3.6.
(b) As soon as reasonably practicable after the Effective Time, Regions
shall deliver to the participants in each St. Mary Stock Plan an appropriate
notice setting forth such participant's rights pursuant thereto and the grants
pursuant to such St. Mary Stock Plan shall continue in effect on the same terms
and conditions (subject to the adjustments required by Section 3.6(a) after
giving effect to the Merger), and Regions shall comply with the terms of each
St. Mary Stock Plan to ensure, to the extent required by, and subject to the
provisions of, such St. Mary Stock Plan, that St. Mary Rights which qualified as
incentive stock options prior to the Effective Time continue to qualify as
incentive stock options after the Effective Time. At or prior to the Effective
Time, Regions shall take all corporate action necessary to reserve for issuance
sufficient shares of Regions Common Stock for delivery upon exercise of St. Mary
Rights assumed by it in accordance with this Section 3.6. As soon as reasonably
practicable after the Effective Time, Regions shall file a registration
statement on Form S-3 or Form S-8, as the case may be (or any successor or other
appropriate forms), with respect to the shares of Regions Common Stock subject
to such options and shall use its reasonable efforts to maintain the
effectiveness of such registration statements (and maintain the current status
of the prospectus or prospectuses contained therein) for so long as such options
remain outstanding. With respect to those individuals who subsequent to the
Merger will be subject to the reporting requirements under Section 16(a) of the
Exchange Act, where applicable, Regions shall administer the St. Mary Stock Plan
assumed pursuant to this Section 3.6 in a manner that complies with Rule 16b-3
promulgated under the Exchange Act to the extent the St. Mary Stock Plan
complied with such rule prior to the Merger.
(c) All restrictions or limitations on transfer with respect to St. Mary
Common Stock awarded under the St. Mary Stock Plans or any other plan, program,
or arrangement of any St. Mary Company, to the extent that such restrictions or
limitations shall not have already lapsed, and except as otherwise expressly
provided in such plan, program, or arrangement, shall remain in full force and
effect with respect to shares of Regions Common Stock into which such restricted
stock is converted pursuant to Section 3.1 of this Agreement.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, Regions and
the Surviving Corporation shall cause the exchange agent selected by Regions
(the "Exchange Agent") to mail to the former stockholders of St. Mary
appropriate transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing shares of St. Mary Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent). After the Effective Time,
each holder of shares of St. Mary Common Stock (other than shares to be canceled
pursuant to Section 3.3 of this Agreement or as to which dissenters' rights of
appraisal have been perfected and not withdrawn or forfeited under Section
12:131 of the LBCL) issued and outstanding at the Effective Time, promptly upon
the surrender of the certificate or certificates representing such shares to the
Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the consideration provided in Section 3.1 and, if applicable, Section
10.1(g) of this Agreement, together with all undelivered dividends and other
distributions in respect of such shares (without interest thereon) pursuant to
Section 4.2 of this Agreement. To the extent required by Section 3.5 of this
Agreement, each holder of shares of St. Mary Common Stock issued and outstanding
at the Effective Time also shall receive, upon surrender of the Certificate or
Certificates representing such shares, cash in lieu of any fractional share of
Regions Common Stock to which such holder otherwise would be entitled (without
interest). Until so surrendered, each outstanding certificate of St. Mary Common
Stock shall be deemed for all purposes, other than as provided below with
respect to the payment of dividends or other distributions payable to the
holders of shares of Regions Common Stock, to represent the
A-8
<PAGE> 109
consideration into which the number of shares of St. Mary Common Stock
represented thereby prior to the Effective Time shall have been converted.
Regions shall not be obligated to deliver the certificate or certificates
representing the shares of Regions Common Stock or any cash payments to which
any former holder of St. Mary Common Stock is entitled as a result of the
Merger, or any dividends or distributions in respect of shares of Regions Common
Stock, until such holder surrenders such holder's certificate or certificates
representing the shares of St. Mary Common Stock for exchange as provided in
this Section 4.1 or otherwise complies with the procedures of the Exchange Agent
with respect to lost, stolen, or destroyed certificates. The certificate or
certificates of St. Mary Common Stock so surrendered shall be duly endorsed as
the Exchange Agent may require. Any other provision of this Agreement
notwithstanding, neither Regions, St. Mary, nor the Exchange Agent shall be
liable to a holder of St. Mary Common Stock for any amounts paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property Law.
4.2 RIGHTS OF FORMER ST. MARY STOCKHOLDERS. At the Effective Time, the
stock transfer books of St. Mary shall be closed as to holders of St. Mary
Common Stock immediately prior to the Effective Time and no transfer of St. Mary
Common Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 4.1 of
this Agreement, each certificate theretofore representing shares of St. Mary
Common Stock (other than shares to be canceled pursuant to Sections 3.3 and 3.4
of this Agreement) shall from and after the Effective Time represent for all
purposes only the right to receive the consideration provided in Sections 3.1
and 3.4 of this Agreement in exchange therefor. To the extent permitted by Law,
former stockholders of record of St. Mary shall be entitled to vote after the
Effective Time at any meeting of Regions stockholders the number of whole shares
of Regions Common Stock into which their respective shares of St. Mary Common
Stock are converted, regardless of whether such holders have exchanged their
certificates representing St. Mary Common Stock for certificates representing
Regions Common Stock in accordance with the provisions of this Agreement.
Whenever a dividend or other distribution is declared by Regions on the Regions
Common Stock, the record date for which is at or after the Effective Time, the
declaration shall include dividends or other distributions on all shares of
Regions Common Stock issuable pursuant to this Agreement, but no dividend or
other distribution payable to the holders of record of Regions Common Stock as
of any time subsequent to the Effective Time shall be delivered to the holder of
any certificate representing shares of St. Mary Common Stock issued and
outstanding at the Effective Time until such holder surrenders such certificate
for exchange as provided in Section 4.1 of this Agreement. However, upon
surrender of such St. Mary Common Stock certificate, both the Regions Common
Stock certificate (together with all such undelivered dividends or other
distributions without interest) and any undelivered dividends and cash payments
to be paid for fractional share interests (without interest) shall be delivered
and paid with respect to each share represented by such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ST. MARY
St. Mary hereby represents and warrants to Regions that, except as set
forth in the corresponding section of the St. Mary Disclosure Memorandum:
5.1 ORGANIZATION, STANDING, AND POWER. St. Mary is a corporation duly
organized and validly existing, and in good standing under the Laws of the State
of Louisiana, and has the corporate power and authority to carry on its business
as now conducted and to own, lease, and operate its material Assets. St. Mary is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on St. Mary.
5.2 AUTHORITY; NO BREACH BY AGREEMENT. (a) St. Mary has the corporate
power and authority necessary to execute, deliver, and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby and
thereby. The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated herein, including the Merger, have
been duly and
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validly authorized by all necessary corporate action in respect thereof on the
part of St. Mary, subject to the approval of this Agreement by the required vote
of the outstanding shares of St. Mary Common Stock, which is the only
stockholder vote required for approval of this Agreement and consummation of the
Merger by St. Mary. Subject to such requisite stockholder approval, this
Agreement represents a legal, valid, and binding obligation of St. Mary,
enforceable against St. Mary in accordance with its respective terms (except in
all cases as such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and (ii)
application of, and limitations on the application of, equitable principles and
remedies, including limitations on the availability of the equitable remedy of
specific performance or injunctive relief).
(b) Neither the execution and delivery of this Agreement by St. Mary, nor
the consummation by St. Mary of the transactions contemplated hereby, nor
compliance by St. Mary with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of St. Mary's Articles of Incorporation
or Bylaws, or (ii) constitute or result in a Default under, or require any
Consent pursuant to, or result in the creation of any Lien on any Asset of any
St. Mary Company under, any Contract or Permit of any St. Mary Company, where
such Default or Lien, or any failure to obtain such Consent, is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
St. Mary, or (iii) subject to receipt of the requisite approvals referred to in
Section 9.1(b) of this Agreement, violate any Law or Order applicable to any St.
Mary Company or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation or both with respect to any employee
benefit plans, or under the HSR Act, and other than Consents, filings, or
notifications which, if not obtained or made, are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on St. Mary, no
notice to, filing with, or Consent of, any public body or authority is necessary
for the consummation by St. Mary of the Merger and the other transactions
contemplated in this Agreement.
5.3 CAPITAL STOCK. The authorized capital stock of St. Mary consists of
10,000,000 shares of St. Mary Common Stock, of which 394,520 shares are issued
and outstanding as of the date of this Agreement and not more than 394,520
shares will be issued and outstanding at the Effective Time. All of the issued
and outstanding shares of capital stock of St. Mary are duly and validly issued
and outstanding and are fully paid and nonassessable under the LBCL. To the
Knowledge of St. Mary, none of the outstanding shares of capital stock of St.
Mary has been issued in violation of any preemptive rights of the current or
past stockholders of St. Mary. There are no other shares of capital stock or
other equity securities of St. Mary outstanding and no outstanding Rights
relating to the capital stock of St. Mary.
5.4 ST. MARY SUBSIDIARIES. St. Mary has disclosed in Section 5.4 of the
St. Mary Disclosure Memorandum all of the St. Mary Subsidiaries as of the date
of this Agreement. St. Mary or one of its Subsidiaries owns all of the issued
and outstanding shares of capital stock of each St. Mary Subsidiary. No equity
securities of any St. Mary Subsidiary are or may become required to be issued
(other than to another St. Mary Company) by reason of any Rights, and there are
no Contracts by which any St. Mary Subsidiary is bound to issue (other than to
another St. Mary Company) additional shares of its capital stock or Rights or by
which any St. Mary Company is or may be bound to transfer any shares of the
capital stock of any St. Mary Subsidiary (other than to another St. Mary
Company). There are no Contracts relating to the rights of any St. Mary Company
to vote or to dispose of any shares of the capital stock of any St. Mary
Subsidiary. All of the shares of capital stock of each St. Mary Subsidiary held
by a St. Mary Company are fully paid and nonassessable (except as provided in
La. R.S. 6:262) under the applicable corporation Law of the jurisdiction in
which such Subsidiary is incorporated or organized and are owned by the St. Mary
Company free and clear of any Lien. Each St. Mary Subsidiary is either a bank, a
savings association or a corporation, and is duly organized, validly existing,
and in good standing under the Laws of the jurisdiction in which it is
incorporated or organized, and has the corporate power and authority necessary
for it to own, lease, and operate its Assets and to carry on its business as now
conducted. Each St. Mary Subsidiary is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign
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jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on St. Mary. The only St. Mary Subsidiary that is a depository
institution is St. Mary Bank and Trust Co. St. Mary Bank and Trust Co. is an
"insured institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder, and its deposits are insured by the Bank
Insurance Fund.
5.5 FINANCIAL STATEMENTS. St. Mary has included in Section 5.5 of the St.
Mary Disclosure Memorandum copies of all St. Mary Financial Statements for
periods ended prior to the date hereof and will deliver to Regions copies of all
St. Mary Financial Statements prepared subsequent to the date hereof. The St.
Mary Financial Statements (as of the dates thereof and for the periods covered
thereby) (i) are or, if dated after the date of this Agreement, will be in
accordance with the books and records of the St. Mary Companies, which are or
will be, as the case may be, complete and correct in all material respects and
which have been or will have been, as the case may be, maintained in accordance
with good business practices, and (ii) present or will present, as the case may
be, fairly the consolidated financial position of the St. Mary Companies as of
the dates indicated and the consolidated results of operations, changes in
stockholders' equity, and cash flows of the St. Mary Companies for the periods
indicated, in accordance with GAAP (subject to any exceptions as to consistency
specified therein or as may be indicated in the notes thereto or, in the case of
interim financial statements, to normal recurring year-end adjustments that are
not material in amount or effect and to the absence from interim financial
statements of any footnote disclosures).
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No St. Mary Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on St. Mary, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of St. Mary as of
June 30, 1997, included in the St. Mary Financial Statements or reflected in the
notes thereto and those referred to in the following sentence. No St. Mary
Company has incurred or paid any Liability since June 30, 1997, except for such
Liabilities incurred or paid in the ordinary course of business consistent with
past business practice or incurred in connection with the process leading up to
the execution and consummation of this Agreement and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
St. Mary.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1997, except as
disclosed in the St. Mary Financial Statements delivered prior to the date of
this Agreement, to the Knowledge of St. Mary, (i) there have been no events,
changes, or occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on St. Mary, and
(ii) the St. Mary Companies have not taken any action, or failed to take any
action, prior to the date of this Agreement, which action or failure, if taken
after the date of this Agreement, would represent or result in a material breach
or violation of any of the covenants and agreements of St. Mary provided in
Article 7 of this Agreement, other than conducting the process that has lead up
to the execution and consummation of this Agreement.
5.8 TAX MATTERS. (a) All Tax returns required to be filed by or on behalf
of any of the St. Mary Companies have been timely filed or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 1996, and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time, except to the
extent that all such failures to file or untimely filings, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect on
St. Mary; and all returns filed are complete and accurate in all material
respects to the Knowledge of St. Mary. All Taxes shown on filed returns have
been paid. There is no audit examination, deficiency, refund Litigation, or
penalties due or owed with respect to any Taxes that is reasonably and likely to
result in a determination that would have a Material Adverse Effect on St. Mary,
except as reserved against in the St. Mary Financial Statements delivered prior
to the date of this Agreement. All Taxes and other Liabilities due with respect
to completed and settled examinations or concluded Litigation have been paid.
(b) None of the St. Mary Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due that
is currently in effect.
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(c) To the Knowledge of St. Mary, adequate provision for any Taxes due or
to become due for any of the St. Mary Companies for the period or periods
through and including the date of the respective St. Mary Financial Statements
has been made and is reflected on such respective St. Mary Financial Statements.
(d) Each of the St. Mary Companies is in compliance with, and its records
contain the information and documents (including properly completed IRS Forms
W-9) necessary to comply with, in all material respects, applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws, and such records identify the accounts subject to backup withholding under
Section 3406 of the Internal Revenue Code.
(e) None of the St. Mary Companies has made any payments, is obligated to
make any payments, or is a party to any contract, agreement, or other
arrangement that could obligate it to make any payments that would be disallowed
as a deduction under Section 280G or 162(m) of the Internal Revenue Code.
(f) There are no Liens with respect to Taxes upon any of the assets of the
St. Mary Companies.
(g) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the St. Mary Companies that occurred during or after any
Taxable Period in which the St. Mary Companies incurred a net operating loss
that carries over to any Taxable Period ending after December 31, 1994.
(h) No St. Mary Company has filed any consent under Section 341(f) of the
Internal Revenue Code concerning collapsible corporations.
(i) All material elections with respect to Taxes affecting the St. Mary
Companies as of the date of this Agreement have been or will be timely made as
set forth in Section 5.8 of the St. Mary Disclosure Memorandum. After the date
hereof, no election with respect to Taxes will be made without the prior written
consent of Regions, which consent will not be unreasonably withheld.
(j) No St. Mary Company has or has had a permanent establishment in any
foreign country, as defined in any applicable tax treaty or convention between
the United States and such foreign country.
5.9 ASSETS. The St. Mary Companies have good and marketable title, free
and clear of all Liens, to all of their respective owned Assets that are
material to their business. All material tangible properties used in the
businesses of the St. Mary Companies are in good condition, reasonable wear and
tear excepted, and are usable in the ordinary course of business consistent with
St. Mary's past practices. All Assets which are material to St. Mary's business
on a consolidated basis, held under leases or subleases by any of the St. Mary
Companies, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, Merger, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect. The St. Mary Companies currently
maintain insurance similar, to their Knowledge, in amounts, scope, and coverage
to that maintained by other peer banking organizations. None of the St. Mary
Companies has received notice from any insurance carrier that (i) such insurance
will be canceled or that coverage thereunder will be reduced or eliminated, or
(ii) premium costs with respect to such policies of insurance will be
substantially increased. There are presently no claims pending under such
policies of insurance and no notices have been given by any St. Mary Company
under such policies. The Assets of the St. Mary Companies include all Assets
required to operate the business of the St. Mary Companies as presently
conducted.
5.10 ENVIRONMENTAL MATTERS. (a) To the Knowledge of St. Mary, each St.
Mary Company, its Participation Facilities, and its Loan Properties are, and
have been, in compliance with all Environmental Laws, except for such instances
of non-compliance that are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on St. Mary.
(b) To the Knowledge of St. Mary, there is no Litigation pending or
threatened before any court, governmental agency, or authority or other forum in
which any St. Mary Company or any of its Loan Properties or Participation
Facilities (or any St. Mary Company in respect of any such Loan Property or
Participation Facility) has been or, with respect to threatened Litigation, may
be named as a defendant or
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potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material, whether or not occurring at, on, under,
or involving a site owned, leased, or operated by any St. Mary Company or any of
its Loan Properties or Participation Facilities, except for such Litigation
pending or threatened that is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on St. Mary, and to the Knowledge of
St. Mary, there is no reasonable basis for any such Litigation, subject to the
same exception.
(c) To the Knowledge of St. Mary, there have been no releases of Hazardous
Material in, on, under, or affecting any Participation Facility, or Loan
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on St. Mary.
5.11 COMPLIANCE WITH LAWS. Each St. Mary Company has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on St. Mary, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on St. Mary. No St.
Mary Company:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on St. Mary; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any St. Mary Company is
not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on St. Mary, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on St. Mary, or (iii) requiring any
St. Mary Company to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment, or memorandum of
understanding, or to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any material
manner relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
5.12 EMPLOYEE BENEFIT PLANS. (a) St. Mary has disclosed in Section 5.12 of
the St. Mary Disclosure Memorandum, and has delivered or made available to
Regions prior to the execution of this Agreement copies in each case of, all
written pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus, or other
incentive plan, all other written employee programs, arrangements, or
agreements, all medical, vision, dental, or other written health plans, all life
insurance plans, and all other written employee benefit plans or fringe benefit
plans, including written "employee benefit plans" as that term is defined in
Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or
in part by, or contributed to, by any St. Mary Company or Affiliate thereof for
the benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "St. Mary Benefit Plans"). Any of
the St. Mary Benefit Plans which is an "employee pension benefit plan," as that
term is defined in Section 3(2) of ERISA, is referred to herein as a "St. Mary
ERISA Plan." Each St. Mary ERISA Plan which is also a "defined benefit plan" (as
defined in Section 414(j) of the Internal Revenue Code) is referred to herein as
a "St. Mary Pension Plan." No St. Mary Pension Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) To the Knowledge of St. Mary, all St. Mary Benefit Plans are in
compliance with the applicable terms of ERISA, the Internal Revenue Code, and
any other applicable Laws the breach or violation of which are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on St.
Mary. Each St. Mary ERISA Plan which is intended to be qualified under Section
401(a) of the Internal Revenue Code has received a favorable determination
letter from the Internal Revenue Service, and St. Mary is not aware of any
circumstances likely to result in revocation of any such favorable determination
letter. To the Knowledge
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of St. Mary, no St. Mary Company has engaged in a transaction with respect to
any St. Mary Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject any St. Mary Company to a tax or
penalty imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA that, individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect on St. Mary.
(c) No St. Mary Pension Plan has any "unfunded current liability," as that
term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value of
the assets of any such plan equals or exceeds the plan's "benefit liabilities,"
as that term is defined in Section 4001(a)(16) of ERISA, when determined under
actuarial factors that would apply if the plan terminated in accordance with all
applicable legal requirements. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position of
any St. Mary Pension Plan, (ii) no change in the actuarial assumptions with
respect to any St. Mary Pension Plan, and (iii) no increase in benefits under
any St. Mary Pension Plan as a result of plan amendments or changes in
applicable Law which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on St. Mary or materially adversely affect
the funding status of any such plan. Neither any St. Mary Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any St. Mary Company, or the single-employer
plan of any entity which is considered one employer with St. Mary under Section
4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of
ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA. No St. Mary Company has provided, or is required to
provide, security to a St. Mary Pension Plan or to any single-employer plan of
an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by any St. Mary Company with respect to any ongoing,
frozen, or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate. No St. Mary Company has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any St. Mary Pension Plan or by any ERISA Affiliate within the
12-month period ending on the date hereof.
(e) No St. Mary Company has any Liability for retiree health and life
benefits under any of the St. Mary Benefit Plans and, to the Knowledge of St.
Mary, there are no restrictions on the rights of such St. Mary Company to amend
or terminate any such Plan conformably with Law without incurring any Liability
thereunder.
(f) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any St. Mary Company
from any St. Mary Company under any St. Mary Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any St. Mary Benefit Plan, or
(iii) result in any acceleration of the time of payment or vesting of any such
benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any St. Mary Company and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the St. Mary Financial Statements to the extent
required by and in accordance with GAAP.
5.13 MATERIAL CONTRACTS. Except as reflected in the St. Mary Disclosure
Schedule, none of the St. Mary Companies, nor any of their respective Assets,
businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, (i) any employment, severance, termination, consulting,
or retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $50,000, (ii) any Contract relating to the borrowing
of money by any St. Mary Company or the guarantee by any St. Mary
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Company of any such obligation (other than Contracts evidencing deposit
liabilities, purchases of federal funds, fully-secured repurchase agreements,
and Federal Home Loan Bank advances of depository institution Subsidiaries,
trade payables, and Contracts relating to borrowings or guarantees made in the
ordinary course of business), (iii) any Contracts between or among St. Mary
Companies, and (iv) any other Contract or amendment thereto that would be
required to be filed as an exhibit to a Form 10-K filed by St. Mary with the SEC
as of the date of this Agreement if St. Mary were required to file a Form 10-K
as of such date (together with all Contracts referred to in Section 5.11(a) of
this Agreement, the "St. Mary Contracts"). With respect to each St. Mary
Contract: (i) the Contract is in full force and effect; (ii) no St. Mary Company
is in Default thereunder, other than Defaults which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on St. Mary;
(iii) no St. Mary Company has repudiated or waived any material provision of any
such Contract; and (iv) no other party to any such Contract is, to the Knowledge
of St. Mary, in Default in any respect, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on St. Mary, or has repudiated or waived any material provision
thereunder. All of the indebtedness of any St. Mary Company for money borrowed
is prepayable at any time by such St. Mary Company without penalty or premium.
5.14 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or,
to the Knowledge of St. Mary, threatened (or unasserted but considered probable
of assertion and which if asserted would have at least a reasonable probability
of an unfavorable outcome) against any St. Mary Company, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on St. Mary, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any St. Mary Company that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
St. Mary. Section 5.14 of the St. Mary Disclosure Memorandum includes a summary
report of all Litigation as of the date of this Agreement to which any St. Mary
Company is a party as a defendant or cross-defendant.
5.15 STATEMENTS TRUE AND CORRECT. Since January 1, 1994, or the date of
organization if later, each St. Mary Company has timely filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with any Regulatory Authorities (except,
in the case of state securities authorities, failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on St. Mary). At the time of filing (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing):
(i) each report and other document, including financial statements, exhibits,
and schedules thereto, filed by a St. Mary Company with any Regulatory Authority
complied in all material respects with all applicable Laws, and (ii) each such
report and document did not, in all material respects, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The statements,
certificates, instruments, or other writings, taken as a whole, furnished or to
be furnished by any St. Mary Company or any Affiliate thereof to Regions
pursuant to this Agreement or any other document, agreement, or instrument
referred to herein, do not and will not contain any untrue statement of material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. None
of the information supplied or to be supplied by any St. Mary Company or any
Affiliate thereof for inclusion in the Registration Statement to be filed by
Regions with the SEC will, when the Registration Statement becomes effective, be
false or misleading with respect to any material fact, or contain any untrue
statement of a material fact, or omit to state any material fact required to be
stated thereunder or necessary to make the statements therein not misleading.
None of the information supplied or to be supplied by any St. Mary Company or
any Affiliate thereof for inclusion in the Proxy Statement to be mailed to St.
Mary stockholders in connection with the Stockholders' Meeting, and no other
documents to be filed by a St. Mary Company or any Affiliate thereof with the
SEC or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Proxy Statement, when first mailed to the stockholders of
St. Mary, be false or misleading with respect to any material fact, or contain
any misstatement of material fact, or omit to state any material fact required
to be stated thereunder or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case of
the Proxy Statement or any amendment thereof or supplement
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thereto, at the time of the Stockholders' Meeting, be false or misleading with
respect to any material fact, or omit to state any material fact required to be
stated thereunder or necessary to correct any material statement in any earlier
communication with respect to the solicitation of any proxy for the
Stockholders' Meeting. All documents that any St. Mary Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
5.16 TAX AND REGULATORY MATTERS. Except as specifically contemplated by
this Agreement, no St. Mary Company or any Affiliate thereof has taken any
action, or agreed to take any action, or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the transactions
contemplated hereby, including the Merger, from qualifying treatment as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement. To the Knowledge of
St. Mary there exists no fact, circumstance, or reason why the requisite
Consents referred to in Section 9.1(b) of this Agreement cannot be received in a
timely manner without imposition of any condition of the type described in the
last sentence of such Section 9.1(b) or result in the imposition of a condition
or restriction of the type referred to in Section 9.3(f).
5.17 STATE TAKEOVER LAWS. To the extent applicable, each St. Mary Company
has taken all necessary action to exempt the transactions contemplated by this
Agreement from Sections 12:132 et. seq. and 12:135 et. seq. of the LBCL and any
comparable provisions of the Articles of Incorporation of St. Mary.
5.18 SUPPORT AGREEMENTS. Each of the directors of St. Mary has executed
and delivered to Regions an agreement in substantially the form of Exhibit 1.
5.19 ARTICLES OF INCORPORATION PROVISIONS. Each St. Mary Company has taken
all action so that the entering into of this Agreement and the consummation of
the Merger and the other transactions contemplated by this Agreement do not and
will not result in the grant of any rights to any Person under the Articles of
Incorporation, Bylaws, or other governing instruments of any St. Mary Company or
restrict or impair the ability of Regions or any of its Subsidiaries to vote, or
otherwise to exercise the rights of a stockholder with respect to, shares of any
St. Mary Company that may be directly or indirectly acquired or controlled by
it.
5.20 DERIVATIVES CONTRACTS. Neither St. Mary nor any of its Subsidiaries
is a party to or has agreed to enter into an exchange-traded or over-the-counter
swap, forward, future, option, cap, floor, or collar financial contract, or any
other interest rate or foreign currency protection contract not included on its
balance sheet which is a financial derivative contract (including various
combinations thereof) and which might reasonably be expected to have a Material
Adverse Effect on St. Mary.
5.21 YEAR 2000. To the Knowledge of St. Mary, all computer software
necessary for the conduct of its business (the "Software") is designed to be
used prior to, during, and after the calendar year 2000 A.D., and the Software
will operate during each such time period without error relating to the year
2000, specifically including any error relating to, or the product of, date data
which represents or references different centuries or more than one century. St.
Mary further represents and warrants, to its Knowledge, that the Software
accepts, calculates, sorts, extracts and otherwise processes date inputs and
date values, and returns and displays date values, in a consistent manner
regardless of the dates used, whether before, on, or after January 1, 2000.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF REGIONS
Regions hereby represents and warrants to St. Mary as follows:
6.1 ORGANIZATION, STANDING, AND POWER. Regions is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business as
now conducted and to own, lease, and operate its material Assets. Regions is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be
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so qualified or licensed, except for such jurisdictions in which the failure to
be so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Regions.
6.2 AUTHORITY; NO BREACH BY AGREEMENT. (a) Regions has the corporate power
and authority necessary to execute, deliver, and perform its obligations under
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Regions. This Agreement represents a legal, valid, and binding
obligation of Regions, enforceable against Regions in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, Merger, moratorium, or similar Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Regions, nor
the consummation by Regions of the transactions contemplated hereby, nor
compliance by Regions with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of Regions' Certificate of Incorporation
or Bylaws, or (ii) constitute or result in a Default under, or require any
Consent pursuant to, or result in the creation of any Lien on any Asset of any
Regions Company under, any Contract or Permit of any Regions Company, where such
Default or Lien, or any failure to obtain such Consent, is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Regions, or
(iii) subject to receipt of the requisite approvals referred to in Section
9.1(b) of this Agreement, violate any Law or Order applicable to any Regions
Company or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NYSE and the NASD, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation, or both, with respect to
any employee benefit plans, or under the HSR Act, and other than Consents,
filings, or notifications which, if not obtained or made, are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Regions, no notice to, filing with, or Consent of, any public body or authority
is necessary for the consummation by Regions of the Merger and the other
transactions contemplated in this Agreement.
6.3 CAPITAL STOCK. The authorized capital stock of Regions as of the date
of this Agreement consists of 240,000,000 shares of Regions Common Stock, of
which 136,722,928 shares were issued and outstanding as of June 30, 1997. All of
the issued and outstanding shares of Regions Common Stock are, and all of the
shares of Regions Common Stock to be issued in exchange for shares of St. Mary
Common Stock upon consummation of the Merger, when issued in accordance with the
terms of this Agreement, will be, duly and validly issued and outstanding, and
fully paid and nonassessable under the DGCL. None of the outstanding shares of
Regions Common Stock has been, and none of the shares of Regions Common Stock to
be issued in exchange for shares of St. Mary Common Stock upon consummation of
the Merger will be, issued in violation of any preemptive rights of the current
or past stockholders of Regions.
6.4 REGIONS SUBSIDIARIES. Regions has disclosed in Exhibit 21 of its
Annual Report on Form 10-K for the fiscal year ended December 31, 1996, all of
the material Regions Subsidiaries as of the date of such report. Except as
disclosed in such report, Regions or one of its Subsidiaries, owns all of the
issued and outstanding shares of capital stock of each material Regions
Subsidiary. All of the shares of capital stock of each material Regions
Subsidiary held by a Regions Company are fully paid and (except pursuant to 12
USC Section 55 in the case of national banks and comparable, applicable state
Law, if any, in the case of state depository institutions) nonassessable under
the applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the Regions Company free and clear of
any Lien. Each material Regions Subsidiary is either a bank, a savings
association, or a corporation, and is duly organized, validly existing, and (as
to corporations) in good standing under the Laws of the jurisdiction in which it
is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease, and operate its Assets and to carry on its
business as now conducted. Each material Regions Subsidiary is duly
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qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Regions. Each material Regions
Subsidiary that is a depository institution is an "insured institution" as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder, and the deposits thereof are insured by the Bank Insurance Fund or
the Savings Association Insurance Fund, as appropriate, to the extent provided
by applicable law.
6.5 SEC FILINGS; FINANCIAL STATEMENTS. (a) Regions has filed and made
available to St. Mary all forms, reports, and documents required to be filed by
Regions with the SEC since December 31, 1994, except for registration statements
on Forms S-4 and S-8 (collectively, with such exception, the "Regions SEC
Reports"). The Regions SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated in such Regions SEC
Reports or necessary in order to make the statements in such Regions SEC
Reports, in light of the circumstances under which they were made, not
misleading.
(b) Each of the Regions Financial Statements (including, in each case, any
related notes) contained in the Regions SEC Reports, including any Regions SEC
Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC), and fairly presented or will fairly present the consolidated financial
position of Regions and its Subsidiaries as at the respective dates and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in Section 6.6
of the Regions Disclosure Memorandum, and to the Knowledge of Regions, no
Regions Company has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Regions, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of Regions as of September 30, 1995, included in the Regions Financial
Statements or reflected in the notes thereto. Except as disclosed in Section 6.6
of the Regions Disclosure Memorandum, no Regions Company has incurred or paid
any Liability since September 30, 1995, except for such Liabilities incurred or
paid in the ordinary course of business consistent with past business practice
and which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1997, except as
disclosed in the Regions Financial Statements delivered prior to the date of
this Agreement, (i) there have been no events, changes, or occurrences which
have had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions, and (ii) the Regions Companies have not
taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement
would represent or result in a material breach or violation of any of the
covenants and agreements of Regions provided in Article 7 of this Agreement.
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6.8 COMPLIANCE WITH LAWS. Regions is duly registered as a bank holding
company under the BHC Act. Each Regions Company has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Regions, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Regions. No
Regions Company:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any Regions Company is
not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Regions, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have individually or in the
aggregate, a Material Adverse Effect on Regions, or (iii) requiring any
Regions Company to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any material
manner relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
6.9 LEGAL PROCEEDINGS. Except to the extent specifically reserved against
in the Regions Financial Statements dated prior to the date of this Agreement,
there is no Litigation instituted or pending, or, to the Knowledge of Regions,
threatened (or unasserted but considered probable of assertion and which if
asserted would have at least a reasonable probability of an unfavorable outcome)
against any Regions Company, or against any Asset, interest, or right of any of
them, that is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
any Regions Company, that is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions.
6.10 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument,
or other writing furnished or to be furnished by any Regions Company or any
Affiliate thereof to St. Mary pursuant to this Agreement or any other document,
agreement, or instrument referred to herein contains or will contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The statements,
certificates, instruments, or other writings, taken as a whole, furnished or to
be furnished by any Regions Company or any Affiliate thereof to St. Mary
pursuant to this Agreement or any other document, agreement, or instrument
referred to herein, do not and will not contain any untrue statement of material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. None
of the information supplied or to be supplied by any Regions Company or any
Affiliate thereof for inclusion in the Registration Statement to be filed by
Regions with the SEC, will, when the Registration Statement becomes effective,
be false or misleading with respect to any material fact, or contain any untrue
statement of a material fact, or omit to state any material fact required to be
stated thereunder or necessary to make the statements therein not misleading.
None of the information supplied or to be supplied by any Regions Company or any
Affiliate thereof for inclusion in the Proxy Statement to be mailed to St. Mary
stockholders in connection with the Stockholders' Meeting, and any other
documents to be filed by any Regions Company or any Affiliate thereof with the
SEC or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Proxy Statement, when first mailed to the stockholders of
St. Mary, be false or misleading with respect to any material fact, or contain
any misstatement of a material fact or, omit to state any material fact required
to be stated thereunder or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case of
the Proxy Statement, or any amendment thereof or supplement thereto, at the time
of the Stockholders' Meeting, be
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false or misleading with respect to any material fact, or omit to state any
material fact required to be stated thereunder or necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Stockholders' Meeting. All documents that any Regions Company or
any Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
6.11 TAX AND REGULATORY MATTERS. Except as specifically contemplated by
this Agreement, no Regions Company or any Affiliate thereof has taken any
action, or agreed to take any action, or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the transactions
contemplated hereby, including the Merger, from qualifying for treatment as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement. To the Knowledge of
Regions, there exists no fact, circumstance, or reason why the requisite
Consents referred to in Section 9.1(b) of this Agreement cannot be received in a
timely manner without imposition of any condition of the type described in the
last sentence of such Section 9.1(b), or result in the imposition of a condition
or restriction of the type referred to in Section 9.3(f).
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF ST. MARY. Unless the prior written consent of
the chief executive officer, vice chairman, or appropriate regional president,
of Regions shall have been obtained, and except as otherwise expressly
contemplated herein or disclosed in Section 7.1 of the St. Mary Disclosure
Memorandum, St. Mary shall and shall cause each of its Subsidiaries to, from the
date of this Agreement until the Effective Time or termination of this
Agreement, (i) operate its business only in the usual, regular, and ordinary
course, (ii) preserve intact in all material respects its business organization
and Assets and maintain its rights and franchises, and (iii) take no action
which would (x) materially adversely affect the ability of any Party to obtain
any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentences of Sections 9.1(b) and 9.1(c) or in Section 9.3(f) of this Agreement,
or (y) materially adversely affect the ability of any Party to perform its
covenants and agreements under this Agreement.
7.2 NEGATIVE COVENANTS OF ST. MARY. Except as disclosed in Section 7.2 of
the St. Mary Disclosure Memorandum for the applicable paragraphs indicated
below, from the date of this Agreement until the earlier of the Effective Time
or the termination of this Agreement, St. Mary covenants and agrees that it will
not do or agree or commit to do, or permit any of its Subsidiaries to do or
agree or commit to do, any of the following without the prior written consent of
the chief executive officer, vice chairman, or appropriate regional president of
Regions, which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any St. Mary Company; or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a St. Mary Company to another
St. Mary Company) in excess of an aggregate amount outstanding at any time
of $150,000 (for the St. Mary Companies on a consolidated basis) except in
the ordinary course of the business of St. Mary consistent with past
practices (which shall include, for St. Mary, creation of deposit
liabilities, purchases of federal funds, advances from the Federal Reserve
Bank or Federal Home Loan Bank, whether or not St. Mary has previously
received any such advances, overnight borrowings to meet temporary
liquidity needs, and entry into repurchase agreements fully secured by U.S.
Government or agency securities), or impose, or suffer the imposition, on
any Asset of any St. Mary Company of any Lien or permit any such Lien to
exist (other than in connection with deposits, repurchase agreements,
bankers acceptances, "treasury tax and loan" accounts established in the
ordinary course of business, the satisfaction of legal requirements in the
exercise of trust powers, Liens to secure debt obligations or other
obligations for borrowed money permitted under this
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paragraph (b), and Liens in effect as of the date hereof that are disclosed
in the St. Mary Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any St. Mary Company, or declare or pay any dividend
or make any other distribution in respect of St. Mary's capital stock,
provided that St. Mary may (to the extent legally and contractually
permitted to do so), but shall not be obligated to, declare and pay
quarterly cash dividends on the shares of St. Mary Common Stock at a rate
not in excess of $.50 per share with record and payment dates the same as
the record and payment dates declared by Regions for cash dividends on the
Regions Common Stock; provided, that the Parties shall cooperate in
selecting the record date of St. Mary's cash dividend for the quarter in
which the Effective Time is to occur to ensure that, with respect to such
quarterly period, the holders of St. Mary Common Stock do not receive both
a dividend in respect of their St. Mary Common Stock and a dividend in
respect of Regions Common Stock or fail to receive any dividend; or
(d) except for this Agreement, or pursuant to the exercise of stock
options outstanding as of the date hereof and pursuant to the terms thereof
in existence on the date hereof, or as disclosed in Section 7.2(d) of the
St. Mary Disclosure Memorandum, issue, sell, pledge, encumber, authorize
the issuance of, enter into any Contract to issue, sell, pledge, encumber,
or authorize the issuance of, or otherwise permit to become outstanding,
any additional shares of St. Mary Common Stock or any other capital stock
of any St. Mary Company, or any Rights to acquire such stock; or
(e) adjust, split, combine, or reclassify any capital stock of any St.
Mary Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of St. Mary Common Stock, or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber any shares
of capital stock of any St. Mary Subsidiary (unless any such shares of
stock are sold or otherwise transferred to another St. Mary Company) or any
Asset having a book value in excess of $100,000 other than in the ordinary
course of business for reasonable and adequate consideration and other than
dispositions in the ordinary course of business of (i) investment
securities, (ii) loans, including dispositions thereof through loan
participation agreements, and (iii) other real estate owned by any St. Mary
Company; or
(f) except for purchases of U.S. Treasury securities, U.S. Government
agency securities and mortgage backed balloon loans, which in each case
have maturities of five years or less, purchase any securities or make any
material investment, either by purchase of stock or securities,
contributions to capital, Asset transfers, or purchase of any Assets, in
any Person other than a wholly owned St. Mary Subsidiary, or otherwise
acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, or
(ii) acquisitions of control by a depository institution Subsidiary in its
fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees or
officers of any St. Mary Company, except in accordance with past practice
or previously approved by the Board of Directors of St. Mary, in each case
as disclosed in Section 7.2(g) of the St. Mary Disclosure Memorandum or as
required by Law; except as disclosed in Section 7.2(g) of the St. Mary
Disclosure Memorandum, pay any severance or termination pay or any bonus
other than pursuant to written policies or written Contracts in effect on
the date of this Agreement and disclosed in Section 7.2(g) of the St. Mary
Disclosure Memorandum; and enter into or amend any severance agreements
with officers of any St. Mary Company; grant any increase in fees or other
increases in compensation or other benefits to directors of any St. Mary
Company except in accordance with past practice disclosed in Section 7.2(g)
of the St. Mary Disclosure Memorandum; or voluntarily accelerate the
vesting of any stock options or other stock-based compensation or employee
benefits; or
(h) enter into or amend any employment Contract between any St. Mary
Company and any Person (unless such amendment is required by Law) that the
St. Mary Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered) at any time
on or after the Effective Time; or
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(i) adopt any new employee benefit plan of any St. Mary Company or
make any material change in or to any existing employee benefit plans of
any St. Mary Company other than any such change that is required by Law or
that, in the opinion of counsel, is necessary or advisable to maintain the
tax qualified status of any such plan; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(k) commence any material Litigation other than in accordance with
past practice, settle any Litigation involving any Liability of any St.
Mary Company for money damages in excess of $100,000 or imposing material
restrictions upon the operations of any St. Mary Company; or
(l) modify, amend, or terminate any material Contract (other than any
loan Contract, the modification, amendment, or termination of which does
not result in the St. Mary Companies recognizing a loss that exceeds
$100,000) or waive, release, compromise, or assign any material rights or
claims, other than in connection with the modification, amendment, or
termination of a loan Contract permitted under the preceding clause of this
paragraph (1).
7.3 COVENANTS OF REGIONS. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Regions
covenants and agrees that, except as disclosed in Section 7.3 of the Regions
Disclosure Memorandum, it shall and shall cause each of its Subsidiaries to (x)
continue to conduct its business and the business of its Subsidiaries in a
manner designed in its reasonable judgment to enhance the long-term value of the
Regions Common Stock and the business prospects of the Regions Companies and to
the extent consistent therewith use all reasonable efforts to preserve intact
the Regions Companies' core businesses and goodwill with their respective
employees and the communities they serve, (y) take no action which would (i)
materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentences of
Sections 9.1(b) and 9.1(c) or in Section 9.3(f) of this Agreement, or (ii)
materially adversely affect the ability of any Party to perform its covenants
and agreements under this Agreement; provided, that the foregoing shall not
prevent any Regions Company from discontinuing or disposing of any of its Assets
or business if such action is, in the judgment of Regions, desirable in the
conduct of the business of Regions and its Subsidiaries, and (z) not amend the
Certificate of Incorporation or Bylaws of Regions, in each case, in any manner
which is adverse to, and discriminates against, the holders of St. Mary Common
Stock. Regions further agrees that it shall not, directly or indirectly, acquire
or enter into any agreement in principle or definitive agreement to acquire, any
financial or other institution or business if such acquisition would be
reasonably likely to cause any Consent of any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby to be conditioned
or restricted in any manner that would cause the condition set forth in the
second sentence of Section 9.1(b) not to be satisfied, unless Regions waives
such condition in writing in advance of the earliest of such acquisition,
agreement and agreement in principle.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.5 REPORTS. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in stockholders' equity, and cash flow for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not material and
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to the absence from interim financial statements of any (in the case of St.
Mary) or complete (in the case of Regions) footnote disclosures). As of the
respective dates, such reports filed with the SEC will comply in all material
respects with the Securities Laws and will not contain any untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Any financial statements contained
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; STOCKHOLDER APPROVAL. (a) As
soon as reasonably practicable after execution of this Agreement, Regions shall
prepare and file the Registration Statement with the SEC, and shall use its
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act and take any action required to be taken under the applicable state
Blue Sky or securities Laws in connection with the issuance of the shares of
Regions Common Stock upon consummation of the Merger. St. Mary shall furnish all
information concerning it and the holders of its capital stock as Regions may
reasonably request in connection with such action. St. Mary shall call a
Stockholders' Meeting for the purpose of voting upon approval of this Agreement
and such other related matters as it deems appropriate. In connection with the
Stockholders' Meeting, (i) St. Mary shall mail the Proxy Statement to its
stockholders, (ii) the Parties shall furnish to each other all information
concerning them that they may reasonably request in connection with such Proxy
Statement, (iii) the Board of Directors of St. Mary shall recommend (subject to
compliance with their fiduciary duties as advised by counsel) to its
stockholders the approval of this Agreement, and (iv) the Board of Directors and
officers of St. Mary shall (subject to compliance with their fiduciary duties as
advised by counsel) use their reasonable efforts to obtain such stockholders'
approval.
(b) Regions shall indemnify and hold harmless St. Mary, each of its
directors and officers, and each Person, if any, who controls St. Mary within
the meaning of the 1933 Act against any losses, claims, damages, or Liabilities,
joint, several, or solidary, to which they or any of them may become subject,
under the 1933 Act or otherwise, insofar as such losses, claims, damages, or
Liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of material fact contained in the
Registration Statement or the Proxy Statement, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse each such Person for any legal or other expenses reasonably
incurred by such person in connection with investigating or defending any such
action or claim; provided, however, that Regions shall not be liable in any such
case to the extent that any such loss, claim, damage, or Liability (or action in
respect thereof) arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
Statement or the Proxy Statement in reliance upon and in conformity with
information furnished to Regions by the indemnified Person. Promptly after
receipt by an indemnified Person of notice of the commencement of any action,
such indemnified Person shall, if a claim in respect thereof is to be made
against Regions under this Section 8.1(b), notify Regions in writing of the
commencement thereof, but failure to give prompt notice shall deprive the
indemnified Person of his or her right to be indemnified only to the extent that
Regions is thereby prejudiced. In case any such action shall be brought against
any indemnified Person and it shall notify Regions of the commencement thereof,
Regions shall be entitled to participate therein, and to the extent that it
shall wish, to assume the defense thereof, with counsel satisfactory to such
indemnified Person, and, after notice from Regions to such indemnified Person of
its election to so assume the defense thereof, Regions shall not be liable to
such indemnified party under this Section 8.1(b) for any legal expenses of other
counsel or any other expenses subsequently incurred with such other counsel by
such indemnified Person, except that if Regions elects not to assume such
defense or counsel for an indemnified Person or Persons advises in writing that
there are material substantive issues which raise conflicts of interests between
Regions and one or more indemnified Persons, such indemnified Person or Persons
may retain counsel satisfactory to them, and Regions shall pay all reasonable
fees and expenses of such counsel for the indemnified Persons, promptly as
statements therefor are
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received; provided that (i) Regions shall be obligated pursuant to this Section
8.1(b) to pay for only one firm of counsel for all indemnified Persons in any
jurisdiction and (ii) Regions shall not be liable for any settlement effected
without its prior written consent.
8.2 EXCHANGE LISTING. Regions shall use its reasonable efforts to list,
prior to the Effective Time, on the Nasdaq NMS, subject to official notice of
issuance, the shares of Regions Common Stock to be issued to the holders of St.
Mary Common Stock pursuant to the Merger.
8.3 APPLICATIONS. Regions shall promptly prepare and file, and St. Mary
shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement.
8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, Regions shall execute and file the Delaware
Certificate of Merger with the Secretary of State of the State of Delaware and
the Louisiana Certificate of Merger with the Secretary of State of the State of
Louisiana.
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including using its reasonable efforts to lift or rescind any
Order adversely affecting its ability to consummate the transactions
contemplated herein and to cause to be satisfied the conditions referred to in
Article 9 of this Agreement; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use, and
shall cause each of its Subsidiaries to use, its reasonable efforts to obtain
all Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
8.6 INVESTIGATION AND CONFIDENTIALITY. (a) Prior to the Effective Time,
each Party shall keep the other Party advised of all material developments
relevant to its business and to consummation of the Merger and shall permit the
other Party to make or cause to be made such investigation of the business and
properties of it and its Subsidiaries and of their respective financial and
legal conditions as the other Party reasonably requests, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations. St. Mary
shall cooperate with Regions in obtaining, at Regions' election and expense,
environmental audits of any or all of the properties owned or occupied by St.
Mary. No investigation by a Party shall affect the representations and
warranties of the other Party.
(b) Each Party shall, and shall cause its Representatives to, maintain the
confidentiality of all written, oral, and other confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions ("Confidential Information") and
shall not use such information for any purpose except in furtherance of the
transactions contemplated by this Agreement. Each Party shall maintain the
confidentiality of all Confidential Information obtained in connection with this
Agreement or the transactions contemplated hereby unless (i) such information
becomes publicly available through no fault of such Party, or was, is, or
becomes available to that Party from a source other than the other Party or its
Representatives, which source was itself not bound by a confidentiality
agreement with, or other contractual, legal, or fiduciary obligation of
confidentiality with respect to that information, or (ii) the furnishing or use
of such information is required by proper judicial, administrative, or other
legal proceeding, provided that the other Party is promptly notified in writing
of such request, unless such notification is not, in the opinion of counsel,
permitted by Law. Each Party and its Representatives will hold and maintain all
Confidential Information in confidence and will not disclose to any third party
or permit any third party access to any Confidential Information or the
substance thereof; provided that a Party may disclose Confidential Information
to such of its Representatives who need to know such information in connection
with the transactions contemplated hereby. If this Agreement is terminated prior
to the Effective Time, each Party shall promptly return or certify the
destruction of all documents and copies thereof, and all work papers containing
confidential information received from the other Party.
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(c) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
Party which it has discovered through the course of its investigation and which
represents, or is reasonably likely to represent, either a material breach of
any representation, warranty, covenant, or agreement of the other Party or which
has had or is reasonably likely to have a Material Adverse Effect on the other
Party.
8.7 PRESS RELEASES. Prior to the Effective Time, St. Mary and Regions
shall consult with each other as to the form and substance of any press release
or other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.8 CERTAIN ACTIONS. Except with respect to this Agreement and the
transactions contemplated hereby, no St. Mary Company nor any Affiliate thereof
nor any Representative retained by any St. Mary Company shall directly or
indirectly solicit any Acquisition Proposal by any Person. Except to the extent
necessary to comply with the fiduciary duties as advised by counsel of St.
Mary's Board of Directors, no St. Mary Company or any Affiliate or
Representative thereof shall furnish any non-public information that it is not
legally obligated to furnish, negotiate with respect to, or enter into any
Contract with respect to, any Acquisition Proposal, but St. Mary may communicate
information about such an Acquisition Proposal to its stockholders if and to the
extent that it or its directors are required to do so in order to comply with
its or their fiduciary duties as advised by counsel. St. Mary shall promptly
notify Regions orally and in writing in the event that it receives any inquiry
or proposal relating to any such transaction. St. Mary shall (i) immediately
cease and cause to be terminated any existing activities, discussions, or
negotiations with any Persons conducted heretofore with respect to any of the
foregoing, and (ii) direct and use its reasonable efforts to cause all of its
Representatives not to engage in any of the foregoing subject to fiduciary
duties as aforesaid.
8.9 TAX TREATMENT. Each of the Parties undertakes and agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 STATE TAKEOVER LAWS. Each St. Mary Company shall take all necessary
steps to exempt the transactions contemplated by this Agreement from, or if
necessary challenge the validity or applicability of Sections 12:132 et seq. of
the LBCL.
8.11 CHARTER PROVISIONS. Each St. Mary Company shall take all necessary
action to ensure that the entering into of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby or thereby do not
and will not result in the grant of any rights to any Person under the Articles
of Incorporation, Bylaws, or other governing instruments of any St. Mary Company
or restrict or impair the ability of Regions or any of its Subsidiaries to vote,
or otherwise to exercise the rights of a stockholder with respect to, shares of
any St. Mary Company that may be directly or indirectly acquired or controlled
by it.
8.12 AGREEMENT OF AFFILIATES. St. Mary has disclosed in Section 8.12 of
the St. Mary Disclosure Memorandum each Person whom it reasonably believes is an
"affiliate" of St. Mary for purposes of Rule 145 under the 1933 Act. St. Mary
shall use its reasonable efforts to cause each such Person to deliver to Regions
not later than 30 days prior to the Effective Time, a written agreement,
substantially in the form of Exhibit 2, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of Regions Common
Stock to be received by such Person upon consummation of the Merger except in
compliance with applicable provisions of the 1933 Act and the rules and
regulations thereunder. Regions shall not be required to maintain the
effectiveness of the Registration Statement under the 1933 Act for the purposes
of resale of Regions Common Stock by such affiliates.
8.13 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Time,
Regions shall provide generally to officers and employees of the St. Mary
Companies, who at or after the Effective Time become employees of a Regions
Company, employee benefits under employee benefit plans (other than stock option
or other plans involving the potential issuance of Regions Common Stock except
as set forth in this Section 8.13), on terms and conditions which when taken as
a whole are substantially similar to those currently provided by the
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Regions Companies to their similarly situated officers and employees. For
purposes of participation and vesting (but not accrual of benefits) under such
employee benefit plans, (i) service under any qualified defined benefit plans of
St. Mary shall be treated as service under Regions' qualified defined benefit
plans, (ii) service under any qualified defined contribution plans of St. Mary
shall be treated as service under Regions' qualified defined contribution plans,
and (iii) service under any other employee benefit plans of St. Mary shall be
treated as service under any similar employee benefit plans maintained by
Regions. Regions as the Surviving Corporation shall and shall cause its
Subsidiaries to honor in accordance with their terms all employment, severance,
consulting, and other compensation Contracts disclosed in Section 8.13 of the
St. Mary Disclosure Memorandum to Regions between any St. Mary Company and any
current or former director, officer, or employee thereof, and all provisions for
vested benefits or other vested amounts earned or accrued through the Effective
Time under the St. Mary Benefit Plans.
8.14 INDEMNIFICATION. (a) For a period of ten years after the Effective
Time, Regions shall, and shall cause the Surviving Corporation to, indemnify,
defend, and hold harmless the present and former directors, officers, employees,
and agents of each of the St. Mary Companies (each, an "Indemnified Party")
against all Liabilities arising out of actions or omissions occurring at or
prior to the Effective Time (including the transactions contemplated by this
Agreement) to the full extent permitted under Louisiana Law and to the same
extent that indemnification of directors and officers is permitted by St. Mary's
Articles of Incorporation as in effect on the date hereof, including provisions
relating to advances of expenses incurred in the defense of any Litigation;
provided however, that the indemnification provided by this Section 8.14(a)
shall not apply to any claim against an Indemnified Party if such Indemnified
Party knew of the existence of the claim and failed to make a good faith effort
to require St. Mary to notify its director and officer liability insurance, if
any, of the existence of such claim prior to the Effective Time. Without
limiting the foregoing, in any case in which approval is required to effectuate
any indemnification, the determination of any such approval shall be made, at
the election of the Indemnified Party, by independent counsel mutually agreed
upon between Regions and the Indemnified Party.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 8.14, upon learning of any such Liability or Litigation,
shall promptly notify Regions thereof, but failure to give prompt notice shall
deprive the Indemnified Person of his or her right to be indemnified only to the
extent that Regions is thereby prejudiced. In the event of any such Litigation
(whether arising before or after the Effective Time), (i) Regions shall have the
right to assume the defense thereof and Regions shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if Regions elects not to assume such defense or
counsel for the Indemnified Parties advises in writing that there are material
substantive issues which raise conflicts of interest between Regions and the
Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to
them, and Regions shall pay all reasonable fees and expenses of such counsel for
the Indemnified Parties promptly as statements therefor are received; provided,
that (i) Regions shall be obligated pursuant to this paragraph (b) to pay for
only one firm of counsel for all Indemnified Parties in any jurisdiction, (ii)
the Indemnified Parties will cooperate (to the extent reasonably appropriate
under the circumstances) in the defense of any such Litigation, and (iii)
Regions shall not be liable for any settlement effected without its prior
written consent; and provided further that Regions shall not have any obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable Law.
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ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of
each Party to consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by both Parties pursuant to Section 11.6 of this Agreement:
(a) Stockholder Approval. The stockholders of St. Mary shall have
approved this Agreement, and the consummation of the transactions
contemplated hereby and thereby, including the Merger, as and to the extent
required by Law or by the provisions of any governing instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including requirements relating to
the raising of additional capital or the disposition of Assets) which in
the reasonable judgment of the Board of Directors of Regions would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement that, had such condition or
requirement been known, Regions would not, in its reasonable judgment, have
entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any and
all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b) of this Agreement) or for the preventing of
any Default under any Contract or Permit of such Party which, if not
obtained or made, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on such Party. No Consent so obtained
which is necessary to consummate the transactions contemplated hereby shall
be conditioned or restricted in a manner which in the reasonable judgment
of the Board of Directors of Regions would so materially adversely impact
the economic or business benefits of the transactions contemplated by this
Agreement so as to render inadvisable the consummation of the Merger.
(d) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
preliminary, or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of the transactions contemplated
by this Agreement or the Joint Agreement of Merger.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding, or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities Laws or the 1933 Act or 1934 Act relating
to the issuance or trading of the shares of Regions Common Stock issuable
pursuant to the Merger shall have been received.
(f) Exchange Listing. The shares of Regions Common Stock issuable
pursuant to the Merger shall have been approved for listing on the Nasdaq
NMS subject to official notice of issuance.
(g) Tax Matters. Each Party shall have received a written opinion of
Alston & Bird LLP, special counsel to Regions, in form reasonably
satisfactory to the Parties and updated to the Closing Date (the "Tax
Opinion"), to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, and (ii) the exchange in the Merger of St. Mary Common Stock for
Regions Common Stock will not give rise to gain or loss to the stockholders
of St. Mary with respect to such exchange (except to the extent of any cash
received). In rendering such Tax Opinion, counsel for Regions shall be
entitled to rely upon representations of officers of St. Mary and Regions
reasonably satisfactory in form and substance to such counsel.
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9.2 OBLIGATIONS OF REGIONS. The obligations of Regions to consummate the
Merger and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by Regions pursuant to
Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of St. Mary set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of St. Mary set forth in Section 5.3 of this Agreement shall be
true and correct (except for inaccuracies which are de minimus in amount).
The representations and warranties of St. Mary set forth in Sections 5.16,
5.17, and 5.19 of this Agreement shall be true and correct in all material
respects. There shall not exist inaccuracies in the representations and
warranties of St. Mary set forth in this Agreement (including the
representations and warranties set forth in Sections 5.3, 5.16, 5.17, and
5.19) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on St. Mary; provided
that, for purposes of this sentence only, those representations and
warranties which are qualified by references to "material" or "Material
Adverse Effect" or to the "Knowledge" of St. Mary or to a matter being
"known" by St. Mary shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of St. Mary to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(c) Certificates. St. Mary shall have delivered to Regions (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Sections 9.2(a) and 9.2(b)
of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by St. Mary's Board of Directors and stockholders
evidencing the taking of all corporate action necessary to authorize the
execution, delivery, and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such
reasonable detail as Regions and its counsel shall request.
(d) Opinion of Counsel. Regions shall have received an opinion of
Correro Fishman Haygood Phelps Weiss Walmsley & Casteix, L.L.P., counsel to
St. Mary, dated as of the Effective Time, in form reasonably satisfactory
to Regions, as to the matters set forth in Exhibit.
(e) Affiliates Agreements. Regions shall have received from each
affiliate of St. Mary the affiliates letter referred to in Section 8.12 of
this Agreement.
(f) Claims Letters. Each of the directors and officers of St. Mary
shall have executed and delivered to Regions letters in substantially the
form of Exhibit 4.
9.3 CONDITIONS TO OBLIGATIONS OF ST. MARY. The obligations of St. Mary to
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction of the following conditions, unless waived by St. Mary
pursuant to Section 11.6(b) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of Regions set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of Regions set forth in Section 6.3 of this Agreement shall be
true and correct (except for inaccuracies which are de minimus in amount).
The representations and warranties of Regions set forth in Section 6.11 of
this Agreement shall be true and correct in all material respects. There
shall not exist inaccuracies in the representations and warranties of
Regions set forth in this Agreement (including the representations and
warranties set forth in Sections 6.3 and 6.11) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a
Material Adverse Effect on Regions; provided that, for
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purposes of this sentence only, those representations and warranties which
are qualified by references to "material" or "Material Adverse Effect" or
to the "Knowledge" of Regions or to a matter being "known" by Regions shall
be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Regions to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(c) Certificates. Regions shall have delivered to St. Mary (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Sections 9.3(a) and 9.3(b)
of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Regions' Board of Directors evidencing the
taking of all corporate action necessary to authorize the execution,
delivery, and performance of this Agreement, and the consummation of the
transactions contemplated hereby, all in such reasonable detail as St. Mary
and its counsel shall request.
(d) Opinion of Counsel. St. Mary shall have received an opinion of
Lange, Simpson, Robinson & Somerville, counsel to Regions, dated as of the
Effective Time, in form reasonably acceptable to St. Mary, as to the
matters set forth in Exhibit 5.
(e) Fairness Opinion. St. Mary shall have received a letter from
Chaffe & Associates, Inc. or another financial adviser selected by St. Mary
dated not more than five days subsequent to the date of this Agreement and
to be updated to a date not more than five days prior to the date of the
Proxy Statement, to the effect that in the opinion of such firm, the
consideration to be received in the Merger by the stockholders of St. Mary
is fair to the stockholders of St. Mary from a financial point of view.
(f) Regulatory Conditions. No consent obtained from any Regulatory
Authority which is necessary to consummate the transactions contemplated
hereby shall require any action to be taken prior to the Effective Time
that, in the reasonable judgment of the Board of Directors of St. Mary,
would adversely affect the financial position, business, or results of
operations of St. Mary should the Merger not occur.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the stockholders of St.
Mary, this Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) By mutual consent of the Board of Directors of Regions and the
Board of Directors of St. Mary; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of St. Mary and Section 9.3(a)
of this Agreement in the case of Regions or in material breach of any
covenant or other agreement contained in this Agreement) in the event of an
inaccuracy of any representation or warranty of the other Party contained
in this Agreement which cannot be or has not been cured within 30 days
after the giving of written notice to the breaching Party of such
inaccuracy and which inaccuracy would provide the terminating Party the
ability to refuse to consummate the Merger under the applicable standard
set forth in Section 9.2(a) of this Agreement in the case of St. Mary and
Section 9.3(a) of this Agreement in the case of Regions; or
(c) By the Board of Directors of either Party in the event of a
material breach by the other Party of any covenant or agreement contained
in this Agreement which cannot be or has not been cured within 30 days
after the giving of written notice to the breaching Party of such breach;
or
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(d) By the Board of Directors of either Party in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger
and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
stockholders of St. Mary fail to vote their approval of this Agreement and
the transactions contemplated hereby as required by the LBCL at the
Stockholders' Meeting or any adjournment or postponement thereof where the
transactions were presented to such stockholders for approval and voted
upon; or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by September 30, 1998, except that a
Party that has breached the obligation to consummate the Closing and has
failed to cure such breach may not terminate under this subsection; or
(f) By the Board of Directors of either Party in the event that any of
the conditions precedent to the obligations of such Party to consummate the
Merger, other than the conditions in Section 9.2(a) in the case of St. Mary
or 9.3(a) in the case of Regions, cannot be satisfied or fulfilled by the
date specified in Section 10.1(e) of this Agreement; or
(g) By the Board of Directors of St. Mary, if it is determined to
terminate this Agreement by a vote of a majority of the members of its
entire Board of Directors, at any time during the period commencing on the
Determination Date and ending at the conclusion of the Closing, if the
Average Closing Price shall be less than $32.00; subject, however, to the
following three sentences. If St. Mary refuses to consummate the Merger
pursuant to this Section 10.1(g), it shall give prompt written notice
thereof to Regions; provided, that such notice of election to terminate may
be withdrawn at any time. During the seven-day period commencing with its
receipt of such notice, Regions shall have the option in its sole
discretion to elect to increase the Exchange Ratio to equal the quotient
obtained by dividing (i) the product of $32.00 and the Exchange Ratio (as
then in effect) by (ii) the Average Closing Price. If Regions makes an
election contemplated by the preceding sentence, within such seven-day
period, it shall give prompt written notice to St. Mary of such election
and the revised Exchange Ratio, whereupon no termination shall have
occurred pursuant to this Section 10.1(g) and this Agreement shall remain
in effect in accordance with its terms (except the Exchange Ratio shall
have been so modified), and any references in this Agreement to "Exchange
Ratio" shall thereafter be deemed to refer to the Exchange Ratio as
adjusted pursuant to this Section 10.1(g) and, if the previously scheduled
Closing did not occur due to the intervention of such seven-day period,
then the Closing shall be rescheduled for 9:00 A.M. on the second business
day following Regions giving notice of the exercise of its option; or
(h) By the Board of Directors of Regions, at any time prior to the
15th day after receipt by the General Counsel of Regions of the St. Mary
Disclosure Memorandum without any Liability of any Party in the event that
the review of any of the disclosures contained in the St. Mary Disclosure
Memorandum causes the Board of Directors of Regions to determine, in its
reasonable good faith judgment, that a fact or circumstance exists or is
likely to exist or result which materially and adversely impacts one or
more of the economic benefits to Regions of the transactions contemplated
by this Agreement so as to render inadvisable the consummation of the
Merger.
10.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect, and neither Party shall have any
claim or legal right to redress, whether for breach of contract or otherwise, as
a result of a breach of any representation, warranty, covenant, or condition of
this Agreement, except that (i) the provisions of this Section 10.2 and Article
11 and Section 8.6(b) of this Agreement shall survive any such termination and
abandonment, and (ii) a termination pursuant to Section 10.1(b), 10.1(c), or
10.1(f) of this Agreement shall not relieve the breaching Party from Liability
for an uncured willful and knowing breach of a representation, warranty,
material covenant, or material agreement giving rise to such termination.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 1, 2, 3, 4, and 11 of this Agreement and Sections 8.1(b), 8.12, and
8.14 of this Agreement.
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ARTICLE 11
MISCELLANEOUS
11.1 DEFINITIONS. Except as otherwise provided herein, the capitalized
terms set forth below shall have the following meanings:
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, such Party or any
of its Subsidiaries.
"AFFILIATE" of a Person shall mean any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by,
or under common control with such Person.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including
the Exhibits delivered pursuant hereto and incorporated herein by
reference.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character, and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"AVERAGE CLOSING PRICE" shall mean the average daily last sale prices
of Regions Common Stock as reported on the Nasdaq NMS (as reported by The
Wall Street Journal or, if not reported thereby, another authoritative
source as chosen by Regions) for the ten consecutive full trading days in
which such shares are traded on the Nasdaq NMS ending at the close of
trading on the Determination Date. If the price of Regions Common Stock is
adjusted at any time following the first day of such period and prior to
the Effective Time by reason of any action by Regions of the nature
described in the second sentence of Section 3.2, then all prices preceding
such adjustment shall themselves be adjusted so as to be comparable with
those following such adjustment.
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"BUSINESS COMBINATION" shall mean an acquisition of, merger or
combination with, share exchange involving any class of voting stock of,
sale of more than twenty-five percent (25%) of the consolidated assets by,
or other business combination involving, or tender offer for or sale or
issuance of any equity securities involving an acquisition by a third-party
of more than twenty-five percent (25%) of the voting stock of, St. Mary.
"CLOSING" shall mean the closing of the transactions contemplated
hereby, as described in Section 1.2 of this Agreement.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets, or business.
"DEFAULT" shall mean (i) any breach or violation of or default under
any Contract, Order, or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any
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Liability under, any Contract, Order, or Permit; where, in any such event,
such Default is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on a Party.
"DELAWARE CERTIFICATE OF MERGER" shall mean the certificate of merger
to be executed by Regions and filed with the Secretary of State of the
State of Delaware, relating to the Merger as contemplated by Section 1.1 of
this Agreement.
"DETERMINATION DATE" shall mean the date that is seven business days
before the Closing Date.
"DGCL" shall mean the General Corporation Law of Delaware.
"EFFECTIVE TIME" shall mean the date and time at which the Merger
becomes effective as defined in Section 1.3 of this Agreement.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
discharges, releases, or threatened releases of any Hazardous Material, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of any Hazardous
Material.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall have the meaning provided in Section 5.12 of
this Agreement.
"ERISA PLAN" shall have the meaning provided in Section 5.12 of this
Agreement.
"EXCHANGE AGENT" shall have the meaning provided in Section 4.1 of
this Agreement.
"EXCHANGE RATIO" shall have the meaning provided in Section 3.1(b) of
this Agreement.
"EXHIBITS" 1 through 5, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person shall mean the actual
knowledge of the chairman, president, chief financial officer, chief
accounting officer, chief credit officer, general counsel, any assistant or
deputy general counsel, or any senior or executive vice president of such
Person.
"LBCL" shall mean the Louisiana Business Corporation Law.
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"LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities, or business, including those promulgated, interpreted,
or enforced by any of the Regulatory Authorities.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including
costs of investigation, collection, and defense), claim, deficiency,
guaranty, or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute, or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention, or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property or
other Taxes not yet due and payable, (ii) such imperfections of title and
encumbrances, if any, as do not materially detract from the value or
interfere with the present use of any of such Party's Assets, (iii) for
depository institution Subsidiaries of a Party, pledges to secure deposits,
and other Liens incurred in the ordinary course of the banking business,
and (iv) Liens that arise by operation of Law with respect to Liabilities
that are not delinquent or are being contested in good faith.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative, or
other proceeding, or notice (written or oral) by any Person alleging
potential Liability or requesting information about a potential claim
relating to or affecting a Party, its business, its Assets (including
Contracts related to it), or the transactions contemplated by this
Agreement, but shall not include regular, periodic examinations of
depository institutions and their Affiliates by Regulatory Authorities.
"LOAN PROPERTY" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner
or operator of such property, but only with respect to such property.
"LOUISIANA CERTIFICATE OF MERGER" shall mean the certificate of merger
to be executed by Regions and filed with the Secretary of State of the
State of Louisiana, relating to the Merger as contemplated by Section 1.1
of this Agreement.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change, or
occurrence which, together with any other event, change, or occurrence, has
a material adverse impact on (i) the financial position, business, or
results of operations of such Party and its Subsidiaries, taken as a whole,
or (ii) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement, provided that "material adverse impact"
shall not be deemed to include the impact of (a) changes in banking and
similar Laws of general applicability or interpretations thereof by courts
or governmental authorities, (b) changes in GAAP or regulatory accounting
principles generally applicable to banks and savings associations and their
holding companies, (c) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior informed consent of the other Party in
contemplation of the transactions contemplated hereby, (d) circumstances
affecting regional (in the case of Regions) or community (in the case of
St. Mary) bank holding companies generally, and (e) the Merger and
compliance with the provisions of this Agreement on the operating
performance of the Parties.
"MERGER" shall mean the merger of St. Mary into and with Regions
referred to in Section 1.1 of this Agreement.
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"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ NMS" shall mean the National Market System of Nasdaq or other
principal exchange on which Regions Common Stock is listed or quoted at the
relevant time.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"NYSE" shall mean the New York Stock Exchange, Inc.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"PARTY" shall mean either St. Mary or Regions, and "PARTIES" shall
mean both St. Mary and Regions.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, or business.
"PERSON" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"PROXY STATEMENT" shall mean the proxy statement used by St. Mary to
solicit the approval of its stockholders of the transactions contemplated
by this Agreement, which shall include the prospectus of Regions relating
to the issuance of the Regions Common Stock to holders of St. Mary Common
Stock.
"REGIONS COMMON STOCK" shall mean the $0.625 par value common stock of
Regions.
"REGIONS COMPANIES" shall mean, collectively, Regions and all Regions
Subsidiaries.
"REGIONS DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Regions Financial Corporation Disclosure Memorandum" delivered
prior to the date of this Agreement to St. Mary describing in reasonable
detail the matters contained therein and, with respect to each disclosure
made therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"REGIONS FINANCIAL STATEMENTS" shall mean (i) the consolidated
statements of condition (including related notes and schedules, if any) of
Regions as of June 30, 1997, and the restated consolidated statements of
condition (including related notes and schedules, if any) as of December
31, 1996 and 1995, the related statements of income, changes in
stockholders' equity, and cash flows (including related notes and
schedules, if any) for the six months ended June 30, 1997, and for each of
the three years ended December 31, 1996, 1995, and 1994, as filed by
Regions in SEC Documents and reflecting the acquisition of First National
Bancorp accounted for as a pooling of interests, and (ii) the consolidated
statements of condition of Regions (including related notes and schedules,
if any) and related statements of income, changes in stockholders' equity,
and cash flows (including related notes and schedules, if any) included in
SEC Documents filed with respect to periods ended subsequent to June 30,
1997.
"REGIONS SUBSIDIARIES" shall mean the Subsidiaries of Regions, which
shall include the Regions Subsidiaries described in Section 6.4 of this
Agreement and any corporation, bank, savings association, or
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other organization acquired as a Subsidiary of Regions in the future and
owned by Regions at the Effective Time.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by
Regions under the 1933 Act with respect to the shares of Regions Common
Stock to be issued to the stockholders of St. Mary in connection with the
transactions contemplated by this Agreement and which shall include the
Proxy Statement.
"REGULATORY AUTHORITIES" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of Thrift Supervision
(including its predecessor, the Federal Home Loan Bank Board), the Office
of the Comptroller of the Currency, Federal Deposit Insurance Corporation,
all state regulatory agencies having jurisdiction over the Parties and
their respective Subsidiaries, the NYSE, the NASD, and the SEC.
"REPRESENTATIVES" means with respect to any Party its directors,
officers, employees, agents, advisors, attorneys, accountants, and other
representatives.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock
of a Person or by which a Person is or may be bound to issue additional
shares of its capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"ST. MARY BENEFIT PLANS" shall have the meaning set forth in Section
5.12 of this Agreement.
"ST. MARY COMMON STOCK" shall mean the $5.00 par value common stock of
St. Mary.
"ST. MARY COMPANIES" shall mean, collectively, St. Mary and all St.
Mary Subsidiaries.
"ST. MARY DISCLOSURE MEMORANDUM" shall mean the written information
entitled "St. Mary Holding Corporation Disclosure Memorandum" delivered
prior to the 30th day after the date of this Agreement to Regions
describing in reasonable detail the matters contained therein and, with
respect to each disclosure made therein, specifically referencing each
Section of this Agreement under which such disclosure is being made.
Information disclosed with respect to one Section shall not be deemed to be
disclosed for purposes of any other Section not specifically referenced
with respect thereto.
"ST. MARY FINANCIAL STATEMENTS" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of St. Mary
as of June 30, 1997, and as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in stockholders' equity, and
cash flows (including related notes and schedules, if any) for the six
months ended June 30, 1997, and for each of the three years ended December
31, 1996, 1995, and 1994, included in the St. Mary Disclosure Memorandum,
and (ii) the consolidated balance sheets of St. Mary (including related
notes and schedules, if any) and related statements of income, changes in
stockholders' equity, and cash flows (including related notes and
schedules, if any) with respect to quarterly periods ended subsequent to
June 30, 1997.
"ST. MARY SUBSIDIARIES" shall mean the Subsidiaries of St. Mary, which
shall include the St. Mary Subsidiaries described in Section 5.4 of this
Agreement and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of St. Mary in the future and owned
by St. Mary at the Effective Time.
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"STOCKHOLDERS' MEETING" shall mean the meeting of the stockholders of
St. Mary to be held pursuant to Section 8.1 of this Agreement, including
any adjournment or adjournments thereof.
"SUBSIDIARIES" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 50% or
more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its
parent; provided, there shall not be included any such entity acquired
through foreclosure or any such entity the equity securities of which are
owned or controlled in a fiduciary capacity.
"SURVIVING CORPORATION" shall mean Regions as the surviving bank
holding company resulting from the Merger.
"TAX" or "TAXES" shall mean all federal, state, local, and foreign
taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall
profits, environmental, federal highway use, commercial rent, customs
duties, capital stock, paid-up capital, profits, withholding, Social
Security, single business and unemployment, disability, real property,
personal property, registration, ad valorem, value added, alternative or
add-on minimum, estimated, or other tax or governmental fee of any kind
whatsoever, imposed or required to be withheld by the United States or any
state, local, foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto.
Any singular term in this Agreement shall be deemed to include the plural, and
any plural term the singular. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation."
11.2 EXPENSES. (a) Except as otherwise provided in this Section 11.2, each
of the Parties shall bear and pay all direct costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including filing, registration, and application fees, printing fees, and fees
and expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, except that Regions shall bear and pay the filing fees
payable in connection with the Registration Statement and the Proxy Statement
and printing costs incurred in connection with the printing of the Registration
Statement and the Proxy Statement.
(b) Notwithstanding the foregoing, if this Agreement is terminated by St.
Mary pursuant to Section 10.1(g) of this Agreement and Regions does not elect to
increase the Exchange Ratio as provided for in such Section 10.1(g), St. Mary
shall pay to Regions an amount in cash equal to $250,000, which sum represents
the direct costs and expenses (including, without limitation, fees and expenses
of Regions' financial or other consultants, printing costs, investment bankers,
accountants, and counsel) incurred by Regions in negotiating and carrying out
the transactions contemplated by this Agreement, and the indirect costs and
expenses incurred by Regions in connection with the transactions contemplated by
this Agreement including Regions' management time devoted to negotiation and
preparation for such transaction.
(c) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful and knowing breach by a
Party of the terms of this Agreement or otherwise limit the rights of the
nonbreaching Party.
11.3 BROKERS AND FINDERS. Except for Chaffe & Associates, Inc. as to St.
Mary, each of the Parties represents and warrants that neither it nor any of its
officers, directors, employees, or Affiliates has employed any broker or finder
or incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his or its representing or being retained by or
allegedly representing or being retained by St. Mary or Regions, each of St.
Mary and Regions, as the case may be, agrees to indemnify and hold the other
Party harmless of and from any Liability in respect of any such claim.
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11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral, other than the
confidentiality agreement between the Parties, which shall remain in effect.
Except as contemplated by Articles 3 and 4 of this Agreement and Sections
8.1(b), 8.12 and 8.14 of this Agreement, nothing in this Agreement expressed or
implied, is intended to confer upon any Person, other than the Parties or their
respective successors, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement.
11.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties; provided, that after any
approval by the holders of St. Mary Common Stock, there shall be made no
amendment that pursuant to the LBCL requires further approval by such
stockholders without the further approval of such stockholders.
11.6 WAIVERS. (a) Prior to or at the Effective Time, Regions, acting
through its Board of Directors, chief executive officer, vice chairman, or other
authorized officer, shall have the right to waive any Default in the performance
of any term of this Agreement by St. Mary, to waive or extend the time for the
compliance or fulfillment by St. Mary of any and all of its obligations under
this Agreement, and to waive any or all of the conditions precedent to the
obligations of Regions under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of Regions
except that any unfulfilled conditions shall be deemed to have been waived at
the Effective Time.
(b) Prior to or at the Effective Time, St. Mary, acting through its Board
of Directors, chief executive officer, or other authorized officer, shall have
the right to waive any Default in the performance of any term of this Agreement
by Regions, to waive or extend the time for the compliance or fulfillment by
Regions of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of St. Mary under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing signed
by a duly authorized officer of St. Mary except that any unfulfilled conditions
shall be deemed to have been waived at the Effective Time.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by the Parties and their respective successors and assigns.
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11.8 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
<TABLE>
<S> <C>
St. Mary: St. Mary Holding Corporation
1504 Hospital Avenue
Franklin, Louisiana 70538-3723
Telecopy Number: (504) 388-9678
Attention: James J. Bailey III
Chairman of the Board
Copy to Counsel: Correro Fishman Haygood Phelps
Weiss Walmsley & Casteix, L.L.P.
201 St. Charles Avenue -- 47th Floor
New Orleans, Louisiana 70170-4700
Telecopy Number (504) 586-5250
Attention: Louis Y. Fishman
Regions: Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7571
Attention: Richard D. Horsley
Vice Chairman and Executive Financial Officer
Copy to Counsel: Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7751
Attention: Samuel E. Upchurch, Jr.
General Counsel and Corporate Secretary
</TABLE>
11.9 GOVERNING LAW. Except to the extent the laws of the State of
Louisiana also apply to the Merger, this Agreement shall be governed by and
construed in accordance with the Laws of the State of Delaware, without regard
to any applicable conflicts of Laws.
11.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 CAPTIONS. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of the
Parties.
11.13 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof
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<PAGE> 139
in any court of the United States or any state having jurisdiction, this being
in addition to any other remedy to which they are entitled at law or in equity.
11.14 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
<TABLE>
<S> <C>
ATTEST: ST. MARY HOLDING CORPORATION
By: /s/ V. GEORGE RAMIREZ, JR. By: /s/ JAMES J. BAILEY III
------------------------------------------------- -------------------------------------------------
V. George Ramirez, Jr. James J. Bailey III
Secretary Chairman of the Board
[CORPORATE SEAL]
REGIONS FINANCIAL CORPORATION
By: /s/ SAMUEL E. UPCHURCH, JR. By: /s/ RICHARD D. HORSLEY
------------------------------------------------- -------------------------------------------------
Samuel E. Upchurch, Jr. Richard D. Horsley
General Counsel and Vice Chairman and
Corporate Secretary Executive Financial Officer
[CORPORATE SEAL]
</TABLE>
A-39
<PAGE> 140
[LETTERHEAD OF CHAFFE & ASSOCIATES, INC.]
APPENDIX "B"
, 1998
The Board of Directors
St. Mary Holding Corporation
1504 Hospital Avenue
Franklin, LA 70538-0587
Attention: Mr. James J. Bailey III
Chairman
Gentlemen:
We understand that St. Mary Holding Corporation ("St. Mary") and Regions
Financial Corp. ("Regions") have entered into an Agreement and Plan of Merger,
dated as of November 3, 1997 (the "Agreement") which provides, among other
things, for the merger of St. Mary into Regions. Pursuant to the Agreement, each
share of St. Mary Common Stock shall be converted into the Merger Consideration,
as defined in the Agreement.
You have asked our opinion as to whether the Merger Consideration is fair,
from a financial point of view, to the stockholders of St. Mary.
Chaffe & Associates, Inc. ("Chaffe"), through its experience in the
securities industry, investment analysis and appraisal, and in related corporate
finance and investment banking activities, including mergers and acquisitions,
corporate recapitalization, and valuations for corporate and other purposes,
states that it is competent to provide the opinion as to the fairness of the
Merger Consideration. Neither Chaffe nor any of its officers or employees has an
interest in St. Mary or Regions Common Stock. The fee received for the
preparation and delivery of the opinion is not dependent or contingent upon any
transaction.
In connection with rendering its opinion, Chaffe, among other things: (i)
reviewed a copy of the Agreement; (ii) reviewed and analyzed certain
publicly-available financial statements and other information of Regions; (iii)
reviewed and analyzed certain internal financial statements and other financial
and operating data concerning St. Mary, prepared by the management of St. Mary,
including budget projections; (iv) discussed the past and current operations and
financial condition, and the prospects of St. Mary with senior executives of St.
Mary; (v) reviewed the historical prices and trading volumes of the shares of
Regions Common Stock; (vi) compared the financial performance of Regions, and
the prices and trading activity of the Regions Common Stock, with that of
certain other comparable publicly-traded companies and their securities; (vii)
reviewed the financial terms of business combinations in the commercial banking
industry specifically and other industries generally, which Chaffe deemed
generally comparable to the proposed transaction; (viii) considered a number of
valuation methodologies, including among others, those that incorporate book
value, deposit base premium and capitalization of earnings; and (ix) performed
such valuations and such other studies and analyses as we deemed appropriate to
this opinion.
In its review, Chaffe relied, without independent verification, upon the
accuracy and completeness of the historical and projected financial information
and all other information reviewed by it for purposes of its opinion. Chaffe did
not make or obtain an independent review of St. Mary's assets or liabilities,
nor was Chaffe furnished with any such appraisals. Chaffe relied solely on St.
Mary for information as to the adequacy of St. Mary's respective loan loss
reserves and values of other real estate owned. With respect to St. Mary's
projected financial results, Chaffe has assumed that they were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the management of St. Mary of future financial performance of St.
Mary. This opinion was necessarily based upon market, economic and other
conditions as they existed on, and could be evaluated as of, the date hereof.
Chaffe expressed no opinion on the tax consequences of the proposed transaction
or the effect of any tax consequences on the value to be received by the holders
of St. Mary Common Stock.
<PAGE> 141
Based upon and subject to the foregoing and based upon such other matters
as we considered relevant, it is our opinion on the date hereof that the Merger
Consideration is fair, from a financial point of view, to the holders of St.
Mary Common Stock.
Very truly yours,
CHAFFE & ASSOCIATES, INC.
<PAGE> 142
APPENDIX C
LOUISIANA STATUTES ANNOTATED-REVISED STATUTES 12:131
SEC. 131. RIGHTS OF A SHAREHOLDER DISSENTING FROM CERTAIN CORPORATE ACTIONS
A. Except as provided in subsection B of this section, if a corporation
has, by vote of its shareholders, authorized a sale, lease or exchange of all of
its assets, or has, by vote of its shareholders, become a party to a merger or
consolidation, then, unless such authorization or action shall have been given
or approved by at least eighty per cent of the total voting power, a shareholder
who voted against such corporate action shall have the right to dissent. If a
corporation has become a party to a merger pursuant to R.S. 12:112(H), the
shareholders of any subsidiaries party to the merger shall have the right to
dissent without regard to the proportion of the voting power which approved the
merger and despite the fact that the merger was not approved by vote of the
shareholders of any of the corporations involved.
B. The right to dissent provided by this Section shall not exist in the
case of:
(1) A sale pursuant to an order of a court having jurisdiction in the
premises.
(2) A sale for cash on terms requiring distribution of all or
substantially all of the net proceeds to the shareholders in accordance
with their respective interests within one year after the date of the sale.
(3) Shareholders holding shares of any class of stock which, at the
record date fixed to determine shareholders entitled to receive notice of
and to vote at the meeting of shareholders at which a merger or
consolidation was acted on, were listed on a national securities exchange,
unless the articles of the corporation issuing such stock provide otherwise
or the shares of such shareholders were not converted by the merger or
consolidation solely into shares of the surviving or new corporation.
C. Except as provided in the last sentence of this subsection, any
shareholder electing to exercise such right of dissent shall file with the
corporation, prior to or at the meeting of shareholders at which such proposed
corporate action is submitted to a vote, a written objection to such proposed
corporate action, and shall vote his shares against such action. If such
proposed corporate action be taken by the required vote, but by less than eighty
per cent of the total voting power, and the merger, consolidation or sale, lease
or exchange of assets authorized thereby be effected, the corporation shall
promptly thereafter give written notice thereof, by registered mail, to each
shareholder who filed such written objection to, and voted his shares against,
such action, at such shareholder's last address on the corporation's records.
Each such shareholder may, within twenty days after the mailing of such notice
to him, but not thereafter, file with the corporation a demand in writing for
the fair cash value of his shares as of the day before such vote was taken;
provided that he state in such demand the value demanded, and a post office
address to which the reply of the corporation may be sent, and at the same time
deposit in escrow in a chartered bank or trust company located in the parish of
the registered office of the corporation, the certificates representing his
shares, duly endorsed and transferred to the corporation upon the sole condition
that said certificates shall be delivered to the corporation upon payment of the
value of the shares determined in accordance with the provisions of this
section. With his demand the shareholder shall deliver to the corporation, the
written acknowledgment of such bank or trust company that it so holds his
certificates of stock. Unless the objection, demand and acknowledgment aforesaid
be made and delivered by the shareholder within the period above limited, he
shall conclusively be presumed to have acquiesced in the corporate action
proposed or taken. In the case of a merger pursuant to R.S. 12:112(H), the
dissenting shareholder need not file an objection with the corporation nor vote
against the merger, but need only file with the corporation, within twenty days
after a copy of the merger certificate was mailed to him, a demand in writing
for the cash value of his shares as of the day before the certificate was filed
with the secretary of state, state in such demand the value demanded and a post
office address to which the corporation's reply may be sent, deposit the
certificates representing his shares in escrow as hereinabove provided, and
deliver to the corporation with his demand the acknowledgment of the escrow bank
or trust company as hereinabove prescribed.
D. If the corporation does not agree to the value so stated and demanded,
or does not agree that a payment is due, it shall, within twenty days after
receipt of such demand and acknowledgment, notify in writing the shareholder, at
the designated post office address, of its disagreement, and shall state in such
notice
C-1
<PAGE> 143
the value it will agree to pay if any payment should be held to be due;
otherwise it shall be liable for, and shall pay to the dissatisfied shareholder,
the value demanded by him for his shares.
E. In case of disagreement as to such fair cash value, or as to whether any
payment is due, after compliance by the parties with the provisions of
subsections C and D of this section, the dissatisfied shareholder, within sixty
days after receipt of notice in writing of the corporation's disagreement, but
not thereafter, may file suit against the corporation, or the merged or
consolidated corporation, as the case may be, in the district court of the
parish in which the corporation or the merged or consolidated corporation, as
the case may be, has its registered office, praying the court to fix and decree
the fair cash value of the dissatisfied shareholder's shares as of the day
before such corporate action complained of was taken, and the court shall, on
such evidence as may be adduced in relation thereto, determine summarily whether
any payment is due, and, if so, such cash value, and render judgment
accordingly. Any shareholder entitled to file such suit may, within such
sixty-day period but not thereafter, intervene as a plaintiff in such suit filed
by another shareholder, and recover therein judgment against the corporation for
the fair cash value of his shares. No order or decree shall be made by the court
staying the proposed corporate action, and any such corporate action may be
carried to completion notwithstanding any such suit. Failure of the shareholder
to bring suit, or to intervene in such a suit, within sixty days after receipt
of notice of disagreement by the corporation shall conclusively bind the
shareholder (1) by the corporation's statement that no payment is due, or (2) if
the corporation does not contend that no payment is due, to accept the value of
his shares as fixed by the corporation in its notice of disagreement.
F. When the fair value of the shares has been agreed upon between the
shareholder and the corporation, or when the corporation has become liable for
the value demanded by the shareholder because of failure to give notice of
disagreement and of the value it will pay, or when the shareholder has become
bound to accept the value the corporation agrees is due because of his failure
to bring suit within sixty days after receipt of notice of the corporation's
disagreement, the action of the shareholder to recover such value must be
brought within five years from the date the value was agreed upon, or the
liability of the corporation became fixed.
G. If the corporation or the merged or consolidated corporation, as the
case may be, shall, in its notice of disagreement, have offered to pay to the
dissatisfied shareholder on demand an amount in cash deemed by it to be the fair
cash value of his shares, and if, on the institution of a suit by the
dissatisfied shareholder claiming an amount in excess of the amount so offered,
the corporation, or the merged or consolidated corporation, as the case may be,
shall deposit in the registry of the court, there to remain until the final
determination of the cause, the amount so offered, then, if the amount finally
awarded such shareholder, exclusive of interest and costs, be more than the
amount offered and deposited as aforesaid, the costs of the proceeding shall be
taxed against the corporation, or the merged or consolidated corporation, as the
case may be; otherwise the costs of the proceeding shall be taxed against such
shareholder.
H. Upon filing a demand for the value of his shares, the shareholder shall
cease to have any of the rights of a shareholder except the rights accorded by
this section. Such a demand may be withdrawn by the shareholder at any time
before the corporation gives notice of disagreement, as provided in subsection D
of this section. After such notice of disagreement is given, withdrawal of a
notice of election shall require the written consent of the corporation. If a
notice of election is withdrawn, or the proposed corporate action is abandoned
or rescinded, or a court shall determine that the shareholder is not entitled to
receive payment for his shares, or the shareholder shall otherwise lose his
dissenter's rights, he shall not have the right to receive payment for his
shares, his share certificates shall be returned to him (and, on his request,
new certificates shall be issued to him in exchange for the old ones endorsed to
the corporation), and he shall be reinstated to all his rights as a shareholder
as of the filing of his demand for value, including any intervening preemptive
rights, and the right to payment of any intervening dividend or other
distribution, or, if any such rights have expired or any such dividend or
distribution other than in cash has been completed, in lieu thereof, at the
election of the corporation, the fair value thereof in cash as determined by the
board as of the time of such expiration or completion, but without prejudice
otherwise to any corporate proceedings that may have been taken in the interim.
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<PAGE> 144
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Tenth of the Certificate of Incorporation of the Registrant
provides:
"(a) The corporation shall indemnify its officers, directors,
employees, and agents to the full extent permitted by the General
Corporation Law of Delaware. (b) No director of the corporation shall be
personally liable to the corporation or its stockholders for monetary
damages, for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the corporation or
its stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derived an improper personal benefit."
Section 145 of the Delaware General Corporation law empowers the Company
to indemnify its officers and directors under certain circumstances. The
pertinent provisions of that statute read as follows:
"(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
"(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
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<PAGE> 145
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
"(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
"(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
"(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
"(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
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<PAGE> 146
"(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
"(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
"(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
"(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
"(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees)."
The Registrant has purchased a directors' and officers' liability insurance
contract which provides, within stated limits, reimbursement either to a
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<PAGE> 147
director or officer whose actions in his capacity result in liability, or to the
Registrant, in the event it has indemnified the director or officer. Major
exclusions from coverage include libel, slander, personal profit based on inside
information, illegal payments, dishonesty, accounting of securities profits in
violation of Section 16(b) of the Securities Exchange Act of 1934 and acts
within the scope of the Pension Reform Act of 1974.
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------------------------------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of November 3, 1997, by
and between St. Mary Holding Corporation and Regions Financial
Corporation -- included as Appendix A to the Proxy
Statement/Prospectus.
4.1 -- Certificate of Incorporation of Regions Financial Corporation -- incorporated by reference from S-4
Registration Statement of Regions Financial Corporation, file no. 333-37361.
4.2 -- By-laws of Regions Financial Corporation -- incorporated by reference from S-4 Registration Statement of
Regions Financial Corporation, file no. 333-37361.
5. -- Opinion re: legality.
8. -- Form of Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Castaing, Hussey & Lolan, LLP
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- included in Exhibit 5.
23.4 -- Consent of Alston & Bird LLP -- to be included in Exhibit 8.
23.5 -- Consent of Chaffe & Associates, Inc.
24. -- Power of Attorney -- the manually signed power of attorney is set forth in the signature page of the
registration statement.
99. -- Form of proxy.
</TABLE>
ITEM 22. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
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<PAGE> 148
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
C.(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
D. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
E. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Birmingham, State of
Alabama on this the 26th day of January, 1998.
REGISTRANT:
REGIONS FINANCIAL CORPORATION
BY: /s/ Richard D. Horsley
--------------------------------
Richard D. Horsley
Vice Chairman of the Board and
Executive Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard D. Horsley and Samuel E. Upchurch, Jr.
and each of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments to this
registration statement, and to file the same with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney- in-fact and agents, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- ------------------------------- ------------------
<S> <C> <C>
/s/ Carl E. Jones, Jr. President and Chief Executive January 26, 1998
- -------------------------- Officer and Director
Carl E. Jones, Jr. (principal executive officer)
/s/ Richard D. Horsley Vice Chairman of the Board and January 26, 1998
- -------------------------- Executive Financial Officer
Richard D. Horsley and Director
(principal financial officer)
/s/ Robert P. Houston Executive Vice President and January 26, 1998
- -------------------------- Comptroller
Robert P. Houston (principal accounting officer)
</TABLE>
<PAGE> 150
<TABLE>
<S> <C> <C>
/s/ Sheila S. Blair Director January 26, 1998
- --------------------------
Sheila S. Blair
/s/ William B. Boles, Sr. Director January 26, 1998
- --------------------------
William B. Boles, Sr.
/s/ James B. Boone, Jr. Director January 26, 1998
- --------------------------
James B. Boone, Jr.
/s/ Albert P. Brewer Director January 26, 1998
- --------------------------
Albert P. Brewer
/s/ James S.M. French Director January 26, 1998
- --------------------------
James S.M. French
/s/ Olin B. King Director January 26, 1998
- --------------------------
Olin B. King
/s/ J. Stanley Mackin Chairman of the Board and January 26, 1998
- -------------------------- Director
J. Stanley Mackin
/s/ Henry E. Simpson Director January 26, 1998
- --------------------------
Henry E. Simpson
/s/ Lee J. Styslinger, Jr. Director January 26, 1998
- --------------------------
Lee J. Styslinger, Jr.
Director
- --------------------------
Robert J. Williams
</TABLE>
<PAGE> 151
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------------------------ ------------
<S> <C> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of November 3, 1997, by
and between St. Mary Holding Corporation and Regions Financial
Corporation -- included as Appendix A to the Proxy
Statement/Prospectus.
4.1 -- Certificate of Incorporation of Regions Financial Corporation -- incorporated by reference from S-4
Registration Statement of Regions Financial Corporation, file no. 333-37361.
4.2 -- By-laws of Regions Financial Corporation -- incorporated by reference from S-4 Registration Statement of
Regions Financial Corporation, file no. 333-37361.
5. -- Opinion re: legality.
8. -- Form of Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Castaing, Hussey & Lolan, LLP
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- included in Exhibit 5.
23.4 -- Consent of Alston & Bird LLP -- to be included in Exhibit 8.
23.5 -- Consent of Chaffe & Associates, Inc.
24. -- Power of Attorney -- the manually signed power of attorney is set forth in the signature page of the
registration statement.
99. -- Form of proxy.
</TABLE>
<PAGE> 1
EXHIBIT 5
[Letterhead of Lange, Simpson, Robinson & Somerville LLP]
January 27, 1998
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Re: Regions Financial Corporation
S-4 Registration Statement
Combination with St. Mary Holding Corporation
Ladies and Gentlemen:
We have acted as counsel for Regions Financial Corporation, a Delaware
corporation ("Regions") in connection with the merger of St. Mary Holding
Corporation ("SMHC") with and into Regions (the "Merger") and in connection with
the registration of shares of common stock of Regions, par value $.625 per share
("Regions Common Stock"), on Form S-4 under the Securities Act of 1933. The
Merger provides for issuance of shares of common stock of Regions, par value
$.625 per share, to the stockholders of SMHC upon consummation of the Merger.
The maximum number of shares of Regions to be issued in the Merger is estimated
to be 828,492.
We have examined and are familiar with the registration statement on Form
S-4 filed with the Securities and Exchange Commission, as such registration
statement has been amended to date. We have examined and are familiar with the
records relating to the organization of Regions and the documents and records
as we have deemed relevant for purposes of rendering this opinion.
Based on the foregoing it is our opinion that upon satisfaction of the
conditions precedent to consummation of the Merger, or waiver of such conditions
capable of being waived, and upon consummation of the Merger, the shares of
Regions Common Stock issued pursuant to the Merger will be duly authorized,
validly issued and outstanding, fully paid and non-assessable, with no personal
liability attaching to the ownership thereof.
We hereby consent to the filing of this opinion as an exhibit to the
registration statement and to the reference to Lange, Simpson, Robinson &
Somerville LLP under the caption "Opinions" in the proxy statement/prospectus
forming a part of the registration statement.
Very truly yours,
/s/ Lange, Simpson, Robinson & Somerville LLP
<PAGE> 1
EXHIBIT 8
[ALSTON & BIRD LLP LOGO]
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
404-881-7000
Fax: 404-881-4777
www.alston.com
Philip C. Cook Direct Dial (404)881-7000
[FORM OF TAX OPINION]
January __, 1998
Regions Financial Corporation
417 N. 20th Street
Birmingham, Alabama 35203
St. Mary Holding Corporation
1504 Hospital Avenue
Franklin, Louisiana 70538
Re: Proposed Merger of St. Mary Holding Corporation with and into
Regions Financial Corporation
Ladies and Gentlemen:
We have acted as special tax counsel to Regions Financial Corporation
("Regions"), a corporation organized and existing under the laws of the State of
Delaware, in connection with the proposed merger of St. Mary Holding Corporation
("St. Mary"), a corporation organized and existing under the laws of the
Louisiana, with and into Regions. The Merger (as defined below) will be
effected pursuant to the Agreement and Plan of Merger by and between St. Mary
and Regions, dated as of November 3, 1997 (the "Agreement"). As soon as
practical following the Merger, The St. Mary Bank & Trust Company, a
wholly-owned subsidiary of St. Mary, will be merged with and into a wholly-owned
subsidiary of Regions (the "Bank Merger"). In our capacity as counsel to
Regions, our opinion has been requested with respect to certain of the federal
income tax consequences of the proposed Merger.
In rendering this opinion, we have examined (i) the Internal Revenue
Code of 1986, as amended (the "Code") and Treasury Regulations, (ii) the
legislative history of applicable sections of the Code, and (iii) appropriate
Internal Revenue Service and court decisional authority. In addition, we have
relied upon certain information made known to us as more fully described below.
All capitalized terms used herein without definition shall have the respective
meanings specified in the Agreement, and unless otherwise specified, all section
references herein are to the Code.
1211 East Morehead Street 3605 Glenwood Avenue 601 Pennsylvania Avenue, N.W.
P.O. Drawer 34009 P.O. Drawer 31107 North Building, Suite 250
Charlotte, NC 28234-4009 Raleigh, NC 27622-1107 Washington, DC 20004-2601
704-331-6000 919-420-2200 202-508-3300
Fax: 704-335-2014 Fax: 919-881-3175 Fax: 202-508-3333
<PAGE> 2
Regions Financial Corporation
St. Mary Holding Corporation
January __, 1998
Page 2
INFORMATION RELIED UPON
In rendering the opinions express herein, we have examined such documents
as we have deemed appropriate, including:
(1) the Agreement;
(2) the Registration Statement on Form S-4 filed by Regions with the
Securities and Exchange Commission under the Securities Act of 1933,
on January __, 1998, including the Proxy Statement/Prospectus for the
Special Meeting of the Stockholders of St. Mary Holding Corporation;
and
(3) such additional documents as we have considered relevant.
In our examination of such documents, we have assumed, with your consent,
that all documents submitted to us as photocopies faithfully reproduce the
originals thereof, that such originals are authentic, that all such documents
have been or will be duly executed to the extent required, and that all
statements set forth in such documents are accurate.
We have also obtained such additional information and representations as we
have deemed relevant and necessary through consultation with various officers
and representatives of Regions and St. Mary and through certificates provided by
the management of Regions and the management of St. Mary.
You have advised us that the proposed transaction will enable the combined
organization to realize certain economies of scale, provide a wider array of
banking and banking related services to consumers and businesses, and strengthen
market position and increase financial resources to meet competitive challenges
within the greater Franklin, Louisiana market area. To achieve these goals, the
following will occur pursuant to the Agreement:
(1) Subject to the terms and conditions of the Agreement, at the Effective
Time, St. Mary shall be merged into and with Regions in accordance with the
provisions of Section 253 of the DGCL and Section 12:112 of the LBCL and with
the effect provided in Section 259 of the DGCL and Section 12:115 of the LBCL
(the "Merger"). Regions shall be the Surviving Corporation of the Merger and
shall continue to be governed by the Laws of the State of Delaware. The Merger
shall be consummated pursuant to the terms of the Agreement, which has been
approved and adopted by the respective boards of Directors of St. Mary and
Regions.
(2) Subject to the provisions of Article 3 of the Agreement, at the
Effective Time, by virtue of the Merger and without any action on the part of
St. Mary, Regions or the stockholders thereof, the shares of the constituent
corporations shall be converted as follows:
<PAGE> 3
Regions Financial Corporation
St. Mary Holding Corporation
January __, 1998
Page 3
(a) Each share of Regions Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(b) Each share of St. Mary Common Stock (excluding shares to
be canceled as provided in Section 3.3 of the Agreement, and excluding
shares held by stockholders who perfect their dissenters' rights of
appraisal) issued and outstanding at the Effective Time shall cease to
be outstanding and shall be converted into and exchanged for 2.1 shares
of Regions Common Stock (subject to adjustment as described in the
Agreement, the "Exchange Ratio"):
(3) Each of the shares of St. Mary Common Stock held by any St. Mary
Company or by any Regions Company, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
(4) Any holder of shares of St. Mary Common Stock who perfects such
holder's dissenters' rights of appraisal in accordance with and as contemplated
by Section 12:131 of LBCL shall be entitled to receive the value of such shares
in cash as determined pursuant to such provision of Law; provided, that no
such payment shall be made to any dissenting stockholder unless and until such
dissenting stockholder has complied with the applicable provisions of the LBCL,
including the provisions of Section 131 thereof relating to the deposit in
escrow, endorsement, and transfer of the certificate or certificates
representing the shares for which payment is being made.
(5) Notwithstanding any other provision of the Agreement, each holder
of shares of St. Mary Common Stock exchanged pursuant to the Merger or of
options to purchase shares of St. Mary Common Stock, who would otherwise have
been entitled to receive a fraction of a share of Regions Common Stock (after
taking into account all certificates delivered by such holder) shall receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of Regions Common Stock multiplied by the market value (as determined
pursuant to the Agreement) of one share of Regions Common Stock at the Effective
Time, in the case of shares exchanged pursuant to the Merger, or the date of
exercise, in the case of options.
(6) At the Effective Time, each award, option, or other right to
purchase or acquire shares of St. Mary Common Stock pursuant to stock options,
stock appreciation rights, or stock awards ("St. Mary Rights") granted by St.
Mary under the St. Mary Stock Plans, which are outstanding at the Effective
Time, whether or not exercisable, shall be converted into and become rights
with respect to Regions Common Stock, and Regions shall assume each St. Mary
Right, in accordance with the terms of the St. Mary Stock Plan and stock option
agreement by which it is evidenced on substantially the same terms and
conditions.
<PAGE> 4
Regions Financial Corporation
St. Mary Holding Corporation
January __, 1998
Page 4
With your consent, we have also assumed that the following statements
are true on the date hereof and will be true on the date the proposed
transaction is consummated:
(1) The fair market value of the Regions Common Stock and other
consideration, if any, received in the aggregate by the stockholders of St.
Mary will be approximately equal to the fair market value of the St. Mary
Common Stock surrendered in exchange therefor.
(2) There is no plan or intention on the part of the stockholders of
St. Mary who own one percent (1%) or more of St. Mary Common Stock, and to the
best of the knowledge of the management of St. Mary, there is no plan or
intention on the part of the remaining stockholders of St. Mary to sell,
exchange, or otherwise dispose of a number of shares of Regions Common Stock to
be received in the proposed transaction that would reduce their holdings in
Regions Common Stock received to a number of shares having, in the aggregate, a
value as of the Effective Time of less than fifty percent (50%) of the total
value of all shares of St. Mary Common Stock outstanding immediately prior to
the Effective Time. For purposes of this assumption, shares of St. Mary Common
Stock exchanged for cash or other property, surrendered by dissenters or
exchanged for cash in lieu of fractional shares of Regions Common Stock will be
treated as outstanding St. Mary Common Stock as of the Effective Time.
Moreover, shares of St. Mary Common Stock and shares of Regions Common Stock
held by St. Mary stockholders and otherwise sold, redeemed, or disposed of
prior or subsequent to the transaction will be considered in making this
assumption.
(3) Regions has no plan or intention to redeem or otherwise reacquire
any shares of Regions Common Stock issued in the Merger, except for purchases
of stock in the open market in the normal course of business executed through
an independent broker in which Regions is not aware of the identity of any
seller or in private placement transactions in which the sellers are not former
St. Mary stockholders.
(4) Regions has no plan or intention to dispose of any of the assets
of St. Mary acquired in the transaction, except for the Bank Merger,
dispositions made in the ordinary course of business or transfers described in
Section 368(a)(2)(C).
(5) The liabilities of St. Mary assumed by Regions and the liabilities
to which the transferred assets of St. Mary are subject were incurred by St.
Mary in the ordinary course of its business.
(6) Following the transaction, Regions will continue the historic
business of St. Mary or use a significant portion of St. Mary's historic
business assets in a business.
(7) Regions, St. Mary, and the stockholders of St. Mary will pay their
respective expenses, if any, incurred in connection with the transaction,
except that Regions shall bear and pay the filing fees payable in connection
with the Registration
<PAGE> 5
Regions Financial Corporation
St. Mary Holding Corporation
January __, 1998
Page 5
Statement and the Proxy Statement and printing costs incurred in connection
with the printing of the Registration Statement and the Proxy Statement.
(8) There is no intercorporate indebtedness existing between St. Mary
or any of its subsidiaries and Regions or any of its subsidiaries that was
issued, acquired, or will be settled at a discount.
(9) St. Mary is not under the jurisdiction of a court in a case under
Title 11 of the United States Code or a receivership, foreclosure, or similar
proceeding in a federal or state court.
(10) Both the fair market value and the total adjusted basis of the
assets of St. Mary transferred to Regions will equal or exceed the sum of the
liabilities assumed by Regions plus the amount of the liabilities, if any, to
which the transferred assets are subject.
(11) The payment of cash to St. Mary stockholders in lieu of
fractional shares of Regions Common Stock is solely for the purpose of avoiding
the expense and inconvenience to Regions of issuing fractional shares and does
not represent separately bargained for consideration. The total cash
consideration that will be paid in the transaction to the St. Mary stockholders
instead of issuing fractional shares of Regions Common Stock will not exceed
one percent (1%) of the total consideration that will be issued in the
transaction to the St. Mary stockholders in exchange for their shares of St.
Mary Common Stock. The fractional share interests of each St. Mary stockholder
will be aggregated, and no St. Mary stockholder will receive cash in an amount
equal to or greater than the value of one full share of Regions Common Stock.
(12) None of the compensation received by any stockholder-employees of
St. Mary will be separate consideration for, or allocable to, any of their
shares of St. Mary Common Stock; none of the shares of Regions Common Stock
received by any stockholder-employees will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to any
stockholder-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
(13) At all times during the five-year period ending on the Effective
Date of the Merger, the fair market value of all of St. Mary's United States
real property interests was and will have been less than fifty percent (50%) of
the fair market value of the total of (a) its United States real property
interests, (b) its interests in real property located outside the United States,
and (c) its other assets used or held for use in a trade or business. For
purposes of the preceding sentence, (i) United States real property interests
include all interests (other than an interest solely as a creditor) in real
property and associated personal property (such as movable walls and
furnishings) located in the United States or the Virgin Islands and interests
in any domestic corporation (other than a controlled
<PAGE> 6
Regions Financial Corporation
St. Mary Holding Corporation
January __, 1998
Page 6
corporation) owning any United States real property interest, (ii) St. Mary is
treated as owning its proportionate share (based on the relative fair market
value of its ownership interest to all ownership interests) of the assets owned
by any controlled corporation or any partnership, trust, or estate in which St.
Mary is a partner or beneficiary, and (iii) any such entity in turn is treated
as owning its proportionate share of the assets owned by any controlled
corporation or any partnership, trust, or estate in which the entity is a
partner or beneficiary. As used in this paragraph, "controlled corporation"
means any corporation at least fifty percent (50%) of the fair market value of
the stock of which is owned by St. Mary, in the case of a first-tier subsidiary
of St. Mary or by a controlled corporation, in the case of a lower-tier
subsidiary.
(14) Neither Regions nor St. Mary is an "investment company" as
defined in Section 368(a)(2)(F)(iii) and (iv).
(15) The Agreement represents the entire understanding of St. Mary and
Regions with respect to the Merger.
OPINIONS
Based solely on the information submitted and the representations set
forth above and assuming that the Merger will take place as described in the
Agreement and that the representations made by Regions and St. Mary (including
the representation that St. Mary stockholders will maintain sufficient equity
ownership interests in Regions after the Merger) are true and correct at the
time of the consummation of the Merger, we are of the opinion that:
(1) Provided the Merger qualifies as a statutory merger under the
DGCL and the LBCL, the Merger will be a reorganization within the meaning of
Section 368(a).
(2) The stockholders of St. Mary will recognize no gain or loss upon
the exchange of all of their St. Mary Common Stock solely for shares of Regions
Common Stock.
(3) The basis of the Regions Common Stock received by the St. Mary
stockholders in the Merger will, in each instance, be the same as the basis of
the St. Mary Common Stock surrendered in exchange therefor, less the basis of
any fractional share of Regions Common Stock settled by cash payment.
(4) The holding period of the Regions Common Stock received by the
St. Mary stockholders will, in each instance, include the period during which
the St. Mary Common Stock surrendered in exchange therefor was held, provided
that the St. Mary Common Stock was held as a capital asset on the date of the
exchange.
(5) The payment of cash to St. Mary stockholders in lieu of
fractional share interests of Regions Common Stock will be treated for federal
income tax purposes as if
<PAGE> 7
Regions Financial Corporation
St. Mary Holding Corporation
January __, 1998
Page 7
the fractional shares were distributed as part of the exchange and then were
redeemed by Regions. These cash payments will be treated as having been
received as distributions in full payment in exchange for the shares redeemed as
provided in Section 302(a).
(6) Where solely cash is received by a St. Mary stockholder in exchange
for St. Mary Common Stock pursuant to the exercise of dissenters' rights, such
cash will be treated as having been received in redemption of such holder's St.
Mary Common Stock, subject to the provisions and limitations of Section 302.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined, the additional information that we have obtained, and the
statements set out herein, which we have assumed and you have confirmed to be
true on the date hereof and will be true on the date on which the proposed
transaction is consummated. Our opinions cannot be relied upon if any of the
facts contained in such documents or if such additional information is, or later
becomes, inaccurate, or if any of the statements set out herein is, or later
becomes, inaccurate. Finally, our opinions are limited to the tax matters
specifically covered thereby, and we have not been asked to address, nor have we
addressed, any other tax consequences of the proposed transaction, including for
example any issues related to the Bank Merger, intercompany transactions,
accounting methods, bad debt reserves, or changes in accounting methods
resulting from the Merger.
This opinion is being provided solely for the benefit of Regions, St. Mary
and St. Mary's stockholders. No other person or party shall be entitled to rely
on this opinion.
We consent to the use of this opinion and to the references made to the
firm under the caption "Description of the Transaction--Certain Federal Income
Tax Consequences of the Merger" in the Proxy Statement/Prospectus constituting
part of the Registration Statement on Form S-4 of Regions.
Very truly yours,
ALSTON & BIRD LLP
By:
------------------------
Philip C. Cook
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Regions Financial
Corporation for the registration of up to 828,492 shares of its common stock and
to the incorporation by reference therein of our report dated February 4, 1997
(except for the last two paragraphs of Note Q as to which the date is March 13,
1997) with respect to the consolidated financial statements of Regions
Financial Corporation incorporated by reference in its Annual Report (Form
10-K) for the year ended December 31, 1996, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
Birmingham, Alabama
January 22, 1998
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Regions Financial
Corporation for the registration of its common stock to be issued pursuant to
its proposed merger with St. Mary Holding Corporation and to the inclusion
therein of our report dated February 13, 1997, with respect to the consolidated
financial statements of St. Mary Holding Corporation and also included therein,
filed with the Securities and Exchange Commission.
/s/ Castaing, Hussey & Lolan, LLP
New Iberia, Louisiana
January 22, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF CHAFFE & ASSOCIATES, INC.
We hereby consent to the inclusion as Appendix B to the Proxy
Statement/Prospectus constituting part of the Registration Statement on Form
S-4 of Regions Financial Corporation of our letter to the Board of Directors of
St. Mary Holding Corporation and to the references made to such letter and to
the firm in such Proxy Statement/Prospectus. In giving such consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission thereunder.
/s/ Chaffe & Associates, Inc.
CHAFFE & ASSOCIATES, INC.
New Orleans, Louisiana
January 27, 1998
<PAGE> 1
EXHIBIT 99
ST. MARY HOLDING CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby names, constitutes and appoints _______, _______,
and ________, or any one of them acting in the absence of the others, with full
power of substitution, the lawful attorneys and proxies of the undersigned, to
attend and represent the undersigned at the Special Meeting of Stockholders of
the Company to be held _____, 1998, and at all adjournments and postponements
thereof, and to vote thereat all of the shares of the common stock of the
Company that the undersigned would be entitled to vote if personally present,
such shares to be voted as specified below on Proposal 1 (or, if no
specification is made, then "FOR" Proposal 1) and in accordance with the
discretion of such proxyholders with respect to any other matter that may
properly come before the Special Meeting or any adjournment or postponement
thereof.
1. Proposal to approve the Agreement and Plan of Merger, dated as of
November 3, 1997 (the "Agreement"), by and between the Company and Regions
Financial Corporation ("Regions") pursuant to which the Company will merge
with and into Regions (the "Merger") and each share of the Company's common
stock (except for certain shares held by the Company, Regions, or their
respective subsidiaries) will be converted into 2.1 shares of Regions
common stock, subject to possible adjustment, and under such other terms
and conditions as are set forth in the Agreement and to approve the Merger,
as described in the Agreement.
______ FOR _______ AGAINST ______ ABSTAIN
2. To transact such other business as may properly come before the
meeting or any adjournment thereof
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder, and in the discretion of the persons
named as Proxies on all other matters which may properly come before the
Special Meeting or any adjournment or postponement thereof. If no direction
is made, this proxy will be voted in favor of Proposal 1.
<PAGE> 2
This Proxy revokes all prior proxies with respect to the Special Meeting
and may be revoked prior to its exercise.
Please date and sign exactly as name appears on your stock certificate.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
Date: 1998.
--------------,
-----------------------------------
(Print Name of Stockholder)
-----------------------------------
(Signature of Stockholder)
-----------------------------------
(Print Name of Stockholder)
-----------------------------------
(Signature of Stockholder)
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE
