<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1998 COMMISSION FILE NUMBER
0-6159
REGIONS FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 63-0589368
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
417 North 20th Street, Birmingham, Alabama 35203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 326-7100
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to the filing requirements for at least
the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common Stock, $.625 Par Value-214,100,931 shares outstanding
as of July 31, 1998
<PAGE>
REGIONS FINANCIAL CORPORATION
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Condition -
June 30, 1998, December 31, 1997
and June 30, 1997 2
Consolidated Statements of Income -
Three months ended June 30, 1998 and
June 30, 1997 and Six months ended
June 30, 1998 and June 30, 1997 3
Consolidated Statement of Stockholders' Equity -
Six months ended June 30, 1998 4
Consolidated Statements of Cash Flows -
Six months ended June 30, 1998 and
June 30, 1997 5
Notes to Consolidated Financial Statements -
June 30, 1998 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
June 30 December 31 June 30
1998 1997 1997
ASSETS
Cash and due from banks $ 965,035 $ 780,203 $ 672,719
Interest-bearing deposits in
other banks 86,355 48,162 49,187
Investment securities 2,529,887 2,929,596 2,526,733
Securities available for sale 2,781,985 1,667,690 2,001,889
Trading account assets 18,516 50,676 20,474
Mortgage loans held for sale 717,557 383,840 197,857
Federal funds sold and securities
purchased under agreement
to resell 27,083 118,395 134,111
Loans 18,509,366 17,607,840 16,337,529
Unearned income (36,479) (44,451) (48,888)
Loans, net of unearned income 18,472,887 17,563,389 16,288,641
Allowance for loan losses (226,451) (210,604) (211,813)
Net Loans 18,246,436 17,352,785 16,076,828
Premises and equipment 362,143 333,953 331,620
Interest receivable 212,109 175,844 163,629
Due from customers on acceptances 64,219 157,262 47,115
Other assets 504,371 541,929 498,114
$26,515,696 $24,540,335 $22,720,276
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing $ 2,674,865 $ 2,521,538 $ 2,327,376
Interest-bearing 17,522,706 16,541,981 15,780,689
Total Deposits 20,197,571 19,063,519 18,108,065
Borrowed funds:
Short-term borrowings:
Federal funds purchased and
securities sold under agreement
to repurchase 1,302,809 1,948,582 1,881,108
Commercial paper 54,750 52,750 22,384
Other short-term borrowings 2,084,428 502,834 17,669
Total Short-term Borrowings 3,441,987 2,504,166 1,921,161
Long-term borrowings 366,908 440,426 489,290
Total Borrowed Funds 3,808,895 2,944,592 2,410,451
Bank acceptances outstanding 64,219 157,262 47,115
Other liabilities 250,964 337,301 211,749
Total Liabilities 24,321,649 22,502,674 20,777,380
Stockholders' Equity:
Common Stock, par value $.625 a share:
Authorized - 240,000,000 shares
Issued, including treasury stock -
149,951,761; 146,712,761; and
146,299,986 shares, respectively 93,720 91,695 91,438
Surplus 683,370 656,651 652,187
Undivided profits 1,411,467 1,300,962 1,201,075
Treasury stock, at cost - 0;
363,279; and 0 shares, respectively -0- (13,855) -0-
Unearned restricted stock (8,145) (9,410) (5,628)
Accumulated other comprehensive income 13,635 11,618 3,824
Total Stockholders' Equity 2,194,047 2,037,661 1,942,896
$26,515,696 $24,540,335 $22,720,276
</TABLE>
See notes to consolidated financial statements.
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
Interest Income:
Interest and fees on loans $402,724 $356,457 $797,480 $693,673
Interest on securities:
Taxable interest income 73,840 67,727 145,553 133,469
Tax-exempt interest income 7,747 7,734 15,491 15,771
Total Interest on Securities 81,587 75,461 161,044 149,240
Interest on mortgage loans held
for sale 8,040 2,486 16,173 6,857
Income on federal funds sold
and securities purchased under
agreement to resell 885 1,663 2,974 3,228
Interest on time deposits in other
banks 1,042 536 2,017 1,402
Interest on trading account assets 110 268 416 468
Total Interest Income 494,388 436,871 980,104 854,868
Interest Expense:
Interest on deposits 209,245 182,479 410,505 358,196
Interest on short-term borrowings 33,127 24,366 64,849 44,131
Interest on long-term borrowings 6,564 8,221 13,892 17,648
Total Interest Expense 248,936 215,066 489,246 419,975
Net Interest Income 245,452 221,805 490,858 434,893
Provision for loan losses 12,218 11,052 24,337 22,246
Net Interest Income After Provision
for Loan Losses 233,234 210,753 466,521 412,647
Non-Interest Income:
Trust department income 8,365 7,271 17,360 14,861
Service charges on deposit accounts 32,062 28,350 63,187 56,084
Mortgage servicing and origination
fees 20,200 13,230 37,569 26,712
Securities gains (losses) (53) 52 (122) 516
Other 20,697 16,550 40,588 31,775
Total Non-Interest Income 81,271 65,453 158,582 129,948
Non-Interest Expense:
Salaries and employee benefits 100,839 88,823 199,794 177,154
Net occupancy expense 10,887 11,089 21,184 22,151
Furniture and equipment expense 12,075 9,922 22,968 18,780
Other 56,734 51,065 115,226 97,027
Total Non-Interest Expense 180,535 160,899 359,172 315,112
Income Before Income Taxes 133,970 115,307 265,931 227,483
Applicable income taxes 44,327 37,787 90,085 75,667
Net Income $ 89,643 $ 77,520 $175,846 $151,816
Average number of shares
outstanding 149,883 146,211 149,720 146,030
Average number of shares
outstanding--diluted 153,209 149,147 152,892 149,081
Per share:
Net income $0.60 $0.53 $1.17 $1.04
Net income--diluted $0.59 $0.52 $1.15 $1.02
Cash dividends declared $0.23 $0.20 $0.46 $0.40
</TABLE>
See notes to consolidated financial statements.
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulated
Unearned Other
Common Undivided Treasury Restricted Comprehen-
Stock Surplus Profits Stock Stock sive Income Total
BALANCE AT
JANUARY 1, 1998 $91,695 $656,651 $1,300,962 $(13,855) $(9,410) $11,618 $2,037,661
Comprehensive Income:
Net Income 175,846 175,846
Other comprehensive
income, net of tax
Unrealized gains
(losses) on AFS
securities, net of
reclassification
adjustment 2,017 2,017
Comprehensive income 175,846 2,017 177,863
Equity from acquisitions
accounted for as
poolings of interest 1,631 10,810 4,037 13,855 30,333
Cash dividends declared
($0.23 per common share) (69,378) (69,378)
Common stock transactions:
Stock issued to
employees under
incentive plan 220 13,451 13,671
Stock options exercised 174 2,458 2,632
Amortization of unearned
restricted stock 1,265 1,265
BALANCE AT
JUNE 30, 1998 $93,720 $683,370 $1,411,467 $-- $(8,145) $13,635 $2,194,047
Disclosure of reclassification amount:
Unrealized holding gains(losses) on AFS
securities arising during period $ 1,938
Reclassification adjustment, net of
tax, for gains and losses realized in
net income (79)
Net unrealized gains on AFS
securities, net of tax $ 2,017
</TABLE>
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
<S> <C> <C>
Six Months Ended
June 30
1998 1997
Operating Activities:
Net income $ 175,846 $ 151,816
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization of premises and
equipment 18,807 17,338
Provision for loan losses 24,337 22,246
Net (accretion) of securities (15) (821)
Amortization of loans and other assets 21,330 16,854
Amortization of deposits and borrowings 123 (821)
Provision for losses on other real estate 59 961
Deferred income taxes 2,686 (6,055)
(Gain) on sale of premises and equipment (81) (401)
Realized security losses (gains) 122 (516)
Decrease in trading account assets 32,160 33,190
(Increase) in mortgages held for sale (333,717) 4,250
(Increase) in interest receivable (32,641) (15,222)
Decrease (increase) in other assets 17,692 (63,337)
(Decrease) increase in other liabilities (90,930) 23,157
Stock issued to employees 14,717 8,537
Other 1,676 1,993
Net Cash Provided By Operating Activities (147,829) 193,169
Investing Activities:
Net (increase) in loans (603,327) (973,079)
Proceeds from sale of securities available
for sale 38,773 18,905
Proceeds from maturity of investment securities 746,715 243,305
Proceeds from maturity of securities available
for sale 344,342 185,024
Purchase of investment securities (401,139) (304,931)
Purchase of securities available for sale (1,367,956) (66,229)
Net decrease in interest-bearing deposits
in other banks 4,524 28,377
Proceeds from sale of premises and equipment 1,968 4,335
Purchase of premises and equipment (38,923) (20,596)
Net decrease (increase) in customers'
acceptance liability 93,043 30,993
Net cash received in acquisitions 9,820 170,646
Net Cash (Used) By Investing Activities (1,172,160) (683,250)
Financing Activities:
Net increase in deposits 718,590 376,204
Net (decrease) in short-term borrowings 937,394 251,231
Proceeds from long-term borrowings 213,408 98,275
Payments on long-term borrowings (296,811) (194,904)
Net (decrease) increase in bank acceptance
liability (93,043) (30,993)
Cash dividends (68,661) (55,967)
Purchase of treasury stock 0 (14,959)
Proceeds from exercise of stock options 2,632 2,537
Net Cash Provided (Used) By Financing Activities 1,413,509 431,424
Increase (Decrease) In Cash And Cash Equivalents 93,520 (58,657)
Cash and Cash Equivalents, Beginning of Period 898,598 865,487
Cash And Cash Equivalents, End of Period $ 992,118 $ 806,830
See notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE A -- Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions for Form 10-Q,
and, therefore, do not include all information and footnotes
necessary for a fair presentation of financial position, results
of operations and cash flows in conformity with generally accepted
accounting principles. For a summary of significant accounting
policies that have been consistently followed, see NOTE A to the
Consolidated Financial Statements included in the 1997 Annual Re-
port to Stockholders previously filed as Exhibit 13 to Form 10-K.
It is management's opinion that all adjustments, consisting of
only normal and recurring items necessary for a fair presentation,
have been included.
Prior period financial information has been restated for business
combinations with PALFED, Inc., First United Bancorporation and
First State Corporation, which were consummated in the first
quarter of 1998 and accounted for as poolings of interests
according to Generally Accepted Accounting Principles.
Certain amounts in prior periods have been reclassified to conform
to the current period presentation.
NOTE B -- Business Combinations
Regions consummated no business combinations during the second
quarter of 1998.
On July 31, 1998, Regions issued 64,120,031 shares of common stock
in exchange for all the outstanding stock of First Commercial
Corporation of Little Rock, Arkansas. This transaction, accounted
for as a pooling of interests, added approximately $7.3 billion in
assets. First Commercial reported revenues of $214.4 million, net
income of $60.5 million, earnings per share of $1.61, and diluted
earnings per share of $1.59 for the six months ended June 30,
1998.
As explained in Note A Regions restated prior period financial
information for the PALFED, First United and First State
transactions which were closed in the first quarter of 1998. The
following table presents financial information as reported by
Regions, PALFED, First United, First State and on a combined basis
for the six months ended June 30, 1997.
Net interest income:
Regions $402,068
PALFED 12,423
First State 12,058
First United 8,344
Combined $434,893
Net income:
Regions $143,735
PALFED 2,807
First State 3,494
First United 1,780
Combined $151,816
Net income per share:
Regions $1.05
Combined $1.04
Net income per share - diluted:
Regions $1.03
Combined $1.02
NOTE C - Pending Acquisitions
Regions' pending acquisitions are summarized in the following
table. Those being acquired in exchange for Regions common stock
are expected to be accounted for as poolings of interests and are
subject to applicable shareholder and regulatory approvals.
<TABLE>
<S> <C> <C> <C> <C>
Expected
Number of
Shares of
Regions to
Approximate be
Asset Size Type of Exchange issued(1)
Institution (in millions) Consideration Ratio (in 000's)
Etowah Bank, Regions
of Canton, Common
Georgia $432 Stock 3.20 2,915
First
Community
Banking
Services, Inc. Regions
of Peachtree Common
City, Georgia 131 Stock .625 850
Jacobs Bank, Regions
of Scottsboro, Common
Alabama 190 Stock 13.50 1,350
Village
Bankshares, Regions
Inc., of Common
Tampa, Florida 199 Stock 1.34 1,339
VB&T
Bancshares
Corporation, Regions
of Valdosta, Common
Georgia 75 Stock .6654(2) 400
Meigs County
Bancshares,
Inc., of Regions
Decatur, Common
Tennessee 103 Stock 1.90 577
Bullsboro
BancShares,
Inc., of Regions
Newnan, Common
Georgia 108 Stock 3.65 848
St. James
Bancorporation
Inc., of Regions
Lutcher, Common
Louisiana 152 Stock 4.23(2) 1,039
Branches from
First Union
National Bank
in Valdosta,
Georgia 100 Cash N/A N/A
Arkansas
Banking
Company of Regions
Jonesboro, Common
Arkansas 343 Stock 2.85 1,673
(1) - Based on the number of shares of outstanding stock of each
institution as of the announcement date.
(2) - To be adjusted based on the average of the last sales price
of Regions Common Stock on the Nasdaq National Market over
a specified period.
</TABLE>
NOTE D - New Accounting Standards
As of January 1, 1998, Regions adopted Financial Accounting
Standards Statement No. 130 (Statement 130), 'Reporting
Comprehensive Income'. Statement 130 establishes new rules for the
reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on net
income or stockholders' equity. Statement 130 requires unrealized
gains and losses from available for sale securities, which prior
to adoption were reported separately in shareholders' equity, to
be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements
of Statement 130. Comprehensive income for the six months ended
June 30, 1997, was $152.6 million.
By December 31, 1998, Regions will adopt Financial Accounting
Standards Statement No. 131 (Statement 131), 'Disclosures About
Segments of an Enterprise and Related Information'. Statement 131,
superseding FASB Statement 114, 'Financial Reporting for Segments
of a Business Enterprise', establishes standards for the way
public business enterprises report information about operating
segments in annual financial statements and requires those
enterprises to report selected information about operating
segments in interim financial reports. The adoption of Statement
131 will have no effect on the results of operations or financial
position of Regions.
In February 1998, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 132
'Employers' Disclosures about Pensions and Other Postretirement
Benefits' (Statement 132). Statement 132 standardizes disclosure
requirements for pensions and other postretirement benefits.
Statement 132 does not change the recognition or measurement of
pensions and other postretirement benefits and therefore will have
no effect on the Company's financial statements.
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133 'Accounting for Derivative Instruments and for
Hedging Activities' (Statement 133). Statement 133 requires all
derivatives to be recorded on the balance sheet at fair value.
Statement 133 is effective for fiscal periods beginning after June
15, 1999 and is not expected to have a material effect on the
Company's financial statements.
NOTE E - Year 2000 Compliance
Regions is preparing its computer systems and applications for the
Year 2000. This process involves modifying or replacing certain
hardware and software maintained by Regions as well as
communicating with external service providers to ensure that they
are taking the appropriate action to remedy any Year 2000 issues.
The majority of applications used by Regions are products of
established national vendors. Management expects to have
substantially all of the system and application changes completed
by December 31, 1998, and believes that its level of preparedness
is appropriate. However, there can be no assurance that the
systems of other companies on which Regions' systems rely will be
converted and would not have an adverse impact on the Company's
systems.
Regions estimates that the cumulative cost of the project will be
approximately $15 million. This cost includes personnel cost
related to the modification of systems and applications as well as
the cost to purchase or lease certain hardware and software. In
1998, Region expects to incur approximately $10 million of the
total anticipated amount for the project. The purchase of hardware
and software will be capitalized according to normal policy. Cost
associated with personnel will be expensed in the period incurred.
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Regions' total assets at June 30, 1998, were $26.5 billion--an
increase of 17% over a year earlier. This increase was due to
growth in almost all categories of assets, particularly loans and
securities, due to acquisition activity and internal growth.
Since year-end 1997, total assets have increased 8%, due primarily
to acquisition activity.
Comparisons with the prior year are affected by the GF Bancshares,
Inc. acquisition accounted for as purchase, and by Greenville
Financial Corporation, St. Mary Holding Corporation, and Key
Florida Bancorp, Inc. acquisitions, which were accounted for as
poolings of interests. Prior year financial information has not
been restated to give effect to the Greenville, Key and St. Mary
transactions since the effect is not material. Prior period
financial information has been restated for the business
combinations with PALFED, Inc., First United Bancorporation and
First State Corporation, which were closed in the first quarter of
1998. Relevant 1997 and 1998 acquisitions (excluding the three
business combinations for which prior period financial information
has been restated) are summarized as follows:
<TABLE>
<S> <C> <C> <C> <C>
Date Headquarters Total Assets Accounting
Acquired Company Acquired Location (in thousands) Treatment
December GF Bancshares, Griffen,
1997 Inc. Georgia $ 98,446 Purchase
February Greenville Greenville,
1998 Financial South
Corporation Carolina 143,331 Pooling
March Key Florida Bradenton,
1998 Bancorp, Inc. Florida 207,193 Pooling
March St. Mary Holding Franklin,
1998 Corporation Louisiana 110,216 Pooling
</TABLE>
Loans have increased 13% since a year ago. Loans added from the
purchase acquisition, combined with the three pooling
transactions, accounted for a 2% increase in loans. The remaining
11% increase was attributable to internal growth, primarily in
commercial and real estate loans. Since year-end, total loans
have increased 5%, due to $320 million in loans added by
acquisitions and $588 million in internal growth. The average
yield on loans during the first six months of 1998 was 8.94%,
compared to 8.96% during the same period in 1997. This decrease
was primarily the result of lower average base lending rates.
Non-performing assets were as follows (in thousands):
<TABLE>
<S> <C> <C> <C>
June 30, Dec. 31, June 30,
1998 1997 1997
Non-accruing loans $129,757 $103,588 $ 89,146
Loans past due 90
days or more 21,198 19,179 24,641
Renegotiated loans 2,825 6,543 10,709
Other real estate 13,898 15,247 18,800
Total $167,678 $144,557 $143,296
Non-performing assets
as a percentage of
loans and other real
estate .91% .82% .88%
</TABLE>
Non-accruing loans have increased $40.6 million since June of last
year and $26.2 million since year end. These increases were mainly
in the consumer category combined with the effect of acquisitions
and two commercial credits which were transferred to non-accrual
status in the first quarter of 1998. At June 30, 1998, real estate
loans comprised $50.5 million of total non-accruing loans, with
commercial loans accounting for $32.5 million and consumer loans
$46.8 million. Other real estate decreased $1.3 million since year
end, and $4.9 million since June 1997, due primarily to the
disposition and writedown of several parcels of other real estate.
Activity in the allowance for loan losses is summarized as follows
(in thousands):
<TABLE>
<S> <C> <C>
June 30, June 30,
1998 1997
Balance at beginning of period $210,604 $190,753
Net loans charged-off (recovered):
Commercial 1,306 (3,598)
Real estate 386 (289)
Installment 15,423 18,827
Total 17,115 14,940
Allowance of acquired banks 8,625 13,754
Provision charged to expense 24,337 22,246
Balance at end of period $226,451 $211,813
</TABLE>
Net loan losses in the first six months of 1998 and 1997 were
0.19% of average loans (annualized). At June 30, 1998, the
allowance for loan losses stood at 1.23% of loans, compared to
1.30% a year ago and 1.20% at year end. The allowance for loan
losses as a percentage of non-performing loans and non-performing
assets was 147% and 135%, respectively, at June 30, 1998, compared
to 170% and 148%, respectively, at June 30, 1997.
The allowance for loan losses is maintained at a level deemed
adequate by management to absorb possible losses from loans in the
portfolio. In determining the adequacy of the allowance for loan
losses, management considers numerous factors, including but not
limited to: (1) management's estimate of future economic
conditions and the resulting impact on Regions, (2) management's
estimate of the financial condition and liquidity of certain loan
customers, and (3) management's estimate of collateral values of
property securing certain loans. Because all of these factors and
others involve the use of management's estimation and judgment,
the allowance for loan losses is inherently subject to adjustment
at future dates. At June 30, 1998, it is management's opinion
that the allowance for loan losses is adequate. However,
unfavorable changes in the factors used by management to determine
the adequacy of the allowance, including increased consumer loan
delinquencies and subsequent charge-offs, or the availability of
new information, could require additional provisions, in excess of
normal provisions, to the allowance for loan losses in future
periods.
Total securities have increased 17% since a year ago and 16% since
year end, as a result of securities added by acquisitions in the
first quarter of 1998 and increased balance sheet leveraging.
Mortgage loans held for sale have increased $520 million since
June 30, 1997 and $334 million since year end as a result of
record levels of residential mortgage loan production at Regions'
mortgage banking subsidiary. Residential mortgage loan production
at Regions' mortgage banking subsidiary was approximately $2.0
billion during the first six months of 1998, compared to $933
million during the same time period in 1997.
Interest-bearing deposits in other banks at June 30, 1998 totaled
$86.4 million, an increase of $37.2 million compared to a year ago
and $38.2 compared to year end. These increases resulted from
interest bearing deposits added by acquisitions during the first
quarter of 1998.
Net federal funds purchased and security repurchase agreements
totaled $1.3 billion at June 30, 1998, $1.8 billion at year end
and $1.7 billion at June 30, 1997. The level of federal funds and
security agreements can fluctuate significantly on a day-to-day
basis, depending on funding needs and which sources of funds are
used to satisfy those needs. During the first six months of 1998
net funds purchased averaged $1.2 billion compared to $1.4 billion
for the same period of 1997, indicating less reliance on purchased
funds and the utilization of alternative sources of funds to
support earning asset growth since the second quarter of 1997.
Premises and equipment have increased $28.2 million since year end
and $30.5 million since June 30, 1997. These increases were due
primarily to the addition of premises and equipment obtained
through acquisitions since December 1997 and the installation of
new branch equipment.
Other assets have decreased $37.6 million since year end, but
increased $6.3 million since the second quarter of last year. The
year to year increase was due primarily to increased investment in
low-income housing partnerships, and increased mortgage servicing
rights due to the capitalization of mortgage servicing rights in
accordance with Financial Accounting Standards Board Statement No.
122. The decrease since year end was due to amortization of excess
purchase price and decreases in accounts receivable and
overdrafts.
Total deposits have increased 12% since June of last year. The
deposits acquired in connection with acquisitions resulted in a 3%
increase, with the remaining 9% increase attributable to internal
growth. The internal growth resulted primarily from increases in
certificates of deposit and interest-bearing checking accounts.
Since year end, total deposits have increased 4%, after adjusting
for the deposits acquired in connection with acquisitions during
the first quarter of 1998.
Other short-term borrowings increased $2.1 billion since June 1997
and $1.6 billion since year end. These increases are the result of
Regions' utilization of Federal Home Loan Bank structured notes as
a short-term funding source in late 1997 and throughout the first
half of 1998.
Long-term borrowings have decreased $73.5 million since year end,
and $122.4 million since June 30, 1997. The decrease in long-term
borrowings since year end and the second quarter of 1997 resulted
primarily from maturities of Federal Home Loan Bank advances.
Stockholders' equity was $2.2 billion at June 30, 1998, an
increase of 13% over last year and an increase of 8% since year
end. These increases resulted primarily from internally generated
capital and equity added in connection with acquisitions since
December 1997. The accumulated other comprehensive income totaled
$13.6 million at June 30, 1998, compared to $11.6 million at year
end and $3.8 million at June of 1997. Regions' ratio of equity to
total assets was 8.27% at June 30, 1998, compared to 8.55% a year
ago and 8.30% at year end.
Regions' primary sources of liquidity are maturities from its loan
and securities portfolios. In addition to these sources of
liquidity, Regions has access to purchased funds in the state and
national money markets. Liquidity is further enhanced by a
relatively stable source of deposits. At June 30, 1998, the loan
to deposit ratio was 91.46%, compared to 89.95% a year ago and
92.13% at year end. Regions' management places constant emphasis
on the maintenance of adequate liquidity to meet conditions that
might reasonably be expected to occur.
Net interest income for the first six months of 1998 increased
$56.0 million or 13%, compared to the same period in 1997. The
increased net interest income resulted from a higher level of
earning assets, partially offset by lower spreads on those earning
assets. The net yield on interest-earning assets (taxable
equivalent basis) was 4.27% in the first six months of 1998,
compared to 4.37% in the same period in 1997. This ratio
decreased due partially to unfavorable repricing of the securities
portfolio and slightly higher funding costs in the first half of
1998. For the second quarter of 1998 net interest income increased
$23.6 million or 11% over the second quarter of 1997 due to
increased earning assets.
Total non-interest income increased $28.6 million or 22% over the
first six months of 1997 and $15.8 million or 24% over the second
quarter of 1997. Trust department income increased $2.5 million
or 17% on a year-to-year comparison and $1.1 million or 15% on a
quarterly comparison. This resulted from growth in trust assets,
due to internal growth, changes in fee structures and increases in
personal and employee benefit trust fees. Increased charges for
selected deposit account services, coupled with an increase in the
number of deposit accounts due to acquisitions and internal
growth, resulted in service charges on deposit accounts increasing
$7.1 million or 13% in the first six months of 1998 and $3.7
million or 13% in the second quarter, compared to the same periods
in 1997. Mortgage servicing and origination fees increased $10.9
million or 41% in the first six months of 1998 and $7.0 million in
the second quarter compared to the same periods in 1997. Mortgage
origination fees were up significantly due to increased volume of
new loan production in the first and second quarter of 1998.
Mortgage servicing fees increased 24% on a year-to-year
comparison. The mortgage company's servicing portfolio totaled
$14.4 billion at June 30, 1998. Other non-interest income
increased $8.8 million or 28% in the first six months of 1998 and
$4.1 million or 25% in the second quarter of 1998, compared to the
first six months and second quarter of 1997, primarily due to
higher capitalization of originated mortgage servicing rights,
increased trading account income and increased insurance premiums
and commissions.
Total non-interest expense increased $44.1 million or 14% in the
first six months of 1998 and $19.6 million or 12% in the second
quarter, compared to the same periods in 1997. Salaries and
employee benefits were up 13% in the first six months of 1998
compared to the same period in 1997 and up 14% in the second
quarter of 1998 compared to the same period of in 1997, due to an
increase in the number of employees because of acquisitions, and
increased mortgage loan production related compensation coupled
with normal merit increases and higher benefit costs. Net
occupancy expense and furniture and equipment expense increased 8%
in the first six months of 1998 over the same period in 1997, and
increased 9% in the second quarter of 1998 over the same period in
1997. The increase is primarily due to additional expenses
associated with branch offices and equipment added by the 1998
acquisitions. Other non-interest expense increased $18.2 million
or 19% in the first six months of 1998 and $5.7 million or 11% in
the second quarter over the same periods in 1997, primarily
because of losses on mortgage loans held for sale and increases in
amortization of excess purchase price, amortization of mortgage
servicing rights, postage, and stationery and printing costs.
Income tax expense increased $14.4 million or 19% over the first
six months of 1997, and $6.5 million or 17% over the second
quarter of 1997. This increase was the result of an increase in
taxable income and an increase in taxable income as a percentage
of total income.
Net income for the second quarter was $89.6 million--up 16% over
the second quarter of last year. Year-to-date net income totaled
$175.8 million or $1.17 per share, an increase of 13% on a per
share basis compared to the first six months of 1997. Annualized
return on stockholders' equity increased to 16.63%, compared to
16.04% in the first six months of last year. Annualized return on
assets also increased to 1.40% in the first six months of 1998,
compared to 1.39% for the same period in 1997.
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Stockholders held on July 29,
1998, the proposed merger of First Commercial Corporation
of Little Rock, Arkansas with and into Regions was
approved by the stockholders (105,528,687 votes in favor,
860,515 votes against, 906,180 votes abstained, and
16,664,432 broker non-votes).
Also at the Annual Meeting, three nominees were elected as
directors of Regions to serve three year terms. The
directors elected at the 1998 Annual Meeting were Carl E.
Jones, Jr. (123,223,369 votes in favor and 746,445 votes
withheld), Henry E. Simpson (123,215,065 votes in favor
and 744,749 votes withheld), Robert J. Williams
(123,211,962 votes in favor and 747,852 votes withheld).
In addition, the stockholders approved an amendment to
Article IV of the Certificate of Incorporation to increase
the number of authorized shares of common stock from
240,000,000 to 500,000,000 (119,928,672 votes in favor,
3,288,541 votes against, and 742,601 votes abstained).
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27) Financial Data Schedule (SEC use only)
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the second
quarter of 1998.
On August 12, 1998, A report on Form 8-K was filed
under items 2 and 7. The report related to the
Registrant's completed acquisition of First
Commercial Corporation, headquartered in Little Rock,
Arkansas.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by undersigned thereunto duly authorized.
Regions Financial Corporation
DATE: August 14, 1998 /s/ Robert P. Houston
Robert P. Houston
Executive Vice President and
Comptroller
(Chief Accounting Officer and
Duly Authorized Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 965,035,000 672,719,000
<INT-BEARING-DEPOSITS> 86,355,000 49,187,000
<FED-FUNDS-SOLD> 27,083,000 134,111,000
<TRADING-ASSETS> 18,516,000 20,474,000
<INVESTMENTS-HELD-FOR-SALE> 2,781,985,000 2,001,889,000
<INVESTMENTS-CARRYING> 2,529,887,000 2,526,733,000
<INVESTMENTS-MARKET> 2,566,735,000 2,537,205,000
<LOANS> 18,472,887,000 16,288,641,000
<ALLOWANCE> 226,451,000 211,813,000
<TOTAL-ASSETS> 26,515,696,000 22,720,276,000
<DEPOSITS> 20,197,571,000 18,108,065,000
<SHORT-TERM> 3,441,987,000 1,921,161,000
<LIABILITIES-OTHER> 315,183,000 258,864,000
<LONG-TERM> 366,908,000 489,290,000
<COMMON> 93,720,000 91,438,000
0 0
0 0
<OTHER-SE> 2,100,327,000 1,851,458,000
<TOTAL-LIABILITIES-AND-EQUITY> 26,515,696,000 22,720,276,000
<INTEREST-LOAN> 797,480,000 693,673,000
<INTEREST-INVEST> 161,044,000 149,240,000
<INTEREST-OTHER> 21,580,000 11,955,000
<INTEREST-TOTAL> 980,104,000 854,868,000
<INTEREST-DEPOSIT> 410,505,000 358,196,000
<INTEREST-EXPENSE> 489,246,000 419,975,000
<INTEREST-INCOME-NET> 490,858,000 434,893,000
<LOAN-LOSSES> 24,337,000 22,246,000
<SECURITIES-GAINS> (122,000) 516,000
<EXPENSE-OTHER> 359,172,000 315,112,000
<INCOME-PRETAX> 265,931,000 227,483,000
<INCOME-PRE-EXTRAORDINARY> 265,931,000 227,483,000
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 175,846,000 151,816,000
<EPS-PRIMARY> 1.17 1.04
<EPS-DILUTED> 1.15 1.02
<YIELD-ACTUAL> 4.27 4.37
<LOANS-NON> 129,757,000 89,146,000
<LOANS-PAST> 21,198,000 24,641,000
<LOANS-TROUBLED> 2,825,000 10,709,000
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 210,604,000 190,753,000
<CHARGE-OFFS> 29,574,000 28,596,000
<RECOVERIES> 12,459,000 13,656,000
<ALLOWANCE-CLOSE> 226,451,000 211,813,000
<ALLOWANCE-DOMESTIC> 226,451,000 211,813,000
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 226,451,000 211,813,000
</TABLE>
