<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2000 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) 944-1300
(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-220,645,707 shares outstanding
as of April 30, 2000
<PAGE>
REGIONS FINANCIAL CORPORATION
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Condition -
March 31, 2000, December 31, 1999
and March 31, 1999 2
Consolidated Statements of Income -
Three months ended March 31, 2000 and
March 31, 1999 3
Consolidated Statement of Stockholders' Equity -
Three months ended March 31, 2000 4
Consolidated Statements of Cash Flows -
Three months ended March 31, 2000 and
March 31, 1999 5
Notes to Consolidated Financial Statements -
March 31, 2000 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
March 31 December 31 March 31
2000 1999 1999
ASSETS
Cash and due from banks $ 1,038,303 $ 1,393,418 $ 1,243,942
Interest-bearing deposits in other banks 51,875 9,653 75,492
Investment securities 3,602,979 4,054,279 3,480,541
Securities available for sale 5,528,877 6,858,765 5,489,283
Trading account assets 24,155 14,543 24,447
Mortgage loans held for sale 351,978 567,131 1,046,924
Federal funds sold and securities
purchased under agreement to resell 61,863 66,078 49,089
Loans 29,164,121 28,221,240 25,602,677
Unearned income (82,834) (76,565) (62,441)
Loans, net of unearned income 29,081,287 28,144,675 25,540,236
Allowance for loan losses (352,998) (338,375) (330,151)
Net Loans 28,728,289 27,806,300 25,210,085
Premises and equipment 585,934 580,707 559,241
Interest receivable 300,445 306,707 297,737
Due from customers on acceptances 85,624 72,098 73,036
Other assets 1,058,081 984,716 1,051,946
$41,418,403 $42,714,395 $38,601,763
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing $ 4,853,155 $ 4,419,693 $ 4,473,304
Interest-bearing 27,101,228 25,569,401 24,657,747
Total Deposits 31,954,383 29,989,094 29,131,051
Borrowed funds:
Short-term borrowings:
Federal funds purchased and securities
sold under agreement to repurchase 3,136,794 5,614,613 2,506,805
Commercial paper 26,750 56,750 56,750
Other short-term borrowings 725,045 1,953,622 2,934,584
Total Short-term Borrowings 3,888,589 7,624,985 5,498,139
Long-term borrowings 2,032,411 1,750,861 497,430
Total Borrowed Funds 5,921,000 9,375,846 5,995,569
Bank acceptances outstanding 85,624 72,098 73,036
Other liabilities 316,662 212,245 283,586
Total Liabilities 38,277,669 39,649,283 35,483,242
Stockholders' Equity:
Preferred Stock, par value
$1.00 a share Authorized
5,000,000 shares -0- -0- -0-
Common Stock, par value $.625 a share:
Authorized - 500,000,000 shares
Issued, including treasury stock -
222,171,783; 220,635,661; and
223,910,981 shares, respectively 138,857 137,897 139,944
Surplus 1,051,634 1,022,825 1,167,184
Undivided profits 2,130,595 2,044,209 1,813,790
Treasury stock, at cost - 1,750,000; 0;
and 888 shares, respectively (38,696) -0- (34)
Unearned restricted stock (4,216) (4,719) (6,294)
Accumulated other comprehensive
(loss) income (137,440) (135,100) 3,931
Total Stockholders' Equity 3,140,734 3,065,112 3,118,521
$41,418,403 $42,714,395 $38,601,763
</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>
Three Months Ended
March 31
2000 1999
Interest Income:
Interest and fees on loans $602,957 $512,478
Interest on securities:
Taxable interest income 155,067 121,762
Tax-exempt interest income 10,161 9,798
Total Interest on Securities 165,228 131,560
Interest on mortgage loans held for sale 10,313 20,636
Income on federal funds sold and securities
purchased under agreement to resell 1,129 938
Interest on time deposits in other banks 193 514
Interest on trading account assets 409 315
Total Interest Income 780,229 666,441
Interest Expense:
Interest on deposits 319,177 257,455
Interest on short-term borrowings 77,956 57,599
Interest on long-term borrowings 28,980 8,790
Total Interest Expense 426,113 323,844
Net Interest Income 354,116 342,597
Provision for loan losses 29,177 20,738
Net Interest Income After Provision for Loan
Losses 324,939 321,859
Non-Interest Income:
Trust department income 14,051 12,751
Service charges on deposit accounts 53,408 44,812
Mortgage servicing and origination fees 21,956 33,084
Securities (losses) gains (40,018) 16
Other 117,395 52,452
Total Non-Interest Income 166,792 143,115
Non-Interest Expense:
Salaries and employee benefits 147,253 136,649
Net occupancy expense 15,858 14,656
Furniture and equipment expense 16,997 16,530
Other 91,027 94,740
Total Non-interest Expense 271,135 262,575
Income Before Income Taxes 220,596 202,399
Applicable income taxes 74,591 73,019
Net Income $146,005 $129,380
Average number of shares outstanding 221,299 222,408
Average number of shares outstanding-diluted 222,549 225,467
Per share:
Net income $0.66 $0.58
Net income-diluted $0.66 $0.57
Cash dividends declared $0.27 $0.25
</TABLE>
See notes to consolidated financial statements.
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE> <C> <C> <C> <C> <C> <C> <C>
Accumulated
Unearned Other
Common Undivided Treasury Restricted Comprehensive
Stock Surplus Profits Stock Stock Income Total
BALANCE AT JANUARY 1, 2000 $137,897 $1,022,825 $2,044,209 $ -0- $(4,719) $(135,100) $3,065,112
Comprehensive Income:
Net Income 146,005 146,005
Other comprehensive income,
net of tax
Unrealized (losses) on
available for sale
securities, net of
reclassification adjustment (2,340) (2,340)
Comprehensive income* 146,005 (2,340) 143,665
Cash dividends declared
($0.27 per common share) (59,619) (59,619)
Purchase of treasury stock (38,696) (38,696)
Common stock transactions:
Stock issued for
acquisitions 770 27,172 27,942
Stock issued to employees
under incentive plan 53 459 512
Stock options exercised 137 1,178 1,315
Amortization of unearned
restricted stock 503 503
BALANCE AT MARCH 31, 2000 $138,857 $1,051,634 $2,130,595 $(38,696) $(4,216) $(137,440) $3,140,734
Disclosure of reclassification amount:
Unrealized holding (losses)
on available for sale securities
arising during period $(28,352)
Less:Reclassification adjustment,
net of tax, for gains and losses
realized in net income (26,012)
Net unrealized (losses) on
available for sale securities,
net of tax $ (2,340)
</TABLE>
*Comprehensive income as of March 31, 1999 was $115.5 million.
See notes to consolidated financial statements.
<PAGE>
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
<S> <C> <C>
Three Months Ended
March 31
2000 1999
Operating Activities:
Net income $ 146,005 $ 129,380
Adjustments to reconcile net cash provided by
operating activities
(Gain) on sale of credit card portfolio (67,220) -0-
Depreciation and amortization of premises and
equipment 15,109 14,268
Provision for loan losses 29,177 20,738
Net (accretion) of securities (789) (605)
Amortization of loans and other assets 19,357 17,018
Amortization of deposits and borrowings 235 104
Provision for losses on other real estate 30 17
Deferred income taxes (5,860) 3,460
(Gain) on sale of premises and equipment (613) (485)
Realized securities losses (gains) 40,018 (16)
(Increase) Decrease in trading account assets (9,612) 24,940
Decrease (Increase) in mortgages held for
sale 215,153 (119,256)
Decrease (increase) in interest receivable 9,036 458
(Increase) in other assets (88,935) (107,916)
Increase (decrease) in other liabilities 111,197 (60,842)
Stock issued to employees 3,088 4,871
Other 503 660
Net Cash Provided (Used) By Operating
Activities 415,879 (73,206)
Investing Activities:
Net (increase) in loans (1,116,740) (750,854)
Proceeds from sale of credit card portfolio 344,785 -0-
Proceeds from sale of securities available for
sale 1,139,147 1,730
Proceeds from maturity of investment
securities 459,618 395,959
Proceeds from maturity of securities available
for sale 256,927 672,314
Purchase of investment securities (8,016) (771,049)
Purchase of securities available for sale (78,226) (1,243,986)
Net (increase) decrease in interest-bearing
deposits in other banks (37,530) 69,575
Proceeds from sale of premises and equipment 3,185 6,904
Purchase of premises and equipment (18,843) (30,347)
Net decrease in customers' acceptance
liability (13,526) (15,990)
Net cash received in acquisitions 20,529 118,679
Net Cash Provided (Used) By Investing
Activities 951,310 (1,547,065)
Financing Activities:
Net increase in deposits 1,811,801 207,597
Net (decrease) increase in short-term
borrowings (3,736,396) 997,853
Proceeds from long-term borrowings 446,940 120,876
Payments on long-term borrowings (165,390) (203,486)
Net increase in bank acceptance liability 13,526 15,990
Cash dividends (59,619) (56,341)
Purchase of treasury stock (38,696) (31,299)
Proceeds from exercise of stock options 1,315 9,165
Net Cash (Used) Provided By Financing
Activities (1,726,519) 1,060,355
(Decrease) in Cash and Cash Equivalents (359,330) (559,916)
Cash and Cash Equivalents, Beginning of Period 1,459,496 1,852,947
Cash and Cash Equivalents, End of Period $1,100,166 $1,293,031
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
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 accounting
principles generally accepted in the United States. For a summary
of significant accounting policies that have been consistently
followed, see NOTE A to the Consolidated Financial Statements
included under Item 8 of the Annual Report on Form 10-K. It is
management's opinion that all adjustments, consisting of only
normal and recurring items necessary for a fair presentation, have
been included.
Certain amounts in prior periods have been reclassified to conform
to the current period presentation.
NOTE B -- Business Combinations
In January 2000, Regions issued 1,231,542 shares of common stock
in exchange for all the outstanding stock of LCB Corporation of
Fayetteville, Tennessee. This transaction, accounted for as a
purchase, added approximately $173 million in assets and generated
approximately $12.3 million in excess purchase price.
NOTE C -- Pending Acquisitions
Regions' pending acquisitions are summarized in the following
table. These transactions are expected to be accounted for as
purchases and are subject to applicable shareholder and regulatory
approvals.
Expected
Number of
Shares of
Regions to
Approximate be
Asset Size Type of Exchange issued(1)
Institution (in millions) Consideration Ratio (in 000's)
First National
Bancshares of
Louisiana,
Inc. of Regions
Alexandria, Common
Louisiana $245 Stock .7045 2,404
Heritage
Bancorp, Inc. Regions
of Round Rock, Common
Texas $97 Stock 1.50 782
East Coast
Bank
Corporation of Regions
Ormond Beach, Common
Florida $108 Stock 1,750.00 523
Branches from
AmSouth
Bancorporation
in Fort Smith,
Arkansas $195 Cash N/A N/A
(1) - Based on the number of shares of outstanding stock of each
institution as of the announcement date.
NOTE D -- New Accounting Standards
In June 1999, The FASB issued Statement of Financial Accounting
Standards No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133" (Statement 137). Statement 137 defers for one
year the effective date of FASB Statement of Financial Accounting
Standards No. 133, "Accounting for Derivatives Instruments and
Hedging Activities" (Statement 133). Statement 133 requires all
derivatives to be recorded on the balance sheet at fair value and
establishes "special accounting" for the following three different
types of hedges: hedges of changes in the fair value of assets,
liabilities or firm commitments (referred to as fair value
hedges); hedges of the variable cash flows of forecasted
transactions (cash flow hedges); and hedges of foreign currency
exposures of net investments in foreign operations. As amended,
Statement 133 is effective for quarters in fiscal years beginning
after June 15, 2000. Regions is currently evaluating the impact of
Statement 133 on its financial position and results of operations.
NOTE E -- Year 2000 Compliance
In prior periods, Regions discussed the nature and progress of its
plans to become Year 2000 ready. In 1999, Regions completed its
remediation and testing of systems. As a result of those planning
and remediation efforts, Regions experienced no significant
disruptions in mission critical information technology and non-
information technology systems and believes those systems
successfully responded to the Year 2000 date change. Regions is
not aware of any material problems resulting from Year 2000
issues, either with its products, its internal systems, or its
products or services of third parties. Regions will continue to
monitor its mission critical computer applications and those of
its suppliers and vendors throughout the Year 2000 to ensure that
any latent Year 2000 matters that arise are addressed promptly.
NOTE F -- Sale of Credit Card Portfolio
During the first quarter, Regions completed the sale of its $278
million credit card portfolio. As a result of the transaction,
Regions recognized a $67.2 million pre-tax gain ($44.0 million
after tax or $.20 per share). As a part of this transaction,
Regions will enter into a long-term arrangement through which
Regions customers will continue to be offered Regions-branded
credit cards. Additionally, Regions will receive fee-based income
related to credit card products on an ongoing basis.
NOTE G. Business Segment Information
Regions' segment information is presented geographically, based on Regions'
three operating regions in the Southeastern United States. Each region is a
strategic business unit that serves a particular group of customers in a
specified area. The company's three reportable regions are West, Central, and
East. These regions represent the company's branch banking functions and have
separate managements that are responsible for the operation of each business
unit. The West region consists of the states of Arkansas, Louisiana, and east
Texas. The Central region is made up of Alabama and Tennessee. Georgia, South
Carolina, and Florida comprise the East region. In addition, Regions has
included the activity of its treasury division, which includes its bond
portfolio, indirect mortgage lending division, and other wholesale activities.
The other reportable segments include activity of Regions' broker dealer and
insurance subsidiaries, the indirect consumer lending division, and the parent
company.
The accounting policies used by each reportable segment are the same as those
discussed in Note A to the Consolidated Financial Statements included under Item
8 of the Annual Report on Form 10-K. The following table presents financial
information for each reportable segment.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Three months ended March 31, 2000
(in thousands) Total
West Central East Treasury Other Company
Net interest income $95,128 $108,600 $100,948 $11,553 $ 37,887 $354,116
Provision for loan loss 6,420 7,557 7,537 5,998 1,665 29,177
Non-interest income 24,046 31,244 20,523 38 90,941 166,792
Non-interest expense 56,093 53,928 54,708 4,862 101,544 271,135
Income taxes 22,421 31,241 24,019 275 (3,365) 74,591
Net income $34,240 $47,118 $ 35,207 $ 456 $ 28,984 $146,005
Average assets $6,684,377 $7,792,854 $7,660,414 $17,165,099 $3,286,162 $42,588,906
Three months ended March 31, 1999
(in thousands) Total
West Central East Treasury Other Company
Net interest income $90,012 $98,072 $95,452 $14,989 $ 44,072 $342,597
Provision for loan loss 4,814 5,388 5,314 3,590 1,632 20,738
Non-interest income 21,099 27,361 18,835 7,498 68,322 143,115
Non-interest expense 51,616 49,815 51,942 3,234 105,968 262,575
Income taxes 21,434 27,925 22,560 7,237 (6,137) 73,019
Net income $33,247 $42,305 $34,471 $ 8,426 $ 10,931 $129,380
Average assets $6,143,101 $6,781,765 $6,772,743 $12,513,883 $5,107,408 $37,318,900
</TABLE>
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Regions' total assets at March 31, 2000, were $41.4 billion -- an
increase of 7% over a year earlier. This increase was due to
growth in almost all categories of assets, particularly loans, due
to acquisition activity and internal growth. Since year-end 1999,
total assets have decreased 3%, due primarily to the sale of
approximately $1.3 billion of securities available for sale and to
the sale of the credit card portfolio.
Comparisons with the prior year are affected by the acquisitions
of Minden Bancshares, Inc. and LCB Corporation (accounted for as
purchases). Relevant 1999 and 2000 acquisitions are summarized as
follows:
Date Headquarters Total Assets Accounting
Acquired Company Acquired Location (in thousands) Treatment
December Minden Minden, $318,955 Purchase
1999 Bancshares, Inc. Louisiana
January LCB Corporation Fayetteville, 173,157 Purchase
2000 Tennessee
Loans have increased 14% since a year ago. During the third and
fourth quarters of 1999, Regions securitized $1.3 billion of
mortgage loans. Adjusting for the securitizations, the sale of the
credit card portfolio and acquisitions, loans increased 19% over
the prior year. The 19% increase was attributable primarily to
growth in the real estate loan portfolio. Since year-end, total
loans have increased 3%, due to $112 million in loans added by
acquisitions and $1.1 billion in internal growth partially offset
by the $278 million credit card sale. The average yield on loans
during the first three months of 2000 was 8.47%, compared to 8.44%
during the same period in 1999. This increase was primarily the
result of higher average base lending rates.
Non-performing assets were as follows (in thousands):
Mar. 31, Dec. 31, Mar. 31,
2000 1999 1999
Non-accruing loans $189,260 $169,904 $152,630
Loans past due 90
days or more 64,117 71,952 121,393
Renegotiated loans 12,969 8,390 5,084
Other real estate 13,474 12,662 15,069
Total $279,820 $262,908 $294,176
Non-performing assets
as a percentage of
loans and other real
estate .96% .93% 1.15%
Non-accruing loans have increased $36.6 million since March of
last year and $19.4 million since year end. The increases were
primarily in the commercial and real estate categories resulting
from the transfer of certain credits to non-accrual status due to
unfavorable changes in the status of these loans. Loans past due
90 days or more decreased $57.3 million, compared to March 1999
and $7.8 million since year end due to charge-offs and collections
of past due loans. At March 31, 2000, real estate loans comprised
$111.9 million of total non-accruing loans, with commercial loans
accounting for $62.5 million and consumer loans $14.9 million.
Other real estate increased $812,000 since year end due to parcels
added in connection with acquisitions, but decreased $1.6 million
since March 1999, 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):
Mar. 31, Mar. 31,
2000 1999
Balance at beginning of period $338,375 $315,412
Net loans charged-off:
Commercial 2,345 1,833
Real estate 559 366
Installment 13,509 9,334
Total 16,413 11,533
Allowance of acquired banks 1,859 5,534
Provision charged to expense 29,177 20,738
Balance at end of period $352,998 $330,151
Net loan losses in the first three months of 2000 and 1999 were
0.23% and 0.19% of average loans (annualized), respectively. The
higher levels of loan losses are due to increased charge-offs of
consumer loans and specific commercial credits. At March 31, 2000
the allowance for loan losses stood at 1.21% of loans, compared to
1.29% 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 133% and 126%, respectively, at March 31, 2000,
compared to 118% and 112%, respectively, at March 31, 1999.
The allowance for loan losses is maintained at a level deemed
adequate by management to absorb possible losses from loans in the
portfolio. In determining the adequacy of the allowance for loan
losses, management considers numerous factors, including but not
limited to: (1) management's estimate of future economic
conditions and the resulting impact on Regions, (2) management's
estimate of the financial condition and liquidity of certain loan
customers, and (3) management's estimate of collateral values of
property securing certain loans. Because all of these factors and
others involve the use of management's estimation and judgment,
the allowance for loan losses is inherently subject to adjustment
at future dates. At March 31, 2000, 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. No portion of the resulting allowance is in any way
allocated or restricted to any individual loan or group of loans.
The entire allowance is available to absorb losses from any and
all loans.
Regions uses a systematic approach to determine the adequacy of
the allowance for loan losses. Regions' systematic approach
includes assigning loss factors, based on historical data as
adjusted for current business and economic conditions, to
portfolios of loans with similar characteristics for which
estimates of inherent probable losses can be made. The loss
factors are applied to the respective portfolios in order to
determine the overall allowance adequacy.
On loans which are considered impaired, it is Regions' policy to
reverse interest previously accrued on the loan against interest
income. Interest on such loans is thereafter recorded on a "cash
basis" and is included in earnings only when actually received in
cash and when full payment of principal is no longer doubtful.
Total securities have increased 2% since a year ago but decreased
16% since year end. The decline since December is the result of
the $1.3 billion sale of securities available for sale. On a
yearly comparison, securities showed only modest growth as the
securitizations in the third and fourth quarters of 1999, totaling
$1.3 billion, were offset by the aforementioned sale of
securities. A small balance of securities were added by
acquisitions in late 1999 and early 2000.
Mortgage loans held for sale have decreased $695 million since
March 31, 1999 and $215 million since year end as a result of
lower levels of residential mortgage loan production at Regions'
mortgage banking subsidiary compared to 1999. Residential mortgage
loan production at Regions' mortgage banking subsidiary was
approximately $730 million during the first three months of 2000,
compared to $1.8 billion during the same time period in 1999.
Interest-bearing deposits in other banks at March 31, 2000 totaled
$51.9 million, a decrease of $23.6 million compared to a year ago
but an increase of $42.2 million compared to year end. The
decrease resulted from the utilization of alternative investments
as interest bearing deposits matured. The increase over year end
was the result of balances added in connection with the
acquisition in 2000.
Net federal funds purchased and security repurchase agreements
totaled $3.1 billion at March 31, 2000, $5.5 billion at year end
and $2.5 billion at March 31, 1999. The decrease since year end
resulted primarily from the pay down of outstanding federal funds
purchased and security repurchase positions using the proceeds
from the sale of the $1.3 billion in available for sale
securities, which were sold near the end of the first quarter of
2000. Using the proceeds of this sale to pay down federal funds
purchased and security repurchase positions reduced interest rate
risk and should partially mitigate the unfavorable effect of
further interest rate increases. The level of federal funds and
security agreements can fluctuate significantly on a day-to-day
basis, depending on funding needs and which sources of funds are
used to satisfy those needs. During the first three months of
2000 net funds purchased averaged $4.3 billion compared to $2.1
billion for the same period of 1999, indicating increased reliance
on purchased funds to support earning asset growth since March of
1999.
Premises and equipment have increased $5.2 million since year end
and $26.7 million since March 31, 1999. These increases were due
primarily to the addition of premises and equipment obtained
through acquisitions since March 1999 and the installation of new
branch equipment.
Other assets have increased $73.4 million since year end, and $6.1
million since the first quarter of last year. These increases were
due primarily to higher excess purchase price due to acquisitions,
as well as increased investments in low-income housing
partnerships.
Total deposits have increased 10% since March 31 of last year.
The deposits acquired in connection with acquisitions resulted in
a 2% increase, with the remaining 8% increase attributable to
internal growth. The internal growth resulted primarily from
increases in interest-bearing checking accounts, large
certificates of deposit and other wholesale deposit sources. Since
year end, total deposits have increased 6% after adjusting for the
deposits acquired in connection with acquisitions during the first
quarter of 2000.
Other short-term borrowings decreased $2.2 billion since March 31,
1999 and $1.2 billion since year end. These declines resulted from
increased usage of longer-term borrowings as a funding source.
Long-term borrowings have increased $281.6 million since year end,
and $1.5 billion since March 31, 1999. These increases in long-
term borrowings resulted primarily from Regions' utilization of
Federal Home Loan Bank structured notes with call periods in
excess of one year. Regions has increased its usage of long-term
borrowings to partially mitigate the unfavorable effect of rising
interest rates.
Stockholders' equity was $3.1 billion at March 31, 2000, an
increase of 1% over last year and an increase of 2% since year
end. These increases resulted primarily from internally generated
capital and equity added in connection with acquisitions offset by
treasury stock purchases totaling $263 million since March 31,
1999 and by declines in the estimated fair value of available for
sale securities (which are included in accumulated other
comprehensive (loss) income). Accumulated other comprehensive
(loss) income totaled $(137.4) million at March 31, 2000, compared
to $(135.1) million at year end and $3.9 million at March of 1999.
Regions' ratio of equity to total assets was 7.58% at March 31,
2000, compared to 8.08% a year ago and 7.18% at year end.
Regions' primary sources of liquidity are maturities from its loan
and securities portfolios. In addition to these sources of
liquidity, Regions has access to purchased funds in the state and
national money markets. Liquidity is further enhanced by a
relatively stable source of deposits. At March 31, 2000, the loan
to deposit ratio was 91.01%, compared to 87.67% a year ago and
93.85% at year end. Regions' management places constant emphasis
on the maintenance of adequate liquidity to meet conditions that
might reasonably be expected to occur.
Net interest income for the first three months of 2000 increased
$11.5 million or 3%, compared to the same period in 1999. 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 3.65% in the first three months of 2000,
compared to 4.09% in the same period in 1999. This ratio declined
as interest rates rose and interest bearing liabilities repriced
faster than interest earning assets.
The provision for loan losses was $29.2 million or .41% annualized
of average loans in the first three months of 2000, compared to
$20.7 million or .34% annualized of average loans in the first
three months of 1999. A higher provision for loan losses was
recorded in the first three months of 2000 because of higher net
charge-offs and growth in the loan portfolio. Acquisitions added
$1.9 million to the allowance for loan losses in the first quarter
of 2000.
Total non-interest income increased $23.7 million or 17% over the
first three months of 1999. Trust department income increased $1.3
million compared to the first three months of 1999 due to higher
advisory fees from mutual funds. An increase in the number of
deposit accounts due to acquisitions and internal growth, and fee
standardization, resulted in service charges on deposit accounts
increasing $8.6 million or 19% in the first three months of 2000
compared to the same period in 1999. Mortgage servicing and
origination fees decreased $11.1 million or 34% in the first three
months of 2000 compared to the same period in 1999, primarily due
to declining levels of new loan production in the first quarter of
2000. The mortgage company's servicing portfolio totaled $23.8
billion at March 31, 2000, compared to $23.0 billion at March 31,
1999. The $40.0 million in securities losses in the first quarter
of 2000 resulted from the sale of the $1.3 billion in lower
yielding mortgage related securities. Other non-interest income
increased $64.9 million in the first three months of 2000 over the
same period in 1999. The increase was the result of increased
income related to trading account income, brokerage income,
insurance premiums and commissions, and a $4.4 million gain on the
sale of certain mortgage servicing assets that were not a
strategic fit for Regions mortgage subsidiary. Regions also
recognized a $67.2 million gain in connection with the sale of its
credit card portfolio in the first quarter of 2000, which is
included in other non-interest income. In addition, in the first
quarter of 1999, Regions recognized an $18.4 million gain in
connection with the sale of joint venture banking interests.
Total non-interest expense increased $8.6 million or 3% in the
first three months of 2000 compared to the same period in 1999.
Salaries and employee benefits were up 8% in the first three
months of 2000 compared to the same period in 1999. These
increases are due to a higher number of employees due to
acquisitions coupled with normal merit increases and higher
benefit costs. Net occupancy expense and furniture and equipment
expense increased 5% in the first three months of 2000 over the
same period in 1999. These increases are primarily the result of
higher levels of depreciation related to new branch equipment.
Other non-interest expense decreased $3.7 million or 4% in the
first three months of 2000 compared to the same period in 1999.
The decline resulted from decreases in postage, stationery,
professional fees and computer services partially offset by
increases in excess purchase price amortization and communication
costs.
Income tax expense increased $1.6 million or 2% over the first
three months of 1999. The increase was the result of an increase
in taxable income in 2000 as compared to 1999.
Net income for the first quarter totaled $146.0 million or $.66 per
diluted share, a 16% increase on a per share diluted basis compared
to the first three months of 1999. Operating income, which excludes
a net after-tax gain of $17.8 million resulting from the sale of
the credit card portfolio and the security sales, totaled $128.2
million or $.58 per diluted share, an increase of 2% on a per-share
diluted basis from the first quarter of last year. Annualized
return on stockholders' equity during the first quarter of 2000 was
18.90% based on net income and 16.60% based on operating income.
In the first quarter of 1999, annualized return on stockholders'
equity was 17.21%. Annualized return on assets during the first
quarter of 2000 was 1.38% based on net income and 1.21% based on
operating income. In the first quarter of 1999, annualized return
on assets was 1.41%.
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27.1) Financial Data Schedule (SEC use only)
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the first
quarter of 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by undersigned thereunto duly authorized.
Regions Financial Corporation
DATE: May 11, 2000 /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>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,038,303,000
<INT-BEARING-DEPOSITS> 51,875,000
<FED-FUNDS-SOLD> 61,863,000
<TRADING-ASSETS> 24,155,000
<INVESTMENTS-HELD-FOR-SALE> 5,528,877,000
<INVESTMENTS-CARRYING> 3,602,979,000
<INVESTMENTS-MARKET> 3,471,088,000
<LOANS> 29,081,287,000
<ALLOWANCE> 352,998,000
<TOTAL-ASSETS> 41,418,403,000
<DEPOSITS> 31,954,383,000
<SHORT-TERM> 3,888,589,000
<LIABILITIES-OTHER> 402,286,000
<LONG-TERM> 2,032,411,000
0
0
<COMMON> 138,857,000
<OTHER-SE> 3,001,877,000
<TOTAL-LIABILITIES-AND-EQUITY> 41,418,403,000
<INTEREST-LOAN> 602,957,000
<INTEREST-INVEST> 165,228,000
<INTEREST-OTHER> 12,044,000
<INTEREST-TOTAL> 780,229,000
<INTEREST-DEPOSIT> 319,177,000
<INTEREST-EXPENSE> 426,113,000
<INTEREST-INCOME-NET> 354,116,000
<LOAN-LOSSES> 29,177,000
<SECURITIES-GAINS> (40,018,000)
<EXPENSE-OTHER> 271,135,000
<INCOME-PRETAX> 220,596,000
<INCOME-PRE-EXTRAORDINARY> 220,596,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146,005,000
<EPS-BASIC> .66
<EPS-DILUTED> .66
<YIELD-ACTUAL> 3.65
<LOANS-NON> 189,260,000
<LOANS-PAST> 64,117,000
<LOANS-TROUBLED> 12,969,000
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<ALLOWANCE-OPEN> 338,375,000
<CHARGE-OFFS> 22,862,000
<RECOVERIES> 6,449,000
<ALLOWANCE-CLOSE> 352,998,000
<ALLOWANCE-DOMESTIC> 352,998,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 352,998,000
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