Regions Financial (RF) 10-Q 2005 Q1 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

[X]	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2005
	or
[   ]	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from ____________________  to  ____________________

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 incorporation or organization)	(IRS Employer Identification Number)
417 North 20th Street Birmingham, Alabama	35203
(Address of principal executive offices)	(Zip code)

(205) 944-1300

(Registrant's telephone number, including area code)

NOT APPLICABLE

(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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] Yes [  ] No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

[X] Yes [  ] No

The number of shares outstanding of each of the issuer's classes of common stock was 463,910,454 shares of common stock, par value $.01, outstanding as of April 30, 2005.

	REGIONS FINANCIAL COPORATION
	INDEX
		Page Number
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Condition -
	March 31, 2005, December 31, 2004
	and March 31, 2004	4
	Consolidated Statements of Income -
	Three months ended
	March 31, 2005 and March 31, 2004	5
	Consolidated Statement of Stockholders' Equity -
	Three months ended March 31, 2005	6
	Consolidated Statements of Cash Flows -
	Three months ended March 31, 2005 and
	March 31, 2004	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of
	Financial Condition and Results of Operations	21
Item 3.	Qualitative and Quantitative Disclosures about
	Market Risk	52
Item 4.	Controls and Procedures	52
PART II.	OTHER INFORMATION
Item 2.	Issuer Purchase of Equity Securities	52
Item 6.	Exhibits and Reports on Form 8-K	53
SIGNATURES		54

Forward Looking Statements

This Quarterly Report on Form 10-Q, other periodic reports filed by Regions Financial Corporation ("the Company") under the Securities Exchange Act of 1934, as amended, and any other written or oral statements made by or on behalf of Regions may include forward looking statements which reflect Regions' current views with respect to future events and financial performance. Such forward-looking statements are made in good faith by Regions pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on current expectations and general assumptions and are subject to various risks, uncertainties, and other factors that may cause actual results to differ materially from the views, beliefs, and projections expressed in such statements. These risks, uncertainties and other factors include, but are not limited to, those described below.

Some factors are specific to Regions, including:

• Regions' ability to achieve the earnings expectations related to the businesses that were acquired, including its merger with Union Planters Corporation in July 2004, or that may be acquired in the future, which in turn depends on a variety of factors, including:
• Regions' ability to achieve the anticipated cost savings and revenue enhancements with respect to the acquired operations, or lower than expected revenues from continuing operations;
• the assimilation of the acquired operations to Regions' corporate culture, including the ability to instill Regions' credit practices and efficient approach to the acquired operations;
• the continued growth of the markets that the acquired entities serve, consistent with recent historical experience;
• difficulties related to the integration of the businesses of Regions and Union Planters, including integration of information systems and retention of key personnel.
• Regions' ability to expand into new markets and to maintain profit margins in the face of pricing pressures.
• Regions' ability to keep pace with technological changes.
• Regions' ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by Regions' customers and potential customers.
• Regions' ability to effectively manage interest rate risk, market risk, credit risk and operational risk.
• Regions' ability to manage fluctuations in the value of assets and liabilities and off-balance sheet exposure so as to maintain sufficient capital and liquidity to support Regions' business.
• The cost and other effects of material contingencies, including litigation contingencies.

Other factors which may affect Regions apply to the financial services industry more generally, including:

• Further easing of restrictions on participants in the financial services industry, such as banks, securities brokers and dealers, investment companies and finance companies, may increase competitive pressures.
• Possible changes in interest rates may increase funding costs and reduce earning asset yields, thus reducing margins.
• Possible changes in general economic and business conditions in the United States in general and in the communities Regions serves in particular may lead to a deterioration in credit quality, thereby increasing provisioning costs, or a reduced demand for credit, thereby reducing earning assets.
• The threat or occurrence of war or acts of terrorism and the existence or exacerbation of general geopolitical instability and uncertainty.
• Possible changes in trade, monetary and fiscal policies, laws, and regulations, and other activities of governments, agencies, and similar organizations, including changes in accounting standards, may have an adverse effect on business.
• Possible changes in consumer and business spending and saving habits could affect Regions' ability to increase assets and to attract deposits.

The words "believe," "expect," "anticipate," "project," and similar expressions signify forward looking statements. Readers are cautioned not to place undue reliance on any forward looking statements made by or on behalf of Regions. Any such statement speaks only as of the date the statement was made. Regions undertakes no obligation to update or revise any forward looking statements.

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)
	March 31,	December 31,	March 31,
ASSETS	2005	2004	2004
Cash and due from banks	$ 1,978,199	$ 1,853,399	$ 970,762
Interest-bearing deposits in other banks	126,678	115,018	102,408
Securities held to maturity	31,893	31,152	31,990
Securities available for sale	12,182,651	12,585,437	8,473,044
Trading account assets	953,364	928,676	790,864
Loans held for sale	1,976,967	1,783,331	1,436,812
Federal funds sold and securities
purchased under agreements to resell	521,093	717,563	594,064
Margin receivables	551,075	477,813	547,955
Loans	58,169,485	57,735,564	33,000,869
Unearned income	(204,982)	(208,610)	(231,119)
Loans, net of unearned income	57,964,503	57,526,954	32,769,750
Allowance for loan losses	(760,032)	(754,721)	(455,566)
Net loans	57,204,471	56,772,233	32,314,184
Premises and equipment	1,108,469	1,089,094	631,186
Interest receivable	337,383	345,563	182,116
Due from customers on acceptances	41,313	31,982	35,058
Excess purchase price	4,997,232	4,992,563	1,089,308
Mortgage servicing rights	425,180	396,553	113,099
Other identifiable intangible assets	344,447	356,880	5,363
Other assets	1,503,217	1,629,181	1,458,730
	$84,283,632	$84,106,438	$48,776,943
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing	$ 11,655,721	$ 11,424,137	$ 5,918,325
Interest-bearing	47,931,950	47,242,886	25,507,248
Total deposits	59,587,671	58,667,023	31,425,573
Borrowed Funds:
Short-term borrowings:
Federal funds purchased and securities
sold under agreements to repurchase	4,212,431	4,679,926	4,447,518
Other short-term borrowings	1,240,292	1,315,685	1,441,916
Total short-term borrowings	5,452,723	5,995,611	5,889,434
Long-term borrowings	7,153,910	7,239,585	5,768,131
Total borrowed funds	12,606,633	13,235,196	11,657,565
Bank acceptances outstanding	41,313	31,982	35,058
Other liabilities	1,402,872	1,422,780	1,232,289
Total liabilities	73,638,489	73,356,981	44,350,485
Stockholders' Equity:
Preferred stock, par value $1.00 a share:
Authorized 10,000,000, 10,000,000, 5,000,000 shares, respectively	-0-	-0-	-0-
Common stock, par value $.01, $.01, and $.625 a share, respectively:
Authorized 1,500,000,000, 1,500,000,000, and
500,000,000 shares, respectively;
issued, including treasury stock,
468,554,363; 467,084,489; and
224,282,416 shares, respectively	4,686	4,671	140,177
Surplus	7,178,669	7,126,408	1,000,479
Undivided profits	3,746,113	3,662,971	3,407,590
Treasury stock, at cost 5,325,500; 843,000;
and 5,543,000 shares, respectively	(176,252)	(29,395)	(206,825)
Unearned restricted stock	(60,849)	(65,451)	(15,075)
Accumulated other comprehensive (loss) income	(47,224)	50,253	100,112
Total Stockholders' Equity	10,645,143	10,749,457	4,426,458
	$84,283,632	$84,106,438	$48,776,943

See notes to consolidated financial statements

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)

	Three Months Ended
	March 31,
	2005	2004
Interest Income:
Interest and fees on loans	$810,834	$411,012
Interest on securities:
Taxable interest income	122,752	86,557
Tax-exempt interest income	7,016	5,661
Total Interest on Securities	129,768	92,218
Interest on loans held for sale	31,180	19,971
Interest on margin receivables	6,142	4,192
Interest on federal funds sold and securities purchased under agreements to resell	3,053	1,378
Interest on time deposits in other banks	435	22
Interest on trading account assets	10,564	6,889
Total Interest Income	991,976	535,682
Interest Expense:
Interest on deposits	199,892	84,054
Interest on short-term borrowings	38,978	19,651
Interest on long-term borrowings	72,535	52,980
Total Interest Expense	311,405	156,685
Net Interest Income	680,571	378,997
Provision for loan losses	30,000	15,000
Net Interest Income After Provision for Loan Losses	650,571	363,997
Non-Interest Income:
Brokerage and investment banking	144,490	138,203
Trust department income	31,990	20,691
Service charges on deposit accounts	123,818	71,868
Mortgage servicing and origination fees	39,312	21,584
Securities (losses) gains, net	(33,966)	12,803
Other	113,158	92,831
Total Non-Interest Income	418,802	357,980
Non-Interest Expense:
Salaries and employee benefits	437,658	286,903
Net occupancy expense	54,284	27,800
Furniture and equipment expense	32,209	18,130
Other	197,687	150,763
Total Non-Interest Expense	721,838	483,596
Income Before Income Taxes	347,535	238,381
Applicable income taxes	105,894	69,846
Net Income	$241,641	$168,535
Net Income Available to Common Shareholders	$241,641	$166,572
Average number of shares outstanding	465,122	273,270
Average number of shares outstanding-diluted	470,759	277,278
Per share:
Net income	$0.52	$0.61
Net income-diluted	$0.51	$0.60
Cash dividends declared	$0.34	$0.33
See notes to consolidated financial statements

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS) (UNAUDITED)

	Common Stock	Surplus	Undivided Profits	Treasury Stock	Unearned Restricted Stock	Accumulated Other Comprehensive Income	Total
BALANCE AT JANUARY 1, 2005	$ 4,671	$ 7,126,408	$3,662,971	$ (29,395)	$(65,451)	$ 50,253	$ 10,749,457
Comprehensive Income:
Net income			241,641				241,641
Unrealized loss on available for sale securities,
net of tax and reclassification adjustment						(92,180)	(92,180)
Other comprehensive loss from derivatives, net of tax
and reclassification adjustment						(5,297)	(5,297)
Comprehensive income*			241,641			(97,477)	144,164
Cash dividends declared ($.34 per common share)			(158,499)				(158,499)
Purchase of treasury stock				(146,857)			(146,857)
Common stock transactions:
Stock options exercised	15	30,411					30,426
Stock issued to employees under incentive plan, net		21,850			(1,755)		20,095
Amortization of unearned restricted stock					6,357		6,357
BALANCE AT March 31, 2005	$ 4,686	$7,178,669	$3,746,113	$(176,252)	$(60,849)	$ (47,224)	$10,645,143
Disclosure of reclassification amount:
Unrealized holding losses, net of $68,909 in income taxes,
on available for sale securities arising during period						$ (114,258)
Less: Reclassification adjustment, net of $11,888 in
income taxes, for net loss realized in net income						(22,078)
Unrealized holding loss on derivatives, net of $2,412 in
income taxes						(5,136)
Less: Reclassification adjustment, net of $87 in income
taxes, for amortization of cash flow hedges						161
Comprehensive income, net of $59,520 in income taxes						$ ( 97,477)

*Comprehensive income for the three months ended March 31, 2004 was $205.1 million.

See notes to consolidated financial statements.

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)

	Three Months Ended
	March 31,
Operating Activities:	2005		2004
Net income	$ 241,641		$ 168,535
Adjustments to reconcile net cash provided by (used in) operating activities
Depreciation and amortization of premises and equipment	26,766		15,753
Provision for loan losses	30,000		15,000
Net amortization of securities	6,490		8,214
Amortization of loans and other assets	44,500		22,126
(Recapture) impairment of mortgage servicing rights	(35,000	)	12,000
Amortization of deposits and borrowings	112		238
Provision for losses on other real estate	946		588
Deferred income tax expense	5,551		40,081
Loss on sale of premises and equipment	310		77
Realized securities losses (gains)	33,966		(12,803	)
(Increase) decrease in trading account assets	(24,688	)	43,651
Increase in loans held for sale	(193,636	)	(194,960	)
Increase in margin receivables	(73,262	)	(44,380	)
Decrease in interest receivable	8,180		12,532
Decrease (increase) in other assets	94,651		(302,122	)
Increase (decrease) in other liabilities	26,283		(51,700	)
Other	26,452		780
Net Cash Provided By (Used In) Operating Activities	219,262		(266,390	)
Investing Activities:
Net increase in loans	(462,234	)	(598,878	)
Proceeds from sale of securities available for sale	1,467,145		280,572
Proceeds from maturity of securities held to maturity	144		10
Proceeds from maturity of securities available for sale	548,495		856,229
Purchases of securities held to maturity	(348	)	(1,177	)
Purchases of securities available for sale	(1,803,068	)	(490,280	)
Net increase in interest-bearing deposits in other banks	(11,660	)	(5,871	)
Proceeds from sale of premises and equipment	4,074		1,652
Purchases of premises and equipment	(50,524	)	(19,030	)
Net (increase) decrease in customers' acceptance liability	(9,331	)	5,995
Net Cash (Used In) Provided By Investing Activities	(317,307	)	49,222
Financing Activities:
Net increase (decrease) in deposits	920,536		(1,307,200	)
Net (decrease) increase in short-term borrowings	(542,888	)	1,462,396
Proceeds from long-term borrowings	47,202		54,987
Payments on long-term borrowings	(132,876	)	(4,493	)
Net increase (decrease) in bank acceptance liability	9,331		(25,995	)
Cash dividends	(158,499	)	(89,968	)
Purchases of treasury stock	(146,857	)	(156,881	)
Proceeds from exercise of stock options	30,426		15,306
Net Cash Provided By (Used In) Financing Activities	26,375		(51,848	)
Decrease in Cash and Cash Equivalents	(71,670	)	(269,016	)
Cash and Cash Equivalents, Beginning of Period	2,570,962		1,833,842
Cash and Cash Equivalents, End of Period	$ 2,499,292		$ 1,564,826
See notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

March 31, 2005

NOTE A - Basis of Presentation

The accounting and reporting policies of Regions Financial Corporation ("Regions" or the "Company"), conform with accounting principles generally accepted in the United States and with general financial services industry practices. Regions provides a full range of banking and bank-related services to individual and corporate customers through its subsidiaries and branch offices located primarily in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee and Texas. The Company is subject to intense competition from other financial institutions and is also subject to the regulations of certain government agencies and undergoes periodic examinations by those regulatory authorities.

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 notes to the financials necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included under Item 8 of the Annual Report on Form 10-K for year ended December 31, 2004. It is management's opinion that all adjustments, consisting of only normal and recurring items necessary for a fair presentation, have been included. Please also refer to "Critical Accounting Policies" included in Management's Discussion and Analysis.

Regions and Union Planters Corporation ("Union Planters") merged into a new holding company named Regions Financial Corporation on July 1, 2004. Each share of Regions' $0.625 par value common stock was exchanged for 1.2346 shares of the new company $0.01 par value common stock. Union Planters' results of operations were included in Regions' results beginning July 1, 2004. All historical per share amounts for periods presented in this Form 10-Q have been adjusted to reflect the impact of the exchange of Regions' common stock, which occurred on July 1, 2004.

Certain amounts in prior periods have been reclassified to conform to the current period presentation.

NOTE B - Union Planters Merger

On July 1, 2004, the Company completed its merger with Union Planters Corporation, headquartered in Memphis, Tennessee. Both companies merged into a new holding company named Regions Financial Corporation upon completion of the transaction. In the transaction, each share of Union Planters Corporation common stock was converted into one share of the new company $0.01 par value common stock and each share of Regions' $0.625 par value common stock was converted into 1.2346 shares of the new company $0.01 par value common stock. The merger was accounted for as a purchase of Union Planters for accounting and financial reporting purposes. As a result, Union Planters' results of operations were included in the Company's results beginning July 1, 2004.

In connection with the merger, Regions Financial Corporation issued a total of 461,842,025 shares of common stock. The table below provides a summary of the number of shares issued upon the completion of the merger:

	Shares Issued on July 1, 2004
Union Planters common shares outstanding	190,268,933
Regions common shares outstanding (adjusted for 1.2346 exchange ratio)	271,573,092
Total Regions common stock issued	461,842,025

The merger is being accounted for in accordance with Statement of Financial Accounting Standards No. 141, "Business Combinations." Accordingly, the purchase price was preliminarily allocated to the assets acquired and liabilities assumed based on their estimated fair values at the merger date, as summarized below. The final allocation of the purchase price will be adjusted after completion of additional analysis relating to the fair values of Union Planters' tangible and identifiable intangible assets and liabilities, and final decisions regarding integration activities.

(in thousands, except share and per share amounts)
Purchase price:
Regions shares issued to Union Planters common shareholders		190,268,933
Average Regions share price over four days surrounding
announcement of merger	$38.61
Regions exchange ratio	1.2346	$31.27
Purchase price for Union Planters' common shares		$5,950,335
Transaction costs		33,148
Estimated fair value of Union Planters' stock options		79,645
Purchase price		$6,063,128
Net assets acquired:
Union Planters' shareholders' equity	$2,937,936
Less Union Planters' excess purchase price and other intangibles	(896,140)	(2,041,796)
Excess of purchase price over carrying value of assets acquired		4,021,332
Estimated adjustments to reflect fair value of assets acquired and
Liabilities assumed:
Loans, net of unearned income		(126,701)
Premises and equipment		48,730
Loans held for sale		(3,516)
Core deposit intangibles		(368,017)
Mortgage servicing rights		6,684
Other assets		(10,243)
Deferred income taxes		8,326
Other liabilities		88,528
Interest-bearing deposits		27,336
Short-term borrowings		14,822
Long-term borrowings		180,293
Excess purchase price		$3,887,574

The following table summarizes the assets acquired and liabilities assumed in connection with the merger with Union Planters effective July 1, 2004.

(dollar amounts in thousands)
	July 1, 2004
Cash and due from banks	$ 805,252
Interest-bearing deposits	130,326
Securities available for sale	5,386,696
Trading account assets	346,933
Loans held for sale	1,271,150
Fed funds sold and securities purchased
under agreements to resell	162,238
Loans, net of unearned income	22,272,663
Allowance for loan losses	(303,144)
Premises and equipment	433,602
Excess purchase price	3,887,574
Mortgage servicing rights	352,574
Other identifiable intangible assets	368,017
Other assets	544,807
Deposits	22,903,264
Borrowings	5,888,159
Other liabilities	804,139

NOTE C - Earnings Per Share

In connection with Regions' adoption, in the second quarter of 2004, of EITF Issue No. 03-6 ("EITF 03-6"), "Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share," Regions began using the two-class method to calculate earnings per share. The requirements of EITF 03-6 and the two-class method have been applied to all periods presented. Under the two-class method, Regions allocated a portion of net income to the forward agreement entered into in connection with the accelerated stock purchase agreement executed on March 9, 2004 and settled on August 18, 2004. The following table sets forth the computation of basic net income per share and diluted net income per share.

	Three Months Ended March 31,
(in thousands, except per share amounts)	2005	2004
Numerator:
For basic net income per share and
diluted net income per share, net
income	$241,641	$168,535
Net income allocable to equity forward
agreement	0	(1,963)
For basic net income per share and
diluted net income per share, net
income available to common
shareholders	$241,641	$166,572
Denominator:
For basic net income per share --
Weighted average shares outstanding	465,122	273,270
Effect of dilutive securities --
Stock options	5,637	4,008
For diluted net income per share	470,759	277,278
Basic net income per share	$0.52	$0.61
Diluted net income per share	0.51	0.60

EITF 03-6 impacted earnings per share for the three months ended March 31, 2004. Regions reported net income of $168,535,000, basic earnings per share of $0.62, and diluted earnings per share of $0.61 (after adjusting per share amounts to reflect the impact of the exchange of Regions' common stock on July 1, 2004, as described in NOTE A). As a result of applying EITF 03-6, net income was adjusted by $1,963,000 to arrive at net income available to common shareholders of $166,572,000 for the three months ended March 31, 2004. The resulting adjusted basic and diluted earnings per share for the three months ended March 31, 2004 are $0.61 and $0.60, respectively.

NOTE D - Stock-Based Compensation

Statement of Financial Accounting Standards No. 123 (revised 2004) (Statement 123(R)), "Share-based Payment" is expected to be adopted by the Company as of January 1, 2006, as required by the SEC. This accounting standard revises Statement of Financial Accounting Standards No. 123 (Statement 123), "Accounting for Stock-Based Compensation" by requiring that all share-based payments to employees, including grants of employee stock options, be recognized in the financial statements based on their fair values at the date of grant. See additional discussion of this new accounting standard in Note I "Recent Accounting Pronouncements."

Statement of Financial Accounting Standards No. 123, "Accounting and Disclosure of Stock-Based Compensation" ("Statement 123") allows for the option of continuing to follow Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees", and the related interpretations, or selecting the fair value method of expense recognition as described in Statement 123. The Company has elected to follow APB 25 in accounting for its employee stock options. Pro forma net income and net income per share data is presented below for the three months ended March 31, 2005 and 2004, as if the fair-value method had been applied in measuring compensation costs:

(in thousands, except per share amounts)	Three Months Ended March 31,
	2005	2004
Net income available to common
shareholders	$241,641	$166,572
Add: Stock-based compensation expense
included in net income, net of related
tax effects	4,131	552
Less: Total stock-based compensation
expense based on fair value method for
all awards, net of related tax effects	(7,402)	(2,735)
Pro forma net income available to
common shareholders	$238,370	$164,389
Per share:
Net income	$0.52	$0.61
Net income-diluted	0.51	0.60
Pro forma net income	0.51	0.60
Pro forma net income-diluted	0.51	0.59

The weighted average fair value of options granted was $4.93 and $3.78 for the three months ended March 31, 2005 and 2004, respectively. The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 2005 and 2004:

	2005	2004
Expected Dividend Yield	4.20%	4.50%
Expected Option Life (in years)	5.0	5.0
Expected Volatility	21.4%	22.2%
Risk-Free Interest Rate	4.2%	2.8%

NOTE E - Business Segment Information

Regions' segment information is presented based on Regions' primary segments of business. Each segment is a strategic business unit that serves specific needs of Regions' customers. The Company's primary segment is community banking. Community banking represents the Company's branch banking functions and has separate management that is responsible for the operation of that business unit. In addition, Regions has designated as distinct reportable segments the activities of its treasury, mortgage banking, investment banking/brokerage/trust, and insurance divisions. The treasury division includes the Company's bond portfolio, mortgage lending portfolio, and other wholesale activities. Mortgage banking consists of origination and servicing functions of Regions' mortgage operations. Investment banking includes trust activities and all brokerage and investment activities associated with Morgan Keegan. Insurance includes all business associated with commercial insurance, in addition to credit life products s old to consumer customers. The reportable segment designated "Other" includes activity of Regions' indirect consumer lending division and the parent company. Prior period amounts have been restated to reflect changes in methodology.

The accounting policies used by each reportable segment are the same as those discussed in Note 1 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.

Three months ended March 31, 2005

	Total Banking
(in thousands)	Community Banking	Treasury	Combined	Mortgage Banking
Net interest income	$612,422	$ 60,338	672,760	$ 19,456
Provision for loan losses	25,307	2,830	28,137	600
Non-interest income	150,678	(33,809)	116,869	73,327
Non-interest expense	394,646	9,964	404,610	40,887
Income taxes (benefit)	128,655	5,151	133,806	19,426
Net income (loss)	$ 214,492	$ 8,584	$223,076	$ 31,870
Average assets	$51,785,366	$21,275,055	$73,060,421	$4,330,803

(in thousands)	Investment Banking/ Brokerage/ Trust	Insurance	Other	Total Company
Net interest income	$ 8,666	$ 653	$ (20,964)	$680,571
Provision for loan losses	-0-	-0-	1,263	30,000
Non-interest income	186,456	21,886	20,264	418,802
Non-interest expense	153,218	13,656	109,467	721,838
Income taxes (benefit)	15,672	3,198	(66,208)	105,894
Net income (loss)	$ 26,232	$ 5,685	$ (45,222)	$241,641
Average assets	$2,698,047	$131,326	$4,096,727	$84,317,324

Three months ended March 31, 2004

	Total Banking
(in thousands)	Community Banking	Treasury	Combined	Mortgage Banking
Net interest income	$301,118	$ 73,368	$374,486	$ 11,712
Provision for loan losses	11,842	2,627	14,469	33
Non-interest income	81,104	12,856	93,960	71,377
Non-interest expense	213,729	9,579	223,308	72,889
Income taxes (benefit)	52,961	27,757	80,718	4,188
Net income (loss)	$ 103,690	$ 46,261	$149,951	$5,979
Average assets	$27,009,969	$14,685,553	$41,695,522	$1,346,716

(in thousands)	Investment Banking/ Brokerage/ Trust	Insurance	Other	Total Company
Net interest income	$ 5,239	$ 537	$(12,977)	$378,997
Provision for loan losses	-0-	-0-	498	15,000
Non-interest income	163,834	22,630	6,179	357,980
Non-interest expense	135,614	16,783	35,002	483,596
Income taxes (benefit)	12,540	2,380	(29,980)	69,846
Net income (loss)	$ 20,919	$ 4,004	$(12,318)	$168,535
Average assets	$2,658,892	$133,573	$2,986,023	$48,820,726

NOTE F - Commitments and Contingencies

To accommodate the financial needs of its customers, Regions makes commitments under various terms to lend funds to consumers, businesses and other entities. These commitments include (among others) revolving credit agreements, term loan commitments and short-term borrowing agreements. Many of these loan commitments have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of these commitments are expected to expire without being funded, the total commitment amounts do not necessarily represent future liquidity requirements. Standby letters of credit are also issued, which commit Regions to make payments on behalf of customers if certain specified future events occur. Historically, a large percentage of standby letters of credit also expire without being funded.

Both loan commitments and standby letters of credit have credit risk essentially the same as that involved in extending loans to customers and are subject to normal credit approval procedures and policies. Collateral is obtained based on management's assessment of the customer's credit.

Loan commitments totaled $17.6 billion at March 31, 2005, and $10.2 billion at March 31, 2004. Standby letters of credit were $2.6 billion at March 31, 2005, and $1.3 billion at March 31, 2004. Commitments under commercial letters of credit used to facilitate customers' trade transactions were $152.4 million at March 31, 2005, and $58.8 million at March 31, 2004.

The Company and its affiliates are subject to litigation and claims arising out of the normal course of business. Based on consultation with legal counsel, management is of the opinion that the outcome of pending and threatened litigation will not have a material effect on Regions' consolidated financial statements.

NOTE G - Derivative Financial Instruments

Regions maintains positions in derivative financial instruments to manage interest rate risk, to facilitate asset/liability management strategies, and to manage other risk exposures. The most common derivative instruments are forward rate agreements, interest rate swaps, and put and call options. For those derivative contracts that qualify for special hedge accounting treatment, according to Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", Regions designates the hedging instrument as either a cash flow or fair value hedge. The accounting policies associated with derivative financial instruments are discussed further in Note A to the Consolidated Financial Statements included under Item 8 of the Annual Report on Form 10-K.

Regions utilizes certain derivative instruments to hedge the variability of interest cash flows on debt instruments. On July 1, 2004, Regions also designated several interest rate swaps to hedge the variability of future cash flows associated with certain variable-rate loans. These interest rate swaps and variable-rate loans were acquired in the merger with Union Planters. To the extent that the hedge of future cash flows is effective, changes in the fair value of the derivative are recognized as a component of other comprehensive income in stockholders' equity. At March 31, 2005, Regions reported a $2.5 million loss in accumulated other comprehensive income related to cash flow hedges of debt instruments. The Company will amortize this loss into earnings in conjunction with the recognition of interest payments on the debt instruments through 2011. At March 31, 2005, Regions also reported a $3.6 million loss in accumulated other comprehensive income related to cash flow hedges of variable-rate loans. T o the extent that the hedge of future cash flows is ineffective, changes in the fair value of the derivative are recognized in earnings as a component of other non-interest expense. For the three months ended March 31, 2005, there was a loss of approximately $92,000 related to hedge ineffectiveness recognized in other non-interest expense attributable to cash flow hedges on variable-rate loans.

Regions hedges the changes in the fair value of assets using forward contracts, which represent commitments to sell money market instruments at a future date at a specified price or yield. The contracts are utilized by the Company to hedge interest rate risk positions associated with the origination of mortgage loans held for sale. The Company is subject to the market risk associated with changes in the value of the underlying financial instrument, as well as the risk that the other party will fail to perform. For the three months ended March 31, 2005, Regions recognized a net gain of $2.0 million associated with these instruments.

Regions has also entered into interest rate swap agreements converting a portion of its fixed rate long-term debt to floating rate. In addition to the hedges previously designated by Regions, Regions also designated several interest rate swaps acquired in the merger with Union Planters as fair value hedges on July 1, 2004. These interest rate swaps are converting portions of the fixed rate long-term debt acquired in the merger with Union Planters to floating rate. The fair values of the derivative instruments used in these fair value hedges are included in other assets on the statements of financial condition. For the three months ended March 31, 2005, there was a loss of $34,814 related to hedge ineffectiveness recognized in other non-interest expense attributable to these fair value hedges.

The Company also maintains a derivatives trading portfolio of interest rate swaps, option contracts and futures and forward commitments used to meet the needs of its customers. The portfolio is used to generate trading profit and help clients manage interest rate risk. The Company is subject to the risk that a counter-party will fail to perform. These trading derivatives are recorded in other assets and other liabilities. The net fair value of the derivatives trading portfolio at March 31, 2005, was an asset of $15.0 million.

Foreign currency contracts involve the exchange of one currency for another on a specified date and at a specified rate. These contracts are executed on behalf of the Company's customers and are used to manage fluctuations in foreign exchange rates. The notional amount of forward foreign exchange contracts totaled $12 million at March 31, 2005 and $15 million at March 31, 2004. The Company is subject to the risk that a counterparty will fail to perform.

In the normal course of business, Regions' brokerage subsidiary enters into underwriting and forward and future commitments. At March 31, 2005, the contract amount of future contracts was $74 million to purchase and $185 million to sell U.S. Government and municipal securities. The brokerage subsidiary typically settles its position by entering into equal but opposite contracts and, as such, the contract amounts do not necessarily represent future cash requirements. Settlement of transactions relating to such commitments is not expected to have a material effect on the subsidiary's financial position. Transactions involving future settlement give rise to market risk, which represents the potential loss that can be caused by a change in the market value of a particular financial instrument. The exposure to market risk is determined by a number of factors, including size, composition and diversification of positions held, the absolute and relative levels of interest rates and market volatility.

Regions' derivative financial instruments are summarized as follows:

	Other Than Trading Derivatives
	As of March 31, 2005
(dollar amounts in millions)	Notional Amount	Fair Value	Receive	Pay	Average Maturity in Years
Asset hedges:
Fair value hedges:
Forward sale commitments	$ 1,211	$ 9			0.1
Mortgage-backed security options	25	-			0.1
Total asset hedges	$ 1,236	$ 9			0.1
Liability hedges:
Fair value hedges:
Interest rate swaps	$4,548	$ 26	4.75%	3.19%	6.2
Total liability hedges	$4,548	$ 26			6.2

	As of March 31, 2004
(dollar amounts in millions)	Notional Amount	Fair Value	Receive	Pay	Average Maturity in Years
Asset hedges:
Fair value hedges:
Forward sale commitments	$ 234	$ -			0.2
Interest rate futures	5,635	-			1.4
Total asset hedges	$ 5,869	$ -			1.3
Liability hedges:
Fair value hedges:
Interest rate swaps	$3,438	$210	4.12%	1.34%	5.8
Interest rate options	250	-			1.2
Total liability hedges	$3,688	$210			5.5

	Derivative Financial Instruments
	As of March 31,
	2005			2004
	Contract or Notional Amount			Contract or Notional Amount
	Other			Other
	Than		Credit Risk	Than		Credit Risk
	Trading	Trading	Amount*	Trading	Trading	Amount*
	(in millions)
Interest rate swaps	$ 4,548	$10,618	$ 57	$  3,438	$5,839	$134
Interest rate options	-0-	1,635	-0-	250	839	-0-
Futures and forward
commitments	1,211	11,675	-0-	5,869	1,294	-0-
Mortgage-backed
security options	25	-0-	-0-
Foreign exchange
forwards	-0-	12	-0-	-0-	15	-0-
Total	$ 5,784	$23,940	$ 57	$ 9,557	$7,987	$134

The following table is a summary of Regions' derivative financial instruments as of December 31, 2004 and 2003, and is presented for comparison purposes.

	Derivative Financial Instruments
	As of December 31,
	2004			2003
	Contract or Notional Amount			Contract or Notional Amount
	Other			Other
	Than		Credit Risk	Than		Credit Risk
	Trading	Trading	Amount*	Trading	Trading	Amount*
	(in millions)
Interest rate swaps	$ 4,548	$10,508	$ 107	$  3,438	$5,673	$191
Interest rate options	-0-	1,237	-0-	250	911	-0-
Futures and forward
commitments	1,141	10,564	-0-	111	945	-0-
Mortgage-backed
security options	50	-0-	-0-	-0-	-0-	-0-
Foreign exchange
forwards	-0-	25	-0-	-0-	20	-0-
Total	$ 5,739	$22,334	$ 107	$ 3,799	$7,549	$191

*Credit Risk Amount is defined as all positive exposures not collateralized with cash on deposit. Any credit risk arising under option contracts is combined with swaps to reflect netting agreements.

NOTE H - Pension and Postretirement Benefits

The following table provides the net pension cost and postretirement benefit cost recognized for the three months ended March 31, 2005 and 2004:

	Pension Cost		Postretirement Benefit Cost
(in thousands)	Three Months Ended March 31,		Three Months Ended March 31,
	2005	2004	2005	2004
Service cost	$ 3,913	$ 3,758	$ 122	$ 536
Interest cost	6,145	5,666	534	507
Expected return on plan assets	(7,326)	(6,194)	(82)	(43)
Net amortization	2,860	2,225	44	234
Net periodic pension expense	$ 5,592	$ 5,455	$ 618	$ 1,234

NOTE I - Recent Accounting Pronouncements

On December 16, 2004, the FASB issued Statement 123(R). Statement 123(R) revises Statement of Financial Accounting Standards No. 123 (Statement 123), "Accounting for Stock-Based Compensation" and supersedes APB 25, "Accounting for Stock Issued to Employees." Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. It uses a "modified grant-date" approach in which the fair value of an equity award is estimated on the grant date without regard to service or performance conditions. The fair value is recognized as expense over the requisite service period for all awards that vest. The requisite service period is the period of time over which an employee must provide service in exchange for an award under a share-based payment arrangement, or the vesting period. Statement 123(R) is effective for public companies no later than the beginning of the first fiscal year beginning aft er June 15, 2005 and allows for two transition alternatives. The modified-prospective-transition method would require companies to recognize expense for share-based payments to employees based on their grant-date fair value from the beginning of the fiscal period in which the recognition provisions are first applied. In addition, expense would be recognized for awards that were granted prior to, but not vested as of, the date Statement 123 (R) is adopted based on the same estimate of grant-date fair value used previously under Statement 123 for pro forma footnote disclosure purposes. Statement 123(R) also allows the modified-retrospective-transition method in which companies will restate prior periods for the amounts previously reported in the pro forma footnote disclosures under the provisions of Statement 123. As permitted by Statement 123, the Company currently accounts for share-based payments to employees using APB 25 intrinsic value method and, as such, generally recognizes no expense for employee stock options. Accordingly, the adoption of Statement 123(R) will have an impact on Regions results of operations, although it will have no significant impact on Regions' overall financial position. The impact of adoption of Statement 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had Regions adopted Statement 123(R) in prior periods, the impact of that standard would have approximated the impact of Statement 123 as described in the disclosure of pro forma net income and earnings per share in Note D "Stock-Based Compensation."

At its March 31, 2004 meeting, the FASB ratified several consensuses reached by the Emerging Issues Task Force in EITF Issue No. 03-1 ("EITF 03-1"), "The Meaning of Other-Than-Temporary Impairments and Its Application to Certain Investments." The consensuses ratified include application guidance for determining whether an other-than-temporary impairment has occurred on certain investments. The application guidance in EITF 03-1 was initially effective in reporting periods beginning after June 15, 2004. On September 15, 2004, the FASB issued proposed FASB Staff Position EITF Issue 03-1-a ("FSP 03-1-a") to address the application of EITF 03-1 to debt securities that are impaired solely because of interest-rate and/or sector-spread increases and that are analyzed for impairment under paragraph 16 of EITF 03-1. FSP 03-1-a would be effective for other than temporary impairment evaluations of interest-rate impaired and sector-spread impaired debt securities that are analyzed under paragraph 16 of EITF 03-1 on th e last reporting date for the reporting periods ending after the final FSP is posted to the FASB website. On March 31, 2004, the FASB issued FASB Staff Position 03-1-1, which delayed the effective date of paragraphs 10-20 of EITF Issue 03-1. Application of those paragraphs is deferred pending issuance of proposed FSP 03-1-a. Regions is currently assessing the potential impact of the application guidance in EITF 03-1 and the proposed FSP 03-1-a on its securities portfolio.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

The following discussion and financial information is presented to aid in understanding Regions Financial Corporation's ("Regions" or "the Company") financial position and results of operations. The emphasis of this discussion will be on the three months ended March 31, 2005, as compared to the three months ended March 31, 2004, and the three months ended December 31, 2004.

Comparisons with certain prior periods are significantly impacted by the merger with Union Planters Corporation ("Union Planters"), consummated on July 1, 2004, and accounted for as a purchase (see "NOTE B - Union Planters Merger").

CORPORATE PROFILE

Regions' primary business is providing traditional commercial and retail banking services to customers throughout the South, Midwest and Texas. Regions has two principal banking subsidiaries. Regions Bank operates as an Alabama state-chartered bank with branch offices in Alabama, Arkansas, Florida, Georgia, Louisiana, North Carolina, South Carolina, Tennessee and Texas. Union Planters Bank, National Association ("UPBNA"), operates in Alabama, Arkansas, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, Tennessee and Texas.

In addition to providing traditional commercial and retail banking services, Regions provides other financial services in the fields of investment banking, asset management, trust, mutual funds, securities brokerage, mortgage banking, insurance, leasing, and other specialty financing. Regions provides investment banking and brokerage services from 251 offices of Morgan Keegan & Company, Inc. ("Morgan Keegan"), one of the largest investment firms based in the South. Regions' mortgage banking operations, Regions Mortgage and EquiFirst Corporation ("EquiFirst"), provide residential mortgage loan origination and servicing activities for customers. The conforming mortgage operations for Regions Bank and UPBNA were merged together in the third quarter of 2004 and operate as Regions Mortgage, which services approximately $39.5 billion in mortgage loans. Regions provides full-line insurance brokerage services through Rebsamen Insurance, Inc., one of the 50 largest insurance brokers in the country.

Regions' profitability, like that of many other financial institutions, is dependent on its ability to generate revenue from net interest income and non-interest income sources. Net interest income is the difference between the interest income Regions receives on earning assets, such as loans and securities, and the interest expense Regions pays on interest-bearing liabilities, principally deposits and borrowings. Regions' net interest income is impacted by the size and mix of its balance sheet and the interest rate spread it earns. Non-interest income includes fees from service charges on deposit accounts, trust and securities brokerage activities, mortgage origination and servicing, insurance and other customer services which Regions provides.

Results of operations are also affected by the provision for loan losses and non-interest expenses such as salaries and employee benefits, occupancy and other operating expenses, including income taxes.

Economic conditions, competition and the monetary and fiscal policies of the Federal government in general, significantly affect financial institutions, including Regions. Lending and deposit activities and fee income generation are influenced by the level of business spending and investment, consumer income, spending and savings, capital market activities, competition among financial institutions, customer preferences, interest rate conditions and prevailing market rates on competing products in Regions' primary market areas.

Regions' business strategy has been and continues to be focused on providing a competitive mix of products and services, delivering quality customer service and maintaining a branch distribution network with offices in convenient locations. Regions believes that its merger with Union Planters Corporation will be beneficial in the continued implementation of this strategy.

The Company's principal market areas are located in the states of Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee and Texas. Morgan Keegan also operates offices in Massachusetts, New York and Virginia, as well as Toronto, Canada.

FIRST QUARTER HIGHLIGHTS

Regions reported net income available to common shareholders of $.51 per diluted share in the first quarter of 2005, including a reduction of $.06 per diluted share related to $26.8 million (after tax) in merger- related expenses. Net income available to common shareholders was $.60 per diluted share for the first quarter of 2004 and $.50 per diluted share for the fourth quarter of 2004. The third quarter of 2004 was the first period to report combined results reflecting the merger with Union Planters.

Net interest income for the first quarter of 2005 was $680.6 million, compared to $379.0 million in the first quarter of 2004 and $677.3 million in the fourth quarter of 2004. The net interest margin (annualized) for the first quarter of 2005 was 3.84%, up from 3.56% in the first quarter of 2004 and 3.76% in the fourth quarter of 2004. The increase in the net interest margin was due primarily to the combination of Regions and Union Planters balance sheets at July 1, 2004 and, from a linked-quarter perspective, an increase in loan yields, partially offset by a lesser increase in deposit rates.

Morgan Keegan's revenues were $204.3 million in the first quarter of 2005 compared to $176.5 million in the first quarter of 2004 and $203.7 million in the fourth quarter of 2004. Revenue comparisons are impacted by the addition of Union Planters' brokerage division in third quarter 2004, which primarily affects commissions and private client results, and strong investment banking activity in the fixed income and equity capital markets during the first quarter of 2005.

Gains on the sale of mortgage loans decreased 39% over the first quarter of 2004 and 13% compared to the fourth quarter of 2004, primarily due to decreased volume of conforming loan sales. Total mortgage production in the first quarter of 2005 was $3.8 billion.

Positive trends continued in Regions' banking unit. Loan growth of $437.5 million, linked quarter, was driven by commercial real estate and consumer lending. Deposits increased by $920.6 million, linked quarter, driven by non-interest-bearing demand deposits and retail and wholesale certificates of deposits.

Net charge-offs totaled $24.7 million or 0.17% of average loans, annualized, in the first quarter of 2005, compared to 0.17% for the first quarter of 2004 and 0.33% in the fourth quarter of 2004. On a linked-quarter basis, non-performing assets, including loans past due 90 days, increased $22.1 million to $549.1 million at March 31, 2005. The increase in non-performing assets was attributable to a single sizeable loan relationship being placed on non-accrual status. Non-accrual loans increased $40.8 million, other real estate decreased $6.0 million, and renegotiated loans decreased $22,000 compared to fourth quarter 2004 levels. Loans past due greater than 90 days decreased $12.7 million in the first quarter of 2005, compared to the prior quarter.

The provision for loan losses totaled $30.0 million in the first quarter of 2005 compared to $15.0 million during the same period of 2004 (prior to the Union Planters merger) and $45.0 million during the fourth quarter of 2004. The allowance for loan losses at March 31, 2005, was 1.31% of total loans, net of unearned income, compared to 1.39% at March 31, 2004, and 1.31% at year end 2004.

Non-interest income, excluding securities gains and losses, increased $107.6 million compared to the first quarter of 2004, primarily due to the addition of Union Planters in the third quarter of 2004, and decreased $6.3 million linked-quarter, resulting primarily from declines in service charge revenue from deposit accounts. Brokerage and investment banking revenues totaled $144.5 million in the first quarter of 2005, compared to $138.2 million in the first quarter of 2004 and $145.9 million in the fourth quarter of 2004. Trust fees totaled $32.0 million in the first quarter of 2005, compared to $20.7 million in the same period in 2004 and $29.8 million in the fourth quarter of 2004. Regions' mortgage servicing and origination fees totaled $39.3 million in the first quarter 2005 compared to $21.6 million in the first quarter of 2004 and $41.2 million in the fourth quarter of 2004.

Regions recognized $35 million of recapture in the value of mortgage servicing rights ("MSR") in the first quarter of 2005, included in other non-interest expense. The recapture was offset by a comparable amount of securities losses. Merger-related charges in the first quarter of 2005 totaled $38.9 million. Total non-interest expenses, excluding merger-related and other charges, increased $246.7 million compared to the first quarter of 2004 due primarily to the addition of Union Planters in the third quarter of 2004. Total non-interest expenses, excluding merger-related and other charges increased $4.4 million linked quarter due to an increase in salaries and benefits expense.

Subsequent to the end of the first quarter of 2005, Regions successfully completed its first of three planned conversions to integrate the former UPBNA branch locations. The first conversion event covered more than 130 branch locations; the remaining conversions are scheduled for third quarter 2005 and fourth quarter 2005, respectively.

CRITICAL ACCOUNTING POLICIES

In preparing financial information, management is required to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses for the periods shown. The accounting principles followed by Regions and the methods of applying these principles conform with accounting principles generally accepted in the United States and general banking practices. Estimates and assumptions most significant to Regions are related primarily to allowance for loan losses, intangibles, and income taxes and are summarized in the following discussion and the Notes to the consolidated financial statements included under Item 8 of the Annual Report on Form 10-K.

Management's determination of the adequacy of the allowance for loan losses, which is based on the factors and risk identification procedures discussed in the following pages, requires the use of judgments and estimates that may change in the future. Changes in the factors used by management to determine the adequacy of the allowance or the availability of new information could cause the allowance for loan losses to be increased or decreased in future periods. In addition, bank regulatory agencies, as part of their examination process, may require that additions be made to the allowance for loan losses based on their judgments and estimates.

Regions' excess purchase price (the amount in excess of the fair value of net assets acquired) is tested for impairment annually, or more often if events or circumstances indicate impairment may exist. Adverse changes in the economic environment, operations of acquired business units, or other factors could result in a decline in implied fair value of excess purchase price. If the implied fair value is less than the carrying amount, a loss would be recognized to reduce the carrying amount to implied fair value.

Other identifiable intangible assets, primarily core deposits intangibles, are reviewed at least annually for events or circumstances which could impact the recoverability of the intangible asset, such as loss of core deposits, increased competition or adverse changes in the economy. To the extent an other identifiable intangible asset is deemed unrecoverable, an impairment loss would be recorded to reduce the carrying amount to the fair value.

For purposes of evaluating mortgage servicing impairment, Regions must value its mortgage servicing rights. Mortgage servicing rights do not trade in an active market with readily observable market prices. Although sales of mortgage servicing rights do occur, the exact terms and conditions of sales may not be readily available. As a result, Regions stratifies its mortgage servicing portfolio on the basis of certain risk characteristics including loan type and contractual note rate and values its mortgage servicing rights using discounted cash flow modeling techniques which require management to make estimates regarding future net servicing cash flows, taking into consideration actual and expected mortgage loan prepayment rates and discount rates. Changes in interest rates, prepayment frequency or other factors could result in impairment of the servicing asset and a charge against earnings to reduce the recorded carrying amount. Based on a hypothetical sensitivity analysis, Regions estimates that a reducti on in the primary mortgage market rates of 25 basis points and 50 basis points would reduce the March 31, 2005 fair value of mortgage servicing rights by 13% and 26%, respectively. Management mitigates risk associated with declines in the estimated value of mortgage servicing rights by purchasing agency securities to create economic hedges.

Management's determination of the realization of the deferred tax asset is based upon management's judgment of various future events and uncertainties, including the timing and amount of future income earned by certain subsidiaries and the implementation of various tax plans to maximize realization of the deferred tax asset. Management believes that the subsidiaries will generate sufficient operating earnings to realize the deferred tax benefits. Regions' 1998 to 2003 consolidated federal income tax returns are open for examination. From time to time, Regions engages in business plans that may also have an effect on its tax liabilities. While Regions has obtained the opinion of advisors that the tax aspects of these plans should prevail, examination of Regions' income tax returns or changes in tax law may impact these plans and resulting provisions for income taxes.

TOTAL ASSETS

Regions' total assets at March 31, 2005, were $84.3 billion, a 73% increase compared to March 31, 2004. Total assets have not changed significantly since December 31, 2004. The increase from first quarter 2004 was due primarily to the merger with Union Planters.

LOANS AND ALLOWANCE FOR LOAN LOSSES

LOAN PORTFOLIO

Regions' primary investment is loans. At March 31, 2005, loans represented 78% of Regions' earning assets.

The following table includes a distribution of Regions' loan portfolio.

Loan Portfolio (period end data)
(in thousands)	First Quarter 2005	Fourth Quarter 2004	First Quarter 2004
Commercial	$15,580,577	$15,592,887	$10,215,384
Residential mortgages	11,478,974	11,518,716	8,267,924
Other real estate loans	14,555,851	14,385,317	6,240,204
Construction	6,895,472	6,529,751	3,601,942
Branch installment	1,732,933	1,781,368	1,293,711
Indirect installment	1,507,689	1,597,641	368,595
Consumer lines of credit	5,370,837	5,229,256	2,072,063
Student loans	842,170	892,018	709,927
	$57,964,503	$57,526,954	$32,769,750

Total loans at March 31, 2005, increased 77% from March 31, 2004, and 1% over year-end 2004. The strongest categories of growth in the loan portfolio, in addition to increases related to the merger of $22.3 billion in July of 2004, have been in commercial real estate, construction and consumer lines of credit. The average yield on loans during the first quarter of 2005 was 5.83% compared to 5.27% during the first quarter of 2004, and 5.50% during the fourth quarter of 2004.

ALLOWANCE FOR LOAN LOSSES

Every loan carries some degree of credit risk. This risk is reflected in the consolidated financial statements by the allowance for loan losses, the amount of loans charged off and the provision for loan losses charged to operating expense. It is Regions' policy that when a loss is identified, it is charged against the allowance for loan losses in the current period. The policy regarding recognition of losses requires immediate recognition of a loss if significant doubt exists as to principal repayment.

Regions' provision for loan losses is a reflection of actual losses experienced during the period and management's judgment as to the adequacy of the allowance for loan losses. Some of the factors considered by management in determining the amount of the provision and resulting allowance include: (1) detailed reviews of individual loans; (2) gross and net loan charge-offs in the current period; (3) the current level of the allowance in relation to total loans and to historical loss levels; (4) past due and non-accruing loans; (5) collateral values of properties securing loans; (6) the composition of the loan portfolio (types of loans) and risk profiles; and (7) management's analysis of economic conditions and the resulting impact on Regions' loan portfolio.

A coordinated effort is undertaken to identify credit losses in the loan portfolio for management purposes and to establish the loan loss provision and resulting allowance for accounting purposes. A regular, formal and ongoing loan review is conducted to identify loans with unusual risks or possible losses. The primary responsibility for this review rests with the management of the individual banking offices. Their work is supplemented with reviews by Regions' internal audit staff and corporate loan examiners. This process provides information that helps in assessing the quality of the portfolio, assists in the prompt identification of problems and potential problems, and aids in deciding if a loan represents a probable loss that should be recognized or a risk for which an allowance should be maintained.

If it is determined that payment of interest on a loan is questionable, it is Regions' policy to classify the loan as non-accrual and reverse interest previously accrued and uncollected 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.

Although it is Regions' policy to immediately charge off as a loss all loan amounts judged to be uncollectible, historical experience indicates that certain losses exist in the loan portfolio that have not been specifically identified. To anticipate and provide for these unidentifiable losses, the allowance for loan losses is established by charging the provision for loan loss expense against current earnings. 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 determines its allowance for loan losses in accordance with Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan-an Amendment of FASB Statements No. 5 and 15" and Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies." In determining the amount of the allowance for loan losses, management uses information from its ongoing loan review process to stratify the loan portfolio into risk grades. The higher-risk-graded loans in the portfolio are assigned estimated amounts of loss based on several factors, including current and historical loss experience of each higher-risk category, regulatory guidelines for losses in each higher-risk category andmanagement's judgment of economic conditions and the resulting impact on the higher-risk-graded loans. All loans deemed to be impaired, which include all non-accrual loans greater than $1 million, excluding loans to individuals, are evaluated individually. Impairedloans totaled approximately $150 million at March 31, 2005 and $95 million at December 31, 2004. The increase in impaired loans in the first quarter of 2005 relates to one specific credit relationship with an outstanding balance of approximately $61 million. The vast majority of Regions' impaired loans are dependent upon collateral for repayment. For these loans, impairment is measured by evaluating collateral value as compared to the current investment in the loan. For all other loans, Regions compares the amount of estimated discounted cash flows to the investment in the loan. In the event a particular loan's collateral value or discounted cash flows are not sufficient to support the collection of the investment in the loan, the loan is specifically considered in the determination of the allowance for loan losses or a charge is immediately taken against the allowance for loan losses. The percentage of the allowance for loan losses related to the higher-risk loans was approximately 45% at March 31, 2005, compared to approximately 55% at December 31,2004. Higher-risk loans, which include impaired loans, consist of loans classified as OLEM (other loans especially mentioned) and below and loans in other loan categories that are significantly past due.

In addition to establishing allowance levels for specifically identified higher-risk-graded loans, management determines allowance levels for all other loans in the portfolio for which historical experience indicates that certain losses exist. These loans are categorized by loan type and assigned estimated amounts of loss based on several factors, including current and historical loss experience of each loan type and management's judgment of economic conditions and the resulting impact on each category of loans. The percentage of the allowance for loan losses related to all other loans in the portfolio for which historical experience indicates that certain losses exist was approximately 55% of Regions' allowance for loan losses at March 31, 2005 and 45% at December 31, 2004. The amount of the allowance related to these loans is combined with the amount of the allowance related to the higher-risk-graded loans to evaluate the overall level of the allowance for loan losses.

As a part of the integration of Regions and Union Planters, the loan review, grading and rating systems were combined throughout the combined organization. The result is a consistent approach of review and rating for loans originated from both organizations.

Management considers the current level of the allowance for loan losses adequate to absorb probable losses on loans in the portfolio. Management's determination of the adequacy of the allowance for loan losses, which is based on the factors and risk identification procedures previously discussed, requires the use of judgments and estimations that may change in the future. Changes in the factors used by management to determine the adequacy of the allowance or the availability of new information could cause the allowance for loan losses to be increased or decreased in future periods. In addition, bank regulatory agencies, as part of their examination process, may require that additions be made to the allowance for loan losses based on their judgments and estimates.

Activity in the allowance for loans losses is summarized as follows:

	Three Months Ended
(dollar amounts in thousands)	March 31,	March 31,
	2005	2004
Balance at beginning of period	$754,721	$454,057
Loans charged-off:
Commercial	21,670	15,412
Real estate	12,259	2,543
Installment	13,314	8,562
Total	47,243	26,517
Recoveries:
Commercial	12,445	7,062
Real estate	2,318	885
Installment	7,791	5,079
Total	22,554	13,026
Net loans charged off:
Commercial	9,225	8,350
Real estate	9,941	1,658
Installment	5,523	3,483
Total	24,689	13,491
Provision charged to expense	30,000	15,000
Balance at end of period	$760,032	$455,566
Average loans outstanding:
Commercial	$15,100,706	$9,991,182
Real estate	33,354,288	16,698,521
Installment	9,057,000	5,652,378
Total	$57,511,994	$32,342,081
Net charge-offs as percent of average
loans outstanding (annualized):
Commercial	.25%	.34%
Real estate	.12%	.04%
Installment	.25%	.25%
Total	.17%	.17%

Net loan losses as a percentage of average loans (annualized) were 0.17% in the first quarter of 2005 compared to 0.17% in the first quarter 2004 and 0.33% in the fourth quarter of 2004. At March 31, 2005, the allowance for loan losses was 1.31% of loans, compared to 1.39% at March 31, 2004, and 1.31% at December 31, 2004. The allowance for loan losses as a percentage of non-performing loans was 155% at March 31, 2005, compared to 193% at March 31, 2004, and 163% at December 31, 2004. The allowance for loan losses as a percentage of non-performing assets was 138% at March 31, 2005, compared to 162% at March 31, 2004, and 143% at December 31, 2004.

NON-PERFORMING ASSETS

Non-performing assets are summarized as follows:

(dollar amounts in thousands)	March 31,	December 31,	March 31,
	2005	2004	2004
Non-accruing loans	$429,171	$388,379	$201,805
Loans past due 90 days or more	62,074	74,777	34,091
Renegotiated loans	257	279	391
Other real estate	57,624	63,598	45,356
Total	$549,126	$527,033	$281,643
Non-performing assets as a
percentage of loans and
other real estate	0.95%	0.92%	0.86%

Non-accruing loans at March 31, 2005, increased $227.4 million from March 31, 2004 levels and $40.8 million from year-end 2004 levels. Non-accruing loans increased due to the addition of Union Planters in the third quarter of 2004, as well as a single sizeable loan relationship which was placed on non-accrual status (see ALLOWANCE FOR LOAN LOSSES above) during first quarter 2005. At March 31, 2005, realestate loans comprised $214.4 million ($131.7 million in residential) of total non-accruing loans, with commercial loans accounting for $197.2 million and consumer loans accounting for $17.6 million. Loans past due 90 days or more increased $28.0 million compared to March 31, 2004 and decreased $12.7 million from year-end 2004 levels. Renegotiated loans decreased $134,000 compared to March 31, 2004 and $22,000 from year-end 2004 levels. Other real estate increased $12.3 million from March 31, 2004 due primarily to properties added in connection with the merger with Union Planters and decreased $6. 0 million since December 31, 2004.

INTEREST-BEARING DEPOSITS IN OTHER BANKS

Interest-bearing deposits in other banks are used primarily as temporary investments and generally have short-term maturities. At March 31, 2005, this category of earning asset totaled $126.7 million compared to $102.4 million at March 31, 2004, and $115.0 million at December 31, 2004.

SECURITIES

The following table shows the carrying values of securities as follows:

(in thousands)	March 31,	December 31,	March 31,
	2005	2004	2004
Securities held to maturity:
U.S. Treasury and Federal agency securities	$31,893	$31,152	$31,238
Obligations of states and political subdivisions	-	-	752
Total	$31,893	$31,152	$31,990
Securities available for sale:
U.S. Treasury and Federal agency securities	$ 3,528,199	$4,375,697	$1,895,131
Obligations of states and political subdivisions	519,460	569,060	430,809
Mortgage-backed securities	7,574,977	6,980,513	5,826,168
Other securities	72,662	179,374	88,220
Equity securities	487,353	480,793	232,716
Total	$12,182,651	$12,585,437	$8,473,044

Total securities at March 31, 2005, increased 44% from March 31, 2004 due primarily to the merger with Union Planters which added $5.4 billion of securities and decreased 3% since year-end 2004 levels. During the first quarter of 2005, Regions sold $1.4 billion in government and agency securities, incurring a loss of $34.0 million. Securities available for sale are an important tool used to manage interest rate sensitivity and provide a primary source of liquidity for the Company (see INTEREST RATE SENSITIVITY,Exposure to Interest Rate Movementsand LIQUIDITY).

LOANS HELD FOR SALE

Loans held for sale increased $540.2 million compared to March 31, 2004, due to the merger with Union Planters in the third quarter 2004, and $193.6 million compared to year-end 2004, due to an increase in mortgage loans held for sale. At March 31, 2005, mortgage loans held for sale accounted for $1.9 billion of the total loans held for sale, while factored accounts receivable accounted for $33 million.

MARGIN RECEIVABLES

Margin receivables at March 31, 2005, totaled $551.1 million compared to $548.0 million at March 31, 2004, and $477.8 million at December 31, 2004. Margin receivables represent funds advanced to brokerage customers for the purchase of securities that are secured by certain marketable securities held in the customer's brokerage account. The risk of loss from these receivables is minimized by requiring that customers maintain marketable securities in the brokerage account which have a fair market value substantially in excess of the funds advanced to the customer. Fluctuations in these balances are caused by trends in general market conditions, volatility in equity retail products, and investor sentiment toward economic stability.

EXCESS PURCHASE PRICE

Excess purchase price at March 31, 2005, totaled $5.0 billion compared to $1.1 billion at March 31, 2004 and $5.0 billion year-end 2004. The increase from March 31, 2004 is related to excess purchase price added in connection with the merger with Union Planters.

MORTGAGE SERVICING RIGHTS

Mortgage servicing rights increased $312.1 million compared to March 31, 2004 due to additions associated with the July 1, 2004 merger with Union Planters. Since year end, mortgage servicing rights increased $28.6 million due to a recapture of a portion of the related valuation allowance during the first quarter of 2005. At March 31, 2005, mortgage servicing rights totaled $425.2 million.

OTHER IDENTIFIABLE INTANGIBLE ASSETS

Other identifiable intangible assets at March 31, 2005 totaled $344.4 million compared to $5.4 million at March 31, 2004 and $356.9 million at year-end 2004. The increase from the first quarter of 2004 is related primarily to $368.0 million in core deposit intangibles added in connection with the merger with Union Planters. The decrease during the first quarter of 2005 is related to amortization of other identifiable intangibles.

OTHER ASSETS

Other assets increased $44.5 million compared to March 31, 2004, and declined $126.0 million since year-end 2004. The increase from first quarter 2004 was primarily the result of assets added in connection with the merger with Union Planters in the third quarter of 2004. The decline from fourth quarter 2004 was primarily attributable to decreases in derivative assets and investments in low income housing partnerships.

LIQUIDITY

GENERAL

Liquidity is an important factor in the financial condition of Regions and affects Regions' ability to meet the borrowing needs and deposit withdrawal requirements of its customers. Assets, consisting principally of loans and securities, are funded by customer deposits, purchased funds, borrowed funds and stockholders' equity.

The securities portfolio is one of Regions' primary sources of liquidity. Maturities of securities provide a constant flow of funds available for cash needs. Maturities in the loan portfolio also provide a steady flow of funds. Additional funds are provided from payments on consumer loans and one-to-four family residential mortgage loans. Historically, Regions' high levels of earnings have also contributed to cash flow. In addition, liquidity needs can be met by the purchase of funds in state and national money markets. Regions' liquidity also continues to be enhanced by a relatively stable deposit base.

The loan to deposit ratio at March 31, 2005, was 97.28% compared to 104.28% at March 31, 2004 and 98.06% at December 31, 2004.

In April 2005, Regions filed a universal shelf registration statement. This shelf registration, when effective, will allow the company to issue up to $2 billion of various debt and equity securities at market rates for future funding and liquidity needs.

Regions also has the ability to obtain additional Federal Home Loan Bank ("FHLB") advances subject to collateral requirements and other limitations. The FHLB has been and is expected to continue to be a reliable and economical source of funding and can be used to fund debt maturities as well as other obligations.

In addition, Regions Bank has the requisite agreements in place to issue and sell up to $5 billion of its bank notes to institutional investors through placement agents. As of March 31, 2005, approximately $1 billion in bank notes were outstanding, including $400 million under a previous agreement and $600 million assumed through acquisitions. The issuance of additional bank notes could provide a significant source of liquidity and funding to meet future needs.

Morgan Keegan maintains certain lines of credit with unaffiliated banks to manage liquidity in the ordinary course of business.

RATINGS

The table below reflects the most recent debt ratings of Regions Financial Corporation and Regions Bank by Standard & Poor's Corporation, Moody's Investors Service and Fitch IBCA:

	S&P	Moody's	Fitch
Regions Financial Corporation:
Senior notes	A	A1	A+
Subordinated notes	A-	A2	A
Trust preferred securities	BBB+	A2	A
Regions Bank and Union Planters Bank, N.A.:
Short-term certificates of deposit	A-1	P-1	F1+
Short-term debt	A-1	P-1	F1+
Long-term certificates of deposit	A+	Aa3	AA-
Long-term debt	A+	Aa3	A+

A security rating is not a recommendation to buy, sell or hold securities, and the ratings above are subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.

DEPOSITS

Regions competes with other banking and financial services companies for a share of the deposit market. Regions' ability to compete in the deposit market depends heavily on how effectively the Company meets customers' needs. Regions employs both traditional and non-traditional means to meet customers' needs and enhance competitiveness. The traditional means include providing well-designed products, providing a high level of customer service, providing attractive pricing and expanding the traditional branch network to provide convenient branch locations for customers throughout the South, Midwest and Texas. Regions also employs non-traditional approaches to enhance its competitiveness. These include providing centralized, high quality telephone banking services and alternative product delivery channels like Internet banking.

Total deposits at March 31, 2005, increased 90% compared to March 31, 2004, and 2% from year-end 2004 levels. The significant increase in deposits from first quarter 2004 was due primarily to $22.9 billion in deposits added in connection with the merger with Union Planters. In addition to the increases realized through the merger, the other drivers of growth were non-interest bearing demand deposits and certificates of deposit.

The following table presents the average rates paid on deposits by category for the three months ended March 31, 2005 and 2004 (annualized):

	Average Rates Paid
	March 31,	March 31,
	2005	2004
Interest-bearing transaction accounts	1.62%	0.84%
Savings accounts	0.23	0.22
Money market savings accounts	0.97	0.61
Certificates of deposit of $100,000 or more	2.61	1.94
Other interest-bearing deposits	2.63	2.13
Total interest-bearing deposits	1.73%	1.27%

The following table presents the average amounts of deposits outstanding by category for the three months ended March 31, 2005 and 2004:

	Average Amounts Outstanding
	Three months ended March 31,
(in thousands)	2005	2004
Non-interest-bearing demand deposits	$ 11,465,076	$ 5,709,946
Interest-bearing transaction accounts	3,133,340	2,642,203
Savings accounts	2,902,368	1,426,803
Money market savings accounts	19,271,295	10,578,972
Certificates of deposit of $100,000 or more	7,494,832	3,544,559
Other interest-bearing deposits	14,121,224	8,429,297
Total interest-bearing deposits	46,923,059	26,621,834
Total deposits	$58,388,135	$32,331,780

BORROWINGS

Following is a summary of short-term borrowings:

(in thousands)	March 31,	December 31,	March 31,
	2005	2004	2004
Federal funds purchased	$1,631,953	$ 1,872,119	$2,524,452
Securities sold under
agreements to repurchase	2,580,478	2,807,807	1,923,066
Federal Home Loan Bank structured notes	350,000	350,000	350,000
Notes payable to unaffiliated banks	59,600	56,400	55,200
Treasury, tax and loan note	4,984	5,000	-
Due to brokerage customers	463,539	457,702	513,874
Derivative collateral	19,553	75,846	89,803
Short sale liability	342,616	370,737	433,039
Total	$5,452,723	$5,995,611	$5,889,434

Net federal funds purchased and security repurchase agreements totaled $3.7 billion at March 31, 2005, compared to $3.9 billion at March 31, 2004, and $4.0 billion at year-end 2004. The level of federal funds and security repurchase 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 2005, net funds purchased averaged $4.4 billion compared to $2.9 billion for the same period in 2004. Other short-term borrowings decreased $201.6 million since March 31, 2004 and $75.4 million since year end due primarily to reductions in short sale liabilities and customer funds in brokerage accounts.

Long-term borrowings are summarized as follows:

(in thousands)	March 31,	December 31,	March 31,
	2005	2004	2004
6.375% subordinated notes due 2012	$ 600,000	$ 600,000	$ 600,000
7.00% subordinated notes due 2011	500,000	500,000	500,000
7.75% subordinated notes due 2024	100,000	100,000	100,000
6.75% subordinated notes due 2005	102,258	103,225	-
6.50% subordinated notes due 2018	318,350	319,873	-
7.75% subordinated notes due 2011	565,453	568,219	-
Senior holding company notes due 2010	484,634	483,956	-
Senior bank notes	1,015,266	1,017,050	400,000
Federal Home Loan Bank structured notes	1,785,000	1,785,000	2,835,000
Federal Home Loan Bank advances	949,186	945,916	811,997
Junior subordinated notes	523,608	525,015	300,720
Mark-to-market on hedged long-term debt	40,293	125,294	155,245
Other long-term debt	169,862	166,037	65,169
Total	$7,153,910	$7,239,585	$5,768,131

Long-term borrowings have increased $1.4 billion since March 31, 2004 (due primarily to the additional $2.7 billion in long-term borrowings added from the merger with Union Planters in the third quarter of 2004 and partially offset by the early retirement of $1.1 billion in Federal Home Loan Bank advances in the second quarter of 2004) and increased $85.7 million since year-end 2004.

OTHER LIABILITIES

Other liabilities increased $170.6 million compared to March 31, 2004 due primarily to liabilities added in the merger with Union Planters and decreased by $19.9 million compared to year-end 2004, primarily due to a decrease in accrued incentive awards.

STOCKHOLDERS' EQUITY

Stockholders' equity was $10.6 billion at March 31, 2005, compared to $4.4 billion at March 31, 2004, and $10.7 billion at December 31, 2004. The increase from first quarter 2004 results from equity added in connection with the merger with Union Planters on July 1, 2004. The total value added to equity was approximately $6.0 billion with 190.3 million shares being issued. Accumulated other comprehensive loss totaled $47.2 million at March 31, 2005, compared to income of $100.1 million at March 31, 2004, and $50.3 million at year-end 2004. Fluctuations in accumulated other comprehensive income (loss) primarily relate to changes in the carrying value of available for sale securities.

Regions' ratio of equity to total assets was 12.63% at March 31, 2005, compared to 9.07% at March 31, 2004 and 12.78% at December 31, 2004. Regions' ratio of tangible equity to tangible assets was 6.72% at March 31, 2005, compared to 6.99% at March 31, 2004 and 6.86% at December 31, 2004.

On July 15, 2004, Regions' Board of Directors assessed the pre-merger repurchase authorizations of both Regions and Union Planters and authorized Regions to repurchase up to 20.0 million shares of its $0.01 par value common stock through open market transactions. Regions repurchased 4,482,500 shares in the first quarter of 2005. An additional 14.7 million shares could be repurchased under this authorization.

Regions and its subsidiaries are required to comply with capital adequacy standards established by banking regulatory agencies. Currently, there are two basic measures of capital adequacy: a risk-based measure and a leverage measure.

The risk-based capital standards are designed to make regulatory capital requirements more sensitive to differences in credit risk profiles among banks and bank holding companies, to account for off-balance sheet exposure and interest rate risk, and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with specified risk-weighting factors. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items. Banking organizations that are considered to have excessive interest rate risk exposure are required to maintain higher levels of capital.

The minimum standard for the ratio of total capital to risk-weighted assets is 8%. At least 50% of that capital level must consist of common equity, undivided profits and non-cumulative perpetual preferred stock, less goodwill and certain other intangibles ("Tier 1 capital"). The remainder ("Tier 2 capital") may consist of a limited amount of other preferred stock, mandatory convertible securities, subordinated debt, and a limited amount of the allowance for loan losses. The sum of Tier 1 capital and Tier 2 capital is "total risk-based capital."

The banking regulatory agencies also have adopted regulations that supplement the risk-based guidelines to include a minimum ratio of 3% of Tier 1 capital to average assets less goodwill (the "leverage ratio").

Depending upon the risk profile of the institution and other factors, the regulatory agencies may require a leverage ratio of 1% to 2% above the minimum 3% level.

The following chart summarizes the applicable bank regulatory capital requirements. Regions' capital ratios at March 31, 2005 and 2004, substantially exceeded all regulatory requirements.

		Well
	Minimum	Capitalized	Regions at	Regions at
	Regulatory	Regulatory	March 31,	March 31,
	Requirement	Requirement	2005	2004
Tier 1 capital to risk-adjusted assets	4.00%	6.00%	8.90%	9.26%
Total risk-based capital to
risk adjusted assets	8.00	10.00	13.20	13.87
Tier 1 leverage ratio	3.00	5.00	7.46	7.34

OPERATING RESULTS

For the first quarter of 2005, net income available to common shareholders totaled $241.6 million ($0.51 per diluted share) compared to $166.6 million ($0.60 per diluted share) in the first quarter of 2004 and $236.5 million ($0.50 per diluted share) in the fourth quarter of 2004.

Annualized return on stockholders' equity for the three months ended March 31, 2005 was 9.15% compared to 15.14% for the same period in 2004. Annualized return on assets for the three months ended March 31, 2005 was 1.16% compared to 1.39% for the same period in 2004.

Annualized return on tangible stockholders' equity was 18.00% for the three months ended March 31, 2005 compared to 20.02% for the same period in 2004 and 17.61% at December 31, 2004.

NET INTEREST INCOME

The following table presents a summary of net interest income for the quarters ended March 31, 2005, December 31, 2004, and March 31, 2004.

(dollar amounts in thousands)	March 31,	December 31,	March 31,
	2005	2004	2004
Interest income	$991,976	$956,446	$535,682
Interest expense	311,405	279,175	156,685
Net interest income	680,571	677,271	378,997
Tax equivalent adjustment	20,535	18,074	16,414
Net interest income (taxable equivalent)	$701,106	$695,345	$395,411
Net interest margin	3.84%	3.76%	3.56%

Net interest income (taxable equivalent basis) for the three months ended March 31, 2005, increased $305.7 million, or 77%, compared to the same period in 2004. The increase in net interest income is due primarily to increases in interest rates during 2004 and first quarter 2005, as well as increases in average earning assets resulting from the merger with Union Planters. The net yield on interest-earning assets (taxable equivalent basis) was 3.84% in the first quarter of 2005, compared to 3.56% during the same period in 2004 and 3.76% in the fourth quarter of 2004. The increase of 8 basis points in the first quarter of 2005 was due to an increase in earning asset yields (due to rising interest rates), partially offset by a lesser increase in deposit account interest rates. The net yield on interest earning assets increased 28 basis points, compared to the first quarter of 2004, primarily due to increases in interest rates throughout 2004 and first quarter 2005, the combination of Regions' and Union Pla nters' balance sheets at July 1, 2004, and an increase in loans (the highest yielding earning asset) as a percentage of earning assets.

Analysis of Changes in Net Interest Income

	Three months ended March 31,
(in thousands)	2005 over 2004
	Volume	Yield/Rate	Total
Increase (decrease) in:
Interest income on:
Loans	$350,546	$49,276	$399,822
Federal funds sold	(163)	1,839	1,676
Taxable securities	34,592	1,603	36,195
Non-taxable securities	1,358	(3)	1,355
Other earning assets	8,890	8,357	17,247
Total	395,223	61,072	456,295
Interest expense on:
Savings deposits	840	43	883
Other interest-bearing deposits	77,412	37,544	114,956
Borrowed funds	20,801	18,081	38,882
Total	99,053	55,668	154,721
Increase in net interest income	$296,170	$5,404	$301,574

Note: The change in interest due to both rate and volume has been allocated to change due to volume and change due to rate in proportion to the absolute dollar amounts of the change in each.

MARKET RISK

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates, commodity prices, equity prices, or the credit quality of debt securities.

INTEREST RATE SENSITIVITY

Regions' primary market risk is interest rate risk, including uncertainty with respect to absolute interest rate levels as well as uncertainty with respect to relative interest rate levels which impact both the shape and the slope of the various yield curves affecting the financial products and services that the Company offers. To quantify this risk, Regions measures the change in its net interest income in various interest rate scenarios as compared to a base case scenario. Net interest income sensitivity (as measured over 12 months) is a useful short-term indicator of Regions' interest rate risk.

Sensitivity Measurement. Financial simulation models are Regions' primary tools used to measure interest rate exposure. Using a wide range of hypothetical deterministic and stochastic simulations, these tools provide management with extensive information on the potential impact to net interest income caused by changes in interest rates.

These models are structured to simulate cash flows and accrual characteristics of Regions' balance sheet. Assumptions are made about the direction and volatility of interest rates, the slope of the yield curve, and about the changing composition of the balance sheet that result from both strategic plans and from customer behavior. Among the assumptions are expectations of balance sheet growth and composition, the pricing and maturity characteristics of existing business and the characteristics of future business. Interest rate related risks are expressly considered, such as pricing spreads, the lag time in pricing administered rate accounts, prepayments and other option risks. Regions considers these factors, as well as the degree of certainty or uncertainty surrounding their future behavior.

Financial derivative instruments are used to mitigate the risk of changes in the values of selected assets and liabilities resulting from changes in interest rates. The effect of these hedges is included in the simulations of net interest income.

The primary objectives of asset/liability management at Regions are balance sheet coordination and the management of interest rate risk in achieving reasonable and stable net interest income throughout various interest rate cycles. A standard set of alternate interest rate scenarios is compared to the results of the base case scenario to determine the extent of potential fluctuations and to establish exposure limits. The standard set of interest rate scenarios includes the traditional instantaneous parallel rate shifts of plus and minus 100 and 200 basis points. In addition, Regions includes simulations of gradual interest rate movements that may more realistically mimic potential interest rate movements. Gradual scenarios could include curve steepening, flattening, and parallel movements of various magnitudes phased in over a 6-month period.

Exposure to Interest Rate Movements. Based on the foregoing discussion, management has estimated the potential effect of shifts in interest rates on net interest income. As of March 31, 2005, Regions maintains a slightly asset sensitive position to gradual rate shifts of plus or minus 100 and 200 basis points. The following table demonstrates the expected effect that a gradual (over six months beginning at March 31, 2005 and 2004) parallel interest rate shift would have on Regions' annual net interest income. Results of the same analysis for the comparable period for 2004 are presented for comparison purposes.

	March 31, 2005		March 31, 2004
Gradual	$ Change in	% Change in	$ Change in	% Change in
Change in	Net Interest	Net Interest	Net Interest	Net Interest
Interest Rates	Income	Income	Income	Income
(in basis points)	(dollar amounts in thousands)
+200	$ 101,000	3.7%	$ 36,000	2.4%
+100	59,000	2.2	16,000	1.1
-100	(59,000)	(2.2)	(10,000)	(0.7)
-200	(122,000)	(4.5)	(25,000)	(1.6)

As of March 31, 2005, Regions maintains a slightly asset sensitive position to instantaneous rate shifts of plus or minus 100 and 200 basis points. The following table demonstrates the expected effect that an instantaneous parallel rate shift would have on Regions' annual net interest income. Results of the same analysis for the comparable period of 2004 are presented for comparison purposes.

	March 31, 2005		March 31, 2004
Instantaneous	$ Change in	% Change in	$ Change in	% Change in
Change in	Net Interest	Net Interest	Net Interest	Net Interest
Interest Rates	Income	Income	Income	Income
(in basis points)	(dollar amounts in thousands)
+200	$ 136,000	5.0%	$ 53,000	3.5%
+100	75,000	2.8	26,000	1.7
-100	(72,000)	(2.7)	(12,000)	(0.8)
-200	(183,000)	(6.8)	(40,000)	(2.6)

DERIVATIVES

Regions uses financial derivative instruments for management of interest rate sensitivity. The Asset and Liability Committee in its oversight role for the management of interest rate sensitivity approves the use of derivatives in balance sheet hedging strategies. The most common derivatives the Company employs are interest rate swaps, interest rate options, forward sale commitments, and interest rate and foreign exchange forward contracts.

Interest rate swaps are contractual agreements typically entered into to exchange fixed for variable streams of interest payments. The notional principal is not exchanged but is used as a reference for the size of the interest payments. Interest rate options are contracts that allow the buyer to purchase or sell a financial instrument at a pre-determined price and time. Forward sale commitments are contractual obligations to sell money market instruments at a future date for an already agreed upon price. Foreign exchange forwards are contractual agreements to receive or deliver a foreign currency at an agreed upon future date and price.

Regions has made use of interest rate swaps and interest rate options to convert a portion of its fixed-rate funding position to a variable rate. Regions also uses derivatives to manage interest rate and pricing risk associated with its mortgage origination business. Futures contracts and forward sales commitments are used to protect the value of the loan pipeline from changes in interest rates. In the period of time that elapses between the origination and sale of mortgage loans, changes in interest rates have the potential to cause a decline in the value of the loans in this held for sale portfolio. Futures and forward sale commitment positions are used to protect the Company from the risk of such adverse changes. The change in value of the hedging contracts is expected to be highly effective in offsetting the change in value of specific assets and liabilities over the life of the hedge relationship.

Regions also uses derivatives to meet the needs of its customers. Interest rate swaps, interest rate options, futures and forward commitments and foreign exchange forwards are the most common derivatives sold to customers. Positions with similar characteristics are used to offset the market risk and minimize income statement volatility associated with this portfolio. Those instruments, which are used to service customers, are entered into the trading account, with changes in value recorded in the income statement.

BROKERAGE AND MARKET MAKING ACTIVITY

Morgan Keegan's business activities expose it to market risk, including its securities inventory positions and securities held for investment.

Morgan Keegan trades for its own account in corporate and tax-exempt securities and U.S. government, agency and guaranteed securities. Most of these transactions are entered into to facilitate the execution of customers' orders to buy or sell these securities. In addition, it trades certain equity securities in order to "make a market" in these securities. Morgan Keegan's trading activities require the commitment of capital. All principal transactions place the subsidiary's capital at risk. Profits and losses are dependent upon the skills of employees and market fluctuations. In some cases, in order to mitigate the risks of carrying inventory, Morgan Keegan enters into a low level of activity involving U.S. Treasury note futures.

Morgan Keegan, as part of its normal brokerage activities, assumes short positions on securities. The establishment of short positions exposes Morgan Keegan to off-balance sheet risk in the event that prices increase, as it may be obligated to cover such positions at a loss. Morgan Keegan manages its exposure to these instruments by entering into offsetting or other positions in a variety of financial instruments.

Morgan Keegan will occasionally economically hedge a portion of its long proprietary inventory position through the use of short positions in financial future contracts, which are included in securities sold, not yet purchased at market value. At March 31, 2005, Morgan Keegan had no outstanding futures contracts. The contract amounts do not necessarily represent future cash requirements.

In the normal course of business, Morgan Keegan enters into underwriting and forward and future commitments. At March 31, 2005, the contract amounts of futures contracts were $74 million to purchase and $185 million to sell U.S. Government and municipal securities.Morgan Keegan typically settles its position by entering into equal but opposite contracts and, as such, the contract amounts do not necessarily represent future cash requirements. Settlement of the transactions relating to such commitments is not expected to have a material effect on Regions' consolidated financial position. Transactions involving future settlement give rise to market risk, which represents the potential loss that can be caused by a change in the market value of a particular financial instrument. Regions' exposure to market risk is determined by a number of factors, including the size, composition and diversification of positions held, the absolute and relative levels of interest rates, and market volatility.

Interest rate risk at Morgan Keegan arises from the exposure of holding interest-sensitive financial instruments such as government, corporate and municipal bonds and certain preferred equities. Morgan Keegan manages its exposure to interest rate risk by setting and monitoring limits and, where feasible, hedging with offsetting positions in securities with similar interest rate risk characteristics. Securities inventories are marked to market, and accordingly there are no unrecorded gains or losses in value. While a significant portion of the securities inventories have contractual maturities in excess of five years, these inventories, on average, turn over in excess of twelve times per year. Accordingly, the exposure to interest rate risk inherent in Morgan Keegan's securities inventories is less than that of similar financial instruments held by firms in other industries. Morgan Keegan's equity securities inventories are exposed to risk of loss in the event of unfavorable price movements. The equity s ecurities inventories are marked to market and there are no unrecorded gains or losses.

Morgan Keegan is also subject to credit risk arising from non-performance by trading counterparties, customers, and issuers of debt securities owned. This risk is managed by imposing and monitoring position limits, monitoring trading counterparties, reviewing security concentrations, holding and marking to market collateral and conducting business through clearing organizations that guarantee performance. Morgan Keegan regularly participates as an agent in the trading of some derivative securities for its customers; however, this activity does not involve Morgan Keegan acquiring a position or commitment in these products and this trading is not a significant portion of Morgan Keegan's business.

To manage trading risks arising from interest rate and equity price risks, Regions uses a Value at Risk ("VAR") model to measure the potential fair value the Company could lose on its trading positions given a specified statistical confidence level and time-to-liquidate time horizon. Regions assesses market risk at a 99% confidence level over a one-day holding period. Regions' primary VAR model is based upon a variance-covariance approach with delta-gamma approximations for non-linear securities. For fixed income securities and equities, the Bloomberg Trading System VAR analytics is used. For interest rate derivatives the Company implements its VAR analysis through the OpenLink trading system.

The end-of-period VAR was approximately $466,000 as of March 31, 2005, and approximately $407,000 as of December 31, 2004. Maximum daily VAR utilization during the first quarter of 2005 was $1.2 million and average daily VAR was $588,000.

PROVISION FOR LOAN LOSSES

The provision for loan losses was $30.0 million or 0.21% (annualized) of average loans in the first quarter of 2005 compared to $15.0 million or 0.19% (annualized) of average loans in the first quarter of 2004 and $45.0 million or 0.32% (annualized) in the fourth quarter of 2004. The provision for loan losses recorded in the first quarter of 2005 was based on management's assessment of inherent losses associated with the loan portfolio and management's evaluation of economic conditions (see "ALLOWANCE FOR LOAN LOSSES").

NON-INTEREST INCOME

The following table presents a summary of non-interest income for the quarters ended March 31, 2005, December 31, 2004, and March 31, 2004.

	March 31,	December 31,	March 31,
(in thousands)	2005	2004	2004
Brokerage and investment banking	$144,490	$145,926	$138,203
Trust department income	31,990	29,824	20,691
Service charges on deposit accounts	123,818	133,381	71,868
Mortgage servicing and origination fees	39,312	41,227	21,584
Securities (losses) gains, net	(33,966)	197	12,803
Insurance premiums and commissions	22,006	19,807	23,155
Gain on sale of mortgage loans	21,801	24,927	35,639
Derivative income	3,983	2,585	964
SOI and Capital Factors	13,371	22,683	-
Other	51,997	38,704	33,073
Total non-interest income	$418,802	$459,261	$357,980

Total non-interest income (excluding securities transactions) increased $107.6 million or 31% compared to the first quarter of 2004 primarily due to the impact of the merger with Union Planters and decreased $6.3 million or 1% compared to the fourth quarter of 2004.

BROKERAGE AND INVESTMENT BANKING

Brokerage and investment banking income increased $6.3 million compared to the first quarter of 2004 due to stronger fixed income and equity investment banking activity but decreased $1.4 million linked-quarter due to seasonally slower private client and fixed income capital market revenues in the first quarter as compared to the fourth quarter.

The following table shows the breakout of revenue by division contributed by Morgan Keegan for the three months ended March 31, 2005, December 31, 2004, and March 31, 2004.

Morgan Keegan
Breakout of Revenue by Division
(dollar amounts in thousands)	Private Client	Fixed-income Capital Markets	Equity Capital Markets	Regions MK Trust	Investment Advisory	Interest & Other
Three months ended March 31, 2005:
$ amount of revenue	$63,174	$40,285	$26,416	$25,856	$28,352	$20,207
% of gross revenue	30.9%	19.7%	12.9%	12.7%	13.9%	9.9%
Three months ended December 31, 2004:
$ amount of revenue	$65,822	$45,222	$20,727	$24,734	$27,458	$19,751
% of gross revenue	32.3%	22.2%	10.2%	12.1%	13.5%	9.7%
Three months ended March 31, 2004:
$ amount of revenue	$60,064	$50,464	$15,520	$17,590	$19,792	$13,040
% of gross revenue	34.0%	28.6%	8.8%	10.0%	11.2%	7.4%

The following table shows the components of revenue contributed by Morgan Keegan for the three months ended March 31, 2005, December 31, 2004, and March 31, 2004.

Morgan Keegan Summary Income Statement
(dollar amounts in thousands)	Three months ended March 31, 2005	Three months ended December 31, 2004	Three months ended March 31, 2004	% Change from December 31, 2004	% Change from March 31, 2004
Revenues:
Commissions	$49,650	$49,305	$43,965	0.7%	12.9
Principal transactions	38,277	42,524	53,838	(10.0)	(28.9)
Investment banking	36,905	34,877	24,545	5.8	50.4
Interest	17,833	17,669	12,636	0.9	41.1
Trust fees and services	25,856	24,734	17,591	4.5	47.0
Investment advisory	26,520	25,992	18,683	2.0	41.9
Other	9,249	8,613	5,212	7.4	77.5
Total revenues	204,290	203,714	176,470	0.3	15.8
Expenses:
Interest expense	9,168	9,233	7,397	(0.7)	23.9
Non-interest expense	153,218	156,029	135,614	(1.8)	13.0
Total expenses	162,386	165,262	143,011	(1.7)	13.5
Income before income taxes	41,904	38,452	33,459	9.0	25.2
Income taxes	15,672	14,637	12,540	7.1	25.0
Net income	$26,232	$23,815	$20,919	10.1%	25.4%

TRUST INCOME

First quarter 2005 trust department income increased $11.3 million or 55% compared to the same period of 2004 primarily due to the addition of Union Planters' trust activities in the third quarter of 2004 and increased $2.2 million linked-quarter or 29% (annualized), due to an increase in the value of trust assets as of the beginning of the quarter and a seasonal increase in the annual billing cycle.

SERVICE CHARGES ON DEPOSIT ACCOUNTS

In the first quarter of 2005, service charges on deposit accounts increased $52.0 million over the first quarter of 2004 due to fees on accounts added in connection with the merger with Union Planters in the third quarter of 2004, but decreased $9.6 million compared to the fourth quarter of 2004 as a result of continued weakness in NSF/OD charges in addition to the impact of the expanded offering of the free checking product.

MORTGAGE SERVICING AND ORIGINATION FEES

The primary source of this category of income is Regions' mortgage banking affiliates, Regions Mortgage and EquiFirst. The conforming mortgage operations for Regions Bank and UPBNA were combined in the third quarter of 2004 and are operating as Regions Mortgage. Regions Mortgage's primary business and source of income is the origination and servicing of conforming mortgage loans for long-term investors. EquiFirst typically originates non-conforming mortgage loans which are sold to third-party investors with servicing released. Net gains and losses related to the sale of mortgage loans are included in other non-interest income.

For first quarter 2005, mortgage servicing and origination fees increased $17.7 million or 82% compared to the first quarter of 2004, due to the increased servicing and origination activities acquired through the merger with Union Planters during the third quarter of 2004. Linked-quarter, mortgage servicing and origination fees decreased $1.9 million due to the decrease in conforming mortgage loan origination volume in the first quarter of 2005. Single-family mortgage production was $3.8 billion in the first quarter of 2005, compared to $1.7 billion in the first quarter of 2004 and $4.0 billion in the fourth quarter of 2004. The mortgage operation's servicing portfolio totaled $39.5 billion at March 31, 2005, compared to $15.9 billion at March 31, 2004, and $39.4 billion at December 31, 2004.

A summary of mortgage servicing rights is presented as follows. The balances shown represent the original amounts capitalized, less accumulated amortization and valuation allowance, for the right to service mortgage loans that are owned by other investors. The carrying values of mortgage servicing rights are affected by various factors, including prepayments of the underlying mortgages. A significant change in prepayments of mortgages in the servicing portfolio could result in significant changes in the valuation adjustments.

	Three Months Ended
(dollar amounts in thousands)	March 31,	March 31,
	2005	2004
Balance at beginning of year	$458,053	$166,346
Additions	18,789	7,510
Sales	(3,783)	-
Amortization	(21,379)	(9,257)
	451,680	164,599
Valuation allowance	(26,500)	(51,500)
Balance at end of period	$425,180	$113,099

The changes in the valuation allowance for servicing assets for the three months ended March 31, 2005 and 2004 were as follows:

	Three Months Ended
(in thousands)	March 31,	March 31,
	2005	2004
Balance at beginning of the year	$61,500	$39,500
(Recapture of) provisions for impairment valuation	(35,000)	12,000
Balance at end of the period	$26,500	$51,500

SECURITIES LOSSES/GAINS

Securities losses for the three months ended March 31, 2005 totaled $34.0 million compared to gains of $12.8 million for the same period of 2004. In the first quarter of 2005, securities losses totaled $34.0 million related to the sale of U.S. Treasury and agency securities. These losses were taken to offset the recapture of the impairment of mortgage servicing rights.

OTHER INCOME

The components of other income consist mainly of fees and commissions, insurance premiums, customer derivative fees and gains related to the sale of mortgage loans. In the first quarter of 2005, other non-interest income increased $20.3 million over the first quarter of 2004 due primarily to fees added by the merger with Union Planters in the third quarter of 2004 and increased $4.5 million compared to the fourth quarter of 2004 as a result of increases in insurance, international, and derivative income.

NON-INTEREST EXPENSE

The following table presents a summary of non-interest expense for the quarters ended March 31, 2005, December 31, 2004, and March 31, 2004.

(in thousands)	March 31,	December 31,	March 31,
	2005	2004	2004
Salaries and employee benefits	$425,290	$420,328	$286,903
Net occupancy expense	53,918	52,070	27,800
Furniture and equipment expense	31,890	32,427	18,130
(Recapture) Impairment of MSRs	(35,000)	-	12,000
Merger-related and other charges	38,894	35,005	321
Other	206,846	208,729	138,442
Total non-interest expense	$721,838	$748,559	$483,596

First quarter 2005 non-interest expense increased $238.2 million compared to the first quarter of 2004 and decreased $26.7 million compared to the fourth quarter of 2004. The increase from first quarter 2004 was due primarily to expenses added in connection with the merger with Union Planters in the third quarter of 2004, including merger-related and other charges. The decrease in non-interest expense from fourth quarter 2004 resulted from the recapture of mortgage service rights impairment, partially offset by increases in payroll taxes.

In connection with the integration of Regions and Union Planters, Regions will be incurring merger-related expenses throughout the integration. The following tables show the impact of merger-related and other charges affecting the components of non-interest expense for the quarters ended March 31, 2005, December 31, 2004, and March 31, 2004. Included in merger-related and other charges is the recapture and impairment of mortgage servicing rights, loss on early extinguishment of debt, merger and other charges. Management believes the following tables are useful in evaluating trends in non-interest expense. For further discussion of non-interest expense, refer to the discussion of each component following the tables below.

Three months ended March 31, 2005

		Less: Merger-
		related and
(in thousands)	As Reported	Other Charges	As Adjusted
Salaries and employee benefits	$ 437,658	$ 12,368	$ 425,290
Net occupancy expense	54,284	366	53,918
Furniture and equipment expense	32,209	319	31,890
Recapture of MSRs	(35,000)	(35,000)	-0-
Other	232,687	25,841	206,846
Total	$ 721,838	$ 3,894	$ 717,944

Three months ended December 31, 2004

		Less: Merger-
		related and
(in thousands)	As Reported	Other Charges	As Adjusted
Salaries and employee benefits	$ 431,953	$ 11,625	$ 420,328
Net occupancy expense	53,794	1,724	52,070
Furniture and equipment expense	32,427	-0-	32,427
Impairment (recapture) of MSRs	-0-	-0-	-0-
Other	230,385	21,656	208,729
Total	$ 748,559	$ 35,005	$ 713,554

Three months ended March 31, 2004

		Less: Merger-
		related and
(in thousands)	As Reported	Other Charges	As Adjusted
Salaries and employee benefits	$ 286,903	$ -0-	$ 286,903
Net occupancy expense	27,800	-0-	27,800
Furniture and equipment expense	18,130	-0-	18,130
Impairment of MSRs	12,000	12,000	-0-
Other	138,763	321	138,442
Total	$ 483,596	$ 12,321	$ 471,275

SALARIES AND EMPLOYEE BENEFITS

In the first quarter of 2005, salaries and employee benefits increased $150.8 million compared to the first quarter of 2004 and $5.7 million in comparison with the fourth quarter of 2004. The increase from first quarter 2004 resulted primarily from an increased number of associates added in connection with the Union Planters merger. The slight increase from fourth quarter 2004 was related to increased payroll taxes and 401(k) expenses in the first quarter of 2005. As of March 31, 2005, Regions had 25,751 full-time equivalent employees.

NET OCCUPANCY EXPENSE

Net occupancy expense includes rents, depreciation and amortization, utilities, maintenance, insurance, taxes and other expenses of premises occupied by Regions and its affiliates. Regions' affiliates operate banking offices in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, and Texas.

Net occupancy expense in the first quarter of 2005 increased $26.5 million compared to first quarter of 2004 and $490,000 linked-quarter. The increase from first quarter 2004 was due primarily to expenses attributable to properties added in connection with the merger with Union Planters and new branch offices.

FURNITURE AND EQUIPMENT EXPENSE

In the first quarter of 2005, furniture and equipment expense increased $14.1 million compared to the first quarter of 2004 and decreased by $218,000 compared to the fourth quarter of 2004. The increase from first quarter 2004 was primarily due to increased depreciation associated with equipment added in connection with the merger with Union Planters.

IMPAIRMENT (RECAPTURE) OF MORTGAGE SERVICING RIGHTS

In the first quarter of 2005, recapture of MSR impairment totaled $35.0 million compared to the first quarter of 2004, in which an impairment of $12 million was recognized. Recapture of MSRs in the first quarter of 2005 resulted from increased mortgage rates and decreased mortgage prepayment speeds (resulting from increased mortgage rates) during the first quarter of 2005.

OTHER EXPENSES

The significant components of other expense include other non-credit losses, amortization and computer and other outside services. In the first quarter of 2005, other non-interest expense increased $93.9 million compared to the first quarter of 2004, due to the expenses added by the merger with Union Planters. Other non-interest expense increased by $2.3 million compared to the fourth quarter of 2004, due to an increase in advertising expense.

APPLICABLE INCOME TAXES

The first quarter 2005 income tax expense increased $36.0 million compared to the first quarter of 2004 due to increased earnings resulting from the 2004 merger with Union Planters. The first quarter 2005 provision for income taxes decreased $619,000 compared to the fourth quarter of 2004 due to lower state taxes and higher tax benefit on merger costs for the quarter. Regions' effective income tax rate for the first quarter of 2005 was 30.5% compared to 29.3% in the first quarter of 2004 and 31.1 % in the fourth quarter of 2004.

From time to time Regions engages in business plans that may also have an effect on its tax liabilities. While Regions has obtained the opinion of advisors that the tax aspects of these strategies should prevail, examination of Regions' income tax returns or changes in tax law may impact the tax benefits of these plans.

Periodically, Regions invests in pass-through investment vehicles that generate tax credits, principally low-income housing and non-conventional fuel source credits, which directly reduce Regions' federal income tax liability. Congress has legislated these tax credit programs to encourage capital inflows to these investment vehicles. The amount of tax benefit recognized from these tax credits was $10.7 million in the first quarter of 2005 compared to $6.0 million in the first quarter of 2004 and $10.7 million in the fourth quarter of 2004.

During the fourth quarter of 2000, Regions recapitalized a mortgage-related subsidiary by raising Tier 2 capital, which resulted in a reduction in taxable income of that subsidiary attributable to Regions. The reduction in the taxable income of this subsidiary attributable to Regions is expected to result in a lower effective tax rate applicable to the consolidated taxable income before taxes of Regions for future periods. The impact on Regions' effective tax rate applicable to consolidated income before taxes of the reduction in the subsidiary's taxable income attributable to Regions will, however, depend on a number of factors, including, but not limited to: the amount of assets in the subsidiary, the yield of the assets in the subsidiary, the cost of funding the subsidiary, possible loan losses in the subsidiary, the level of expenses of the subsidiary, the level of income attributable to obligations of states and political subdivisions, and various other factors. The amount of federal and state tax b enefits recognized related to the recapitalized subsidiary was $11.9 million in the first quarter of 2005 ($9.5 million federal) compared to $11.2 million in the first quarter of 2004 ($8.9 million federal) and $10.7 million in the fourth quarter of 2004 ($8.0 million federal).

Regions has segregated a portion of its investment securities and intellectual property into separate legal entities in order to, among other business purposes, protect such intangible assets from inappropriate claims of Regions' creditors, and to maximize the return on such assets by the professional and focused management thereof. Regions has recognized state tax benefits related to these legal entities of $6.4 million in the first quarter of 2005 compared to $3.1 million in the first quarter of 2004 and $6.4 million in the fourth quarter of 2004.

Regions' federal and state income tax returns for the years 1998 through 2003 are open for review and examination by governmental authorities. In the normal course of these examinations, Regions is subject to challenges from governmental authorities regarding amounts of taxes due. Regions has received notices of proposed adjustments relating to taxes due for the years 1999 through 2001, which includes proposed adjustments relating to an increase in taxable income of the mortgage-related subsidiary discussed above. Regions believes adequate provision for income taxes have been recorded for all years open for review and intends to vigorously contest the proposed adjustments. To the extent that final resolution of the proposed adjustments results in significantly different conclusions from Regions' current assessment of the proposed adjustments, Regions' effective tax rate in any given financial reporting period may be materially different from its current effective tax rate.

Management's determination of the realization of the deferred tax asset is based upon management's judgment of various future events and uncertainties, including the timing, nature and amount of future income earned by certain subsidiaries and the implementation of various plans to maximize realization of the deferred tax asset. Management believes that the subsidiaries will generate sufficient operating earnings to realize the deferred tax benefits. However, management does not believe that it is more likely than not to realize the benefits of all of its capital loss carryforwards nor all of its state net operating loss carryforwards. Accordingly, it has set up a valuation allowance against such benefits of $63.8 million (capital loss carryforwards) and $9.0 million (state NOL carryforwards) as of the first quarter 2005 compared to $63.8 million and $7.6 million, respectively, in the fourth quarter of 2004. No material valuation allowance had been established during the first quar ter of 2004.

Item 3. Qualitative and Quantitative Disclosures about Market Risk

Reference is made to pages 38 through 42 'Market Risk' included in Management's Discussion and Analysis.

Item 4. Controls and Procedures

Based on an evaluation, as of the end of the period covered by this Form 10-Q, under the supervision and with the participation of Regions' management, including its Chief Executive Officer and Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer have concluded that Regions' disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective. As of the end of the period covered by this report, there have been no changes in Regions' internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Regions' internal control over financial reporting.

PART II. OTHER INFORMATION

Item 2. Issuer Purchase of Equity Securities

			Total Number of	Maximum Number
	Total Number	Average Price	Shares Purchased As Part of Publicly	of Shares that May Yet Be Purchased
	of Shares	Paid Per	Announced Plans	Under the Plans
Period	Purchased	Share	or Programs	or Programs(1)
January 1, 2005 -
January 31, 2005	955,000	$32.74	955,000	18,202,000
February 1, 2005 -
February 28, 2005	1,727,500	$32.39	1,727,500	16,474,500
March 1, 2005 -
March 31, 2005	1,800,000	$33.14	1,800,000	14,674,500
Total	4,482,500		4,482,500

(1) On July 15, 2004, Regions' Board of Directors assessed the pre-merger repurchase authorizations of both Regions and Union Planters and authorized the repurchase of up to 20.0 million shares of Regions' $0.01 par value common stock through open market transactions.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

Exhibit No.	Description
31.1	Certification of chief executive officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2	Certification of chief financial officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

A report on Form 8-K, dated January 18, 2005, was furnished on that date under items 2.02 and 7.01 in connection with the Registrant's results of operations for the twelve months and quarter ended December 31, 2004.

A report on Form 8-K, dated January 27, 2005, was furnished on that date under items 7.01 and 9.01 in connection with the Registrant's presentation in New York, New York discussing current prospects of the Company

A report on Form 8-K, dated February 9, 2005, was furnished on that date under items 7.01 and 9.01 in connection with the Registrant's presentation in Orlando, Florida discussing current prospects of the Company.

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 9, 2005

/s/ Ronald C. Jackson
Ronald C. Jackson
Senior Vice President and Comptroller
(Chief Accounting Officer and
Duly Authorized Officer)