Regions Financial (RF) 10-Q 2005 Q2 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 June 30, 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 460,494,820 shares of common stock, par value $.01, outstanding as of July 31, 2005.

	REGIONS FINANCIAL COPORATION
	INDEX
		Page Number
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Condition -
	June 30, 2005, December 31, 2004
	and June 30, 2004	5
	Consolidated Statements of Income -
	Six months and three months ended
	June 30, 2005 and June 30, 2004	6
	Consolidated Statement of Stockholders' Equity -
	Six months ended June 30, 2005	7
	Consolidated Statements of Cash Flows -
	Six months ended June 30, 2005 and
	June 30, 2004	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of
	Financial Condition and Results of Operations	24
Item 3.	Qualitative and Quantitative Disclosures about
	Market Risk	57
Item 4.	Controls and Procedures	57
PART II.	OTHER INFORMATION
Item 2.	Issuer Purchase of Equity Securities	57
Item 4.	Submission of Matters to a Vote of Security Holders	58
Item 6.	Exhibits	59
SIGNATURES		61

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)
	June 30,	December 31,	June 30,
ASSETS	2005	2004	2004
Cash and due from banks	$ 2,105,962	$ 1,853,399	$ 1,254,432
Interest-bearing deposits in other banks	85,653	115,018	35,802
Securities held to maturity	31,284	31,152	31,639
Securities available for sale	12,195,048	12,585,437	8,717,580
Trading account assets	957,368	928,676	754,213
Loans held for sale	2,080,812	1,783,331	1,231,132
Federal funds sold and securities
purchased under agreements to resell	603,594	717,563	810,581
Margin receivables	549,298	477,813	549,673
Loans	58,533,182	57,735,564	33,863,816
Unearned income	(194,238)	(208,610)	(227,032)
Loans, net of unearned income	58,338,944	57,526,954	33,636,784
Allowance for loan losses	(758,453)	(754,721)	(452,677)
Net loans	57,580,491	56,772,233	33,184,107
Premises and equipment	1,092,302	1,089,094	639,822
Interest receivable	350,938	345,563	182,636
Due from customers on acceptances	36,418	31,982	9,604
Excess purchase price	5,070,026	4,992,563	1,101,425
Mortgage servicing rights	371,111	396,553	156,774
Other identifiable intangible assets	337,610	356,880	16,002
Other assets	1,831,183	1,629,181	1,081,371
	$85,279,098	$84,106,438	$49,756,793
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing	$ 12,200,095	$ 11,424,137	$ 5,953,180
Interest-bearing	48,670,755	47,242,886	28,483,781
Total deposits	60,870,850	58,667,023	34,436,961
Borrowed Funds:
Short-term borrowings:
Federal funds purchased and securities
sold under agreements to repurchase	3,835,320	4,679,926	3,702,172
Other short-term borrowings	921,884	1,315,685	1,110,863
Total short-term borrowings	4,757,204	5,995,611	4,813,035
Long-term borrowings	7,285,717	7,239,585	4,580,054
Total borrowed funds	12,042,921	13,235,196	9,393,089
Bank acceptances outstanding	36,418	31,982	9,604
Other liabilities	1,585,604	1,422,780	1,542,543
Total liabilities	74,535,793	73,356,981	45,382,197
Stockholders' Equity:
Preferred stock, par value $1.00 a share:
Authorized 10,000,000, 10,0000,000 and 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,
470,913,008; 467,084,489; and
271,573,092 shares, respectively	4,709	4,671	2,716
Surplus	7,248,899	7,126,408	970,024
Undivided profits	3,836,716	3,662,971	3,479,106
Treasury stock, at cost 9,353,800; 843,000; and -0- shares, respectively	(311,341)	(29,395)	-0-
Unearned restricted stock	(54,384)	(65,451)	(36,904)
Accumulated other comprehensive income (loss)	18,706	50,253	(40,346)
Total Stockholders' Equity	10,743,305	10,749,457	4,374,596
	$85,279,098	$84,106,438	$49,756,793
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		Six Months Ended
	June 30,		June 30,
	2005	2004	2005	2004
Interest Income:
Interest and fees on loans	$864,115	$413,613	$ 1,674,949	$ 824,625
Interest on securities:
Taxable interest income	124,931	82,123	247,683	168,680
Tax-exempt interest income	6,670	5,289	13,686	10,950
Total Interest on Securities	131,601	87,412	261,369	179,630
Interest on loans held for sale	39,402	25,044	70,582	45,015
Interest on margin receivables	7,167	4,434	13,309	8,626
Income on federal funds sold and securities purchased under agreements to resell	3,539	1,448	6,592	2,826
Interest on time deposits in other banks	599	18	1,034	40
Interest on trading account assets	8,961	5,911	19,525	12,800
Total Interest Income	1,055,384	537,880	2,047,360	1,073,562
Interest Expense:
Interest on deposits	241,813	85,998	441,705	170,052
Interest on short-term borrowings	37,931	18,157	76,909	37,808
Interest on long-term borrowings	78,928	52,862	151,463	105,842
Total Interest Expense	358,672	157,017	670,077	313,702
Net Interest Income	696,712	380,863	1,377,283	759,860
Provision for loan losses	32,500	25,000	62,500	40,000
Net Interest Income After Provision for Loan Losses	664,212	355,863	1,314,783	719,860
Non-Interest Income:
Brokerage and investment banking	132,179	128,886	276,669	267,089
Trust department income	31,256	21,668	63,246	42,359
Service charges on deposit accounts	131,654	73,607	255,472	145,475
Mortgage servicing and origination fees	37,057	19,868	76,369	41,452
Securities gains	53,400	149	19,434	12,952
Other	123,879	86,628	249,145	179,754
Total Non-Interest Income	509,425	330,806	940,335	689,081
Non-Interest Expense:
Salaries and employee benefits	426,443	283,361	864,101	570,264
Net occupancy expense	56,635	25,985	110,919	53,785
Furniture and equipment expense	32,292	19,341	64,501	37,471
Other	302,481	129,489	512,276	280,547
Total Non-Interest Expense	817,851	458,176	1,551,797	942,067
Income Before Income Taxes	355,786	228,493	703,321	466,874
Applicable income taxes	107,435	66,469	213,329	136,315
Net Income	$248,351	$162,024	$ 489,992	$ 330,559
Net Income Available to Common Shareholders	$248,351	$159,263	$ 489,992	$ 325,835
Average number of shares outstanding	462,913	271,024	464,011	272,147
Average number of shares outstanding-diluted	468,193	274,564	469,469	275,921
Per share:
Net income	$0.54	$0.59	$1.06	$1.20
Net income-diluted	$0.53	$0.58	$1.04	$1.18
Cash dividends declared	$0.34	$0.33	$0.68	$0.67
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			489,992				489,992
Unrealized loss on available for sale securities,
net of tax and reclassification adjustment						(27,431)	(27,431)
Other comprehensive loss from derivatives, net of tax and reclassification adjustment						(4,116)	(4,116)
Comprehensive income*			489,992			(31,547)	458,445
Cash dividends declared ($0.68 per common share)			(316,247)				(316,247)
Purchase of treasury stock				(281,946)			(281,946)
Common stock transactions:
Stock options exercised	39	124,681					124,720
Stock issued to employees under incentive plan	(1)	(2,190)			(1,912)		(4,103)
Amortization of unearned restricted stock					12,979		12,979
BALANCE AT JUNE 30, 2005	$ 4,709	$ 7,248,899	$3,836,716	$(311,341)	$(54,384)	$ 18,706	$10,743,305
Disclosure of reclassification amount:
Unrealized holding losses, net of $9,798 in income taxes,
on available for sale securities arising during period						$ (14,799)
Less: Reclassification adjustment, net of ($6,802) in income
taxes, for net gains realized in net income						12,632
Unrealized holding loss on derivatives, net of $1,490 in
income taxes						(3,793)
Less: Reclassification adjustment, net of ($174) in income
taxes, for amortization of cash flow hedges						323
Comprehensive income, net of $18,264 in income taxes						$ (31,547)

*Comprehensive income for the six months ended June 30, 2004 was $226.7 million.

*Comprehensive income for the three months ended June 30, 2005 was $314.3 million compared to $21.6 million for the three months ended June 30, 2004.

See notes to consolidated financial statements.

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

	Six Months Ended
	June 30, 2005
Operating Activities:	2005		2004
Net income	$ 489,992		$ 330,559
Adjustments to reconcile net cash provided by (used in) operating activities
Depreciation and amortization of premises and equipment	53,572		31,959
Provision for loan losses	62,500		40,000
Net amortization of securities	9,784		17,730
Amortization of loans and other assets	92,953		45,179
Impairment (recapture) of mortgage servicing rights	18,000		(28,000	)
Amortization of deposits and borrowings	222		434
Provision for losses on other real estate	2,184		998
Deferred income tax expense	1,385		23,270
Loss on sale of premises and equipment	1,917		30
Realized securities gains	(19,434	)	(12,952	)
(Increase) decrease in trading account assets	(28,692	)	80,302
(Increase) decrease in loans held for sale	(297,481	)	10,720
Increase in margin receivables	(71,485	)	(46,098	)
(Increase) decrease in interest receivable	(5,375	)	12,012
(Increase) decrease in other assets	(347,905	)	25,326
Increase in other liabilities	173,954		360,059
Other	8,846		3,515
Net Cash Provided By Operating Activities	144,937		895,043
Investing Activities:
Net increase in loans	(870,743	)	(1,493,784	)
Proceeds from sale of securities available for sale	2,717,572		312,682
Proceeds from maturity of securities held to maturity	514		559
Proceeds from maturity of securities available for sale	1,072,862		1,708,071
Purchases of securities held to maturity	(481	)	(1,797	)
Purchases of securities available for sale	(3,434,593	)	(1,852,864	)
Net decrease in interest-bearing deposits in other banks	29,365		60,735
Proceeds from sale of premises and equipment	71,046		3,611
Purchases of premises and equipment	(129,742	)	(45,784	)
Net (increase) decrease in customers' acceptance liability	(4,436	)	51,449
Net Cash Used By Investing Activities	(548,636	)	(1,257,122	)
Financing Activities:
Net increase (decrease) in deposits	2,203,605		1,703,992
Net (decrease) increase in short-term borrowings	(1,238,407	)	385,997
Proceeds from long-term borrowings	216,812		53,813
Payments on long-term borrowings	(170,680	)	(1,191,396	)
Net increase (decrease) in bank acceptance liability	4,436		(51,449	)
Cash dividends	(316,247	)	(180,476	)
Purchases of treasury stock	(281,946	)	(156,881	)
Proceeds from exercise of stock options	124,720		29,650
Net Cash Provided By Financing Activities	542,293		593,250
Increase in Cash and Cash Equivalents	138,594		231,171
Cash and Cash Equivalents, Beginning of Period	2,570,962		1,833,842
Cash and Cash Equivalents, End of Period	$ 2,709,556		$ 2,065,013
See notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 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 allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the merger date, as summarized below.

(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		36,004
Estimated fair value of Union Planters' stock options		79,645
Purchase price		$6,065,984
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		4,024,188
Adjustments to reflect fair value of assets acquired and
liabilities assumed:
Loans, net of unearned income		(126,701)
Premises and equipment		48,740
Loans held for sale		(3,516)
Core deposit intangibles		(368,017)
Mortgage servicing rights		6,684
Other assets		12,114
Deferred income taxes		(32,217)
Other liabilities		172,698
Interest-bearing deposits		27,336
Short-term borrowings		14,822
Long-term borrowings		180,293
Excess purchase price		$3,956,424

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	433,592
Excess purchase price	3,956,424
Mortgage servicing rights	352,574
Other identifiable intangible assets	368,017
Other assets	522,450
Deposits	22,903,264
Borrowings	5,888,159
Other liabilities	847,766

Restructuring Liability

At June 30, 2005, $52.6 million of liabilities ($14.9 million of which were recorded as adjustments of the cost of acquisition during the second quarter of 2005 and included $13.7 million in contract terminations and $1.2 million in tax payments for certain employees' compensation) were recorded related to Union Planters as purchase accounting adjustments resulting in an increase in excess purchase price. Through June 30, 2005, cash payments of $36.3 million have been charged against this liability, including $27.7 million of tax payments and $8.6 million of contract terminations, resulting in a balance of $16.3 million remaining in this liability at June 30, 2005.

NOTE C - Earnings Per Share

In connection with Regions' adoption of EITF Issue No. 03-6 (EITF 03-6), "Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share" in the second quarter of 2004, Regions began using the two-class method to calculate earnings per share. 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 June 30,		Six Months Ended June 30,
(in thousands, except per share amounts)	2005	2004	2005	2004
Numerator:
For basic net income per share and
diluted net income per share, net
income	$248,351	$162,024	$489,992	$330,559
Net income allocable to equity forward
agreement	-0-	(2,761)	-0-	(4,724)
For basic net income per share and
diluted net income per share, net
income available to common
shareholders	$248,351	$159,263	$489,992	$325,835
Denominator:
For basic net income per share --
Weighted average shares outstanding	462,913	271,024	464,011	272,147
Effect of dilutive securities --
Stock options	5,280	3,540	5,458	3,774
For diluted net income per share	468,193	274,564	469,469	275,921
Basic net income per share	$0.54	$0.59	$1.06	$1.20
Diluted net income per share	0.53	0.58	1.04	1.18

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 estimated 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 and six months ended June 30, 2005 and 2004, as if a fair-value method had been applied in measuring compensation costs:

(in thousands, except per share amounts)	Three Months Ended June 30,		Six Months Ended June 30,
	2005	2004	2005	2004
Net income available to common
shareholders	$248,351	$159,263	$489,992	$325,835
Add: Stock-based compensation expense
included in net income, net of related
tax effects	4,306	1,801	8,437	2,353
Less: Total stock-based compensation
expense based on fair value method for
all awards, net of related tax effects	(7,502)	(4,197)	(14,904)	(6,932)
Pro forma net income available to
common shareholders	$245,155	$156,867	$483,525	$321,256
Per share:
Net income	$0.54	$0.59	$1.06	$1.20
Net income-diluted	0.53	0.58	1.04	1.18
Pro forma net income	0.53	0.58	1.04	1.18
Pro forma net income-diluted	0.52	0.57	1.03	1.16

The weighted average fair value of options granted was $5.03 and $4.93 for the three months and six months ended June 30, 2005, respectively, and $3.68 and $3.70 for the three months and six months ended June 30, 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%	21.0%
Risk-Free Interest Rate	4.2%	3.6%

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.

Six months ended June 30, 2005

	Total Banking
(in thousands)	Community Banking	Treasury	Combined	Mortgage Banking
Net interest income	$1,238,558	$ 51,947	$1,290,505	$ 37,002
Provision for loan losses	55,319	4,101	59,420	42
Non-interest income	315,587	19,749	335,336	183,195
Non-interest expense	850,529	22,144	872,673	200,720
Income taxes	243,032	17,043	260,075	7,835
Net income	$ 405,265	$ 28,408	$433,673	$ 11,600
Average assets	$51,434,821	$25,009,231	$76,444,052	$3,868,559

(in thousands)	Investment Banking/ Brokerage/ Trust	Insurance	Other	Total Company
Net interest income	$ 15,323	$ 1,375	$ 33,078	$1,377,283
Provision for loan losses	-0-	-0-	3,038	62,500
Non-interest income	360,428	41,249	20,127	940,335
Non-interest expense	294,934	29,240	154,230	1,551,797
Income taxes	30,131	4,769	(89,481)	213,329
Net income	$ 50,686	$ 8,615	$ (14,582)	$489,992
Average assets	$2,240,076	$166,039	$2,064,677	$84,783,403

Six months ended June 30, 2004

	Total Banking
(in thousands)	Community Banking	Treasury	Combined	Mortgage Banking
Net interest income	$608,801	$ 139,191	$747,992	$ 28,119
Provision for loan losses	35,380	2,675	38,055	30
Non-interest income	165,096	13,191	178,287	136,589
Non-interest expense	428,678	59,474	488,152	89,265
Income taxes	105,197	33,837	139,034	27,926
Net income	$ 204,642	$ 56,396	$261,038	$ 47,487
Average assets	$27,278,252	$14,546,797	$41,825,049	$1,488,669

(in thousands)	Investment Banking/ Brokerage/ Trust	Insurance	Other	Total Company
Net interest income	$ 11,406	$ 1,070	$ (28,727)	$759,860
Provision for loan losses	-0-	-0-	1,915	40,000
Non-interest income	322,178	43,547	8,480	689,081
Non-interest expense	269,116	33,494	62,040	942,067
Income taxes	24,120	4,164	(58,929)	136,315
Net income	$ 40,348	$ 6,959	$ (25,273)	$330,559
Average assets	$2,540,044	$130,782	$3,161,231	$49,145,775

Three months ended June 30, 2005

	Total Banking
(in thousands)	Community Banking	Treasury	Combined	Mortgage Banking
Net interest income	$626,136	$ (8,391)	$617,745	$ 17,546
Provision for loan losses	30,012	1,271	31,283	(558)
Non-interest income	164,909	53,559	218,468	97,760
Non-interest expense	455,883	12,180	468,063	147,725
Income taxes	114,377	11,892	126,269	(11,591)
Net income	$ 190,773	$ 19,825	$210,598	$(20,270)
Average assets	$51,088,128	$28,221,759	$79,309,887	$3,411,395

(in thousands)	Investment Banking/ Brokerage/ Trust	Insurance	Other	Total Company
Net interest income	$ 6,657	$ 722	$54,042	$696,712
Provision for loan losses	-0-	-0-	1,775	32,500
Non-interest income	173,972	19,363	(138)	509,425
Non-interest expense	141,716	15,584	44,763	817,851
Income taxes	14,459	1,571	(23,273)	107,435
Net income	$ 24,454	$ 2,930	$ 30,639	$248,351
Average assets	$1,787,138	$200,371	$535,569	$85,244,360

Three months ended June 30, 2004

	Total Banking
(in thousands)	Community Banking	Treasury	Combined	Mortgage Banking
Net interest income	$307,683	$ 65,823	$373,506	$ 16,407
Provision for loan losses	23,538	48	23,586	(3)
Non-interest income	83,992	335	84,327	64,917
Non-interest expense	214,949	49,895	264,844	16,081
Income taxes	52,236	6,080	58,316	23,738
Net income	$ 100,952	$ 10,135	$111,087	$41,508
Average assets	$27,546,535	$14,408,041	$41,954,576	$1,630,622

(in thousands)	Investment Banking/ Brokerage/ Trust	Insurance	Other	Total Company
Net interest income	$ 6,167	$ 533	$(15,750)	$380,863
Provision for loan losses	-0-	-0-	1,417	25,000
Non-interest income	158,344	20,917	2,301	330,806
Non-interest expense	133,502	16,711	27,038	458,176
Income taxes	11,580	1,784	(28,949)	66,469
Net income	$ 19,429	$ 2,955	$(12,955)	$162,024
Average assets	$2,421,196	$127,991	$3,336,439	$49,470,824

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 $17.9 billion at June 30, 2005, and $9.2 billion at June 30, 2004. Standby letters of credit were $2.9 billion at June 30, 2005, and $1.6 billion at June 30, 2004. Commitments under commercial letters of credit used to facilitate customers' trade transactions were $86.1 million at June 30, 2005, and $47.5 million at June 30, 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 modify the interest rate characteristics of variable rate loans to fixed rates in order to reduce the impact of interest rate changes on future interest income. On July 1, 2004, Regions 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 deemed effective, changes in the fair value of the derivative are recognized as a component of other comprehensive income in stockholders' equity. At June 30, 2005, Regions reported a $3.2 million loss in accumulated other comprehensive income related to this strategy. The Company will amortize this loss into earnings throughout the term of the hedging relationship. Hedge ineffectiveness is recognized in earnings as a component of other non-interest expense. For the six months ended June 30, 2005, there was a loss of approximately $40,000 related to hedge ineffectiveness.

Regions hedges the changes in the fair value of assets using forward contracts, which represent commitments to sell fixed income 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 six months ended June 30, 2005, Regions recognized a net loss of approximately $1.9 million associated with these instruments.

Regions has entered into interest rate swap agreements to hedge the changes in fair value of fixed rate debt, due primarily to changes in interest rates. 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. 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 six months ended June 30, 2005, there was a loss of approximately $323,000 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, options, futures and forward commitments, and other fixed income securities 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 counterparty will fail to perform. These trading derivatives are recorded in other assets and other liabilities. The net fair value of the derivatives in the trading portfolio at June 30, 2005, was an asset of $26.0 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 $16 million at June 30, 2005 and $9 million at June 30, 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 June 30, 2005, the contract amount of future contracts was $61 million to purchase and $172 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 June 30, 2005
(dollar amounts in millions)	Notional Amount	Fair Value	Receive	Pay	Average Maturity in Years
Asset hedges:
Fair value hedges:
Forward sale commitments	$ 1,035	$ -			0.1
Mortgage-backed security options	25	-			0.1
Total asset hedges	$ 1,060	$ -			0.1
Liability hedges:
Fair value hedges:
Credit default swaps	$ 75	$ 1
Interest rate swaps	4,548	217	4.75%	3.62%	5.9
Interest rate options	473	(123)			24.0
Total liability hedges	$ 5,096	$ 95			7.6

	As of June 30, 2004
(dollar amounts in millions)	Notional Amount	Fair Value	Receive	Pay	Average Maturity in Years
Asset hedges:
Fair value hedges:
Forward sale commitments	$ 126	$ -			0.2
Interest rate futures	2,075	-			1.5
Total asset hedges	$2,201	$ -			1.4
Liability hedges:
Fair value hedges:
Interest rate swaps	$2,388	$ 55	4.95%	1.76%	6.3
Interest rate options	250	-			0.9
Total liability hedges	$2,638	$ 55			5.8

	Derivative Financial Instruments
	As of June 30,
	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	$ 8,010	$-0-	$ 2,388	$ 6,159	$ 66
Interest rate options	473	1,113	-0-	250	995	-0-
Credit default swaps	75	60	-0-
Futures and forward
commitments	1,035	7,495	-0-	2,201	2,442	-0-
Mortgage-backed
security options	25	-0-	-0-	-0-	-0-	-0-
Foreign exchange
forwards	-0-	16	-0-	-0-	9	-0-
Total	$ 6,156	$ 16,694	$ -0-	$ 4,839	$9,605	$ 66

The following table is a summary of Regions' derivative financial instruments as of March 31, 2005 and 2004, and is presented for comparison purposes.

	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

*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 six months ended June 30, 2005 and 2004:

	Pension Cost		Postretirement Benefit Cost
(in thousands)	Six Months Ended June 30,		Six Months Ended June 30,
	2005	2004	2005	2004
Service cost	$8,315	$ 7,517	$ 232	$ 1,064
Interest cost	13,055	11,333	1,013	1,006
Expected return on plan assets	(15,566)	(12,388)	(155)	(86)
Net amortization (deferral)	6,077	4,451	83	464
Net periodic pension expense	$ 11,881	$ 10,913	$ 1,173	$ 2,448

The following table provides the net pension cost and postretirement benefit cost recognized for the three months ended June 30, 2005 and 2004:

	Pension Cost		Postretirement Benefit Cost
(in thousands)	Three Months Ended June 30,		Three Months Ended June 30,
	2005	2004	2005	2004
Service cost	$ 4,401	$ 3,759	$ 110	$ 528
Interest cost	6,911	5,667	480	499
Expected return on plan assets	(8,240)	(6,194)	(73)	(43)
Net amortization (deferral)	3,217	2,226	39	230
Net periodic pension expense	$ 6,289	$ 5,458	$ 556	$ 1,214

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."

On June 1, 2005, the FASB issued Statement No. 154, "Accounting Changes and Error Corrections", a replacement of APB 20 and Statement 3. The Statement applies to all voluntary changes in accounting principle, and changes the requirements for accounting for and reporting of a change in accounting principle. In the absence of specific transition requirements to the contrary in the adoption of an accounting principle, Statement 154 requires retrospective application to prior periods' financial statements of a voluntary change in accounting principle unless it is impracticable for comparability and consistency of financial information between periods. Statement 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Earlier application is permitted for accounting changes and corrections of errors occurring in fiscal years beginning after June 1, 2005.

On July 14, 2005, the FASB issued an Exposure Draft on Accounting for Uncertain Tax Positions, a proposed Interpretation of FASB Statement No. 109. The proposed Interpretation requires that only benefits from tax positions that are probable of being sustained under audit should be recognized in the financial statements. These benefits would be recorded at amounts considered to be the best estimates of management. At the time these positions become "more likely than not" to be disallowed under audit, they would be derecognized. This proposed Interpretation is currently scheduled to become effective for the year ended December 31, 2005. Regions is currently reviewing the potential impact of this proposed Interpretation; any cumulative effect associated with the application of the provisions of the proposed Interpretation will be reported as a change in accounting principle in the period in which the Interpretation is adopted.

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 six and three months ended June 30, 2005, as compared to the six and three months ended June 30, 2004, and the three months ended March 31, 2005.

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' principal banking subsidiary, Regions Bank, operates as an Alabama state-chartered bank with branch offices in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee and Texas. Certain banking offices continue to operate under the Union Planters name until conversion later this year.

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 nearly 270 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. Regions Mortgage services approximately $39.3 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 the diversification of its revenue stream, 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.

SECOND QUARTER HIGHLIGHTS

Regions reported net income available to common shareholders of $.53 per diluted share in the second quarter of 2005, including a reduction of $.06 per diluted share related to $29.6 million (after tax) in merger-related expenses. Net income available to common shareholders was $.58 per diluted share for the second quarter of 2004 and $.51 per diluted share for the first quarter of 2005. The third quarter of 2004 was the first period to report combined results reflecting the merger with Union Planters.

Net interest income for the second quarter of 2005 was $696.7 million, compared to $380.9 million in the second quarter of 2004 and $680.6 million in the first quarter of 2005. The net interest margin (annualized) for the second quarter of 2005 was 3.85%, up from 3.53% in the second quarter of 2004 and 3.84% in the first quarter of 2005. 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 $195.6 million in the second quarter of 2005 compared to $169.8 million in the second quarter of 2004 and $204.3 million in the first quarter of 2005. Revenue comparisons between second quarter 2005 and 2004 are impacted by the addition of Union Planters' brokerage division in third quarter 2004, which primarily affects commissions and private client results. The $8.7 million linked-quarter decline was driven primarily by a reduction in unusually strong first quarter 2005 investment banking activity.

Gains on the sale of mortgage loans increased 14% over the second quarter of 2004 and 21% compared to the first quarter of 2005, due primarily to increased sales volume during the second quarter. Total mortgage production in the second quarter of 2005 was $4.4 billion, an increase over first quarter 2005 production due to an increase in non-conforming mortgage production.

Positive trends continued in Regions' banking unit. Loan growth of $374.4 million, linked quarter, was driven by commercial real estate and consumer lending. Deposits increased by $1.3 billion, linked quarter, driven by non-interest-bearing demand deposits and retail and wholesale certificates of deposits.

Net charge-offs totaled $34.1 million or 0.23% of average loans, annualized, in the second quarter of 2005, compared to 0.34% for the second quarter of 2004 and 0.17% in the first quarter of 2005. On a linked-quarter basis, non-performing assets decreased $31.2 million to $455.8 million at June 30, 2005. The decrease in non-performing assets was attributable to a reduction in non-accrual loans during the second quarter, partially offset by an increase in other real estate. Non-accrual loans decreased $37.6 million and other real estate increased $6.4 million compared to first quarter 2005 levels. Loans past due greater than 90 days increased $14.3 million in the second quarter of 2005, compared to the prior quarter.

The provision for loan losses totaled $32.5 million in the second quarter of 2005 compared to $25.0 million during the same period of 2004 (prior to the Union Planters merger) and $30.0 million during the first quarter of 2005. The allowance for loan losses at June 30, 2005, was 1.30% of total loans, net of unearned income, compared to 1.35% at June 30, 2004, and 1.31% at March 31, 2005.

Non-interest income, excluding securities gains and losses, increased $125.4 million compared to the second quarter of 2004, primarily due to the addition of Union Planters in the third quarter of 2004, and decreased $8.9 million linked-quarter, resulting primarily from declines in several categories of non-interest income. Brokerage and investment banking revenues totaled $132.2 million in the second quarter of 2005, compared to $128.9 million in the second quarter of 2004 and $144.5 million in the first quarter of 2005. Trust fees totaled $31.3 million in the second quarter of 2005, compared to $21.7 million in the same period in 2004 and $32.0 million in the first quarter of 2005. Regions' mortgage servicing and origination fees totaled $37.1 million in the second quarter 2005 compared to $19.9 million in the second quarter of 2004 and $39.3 million in the first quarter of 2005.

Regions recognized $53 million of impairment charges in the estimated value of mortgage servicing rights ("MSR") in the second quarter of 2005, included in other non-interest expense. This charge was offset by a comparable amount of securities gains. Merger-related charges in the second quarter of 2005 totaled $43.8 million. Total non-interest expenses, excluding merger-related and other charges, increased $270.7 million compared to the second 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 MSR impairment charges decreased $9.0 million linked quarter due to a reduction in salary and benefits expense.

During the second quarter of 2005, Regions successfully completed its first of three planned conversions to integrate the former Union Planters 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 June 30, 2005 fair value of mortgage servicing rights by 14% and 27%, 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 June 30, 2005, were $85.3 billion, compared to $49.8 billion on June 30, 2004. This increase in total assets was primarily attributable to the merger with Union Planters in the third quarter of 2004. Total assets have increased approximately 1% since December 31, 2004.

LOANS AND ALLOWANCE FOR LOAN LOSSES

LOAN PORTFOLIO

Regions' primary investment is loans. At June 30, 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)	Second Quarter 2005	Fourth Quarter 2004	Second Quarter 2004
Commercial	$15,391,714	$15,592,887	$10,034,086
Residential mortgages	11,770,299	11,518,716	8,199,935
Other real estate loans	14,438,754	14,385,317	6,738,835
Construction	7,134,584	6,529,751	3,647,943
Branch installment	1,694,967	1,781,368	1,256,961
Indirect installment	1,456,836	1,597,641	808,130
Consumer lines of credit	5,619,645	5,229,256	2,241,820
Student loans	832,145	892,018	709,074
	$58,338,944	$57,526,954	$33,636,784

Total loans at June 30, 2005, increased 73% from June 30, 2004, due to the merger with Union Planters, 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 second quarter of 2005 was 6.06% compared to 5.19% during the second quarter of 2004, and 5.83% during the first quarter of 2005. During the first half of 2005, the average yield on loans was 5.95% compared to 5.23% in 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 $120 million at June 30, 2005, compared to $150 million at March 31, 2005. The decrease in impaired loans in the second quarter of 2005 relates to a $9 million reduction in the outstanding balance of one large impaired loan due to a partial charge-off and $22 million in balance reductions related to several smaller impaired loans. 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 43% at June 30, 2005, compared to approximately 45% at March 31,2005. 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 57% of Regions' allowance for loan losses at June 30, 2005 and 55% at March 31, 2005. 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 loan losses is summarized as follows:

	Six Months Ended
(dollar amounts in thousands)	June 30,	June 30,
	2005	2004
Balance at beginning of period	$754,721	$454,057
Loans charged-off:
Commercial	51,983	40,824
Real estate	21,723	7,104
Installment	24,239	15,159
Total	97,945	63,087
Recoveries:
Commercial	20,889	11,002
Real estate	4,096	1,600
Installment	14,192	9,105
Total	39,177	21,707
Net loans charged off:
Commercial	31,094	29,822
Real estate	17,627	5,504
Installment	10,047	6,054
Total	58,768	41,380
Provision charged to expense	62,500	40,000
Balance at end of period	$758,453	$452,677
Average loans outstanding:
Commercial	$ 15,152,548	$ 10,048,599
Real estate	33,642,625	16,890,006
Installment	9,071,924	5,729,302
Total	$57,867,097	$32,667,907
Net charge-offs as percent of average
loans outstanding (annualized):
Commercial	.41%	.60%
Real estate	.11%	.07%
Installment	.22%	.21%
Total	.20%	.25%

Net loan losses as a percentage of average loans (annualized) were 0.23% in the second quarter of 2005 compared to 0.34% in the second quarter 2004 and 0.17% in the first quarter of 2005. At June 30, 2005, the allowance for loan losses was 1.30% of loans, compared to 1.35% at June 30, 2004, and 1.31% at March 31, 2005. The allowance for loan losses as a percentage of non-performing loans was 194% at June 30, 2005, compared to 241% at June 30, 2004, and 194% at December 31, 2004. The allowance for loan losses as a percentage of non-performing assets was 166% at June 30, 2005, compared to 201% at June 30, 2004, and 167% at December 31, 2004.

NON-PERFORMING ASSETS

Non-performing assets are summarized as follows:

(dollar amounts in thousands)	June 30,	March 31,	December 31,	June 30,
	2005	2005	2004	2004
Non-accruing loans	$391,542	$429,171	$388,379	$187,685
Renegotiated loans	247	257	279	-
Other real estate	64,031	57,624	63,598	37,652
Total	$455,820	$487,052	$452,256	$225,337
Non-performing assets as a
percentage of loans and
other real estate	0.78%	0.84%	0.79%	0.67%
Loans past due 90 days or more	$76,417	$62,074	$74,777	$37,147

Non-accruing loans at June 30, 2005, increased $203.9 million from June 30, 2004 levels and $3.2 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 during first quarter 2005. At June 30, 2005, realestate loans comprised $210.6 million ($147.9 million in residential) of total non-accruing loans, with commercial loans accounting for $165.1 million and consumer loans accounting for $15.8 million. Loans past due 90 days or more increased $39.3 million compared to June 30, 2004, due primarily to the Union Planters merger and increased $1.6 million from year-end 2004 levels. Other real estate increased $26.4 million from June 30, 2004 due primarily to properties added in connection with the merger with Union Planters and increased $433,000 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 June 30, 2005, this category of earning asset totaled $85.7 million compared to $35.8 million at June 30, 2004, and $115.0 million at December 31, 2004.

SECURITIES

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

(in thousands)	June 30,	December 31,	June 30,
	2005	2004	2004
Securities held to maturity:
U.S. Treasury and Federal agency securities	$31,284	$31,152	$30,888
Obligations of states and political subdivisions	-	-	751
Total	$31,284	$31,152	$31,639
Securities available for sale:
U.S. Treasury and Federal agency securities	$3,534,287	$4,375,697	$1,786,479
Obligations of states and political subdivisions	500,858	569,060	433,588
Mortgage-backed securities	7,487,644	6,980,513	6,196,326
Other securities	63,977	179,374	83,657
Equity securities	608,282	480,793	217,530
Total	$12,195,048	$12,585,437	$8,717,580

Total securities at June 30, 2005, increased 40% from June 30, 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 second quarter of 2005, Regions sold $1.1 billion in government and agency securities, incurring a gain of $53.4 million. Reinvestment of proceeds from this sale into shorter term securities is expected to have a $4 to $5 million negative effect on interest income in the second half of 2005. 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 $849.7 million compared to June 30, 2004, due to the merger with Union Planters in the third quarter 2004, and $297.5 million compared to year-end 2004, due to an increase in mortgage loans held for sale. At June 30, 2005, mortgage loans held for sale accounted for substantially all of the $2.1 billion in total loans held for sale.

MARGIN RECEIVABLES

Margin receivables at June 30, 2005, totaled $549.3 million compared to $549.7 million at June 30, 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.

PREMISES AND EQUIPMENT

Premises and equipment at June 30, 2005, increased by $452.5 million in comparison with the same quarter in 2004, due primarily to assets added through the Union Planters merger, and increased $3.2 million from December 31, 2004. The increase from year-end was due to the normal addition of premises and equipment during the first two quarters of 2005, offset by a $21.5 million decrease in premises related to a second quarter 2005 transaction whereby Regions sold certain properties to a third party, but has agreed to lease back a portion of these properties. As a part of this transaction, Regions maintains a continuing involvement in certain properties and, as such, will continue to incur depreciation expense related to these properties. In addition, Regions has recorded a long term debt obligation totaling $83.1 million relating to the continuing involvement in these properties (See BORROWINGS).

EXCESS PURCHASE PRICE

Excess purchase price at June 30, 2005, totaled $5.1 billion compared to $1.1 billion at June 30, 2004 and $5.0 billion year-end 2004. The increase from June 30, 2004 is related to the approximately $4 billion in excess purchase price added in connection with the merger with Union Planters.

MORTGAGE SERVICING RIGHTS

Mortgage servicing rights increased $214.3 million compared to June 30, 2004 due to additions associated with the July 1, 2004 merger with Union Planters. Since year end, mortgage servicing rights decreased $25.4 million, primarily due to a net impairment charge against mortgage servicing rights of $18 million during the first six months of 2005, as a result of a reduction in mortgage rates and an increase in prepayment speed assumptions. At June 30, 2005, mortgage servicing rights totaled $371.1 million.

OTHER IDENTIFIABLE INTANGIBLE ASSETS

Other identifiable intangible assets at June 30, 2005 totaled $337.6 million compared to $16.0 million at June 30, 2004 and $356.9 million at year-end 2004. The increase from the second quarter of 2004 is related primarily to core deposit intangibles added in connection with the merger with Union Planters. The decrease during the first two quarters of 2005 is related to amortization of other identifiable intangibles.

OTHER ASSETS

Other assets increased $749.8 million compared to June 30, 2004, and increased $202.0 million since year-end 2004. The increase from second quarter 2004 was primarily the result of assets added in connection with the merger with Union Planters during the third quarter of 2004. The increase from year-end 2004 was primarily attributable to an increase in computer software, deferred tax assets, and treasury receivables, partially offset by a decrease in investment 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 June 30, 2005, was 95.84% compared to 97.68% at June 30, 2004 and 98.06% at December 31, 2004.

Regions recently filed a universal shelf registration statement that allows the company to issue up to $2 billion of various debt and equity securities at market rates for future funding and liquidity needs. On August 3, 2005, Regions issued $750 million of senior debt notes ($400 million of 3-year floating rate notes and $350 million of 3-year fixed rate notes) under the above universal shelf registration. Proceeds will be used for general corporate purposes.

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 June 30, 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:
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 June 30, 2005, increased 77% compared to June 30, 2004, and 4% from year-end 2004 levels. The significant increase in deposits from second 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 six months ended June 30, 2005 and 2004:

	Average Rates Paid
	June 30,	June 30,
	2005	2004
Interest-bearing transaction accounts	1.69%	0.86%
Savings accounts	0.23	0.22
Money market savings accounts	1.05	0.62
Certificates of deposit of $100,000 or more	2.87	1.92
Other interest-bearing deposits	2.76	2.09
Total interest-bearing deposits	1.87%	1.27%

The following table presents the average amounts of deposits outstanding by category for the six months ended June 30, 2005 and 2004:

	Average Amounts Outstanding
	Six months ended June 30,
(in thousands)	2005	2004
Non-interest-bearing demand deposits	$ 11,665,276	$ 5,856,875
Interest-bearing transaction accounts	3,088,178	2,706,828
Savings accounts	2,921,799	1,438,443
Money market savings accounts	19,008,984	10,600,753
Certificates of deposit of $100,000 or more	7,946,978	3,696,782
Other interest-bearing deposits	14,668,269	8,567,316
Total interest-bearing deposits	47,634,208	27,010,122
Total deposits	$59,299,484	$32,866,997

BORROWINGS

Following is a summary of short-term borrowings:

(in thousands)	June 30,	December 31,	June 30,
	2005	2004	2004
Federal funds purchased	$ 983,972	$ 1,872,119	$1,409,985
Securities sold under agreements to repurchase	2,851,348	2,807,807	2,292,187
Federal Home Loan Bank structured notes	-	350,000	350,000
Notes payable to unaffiliated banks	81,900	56,400	53,000
Treasury, tax and loan note	5,000	5,000	-
Due to brokerage customers	425,684	457,702	442,376
Derivative collateral/broker margin calls	63,188	75,846	36,260
Short sale liability	346,112	370,737	229,227
Total	$4,757,204	$5,995,611	$4,813,035

Net federal funds purchased and security repurchase agreements totaled $3.2 billion at June 30, 2005, compared to $2.9 billion at June 30, 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 six months of 2005, net funds purchased averaged $4.0 billion compared to $2.9 billion for the same period in 2004. Other short-term borrowings decreased $189.0 million since June 30, 2004 and $393.8 million since year end due primarily to reductions in Federal Home Loan Bank structured notes and customer funds in brokerage accounts.

Long-term borrowings are summarized as follows:

(in thousands)	June 30,	December 31,	June 30,
	2005	2004	2004
6.375% subordinated notes due 2012	$ 598,850	$ 600,000	$ 600,000
7.00% subordinated notes due 2011	498,726	500,000	500,000
7.75% subordinated notes due 2024	100,000	100,000	100,000
6.75% subordinated notes due 2005	101,290	103,225	-
6.50% subordinated notes due 2018	316,826	319,873	-
7.75% subordinated notes due 2011	562,688	568,219	-
Senior holding company notes due 2010	485,312	483,956	-
Senior bank notes	1,013,571	1,017,050	400,000
Federal Home Loan Bank structured notes	1,785,000	1,785,000	1,785,000
Federal Home Loan Bank advances	939,614	945,916	768,518
Junior subordinated notes	523,401	525,015	300,708
Mark-to-market on hedged long-term debt	105,436	125,294	65,275
Other long-term debt	255,003	166,037	60,553
Total	$7,285,717	$7,239,585	$4,580,054

Long-term borrowings have increased $2.7 billion since June 30, 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 increased $46.1 million since year-end 2004. This increase is due to the $83.1 million added to other long-term debt in connection with the seller-lessee transaction with continuing involvement (see PREMISES AND EQUIPMENT), offset by reductions in subordinated debt, senior notes, and mark-to market on hedged debt.

OTHER LIABILITIES

Other liabilities increased $43.0 million compared to June 30, 2004 due primarily to liabilities added in the merger with Union Planters and increased by $162.8 million compared to year-end 2004, primarily due to an increase in accrued income taxes and interest expense.

STOCKHOLDERS' EQUITY

Stockholders' equity was $10.7 billion at June 30, 2005, compared to $4.4 billion at June 30, 2004, and $10.7 billion at December 31, 2004. The increase from second 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 $18.7 million at June 30, 2005, compared to a loss of $40.3 million at June 30, 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 12.60% at June 30, 2005, compared to 8.79% at June 30, 2004 and 12.78% at December 31, 2004. Regions' ratio of tangible equity to tangible assets was 6.68% at June 30, 2005, compared to 6.70% at June 30, 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 8.5 million shares in the first two quarters of 2005. An additional 10.6 million shares could be repurchased under this authorization.

The Board of Directors declared a $.34 cash dividend for the second quarter of 2005, compared to a $.33 cash dividend declared for the second quarter of 2004 and $.34 for first quarter 2005.

REGULATORY CAPITAL REQUIREMENTS

Regions and Regions Bank 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 June 30, 2005 and 2004, substantially exceeded all regulatory requirements.

		Well
	Minimum	Capitalized	Regions at	Regions at
	Regulatory	Regulatory	June 30,	June 30,
	Requirement	Requirement	2005	2004
Tier 1 capital to risk-adjusted assets	4.00%	6.00%	8.73%	9.50%
Total risk-based capital to risk-adjusted assets	8.00	10.00	12.95	14.13
Tier 1 leverage ratio	3.00	5.00	7.35	7.39

OPERATING RESULTS

For the first six months of 2005, net income available to common shareholders totaled $490.0 million ($1.04 per diluted share), compared to $325.8 million ($1.18 per diluted share) for the same period in 2004. For the second quarter of 2005, net income available to common shareholders totaled $248.4 million ($0.53 per diluted share), compared to $159.3 million ($0.58 per diluted share) for the second quarter of 2004 and $241.6 million ($0.51 per diluted share) in the first quarter of 2005.

Annualized return on stockholders' equity for the six months ended June 30, 2005 was 9.21% compared to 15.04% for the same period in 2004. Annualized return on assets for the six months ended June 30, 2005 was 1.17% compared to 1.35% for the same period in 2004.

Annualized return on tangible stockholders' equity was 18.33% for the quarter ended June 30, 2005 compared to 20.02% for the same period in 2004.

NET INTEREST INCOME

The following table presents a summary of net interest income for the quarters ended June 30, 2005, March 31, 2005, and June 30, 2004.

(dollar amounts in thousands)	June 30,	March 31,	June 30,
	2005	2005	2004
Interest income	$1,055,384	$991,976	$537,880
Interest expense	358,672	311,405	157,017
Net interest income	696,712	680,571	380,863
Tax equivalent adjustment	19,795	20,535	16,226
Net interest income (taxable equivalent)	$716,507	$701,106	$397,089
Net interest margin	3.85%	3.84%	3.53%

Net interest income (taxable equivalent basis) for the first six months of 2005 increased $625.1 million, or 79%, compared to the same period in 2004. The increase in net interest income is due primarily to increases in interest rates during 2004 and 2005, as well as increases in average earning assets resulting from the Union Planters merger. The net yield on interest-earning assets (taxable equivalent basis) was 3.85% in the first six months of 2005 compared to 3.54% during the same period in 2004.

For the second quarter of 2005, net interest income (taxable equivalent basis) increased $319.4 million, or 81%, from the comparable quarter in 2004, due to increases in interest rates during 2004 and 2005, as well as increases in average earning assets resulting from the Union Planters merger. The net yield on interest earning assets (taxable equivalent basis) was 3.85% in the second quarter of 2005 compared to 3.53% during the second quarter of 2004. The yield on interest earning assets increased 85 basis points in the second quarter of 2005, while the rate on interest bearing liabilities increased 69 basis points, compared to the second quarter of 2004.

Compared to the first quarter of 2005, net interest income (taxable equivalent basis) increased $15.4 million, or 9% annualized, due to earning asset growth and increased interest rates. The net yield on interest earning assets (taxable equivalent basis) was 3.85% in the second quarter of 2005 compared to 3.84% in the first quarter of 2005. The yield on interest earning assets increased 22 basis points, while the rate on interest bearing liabilities increased 27 basis points, compared to the previous quarter.

Analysis of Changes in Net Interest Income

	Six months ended June 30,
(in thousands)	2005 over 2004
	Volume	Yield/Rate	Total
Increase (decrease) in:
Interest income on:
Loans	$714,481	$135,843	$850,324
Federal funds sold	(486)	4,252	3,766
Taxable securities	69,657	9,346	79,003
Non-taxable securities	2,450	286	2,736
Other earning assets	21,925	16,044	37,969
Total	808,027	165,771	973,798
Interest expense on:
Savings deposits	1,719	123	1,842
Other interest-bearing deposits	163,363	106,448	269,811
Borrowed funds	37,046	47,676	84,722
Total	202,128	154,247	356,375
Increase in net interest income	$605,899	$ 11,524	$ 617,423

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. The allocation between volume and rate has been impacted by balances added in connection with the Union Planters merger.

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 the many products both on and off 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 economic 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 June 30, 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 June 30, 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.

Gradual	June 30, 2005		June 30, 2004
	$ 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	$ 105,000	3.9%	$ 39,000	2.5%
+100	53,000	2.0	24,000	1.6
-100	(70,000)	(2.6)	(7,000)	(0.5)
-200	(157,000)	(5.8)	(16,000)	(1.0)

As of June 30, 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.

Instantaneous	June 30, 2005		June 30, 2004
	$ 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	$ 135,000	5.0%	$ 44,000	2.9%
+100	73,000	2.7	25,000	1.7
-100	(73,000)	(2.7)	(16,000)	(1.1)
-200	(204,000)	(7.5)	(26,000)	(1.7)

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 June 30, 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 June 30, 2005, the contract amounts of futures contracts were $61 million to purchase and $172 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 $358,000 at June 30, 2005 compared to approximately $466,000 at March 31, 2005. Maximum daily VAR utilization during the second quarter of 2005 was approximately $667,000, compared to $1.2 million during the first quarter of 2005, and average daily VAR was $451,000 during the second quarter of 2005, compared to $588,000 during the first quarter of 2005.

PROVISION FOR LOAN LOSSES

The provision for loan losses was $62.5 million or .22% (annualized) of average loans in the first six months of 2005 compared to $40.0 million or .25% (annualized) of average loans in the first six months of 2004. For the second quarter of 2005, the provision for loan losses was $32.5 million or .22% (annualized) of average loans compared to $25.0 million or .30% (annualized) of average loans in the second quarter of 2004 and $30.0 million or .21% (annualized) in the first quarter of 2005. The provision for loan losses recorded in the first six months and second 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 June 30, 2005, March 31, 2005, and June 30, 2004.

	June 30,	March 31,	June 30,
(in thousands)	2005	2005	2004
Brokerage and investment banking	$132,179	$144,490	$128,886
Trust department income	31,256	31,990	21,668
Service charges on deposit accounts	131,654	123,818	73,607
Mortgage servicing and origination fees	37,057	39,312	19,868
Securities gains (losses)	53,400	(33,966)	149
Insurance premiums and commissions	21,079	22,006	21,645
Gain on sale of mortgage loans	40,913	33,909	35,841
Derivative income	9,921	3,983	1,799
SOI and Capital Factors	10,105	13,371	-
Other	41,861	51,997	27,343
Total non-interest income	$509,425	$430,910	$330,806

Total non-interest income (excluding securities transactions) increased $244.8 million or 36% in the first six months of 2005 compared to the same period of 2004, due primarily to the impact of the merger with Union Planters. On a quarterly basis, total non-interest income (excluding securities transactions) increased $125.4 million, or 38%, compared to the second quarter of 2004 (due primarily to the merger as noted above) and decreased $8.9 million, or 8% annualized, compared to the first quarter of 2005, due primarily to a reduction in unusually strong first quarter 2005 investment banking fees and insurance premiums and commissions, partially offset by an increase in the gain on the sale of mortgages and in service charges on deposit accounts.

BROKERAGE AND INVESTMENT BANKING

Brokerage and investment banking income reflected an increase of $9.6 million in the first six months of 2005 compared to the same period in 2004 due primarily to unusually strong investment banking activity in the first quarter of 2005. In the second quarter of 2005, brokerage and investment banking income increased $3.3 million compared to the second quarter of 2004 but decreased $12.3 million compared to the first quarter of 2005 based on the reduction of unusually strong first quarter 2005 investment banking revenue.

The following table shows the breakout of revenue by division contributed by Morgan Keegan for the three months ended June 30, 2005 and March 31, 2005, and the six months ended June 30, 2005 and 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 June 30, 2005:
$ amount of revenue	$60,143	$42,116	$17,797	$25,207	$29,771	$20,518
% of gross revenue	30.8%	21.5%	9.1%	12.9%	15.2%	10.5%
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%
Six months ended June 30, 2005:
$ amount of revenue	$123,317	$82,401	$44,213	$51,063	$58,123	$40,725
% of gross revenue	30.8%	20.6%	11.1%	12.8%	14.5%	10.2%
Six months ended June 30, 2004:
$ amount of revenue	$108,760	$101,285	$33,399	$35,836	$41,425	$25,579
% of gross revenue	31.4%	29.2%	9.6%	10.3%	12.0%	7.5%

The following table shows the components of revenue contributed by Morgan Keegan for the three months ended June 30, 2005, March 31, 2005, and June 30, 2004.

Morgan Keegan Summary Income Statement
(dollar amounts in thousands)	Three months ended June 30, 2005	Three months ended Mar. 31, 2005	Three months ended June 30, 2004	% Change from Mar. 31, 2005	% Change from June 30, 2004
Revenues:
Commissions	$50,263	$49,650	$38,751	1.2%	29.7%
Principal transaction	35,425	38,277	48,583	(7.5)	(27.1)
Investment banking	27,434	36,905	24,944	(25.7)	10.0
Interest	19,766	17,833	11,470	10.8	72.3
Trust fees and services	25,207	25,856	18,245	(2.5)	38.2
Investment advisory	29,211	26,520	20,530	10.1	42.3
Other	8,246	9,249	7,291	(10.8)	13.1
Total revenues	195,552	204,290	169,814	(4.3)	15.2
Expenses:
Interest expense	13,109	9,168	5,303	43.0	147.2
Non-interest expense	143,531	153,218	133,502	(6.3)	7.5
Total expenses	156,640	162,386	138,805	(3.5)	12.8
Income before income taxes	38,912	41,904	31,009	(7.1)	25.5
Income taxes	14,459	15,672	11,580	(7.7)	24.9
Net income	$24,453	$26,232	$19,429	(6.8)%	25.9%

TRUST INCOME

Trust department income for the first six months of 2005 increased $20.9 million or 49% compared to the first six months of 2004 due to the addition of Union Planters' trust activities in the third quarter of 2004. Second quarter 2005 trust department income increased $9.6 million or 44% over the second quarter of 2004, primarily due to the addition of Union Planters' trust activities in 2004, and decreased $734,000 or 9% (annualized) linked-quarter due to decreases in fee levels and lower asset values, on which fees are based.

SERVICE CHARGES ON DEPOSIT ACCOUNTS

Service charges on deposit accounts increased $110.0 million or 76% in the first six months of 2005 and increased $58.0 million or 79% in the second quarter of 2005, compared to the same periods in 2004 due to fees on accounts added in connection with the merger with Union Planters. On a linked quarter comparison, service charges on deposit accounts increased $7.8 million over the first quarter of 2005, as a result of the return of NSF/OD fees to higher levels, partially offset by the expanded offering of a free checking product, lower commercial service fees, and the continuing conversion of legacy Union Planters' fee structure to Regions' somewhat lower fee structure.

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 Union Planters Bank 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 the first six months of 2005, mortgage servicing and origination fees increased $34.9 million or 84% compared to the same period of 2004 due to increased servicing and origination activities acquired through the merger with Union Planters during the third quarter of 2004. Mortgage servicing and origination fees increased $17.2 million or 86% in the second quarter of 2005 compared to the second quarter of 2004, due to increased mortgage production and servicing volume. From a linked-quarter perspective, mortgage servicing and origination fees decreased $2.3 million or 23% (annualized) due to the sale of the conforming wholesale mortgage business. Single-family mortgage production was $4.4 billion in the second quarter of 2005, compared to $2.4 billion in the second quarter of 2004 and $3.8 billion in the first quarter of 2005. The mortgage operation's servicing portfolio totaled $39.3 billion at June 30, 2005, compared to $15.8 billion at June 30, 2004, and $39.5 billion at March 31, 2005.

A summary of mortgage servicing rights is presented as follows. The balances shown represent the original amounts capitalized, less accumulated amortization and valuation adjustments, 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.

	Six Months Ended
(dollar amounts in thousands)	June 30,	June 30,
	2005	2004
Balance at beginning of year	$458,053	$166,346
Additions	40,413	18,849
Sales	(3,783)	-
Amortization	(44,072)	(16,921)
	450,611	168,274
Valuation adjustment	(79,500)	(11,500)
Balance at end of period	$371,111	$156,774

The changes in the valuation allowance for servicing assets for the six months ended June 30, 2005 and 2004 were as follows:

	Six Months Ended
(in thousands)	June 30,	June 30,
	2005	2004
Balance at beginning of the year	$61,500	$39,500
Provisions for (recapture of) impairment valuation	18,000	(28,000)
Balance at end of the period	$79,500	$11,500

SECURITIES GAINS

Securities gains for the first six months of 2005 totaled $19.4 million (resulting from a $34 million loss on the sale of securities in the first quarter of 2005 followed by a $53.4 million gain on sales of securities during the second quarter) compared to $13.0 million for the same period of 2004. Gains during the second quarter of 2005 reflected a $53.3 million increase over the comparable quarter in 2004, resulting from the second quarter 2005 sale of securities that served as an economic hedge for the $53 million impairment of mortgage servicing rights during the quarter.

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. Other non-interest income for the first six months of 2005 increased $69.4 million over the first six months of 2004 due primarily to fees added by the merger with Union Planters in the third quarter of 2004. In the second quarter of 2005, other non-interest income increased $37.3 million over the second quarter of 2004 due to the merger noted above and decreased $1.4 million linked-quarter, as a result of reduced insurance premiums, trading income, safe deposit fees, and income from investments in low income housing, partially offset by increases in customer derivative fees and gains on mortgage loan sales.

NON-INTEREST EXPENSE

The following table presents a summary of non-interest expense for the quarters ended June 30, 2005, March 31, 2005, and June 30, 2004.

(in thousands)	June 30,	March 31,	June 30,
	2005	2005	2004
Salaries and employee benefits	$411,953	$437,658	$282,369
Net occupancy expense	54,898	54,284	25,985
Furniture and equipment expense	32,161	32,209	19,333
Impairment (recapture) of MSRs	53,000	(35,000)	(40,000)
Loss on early extinguishment of debt	-0-	-0-	39,620
Merger-related and other charges	43,765	38,894	8,173
Other	222,074	205,901	122,696
Total non-interest expense	$817,851	$733,946	$458,176

Total non-interest expense increased $609.7 million or 65% in the first six months of 2005 compared to the same period in 2004 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. Second quarter 2005 non-interest expense increased $359.7 million compared to the second quarter of 2004 due to the merger noted above and $83.9 million compared to the first quarter of 2005, due primarily to the $53 million impairment charge recorded during the quarter (in comparison to the $35 million recapture of impairment recorded during the first quarter).

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 June 30, 2005, March 31, 2005, and June 30, 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 June 30, 2005

		Less: Merger-
		related and
(in thousands)	As Reported	Other Charges	As Adjusted
Salaries and employee benefits	$ 426,443	$ 14,490	$ 411,953
Net occupancy expense	56,635	1,737	54,898
Furniture and equipment expense	32,292	131	32,161
Impairment of MSRs	53,000	53,000	-0-
Other	249,481	27,407	222,074
Total	$ 817,851	$ 96,765	$ 721,086

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	244,795	25,841	218,954
Total	$ 733,946	$ 3,894	$ 730,052

Three months ended June 30, 2004

		Less: Merger-
		related and
(in thousands)	As Reported	Other Charges	As Adjusted
Salaries and employee benefits	$ 283,361	$ 992	$ 282,369
Net occupancy expense	25,985	-0-	25,985
Furniture and equipment expense	19,341	8	19,333
Recapture of MSRs	(40,000)	(40,000)	-0-
Loss on early extinguishment of debt	39,620	39,620	-0-
Other	129,869	7,173	122,696
Total	$ 458,176	$ 7,793	$ 450,383

SALARIES AND EMPLOYEE BENEFITS

Salaries and employee benefits were up $293.8 million or 52% in the first six months of 2005 compared to the same period in 2004, due to the increased number of associates added in connection with the Union Planters merger. In the second quarter of 2005, salaries and employee benefits increased $143.1 million compared to the second quarter of 2004 (as a result of merger with Union Planters merger) and decreased $11.2 million linked-quarter, due to reduced headcount, lower payroll taxes, and reduced brokerage commissions, partially offset by higher commissions related to increased mortgage production in the second quarter. As of June 30, 2005, Regions had 25,654 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 increased $57.1 million or 106% in the first six months of 2005 over the first six months of 2004 due primarily to expenses attributable to properties added in connection with the merger with Union Planters and new branch offices. Net occupancy expense in the second quarter of 2005 increased $30.7 million compared to second quarter of 2004 and $2.4 million linked quarter.

FURNITURE AND EQUIPMENT EXPENSE

Furniture and equipment expense during the first six months of 2005 increased $27.0 million or 72% compared to the same period in 2004 due primarily to increased depreciation associated with equipment added in connection with the merger with Union Planters during the third quarter of 2004. During the second quarter of 2005, furniture and equipment expense increased $13.0 million in comparison with the second quarter of 2004, as a result of the merger noted above. Furniture and equipment expense increased $83,000 linked quarter.

IMPAIRMENT (RECAPTURE) OF MORTGAGE SERVICING RIGHTS

Impairment of mortgage servicing rights during the first six months of 2005 increased $46.0 million compared to the same period in 2004 and $93.0 million when comparing the three months ended June 30, 2005 and 2004, due primarily to a declining mortgage rate environment, higher prepayment speeds, and shorter servicing periods on mortgage loans. The $53.0 million impairment charge during the second quarter of 2005 contrasted with the $35.0 million recapture of impairment recognized in 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. Other non-interest expense increased $185.7 million or 60% in the first six months of 2005 compared to the same period in 2004 due to expenses added by the merger with Union Planters. In the second quarter of 2005, other non-interest expense increased $80.0 million compared to the second quarter of 2004 (primarily due to the merger noted above) and $4.7 million compared to the first quarter of 2005, due to an increase in advertising and promotion expense.

APPLICABLE INCOME TAXES

Regions' provision for income tax expense for the first six months of 2005 increased $77 million compared to the first six months of 2004 due to increased earnings resulting from the third quarter 2004 merger with Union Planters. The second quarter 2005 income tax expense increased $41 million compared to the second quarter of 2004. Regions effective tax rate for the first six months of 2005 was 30.3% compared to 29.2% in the first six months 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 credits 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 $20.8 million in the first six months of 2005 compared to $12.0 million in the first six months of 2004. The amount of tax benefit recognized from these tax credits in the second quarter of 2005 and 2004 was $10.1 million and $6.0 million, respectively.

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 benefits recognized related to the recapitalized subsidiary was $25.0 million in the first six months of 2005 ($19.9 million federal) compared to $22.3 million in the first six months of 2004 ($17.8 million federal). For the second quarter of 2005, the amount of federal and state tax benefits recognized was $13.0 million ($10.4 million federal) compared to $11.1 million ($8.8 million federal) in the second quarter of 2004.

Regions has segregated a portion of its investment securities and intellectual property into separate legal entities organized in Delaware 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 $12.5 million in the first six months of 2005 compared to $6.7 million in the first six months of 2004. In the second quarter of 2005, $6.2 million of state tax benefits was recognized compared to $3.6 million in the second quarter of 2004.

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 2002, 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 has 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 valuation allowances against such benefits of $63.8 million (capital loss carryforwards) and $10.4 million (state NOL carryforwards) as of the second quarter 2005, compared to $63.8 million and $9.0 million, respectively, in the first quarter of 2005. No material valuation allowance had been est ablished during the second quarter of 2004.

Item 3. Qualitative and Quantitative Disclosures about Market Risk

Reference is made to pages 43 through 46 '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. Unregistered Sales of Equity Securities and Use of Proceeds

Information concerning Regions' repurchases of its outstanding common stock during the three month period ended June 30, 2005, is set forth in the following table:

	Issuer Purchases 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)
April 1, 2005 -
April 30, 2005	349,400	$32.42	349,400	14,325,100
May 1, 2005 -
May 31, 2005	1,835,600	$33.55	1,835,600	12,489,500
June 1, 2005 -
June 30, 2005	1,843,300	$33.73	1,843,300	10,646,200
Total	4,028,300		4,028,300

(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 4. Submission of Matters to a Vote of Security Holders

At the Annual Meeting of Stockholders held May 19, 2005, the proposal to adopt the Regions Financial Corporation Executive Bonus Plan was approved by stockholders. For this proposal, 344,113,844 shares were voted in favor, 29,576,957 shares were voted against, 8,052,615 shares abstained, and there were no broker non-votes. The plan had been previously adopted by the Compensation Committee of the Board of Directors of the Company, subject to stockholder approval.

In addition, four nominees were re-elected as directors of Regions to serve three-year terms. The directors elected at the 2005 Annual Meeting were Allen B. Morgan Jr. (372,071,648 votes in favor and 9,671,768 votes withheld), Jorge M. Perez (370,622,367 votes in favor and 11,121,049 votes withheld), Spence L. Wilson (371,198,520 votes in favor and 10,544,896 votes withheld), and Harry W. Witt (370,575,479 votes in favor and 11,167,937 votes withheld).

The stockholders also ratified the Board of Directors' selection of Ernst & Young LLP as independent auditors of the Company for the year ending December 31, 2005. For this proposal, 370,193,349 shares were voted in favor, 7,697,003 shares were voted against, 3,853,064 shares abstained, and there were no broker non-votes.

Item 6. Exhibits

Exhibit No.	Description
4	Instruments defining the rights of security holders, including indentures. The registrant hereby agrees to furnish to the Commission upon request copies of instruments defining the rights of holders of long term debt of the registrant issued on August 3, 2005; the total amount of such debt does not exceed 10% of the assets of the registrant and its subsidiaries on a consolidated basis.
10.1	Regions Financial Corporation Executive Bonus Plan, incorporated by reference to Exhibit 99 to Form 8-K of Regions Financial Corporation dated May 19, 2005, and filed with the Commission on May 25, 2005.
10.2	Letter of Understanding, dated May 16, 2005, between Jackson W. Moore and Regions Financial Corporation, incorporated by reference to Exhibit 99.1 to Form 8-K of Regions Financial Corporation dated May 16, 2005, and filed with the Commission on May 17, 2005.
10.3	Amended and Restated Employment Agreement, dated June 29, 2005, between Jackson W. Moore and Regions Financial Corporation, incorporated by reference to Exhibit 99.1 to Form 8-K of Regions Financial Corporation dated June 29, 2005, and filed with the Commission on July 6, 2005.
10.4	Amendment, executed June 29, 2005, to Employment Agreement dated September 1, 2001 between Richard D. Horsley and Regions Financial Corporation, incorporated by reference to Exhibit 99.2 to Form 8-K of Regions Financial Corporation dated June 29, 2005, and filed with the Commission on July 6, 2005.
10.5	Amendment, executed June 29, 2005, to Employment Agreement dated September1, 2001 between Peter D. Miller and Regions Financial Corporation, incorporated by reference to Exhibit 99.3 to Form 8-K of Regions Financial Corporation dated June 29, 2005, and filed with the Commission on July 6, 2005.
10.6	Amendment, executed June 29, 2005, to Employment Agreement dated September 1, 2001 between John I. Fleischauer and Regions Financial Corporation, incorporated by reference to Exhibit 99.4 to Form 8-K of Regions Financial Corporation dated June 29, 2005, and filed with the Commission on July 6, 2005.
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.

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: August 9, 2005

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