Exhibit 99.1
(REGIONS FINANCIAL CORP.(SM) LOGO)
July 14, 2006
REGIONS REPORTS RECORD SECOND QUARTER PROFITS, EXCELLENT MOMENTUM, GOOD MERGER
PREPARATION PROGRESS
BIRMINGHAM, ALA.--Regions Financial Corporation (NYSE:RF) today announced
highlights for the quarter ended June 30, 2006, including:
- Record earnings of 75 cents per diluted share
- Higher net interest income
- Strong fee-based revenues
- Improved operating efficiency
- Outstanding credit quality
- Good merger preparation progress
REAPING REWARDS OF MERGER OPPORTUNITIES, BALANCE SHEET POSITIONING
"Regions' significant second quarter earnings gain sets the stage for record
full-year 2006 operating profits," said Regions Chairman, President and Chief
Executive Officer Jackson W. Moore. "We continue to see the powerful benefits of
Regions' mid-2004 merger of equals with Union Planters as incremental revenue
generating opportunities are realized and operating efficiency is improved.
"Strong revenue, combined with lower expenses, drove Regions' sharp bottom line
increase first-to-second quarter," according to Moore. "A well-positioned
balance sheet enabled continued net interest income growth, and fee-based
revenues were solid. Additionally, net loan charge-offs remained low. As a
result, Regions' annualized return on tangible common equity increased to
approximately 26 percent.
"This was a milestone quarter due to our record-breaking profits as well as our
May 25 announcement of an agreement to merge with Birmingham-based AmSouth,"
Moore stated. "The merger planning process is well underway, with a fourth
quarter close anticipated.
"I'm excited about the Regions-AmSouth merger and its substantial opportunities
to accelerate our vision of Regions becoming the leading regional financial
services provider by creating significant shareholder value, enhancing products
and services for our customers and enhancing career opportunities for our
associates. Regions' year-to-date 2006 results validate the power of a
complementary, well-executed merger of equals. I am confident in our ability to
successfully integrate the two companies and realize the combined entity's
enhanced long-term profit potential."
EPS CLIMBS TO NEW QUARTERLY HIGH
Second quarter 2006 net income was $345 million, or 75 cents per diluted share
compared to first quarter 2006's 64 cents per diluted share and year-ago second
quarter's 53 cents per diluted share, including 6
Continued Next Page
July 14, 2006
Page 2
cents of merger-related charges. Thus, per share quarterly earnings rose 17
percent linked quarter and 27 percent year-over-year, excluding merger charges.
For the first six months of 2006, net income totaled $640 million, or $1.39 per
diluted share compared to $1.04 per diluted share, including 12 cents of merger
and other charges, reported in the first six months of 2005. The 20 percent
annual increase, excluding merger and other charges, reflected solid revenue
growth and merger-related cost save benefits.
BANKING OPERATIONS CONTINUE TO GROW NET INTEREST INCOME
"Regions' banking business posted good revenue growth first-to-second
quarter--both spread-related and fee-based," Moore noted. "Regions' ongoing
disciplined balance sheet management positively impacted spread-related net
interest income."
Taxable equivalent net interest income rose $25 million, or an annualized 13
percent linked quarter, reflecting a higher net interest margin (4.24 percent)
and an additional business day in the second quarter. The year-over-year
quarterly increase was 10 percent, driven by 39 basis point margin expansion and
modest balance sheet growth.
Total loans grew 5 percent, linked-quarter, annualized. Increases in commercial
and industrial credits drove overall community bank loan growth, offset somewhat
by a decline in commercial real estate and consumer lines of credit.
Total deposits grew 6 percent linked-quarter, annualized. Customer preferences
continued to move toward higher-yielding instruments such as retail certificates
of deposit, shifting funds out of interest free and low-cost deposit accounts.
Regions continues to actively control deposit pricing while strengthening its
core funding base.
FEE-BASED REVENUES REMAIN STRONG
"We're pleased with Regions' broad and expanding base of fee revenues," stated
Moore. "Total fees have risen 8 percent since second quarter 2005, excluding
securities transactions."
Linked-quarter fee-based revenue comparisons were steady-to-favorable, leading
to an aggregate 4 percent increase even with first quarter's unusually strong
contribution from capital markets-related businesses. Service charges on deposit
accounts jumped 15 percent from first quarter's seasonal low and were up 12
percent year-over-year second quarter.
Mortgage-related servicing and origination fees improved 5 percent compared to
first quarter, helped by EquiFirst's higher origination volume. Gain on sale of
mortgage loans improved significantly given higher sales volumes and slightly
better gain on sale margins at EquiFirst.
MORGAN KEEGAN REMAINS WELL POSITIONED FOR RECORD FULL-YEAR EARNINGS
"Morgan Keegan's second quarter results were excellent," Moore said. "Profits
were $33 million, or 34 percent higher than a year ago, and support our
expectations that full-year 2006 will be another record earnings year for Morgan
Keegan. Second quarter earnings, though, did drop from first quarter 2006's
particularly strong $41 million, which included a $9 million after tax gain on
the swap of NYSE seats for stock."
Revenue aggregated $239 million, up 22 percent from a year earlier but down from
first quarter 2006's $252 million. First quarter revenues included a $13 million
pre-tax gain related to the exchange of NYSE seats for stock.
All divisions reported good business flows, helped by Morgan Keegan's increased
distribution system and larger sales force.
Continued Next Page
July 14, 2006
Page 3
OPERATING EFFICIENCY IMPROVES
Non-interest expenses dropped 4 percent linked-quarter, to $727 million from
first quarter's $756 million. Favorable expense trends reflect cost savings from
the Union Planters merger, continuing efforts to streamline operations, and
seasonally lower second quarter expenses. Also included in first quarter and
second quarter non-interest expense were recoveries of $9 million and $10
million, respectively, from valuation of mortgage servicing rights.
Regions' operating efficiency ratio improved to 57 percent from first quarter's
61 percent, driven by strong gains in total revenue combined with favorable
expense trends.
NON-PERFORMING ASSETS FALL, LOAN CHARGE-OFFS STAY LOW
Credit quality was excellent in the second quarter. Non-performing assets
declined 22 percent linked quarter, or $89 million, to $320 million at June 30,
2006--0.54 percent of loans and foreclosed real estate. This compares to $456
million (0.78 percent of loans and foreclosed real estate) at June 30, 2005.
Loans greater than 90 days past due also improved, dropping $15 million, or 16
percent, first-to-second quarter.
During the second quarter, Regions sold $10 million of foreclosed real estate,
realizing a net $5 million gain. Additionally, $59 million of non-performing
residential mortgage loans were sold, with no income statement impact.
Net loan charge-offs remained low at $31 million, or an annualized 0.21 percent
of average loans. Aggregate net charge-offs rose slightly from first quarter's
seasonally low $29 million (annualized 0.20 percent of average loans), and
declined from second quarter 2005's $34 million (annualized 0.23 percent of
average loans).
Second quarter's provision for loan losses was $30 million, resulting in a $778
million loan loss allowance (1.32 percent of loans) at June 30, 2006.
ADHERES TO ACTIVE CAPITAL MANAGEMENT STRATEGY
During the second quarter, Regions repurchased 3.6 million common shares at an
average cost of $35.08 per share. Year-to-date June 30, buybacks totaled 7.3
million shares, leaving up to an additional 20.3 million common shares that can
be repurchased under the company's current authorization.
Regions remained well capitalized. Tangible stockholders' equity-to-tangible
assets was 6.69 percent at June 30, 2006--down slightly from March 31's 6.77
percent.
STRIKES AGREEMENT TO MERGE WITH AMSOUTH
On May 25, 2006, Regions and AmSouth announced an agreement to merge, creating a
top ten U. S. banking organization with approximately $140 billion in assets and
a $24 billion market capitalization. AmSouth shareholders will receive 0.7974
Regions shares for each AmSouth share. The newly formed entity will retain the
name Regions Financial Corporation. Pending shareholder and regulatory
approvals, the transaction is expected to close during the fourth quarter of
2006.
ABOUT REGIONS FINANCIAL CORPORATION
Regions Financial Corporation (NYSE: RF), headquartered in Birmingham, Ala., is
a full-service provider of retail and commercial banking, trust, securities
brokerage, mortgage and insurance products and services. Regions had $86.1
billion in assets as of June 30, 2006, making it one of the nation's top 15
banks. Regions' banking subsidiary, Regions Bank, operates some 1,300 offices
and a 1,600-ATM network across a 16-state geographic footprint in the South,
Midwest and Texas. Its investment and securities brokerage, trust and asset
management division, Morgan Keegan & Company Inc., provides services from over
300 offices. Additional information about Regions, which is a member of both the
Forbes and Fortune 500, can be found at www.regions.com.
Continued Next Page
July 14, 2006
Page 4
FINANCIAL HIGHLIGHTS (UNAUDITED)
(Dollar amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
------------------- -------------------
2006 2005 Change 2006 2005 Change
-------- -------- ------ -------- -------- ------
Earnings
Net income $345,257 $248,351 39% $639,937 $489,992 31%
Per share:
Net income $ 0.76 $ 0.54 41% $ 1.40 $ 1.06 32%
Net income-diluted $ 0.75 $ 0.53 42% $ 1.39 $ 1.04 34%
Cash dividends declared $ 0.35 $ 0.34 3% $ 0.70 $ 0.68 3%
June 30
-------------------------
Financial Condition 2006 2005 Change
- ------------------- ----------- ----------- ------
Total assets $86,062,786 $85,279,098 1%
Loans, net of unearned income $59,130,632 $58,338,944 1%
Securities $11,788,018 $12,226,332 -4%
Total earning assets $75,598,113 $74,842,001 1%
Total deposits $61,404,826 $60,870,850 1%
Stockholders' equity $10,698,359 $10,743,305 --
Stockholders' equity per share $ 23.56 $ 23.28 1%
As of and for six months ended June 30
--------------------------------------
Selected Ratios 2006 2005
- --------------- ----- -----
Return on average tangible equity 24.04% 18.33%
Return on average stockholders' equity 12.09% 9.21%
Return on average total assets 1.51% 1.17%
Stockholders' equity to total assets 12.43% 12.60%
Allowance for loan losses as a
percentage of loans, net of
unearned income 1.32% 1.30%
Loans, net of unearned income, to
total deposits 96.30% 95.84%
Net charge-offs to average loans 0.21% 0.20%
For additional information, including supplemental financial information, refer
to Regions' Form 8-K furnished to the Securities and Exchange Commission on July
14, 2006, or visit Regions' Web site at www.regions.com. Regions' Investor
Relations contact is Jenifer Goforth Kimbrough at 205/244-2823; Regions' Media
contact is Sonya L. Smith at 205/244-2859.
Statements made in this press release, other than those containing historical
information, are forward-looking statements made pursuant to the safe-harbor
provisions of the Private Securities Litigation Act of 1995. Such statements
involve risks and uncertainties that may cause results to differ materially from
those set forth in these statements. Regions cautions readers that results and
events subject to forward-looking statements could differ materially due to the
following factors: possible changes in economic and business conditions; the
existence or exacerbation of general geopolitical instability and uncertainty;
the ability of Regions to integrate recent acquisitions and attract new
customers; possible changes in monetary and fiscal policies, and laws and
regulations; the effects of easing of restrictions on participants in the
financial services industry; the cost and other effects of legal and
administrative cases; possible changes in the credit worthiness of customers and
the possible impairment of collectibility of loans; the effects of changes in
interest rates and other risks and factors identified in the company's filings
with the Securities and Exchange Commission.
###
FINANCIAL SUPPLEMENT TO SECOND QUARTER 2006
(REGIONS FINANCIAL CORP.(SM) LOGO) EARNINGS RELEASE
SUMMARY
Record quarterly earnings of $0.75 per diluted share
- - Increase of 17% linked-quarter, annualized, and 27% year-over-year compared
to diluted EPS excluding merger and other charges
- - Primary drivers of increase include net interest income, fee-based revenues
and reduction of expenses
- - Improvement in annualized return on average tangible equity to 25.73%
15% linked-quarter, annualized, increase in total revenue, led by banking
business
- - FTE net interest income rose 13% linked-quarter, annualized, to $791
million
- - Quarterly net interest margin up 6 bps linked-quarter and 39 bps
year-over-year second quarter to 4.24%
- - Fee-based revenues (excluding securities gains) up 18% linked-quarter,
annualized, and 8% compared to 2Q05
- - Revenue per FTE in banking units improved to $287,000 year-to-date June 30,
2006 compared to $281,000 year-to-date March 31, 2006
Continued strong Morgan Keegan profits and revenues
- - Revenues of $239 million, a 22% increase year-over-year second quarter, and
a 5% decrease compared to 1Q06, which included a $13.1 million pre-tax gain
on swap of NYSE seats
- - Profits of $33 million, down from $41 million in 1Q06, which included a $9
million after-tax gain on swap of NYSE seats
- - Profits increased 34% compared to 2Q05's $24.5 million
- - Broad-based strong results across Morgan Keegan's business lines
Mortgage results improved from challenging first quarter
- - Mortgage profits at $10.3 million in 2Q06 compared to break-even in 1Q06,
excluding the effects of MSR recovery
- - Increase in total origination volume of 42% linked quarter, to $4.4
billion, primarily driven by EquiFirst's increased production levels
- - EquiFirst gain on sale premiums and sales volume increased linked-quarter,
leading to higher gain on sale income
- - MSR valuation recoveries of $10 million and $9 million were recorded in
2Q06 and 1Q06, respectively
Operating efficiency improved significantly
- - Non-interest expense declined 4% linked-quarter due primarily to ongoing
efficiency initiatives and seasonally higher first quarter expenses
- - Overall operating efficiency ratio improved to 57% from 61% in 1Q06
- - Banking efficiency ratio improved to 50% in 2Q06 from 53% in 1Q06
Continued improvement in credit quality
- - 2Q06 provision for loan losses of $30 million
- - Net charge-offs of $31 million or an annualized 0.21% of average loans vs.
1Q06's 0.20% and 2Q05's 0.23%
- - Non-performing assets declined to $320 million or .54% of loans and other
real estate at June 30, 2006, compared to $409 million or 0.70% at March
31, 2006
- - Net charge-offs of $1.3 million in Hurricane Katrina-impacted portfolio in
2Q06
- - Sold $10 million of other real estate and $59 million of non-performing
residential mortgage loans in 2Q06
Regions/AmSouth merger planning underway
- - On May 25, 2006, Regions and AmSouth announced intended merger of equals
- - Merger planning proceeding well and on schedule
- - Over 100 management positions announced thus far
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 2
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED)
6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
----------- ----------- ----------- ----------- -----------
($ amounts in thousands)
Assets:
Cash and due from banks $ 2,304,934 $ 2,059,251 $ 2,414,560 $ 2,076,344 $ 2,105,962
Interest-bearing deposits in other banks 31,565 37,049 92,098 89,253 85,653
Securities held to maturity 29,983 30,591 31,464 31,428 31,284
Securities available for sale 11,758,035 11,823,198 11,947,810 11,913,649 12,195,048
Trading account assets 1,056,434 1,119,854 992,082 814,663 957,368
Loans held for sale 2,281,372 1,547,840 1,531,664 2,054,012 2,080,812
Federal funds sold and securities purchased
under agreement to resell 733,476 869,117 710,282 607,756 603,594
Margin receivables 576,616 563,202 527,317 513,339 549,298
Loans 59,326,346 58,658,565 58,591,816 58,535,410 58,533,182
Unearned income (195,714) (198,354) (186,903) (179,524) (194,238)
----------- ----------- ----------- ----------- -----------
Loans, net of unearned income 59,130,632 58,460,211 58,404,913 58,355,886 58,338,944
Allowance for loan losses (777,783) (782,368) (783,536) (783,943) (758,453)
----------- ----------- ----------- ----------- -----------
Net Loans 58,352,849 57,677,843 57,621,377 57,571,943 57,580,491
Premises and equipment 1,109,732 1,109,587 1,122,289 1,109,922 1,092,302
Interest receivable 407,811 402,072 420,818 383,839 350,938
Due from customers on acceptances 22,519 25,481 22,924 25,784 36,418
Excess purchase price 4,996,028 4,987,770 5,027,044 5,025,964 5,070,026
Mortgage servicing rights 420,322 413,672 412,008 397,176 371,111
Other identifiable intangible assets 295,588 304,008 314,368 325,933 337,610
Other assets 1,685,522 1,623,983 1,597,495 1,653,609 1,831,183
----------- ----------- ----------- ----------- -----------
$86,062,786 $84,594,518 $84,785,600 $84,594,614 $85,279,098
=========== =========== =========== =========== ===========
Liabilities and Stockholders' Equity:
Deposits
Non-interest-bearing $13,158,707 $13,328,143 $13,699,038 $12,606,368 $12,200,095
Interest-bearing 48,246,119 47,191,336 46,679,329 46,858,807 48,670,755
----------- ----------- ----------- ----------- -----------
Total Deposits 61,404,826 60,519,479 60,378,367 59,465,175 60,870,850
Borrowed funds:
Short-term borrowings:
Federal funds purchased and securities
sold under agreement to repurchase 4,770,538 3,900,737 3,928,185 4,679,352 3,835,320
Other short-term borrowings 958,048 995,312 1,038,094 954,462 921,884
----------- ----------- ----------- ----------- -----------
Total Short-term Borrowings 5,728,586 4,896,049 4,966,279 5,633,814 4,757,204
Long-term borrowings 6,293,372 6,621,710 6,971,680 7,207,015 7,285,717
----------- ----------- ----------- ----------- -----------
Total Borrowed Funds 12,021,958 11,517,759 11,937,959 12,840,829 12,042,921
Bank acceptances outstanding 22,519 25,481 22,924 25,784 36,418
Other liabilities 1,915,124 1,875,014 1,832,067 1,617,771 1,585,604
----------- ----------- ----------- ----------- -----------
Total Liabilities 75,364,427 73,937,733 74,171,317 73,949,559 74,535,793
Stockholders' equity:
Common stock 4,787 4,778 4,738 4,718 4,709
Surplus 7,393,185 7,360,704 7,248,855 7,220,396 7,194,515
Undivided profits 4,355,306 4,169,678 4,034,905 3,936,657 3,836,716
Treasury stock (833,633) (708,593) (581,890) (453,235) (311,341)
Accumulated other comprehensive
income (loss) (221,286) (169,782) (92,325) (63,481) 18,706
----------- ----------- ----------- ----------- -----------
Total Stockholders' Equity 10,698,359 10,656,785 10,614,283 10,645,055 10,743,305
----------- ----------- ----------- ----------- -----------
$86,062,786 $84,594,518 $84,785,600 $84,594,614 $85,279,098
=========== =========== =========== =========== ===========
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 3
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Quarter Ended
--------------------------------------------------------------
6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
---------- ---------- ---------- ---------- ----------
($ amounts in thousands, except per share amounts)
Interest Income:
Interest and fees on loans $1,047,843 $ 992,523 $ 953,903 $ 917,915 $ 864,115
Interest on securities:
Taxable interest income 130,979 131,651 126,070 124,913 124,931
Tax-exempt interest income 7,904 8,116 7,706 7,408 6,670
---------- ---------- ---------- ---------- ----------
Total Interest on Securities 138,883 139,767 133,776 132,321 131,601
Interest on loans held for sale 47,261 33,882 37,798 40,787 39,402
Interest on margin receivables 9,525 8,673 8,283 7,581 7,167
Income on federal funds sold and
securities purchased under agreement to
resell 11,573 10,490 6,653 6,056 3,539
Interest on time deposits in other banks 343 544 384 487 599
Interest on trading account assets 9,558 9,853 8,363 8,708 8,961
---------- ---------- ---------- ---------- ----------
Total Interest Income 1,264,986 1,195,732 1,149,160 1,113,855 1,055,384
Interest Expense:
Interest on deposits 357,026 314,708 292,886 270,136 241,813
Interest on short-term borrowings 56,065 50,133 44,950 42,957 37,931
Interest on long-term borrowings 89,360 88,164 85,411 83,339 78,928
---------- ---------- ---------- ---------- ----------
Total Interest Expense 502,451 453,005 423,247 396,432 358,672
---------- ---------- ---------- ---------- ----------
Net Interest Income 762,535 742,727 725,913 717,423 696,712
Provision for loan losses 30,000 27,500 40,000 62,500 32,500
---------- ---------- ---------- ---------- ----------
Net Interest Income After Provision for
Loan Losses 732,535 715,227 685,913 654,923 664,212
Non-Interest Income:
Brokerage and investment banking 158,865 166,793 140,255 131,738 132,179
Trust department income 35,730 34,555 30,847 33,673 31,256
Service charges on deposit accounts 147,272 128,529 129,992 132,924 131,654
Mortgage servicing and origination fees 34,270 32,698 33,651 35,284 37,057
Securities gains (losses), net 28 11 (17,609) (20,717) 53,400
Other 114,546 107,531 105,649 137,410 123,879
---------- ---------- ---------- ---------- ----------
Total Non-Interest Income 490,711 470,117 422,785 450,312 509,425
Non-Interest Expense:
Salaries and employee benefits 441,475 447,008 436,965 437,951 426,443
Net occupancy expense 53,772 59,888 56,558 56,596 56,635
Furniture and equipment expense 33,942 34,083 34,171 34,104 32,292
(Recapture) impairment of MSR's (10,000) (9,000) (18,000) (32,000) 53,000
Other 207,324 224,115 244,342 244,472 249,481
---------- ---------- ---------- ---------- ----------
Total Non-Interest Expense 726,513 756,094 754,036 741,123 817,851
---------- ---------- ---------- ---------- ----------
Income Before Income Taxes 496,733 429,250 354,662 364,112 355,786
Applicable income taxes 151,476 134,570 100,666 107,556 107,435
---------- ---------- ---------- ---------- ----------
Net Income $ 345,257 $ 294,680 $ 253,996 $ 256,556 $ 248,351
========== ========== ========== ========== ==========
Average shares outstanding--during quarter 455,528 456,442 457,193 459,563 462,913
Average shares outstanding--during quarter,
diluted 460,131 461,043 461,651 464,250 468,193
Actual shares outstanding--end of quarter 454,034 456,701 456,348 458,208 461,559
Net income per share $ 0.76 $ 0.65 $ 0.56 $ 0.56 $ 0.54
Net income per share, diluted $ 0.75 $ 0.64 $ 0.55 $ 0.55 $ 0.53
Dividends per share $ 0.35 $ 0.35 $ 0.34 $ 0.34 $ 0.34
Taxable equivalent net interest income $ 791,268 $ 766,682 $ 748,642 $ 739,816 $ 716,507
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 4
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Six Months Ended
June 30
-----------------------
2006 2005
---------- ----------
($ amounts in thousands, except per share amounts)
Interest Income:
Interest and fees on loans
$2,040,366 $1,674,949
Interest on securities:
Taxable interest income 262,630 247,683
Tax-exempt interest income 16,020 13,686
---------- ----------
Total Interest on Securities 278,650 261,369
Interest on loans held for sale 81,143 70,582
Interest on margin receivables 18,198 13,309
Income on federal funds sold and
securities purchased under agreement
to resell 22,063 6,592
Interest on time deposits in other banks 887 1,034
Interest on trading account assets 19,411 19,525
---------- ----------
Total Interest Income 2,460,718 2,047,360
Interest Expense:
Interest on deposits 671,734 441,705
Interest on short-term borrowings 106,198 76,909
Interest on long-term borrowings
177,524 151,463
---------- ----------
Total Interest Expense 955,456 670,077
---------- ----------
Net Interest Income 1,505,262 1,377,283
Provision for loan losses 57,500 62,500
---------- ----------
Net Interest Income After Provision
for Loan Losses 1,447,762 1,314,783
Non-Interest Income:
Brokerage and investment banking 325,658 276,669
Trust department income 70,285 63,246
Service charges on deposit accounts 275,801 255,472
Mortgage servicing and origination fees 66,968 76,369
Securities gains 39 19,434
Other 222,077 249,145
---------- ----------
Total Non-Interest Income 960,828 940,335
Non-Interest Expense:
Salaries and employee benefits 888,483 864,101
Net occupancy expense 113,660 110,919
Furniture and equipment expense 68,025 64,501
(Recapture) impairment of MSR's (19,000) 18,000
Other 431,439 494,276
---------- ----------
Total Non-Interest Expense 1,482,607 1,551,797
---------- ----------
Income Before Income Taxes 925,983 703,321
Applicable income taxes 286,046 213,329
---------- ----------
Net Income $ 639,937 $ 489,992
========== ==========
Average shares outstanding--year-to-date 455,982 464,011
Average shares outstanding--year-to-date, diluted 460,584 469,469
Actual shares outstanding--end of quarter 454,034 461,559
Net income per share $ 1.40 $ 1.06
Net income per share, diluted $ 1.39 $ 1.04
Dividends per share $ 0.70 $ 0.68
Taxable equivalent net interest income $1,557,950 $1,417,612
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 5
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE DAILY BALANCES AND YIELD/RATE ANALYSIS
Quarter Ended
---------------------------------------------------------------------------------------------------
6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
------------------- ------------------- ------------------- ------------------- -------------------
Average Yield/ Average Yield/ Average Yield/ Average Yield/ Average Yield/
Balance Rate Balance Rate Balance Rate Balance Rate Balance Rate
----------- ------ ----------- ------ ----------- ------ ----------- ------ ----------- ------
($ amounts in thousands; yields on taxable equivalent basis)
Assets
Earning assets:
Taxable securities $11,175,675 4.71% $11,462,264 4.67% $11,377,852 4.41% $11,594,884 4.29% $11,660,144 4.32%
Non-taxable securities 406,340 11.92% 426,119 11.75% 464,238 10.06% 486,420 9.22% 508,349 8.01%
Federal funds sold 871,206 5.33% 936,243 4.54% 687,208 3.84% 726,717 3.31% 495,752 2.86%
Margin receivables 557,148 6.86% 534,978 6.57% 546,389 6.01% 528,461 5.69% 554,494 5.18%
Loans, net of unearned
income 58,489,995 7.35% 58,191,512 7.05% 58,047,052 6.64% 58,223,018 6.38% 58,218,298 6.06%
Interest-bearing deposits
in other banks 38,825 3.54% 52,400 4.21% 58,311 2.61% 89,443 2.16% 97,180 2.47%
Loans held for sale 2,355,875 8.05% 1,828,232 7.52% 2,082,891 7.20% 2,276,817 7.11% 2,362,598 6.69%
Trading account assets 969,137 3.97% 924,044 4.53% 849,974 4.08% 809,683 4.44% 831,576 4.41%
----------- ----------- ----------- ----------- -----------
Total earning assets 74,864,201 6.93% 74,355,792 6.65% 74,113,915 6.27% 74,735,443 6.03% 74,728,391 5.77%
Allowance for loan losses (781,282) (785,847) (779,144) (760,447) (765,818)
Cash and due from banks 2,016,715 2,029,747 2,083,756 2,048,188 1,873,651
Other non-earning assets 9,776,953 9,838,032 9,725,428 9,641,715 9,408,136
----------- ----------- ----------- ----------- -----------
$85,876,587 $85,437,724 $85,143,955 $85,664,899 $85,244,360
=========== =========== =========== =========== ===========
Liabilities and Stockholders'
Equity Interest-bearing
liabilities:
Savings accounts $ 3,155,230 0.43% $ 3,100,922 0.37% $ 2,976,913 0.36% $ 2,885,383 0.26% $ 2,941,016 0.24%
Interest-bearing transaction
accounts 2,158,034 2.14% 2,272,440 1.97% 2,530,011 1.97% 2,796,439 2.03% 3,043,512 1.77%
Money market accounts 19,759,267 2.29% 19,873,074 2.04% 19,522,227 1.76% 18,631,989 1.37% 18,749,556 1.13%
Certificates of deposit of
$100,000 or more 7,650,843 4.31% 7,383,192 3.97% 7,873,050 3.65% 8,427,191 3.31% 8,394,155 3.09%
Other interest-bearing
deposit accounts 15,067,677 3.92% 14,442,354 3.61% 14,081,524 3.34% 15,233,717 3.11% 15,209,303 2.87%
----------- ----------- ----------- ----------- -----------
Total interest-bearing
deposits 47,791,051 3.00% 47,071,982 2.71% 46,983,725 2.47% 47,974,719 2.23% 48,337,542 2.01%
Federal funds purchased 4,301,848 4.40% 4,176,546 4.01% 4,202,647 3.58% 4,520,978 3.19% 4,217,075 2.72%
Other short-term borrowings 886,953 4.00% 999,141 3.59% 886,991 3.13% 920,142 2.86% 1,127,613 3.31%
Long-term borrowings 6,589,755 5.44% 6,859,167 5.21% 7,124,742 4.76% 7,186,493 4.60% 7,162,105 4.42%
----------- ----------- ----------- ----------- -----------
Total interest-bearing
liabilities 59,569,607 3.38% 59,106,836 3.11% 59,198,105 2.84% 60,602,332 2.60% 60,844,335 2.36%
Non-interest bearing deposits 12,882,910 12,926,748 12,871,222 12,409,465 11,863,276
Other liabilities 2,754,398 2,717,892 2,518,080 1,965,246 1,784,187
Stockholders' equity 10,669,672 10,686,248 10,556,548 10,687,856 10,752,562
----------- ----------- ----------- ----------- -----------
$85,876,587 $85,437,724 $85,143,955 $85,664,899 $85,244,360
=========== =========== =========== =========== ===========
Net yield on interest
earning assets 4.24% 4.18% 4.01% 3.93% 3.85%
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 6
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE DAILY BALANCES AND YIELD/RATE ANALYSIS
Six Months Ended
June 30
-------------------------------------------
2006 2005
-------------------- --------------------
Average Yield/ Average Yield/
Balance Rate Balance Rate
----------- ------ ----------- ------
($ amounts in thousands; yields on taxable equivalent basis)
Assets
Earning assets:
Taxable securities $11,318,178 4.69% $11,837,534 4.24%
Non-taxable securities 416,175 11.83% 524,406 7.99%
Federal funds sold 903,545 4.92% 521,961 2.55%
Margin receivables 546,124 6.72% 529,998 5.06%
Loans, net of unearned income 58,341,578 7.20% 57,867,097 5.95%
Interest-bearing deposits in other banks 45,575 3.92% 89,401 2.33%
Loans held for sale 2,093,511 7.82% 2,145,397 6.63%
Trading account assets 946,715 4.24% 829,259 4.99%
----------- -----------
Total earning assets 74,611,401 6.79% 74,345,053 5.66%
Allowance for loan losses (783,552) (761,845)
Cash and due from banks 2,023,195 1,856,091
Other non-earning assets 9,807,324 9,344,104
----------- -----------
$85,658,368 $84,783,403
=========== ===========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Savings accounts $ 3,128,226 0.40% $ 2,921,799 0.23%
Interest-bearing transaction accounts 2,214,921 2.05% 3,088,178 1.69%
Money market accounts 19,815,856 2.16% 19,008,984 1.05%
Certificates of deposit of $100,000 or more 7,517,757 4.14% 7,946,978 2.87%
Other interest-bearing deposit accounts 14,756,743 3.77% 14,668,269 2.76%
----------- -----------
Total interest-bearing deposits 47,433,503 2.86% 47,634,208 1.87%
Federal funds purchased 4,239,543 4.21% 4,565,409 2.49%
Commercial paper -- -- -- --
Other short-term borrowings 942,737 3.79% 1,208,546 3.42%
Long-term borrowings 6,723,717 5.32% 7,194,855 4.25%
----------- -----------
Total interest-bearing liabilities 59,339,500 3.25% 60,603,018 2.23%
Non-interest bearing deposits 12,904,708 11,665,276
Other liabilities 2,736,246 1,780,727
Stockholders' equity 10,677,914 10,734,382
----------- -----------
$85,658,368 $84,783,403
=========== ===========
Net yield on interest-earning assets 4.21% 3.85%
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES
Six Months Ended
June 30
-------------------
2006 2005
-------- --------
($ amounts in thousands)
Balance at beginning of year $783,536 $754,721
Net loans charged off:
Commercial 35,039 31,094
Real estate 16,489 17,627
Installment 7,946 10,047
-------- --------
Total 59,474 58,768
Allowance allocated to loans sold (3,779) --
Provision charged to expense 57,500 62,500
-------- --------
Balance at end of period $777,783 $758,453
======== ========
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 7
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED RATIOS
Quarter Ended
------------------------------------------------
6/30/06 3/31/06 12/31/05 9/30/05 6/30/05
------- ------- -------- ------- -------
Return on average assets* 1.61% 1.40% 1.18% 1.19% 1.17%
Return on average tangible equity* 25.73% 22.32% 19.34% 19.22% 18.46%
Return on average equity* 12.98% 11.18% 9.55% 9.52% 9.26%
Stockholders' equity per share $23.56 $23.33 $23.26 $23.23 $23.28
Stockholders' equity to total assets 12.43% 12.60% 12.52% 12.58% 12.60%
Tangible stockholders' equity to tangible assets 6.69% 6.77% 6.64% 6.68% 6.68%
Allowance for loan losses as a percentage of
loans, net of unearned income 1.32% 1.34% 1.34% 1.34% 1.30%
Net Interest Margin (FTE) 4.24% 4.18% 4.01% 3.93% 3.85%
Efficiency Ratio (1) 57.45% 61.20% 60.44% 59.58% 61.50%
Loans, net of unearned income, to total deposits 96.30% 96.60% 96.73% 98.13% 95.84%
Net charge-offs as a percentage of average loans* 0.21% 0.20% 0.28% 0.25% 0.23%
Total non-performing assets (excluding loans 90
days past due) as a percentage of loans and
other real estate 0.54% 0.70% 0.70% 0.75% 0.78%
Total non-performing assets (including loans 90
days past due) as a percentage of loans and
other real estate 0.67% 0.86% 0.85% 0.88% 0.91%
* Annualized
(1) Excluding MSR impairment(recapture), debt extinguishment expense, and
merger-related and other expenses
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 8
LOANS
LOAN PORTFOLIO - PERIOD END DATA
6/30/2006 6/30/2006
6/30/06 3/31/06 12/31/05 9/30/05 6/30/05 vs. 3/31/06* vs.6/30/2005
----------- ----------- ----------- ----------- ----------- ---------------- ------------------
($ amounts in thousands)
Commercial $15,903,897 $14,953,740 $14,979,811 $15,026,107 $15,391,714 $ 950,157 25.4% $ 512,183 3.3%
Residential Mortgages 12,845,001 12,925,223 12,678,332 11,950,831 11,854,633 (80,222) -2.5% 990,368 8.4%
Other Real Estate Loans 12,836,023 13,379,282 13,745,201 14,328,521 14,354,420 (543,259) -16.2% (1,518,397) -10.6%
Construction 8,163,378 7,701,478 7,363,353 7,306,720 7,134,584 461,900 24.0% 1,028,794 14.4%
Branch Installment 1,559,533 1,591,127 1,625,929 1,679,996 1,694,967 (31,594) -7.9% (135,434) -8.0%
Indirect Installment 1,344,853 1,319,819 1,353,929 1,415,764 1,456,836 25,034 7.6% (111,983) -7.7%
Consumer Lines of Credit 5,559,417 5,661,990 5,786,770 5,764,722 5,619,645 (102,573) -7.2% (60,228) -1.1%
Student Loans 918,530 927,552 871,588 883,225 832,145 (9,022) -3.9% 86,385 10.4%
----------- ----------- ----------- ----------- ----------- --------- ----- ----------- -----
$59,130,632 $58,460,211 $58,404,913 $58,355,886 $58,338,944 $ 670,421 4.6% $ 791,688 1.4%
=========== =========== =========== =========== =========== ========= ===== =========== =====
LOAN PORTFOLIO - AVERAGE BALANCES
2Q06 2Q06
2Q06 1Q06 4Q05 3Q05 2Q05 vs. 1Q06* vs. 2Q05
----------- ----------- ----------- ----------- ----------- ---------------- ------------------
($ amounts in thousands)
Commercial $15,291,717 $14,828,381 $14,793,576 $15,142,708 $15,481,531 $ 463,336 12.5% $ (189,814) -1.2%
Residential Mortgages 12,816,313 12,620,698 12,129,967 11,861,795 11,652,696 195,615 6.2% 1,163,617 10.0%
Other Real Estate Loans 13,051,119 13,609,406 14,012,136 14,387,171 14,414,636 (558,287) -16.4% (1,363,517) -9.5%
Construction 7,905,195 7,537,309 7,383,453 7,169,220 7,060,083 367,886 19.5% 845,112 12.0%
Branch Installment 1,549,298 1,604,554 1,687,189 1,691,721 1,796,044 (55,256) -13.8% (246,746) -13.7%
Indirect Installment 1,329,399 1,333,556 1,380,761 1,431,649 1,476,607 (4,157) -1.2% (147,208) -10.0%
Consumer Lines of Credit 5,628,132 5,732,152 5,783,665 5,690,179 5,505,950 (104,020) -7.3% 122,182 2.2%
Student Loans 918,822 925,456 876,305 848,575 830,751 (6,634) -2.9% 88,071 10.6%
----------- ----------- ----------- ----------- ----------- --------- ----- ----------- -----
$58,489,995 $58,191,512 $58,047,052 $58,223,018 $58,218,298 $ 298,483 2.1% $ 271,697 0.5%
=========== =========== =========== =========== =========== ========= ===== =========== =====
AVERAGE COMMUNITY BANKING AND WHOLESALE LOANS
2Q06 2Q06
2Q06 1Q06 4Q05 3Q05 2Q05 vs. 1Q06* vs. 2Q05
----------- ----------- ----------- ----------- ----------- ------------- --------------
($ amounts in thousands)
Community Bank Loans $46,836,944 $46,690,895 $46,756,538 $46,732,402 $46,478,771 $146,049 1.3% $358,173 0.8%
Wholesale Loans 11,653,051 11,500,617 11,290,514 11,490,617 11,739,527 152,434 5.3% (86,476) -0.7%
----------- ----------- ----------- ----------- ----------- -------- --- -------- ----
$58,489,995 $58,191,512 $58,047,052 $58,223,019 $58,218,298 $298,483 2.1% $271,697 0.5%
=========== =========== =========== =========== =========== ======== === ======== ====
* Linked quarter percentage changes are presented on an annualized basis.
- - Loan trends continued to reflect Regions' focus on strong underwriting
principles and discipline in pricing.
- - Linked-quarter commercial loan growth is a result of overall improvement in
C&I portfolio trends.
- - The linked-quarter period end decline in residential mortgages is partially
a result of the sale of $59 MM of non-performing residential mortgage
loans.
- - Construction loan growth was strongest in the Southeast region,
particularly, the Mid-Atlantic and Georgia.
- - Average community banking loans increased 1.3%, linked-quarter, annualized,
primarily due to an increase in commercial loans, offset partially by a
decline in commercial real estate mortgages and consumer lines of credit.
- - In the above tables, commercial loans and other real estate loans are
impacted by ongoing reclassification of new and renewed loans by purpose as
opposed to collateral.
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 9
DEPOSITS
DEPOSIT PORTFOLIO - PERIOD END DATA
6/30/2006 6/30/2006
6/30/06 3/31/06 12/31/05 9/30/05 6/30/05 vs. 3/31/06* vs.6/30/2005
----------- ----------- ----------- ----------- ----------- ----------------- ------------------
($ amounts in thousands)
Interest-Free Deposits $13,158,707 $13,328,143 $13,699,038 $12,606,368 $12,200,095 $(169,436) -5.1% $ 958,612 7.9%
Interest-Bearing
Checking 2,180,298 2,490,444 2,756,556 2,924,131 3,033,095 (310,146) -49.8% (852,797) -28.1%
Savings 3,081,192 3,182,650 3,037,687 2,884,471 2,912,335 (101,458) -12.8% 168,857 5.8%
Money Market 19,788,991 19,897,135 19,856,890 18,789,340 18,463,023 (108,144) -2.2% 1,325,968 7.2%
----------- ----------- ----------- ----------- ----------- --------- ----- ----------- -----
Total Low-Cost
Deposits 38,209,188 38,898,372 39,350,171 37,204,310 36,608,548 (689,184) -7.1% 1,600,640 4.4%
CD's < $100K 11,063,668 10,874,303 10,201,745 10,293,091 10,187,180 189,365 7.0% 876,488 8.6%
CD's > $100K 7,918,736 7,480,764 7,412,359 8,169,760 8,296,374 437,972 23.4% (377,638) -4.6%
Other Time Deposits 4,213,234 3,266,040 3,414,092 3,798,014 5,778,748 947,194 116.0% (1,565,514) -27.1%
----------- ----------- ----------- ----------- ----------- --------- ----- ----------- -----
$61,404,826 $60,519,479 $60,378,367 $59,465,175 $60,870,850 $ 885,347 5.9% $ 533,976 0.9%
=========== =========== =========== =========== =========== ========= ===== =========== =====
AVERAGE COMMUNITY BANKING AND WHOLESALE DEPOSITS
2Q06 2Q06
2Q06 1Q06 4Q05 3Q05 2Q05 vs. 1Q06* vs. 2Q05
----------- ----------- ----------- ----------- ----------- -------------- ------------------
($ amounts in thousands)
Community Bank Deposits $52,834,250 $52,757,452 $51,940,107 $50,430,723 $50,248,895 $ 76,798 0.6% $ 2,585,355 5.1%
Wholesale Deposits 7,839,711 7,241,278 7,914,840 9,953,461 9,951,923 598,433 33.1% (2,112,212) -21.2%
----------- ----------- ----------- ----------- ----------- -------- ---- ----------- -----
$60,673,961 $59,998,730 $59,854,947 $60,384,184 $60,200,818 $675,231 4.5% $ 473,143 0.8%
=========== =========== =========== =========== =========== ======== ==== =========== =====
* Linked quarter percentage changes are presented on an annualized basis.
- - The decline in low-cost deposits was offset by an increase in CD's due to
the rising interest rate environment and corresponding customer preference
for longer term, higher rate deposit products.
- - The linked-quarter increase in other time deposits is primarily due to an
increase in Euro deposits as a funding source.
- - Average community banking deposits were relatively steady linked-quarter as
declines in interest-bearing checking and money market savings accounts
were offset by increasing certificate of deposit balances.
- - The increase in average wholesale deposits is primarily related to the
increase in Euro deposits.
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 10
OPERATING PERFORMANCE
REVENUE
2Q06 2Q06
2Q06 1Q06 4Q05 3Q05 2Q05 vs. 1Q06* vs. 2Q05
---------- ---------- ---------- ---------- ---------- ------------- --------------
($ amounts in thousands)
Net Interest Income
(TE basis) $ 791,268 $ 766,682 $ 748,642 $ 739,816 $ 716,507 $24,586 12.8% $ 74,761 10.4%
Non-Interest Income
(excl. sec. gains/losses) 490,683 470,106 440,394 471,029 456,025 20,577 17.5% 34,658 7.6%
---------- ---------- ---------- ---------- ---------- ------- ---- -------- ----
Total Revenue (TE basis) $1,281,951 $1,236,788 $1,189,036 $1,210,845 $1,172,532 $45,163 14.6% $109,419 9.3%
========== ========== ========== ========== ========== ======= ==== ======== ====
Fee Income as a % of
Total Revenue 38.3% 38.0% 37.0% 38.9% 38.9%
========== ========== ========== ========== ==========
* Linked quarter percentage changes are presented on an annualized basis.
- - Strong revenue growth - 15% linked-quarter, annualized.
- - Net interest income (TE basis) up 13% and non-interest income (excluding
securities gains) up 18%, linked-quarter, annualized.
- - The 2Q06 net interest margin was 4.24%, an increase of 6 bps linked-quarter
and 39 bps compared to 2Q05.
- - Non-interest income increased due primarily to higher service charges and
mortgage revenue, offset partially by the effect of 1Q06 gains related to
NYSE stock.
- - Regions is positioned slightly asset-sensitive at June 30, 2006.
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 11
NON-INTEREST INCOME AND EXPENSE
NON-INTEREST INCOME AND EXPENSE
2Q06 2Q06
NON-INTEREST INCOME 2Q06 1Q06 4Q05 3Q05 2Q05 vs. 1Q06* vs. 2Q05
- ------------------- -------- -------- -------- -------- -------- -------------- ---------------
($ amounts in thousands)
Brokerage and investment banking $158,865 $166,793 $140,255 $131,738 $132,179 $(7,928) -19.0% $ 26,686 20.2%
Trust department income 35,730 34,555 30,847 33,673 31,256 1,175 13.6% 4,474 14.3%
Service charges on deposit accounts 147,272 128,529 129,992 132,924 131,654 18,743 58.3% 15,618 11.9%
Mortgage servicing & origination fees 34,270 32,698 33,651 35,284 37,057 1,572 19.2% (2,787) -7.5%
Securities gains (losses), net 28 11 (17,609) (20,717) 53,400 17 618.2% (53,372) -99.9%
Insurance premiums & commissions 21,267 21,394 18,616 19,827 19,281 (127) -2.4% 1,986 10.3%
Gain on sale of mortgage loans 24,255 12,351 21,623 60,620 40,913 11,904 385.5% (16,658) -40.7%
Derivative income 9,122 6,194 6,434 7,388 9,921 2,928 189.1% (799) -8.1%
SOI and Capital Factors -- -- -- 4,002 10,104 -- NM (10,104) NM
Other 59,902 67,592 58,976 45,573 43,660 (7,690) -45.5% 16,242 37.2%
-------- -------- -------- -------- -------- ------- ----- -------- -----
Total non-interest income $490,711 $470,117 $422,785 $450,312 $509,425 $20,594 17.5% $(18,714) -3.7%
======== ======== ======== ======== ======== ======= ===== ======== =====
2Q06 2Q06
NON-INTEREST EXPENSE 2Q06 1Q06 4Q05 3Q05 2Q05 vs. 1Q06* vs. 2Q05
- -------------------- -------- -------- -------- -------- -------- --------------- ---------------
($ amounts in thousands)
Salaries and employee benefits** $441,475 $447,008 $408,873 $418,645 $411,953 $ (5,533) -5.0% $ 29,522 7.2%
Net occupancy expense** 53,772 59,888 54,133 53,574 54,898 (6,116) -40.8% (1,126) -2.1%
Furniture and equipment expense** 33,942 34,083 33,872 34,027 32,161 (141) -1.7% 1,781 5.5%
Amortization of core deposit intangible 10,370 10,724 11,039 11,320 11,693 (354) -13.2% (1,323) -11.3%
Amortization of MSR's 16,263 18,303 17,890 22,544 22,693 (2,040) -44.6% (6,430) -28.3%
(Recapture) impairment of MSR's (10,000) (9,000) (18,000) (32,000) 53,000 (1,000) 44.4% (63,000) NM
Loss on early extinguishment of debt (1,089) 8,168 -- 10,878 -- (9,257) NM (1,089) NM
Merger-related and other charges -- -- 53,333 40,875 43,765 -- NM (43,765) NM
Other** 181,780 186,920 192,896 181,260 187,688 (5,140) -11.0% (5,908) -3.1%
-------- -------- -------- -------- -------- -------- ----- -------- -----
Total non-interest expense $726,513 $756,094 $754,036 $741,123 $817,851 $(29,581) -15.6% $(91,338) -11.2%
======== ======== ======== ======== ======== ======== ===== ======== =====
* Linked quarter percentage changes are presented on an annualized basis.
** Net of merger and other charges in 2005
- - Brokerage and investment banking revenue trends were impacted by 1Q06's
revenue related to the closed-end fund IPO.
- - Trust department income increased primarily as a result of a $500 million
increase in assets managed linked-quarter as well as an increase in mutual
fund revenue and other trust fees.
- - Service charges on deposit accounts increased $18.7 million or 15%
linked-quarter, primarily due to a mid-1Q06 NSF fee increase and seasonal
factors.
- - Mortgage servicing and origination fees increased 5% linked-quarter,
primarily due to an increase in EquiFirst production volume.
- - Capital Factors and SOI were sold in 2Q05 and 3Q05, respectively.
- - Salaries and employee benefits declined 5% linked-quarter, annualized, due
to a reduction in headcount, an $11 million decline in payroll taxes and
reduced Morgan Keegan commission expense, offset somewhat by an increase in
commissions related to the mortgage business.
- - No impact on 2Q06 net occupancy expense from storm-related expenses, but
1Q06 net occupancy expense included approximately $3 million in
storm-related expenses.
- - Regions recaptured $10 million in MSR impairment in 2Q06 as increasing
mortgage interest rates reduced prepayments of mortgage loans serviced.
- - The linked-quarter decline in other non-interest expense was impacted by a
subsidiary dividend payment in 1Q06. In 2Q06, Regions recognized $5 million
of gain on sale of ORE and a general decline in overall expense levels
related to cost savings and continuing efficiency initiatives.
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 12
MORGAN KEEGAN
MORGAN KEEGAN
2Q06 2Q06
Summary Income Statement 2Q06 1Q06 4Q05 3Q05 2Q05 vs. 1Q06* vs. 2Q05
- ------------------------ -------- -------- -------- -------- -------- ---------------- -------------
($ amounts in thousands)
Revenues:
Commissions $ 56,960 $ 57,073 $ 51,619 $ 50,197 $ 50,263 $ (113) -0.8% $ 6,697 13.3%
Principal transactions 32,996 41,951 34,752 33,696 35,425 (8,955) -85.4% (2,429) -6.9%
Investment banking 41,623 43,027 25,894 26,919 27,434 (1,404) -13.1% 14,189 51.7%
Interest 32,511 30,327 24,735 22,900 19,766 2,184 28.8% 12,745 64.5%
Trust fees and services 29,014 28,046 24,680 27,475 25,207 968 13.8% 3,807 15.1%
Investment advisory 36,151 28,885 37,557 30,006 29,211 7,266 100.6% 6,940 23.8%
Other 9,473 22,639 11,790 8,191 8,246 (13,166) -232.6% 1,227 14.9%
-------- -------- -------- -------- -------- -------- ------ ------- ----
Total revenues 238,728 251,948 211,027 199,384 195,552 (13,220) -21.0% 43,176 22.1%
Expenses:
Interest expense 21,999 18,085 16,855 16,105 13,109 3,914 86.6% 8,890 67.8%
Non-interest expense 165,568 169,352 152,280 145,276 143,531 (3,784) -8.9% 22,037 15.4%
-------- -------- -------- -------- -------- -------- ------ ------- ----
Total expenses 187,567 187,437 169,135 161,381 156,640 130 0.3% 30,927 19.7%
-------- -------- -------- -------- -------- -------- ------ ------- ----
Income before income taxes 51,161 64,511 41,892 38,003 38,912 (13,350) -82.8% 12,249 31.5%
Income taxes 18,442 23,703 14,942 13,945 14,459 (5,261) -88.8% 3,983 27.5%
-------- -------- -------- -------- -------- -------- ------ ------- ----
Net income $ 32,719 $ 40,808 $ 26,950 $ 24,058 $ 24,453 $ (8,089) -79.3% $ 8,266 33.8%
======== ======== ======== ======== ======== ======== ====== ======= ====
Fixed-
income Equity Regions
Breakout of Revenue Private Capital Capital MK Asset Interest
by Division Client Markets Markets Trust Management & Other
- ------------------- -------- ------- ------- ------- ---------- --------
($ amounts in thousands)
THREE MONTHS ENDED
JUNE 30, 2006:
$ amount of revenue $ 69,975 $50,484 $24,366 $29,016 $36,076 $28,811
% of gross revenue 29.3% 21.1% 10.2% 12.2% 15.1% 12.1%
THREE MONTHS ENDED
MARCH 31, 2006:
$ amount of revenue $ 78,083 $42,733 $28,001 $28,046 $32,301 $42,784
% of gross revenue 31.0% 17.0% 11.1% 11.1% 12.8% 17.0%
SIX MONTHS ENDED
JUNE 30, 2006
$ amount of revenue $ 148,058 $93,217 $52,367 $57,062 $68,377 $71,595
% of gross revenue 30.2% 19.0% 10.7% 11.6% 13.9% 14.6%
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%
* Linked quarter percentage changes are presented on an annualized basis.
- - Principal transactions revenue declined linked-quarter, primarily as a
result of increased revenues in 1Q06 from the successful IPO of a closed
end fund.
- - Investment banking revenues were relatively steady linked-quarter,
reflecting very strong equity capital markets banking and the IPO of the
closed end fund in 1Q06.
- - Investment advisory and asset management division revenues increased
linked-quarter primarily as a result of increases in wrap account billings,
money market fees, and asset management fees.
- - The decline in other revenues is a result of the recognition of a $13.1
million pre-tax gain related to the exchange of NYSE seats for stock in
1Q06.
- - Non-interest expense decreased in 2Q06 compared to 1Q06 due to lower
commission expense related directly to decreased revenues.
- - Trends in private client and equity capital markets divisions were affected
by the 1Q06 closed end fund IPO.
- - The strength in fixed income capital markets is a product of strong
underwriting activity in new issue municipal bonds and successful corporate
debt issuance business.
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 13
MORGAN KEEGAN (CONT.)
- - 20 new offices opened in 2Q06, primarily in bank branches, bringing YTD
total additions to 40.
- - 22,200 new accounts were opened in 2Q06 compared to 22,900 in 1Q06 and
19,500 in 2Q05.
- - Total customer assets were $62.5 billion at June 30, 2006, compared to
$60.5 billion at March 31, 2006 and $51.7 billion at June 30, 2005.
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 14
MORTGAGE OPERATIONS
MORTGAGE OPERATIONS
2Q06 1Q06 4Q05 3Q05 2Q05 2Q06 vs. 1Q06* 2Q06 vs. 2Q05
------------- ------------- ------------- ------------- ------------- -------------- ---------------
Single family mortgage
production
(millions):
Regions Mortgage $ 1,440 $ 1,345 $ 1,459 $ 1,676 $ 1,958 $ 95 28.3% $ (518) -26.5%
EquiFirst 2,966 1,749 2,203 2,482 2,464 1,217 278.3% 502 20.4%
------------- ------------- ------------- ------------- ------------- ------- ----- -------- -----
Total $ 4,406 $ 3,094 $ 3,662 $ 4,158 $ 4,422 $ 1,312 169.6% $ (16) -0.4%
============= ============= ============= ============= ============= ======= ===== ======== =====
Gain(loss) on sale of
mortgage loans
(thous.):
Regions Mortgage $ 3,824 $ 2,732 $ 4,653 $ 4,716 $ 6,737 $ 1,092 159.9% $ (2,913) -43.2%
EquiFirst 20,431 9,619 16,970 55,904 34,176 10,812 449.6% (13,745) -40.2%
------------- ------------- ------------- ------------- ------------- ------- ----- -------- -----
Total $ 24,255 $ 12,351 $ 21,623 $ 60,620 $ 40,913 $11,904 385.5% $(16,658) -40.7%
============= ============= ============= ============= ============= ======= ===== ======== =====
Servicing portfolio $36.4 BILLION $36.7 Billion $37.2 Billion $37.8 Billion $39.3 Billion
Capitalized mortgage
servicing rights
(net) $ 420.3 MM $ 413.7 MM $ 412 MM $ 397.2 MM $ 371.1 MM
MSR valuation allowance $ 6.4 MM $ 20.5 MM $ 29.5 MM $ 47.5 MM $ 79.5 MM
MSR capitalization rate
- total portfolio 115 BPS. 113 bps. 111 bps. 105 bps. 91 bps.
MSR capitalization rate
- 3rd party
servicing 148 BPS. 144 bps. 142 bps. 135 bps. 119 bps.
New servicing
capitalization rate 117 BPS. 104 bps. 116 bps. 126 bps. 134 bps.
- - Mortgage profitability improved to $10.3 million in 2Q06 compared to
break-even in 1Q06.
- - Regions Mortgage net income, excluding MSR recapture, was $8.5 million in
2Q06 compared to $4.6 million in 1Q06, increasing primarily as a result of
higher origination volume, improved gains from sale of mortgage loans, and
a reduction in amortization of mortgage servicing rights.
- - Regions Mortgage recorded $10 million and $9 million of MSR recapture in
2Q06 and 1Q06, respectively, primarily as a result of increasing mortgage
interest rates favorably impacting prepayments of mortgage loans serviced.
- - Regions Mortgage recorded $3.7 million of permanent MSR impairment in 2Q06.
- - EquiFirst reported profit of $1.8 million in 2Q06 compared to a loss of
$4.5 million in 1Q06, a net increase of $6.3 million, primarily due to
increased production volume combined with higher loan sale premiums.
- - EquiFirst's gross gain on sale premiums approximated 1.90% in 1Q06 and
2.20% in 2Q06.
- - Regions sold its conforming wholesale production unit in 2Q05. Its
production totaled $423 million in 2Q05.
- - Regions Mortgage originates conforming mortgage loans and services loans
originated in-house and by others.
- - EquiFirst originates non-conforming mortgage loans primarily through a
broker network and sells them servicing-released, on a whole loan basis, at
a premium.
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 15
CREDIT QUALITY
CREDIT QUALITY
YTD YTD
2Q06 1Q06 4Q05 3Q05 2Q05 6/30/06 6/30/05
-------- -------- -------- -------- -------- -------- --------
($ in thousands)
Allowance for loan losses $777,783 $782,368 $783,536 $783,943 $758,453 $777,783 $758,453
Provision for loan losses $ 30,000 $ 27,500 $ 40,000 $ 62,500 $ 32,500 $ 57,500 $ 62,500
Net loans charged off:
Commercial $ 22,226 $ 12,813 $ 25,129 $ 21,000 $ 21,869 $ 35,039 $ 31,094
Real estate 6,280 10,209 7,019 10,053 7,686 16,489 17,627
Installment 2,300 5,646 8,259 5,957 4,524 7,946 10,047
-------- -------- -------- -------- -------- -------- --------
Total $ 30,806 $ 28,668 $ 40,407 $ 37,010 $ 34,079 $ 59,474 $ 58,768
======== ======== ======== ======== ======== ======== ========
Net loan charge-offs as a % of
average loans, annualized
Commercial 0.59% 0.35% 0.68% 0.57% 0.57% 0.47% 0.41%
Real estate 0.07% 0.12% 0.08% 0.12% 0.09% 0.10% 0.11%
Installment 0.10% 0.25% 0.36% 0.26% 0.20% 0.18% 0.22%
-------- -------- -------- -------- -------- -------- --------
Total 0.21% 0.20% 0.28% 0.25% 0.23% 0.21% 0.20%
======== ======== ======== ======== ======== ======== ========
Non-performing assets:
Non-accrual loans $264,284 $343,880 $341,177 $382,858 $391,542
Renegotiated loans 107 190 241 244 247
Other real estate 55,495 64,999 65,459 57,418 64,031
-------- -------- -------- -------- --------
Total $319,886 $409,069 $406,877 $440,520 $455,820
======== ======== ======== ======== ========
Loans past due > 90 days $ 78,096 $ 92,766 $ 87,523 $ 74,246 $ 76,417
- - Net charge-offs totaled $31 million, or an annualized 0.21 percent of
average loans, and included approximately $1.3 million of net charge-offs
from the Katrina-related portfolio.
- - The provision for loan losses was $30 million for 2Q06.
- - Regions' June 30, 2006, allowance for loan losses includes approximately
$57 million of reserves identified for the Katrina portfolio; approximately
$5 million in cumulative Katrina portfolio net charge-offs have been
recognized through June 30, 2006.
- - Non-performing assets decreased to 0.54% of loans and other real estate at
June 30, 2006 due in part to the sale of non-performing residential
mortgage loans and other real estate and in part to overall improvement in
the portfolio.
- - Loans past due greater than 90 days decreased $14.7 million linked quarter
primarily as a result of the sale of past due residential mortgage loans.
- - $59 million of non-performing residential mortgage loans (included in
non-accrual loans and in past due greater than 90 days) and $10 million of
other real estate were sold in 2Q06. A $5 million pre-tax gain was
recognized on the sale of the other real estate. The sale of the $59
million in non-performing residential mortgage loans had no impact to 2Q06
net income.
- - Regions' non-performing loan portfolio is composed primarily of small to
medium-sized loans that are diversified geographically throughout its
franchise.
- - Management considers the current level of the allowance for loan losses
adequate to absorb probable losses from loans in the portfolio.
Management's determination of the adequacy of the allowance for loan losses
requires the use of judgments and estimates that may change in the future.
Unfavorable changes in the factors used by management to determine the
adequacy of the reserve, or the availability of new information, could
cause the allowance for loan losses to be increased or decreased in future
periods.
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 16
CREDIT QUALITY (CONT.)
KATRINA UPDATE
- - Loans in the hardest hit areas have been placed into a separate pool to
track them against the $62 million allowance for loan losses that was
identified for them in 3Q05.
Loan Exposure as of June 30, 2006 (in thousands)
Commercial Real Estate $ 420,909
Commercial & Industrial 260,086
Retail/Consumer 150,150
Mortgage 178,087
----------
TOTAL $1,009,232
==========
Commercial Real Estate Summary as of June 30, 2006 (in thousands)
1-4 Residential $ 68,394
Retail 68,115
Land/Lots 55,362
Office Buildings 50,550
Hotel 46,597
Warehouses 19,613
Apartments 15,365
Mall 13,985
Condo 12,265
Other 70,664
--------
TOTAL $420,909
========
Net Loans Charged Off 2Q06 (in thousands)
Commercial $ 668
Retail/Consumer 144
Mortgage 452
------
TOTAL $1,264
======
Non-accrual Loan Summary as of June 30, 2006 (in thousands)
Commercial $ 4,520
Retail/Consumer 392
Mortgage 7,956
-------
TOTAL $12,868
=======
Past Due Loans > 90 Days Summary as of June 30, 2006 (in thousands)
Commercial $4,589
Retail/Consumer 178
Mortgage 65
------
TOTAL $4,832
======
- - Home Equity Loans make up 51% of the Consumer/Retail Exposure as of June
30, 2006.
- - The quality of the Katrina-impacted portfolio continues to improve with a
reduction in non-accrual loans of $13 million compared to $26 million at
March 31, 2006 and a reduction in past dues of $3 million compared to $7
million at March 31, 2006.
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 17
ADDITIONAL FINANCIAL AND OPERATIONAL DATA
2Q06 1Q06 4Q05 3Q05 2Q05
------- ------- ------- ------ -------
FTE employees 24,457 24,928 25,326 25,463 25,654
Authorized shares remaining
under buyback program 20.3 MM 23.9 MM 27.6 MM 6.4 MM 10.7 MM
Full service offices 1,304 1,312 1,311 1,317 1,320
ATM's 1,564 1,586 1,585 1,594 1,577
Morgan Keegan offices 321 301 281 282 268
- - During the second quarter, 3.6 million shares were repurchased at an
average cost of $35.08.
FINANCIAL SUPPLEMENT TO
SECOND QUARTER 2006 EARNINGS RELEASE
PAGE 18
FORWARD-LOOKING STATEMENTS
The information contained in this press release may include forward-looking
statements. The Private Securities Litigation Reform Act of 1995 (the "Act")
provides a "safe-harbor" for forward-looking statements which are identified as
such and are accompanied by the identification of important factors that could
cause actual results to differ materially from the forward-looking statements.
For these statements, we, together with our subsidiaries, unless the context
implies otherwise, claim the protection afforded by the safe harbor in the Act.
Forward-looking statements are not based on historical information, but rather
are related to future operations, strategies, financial results or other
developments. Forward-looking statements are based on managements' expectations
as well as certain assumptions and estimates made by, and information available
to, management at the time the statements are made. These statements are based
on 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.
Some risks, uncertainties and other factors include, but are not limited to
those described below:
o Regions' ability to achieve the earnings expectations related to the
businesses that were acquired, including its merger with Union Planters
Corporation ("Union Planters") in July 2004, or that may be acquired in
the future, including its announced plan to merge with AmSouth
Bancorporation ("AmSouth"), which in turn depends on a variety of factors,
including:
o Regions' ability to achieve anticipated cost savings and revenue
enhancements with respect to acquired operations, or lower our
ability to achieve anticipated cost savings and revenue enhancements
with respect to acquired operations, or lower than expected revenues
from continuing operations;
o the assimilation of acquired operations to Regions' corporate
culture, including the ability to instill our credit practices and
efficient approach to acquired operations;
o the continued growth of the markets that the acquired entities
serve, consistent with recent historical experience;
o difficulties related to the integration of the businesses, including
integration of information systems and retention of key personnel.
o Regions' ability to expand into new markets and to maintain profit margins
in the face of pricing pressures.
o Regions' ability to keep pace with technological changes.
o 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 Regions customers.
o Regions' ability to effectively manage interest rate risk, market risk,
credit risk and operational risk.
o 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.
o The cost and other effects of material contingencies, including litigation
contingencies.
o 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 our competitive pressures.
o Possible changes in interest rates may increase funding costs and reduce
earning asset yields, thus reducing margins.
o Possible changes in general economic and business conditions in the United
States and the South, in general, and in the communities we serve, in
particular, may lead to a deterioration in credit quality, thereby
increasing our provisioning costs, or a reduced demand for credit, thereby
reducing our earning assets.
o The occurrence of natural disasters or the threat or occurrence of war or
acts of terrorism and the existence or exacerbation of general
geopolitical instability and uncertainty.
o 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.
o 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. You should not place undue reliance on any
forward-looking statement, which speak only as of the date made. Regions assumes
no obligation to update or revise any forward-looking statements that are made
from time to time.
Regions' Investor Relations contact is Jenifer Goforth Kimbrough at (205)
244-2823; Regions' Media contact is Sonya L. Smith at (205) 244-2859.