Exhibit 99.1
(REGIONS FINANCIAL CORP.(SM) LOGO)
October 13, 2006
REGIONS ANNOUNCES RECORD THIRD QUARTER EARNINGS, MERGER PLANNING PROGRESS
BIRMINGHAM, ALA.--Regions Financial Corporation (NYSE:RF) today reported
highlights for the quarter ended Sept. 30, 2006, including:
- - Record earnings of 77 cents per diluted share
- - Increased net interest income
- - Steady loan growth
- - Reduced operating expenses
- - Lower net loan charge-offs
- - On-schedule merger planning
REPEATS RECORD-LEVEL PROFIT PERFORMANCE
"Regions sustained record-level, high-quality earnings in the third quarter,
resulting from associates' hard work and commitment to implement revenue
enhancement and cost containment initiatives," said Regions Chairman, President
and Chief Executive Officer Jackson W. Moore. "We reduced operating expenses and
achieved higher net interest income, solid fee revenues and lower credit-related
costs, all of which contributed to our third quarter's bottom-line strength."
"We have a strong, solid earnings base to build on and believe the soon-to-be
completed AmSouth merger offers significant new opportunities to boost Regions'
profits and shareholder returns over the long term. We are firmly committed to
successfully executing on these opportunities, while providing superior products
and services to our customers and creating a rewarding work environment for
associates," Moore noted.
"There was also good merger planning progress in the third quarter," according
to Moore. "And, on October 3, AmSouth and Regions shareholders approved our
planned merger, which paves the way for an on-target fourth quarter completion,
pending regulatory approvals.
"I am extremely proud of Regions' significant accomplishments and overall
excellent performance since the mid-2004 merger of equals with Union Planters.
Nonetheless, I believe the best is yet to come--with the merger of AmSouth and
Regions."
EPS UP 26 PERCENT YEAR-OVER-YEAR BEFORE MERGER AND OTHER CHARGES
Third quarter 2006 net income was $352 million, or 77 cents per diluted share,
an increase from second quarter 2006's record 75 cents per diluted share and up
sharply from year-ago third quarter's 55 cents per share, including 6 cents of
merger-related and other charges. Thus, per share earnings increased 26 percent
year-over-year third quarter, excluding merger and other charges.
Continued Next Page
October 13, 2006
Page 2
For the first nine months of 2006, net income totaled $992 million, or $2.16 per
diluted share compared to $1.60 per diluted share, including 18 cents of merger
and other charges, reported in the first nine months of 2005. The 21 percent
annual rise, excluding merger and other charges, was the result of good revenue
growth, realization of merger-related cost saves, and improved credit-related
expenses.
BANKING FRANCHISE DELIVERS GOOD RESULTS
Taxable equivalent net interest income increased $15 million in the third
quarter to $806 million vs. second quarter's strong $791 million. Modest asset
growth and an extra day in the third quarter more than offset a three basis
point dip in the net interest margin to 4.21 percent. Year-over-year third
quarter, taxable equivalent net interest income rose 9 percent, largely due to
28 basis point net interest margin expansion. Regions continues to take a very
disciplined approach to balance sheet management which should minimize the
effect of future interest rate shifts on net interest income levels.
Average total loans grew at a relatively steady pace second-to-third quarter, or
an annualized 4 percent. Commercial and construction lending accounted for the
bulk of the gain.
Regions' money market campaign was successful, generating approximately $1.5
billion of deposits since its inception in mid-June. The increase in money
market deposits was offset by a decline in interest-free and other low-cost
deposit accounts, as customers continued to shift funds into higher-yielding
instruments. Nonetheless, average total deposits grew 7 percent linked-quarter,
annualized. Regions remains focused on carefully managing funding costs while
sustaining a strong core deposit base.
FEE-BASED REVENUES MAKE SOLID CONTRIBUTION
Service charges on deposit accounts increased an annualized 8 percent from
second quarter's robust level, primarily as a result of seasonally higher NSF
fees on strong underlying base levels of service charge fees. Compared to a
year-ago third quarter, service charges were up 13 percent, largely due to
increased NSF fee levels.
Mortgage originations were down to a still strong $4 billion in the third
quarter contributing to a good third-quarter showing by Regions Mortgage. Gains
on sale of mortgage loans were down as non-conforming mortgage premiums declined
and early payment defaults increased. As a result, total mortgage-related
profits, excluding mortgage servicing rights impairment and recapture, declined
to $2.6 million in third quarter 2006 from $10.3 million in 2Q06, as weaker
industry fundamentals pressured EquiFirst's revenues and earnings. Regions
continues to manage the cost structure and efficiency of the mortgage business.
Regions sold $310 million dollars of securities during the quarter at an
approximate $8 million gain.
MORGAN KEEGAN SET FOR RECORD FULL-YEAR 2006 PROFITS
"Given continued strength in third quarter results, 2006 should mark another
record earnings year for Morgan Keegan," Moore stated.
Morgan Keegan earned $30.6 million in the third quarter, 27 percent above the
comparable 2005 period. Profits declined 6 percent from second quarter's very
strong $32.7 million, reflecting both seasonality and less favorable capital
markets conditions.
Morgan Keegan revenue totaled $231 million, rising 16 percent from third quarter
2005's $199 million but declining 3 percent compared to second quarter 2006's
$239 million. The linked-quarter revenue pullback was largely due to less robust
fixed income and equity capital markets business flows relative to a very strong
second quarter.
OPERATING EXPENSES DECLINE
Non-interest expenses dipped to $715 million from second quarter's $727 million,
helped by cost control initiatives rolled out earlier this year. Linked-quarter
expense comparisons are impacted by an $8 million mortgage servicing rights
impairment charge in the third quarter of 2006 and $10 million of mortgage
Continued Next Page
October 13, 2006
Page 3
servicing rights reserve recapture in the second quarter of 2006. Excluding
these items, non-interest expenses declined $30 million or 4 percent
linked-quarter.
Regions experienced positive operating leverage in the third quarter of 2006 as
the operating efficiency ratio improved to 55.9 percent compared to 57.5 percent
in the second quarter. Since third quarter 2005, Regions' operating efficiency
ratio has improved 364 basis points, reflecting success in growing revenue while
controlling expenses.
NET LOAN CHARGE-OFFS DROP
Credit quality trends were broadly favorable in the third quarter. Net loan
charge-offs declined to $24 million, or an annualized 0.16 percent of average
loans, from second quarter's $31 million (annualized 0.21 percent of average
loans). Net charge-offs were down 34 percent from a year-ago third quarter's $37
million (annualized 0.25 percent of average loans).
Regions' third quarter 2006 provision for loan losses was $25 million and the
loan loss allowance was $778 million at both June 30 and Sept. 30, 2006. The
allowance-to-loans ratio was 1.31 percent compared to mid-year's 1.32 percent.
Non-performing assets dropped $8 million linked quarter, or to $312 million at
Sept. 30, 2006--0.52 percent of loans and foreclosed real estate. By comparison,
non-performing assets were $441 million (0.75 percent of loans and foreclosed
real estate) at Sept. 30, 2005. Loans greater than 90 days past due were steady
linked quarter at $79 million.
SHARE BUYBACKS REMAIN PART OF ACTIVE CAPITAL MANAGEMENT POLICY
During the third quarter, Regions repurchased 1.4 million common shares at an
average cost of $35.46 per share. Year-to-date Sept. 30, buybacks totaled 8.7
million shares, leaving an additional 18.9 million shares that can be
repurchased under the company's current authorization.
At Sept. 30, 2006, Regions maintained a strong capital position, or tangible
shareholders' equity-to-tangible assets of 7.08 percent. This compared to 6.69
percent at mid-2006.
MERGER WITH AMSOUTH EXPECTED TO CLOSE FOURTH QUARTER 2006
On Oct. 3, 2006, AmSouth and Regions shareholders voted to approve the merger of
the two companies, meaning the transaction is likely to be completed in the
fourth quarter pending regulatory approvals. Upon completion of the merger,
AmSouth shareholders will receive 0.7974 Regions shares for each AmSouth share.
The combined company will retain the name Regions Financial Corporation.
The merger planning process is proceeding on schedule. Over 600 senior
leadership positions have been announced and preliminary integration timelines
have been laid out.
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 $87.0
billion in assets as of Sept. 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
October 13, 2006
Page 4
FINANCIAL HIGHLIGHTS (UNAUDITED)
(Dollar amounts in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
------------------- -------------------
2006 2005 Change 2006 2005 Change
-------- -------- ------ -------- -------- ------
Earnings
Net income $351,657 $256,556 37% $991,594 $746,548 33%
Per share:
Net income $ 0.77 $ 0.56 38% $ 2.18 $ 1.61 35%
Net income-diluted $ 0.77 $ 0.55 40% $ 2.16 $ 1.60 35%
Cash dividends declared $ 0.35 $ 0.34 3% $ 1.05 $ 1.02 3%
September 30
-------------------------
2006 2005 Change
----------- ----------- ------
Financial Condition
Total assets $86,980,091 $84,594,614 3%
Loans, net of unearned income $59,477,905 $58,355,886 2%
Securities $12,455,588 $11,945,077 4%
Total earning assets $76,730,222 $74,379,986 3%
Total deposits $62,169,545 $59,465,175 5%
Stockholders' equity $11,042,903 $10,645,055 4%
Stockholders' equity per share $ 24.27 $ 23.23 4%
As of and for nine
months ended September 30
-------------------------
2006 2005
----- -----
Selected Ratios
Return on average tangible equity* 24.35% 18.63%
Return on average stockholders' equity* 12.34% 9.30%
Return on average total assets* 1.54% 1.17%
Stockholders' equity to total assets 12.70% 12.58%
Allowance for loan losses as a percentage
of loans, net of unearned income 1.31% 1.34%
Loans, net of unearned income, to
total deposits 95.67% 98.13%
Net charge-offs to average loans* 0.19% 0.22%
* Annualized
For additional information, including supplemental financial information, refer
to Regions' Form 8-K furnished to the Securities and Exchange Commission on
October 13, 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.
###
(REGIONS FINANCIAL CORP.(SM) LOGO)
FINANCIAL SUPPLEMENT TO THIRD QUARTER 2006
EARNINGS RELEASE
SUMMARY
Record quarterly earnings of $0.77 per diluted share
- - Increase of 26% compared to 3Q05 diluted EPS of $0.61, excluding merger and
other charges
- - Primary drivers of earnings include increased net interest income,
reduction of expenses and lower credit-related costs
- - Improvement in annualized return on average tangible equity to 24.93% in
3Q06 from year-ago 19.22%
Strong revenues through third quarter; banking group leading the way
- - Record quarterly FTE net interest income of $806 million compared to $791
million in 2Q06
- - Quarterly net interest margin of 4.21%, down 3 bps linked-quarter, and an
increase of 28 bps year-over-year
- - Community banking average loan growth of 6% linked-quarter, annualized, in
3Q06
- - Service charges increased 8% linked-quarter, annualized, and 13%
year-over-year
- - Revenue per FTE in banking units improved to $290,000 year-to-date
September 30, 2006 compared to $287,000 year-to-date June 30, 2006
On track for record annual profits and revenues at Morgan Keegan
- - Profits up 27% year-over-year third quarter to $30.6 million, but 6% below
2Q06 due to linked-quarter seasonality and less investment banking activity
- - Revenues of $231 million in 3Q06, or 16% above 3Q05, but 3% below 2Q06's
very strong level
Challenging mortgage banking environment persists
- - Mortgage profits down to $2.6 million in 3Q06, compared to $10.3 million in
2Q06, due to difficult non-conforming mortgage environment
- - Total origination volume of $4.0 billion in 3Q06 compared to $4.4 billion
in 2Q06
- - Recorded MSR impairment of $8 million in 3Q06 compared to $10 million of
MSR allowance recapture in 2Q06
Operating efficiency improves
- - Non-interest expense down 7%, linked-quarter, annualized, to $715 million
compared to $727 million in 2Q06
- - Operating efficiency ratio improved to 56% in 3Q06 from 2Q06's 57% and
3Q05's 60%
Broad-based improvement in credit quality
- - Net charge-offs of $24 million, or an annualized 0.16% of average loans vs.
2Q06's 0.21% and 3Q05's 0.25%
- - Non-performing assets down $8 million linked-quarter to $312 million, or
0.52% of loans and other real estate at September 30, 2006, compared to
0.54% at June 30, 2006
- - Provision for loan losses declined $5 million linked quarter to $25 million
Regions/AmSouth merger planning progresses
- - On October 3, 2006, Regions and AmSouth stockholders approved the merger of
the two companies
- - Transaction is set to close in the fourth quarter of this year pending
regulatory approvals
- - Majority of systems decisions have been made
- - Over 600 key management positions announced thus far
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 2
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED)
($ amounts in thousands) 9/30/06 6/30/06 3/31/06 12/31/05 9/30/05
- ------------------------ ----------- ----------- ----------- ----------- -----------
Assets:
Cash and due from banks $ 2,055,137 $ 2,304,934 $ 2,059,251 $ 2,414,560 $ 2,076,344
Interest-bearing deposits
in other banks 38,981 31,565 37,049 92,098 89,253
Securities held to maturity 30,033 29,983 30,591 31,464 31,428
Securities available for sale 12,425,555 11,758,035 11,823,198 11,947,810 11,913,649
Trading account assets 1,438,427 1,056,434 1,119,854 992,082 814,663
Loans held for sale 1,824,687 2,281,372 1,547,840 1,531,664 2,054,012
Federal funds sold and securities
purchased under agreement
to resell 913,076 733,476 869,117 710,282 607,756
Margin receivables 581,558 576,616 563,202 527,317 513,339
Loans 59,677,657 59,326,346 58,658,565 58,591,816 58,535,410
Unearned income (199,752) (195,714) (198,354) (186,903) (179,524)
----------- ----------- ----------- ----------- -----------
Loans, net of unearned
income 59,477,905 59,130,632 58,460,211 58,404,913 58,355,886
Allowance for loan losses (778,465) (777,783) (782,368) (783,536) (783,943)
----------- ----------- ----------- ----------- -----------
Net Loans 58,699,440 58,352,849 57,677,843 57,621,377 57,571,943
Premises and equipment 1,097,616 1,109,732 1,109,587 1,122,289 1,109,922
Interest receivable 456,978 407,811 402,072 420,818 383,839
Due from customers on acceptances 28,657 22,519 25,481 22,924 25,784
Excess purchase price 4,967,799 4,996,028 4,987,770 5,027,044 5,025,964
Mortgage servicing rights 407,740 420,322 413,672 412,008 397,176
Other identifiable intangible assets 287,437 295,588 304,008 314,368 325,933
Other assets 1,726,970 1,685,522 1,623,983 1,597,495 1,653,609
----------- ----------- ----------- ----------- -----------
$86,980,091 $86,062,786 $84,594,518 $84,785,600 $84,594,614
=========== =========== =========== =========== ===========
Liabilities and Stockholders' Equity:
Deposits
Non-interest-bearing $12,570,051 $13,158,707 $13,328,143 $13,699,038 $12,606,368
Interest-bearing 49,599,494 48,246,119 47,191,336 46,679,329 46,858,807
----------- ----------- ----------- ----------- -----------
Total Deposits 62,169,545 61,404,826 60,519,479 60,378,367 59,465,175
Borrowed funds:
Short-term borrowings:
Federal funds purchased and
securities sold under agree-
ment to repurchase 4,943,568 4,770,538 3,900,737 3,928,185 4,679,352
Other short-term borrowings 1,368,480 958,048 995,312 1,038,094 954,462
----------- ----------- ----------- ----------- -----------
Total Short-term Borrowings 6,312,048 5,728,586 4,896,049 4,966,279 5,633,814
Long-term borrowings 5,490,404 6,293,372 6,621,710 6,971,680 7,207,015
----------- ----------- ----------- ----------- -----------
Total Borrowed Funds 11,802,452 12,021,958 11,517,759 11,937,959 12,840,829
Bank acceptances outstanding 28,657 22,519 25,481 22,924 25,784
Other liabilities 1,936,534 1,915,124 1,875,014 1,832,067 1,617,771
----------- ----------- ----------- ----------- -----------
Total Liabilities 75,937,188 75,364,427 73,937,733 74,171,317 73,949,559
Stockholders' equity:
Common stock 4,813 4,787 4,778 4,738 4,718
Surplus 7,466,180 7,393,185 7,360,704 7,248,855 7,220,396
Undivided profits 4,547,845 4,355,306 4,169,678 4,034,905 3,936,657
Treasury stock (888,282) (833,633) (708,593) (581,890) (453,235)
Accumulated other comprehensive
income (loss) (87,653) (221,286) (169,782) (92,325) (63,481)
----------- ----------- ----------- ----------- -----------
Total Stockholders' Equity 11,042,903 10,698,359 10,656,785 10,614,283 10,645,055
----------- ----------- ----------- ----------- -----------
$86,980,091 $86,062,786 $84,594,518 $84,785,600 $84,594,614
=========== =========== =========== =========== ===========
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 3
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Quarter Ended
---------------------------------------------------------------
($ amounts in thousands, except per share amounts) 9/30/06 6/30/06 3/31/06 12/31/05 9/30/05
- -------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Interest Income:
Interest and fees on loans $1,106,807 $1,047,843 $ 992,523 $ 953,903 $ 917,915
Interest on securities:
Taxable interest income 143,118 130,979 131,651 126,070 124,913
Tax-exempt interest income 7,852 7,904 8,116 7,706 7,408
---------- ---------- ---------- ---------- ----------
Total Interest on Securities 150,970 138,883 139,767 133,776 132,321
Interest on loans held for sale 45,416 47,261 33,882 37,798 40,787
Interest on margin receivables 9,767 9,525 8,673 8,283 7,581
Income on federal funds sold and
securities purchased under
agreement to resell 13,505 11,573 10,490 6,653 6,056
Interest on time deposits in
other banks 637 343 544 384 487
Interest on trading account assets 12,519 9,558 9,853 8,363 8,708
---------- ---------- ---------- ---------- ----------
Total Interest Income 1,339,621 1,264,986 1,195,732 1,149,160 1,113,855
Interest Expense:
Interest on deposits 411,178 357,026 314,708 292,886 270,136
Interest on short-term borrowings 66,315 56,065 50,133 44,950 42,957
Interest on long-term borrowings 84,429 89,360 88,164 85,411 83,339
---------- ---------- ---------- ---------- ----------
Total Interest Expense 561,922 502,451 453,005 423,247 396,432
---------- ---------- ---------- ---------- ----------
Net Interest Income 777,699 762,535 742,727 725,913 717,423
Provision for loan losses 25,000 30,000 27,500 40,000 62,500
---------- ---------- ---------- ---------- ----------
Net Interest Income After
Provision for Loan Losses 752,699 732,535 715,227 685,913 654,923
Non-Interest Income:
Brokerage and investment banking 144,093 158,865 166,793 140,255 131,738
Trust department income 36,366 35,730 34,555 30,847 33,673
Service charges on deposit
accounts 150,078 147,272 128,529 129,992 132,924
Mortgage servicing and origination
fees 33,296 34,270 32,698 33,651 35,284
Securities gains (losses), net 8,104 28 11 (17,609) (20,717)
Other 94,012 114,546 107,531 105,649 137,410
---------- ---------- ---------- ---------- ----------
Total Non-Interest Income 465,949 490,711 470,117 422,785 450,312
Non-Interest Expense:
Salaries and employee benefits 413,719 441,475 447,008 436,965 437,951
Net occupancy expense 54,012 53,772 59,888 56,558 56,596
Furniture and equipment expense 33,838 33,942 34,083 34,171 34,104
Impairment (recapture) of MSR's 8,000 (10,000) (9,000) (18,000) (32,000)
Other 205,024 207,324 224,115 244,342 244,472
---------- ---------- ---------- ---------- ----------
Total Non-Interest Expense 714,593 726,513 756,094 754,036 741,123
---------- ---------- ---------- ---------- ----------
Income Before Income Taxes 504,055 496,733 429,250 354,662 364,112
Applicable income taxes 152,398 151,476 134,570 100,666 107,556
---------- ---------- ---------- ---------- ----------
Net Income $ 351,657 $ 345,257 $ 294,680 $ 253,996 $ 256,556
========== ========== ========== ========== ==========
Average shares outstanding--
during quarter 454,441 455,528 456,442 457,193 459,563
Average shares outstanding--during
quarter, diluted 458,903 460,131 461,043 461,651 464,250
Actual shares outstanding--
end of quarter 455,067 454,034 456,701 456,348 458,208
Net income per share $ 0.77 $ 0.76 $ 0.65 $ 0.56 $ 0.56
Net income per share, diluted $ 0.77 $ 0.75 $ 0.64 $ 0.55 $ 0.55
Dividends per share $ 0.35 $ 0.35 $ 0.35 $ 0.34 $ 0.34
Taxable equivalent net interest income $ 806,260 $ 791,268 $ 766,682 $ 748,642 $ 739,816
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 4
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Nine Months Ended
September 30
-----------------------
($ amounts in thousands, except per share amounts) 2006 2005
- -------------------------------------------------- ---------- ----------
Interest Income:
Interest and fees on loans $3,147,173 $2,592,864
Interest on securities:
Taxable interest income 405,748 372,596
Tax-exempt interest income 23,872 21,094
---------- ----------
Total Interest on Securities 429,620 393,690
Interest on loans held for sale 126,559 111,369
Interest on margin receivables 27,965 20,890
Income on federal funds sold and
securities purchased under agreement
to resell 35,568 12,648
Interest on time deposits in other banks 1,524 1,521
Interest on trading account assets 31,930 28,233
---------- ----------
Total Interest Income 3,800,339 3,161,215
Interest Expense:
Interest on deposits 1,082,912 711,841
Interest on short-term borrowings 172,513 119,866
Interest on long-term borrowings 261,953 234,802
---------- ----------
Total Interest Expense 1,517,378 1,066,509
---------- ----------
Net Interest Income 2,282,961 2,094,706
Provision for loan losses 82,500 125,000
---------- ----------
Net Interest Income After Provision
for Loan Losses 2,200,461 1,969,706
Non-Interest Income:
Brokerage and investment banking 469,751 408,407
Trust department income 106,651 96,919
Service charges on deposit accounts 425,879 388,396
Mortgage servicing and origination fees 100,264 111,653
Securities gains (losses), net 8,143 (1,283)
Other 316,089 386,555
---------- ----------
Total Non-Interest Income 1,426,777 1,390,647
Non-Interest Expense:
Salaries and employee benefits 1,302,202 1,302,052
Net occupancy expense 167,672 167,515
Furniture and equipment expense 101,863 98,605
Recapture of MSR's (11,000) (14,000)
Other 636,463 738,748
---------- ----------
Total Non-Interest Expense 2,197,200 2,292,920
---------- ----------
Income Before Income Taxes 1,430,038 1,067,433
Applicable income taxes 438,444 320,885
---------- ----------
Net Income $ 991,594 $ 746,548
========== ==========
Average shares outstanding--year-to-date 455,463 462,512
Average shares outstanding--year-to-date, diluted 460,018 467,710
Actual shares outstanding--end of quarter 455,067 458,208
Net income per share $ 2.18 $ 1.61
Net income per share, diluted $ 2.16 $ 1.60
Dividends per share $ 1.05 $ 1.02
Taxable equivalent net interest income $2,364,211 $2,157,429
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 5
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE DAILY BALANCES AND YIELD/RATE ANALYSIS
Quarter Ended
------------------------------------------------------------------
9/30/06 6/30/06 3/31/06
-------------------- -------------------- --------------------
($ amounts in thousands; Average Yield/ Average Yield/ Average Yield/
yields on taxable equivalent basis) Balance Rate Balance Rate Balance Rate
- ----------------------------------- ----------- ------ ----------- ------ ----------- ------
Assets
Earning assets:
Taxable securities $11,612,748 4.90% $11,175,675 4.71% $11,462,264 4.67%
Non-taxable securities 397,160 11.99% 406,340 11.92% 426,119 11.75%
Federal funds sold 937,005 5.72% 871,206 5.33% 936,243 4.54%
Margin receivables 553,946 7.00% 557,148 6.86% 534,978 6.57%
Loans, net of unearned income 59,111,355 7.59% 58,489,995 7.35% 58,191,512 7.05%
Interest-bearing deposits
in other banks 41,821 6.04% 38,825 3.54% 52,400 4.21%
Loans held for sale 2,263,608 7.96% 2,355,875 8.05% 1,828,232 7.52%
Trading account assets 1,130,260 4.45% 969,137 3.97% 924,044 4.53%
----------- ----------- -----------
Total earning assets 76,047,903 7.14% 74,864,201 6.93% 74,355,792 6.65%
Allowance for loan losses (780,715) (781,282) (785,847)
Cash and due from banks 1,959,441 2,016,715 2,029,747
Other non-earning assets 9,749,193 9,776,953 9,838,032
----------- ----------- -----------
$86,975,822 $85,876,587 $85,437,724
=========== =========== ===========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Savings accounts $ 2,988,548 0.41% $ 3,155,230 0.43% $ 3,100,922 0.37%
Interest-bearing transaction
accounts 1,917,648 2.26% 2,158,034 2.14% 2,272,440 1.97%
Money market accounts 20,144,394 2.56% 19,759,267 2.29% 19,873,074 2.04%
Certificates of deposit of
$100,000 or more 8,297,133 4.67% 7,650,843 4.31% 7,383,192 3.97%
Other interest-bearing
deposit accounts 15,875,539 4.24% 15,067,677 3.92% 14,442,354 3.61%
----------- ----------- -----------
Total interest-bearing deposits 49,223,262 3.31% 47,791,051 3.00% 47,071,982 2.71%
Federal funds purchased 4,806,594 4.70% 4,301,848 4.40% 4,176,546 4.01%
Other short-term borrowings 927,313 4.03% 886,953 4.00% 999,141 3.59%
Long-term borrowings 5,810,710 5.76% 6,589,755 5.44% 6,859,167 5.21%
----------- ----------- -----------
Total interest-bearing
liabilities 60,767,879 3.67% 59,569,607 3.38% 59,106,836 3.11%
Non-interest bearing deposits 12,482,899 12,882,910 12,926,748
Other liabilities 2,847,404 2,754,398 2,717,892
Stockholders' equity 10,877,640 10,669,672 10,686,248
----------- ----------- -----------
$86,975,822 $85,876,587 $85,437,724
=========== =========== ===========
Net yield on interest earning assets 4.21% 4.24% 4.18%
Quarter Ended
-------------------------------------------
12/31/05 9/30/05
-------------------- --------------------
($ amounts in thousands; Average Yield/ Average Yield/
yields on taxable equivalent basis) Balance Rate Balance Rate
- ----------------------------------- ----------- ------ ----------- ------
Assets
Earning assets:
Taxable securities $11,377,852 4.41% $11,594,884 4.29%
Non-taxable securities 464,238 10.06% 486,420 9.22%
Federal funds sold 687,208 3.84% 726,717 3.31%
Margin receivables 546,389 6.01% 528,461 5.69%
Loans, net of unearned income 58,047,052 6.64% 58,223,018 6.38%
Interest-bearing deposits
in other banks 58,311 2.61% 89,443 2.16%
Loans held for sale 2,082,891 7.20% 2,276,817 7.11%
Trading account assets 849,974 4.08% 809,683 4.44%
----------- -----------
Total earning assets 74,113,915 6.27% 74,735,443 6.03%
Allowance for loan losses (779,144) (760,447)
Cash and due from banks 2,083,756 2,048,188
Other non-earning assets 9,725,428 9,641,715
----------- -----------
$85,143,955 $85,664,899
=========== ===========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Savings accounts $2,976,913 0.36% $ 2,885,383 0.26%
Interest-bearing transaction
accounts 2,530,011 1.97% 2,796,439 2.03%
Money market accounts 19,522,227 1.76% 18,631,989 1.37%
Certificates of deposit of
$100,000 or more 7,873,050 3.65% 8,427,191 3.31%
Other interest-bearing
deposit accounts 14,081,524 3.34% 15,233,717 3.11%
----------- -----------
Total interest-bearing deposits 46,983,725 2.47% 47,974,719 2.23%
Federal funds purchased 4,202,647 3.58% 4,520,978 3.19%
Other short-term borrowings 886,991 3.13% 920,142 2.86%
Long-term borrowings 7,124,742 4.76% 7,186,493 4.60%
----------- -----------
Total interest-bearing
liabilities 59,198,105 2.84% 60,602,332 2.60%
Non-interest bearing deposits 12,871,222 12,409,465
Other liabilities 2,518,080 1,965,246
Stockholders' equity 10,556,548 10,687,856
----------- -----------
$85,143,955 $85,664,899
=========== ===========
Net yield on interest earning assets 4.01% 3.93%
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 6
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE DAILY BALANCES AND YIELD/RATE ANALYSIS
Nine Months Ended September 30
-------------------------------------------
2006 2005
-------------------- --------------------
($ amounts in thousands; Average Yield/ Average Yield/
yields on taxable equivalent basis) Balance Rate Balance Rate
- ----------------------------------- ----------- ------ ----------- ------
Assets
Earning assets:
Taxable securities $11,417,447 4.76% $11,755,762 4.26%
Non-taxable securities 409,767 11.88% 511,605 8.39%
Federal funds sold 914,821 5.20% 590,963 2.86%
Margin receivables 548,760 6.81% 529,480 5.27%
Loans, net of unearned income 58,600,990 7.33% 57,987,041 6.09%
Interest-bearing deposits in other banks 44,310 4.60% 89,415 2.27%
Loans held for sale 2,150,833 7.87% 2,189,685 6.80%
Trading account assets 1,008,569 4.32% 822,662 4.81%
----------- -----------
Total earning assets 75,095,497 6.91% 74,476,613 5.79%
Allowance for loan losses (782,596) (761,374)
Cash and due from banks 2,001,710 1,920,827
Other non-earning assets 9,787,734 9,444,398
----------- -----------
$86,102,345 $85,080,464
=========== ===========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Savings accounts $ 3,081,155 0.40% $ 2,909,527 0.24%
Interest-bearing transaction accounts 2,114,741 2.12% 2,989,863 1.80%
Money market accounts 19,926,572 2.30% 18,881,938 1.15%
Certificates of deposit of $100,000 or more 7,780,404 4.33% 8,108,808 3.02%
Other interest-bearing deposit accounts 15,133,773 3.94% 14,858,823 2.88%
----------- -----------
Total interest-bearing deposits 48,036,645 3.01% 47,748,959 1.99%
Federal funds purchased 4,430,637 4.39% 4,550,436 2.72%
Other short-term borrowings 937,539 3.87% 1,111,355 3.27%
Long-term borrowings 6,416,037 5.46% 7,192,037 4.36%
----------- -----------
Total interest-bearing liabilities 59,820,858 3.39% 60,602,787 2.35%
Non-interest bearing deposits 12,762,560 11,916,065
Other liabilities 2,773,706 1,842,909
Stockholders' equity 10,745,221 10,718,703
----------- -----------
$86,102,345 $85,080,464
=========== ===========
Net yield on interest-earning assets 4.21% 3.87%
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES
Nine Months Ended
September 30
-------------------
($ amounts in thousands) 2006 2005
- ------------------------ -------- --------
Balance at beginning of year $783,536 $754,721
Net loans charged off:
Commercial 52,100 52,094
Real estate 23,445 27,680
Installment 8,247 16,004
-------- --------
Total 83,792 95,778
Allowance allocated to loans sold (3,779) --
Provision charged to expense 82,500 125,000
-------- --------
Balance at end of period $778,465 $783,943
======== ========
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 7
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED RATIOS
Quarter Ended
------------------------------------------------
9/30/06 6/30/06 3/31/06 12/31/05 9/30/05
------- ------- ------- -------- -------
Return on average assets* 1.60% 1.61% 1.40% 1.18% 1.19%
Return on average tangible equity* 24.93% 25.73% 22.32% 19.34% 19.22%
Return on average equity* 12.83% 12.98% 11.18% 9.55% 9.52%
Stockholders' equity per share $24.27 $23.56 $23.33 $23.26 $23.23
Stockholders' equity to total assets 12.70% 12.43% 12.60% 12.52% 12.58%
Tangible stockholders' equity
to tangible assets 7.08% 6.69% 6.77% 6.64% 6.68%
Allowance for loan losses as a percentage
of loans, net of unearned income 1.31% 1.32% 1.34% 1.34% 1.34%
Net interest margin (FTE) 4.21% 4.24% 4.18% 4.01% 3.93%
Efficiency ratio (1) 55.94% 57.45% 61.20% 60.44% 59.58%
Loans, net of unearned income,
to total deposits 95.67% 96.30% 96.60% 96.73% 98.13%
Net charge-offs as a percentage of
average loans* 0.16% 0.21% 0.20% 0.28% 0.25%
Total non-performing assets (excluding loans
90 days past due) as a percentage of
loans and other real estate 0.52% 0.54% 0.70% 0.70% 0.75%
Total non-performing assets (including loans
90 days past due) as a percentage of
loans and other real estate 0.66% 0.67% 0.86% 0.85% 0.88%
* Annualized
(1) Excluding MSR impairment(recapture), debt extinguishment expense, and
merger-related and other expenses
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 8
LOANS
LOAN PORTFOLIO - PERIOD END DATA
($ amounts in 9/30/2006 9/30/2006
thousands) 9/30/06 6/30/06 3/31/06 12/31/05 9/30/05 vs. 6/30/06* vs.9/30/2005
- ------------- ----------- ----------- ----------- ----------- ----------- ----------------- ------------------
Commercial $16,215,004 $15,903,897 $14,953,740 $14,979,811 $15,026,107 $ 311,107 7.8% $ 1,188,897 7.9%
Residential Mortgages 13,021,800 12,845,001 12,925,223 12,678,332 11,950,831 176,799 5.5% 1,070,969 9.0%
Other Real Estate
Loans 12,305,245 12,836,023 13,379,282 13,745,201 14,328,521 (530,778) -16.5% (2,023,276) -14.1%
Construction 8,731,614 8,163,378 7,701,478 7,363,353 7,306,720 568,236 27.8% 1,424,894 19.5%
Branch Installment 1,550,031 1,559,533 1,591,127 1,625,929 1,679,996 (9,502) -2.4% (129,965) -7.7%
Indirect Installment 1,324,017 1,344,853 1,319,819 1,353,929 1,415,764 (20,836) -6.2% (91,747) -6.5%
Consumer Lines of
Credit 5,358,806 5,559,417 5,661,990 5,786,770 5,764,722 (200,611) -14.4% (405,916) -7.0%
Student Loans 971,388 918,530 927,552 871,588 883,225 52,858 23.0% 88,163 10.0%
----------- ----------- ----------- ----------- ----------- --------- ----- ----------- -----
$59,477,905 $59,130,632 $58,460,211 $58,404,913 $58,355,886 $ 347,273 2.3% $ 1,122,019 1.9%
=========== =========== =========== =========== =========== ========= ===== =========== =====
LOAN PORTFOLIO - AVERAGE BALANCES
($ amounts in thousands) 3Q06 2Q06 1Q06 4Q05 3Q05
- ------------------------ ----------- ----------- ----------- ----------- -----------
Commercial $15,994,748 $15,291,717 $14,828,381 $14,793,576 $15,142,708
Residential Mortgages 12,870,157 12,816,313 12,620,698 12,129,967 11,861,795
Other Real Estate Loans 12,541,261 13,051,119 13,609,406 14,012,136 14,387,171
Construction 8,436,309 7,905,195 7,537,309 7,383,453 7,169,220
Branch Installment 1,546,474 1,549,298 1,604,554 1,687,189 1,691,721
Indirect Installment 1,336,290 1,329,399 1,333,556 1,380,761 1,431,649
Consumer Lines of Credit 5,450,527 5,628,132 5,732,152 5,783,665 5,690,179
Student Loans 935,589 918,822 925,456 876,305 848,575
----------- ----------- ----------- ----------- -----------
$59,111,355 $58,489,995 $58,191,512 $58,047,052 $58,223,018
=========== =========== =========== =========== ===========
3Q06 3Q06
($ amounts in thousands) vs. 2Q06* vs. 3Q05
- ------------------------ ---------------- ------------------
Commercial $ 703,031 18.4% $ 852,040 5.6%
Residential Mortgages 53,844 1.7% 1,008,362 8.5%
Other Real Estate Loans (509,858) -15.6% (1,845,910) -12.8%
Construction 531,114 26.9% 1,267,089 17.7%
Branch Installment (2,824) -0.7% (145,247) -8.6%
Indirect Installment 6,891 2.1% (95,359) -6.7%
Consumer Lines of Credit (177,605) -12.6% (239,652) -4.2%
Student Loans 16,767 7.3% 87,014 10.3%
--------- ----- ----------- -----
$ 621,360 4.2% $ 888,337 1.5%
========= ===== =========== =====
AVERAGE COMMUNITY BANKING AND WHOLESALE LOANS
3Q06 3Q06
($ amounts in thousands) 3Q06 2Q06 1Q06 4Q05 3Q05 vs. 2Q06* vs. 3Q05
- ------------------------ ----------- ----------- ----------- ----------- ----------- -------------- -------------
Community Bank Loans $47,524,954 $46,836,944 $46,690,895 $46,756,538 $46,732,402 $688,010 5.9% $792,552 1.7%
Wholesale Loans 11,586,401 11,653,051 11,500,617 11,290,514 11,490,617 (66,650) -2.3% 95,784 0.8%
----------- ----------- ----------- ----------- ----------- -------- ---- -------- ---
$59,111,355 $58,489,995 $58,191,512 $58,047,052 $58,223,019 $621,360 4.2% $888,336 1.5%
=========== =========== =========== =========== =========== ======== ==== ======== ===
* Linked quarter percentage changes are presented on an annualized basis.
- - Construction loan growth was broad-based across Regions' footprint, but
strongest in the Atlanta area, south Florida and the Mid Atlantic.
Construction loan balances related to various types of properties grew
including single family residential, multi-family residential, retail
developments and commercial use facilities.
- - Average community banking loans increased 5.9%, linked-quarter, annualized,
primarily due to an increase in commercial and construction loans, offset
partially by a decline in consumer lines of credit.
- - In the above tables, commercial loans and other real estate loans are
impacted by ongoing reclassification of new and renewed loans by purpose as
opposed to collateral.
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 9
DEPOSITS
DEPOSIT PORTFOLIO - PERIOD END DATA
($ amounts in thousands) 9/30/06 6/30/06 3/31/06 12/31/05 9/30/05
- ------------------------ ----------- ----------- ----------- ----------- -----------
Interest-Free Deposits $12,570,051 $13,158,707 $13,328,143 $13,699,038 $12,606,368
Interest-Bearing Checking 1,938,261 2,180,298 2,490,444 2,756,556 2,924,131
Savings 2,908,930 3,081,192 3,182,650 3,037,687 2,884,471
Money Market 20,458,363 19,788,991 19,897,135 19,856,890 18,789,340
----------- ----------- ----------- ----------- -----------
Total Low-Cost Deposits 37,875,605 38,209,188 38,898,372 39,350,171 37,204,310
CD's < $100K 11,055,918 11,063,668 10,874,303 10,201,745 10,293,091
CD's > $100K 9,124,935 7,918,736 7,480,764 7,412,359 8,169,760
Other Time Deposits 4,113,087 4,213,234 3,266,040 3,414,092 3,798,014
----------- ----------- ----------- ----------- -----------
$62,169,545 $61,404,826 $60,519,479 $60,378,367 $59,465,175
=========== =========== =========== =========== ===========
9/30/2006 9/30/2006
($ amounts in thousands) vs. 6/30/06* vs.9/30/2005
- ------------------------ ----------------- -----------------
Interest-Free Deposits $ (588,656) -17.9% $ (36,317) -0.3%
Interest-Bearing Checking (242,037) -44.4% (985,870) -33.7%
Savings (172,262) -22.4% 24,459 0.8%
Money Market 669,372 13.5% 1,669,023 8.9%
---------- ----- ---------- -----
Total Low-Cost Deposits (333,583) -3.5% 671,295 1.8%
CD's < $100K (7,750) -0.3% 762,827 7.4%
CD's > $100K 1,206,199 60.9% 955,175 11.7%
Other Time Deposits (100,147) -9.5% 315,073 8.3%
---------- ----- ---------- -----
$ 764,719 5.0% $2,704,370 4.5%
========== ===== ========== =====
AVERAGE COMMUNITY BANKING AND WHOLESALE DEPOSITS
($ amounts in thousands) 3Q06 2Q06 1Q06 4Q05 3Q05
- ------------------------ ----------- ----------- ----------- ----------- -----------
Community Bank Deposits $52,351,144 $52,834,250 $52,757,452 $51,940,107 $50,430,723
Wholesale Deposits 9,355,017 7,839,711 7,241,278 7,914,840 9,953,461
----------- ----------- ----------- ----------- -----------
$61,706,161 $60,673,961 $59,998,730 $59,854,947 $60,384,184
=========== =========== =========== =========== ===========
3Q06 3Q06
($ amounts in thousands) vs. 2Q06* vs. 3Q05
- ------------------------ ---------------- ----------------
Community Bank Deposits $ (483,106) -3.7% $1,920,421 3.8%
Wholesale Deposits 1,515,306 77.3% (598,444) -6.0%
---------- ---- ---------- ----
$1,032,200 6.8% $1,321,977 2.2%
========== ==== ========== ====
* Linked quarter percentage changes are presented on an annualized basis.
- - The linked-quarter decline in interest-free deposits, interest-bearing
checking deposits and savings was primarily due to the combination of a
decline in deposits in areas impacted by Hurricane Katrina and customer
preference for longer term, higher rate deposit products.
- - Regions introduced a money market promotion in mid-June designed to attract
rate sensitive customers to a lower cost transaction account.
Correspondingly, money market deposits increased and the recent momentum in
CD accounts slowed. In addition, as customer preferences for higher rate
products increased, some monies shifted from interest-free and
interest-bearing checking into these accounts.
- - Regions continues to open net new accounts. The DDA open/close ratio
remains positive at 1.10 for 3Q06; however, it has declined slightly from
2Q06 levels (1.24) given net outflows in Katrina-impacted areas and
customer preferences for longer term, higher rate deposit products.
- - Average community banking deposits declined 3.7%, linked-quarter,
annualized, primarily as a result of decreases in levels of interest-free,
savings and interest-bearing checking deposits, partially offset by an
increase in money market deposits.
- - The increase in CD's > $100K and average wholesale deposits is a result of
increased use of money desk CD's as a funding source.
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 10
OPERATING PERFORMANCE
REVENUE
($ amounts in thousands) 3Q06 2Q06 1Q06 4Q05 3Q05
- ------------------------ ---------- ---------- ---------- ----------- ----------
Net Interest Income (TE basis) $ 806,260 $ 791,268 $ 766,682 $ 748,642 $ 739,816
Non-Interest Income (excl. sec.
gains/losses) 457,845 490,683 470,106 440,394 471,029
---------- ---------- ---------- ----------- ----------
Total Revenue (TE basis) $1,264,105 $1,281,951 $1,236,788 $ 1,189,036 $1,210,845
========== ========== ========== =========== ==========
Fee Income as a % of Total Revenue 36.2% 38.3% 38.0% 37.0% 38.9%
========== ========== ========== =========== ==========
3Q06 3Q06
($ amounts in thousands) vs. 2Q06* vs. 3Q05
- ------------------------ --------------- --------------
Net Interest Income (TE basis) $ 14,992 7.6% $ 66,444 9.0%
Non-Interest Income (excl. sec.
gains/losses) (32,838) -26.8% (13,184) -2.8%
-------- ----- -------- ----
Total Revenue (TE basis) $(17,846) -5.6% $ 53,260 4.4%
======== ===== ======== ====
Fee Income a % of Total Revenue
* Linked quarter percentage changes are presented on an annualized basis.
- - Net interest margin was 4.21% in 3Q06, a decrease of 3 bps linked-quarter,
from 4.24% in 2Q06 and an increase of 28 bps compared to 3Q05.
- - Linked-quarter decline in non-interest income is primarily due to a decline
in mortgage and brokerage revenues.
- - Regions is positioned slightly asset-sensitive at September 30, 2006.
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 11
NON-INTEREST INCOME AND EXPENSE
NON-INTEREST INCOME AND EXPENSE
NON-INTEREST INCOME
($ amounts in thousands) 3Q06 2Q06 1Q06 4Q05 3Q05 3Q06 vs. 2Q06* 3Q06 vs. 3Q05
- ------------------------ -------- -------- -------- -------- -------- ---------------- ----------------
Brokerage and investment banking $144,093 $158,865 $166,793 $140,255 $131,738 $(14,772) -37.2% $ 12,355 9.4%
Trust department income 36,366 35,730 34,555 30,847 33,673 636 7.1% 2,693 8.0%
Service charges on deposit accounts 150,078 147,272 128,529 129,992 132,924 2,806 7.6% 17,154 12.9%
Mortgage servicing & origination
fees 33,296 34,270 32,698 33,651 35,284 (974) -11.4% (1,988) -5.6%
Securities gains (losses), net 8,104 28 11 (17,609) (20,717) 8,076 NM 28,821 NM
Insurance premiums & commissions 21,330 21,267 21,394 18,616 19,827 63 1.2% 1,503 7.6%
Gain on sale of mortgage loans 6,155 24,255 12,351 21,623 60,620 (18,100) -298.5% (54,465) -89.8%
Derivative income 9,595 9,122 6,194 6,434 7,388 473 20.7% 2,207 29.9%
SOI -- -- -- -- 4,002 -- NM (4,002) NM
Other 56,932 59,902 67,592 58,976 45,573 (2,970) -19.8% 11,359 24.9%
-------- -------- -------- -------- -------- -------- ------ -------- -----
Total non-interest income $465,949 $490,711 $470,117 $422,785 $450,312 $(24,762) -20.2% $ 15,637 3.5%
======== ======== ======== ======== ======== ======== ====== ======== =====
NON-INTEREST EXPENSE
($ amounts in thousands) 3Q06 2Q06 1Q06 4Q05 3Q05 3Q06 vs. 2Q06* 3Q06 vs. 3Q05
- ------------------------ -------- -------- -------- -------- -------- ---------------- ----------------
Salaries and employee benefits** $413,719 $441,475 $447,008 $408,873 $418,645 $(27,756) -25.1% $ (4,926) -1.2%
Net occupancy expense** 54,012 53,772 59,888 54,133 53,574 240 1.8% 438 0.8%
Furniture and equipment expense** 33,838 33,942 34,083 33,872 34,027 (104) -1.2% (189) -0.6%
Amortization of core deposit
intangible 10,073 10,370 10,724 11,039 11,320 (297) -11.5% (1,247) -11.0%
Amortization of MSR's 16,592 16,263 18,303 17,890 22,544 329 8.1% (5,952) -26.4%
Impairment (recapture) of MSR's 8,000 (10,000) (9,000) (18,000) (32,000) 18,000 NM 40,000 NM
Loss on early extinguishment of debt (547) (1,089) 8,168 -- 10,878 542 NM (11,425) NM
Merger-related and other charges -- -- -- 53,333 40,875 -- NM -- NM
Other** 178,906 181,780 186,920 192,896 181,260 (2,874) -6.3% (2,354) -1.3%
-------- -------- -------- -------- -------- -------- ----- -------- -----
Total non-interest expense $714,593 $726,513 $756,094 $754,036 $741,123 $(11,920) -6.6% $(26,530) -3.6%
======== ======== ======== ======== ======== ======== ===== ======== =====
* Linked quarter percentage changes are presented on an annualized basis.
** Net of merger and other charges in 2005
- - Brokerage and investment banking revenue declined from strong 2Q06 levels
primarily as a result of a seasonal decline and less robust fixed income
and equity capital markets business flows.
- - Service charges on deposit accounts increased $2.8 million or 7.6%
linked-quarter, annualized, primarily due to seasonally higher NSF fees on
strong underlying base levels of service charges.
- - Mortgage servicing and origination fees decreased 3% linked-quarter, as a
result of lower production volume.
- - Gain on sale of mortgage loans declined $18.1 million linked-quarter due to
lower premium levels in the market and increased early payment defaults on
non-conforming mortgages.
- - Salaries and employee benefits declined 25% linked-quarter, annualized, due
to various factors including reduced Morgan Keegan and mortgage commission
expense, overall reduction in headcount and reductions in other commissions
and group insurance expense.
- - Net occupancy expense for 3Q06 is impacted by $5 million of insurance
recoveries on hurricane expenses which were directly related to expenses
incurred earlier in the year. The favorable effect of the insurance
recoveries was offset by higher utilities and building insurance expenses
linked-quarter.
- - Regions sold $310 million dollars of securities during the quarter at an
$8.1 million gain.
- - Excluding MSR impairment/recapture, total non-interest expense declined $30
million or 16% linked-quarter, annualized.
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 12
MORGAN KEEGAN
MORGAN KEEGAN
Summary Income Statement
($ amounts in thousands) 3Q06 2Q06 1Q06 4Q05 3Q05 3Q06 vs. 2Q06* 3Q06 vs. 3Q05
- ------------------------ -------- -------- -------- -------- -------- ----------------- --------------
Revenues:
Commissions $ 56,194 $ 56,960 $ 57,073 $ 51,619 $ 50,197 $ (766) -5.4% $ 5,997 11.9%
Principal transactions 38,381 32,996 41,951 34,752 33,696 5,385 65.3% 4,685 13.9%
Investment banking 25,767 41,623 43,027 25,894 26,919 (15,856) -152.4% (1,152) -4.3%
Interest 36,721 32,511 30,327 24,735 22,900 4,210 51.8% 13,821 60.4%
Trust fees and services 29,966 29,014 28,046 24,680 27,475 952 13.1% 2,491 9.1%
Investment advisory 35,425 36,151 28,885 37,557 30,006 (726) -8.0% 5,419 18.1%
Other 8,062 9,473 22,639 11,790 8,191 (1,411) -59.6% (129) -1.6%
-------- ------- ------- ------- ------- ------- ------ ------ ----
Total revenues 230,516 238,728 251,948 211,027 199,384 (8,212) -13.8% 31,132 15.6%
Expenses:
Interest expense 21,966 21,999 18,085 16,855 16,105 (33) -0.6% 5,861 36.4%
Non-interest expense 160,679 165,568 169,352 152,280 145,276 (4,889) -11.8% 15,403 10.6%
-------- ------- ------- ------- ------- ------- ------ ------ ----
Total expenses 182,645 187,567 187,437 169,135 161,381 (4,922) -10.5% 21,264 13.2%
-------- ------- ------- ------- ------- ------- ------ ------ ----
Income before income taxes 47,872 51,161 64,511 41,892 38,003 (3,289) -25.7% 9,869 26.0%
Income taxes 17,251 18,442 23,703 14,942 13,945 (1,191) -25.8% 3,306 23.7%
-------- -------- -------- -------- -------- --------- ----- ------- ----
Net income $ 30,621 $ 32,719 $ 40,808 $ 26,950 $ 24,058 $ (2,098) -25.6% $ 6,563 27.3%
======== ======== ======== ======== ======== ========= ===== ======= ====
Breakout of Revenue by Division
Fixed-
income Equity Regions
Private Capital Capital MK Asset Interest
($ amounts in thousands) Client Markets Markets Trust Management & Other
- ------------------------ -------- -------- ------- ------- ---------- --------
THREE MONTHS ENDED
SEPTEMBER 30, 2006:
$ amount of revenue $ 67,271 $ 43,292 $18,093 $29,967 $37,003 $ 34,890
% of gross revenue 29.2% 18.8% 7.8% 13.0% 16.1% 15.1%
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%
NINE MONTHS ENDED
SEPTEMBER 30, 2006
$ amount of revenue $215,329 $136,509 $70,460 $87,029 $105,380 $106,485
% of gross revenue 29.9% 18.9% 9.8% 12.1% 14.6% 14.8%
NINE MONTHS ENDED
SEPTEMBER 30, 2005
$ amount of revenue $184,707 $118,211 $65,518 $78,538 $ 89,915 $ 62,337
% of gross revenue 30.8% 19.7% 10.9% 13.1% 15.0% 10.4%
* Linked quarter percentage changes are presented on an annualized basis.
- - Principal transactions revenue increased 16% linked-quarter, primarily as a
result of higher levels of fixed income sales and trading activity.
- - Investment banking and the Fixed Income Capital Markets and Equity Capital
Markets lines of business all experienced declining revenues
linked-quarter, reflecting less robust deal flow in fixed income and equity
capital markets.
- - Interest income increased due to both higher margin account balances and
higher levels of trading securities.
- - 1Q06 other income includes a $13.1 million pre-tax gain related to the
swap of NYSE seats in exchange for stock.
- - Non-interest expense was down $4.9 million linked-quarter due to lower
salaries and benefits expense, offset partially by increased occupancy and
other operating expenses.
- - Private client revenues declined slightly linked-quarter due primarily to
the seasonality of the third quarter, but were up $6 million or 10%
year-over-year third quarter as customer assets and customer accounts
continued to grow.
- - Asset management revenues increased both linked-quarter ($1 million) and
year-over-year ($5 million or 16%) due in part to a successful, ongoing
effort to increase assets held in wrap accounts.
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 13
MORGAN KEEGAN (CONT.)
- - 20,000 new accounts were opened in 3Q06 compared to 22,200 in 2Q06 and
21,300 in 3Q05.
- - Total customer assets were $65.9 billion at September 30, 2006, compared to
$62.5 billion at June 30, 2006 and $54.4 billion at September 30, 2005.
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 14
MORTGAGE OPERATIONS
MORTGAGE OPERATIONS
3Q06 2Q06 1Q06 4Q05 3Q05
------------- ------------- ------------- ------------- -------------
Single family mortgage production (millions):
Regions Mortgage $ 1,253 $ 1,440 $ 1,345 $ 1,459 $ 1,676
EquiFirst 2,754 2,966 1,749 2,203 2,482
------------- ------------- ------------- ------------- -------------
Total $ 4,007 $ 4,406 $ 3,094 $ 3,662 $ 4,158
============= ============= ============= ============= =============
Gain(loss) on sale of mortgage loans (thous.):
Regions Mortgage $ 2,956 $ 3,824 $ 2,732 $ 4,653 $ 4,716
EquiFirst 3,199 20,431 9,619 16,970 55,904
------------- ------------- ------------- ------------- -------------
Total $ 6,155 $ 24,255 $ 12,351 $ 21,623 $ 60,620
============= ============= ============= ============= =============
Servicing portfolio $36.0 BILLION $36.4 Billion $36.7 Billion $37.2 Billion $37.8 Billion
Capitalized mortgage servicing rights (net) $407.7 MM $420.3 MM $413.7 MM $412 MM $397.2 MM
MSR valuation allowance $14.4 MM $6.4 MM $20.5 MM $29.5 MM $47.5 MM
MSR capitalization rate - total portfolio 113 BPS. 115 bps. 113 bps. 111 bps. 105 bps.
MSR capitalization rate - 3rd party servicing 145 BPS. 148 bps. 144 bps. 142 bps. 135 bps.
New servicing capitalization rate 125 BPS. 117 bps. 104 bps. 116 bps. 126 bps.
3Q06 vs. 2Q06* 3Q06 vs. 3Q05
------------------ -----------------
Single family mortgage production (millions):
Regions Mortgage $ (187) -51.9% $ (423) -25.2%
EquiFirst (212) -28.6% 272 11.0%
-------- ------ -------- -----
Total $ (399) -36.2% $ (151) -3.6%
======== ====== ======== =====
Gain(loss) on sale of mortgage loans (thous.):
Regions Mortgage $ (868) -90.8% $ (1,760) -37.3%
EquiFirst (17,232) -337.4% (52,705) -94.3%
-------- ------ -------- -----
Total $ (18,100) -298.5% $(54,465) -89.8%
======== ====== ======== =====
Servicing portfolio
Capitalized mortgage servicing rights (net)
MSR valuation allowance
MSR capitalization rate - total portfolio
MSR capitalization rate - 3rd party servicing
New servicing capitalization rate
* Linked quarter percentage changes are presented on an annualized basis.
- - Mortgage profitability declined to $2.6 million in 3Q06 compared to $10.3
million in 2Q06.
- - Regions Mortgage net income, excluding MSR impairment/recapture, was $8.8
million in 3Q06 compared to $8.5 million in 2Q06.
- - Regions Mortgage recorded $8 million of MSR impairment in 3Q06 and $10
million of MSR recapture in 2Q06.
- - EquiFirst reported a $6.3 million loss in 3Q06 compared to a profit of $1.8
million in 2Q06, primarily due to lower loan sale premiums and increasing
early payment default losses.
- - EquiFirst's gross gain on sale premiums approximated 2.0% in 3Q06, compared
to 2.2% in 2Q06.
- - Regions Mortgage originates conforming mortgage loans and services loans
originated in-house and by others.
- - EquiFirst originates non-conforming mortgage loans primarily through a
broker network and sells them servicing-released, on a whole loan basis, at
a premium.
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 15
CREDIT QUALITY
CREDIT QUALITY
YTD YTD
($ in thousands) 3Q06 2Q06 1Q06 4Q05 3Q05 9/30/06 9/30/05
- ---------------- -------- -------- -------- -------- -------- ------- --------
Allowance for loan losses $778,465 $777,783 $782,368 $783,536 $783,943
Provision for loan losses $ 25,000 $ 30,000 $ 27,500 $ 40,000 $ 62,500 $82,500 $125,000
Net loans charged off:
Commercial $ 17,061 $ 22,226 $ 12,813 $ 25,129 $ 21,000 $52,100 $ 52,094
Real estate 6,956 6,280 10,209 7,019 10,053 23,445 27,680
Installment 301 2,300 5,646 8,259 5,957 8,247 16,004
-------- -------- -------- -------- -------- ------- --------
Total $ 24,318 $ 30,806 $ 28,668 $ 40,407 $ 37,010 $83,792 $ 95,778
======== ======== ======== ======== ======== ======= ========
Net loan charge-offs as a % of
average loans, annualized
Commercial 0.42% 0.59% 0.35% 0.68% 0.57% 0.46% 0.46%
Real estate 0.08% 0.07% 0.12% 0.08% 0.12% 0.09% 0.11%
Installment 0.01% 0.10% 0.25% 0.36% 0.26% 0.12% 0.23%
-------- -------- -------- -------- -------- ------- --------
Total 0.16% 0.21% 0.20% 0.28% 0.25% 0.19% 0.22%
======== ======== ======== ======== ======== ======= ========
Non-performing assets:
Non-accrual loans $246,728 $264,284 $343,880 $341,177 $382,858
Renegotiated loans 103 107 190 241 244
Other real estate 65,190 55,495 64,999 65,459 57,418
-------- -------- -------- -------- --------
Total $312,021 $319,886 $409,069 $406,877 $440,520
======== ======== ======== ======== ========
Loans past due > 90 days $ 78,785 $ 78,096 $ 92,766 $ 87,523 $ 74,246
- - Net charge-offs totaled $24 million, or an annualized 0.16 percent of
average loans, and included approximately $1.4 million of net charge-offs
from the Katrina-related portfolio.
- - The provision for loan losses was $25 million in 3Q06.
- - Regions' September 30, 2006, allowance for loan losses includes
approximately $55 million of reserves identified for the Katrina portfolio;
approximately $7 million in cumulative Katrina portfolio net charge-offs
have been recognized through September 30, 2006.
- - Non-performing assets decreased to 0.52% of loans and other real estate at
September 30, 2006 from 0.54% at June 30, 2006.
- - 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
THIRD 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 September 30, 2006 (in thousands)
Commercial Real Estate $401,165
Commercial & Industrial 213,445
Retail/Consumer 137,058
Mortgage 166,982
--------
TOTAL $918,650
========
Commercial Real Estate Summary as of September 30, 2006 (in thousands)
1-4 Residential $ 61,042
Retail 66,809
Land/Lots 47,487
Office Buildings 41,163
Hotel 46,143
Warehouses 18,219
Apartments 14,460
Mall 12,837
Condo 12,771
Other 80,235
--------
TOTAL $401,165
========
Net Loans Charged Off 3Q06 (in thousands)
Commercial $ 205
Retail/Consumer 372
Mortgage 804
------
TOTAL $1,381
======
Non-accrual Loan Summary as of September 30, 2006 (in thousands)
Commercial $6,137
Retail/Consumer 190
Mortgage 2,738
------
TOTAL $9,065
======
Past Due Loans > 90 Days Summary as of September 30, 2006 (in thousands)
Commercial $ 864
Retail/Consumer 182
Mortgage --
------
TOTAL $1,046
======
- - Home Equity Loans make up 51% of the Consumer/Retail Exposure as of
September 30, 2006.
- - The quality of the Katrina-impacted portfolio continues to improve with a
reduction in non-accrual loans of $4 million compared to $13 million at
June 30, 2006 and a reduction in past dues of $4 million compared to $5
million at June 30, 2006.
- - Charge-offs in the Katrina-impacted portfolio for the 9 months ended
September 30, 2006 were $6.0 million.
FINANCIAL SUPPLEMENT TO
THIRD QUARTER 2006 EARNINGS RELEASE
PAGE 17
ADDITIONAL FINANCIAL AND OPERATIONAL DATA
3Q06 2Q06 1Q06 4Q05 3Q05
------- ------- ------- ------- ------
FTE employees 24,277 24,457 24,928 25,326 25,463
Authorized shares remaining
under buyback program 18.9 MM 20.3 MM 23.9 MM 27.6 MM 6.4 MM
Full service offices 1,299 1,304 1,312 1,311 1,317
ATM's 1,549 1,564 1,586 1,585 1,594
Morgan Keegan offices 328 321 301 281 282
- - During the third quarter, 1.4 million shares were repurchased at an average
cost of $35.46.
FINANCIAL SUPPLEMENT TO
THIRD 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:
- - 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:
- 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;
- the assimilation of acquired operations to Regions' corporate culture,
including the ability to instill our credit practices and efficient
approach to 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, 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 Regions 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.
- - 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.
- - 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 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.
- - 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.
- - 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. 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.