Regions Announces Solid First Quarter Profits, Good Integration Progre

Regions Announces Solid First Quarter Profits, Good Integration Progress

    Business Editors

    BIRMINGHAM, Ala.--(BUSINESS WIRE)--April 15, 2005--Regions Financial Corporation (NYSE:RF) today reported highlights for the quarter ended March 31, 2005, including:

--	Earnings of $0.51 per diluted share or $0.57 excluding $0.06 in merger-related charges (see page 4 for additional details)
--	Merger integration continuing on schedule
--	Favorable community bank loan and deposit growth
--	Higher net interest margin and increased net interest income
--	Record profits at Morgan Keegan
--	Advance in mortgage strategy
--	Low net loan charge-offs
--	Stepped-up share repurchases

    Good Beginning for Transition Year

    "The year is off to a good start," said Regions Chairman and CEO Carl E. Jones Jr. "First-quarter earnings met our expectations, benefiting from a very strong capital markets business, along with solid loan and deposit growth, outstanding credit quality and additional merger-related cost saves.
    "And, our integration is proceeding as scheduled - we have completed preparations for the first legacy Union Planters bank branch conversion event, which is set for the weekend of April 22," Jones said. "We also completed rebranding efforts and signage changes for more than 300 branches located in our South Florida and Midwest markets. In addition, as part of our ongoing effort to evaluate the strategic deployment of capital, we made the decision to exit Regions' conforming wholesale mortgage banking operations and the Capital Factors subsidiary."
    Jones said no significant earnings impact is expected as a result of these sales.

    First Quarter EPS of $0.57 Before Merger-Related Charges (see page 4 for additional details)

    First quarter 2005 net income was $242 million, or $0.51 per diluted share, including after-tax merger-related costs of $27 million ($0.06 per diluted share). This compares to fourth quarter 2004's $0.50 per diluted share, including $0.06 of merger-related and other costs. Accordingly, excluding special charges, per share earnings rose 2% from $0.56 in fourth quarter 2004 to $0.57 in first quarter 2005.
    Regions' July 1, 2004, merger with Union Planters Corp. was accounted for as a purchase, therefore, 2004 first and second quarter financial data are only for legacy Regions and do not include the former Union Planters. Legacy Regions reported first quarter 2004 net income available to common shareholders of $166.6 million, or $0.60 per diluted share, including an after-tax $2 million ($0.01 per share) charge related to a new accounting pronouncement.
    "This is truly a transition year for Regions," said the Regions chairman, who will turn over his title as CEO to Regions President Jackson W. Moore on July 1. "We're working hard to build a more efficient and profitable long-term business model, and our first-quarter progress is encouraging."
    Jones then noted factors that did restrict further bottom-line improvement in the first quarter were a less accommodating yield curve, mortgage banking softness and seasonality.

    Merger Integration Remains on Schedule

    The merger integration is proceeding smoothly, with the first round of bank branch conversions scheduled for completion later this month.
    "Preparations for this milestone were the focal point of first-quarter integration efforts," said Moore, who is responsible for the company's banking operations. "Ensuring a seamless experience for our customers has been critical to the planning process, and we're comfortable this will be the case as 'dress rehearsals' have gone well."
    This initial phase of conversions involves more than 100 branches located in Alabama, Arkansas, Kentucky, Louisiana, Tennessee and Texas. All three phases of the conversion are still on track for completion by year-end 2005, with the next two conversions including more than 250 branches each. Conversion of the mortgage origination platform was completed in the first quarter.
    Regions realized approximately $23 million in cost saves during the quarter. Full-year 2005 targeted saves are unchanged at $130 million to $150 million. As previously disclosed, $50 million to $60 million of these planned savings will be used to fund additional investment spending related to building out talent in strategic businesses, enhancing technology and constructing new bank branches. Revenue and efficiency payback from the investments is not anticipated to be material until 2006 and beyond.

    Banking Franchise Achieves Solid Results

    Regions' banking operations posted favorable first quarter results, especially taking into account seasonal challenges. Taxable equivalent net interest income of $701 million increased $5.8 million compared to fourth quarter 2004. An 8 basis point rise in the net interest margin to 3.84% offset the effect of two fewer days in the first quarter. In connection with the recapture of $35 million in mortgage servicing rights impairment, $1.4 billion in bonds were sold at an approximate $34 million loss.
    Community banking loans and deposits achieved steady gains, increasing at an annualized 5% and 6% rate, respectively, linked-quarter average comparison. Home equity and commercial real estate credits continued to fuel loan growth, as commercial loan outstandings remained flat. Deposit growth was fueled by low-cost demand deposits and retail certificates of deposit.

    Morgan Keegan Books Strong Revenues, Record Earnings

    Morgan Keegan's first quarter performance was excellent. Revenues and after-tax profits rose to $204.3 million and $26.2 million, respectively, from fourth quarter's $203.7 million and $23.8 million. All major segments achieved good results, but fixed income banking and equity capital markets banking businesses were particularly strong, benefiting from healthy deal flow.
    "We're very pleased with Morgan Keegan's first-quarter accomplishment and encouraged about full-year prospects," said Regions Vice Chairman and Morgan Keegan Chairman Allen B. Morgan, Jr. "Market conditions have been favorable this quarter, and we've started to see the pay-off from moves we've made to better leverage Regions' broadened customer base."

    Mortgage Banking Strategy Advances

    Regions continues to take steps to right-size its conforming mortgage business and evaluate its business strategies. In line with these ongoing reviews, during the first quarter, Regions announced that its conforming wholesale origination operation will be assumed by M&T Mortgage effective May 1.
    Helped by cost saves and loan sale gains, the company's conforming mortgage earnings improved to $5.2 million, excluding mortgage servicing right recapture, in the first quarter from the fourth quarter's disappointing $850,000, as origination volume declined slightly to $2.1 billion in the first quarter of 2005. However, profitability of EquiFirst, Regions' non-traditional mortgage operation, weakened to $4.8 million from $7.3 million in the preceding period. While EquiFirst's residential mortgage originations were little changed from fourth-to-first quarter, or $1.7 billion, lower sales volume reduced gain on sale revenues in the first quarter of 2005.
    "Given rising interest rates and industry competitive pressures, 2005 will be a challenging year for Regions' overall mortgage business," Jones said. "We're nevertheless determined to carve out additional efficiencies and refine our strategies in this area to continue to better position this important part of our business."

    Sound Expense Management

    First quarter core operating expenses totaled $718 million, excluding a $35 million mortgage servicing rights reserve recapture benefit and $38.9 million of merger-related costs. This compares to fourth quarter's $714 million (excluding $35 million of merger and other charges) and reflects the benefit of cost saves of $23 million. The impact of the cost saves was somewhat mitigated by seasonally higher costs such as employee benefits and investment initiatives previously discussed.

    Net Loan Charge-Offs Decline

    Regions' overall credit quality remains good. First quarter net loan charge-offs dropped to a low $24.7 million, or an annualized 0.17% of average loans. Provisioning of $30 million resulted in a March 31 loan loss allowance-to-total loans ratio of 1.31%.
    Due to a single sizable loan relationship, non-performing assets increased to $487.1 million (0.84% of loans and other real estate) from year-end 2004's $452.3 million.

    Returning Excess Capital to Shareholders

    During the first quarter, Regions repurchased 4.5 million shares. Management expects the full-year impact of share repurchases in 2005 to result in a reduction of 7 million to 10 million average shares outstanding compared to fourth quarter year 2004 levels.
    Regions will host a conference call and Webcast to discuss first-quarter earnings this morning at 8:30 a.m. CT. Internet access to the call and to the supporting materials will be available through the Investor Relations section of the Regions Web site, www.regions.com, under the heading of Live Webcast. Telephone access to the call may be obtained by dialing 1-800-322-5044 for U.S. callers and 617-614-4927 for international callers with access code 27822597 by 8:20 a.m. CT.

    About Regions Financial Corporation

    Regions Financial Corporation (NYSE: RF), headquartered in Birmingham, Ala., is a full-service provider of retail and commercial banking, securities brokerage, mortgage, and insurance products and services. With its merger with former Union Planters Corp. complete, Regions had assets of $84.3 billion as of Mar. 31, 2005, making it one of the nation's Top 15 financial services providers. Regions' banking subsidiaries, Regions Bank and Union Planters Bank, operate some 1,400 offices and a 1,700-ATM network across a 15-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 more than 250 offices. Additional information about the new Regions, which is a member of both the Forbes and Fortune 500 and operates one of the Top 20 mortgage companies in the United States, can be found at www.regions.com.

Reconciliation to GAAP Financial Measures

The table below presents the computation of earnings excluding certain significant items affecting financial results. These significant items are included in financial results presented in accordance with generally accepted accounting principles (GAAP). We believe the exclusion of the significant items in expressing earnings provides a meaningful base for period-to-period comparisons. See the table below for computation of earnings excluding significant items and corresponding reconciliation to GAAP financial measures for the periods presented.

Pre-tax After-tax Diluted EPS ---------------------------------------------------------------------- First Quarter 2005: GAAP EARNINGS-COMMON SHAREHOLDERS $347.5 $241.6 $0.51 Significant items impact:(1) Merger and other charges (38.9) (26.8) (0.06) Loss on sale of securities (34.0) (23.6) (0.05) Mortgage servicing rights recapture 35.0 24.3 0.05 -------------------------- Net impact (37.9) (26.1) (0.06) -------------------------- Earnings excluding significant items $385.4 $267.7 $0.57 ==========================

Fourth Quarter 2004: GAAP EARNINGS-COMMON SHAREHOLDERS $343.0 $236.5 $0.50 Significant items impact:(1) Merger and other charges (35.0) (26.0) (0.06) -------------------------- Net impact (35.0) (26.0) (0.06) -------------------------- Earnings excluding significant items $378.0 $262.5 $0.56 ==========================

Third Quarter 2004: GAAP EARNINGS-COMMON SHAREHOLDERS $365.7 $255.5 $0.55 Significant items impact:(1) Merger and other charges (12.4) (8.7) (0.02) Gain on sale of securities 49.9 35.0 0.07 Mortgage servicing rights impairment (50.0) (35.1) (0.07) Effect of EITF 03-6 adoption (3) - (1.3) - -------------------------- Net impact (12.5) (10.1) (0.02) -------------------------- Earnings excluding significant items $378.2 $265.6 $0.57 ==========================

Second Quarter 2004 (2): GAAP EARNINGS-COMMON SHAREHOLDERS $228.5 $159.3 $0.58 Significant items impact:(1) Merger and other charges (8.2) (5.8) (0.02) Losses on early retirement of FHLB advances (39.6) (28.1) (0.10) Mortgage servicing rights recapture 40.0 28.4 0.10 Effect of EITF 03-6 adoption (3) - (2.7) (0.01) -------------------------- Net impact (7.8) (8.2) (0.03) -------------------------- Earnings excluding significant items $236.3 $167.5 $0.61 ==========================

First Quarter 2004 (2): GAAP EARNINGS-COMMON SHAREHOLDERS $238.4 $166.6 $0.60 Significant items impact:(1) Gain on sale of securities 12.8 9.1 0.03 Mortgage servicing rights impairment (12.0) (8.5) (0.03) Effect of EITF 03-6 adoption (3) - (2.0) (0.01) -------------------------- Net impact 0.8 (1.4) (0.01) -------------------------- Earnings excluding significant items $237.6 $168.0 $0.61 ==========================

(1)Positive/(negative) impact on GAAP earnings (2)Results prior to third quarter 2004 are for legacy Regions, as the merger (accounted for as a purchase transaction) with Union Planters was not effective until July 1, 2004. However, prior period per share amounts have been restated to reflect the exchange of Regions shares in connection with the merger. Each Regions shareholder received 1.2346 shares for each 1.0 share held on July 1, 2004. (3)Effective second quarter 2004 and retroactively applied, EITF 03-6, "Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share," requires a portion of earnings to be allocated to participating securities using the two-class method described in FAS 128. Regions repurchased 4.0 million shares through an accelerated stock repurchase agreement entered into March 9, 2004 which included a forward agreement, considered a participating security. First and second quarter 2004 earnings were reduced by $0.01 per basic and diluted share each quarter as a result of the application of this EITF. As the position was closed out during the third quarter, basic and diluted EPS for the third quarter were reduced by less than $0.01 per share.

Financial Highlights (Unaudited) (Dollar amounts in thousands, except per share amounts)

Three Months Ended March 31 -------------------------- 2005 2004 Change ------------ ------------- Earnings

Net income $241,641 $168,535 43% Net income available to common shareholders $241,641 $166,572 45%

Per share: Net income $0.52 $0.61 -15% Net income-diluted $0.51 $0.60 -15% Cash dividends declared $0.34 $0.33 3%

March 31 -------------------------- Financial Condition 2005 2004 Change ------------ -------------

Total assets $84,283,632 $48,776,943 73% Loans, net of unearned income $57,964,503 $32,769,750 77% Securities $12,214,544 $8,505,034 44% Total earning assets $74,308,224 $44,746,887 66% Total deposits $59,587,671 $31,425,573 90% Stockholders' equity $10,645,143 $4,426,458 140% Stockholders' equity per share $22.98 $16.39 40%

Selected Ratios

Return on average stockholders' equity(a) 9.15% 15.14% Return on tangible equity(a) 18.00% 20.02% Return on average total assets(a) 1.16% 1.39% Stockholders' equity to total assets 12.63% 9.07% Allowance for loan losses as a percentage of loans, net of unearned income 1.31% 1.39% Loans, net of unearned income, to total deposits 97.28% 104.28% Net charge-offs to average loans(a) 0.17% 0.17%

(a) Annualized

Results prior to third quarter 2004 are for legacy Regions, as the merger (accounted for as a purchase transaction) with Union Planters was not effective until July 1, 2004. However, prior period per share amounts have been restated to reflect the exchange of Regions shares in connection with the merger. Each Regions shareholder received 1.2346 shares for each 1.0 share held on July 1, 2004.

For additional information, including supplemental financial information, refer to Regions' Form 8-K filed with the Securities and Exchange Commission on April 15, 2005, or visit Regions' Web site at www.regions.com. Regions' Investor Relations contact is Jenifer Goforth at 205/244-2823; Regions' Media contact is Kristi Lamont Ellis at 205/326-7179.

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.

--30--TM1/na*

CONTACT: Regions Financial Corporation Investor Relations: Jenifer Goforth, 205-244-2823 or Media contact: Kristi Lamont Ellis, 205-326-7179

KEYWORD: KENTUCKY IOWA INDIANA GEORGIA FLORIDA ALABAMA TEXAS TENNESSEE SOUTH CAROLINA NORTH CAROLINA MISSOURI INDUSTRY KEYWORD: BANKING CONFERENCE CALLS EARNINGS SOURCE: Regions Financial Corporation

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