Filed by Regions Financial Corporation
Pursuant to Rule 425 under the Securities Act of
1933 and
deemed filed pursuant to Rule 14a-12 of the
Securities Exchange Act of 1934
Subject Companies: Union Planters Corporation
(Commission File No. 1-10160)
Regions Financial Corporation (Commission File
No. 0-6159)
[Regions Logo][Union Planters Logo]
Investor Relations
Contact:
Regions Financial
Corp.:
Jenifer M. Goforth
205/244-2823
Media Relations
Contact:
Regions Financial
Corp.:
Kristi Lamont Ellis
205/326-7179
CORPORATE PARTICIPANTS
JENIFER GOFORTH
Regions Financial Corp. - IR
CARL JONES
Regions Financial Corp. - Chairman, President, CEO
BRYAN JORDAN
Regions Financial Corp. - EVP, CFO
RICK HORSLEY
Regions Financial Corp. - Vice Chairman, COO
CONFERENCE CALL PARTICIPANTS
JEFF DAVIS
First Tennessee - Analyst
AMY EISNER
Friedman, Billings,
Ramsey-Analyst
JEFFERSON HARRALSON
KBW-Analyst
KEVIN REEVEY
Ryan Beck-Analyst
ROGER LISTER
Morgan Stanley-Analyst
JED GORE
Synovus Capital - Analyst
CHRIS MARINAC
FIG Partners-Analyst
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PRESENTATION
OPERATOR
Good day, ladies and gentlemen, and welcome to Regions Financial Corporation's
first quarter earnings conference call. My name is Carol and I will be your
coordinator for today. (OPERATOR INSTRUCTIONS). As a reminder, ladies and
gentlemen, this conference is being recorded. I would now like to turn the
presentation over to Ms. Jenifer Goforth. Ma'am, please go ahead.
JENIFER GOFORTH - REGIONS FINANCIAL CORP. - IR
Thank you for joining us today. Carl Jones, Regions' Chairman and CEO; Rick
Horsley, Regions' Chief Operating Officer; and Bryan Jordan, Regions' Chief
Financial Officer will be commenting on first quarter earnings and the status of
our merger with Union Planters. Our earnings release and supplement has been
filed on Form 8-K and is also located on our website at regions.com in the
Investor Relations section of website.
As always, I remind you that certain statements made in this call may be
forward-looking. These forward-looking statements reflect Regions' current views
with respect to future events and financial performance. Absolute results could
differ substantially and materially from what we have projected. Such statements
are made in good faith pursuant to the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995. Please refer to our press release
filed on Form 8-K dated today, April 16, 2004, for factors that could affect the
accuracy of our expectations or cause our future results to differ materially
from our expectations. With that I will turn it over to Mr. Jones.
CARL JONES - REGIONS FINANCIAL CORP. - CHAIRMAN, PRESIDENT, CEO
Good morning everyone. We've got good news to report on two fronts this
morning. We'll talk about our first quarter financials and we will talk about
the status of our plans and preparations for our upcoming merger with Union
Planters. Rick will help me with the latter and Bryan will help me discuss the
former. I am pleased with both efforts. But let me highlight first the quarterly
financial results.
Our first quarter earnings totaled $168.5 million or 75 cents per diluted share.
That is an increase of $4.7 million or 11 percent on a linked quarter annualized
basis. Topline revenue grew almost 12 percent on an annualized basis, and
continues at an almost 50-50 mix, fee income to net interest income.
Within the last year I stated that 2004 was going to be the year of our
frontline bankers, as we renewed focus on our community banking franchise. Well
our banks are delivering as evidenced by the healthy growth in loans and
low-cost deposits.
We're moving forward with our DeNovo Bank expansion. Although we have slowed a
bit the first quarter, maybe it has something to do with the pending merger. We
have opened seven branches during the quarter, including a couple of
relocations. About twenty more branches are in process and scheduled to open
this year mainly in Texas, Florida and the Carolinas.
Another highlight of the first quarter was that the margin was stable, actually
up a couple of basis points from the fourth quarter and up 6 basis points from a
year ago. To me that says we aren't out there buying that healthy growth I
referred to earlier.
Looking at our nonbanking units a moment, Morgan Keegan had a record first
quarter and their third best quarter ever. Insurance revenues increased 17.8
percent year-over-year. Our nonconforming mortgage company, EquiFirst, had
another record quarter. Our conforming mortgage operations suffered through a
substantial decline in refi business for most of the quarter, and then saw a
rate change towards the end of the quarter that restarted the refi activity, but
created some impairment in our MSRs, which we dealt with as usual selling some
bullet agencies to create offsetting gains.
But maybe our biggest story the first quarter involves our asset quality. Past
dues are at record lows. Nonperformers declined more than $50 million in the
last 90 days and declined more than $100 million dollars in the last year. And
we didn't register this accomplishment by charging them off; net charge-offs in
the first quarter were only 17 basis points. This record enabled us to reduce
our provision in the first quarter while still over providing for our net
charges.
And finally let me remind you that we raised our dividends with the quarterly
dividend rate increasing 28 percent, producing a 4.5 percent yield at quarter
end. So all in all, we're proud of our first quarter. Solid, steady performance
built on positive fundamentals. In a moment Bryan will circle back and discuss
some of the details with you.
But while I still have the talking card let me mention a few highlights of our
merger integration plan. I'm pleased to report that we're on track for a midyear
completion of the merger. Preparations are going as expected, lead brilliantly
by Rick Horsley, our Vice Chairman and COO, and Bobby Doxey, who is Senior EVP
and CFO of Union Planters. These two guys are great
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RF-Q1 2004 REGIONS FINANCIAL CORP. EARNINGS CONFERENCE CALL
champions for this effort and they bring tremendous operational and merger
experience to the table.
Our planning has gotten quite specific at this point. As we have made regular
announcements to our associates as to the who's, what's and when's in the
postmerger environment. The rating agencies had some questions about our
integration plans, but after meeting Rick and some of his team, all three
agencies have reaffirmed Regions' ratings in the go forward combined
environment.
Both companies independently at this point are progressing as expected as we
prepare for consummation of this merger. Union Planters announced their first
quarter results yesterday and they were within our range of expectations. Of
course our announcement this morning, again, within our range of expectations.
But let me emphasize that today our integration plan is the single most
important initiative in our Company. We remain tremendously excited about the
opportunities ahead. In the interim, our goal is to remain focused on our
customers, our associates, and on growing our franchise during the transition.
Rick is going to discuss our integration efforts in more detail in a moment.
First, I would like to turn the call over to Bryan who can give you a little
more color on the first quarter results.
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
Good morning. All in all this was a clean, strong quarter. The main themes for
the quarter were consistency and growth. Regions continued to perform well in
the first quarter, generating earnings growth built on the consistent strength
of our fundamentals, positive trends in our core banking business, a
well-positioned balance sheet, and outstanding credit quality.
We grew revenues 12 percent on a linked quarter annualized basis and 5.8 percent
year-over-year, excluding security gains. We earned 75 cents per diluted share
in the first quarter, an increase of 5.6 percent year-over-year, and an 11
percent increase on a linked quarter annualized basis.
One of the drivers of our quarter was a continued rise in loan and deposit
activity. Total loans in the first quarter grew 8 percent, linked quarter
annualized, mainly due to a pick up in commercial real estate. Commercial and
industrial activity was up slightly from last quarter, having slowed somewhat in
January but followed by a nice pick up towards the end of the quarter. We're
optimistic that this trend will continue.
Low-cost deposits continued to grow, increasing 7.1 percent in the first three
months of the year. Non-interest-bearing and interest-bearing transaction
accounts are driving this growth. We started a positive acquisition campaign in
our banking franchise in January that has yielded positive results on new
accounts opened. Our banks have the goal of opening 250,000 new deposit accounts
over the course of 2004, utilizing products like free checking and free bill pay
with direct deposit, products and features with a good customer retention
characteristics. So far we have opened 55,000 new deposit accounts.
Another highlight of the quarter was our excellent credit quality.
Non-performing assets were down 18 percent or $55 million to $248 million
compared to $303 million in the fourth quarter and $339 million in the first
quarter of 2003. Non-performing assets totaled 75 basis points of total loans at
March 31st, down from 94 basis points at year-end and 1.07 percent in the same
period last year.
Also notable is the fact that new non-accruals slowed significantly in the first
quarter. Net charge-offs in the first quarter were $13.5 million while our
provision for loan losses totaled $15 million. The allowance for loan losses as
a percentage of loans was 1.39 percent, a slight decline from 1.41 percent
December 31st.
We continue to maintain a strong balance sheet. Our strategy of maintaining a
shorter duration in our investment portfolio given the current economic
environment and the slightly asset sensitive position should pay off when
interest rates rise. At March 31st, our securities portfolio had a duration of
2.61 years with a yield of 4.06 percent.
Net interest margin was up in the first quarter at 3.56 percent compared with
3.54 percent in the previous quarter. Net interest income totaled $379 million
for the quarter, virtually flat compared to the fourth quarter. Again, we remain
slightly asset sensitive at March 31st and expect a stable net interest margin
in the second quarter.
Turning now to our fee-based revenues, our balanced business mix continued to
produce steady and predictable returns in the first quarter. Fee-based revenues
in the first quarter were approximately 48 percent of total revenues.
Noninterest income totaled $353 million, up 26 percent linked quarter
annualized, and up 6 percent compared to 2003, both excluding security gains.
Of note was the solid performance of our mortgage business. Originations were
down only slightly from the fourth quarter. The gain on sale of mortgages,
however, increased by $3 million. The contribution to total net income by
mortgage operations, net of impairment charges, was $13.5 million or about 8
percent compared with $15 million or 9 percent in the fourth quarter.
EquiFirst, our non-conforming mortgage subsidiary, contributed $9.2 million to
net income in the first quarter compared with $8.5 million in the fourth
quarter. Originations dipped to $985 million from $1.1 billion in the fourth
quarter, but were ahead of first quarter 2003's $695 million. Higher sale
premiums increased the gain on sale amount.
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RF-Q1 2004 REGIONS FINANCIAL CORP. EARNINGS CONFERENCE CALL
Late last year EquiFirst expanded its origination and underwriting platform to
the western U.S. by opening an office in Phoenix. It's off to a great start.
Origination volume doubled each month during the first quarter. The Phoenix
office is on track to break even by summer.
Regions Mortgage, our conforming mortgage subsidiary, earned $4.3 million net of
impairment versus fourth quarter's $6.5 million. Origination volume declined 731
-- excuse me -- declined to $731 million from $801 million. There was a
noticeable pickup in refinance activity in March that led to a quarter end
unclosed pipeline of $804 million, sharply above year end's $537 million. We are
comfortable with our pipeline hedging at quarter end.
During the first quarter we incurred mortgage servicing rights impairment of $12
million, which was offset by securities gains. At March 31, our MSRs were valued
at 71 basis points of our servicing portfolio. With rates rising an early April,
MSR value should be increased. To the extent that higher MSR evaluations result
in any reversal of impairment reserves, you can expect us to offset the P&L
effect by taking securities losses or losses on long-term borrowings in the
future, essentially reversing the negative impact on net interest income of
security gains taken when the impairment reserves were established.
Our other major nontraditional fee business, Morgan Keegan, recorded a very good
first quarter. Earnings were $20.9 million accounting for about 12 percent of
Regions' bottom line. Revenues rose to $176 million from fourth quarter's $172
million and $160 million a year ago.
The launch of a new closed-end fund, RMK Strategic Income Fund, contributed
about $10 million in first quarter revenues, split evenly between the private
client and the equity capital markets groups. Going forward this closed-end fund
should generate annual fees approximating $2 million.
As anticipated, Morgan Keegan's business mix has adjusted to economic
conditions. Private client accounted for 34 percent of its first quarter total
revenues versus 25 percent a year earlier, while fixed incomes' contribution
dropped to 29 percent from 41 percent a year earlier. Linked quarter private
client revenues increased approximately $10 million. Equity capital markets
revenues declined $5 million sequentially.
Each year we deal with seasonal expense fluctuations in the first quarter. For
example, payroll taxes increased approximately $8 million from the fourth
quarter. The employer match of payroll taxes for many employees restarts in
January and is also impacted by the timing of first quarter incentive plans.
Payroll taxes then tend to taper off over the course of the year. Overall, we
are comfortable about our expense trends and our ability to continue to control
costs.
During the first quarter Regions repurchased 4.2 million shares of common stock
leaving approximately 7 million shares available to be repurchased under our
current share repurchase authorization. There's been a fair amount of confusion
about our dividends since the Union Planters merger announcement. Our Board of
Directors declared a total of 41.16 cents in dividends in the first quarter,
which conforms to Union Planters dividend rate adjusted for the exchange ratio.
It is Regions' intent to maintain such conformity with Union Planters' dividend
through closing of the merger at which time the Company will adopt the Union
Planters' dividend rate of 33.34 cents per quarter or 41.16 cents divided by the
exchange ratio. At yesterday's close our dividend yield was about 4.8 percent.
In summary, we have not leveraged our balance sheet through the securities
portfolio or taken on the risk of the steep yield curve by extending the
duration of our portfolio. Our diversified revenue stream, excellent credit
quality, selective branch expansion initiatives, and conservative balance sheet
position us well to further build shareholder value.
On a final note, although it would not be appropriate for us to comment on the
specifics of Union Planters first quarter earnings, as Carl said, they were in
line with our range of expectations. We continue to believe the pending merger
offers considerable opportunities to enhance long-term value of Regions and
create significant value for our shareholders. To discuss the status of the
merger integration process further I will now turn it over to Rick.
RICK HORSLEY - REGIONS FINANCIAL CORP. - VICE CHAIRMAN, COO
I do agree with Carl's assessment. It is a very exciting time in the lives of
both organizations right now. The resources of both companies are actively
engaged in this integration planning. Communication, I believe, is very
effective and cooperation between the two companies is good. The merger process
is on schedule. All regulatory and shareholder filings are on schedule and we
see no foreseeable roadblocks. We continue to expect shareholder meetings and
closings at midyear.
As you know, when we announced our transaction we laid out a two to three year
timeframe for the complete integration of the two organizations. Our overall
plan is to take whatever time is required to do it right and minimize the impact
on our customers and associates. Having said that, we have adopted a very
structured and formalized approach to planning and decision-making. It is
working well for us. For example, in the last 60 days we have determined the
functional responsibilities for all areas of the new Company, created
corresponding organizational charts, and named leadership.
With regard to the merger planning process itself, we have created management
oversight over all aspects of the merger process. It is
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RF-Q1 2004 REGIONS FINANCIAL CORP. EARNINGS CONFERENCE CALL
coordinated centrally and enterprise-wide in scope. We have staffed our PMO and
integration teams. These teams have established aggressive schedules for the
completion of their task. Accenture was employed by the Company, our two
companies, to assist our PMO effort. And KPMG has been employed to provide
independent risk assessment.
We have begun a strategic planning process that will clearly define the future
visions and goals for the new Regions Financial Corporation. We expect this
process to be completed by closing.
A cultural survey was conducted to enhance the understanding and communication
between our two organizations. We have agreed upon a credit approval process for
the new organization. Substantial progress has been made with systems decisions.
In two weeks we expect to complete the decision process on all core technologies
systems.
We have made substantial progress in our plans to merge our mortgage operations.
You may have seen that announcement Monday. Broadly our plans call for the
second half of 2004 to be focused on installation of our corporate systems, such
as financial and HR, assimilation of the Union Planters Brokerage into Morgan
Keegan, and the merger of our mortgage company. Branch conversions should begin
in early 2005 and last for 1.5 to 2 years. We plan to begin in markets where we
have overlap.
In conclusion, I believe that integration risk is manageable and is mitigated
because there should be minimal impact to customers and customer contact
associates due to few overlap markets. Both organizations have made substantial
investments in people and systems in recent years which can be leveraged
across the new Regions. Most of the core banking systems will be on Regions'
platform where our systems are stable, scalable, quality is high, and facilities
are adequate. And finally we have no high premium to overcome or outsized cost
savings to achieve. With regard to cost saves we have refreshed our numbers that
we previously reported and believe they are achievable.
I will close here. Our plans call for us to bring you a merger update on future
calls. With that, operator, we would like to open up the call for questions.
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QUESTION AND ANSWER
OPERATOR
(OPERATOR INSTRUCTIONS). Jeff Davis of First Tennessee.
JEFF DAVIS - FIRST TENNESSEE - ANALYST
Good quarter. First question for you, Carl, and then I want to come back to
Bryan. On the loan growth, was there any geography that was particularly
notable, for instance commercial real estate in Florida?
CARL JONES - REGIONS FINANCIAL CORP. - CHAIRMAN, PRESIDENT, CEO
No, it was pretty much spread across the franchise, Jeff. And we are pleased
with that. The two big categories I guess were commercial real estate and equity
asset lines. But it was pretty much spread across the franchise.
JEFF DAVIS - FIRST TENNESSEE - ANALYST
And as you went through the quarter were the pipelines such that the feel is
that it ought to accelerate as the year progresses, or at least looking out a
quarter or so?
CARL JONES - REGIONS FINANCIAL CORP. - CHAIRMAN, PRESIDENT, CEO
We feel good about the pipeline. It is growing. And so assume they close, your
expectations there ought to be met.
JEFF DAVIS - FIRST TENNESSEE - ANALYST
Okay. Bryan, with regards to putting the two balance sheets together, could you
comment on positioning you may want to do in front of it, whether it relates to
the securities portfolio, adding, trimming? And then thoughts on purchase
accounting mark to marks and where you might benefit from that?
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
That is a --
JEFF DAVIS - FIRST TENNESSEE - ANALYST
And I guess that is a function of where rates are.
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
That's right. Clearly the mark-to-market is going to be determined at closing
date which will be around midyear. We will employee somebody to help us in the
evaluation process. I don't anticipate a lot of significant changes as a result
of the mark-to-market, but until we get to that point and go through the
process, I can't really say for sure.
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RF-Q1 2004 REGIONS FINANCIAL CORP. EARNINGS CONFERENCE CALL
JEFF DAVIS - FIRST TENNESSEE - ANALYST
Is it fair to say most of the mark-to-market's adjustments are going to be
limited then to the loan portfolio as it maybe relates to asset quality and then
secondly, mortgage servicing rights? And the securities portfolio and the
borrowings are sort of maybe a net wash?
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
Yes, that is probably not too far off. We will go through each element of it.
You will mark-to-market the securities portfolio, the borrowings, and it will
depend on the statements and the shape of the yield curve and it will have some
impact of the duration of the assets and liabilities. For the most part it will
be around investment securities, loans, borrowings, deposit, intangibles will be
where I expect the major adjustments to come.
JEFF DAVIS - FIRST TENNESSEE - ANALYST
Aside from bringing MSR values down as I assume you will, is your sense, Bryan,
is there some juice in the sum of all these adjustments? And we certainly saw it
out of Wachovia First Union?
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
If there is, Jeff, I don't think it is significant.
JEFF DAVIS - FIRST TENNESSEE - ANALYST
Okay. Thank you.
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
Let me get back to -- I just finished the first part of your question but I do
want to answer it. Their securities portfolio is like ours in terms of size to
relative assets. We both have fairly small securities portfolios. And so I don't
expect a lot of additions or reductions as a result of putting the two balance
sheets together.
OPERATOR
Amy Eisner with Friedman, Billings, Ramsey.
AMY EISNER - FRIEDMAN, BILLINGS, RAMSEY - ANALYST
First for your net interest margin guidance that you gave for a stable margin
in the second quarter, what are your interest rate assumptions? And what are
your interest rate assumptions for the year?
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
-7-
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RF-Q1 2004 REGIONS FINANCIAL CORP. EARNINGS CONFERENCE CALL
I would have to change my interest rate assumptions hourly the way it has
behaved since the first (inaudible). We think that rates are going to be stable
for a period of time here. The market seems to have picked up a little more
momentum towards rising rates on a daily basis. It looked like rates were coming
in a little bit this morning. So I am not quite sure. We are positioned for
higher rates, Amy, and over time we believe that they will be higher, whether it
would be second quarter, third quarter of 2005, I don't know. We have tried to
minimize the interest rate risk in our balance sheet. We tried to keep it as
close to neutral as we can, take as little interest rate sensitivity as
possible. But we are positioned for slightly higher interest rates.
AMY EISNER - FRIEDMAN, BILLINGS, RAMSEY - ANALYST
Okay, thank you. And just one other question. Looking at the provision,
obviously you guys had a great quarter in terms of the profits. Should we expect
this to be a run rate or is this a low in terms of losses and provision expense
going forward?
CARL JONES - REGIONS FINANCIAL CORP. - CHAIRMAN, PRESIDENT, CEO
Amy, this is Carl. I think traditionally our first quarter is our low quarter
of the year as far as net charge-offs are concerned. Our fourth quarter is
traditionally the highest. It just goes back to an old mindset of you do things
on an ongoing basis, but then at year-end you make sure you've done everything
you should have done during the year. But we are starting with the lowest level
of nonperformers we've had in several years. And so I am feeling pretty good
about the go forward situation as far as net charge-offs and the level of
nonperformance because we're starting at such a good level.
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
We go through a bottoms up analysis in the allowance every quarter. We look at
it from 360 degrees, and so it is impossible to predict where we will be from
quarter to quarter. We just go through the exercise every quarter and evaluate
it and get comfortable with it.
OPERATOR
Jefferson Harralson of KBW.
JEFFERSON HARRALSON - KBW - ANALYST
My first question is sort of a housekeeping one, if you guys have it in front
of you. But do you have what your pro forma book value and your pro forma
tangible book value will be before any proposed mark-to-markets on deal closing?
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
Yes, it will be in the S4, Jefferson. I don't have that in front of us.
JEFFERSON HARRALSON - KBW - ANALYST
Okay. Secondly, with Union Planters' numbers probably coming down today and you
guys presentation on the deal announcement, you guys added a Union Planters
consensus number coming in there. I know you can't comment so much on UP's
numbers, but I expect that the UP consensus is going to be coming down today?
And I guess my question is did you guys have some conservatism built into your
model here, or does the UP numbers coming down -- should we think about that as
negatively affecting the presentation you guys made when the deal was announced?
-8-
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RF-Q1 2004 REGIONS FINANCIAL CORP. EARNINGS CONFERENCE CALL
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
Jefferson, as you know we don't provide guidance. However, we do believe that
the pro formas and the assumptions that we made in our presentation in January
are still representative.
OPERATOR
Kevin Reevey of Ryan Beck.
KEVIN REEVEY - RYAN BECK - ANALYST
Good morning. My questions have already been answered. Thank you.
OPERATOR
(OPERATOR INSTRUCTIONS). Roger Lister with Morgan Stanley.
ROGER LISTER - MORGAN STANLEY - ANALYST
Can you give us any sense of what is happening on the C&I in terms in borrowing
demand in terms of like commitments, line usage and any signs of reduction into
the excess liquidity?
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
Carl, you might want to add to this question. It was about the line usage and
drawing down lines in excess liquidity. We're seeing fairly positive trends
there. We're not seeing a tremendous move in drawing down lines. We are seeing
more interest in higher pipeline demand. Some drawing down but it is relatively
minor at this point, Roger.
CARL JONES - REGIONS FINANCIAL CORP. - CHAIRMAN, PRESIDENT, CEO
Well I will just add a little bit to that. Our loan portfolio is really very
granular, dominated by midsize and small business. There seems to be more
activity in those two segments of the market as opposed to large commercial
businesses. The large commercial business, we're not seeing much activity, but
midsize and small are beginning to activate some lines and to draw down on some
previously committed lines. So that is part of the pipeline, and we feel pretty
good about it right now.
ROGER LISTER - MORGAN STANLEY - ANALYST
The challenge as always is that one has often a better read on the larger
corporations in terms of the economic numbers, much less of a read on what is
going on down in the small-business middle market. Are there any differences
across your regions -- across your footprint?
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
Well, just a little bit. Alabama is surprisingly strong, the urban areas of
Alabama. Florida, the commercial activity in Florida is strong. Texas is strong.
The Carolinas are strong. Those I guess would be the strongest parts of our
footprint.
-9-
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RF-Q1 2004 REGIONS FINANCIAL CORP. EARNINGS CONFERENCE CALL
ROGER LISTER - MORGAN STANLEY - ANALYST
Shifting direction, when you look at sort of increasing rates, how are you
thinking about the impact of higher rates on sort of mortgage volumes and
commercial real estate?
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
Well, it would affect as you expect. If rates go up we think originations will
fall off a little bit in the mortgage, whether it is residential or commercial.
But that is one of the things we feel good about, our topline revenue being as
diversified as it is. There ought to be some corresponding pick up in for
instance the private client business in Morgan Keegan which we're seeing; in
commercial loan activity as the economy picks up. Usually there is a correlation
between interest rates picking up and the economy picking up. So we think that
-- your premise may be correct, but we think there is some offsetting factors
that will keep our topline revenues still pretty strong.
ROGER LISTER - MORGAN STANLEY - ANALYST
So you feel like if rates are going up you have some balancing mechanisms
between noninterest bearing deposits, you know, pick up in business demand, pick
up in retail and investment banking demand and things like that that offset
maybe a slowdown elsewhere?
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
Yes, we do.
CARL JONES - REGIONS FINANCIAL CORP. - CHAIRMAN, PRESIDENT, CEO
Absolutely.
OPERATOR
Jed Gore (ph) of Sunova Capital.
JED GORE - SUNOVA CAPITAL - ANALYST
It sounds like you're not surprised by the lower run rate of Union Planters,
just given that you say it came within your range of expectations. Is it safe to
say that you believe your cost save assumptions were conservative enough to give
you some cushion to offset this lower run rate?
CARL JONES - REGIONS FINANCIAL CORP. - CHAIRMAN, PRESIDENT, CEO
I will probably let Rick answer that one.
RICK HORSLEY - REGIONS FINANCIAL CORP. - VICE CHAIRMAN, COO
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No, we have confirmed our cost savings. We did build those cost savings from
the bottom up, area by area. And we have just gone through a process to
reconfirm those numbers, and we would not want you to expect a higher number
than what we are talking about.
JED GORE - SUNOVA CAPITAL - ANALYST
I understand that, but from the beginning it feels like you had built in some
conservatism in your cost savings expectations?
RICK HORSLEY - REGIONS FINANCIAL CORP. - VICE CHAIRMAN, COO
Well, overall of course in terms of other mergers it was not a -- it was in the
range -- the low end of the range of the other mergers. But remember, we do not
have -- we do not have a lot of branch overlap that in many mergers creates cost
savings. So I believe that these are reasonable numbers. Hopefully they are
conservative. But we would not want you to expect that it that we will do a lot
better.
JED GORE - SUNOVA CAPITAL - ANALYST
Okay. So if Union Planters announcements results that are within your range of
expectations -- and they are now running at a lower run rate I think that when
you announced the deal -- what makes you still comfortable about your
expectations for the deal, I guess is what we're asking?
RICK HORSLEY - REGIONS FINANCIAL CORP. - VICE CHAIRMAN, COO
A lot of the issues with Union Planters relate to their mortgage operations.
And you can see from our plans that we are fairly aggressively putting those two
mortgage operations together. We think that is going to bring some efficiencies
and effectiveness that the two organizations operating separately do not have.
So we believe there will be synergies there. That is part of that plan that we
predicted and we were excited about. We were excited about the revenue
opportunities that we had not factored into the equation that we are beginning
to set up plans around. We believe we can leverage Morgan Keegan effectively.
But none of those numbers were in the presentations.
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
This is Bryan. I will circle back on the cost saves. Rick is absolutely right.
We structured our plans of integration and these cost saves in such a way that,
one, they were achievable. We could take a conservative measured approach to
integration and minimize customer impact.
And we're going to work to get every dollar of cost savings available to us out
of it. But we're not going to put customer business and customer revenue at risk
and try to increase that number. At this point those are numbers we're
comfortable with. And you can rest assure we're going to try to realize every
dollar that is available to us, maximize the opportunities. But we're not going
to speed up the process in such a way that you put customer business at risk.
OPERATOR
Chris Marinac of FIG Partners.
CHRIS MARINAC - FIG PARTNERS - ANALYST
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I wanted to ask you if you have any update for us on some of the divisions that
you'll be inheriting from Union Planters, particularly the factoring and other
related areas, or other parts of the footprint in terms of things you will keep
and not. If you could clarify any of that?
RICK HORSLEY - REGIONS FINANCIAL CORP. - VICE CHAIRMAN, COO
We haven't made any announcements and have no planned announcements for any
change in those areas. Union Planters is working to continue to improve the
profitability of some of those areas, and we have no future plans to announce.
CHRIS MARINAC - FIG PARTNERS - ANALYST
So, Rick, the estimates that you have out, the original numbers and I guess
what you're sort of confirming today, include all those businesses in there, you
know, factoring and the --?
RICK HORSLEY - REGIONS FINANCIAL CORP. - VICE CHAIRMAN, COO
That's correct.
CHRIS MARINAC - FIG PARTNERS - ANALYST
If you were theoretically to sell any or all of those, would it be fair to say
that those would be the kind of dilutive on the front end, or is there a
scenario where that can be actually accretive to earnings day one if you did
those?
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
Chris, this is Bryan. That is probably way too hypothetical to answer. Not
having the plans formed it is way too hypothetical to even make a guess at.
OPERATOR
Jeff Davis of First Tennessee.
JEFF DAVIS - FIRST TENNESSEE - ANALYST
A clarification. On EquiFirst front, was any of that production -- did it go to
Regions' portfolio or was it all sold out on a float basis?
BRYAN JORDAN - REGIONS FINANCIAL CORP. - EVP, CFO
Yes, it was all sold, a whole loan servicing release.
OPERATOR
Ladies and gentlemen, this concludes the question-and-answer portion of today's
call. I will now turn the presentation back to Carl Jones for his closing
remarks.
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CARL JONES - REGIONS FINANCIAL CORP. - CHAIRMAN, PRESIDENT, CEO
Well, just very briefly I want to thank you for participating this morning.
We're very excited about the start we've got for this year. We're proud of our
first quarter. And we think this is going to be a very exciting positive year
for our shareholders. And so we appreciate you sharing with us some time this
morning as we tell you about the first quarter and the status of our
put-together with Union Planters. So thanks for joining us.
OPERATOR
Ladies and gentlemen, thank you for your participation in today's conference.
This concludes the presentation, and you may now disconnect. Have a great day.
Regions Financial Corporation has filed a preliminary joint proxy
statement/prospectus with the Securities and Exchange Commission containing a
preliminary joint proxy statement/prospectus regarding the proposed merger.
Stockholders are urged to read the definitive joint proxy statement/prospectus
when it becomes available, because it will contain important information.
Stockholders will be able to obtain a free copy of the definitive joint proxy
statement/prospectus, as well as other filings containing information about
Regions Financial Corporation and Union Planters Corporation, without charge, at
the SEC's Internet site (http://www.sec.gov). Copies of the definitive joint
proxy statement/prospectus and the filings with the SEC that will be
incorporated by reference in the definitive joint proxy statement/prospectus can
also be obtained, without charge, by directing a request to Regions Financial
Corporation, 417 North 20th Street, Birmingham, Alabama 35203, Attention:
Jenifer M. Goforth, Director of Investor Relations, 205-244-2823, or to Union
Planters Corporation, 6200 Poplar Avenue, Memphis, Tennessee 38119, Attention:
Richard W. Trigger, Director of Investor Relations, 901-580-5977. The respective
directors and executive officers of Regions Financial Corporation and Union
Planters Corporation and other persons may be deemed to be participants in the
solicitation of proxies in respect of the proposed merger. Information regarding
Regions Financial Corporation's and Union Planters Corporation's directors and
executive officers and a description of their direct and indirect interests, by
security holdings or otherwise, is available in their respective preliminary
joint proxy statement/prospectus filed with the SEC on April 13, 2004.
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