Regions Reports Fourth Quarter 2007 Earnings

BIRMINGHAM, Ala.--(Business Wire)--Regions Financial Corporation (NYSE:RF) today reported earnings
for the quarter ending December 31, 2007, including these highlights:

-- Earnings from continuing operations of 10 cents per diluted
share. Excluding 14 cents of after-tax merger charges,
earnings totaled 24 cents per diluted share (see
reconciliation in "Earnings Highlights" table below)

-- Recorded $134 million of pre-tax non-merger-related charges

-- Increased provision for loan losses to $358 million - $251
million above charge-offs and $268 million higher than third
quarter 2007

-- Increased allowance for credit losses to 1.45 percent of
year-end loans from prior period's 1.19 percent

-- Implemented aggressive plan to address effects of weakening
housing demand on residential builder loan portfolio

-- Successfully completed merger integration; cost saves continue
to exceed expectations

-- Morgan Keegan continues strong performance, including record
quarterly revenue

-0-
*T
Earnings
Highlights Three months ended:

(in millions
except per
share data) December 31, 2007 September 30, 2007 December 31, 2006
Amount Dil. EPS Amount Dil. EPS Amount Dil. EPS
Earnings
Net interest
income (FTE) -
continuing
operations $1,050.4 $1,086.6 $1,094.1
Non-interest
income -
continuing
operations 733.0 729.1 637.6
Non-interest
expense -
continuing
operations 1,348.3 1,145.4 1,091.2
Income from
continuing
operations 71.1 $0.10 394.2 $0.56 372.0 $ 0.58
Loss from
discontinued
operations,
net of tax (0.5) 0.00 (0.1) 0.00 (10.4) (0.02)
Net income 70.6 0.10 394.2 0.56 361.6 0.56

Income from
continuing
operations
(GAAP) 71.1 0.10 394.2 0.56 372.0 0.58
Merger-related
charges, net
of tax(1) 93.5 0.14 56.5 0.08 59.3 0.09
Income from
continuing
operations,
excluding
merger-related
charges (Non-
GAAP)(1) $ 164.6 $0.24 $ 450.7 $0.64 431.3 $ 0.67
Key ratios
Net interest
margin (FTE) 3.61% 3.74% 4.10%
Return on
average
assets(2) 0.20% 1.14% 1.15%
Return on
average
tangible
equity(2) 3.67% 20.14% 19.59%
Asset quality
Reserves for
credit losses
as % of net
loans 1.45% 1.19% 1.17%
Net charge-offs
as % of
average net
loans(2) 0.45% 0.27% 0.27%
Non-performing
assets as % of
loans and
other real
estate 0.90% 0.62% 0.40%
Non-performing
assets
(including 90+
past due) as %
of loans and
other real
estate 1.28% 0.97% 0.55%
(1)See "Use of non-GAAP financial measures" at the end of this release
(2) Annualized
*T

Fourth quarter EPS of 24 cents, excluding merger-related charges

Regions' fourth quarter 2007 net income was $70.6 million, or 10
cents per diluted share, which included $150.2 million in pre-tax
merger-related expenses, $134.2 million in pre-tax non-merger-related
charges and valuation adjustments, and a provision for loan losses
that increased to $358.0 million. Excluding the impact of
merger-related expenses, earnings per diluted share from continuing
operations were 24 cents compared to the third quarter's 64 cents. For
the full year 2007, Regions earned $1.3 billion, or $1.95 per diluted
share, including $217.5 million of after-tax merger-related charges
(31 cents per diluted share).

"Despite an increasingly challenging operating environment,
Regions is well positioned for 2008 and beyond," said Dowd Ritter,
chairman, president and chief executive officer. "With our successful
merger integration behind us, our full energy is focused on managing
through current market challenges and the execution of our three-year
strategic plan."

Merger integration successfully completed

During the fourth quarter, Regions' final branch systems
conversions were successfully completed. Based on the success of the
first conversion event in July, the remaining conversion schedule was
condensed into two events in October and December, allowing Regions to
begin 2008 with complete focus on operating goals. Customer retention
was approximately 87 percent throughout the integration period, above
typical industry metrics even for companies not in the midst of merger
conversion.

Merger cost saves continue to be realized faster than projected,
with the Company achieving net pre-tax cost saves of $108 million in
the fourth quarter, bringing the year-to-date total to $345 million,
exceeding a $300 million target set for 2007. The full annual
projected cost savings run rate, expected to be achieved in the second
quarter of 2008, is likely to exceed $500 million.

Annualized net charge-offs of 45 basis points of average loans,
non-performing assets at 90 basis points of loans and other real
estate

Net loan charge-offs increased to $107.5 million, or an annualized
0.45 percent of average net loans, in the fourth quarter of 2007
compared to $63.1 million, or an annualized 0.27 percent of average
net loans in the prior quarter. The linked-quarter increase was
partially related to deterioration in the residential homebuilder loan
portfolio, a result of the housing down cycle in some of the Company's
markets, including Florida and Atlanta. Loans within Regions'
residential first mortgage and home equity portfolios continue to
perform relatively well.

As previously reported, residential homebuilder loans represent
approximately 8 percent, or $7.2 billion, of Regions' total portfolio
of $95.4 billion. In addition to increasing the loan loss provision,
the Company is implementing several measures to support the management
of this portion of its portfolio, including reassignment of highly
experienced, key relationship managers to focus on work-out strategies
for distressed borrowers. Approximately $850 million of loans have
been identified to be managed by Regions' special assets department.

Indicative of the more challenging credit environment, the fourth
quarter's loan loss provision totaled $358.0 million, or $250.5
million above actual fourth quarter net loan charge-offs. The total
reserve for credit losses was 1.45 percent of net loans at December
31, 2007, a significant increase over the prior quarter's 1.19
percent.

Total non-performing assets at December 31, 2007, were $864.1
million, or 0.90 percent of loans and other real estate, compared to
$588.3 million, or 0.62 percent at September 30, 2007. Stress on the
residential builder portfolio largely drove the quarterly increase.
Non-performing assets and net charge-off levels are expected to
continue upward in 2008 as the depressed housing market further
evolves.

Growing revenue through expanding customer relationships

Revenues for the fourth quarter reflect a solid, albeit lower, net
interest margin and accelerating non-interest revenue growth,
including a strong performance at Morgan Keegan.

Taxable equivalent net interest income was $1.1 billion in fourth
quarter 2007, $36.2 million below the third quarter level. The fourth
quarter's 13 basis point net interest margin decline to 3.61 percent
was driven in part by a reduced level of low-cost deposits. A purchase
of bank owned life insurance and the full effect of a large tax
deposit made in the previous quarter also pressured the net interest
margin, but were accretive to net income.

On a linked-quarter basis, total average deposits were little
changed in the fourth quarter. Average total loans grew a modest 2
percent annualized, compared to the third quarter, with an upswing to
an annualized 4 percent at quarter end.

Non-interest revenue, excluding securities transactions, grew an
annualized 16 percent from the previous quarter to $733.0 million.
This continued strong performance was driven by brokerage income and
commercial credit fees and indicates progress in deepening customer
relationships, as well as attracting new customers.

Morgan Keegan continued to expand customer relationships, opening
21,300 new retail accounts in the quarter, with overall revenue
increasing $32.5 million to a quarterly record of $350.9 million.
Strong revenue momentum was offset by a $38.5 million loss on
investments in two Morgan Keegan mutual funds, resulting in a net
earnings drop to $25.1 million compared to the prior quarter's $45.2
million. These investments, which had a market value of approximately
$65 million at year-end 2007, were made to provide liquidity for the
funds.

Non-interest expenses, additional pre-tax charges

Non-interest expenses in the fourth quarter, excluding merger
costs, rose to $1.2 billion, largely driven by valuation-related and
other charges, higher commissions related to Morgan Keegan's strong
revenue generation, higher professional fees and an increase in
marketing costs. These items more than offset incremental merger cost
saves realized for the three-month period.

The linked-quarter increase in fourth quarter non-interest
expenses, excluding merger costs, was primarily due to $120.4 million
of the charges originally announced January 3rd. As outlined at that
time, these charges include: $38.5 million in losses from investments
in Morgan Keegan funds; $51.5 million for liabilities relating to the
Visa USA Inc. antitrust lawsuit settlement with American Express and
other pending Visa litigation (reflecting Regions' share as a Visa
member); and $30.4 million in other valuation-related expenses, the
majority of which relate to Regions' mortgage servicing business.
Regions expects that proceeds from an anticipated share redemption
related to its ownership interest in Visa's planned initial public
offering will more than offset its recorded Visa-related liabilities.
The balance of the pre-tax non-merger charges announced on January 3rd
was recorded as an offset to non-interest income.

Capital position remains strong

At December 31, 2007, Regions' capital position, as measured by
the tangible stockholders' equity-to-tangible assets ratio, was a
strong 5.88 percent. This compared to 6.02 percent at September 30,
2007. Regions repurchased 3.8 million of its common shares early in
the fourth quarter; repurchases slowed as the quarter progressed.
There remain 23.1 million shares available under current repurchase
authorizations.

For supplemental financial information about the fourth quarter
results, please refer to the information on Form 8-K furnished by
Regions to the Securities and Exchange Commission on January 22, 2008,
or visit the Investor Relations page at www.regions.com.

About Regions Financial Corporation

Regions Financial Corporation is a member of the S&P 100 Index and
Forbes Magazine's "Platinum 400" list of America's best big companies.
With $141 billion in assets, Regions is one of the nation's largest
full-service providers of consumer and commercial banking, trust,
securities brokerage, mortgage and insurance products and services.
Regions serves customers in 16 states across the South, Midwest and
Texas, and through its subsidiary, Regions Bank, operates almost 2,000
banking offices and nearly 2,500 ATMs. Its investment and securities
brokerage, trust and asset management division, Morgan Keegan &
Company Inc., provides services from over 400 offices. Additional
information about Regions and its full line of products and services
can be found at www.regions.com.

Forward-looking statements

This press release may include forward-looking statements about
Regions Financial Corporation within the meaning of the Private
Securities Litigation Reform Act of 1995. Statements that are not
historical or current facts, including statements about beliefs and
expectations, are forward-looking statements. The words "believe,"
"expect," "anticipate," "project," and similar expressions often
signify forward-looking statements. Such statements involve inherent
risks and uncertainties. Regions cautions that actual results and
events could differ materially from expectations expressed in
forward-looking statements as a result of factors such as possible
changes in economic and business conditions and interest rates; the
current stresses in the financial markets; Regions' ability to attract
and retain customers; the effects of geopolitical instability and
risks such as terrorist attacks; the effects of weather and natural
disasters such as hurricanes; possible changes in laws and regulations
and governmental monetary and fiscal policies; the cost and other
effects of legal and administrative cases and similar contingencies;
possible changes in the creditworthiness of customers and the possible
impairment of collectibility of loans; increased competition from both
banks and non-banks; and effects of critical accounting policies and
judgments. For discussion of these and other risks that may cause
actual results to differ from expectations, please look under the
caption "Forward Looking Statements" in Regions' Annual Report on Form
10-K for the year ended December 31, 2006, and in subsequently-filed
Forms 10-Q, on file with the Securities and Exchange Commission. You
should not place undue reliance on any forward-looking statements,
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.

Use of non-GAAP financial measures

Page one of this earnings release presents computations of
earnings and certain other financial measures excluding discontinued
operations and merger charges (non-GAAP). Merger charges and
discontinued operations are included in financial results presented in
accordance with generally accepted accounting principles (GAAP).
Regions believes the exclusion of merger charges in expressing
earnings and certain other financial measures, including "earnings per
share from continuing operations, excluding merger charges" and
"return on average tangible equity, excluding discontinued operations
and merger charges", provides a meaningful base for period-to-period
and company-to-company comparisons, which management believes will
assist investors in analyzing the operating results of the Company and
predicting future performance. These non-GAAP financial measures are
also used by management to assess the performance of Regions'
business, because management does not consider merger charges to be
relevant to ongoing operating results. Management and the Board of
Directors utilize these non-GAAP financial measures for the following
purposes:

-- Preparation of Regions' operating budgets

-- Calculation of performance-based annual incentive bonuses for
certain executives

-- Calculation of performance-based multi-year incentive bonuses
for certain executives

-- Monthly financial performance reporting, including segment
reporting

-- Monthly close-out "flash" reporting of consolidated results
(management only)

-- Presentations of company performance to investors

Regions believes that presenting these non-GAAP financial measures
will permit investors to assess the performance of the Company on the
same basis as that applied by management and the Board of Directors.

Non-GAAP financial measures have inherent limitations, are not
required to be uniformly applied and are not audited. To mitigate
these limitations, Regions has policies in place to address expenses
that qualify as merger charges and procedures in place to approve and
segregate merger charges from other normal operating expenses to
ensure that the Company's operating results are properly reflected for
period-to-period comparisons. Although these non-GAAP financial
measures are frequently used by stakeholders in the evaluation of a
company, they have limitations as analytical tools, and should not be
considered in isolation, or as a substitute for analyses of results as
reported under GAAP. In particular, a measure of earnings that
excludes merger charges does not represent the amount that effectively
accrues directly to stockholders (i.e., merger charges are a reduction
in earnings and stockholders' equity).

See page 19 of the supplement to this earnings release for
computations of earnings and certain other GAAP financial measures and
corresponding reconciliation to non-GAAP financial measures, which
exclude discontinued operations and merger charges for the periods
presented.

Regions Financial Corporation
Media:
Tim Deighton, 205-264-5277
or
Investor Relations:
List Underwood, 205-801-0265

Copyright Business Wire 2008