<PAGE>
                                   FORM 10-Q
 
                                 UNITED STATES
 
                       SECURITIES AND EXCHANGE COMMISSION
 
                            Washington, D.C. 20549
 
                      -----------------------------------

                 Quarterly Report Under Section 13 or 15 (d) 
                   of the Securities Exchange Act of 1934
 

For the quarter ended                             SEC Commission File 
September 30, 1997                                Docket Number 0-15334
----------------------                            -----------------------
                                PALFED, INC.

-------------------------------------------------------------------------------

              (Exact name of registrant as specified in its charter)



South Carolina                                       57-0821295
-------------------------------                     ---------------------------
(State or other jurisdiction of                     (IRS Employer 
incorporation or organization)                      identification number)



107 Chesterfield Street South                                      29801 
Aiken, South Carolina                                        (Zip Code)
(Address of principal executive office)

 
Registrant's telephone number, including area code: (803) 642-1400
 
Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.
 
                 Yes..X...                        NO......
 
There were 5,299,201 shares of Common Stock outstanding on September 30, 1997.
 
<PAGE>

                                 PALFED, Inc.
              ---------------------------------------------------

                           Quarterly Report on Form 10-Q 
                      For The Quarter Ended September 30, 1997
 


                               Table of Contents
 
PART I--FINANCIAL INFORMATION
 



ITEM                                                               PAGE
                                                                  ------

1.  Financial Statements
      Consolidated Statements of Financial 
      Condition as of September 30, 1997 
      and December 31, 1996.......................................     3

      Consolidated Statements of Operations
      for the Three and Nine Months Ended 
      September 30, 1997 and 1996.................................     4

      Consolidated Statements of Cash 
      Flows for the Nine Months Ended 
      September 30, 1997 and 1996.................................     5

      Notes to Consolidated Financial Statements..................     7

2.  Management's Discussion and Analysis of 
      Financial Condition and Results of 
      Operations..................................................    11

PART II--OTHER INFORMATION

Item

5.  Other Information.............................................    16

6.  (a) Exhibits..................................................    16
    (b) Reports on Form 8-K.......................................    16

Exhibit 11.1......................................................    17

SIGNATURES........................................................    18

 

<PAGE>

Consolidated Statements of Financial Condition 
(Unaudited)
 
<TABLE>
<CAPTION>
PALFED, Inc.                                                                           September 30  December 31
and subsidiaries                                                                           1997          1996
                                                                                       ------------  ------------
<S>                                                                                    <C>           <C>
                                                                                         (in thousands, except
                                                                                              share data)
ASSETS
Cash and due from banks..............................................................   $    9,855    $   16,942
Interest-bearing deposits with other banks...........................................        6,613         3,465
Investment and mortgage-backed securities:
    Available-for-sale...............................................................       22,925        24,007
    Held-to-maturity.................................................................       50,682        58,700
Loans held-for-sale..................................................................        9,327        11,241
Loans receivable, net................................................................      540,712       512,879
Investment in real estate, net.......................................................       11,278        13,501
Investment in Federal Home Loan Bank stock...........................................        3,479        10,884
Premises and equipment, net..........................................................        5,837         5,958
Accrued interest receivable..........................................................        3,920         3,835
Other assets.........................................................................        3,876         3,845
                                                                                       ------------  ------------
                                                                                        $  668,504    $  665,257
                                                                                       ------------  ------------
                                                                                       ------------  ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
        Noninterest-bearing accounts.................................................   $   33,597    $   30,577
        Savings and NOW accounts.....................................................      126,976       121,432
        Certificates of deposit......................................................      406,339       384,678
        Accrued interest payable.....................................................        6,499         3,441
                                                                                       ------------  ------------
            Total deposits...........................................................      573,411       540,128
Federal Home Loan Bank advances......................................................       32,500        68,400
Other liabilities....................................................................        5,665         4,906
                                                                                       ------------  ------------
Total liabilities....................................................................      611,576       613,434
                                                                                       ------------  ------------
Commitments and contingencies
Stockholders' equity:
    Common stock, $1.00 par value; authorized 10,000,000 shares; 5,299,201 and
      5,231,317 shares issued and outstanding, respectively..........................        5,299         5,231
    Additional paid-in capital.......................................................       28,500        28,115
    Retained earnings................................................................       23,593        20,320
    Unearned compensation............................................................                     (1,128)
    Net unrealized loss on securities, net of tax benefit of $261 and $369,
      respectively...................................................................         (464)         (715)
                                                                                       ------------  ------------
        Total stockholders' equity...................................................       56,928        51,823
                                                                                       ------------  ------------
                                                                                        $  668,504    $  665,257
                                                                                       ------------  ------------
                                                                                       ------------  ------------
</TABLE>
 
The accompanying notes are an integral part of these consolidated financial 
statements.
                                       3

<PAGE>

Consolidated Statements of Income 
(Unaudited)

<TABLE>
<CAPTION>
                                                             Three Months Ended          Nine Months Ended
                                                         --------------------------  --------------------------
<S>                                                      <C>           <C>           <C>           <C>
PALFED, Inc.                                             September 30  September 30  September 30  September 30
and subsidiaries                                             1997          1996          1997          1996
                                                         ------------  ------------  ------------  ------------
 
<CAPTION>
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                      <C>           <C>           <C>           <C>
Interest income:
  Loans receivable.....................................   $   12,338    $   11,055    $   36,249    $   32,209
  Mortgage-backed securities...........................          998         1,081         3,082         3,244
  Investment securities................................          321           570         1,046         1,857
  Other................................................           88            58           205           182
                                                         ------------  ------------  ------------  ------------
        Total interest income..........................       13,745        12,764        40,582        37,492
                                                         ------------  ------------  ------------  ------------
Interest expense:
  Deposits.............................................        6,829         6,159        19,810        18,199
  Other borrowings.....................................          512           870         1,945         3,100
                                                         ------------  ------------  ------------  ------------
        Total interest expense.........................        7,341         7,029        21,755        21,299
                                                         ------------  ------------  ------------  ------------
Net interest income....................................        6,404         5,735        18,827        16,193
Provision for estimated losses on loans................           41           313           665           899
                                                         ------------  ------------  ------------  ------------
Net interest income after provision for estimated loan
  losses...............................................        6,363         5,422        18,162        15,294
                                                         ------------  ------------  ------------  ------------
Noninterest income:
  Checking transaction fees............................          528           611         1,603         1,812
  Financial services fees..............................          228           209           598           664
  Late charge and other fees...........................          123            77           376           353
  Net trading account gains and losses.................          110            87           318           219
  Gain on sales of available-for-sale securities.......           19            23            34           197
  Gain on sales of loans held-for-sale.................          108            67           224           350
  Real estate operations...............................         (423)         (288)         (903)         (463)
  Other................................................          206           288           576           677
                                                         ------------  ------------  ------------  ------------
        Total noninterest income.......................          899         1,074         2,826         3,809
                                                         ------------  ------------  ------------  ------------
Noninterest expenses:
  Compensation and employee benefits...................        4,043         2,449         9,504         7,429
  Occupancy and equipment..............................          784           764         2,369         2,228
  Federal insurance premiums and assessments...........          163         3,657           482         4,364
  Professional and outside service fees................          316           335         1,049         1,035
  Data processing......................................          220           208           654           626
  Advertising and public relations.....................          120           139           481           562
  Other................................................          146           375           513           864
                                                         ------------  ------------  ------------  ------------
        Total noninterest expenses.....................        5,792         7,927        15,052        17,108
                                                         ------------  ------------  ------------  ------------
Income (loss) before provision for income taxes........        1,470        (1,431)        5,936         1,995
Provision (benefit) for income taxes...................          529          (453)        2,188           749
                                                         ------------  ------------  ------------  ------------
Net income (loss)......................................   $      941    $     (978)   $    3,748    $    1,246
                                                         ------------  ------------  ------------  ------------
                                                         ------------  ------------  ------------  ------------
Earnings (loss) per share..............................   $     0.18    $     (0.19)  $     0.70    $     0.24
                                                         ------------  ------------  ------------  ------------
                                                         ------------  ------------  ------------  ------------
Dividends per share....................................   $     0.03    $     0.02    $     0.09    $     0.06
                                                         ------------  ------------  ------------  ------------
                                                         ------------  ------------  ------------  ------------
</TABLE>
 
The accompanying notes are an integral part of these consolidated financial 
statements.
                                       4

<PAGE>

Consolidated Statements of Cash Flows 
(Unaudited)
 
<TABLE>
<CAPTION>
                                                                                                     Nine Months
                                                                                                 Ended September 30,
PALFED, Inc.                                                                                     --------------------
and subsidiaries                                                                                    1997       1996
                                                                                                 ---------  ---------
<S>                                                                                              <C>        <C>
                                                                                                    (in thousands)
Operating Activities:
Cash flows from operating activities :
  Net income........................................................................             $ 3,748    $ 1,246
  Adjustments to reconcile net income to cash provided by operations:
      Depreciation and amortization.................................................                 520        642
      Recognition of unearned compensation..........................................               1,123
      Provision for estimated losses on loans and real estate.......................               1,000      1,076
      Other gains, net..............................................................                (404)      (647)
      Proceeds from sales of loans held-for-sale....................................              13,330     18,303
      Originations of loans held-for-sale...........................................             (33,150)   (33,332)
      Proceeds from sales of trading account securities.............................              35,001     17,532
      Gain on sale of available-for-sale securities.................................                 (34)      (350)
      Changes in:
            Accrued interest receivable, net........................................                 (85)       312
            Accrued interest payable................................................               3,058      5,536
            Other assets............................................................                 (81)       954
            Other liabilities (excluding deferred income)...........................                (407)     5,161
      Other, net....................................................................                 274        712
                                                                                                 ---------  ---------
      Net cash provided by operating activities.....................................              23,893     17,145
                                                                                                 ---------  ---------

Investing activities:
Cash flows from investing activities:
    Net sales of FHLB stock.........................................................               7,405
    Proceeds from sales of available-for-sale securities............................               7,128     19,198
    Principal collections on available-for-sale securities..........................               1,345     12,641
    Purchases of available-for-sale securities......................................              (7,183)    (7,998)
    Net increase in loans receivable................................................             (40,932)   (52,685)
    Purchases of held-to-maturity securities........................................                         (6,852)
    Principal collections and maturities of held-to-maturity securities.............               8,176      8,005
    Proceeds from sales of foreclosed real estate...................................               1,432      2,419
    Purchase of premises and equipment..............................................                (583)    (1,143)
    Other, net......................................................................                 (46)     1,561
                                                                                                 ---------  ---------
        Net cash used by investing activities.......................................             (23,258)   (24,854)
                                                                                                 ---------  ---------

</TABLE>
                                       5 

<PAGE>

Consolidated Statements of Cash Flows 
(Unaudited)
 
<TABLE>
<CAPTION>
                                                                                                     Nine Months
                                                                                                 Ended September 30,
PALFED, Inc.                                                                                     --------------------
and subsidiaries                                                                                    1997       1996
                                                                                                 ---------  ---------
<S>                                                                                              <C>        <C>
                                                                                                    (IN THOUSANDS)
Financing activities:
Cash flows from financing activities :
  Net increase in deposit accounts..................................................                30,225     19,077
  Proceeds from FHLB advances.......................................................                61,850     84,900
  Repayments of FHLB advances.......................................................               (97,750)  (102,700)
  Payment of cash dividend..........................................................                  (475)      (313)
  Other, net........................................................................                 1,576        844
                                                                                                 ---------  ---------
      Net cash provided (used) by financing activities..............................                (4,574)     1,808
                                                                                                 ---------  ---------
Net decrease in cash and cash equivalents...........................................                (3,939)    (5,901)
Cash and cash equivalents, beginning of period......................................                20,407     21,325
                                                                                                 ---------  ---------
Cash and cash equivalents, end of period............................................             $  16,468  $  15,424
                                                                                                 ---------  ---------
                                                                                                 ---------  ---------
Supplemental disclosures of cash flow information:
  Cash paid for:
      Interest......................................................................             $  18,697  $  15,763
      Income taxes..................................................................                 2,147      1,217
  Supplemental schedule of noncash investing and financing activities:
    Securitizations of mortgage loans...............................................             $  34,683  $  17,312
    Conversion of adjustable rate and construction loans receivable to 30 
      year fixed rate mortgage loans held-for-sale..................................                12,695      7,918
    Real estate acquired through foreclosure........................................                 1,750      4,471
    Financed sales of foreclosed real estate........................................                 2,123      1,677
    Issuance of common stock as compensation........................................                    36         81
</TABLE>
 
The accompanying notes are an integral part of these financial 
statements.
                                       6
<PAGE>
 
                         PALFED, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1. summary of Significant Accounting Policies
 
General
 
The accounting and reporting policies of PALFED, Inc. and Subsidiaries (the 
"Company") conform to generally accepted accounting principles and to general 
practice within the thrift industry. They reflect all adjustments which, in 
the opinion of management, are necessary for a fair presentation of the 
consolidated financial position, results of operations and cash flows for the 
interim periods presented. These adjustments are of a normal and recurring 
nature. These consolidated financial statements should be read in conjunction 
with the consolidated financial statements, the related notes, and the report 
of independent accountants included in the Company's Annual Report to 
Shareholders for the year ended December 31, 1996. The year end consolidated 
statement of financial condition data was derived from audited financial 
statements, but does not include all disclosures required by generally 
accepted accounting principles. The results of operations for the three and 
nine months ended September 30, 1997 are not necessarily indicative of the 
results to be expected for a full year.
 
Recently Issued Accounting Standards
 
The Financial Accounting Standards Board ("FASB") has issued SFAS No. 128, 
"Earnings Per Share", which simplifies the present standards for computing 
earnings per share ("EPS"). SFAS No. 128 replaces primary EPS with basic EPS 
which excludes dilution and is computed by dividing net income by the 
weighted average number of common shares outstanding for the period. SFAS No. 
128 replaces fully diluted EPS with diluted EPS which reflects the potential 
dilution that would occur if securities or other contracts to issue common 
stock were exercised. SFAS No. 128 is effective for the Company as of 
December 31, 1997. The following presents EPS for the three and nine months 
ended September 30, 1997 and 1996 if SFAS No. 128 had been in effect:
 
<TABLE>
<CAPTION>
                                                     Three Months          Nine Months
                                                   1997       1996       1997       1996
                                                 ---------  ---------  ---------  ---------
<S>                                              <C>        <C>        <C>        <C>
Basic earnings per share.......................  $    0.18  $   (0.19) $    0.72  $    0.24
                                                 ---------  ---------  ---------  ---------
                                                 ---------  ---------  ---------  ---------
Diluted earnings per share.....................  $    0.18  $   (0.19) $    0.70  $    0.24
                                                 ---------  ---------  ---------  ---------
                                                 ---------  ---------  ---------  ---------
</TABLE>
 
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information 
About Capital Structure", which consolidates the existing requirements to 
disclose certain information about an entity's capital structure and is not 
expected to change the Company's current capital structure disclosures. SFAS 
No. 129 is effective for the Company for the year ending December 31, 1997.
 
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income", 
which establishes standards for reporting and displaying comprehensive income 
and its components (revenues, expenses, gains and losses) in a full set of 
general-
                                       7
<PAGE>

purpose financial statements. The purpose of reporting comprehensive income 
is to present a measure of all changes in equity that result from recognized 
transactions and other economic events of the period other than investments 
by owners and distributions to owners. The FASB believes that SFAS No. 130 
should help investors, creditors and others in assessing a company's 
activities and the timing and magnitude of its future cash flows. For the 
Company, the primary difference between net income and comprehensive income 
is the change in unrealized gains and losses on securities 
available-for-sale. SFAS No. 130 is not expected to have a materially adverse 
impact on the consolidated financial position of the Company and is effective 
for the year ending December 31, 1998.
 
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments 
of an Enterprise and Related Information", which establishes new standards 
for public companies to report information about operating segments in annual 
financial statements and also requires that those companies report selected 
information about operating segments in interim financial reports issued to 
shareholders. It also establishes standards for related disclosures about 
products and services, geographic areas and major customers. Management has 
not yet determined the impact of SFAS No. 131 on the Company's future 
disclosures. SFAS No. 131 is effective for the Company beginning January 1, 
1998.
 
Reclassifications
 
Certain accounts in the 1996 consolidated financial statements have been 
reclassified to conform to the 1997 presentation. Included in these accounts 
are net reclassifications between operating and investing activities in the 
statements of cash flows of $2.6 million, relating to loans held-for-sale and 
trading securities.
 
2. Merger with Regions Financial Corporation
 
On September 23, 1997, PALFED, Inc. and Regions Financial Corporation 
("Regions") entered into an Agreement and Plan of Merger ("Agreement") 
pursuant to which PALFED will merge with and into Regions. Regions is a 
multi-bank holding company located in Birmingham, Alabama, with total assets 
of approximately $22 billion. Under the terms of the Agreement, each 
outstanding share of PALFED common stock will be converted into 0.70 shares 
of Regions common stock, subject to adjustment. The Agreement is subject to 
PALFED shareholder approval, appropriate regulatory approvals and other 
customary closing conditions. The transaction is intended to qualify as a 
tax-free reorganization. The transaction will be accounted for as a pooling 
of interests.
 
PALFED and a subsidiary of Regions are currently finalizing the terms of 
mortgage loan sub-servicing agreements in anticipation of the merger between 
these companies. Under this agreement, Regions will service approximately 
$490 million in first mortgage loans which PALFED either owns or services for 
others. The agreement is expected to provide for the nullification of this 
arrangement in the event the merger is not consummated.

3. Investment and Mortgage-Backed Securities
 
Investment and mortgage-backed securities are summarized as follows:

<TABLE>
<CAPTION>
                                                                         September 30, 1997     December 31, 1996
                                                                       ----------------------  --------------------
                                                                        Amortized     Fair     Amortized    Fair
                                                                          Cost        Value      Cost       Value
                                                                       -----------  ---------  ---------  ---------
                                                                                      (in thousands)
<S>                                                                    <C>          <C>        <C>        <C>
Available-for-sale
Investment securities................................................   $  12,448   $  12,361  $  15,964  $  15,768
Mortgage-backed securities...........................................      10,442      10,564      8,161      8,239
                                                                       -----------  ---------  ---------  ---------
                                                                        $  22,890   $  22,925  $  24,125  $  24,007
                                                                       -----------  ---------  ---------  ---------
                                                                       -----------  ---------  ---------  ---------
Held-to-maturity
Investment securities................................................   $   3,969   $   3,969  $   6,962  $   6,947
Mortgage-backed securities...........................................      46,713      47,450     51,738     52,275
                                                                       -----------  ---------  ---------  ---------
                                                                        $  50,682   $  51,419  $  58,700  $  59,222
                                                                       -----------  ---------  ---------  ---------
                                                                       -----------  ---------  ---------  ---------
</TABLE>
 
                                       8
<PAGE>

3. Loans Receivable
 
Loans receivable are summarized as follows at the indicated dates:
 
<TABLE>
<CAPTION>
                                                                                       September 30  December 31
                                                                                           1997          1996
                                                                                       ------------  ------------
<S>                                                                                    <C>           <C>
                                                                                             (in thousands)
Loan collateralized by real estate:
  Permanent residential mortgage.....................................................   $  230,685    $  224,955
  Construction.......................................................................       72,610        54,816
  Second mortgage....................................................................       55,197        56,022
  Commercial.........................................................................      158,455       145,685
Loans collateralized by other property:
  Consumer...........................................................................       32,529        34,903
  Commercial.........................................................................       16,661        16,209
Loans collateralized by savings accounts.............................................        4,780         4,725
                                                                                       ------------  ------------
                                                                                           570,917       537,315
Less:
  Loans in process...................................................................      (20,280)      (16,263)
  Unamortized yield adjustments......................................................       (2,658)       (1,190)
  Allowance for estimated losses.....................................................       (7,267)       (6,983)
                                                                                       ------------  ------------
                                                                                        $  540,712    $  512,879
                                                                                       ------------  ------------
                                                                                       ------------  ------------
</TABLE>
 
Changes in the allowance for estimated loan losses are summarized as follows
for the quarters and nine months ended September 30:
<TABLE>
<CAPTION>
                                                                                   Quarters            Nine Months
                                                                             --------------------  --------------------
                                                                               1997       1996       1997       1996
                                                                             ---------  ---------  ---------  ---------
                                                                                           (in thousands)
<S>                                                                          <C>        <C>        <C>        <C>
Balance, beginning of period...............................................  $   7,215  $   7,914  $   6,983  $   8,417
Provisions.................................................................         41        313        665        899
Charge-offs................................................................       (156)      (521)      (806)    (1,867)
Recoveries.................................................................        167         92        425        349
                                                                             ---------  ---------  ---------  ---------
Balance, end of period.....................................................  $   7,267  $   7,798  $   7,267  $   7,798
                                                                             ---------  ---------  ---------  ---------
                                                                             ---------  ---------  ---------  ---------
</TABLE>
 
At September 30, 1997, the recorded investment in loans for which impairment 
has been recognized in accordance with SFAS No. 114 totalled approximately 
$3.0 million, of which $190,000 related to loans with a corresponding 
valuation allowance of $70,000. The impaired loans at September 30, 1997, 
were measured for impairment using the fair value of the collateral as 
substantially all such loans were collateral dependent. For the nine months 
ended September 30, 1997, the average recorded investment in impaired loans 
was approximately $4.6 million. The interest income recognized on impaired 
loans during the nine months ended September 30, 1997 was $140,000. Impaired 
loans are summarized as follows:
 
<TABLE>
<CAPTION>
                                                            September 30    december 31
                                                                1997           1996
                                                            -------------  -------------
                                                                   (in thousands)
<S>                                                         <C>            <C>
Construction loans........................................    $     155      $     557
Commercial real estate loans..............................        2,303          7,150
Residential mortgage......................................          513            515
                                                                 ------         ------
                                                              $   2,971      $   8,222
                                                                 ------         ------
                                                                 ------         ------
</TABLE>
                                       9 

<PAGE>

4. Commitments and Contingencies
 
The Company has salary continuation and noncompete agreements with nine 
officers which grant these officers the right to receive three times their 
average annual compensation for the five years preceding a change of control 
of the Company and a change of duties or salary for such officers. The 
estimated contingent liability under these agreements is approximately $4.1 
million at September 30, 1997. Upon the effective date of the merger between 
PALFED and Regions (as discussed in Note 2), the obligation under these 
agreements will be fixed and payable to these officers.
 
Concurrent with the 1990 sale of the Woodside Plantation Country Club 
("WPCC"), the Company entered into an agreement with WPCC to purchase club 
memberships. This obligation to purchase memberships, based on future lot 
sales, is subject to an annual limitation and depends upon whether full or 
partial memberships are purchased. The maximum liability under this 
contingency, assuming the annual limitation is met and partial memberships 
are purchased, is approximately $1.1 million. In 1993, the Company sold the 
remaining lots and certain other real estate at Woodside Plantation and the 
purchaser assumed the Company's obligations under this agreement. The Company 
remains contingently liable under this agreement.
 
5. Financial Instruments With Off-Balance-Sheet Risk
 
The amounts of financial instruments with off-balance-sheet risk are as 
follows at the dates indicated:
 
<TABLE>
<CAPTION>
                                                                September 30  December 31
                                                                    1997          1996
                                                                ------------  ------------
                                                                      (in thousands)
<S>                                                             <C>           <C>
Financial instruments whose contract 
  amounts represent credit risk:

  Commitments to originate loans:.............................   $   33,242    $   32,908
                                                                ------------  ------------
                                                                ------------  ------------
  Unused lines of credit:.....................................   $   39,137    $   35,560
                                                                ------------  ------------
                                                                ------------  ------------
  Letters of credit...........................................   $    1,083    $    1,004
                                                                ------------  ------------
                                                                ------------  ------------
</TABLE>

                                      10 
<PAGE>

ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS
 
OVERVIEW
 
On September 23, 1997, PALFED, Inc. and Regions Financial Corporation 
("Regions") entered into an Agreement and Plan of Merger (the "Agreement") 
pursuant to which PALFED will merge with and into Regions. Under the terms of 
the Agreement, each outstanding share of PALFED common stock will be 
converted into the right to receive 0.70 shares of Regions common stock, 
subject to adjustment. The Agreement is subject to PALFED shareholder 
approval, appropriate regulatory approvals and other customary closing 
conditions. The transaction is intended to qualify as a pooling of interests 
and is expected to close during the first quarter of 1998.
 
The Company's net earnings for the three months ended September 30, 1997 were 
$941,000 or $0.18 per common share compared to a loss of $978,000 or $0.19 
per common share in 1996. The net earnings for the nine months ended 
September 30, 1997 were $3.7 million or $0.70 per common share compared to 
$1.2 million or $0.24 per common share in 1996. Earnings for the 1997 periods 
were reduced by $1.1 million (before tax) due to recognition of additional 
compensation expense related to accelerated amortization of stock grants. 
Results of operations for both the three and nine month periods in 1996 were 
significantly affected by the special assessment of $3.3 million to 
recapitalize the Savings Association Insurance Fund.
 
PALFED and a subsidiary of Regions are currently finalizing the terms of 
mortgage loan sub-servicing agreements in anticipation of the merger between 
these companies. Under this agreement, Regions will service approximately 
$490 million in first mortgage loans which PALFED either owns or services for 
others. The agreement is expected to provide for the nullification of this 
arrangement in the event the merger is not consummated.
 
COMPARISON OF 1997 AND 1996 OPERATING RESULTS
 
Net Interest Income
 
Net interest income was $6.4 million for the quarter ended September 30, 
1997, an increase of $669,000 or 11.7% compared to the quarter ended 
September 30, 1996. For the nine months ended September 30, 1997, net 
interest income increased by $2.6 million or 16.3% to $18.8 million compared 
to the nine months ended September 30, 1996. Several balance sheet changes 
contributed to the improvement. Although total assets remained virtually 
unchanged, the loan portfolio grew by $25.9 million and deposits grew by 
$33.3 million, mostly in certificates of deposit. Offsetting these increases 
were decreases in investments, including Federal Home Loan Bank ("FHLB") 
stock, cash, and FHLB advances. The net interest spread resulting from the 
investments and advances (which were paid off) was very small, while the loan 
and deposit growth produced both an increase in earning asset yield and a 
decline in cost of funds. As a result, the net interest spread and the net 
yield on average interest-earning assets improved for both the three and nine 
month periods.
 
The following table presents information with respect to interest income from 
interest-earning assets and interest expense from interest-bearing 
liabilities, expressed in both dollars (in thousands) and rates, for the nine 
months ended September 30, 1997 and 1996. Averages are computed using 
month-end balances for the periods presented. Nonaccruing loans have been 
included in average loans receivable for purposes of calculating the average 
yield on loans receivable.

                                      11
<PAGE>
 
<TABLE>
<CAPTION>
                                                                                     1997                     1996
                                                                            -----------------------  -----------------------
                                                                             Average       Yield/     Average         Yield/
                                                                             Balance        Rate      Balance         Rate
                                                                            ----------     ------     ----------      ------
<S>                                                                         <C>           <C>        <C>              <C>
Assets:
  Interest-bearing deposits...............................................  $    5,043        5.42%  $    3,482        5.17%
  Loans receivable........................................................     537,890        8.99      483,393        8.88
  Mortgage-backed securities..............................................      59,245        6.94       64,741        6.68
  Total investments.......................................................      20,009        5.65       30,574        5.52
  FHLB stock..............................................................       3,658        7.25       10,884        7.20
                                                                            ----------       -----   ----------        -----
  Total interest-earning assets...........................................  $  625,845        8.65%  $  593,074        8.43%
                                                                            ----------       -----   ----------        -----
                                                                            ----------       -----   ----------        -----
Liabilities:
  Retail savings deposits.................................................  $   33,611        2.74%  $   32,103        2.58%
  Retail time deposits....................................................     402,400        5.75      372,286        5.82
  Demand deposits.........................................................     121,562        1.98      104,621        1.72
  FHLB advances...........................................................      46,290        5.62       68,590        6.04
                                                                            ----------       -----   ----------        -----

  Total interest-bearing liabilities......................................  $  603,863        4.82%  $  577,600        4.93%
                                                                            ----------       -----   ----------        -----
                                                                            ----------       -----   ----------        -----
        Net interest spread...............................................                    3.83%                    3.50%
                                                                            ----------       -----   ----------        -----
                                                                            ----------       -----   ----------        -----
        Net yield.........................................................                    4.01%                    3.64%
                                                                            ----------       -----   ----------        -----
                                                                            ----------       -----   ----------        -----
</TABLE>
 
The following table describes the extent to which changes in interest rates 
and changes in volume of interest-earning assets and interest-bearing 
liabilities have affected Palmetto Federal's net interest income during the 
nine month periods indicated.

<TABLE>
<CAPTION>
                                                                                   September 1997 versus September 1996
                                                                                           Increase (Decrease)
                                                                               --------------------------------------------
                                                                                                        Rate/
                                                                                Volume      Rate       Volume       Total
                                                                               ---------  ---------  -----------  ---------
                                                                                              (in thousands)
<S>                                                                            <C>        <C>        <C>          <C>
Changes in:
  Interest income:
  Loans receivable...........................................................  $   3,615  $     382   $      43   $   4,040
  Mortgage-backed securities.................................................       (275)       124         (11)       (162)
  Investments................................................................       (736)       (84)         32        (788)
                                                                               ---------  ---------         ---   ---------
 Total interest income.......................................................      2,604        422          64       3,090
                                                                               ---------  ---------         ---   ---------
 Interest expense:
  Deposits...................................................................      1,736       (114)        (11)      1,611
  Other borrowed money.......................................................     (1,008)      (218)         71      (1,155)
                                                                               ---------  ---------         ---   ---------
 Total interest expense......................................................        728       (332)         60         456
                                                                               ---------  ---------         ---   ---------
Net interest income (expense)................................................  $   1,876  $     754   $       4   $   2,634
                                                                               ---------  ---------         ---   ---------
                                                                               ---------  ---------         ---   ---------
</TABLE>
 
Noninterest Income
 
Noninterest income was $899,000 for the quarter ended September 30, 1997, a 
decrease of $175,000 or 16.3% from the 1996 quarter. The decline was 
primarily attributable to increased real estate operations losses which 
resulted from an increase of $95,000 in provisions for estimated losses 
related to real estate held for development and sale. Additionally, repairs 
and maintenance on such properties increased by $55,000.
 
Checking fees continued to decline primarily due to decreased nonsufficient 
funds charges related to a previously discontinued "no minimum balance" 
product line. The number of such accounts continues to decrease, but this 
decrease has been offset by an increase in a higher average balance checking 
account.
 
The Company experienced gains of $237,000 on sales of investment and 
mortgage-backed securities available-for-sale and loans held-for-sale during 
the 1997 quarter compared to $177,000 for the 1996 quarter. For the 
comparable nine month periods, gains totalled $576,000 for 1997 and $766,000 
for 1996.
 
For the nine months ended September 30, 1997, noninterest income decreased by 
$983,000 or 25.8% to $2.8 million from the 1996 period. For the comparable 
nine month periods: losses from real estate operations increased by $440,000 
due

                                      12
<PAGE>

primarily to an increase in the provision for loss on foreclosed real estate, 
and; checking transaction fees decreased $209,000 or 11.5% due to decreases 
in fee generating accounts.
 
Noninterest Expenses
 
Noninterest expenses were $5.8 million for the quarter ended September 30, 
1997 compared to $7.9 million for the comparable 1996 quarter. The 1997 
quarter included additional compensation expense of $1.1 million related to 
certain common stock grants. Upon the signing of the definitive merger 
agreement with Regions, restrictions on 88,049 shares of restricted stock 
lapsed. These shares were issued in February 1996 pursuant to the 1993 
Restricted Stock Incentive Award Plan. The 1996 quarter included a special 
assessment of $3.3 million to recapitalize the SAIF which was enacted by the 
United States Congress on September 30, 1996.
 
Compensation and employee benefits also increased during the 1997 quarter due 
to average merit salary increases of 4%, additional employees staffing new 
offices and additional incentive compensation.
 
Other noninterest expenses decreased by 61% during the 1997 quarter. The 1996 
quarter included an estimated loss of $145,000 on a commercial checking 
account and $62,000 in goodwill and core deposit intangible amortization. 
These remaining intangible assets were written off in December 1996.
 
For the nine months ended September 30, 1997, noninterest expense decreased 
by $2.1 million from the 1996 period. The $2.1 million increase in 
compensation and employee benefits in 1997 was offset by the $3.3 million 
SAIF special assessment in 1996.
 
LENDING ACTIVITIES
 
During the quarter ended September 30, 1997, the Company originated $65.2 
million in loans compared to $56.3 million for the quarter ended September 
30, 1996. Year-to-date originations were $183.7 million in 1997 compared to 
$173.9 million in 1996. Loans receivable were $540.7 million at September 30, 
1997, compared to $512.9 million at December 31, 1996, an increase of 5.4%.
 
Residential mortgage loan originations were $25.0 million in the 1997 quarter 
compared to $20.6 million for the quarter ended September 30, 1996. 
Construction loan originations increased by 29.3% to $18.9 million in the 
1997 quarter. Consumer loan originations increased by 34.7% to $8.9 million 
for the 1997 quarter.
 
CREDIT QUALITY
 
During the quarter ended September 30, 1997, nonperforming assets and 
restructured loans continued to decline. Additionally, charge-offs during the 
quarter were $156,000 compared to $521,000 during the 1996 quarter and 
recoveries were $167,000 during the 1997 quarter compared to $92,000 in 1996. 
Consequently, the provision for estimated losses on loans was $41,000 for the 
1997 quarter compared to $313,000 for the 1996 quarter. For the comparable 
nine month periods, the provision for estimated loan losses decreased from 
$899,000 in 1996 to $665,000 in 1997 while net charge-offs decreased from 
$1.5 million in 1996 to $381,000 in 1997. The allowance for estimated loan 
losses of $7.3 million resulted in a coverage ratio of 52.4% at September 30, 
1997 compared to 29.6% at September 30, 1996.
 
Nonperforming assets (nonaccrual loans and foreclosed real estate ("REO")) 
and restructured loans, net of specific allowances, decreased from $17.7 
million or 2.7% of total assets at December 31, 1996 to $13.6 million or 2.0% 
of total assets at September 30, 1997. The table below sets forth the amounts 
and categories of Palmetto Federal's nonperforming assets and restructured 
loans at the dates indicated.

                                      13 
<PAGE>

<TABLE>
<CAPTION>
                                                                     Sept. 30    June 30   December 31   Sept. 30
                                                                       1997       1997         1996        1996
                                                                     ---------  ---------  ------------  ---------
                                                                                (dollars in thousands)
<S>                                                                  <C>        <C>        <C>           <C>
Nonaccrual loans...................................................  $   3,412  $   2,867   $    3,971   $   3,309
Foreclosed real estate.............................................      5,908      6,155        7,187       8,884
Restructured loans.................................................      4,296      5,065        6,533      10,532
                                                                     ---------  ---------  ------------  ---------
                                                                     $  13,616  $  14,087   $   17,691   $  22,725
                                                                     ---------  ---------  ------------  ---------
                                                                     ---------  ---------  ------------  ---------
General loan loss allowance as a percentage of the total...........       52.4%      50.1%        36.2%       29.6%
                                                                     ---------  ---------  ------------  ---------
                                                                     ---------  ---------  ------------  ---------
Total as a percentage of loans receivable, net.....................        2.5%       2.6%         3.4%        4.5%
                                                                     ---------  ---------  ------------  ---------
                                                                     ---------  ---------  ------------  ---------
Total as a percentage of total assets..............................        2.0%       2.1%         2.7%        3.4%
                                                                     ---------  ---------  ------------  ---------
                                                                     ---------  ---------  ------------  ---------
</TABLE>
 
The quarterly increase in nonaccrual loans resulted primarily from 
lines-of-credit totalling $375,000 to a local retailer and an increased level 
of delinquent consumer loans. The decrease in foreclosed real estate resulted 
primarily from sales of $763,000 offset by new foreclosures of $472,000. New 
foreclosures consist primarily of single family houses, none exceeding 
$275,000.
 
The Bank's total criticized assets include its nonperforming assets and 
restructured loans of $13.6 million as well as its potential problem loans of 
$6.8 million. The following table summarizes the Bank's criticized assets as 
of the dates indicated:
 
<TABLE>
<CAPTION>

                                                                     Sept. 30    June 30    December 31   Sept. 30
                                                                       1997       1997         1996        1996
                                                                     ---------  ---------  ------------  ---------
                                                                                    (in thousands)
<S>                                                                  <C>        <C>        <C>           <C>
Special mention....................................................  $  14,627  $  13,392   $   13,278   $  14,523
Substandard........................................................      5,786     14,198       17,702      22,181
Doubtful...........................................................                                364
Loss...............................................................        659        479        1,220       1,438
                                                                     ---------  ---------  ------------  ---------
                                                                     $  21,072  $  28,069   $   32,564   $  38,142
                                                                     ---------  ---------  ------------  ---------
                                                                     ---------  ---------  ------------  ---------
</TABLE>
 
REAL ESTATE DEVELOPMENT ACTIVITY
 
The purchaser of certain real estate at the Woodside Plantation project has 
an option to acquire parcels of the remaining undeveloped land at Woodside 
Plantation which option expires December 31, 1997. The Company is presently 
negotiating terms for this purchaser to acquire all the remaining undeveloped 
land. These terms may include but are not limited to a lower sales price than 
included in the option agreement and providing financing for the Purchaser. 
At this time the Company doesn't expect this sale to result in a loss to the 
Company. There are no assurances the purchaser will exercise its option by 
its expiration date.
 
LIQUIDITY
 
Palmetto Federal's principal sources of funds are deposits, loan repayments, 
proceeds from sales and principal payments of investment and mortgage-backed 
securities and loans, FHLB advances, other borrowings, and retained earnings. 
The liquidity of Palmetto Federal's operations is measured by the ratio of 
cash and short-term investments as defined by the Office of Thrift 
Supervision ("OTS") regulations to the sum of savings and borrowings payable 
in one year, less loans on savings. The Bank's average liquidity level for 
September 1997 of 5.9% was in excess of the required amount of 5.0%.
 
REGULATORY MATTERS

At September 30, 1997, 

                                      14
<PAGE>

Palmetto Federal's regulatory capital was 6.6 % for both tangible and core 
capital and 10.6% for risk-based capital, exceeding both the regulatory 
minimum levels and the well capitalized standards under the Prompt Corrective 
Action regulations adopted by the OTS under the FDIC Improvement Act of 1991. 
The most recent notification from the OTS categorized the Bank as well 
capitalized. The OTS completed its regular examination of Palmetto Federal 
and PALFED during the third quarter.
 
RECENT ACCOUNTING AND REPORTING CHANGES
 
The FASB has issued SFAS No. 128, "Earnings Per Share", which simplifies the 
present standards for computing earnings per share ("EPS"). SFAS No. 128 
replaces primary EPS with basic EPS which excludes dilution and is computed 
by dividing net income by the weighted average number of common shares 
outstanding for the period. SFAS No. 128 also replaces fully diluted EPS with 
diluted EPS which reflects the potential dilution that would occur if 
securities or other contracts to issue common stock were exercised. SFAS No. 
128 is effective for the Company as of December 31, 1997.
 
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information 
About Capital Structure", which consolidates the existing requirements to 
disclose certain information about an entity's capital structure and is not 
expected to change the Company's current capital structure disclosures. SFAS 
No. 129 is effective for the Company for the year ending December 31, 1997.
 
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income", 
which establishes standards for reporting and displaying comprehensive income 
and its components (revenues, expenses, gains and losses) in a full set of 
general-purpose financial statements. The purpose of reporting comprehensive 
income is to present a measure of all changes in equity that result from 
recognized transactions and other economic events of the period other than 
investments by owners and distributions to owners. The FASB believes that 
SFAS No. 130 should help investors, creditors and others in assessing a 
company's activities and the timing and magnitude of its future cash flows. 
For the Company, the primary difference between net income and comprehensive 
income is the change in unrealized gains and losses on securities 
available-for-sale. SFAS No. 130 is not expected to have a materially adverse 
impact on the consolidated financial position of the Company and is effective 
for the year ending December 31, 1998.
 
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments 
of an Enterprise and Related Information", which establishes new standards 
for public companies to report information about operating segments in annual 
financial statements and also requires that those companies report selected 
information about operating segments in interim financial reports issued to 
shareholders. It also establishes standards for related disclosures about 
products and services, geographic areas and major customers. Management has 
not yet determined the impact of SFAS No. 131 on the Company's future 
disclosures. SFAS No. 131 is effective for the Company beginning January 1, 
1998.

                                      15 
<PAGE>

PART II.  Other Information
 
Item 5. Other Information
 
    None.
 
Item 6. Exhibits and Reports on Form 8-K
 
    (a) Exhibits
 
    Exhibit 11.1 Statement regarding computation of per share data.
 
    (b) Reports on Form 8-K.
 
    The Company filed a report on Form 8-K dated August 26, 1997, regarding
    changes made to the bylaws of PALFED, Inc. The Company also filed a report
    dated September 23, 1997, announcing that PALFED, Inc. and Regions Financial
    Corporation ("Regions") had entered into an Agreement and Plan of Merger
    ("Agreement") pursuant to which PALFED will merge with and into Regions.

                                      16 
<PAGE>

                                   SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the 
registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.
 
                                           PALFED, Inc. 
                                           (Registrant)
 

Date: November 13, 1997                        /s/ John C. Troutman 
                                               ----------------------------
                                               John C. Troutman
                                               President and Chief 
                                               Executive Officer

Date: November 13, 1997                        /s/ Darrell R. Rains 
                                               ----------------------------
                                               Darrell R. Rains
                                               Executive Vice President 
                                               and Chief Financial
                                               Officer

Date: November 13, 1997                        /s/ Michael B. Smith 
                                               ----------------------------
                                               Michael B. Smith 
                                               Senior Vice President 
                                               and Controller

 
                                      17