SECURITIES AND EXCHANGE COMMISSION

Form 10-Q





|[X]   |                                                                             | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
|----- | --------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|      | For the quarterly period ended  June 30, 2003                              
|      | or                                                                         
|[   ] |                                                                             | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|      | For the transition period from ____________________to  ____________________





|Commission File Number: | 0-6159
|----------------------- | ------
|                        |       



|Regions Financial Corporation                         
|------------------------------------------------------
|                                                      
|(Exact name of registrant as specified in its charter)





|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 63-0589368                          
|                                                               |  |                                     
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer Identification Number)
|                                                               |  |                                     
|417 North 20th Street
Birmingham, Alabama                      |  | 35203                               
|                                                               |  |                                     
|(Address of principal executive offices)                       |  | (Zip code)                          





|(205) 944-1300                                                                    
|----------------------------------------------------------------------------------
|                                                                                  
|(Registrant's telephone number, including area code)                              
|                                                                                  
|NOT APPLICABLE                                                                    
|                                                                                  
|(Former name, former address and former fiscal year, if changed since last report)



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.



| | [X] | Yes |  | [  ] | No
| | --- | --- |  | ---- | --

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).



| | [X] | Yes |  | [  ] | No
| | --- | --- |  | ---- | --

The number of shares outstanding of each of the issuer's classes of common stock was 222,692,475 shares of common stock, par value $.625, outstanding as of July 31, 2003.





---



|REGIONS FINANCIAL COPORATION
|----------------------------
|                            
|INDEX                       
|                            
|                            
|PART I.                     
|                            
|Item 1.                     
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|Item 2.                     
|                            
|                            
|Item 3.                     
|                            
|                            
|Item 4.                     
|                            
|                            
|PART II.                    
|                            
|Item 4.                     
|                            
|Item 6.                     
|                            
|                            
|SIGNATURES                  
|                            



---

Forward Looking Statements

This Quarterly Report on Form 10-Q, other periodic reports filed by Regions under the Securities Exchange Act of 1934, as amended, and any other written or oral statements made by or on behalf of Regions may include forward looking statements which reflect Regions' current views with respect to future events and financial performance.  Such forward-looking statements are made in good faith by Regions pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.  The forward-looking statements are based on current expectations and general assumptions and are subject to various risks, uncertainties, and other factors that may cause actual results to differ materially from the views, beliefs, and projections expressed in such statements.  These risks, uncertainties and other factors include, but are not limited to, those described below.

Some factors are specific to Regions, including:

- The cost and other effects of material contingencies, including litigation contingencies.

- Regions' ability to expand into new markets and to maintain profit margins in the face of pricing pressures.

- Regions' ability to keep pace with technological changes.

- Regions' ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by Regions' customers and potential customers.

- Regions' ability to effectively manage interest rate risk and other market risk, credit risk and operational risk.

- Regions' ability to manage fluctuations in the value of assets and liabilities and off-balance sheet exposure so as to maintain sufficient capital and liquidity to support Regions' business.

- Regions' ability to achieve the earnings expectations related to the businesses that were acquired or that may be acquired in the future, which in turn depends on a variety of factors, including:

- Regions' ability to achieve the anticipated cost savings and revenue enhancements with respect to the acquired operations;

- the assimilation of the acquired operations to Regions' corporate culture, including the ability to instill Regions' credit practices and efficient approach to the acquired operations; and

- the continued growth of the markets that the acquired entities serve, consistent with recent historical experience.

Other factors which may affect Regions apply to the financial services industry more generally, including:

- Further easing of restrictions on participants in the financial services industry, such as banks, securities brokers and dealers, investment companies and finance companies, may increase competitive pressures.

- Possible changes in interest rates may increase funding costs and reduce earning asset yields, thus reducing margins.

- Possible changes in general economic and business conditions in the United States and the South in general and in the communities Regions serves in particular may lead to a deterioration in credit quality, thereby increasing provisioning costs, or a reduced demand for credit, thereby reducing earning assets.

- The existence or exacerbation of general geopolitical instability and uncertainty, including the threat or occurrence of acts of terror or the occurrence or escalation of hostilities.

- Possible changes in trade, monetary and fiscal policies, laws, and regulations, and other activities of governments, agencies, and similar organizations, including changes in accounting standards, may have an adverse effect on business.

- Possible changes in consumer and business spending and saving habits could affect Regions' ability to increase assets and to attract deposits.

The words "believe," "expect," "anticipate," "project," and similar expressions signify forward-looking statements.  Readers are cautioned not to place undue reliance on any forward-looking statements made by or on behalf of Regions.  Any such statement speaks only as of the date the statement was made. Regions undertakes no obligation to update or revise any forward-looking statements.



---



REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)



|                                                | June 30,     |  | December 31, |  | June 30,    
|----------------------------------------------- | ------------ |  | ------------ |  | ------------
|ASSETS                                          | 2003         |  | 2002         |  | 2002        
|                                                |              |  |              |  |             
|Cash and due from banks                         | $ 1,235,107  |  | $ 1,577,536  |  | $   938,871 
|Interest-bearing deposits in other banks        | 154,317      |  | 303,562      |  | 271,990     
|Securities held to maturity                     | 32,082       |  | 32,909       |  | 34,785      
|Securities available for sale                   | 9,487,220    |  | 8,961,691    |  | 8,533,371   
|Trading account assets                          | 897,732      |  | 785,992      |  | 874,709     
|Loans held for sale                             | 1,487,608    |  | 1,497,849    |  | 447,475     
|Federal funds sold and securities               |              |  |              |  |             
|purchased under agreements to resell            | 572,226      |  | 334,788      |  | 602,972     
|Margin receivables                              | 682,433      |  | 432,337      |  | 536,245     
|Loans                                           | 31,945,121   |  | 31,230,268   |  | 31,471,671  
|Unearned income                                 | (229,921)    |  | (244,494)    |  | (249,836)   
|                                                |              |  |              |  |             
|Loans, net of unearned income                   | 31,715,200   |  | 30,985,774   |  | 31,221,835  
|Allowance for loan losses                       | (456,672)    |  | (437,164)    |  | (432,624)   
|                                                |              |  |              |  |             
|Net loans                                       | 31,258,528   |  | 30,548,610   |  | 30,789,211  
|Premises and equipment                          | 623,050      |  | 638,031      |  | 644,584     
|Interest receivable                             | 208,094      |  | 242,088      |  | 241,932     
|Due from customers on acceptances               | 19,912       |  | 60,320       |  | 53,844      
|Other assets                                    | 2,890,022    |  | 2,523,127    |  | 2,176,458   
|                                                |              |  |              |  |             
|                                                | $49,548,331  |  | $47,938,840  |  | $46,146,447 
|                                                |              |  |              |  |             
|                                                |              |  |              |  |             
|                                                |              |  |              |  |             
|LIABILITIES AND STOCKHOLDERS' EQUITY            |              |  |              |  |             
|Deposits:                                       |              |  |              |  |             
|Non-interest-bearing                            | $  5,530,777 |  | $  5,147,689 |  | $  4,876,717
|Interest-bearing                                | 26,335,738   |  | 27,778,512   |  | 26,151,897  
|                                                |              |  |              |  |             
|Total deposits                                  | 31,866,515   |  | 32,926,201   |  | 31,028,614  
|Borrowed Funds:                                 |              |  |              |  |             
|Short-term borrowings:                          |              |  |              |  |             
|Federal funds purchased and securities          |              |  |              |  |             
|sold under agreements to repurchase             | 4,076,180    |  | 2,203,261    |  | 2,496,069   
|Commercial paper                                | 17,250       |  | 17,250       |  | 26,750      
|Other short-term borrowings                     | 1,999,772    |  | 1,864,946    |  | 2,380,834   
|                                                |              |  |              |  |             
|Total short-term borrowings                     | 6,093,202    |  | 4,085,457    |  | 4,903,653   
|Long-term borrowings                            | 5,439,448    |  | 5,386,109    |  | 5,369,468   
|                                                |              |  |              |  |             
|Total borrowed funds                            | 11,532,650   |  | 9,471,566    |  | 10,273,121  
|Bank acceptances outstanding                    | 19,912       |  | 60,320       |  | 53,844      
|Other liabilities                               | 1,758,954    |  | 1,302,331    |  | 853,274     
|                                                |              |  |              |  |             
|Total liabilities                               | 45,178,031   |  | 43,760,418   |  | 42,208,853  
|Stockholders' Equity:                           |              |  |              |  |             
|Preferred stock, par value $1.00 a share:       |              |  |              |  |             
|Authorized 5,000,000 shares                     | -0-          |  | -0-          |  | -0-         
|Common stock, par value $.625 a share:          |              |  |              |  |             
|Authorized 500,000,000 shares,                  |              |  |              |  |             
|issued, including treasury stock,               |              |  |              |  |             
|222,560,561; 221,336,905; and                   |              |  |              |  |             
|231,275,806 shares, respectively                | 139,100      |  | 138,336      |  | 144,547     
|Surplus                                         | 965,244      |  | 936,958      |  | 1,276,918   
|Undivided profits                               | 3,142,722    |  | 2,952,657    |  | 2,768,357   
|Treasury stock, at cost -0-; -0-;               |              |  |              |  |             
|and 10,221,700 shares, respectively             | -0-          |  | -0-          |  | (358,199)   
|Unearned restricted stock                       | (17,401)     |  | (13,620)     |  | (17,522)    
|Accumulated other comprehensive income          | 140,635      |  | 164,091      |  | 123,493     
|                                                |              |  |              |  |             
|Total Stockholders' Equity                      | 4,370,300    |  | 4,178,422    |  | 3,937,594   
|                                                |              |  |              |  |             
|                                                | $49,548,331  |  | $47,938,840  |  | $46,146,447 
|                                                |              |  |              |  |             
|                                                |              |  |              |  |             
|                                                |              |  |              |  |             
|See notes to consolidated financial statements. |              |  |              |  |             



---



REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)



|                                                                                      | Three Months Ended |  | Six Months Ended
|------------------------------------------------------------------------------------- | ------------------ |  | ----------------
|                                                                                      | June 30,           |  | June 30,        
|                                                                                      |                    |  |                 
|                                                                                      | 2003               |  | 2002            
|                                                                                      |                    |  |                 
|Interest Income:                                                                      |                    |  |                 
|Interest and fees on loans                                                            | $435,161           |  | $506,410        
|Interest on securities:                                                               |                    |  |                 
|Taxable interest income                                                               | 88,609             |  | 101,419         
|Tax-exempt interest income                                                            | 6,111              |  | 7,402           
|                                                                                      |                    |  |                 
|Total Interest on Securities                                                          | 94,720             |  | 108,821         
|Interest on loans held for sale                                                       | 19,830             |  | 9,376           
|Interest on margin receivables                                                        | 3,973              |  | 5,061           
|Income on federal funds sold and securities 
    purchased under agreements to resell | 1,391              |  | 2,251           
|Interest on time deposits in other banks                                              | 49                 |  | 71              
|Interest on trading account assets                                                    | 6,822              |  | 6,729           
|                                                                                      |                    |  |                 
|Total Interest Income                                                                 | 561,946            |  | 638,719         
|                                                                                      |                    |  |                 
|Interest Expense:                                                                     |                    |  |                 
|Interest on deposits                                                                  | 115,237            |  | 165,231         
|Interest on short-term borrowings                                                     | 27,507             |  | 32,236          
|Interest on long-term borrowings                                                      | 52,901             |  | 66,161          
|                                                                                      |                    |  |                 
|Total Interest Expense                                                                | 195,645            |  | 263,628         
|                                                                                      |                    |  |                 
|Net Interest Income                                                                   | 366,301            |  | 375,091         
|Provision for loan losses                                                             | 30,000             |  | 30,000          
|                                                                                      |                    |  |                 
|Net Interest Income After Provision for Loan Losses                                   | 336,301            |  | 345,091         
|                                                                                      |                    |  |                 
|Non-Interest Income:                                                                  |                    |  |                 
|Brokerage and investment banking                                                      | 151,811            |  | 123,296         
|Trust department income                                                               | 16,850             |  | 15,807          
|Service charges on deposit accounts                                                   | 72,205             |  | 68,943          
|Mortgage servicing and origination fees                                               | 31,757             |  | 23,283          
|Securities gains                                                                      | 15,799             |  | 1,928           
|Other                                                                                 | 89,702             |  | 57,443          
|                                                                                      |                    |  |                 
|Total Non-Interest Income                                                             | 378,124            |  | 290,700         
|                                                                                      |                    |  |                 
|Non-Interest Expense:                                                                 |                    |  |                 
|Salaries and employee benefits                                                        | 288,937            |  | 250,283         
|Net occupancy expense                                                                 | 25,518             |  | 23,964          
|Furniture and equipment expense                                                       | 20,501             |  | 23,167          
|Other                                                                                 | 149,029            |  | 123,659         
|                                                                                      |                    |  |                 
|Total Non-Interest Expense                                                            | 483,985            |  | 421,073         
|                                                                                      |                    |  |                 
|Income Before Income Taxes                                                            | 230,440            |  | 214,718         
|Applicable income taxes                                                               | 65,674             |  | 61,592          
|                                                                                      |                    |  |                 
|Net Income                                                                            | $164,766           |  | $153,126        
|                                                                                      |                    |  |                 
|                                                                                      |                    |  |                 
|                                                                                      |                    |  |                 
|                                                                                      |                    |  |                 
|Average number of shares outstanding                                                  | 222,213            |  | 224,878         
|Average number of shares outstanding-diluted                                          | 225,064            |  | 229,112         
|Per share:                                                                            |                    |  |                 
|Net income                                                                            | $0.74              |  | $0.68           
|Net income-diluted                                                                    | $0.73              |  | $0.67           
|Cash dividends declared                                                               | $0.30              |  | $0.29           
|                                                                                      |                    |  |                 
|See notes to consolidated financial statements.                                       |                    |  |                 



---



REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY(AMOUNTS IN THOUSANDS) (UNAUDITED)

|                                                           |              |          |                   |                |                           |                                        |           
|---------------------------------------------------------- | ------------ | -------- | ----------------- | -------------- | ------------------------- | -------------------------------------- | ----------
|                                                           | Common Stock | Surplus  | Undivided Profits | Treasury Stock | Unearned Restricted
Stock | Accumulated Other Comprehensive Income | Total     
|                                                           |              |          |                   |                |                           |                                        |           
|BALANCE AT JANUARY 1, 2003                                 | $138,336     | $936,958 | $2,952,657        | $      -0-     | $(13,620)                 | $164,091                               | $4,178,422
|Comprehensive Income:                                      |              |          |                   |                |                           |                                        |           
|Net income                                                 |              |          | 323,366           |                |                           |                                        | 323,366   
|Unrealized loss on available for sale securities,          |              |          |                   |                |                           |                                        |           
|net of reclassification adjustment                         |              |          |                   |                |                           | (23,886)                               | (23,886)  
|Other comprehensive gain from derivatives                  |              |          |                   |                |                           | 430                                    | 430       
|                                                           |              |          |                   |                |                           |                                        |           
|Comprehensive income*                                      |              |          | 323,366           |                |                           | (23,456)                               | 299,910   
|Cash dividends declared ($0.60 per common share)           |              |          | ( 133,301)        |                |                           |                                        | (133,301) 
|Common stock transactions:                                 |              |          |                   |                |                           |                                        |           
|Stock options exercised                                    | 624          | 21,139   |                   |                |                           |                                        | 21,763    
|Stock issued to employees under incentive plan             | 140          | 7,147    |                   |                | (9,967)                   |                                        | (2,680)   
|Amortization of unearned restricted stock                  |              |          |                   |                | 6,186                     |                                        | 6,186     
|                                                           |              |          |                   |                |                           |                                        |           
|BALANCE AT JUNE 30, 2003                                   | $139,100     | $965,244 | $3,142,722        | $      -0-     | $(17,401)                 | $140,635                               | $4,370,300
|                                                           |              |          |                   |                |                           |                                        |           
|                                                           |              |          |                   |                |                           |                                        |           
|                                                           |              |          |                   |                |                           |                                        |           
|                                                           |              |          |                   |                |                           |                                        |           
|Disclosure of reclassification amount:                     |              |          |                   |                |                           |                                        |           
|Unrealized holding losses on available for sale securities |              |          |                   |                |                           |                                        |           
|arising during period, net of tax                          |              |          |                   |                |                           | $     (5,513)                          |           
|Less: Reclassification adjustment, net of tax, for gains   |              |          |                   |                |                           |                                        |           
|and losses realized  in net income                         |              |          |                   |                |                           | 18,373                                 |           
|Unrealized holding gain on derivatives, net of tax         |              |          |                   |                |                           | 917                                    |           
|Less: Reclassification adjustment, net of tax, for losses  |              |          |                   |                |                           |                                        |           
|realized in net income                                     |              |          |                   |                |                           | 487                                    |           
|                                                           |              |          |                   |                |                           |                                        |           
|Comprehensive income                                       |              |          |                   |                |                           | $  (23,456)                            |           
|                                                           |              |          |                   |                |                           |                                        |           
|                                                           |              |          |                   |                |                           |                                        |           
|                                                           |              |          |                   |                |                           |                                        |           

*Comprehensive income for the six months ended June 30, 2002 was $372.3 million.

*Comprehensive income for the three months ended June 30, 2003 was $148.3 compared to $224.5 for the three months ended June 30, 2002.

See notes to consolidated financial statements.



---



REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS 	(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)

|                                                                             |                  |  
|---------------------------------------------------------------------------- | ---------------- | -
|                                                                             | Six Months Ended |  
|                                                                             | June 30,         |  
|                                                                             |                  |  
|Operating Activities:                                                        | 2003             |  
|                                                                             |                  |  
|Net income                                                                   | $   323,366      |  
|Adjustments to reconcile net cash provided by (used in) operating activities |                  |  
|Gain on securitization of loans held for sale                                | (6,830           | )
|Depreciation and amortization of premises and equipment                      | 33,957           |  
|Provision for loan losses                                                    | 61,500           |  
|Net amortization of securities                                               | 15,008           |  
|Amortization of loans and other assets                                       | 39,700           |  
|Provision for impairment of mortgage servicing rights                        | 19,000           |  
|Amortization of deposits and borrowings                                      | 476              |  
|Provision for losses on other real estate                                    | 1,379            |  
|Deferred income tax (benefit) expense                                        | (27,636          | )
|Gain on sale of premises and equipment                                       | (186             | )
|Realized securities gains                                                    | (25,697          | )
|Increase in trading account assets                                           | (111,740         | )
|Increase in margin receivables                                               | (250,096         | )
|Decrease in interest receivable                                              | 33,994           |  
|Increase in other assets                                                     | (426,864         | )
|Increase (decrease) in other liabilities                                     | 499,455          |  
|Other                                                                        | 3,506            |  
|                                                                             |                  |  
|Net Cash Provided By (Used In) Operating Activities                          | 182,292          |  
|                                                                             |                  |  
|Investing Activities:                                                        |                  |  
|Net increase in loans                                                        | (771,528         | )
|(Increase) decrease in loans held for sale                                   | (559,446         | )
|Proceeds from securitization of loans held for sale                          | 576,517          |  
|Proceeds from sale of securities available for sale                          | 336,525          |  
|Proceeds from maturity of securities held to maturity                        | 812              |  
|Proceeds from maturity of securities available for sale                      | 2,405,656        |  
|Purchases of securities held to maturity                                     | (251             | )
|Purchases of securities available for sale                                   | (3,295,407       | )
|Net decrease in interest-bearing deposits in other banks                     | 149,245          |  
|Proceeds from sale of premises and equipment                                 | 8,257            |  
|Purchases of premises and equipment                                          | (27,047          | )
|Net decrease in customers' acceptance liability                              | 40,408           |  
|Acquisitions net of cash acquired                                            | -0               | -
|                                                                             |                  |  
|Net Cash (Used In) Provided By Investing Activities                          | (1,136,259       | )
|                                                                             |                  |  
|Financing Activities:                                                        |                  |  
|Net decrease in deposits                                                     | (1,060,162       | )
|Net increase in short-term borrowings                                        | 2,007,745        |  
|Proceeds from long-term borrowings                                           | 56,177           |  
|Payments on long-term borrowings                                             | (2,838           | )
|Net increase in bank acceptance liability                                    | (40,408          | )
|Cash dividends                                                               | (133,301         | )
|Purchases of treasury stock                                                  | -0               | -
|Proceeds from exercise of stock options                                      | 21,763           |  
|                                                                             |                  |  
|Net Cash Provided By Financing Activities                                    | 848,976          |  
|                                                                             |                  |  
|(Decrease) Increase in Cash and Cash Equivalents                             | (104,991         | )
|Cash and Cash Equivalents, Beginning of Period                               | 1,912,324        |  
|                                                                             |                  |  
|Cash and Cash Equivalents, End of Period                                     | $ 1,807,333      |  
|                                                                             |                  |  
|                                                                             |                  |  
|                                                                             |                  |  
|                                                                             |                  |  
|See notes to consolidated financial statements.                              |                  |  



---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2003



NOTE A -- Basis of Presentation

The accounting and reporting policies of Regions Financial Corporation ("Regions" or the "Company"), conform with accounting principles generally accepted in the United States and with general financial services industry practices. Regions provides a full range of banking and bank-related services to individual and corporate customers through its subsidiaries and branch offices located primarily in Alabama, Arkansas, Florida, Georgia, Louisiana, North Carolina, South Carolina, Tennessee and Texas.  The Company is subject to intense competition from other financial institutions and is also subject to the regulations of certain government agencies and undergoes periodic examinations by those regulatory authorities.

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with the instructions for Form 10-Q, and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States. For a summary of significant accounting policies that have been consistently followed, see NOTE A to the Consolidated Financial Statements included under Item 8 of the Annual Report on Form 10-K.  It is management's opinion that all adjustments, consisting of only normal and recurring items necessary for a fair presentation, have been included. Please refer to "Critical Accounting Policies" included in Management's Discussion and Analysis.

Certain amounts in prior periods have been reclassified to conform to the current period presentation.



NOTE B -- Stock-Based Compensation

Regions has stock option plans for certain key employees  that provide for the granting of options to purchase up to 5,720,000  shares of Regions' common stock (excluding options assumed in connection with acquisitions). The terms of options granted are determined by the personnel committee of the Board of Directors; however, no options may be granted after ten years from the plans' adoption, and no options may be exercised beyond ten years from the date granted.  The option price per share of incentive stock options cannot be less than the fair market value of the common stock on the date of the grant; however, the option price of non-qualified options may be less than the fair market value of the common stock on the date of the grant.

Regions' long-term incentive plans provide for the granting of up to 35,000,000 shares of common stock in the form of stock options, stock appreciation rights, performance awards or restricted stock awards. The terms of stock options granted under the long-term incentive plans are generally subject to the same terms as options granted under Regions' stock option plans.



---



|                                               | Six months ended
|---------------------------------------------- | ----------------
|                                               |                 
|                                               | June 30,        
|                                               | 2003            
|                                               |                 
|Net income                                     | $323,366        
|Less:  Total stock-based compensation expense  |                 
|based on fair value method for all awards, net |                 
|of related tax effects                         | (4,238)         
|                                               |                 
|                                               |                 
|Pro forma net income                           | $319,128        
|                                               |                 
|                                               |                 
|                                               |                 
|                                               |                 
|Per share:                                     |                 
|Net income                                     | $1.46           
|Net income-diluted                             | 1.44            
|Pro forma net income                           | 1.44            
|Pro forma net income-diluted                   | 1.42            

The weighted average fair value of options granted during the six months ended June 30, 2003 and 2002, was $4.52 and $4.73, respectively.  The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants in 2003: expected dividend yield of 3.70%; expected option life of 5 years; expected volatility of 21.8%; and a risk-free interest rate of 2.8%.  The 2002 assumptions used in the model included: expected dividend yield of 3.38%; expected option life of 5 years; expected volatility of 22.0%; and a risk-free interest rate of 2.7%.

NOTE C -- Business Segment Information



Regions' segment information is presented based on Regions' primary segments of business.  Each segment is a strategic business unit that serves specific needs of Regions' customers. The Company's primary segment is community banking.  Community banking represents the Company's branch banking functions and has separate management that is responsible for the operation of that business unit.  In addition, Regions has designated as distinct reportable segments the activities of its treasury, mortgage banking, investment banking/brokerage/trust, and insurance divisions. The treasury division includes the Company's bond portfolio, indirect mortgage lending division, and other wholesale activities. Mortgage banking consists of origination and servicing functions of Regions' mortgage operations.  Investment banking includes trust activities and all brokerage and investment activities associated with Morgan Keegan. Insurance includes all business associated with commercial insurance, in addition to credit life products sold to consumer customers. The reportable segment designated "Other" includes activity of Regions' indirect consumer lending division and the parent company. Prior period amounts have been restated to reflect changes in methodology.



---

The accounting policies used by each reportable segment are the same as those discussed in Note A to the Consolidated Financial Statements included under Item 8 of the Annual Report on Form 10-K.  The following table presents financial information for each reportable segment.

Six months ended June 30, 2003



|                        | Total Banking     |            
|----------------------- | ----------------- | -----------
|                        |                   |            
|(in thousands)          | Community
Banking | Treasury   
|                        |                   |            
|Net interest income     | $560,219          | $ 139,671  
|Provision for loan loss | 58,236            | 2,526      
|Non-interest income     | 170,256           | 25,673     
|Non-interest expense    | 431,109           | 16,587     
|Income taxes            | 77,806            | 54,837     
|                        |                   |            
|                        |                   |            
|Net income              | $ 163,324         | $ 91,394   
|                        |                   |            
|                        |                   |            
|                        |                   |            
|                        |                   |            
|Average assets          | $26,429,826       | $14,659,376



|(in thousands)          | Investment Banking/
Brokerage/
Trust | Insurance  | Other      | Total
Company
|----------------------- | ------------------------------------ | ---------- | ---------- | -------------
|                        |                                      |            |            |              
|Net interest income     | $   11,449                           | $    1,075 | $ (10,412) | $726,204     
|Provision for loan loss | -0-                                  | -0-        | 181        | 61,500       
|Non-interest income     | 322,513                              | 36,401     | (3,112)    | 719,713      
|Non-interest expense    | 269,150                              | 27,296     | 36,303     | 932,159      
|Income taxes            | 24,339                               | 3,510      | (47,098)   | 128,892      
|                        |                                      |            |            |              
|                        |                                      |            |            |              
|Net income              | $  40,473                            | $  6,670   | $  (2,910) | $323,366     
|                        |                                      |            |            |              
|                        |                                      |            |            |              
|                        |                                      |            |            |              
|                        |                                      |            |            |              
|Average assets          | $2,691,214                           | $119,829   | $2,936,725 | $48,297,620  



---

Six months ended June 30, 2002



|                        | Total Banking     |            
|----------------------- | ----------------- | -----------
|                        |                   |            
|(in thousands)          | Community
Banking | Treasury   
|                        |                   |            
|Net interest income     | $597,722          | $ 150,132  
|Provision for loan loss | 53,912            | 2,242      
|Non-interest income     | 157,489           | 4,070      
|Non-interest expense    | 442,296           | 13,792     
|Income taxes            | 89,172            | 51,813     
|                        |                   |            
|                        |                   |            
|Net income              | $  169,831        | $ 86,355   
|                        |                   |            
|                        |                   |            
|                        |                   |            
|                        |                   |            
|Average assets          | $25,056,928       | $13,296,246



|(in thousands)          | Investment
Banking/
Brokerage/
Trust | Insurance  | Other      | Total
Company
|----------------------- | ------------------------------------ | ---------- | ---------- | -------------
|                        |                                      |            |            |              
|Net interest income     | $   11,648                           | $    1,237 | $(32,349)  | $744,877     
|Provision for loan loss | -0-                                  | -0-        | 3,632      | 60,000       
|Non-interest income     | 275,568                              | 28,557     | 2,433      | 569,308      
|Non-interest expense    | 242,297                              | 22,217     | 20,737     | 823,433      
|Income taxes            | 16,593                               | 2,761      | (50,393)   | 123,563      
|                        |                                      |            |            |              
|                        |                                      |            |            |              
|Net income              | $ 28,326                             | $ 4,816    | $ (3,892)  | $307,189     
|                        |                                      |            |            |              
|                        |                                      |            |            |              
|                        |                                      |            |            |              
|                        |                                      |            |            |              
|Average assets          | $2,643,657                           | $102,438   | $3,027,836 | $45,048,429  



---

NOTE D -- Derivative Financial Instruments

Regions maintains positions in derivative financial instruments to manage interest rate risk, to facilitate asset/liability management strategies, and to manage other risk exposures.  The most common derivative instruments are forward rate agreements, interest rate swaps, and put and call options.  For those derivative contracts that qualify for special hedge accounting treatment, according to Statement of Financial Accounting Standards No. 133 (Statement 133), Regions designates the hedging instrument as either a cash flow or fair value hedge.  The accounting policies associated with derivative financial instruments are discussed further in Note A to the Consolidated Financial Statements included under Item 8 of the Annual Report on Form 10-K.

Regions utilizes certain derivative instruments to hedge the variability of interest cash flows on debt instruments.  To the extent that the hedge of future cash flows is effective, changes in the fair value of the derivative are recognized as a component of other comprehensive income in stockholders' equity.  At June 30, 2003, Regions had reported a $4.9 million loss in other comprehensive income related to cash flow hedges.  The Company will amortize this loss into earnings in conjunction with the recognition of interest payments through 2011.  To the extent that the hedge of future cash flows is ineffective, changes in the fair value of the derivative are recognized in earnings as a component of other non-interest expense.  For the six months ended June 30, 2003, there was no ineffectiveness recognized in other non-interest expense attributable to cash flow hedges.  No gains or losses were recognized in the first six months of 2003 related to components of derivative instruments that were excluded from the assessment of hedge effectiveness.

Regions hedges the changes in the fair value of assets using forward contracts, which represent commitments to sell money market instruments at a future date at a specified price or yield.  The contracts are utilized by the Company to hedge interest rate risk positions associated with the origination of mortgage loans held for sale.  The Company is subject to the market risk associated with changes in the value of the underlying financial instrument, as well as the risk that the other party will fail to perform.  For the six months ended June 30, 2003, Regions recognized a net hedging gain of $2.4 million associated with these hedging instruments.

Regions has also entered into interest rate swap agreements converting a portion of its fixed rate long-term debt to floating rate. The fair values of these derivative instruments are included in other assets on the statements of financial condition. For the six months ended June 30, 2003, there was a $553,000 loss recorded in earnings due to hedge ineffectiveness. No gains or losses were recognized in the first six months of 2003 related to components of derivative instruments that were excluded from the assessment of hedge effectiveness.

The Company also maintains a trading portfolio of interest rate swaps, option contracts and futures and forward commitments used to meet the needs of its customers.  The portfolio is used to generate trading profit and help clients manage interest rate risk. The Company is subject to the risk that a counterparty will fail to perform. The fair value of the trading portfolio at June 30, 2003, was $34.5 million.

Foreign currency contracts involve the exchange of one currency for another on a specified date and at a specified rate. These contracts are executed on behalf of the Company's customers and are used to manage fluctuations in foreign exchange rates. The notional amount of forward foreign exchange contracts totaled $9 million at both June 30, 2003 and  2002. The Company is subject to the risk that a counterparty will fail to perform.



---

In the normal course of business, Regions' brokerage subsidiary enters into underwriting and forward and future commitments. At June 30, 2003, the contract amount of future contracts was $6 million to purchase and $50 million to sell U.S. Government and municipal securities. The brokerage subsidiary typically settles its position by entering into equal but opposite contracts and, as such, the contract amounts do not necessarily represent future cash requirements. Settlement of transactions relating to such commitments is not expected to have a material effect on the subsidiary's financial position. Transactions involving future settlement give rise to market risk, which represents the potential loss that can be caused by a change in the market value of a particular financial instrument. The exposure to market risk is determined by a number of factors, including size, composition and diversification of positions held, the absolute and relative levels of interest rates, and market volatility.

Regions' derivative financial instruments are summarized as follows:



|                         | Other Than Trading Derivatives
|------------------------ | ------------------------------
|                         |                               
|                         | As of June 30, 2003           
|                         |                               
|                         | Notional Amount               
|                         |                               
|                         | (dollars in millions)         
|Asset hedges:            |                               
|Fair value hedges:       |                               
|Forward sale commitments | $ 515                         
|                         |                               
|Total asset hedges       | $ 515                         
|                         |                               
|                         |                               
|                         |                               
|                         |                               
|Liability hedges:        |                               
|Fair value hedges:       |                               
|Interest rate swaps      | $3,488                        
|Interest rate options    | 1,400                         
|                         |                               
|Total liability hedges   | $4,888                        
|                         |                               
|                         |                               
|                         |                               



|                         | As of June 30, 2002  
|------------------------ | ---------------------
|                         |                      
|                         | Notional Amount      
|                         |                      
|                         | (dollars in millions)
|Asset hedges:            |                      
|Fair value hedges:       |                      
|Forward sale commitments | $ 168                
|                         |                      
|Total asset hedges       | $ 168                
|                         |                      
|                         |                      
|                         |                      
|                         |                      
|Liability hedges:        |                      
|Fair value hedges:       |                      
|Interest rate swaps      | $2,288               
|Interest rate options    | 900                  
|                         |                      
|Total liability hedges   | $3,188               
|                         |                      
|                         |                      
|                         |                      



---

|                      | Derivative Financial Instruments
|--------------------- | --------------------------------
|                      | As of June 30,                  
|                      |                                 
|                      | 2003                            
|                      |                                 
|                      | Contract or Notional Amount     
|                      |                                 
|                      | Other                           
|                      | Than                            
|                      | Trading                         
|                      |                                 
|                      | (in millions)                   
|Interest rate swaps   | $3,488                          
|Interest rate options | 1,400                           
|Futures and forward   |                                 
|commitments           | 515                             
|Foreign exchange      |                                 
|forwards              | -0-                             
|                      |                                 
|Total                 | $5,403                          
|                      |                                 
|                      |                                 
|                      |                                 

*Credit Risk Amount is defined as all positive exposures not collateralized with cash on deposit.  Any credit risk arising under option contracts is combined with swaps to reflect netting agreements.

The following table is a summary of Regions' derivative financial instruments as of March 31, 2003 and is presented for comparison purposes.

|                      | Derivative Financial Instruments
|--------------------- | --------------------------------
|                      | As of March 31,                 
|                      |                                 
|                      | 2003                            
|                      |                                 
|                      | Contract or Notional Amount     
|                      |                                 
|                      | Other                           
|                      | Than                            
|                      | Trading                         
|                      |                                 
|                      | (in millions)                   
|Interest rate swaps   | $3,938                          
|Interest rate options | 1,400                           
|Futures and forward   |                                 
|commitments           | 395                             
|Foreign exchange      |                                 
|forwards              | -0-                             
|                      |                                 
|Total                 | $5,733                          
|                      |                                 
|                      |                                 
|                      |                                 

*Credit Risk Amount is defined as all positive exposures not collateralized with cash on deposit.  Any credit risk arising under option contracts is combined with swaps to reflect netting agreements.

NOTE E -- Subsequent Events

On July 16, 2003, Regions' Board of Directors authorized the repurchase of up to 12.6 million shares of the Company's common stock.  This represents an additional 10 million shares over the previously existing authorization.  The purchases will be made from time to time in the open market or in privately negotiated transactions depending on market conditions and other factors.



---

Table of Contents

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

INTRODUCTION

The following discussion and financial information is presented to aid in understanding Regions Financial Corporation's ("Regions" or the "Company") financial position and results of operations. The emphasis of this discussion will be on the six and three months ended June 30, 2003, as compared to the six and three months ended June 30, 2002, and the three months ended March 31, 2003.

CORPORATE PROFILE

Regions' primary business is providing traditional commercial and retail banking services to customers throughout the South. Regions' banking affiliate, Regions Bank, operates as an Alabama state-chartered bank with branch offices in Alabama, Arkansas, Florida, Georgia, Louisiana, North Carolina, South Carolina, Tennessee, and Texas.

In addition to providing traditional commercial and retail banking services, Regions provides other financial services in the fields of investment banking, asset management, trust, mutual funds, securities brokerage, mortgage banking, insurance, leasing, and other specialty financing. Regions has no foreign operations, although it maintains an international department to assist customers with their foreign transactions. Regions provides investment banking and brokerage services from 142 offices of Morgan Keegan & Company, Inc. ("Morgan Keegan"), one of the largest investment firms based in the South. Regions' mortgage banking affiliates, Regions Mortgage and EquiFirst Corporation ("EquiFirst"), provide residential mortgage loan origination and servicing activities for customers. Regions Mortgage services approximately $16.6 billion in mortgage loans.  Regions provides full-line insurance brokerage services through Rebsamen Insurance, Inc., one of the 50 largest insurance brokers in the country.  Credit life insurance services for customers are provided through other Regions' affiliates.

The Company's principal market areas are located in the states of Alabama, Arkansas, Florida, Georgia, Louisiana, North Carolina, South Carolina, Tennessee, and Texas. Morgan Keegan also operates offices in Illinois, Kentucky, Massachusetts, Mississippi, New York, and Virginia.

SECOND QUARTER HIGHLIGHTS

Net income for the second quarter of 2003 totaled a record $164.8 million or $.73 per diluted share, compared to $153.1 million or $.67 per diluted share for the second quarter of 2002 and $158.6 million or $.71 per diluted share for the first quarter of 2003.

Average earning assets increased 6% over the second quarter of 2002 and 5% annualized over the first quarter of 2003. The primary areas of growth were commercial and real estate loans and securities.

Regions continues its strategy to alter its deposit mix toward low cost deposits. As a result, low-cost deposits increased 11% over the second quarter of 2002 and 5% annualized over the first quarter of 2003. Certificates of deposit less than $100,000 declined 20% and 49% annualized in the same respective periods.



---

Total revenue on a linked-quarter comparison increased at a 21% annualized rate. Net interest income increased 7% annualized with fee income increasing at a 37% annualized rate. The net interest margin declined 3 basis points to 3.47% in the second quarter of 2003, compared to the prior quarter, due to overall declining interest rates.

Impairment charges on mortgage servicing rights of $19.2 million were recorded in the second quarter of 2003 as prepayment speeds and refinance activity continued to reach record levels. Securities gains totaling $15.8 million were realized to partially offset the impact of the impairment charge.

Non-interest income, excluding securities gains, increased $73.6 million over the second quarter of 2002 and $30.6 million over the first quarter of 2003, due primarily to strong contributions from Morgan Keegan and mortgage operations. Brokerage and investment banking revenues totaled $151.8 million in the second quarter of 2003, compared to $123.3 million in the second quarter of 2002 and $125.0 million in the first quarter of 2003. Regions' mortgage servicing and origination fees totaled $31.8 million in the second quarter 2003, an increase of $8.5 million over the second quarter of 2002 and $3.5 million over the first quarter of 2003.

Non-interest expense, excluding the impairment charges on mortgage servicing rights, increased $43.7 million over the second quarter 2002 and $16.6 million over the first quarter of 2003, due almost entirely to increased commissions and incentives expense.  Salaries and employee benefits increased 15% from the second quarter of 2002 and 24% annualized over the first quarter of 2003, a direct result of increased production and revenues in the brokerage and mortgage operations.

CRITICAL ACCOUNTING POLICIES

In preparing financial information, management is required to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses for the periods shown.  The accounting principles followed by Regions and the methods of applying these principles conform with accounting principles generally accepted in the United States and general banking practices.  Estimates and assumptions most significant to Regions are related primarily to allowance for loan losses, intangibles, income taxes, securitizations and pensions and are summarized in the following discussion and the notes to the Consolidated Financial Statements included under Item 8 of the Annual Report on Form 
10-K.

Management's determination of the adequacy of the allowance for loan losses, which is based on the factors and risk identification procedures discussed in the following pages, requires the use of judgments and estimates that may change in the future. Changes in the factors used by management to determine the adequacy of the allowance or the availability of new information could cause the allowance for loan losses to be increased or decreased in future periods. In addition, bank regulatory agencies, as part of their examination process, may require that additions be made to the allowance for loan losses based on their judgments and estimates.



---

For purposes of evaluating mortgage servicing impairment, Regions stratifies its mortgage servicing portfolio on the basis of certain risk characteristics including loan type and contractual note rate. Changes in interest rates, prepayment speeds or other factors could result in impairment of the servicing asset and a charge against earnings to reduce the recorded carrying amount.

Management's determination of the realization of the deferred tax asset is based upon management's judgment of various future events and uncertainties, including the timing and amount of future income earned by certain subsidiaries and the implementation of various tax plans to maximize realization of the deferred tax asset.  Management believes that the subsidiaries will generate sufficient operating earnings to realize the deferred tax benefits. Regions' recent consolidated federal income tax returns are open for examination. From time to time Regions engages in business plans that may also have an effect on its tax liabilities. While Regions has obtained the opinion of advisors that the tax aspects of these plans should prevail, examination of Regions' income tax returns or changes in tax law may impact these plans and resulting provisions for income taxes.

Management is required to make various assumptions in valuing its pension assets and liabilities. These assumptions include the expected rate of return on plan assets, the discount rate, and the rate of increase in future compensation levels. Changes to these assumptions could impact earnings in future periods. Regions takes into account the plan asset mix and expert opinions in determining the expected rate of return on plan assets. Regions considers the Moody's AA Corporate Bond yields and other market interest rates in setting the appropriate discount rate. In addition, Regions reviews expected inflationary and merit increases to compensation in determining the rate increase in future compensation levels.

During the first quarter of 2003 and the fourth quarter of 2002, Regions securitized automobile loans as a source of funding. Regions accounted for these transactions as sales in accordance with the guidance of Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". When selling this category of financial assets, estimates of future cash flows are an integral part of determining the gain or loss and subsequently evaluating any impairment of any retained interest, such as a servicing asset or residual interest. The most critical assumptions in estimating cash flows and related fair value include prepayment speeds, expected credit losses, and discount rate. Management reviews these assumptions on a quarterly basis and the assumptions are adjusted if deemed appropriate.

TOTAL ASSETS

Regions' total assets at June 30, 2003 were $49.5 billion -- an increase of 7% compared to June 30, 2002 and 3% compared to December 31, 2002. This growth was primarily the result of increases in securities, loans, loans held for sale, and other assets.



---

LOANS AND ALLOWANCE FOR LOAN LOSSES

LOAN PORTFOLIO

Regions' primary investment is loans.  At June 30, 2003, loans represented 70% of Regions' earning assets.

The following table includes a distribution of Regions' loan portfolio.

|                                  |                     |  |                     |  |                    
|--------------------------------- | ------------------- |  | ------------------- |  | -------------------
|Loan Portfolio 
(period end data) |                     |  |                     |  |                    
|                                  |                     |  |                     |  |                    
|(in thousands)                    | Second Quarter
2003 |  | Fourth Quarter
2002 |  | Second Quarter
2002
|                                  |                     |  |                     |  |                    
|Commercial                        | $10,988,657         |  | $11,080,812         |  | $10,414,685        
|Residential mortgages             | 8,204,385           |  | 7,978,284           |  | 8,280,718          
|Other real estate loans           | 4,910,895           |  | 4,497,486           |  | 4,017,136          
|Construction                      | 3,579,442           |  | 3,603,820           |  | 3,638,088          
|Branch installment                | 1,476,601           |  | 1,632,443           |  | 1,690,493          
|Indirect installment              | 382,401             |  | 375,438             |  | 1,496,196          
|Consumer lines of credit          | 1,538,884           |  | 1,219,286           |  | 1,120,240          
|Student loans                     | 633,935             |  | 598,205             |  | 564,279            
|                                  |                     |  |                     |  |                    
|                                  | $31,715,200         |  | $30,985,774         |  | $31,221,835        
|                                  |                     |  |                     |  |                    
|                                  |                     |  |                     |  |                    
|                                  |                     |  |                     |  |                    

Total loans at June 30, 2003, increased 2% from June 30, 2002, and 2% over year-end 2002. The increase since June 30, 2002, was primarily due to growth in commercial loans, real estate loans and lines of credit, partially offset by a decline in consumer loans. At September 30, 2002, Regions reclassified approximately $1.1 billion of its indirect auto loan portfolio as loans held for sale (see LOANS HELD FOR SALE).  Adjusting for the effects of the securitized loans, total loans increased 5% over the second quarter 2002. The average yield on loans during the second quarter of 2003 was 5.70% compared to 6.70% during the second quarter of 2002, and 5.86% during the first quarter of 2003.  During the first half of 2003, the average yield on loans was 5.78% compared to 6.82% in 2002.

ALLOWANCE FOR LOAN LOSSES

Every loan carries some degree of credit risk.  This risk is reflected in the consolidated financial statements by the allowance for loan losses, the amount of loans charged off and the provision for loan losses charged to operating expense. It is Regions' policy that when a loss is identified, it is charged against the allowance for loan losses in the current period. The policy regarding recognition of losses requires immediate recognition of a loss if significant doubt exists as to principal repayment.

Regions' provision for loan losses is a reflection of actual losses experienced during the period and management's judgment as to the adequacy of the allowance for loan losses.  Some of the factors considered by management in determining the amount of the provision and resulting allowance include: (1) detailed reviews of individual loans; (2) gross and net loan charge-offs in the current period; (3) the current level of the allowance in relation to total loans and to historical loss levels; (4) past due and non-accruing loans; (5) collateral values of properties securing loans; (6) the composition of the loan portfolio (types of loans) and risk profiles; and (7) management's analysis of economic conditions and the resulting impact on Regions' loan portfolio.



---

If, as a result of Regions' loan review and evaluation procedures, it is determined that payment of interest on a loan is questionable, it is Regions' policy to reverse interest previously accrued on the loan against interest income. Interest on such loans is thereafter recorded on a "cash basis" and is included in earnings only when actually received in cash and when full payment of principal is no longer doubtful.

Although it is Regions' policy to immediately charge off as a loss all loan amounts judged to be uncollectible, historical experience indicates that certain losses exist in the loan portfolio that have not been specifically identified. To anticipate and provide for these unidentifiable losses, the allowance for loan losses is established by charging the provision for loan loss expense against current earnings.  No portion of the resulting allowance is in any way allocated or restricted to any individual loan or group of loans.  The entire allowance is available to absorb losses from any and all loans.

Regions' determination of its allowance for loan losses is determined in accordance with Statement of Financial Accounting Standards Nos. 114 and 5.  In determining the amount of the allowance for loan losses, management uses information from its loan review process to stratify the loan portfolio into risk grades.  The higher-risk-graded loans in the portfolio are assigned estimated amounts of loss based on several factors, including current and historical loss experience of each higher-risk category, regulatory guidelines for losses in each higher-risk category andmanagement's judgment of economic conditions and the resulting impact on the higher-risk-graded loans.  All loans deemed to be impaired, which include non-accrual loans and loans past due 90 days or more, excluding loans to individuals, are evaluated individually. The vast majority of Regions' impaired loans are dependent upon collateral for repayment. For these loans, impairment is measured by evaluating collateral value as compared to the current investment in the loan. For all other loans, Regions compares the amount of estimated discounted cash flows to the investment in the loan. In the event a particular loan's collateral value is not sufficient to support the collection of the investment in the loan, a charge is immediately taken against the allowance for loan losses. The amount of the allowance for loan losses related to the higher-risk loans (including impaired loans) was approximately 75% at June 30, 2003, compared to 72% at December 31, 2002.

In addition to establishing allowance levels for specifically identified higher-risk-graded loans, management determines allowance levels for all other loans in the portfolio for which historical experience indicates that certain losses exist.  These loans are categorized by loan type and assigned estimated amounts of loss based on several factors, including current and historical loss experience of each loan type and management's judgment of economic conditions and the resulting impact on each category of loans. The amount of the allowance for loan losses related to all other loans in the portfolio for which historical experience indicates that certain losses exist was approximately 25% of Regions' allowance for loan losses at June 30, 2003, compared to 28% at December 31, 2002. The amount of the allowance related to these loans is combined with the amount of the allowance related to the higher-risk-graded loans to evaluate the overall level of the allowance for loan losses.



---

Activity in the allowance for loan losses is summarized as follows:

|                                      | Six Months Ended
|------------------------------------- | ----------------
|(dollars in thousands)                | June 30,        
|                                      | 2003            
|                                      |                 
|Balance at beginning of period        | $437,164        
|Loans charged-off:                    |                 
|Commercial                            | 34,969          
|Real estate                           | 8,382           
|Installment                           | 19,128          
|                                      |                 
|Total                                 | 62,479          
|Recoveries:                           |                 
|Commercial                            | 6,758           
|Real estate                           | 2,629           
|Installment                           | 11,100          
|                                      |                 
|Total                                 | 20,487          
|Net loans charged off:                |                 
|Commercial                            | 28,211          
|Real estate                           | 5,753           
|Installment                           | 8,028           
|                                      |                 
|Total                                 | 41,992          
|Allowance of acquired banks           | -               
|Provision charged to expense          | 61,500          
|                                      |                 
|Balance at end of period              | $456,672        
|                                      |                 
|                                      |                 
|                                      |                 
|                                      |                 
|Average loans outstanding:            |                 
|Commercial                            | $10,892,392     
|Real estate                           | 15,062,677      
|Installment                           | 5,344,638       
|                                      |                 
|Total                                 | $31,299,707     
|                                      |                 
|                                      |                 
|                                      |                 
|Net charge-offs as percent of average |                 
|loans outstanding (annualized):       |                 
|Commercial                            | .52%            
|Real estate                           | .08%            
|Installment                           | .30%            
|                                      |                 
|Total                                 | .27%            
|                                      |                 
|                                      |                 
|                                      |                 



Net loan losses as a percentage of average loans (annualized) were 0.29% in the second quarter of 2003 compared to 0.38% in the second quarter 2002 and 0.25% in the first quarter of 2003. At June 30, 2003, the allowance for loan losses was 1.44% of loans, compared to 1.39% at June 30, 2002, and 1.41% at year-end 2002. The allowance for loan losses as a percentage of non-performing loans was 149% at June 30, 2003, compared to 118% at June 30, 2002, and 147% at December 31, 2002.  The allowance for loan losses as a percentage of non-performing assets was 127% at June 30, 2003, compared to 103% at June 30, 2002, and 123% at December 31, 2002.



---

NON-PERFORMING ASSETS

Non-performing assets are summarized as follows:

|(dollars in thousands)                | June 30, |  | March 31, |  | December 31, |  | June 30,
|------------------------------------- | -------- |  | --------- |  | ------------ |  | --------
|                                      | 2003     |  | 2003      |  | 2002         |  | 2002    
|                                      |          |  |           |  |              |  |         
|Non-accruing loans                    | $241,789 |  | $244,500  |  | $226,470     |  | $280,371
|Loans past due 90 days or more        | 35,894   |  | 45,171    |  | 38,499       |  | 43,224  
|Renegotiated loans                    | 29,803   |  | 31,524    |  | 32,280       |  | 42,332  
|Other real estate                     | 52,358   |  | 63,585    |  | 59,606       |  | 52,092  
|                                      |          |  |           |  |              |  |         
|Total                                 | $359,844 |  | $384,780  |  | $356,855     |  | $418,019
|                                      |          |  |           |  |              |  |         
|                                      |          |  |           |  |              |  |         
|                                      |          |  |           |  |              |  |         
|                                      |          |  |           |  |              |  |         
|Non-performing assets as a percentage |          |  |           |  |              |  |         
|of loans and other real estate        | 1.13%    |  | 1.22%     |  | 1.15%        |  | 1.34%   

Non-accruing loans at June 30, 2003, declined $38.6 million from June 30, 2002 levels but increased $15.3 million from year-end 2002 levels. Compared to March 31, 2003, non-accrual loans declined $2.7 million. The increase since year-end is primarily related to commercial credits, including a single manufacturing credit of $11.3 million. At June 30, 2003, realestate loans comprised $117.5 million ($75.8 million in residential) of total non-accruing loans, with commercial loans accounting for $120.8 million and consumer loans accounting for $3.5 million. Loans past due 90 days or more decreased $7.3 million compared to June 30, 2002 and $2.6 million from year-end 2002 levels. Compared to March 31, 2003, loans past due 90 days or more decreased $9.3 million. Other real estate increased $266,000 from June 30, 2002, but declined $7.2 million since year-end 2002 levels and $11.2 million compared to March 31, 2003.



INTEREST BEARING DEPOSITS IN OTHER BANKS

Interest-bearing deposits in other banks are used primarily as temporary investments and generally have short-term maturities. At June 30, 2003 this category of earning asset totaled $154.3 million compared to $272.0 million at June 30, 2002, and $303.6 million at December 31, 2002, as maturities were not reinvested in this earning asset category.



---

SECURITIES

The following table shows the carrying values of securities as follows:

|                                                 | June 30,       |  | December 31, |  | June 30,  
|------------------------------------------------ | -------------- |  | ------------ |  | ----------
|                                                 | 2003           |  | 2002         |  | 2002      
|                                                 |                |  |              |  |           
|                                                 | (in thousands)
|Securities held to maturity:                     |                |  |              |  |           
|U.S. Treasury and Federal agency securities      | $30,566        |  | $30,571      |  | $31,527   
|Obligations of states and political subdivisions | 1,516          |  | 2,335        |  | 3,136     
|Other securities                                 | -              |  | 3            |  | 122       
|                                                 |                |  |              |  |           
|Total                                            | $32,082        |  | $32,909      |  | $34,785   
|                                                 |                |  |              |  |           
|                                                 |                |  |              |  |           
|                                                 |                |  |              |  |           
|Securities available for sale:                   |                |  |              |  |           
|U.S. Treasury and Federal agency securities      | $2,610,717     |  | $1,957,593   |  | $1,515,593
|Obligations of states and political subdivisions | 505,593        |  | 543,798      |  | 557,882   
|Mortgage-backed securities                       | 6,031,505      |  | 6,147,946    |  | 6,174,952 
|Other securities                                 | 81,670         |  | 42,315       |  | 8,700     
|Equity securities                                | 257,735        |  | 270,039      |  | 276,244   
|                                                 |                |  |              |  |           
|Total                                            | $9,487,220     |  | $8,961,691   |  | $8,533,371
|                                                 |                |  |              |  |           
|                                                 |                |  |              |  |           
|                                                 |                |  |              |  |           

Total securities at June 30, 2003, increased 11% from June 30, 2002 levels and 6% from year-end 2002 levels. Security balances have increased primarily through the purchase of agency securities to manage the Company's interest rate sensitivity and liquidity position.

LOANS HELD FOR SALE

Loans held for sale increased $1.0 billion compared to June 30, 2002, but declined $10 million since year-end 2002. At June 30, 2003, there were approximately $1.2 billion in mortgage loans held for sale.  At September 30, 2002, Regions reclassified approximately $1.1 billion of its indirect auto loan portfolio as loans held for sale.  Regions securitized and sold approximately $800 million during the fourth quarter of 2002 and $570 million during the first quarter of 2003 of indirect consumer auto loans classified as loans held for sale. At June 30, 2003, there were approximately $321 million in indirect auto loans held for sale.

MARGIN RECEIVABLES

Margin receivables at June 30, 2003, totaled $682.4 million compared to $536.2 million at June 30, 2002, and $432.3 million at December 31, 2002. Margin receivables represent funds advanced to brokerage customers for the purchase of securities that are secured by certain marketable securities held in the customer's brokerage account. The risk of loss from these receivables is minimized by requiring that customers maintain marketable securities in the brokerage account which have a fair market value substantially in excess of the funds advanced to the customer. Fluctuations in these balances are caused by trends in general market conditions, volatility in equity retail products, and investor sentiment toward economic stability.

OTHER ASSETS

Other assets increased $713.6 million compared to June 30, 2002, and $366.9 million since year-end 2002.  Areas of increase include derivative assets, low income housing investments, and receivables related to increased production at Morgan Keegan.



---

LIQUIDITY

GENERAL

Liquidity is an important factor in the financial condition of Regions and affects Regions' ability to meet the borrowing needs and deposit withdrawal requirements of its customers. Assets, consisting principally of loans and securities, are funded by customer deposits, purchased funds, borrowed funds and stockholders' equity.

The securities portfolio is one of Regions' primary sources of liquidity. Maturities of securities provide a constant flow of funds available for cash needs. Maturities in the loan portfolio also provide a steady flow of funds. Additional funds are provided from payments on consumer loans and one-to-four family residential mortgage loans. Historically, Regions' high levels of earnings have also contributed to cash flow. In addition, liquidity needs can be met by the purchase of funds in state and national money markets. Regions' liquidity also continues to be enhanced by a relatively stable deposit base.

The loan to deposit ratio at June 30, 2003, was 99.53% compared to 100.62% at June 30, 2002 and 94.11% at December 31, 2002.

Regions filed a $1.5 billion universal shelf registration statement in November 2001 and a $1.0 billion universal shelf registration statement in January 2001. Under these registration statements, Regions issued $600 million of subordinated notes in May 2002, $500 million of subordinated notes in February 2001 and $288 million of trust preferred securities in February 2001. Consequently, $1.1 billion of various debt securities could be registered and subsequently issued, at market rates, under these registration statements.

In addition, Regions Bank has the requisite agreements in place to issue and sell up to $1 billion of its bank notes to institutional investors through placement agents. As of June 30, 2003, there were no outstanding bank notes under this program.

Morgan Keegan maintains certain lines of credit with unaffiliated banks to manage liquidity in the ordinary course of business.



Regions securitized and sold approximately $800 million in the fourth quarter of 2002 and $570 million in the first quarter of 2003 of indirect consumer auto loans, utilizing an additional funding source (see LOANS HELD FOR SALE). Securitizations provide additional flexibility to Regions in managing liquidity.



---

RATINGS

The table below reflects the most recent debt ratings of Regions Financial Corporation and Regions Bank by Standard & Poor's Corporation, Moody's Investors Service and Fitch IBCA:

|                                   | S&P  | Moody's | Fitch
|---------------------------------- | ---- | ------- | -----
|                                   |      |         |      
|Regions Financial Corporation:     |      |         |      
|Subordinated notes                 | A-   | A2      | A    
|Trust preferred securities         | BBB+ | A1      | A    
|Regions Bank:                      |      |         |      
|Short-term certificates of deposit | A-1  | P-1     | F1+  
|Short-term debt                    | A-1  | P-1     | F1+  
|Long-term certificates of deposit  | A+   | Aa3     | AA-  
|Long-term debt                     | A+   | Aa3     | A+   

A security rating is not a recommendation to buy, sell or hold securities, and the ratings above are subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.

DEPOSITS

Regions competes with other banking and financial services companies for a share of the deposit market. Regions' ability to compete in the deposit market depends heavily on how effectively the Company meets customers' needs. Regions employs both traditional and non-traditional means to meet customers' needs and enhance competitiveness. The traditional means include providing well-designed products, providing a high level of customer service, providing attractive pricing and expanding the traditional branch network to provide convenient branch locations for customers throughout the Southern United States. Regions also employs non-traditional approaches to enhance its competitiveness.  These include providing centralized, high quality telephone banking services and alternative product delivery channels like Internet banking.

Total deposits at June 30, 2003, increased 3% from June 30, 2002, but declined 3% from year-end 2002 levels. Compared to June 30, 2002, non-interest bearing deposits, interest bearing checking, money market, and savings accounts increased $2.0 billion or 11%, but were offset by a $1.2 billion or 12% decline in retail certificates of deposit, due to market interest rate changes and the maturity of $859 million of high yield certificates of deposit in the second quarter of 2003. Wholesale deposits increased from June 30, 2002 levels, as rates on these deposits were more favorable compared to other funding sources.

The following table presents the average rates paid on deposits by category for the six months ended June 30, 2003 and 2002:

|                                            | Average Rates Paid
|------------------------------------------- | ------------------
|                                            |                   
|                                            | June 30,          
|                                            | 2003              
|                                            |                   
|Interest-bearing transaction accounts       | 1.10%             
|Savings accounts                            | 0.30              
|Money market savings accounts               | 0.81              
|Certificates of deposit of $100,000 or more | 2.88              
|Other interest-bearing deposits             | 3.11              
|Total interest-bearing deposits             | 1.87%             



---

The following table presents the average amounts of deposits outstanding by category for the six months ended June 30, 2003 and 2002:

|                                            | Average Amounts Outstanding
|------------------------------------------- | ---------------------------
|                                            |                            
|                                            | Six months ended June 30,  
|                                            | 2003                       
|                                            |                            
|                                            | (in thousands)             
|Non-interest-bearing demand deposits        | $ 5,151,095                
|                                            |                            
|Interest-bearing transaction accounts       | 2,036,865                  
|Savings accounts                            | 1,417,322                  
|Money market savings accounts               | 10,692,566                 
|Certificates of deposit of $100,000 or more | 3,338,815                  
|Other interest-bearing deposits             | 9,496,294                  
|                                            |                            
|Total interest-bearing deposits             | 26,981,862                 
|                                            |                            
|Total deposits                              | $32,132,957                
|                                            |                            
|                                            |                            
|                                            |                            
|                                            |                            

BORROWINGS

Following is a summary of short-term borrowings:

|(in thousands)                          | June 30,   |  | December 31, |  | June 30,  
|--------------------------------------- | ---------- |  | ------------ |  | ----------
|                                        | 2003       |  | 2002         |  | 2002      
|                                        |            |  |              |  |           
|Federal funds purchased                 | $1,999,905 |  | $1,180,368   |  | $1,774,827
|Securities sold under agreements        |            |  |              |  |           
|to repurchase                           | 2,076,275  |  | 1,022,893    |  | 721,241   
|Federal Home Loan Bank structured notes | 850,000    |  | 850,000      |  | 1,100,000 
|Notes payable to unaffiliated banks     | 158,900    |  | 56,009       |  | 410,900   
|Commercial paper                        | 17,250     |  | 17,250       |  | 26,750    
|Due to brokerage customers              | 591,945    |  | 651,078      |  | 652,198   
|Broker margin calls                     | 118,690    |  | 111,321      |  | 16,474    
|Short sale liability                    | 280,237    |  | 196,538      |  | 201,263   
|                                        |            |  |              |  |           
|                                        |            |  |              |  |           
|Total                                   | $6,093,202 |  | $4,085,457   |  | $4,903,653
|                                        |            |  |              |  |           
|                                        |            |  |              |  |           
|                                        |            |  |              |  |           

Net federal funds purchased and security repurchase agreements totaled $3.5 billion at June 30, 2003, $1.9 billion at both June 30, 2002, and year-end 2002. The level of federal funds and security repurchase agreements can fluctuate significantly on a day-to-day basis, depending on funding needs and which sources of funds are used to satisfy those needs.  During the first half of 2003, net funds purchased averaged $2.6 billion compared to $1.3 billion for the same period in 2002. Other short-term borrowings and commercial paper decreased $391 million since June 30, 2002, but increased $135 million since year-end 2002.



---

Long-term borrowings are summarized as follows:

|(in thousands)                          | June 30,    |  | December 31, |  | June 30,   
|--------------------------------------- | ----------- |  | ------------ |  | -----------
|                                        | 2003        |  | 2002         |  | 2002       
|                                        |             |  |              |  |            
|6 3/8% subordinated notes               | $   600,000 |  | $    600,000 |  | $   600,000
|7.80% subordinated notes                | -0-         |  | -0-          |  | 75,000     
|7.00% subordinated notes                | 500,000     |  | 500,000      |  | 500,000    
|7.75% subordinated notes                | 100,000     |  | 100,000      |  | 100,000    
|Federal Home Loan Bank structured notes | 3,585,000   |  | 3,585,000    |  | 3,585,000  
|Federal Home Loan Bank advances         | 115,777     |  | 97,553       |  | 128,922    
|Trust preferred securities              | 291,769     |  | 291,792      |  | 291,815    
|Industrial development revenue bonds    | 2,200       |  | 2,200        |  | 2,400      
|Mark-to-market on hedged long-term debt | 186,876     |  | 151,265      |  | 27,956     
|Other long-term debt                    | 57,826      |  | 58,299       |  | 58,375     
|                                        |             |  |              |  |            
|Total                                   | $5,439,448  |  | $5,386,109   |  | $5,369,468 
|                                        |             |  |              |  |            
|                                        |             |  |              |  |            
|                                        |             |  |              |  |            
|                                        |             |  |              |  |            

Long-term borrowings have increased $70 million since June 30, 2002 and $53 million since year-end 2002 (see NOTE D and Interest Rate Sensitivity).

OTHER LIABILITIES

Other liabilities increased $905.6 million compared to June 30, 2002, and $456.6 million since year-end 2002.  Areas of increase include payables related to increased production at Morgan Keegan and payables to the trustee of the securitizations in the first quarter of 2003 and fourth quarter of 2002.

STOCKHOLDERS' EQUITY

Stockholders' equity was $4.4 billion at June 30, 2003, an increase of 11% over June 30, 2002, and a 5% increase since year-end 2002. Accumulated other comprehensive income totaled $140.6 million at June 30, 2003, compared to $123.5 million at June 30, 2002, and $164.1 million at year-end 2002.  Regions' ratio of equity to total assets was 8.82% at June 30, 2003, compared to 8.53% at June 30, 2002 and 8.72% at December 31, 2002.

At its meeting on July 16, 2003, Regions Board of Directors increased the quarterly cash dividend for the third quarter to $.32 per share from the previous quarterly cash dividend of $.30 per share.  The Board also increased the existing authorization for repurchase of the Company's common stock by 10 million shares, resulting in a total of up to 12.6 million shares that could be repurchased.  Funds for the increased dividend and common stock repurchase program are expected to be generated from working capital.

Regions and its subsidiaries are required to comply with capital adequacy standards established by banking regulatory agencies.  Currently, there are two basic measures of capital adequacy: a risk-based measure and a leverage measure.



---

The minimum standard for the ratio of total capital to risk-weighted assets is 8%.  At least 50% of that capital level must consist of common equity, undivided profits and non-cumulative perpetual preferred stock, less goodwill and certain other intangibles ("Tier 1 capital").  The remainder ("Tier 2 capital") may consist of a limited amount of other preferred stock, mandatory convertible securities, subordinated debt, and a limited amount of the allowance for loan losses.  The sum of Tier 1 capital and Tier 2 capital is "total risk-based capital."

The banking regulatory agencies also have adopted regulations that supplement the risk-based guidelines to include a minimum ratio of 3% of Tier 1 capital to average assets less goodwill (the "leverage ratio").  Depending upon the risk profile of the institution and other factors, the regulatory agencies may require a leverage ratio of 1% to 2% above the minimum 3% level.

The following chart summarizes the applicable bank regulatory capital requirements. Regions' capital ratios at June 30, 2003 and 2002, substantially exceeded all regulatory requirements.

Bank Regulatory Capital Requirements

|                                                     |             | Well        |            |           
|---------------------------------------------------- | ----------- | ----------- | ---------- | ----------
|                                                     | Minimum     | Capitalized | Regions at | Regions at
|                                                     | Regulatory  | Regulatory  | June 30,   | June 30,  
|                                                     | Requirement | Requirement | 2003       | 2002      
|                                                     |             |             |            |           
|Tier 1 capital to risk-adjusted assets               | 4.00%       | 6.00%       | 9.11%      | 8.55%     
|Total risk-based capital to 
   risk-adjusted assets | 8.00        | 10.00       | 13.81      | 13.58     
|Tier 1 leverage ratio                                | 3.00        | 5.00        | 7.22       | 6.81      



OPERATING RESULTS

Net income for the first six months of 2003 totaled $323.4 million or $1.44 per diluted share, an 8% increase (on a per share diluted basis) over the first six months of 2002. For the second quarter of 2003, net income totaled $164.8 million ($0.73 per diluted share) compared to $153.1 million ($0.67 per diluted share) in the second quarter of 2002 and $158.6 ($0.71 per diluted share) in the first quarter of 2003.  This represents a 9% increase (on a per share diluted basis) over second quarter of 2002 and a 11% annualized increase (on a per share diluted basis) over the first quarter of this year. Annualized return on stockholders' equity for the six months ended June 30, 2003, was 15.23% compared to 15.30% for the same period in 2002. Annualized return on assets for the first six months of 2003 was 1.35% compared to 1.38% for the first six months of 2002.



---

NET INTEREST INCOME

The following table presents a summary of net interest income for the quarters ended June 30, 2003, March 31, 2003, and June 30, 2002.

|(dollars in thousands)                   | June 30, |  | March 31, |  | June 30,
|---------------------------------------- | -------- |  | --------- |  | --------
|                                         | 2003     |  | 2003      |  | 2002    
|                                         |          |  |           |  |         
|                                         |          |  |           |  |         
|Interest income                          | $561,946 |  | $575,986  |  | $638,719
|Interest expense                         | 195,645  |  | 216,083   |  | 263,628 
|                                         |          |  |           |  |         
|Net interest income                      | 366,301  |  | 359,903   |  | 375,091 
|                                         |          |  |           |  |         
|Tax equivalent adjustment                | 16,450   |  | 17,083    |  | 17,765  
|                                         |          |  |           |  |         
|Net interest income (taxable equivalent) | $382,751 |  | $376,986  |  | $392,856
|                                         |          |  |           |  |         
|                                         |          |  |           |  |         
|                                         |          |  |           |  |         
|                                         |          |  |           |  |         
|                                         |          |  |           |  |         
|Net interest margin                      | 3.47%    |  | 3.50%     |  | 3.79%   

Net interest income (taxable equivalent basis) for the first six months of 2003 decreased $21.2 million, or 3%, compared to the same period in 2002. The decline in net interest income is due to continued compression in the net interest margin due to lower interest rates, partially offset by increases in earning assets. The net yield on interest-earning assets (taxable equivalent basis) was 3.48% in the first six months of 2003 compared to 3.82% during the same period in 2002.

For the second quarter of 2003, net interest income (taxable equivalent basis) decreased $10.1 million or 3% compared to the second quarter of 2002, with increases in earning assets partially offsetting the effects of the reduced interest margin due to lower interest rates.  The net yield on interest earning assets (taxable equivalent basis) was 3.47% in the second quarter of 2003 compared to 3.79% during the second quarter of 2002.  The yield on interest earning assets declined 109 basis points in the second quarter of 2003, while the rate on interest bearing liabilities declined  90 basis points, compared to the second quarter of 2002.

Compared to the first quarter of 2003, net interest income (taxable equivalent basis) increased $5.8 million or 6% annualized, due to increased earning assets and the maturity of $859 million of high yield certificates of deposit during the second quarter of 2003, partially offset by a continuing decline in interest rates.  The net yield on interest earning assets (taxable equivalent basis) was 3.47% in the second quarter of 2003 compared to 3.50% in the first quarter of 2003.  The yield on interest earning assets declined 26 basis points, while the rate on interest bearing liabilities declined 25 basis points, compared to the prior quarter.



---

Analysis of Changes in Net Interest Income

|                                | Six months ended June 30,
|------------------------------- | -------------------------
|                                |                          
|                                | 2003 over 2002           
|                                |                          
|                                | Volume                   
|                                |                          
|Increase (decrease) in:         |                          
|Interest income on:             |                          
|Loans                           | $16,004                  
|Federal funds sold              | 412                      
|Taxable securities              | 31,044                   
|Non-taxable securities          | (2,483)                  
|Other earning assets            | 22,843                   
|                                |                          
|Total                           | 67,820                   
|Interest expense on:            |                          
|Savings deposits                | 28                       
|Other interest-bearing deposits | 12,377                   
|Borrowed funds                  | 31,323                   
|                                |                          
|Total                           | 43,728                   
|                                |                          
|Decrease in net interest income | $24,092                  
|                                |                          
|                                |                          
|                                |                          
|                                |                          

Note: The change in interest due to both rate and volume has been allocated to change due to volume and change due to rate in proportion to the absolute dollar amounts of the change in each.



---

MARKET RISK

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates, commodity prices, equity prices, or the credit quality of debt securities.

The overall level of market risk taking activity within Regions has recently reached the minimum threshold level as determined by the Federal Reserve Bank which will require future compliance with the 1996 market risk amendment to the Basel Capital Accord. As such, Regions is in process of implementing the protocols and processes necessary to meet the market risk measurement and risk management objectives of the Accord.

Interest Rate Sensitivity

Regions' primary market risk is interest rate risk, including uncertainty with respect to absolute interest rate levels as well as uncertainty with respect to relative interest rate levels which impact both the shape and the slope of the various yield curves affecting the financial products and services that the Company offers. To quantify this risk Regions measures the change in its net interest income in various interest rate scenarios as compared to a base case scenario. Net interest income sensitivity (as measured over 12 months) is a useful short-term indicator of Regions' interest rate risk.



Sensitivity Measurement. Financial simulation models are Regions' primary tools used to measure interest rate exposure. Using a wide range of hypothetical deterministic and stochastic simulations, these tools provide management with extensive information on the potential impact to net interest income caused by changes in interest rates.

These models are structured to simulate cash flows and accrual characteristics of the many products both on and off Regions' balance sheet. Assumptions are made about the direction and volatility of interest rates, the slope of the yield curve, and about the changing composition of the balance sheet that result from both strategic plans and from customer behavior. Among the assumptions are expectations of balance sheet growth and composition, the pricing and maturity characteristics of existing business and the characteristics of future business. Interest rate related risks are expressly considered, such as pricing spreads, the lag time in pricing administered rate accounts, prepayments and other option risks. Regions considers these factors, as well as the degree of certainty or uncertainty surrounding their future behavior.

Off-balance sheet items are used in hedging the values of selected assets and liabilities from changes in interest rates. The effect of these hedges is included in the simulations of net interest income.

The primary objectives of Asset/Liability Management at Regions are balance sheet coordination and the management of interest rate risk in achieving reasonable and stable net interest income throughout various interest rate cycles. A standard set of alternate interest rate scenarios is compared to the results of the base case scenario to determine the extent of potential fluctuations and to establish exposure limits. The standard set of interest rate scenarios includes the traditional instantaneous parallel rate shifts of plus and minus 100 and 200 basis points. In addition, Regions includes simulations of gradual interest rate movements that may more realistically mimic potential interest rate movements. The gradual scenarios include curve steepening, flattening, and parallel movements of various magnitudes phased in over 6- to 12-month periods.



---

Exposure to Interest Rate Movements.  Based on the foregoing discussion, management has estimated the potential effect of shifts in interest rates on net interest income. As of June 30, 2003, Regions maintains an almost balanced position to gradual rate shifts of plus or minus 100 and 200 basis points. The following table demonstrates the expected effect that a gradual (over six months beginning at June 30, 2003) parallel interest rate shift would have on Regions' annual net interest income. Results of the same analysis for the comparable period for 2002 are presented for comparison purposes.

|Gradual           |  | June 30, 2003          |              | June 30, 2002
|----------------- |  | ---------------------- | ------------ | -------------
|                  |  |                        |              |              
|                  |  | $ Change in            | % Change in  |              
|Change in         |  | Net Interest           | Net Interest |              
|Interest Rates    |  | Income                 | Income       |              
|                  |  |                        |              |              
|(in basis points) |  | (dollars in thousands)
|+200              |  | $(2,000)               | (0.2)%       |              
|+100              |  | (6,000)                | (0.4)        |              
|-100              |  | (9,000)                | (0.7)        |              
|-200              |  | (32,000)               | (2.2)        |              

As of June 30, 2003, Regions maintains a slightly asset sensitive position to instantaneous rate shifts of plus or minus 100 and 200 basis points.  The following table demonstrates the expected effect that an instantaneous parallel rate shift would have on Regions' annual net interest income.  Results of the same analysis for the comparable period of 2002 are presented for comparison purposes.

|Instantaneous     |  | June 30, 2003          |              | June 30, 2002
|----------------- |  | ---------------------- | ------------ | -------------
|                  |  |                        |              |              
|                  |  | $ Change in            | % Change in  |              
|Change in         |  | Net Interest           | Net Interest |              
|Interest Rates    |  | Income                 | Income       |              
|                  |  |                        |              |              
|(in basis points) |  | (dollars in thousands)
|+200              |  | $ 22,000               | 1.5%         |              
|+100              |  | 8,000                  | 0.5          |              
|-100              |  | (26,000)               | (1.8)        |              
|-200              |  | (80,000)               | (5.5)        |              



Derivatives

Regions uses financial derivative instruments for management of interest rate sensitivity. The Asset and Liability Committee in its oversight role for the management of interest rate sensitivity approves the use of derivatives in balance sheet hedging strategies. The most common derivatives the Company employs are interest rate swaps, interest rate options, forward sale commitments, and interest rate and foreign exchange forward contracts.

Interest rate swaps are contractual agreements typically entered into to exchange fixed for variable streams of interest payments. The notional principal is not exchanged but is used as a reference for the size of the interest payments. Interest rate options are contracts that allow the buyer to purchase or sell a financial instrument at a pre-determined price and time. Forward sale commitments are contractual obligations to sell money market instruments at a future date for an already agreed upon price. Foreign exchange forwards are contractual agreements to receive or deliver a foreign currency at an agreed upon future date and price.



---

Regions has made use of interest rate swaps and interest rate options to convert a portion of its fixed-rate funding position to a variable rate. Regions also uses derivatives to manage interest rate and pricing risk associated with its mortgage origination business. Futures contracts and forward sales commitments are used to protect the value of the loan pipeline from changes in interest rates. In the period of time that elapses between the origination and sale of mortgage loans, changes in interest rates have the potential to cause a decline in the value of the loans in this held for sale portfolio. Futures and forward sale commitment positions are used to protect the Company from the risk of such adverse changes. The change in value of the hedging contracts is expected to be highly effective in offsetting the change in value of specific assets and liabilities over the life of the hedge relationship.

Regions also uses derivatives to meet the needs of its customers.  Interest rate swaps, interest rate options, futures and forward commitments and foreign exchange forwards are the most common derivatives sold to customers. Positions with similar characteristics are used to offset the market risk and minimize income statement volatility associated with this portfolio. Those instruments, which are used to service customers, are entered into the trading account, with changes in value recorded in the income statement.

Brokerage and Market Making Activity

Morgan Keegan's business activities expose it to market risk, including its securities inventory positions and securities held for investment.

Morgan Keegan trades for its own account in corporate and tax-exempt securities and U.S. government, agency and guaranteed securities. Most of these transactions are entered into to facilitate the execution of customers' orders to buy or sell these securities. In addition, it trades certain equity securities in order to "make a market" in these securities. Morgan Keegan's trading activities require the commitment of capital. All principal transactions place the subsidiary's capital at risk. Profits and losses are dependent upon the skills of employees and market fluctuations. In some cases, in order to hedge the risks of carrying inventory, Morgan Keegan enters into a low level of activity involving U.S. Treasury note futures.

Morgan Keegan, as part of its normal brokerage activities, assumes short positions on securities. The establishment of short positions exposes Morgan Keegan to off-balance sheet risk in the event that prices increase, as it may be obligated to cover such positions at a loss.  Morgan Keegan manages its exposure to these instruments by entering into offsetting or other positions in a variety of financial instruments.

Morgan Keegan will occasionally hedge a portion of its long proprietary inventory position through the use of short positions in financial future contracts, which are included in securities sold, not yet purchased at market value. At June 30, 2003, Morgan Keegan had no outstanding futures contracts. The contract amounts do not necessarily represent future cash requirements.

In the normal course of business, Morgan Keegan enters into underwriting and forward and future commitments. At June 30, 2003, the contract amounts of futures contracts were $6 million to purchase and $50 million to sell U.S. Government and municipal securities.Morgan Keegan typically settles its position by entering into equal but opposite contracts and, as such, the contract amounts do not necessarily represent future cash requirements. Settlement of the transactions relating to such commitments is not expected to have a material effect on Regions' consolidated financial position. Transactions involving future settlement give rise to market risk, which represents the potential loss that can be caused by a change in the market value of a particular financial instrument. Regions' exposure to market risk is determined by a number of factors, including the size, composition and diversification of positions held, the absolute and relative levels of interest rates, and market volatility.



---

Interest rate risk at Morgan Keegan arises from the exposure of holding interest-sensitive financial instruments such as government, corporate and municipal bonds and certain preferred equities. Morgan Keegan manages its exposure to interest rate risk by setting and monitoring limits and, where feasible, hedging with offsetting positions in securities with similar interest rate risk characteristics.  Securities inventories are marked to market, and accordingly there are no unrecorded gains or losses in value. While a significant portion of the securities inventories have contractual maturities in excess of five years, these inventories, on average, turn over in excess of twelve times per year. Accordingly, the exposure to interest rate risk inherent in Morgan Keegan's securities inventories is less than that of similar financial instruments held by firms in other industries.  Morgan Keegan's equity securities inventories are exposed to risk of loss in the event of unfavorable price movements. The equity securities inventories are marked to market and there are no unrecorded gains or losses.

Morgan Keegan is also subject to credit risk arising from non-performance by trading counterparties, customers, and issuers of debt securities owned. This risk is managed by imposing and monitoring position limits, monitoring trading counterparties, reviewing security concentrations, holding and marking to market collateral and conducting business through clearing organizations that guarantee performance.  Morgan Keegan regularly participates as an agent in the trading of some derivative securities for its customers; however, this activity does not involve Morgan Keegan acquiring a position or commitment in these products and this trading is not a significant portion of Morgan Keegan's business.  Morgan Keegan does not participate in the trading of derivative securities that have off-balance sheet risk.

PROVISION FOR LOAN LOSSES

The provision for loan losses was $61.5 million or .40% (annualized) of average loans in the first half of 2003, compared to $60.0 million or .39% (annualized) of average loans in the first half of 2002. For the second quarter of 2003, the provision for loan losses was  $30.0 million or .38% (annualized) of average loans compared to $30.0 million or .39% (annualized) of average loans in the second quarter of 2002 and $31.5 million or .41% (annualized) of average loans in the first quarter of 2003. The provision for loan losses recorded in the first six months and second quarter of 2003 was based on management's assessment of inherent losses associated with the loan portfolio and management's evaluation of current and future economic conditions (see ALLOWANCE FOR LOAN LOSSES).

NON-INTEREST INCOME

The following table presents a summary of non-interest income for the quarters ended June 30, 2003, March 31, 2003, and June 30, 2002.

|(in thousands)                          | June 30, |  | March 31, |  | June 30,
|--------------------------------------- | -------- |  | --------- |  | --------
|                                        | 2003     |  | 2003      |  | 2002    
|                                        |          |  |           |  |         
|                                        |          |  |           |  |         
|Brokerage and investment banking        | $151,811 |  | $125,027  |  | $123,296
|Trust department income                 | 16,850   |  | 17,106    |  | 15,807  
|Service charges on deposit accounts     | 72,205   |  | 69,725    |  | 68,943  
|Mortgage servicing and origination fees | 31,757   |  | 28,228    |  | 23,283  
|Securities gains                        | 15,799   |  | 9,898     |  | 1,928   
|Other                                   | 89,702   |  | 91,605    |  | 57,443  
|                                        |          |  |           |  |         
|                                        |          |  |           |  |         
|Total non-interest income               | $378,124 |  | $341,589  |  | $290,700
|                                        |          |  |           |  |         
|                                        |          |  |           |  |         
|                                        |          |  |           |  |         
|                                        |          |  |           |  |         



---

Total non-interest income (excluding securities transactions) increased $128.5 million or 23% in the first six months of 2003 compared to the same period of 2002 due to increases in all categories of non-interest income. On a quarterly basis, total non-interest income (excluding securities transactions) increased $73.6 million or 25% compared to the second quarter of 2002 and $30.6 million or 37% (annualized) compared to the first quarter of 2003, due primarily to increased production in the brokerage and mortgage operations.

BROKERAGE AND INVESTMENT BANKING

Brokerage and investment banking income reflected an increase of $40.7 million in the first six months of 2003 compared to the same period in 2002 due to strong growth in the fixed income markets. In the second quarter of 2003, brokerage and investment banking income increased $28.5 million over second quarter of 2002 and $26.8 million over first quarter of 2003 due primarily to the strength of the fixed income markets and increased activity in the equity markets.

The following table shows the breakout of revenue by division contributed by Morgan Keegan for the three months ended June 30, 2003 and March 31, 2003, and the six months ended June 30, 2003 and 2002.

|                                   |                |                              |                        |                   |                    
|---------------------------------- | -------------- | ---------------------------- | ---------------------- | ----------------- | -------------------
|Morgan Keegan                      |                |                              |                        |                   |                    
|Breakout of Revenue by Division    |                |                              |                        |                   |                    
|                                   |                |                              |                        |                   |                    
|($ amounts in thousands)           | Private
Client | Fixed-income Capital Markets | Equity Capital Markets | Regions 
MK Trust | Investment Advisory
|                                   |                |                              |                        |                   |                    
|Three months ended
June 30, 2003:  |                |                              |                        |                   |                    
|$ amount of revenue                | $51,369        | $77,348                      | $14,798                | $14,707           | $15,734            
|% of gross revenue                 | 27.3%          | 41.2%                        | 7.9%                   | 7.8%              | 8.4%               
|                                   |                |                              |                        |                   |                    
|Three months ended
March 31, 2003: |                |                              |                        |                   |                    
|$ amount of revenue                | $40,720        | $65,546                      | $9,673                 | $15,158           | $14,802            
|% of gross revenue                 | 25.5%          | 41.0%                        | 6.1%                   | 9.5%              | 9.3%               
|                                   |                |                              |                        |                   |                    
|Six months ended
June 30, 2003:    |                |                              |                        |                   |                    
|$ amount of revenue                | $92,089        | $142,894                     | $24,471                | $29,865           | $30,536            
|% of gross revenue                 | 26.4%          | 41.1%                        | 7.0%                   | 8.6%              | 8.8%               
|                                   |                |                              |                        |                   |                    
|Six months ended
June 30, 2002:    |                |                              |                        |                   |                    
|$ amount of revenue                | $87,022        | $100,994                     | $27,652                | $32,148           | $25,692            
|% of gross revenue                 | 28.9%          | 33.5%                        | 9.2%                   | 10.7%             | 8.5%               



---

The following table shows the components of revenue contributed by Morgan Keegan for the three months ended June 30, 2003, March 31, 2003, and June 30, 2002.

|                                       |                                   |                                    |                                  |                              |                            
|-------------------------------------- | --------------------------------- | ---------------------------------- | -------------------------------- | ---------------------------- | ---------------------------
|Morgan Keegan
Summary Income Statement |                                   |                                    |                                  |                              |                            
|                                       |                                   |                                    |                                  |                              |                            
|($ amounts in thousands)               | Three months 
Ended
June 30, 2003 | Three months 
Ended
March 31, 2003 | Three months
Ended
June 30, 2002 | % Change from
March 31, 2003 | % Change from
June 30, 2002
|                                       |                                   |                                    |                                  |                              |                            
|Revenues:                              |                                   |                                    |                                  |                              |                            
|Commissions                            | $40,022                           | $34,175                            | $35,471                          | 17.1%                        | 12.8%                      
|Principal transaction                  | 72,208                            | 68,015                             | 51,768                           | 6.2                          | 39.5                       
|Investment banking                     | 28,933                            | 12,184                             | 23,259                           | 137.5                        | 24.4                       
|Interest                               | 12,385                            | 12,925                             | 13,704                           | (4.2)                        | (9.6)                      
|Trust fees and services                | 14,707                            | 15,158                             | 16,066                           | (3.0)                        | (8.5)                      
|Investment advisory                    | 14,778                            | 13,616                             | 13,188                           | 8.5                          | 12.1                       
|Other                                  | 4,927                             | 3,790                              | 3,163                            | 30.0                         | 55.8                       
|                                       |                                   |                                    |                                  |                              |                            
|Total revenues                         | 187,960                           | 159,863                            | 156,619                          | 17.6                         | 20.0                       
|                                       |                                   |                                    |                                  |                              |                            
|Expenses:                              |                                   |                                    |                                  |                              |                            
|Interest expense                       | 6,344                             | 7,517                              | 7,685                            | (15.6)                       | (17.5)                     
|Non-interest expense                   | 142,924                           | 126,226                            | 123,900                          | 13.2                         | 15.4                       
|                                       |                                   |                                    |                                  |                              |                            
|Total expenses                         | 149,268                           | 133,743                            | 131,585                          | 11.6                         | 13.4                       
|                                       |                                   |                                    |                                  |                              |                            
|                                       |                                   |                                    |                                  |                              |                            
|Income before income 
   taxes         | 38,692                            | 26,120                             | 25,034                           | 48.1                         | 54.6                       
|                                       |                                   |                                    |                                  |                              |                            
|Income taxes                           | 14,652                            | 9,687                              | 9,303                            | 51.3                         | 57.5                       
|                                       |                                   |                                    |                                  |                              |                            
|                                       |                                   |                                    |                                  |                              |                            
|Net income                             | $24,040                           | $16,433                            | $15,731                          | 46.3%                        | 52.8%                      
|                                       |                                   |                                    |                                  |                              |                            
|                                       |                                   |                                    |                                  |                              |                            
|                                       |                                   |                                    |                                  |                              |                            



TRUST INCOME

Trust department income for the first six months of 2003 increased $2.4 million or 8% compared to the first six months of 2002.  Second quarter 2003 trust department income increased $1.0 million or 7% over the second quarter of 2002.  Compared to the first quarter of 2003 levels, trust fees remained relatively flat.



---

SERVICE CHARGES ON DEPOSIT ACCOUNTS

Service charges on deposit accounts increased $7.0 million or 5% in the first six months of 2003 over same period in 2002 due to management's continued focus on fee collection efforts. For the second quarter of 2003, service charges on deposit accounts increased $3.3 million over the second quarter of 2002 and $2.5 million over the first quarter of 2003.

MORTGAGE SERVICING AND ORIGINATION FEES

The primary source of this category of income is Regions' mortgage banking affiliates, Regions Mortgage and EquiFirst. Regions Mortgage's primary business and source of income is the origination and servicing of mortgage loans for long-term investors. EquiFirst typically originates mortgage loans which are sold to third-party investors with servicing released. Net gains and losses related to the sale of mortgage loans are included in other non-interest income.

Mortgage servicing and origination fees increased $12.0 million or 25% in the first six months of 2003 compared to the first six months of 2002 due to the significant mortgage activity resulting from the historically low interest rate environment over the past twelve months. On a quarterly basis, mortgage servicing and origination fees increased $8.5 million or 36% over the second quarter of 2002 and $3.5 million or 50% annualized over the first quarter of 2003 due to significant increases in production. Single-family mortgage production was $2.5 billion in the second quarter of 2003, compared to $1.2 billion in the second quarter of 2002 and $2.2 billion in the first quarter of 2003. The mortgage company's servicing portfolio totaled $16.6 billion at June 30, 2003, compared to $18.3 billion at June 30, 2002, and $17.1 billion at March 31, 2003.

A summary of mortgage servicing rights, which are included in other assets in the consolidated statements of condition, is presented as follows.  The balances shown represent the original amounts capitalized, less accumulated amortization and valuation adjustments, for the right to service mortgage loans that are owned by other investors.  The carrying values of mortgage servicing rights are affected by various factors, including prepayments of the underlying mortgages.  A significant change in prepayments of mortgages in the servicing portfolio could result in significant changes in the valuation adjustments.

|                                                                | Six Months Ended
|--------------------------------------------------------------- | ----------------
|(dollars in thousands)                                          | June 30,        
|                                                                | 2003            
|                                                                |                 
|Balance at beginning of year                                    | $147,487        
|Additions                                                       | 32,523          
|Amortization                                                    | (24,177)        
|                                                                |                 
|                                                                | 155,833         
|Valuation adjustment                                            | (59,500)        
|                                                                |                 
|Balance at end of period                                        | $ 96,333        
|                                                                |                 
|                                                                |                 
|                                                                |                 
|                                                                |                 
|Mortgage servicing asset as a percent of servicing
   portfolio | 0.58%           
|                                                                |                 
|                                                                |                 



---

SECURITIES GAINS

Securities gains of $15.8 million in the second quarter of 2003 were realized to partially offset the impairment charge for mortgage servicing rights of $19.2 million.  These gains resulted from the sale of approximately $85 million in Agency securities in the second quarter.  Regions holds Agency securities as a means to hedge mortgage servicing impairment resulting from declining interest rates.  Securities gains totaled $1.9 million in the second quarter of 2002 and $9.9 million in the first quarter of 2003.

OTHER INCOME

The components of other income consist mainly of fees and commissions, insurance premiums, customer derivative fees and gains related to the sale of mortgage loans. Other non-interest income for the first six months of 2003 increased $66.4 million over the first six months of 2002 due primarily to strong performance by insurance operations, higher gains resulting from mortgage banking activities, and increased customer derivative fees.  In the second quarter of 2003, other income increased $32.3 million over the second quarter of 2002 due to higher gains resulting from mortgage banking activities and higher customer derivative fees.  Compared to the first quarter of 2003, other income decreased $1.9 million.  Gains on sales of securitized indirect auto loans included in non-interest income were $6.8 million in the first quarter of 2003. There were no gains on sales of securitized indirect auto loans recorded in the second quarter of 2003.



NON-INTEREST EXPENSE

The following table presents a summary of non-interest expense for the quarters ended June 30, 2003, March 31, 2003, and June 30, 2002.

|(in thousands)                  | June 30, |  | March 31, |  | June 30,
|------------------------------- | -------- |  | --------- |  | --------
|                                | 2003     |  | 2003      |  | 2002    
|                                |          |  |           |  |         
|                                |          |  |           |  |         
|Salaries and employee benefits  | $288,937 |  | $272,619  |  | $250,283
|Net occupancy expense           | 25,518   |  | 25,712    |  | 23,964  
|Furniture and equipment expense | 20,501   |  | 20,312    |  | 23,167  
|Other                           | 149,029  |  | 129,531   |  | 123,659 
|                                |          |  |           |  |         
|                                |          |  |           |  |         
|Total non-interest expense      | $483,985 |  | $448,174  |  | $421,073
|                                |          |  |           |  |         
|                                |          |  |           |  |         
|                                |          |  |           |  |         



Total non-interest expense increased $108.7 million or 13% in the first six months of 2003 compared to the same period in 2002. Second quarter 2003 non-interest expense increased $62.9 million compared to the second quarter of 2002 and $35.8 million compared to the first quarter of 2003. These increases were due primarily to increased salaries and employee benefits and other expenses, including mortgage servicing rights impairment and amortization.



---

SALARIES AND EMPLOYEE BENEFITS



Salaries and employee benefits were up $73.9 million or 15% in the first six months of 2003 compared to the same period in 2002, due to higher incentive costs associated with Morgan Keegan and mortgage banking, increased pension costs, and normal merit increases. In the second quarter of 2003, salaries and employee benefits increased $38.7 million  compared to the second quarter of 2002 and $16.3 million compared to the first quarter of 2003 due again to higher commission and incentive pay in the brokerage and mortgage banking operations which corresponds with increases in revenues in those areas in the same periods. As of June 30, 2003, Regions had 16,003 full-time equivalent employees.

NET OCCUPANCY EXPENSE

Net occupancy expense includes rents, depreciation and amortization, utilities, maintenance, insurance, taxes and other expenses of premises occupied by Regions and its affiliates. Regions' affiliates operate banking offices in Alabama, Arkansas, Florida, Georgia, Louisiana, North Carolina, South Carolina, Tennessee, and Texas.

Net occupancy expense increased $4.7 million or 10% in the first six months of 2003 over the first six months of 2002 due to expenses related to new and acquired branch offices and the new operations center. Net occupancy expense in the second quarter of 2003 increased $1.6 million over the second quarter of 2002 and remained relatively flat compared to the first quarter of 2003

FURNITURE AND EQUIPMENT EXPENSE

Furniture and equipment expense during the six months decreased $4.5 million compared to the same period in 2002. In the second quarter of 2003, furniture and equipment expense decreased $2.7 million compared to the second quarter of 2002 and increased only slightly compared to the first quarter of 2003.

OTHER EXPENSES

The significant components of other expense include other non-credit losses, amortization and impairment of mortgage servicing rights and computer and other outside services. Other non-interest expense increased $34.6 million or 14% in the first six months of 2003 compared to the same period in 2002 due primarily to a $11.7 million increase in amortization of mortgage servicing rights and the $19.2 million charge for mortgage servicing rights impairment recorded in the second quarter of 2003. Consequently, other expense in the second quarter of 2003 increased $25.4 million over the second quarter of 2002 and $19.5 million over the first quarter of 2003.

APPLICABLE INCOME TAXES

Income tax expense for the first six months and second quarter of 2003 increased $5.3 million and $4.1 million, respectively, compared to the same periods in 2002 due to higher levels of taxable income. Regions effective tax rates for the first six months of 2003 and 2002 were 28.5% and 28.7%, respectively.

Regions' consolidated federal income tax returns, for the years 1998-2002, are open for examination. From time to time Regions engages in business plans that may also have an effect on its tax liabilities. While Regions has obtained the opinion of advisors that the tax aspects of these plans should prevail, examination of Regions' income tax returns or changes in tax law may impact the tax benefits of these plans. Regions believes adequate provisions for income tax have been recorded for all years open for review.



---



Item 3.	Qualitative and Quantitative Disclosures about Market Risk

Reference is made to pages 30 through 33 'Market Risk' included in Management's Discussion and Analysis.



Item 4.  Controls and Procedures

Based on their evaluation, as of a date within 90 days of the filing of this Form 10-Q, Regions' Chairman of the Board, President and Chief Executive Officer and Executive Vice President and Chief Financial Officer have concluded that Regions' disclosure controls and procedures (as defined in Rule 13a-14 under the Securities Exchange Act of 1934) are effective. There have been no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



PART II.  OTHER INFORMATION

Item 4.	Submission of Matters to a Vote of Security Holders

At the Annual Meeting of Stockholders held May 14, 2003, four nominees were elected as directors of Regions to serve three-year terms.  The directors elected at the 2003 Annual Meeting were James B. Boone Jr. (177,226,141 votes in favor and 2,562,233 votes withheld), James S. M. French (177,251,075 votes in favor and 2,537,299 votes withheld), Richard D. Horsley (176,599,171 votes in favor and 3,189,203 votes withheld), and W.Woodrow Stewart (154,246,826 votes in favor and 25,541,548 votes withheld).

In addition, the stockholders ratified the Board of Directors' selection of Ernst & Young LLP as independent auditors of the Company for the year ending December 31, 2003.  On the proposal, 157,803,717 shares were voted in favor, 19,924,581 shares were voted against, 2,060,076 shares abstained, and there were no broker non-votes.





---



Item 6.	Exhibits and Reports on Form 8-K

(a)		Exhibits:



|Exhibit No. | Description                                                                                                            
|----------- | -----------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                        
|31.1        | Certification of chief executive officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                    
|            |                                                                                                                        
|31.2        | Certification of chief financial officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                    
|            |                                                                                                                        
|32          | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



(b)		Reports on Form 8-K



No reports on Form 8-K were filed during the second quarter of 2003.

However, a report on Form 8-K, dated April 17, 2003, was furnished, under item 9 in connection with the Registrant's results of operations for the quarter ended March 31, 2003.

A report on Form 8-K, dated May 5, 2003, was furnished, under item 9 in connection with the Registrant's presentation in Birmingham, Alabama discussing current prospects for the company.





---



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 undersigned thereunto duly authorized.



Regions Financial Corporation

DATE:  August 13, 2003

/s/ Ronald C. Jackson                          Ronald C. Jackson
Senior Vice President and Comptroller
(Chief Accounting Officer and
  Duly Authorized Officer)