UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

Commission File No. 1-10160

UNION PLANTERS CORPORATION
(Exact name of registrant as specified in its charter)

Union Planters Corporation
6200 Poplar Avenue
Memphis, Tennessee 38119

Registrant’s telephone number, including area code: (901) 580-6000

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, and (2) has been subject to such filing requirements for the past 90 days.

Yes x        No o

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

Yes x        No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

UNION PLANTERS CORPORATION AND SUBSIDIARIES
Form 10-Q For the Three Months Ended March 31, 2004

INDEX

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Part I. FINANCIAL INFORMATION

Item 1 — Financial Statements (unaudited)

UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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UNION PLANTERS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Principles of Consolidation and Basis of Presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The foregoing financial statements are unaudited; however, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods have been included.

The accounting policies followed by Union Planters Corporation and its subsidiaries (collectively, Union Planters or the Company) for interim financial reporting are consistent with the accounting policies followed for annual financial reporting, except for newly issued accounting pronouncements discussed below. The notes included herein should be read in conjunction with Union Planters’ 2003 Annual Report on Form 10-K. Certain prior period amounts have been reclassified to conform with the 2004 financial reporting presentation.

In the second quarter of 2003, Union Planters began netting amortization and impairment expense associated with mortgage servicing rights (MSRs) against mortgage banking revenues in the Consolidated Statement of Earnings. This classification is more consistent with prevailing practice in the banking industry. All prior periods have been adjusted to conform with this presentation.

On January 22, 2004, Union Planters and Regions Financial Corporation (Regions) entered into a definitive merger agreement. Regions, headquartered in Birmingham, Alabama, is a full-service provider of banking, securities brokerage, mortgage and insurance products and services. Upon completion of the merger, the combined company and its banking operations will be headquartered in Birmingham while Morgan Keegan, Regions’ securities brokerage subsidiary, along with the combined mortgage business, will be headquartered in Memphis. Terms of the agreement call for the formation of a new holding company named New Regions Financial Corporation. In the transaction, each share of Union Planters’ common stock will be converted into the right to receive one share of the new company stock, and each share of Regions’ common stock will be converted into the right to receive 1.2346 shares of the new company common stock. The acquisition is subject to regulatory and shareholder approvals and other customary closing conditions. The transaction is expected to be completed in mid 2004. As a result of the merger, certain change-in-control provisions will be triggered related to the Union Planters’ 401(k) Retirement Savings Plan and various stock incentive plans that will result in the immediate vesting of these benefits.

Stock-Based Compensation. Union Planters has currently elected not to adopt the recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, which requires a fair-value based method of accounting for stock options and similar equity awards. As permitted under SFAS No. 123, Union Planters continues to apply Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its stock compensation plans and, accordingly, does not recognize compensation cost, except for stock grants. Had compensation cost for Union Planters stock option plans been consistently expensed based on fair value at the grant date for awards under the methodology prescribed under SFAS No. 123, Union Planters’ net income and earnings per share would have been reduced as shown in the table below. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions during the quarters ended March 31, 2004 and 2003, respectively: expected dividend yield of 4.19% and 4.59%; expected volatility of 25.14% and 26.79%; risk-free interest rate of 2.64% and 2.16%; and an expected life of 2.3 years for both periods. Forfeitures are recognized as they occur.

Recent Accounting Pronouncements

Interest Rate Lock Commitments. The United States Securities and Exchange Commission (SEC) recently issued Staff Accounting Bulletin (SAB) No. 105. SAB No. 105 clarifies the SEC’s position that the inclusion of cash flows from servicing or ancillary income in the determination of the fair value of interest rate lock commitments is not appropriate. SAB No. 105 must be

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implemented for loan commitments entered into on or after April 1, 2004. The adoption is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

Consolidation of Variable Interest Entities. In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 46, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51. The Company adopted FIN No. 46 on July 1, 2003 and as a result, deconsolidated Union Planters Capital Trust A (the UPC Trust). The sole assets of the UPC Trust are 8.20% Junior Subordinated Deferrable Interest Debentures of Union Planters Corporation (the Junior Subordinated Debentures). The UPC Trust’s liabilities are primarily represented by 8.20% Trust Preferred Securities, which have previously been included in other long-term debt in the Union Planters Consolidated Balance Sheet. Under FIN No. 46, the Junior Subordinated Debentures, which are substantially equal in amount to the Trust Preferred Securities, cease to be eliminated in consolidation and are included in other long-term debt in the Union Planters Consolidated Balance Sheet as of March 31, 2004. The Trust Preferred Securities presently qualify as Tier 1 regulatory capital and are reported in Federal Reserve regulatory reports as a minority interest in a consolidated subsidiary. The Junior Subordinated Debentures do not qualify as Tier 1 regulatory capital. The Federal Reserve Board has reached no final conclusion on the continued qualification of Trust Preferred Securities but has indicated that until further notice, Trust Preferred Securities will continue to count as Tier 1 regulatory capital. Should the Federal Reserve Board reach a conclusion that Trust Preferred Securities no longer included on the Consolidated Balance Sheet would cease to qualify as Tier 1 regulatory capital, Union Planters’ Tier 1 regulatory capital would be reduced by approximately $200 million.

Note 2. Available for Sale Securities

The following is a summary of Union Planters’ available for sale securities:

Available for sale securities having a fair value of approximately $2.2 billion at March 31, 2004 and $1.9 billion at December 31, 2003 were pledged to secure public and trust funds on deposit, securities sold under agreements to repurchase and Federal Home Loan Bank (FHLB) advances.

Included in available for sale securities is $289.6 million and $285.2 million of FHLB and Federal Reserve Bank stock at March 31, 2004 and December 31, 2003, respectively, for which there is no readily determinable market value.

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The following table presents the gross realized gains and losses on available for sale securities for the three months ended March 31, 2004 and 2003:

The losses during the first quarter of 2003 are related to interest only strips arising from Union Planters’ sales and securitizations of mortgage loans, which had an other than temporary decline in value due to increased prepayment speeds on the underlying mortgages that were accounted for as a realized loss.

Note 3. Allowance for Losses on Loans and Nonperforming Loans

The changes in the allowance for losses on loans for the three months ended March 31, 2004 and 2003 are as follows:

During the first quarter of 2004, management wrote down the allowance for losses on loans by $43.9 million as the result of a decision to sell a $235.2 million portfolio of brokered home equity and rental car fleet loans. A $25.8 million charge to the provision for losses on loans was also required to write the portfolio down to fair value prior to completing the transfer to loans held for resale. The charge was required because the change in intent with regard to the loans from holding them to maturity to holding them for resale results in the loans being accounted for at the lower of cost or fair value rather than at historical cost. Under Generally Accepted Accounting Principles, the difference between cost and the lower fair value is charged to the provision for losses on loans, with any future write-downs charged to noninterest expense.

Nonperforming loans are summarized as follows:

Note 4. Mortgage Servicing Rights

Union Planters acted as servicing agent on behalf of others for residential mortgage loans totaling approximately $24.3 billion at March 31, 2004, compared to $24.7 billion at December 31, 2003. The principal balances of loans serviced for others are not included in Union Planters’ Consolidated Balance Sheet. The following table presents a reconciliation of the changes in MSRs and the related valuation allowance:

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During the first quarter of 2004, Union Planters recorded a permanent impairment of MSRs of $13.5 million, which reduced both the gross carrying value and associated valuation allowance of the MSRs. This write-down had no impact on the Consolidated Statement of Earnings in the current year but will result in a reduction of MSRs amortization expense in future periods.

The estimated fair value of MSRs at March 31, 2004 was $325.4 million. Significant assumptions utilized in estimating the fair value were as follows:

The significant assumptions above directly relate to and move in concert with mortgage interest rates. In the view of management, in order to understand the hypothetical effect on the fair value of the MSRs as a result of unfavorable variations in the significant assumptions, it is necessary to measure the effect that would result from a decline in mortgage interest rates. At March 31, 2004, the reduction in the current fair value of MSRs resulting from an immediate 50 and 100 basis point decline in mortgage interest rates would be approximately $45.7 million and $101.4 million, respectively. The actual decline in fair value related to decreased mortgage interest rates could differ significantly from this estimate due to the propensity of borrowers to refinance in light of the remaining life and unpaid principal balance of their existing mortgage loan and the costs related to refinancing.

Note 5. Intangible Assets

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, most goodwill is no longer subject to amortization but is assessed at least annually for impairment. The carrying value of goodwill not subject to amortization was $743.2 million at March 31, 2004, December 31, 2003 and March 31, 2003. At each of these dates, $70.5 million of the goodwill was in the “other operating units” line of business, with the remainder in the “banking” line of business.

Union Planters’ other intangible assets are core deposit intangibles acquired through bank acquisitions and other unidentified intangibles arising from branch purchases and are subject to amortization periods up to 15 years with no residual value. The gross amount of other intangible assets was $309.2 million at March 31, 2004 and $316.3 million at December 31, 2003 and March 31, 2003 with accumulated amortization of $151.2 million, $148.4 million and $132.9 million, respectively. Branches sold during the first quarter of 2004 resulted in the release of gross intangible assets of $7.1 million along with associated accumulated amortization of $2.3 million. All other intangibles are in the “banking” line of business. The weighted average amortization period is 164.9 months. Amortization expense over the next five years on current other intangibles is expected to be:

Note 6. Borrowings

Short-Term Borrowings

Short-term borrowings include short-term FHLB advances, federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings. Short-term FHLB advances are borrowings from the FHLB, which are collateralized by mortgage-backed securities and mortgage loans. Federal funds purchased arise from Union Planters’ market activity with its correspondent banks with maturities ranging up to 180 days; the majority mature in one business day. Securities sold under agreements to repurchase are collateralized by U.S. Government and agency securities.

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Short-term borrowings are summarized as follows:

Short- and Medium-Term Senior Notes

At March 31, 2004, March 31, 2003 and December 31, 2003, there were $600 million, 5.125% fixed-rate Medium-term Subordinated Notes outstanding that mature in June 2007.

Long-term Federal Home Loan Bank Advances

Certain of Union Planters’ banking and thrift subsidiaries had outstanding advances with original maturity dates of greater than one year from the FHLB under Blanket Agreements for Advances and Security Agreements (the Agreements). The Agreements enable these subsidiaries to borrow funds from the FHLB to fund mortgage loan programs and to satisfy certain other funding needs. The value of the mortgage-backed securities and mortgage loans pledged under the Agreements must be maintained at not less than 115% and 150%, respectively, of the outstanding advances. At March 31, 2004, Union Planters had an adequate amount of mortgage-backed securities and loans to satisfy the collateral requirements. A summary of the advances is as follows:

Other Long-Term Debt

Union Planters’ other long-term debt is summarized as follows. Reference is made to Note 9 to the consolidated financial statements in Union Planters’ 2003 Annual Report on Form 10-K for additional information regarding these borrowings.

Note 7. Shareholders’ Equity

Common Stock

Union Planters has been authorized by its Board of Directors (Board) to repurchase shares of its common stock from time-to-time, and currently has remaining authorization from the Board to repurchase approximately 24.7 million shares of the Company’s common stock.

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Preferred Stock

During the first quarter of 2004, Union Planters announced its intention to redeem all outstanding shares of its convertible Series E Preferred stock. All shares that were not converted prior to March 31, 2004 were redeemed at par. The result was the conversion of 352,012 shares and the redemption of 32,107 shares not converted prior to the announced redemption date.

Union Planters’ outstanding preferred stock, all of which is convertible into shares of Union Planters’ common stock, is summarized as follows:

Note 8. Preferred Stock of Subsidiary

During 2003, Union Planters Preferred Funding Corporation (UPPFC), an indirect majority-owned, consolidated subsidiary of Union Planters, issued 1,000 shares of 7.75% non-cumulative, perpetual preferred stock, Series B (Series B Preferred Shares), with a liquidation value of $100,000 per share to another indirect wholly-owned subsidiary of Union Planters, U.P. REIT Holdings, Inc. (UP REIT Holdings). UPPFC is a real-estate investment trust (REIT) established for the purpose of acquiring, holding and managing real estate mortgage assets. All of the Series B Preferred Shares were subsequently sold privately to non-affiliates without registration. These securities qualify as Tier I capital and are included in the Consolidated Balance Sheet in other liabilities. Dividends on the Series B Preferred Shares are payable quarterly and are included in the Consolidated Statement of Earnings in other noninterest expense.

The Series B Preferred Shares are redeemable on or after July 15, 2023 and redeemable at the discretion of UPPFC in the event that the Series B Preferred Shares cannot be accounted for as Tier 1 regulatory capital or there is more than an insubstantial risk that dividends paid with respect to the Series B Preferred Shares will not be fully tax deductible. The total amount of Series B Preferred Shares issued and outstanding on December 31, 2003, net of discount and issuance costs, was $89.2 million.

Concurrent with the issuance of the Series B Preferred Shares, UPPFC also issued 3,736 shares of non-cumulative, perpetual preferred stock, Series C (Series C Preferred Shares), with a liquidation value of $100,000 per share to UP REIT Holdings. The holder of each of the Series C Preferred Shares is entitled to dividends, payable quarterly, at an annual rate of three month LIBOR plus 3% on the liquidation value. Additionally, the Series C Preferred Shares rank equal to the Series B Preferred Shares. At December 31, 2003, UP REIT Holdings continued to own all of the Series C Preferred Shares. So long as the Series C Preferred Shares are owned by Union Planters or a consolidated subsidiary, the shares and dividends paid thereon are eliminated in the consolidated financial statements.

The Series B Preferred Shares and the Series C Preferred Shares are not convertible into any other securities of UPPFC, Union Planters or any of its subsidiaries. The Series B Preferred Shares are, however, automatically exchangeable at the direction of the Office of the Comptroller of the Currency (OCC) for preferred stock of UPB, having substantially the same terms as the Series B Preferred Shares in the event UPB becomes undercapitalized under the OCC’s “prompt corrective actions” regulations, insolvent or, in the OCC’s sole discretion, in danger of becoming undercapitalized. Should UPPFC not pay dividends on the Series B Preferred Shares or the Series C Preferred Shares, both UPPFC and UPB will be precluded from paying dividends on their common stock until dividends have been paid on the Series B Preferred Shares for four consecutive quarters.

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Note 9. Other Noninterest Income and Expense

Note 10. Income Taxes

Applicable income taxes for the three months ended March 31, 2004 were $29.9 million, resulting in an effective tax rate of 29.00%. Applicable income taxes for the same period in 2003 were $8.8 million, resulting in an effective tax rate of 6.19%. During the first quarter of 2003, the Company recorded current federal tax benefits of $25.0 million related to the completion of a transaction designed to raise Tier 1 capital through the issuance of preferred stock and $11.0 million related to a reversal of a previously established tax liability, that was no longer required. During the first quarter of 2004, the Company made an investment in a pass-through entity that generates tax credits that can be used to offset federal income tax. The first quarter 2004 effective tax rate reflects a reduction of $10.4 million in tax expense ($7.5 million in tax credits and $2.9 million in benefit from the $8.3 million cost (expense) of the credits) arising from this investment. The cost of the investment is included in noninterest expense.

At March 31, 2004, the Company had a net deferred tax liability of $19.6 million. This compares to a net deferred tax liability of $13.0 million at December 31, 2003. The tax expense applicable to available for sale securities gains for the three months ended March 31, 2004 and 2003 was $11.9 million and $6.8 million, respectively.

Note 11. Other Comprehensive Income

The following table presents a reconciliation of the net change in unrealized gains (losses) on available for sale securities and cash flow hedges for the three months ended March 31, 2004:

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Note 12. Earnings Per Share

The calculation of earnings per share is summarized as follows:

Excluded from the computation of diluted shares were options to purchase 7.2 million and 4.8 million shares that were outstanding at March 31, 2004 and 2003, respectively, because the exercise price of these options was greater than the average market price of the common shares, and therefore, the effect would be antidilutive.

Note 13. Derivative Financial Instruments

Union Planters uses derivative financial instruments to manage risk associated with certain assets and liabilities and provide customers with products that meet their business requirements.

Asset and Liability Management Positions

Fair Value Hedges. To mitigate interest rate risk associated with certain deposits and debt, Union Planters has entered into interest rate swap agreements that qualify as fair value hedges. The swaps and the related debt are reported on the Consolidated Balance Sheet at current fair value at the end of each period. The changes in fair value of both the hedged item and the swap along with the net interest income or expense on the swap are netted against the interest expense related to the hedged item in the Consolidated Statement of Earnings.

The Company is also exposed to credit and interest-rate risk related to its mortgage inventory from the time a loan is closed until completion of normal post-closing review and the subsequent sale of the loan, normally 60 to 90 days. To mitigate interest rate risk associated with mortgage activities, Union Planters enters into mandatory short-term forward contracts, which are contracts for delayed delivery of mortgages in which the Company agrees to make delivery at a specified future date of a specified instrument at a specified price or yield. Risks arise from the possible inability of the counterparties to meet the terms of their contracts and from market movements in securities values and interest rates. These derivative financial instruments are associated with closed loans pending review and sale in fair value hedging relationships to reduce interest rate risk exposure. The fair value adjustment to loans held for resale as a result of these hedging relationships was $5.3 million at March 31, 2004, compared to $6.8 million at December 31, 2003.

The ineffective portion of all fair value hedges had an immaterial impact on interest expense during the three month periods ended March 31, 2004 and March 31, 2003.

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Cash Flow Hedges. Union Planters enters into interest rate swap agreements to hedge the variability of future cash flows associated with certain variable-rate loans. At March 31, 2004, an unrealized gain, net of taxes, of $8.8 million was recorded in accumulated other comprehensive income for the effective portion of changes in the fair value of derivatives designated as cash flow hedges. The reclassification from accumulated other comprehensive income to interest income will occur as interest income is accrued on the underlying loans. Net gains of approximately $950,000 were reclassified to interest income during the three months ended March 31, 2004. There were no net gains reclassified during the three months ended March 31, 2003 as these agreements were not entered into until after that date. Based on current market conditions, it is expected that $9.4 million of gross unrealized gains in accumulated other comprehensive income at March 31, 2004 will be reclassified to interest income over the next 12 months. The change in fair value attributable to hedge ineffectiveness and recorded directly to earnings during the three-month period ended March 31, 2004 was not material.

Other Asset and Liability Management Derivative Positions. The Company’s mortgage commitment pipeline is exposed to interest rate risk associated with interest rate lock commitments (IRLCs) extended to individuals who have applied for loan funding and meet certain defined credit and underwriting criteria. IRLCs are considered derivative financial instruments under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and are recorded at fair value, with changes in value recorded in current earnings. In addition to the mandatory forward contracts designated in fair value hedging relationships of loans held for resale, Union Planters also enters into both mandatory and optional short-term forward contracts to mitigate interest rate risk associated with IRLCs. (Losses) gains on IRLCs and related derivative contracts totaled a net amount of ($2.0) million during the first three months of 2004, compared to $4.8 million during the first three months of 2003.

Union Planters also enters into various derivative instruments to offset changes in fair value of its MSRs portfolio. These derivative instruments are marked-to-market and recorded as a component of mortgage banking revenues. Typical derivative instruments used by Union Planters may include interest rate swaps, swaptions, caps and floors. The gain recorded in association with these derivative instruments during the three months ended March 31, 2004 totaled approximately $760,000. These derivative positions were closed-out during the first quarter of 2004 resulting in the receipt of $46.5 million, which includes the return of the initial investment. There was no gain or loss during the three months ended March 31, 2003.

Summary information for all derivative financial instruments follows:

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Note 14. Line of Business Reporting