Regions Bank 2009 Annual Report Download - page 27

As to the payment of dividends, Regions Bank is subject to the laws of the state of Alabama, and the
regulations of the Alabama State Banking Department, and of the Federal Reserve. The payment of dividends by
Regions and Regions Bank may also be affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines.
If, in the opinion of a federal bank regulatory agency, an institution under its jurisdiction is engaged in or is
about to engage in an unsafe or unsound practice (which, depending on the financial condition of the institution,
could include the payment of dividends), such agency may require, after notice and hearing, that such institution
cease and desist from such practice. The federal bank regulatory agencies have indicated that paying dividends
that deplete an institution’s capital base to an inadequate level would be an unsafe and unsound banking practice.
Under the FDIA, an insured institution may not pay any dividend if payment would cause it to become
“undercapitalized” or if it already is “undercapitalized.” See “Regulatory Remedies under the FDIA” above.
Moreover, the Federal Reserve and the FDIC have issued policy statements stating that bank holding companies
and insured banks should generally pay dividends only out of current operating earnings.
Under the Federal Reserve’s Regulation H, Regions Bank may not, without the approval of the Federal
Reserve, declare or pay a dividend to Regions if the total of all dividends declared in a calendar year exceeds the
total of (a) Regions Bank’s net income for that year and (b) its retained net income for the preceding two
calendar years, less any required transfers to additional paid-in capital or to a fund for the retirement of preferred
stock. As a result of our $5.6 billion loss in 2008 and our $1.3 billion loss in 2009, Regions Bank cannot, without
approval from the Federal Reserve, declare or pay a dividend to Regions until such time as Regions Bank is able
to satisfy the criteria discussed in the preceding sentence. Given the losses in 2008 and 2009, Regions Bank does
not expect to be able to pay dividends to Regions in the near term without obtaining regulatory approval. Under
Alabama law, a bank may not pay a dividend in excess of 90 percent of its net earnings until the bank’s surplus is
equal to at least 20 percent of capital. Regions Bank is also required by Alabama law to obtain approval of the
Superintendent of Banking prior to the payment of dividends if the total of all dividends declared by Regions
Bank in any calendar year will exceed the total of (a) Regions Bank’s net earnings (as defined by statute) for that
year, plus (b) its retained net earnings for the preceding two years, less any required transfers to surplus. Also, no
dividends may be paid from Regions Bank’s surplus without the prior written approval of the Superintendent of
Banking.
However, the ability of Regions to pay dividends to its stockholders is not totally dependent on the receipt
of dividends from Regions Bank, as Regions has other cash available to make such payment. As of December 31,
2009, Regions had $8.0 billion of cash and cash equivalents on a consolidated basis, of which $4.1 billion is
attributable to the parent company. These funds are available for corporate purposes, including debt service and
to pay dividends to its stockholders. This is compared to an anticipated common dividend requirement, assuming
current dividend payment levels, of approximately $48 million and preferred cash dividends of approximately
$202 million for the full year 2010. Expected long-term borrowings maturities in 2010 are approximately $5.5
billion.
Although Regions currently has capacity to make common dividend payments in 2010, the payment of
dividends by Regions and the dividend rate are subject to management review and approval by Regions’ Board
of Directors on a quarterly basis. In the current financial and economic environment, the Federal Reserve has
indicated that bank holding companies should carefully review their dividend policy and has discouraged
payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong.
Regions has reduced its quarterly dividend to $0.01 per share and does not expect to increase its quarterly
dividend above such level for the foreseeable future. Preferred dividends are to be paid in accordance with the
terms of the CPP and Regions Mandatory Convertible Preferred Stock, Series B. See Item 1A. “Risk Factors” of
this Annual Report on Form 10-K for additional information.
Prior to November 14, 2011, unless Regions has redeemed all of the Series A Preferred Stock issued to the
U.S. Treasury on November 14, 2008 or unless the U.S. Treasury has transferred all the preferred securities to a
third party, the consent of the U.S. Treasury will be required for Regions to declare or pay any dividend or make
any distribution on common stock other than (i) regular quarterly cash dividends of not more than $0.10 per
13