Regions Bank 2010 Annual Report Download

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ANNUAL REPORT
TO SHAREHOLDERS
2010

Table of contents

  • Page 1
    2010 ANNUAL REPORT TO SHAREHOLDERS

  • Page 2

  • Page 3
    ... rate in Florida was significantly lower at 4.38 percent, a direct result of our commitment to working with customers to help them stay in their homes through our Customer Assistance Program. Across our 16-state franchise, we've restructured approximately 19,500 consumer real estate loans...

  • Page 4
    ... year in a row, the company opened nearly one million new business and consumer checking accounts and increased low-cost deposits by $7 billion. Recent FDIC market share data indicated our growth in deposits ranked Regions first among our peer group and seventh among the top 25 banks. Importantly...

  • Page 5
    ... distinguished quality service to small business and middle market customers, and the Small Business Administration has recognized Regions as a top small business lender. For a tenth consecutive record year, Morgan Keegan continued to perform extremely well with assets under management increasing to...

  • Page 6
    ... in certain markets, specifically Florida and Georgia. As a result, we are reducing our exposure to real estate and are moving toward a better balance in our consumer and business portfolio and more balance across our geographies. As part of an aggressive plan to improve credit quality, we...

  • Page 7
    ... risk-rated problem loans improved every quarter last year and delinquencies have been trending favorably as well. I am confident that we now have the right people, processes and technology in place to address these issues and that we are making progress. PREPARED FOR A NEW OPERATING ENVIRONMENT...

  • Page 8
    ... team to deliver better results. As the economy improves, we are positioned to demonstrate the business results that our shareholders deserve. Close to 28,000 Regions associates live and work according to five values that lead how we operate and support our communities Put people first Do what is...

  • Page 9
    ... to our senior leadership team who did an outstanding job last year in designing business plans to support these priorities and to our associates who executed those plans every day. I also wish to express my gratitude to our Board of Directors and to our chairman, Earnie Deavenport, for their...

  • Page 10

  • Page 11
    ...REGIONS FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) (Address of principal executive offices) 63-0589368 (I.R.S. Employer Identification No.) 1900 Fifth Avenue North, Birmingham, Alabama 35203...

  • Page 12

  • Page 13
    ... Corporate Governance ...Item 11. Executive Compensation ...Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Item 13. Certain Relationships and Related Transactions, and Director Independence ...Item 14. Principal Accounting Fees and Services...

  • Page 14

  • Page 15
    ... effect on business. The current stresses in the financial and real estate markets, including possible continued deterioration in property values. Regions' ability to manage fluctuations in the value of assets and liabilities and off-balance sheet exposure so as to maintain sufficient capital and...

  • Page 16
    ... holding company headquartered in Birmingham, Alabama, which operates throughout the South, Midwest and Texas. Regions provides traditional commercial, retail and mortgage banking services, as well as other financial services in the fields of investment banking, asset management, trust, mutual funds...

  • Page 17
    ... of Regions Bank. Morgan Keegan employs approximately 1,200 financial advisors offering products and services from over 321 offices located in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, Mississippi, Missouri, New York, North Carolina, South...

  • Page 18
    ..., and Regions Insurance Services, Inc., headquartered in Memphis, Tennessee. Through its insurance brokerage operations in Alabama, Arkansas, Indiana, Louisiana, Missouri, Mississippi, Tennessee and Texas, Regions Insurance, Inc. offers insurance coverage for various lines of personal and commercial...

  • Page 19
    ... electing to be treated as a financial holding company. Regions Bank is a member of the FDIC, and, as such, its deposits are insured by the FDIC to the extent provided by law. Regions Bank is an Alabama state-chartered bank and a member of the Federal Reserve System. It is generally subject to...

  • Page 20
    ... as Regions Bank, their affiliates, and other "larger participants" in the markets for consumer financial services (as determined by the CFPB) will be subject to direct supervision by the CFPB, including any applicable examination, enforcement and reporting requirements the CFPB may establish. New...

  • Page 21
    ... capital elements" are currently limited to 25 percent of Tier 1 capital. Pursuant to the Dodd-Frank Act, trust preferred securities will be phased-out of the definition of Tier 1 capital of bank holding companies having consolidated assets exceeding $500 million, such as Regions, over a three-year...

  • Page 22
    ... rule has not been issued as of February 2011. Leverage Requirements. Neither Basel I nor Basel II includes a leverage requirement as an international standard; however, the Federal Reserve has established minimum leverage ratio guidelines for bank holding companies to be considered well-capitalized...

  • Page 23
    ... permits the Federal banking agencies to adopt regulations affecting banking institutions' capital requirements in a number of respects, including potentially more stringent capital requirements for systemically important financial institutions. Accordingly, the regulations ultimately applicable to...

  • Page 24
    ... the termination of deposit insurance by the FDIC, and to certain restrictions on its business. See "-Regulatory Remedies under the FDIA" below. Given that the Basel III rules are subject to change and the scope and content of capital regulations that U.S. federal banking agencies may adopt under...

  • Page 25
    ... 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. 11

  • Page 26
    ... 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 Regions Bank's $975 million loss in 2009 and $252 million loss in 2010, Regions Bank cannot, without approval from the Federal Reserve, declare or...

  • Page 27
    ... the applicable bank regulatory agency's evaluation of the financial institution's capital, asset quality, management, earnings, liquidity and sensitivity to risk ("CAMELS"). The assessment rate for large institutions with long-term debt issuer ratings, such as Regions, is currently determined using...

  • Page 28
    ... challenges facing the banking industry, the FDIC amended the Restoration Plan to allow seven years for the reserve ratio to return to 1.15 percent. In May 2009, the FDIC adopted a final rule that imposed a five basis point special assessment on each institution's assets minus Tier 1 capital (as of...

  • Page 29
    ...to the Federal Reserve before acquiring direct or indirect ownership or control of any voting shares of any company having consolidated assets of $10 billion or more. Bank holding companies seeking approval to complete an acquisition must be well-capitalized and well-managed effective July 2011. The...

  • Page 30
    ... securities guaranteed under the TLGP to prepay any of its other debt that is not guaranteed by the FDIC. U.S. Treasury Capital Purchase Program Pursuant to the CPP, on November 14, 2008, Regions issued and sold to the U.S. Treasury in a private offering, (i) 3.5 million shares of Series A Preferred...

  • Page 31
    ... incentive-based compensation arrangements for executive officers, employees, directors or principal shareholders that could lead to a material financial loss for the institution. The proposed rule requires covered institutions to establish policies and procedures for monitoring and evaluating their...

  • Page 32
    ... asset and income information from applications. Consumers also have the option to direct banks and other financial institutions not to share information about transactions and experiences with affiliated companies for the purpose of marketing products or services. Community Reinvestment Act Regions...

  • Page 33
    ... subject matter. Rules and regulations for registered broker-dealers cover such issues as: capital requirements; sales and trading practices; use of client funds and securities; the conduct of directors, officers and employees; record-keeping and recording; supervisory procedures to prevent improper...

  • Page 34
    ... intermediaries, such as savings and loan associations, credit unions, consumer finance companies, brokerage firms, insurance companies, investment companies, mutual funds, mortgage companies and financial service operations of major commercial and retail corporations. Regions expects competition to...

  • Page 35
    ... us and their ratings of our long-term debt based on a number of factors, including our financial strength and conditions affecting the financial services industry generally. Over the past two years, all of the major ratings agencies downgraded Regions' and Regions Bank's credit ratings, and many of...

  • Page 36
    .... Such changes may, among other things, adversely affect the ratings of our securities or other securities in which we have an economic interest. The value of our deferred tax assets could adversely affect our operating results and regulatory capital ratios. As of December 31, 2010, Regions had...

  • Page 37
    ... this Annual Report on Form 10-K. Further disruptions in the residential real estate market could adversely affect our performance. As of December 31, 2010, investor real estate loans secured by land, single-family and condominium properties, plus home equity loans secured by second liens in Florida...

  • Page 38
    ... Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, Texas and Virginia. The local economic conditions in these areas have a significant impact on Regions Bank's commercial, real estate and construction...

  • Page 39
    ...from the regulation of certain debt obligations, changes in the control of bank holding companies and state-chartered banks, and the maintenance of adequate capital to the general business operations and financial condition of Regions Bank, including permissible types, amounts and terms of loans and...

  • Page 40
    ...-bank borrowings, repurchase agreements and borrowings from the discount window of the Federal Reserve. Additionally, our debt ratings are currently not investment grade according to some credit ratings agencies. As a non-investment grade issuer, our cost of funding and access to the capital markets...

  • Page 41
    ... assessment rate is applied. The FDIC adopted a rule implementing this change, as well as adopting a revised risk-based assessment calculation in February 2011. The FDIC has also proposed a rule tying assessment rates of FDIC-insured institutions to the institution's employee compensation programs...

  • Page 42
    ... according to the Federal Reserve's study on interchange transactions. The restrictions on interchange fees contained in the proposed rule would be applicable to all debit card issuers who, together with their affiliates, possess more than $10 billion in assets, such as Regions Bank, and do not...

  • Page 43
    ... stockholders. Regulations of both the Federal Reserve and the State of Alabama affect the ability of Regions Bank to pay dividends and other distributions to us and to make loans to us. Due to losses recorded at Regions Bank during 2009 and 2010, under the Federal Reserve's rules, Regions Bank may...

  • Page 44
    ... our strategies to manage interest rate risks, changes in interest rates can still have a material adverse impact on our business, financial condition and results of operations. Additionally, Regions' portfolio segments, particularly investor real estate, include products where terms are tied to...

  • Page 45
    .... In our market areas, we face competition from other commercial banks, savings and loan associations, credit unions, internet banks, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, and other financial intermediaries that offer similar services. Some of...

  • Page 46
    ... Federal Reserve. The instruments of monetary policy employed by the Federal Reserve include open-market operations in U.S. government securities, changes in the discount rate or the federal funds rate on bank borrowings, and changes in reserve requirements against bank deposits. In view of changing...

  • Page 47
    ... deposits, to rely more heavily on equity to fund our business, resulting in greater dilution of our existing shareholders. As a result, our business, financial condition or results of operations may be adversely affected. Our reported financial results depend on management's selection of accounting...

  • Page 48
    ... tax asset balances; or significantly increase our accrued income taxes. Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition. From time to time, the Financial Accounting Standards Board and SEC change the financial...

  • Page 49
    ... equity dilution; Changes in the credit, mortgage and real estate markets, including the markets for mortgage-related securities; and Changes in global financial markets and global economies and general market conditions, such as interest or foreign exchange rates, stock, commodity, credit or asset...

  • Page 50
    ... capital ratios. Item 1B. None. Item 2. Properties Unresolved Staff Comments Regions' corporate headquarters occupy the main banking facility of Regions Bank, located at 1900 Fifth Avenue North, Birmingham, Alabama 35203. At December 31, 2010, Regions Bank, Regions' banking subsidiary, operated...

  • Page 51
    ... Guarantees" in the Notes to the Consolidated Financial Statements which are included in Item 8. of this Annual Report on Form 10-K. Executive Officers of the Registrant Information concerning the Executive Officers of Regions is set forth under Item 10. "Directors, Executive Officers and Corporate...

  • Page 52
    ... of Equity Securities Regions' common stock, par value $.01 per share, is listed for trading on the New York Stock Exchange under the symbol RF. Quarterly high and low sales prices of and cash dividends declared on Regions' common stock are set forth in Table 28 "Quarterly Results of Operations" of...

  • Page 53
    ...a bank holding company, and its ability to declare and pay dividends is dependent on certain federal regulatory considerations, including the guidelines of the Federal Reserve regarding capital adequacy and dividends. In addition, the terms of Regions' outstanding junior subordinated debt securities...

  • Page 54
    ... Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Regions S&P 500 Index S&P Banks Index Cumulative Total Return 12/31/2007 12/31/2008 12/31/2005 12/31/2006 12/31/2009 12/31/2010 Regions ...S&P 500 Index ...S&P Banks Index ...Item 6. Selected Financial Data $100.00 100.00 100.00 $114.92 115.79 115...

  • Page 55
    ... the most credit pressure. Income producing investor real estate, including loans secured by multi-family and retail developments, also came under pressure. Additionally, the risk profile of home equity products, particularly second lien mortgages in Florida, increased as real estate values fell and...

  • Page 56
    ... term. These swaps offer this protection while reducing asset sensitivity through 2012. Management's 2009 decision to de-risk the securities portfolio also impacts the net interest margin. At December 31, 2010, the securities portfolio almost exclusively consisted of agency guaranteed residential...

  • Page 57
    ... to offer additional products and services to its customers. From time to time, Regions evaluates potential bank and non-bank acquisition candidates. In February, 2009, Regions acquired from the Federal Deposit Insurance Corporation ("FDIC") approximately $285 million in deposits from a failed bank...

  • Page 58
    ...Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, Texas and Virginia. The Treasury function includes the Company's securities portfolio and other wholesale funding activities. In 2010, Regions' banking...

  • Page 59
    ... Keegan, a subsidiary of Regions and one of the largest investment firms based in the South. Its lines of business include private client, retail brokerage services, fixed-income capital markets, equity capital markets, trust, and asset management. In 2010, Morgan Keegan's operations reported a loss...

  • Page 60
    ...82.49 51.85 Shareholders of record at year-end (actual) ...76,996 81,166 83,600 85,060 84,877 Weighted-average number of common shares outstanding Basic ...1,227 989 695 708 502 1,227 989 695 713 507 Diluted ...(1) Beginning in 2010, tangible ratios are computed net of deferred taxes associated with...

  • Page 61
    ...securities in 2010, as well as increases in non-interest income attributable to service charges and brokerage, investment banking and capital markets income. The impact of Regulation E on service charges was less than anticipated; however, the Company expects increased pressure on fee-based revenues...

  • Page 62
    ... Federal Home Loan Bank advances, and increased FDIC premiums. Higher salaries and employee benefits and credit-related costs such as other-real-estate-owned expense also contributed to the increase. These items were partially offset by lower other-than-temporary impairment on securities and a 2009...

  • Page 63
    ...non-GAAP financial measures will permit investors to assess the performance of the Company on the same basis as that applied by management and the Board of Directors. The third quarter of 2008 was the final quarter for merger charges related to the AmSouth acquisition. The efficiency ratio, which is...

  • Page 64
    ...GAAP) to Tier 1 capital (regulatory) and to Tier 1 common equity (non-GAAP). Table 2-GAAP to Non-GAAP Reconciliation 2010 For Years Ended December 31 2009 2008 2007 2006 (In millions, except per share data) INCOME (LOSS) Net income (loss) from continuing operations (GAAP) ...Preferred dividends and...

  • Page 65
    ...2009 2008 2007 2006 (In millions, except per share data) EFFICIENCY RATIO Non-interest expense (GAAP) ...Adjustments: Merger-related charges ...Goodwill impairment ...Regulatory charge ...Mortgage servicing rights impairment ...Loss on extinguishment of debt ...FDIC special assessment ...Securities...

  • Page 66
    ... been revised to conform with current presentation. (2) Only one year of projected future taxable income may be applied in calculating deferred tax assets for regulatory capital purposes. CRITICAL ACCOUNTING POLICIES AND ESTIMATES In preparing financial information, management is required to make...

  • Page 67
    ... of the Company's assets and liabilities is carried at fair value, with changes in fair value recorded either in earnings or accumulated other comprehensive income (loss). These include trading account assets, securities available for sale, mortgage loans held for sale, mortgage servicing rights and...

  • Page 68
    ... as business model and market perception of risk) between Regions and the peer set. The table below summarizes the discount rate used in the goodwill impairment tests of the Banking/Treasury reporting unit for the reporting periods indicated: 4th Quarter 2010 3rd Quarter 2010 2nd Quarter 2010 1st...

  • Page 69
    ... were driven by a proposed rule issued by the Federal Reserve governing debit card income and the announcements in the fourth quarter of 2010 and January of 2011 of pending non-distressed, orderly sales of financial institutions of comparable size and/or footprint to Regions. Additionally, the Basel...

  • Page 70
    ... Note 8 for further details. Impact to Step One Conclusion Investment Banking/Brokerage/Trust and Insurance Reporting Units Impact of Change Investment Banking/ Brokerage/Trust Insurance Change in Discount Rate + 1% ...+ 2% ...+ 3% ...Change in Market Approach Multipliers (c) (d) Pass Pass Fail...

  • Page 71
    ...As a result, Regions stratifies its mortgage servicing portfolio on the basis of certain risk characteristics, including loan type and contractual note rate, and values its mortgage servicing rights using discounted cash flow modeling techniques. These techniques require management to make estimates...

  • Page 72
    .... OPERATING RESULTS GENERAL Regions reported a net loss available to common shareholders of $763 million in 2010, compared to a net loss available to common shareholders of $1.3 billion in 2009. The lower loss in 2010 was primarily reflective of moderation in credit quality within the Company's loan...

  • Page 73
    ...earning assets ...17,720 16,866 22,708 $135,955 $142,759 $143,947 Liabilities and Stockholders' Equity Interest-bearing liabilities: Savings accounts ...$ 4,459 Interest-bearing transaction accounts ...14,404 Money market accounts ...26,753 Money market accounts-foreign ...601 Time deposits-customer...

  • Page 74
    ...for sale ...Loans, net of unearned income ...Other interest-earning assets ...Total interest-earning assets ...Interest expense on: Savings accounts ...Interest-bearing transaction accounts ...Money market accounts ...Money market accounts-foreign ...Time deposits-customer ...Total customer deposits...

  • Page 75
    ... primarily the Federal Reserve Bank, as a result of the Company's liquidity management process. These funds generate a significantly lower spread than loans or securities. Average loans as a percentage of average interest-earning assets were 73 percent in 2010 and 75 percent in 2009. The categories...

  • Page 76
    ... 5-Non-Interest Income Year Ended December 31 2010 2009 2008 (In millions) Service charges on deposit accounts ...Brokerage, investment banking and capital markets ...Mortgage income ...Trust department income ...Securities gains (losses), net ...Insurance commissions and fees ...Leveraged lease...

  • Page 77
    ... Morgan Keegan's revenues by division for the years ended December 31, 2010, 2009 and 2008. Table 6-Morgan Keegan Revenue by Division Year Ended December 31 Private Client Fixed-Income Capital Markets Equity Capital Markets Investment Regions Banking MK Trust (Dollars in millions) Asset Management...

  • Page 78
    ... with changes in fair value recorded as a component of mortgage banking income. Regions uses various derivative instruments to mitigate the effect of changes in the fair value of its mortgage servicing rights. Beginning in the fourth quarter of 2009, the Company also began using trading assets to...

  • Page 79
    ... of Debt During 2009, Regions completed an exchange of common shares for outstanding 6.625 percent Trust Preferred Securities issued by Regions Financing Trust II ("the Trust"). In connection with this exchange, the Company recognized a gain on extinguishment of junior subordinated debt issued to...

  • Page 80
    ... Charge, Merger-Related Charges and Goodwill Impairment 2010 2009 2008 (In millions) Salaries and employee benefits ...Net occupancy expense ...Furniture and equipment expense ...Professional and legal fees ...Amortization of core deposit intangibles ...Other real estate owned expense ...Marketing...

  • Page 81
    ... in 2010 as compared to 2009. See Note 17 "Pension and Other Employee Benefit Plans" to the consolidated financial statements for further details. There are various incentive plans in place in many of Regions' lines of business that are tied to the performance levels of employees. At Morgan Keegan...

  • Page 82
    ...bank regulatory agencies' ratings, comprised of Regions Bank's capital, asset quality, management, earnings, liquidity and sensitivity to risk, along with its long-term debt issuer ratings and financial ratios are the primary factors in determining FDIC insurance premiums. During early 2009, Regions...

  • Page 83
    ..., Morgan Asset Management and certain of their employees for violations of federal and state securities laws and NASD rules relating to certain funds previously administered by Morgan Keegan and Morgan Asset Management. Based on the status of settlement negotiations, Regions believed that a loss on...

  • Page 84
    ... bank-owned life insurance, as well as temporary book-tax differences including the allowance for loan losses. The projections relied upon for this process are consistent with those used in the goodwill impairment test and are sourced from the Company's economic forecasting process. Strong capital...

  • Page 85
    ... assets for the year ended December 31, 2009. Lending at Regions is generally organized along three portfolio segments: commercial (including commercial and industrial, and owner occupied commercial real estate mortgage and construction loans), investor real estate loans (commercial real estate...

  • Page 86
    ... from the 2009 year-end. See the "Credit Risk" section later in this report for discussion of risk characteristics in these categories and Regions' management of those risks. Commercial-The Commercial category includes commercial and industrial, representing loans to commercial customers for use in...

  • Page 87
    ... This type of lending, which is secured by a first or second mortgage on the borrower's residence, allows customers to borrow against the equity in their home. Real estate market values as of the time the loan or line is secured directly affect the amount of credit extended and, in addition, changes...

  • Page 88
    ...$18,897 From time to time, Regions sells securities classified as available for sale as part of the Company's asset/ liability management strategy. As part of this process, in the first quarter of 2010, Regions sold approximately $1.4 billion of residential agency securities available for sale and...

  • Page 89
    ...stock, Federal Home Loan Bank stock, and equity stock of other corporations held by Regions are not included in the table above. Portfolio Quality-Regions' investment policy emphasizes credit quality and liquidity. Securities rated in the highest category by nationally recognized rating agencies and...

  • Page 90
    ...compensation plans. Trading account assets are carried at market value with changes in market value reflected in the consolidated statements of operations. At the end of 2009, Regions increased holdings of U.S. Treasury and Federal agency securities held for the purpose of hedging mortgage servicing...

  • Page 91
    ...-bearing transaction accounts to non-interest-bearing demand accounts during the year. Regions continues to deepen and retain existing customer relationships, as well as develop new relationships through client acquisition, new checking products and money market rate offers. Customer deposits, which...

  • Page 92
    ... 90,794 110 $90,904 Regions elected to exit the Federal Deposit Insurance Corporation's ("FDIC") Transaction Account Guarantee ("TAG") program on July 1, 2010. The TAG program was a component of the Temporary Liquidity Guarantee Program, whereby the FDIC guarantees all funds held at participating...

  • Page 93
    ...31, 2010, Regions could borrow a maximum of approximately $16.6 billion from the Federal Reserve Bank Discount Window. See Note 4 "Loans" to the consolidated financial statements for further detail and discussion of loans pledged to the Federal Reserve Bank at December 31, 2010 and 2009. Other short...

  • Page 94
    ...to-day basis. Regions, through Morgan Keegan, maintains two types of liabilities for its brokerage customers that are classified as short-term borrowings since Morgan Keegan pays its customers interest related to these liabilities. The brokerage customer position liability represents liquid funds in...

  • Page 95
    ... FHLB. Regions has pledged certain residential first mortgage loans on one-to-four family dwellings and home equity lines of credit as collateral for the FHLB advances outstanding. See Note 4 "Loans" to the consolidated financial statements for loans pledged to the FHLB at December 31, 2010 and 2009...

  • Page 96
    ... 30 days to 15 years and subordinated notes with maturities from 5 years to 30 years. These notes are not deposits and they are not insured or guaranteed by the FDIC. Regions' borrowing availability with the Federal Reserve Bank Discount Window as of December 31, 2010, based on assets available for...

  • Page 97
    ... Regions Financial Corporation and Regions Bank received downgrades from each of the other ratings agencies, citing concerns regarding Regions' credit quality, specifically commercial real estate loan exposures and unfavorable geographic concentrations, and the related implications for its capital...

  • Page 98
    ...for preferred stock, and changes in accumulated other comprehensive income decreased equity by $390 million. On May 7, 2009, the final results of the Federal Reserve's Supervisory Capital Assessment Program ("SCAP") were released requiring Regions to submit a capital plan to its regulators detailing...

  • Page 99
    ... as an element of Tier 1 capital. This disallowance of trust preferred securities will be phased in from January 1, 2013 to January 1, 2016. Debt or equity instruments issued to the Federal government as part of the CPP are exempt from the Collins Amendment. As of December 31, 2010, Regions has $846...

  • Page 100
    ... assets. Prior periods have been revised to conform with current presentation. See Note 13 "Regulatory Capital Requirements and Restrictions" to the consolidated financial statements for further details. As of December 31, 2010, Regions Bank had the requisite capital levels to qualify as well...

  • Page 101
    ... Regions' equity interests in the business trusts are included in other assets. For regulatory reporting and capital adequacy purposes, the Federal Reserve Board has indicated that such trust preferred securities will continue to constitute Tier 1 capital. Additional discussion regarding the status...

  • Page 102
    ... profile and the committee receives reports from the Company quarterly. Additionally, Regions' Internal Audit Division performs ongoing, independent reviews of the risk management process which are reported to the Audit Committee of the Board of Directors. Some of the more significant processes used...

  • Page 103
    ...Interest rate movements may also have an impact on the value of Regions' securities portfolio, which can directly impact the carrying value of shareholders' equity. Regions from time to time may hedge these price movements with derivatives (as discussed below). However, at December 31, 2010, Regions...

  • Page 104
    ...volatility associated with this portfolio. Instruments used to service customers are held in the trading account, with changes in value recorded in the consolidated statements of operations. The primary objective of Regions' hedging strategies is to mitigate the impact of interest rate changes, from...

  • Page 105
    ...to market risk in its capital markets business, which includes derivatives, loan syndication and foreign exchange trading activities, and mortgage trading activity, which includes secondary marketing of loans to government-sponsored entities. Morgan Keegan trades for its own account in corporate and...

  • Page 106
    ... 31, 2010, customers of Morgan Keegan owned approximately $54 million of auction rate securities, and Morgan Keegan held approximately $161 million of auction rate securities on the balance sheet. To manage trading risks arising from interest rate and equity price risks, Regions uses a Value at Risk...

  • Page 107
    ...payments on consumer loans and one-to-four family residential first mortgage loans. In addition, liquidity needs can also be met by borrowing funds in state and national money markets. Historically, Regions' liquidity has been enhanced by a stable customer deposit base. During 2010 and 2009, Regions...

  • Page 108
    ...not insured or guaranteed by the FDIC. Regions may, from time to time, consider opportunistically retiring outstanding issued securities, including subordinated debt, trust preferred securities and preferred shares in privately negotiated or open market transactions for cash or common shares. Morgan...

  • Page 109
    ..., and corporate debt issuers. Because transactions with a counterparty may be generated in one or more departments, credit limits are established for use by various areas of the Company including treasury, capital markets, finance, the mortgage division and lines of business. To manage counterparty...

  • Page 110
    ... line of business personnel and the Chief Credit Officer. The Chief Credit Officer reviews summaries of these credit reports with executive management and the Board of Directors. Finally, the Credit Review department provides ongoing independent oversight of the credit portfolios to ensure policies...

  • Page 111
    ... underwritten and managed by a specialized real estate group that also manages loan disbursements during the construction process. Net charge-offs on commercial investor real estate construction loans rose substantially, from 6.66 percent in 2009 to 14.3 percent in 2010. Losses on sales or transfers...

  • Page 112
    .... Condominium has been reduced to levels that management no longer considers to be significant exposures. In 2010, Regions executed a bulk sale of non-performing assets which totaled $350 million. Non-accrual portfolio loans secured predominantly by land represented approximately $200 million of the...

  • Page 113
    ... network. Loans of this type are generally smaller in size than commercial or investor real estate loans and are geographically dispersed throughout Regions' market areas, with some guaranteed by government agencies or private mortgage insurers. Losses on the residential loan portfolio depend, to...

  • Page 114
    ... in 2010. Allowance for Credit Losses The allowance for credit losses represents management's estimate of credit losses inherent in the portfolio as of year-end. The allowance for credit losses consists of two components: the allowance for loan losses and the reserve for unfunded credit commitments...

  • Page 115
    ... 2010 versus 2.63 percent in 2009. Losses from Florida-based credits were again particularly high, as property valuations in certain markets continued to experience deterioration. These loans and lines represent approximately $5.2 billion of Regions' total home equity portfolio at December 31, 2010...

  • Page 116
    ...factors used by management to determine the adequacy of the allowance or the availability of new information could cause the allowance for credit losses to be increased or decreased in future periods. In addition, bank regulatory agencies, as part of their examination process, may require changes in...

  • Page 117
    ... 2010 2009 (In millions) 2008 Allowance for loan losses at January 1 ...$ 3,114 $ 1,826 $ 1,321 Loans charged-off: Commercial and industrial ...429 384 235 Commercial real estate mortgage-owner occupied ...225 89 60 Commercial real estate construction-owner occupied ...25 19 12 Commercial investor...

  • Page 118
    ... (1) Breakout of commercial real estate mortgage and construction between owner occupied and investor categories not available for periods prior to 2008. (2) During the fourth quarter of 2006, Regions transferred the portion of the allowance for loan losses related to unfunded credit commitments to...

  • Page 119
    ... ...Commercial real estate mortgage-owner occupied ...Commercial real estate construction-owner occupied ...Total commercial ...Commercial investor real estate mortgage ...Commercial investor real estate construction ...Total investor real estate ...Residential first mortgage ...Home equity...

  • Page 120
    ... customers in their homes and avoiding foreclosure where possible. Modification may be offered to any borrower experiencing financial hardship-regardless of the borrower's payment status. Under the CAP, Regions may offer a short-term deferral, a term extension, an interest rate reduction, a new loan...

  • Page 121
    ..., 2010 December 31, 2009 Loan Allowance for Loan Allowance for Balance Credit Losses Balance Credit Losses (In millions) Accruing: Commercial ...Investor real estate ...Residential first mortgage ...Home equity ...Other consumer ...Non-accrual status or 90 days past due: Commercial ...Investor real...

  • Page 122
    ...construction ...Total investor real estate ...Residential first mortgage ...Home equity ...Total non-performing loans, excluding loans held for sale ...Non-performing loans held for sale ...Total non-performing loans* ...Foreclosed properties ...Total non-performing assets* ...Accruing loans 90 days...

  • Page 123
    ... real estate mortgage and construction between owner occupied and investor categories not available for periods prior to 2008. Loans past due 90 days or more and still accruing totaled $585 million as of year-end 2010, a decrease of $103 million from year-end 2009 levels, reflecting improvement...

  • Page 124
    ...the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding required disclosure. Regions' Disclosure Review Committee, which includes representatives from the legal, risk management, accounting, investor relations and audit departments...

  • Page 125
    ... debt realized in connection with the Company's issuance of common stock in exchange for trust preferred securities. Offsetting the non-interest income increases, brokerage, investment banking and capital markets revenue decreased in 2009 to $989 million compared to $1.0 billion in 2008 due to lower...

  • Page 126
    ... higher premium rates applied to a higher level of insured deposit balances. The FDIC made a number of changes to its assessment rate schedule, which drove the increase in premium rates. The bank regulatory agencies' ratings, comprised of Regions Bank's capital, asset quality, management, earnings...

  • Page 127
    ..., condominium and home equity portfolios. Income-producing investor real estate, including multi-family and retail, also contributed to the increased level of non-performing loans, which significantly impacts the level of the provision. At December 31, 2009, the allowance for loan losses totaled...

  • Page 128
    ... public accounting firm has issued an audit report on the effectiveness of the Company's internal control over financial reporting. This report appears on the following page. REGIONS FINANCIAL CORPORATION by /s/ O. B. GRAYSON HALL, JR. O. B. Grayson Hall, Jr. President and Chief Executive Officer...

  • Page 129
    ... Company Accounting Oversight Board (United States), the consolidated balance sheets of Regions Financial Corporation and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for each of the three years...

  • Page 130
    ... OF DIRECTORS AND SHAREHOLDERS OF REGIONS FINANCIAL CORPORATION We have audited the accompanying consolidated balance sheets of Regions Financial Corporation and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in stockholders' equity, and...

  • Page 131
    ... 2009 (In millions, except share data) Assets Cash and due from banks ...Interest-bearing deposits in other banks ...Federal funds sold and securities purchased under agreements to resell ...Trading account assets ...Securities available for sale ...Securities held to maturity (estimated fair value...

  • Page 132
    REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31 2010 2009 2008 (In millions, except per share data) Interest income on: Loans, including fees ...Securities: Taxable ...Tax-exempt ...Total securities ...Loans held for sale ...Federal funds ...

  • Page 133
    ... change from defined benefit pension plans, net of tax (1) ...Comprehensive income (loss) ...Cash dividends declared-$0.13 per share ...Preferred dividends ...Preferred stock transactions: Net proceeds from issuance of 287,500 shares of mandatorily convertible preferred stock ...Discount accretion...

  • Page 134
    ... ...Net change from defined benefit pension plans, net of tax(1) ...Comprehensive income (loss) ...Cash dividends declared-$0.04 per share ...Preferred dividends ...Preferred stock transactions: Conversion of mandatorily convertible preferred stock into 63 million shares of common stock ...Discount...

  • Page 135
    ... from share-based payments ...Originations and purchases of loans held for sale ...Proceeds from sales of loans held for sale ...Gain on sale of loans, net ...Valuation charges on loans held for sale ...Loss from sale of mortgage servicing rights ...Decrease (increase) in trading account assets...

  • Page 136
    ... Company") provides a full range of banking and bankrelated services to individual and corporate customers through its subsidiaries and branch offices located primarily in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South...

  • Page 137
    ... ACCOUNT ASSETS Trading account assets, which are primarily held for the purpose of selling at a profit, consist of debt and marketable equity securities and are carried at estimated fair value. Gains and losses, both realized and unrealized, are included in brokerage, investment banking and capital...

  • Page 138
    ... loan type. Regions has elected the fair value option for residential mortgage loans held for sale. Residential real estate mortgage loans not designated as held for sale are retained based on available liquidity, interest rate risk management and other business purposes. Student loans held for sale...

  • Page 139
    ... guidelines. Management's determination of the adequacy of the allowance is a quarterly process and is based on an evaluation and rating of the loan portfolio segments, historical loan loss experience, current economic conditions, collateral values of properties securing loans, volume, growth...

  • Page 140
    ... to address the uncertainty of growth estimates and earnings projections of management. Regions uses the public company method and the transaction method as the two market approaches. The public company method applies a value multiplier derived from each reporting unit's peer group to a financial...

  • Page 141
    ... secured borrowing, and the assets remain on the Company's balance sheet, the proceeds from the transaction are recognized as a liability, and gain or loss on sale is deferred until the sale criterion are achieved. Prior to January 1, 2009, amounts capitalized for the right to service mortgage loans...

  • Page 142
    ... market risk associated with changes in the value of the underlying financial instrument, as well as the credit risk that the counterparty will fail to perform. Eurodollar futures are futures contracts on Eurodollar deposits. Eurodollar futures subject Regions to market risk associated with changes...

  • Page 143
    ...as trading with gains and losses related to the change in fair value recognized in the statement of operations during the period. These positions are used to mitigate economic and accounting volatility related to customer derivative transactions, as well as non-derivative instruments. Regions enters...

  • Page 144
    .... Groups of employees that have similar historical exercise behavior are reviewed and considered for valuation purposes. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant and the weighted-average expected life of the grant. Beginning in 2009, Regions issued...

  • Page 145
    ... See Note 21 for additional information related to fair value measurements. DISCONTINUED OPERATIONS As a result of the sale of EquiFirst Corporation ("EquiFirst"), a wholly owned non-conforming mortgage origination subsidiary, on March 30, 2007, the business related to EquiFirst has been accounted...

  • Page 146
    ... equity securities. This guidance is effective for interim and annual reporting periods ending after June 15, 2009, and is applied prospectively. Regions adopted these provisions during the second quarter of 2009. Refer to Note 3 for additional information. In June 2009, the FASB issued accounting...

  • Page 147
    ... financial reporting. See Note 5 for additional information regarding the allowance for credit losses. FUTURE APPLICATION OF ACCOUNTING STANDARDS In October 2010, the FASB issued guidance addressing the diversity in practice regarding which costs related to the acquisition or renewal of insurance...

  • Page 148
    ... of credit, representing Regions' maximum exposure to loss as of December 31 is as follows: 2010 2009 (In millions) Equity method investments included in other assets ...Unfunded commitments included in other liabilities ...Short-term construction loans and letters of credit commitments ...Funded...

  • Page 149
    ...Value Securities available for sale: U.S. Treasury securities ...Federal agency securities ...Obligations of states and political subdivisions ...Mortgage-backed securities: Residential agency ...Residential non-agency ...Commercial agency ...Other debt securities ...Equity securities ...Securities...

  • Page 150
    ... and Federal Home Loan Bank ("FHLB") stock. Shares in the Federal Reserve Bank and FHLB are accounted for at amortized cost, which approximates fair value. For the Years Ended December 31 2010 2009 (In millions) Federal Reserve Bank ...Federal Home Loan Bank ... $471 419 $492 473 Securities with...

  • Page 151
    ... of 292 securities and 151 securities at December 31, 2010 and 2009, respectively, represented an other-than-temporary impairment as of those dates. The unrealized losses are related primarily to the impact of higher interest rates and their impact on mortgage-backed securities. The Company does not...

  • Page 152
    ...six months. The cost basis of the securities is adjusted to current fair value with the entire offset recorded in the statement of operations. For the years ended December 31, 2010 and 2009, activity related to the credit loss component for debt securities where a portion of the other-than-temporary...

  • Page 153
    ... (Losses) Portion (In millions) 2010 ...2009 ...2008 ... $52 60 (2) $ 30 27 (43) In January 2011, Regions sold approximately $1.5 billion in securities, primarily agency mortgage-backed securities, and recognized a net pre-tax gain of approximately $52 million. NOTE 4. LOANS The loan portfolio...

  • Page 154
    ... primarily within Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, Texas and Virginia. During 2009 and 2010, Regions considered its income-producing investor real estate (specifically loans secured by...

  • Page 155
    ...allowance for credit losses calculated using a pooled approach are recorded through the provision for loan losses or non-interest expense, as applicable. As a matter of business practice, Regions may require some form of credit support, such as a guarantee. Guarantees are legally binding and entered...

  • Page 156
    ...,002 $82,864 $35,056 $31,900 Regions employs a credit risk management process with defined policies, accountability and routine reporting to manage credit risk in the loan portfolio segments. Credit risk management is guided by credit policies that provide for a consistent and prudent approach to...

  • Page 157
    ... line of business personnel and the Chief Credit Officer. The Chief Credit Officer reviews summaries of these credit reports with executive management and the Board of Directors. Finally, the Credit Review department provides ongoing independent oversight of the credit portfolios to ensure policies...

  • Page 158
    ... the equity in their home. Real estate market values as of the time the loan or line is secured directly affect the amount of credit extended and, in addition, changes in these values impact the depth of potential losses. Indirect lending, which is lending initiated through third-party business...

  • Page 159
    ... ...Commercial real estate mortgage- owner occupied ...Commercial real estate construction- owner occupied ...Total commercial ...Commercial investor real estate mortgage ...Commercial investor real estate construction ...Total investor real estate ...Residential first mortgage ...Home equity...

  • Page 160
    ... Payments Book for Applied (2) Value (3) Loan Losses (Dollars in millions) Legal Balance (1) Coverage% (4) Commercial and industrial ...Commercial real estate mortgage-owner occupied ...Commercial real estate construction-owner occupied ...Total commercial ...Commercial investor real estate...

  • Page 161
    ...31, 2010 and 2009, Regions had loans contractually past due 90 days or more and still accruing of approximately $585 million and $688 million, respectively. NOTE 6. SERVICING OF FINANCIAL ASSETS Effective January 1, 2009, the Company made an election to prospectively change the policy for accounting...

  • Page 162
    ...of operations associated with changes in mortgage servicing rights and related derivative and/or trading securities for the years ended December 31: 2010 2009 (In millions) Net interest income ...Brokerage income ...Mortgage income ... $ 3 4 16 $23 $20 4 13 $37 During 2010, 2009 and 2008, Regions...

  • Page 163
    ... Banking/Brokerage/Trust reporting units, these multipliers are applied to tangible book value. As of Fourth Quarter 2009 Banking/ Treasury Investment Banking/ Brokerage/Trust Insurance Discount rate used in income approach ...Public company method market multiplier(1) ...Transaction method market...

  • Page 164
    ... rule issued by the Federal Reserve governing the rates charged on debit card income. The Company also considered the announcements in the fourth quarter of 2010 and January of 2011 of pending non-distressed, orderly sales of financial institutions of comparable size and/or footprint to Regions...

  • Page 165
    ...NOTE 10. DEPOSITS The following schedule presents a detail of interest-bearing deposits at December 31: 2010 2009 (In millions) Savings accounts ...Interest-bearing transaction accounts ...Money market accounts ...Money market accounts-foreign ...Time deposits ...Customer deposits ...Treasury time...

  • Page 166
    ... of short-term borrowings at December 31: 2010 2009 (In millions) Company funding sources: Federal funds purchased ...Securities sold under agreements to repurchase ...Federal Home Loan Bank advances ...Treasury, tax and loan notes ...Other short-term borrowings ...Customer-related borrowings...

  • Page 167
    ... brokerage customers that are classified as short-term borrowings since Morgan Keegan pays its customers interest related to these liabilities. The brokerage customer position liability represents liquid funds in the customers' brokerage accounts. The short-sale liability represents Regions' trading...

  • Page 168
    ... as Tier 2 capital under Federal Reserve guidelines. None of the subordinated notes are redeemable prior to maturity. As of December 31, 2010, Regions had senior notes totaling $3.8 billion. In October 2008, the Federal Deposit Insurance Corporation ("FDIC") announced a new program-the Temporary...

  • Page 169
    ...opportunistically retiring outstanding issued securities, including subordinated debt, trust preferred securities and preferred shares in privately negotiated or open market transactions for cash or common shares. NOTE 13. REGULATORY CAPITAL REQUIREMENTS AND RESTRICTIONS Regions and Regions Bank are...

  • Page 170
    ...adjusted quarterly average assets. December 31, 2009 Minimum Amount Ratio Requirement (Dollars in millions) To Be Well Capitalized Tier 1 common (non-GAAP): Regions Financial Corporation ...Tier 1 capital: Regions Financial Corporation ...Regions Bank ...Total capital: Regions Financial Corporation...

  • Page 171
    ... years, less any required transfers to additional paid-in capital or to a fund for the retirement of preferred stock. As a result of the losses incurred by Regions Bank in 2010, 2009, and 2008, Regions Bank cannot, without approval from the Federal Reserve, declare or pay a dividend to Regions...

  • Page 172
    ...and 2009, respectively. Discount accretion on the preferred shares reduced retained earnings by $37 million during 2010 and $36 million in 2009. Both the preferred securities and the warrant are accounted for as components of Regions' regulatory Tier 1 capital. On May 20, 2009 the Company issued 287...

  • Page 173
    ... service credit realized in net income (loss) ...Net change from defined benefit plans ...Comprehensive income (loss) ... $ (885) 83 394 (311) (9) 259 (268) (5) 44 (49) $(1,513) $ 346 (21) (138) 117 3 (99) 102 4 (15) 19 $ 584 $ (539) 62 256 (194) (6) 160 (166) (1) 29 (30) $ (929) Before Tax 2009...

  • Page 174
    ... 31: 2010 2009 2008 (In millions, except per share amounts) Numerator: Income (loss) from continuing operations ...$ (539) $(1,031) $(5,585) Less: Preferred stock dividends and accretion ...(224) (230) (26) Income (loss) from continuing operations available to common shareholders ...Loss from...

  • Page 175
    ...be granted with a lower exercise price than the fair market value of Regions' common stock on the date of grant. The contractual life of options granted under these plans ranges from seven to ten years from the date of grant. Regions issues new shares from authorized reserves upon exercise. Grantees...

  • Page 176
    ...-year term. During 2009, Regions made stock option grants from prior long-term incentive plans that vest based upon a service condition and a market condition in addition to awards that were similar to prior grants. The fair value of these stock options was estimated on the date of the grant using...

  • Page 177
    ... plan is closed to new entrants. Benefits under the pension plan are based on years of service and the employee's highest five years of compensation during the last ten years of employment. Regions' funding policy is to contribute annually at least the amount required by Internal Revenue Service...

  • Page 178
    ... to fund the Company's share of the cost of health care benefits in amounts determined at the discretion of management. Postretirement life insurance is also provided to a grandfathered group of employees and retirees. Actuarially determined pension expense is charged to current operations using the...

  • Page 179
    ... weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31 are as follows: Pension 2009 Other Postretirement Benefits 2010 2009 2008 2010 2008 Discount rate ...Expected long-term rate of return on plan assets ...Rate of annual compensation increase...

  • Page 180
    ... the fair value of Regions' defined-benefit pension plans' and other postretirement plans' financial assets: December 31, 2010 Level 1 Level 2 Level 3 (In millions) Fair Value Cash and cash equivalents(1) ...$100 $- $- Fixed income securities ...- 271 - Common stock ...410 - - Mutual funds ...368...

  • Page 181
    ... pension plan financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31 (the other postretirement plan had no Level 3 financial assets): Year Ended December 31, 2010 Real estate Miscellaneous Hedge funds funds assets...

  • Page 182
    ... years ended December 31: 2010 2009 (In millions) 2008 Professional and legal fees ...Amortization of core deposit intangibles ...Other real estate owned expense ...Marketing ...Mortgage servicing rights impairment ...FDIC special assessment ...FDIC premiums ...Loss on early extinguishment of debt...

  • Page 183
    ...31 are listed below: 2010 2009 (In millions) Deferred tax assets: Allowance for loan losses ...Net operating loss carryfowards, if applicable, net of federal benefit ...Federal tax credit carryforwards ...Unrealized gains and losses included in stockholders' equity ...Employee benefits and deferred...

  • Page 184
    ... that credits are not measured on a pre-tax basis. The Company's determination of the realization of the net deferred tax asset is based on its assessment of all available positive and negative evidence. The Company is currently in a three-year cumulative loss position, which represents negative...

  • Page 185
    ... impact on the Company's business, financial position, results of operations or cash flows. With few exceptions, the Company is no longer subject to state and local income tax examinations for tax years before 2006. Currently, there are disputed tax positions taken in previously filed tax returns...

  • Page 186
    ...to manage overall cash flow changes related to interest rate risk exposure on LIBOR-based loans. The agreements effectively modify the Company's exposure to interest rate risk by utilizing receive fixed/pay LIBOR interest rate swaps. Regions issues long-term fixed-rate debt for various funding needs...

  • Page 187
    ... on the statement of operations for the years ended December 31: Year Ended December 31, 2010 Amount of Gain(Loss) Amount of Gain(Loss) Recognized Derivatives in Fair Location of Gain(Loss) Recognized in Hedged Items in Location of Gain(Loss) in Income on Value Hedging Recognized in Income...

  • Page 188
    ... customers. The portfolio is used to generate trading profit and to help clients manage market risk. The Company is subject to the credit risk that a counterparty will fail to perform. The Company is also subject to market risk, which is evaluated by the Company and monitored by the asset/liability...

  • Page 189
    ... of rate lock commitments. Regions manages market risk on interest rate lock commitments and mortgage loans held for sale with corresponding forward sale commitments, which are recorded at fair value with changes in fair value recorded in mortgage income. At December 31, 2010 and 2009, Regions had...

  • Page 190
    ...The fair value of sold protection at December 31, 2010 was immaterial. In transactions where Regions has sold credit protection, recourse to collateral associated with the original swap transaction is available to offset some or all of Regions' obligation. CONTINGENT FEATURES Certain of Regions Bank...

  • Page 191
    ... VALUE ON A RECURRING BASIS Trading account assets, securities available for sale, certain mortgage loans held for sale, mortgage servicing rights, derivative assets, trading account liabilities and derivative liabilities were recorded at fair value on a recurring basis during 2010 and 2009. Below...

  • Page 192
    .... Regions rarely transfers assets and liabilities measured at fair value between Level 1 and Level 2 measurements. There were no such transfers during the years ended December 31, 2010, 2009 or 2008. Trading account assets are periodically transferred to or from Level 3 valuation based on management...

  • Page 193
    ...-backed securities: Residential agency ...Residential non-agency ...Commercial agency ...Commercial non-agency ...Other debt securities ...Equity securities(1) ...Total securities available for sale ...Mortgage loans held for sale ...Mortgage servicing rights ...Derivative assets Interest rate swaps...

  • Page 194
    ...2010, 2009 and 2008. The tables do not reflect the change in fair value attributable to any related economic hedges the Company used to mitigate the interest rate risk associated with these assets and (liabilities). Year Ended December 31, 2010 Trading account assets(1) Securities available for sale...

  • Page 195
    Trading account assets, net(1) Year Ended December 31, 2009 Securities Mortgage available for servicing sale rights Derivatives, net (In millions) Beginning balance, January 1, 2009 ...Total gains (losses) realized and unrealized: Included in earnings(1) ...Included in other comprehensive income ...

  • Page 196
    ... losses recorded in earnings for Level 3 assets for the years ended December 31, 2010, 2009 and 2008: Total Gains and Losses Year Ended December 31, 2010 Securities available for Trading account assets(1) sale Obligations of Obligations of states and Commercial states and Mortgage political agency...

  • Page 197
    ... and losses recorded in earnings for Level 3 assets and liabilities for the years ended December 31, 2010, 2009 and 2008. Total Unrealized Gains and Losses Year Ended December 31, 2010 Securities Derivatives, available for sale net Obligations of states and Mortgage Interest political servicing rate...

  • Page 198
    ... similar properties. These valuations are considered Level 3 measurements as management uses assumptions not observable in the market. Loans held for sale for which the fair value option has not been elected are recorded at the lower of cost or fair value and therefore are reported at fair value on...

  • Page 199
    ...2009 Level 1 Level 2 Level 3 Total (In millions) Loans held for sale ...Foreclosed property and other real estate ...FAIR VALUE OPTION $- - $ 86 362 $ 17 - $103 362 $(54) (59) Regions elected the fair value option for FNMA or FHLMC eligible thirty-year residential mortgage loans held for sale...

  • Page 200
    ... savings accounts, money market accounts and certain other time deposit accounts is the amount payable on demand at the reporting date (i.e., the carrying amount). Fair values for certificates of deposit are estimated by using discounted cash flow analyses, based on market spreads to benchmark rates...

  • Page 201
    ... with Morgan Keegan. Insurance includes all business associated with commercial insurance and credit life products sold to consumer customers. During 2010, minor reclassifications were made from the Banking/Treasury segment to the Insurance segment to more appropriately present management's current...

  • Page 202
    ... 31, 2009 Investment Merger Banking/ Charges and Brokerage/ Discontinued Trust Insurance Operations (In millions) Total Company Net interest income ...Provision for loan losses ...Non-interest income ...Non-interest expense ...Income tax (benefit) expense ...Net income (loss) ...Average assets...

  • Page 203
    ... AND GUARANTEES COMMERCIAL COMMITMENTS Regions issues off-balance sheet financial instruments in connection with lending activities. The credit risk associated with these instruments is essentially the same as that involved in extending loans to customers and is subject to Regions' normal credit...

  • Page 204
    ... effect on Regions' business, consolidated financial position, results of operations or cash flows. On April 7, 2010, the SEC, the Financial Industry Regulatory Authority ("FINRA") and a joint state task force of securities regulators from Alabama, Kentucky, Mississippi, and South Carolina ("Task...

  • Page 205
    ... loss. Settlement negotiations and hearing preparations are ongoing. On July 21, 2009, the SEC filed a complaint in United States District Court for the Northern District of Georgia against Morgan Keegan alleging violations of the federal securities laws in connection with auction rate securities...

  • Page 206
    ... 2009, Regions was named as a defendant in a purported class-action lawsuit filed by customers of Regions Bank in the U.S. District Court for the Northern District of Georgia challenging the manner in which non-sufficient funds ("NSF") and overdraft fees were charged and the policies related...

  • Page 207
    NOTE 24. PARENT COMPANY ONLY FINANCIAL STATEMENTS Presented below are condensed financial statements of Regions Financial Corporation: Balance Sheets December 31 2010 2009 (In millions) ASSETS Cash and due from banks ...Interest-bearing deposits in other banks ...Loans to subsidiaries ...Securities...

  • Page 208
    Statements of Operations Year Ended December 31 2010 2009 2008 (In millions) Income: Dividends received from subsidiaries ...Service fees from subsidiaries ...Interest from subsidiaries ...Gain on extinguishment of debt ...Other ...Expenses: Salaries and employee benefits ...Interest ...Net ...

  • Page 209
    Statements of Cash Flows Years Ended December 31 2010 2009 2008 (In millions) Operating activities: Net income (loss) ...$ (539) $(1,031) $(5,596) Adjustments to reconcile net cash provided by operating activities: Equity in undistributed earnings of subsidiaries ...403 914 6,129 Depreciation, ...

  • Page 210
    ... Executive Officer and the Chief Financial Officer have concluded that Regions' disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective. During the fourth fiscal quarter of the year ended December 31, 2010, there have been no changes...

  • Page 211
    ...registrant and Regions Bank and Senior Executive Vice President and Lines of Business/Operations and Technology Group Head of AmSouth Bancorporation and AmSouth Bank. Director, Morgan Keegan & Company, Inc. Chief Administrative Officer and Senior Executive Vice President, registrant and Regions Bank...

  • Page 212
    ...of Business Banking. Chief Executive Officer, Morgan Keegan & Company, Inc. Previously president of Fixed Income Capital Markets at Morgan Keegan. Florida Region President and Senior Executive Vice President, Regions Bank. Previously served in senior management roles at Regions Bank and AmSouth Bank...

  • Page 213
    ... in senior management roles in the Human Resources Group at Regions Bank and AmSouth Bank. Chief Marketing Officer and Senior Executive Vice President, Regions Bank. Previously served as Chief Marketing Officer and Senior Executive Vice President of AmSouth Bank. Central Region President and Senior...

  • Page 214
    ... exchange ratio. See Note 16 "Share-Based Payments" to the consolidated financial statements included in Regions' Annual Report on Form 10-K for the year ended December 31, 2010. Does not include 221,976 shares issuable pursuant to outstanding rights under AmSouth deferred compensation plans...

  • Page 215
    ... certificate for the class of Fixed Rate Cumulative Perpetual Preferred Stock Series A, incorporated by reference to Exhibit 4.2 to Form 8-K Current Report filed by registrant on November 18, 2008. Regions Financial Corporation 2010 Long Term Incentive Plan, incorporated by reference to Appendix...

  • Page 216
    ... AmSouth Bancorporation 2006 Long Term Incentive Compensation Plan, incorporated by reference to Exhibit 10.4 to Form 10-Q Quarterly Report filed by registrant on May 11, 2009. Regions Financial Corporation 2006 Long Term Incentive Plan, incorporated by reference to Exhibit 99.1 to Form 8-K Current...

  • Page 217
    ... and award notice applicable to the non-employee members of the Board of Directors under the Regions Financial Corporation 2006 Long Term Incentive Plan, incorporated by reference to Exhibit 10.1 to Form 8-K Current Report filed by registrant on April 22, 2009. Form of director stock option grant...

  • Page 218
    ...10-K Annual Report filed by registrant on February 25, 2009. Regions Financial Corporation Executive Bonus Plan, incorporated by reference to Exhibit 99 to Form 8-K Current Report filed by registrant on May 25, 2005. Amended and Restated AmSouth Bancorporation Management Incentive Plan, incorporated...

  • Page 219
    ...dated February 22, 2010 between Regions Financial Corporation and C. Dowd Ritter, incorporated herein by reference to Exhibit 10.1 to Form 8-K Current report filed by registrant on February 22, 2010. Form of Change-in-Control Agreement for executive officers O. B. Grayson Hall, Jr., David B. Edmonds...

  • Page 220
    ... 2009. Regions Financial Corporation Management Incentive Plan, incorporated by reference to Exhibit 10.2 to Form 8-K Current Report filed by registrant on December 11, 2009. Form of Morgan Keegan & Company, Inc. Restricted Cash Agreement for executive officer John C. Carson. Morgan Keegan & Company...

  • Page 221
    ... not included herein may be obtained free of charge, electronically through Regions' website at www.regions.com or through the SEC's website at www.sec.gov or upon request to: Investor Relations Regions Financial Corporation 1900 Fifth Avenue North Birmingham, Alabama 35203 (205) 326-5807 207

  • Page 222
    ... authorized. REGIONS FINANCIAL CORPORATION By: /S/ O. B. GRAYSON HALL, JR. O. B. Grayson Hall, Jr. President and Chief Executive Officer Date: February 24, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf...

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    ... * Lee J. Styslinger III Director February 24, 2011 * John D. Buchanan, by signing his name hereto, does sign this document on behalf of each of the persons indicated above pursuant to powers of attorney executed by such persons and filed with the Securities and Exchange Commission. By: /s/ JOHN...

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    EXHIBIT 12 Regions Financial Corporation Computation of Ratio of Earnings to Fixed Charges (from continuing operations) (Unaudited) 2010 December 31 2009 2008 2007 (Amounts in millions) 2006 Excluding Interest on Deposits Income (loss) from continuing operations before income taxes ...Fixed charges...

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    ...; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 24, 2011 /S/ O. B. GRAYSON HALL, JR. O. B. Grayson Hall, Jr. President and Chief Executive Officer

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    ... fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 24, 2011 /S/ DAVID J. TURNER, JR. David J. Turner, Jr. Senior Executive Vice President and Chief Financial Officer

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    ... 2002 In connection with the Annual Report of Regions Financial Corporation (the "Company") on Form 10-K for the year ending December 31, 2010 (the "Report"), I, O. B. Grayson Hall, Jr., Chief Executive Officer of the Company, and David J. Turner, Jr., Chief Financial Officer of the Company, certify...

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    ... completed fiscal year that was a TARP period; (ix) Except as disclosed to the Special Master for TARP Executive Compensation ("Special Master"), Regions Financial Corporation and its employees have complied with the excessive or luxury expenditures policy, as defined in the regulations and guidance...

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    ... any amendments; (xv) Regions Financial Corporation has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year , with the non-SEOs ranked in descending order of level of annual compensation, and with the...

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    ....2 ANNUAL CERTIFICATION PURSUANT TO 31 C.F.R. § 30.15 I, David J. Turner, Jr., Senior Executive Vice President and Chief Financial Officer of Regions Financial Corporation, certify, based on my knowledge, that: (i) The compensation committee of Regions Financial Corporation has discussed, reviewed...

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    ... any amendments; (xv) Regions Financial Corporation has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the...

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    ... Regions Financial Corporation Investor Relations 1900 Fifth Avenue North Birmingham, AL 35203 www.regions.com M. List Underwood, Jr. Director of Investor Relations (205) 801-0265 Dana W. Nolan Associate Director of Investor Relations (205) 326-4803 Helen S. Johnson Shareholder Services Manager...

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