Regions Bank 2012 Annual Report Download - page 60

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
EXECUTIVE SUMMARY
Management believes the following points summarize several of the most relevant items necessary for an
understanding of the financial aspects of Regions Financial Corporation’s (“Regions” or “the Company”)
business, particularly regarding its 2012 results. Cross references to more detailed information regarding each
topic within Management’s Discussion and Analysis of Financial Condition and Results of Operations
(“MD&A”) and the consolidated financial statements are included. This summary is intended to assist in
understanding the information provided, but should be read in conjunction with the entire MD&A and
consolidated financial statements, as well as the other sections of this Annual Report on Form 10-K.
Capital
Regulatory Capital—Regions and Regions Bank are required to comply with applicable capital adequacy
standards established by the Federal Reserve. Currently, the minimum guidelines to be considered well-
capitalized for Tier I capital and Total capital are 6.0 percent and 10.0 percent, respectively. At
December 31, 2012, Regions’ Tier 1 capital and Total capital ratios were 12.00 percent and 15.38 percent
respectively. In addition, the Federal Reserve and banking regulators routinely supplement their assessment
of capital adequacy based on a variation of Tier 1 capital, know as Tier 1 common equity (non-GAAP).
Although Federal banking regulators have not established minimum guidelines to be considered well-
capitalized, the Tier 1 common equity ratio has been a key component in assessing capital adequacy under
the Comprehensive Capital Analysis and Review (“CCAR”) process. At December 31, 2012, Regions’
Tier 1 common equity ratio was 10.84 percent. In November 2012, the Federal Reserve, the Federal Deposit
Insurance Corp. and the Office of the Comptroller of the Currency announced the guidelines for the 2013
CCAR review, the results of which will be released in March 2013.
In addition, in 2010 the Basel Committee released Basel III, its final framework for strengthening
international capital and liquidity regulations. The framework requires bank holding companies and their
bank subsidiaries to maintain substantially more capital, with a greater emphasis on common equity.
Subsequently, in June 2012, the Federal Reserve, the FDIC, and the Office of the Comptroller of the
Currency issued proposed rules implementing the capital provisions set forth by the Basel III framework.
Regions is in the process of evaluating the anticipated impact of the proposed rules for implementing Basel
III, which will be phased in beginning in 2013 and is expected to be fully phased in by January 1, 2019.
Based on Regions’ current understanding of the Basel III requirements, the Company’s estimated Basel III
Tier 1 common ratio (non-GAAP) as of December 31, 2012 was approximately 8.87 percent, exceeding the
Basel III minimum of 7 percent for Tier I common (non-GAAP). Similarly, based on Regions’ current
understanding of the proposed rules related to the calculation of the Liquidity Coverage Ratio (“LCR”)
under Basel III, the Company anticipates being fully compliant upon finalization and implementation. As
further clarification of the Basel III rules as well as interpretation by U.S. banking regulators is pending, the
ultimate impact of Basel III on Regions is not completely known at this time. For more information, refer to
the following additional sections within this Form 10-K:
• 2012 Overview discussion in MD&A
• Table 2 – “GAAP to Non-GAAP reconciliation”
• Bank Regulatory Capital Requirements section of MD&A
• Note 13 “Regulatory Capital Requirements and Restrictions” to the consolidated financial statements
Morgan Keegan—On January 11, 2012, Regions entered into a stock purchase agreement to sell Morgan
Keegan & Company, Inc. and related affiliates (“Morgan Keegan”) to Raymond James Financial, Inc.
44