UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2012
or
¨ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number: 000-50831
Regions Financial Corporation
(Exact name of registrant as specified in its charter)
Delaware | 63-0589368 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) | |
1900 Fifth Avenue North Birmingham, Alabama |
35203 | |
(Address of principal executive offices) | (Zip Code) |
(205) 944-1300
(Registrants telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No
The number of shares outstanding of each of the issuers classes of common stock was 1,412,429,000 shares of common stock, par value $.01, outstanding as of April 26, 2012.
REGIONS FINANCIAL CORPORATION
FORM 10-Q
Page | ||||||||
Part I. Financial Information |
| |||||||
Item 1. | Financial Statements (Unaudited) |
|||||||
Consolidated Balance SheetsMarch 31, 2012 and December 31, 2011 |
5 | |||||||
Consolidated Statements of OperationsThree months ended March 31, 2012 and 2011 |
6 | |||||||
Consolidated Statements of Comprehensive Income (Loss)Three months ended March 31, 2012 and 2011 |
7 | |||||||
8 | ||||||||
Consolidated Statements of Cash FlowsThree months ended March 31, 2012 and 2011 |
9 | |||||||
10 | ||||||||
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
59 | ||||||
Item 3. | 100 | |||||||
Item 4. | Controls and Procedures | 100 | ||||||
Part II. Other Information |
||||||||
Item 1. | 101 | |||||||
Item 2. | 101 | |||||||
Item 6. | 102 | |||||||
103 |
2
Forward-Looking Statements
This Quarterly Report on Form 10-Q, other periodic reports filed by Regions Financial Corporation (Regions) under the Securities Exchange Act of 1934, as amended, and any other written or oral statements made by or on behalf of Regions may include forward-looking statements. The Private Securities Litigation Reform Act of 1995 (the Act) provides a safe harbor for forward-looking statements which are identified as such and are accompanied by the identification of important factors that could cause actual results to differ materially from the forward-looking statements. For these statements, we, together with our subsidiaries, unless the context implies otherwise, claim the protection afforded by the safe harbor in the Act. Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, financial results or other developments. Forward-looking statements are based on managements expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, uncertainties and other factors that may cause actual results to differ materially from the views, beliefs and projections expressed in such statements. These risks, uncertainties and other factors include, but are not limited to, those described below:
| The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) became law on July 21, 2010, and a number of legislative, regulatory and tax proposals remain pending. Additionally, the U.S. Treasury and federal banking regulators continue to implement, but are also beginning to wind down, a number of programs to address capital and liquidity in the banking system. Future and proposed rules, including those that are part of the Basel III process, could require banking institutions to increase levels of capital. All of the foregoing may have significant effects on Regions and the financial services industry, the exact nature and extent of which cannot be determined at this time. |
| Regions ability to mitigate the impact of the Dodd-Frank Act on debit interchange fees through revenue enhancements and other revenue measures, which will depend on various factors, including the acceptance by customers of modified fee structures for Regions products and services. |
| Possible additional loan losses, impairment of goodwill and other intangibles, and adjustment of valuation allowances on deferred tax assets and the impact on earnings and capital. |
| Possible changes in interest rates may increase funding costs and reduce earning asset yields, thus reducing margins. Increases in benchmark interest rates would also increase debt service requirements for customers whose terms include a variable interest rate, which may negatively impact the ability of borrowers to pay as contractually obligated. |
| Possible changes in general economic and business conditions in the United States in general and in the communities Regions serves in particular, including any prolonging or worsening of the current unfavorable economic conditions, including unemployment levels. |
| Possible changes in the creditworthiness of customers and the possible impairment of the collectability of loans. |
| Possible changes in trade, monetary and fiscal policies, laws and regulations, and other activities of governments, agencies, and similar organizations, may have an adverse effect on business. |
| Possible 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 liquidity to support Regions business. |
| Regions ability to expand into new markets and to maintain profit margins in the face of competitive pressures. |
3
| Regions ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by Regions customers and potential customers. |
| Regions ability to keep pace with technological changes. |
| Regions ability to effectively manage credit risk, interest rate risk, market risk, operational risk, legal risk, liquidity risk, and regulatory and compliance risk. |
| Regions ability to ensure adequate capitalization which is impacted by inherent uncertainties in forecasting credit losses. |
| The cost and other effects of material contingencies, including litigation contingencies, and any adverse judicial, administrative, or arbitral rulings or proceedings. |
| The effects of increased competition from both banks and non-banks. |
| The effects of geopolitical instability and risks such as terrorist attacks. |
| Possible changes in consumer and business spending and saving habits could affect Regions ability to increase assets and to attract deposits. |
| The effects of weather and natural disasters such as floods, droughts, wind, tornadoes and hurricanes, and the effects of man-made disasters. |
| Possible downgrades in ratings issued by rating agencies. |
| Possible changes in the speed of loan prepayments by Regions customers and loan origination or sales volumes. |
| Possible acceleration of prepayments on mortgage-backed securities due to low interest rates, and the related acceleration of premium amortization on those securities. |
| The effects of problems encountered by larger or similar financial institutions that adversely affect Regions or the banking industry generally. |
| Regions ability to receive dividends from its subsidiaries. |
| The effects of the failure of any component of Regions business infrastructure which is provided by a third party. |
| Changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies. |
| With regard to the sale of Morgan Keegan, the possibility of business disruption following the transaction, reputational risks and the reaction of customers and counterparties to the transaction; and occurrences which could cause post-closing adjustments to the purchase price. |
| The effects of any damage to Regions reputation resulting from developments related to any of the items identified above. |
The words believe, expect, anticipate, project, and similar expressions often signify forward-looking statements. You should not place undue reliance on any forward-looking statements, which speak only as of the date made. We assume no obligation to update or revise any forward-looking statements that are made from time to time.
See also the Forward-Looking Statements and Risk Factors sections of Regions Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the Securities and Exchange Commission.
4
FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31 2012 |
December 31 2011 |
|||||||
(In millions, except share data) | ||||||||
Assets | ||||||||
Cash and due from banks |
$ | 2,036 | $ | 2,132 | ||||
Interest-bearing deposits in other banks |
5,270 | 4,913 | ||||||
Federal funds sold and securities purchased under agreements to resell |
167 | 200 | ||||||
Trading account assets |
1,127 | 1,266 | ||||||
Securities available for sale |
27,177 | 24,471 | ||||||
Securities held to maturity |
15 | 16 | ||||||
Loans held for sale (includes $752 and $844 measured at fair value, respectively) |
1,054 | 1,193 | ||||||
Loans, net of unearned income |
76,720 | 77,594 | ||||||
Allowance for loan losses |
(2,530 | ) | (2,745 | ) | ||||
|
|
|
|
|||||
Net loans |
74,190 | 74,849 | ||||||
Other interest-earning assets |
1,054 | 1,085 | ||||||
Premises and equipment, net |
2,350 | 2,375 | ||||||
Interest receivable |
397 | 361 | ||||||
Goodwill |
4,816 | 4,816 | ||||||
Mortgage servicing rights |
199 | 182 | ||||||
Other identifiable intangible assets |
420 | 449 | ||||||
Other assets |
8,010 | 8,742 | ||||||
|
|
|
|
|||||
Total assets |
$ | 128,282 | $ | 127,050 | ||||
|
|
|
|
|||||
Liabilities and Stockholders Equity | ||||||||
Deposits: |
||||||||
Non-interest-bearing |
$ | 29,707 | $ | 28,266 | ||||
Interest-bearing |
67,431 | 67,361 | ||||||
|
|
|
|
|||||
Total deposits |
97,138 | 95,627 | ||||||
Borrowed funds: |
||||||||
Short-term borrowings: |
||||||||
Federal funds purchased and securities sold under agreements to repurchase |
2,287 | 2,333 | ||||||
Other short-term borrowings |
621 | 734 | ||||||
|
|
|
|
|||||
Total short-term borrowings |
2,908 | 3,067 | ||||||
Long-term borrowings |
7,196 | 8,110 | ||||||
|
|
|
|
|||||
Total borrowed funds |
10,104 | 11,177 | ||||||
Other liabilities |
3,506 | 3,747 | ||||||
|
|
|
|
|||||
Total liabilities |
110,748 | 110,551 | ||||||
Stockholders equity: |
||||||||
Preferred stock, authorized 10 million shares Series A, cumulative perpetual participating, par value $1.00 (liquidation preference $1,000.00) per share, net of discount; Issued3,500,000 shares |
3,429 | 3,419 | ||||||
Common stock, par value $.01 per share: |
||||||||
Authorized 3 billion shares |
||||||||
Issued including treasury stock1,454,644,205 and 1,301,230,838 shares, respectively |
15 | 13 | ||||||
Additional paid-in capital |
19,939 | 19,060 | ||||||
Retained earnings (deficit) |
(4,395 | ) | (4,527 | ) | ||||
Treasury stock, at cost42,215,194 and 42,414,444 shares, respectively |
(1,394 | ) | (1,397 | ) | ||||
Accumulated other comprehensive income (loss), net |
(60 | ) | (69 | ) | ||||
|
|
|
|
|||||
Total stockholders equity |
17,534 | 16,499 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 128,282 | $ | 127,050 | ||||
|
|
|
|
See notes to consolidated financial statements.
5
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31 |
||||||||
2012 | 2011 | |||||||
(In millions, except per share data) | ||||||||
Interest income on: |
||||||||
Loans, including fees |
$ | 812 | $ | 867 | ||||
Securities: |
||||||||
Taxable |
174 | 207 | ||||||
Tax-exempt |
| | ||||||
|
|
|
|
|||||
Total securities |
174 | 207 | ||||||
Loans held for sale |
7 | 13 | ||||||
Trading account assets |
1 | | ||||||
Other interest-earning assets |
3 | 3 | ||||||
|
|
|
|
|||||
Total interest income |
997 | 1,090 | ||||||
Interest expense on: |
||||||||
Deposits |
88 | 139 | ||||||
Short-term borrowings |
| 1 | ||||||
Long-term borrowings |
82 | 95 | ||||||
|
|
|
|
|||||
Total interest expense |
170 | 235 | ||||||
|
|
|
|
|||||
Net interest income |
827 | 855 | ||||||
Provision for loan losses |
117 | 482 | ||||||
|
|
|
|
|||||
Net interest income after provision for loan losses |
710 | 373 | ||||||
Non-interest income: |
||||||||
Service charges on deposit accounts |
254 | 287 | ||||||
Capital markets and investment income |
28 | 31 | ||||||
Mortgage income |
77 | 45 | ||||||
Trust department income |
49 | 50 | ||||||
Securities gains, net |
12 | 82 | ||||||
Other |
104 | 85 | ||||||
|
|
|
|
|||||
Total non-interest income |
524 | 580 | ||||||
Non-interest expense: |
||||||||
Salaries and employee benefits |
442 | 428 | ||||||
Net occupancy expense |
94 | 100 | ||||||
Furniture and equipment expense |
64 | 70 | ||||||
Other |
313 | 334 | ||||||
|
|
|
|
|||||
Total non-interest expense |
913 | 932 | ||||||
|
|
|
|
|||||
Income from continuing operations before income taxes |
321 | 21 | ||||||
Income tax expense (benefit) |
82 | (29 | ) | |||||
|
|
|
|
|||||
Income from continuing operations |
$ | 239 | $ | 50 | ||||
Discontinued operations: |
||||||||
Income (loss) from discontinued operations before income taxes |
(65 | ) | 36 | |||||
Income tax expense (benefit) |
(25 | ) | 17 | |||||
|
|
|
|
|||||
Income (loss) from discontinued operations, net of tax |
(40 | ) | 19 | |||||
Net income |
$ | 199 | $ | 69 | ||||
|
|
|
|
|||||
Net income (loss) from continuing operations available to common shareholders |
$ | 185 | $ | (2 | ) | |||
|
|
|
|
|||||
Net income available to common shareholders |
$ | 145 | $ | 17 | ||||
|
|
|
|
|||||
Weighted-average number of shares outstanding: |
||||||||
Basic |
1,282 | 1,257 | ||||||
Diluted |
1,283 | 1,259 | ||||||
Earnings (loss) per common share from continuing operations: |
||||||||
Basic |
$ | 0.14 | $ | (0.00 | ) | |||
Diluted |
0.14 | (0.00 | ) | |||||
Earnings per common share: |
||||||||
Basic |
$ | 0.11 | $ | 0.01 | ||||
Diluted |
0.11 | 0.01 | ||||||
Cash dividends declared per common share |
0.01 | 0.01 |
See notes to consolidated financial statements.
6
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Three Months Ended March 31 |
||||||||
2012 | 2011 | |||||||
(In millions) | ||||||||
Net income |
$ | 199 | $ | 69 | ||||
Other comprehensive income (loss), net of tax:* |
||||||||
Unrealized gains (losses) on securities available for sale: |
||||||||
Unrealized holding gains (losses) arising during the period (net of zero and $33 tax effect for the three months ended March 31, 2012 and 2011, respectively) |
2 | (48 | ) | |||||
Less: reclassification adjustments for securities gains realized in net income (net of $4 and $29 tax effect for the three months ended March 31, 2012 and 2011, respectively) |
8 | 53 | ||||||
|
|
|
|
|||||
Net change in unrealized gains (losses) on securities available for sale |
(6 | ) | (101 | ) | ||||
Unrealized gains (losses) on derivative instruments designated as cash flow hedges: |
||||||||
Unrealized holding gains (losses) on derivatives arising during the period (net of $6 and zero tax effect for the three months ended March 31, 2012 and 2011, respectively) |
10 | 1 | ||||||
Less: reclassification adjustments for gains realized in net income (net of $6 and $19 tax effect for the three months ended March 31, 2012 and 2011, respectively) |
10 | 31 | ||||||
|
|
|
|
|||||
Net change in unrealized gains (losses) on derivative instruments |
| (30 | ) | |||||
Defined benefit pension plans and other post employment benefits: |
||||||||
Amortization of actuarial loss and prior service cost realized in net income, and other (net of $8 and $4 tax effect for the three months ended March 31, 2012 and 2011, respectively) |
15 | 4 | ||||||
|
|
|
|
|||||
Net change from defined benefit pension plans |
15 | 4 | ||||||
|
|
|
|
|||||
Other comprehensive income (loss), net of tax* |
$ | 9 | $ | (127 | ) | |||
|
|
|
|
|||||
Comprehensive income (loss) |
$ | 208 | $ | (58 | ) | |||
|
|
|
|
See notes to consolidated financial statements.
* | All other comprehensive amounts are shown net of tax. |
7
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
Preferred Stock |
Common Stock |
Additional Paid-In Capital |
Retained Earnings (Deficit) |
Treasury Stock, At Cost |
Accumulated Other Comprehensive Income (Loss) |
Total | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||
(In millions, except share and per share data) | ||||||||||||||||||||||||||||||||||||
BALANCE AT JANUARY 1, 2011 |
4 | $ | 3,380 | 1,256 | $ | 13 | $ | 19,050 | $ | (4,047 | ) | $ | (1,402 | ) | $ | (260 | ) | $ | 16,734 | |||||||||||||||||
Net income |
| | | | | 69 | | | 69 | |||||||||||||||||||||||||||
Net change in unrealized gains and losses on securities available for sale, net of tax and reclassification adjustment |
| | | | | | | (101 | ) | (101 | ) | |||||||||||||||||||||||||
Net change in unrealized gains and losses on derivative instruments, net of tax and reclassification adjustment |
| | | | | | | (30 | ) | (30 | ) | |||||||||||||||||||||||||
Net change from defined benefit pension plans, net of tax |
| | | | | | | 4 | 4 | |||||||||||||||||||||||||||
Cash dividends declared$0.01 per share |
| | | | | (13 | ) | | | (13 | ) | |||||||||||||||||||||||||
Preferred dividends |
| | | | (43 | ) | | | (43 | ) | ||||||||||||||||||||||||||
Preferred stock transactions: |
||||||||||||||||||||||||||||||||||||
Discount accretion |
| 9 | | | | (9 | ) | | | | ||||||||||||||||||||||||||
Common stock transactions: |
||||||||||||||||||||||||||||||||||||
Impact of stock transactions under compensation plans, net |
| | | | (3 | ) | | 2 | | (1 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
BALANCE AT MARCH 31, 2011 |
4 | $ | 3,389 | 1,256 | $ | 13 | $ | 19,047 | $ | (4,043 | ) | $ | (1,400 | ) | $ | (387 | ) | $ | 16,619 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
BALANCE AT JANUARY 1, 2012 |
4 | $ | 3,419 | 1,259 | $ | 13 | $ | 19,060 | $ | (4,527 | ) | $ | (1,397 | ) | $ | (69 | ) | $ | 16,499 | |||||||||||||||||
Net income |
| | | | | 199 | | | 199 | |||||||||||||||||||||||||||
Net change in unrealized gains and losses on securities available for sale, net of tax and reclassification adjustment |
| | | | | | | (6 | ) | (6 | ) | |||||||||||||||||||||||||
Net change from defined benefit pension plans, net of tax |
| | | | | | | 15 | 15 | |||||||||||||||||||||||||||
Cash dividends declared$0.01 per share |
| | | | | (13 | ) | | | (13 | ) | |||||||||||||||||||||||||
Preferred dividends |
| | | | | (44 | ) | | | (44 | ) | |||||||||||||||||||||||||
Preferred stock transactions: |
||||||||||||||||||||||||||||||||||||
Discount accretion |
| 10 | | | | (10 | ) | | | | ||||||||||||||||||||||||||
Common stock transactions: |
||||||||||||||||||||||||||||||||||||
Net proceeds from issuance of 153 million shares of common stock |
| | 153 | 2 | 873 | | | | 875 | |||||||||||||||||||||||||||
Impact of stock transactions under compensation plans, net |
| | | | 6 | | 3 | | 9 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
BALANCE AT MARCH 31, 2012 |
4 | $ | 3,429 | 1,412 | $ | 15 | $ | 19,939 | $ | (4,395 | ) | $ | (1,394 | ) | $ | (60 | ) | $ | 17,534 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
8
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31 |
||||||||
2012 | 2011 | |||||||
(In millions) | ||||||||
Operating activities: |
||||||||
Net income |
$ | 199 | $ | 69 | ||||
Adjustments to reconcile net cash provided by operating activities: |
||||||||
Provision for loan losses |
117 | 482 | ||||||
Depreciation and amortization of premises and equipment |
62 | 68 | ||||||
Provision for losses on other real estate, net |
15 | 30 | ||||||
Net amortization of securities |
68 | 50 | ||||||
Net amortization of loans and other assets |
40 | 47 | ||||||
Net amortization of borrowings |
1 | | ||||||
Net securities gains |
(12 | ) | (82 | ) | ||||
Deferred income tax expense (benefit) |
55 | (14 | ) | |||||
Originations and purchases of loans held for sale |
(1,029 | ) | (1,450 | ) | ||||
Proceeds from sales of loans held for sale |
1,313 | 1,591 | ||||||
Gain on sale of loans, net |
(38 | ) | (20 | ) | ||||
Valuation charges on loans held for sale |
1 | 2 | ||||||
Decrease (increase) in trading account assets |
139 | (168 | ) | |||||
Decrease in other interest-earning assets |
31 | 5 | ||||||
Increase in interest receivable |
(36 | ) | (20 | ) | ||||
Decrease in other assets |
48 | 1,272 | ||||||
Decrease in other liabilities |
(218 | ) | (483 | ) | ||||
Other |
(1 | ) | (47 | ) | ||||
|
|
|
|
|||||
Net cash from operating activities |
755 | 1,332 | ||||||
Investing activities: |
||||||||
Proceeds from sales of securities available for sale |
1,398 | 2,419 | ||||||
Proceeds from maturities of securities available for sale |
1,594 | 1,363 | ||||||
Proceeds from maturities of securities held to maturity |
1 | 2 | ||||||
Purchases of securities available for sale |
(5,075 | ) | (5,323 | ) | ||||
Proceeds from sales of loans |
159 | 602 | ||||||
Purchases of loans |
(174 | ) | (162 | ) | ||||
Net decrease in loans |
337 | 202 | ||||||
Net purchases of premises and equipment |
(37 | ) | (28 | ) | ||||
|
|
|
|
|||||
Net cash from investing activities |
(1,797 | ) | (925 | ) | ||||
Financing activities: |
||||||||
Net increase in deposits |
1,511 | 1,755 | ||||||
Net decrease in short-term borrowings |
(159 | ) | (755 | ) | ||||
Proceeds from long-term borrowings |
| 601 | ||||||
Payments on long-term borrowings |
(900 | ) | (1,551 | ) | ||||
Cash dividends on common stock |
(13 | ) | (13 | ) | ||||
Cash dividends on preferred stock |
(44 | ) | (43 | ) | ||||
Net proceeds from issuance of common stock |
875 | | ||||||
|
|
|
|
|||||
Net cash from financing activities |
1,270 | (6 | ) | |||||
|
|
|
|
|||||
Increase in cash and cash equivalents |
228 | 401 | ||||||
Cash and cash equivalents at beginning of year |
7,245 | 6,919 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period |
$ | 7,473 | $ | 7,320 | ||||
|
|
|
|
See notes to consolidated financial statements.
9
REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three Months Ended March 31, 2012 and 2011
NOTE 1Basis of Presentation
Regions Financial Corporation (Regions or the Company) provides a full range of banking and bank-related services to individual and corporate customers through its subsidiaries and branch offices located primarily in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, Texas and Virginia. The Company is subject to competition from other financial institutions, is subject to the regulations of certain government agencies and undergoes periodic examinations by those regulatory authorities.
The accounting and reporting policies of Regions and the methods of applying those policies that materially affect the consolidated financial statements conform with accounting principles generally accepted in the United States (GAAP) and with general financial services industry practices. The accompanying interim financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and notes to the consolidated financial statements necessary for a complete presentation of financial position, results of operations, comprehensive income and cash flows in conformity with GAAP. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the consolidated financial statements have been included. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in Regions Form 10-K for the year ended December 31, 2011. Regions has evaluated all subsequent events for potential recognition and disclosure through the filing date of this Form 10-Q. See Note 16.
Beginning with first quarter 2012 financial reporting, as required by new accounting literature, Regions began presenting a separate consolidated statement of comprehensive income. Comprehensive income (loss) is the total of net income and all other non-owner changes in equity. Items are recognized as components of comprehensive income (loss) and are displayed net of tax in the consolidated statements of comprehensive income (loss). In the calculation of comprehensive income (loss), certain reclassification adjustments are made to avoid double-counting items that are displayed as part of net income (loss) for a period that also had been displayed as part of other comprehensive income (loss) in that period or earlier periods. The prior period is also shown for comparability.
On January 11, 2012, Regions entered into an agreement to sell Morgan Keegan & Company, Inc. (Morgan Keegan) and related affiliates. The transaction closed on April 2, 2012. See Note 2, Note 14 and Note 16 for further details. Results of operations for the entities being sold are presented separately as discontinued operations for all periods presented on the consolidated statements of operations because the pending sale met all of the criteria for reporting as discontinued operations at March 31, 2012. Other expenses related to the transaction are also included in discontinued operations. This presentation is consistent with the consolidated financial statements included in the 2011 Form 10-K.
Certain amounts in prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications are immaterial and have no effect on net income, comprehensive income, total assets or stockholders equity.
NOTE 2Discontinued Operations
On January 11, 2012, Regions entered into a stock purchase agreement to sell Morgan Keegan and related affiliates to Raymond James Financial, Inc. (Raymond James). The transaction closed on April 2, 2012. Regions Investment Management, Inc. (formerly known as Morgan Asset Management, Inc.) and Regions Trust
10
were not included in the sale. In connection with the closing, the Company and Raymond James agreed that in lieu of the $250 million pre-closing dividend from Morgan Keegan to the Company as contemplated in the original agreement, the parties would increase the purchase price by the same amount. The total purchase price received by the Company was approximately $1.2 billion.
The transaction purchase price is subject to post-closing adjustment based on the closing tangible book value of the entities being sold and retention of Morgan Keegan associates as of 90 days post-closing. Regions believes any adjustments to the sales price will not have a material impact to the consolidated financial statements. Regions has agreed to indemnify Raymond James for all litigation matters related to pre-closing activities. See Note 14 and Note 16 for related disclosure.
The following table represents the condensed results of operations for discontinued operations for the three months ended March 31:
Three Months Ended March 31 |
||||||||
2012 | 2011 | |||||||
(In millions, except per share data) | ||||||||
Interest income |
$ | 8 | $ | 10 | ||||
Interest expense |
1 | 2 | ||||||
|
|
|
|
|||||
Net interest income |
7 | 8 | ||||||
Non-interest income: |
||||||||
Brokerage, investment banking and capital markets |
233 | 236 | ||||||
Other |
7 | 27 | ||||||
|
|
|
|
|||||
Total non-interest income |
240 | 263 | ||||||
Non-interest expense: |
||||||||
Salaries and employee benefits |
171 | 166 | ||||||
Net occupancy expense |
9 | 9 | ||||||
Furniture and equipment expense |
8 | 7 | ||||||
Professional and legal expenses |
96 | 25 | ||||||
Other |
28 | 28 | ||||||
|
|
|
|
|||||
Total non-interest expense |
312 | 235 | ||||||
|
|
|
|
|||||
Income (loss) from discontinued operations before income taxes |
(65 | ) | 36 | |||||
Income tax expense (benefit) |
(25 | ) | 17 | |||||
|
|
|
|
|||||
Income (loss) from discontinued operations, net of tax |
$ | (40 | ) | $ | 19 | |||
|
|
|
|
|||||
Earnings (loss) per common share from discontinued operations: |
||||||||
Basic |
$ | (0.03 | ) | $ | 0.01 | |||
Diluted |
$ | (0.03 | ) | $ | 0.01 |
11
A summary of the major categories of assets and liabilities (including related deferred taxes) related to the entities being sold as of March 31, 2012 and December 31, 2011 is as follows:
March 31, 2012 | December 31, 2011 | |||||||
(In millions) | ||||||||
Assets: |
||||||||
Cash and due from banks |
$ | 165 | $ | 232 | ||||
Securities purchased under agreements to resell |
167 | 200 | ||||||
Trading account assets |
963 | 1,088 | ||||||
Other interest-earning assets |
373 | 340 | ||||||
Other assets |
1,016 | 944 | ||||||
|
|
|
|
|||||
Total assets |
$ | 2,684 | $ | 2,804 | ||||
|
|
|
|
|||||
Liabilities: |
||||||||
Securities sold under agreements to repurchase |
$ | 369 | $ | 253 | ||||
Other short-term borrowings |
560 | 678 | ||||||
Other liabilities |
836 | 914 | ||||||
|
|
|
|
|||||
Total liabilities |
$ | 1,765 | $ | 1,845 | ||||
|
|
|
|
NOTE 3Securities
The amortized cost, gross unrealized gains and losses, and estimated fair value of securities available for sale and securities held to maturity are as follows:
March 31, 2012 | ||||||||||||||||
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Estimated Fair Value |
|||||||||||||
(In millions) | ||||||||||||||||
Securities available for sale: |
||||||||||||||||
U.S. Treasury securities |
$ | 44 | $ | 3 | $ | | $ | 47 | ||||||||
Federal agency securities |
336 | 3 | | 339 | ||||||||||||
Obligations of states and political subdivisions |
21 | 10 | | 31 | ||||||||||||
Mortgage-backed securities: |
||||||||||||||||
Residential agency |
22,992 | 489 | (25 | ) | 23,456 | |||||||||||
Residential non-agency |
14 | 1 | | 15 | ||||||||||||
Commercial agency |
427 | 9 | (1 | ) | 435 | |||||||||||
Commercial non-agency |
479 | 13 | (1 | ) | 491 | |||||||||||
Corporate and other debt securities |
1,538 | 17 | (12 | ) | 1,543 | |||||||||||
Equity securities |
818 | 3 | (1 | ) | 820 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 26,669 | $ | 548 | $ | (40 | ) | $ | 27,177 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Securities held to maturity: |
||||||||||||||||
U.S. Treasury securities |
$ | 4 | $ | | $ | | $ | 4 | ||||||||
Federal agency securities |
3 | | | 3 | ||||||||||||
Mortgage-backed securities: |
||||||||||||||||
Residential agency |
8 | 1 | | 9 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 15 | $ | 1 | $ | | $ | 16 | |||||||||
|
|
|
|
|
|
|
|
12
December 31, 2011 | ||||||||||||||||
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Estimated Fair Value |
|||||||||||||
(In millions) | ||||||||||||||||
Securities available for sale: |
||||||||||||||||
U.S. Treasury securities |
$ | 95 | $ | 3 | $ | | $ | 98 | ||||||||
Federal agency securities |
147 | | | 147 | ||||||||||||
Obligations of states and political subdivisions |
24 | 12 | | 36 | ||||||||||||
Mortgage-backed securities: |
||||||||||||||||
Residential agency |
21,688 | 494 | (7 | ) | 22,175 | |||||||||||
Residential non-agency |
15 | 1 | | 16 | ||||||||||||
Commercial agency |
318 | 8 | | 326 | ||||||||||||
Commercial non-agency |
314 | 7 | | 321 | ||||||||||||
Corporate and other debt securities |
539 | 5 | (7 | ) | 537 | |||||||||||
Equity securities |
817 | 2 | (4 | ) | 815 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 23,957 | $ | 532 | $ | (18 | ) | $ | 24,471 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Securities held to maturity: |
||||||||||||||||
U.S. Treasury securities |
$ | 4 | $ | | $ | | $ | 4 | ||||||||
Federal agency securities |
3 | | | 3 | ||||||||||||
Mortgage-backed securities: |
||||||||||||||||
Residential agency |
9 | 1 | | 10 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 16 | $ | 1 | $ | | $ | 17 | |||||||||
|
|
|
|
|
|
|
|
Entities included with the sale of Morgan Keegan and related affiliates had approximately $7 million and $2 million in securities available for sale at March 31, 2012 and December 31, 2011, respectively, which are included in the tables above. Morgan Keegan and related affiliates had no securities held to maturity at March 31, 2012 or December 31, 2011.
Equity securities in the tables above included the following amortized cost related to Federal Reserve Bank stock 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.
March 31 2012 |
December 31 2011 |
|||||||
(In millions) | ||||||||
Federal Reserve Bank |
$ | 481 | $ | 481 | ||||
Federal Home Loan Bank |
219 | 219 |
Securities with carrying values of $14.4 billion and $14.3 billion at March 31, 2012 and December 31, 2011, respectively, were pledged to secure public funds, trust deposits and certain borrowing arrangements.
13
The amortized cost and estimated fair value of securities available for sale and securities held to maturity at March 31, 2012, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized Cost |
Estimated Fair Value |
|||||||
(In millions) | ||||||||
Securities available for sale: |
||||||||
Due in one year or less |
$ | 15 | $ | 15 | ||||
Due after one year through five years |
762 | 769 | ||||||
Due after five years through ten years |
938 | 946 | ||||||
Due after ten years |
224 | 230 | ||||||
Mortgage-backed securities: |
||||||||
Residential agency |
22,992 | 23,456 | ||||||
Residential non-agency |
14 | 15 | ||||||
Commercial agency |
427 | 435 | ||||||
Commercial non-agency |
479 | 491 | ||||||
Equity securities |
818 | 820 | ||||||
|
|
|
|
|||||
$ | 26,669 | $ | 27,177 | |||||
|
|
|
|
|||||
Securities held to maturity: |
||||||||
Due in one year or less |
$ | 4 | $ | 4 | ||||
Due after one year through five years |
3 | 3 | ||||||
Due after five years through ten years |
| | ||||||
Due after ten years |
| | ||||||
Mortgage-backed securities: |
||||||||
Residential agency |
8 | 9 | ||||||
|
|
|
|
|||||
$ | 15 | $ | 16 | |||||
|
|
|
|
The following tables present gross unrealized losses and estimated fair value of securities available for sale at March 31, 2012 and December 31, 2011. These securities are segregated between investments that have been in a continuous unrealized loss position for less than twelve months and twelve months or more.
March 31, 2012 | ||||||||||||||||||||||||
Less Than Twelve Months |
Twelve Months or More |
Total | ||||||||||||||||||||||
Estimated Fair Value |
Gross Unrealized Losses |
Estimated Fair Value |
Gross Unrealized Losses |
Estimated Fair Value |
Gross Unrealized Losses |
|||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Mortgage-backed securities: |
||||||||||||||||||||||||
Residential agency |
$ | 3,797 | $ | (25 | ) | $ | | $ | | $ | 3,797 | $ | (25 | ) | ||||||||||
Commercial agency |
67 | (1 | ) | | | 67 | (1 | ) | ||||||||||||||||
Commercial non-agency |
134 | (1 | ) | | | 134 | (1 | ) | ||||||||||||||||
All other securities |
733 | (11 | ) | 5 | (2 | ) | 738 | (13 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 4,731 | $ | (38 | ) | $ | 5 | $ | (2 | ) | $ | 4,736 | $ | (40 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
14
December 31, 2011 | ||||||||||||||||||||||||
Less Than Twelve Months |
Twelve Months
or More |
Total | ||||||||||||||||||||||
Estimated Fair Value |
Gross Unrealized Losses |
Estimated Fair Value |
Gross Unrealized Losses |
Estimated Fair Value |
Gross Unrealized Losses |
|||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Mortgage-backed securities: |
||||||||||||||||||||||||
Residential agency |
$ | 1,778 | $ | (7 | ) | $ | | $ | | $ | 1,778 | $ | (7 | ) | ||||||||||
All other securities |
291 | (9 | ) | 5 | (2 | ) | 296 | (11 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 2,069 | $ | (16 | ) | $ | 5 | $ | (2 | ) | $ | 2,074 | $ | (18 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
There was no gross unrealized loss on debt securities held to maturity at either March 31, 2012 or December 31, 2011.
For the securities included in the tables above, management does not believe any individual unrealized loss, which was comprised of 537 securities and 524 securities at March 31, 2012 and December 31, 2011, respectively, represented an other-than-temporary impairment as of those dates. The Company does not intend to sell, and it is not likely that the Company will be required to sell, the securities before the recovery of their amortized cost basis, which may be at maturity.
Proceeds from sale, gross realized gains and gross realized losses from continuing operations on sales of securities available for sale are shown in the table below. The cost of securities sold is based on the specific identification method.
For the Three Months Ended March 31 |
||||||||
2012 | 2011 | |||||||
(In millions) | ||||||||
Proceeds |
$ | 1,398 | $ | 2,419 | ||||
Gross realized gains |
12 | 82 | ||||||
Gross realized losses |
| | ||||||
|
|
|
|
|||||
Net securities gains (losses) |
$ | 12 | $ | 82 | ||||
|
|
|
|
The following table details net gains (losses) for trading account securities:
Three Months Ended March 31 |
||||||||
2012 | 2011 | |||||||
(In millions) | ||||||||
Total net gains (losses) |
$ | 30 | $ | 21 | ||||
Unrealized portion |
25 | 14 |
Included in the table above are amounts related to activities of Morgan Keegan of approximately $25 million and $15 million of total net gains for the three months ended March 31, 2012 and 2011, respectively. These amounts are included with results from discontinued operations.
15
NOTE 4Loans and the Allowance for Credit Losses
LOANS
The following table presents the distribution by loan segment and class of Regions loan portfolio, net of unearned income:
March 31 2012 |
December 31 2011 |
|||||||
(In millions, net of unearned income) | ||||||||
Commercial and industrial |
$ | 25,098 | $ | 24,522 | ||||
Commercial real estate mortgageowner occupied |
10,931 | 11,166 | ||||||
Commercial real estate constructionowner occupied |
281 | 337 | ||||||
|
|
|
|
|||||
Total commercial |
36,310 | 36,025 | ||||||
Commercial investor real estate mortgage |
9,156 | 9,702 | ||||||
Commercial investor real estate construction |
955 | 1,025 | ||||||
|
|
|
|
|||||
Total investor real estate |
10,111 | 10,727 | ||||||
Residential first mortgage |
13,611 | 13,784 | ||||||
Home equity |
12,642 | 13,021 | ||||||
Indirect |
1,938 | 1,848 | ||||||
Consumer credit card |
939 | 987 | ||||||
Other consumer |
1,169 | 1,202 | ||||||
|
|
|
|
|||||
Total consumer |
30,299 | 30,842 | ||||||
|
|
|
|
|||||
$ | 76,720 | $ | 77,594 | |||||
|
|
|
|
During the three months ended March 31, 2012 and 2011, Regions purchased approximately $174 million and $162 million, respectively, in indirect loans from a third party.
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses represents managements estimate of credit losses inherent in the loan and credit commitment portfolios as of period-end. The allowance for credit losses consists of two components: the allowance for loan and lease losses and the reserve for unfunded credit commitments. Managements assessment of the appropriateness of the allowance for credit losses is based on a combination of both of these components. Regions determines its allowance for credit losses in accordance with applicable accounting literature as well as regulatory guidance related to receivables and contingencies. Binding unfunded credit commitments include items such as letters of credit, financial guarantees and binding unfunded loan commitments.
CALCULATION OF ALLOWANCE FOR CREDIT LOSSES
As part of the Companys ongoing efforts to enhance the allowance calculation, and in response to regulatory guidance issued during the first quarter of 2012, the home equity portfolio was segmented at a more granular level. Loss rates for home equity products are now developed based on lien position, status as a troubled debt restructuring (TDR), geography, past due status, and refreshed FICO scores for non-past due loans. The enhancement had the impact of reducing the component of the allowance for loan losses related to home equity loans by an estimate of approximately $30 million.
Except for the enhancement to home equity segmentation described above, during the first quarter of 2012 there were no changes in methodology for the calculation of the allowance for credit losses or policies for identification of non-accrual or for charge-offs. A detailed description of the Companys methodology is included in the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2011.
16
ROLLFORWARD OF ALLOWANCE FOR CREDIT LOSSES
The following tables present analyses of the allowance for credit losses by portfolio segment for the three months ended March 31, 2012 and 2011. The total allowance for credit losses as of March 31, 2012 and 2011 is then disaggregated to detail the amounts derived through individual evaluation and the amounts calculated through collective evaluation. The allowance for credit losses related to individually evaluated loans includes reserves for non-accrual loans and leases equal to or greater than $2.5 million. The allowance for credit losses related to collectively evaluated loans includes the remainder of the portfolio.
Three Months Ended March 31, 2012 | ||||||||||||||||
Commercial | Investor Real Estate |
Consumer | Total | |||||||||||||
(In millions) | ||||||||||||||||
Allowance for loan losses, January 1, 2012 |
$ | 1,030 | $ | 991 | $ | 724 | $ | 2,745 | ||||||||
Provision for loan losses |
61 | (10 | ) | 66 | 117 | |||||||||||
Loan losses: |
||||||||||||||||
Charge-offs |
(125 | ) | (95 | ) | (156 | ) | (376 | ) | ||||||||
Recoveries |
16 | 12 | 16 | 44 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loan losses |
(109 | ) | (83 | ) | (140 | ) | (332 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Allowance for loan losses, March 31, 2012 |
982 | 898 | 650 | 2,530 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserve for unfunded credit commitments, January 1, 2012 |
$ | 30 | $ | 26 | $ | 22 | $ | 78 | ||||||||
Provision (credit) for unfunded credit commitments |
14 | | (1 | ) | 13 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserve for unfunded credit commitments, March 31, 2012 |
44 | 26 | 21 | 91 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Allowance for credit losses, March 31, 2012 |
$ | 1,026 | $ | 924 | $ | 671 | $ | 2,621 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Portion of ending allowance for credit losses: |
||||||||||||||||
Individually evaluated for impairment |
$ | 105 | $ | 146 | $ | 2 | $ | 253 | ||||||||
Collectively evaluated for impairment |
921 | 778 | 669 | 2,368 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total allowance for credit losses |
$ | 1,026 | $ | 924 | $ | 671 | $ | 2,621 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Portion of loan portfolio ending balance: |
||||||||||||||||
Individually evaluated for impairment |
$ | 475 | $ | 532 | $ | 7 | $ | 1,014 | ||||||||
Collectively evaluated for impairment |
35,835 | 9,579 | 30,292 | 75,706 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total loans evaluated for impairment |
$ | 36,310 | $ | 10,111 | $ | 30,299 | $ | 76,720 | ||||||||
|
|
|
|
|
|
|
|
17
Three Months Ended March 31, 2011 | ||||||||||||||||
Commercial | Investor Real Estate |
Consumer | Total | |||||||||||||
(In millions) | ||||||||||||||||
Allowance for loan losses, January 1, 2011 |
$ | 1,055 | $ | 1,370 | $ | 760 | $ | 3,185 | ||||||||
Provision for loan losses |
225 | 89 | 168 | 482 | ||||||||||||
Loan losses: |
||||||||||||||||
Charge-offs |
(151 | ) | (181 | ) | (180 | ) | (512 | ) | ||||||||
Recoveries |
9 | 7 | 15 | 31 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loan losses |
(142 | ) | (174 | ) | (165 | ) | (481 | ) | ||||||||
Allowance for loan losses, March 31, 2011 |
1,138 | 1,285 | 763 | 3,186 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserve for unfunded credit commitments, January 1, 2011 |
$ | 32 | $ | 16 | $ | 23 | $ | 71 | ||||||||
Provision for unfunded credit commitments |
5 | 1 | 1 | 7 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserve for unfunded credit commitments, March 31, 2011 |
37 | 17 | 24 | 78 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Allowance for credit losses, March 31, 2011 |
$ | 1,175 | $ | 1,302 | $ | 787 | $ | 3,264 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Portion of ending allowance for credit losses: |
||||||||||||||||
Individually evaluated for impairment |
$ | 113 | $ | 340 | $ | 3 | $ | 456 | ||||||||
Collectively evaluated for impairment |
1,062 | 962 | 784 | 2,808 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total allowance for credit losses |
$ | 1,175 | $ | 1,302 | $ | 787 | $ | 3,264 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Portion of loan portfolio ending balance: |
||||||||||||||||
Individually evaluated for impairment |
$ | 469 | $ | 1,248 | $ | 19 | $ | 1,736 | ||||||||
Collectively evaluated for impairment |
34,999 | 13,579 | 31,057 | 79,635 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total loans evaluated for impairment |
$ | 35,468 | $ | 14,827 | $ | 31,076 | $ | 81,371 | ||||||||
|
|
|
|
|
|
|
|
PORTFOLIO SEGMENT RISK FACTORS
The following describe the risk characteristics relevant to each of the portfolio segments.
CommercialThe commercial loan portfolio segment includes commercial and industrial loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases or other expansion projects. Commercial also includes owner-occupied commercial real estate loans to operating businesses, which are loans for long-term financing of land and buildings, and are repaid by cash flow generated by business operations. Owner-occupied construction loans are made to commercial businesses for the development of land or construction of a building where the repayment is derived from revenues generated from the business of the borrower. Collection risk in this portfolio is driven by the creditworthiness of underlying borrowers, particularly cash flow from customers business operations.
Investor Real EstateLoans for real estate development are repaid through cash flow related to the operation, sale or refinance of the property. This portfolio segment includes extensions of credit to real estate developers or investors where repayment is dependent on the sale of real estate or income generated from the real estate collateral. A portion of Regions investor real estate portfolio segment is comprised of loans secured by residential product types (land, single-family and condominium loans) within Regions markets. Additionally, these loans are made to finance income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers. Loans in this portfolio segment are particularly sensitive to valuation of real estate.
ConsumerThe consumer loan portfolio segment includes residential first mortgage, home equity, indirect, consumer credit card, and other consumer loans. Residential first mortgage loans represent loans to consumers to finance a residence. These loans are typically financed over a 15 to 30 year term and, in most cases, are extended to borrowers to finance their primary residence. Home equity lending includes both home equity loans and lines
18
of credit. This type of lending, which is secured by a first or second mortgage on the borrowers 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 in these values impact the depth of potential losses. Indirect lending, which is lending initiated through third-party business partners, is largely comprised of loans made through automotive dealerships. Consumer credit card includes approximately 500,000 Regions branded consumer credit card accounts purchased late in the second quarter of 2011 from FIA Card Services. Other consumer loans include direct consumer installment loans, overdrafts and other revolving loans. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.
CREDIT QUALITY INDICATORS
The following tables present credit quality indicators for the loan portfolio segments and classes, excluding loans held for sale, as of March 31, 2012 and December 31, 2011. Commercial and investor real estate loan classes are detailed by categories related to underlying credit quality and probability of default. These categories are utilized to develop the associated allowance for credit losses.
| Passincludes obligations where the probability of default is considered low; |
| Special Mentionincludes obligations that have potential weakness which may, if not reversed or corrected, weaken the credit or inadequately protect the Companys position at some future date. Obligations in this category may also be subject to economic or market conditions which may, in the future, have an adverse effect on debt service ability; |
| Substandard Accrualincludes obligations that exhibit a well-defined weakness which presently jeopardizes debt repayment, even though they are currently performing. These obligations are characterized by the distinct possibility that the Company may incur a loss in the future if these weaknesses are not corrected; |
| Non-accrualincludes obligations where management has determined that full payment of principal and interest is in doubt. |
Substandard accrual and non-accrual loans are often collectively referred to as classified. Special mention, substandard accrual, and non-accrual loans are often collectively referred to as criticized and classified.
19
Classes in the consumer portfolio segment are disaggregated by accrual status. The associated allowance for credit losses is generally based on historical losses of the various classes adjusted for current economic conditions. For home equity products, loss rates are based on lien position, TDR status, geography, past due status, and refreshed FICO scores for current loans.
March 31, 2012 | ||||||||||||||||||||
Pass | Special Mention | Substandard Accrual |
Non-accrual | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Commercial and industrial |
$ | 23,417 | $ | 636 | $ | 606 | $ | 439 | $ | 25,098 | ||||||||||
Commercial real estate mortgageowner occupied |
9,613 | 215 | 558 | 545 | 10,931 | |||||||||||||||
Commercial real estate constructionowner occupied |
229 | 14 | 15 | 23 | 281 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total commercial |
$ | 33,259 | $ | 865 | $ | 1,179 | $ | 1,007 | $ | 36,310 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Commercial investor real estate mortgage |
6,627 | 693 | 1,196 | 640 | 9,156 | |||||||||||||||
Commercial investor real estate construction |
556 | 94 | 178 | 127 | 955 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total investor real estate |
$ | 7,183 | $ | 787 | $ | 1,374 | $ | 767 | $ | 10,111 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Accrual | Non-accrual | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||
Residential first mortgage |
$ | 13,370 | $ | 241 | $ | 13,611 | ||||||||||||||
Home equity |
12,506 | 136 | 12,642 | |||||||||||||||||
Indirect |
1,938 | | 1,938 | |||||||||||||||||
Consumer credit card |
939 | | 939 | |||||||||||||||||
Other consumer |
1,169 | | 1,169 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total consumer |
$ | 29,922 | $ | 377 | $ | 30,299 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
$ | 76,720 | |||||||||||||||||||
|
|
|||||||||||||||||||
December 31, 2011 | ||||||||||||||||||||
Pass | Special Mention | Substandard Accrual |
Non-accrual | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Commercial and industrial |
$ | 22,952 | $ | 479 | $ | 634 | $ | 457 | $ | 24,522 | ||||||||||
Commercial real estate mortgageowner occupied |
9,773 | 262 | 541 | 590 | 11,166 | |||||||||||||||
Commercial real estate constructionowner occupied |
275 | 27 | 10 | 25 | 337 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total commercial |
$ | 33,000 | $ | 768 | $ | 1,185 | $ | 1,072 | $ | 36,025 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Commercial investor real estate mortgage |
6,851 | 756 | 1,361 | 734 | 9,702 | |||||||||||||||
Commercial investor real estate construction |
531 | 113 | 201 | 180 | 1,025 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total investor real estate |
$ | 7,382 | $ | 869 | $ | 1,562 | $ | 914 | $ | 10,727 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Accrual | Non-accrual | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||
Residential first mortgage |
$ | 13,534 | $ | 250 | $ | 13,784 | ||||||||||||||
Home equity |
12,885 | 136 | 13,021 | |||||||||||||||||
Indirect |
1,848 | | 1,848 | |||||||||||||||||
Consumer credit card |
987 | | 987 | |||||||||||||||||
Other consumer |
1,202 | | 1,202 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total consumer |
$ | 30,456 | $ | 386 | $ | 30,842 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
$ | 77,594 | |||||||||||||||||||
|
|
20
AGING ANALYSIS
The following tables include an aging analysis of days past due (DPD) for each portfolio class as of March 31, 2012 and December 31, 2011:
March 31, 2012 | ||||||||||||||||||||||||||||
Accrual Loans | ||||||||||||||||||||||||||||
30-59 DPD | 60-89 DPD | 90+ DPD | Total 30+ DPD |
Total Accrual |
Non-accrual | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Commercial and industrial |
$ | 25 | $ | 18 | $ | 9 | $ | 52 | $ | 24,659 | $ | 439 | $ | 25,098 | ||||||||||||||
Commercial real estate |
40 | 28 | 9 | 77 | 10,386 | 545 | 10,931 | |||||||||||||||||||||
Commercial real estate constructionowner occupied |
1 | | | 1 | 258 | 23 | 281 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total commercial |
66 | 46 | 18 | 130 | 35,303 | 1,007 | 36,310 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Commercial investor real estate mortgage |
69 | 53 | 2 | 124 | 8,516 | 640 | 9,156 | |||||||||||||||||||||
Commercial investor real estate construction |
1 | 2 | | 3 | 828 | 127 | 955 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total investor real estate |
70 | 55 | 2 | 127 | 9,344 | 767 | 10,111 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Residential first mortgage |
158 | 100 | 300 | 558 | 13,370 | 241 | 13,611 | |||||||||||||||||||||
Home equity |
96 | 62 | 87 | 245 | 12,506 | 136 | 12,642 | |||||||||||||||||||||
Indirect |
19 | 6 | 2 | 27 | 1,938 | | 1,938 | |||||||||||||||||||||
Consumer credit card |
7 | 5 | 14 | 26 | 939 | | 939 | |||||||||||||||||||||
Other consumer |
14 | 4 | 4 | 22 | 1,169 | | 1,169 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total consumer |
294 | 177 | 407 | 878 | 29,922 | 377 | 30,299 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
$ | 430 | $ | 278 | $ | 427 | $ | 1,135 | $ | 74,569 | $ | 2,151 | $ | 76,720 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
December 31, 2011 | ||||||||||||||||||||||||||||
Accrual Loans | ||||||||||||||||||||||||||||
30-59 DPD | 60-89 DPD | 90+ DPD | Total 30+ DPD |
Total Accrual |
Non-accrual | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Commercial and industrial |
$ | 38 | $ | 23 | $ | 28 | $ | 89 | $ | 24,065 | $ | 457 | $ | 24,522 | ||||||||||||||
Commercial real estate |
47 | 23 | 9 | 79 | 10,576 | 590 | 11,166 | |||||||||||||||||||||
Commercial real estate constructionowner occupied |
3 | 1 | | 4 | 312 | 25 | 337 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total commercial |
88 | 47 | 37 | 172 | 34,953 | 1,072 | 36,025 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Commercial investor real estate mortgage |
34 | 42 | 13 | 89 | 8,968 | 734 | 9,702 | |||||||||||||||||||||
Commercial investor real estate construction |
23 | 5 | | 28 | 845 | 180 | 1,025 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total investor real estate |
57 | 47 | 13 | 117 | 9,813 | 914 | 10,727 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Residential first mortgage |
187 | 100 | 284 | 571 | 13,534 | 250 | 13,784 | |||||||||||||||||||||
Home equity |
121 | 77 | 93 | 291 | 12,885 | 136 | 13,021 | |||||||||||||||||||||
Indirect |
26 | 7 | 2 | 35 | 1,848 | | 1,848 | |||||||||||||||||||||
Consumer credit card |
8 | 5 | 14 | 27 | 987 | | 987 | |||||||||||||||||||||
Other consumer |
20 | 6 | 4 | 30 | 1,202 | | 1,202 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total consumer |
362 | 195 | 397 | 954 | 30,456 | 386 | 30,842 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
$ | 507 | $ | 289 | $ | 447 | $ | 1,243 | $ | 75,222 | $ | 2,372 | $ | 77,594 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
IMPAIRED LOANS
The following tables present details related to the Companys impaired loans as of March 31, 2012 and December 31, 2011. Loans deemed to be impaired include non-accrual commercial and investor real estate loans, excluding leases, and all TDRs (including accruing commercial, investor real estate, and consumer TDRs). Loans which have been fully charged-off do not appear in the tables below.
Non-accrual Impaired Loans As of March 31, 2012 | ||||||||||||||||||||||||||||
Book Value (3) | ||||||||||||||||||||||||||||
Unpaid Principal Balance (1) |
Charge-offs and Payments Applied (2) |
Total Impaired Loans on Non-accrual Status |
Impaired Loans on Non-accrual Status with No Related Allowance |
Impaired Loans on Non-accrual Status with Related Allowance |
Related Allowance for Loan Losses |
Coverage % (4) | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
Commercial and industrial |
$ | 516 | $ | 89 | $ | 427 | $ | 104 | $ | 323 | $ | 130 | 42.4 | % | ||||||||||||||
Commercial real estate mortgageowner occupied |
632 | 88 | 544 | 37 | 507 | 187 | 43.5 | |||||||||||||||||||||
Commercial real estate constructionowner occupied |
35 | 12 | 23 | 1 | 22 | 10 | 62.9 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total commercial |
1,183 | 189 | 994 | 142 | 852 | 327 | 43.6 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Commercial investor real estate mortgage |
774 | 134 | 640 | 59 | 581 | 201 | 43.3 | |||||||||||||||||||||
Commercial investor real estate construction |
172 | 46 | 126 | 9 | 117 | 44 | 52.3 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total investor real estate |
946 | 180 | 766 | 68 | 698 | 245 | 44.9 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Residential first mortgage |
149 | 52 | 97 | | 97 | 15 | 45.0 | |||||||||||||||||||||
Home equity |
29 | 10 | 19 | | 19 | 2 | 41.4 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total consumer |
178 | 62 | 116 | | 116 | 17 | 44.4 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 2,307 | $ | 431 | $ | 1,876 | $ | 210 | $ | 1,666 | $ | 589 | 44.2 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
Accruing Impaired Loans As of March 31, 2012 | ||||||||||||||||||||
Unpaid Principal Balance (1) |
Charge-offs and Payments Applied (2) |
Book Value |
Related Allowance for Loan Losses |
Coverage % (4) | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Commercial and industrial |
$ | 268 | $ | 2 | $ | 266 | $ | 56 | 21.6 | % | ||||||||||
Commercial real estate mortgageowner occupied |
223 | 2 | 221 | 34 | 16.1 | |||||||||||||||
Commercial real estate constructionowner occupied |
4 | | 4 | 1 | 25.0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total commercial |
495 | 4 | 491 | 91 | 19.2 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Commercial investor real estate mortgage |
930 | 6 | 924 | 186 | 20.6 | |||||||||||||||
Commercial investor real estate construction |
133 | | 133 | 79 | 59.4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total investor real estate |
1,063 | 6 | 1,057 | 265 | 25.5 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Residential first mortgage |
1,054 | 13 | 1,041 | 146 | 15.1 | |||||||||||||||
Home equity |
429 | 4 | 425 | 42 | 10.7 | |||||||||||||||
Indirect |
2 | | 2 | | | |||||||||||||||
Other consumer |
51 | | 51 | 1 | 2.0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total consumer |
1,536 | 17 | 1,519 | 189 | 13.4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 3,094 | $ | 27 | $ | 3,067 | $ | 545 | 18.5 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
23
Total Impaired Loans As of March 31, 2012 | Three Months Ended March 31, 2012 |
|||||||||||||||||||||||||||||||||||
Book Value (3) | ||||||||||||||||||||||||||||||||||||
Unpaid Principal Balance (1) |
Charge-offs and Payments Applied (2) |
Total Impaired Loans |
Impaired Loans with No Related Allowance |
Impaired Loans with Related Allowance |
Related Allowance for Loan Losses |
Coverage % (4) | Average Balance |
Interest Income Recognized (5) |
||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||
Commercial and industrial |
$ | 784 | $ | 91 | $ | 693 | $ | 104 | $ | 589 | $ | 186 | 35.3 | % | $ | 730 | $ | 4 | ||||||||||||||||||
Commercial real estate mortgageowner occupied |
855 | 90 | 765 | 37 | 728 | 221 | 36.4 | 785 | 3 | |||||||||||||||||||||||||||
Commercial real estate constructionowner occupied |
39 | 12 | 27 | 1 | 26 | 11 | 59.0 | 28 | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total commercial |
1,678 | 193 | 1,485 | 142 | 1,343 | 418 | 36.4 | 1,543 | 7 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Commercial investor real estate mortgage |
1,704 | 140 | 1,564 | 59 | 1,505 | 387 | 30.9 | 1,636 | 10 | |||||||||||||||||||||||||||
Commercial investor real estate construction |
305 | 46 | 259 | 9 | 250 | 123 | 55.4 | 294 | 2 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total investor real estate |
2,009 | 186 | 1,823 | 68 | 1,755 | 510 | 34.6 | 1,930 | 12 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Residential first mortgage |
1,203 | 65 | 1,138 | | 1,138 | 161 | 18.8 | 1,131 | 10 | |||||||||||||||||||||||||||
Home equity |
458 | 14 | 444 | | 444 | 44 | 12.7 | 444 | 5 | |||||||||||||||||||||||||||
Indirect |
2 | | 2 | | 2 | | | 1 | | |||||||||||||||||||||||||||
Other consumer |
51 | | 51 | | 51 | 1 | 2.0 | 52 | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total consumer |
1,714 | 79 | 1,635 | | 1,635 | 206 | 16.6 | 1,628 | 15 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total impaired loans |
$ | 5,401 | $ | 458 | $ | 4,943 | $ | 210 | $ | 4,733 | $ | 1,134 | 29.5 | % | $ | 5,101 | $ | 34 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Unpaid principal balance represents the contractual obligation due from the customer and includes the net book value plus charge-offs and payments applied. |
(2) | Charge-offs and payments applied represents cumulative partial charge-offs taken, as well as interest payments received that have been applied against the outstanding principal balance. |
(3) | Book value represents the unpaid principal balance less charge-offs and payments applied; it is shown before any allowance for loan losses. |
(4) | Coverage % represents charge-offs and payments applied plus the related allowance as a percent of the unpaid principal balance. |
(5) | Interest income recognized represents interest income on loans modified in a TDR, and are therefore considered impaired, which are on accruing status. |
24
Non-accrual Impaired Loans As of December 31, 2011 | ||||||||||||||||||||||||||||
Book Value (3) | ||||||||||||||||||||||||||||
Unpaid Principal Balance (1) |
Charge-offs and Payments Applied (2) |
Total Impaired Loans on Non-accrual Status |
Impaired Loans on Non- accrual Status with No Related Allowance |
Impaired Loans on Non- accrual Status with Related Allowance |
Related Allowance for Loan Losses |
Coverage % (4) | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
Commercial and industrial |
$ | 468 | $ | 88 | $ | 380 | $ | 61 | $ | 319 | $ | 129 | 46.4 | % | ||||||||||||||
Commercial real estate mortgageowner occupied |
679 | 88 | 591 | 34 | 557 | 192 | 41.2 | |||||||||||||||||||||
Commercial real estate constructionowner occupied |
37 | 12 | 25 | 1 | 24 | 10 | 59.5 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total commercial |
1,184 | 188 | 996 | 96 | 900 | 331 | 43.8 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Commercial investor real estate mortgage |
870 | 136 | 734 | 63 | 671 | 223 | 41.3 | |||||||||||||||||||||
Commercial investor real estate construction |
236 | 56 | 180 | 23 | 157 | 62 | 50.0 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total investor real estate |
1,106 | 192 | 914 | 86 | 828 | 285 | 43.1 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Residential first mortgage |
146 | 49 | 97 | | 97 | 15 | 43.8 | |||||||||||||||||||||
Home equity |
26 | 10 | 16 | | 16 | 2 | 46.2 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total consumer |
172 | 59 | 113 | | 113 | 17 | 44.2 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 2,462 | $ | 439 | $ | 2,023 | $ | 182 | $ | 1,841 | $ | 633 | 43.5 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing Impaired Loans As of December 31, 2011 | ||||||||||||||||||||
Unpaid Principal Balance (1) |
Charge-offs and Payments Applied (2) |
Book Value (3) |
Related Allowance for Loan Losses |
Coverage % (4) | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Commercial and industrial |
$ | 290 | $ | 1 | $ | 289 | $ | 60 | 21.0 | % | ||||||||||
Commercial real estate mortgageowner occupied |
205 | 3 | 202 | 30 | 16.1 | |||||||||||||||
Commercial real estate constructionowner occupied |
2 | | 2 | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total commercial |
497 | 4 | 493 | 90 | 18.9 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Commercial investor real estate mortgage |
862 | 7 | 855 | 174 | 21.0 | |||||||||||||||
Commercial investor real estate construction |
140 | | 140 | 81 | 57.9 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total investor real estate |
1,002 | 7 | 995 | 255 | 26.1 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Residential first mortgage |
1,025 | 12 | 1,013 | 148 | 15.6 | |||||||||||||||
Home equity |
428 | 4 | 424 | 60 | 15.0 | |||||||||||||||
Indirect |
1 | | 1 | | | |||||||||||||||
Other consumer |
55 | | 55 | 1 | 1.8 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total consumer |
1,509 | 16 | 1,493 | 209 | 14.9 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 3,008 | $ | 27 | $ | 2,981 | $ | 554 | 19.3 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
25
Total Impaired Loans As of December 31, 2011 | Three Months Ended March 31, 2011 |
|||||||||||||||||||||||||||||||||||
Book Value (3) | ||||||||||||||||||||||||||||||||||||
Unpaid Principal Balance (1) |
Charge-offs and Payments Applied (2) |
Total Impaired Loans |
Impaired Loans with No Related Allowance |
Impaired Loans with Related Allowance |
Related Allowance for Loan Losses |
Coverage % (4) | Average Balance |
Interest Income Recognized (5) |
||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||
Commercial and industrial |
$ | 758 | $ | 89 | $ | 669 | $ | 61 | $ | 608 | $ | 189 | 36.7 | % | $ | 436 | $ | | ||||||||||||||||||
Commercial real estate mortgageowner occupied |
884 | 91 | 793 | 34 | 759 | 222 | 35.4 | 705 | 1 | |||||||||||||||||||||||||||
Commercial real estate constructionowner occupied |
39 | 12 | 27 | 1 | 26 | 10 | 56.4 | 32 | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total commercial |
1,681 | 192 | 1,489 | 96 | 1,393 | 421 | 36.5 | 1,173 | 1 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Commercial investor real estate mortgage |
1,732 | 143 | 1,589 | 63 | 1,526 | 397 | 31.2 | 1,367 | 2 | |||||||||||||||||||||||||||
Commercial investor real estate construction |
376 | 56 | 320 | 23 | 297 | 143 | 52.9 | 496 | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total investor real estate |
2,108 | 199 | 1,909 | 86 | 1,823 | 540 | 35.1 | 1,863 | 2 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Residential first mortgage |
1,171 | 61 | 1,110 | | 1,110 | 163 | 19.1 | 1,061 | 9 | |||||||||||||||||||||||||||
Home equity |
454 | 14 | 440 | | 440 | 62 | 16.7 | 379 | 5 | |||||||||||||||||||||||||||
Indirect |
1 | | 1 | | 1 | | | 2 | | |||||||||||||||||||||||||||
Other consumer |
55 | | 55 | | 55 | 1 | 1.8 | 63 | 1 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total consumer |
1,681 | 75 | 1,606 | | 1,606 | 226 | 17.9 | 1,505 | 15 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total impaired loans |
$ | 5,470 | $ | 466 | $ | 5,004 | $ | 182 | $ | 4,822 | $ | 1,187 | 30.2 | % | $ | 4,541 | $ | 18 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Unpaid principal balance represents the contractual obligation due from the customer and includes the net book value plus charge-offs and payments applied. |
(2) | Charge-offs and payments applied represents cumulative partial charge-offs taken, as well as interest payments received that have been applied against the outstanding principal balance. |
(3) | Book value represents the unpaid principal balance less charge-offs and payments applied; it is shown before any allowance for loan losses. |
(4) | Coverage % represents charge-offs and payments applied plus the related allowance as a percent of the unpaid principal balance. |
(5) | Interest income recognized represents interest income on loans modified in a TDR, and are therefore considered impaired, which are on accruing status. |
In addition to the impaired loans detailed in the tables above, there were approximately $249 million in non-performing loans classified as held for sale at March 31, 2012, compared to $328 million at December 31, 2011. These loans are larger balance credits, primarily investor real estate, where management does not have the intent to hold the loans for the foreseeable future. The loans are carried at an amount approximating a price which will be recoverable through the loan sale market. During the three months ended March 31, 2012, approximately $93 million in non-performing loans were transferred to held for sale; this amount is net of charge-offs of $53 million recorded upon transfer. During the three months ended March 31, 2011, approximately $188 million in non-performing loans were transferred to held for sale; this amount is net of charge-offs of $105 million recorded upon transfer. At March 31, 2012 and December 31, 2011, non-accrual loans including loans held for sale totaled $2.4 billion and $2.7 billion, respectively.
26
TROUBLED DEBT RESTRUCTURINGS (TDRs)
Modification Activity: Commercial and Investor Real Estate Portfolio Segments
Regions regularly modifies commercial and investor real estate loans in order to facilitate a workout strategy. Typical modifications include workout accommodations, such as renewals and forbearances. Regions business strategy to keep loan maturities short, particularly in the investor real estate portfolio segment, in order to maintain leverage in negotiating with customers drove the renewal activity. Regions often increases or at least maintains the same interest rate, and often receives consideration in exchange for such modifications (e.g., principal paydowns, additional collateral, or additional guarantor support). However, these modifications are refutably considered by Regions to be concessions if the borrower could not access similar financing at market terms, even if Regions concludes that the borrower will ultimately pay all contractual amounts owed. Additionally, as another workout alternative, Regions periodically uses A/B note restructurings when the underlying assets (primarily investor real estate) have a stabilized level of cash flow. An appropriately underwritten A-note will allow for upgraded risk rating, with ultimate return to accrual status upon charge-off of the B-note, and a satisfactory period of performance of the A-note (generally, six months). Regions continues to report A-notes as TDRs, even if upgraded to accrual status. Also, for smaller-dollar commercial customers, Regions may periodically grant interest rate and other term concessions, similar to those under the Customer Assistance Program (CAP) program as described below.
Modification Activity: Consumer Portfolio Segment
Regions continues to work to meet the individual needs of consumer borrowers to stem foreclosure through the CAP. Regions designed the program to allow for customer-tailored modifications with the goal of keeping customers in their homes and avoiding foreclosure where possible. Modification may be offered to any borrower experiencing financial hardshipregardless of the borrowers payment status. Under the CAP, Regions may offer a short-term deferral, a term extension, an interest rate reduction, a new loan product, or a combination of these options. For loans restructured under the CAP, Regions expects to collect the original contractually due principal. The gross original contractual interest may be collectible, depending on the terms modified. The length of the CAP modifications ranges from temporary payment deferrals of three months to term extensions for the life of the loan. All such modifications are considered TDRs regardless of the term if there is a concession to a borrower experiencing financial difficulty. Modified loans are subject to policies governing accrual/non-accrual evaluation consistent with all other loans of the same product type. Consumer loans are subject to objective accrual/non-accrual decisions. Under these policies, loans subject to the CAP are charged down to estimated value on or before the month in which the loan becomes 180 days past due. Beginning in the third quarter of 2011, home equity second liens are charged down to estimated value by the end of the month in which the loan becomes 120 days past due. If a partial charge-off is necessary as a result of this evaluation, the loan is placed on non-accrual at that time. Because the program was designed to evaluate potential CAP participants as early as possible in the life cycle of the troubled loan, many of the modifications are finalized without the borrower ever reaching 180 days past due, and with the loans having never been placed on non-accrual. Accordingly, given the positive impact of the restructuring on the likelihood of recovery of cash flows due under the modified terms, accrual status continues to be appropriate for these loans. None of the modified consumer loans listed in the following TDR disclosures were collateral-dependent at the time of modification. At March 31, 2012, approximately $134 million in residential first mortgage TDRs were in excess of 180 days past due and are considered collateral-dependent. At March 31, 2012, approximately $11 million in home equity first lien TDRs were in excess of 180 days past due and $9 million in home equity second lien TDRs were in excess of 120 days past due and are considered collateral dependent.
Further discussion related to TDRs, including the impact of recently issued accounting literature, impact on allowance for loan losses, and designation of TDRs in periods subsequent to the modification is included in the Annual Report on Form 10-K for the year ended December 31, 2011.
27
Modifications Considered TDRs and Financial Impact
The majority of Regions 2012 commercial and investor real estate TDRs are the result of renewals where the only concession is that the interest rate at renewal is not considered to be a market rate. Consumer TDRs generally involve an interest rate concession. Accordingly, the financial impact of the modifications is best illustrated by the impact to the allowance calculation at the loan or pool level as a result of the loans being considered impaired due to their status as a TDR.
The following table presents loans by class modified in a TDR, and the financial impact of those modifications, for the period presented.