Edgar Filing: REGIONS FINANCIAL CORP

10-Q

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 June 30, 2011

¨	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

(Registrant’s 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 issuer’s classes of common stock was 1,258,798,000 shares of common stock, par value $.01, outstanding as of July 29, 2011.

REGIONS FINANCIAL CORPORATION

FORM 10-Q

INDEX


			Page
Part I. Financial Information
	Item 1.	Financial Statements (Unaudited)
		Consolidated Balance Sheets—June 30, 2011, December 31, 2010 and June 30, 2010		5
		Consolidated Statements of Operations—Three and six months ended June 30, 2011 and 2010		6
		Consolidated Statements of Changes in Stockholders’ Equity—Six months ended June 30, 2011 and 2010		7
		Consolidated Statements of Cash Flows—Six months ended June 30, 2011 and 2010		8
		Notes to Consolidated Financial Statements		9
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		54
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		98
	Item 4.	Controls and Procedures		98

Part II. Other Information
	Item 1.	Legal Proceedings		99
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		99
	Item 6.	Exhibits		100

Signatures				101

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 management’s 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 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. 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.

•

The impact of compensation and other restrictions imposed under the Troubled Asset Relief Program (“TARP”) until Regions repays the outstanding preferred stock and warrant issued under the TARP, including restrictions on Regions’ ability to attract and retain talented executives and associates.

•

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.

•

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 liquidity to support Regions’ business.

•

Regions’ ability to expand into new markets and to maintain profit margins in the face of competitive pressures.

•

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.

•

Potential dilution of holders of shares of Regions’ common stock resulting from the U.S. Treasury’s investment in TARP.

•

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.

•

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, 2010 and the “Forward-Looking Statements” section of Regions’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, as filed with the Securities and Exchange Commission.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	June 30 2011			December 31 2010			June 30 2010
	(In millions, except share and per share data)
Assets
Cash and due from banks	$	2,271		$	1,643		$	2,097
Interest-bearing deposits in other banks		5,452			4,880			4,562
Federal funds sold and securities purchased under agreements to resell		251			396			752
Trading account assets		1,223			1,116			1,261
Securities available for sale		23,828			23,289			24,166
Securities held to maturity		21			24			28
Loans held for sale (includes $585, $1,174 and $819 measured at fair value, at June 30, 2011, December 31, 2010 and June 30, 2010, respectively)		1,141			1,485			1,162
Loans, net of unearned income		81,176			82,864			85,945
Allowance for loan losses		(3,120	)		(3,185	)		(3,185	)

Net loans		78,056			79,679			82,760
Other interest-earning assets		1,207			1,219			1,082
Premises and equipment, net		2,481			2,569			2,588
Interest receivable		354			421			466
Goodwill		5,561			5,561			5,561
Mortgage servicing rights		268			267			220
Other identifiable intangible assets		420			385			443
Other assets		8,374			9,417			8,192

Total assets	$	130,908		$	132,351		$	135,340

Liabilities and Stockholders’ Equity
Deposits:
Non-interest-bearing	$	28,148		$	25,733		$	22,993
Interest-bearing		68,183			68,881			73,257

Total deposits		96,331			94,614			96,250
Borrowed funds:
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase		1,740			2,716			1,929
Other short-term borrowings		982			1,221			1,035

Total short-term borrowings		2,722			3,937			2,964
Long-term borrowings		11,646			13,190			15,415

Total borrowed funds		14,368			17,127			18,379
Other liabilities		3,321			3,876			3,248

Total liabilities		114,020			115,617			117,877
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; Issued—3,500,000 shares		3,399			3,380			3,360
Common stock, par value $.01 per share:
Authorized 3 billion shares at June 30, 2011 and December 31, 2010, and 1.5 billion shares at June 30, 2010
Issued including treasury stock—1,301,331,383; 1,299,000,755 and 1,298,911,598 shares, respectively		13			13			13
Additional paid-in capital		19,052			19,050			19,038
Retained earnings (deficit)		(4,000	)		(4,047	)		(3,849	)
Treasury stock, at cost—42,533,753; 42,764,258 and 42,969,345 shares, respectively		(1,399	)		(1,402	)		(1,405	)
Accumulated other comprehensive income (loss), net		(177	)		(260	)		306

Total stockholders’ equity		16,888			16,734			17,463

Total liabilities and stockholders’ equity	$	130,908		$	132,351		$	135,340

See notes to consolidated financial statements.

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended June 30						Six Months Ended June 30
	2011			2010			2011			2010
	(In millions, except per share data)
Interest income on:
Loans, including fees	$	856		$	930		$	1,723		$	1,875
Securities:
Taxable		208			224			415			466
Tax-exempt		—			—			—			1

Total securities		208			224			415			467
Loans held for sale		9			9			22			17
Trading account assets		6			9			13			21
Other interest-earning assets		7			8			13			15

Total interest income		1,086			1,180			2,186			2,395
Interest expense on:
Deposits		126			194			265			436
Short-term borrowings		2			2			5			5
Long-term borrowings		94			128			189			267

Total interest expense		222			324			459			708

Net interest income		864			856			1,727			1,687
Provision for loan losses		398			651			880			1,421

Net interest income after provision for loan losses		466			205			847			266
Non-interest income:
Service charges on deposit accounts		308			302			595			590
Brokerage, investment banking and capital markets		248			254			515			490
Mortgage income		50			63			95			130
Trust department income		51			49			101			97
Securities gains, net		24			—			106			59
Leveraged lease termination gains		—			—			—			19
Other		100			88			212			183

Total non-interest income		781			756			1,624			1,568
Non-interest expense:
Salaries and employee benefits		561			560			1,155			1,135
Net occupancy expense		107			110			216			230
Furniture and equipment expense		79			79			156			153
Regulatory charge		—			200			—			200
Other		451			377			838			838

Total non-interest expense		1,198			1,326			2,365			2,556

Income (loss) before income taxes		49			(365	)		106			(722	)
Income tax benefit		(60	)		(88	)		(72	)		(249	)

Net income (loss)	$	109		$	(277	)	$	178		$	(473	)

Net income (loss) available to common shareholders	$	55		$	(335	)	$	72		$	(590	)

Weighted-average number of shares outstanding:
Basic		1,258			1,200			1,257			1,197
Diluted		1,260			1,200			1,259			1,197
Earnings (loss) per common share:
Basic	$	0.04		$	(0.28	)	$	0.06		$	(0.49	)
Diluted		0.04			(0.28	)		0.06			(0.49	)
Cash dividends declared per common share		0.01			0.01			0.02			0.02

See notes to consolidated financial statements.

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		Additional Paid-In Capital			Retained Earnings (Deficit)			Treasury Stock, At Cost			Accumulated Other Comprehensive Income (Loss)			Total
	(In millions, except share and per share data)
BALANCE AT JANUARY 1, 2010		4	$	3,602			1,193	$	12	$	18,781		$	(3,235	)	$	(1,409	)	$	130		$	17,881
Comprehensive income (loss):
Net income (loss)		—		—			—		—		—			(473	)		—			—			(473	)
Net change in unrealized gains and losses on securities available for sale, net of tax and reclassification adjustment*		—		—			—		—		—			—			—			234			234
Net change in unrealized gains and losses on derivative instruments, net of tax and reclassification adjustment*		—		—			—		—		—			—			—			(67	)		(67	)
Net change from defined benefit pension plans, net of tax*		—		—			—		—		—			—			—			9			9

Comprehensive income (loss)																							(297	)
Cash dividends declared—$0.02 per share		—		—			—		—		—			(24	)		—			—			(24	)
Preferred dividends		—		—			—		—		3			(100	)		—			—			(97	)
Preferred stock transactions:
Conversion of mandatorily convertible preferred stock into 63 million shares of common stock		—		(259	)		63		1		258			—			—			—			—
Discount accretion		—		17			—		—		—			(17	)		—			—			—
Common stock transactions:
Impact of stock transactions under compensation plans, net		—		—			—		—		(4	)		—			4			—			—

BALANCE AT JUNE 30, 2010		4	$	3,360			1,256	$	13	$	19,038		$	(3,849	)	$	(1,405	)	$	306		$	17,463

BALANCE AT JANUARY 1, 2011		4	$	3,380			1,256	$	13	$	19,050		$	(4,047	)	$	(1,402	)	$	(260	)	$	16,734
Comprehensive income (loss):
Net income		—		—			—		—		—			178			—			—			178
Net change in unrealized gains and losses on securities available for sale, net of tax and reclassification adjustment*		—		—			—		—		—			—			—			75			75
Net change in unrealized gains and losses on derivative instruments, net of tax and reclassification adjustment*		—		—			—		—		—			—			—			(4	)		(4	)
Net change from defined benefit pension plans, net of tax*		—		—			—		—		—			—			—			12			12

Comprehensive income																							261
Cash dividends declared—$0.02 per share		—		—			—		—		—			(25	)		—			—			(25	)
Preferred dividends		—		—			—		—		—			(87	)		—			—			(87	)
Preferred stock transactions:
Discount accretion		—		19			—		—		—			(19	)		—			—			—
Common stock transactions:
Impact of stock transactions under compensation plans, net		—		—			3		—		2			—			3			—			5

BALANCE AT JUNE 30, 2011		4	$	3,399			1,259	$	13	$	19,052		$	(4,000	)	$	(1,399	)	$	(177	)	$	16,888

See notes to consolidated financial statements.

*	See disclosure of reclassification adjustment amount and tax effect, as applicable, in Note 6 to the consolidated financial statements.

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Six Months Ended June 30
	2011			2010
	(In millions)
Operating activities:
Net income (loss)	$	178		$	(473	)
Adjustments to reconcile net cash provided by operating activities:
Provision for loan losses		880			1,421
Depreciation and amortization of premises and equipment		138			145
Provision for losses on other real estate, net		58			64
Net amortization of securities		92			92
Net amortization of loans and other assets		98			109
Net accretion of deposits and borrowings		1			(3	)
Net securities gains		(106	)		(59	)
Loss on early extinguishment of debt		—			53
Deferred income tax benefit		(81	)		(146	)
Originations and purchases of loans held for sale		(2,624	)		(2,294	)
Proceeds from sales of loans held for sale		3,525			2,853
Gain on sale of loans, net		(37	)		(33	)
Valuation charges on loans held for sale		6			16
Branch consolidation and property and equipment charges		77			—
(Increase) decrease in trading account assets		(107	)		1,778
Decrease (increase) in other interest-earning assets		12			(348	)
Decrease in interest receivable		67			2
Decrease (increase) in other assets		1,246			(58	)
Decrease in other liabilities		(543	)		(365	)
Other		(38	)		41

Net cash from operating activities		2,842			2,795
Investing activities:
Proceeds from sales of securities available for sale		6,479			1,460
Proceeds from maturites of:
Securities available for sale		2,291			3,686
Securities held to maturity		4			3
Purchases of securities available for sale		(9,178	)		(4,899	)
Proceeds from sales of loans		816			630
Purchases of loans		(1,545	)		—
Net decrease in loans		585			2,209
Net purchases of premises and equipment		(128	)		(71	)

Net cash from investing activities		(676	)		3,018
Financing activities:
Net increase (decrease) in deposits		1,717			(2,430	)
Net decrease in short-term borrowings		(1,215	)		(704	)
Proceeds from long-term borrowings		1,001			743
Payments on long-term borrowings		(2,502	)		(3,901	)
Cash dividends on common stock		(25	)		(24	)
Cash dividends on preferred stock		(87	)		(97	)

Net cash from financing activities		(1,111	)		(6,413	)

Increase (decrease) in cash and cash equivalents		1,055			(600	)
Cash and cash equivalents at beginning of year		6,919			8,011

Cash and cash equivalents at end of period	$	7,974		$	7,411

See notes to consolidated financial statements.

REGIONS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Three and Six Months Ended June 30, 2011 and 2010

NOTE 1—Basis 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 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, 2010.

Regions has evaluated all subsequent events for potential recognition and disclosure through the filing date of this Form 10-Q.

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, total assets or stockholders’ equity.

NOTE 2—Securities

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:


	June 30, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In millions)
Securities available for sale:
U.S. Treasury securities	$	85	$	2	$	—		$	87
Federal agency securities		773		2		(1	)		774
Obligations of states and political subdivisions		25		8		—			33
Mortgage-backed securities:
Residential agency		21,297		274		(45	)		21,526
Residential non-agency		16		1		—			17
Commercial agency		155		2		(1	)		156
Commercial non-agency		253		1		(2	)		252
Other debt securities		24		—		(2	)		22
Equity securities		961		—		—			961

	$	23,589	$	290	$	(51	)	$	23,828

Securities held to maturity:
U.S. Treasury securities	$	5	$	—	$	—		$	5
Federal agency securities		3		—		—			3
Mortgage-backed securities:
Residential agency		11		—		—			11
Other debt securities		2		—		—			2

	$	21	$	—	$	—		$	21


	December 31, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In millions)
Securities available for sale:
U.S. Treasury securities	$	85	$	6	$	—		$	91
Federal agency securities		16		—		—			16
Obligations of states and political subdivisions		23		7		—			30
Mortgage-backed securities:
Residential agency		21,735		265		(155	)		21,845
Residential non-agency		20		2		—			22
Commercial agency		113		2		(3	)		112
Commercial non-agency		103		—		(3	)		100
Other debt securities		27		—		(2	)		25
Equity securities		1,047		1		—			1,048

	$	23,169	$	283	$	(163	)	$	23,289

Securities held to maturity:
U.S. Treasury securities	$	5	$	1	$	—		$	6
Federal agency securities		5		—		—			5
Mortgage-backed securities:
Residential agency		12		1		—			13
Other debt securities		2		—		—			2

	$	24	$	2	$	—		$	26

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.


	June 30 2011		December 31 2010
	(In millions)
Federal Reserve Bank	$	460	$	471
Federal Home Loan Bank		340		419

Securities with carrying values of $13.4 billion and $15.4 billion at June 30, 2011 and December 31, 2010, respectively, were pledged to secure public funds, trust deposits and certain borrowing arrangements.

The cost and estimated fair value of securities available for sale and securities held to maturity at June 30, 2011, 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	$	64	$	64
Due after one year through five years		800		803
Due after five years through ten years		15		15
Due after ten years		28		34
Mortgage-backed securities:
Residential agency		21,297		21,526
Residential non-agency		16		17
Commercial agency		155		156
Commercial non-agency		253		252
Equity securities		961		961

	$	23,589	$	23,828

Securities held to maturity:
Due in one year or less	$	2	$	2
Due after one year through five years		6		6
Due after five years through ten years		2		2
Due after ten years		—		—
Mortgage-backed securities:
Residential agency		11		11

	$	21	$	21

The following tables present unrealized loss and estimated fair value of securities available for sale at June 30, 2011 and December 31, 2010. 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.


	Less Than Twelve Months					Twelve Months or More					Total
June 30, 2011	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
	(In millions)
Federal agency securities	$	220	$	(1	)	$	—	$	—		$	220	$	(1	)
Mortgage-backed securities:
Residential agency		6,090		(45	)		—		—			6,090		(45	)
Commercial agency		65		(1	)		—		—			65		(1	)
Commercial non-agency		129		(2	)		—		—			129		(2	)
All other securities		—		—			6		(2	)		6		(2	)

	$	6,504	$	(49	)	$	6	$	(2	)	$	6,510	$	(51	)


	Less Than Twelve Months					Twelve Months or More					Total
December 31, 2010	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	$	11,023	$	(155	)	$	—	$	—		$	11,023	$	(155	)
Commercial agency		94		(3	)		—		—			94		(3	)
Commercial non-agency		100		(3	)		—		—			100		(3	)
All other securities		—		—			5		(2	)		5		(2	)

	$	11,217	$	(161	)	$	5	$	(2	)	$	11,222	$	(163	)

There was no gross unrealized loss on debt securities held to maturity at either June 30, 2011 and December 31, 2010.

For the securities included in the tables above, management does not believe any individual unrealized loss, which was comprised of 253 securities and 292 securities at June 30, 2011 and December 31, 2010, 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 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 gains and gross losses 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.


	Three Months Ended June 30				Six Months Ended June 30
	2011		2010		2011		2010
	(In millions)				(In millions)
Proceeds	$	4,060	$	17	$	6,479	$	1,460
Securities gains		24		—		106		59
Securities losses		—		—		—		—

Net securities gains	$	24	$	—	$	106	$	59

The following table details net gains (losses) for trading account securities:


	Three Months Ended June 30						Six Months Ended June 30
	2011			2010			2011		2010
	(In millions)						(In millions)
Total net gains (losses)	$	10		$	(5	)	$	31	$	9
Unrealized portion		(1	)		(12	)		13		4

NOTE 3—Loans and the Allowance for Credit Losses

The following table presents the distribution by loan type of Regions’ loan portfolio, net of unearned income:


	June 30 2011		December 31 2010		June 30 2010
	(In millions, net of unearned income)
Commercial and industrial	$	23,644	$	22,540	$	21,096
Commercial real estate mortgage—owner occupied		11,797		12,046		11,967
Commercial real estate construction—owner occupied		377		470		547

Total commercial		35,818		35,056		33,610
Commercial investor real estate mortgage		11,836		13,621		15,152
Commercial investor real estate construction		1,595		2,287		3,778

Total investor real estate		13,431		15,908		18,930
Residential first mortgage		14,306		14,898		15,567
Home equity		13,593		14,226		14,802
Indirect		1,704		1,592		1,900
Consumer credit card		1,134		—		—
Other consumer		1,190		1,184		1,136

Total consumer		31,927		31,900		33,405

	$	81,176	$	82,864	$	85,945

The allowance for credit losses represents management’s 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. Management’s 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.

Prior to 2011, the allowance for accruing commercial and investor real estate loans, as well as non-accrual loans in those portfolio segments below $2.5 million, was determined using categories of pools of loans with similar risk characteristics (i.e., pass, special mention, substandard accrual, and nonaccrual, as defined below). These categories were utilized to develop the associated allowance for loan losses using historical losses adjusted for current economic conditions. Beginning in 2011, these pools of loans were compiled at a more granular level. A probability of default and a loss given default were statistically calculated for each pool. These parameters, in combination with other account data and assumptions, were used to calculate the estimate of incurred loss. The Company made the change to provide enhanced segmentation, process controls, transparency, governance and information technology controls. The change did not have a material impact on the overall allowance for credit losses. The credit quality indicators for commercial and investor real estate loans disclosed in the tables below provide additional information regarding the underlying credit quality of Regions’ portfolio segments and classes, and the corresponding impact on the allowance for credit losses.

The components of the calculation of the allowance for credit losses related to non-accrual commercial and investor real estate loans over $2.5 million, troubled debt restructurings (“TDRs”), unfunded commitments, and all consumer loans were calculated in 2011 in the same manner as before. Except for the changes to the calculation of the allowance for loan losses for accruing commercial and investor real estate loans and non-accrual loans in these portfolio segments below $2.5 million as described above, there were no changes to Regions’ allowance process or accounting policies related to the allowance for credit losses from those described in the Annual Report on Form 10-K for the year ended December 31, 2010.

Management considers the current level of allowance for credit losses appropriate to absorb losses inherent in the loan portfolio and unfunded commitments. Management’s determination of the appropriateness of the allowance for credit losses, which is based on the factors and risk identification procedures previously discussed, requires the use of judgments and estimations that may change in the future. Changes in the factors used by management to determine the appropriateness of the allowance or the availability of new information could cause the allowance for credit losses to be adjusted in future periods.

The following tables present an analysis of the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2011. The total allowance for credit losses is then disaggregated to show 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, as well as TDRs, equal to or greater than $2.5 million. The allowance for credit losses related to collectively evaluated loans includes reserves for pools of loans with common risk characteristics.


	Three Months Ended June 30, 2011
	Commercial			Investor Real Estate			Consumer			Total
	(In millions)
Allowance for loan losses, April 1, 2011	$	1,138		$	1,285		$	763		$	3,186
Allowance allocated to purchased loans		10			—			74			84
Provision for loan losses		72			171			155			398
Loan losses:
Charge-offs		(107	)		(306	)		(166	)		(579	)
Recoveries		14			3			14			31

Net loan losses		(93	)		(303	)		(152	)		(548	)


Allowance for loan losses, June 30, 2011		1,127			1,153			840			3,120

Reserve for unfunded credit commitments, April 1, 2011		37			17			24			78
Provision for unfunded credit commitments		(5	)		11			—			6

Reserve for unfunded credit commitments, June 30, 2011		32			28			24			84

Allowance for credit losses, June 30, 2011	$	1,159		$	1,181		$	864		$	3,204


	Six Months Ended June 30, 2011
	Commercial			Investor Real Estate			Consumer			Total
				(In millions)
Allowance for loan losses, January 1, 2011	$	1,055		$	1,370		$	760		$	3,185
Allowance allocated to purchased loans		10			—			74			84
Provision for loan losses		297			260			323			880
Loan losses:
Charge-offs		(258	)		(487	)		(346	)		(1,091	)
Recoveries		23			10			29			62

Net loan losses		(235	)		(477	)		(317	)		(1,029	)


Allowance for loan losses, June 30, 2011		1,127			1,153			840			3,120


Reserve for unfunded credit commitments, January 1, 2011		32			16			23			71
Provision for unfunded credit commitments		—			12			1			13

Reserve for unfunded credit commitments, June 30, 2011		32			28			24			84

Allowance for credit losses, June 30, 2011	$	1,159		$	1,181		$	864		$	3,204

Portion of allowance ending balance:
Individually evaluated for impairment	$	128		$	163		$	4		$	295
Collectively evaluated for impairment		1,031			1,018			860			2,909

Total allowance evaluated for impairment	$	1,159		$	1,181		$	864		$	3,204

Portion of loan portfolio ending balance:
Individually evaluated for impairment	$	599		$	989		$	18		$	1,606
Collectively evaluated for impairment		35,219			12,442			31,909			79,570

Total loans evaluated for impairment	$	35,818		$	13,431		$	31,927		$	81,176

The following describe the risk characteristics relevant to each of the portfolio segments.

Commercial—The commercial loan portfolio segment includes commercial and industrial, representing 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 Estate—Loans 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.

Consumer—The 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 of credit. 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 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 educational loans. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

The following tables present credit quality indicators for the loan portfolio segments and classes, excluding loans held for sale, as of June 30, 2011, December 31, 2010 and June 30, 2010. 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.

•

Pass—includes obligations where the probability of default is considered low;

•

Special Mention—includes obligations that have potential weakness which may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s 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 affect on debt service ability;

•

Substandard Accrual—includes 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-accrual—includes 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.”

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.


	June 30, 2011
	Pass		Special Mention		Substandard Accrual		Non-accrual		Total
	(In millions)
Commercial and industrial	$	21,990	$	445	$	684	$	525	$	23,644
Commercial real estate mortgage—owner occupied		10,235		257		618		687		11,797
Commercial real estate construction—owner occupied		322		17		10		28		377

Total commercial	$	32,547	$	719	$	1,312	$	1,240	$	35,818

Commercial investor real estate mortgage		8,143		1,162		1,711		820		11,836
Commercial investor real estate construction		660		194		370		371		1,595

Total investor real estate	$	8,803	$	1,356	$	2,081	$	1,191	$	13,431


					Accrual		Non-accrual		Total
					(In millions)
Residential first mortgage					$	14,018	$	288	$	14,306
Home equity						13,528		65		13,593
Indirect						1,704		—		1,704
Consumer credit card						1,134		—		1,134
Other consumer						1,190		—		1,190

Total consumer					$	31,574	$	353	$	31,927

									$	81,176

	December 31, 2010
	Pass		Special Mention		Substandard Accrual		Non-accrual		Total
	(In millions)
Commercial and industrial	$	20,764	$	517	$	792	$	467	$	22,540
Commercial real estate mortgage—owner occupied		10,344		283		813		606		12,046
Commercial real estate construction—owner occupied		393		25		23		29		470

Total commercial	$	31,501	$	825	$	1,628	$	1,102	$	35,056

Commercial investor real estate mortgage		8,755		1,300		2,301		1,265		13,621
Commercial investor real estate construction		904		342		589		452		2,287

Total investor real estate	$	9,659	$	1,642	$	2,890	$	1,717	$	15,908


					Accrual		Non-accrual		Total
							(In millions)
Residential first mortgage					$	14,613	$	285	$	14,898
Home equity						14,170		56		14,226
Indirect						1,592		—		1,592
Other consumer						1,184		—		1,184

Total consumer					$	31,559	$	341	$	31,900

									$	82,864


	June 30, 2010
	Pass		Special Mention		Substandard Accrual		Non-accrual		Total
	(In millions)
Commercial and industrial	$	19,224	$	497	$	896	$	479	$	21,096
Commercial real estate mortgage—owner occupied		10,259		323		705		680		11,967
Commercial real estate construction—owner occupied		456		28		26		37		547

Total commercial	$	29,939	$	848	$	1,627	$	1,196	$	33,610

Commercial investor real estate mortgage		9,607		1,723		2,536		1,286		15,152
Commercial investor real estate construction		1,605		570		849		754		3,778

Total investor real estate	$	11,212	$	2,293	$	3,385	$	2,040	$	18,930


					Accrual		Non-accrual		Total
					(In millions)
Residential first mortgage					$	15,355	$	212	$	15,567
Home equity						14,777		25		14,802
Indirect						1,900		—		1,900
Other consumer						1,136		—		1,136

Total consumer					$	33,168	$	237	$	33,405

									$	85,945

The following tables include an aging analysis of days past due (DPD) for each portfolio class as of June 30, 2011, December 31, 2010 and June 30, 2010:


	June 30, 2011
	Accrual Loans
	30-59 DPD		60-89 DPD		90+ DPD		Total 30+ DPD		Total Accrual		Non-accrual		Total
	(In millions)
Commercial and industrial	$	80	$	38	$	7	$	125	$	23,119	$	525	$	23,644
Commercial real estate mortgage—owner occupied		49		22		11		82		11,110		687		11,797
Commercial real estate construction—owner occupied		2		—		—		2		349		28		377

Total commercial		131		60		18		209		34,578		1,240		35,818

Commercial investor real estate mortgage		99		47		5		151		11,016		820		11,836
Commercial investor real estate construction		22		3		—		25		1,224		371		1,595

Total investor real estate		121		50		5		176		12,240		1,191		13,431

Residential first mortgage		172		93		296		561		14,018		288		14,306
Home equity		97		71		158		326		13,528		65		13,593
Indirect		20		5		2		27		1,704		—		1,704
Consumer credit card		7		4		—		11		1,134		—		1,134
Other consumer		18		4		4		26		1,190		—		1,190

Total consumer		314		177		460		951		31,574		353		31,927

	$	566	$	287	$	483	$	1,336	$	78,392	$	2,784	$	81,176


	December 31, 2010
	Accrual Loans
	30-59 DPD		60-89 DPD		90+ DPD		Total 30+ DPD		Total Accrual		Non-accrual		Total
							(In millions)
Commercial and industrial	$	60	$	43	$	9	$	112	$	22,073	$	467	$	22,540
Commercial real estate mortgage—owner occupied		47		54		6		107		11,440		606		12,046
Commercial real estate construction—owner occupied		3		—		1		4		441		29		470

Total commercial		110		97		16		223		33,954		1,102		35,056

Commercial investor real estate mortgage		120		91		5		216		12,356		1,265		13,621
Commercial investor real estate construction		30		12		1		43		1,835		452		2,287

Total investor real estate		150		103		6		259		14,191		1,717		15,908

Residential first mortgage		185		118		359		662		14,613		285		14,898
Home equity		146		78		198		422		14,170		56		14,226
Indirect		29		8		2		39		1,592		—		1,592
Other consumer		22		6		4		32		1,184		—		1,184

Total consumer		382		210		563		1,155		31,559		341		31,900

	$	642	$	410	$	585	$	1,637	$	79,704	$	3,160	$	82,864


	June 30, 2010
	Accrual Loans
	30-59 DPD		60-89 DPD		90+ DPD		Total 30+ DPD		Total Accrual		Non-accrual		Total
							(In millions)
Commercial and industrial	$	80	$	46	$	7	$	133	$	20,617	$	479	$	21,096
Commercial real estate mortgage—owner occupied		67		36		4		107		11,287		680		11,967
Commercial real estate construction—owner occupied		3		3		—		6		510		37		547

Total commercial		150		85		11		246		32,414		1,196		33,610

Commercial investor real estate mortgage		215		109		26		350		13,866		1,286		15,152
Commercial investor real estate construction		50		21		4		75		3,024		754		3,778

Total investor real estate		265		130		30		425		16,890		2,040		18,930

Residential first mortgage		195		117		349		661		15,355		212		15,567
Home equity		124		76		215		415		14,777		25		14,802
Indirect		26		7		3		36		1,900		—		1,900
Other consumer		20		4		4		28		1,136		—		1,136

Total consumer		365		204		571		1,140		33,168		237		33,405

	$	780	$	419	$	612	$	1,811	$	82,472	$	3,473	$	85,945

The following tables present details related to the Company’s impaired loans as of June 30, 2011 and December 31, 2010. Loans deemed to be impaired include non-accrual commercial and investor real estate loans, excluding leasing, 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. The related allowance represents the following components which correspond to impaired loans:

•

Individually evaluated impaired loans (non-accrual commercial and investor real estate loans equal to or greater than $2.5 million),

•

Collectively evaluated impaired loans (non-accrual commercial and investor real estate loans less than $2.5 million, which are evaluated based on pools of loans with similar risk characteristics),

•

Accruing and non-accruing TDRs equal to or greater than $2.5 million, which are individually evaluated like any other impaired loan over the quantitative scope. Accruing and non-accruing TDRs less than $2.5 million are included with pools of loans with similar risk characteristics and evaluated collectively.


	Impaired Loans
	As of June 30, 2011															Three Months Ended June 30, 2011				Six Months Ended June 30, 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)		Average Balance		Interest Income Recognized (5)
	(Dollars in millions)
Commercial and industrial	$	585	$	86	$	499	$	43	$	456	$	183		46.0	%	$	452		—	$	444		—
Commercial real estate mortgage—owner occupied		841		121		720		21		699		194		37.4			690		1		697		2
Commercial real estate construction—owner occupied		44		15		29		—		29		9		54.2			30		—		31		—

Total commercial		1,470		222		1,248		64		1,184		386		41.3			1,172		1		1,172		2

Commercial investor real estate mortgage		1,280		221		1,059		217		842		237		35.8			1,234		3		1,301		5
Commercial investor real estate construction		531		126		405		103		302		105		43.6			442		—		469		—

Total investor real estate		1,811		347		1,464		320		1,144		342		38.1			1,676		3		1,770		5

Residential first mortgage		1,146		63		1,083		—		1,083		153		18.8			1,083		11		1,072		20
Home equity		426		14		412		—		412		53		15.9			401		5		390		10
Indirect		2		—		2		—		2		—		1.0			2		—		2		—
Other consumer		61		—		61		—		61		1		1.4			62		1		63		2

Total consumer		1,635		77		1,558		—		1,558		207		17.4			1,548		17		1,527		32

Total impaired loans	$	4,916	$	646	$	4,270	$	384	$	3,886	$	935		32.2	%	$	4,396	$	21	$	4,469	$	39

(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)	Represents interest income on loans modified in a TDR, and are therefore considered impaired, which are on accruing status.


	Impaired Loans As of December 31, 2010
	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	$	545	$	124	$	421	$	102		41.5	%
Commercial real estate mortgage—owner occupied		746		96		650		167		35.3
Commercial real estate construction—owner occupied		47		16		31		10		55.3

Total commercial		1,338		236		1,102		279		38.5

Commercial investor real estate mortgage		1,693		273		1,420		319		35.0
Commercial investor real estate construction		638		150		488		154		47.6

Total investor real estate		2,331		423		1,908		473		38.4

Residential first mortgage		1,113		60		1,053		126		16.7
Home equity		378		13		365		46		15.6
Indirect		2		—		2		—		—
Other consumer		65		—		65		1		1.5

Total consumer		1,558		73		1,485		173		15.8

Total impaired loans	$	5,227	$	732	$	4,495	$	925		31.7	%

(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.

A significant majority of residential first mortgage, home equity, and indirect and other consumer loans in the table above are considered impaired due to their status as a TDR. Approximately 94 percent of consumer TDRs were accruing at June 30, 2011.

In addition to the impaired loans detailed in the tables above, there were approximately $381 million in non-performing loans classified as held for sale at June 30, 2011, compared to $304 million at December 31, 2010. The loans are larger balance credits, primarily investor real estate, where management does not have the intent to hold these 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 June 30, 2011, approximately $176 million in non-performing loans were transferred to held for sale; this amount is net of charge-offs of $114 million recorded upon transfer. During the six months ended June 30, 2011, approximately $364 million in non-performing loans were transferred to held for sale; this amount is net of charge-offs of $219 million recorded upon transfer. At June 30, 2011 and December 31, 2010, non-accrual loans including loans held for sale totaled $3.2 billion and $3.5 billion, respectively.

In June 2011, Regions completed the purchase of approximately $1.2 billion of Regions-branded credit card accounts from FIA Card Services. The purchase included approximately $1.1 billion in consumer credit card accounts and approximately $0.1 billion in small business credit card accounts, which are included in the commercial and industrial portfolio class. Approximately $86 million of the purchase price was allocated to purchase credit card relationship intangibles and approximately $84 million was allocated to the allowance for loan losses.

During the three and six months ended June 30, 2011, Regions purchased approximately $174 million and $336 million, respectively, in indirect loans from a third party.

NOTE 4—Loan Servicing

The fair value of mortgage servicing rights is calculated using various assumptions including future cash flows, market discount rates, expected prepayment rates, servicing costs and other factors. A significant change in prepayments of mortgages in the servicing portfolio could result in significant changes in the valuation adjustments, thus creating potential volatility in the carrying amount of mortgage servicing rights.

The tables below present an analysis of mortgage servicing rights for the three and six months ended June 30, 2011 and 2010, under the fair value measurement method:


	Three Months Ended June 30						Six Months Ended June 30
	2011			2010			2011			2010
	(In millions)
Carrying value, beginning of period	$	282		$	270		$	267		$	247
Additions		19			13			35			30
Increase (decrease) in fair value:
Due to change in valuation inputs or assumptions		(28	)		(57	)		(23	)		(46	)
Other changes (1)		(5	)		(6	)		(11	)		(11	)

Carrying value, end of period	$	268		$	220		$	268		$	220

(1)	Represents economic amortization associated with borrower repayments.

Data and assumptions used in the fair value calculation related to mortgage servicing rights (excluding related derivative instruments) as of June 30, 2011 and 2010 are as follows (dollars in millions):


	June 30
	2011			2010
Unpaid principal balance	$	26,421		$	23,502
Weighted-average prepayment speed (CPR; percentage)		13.6	%		17.8	%
Estimated impact on fair value of a 10% increase	$	(15	)	$	(15	)
Estimated impact on fair value of a 20% increase	$	(29	)	$	(28	)
Option-adjusted spread (basis points)		714.4			580.2
Estimated impact on fair value of a 10% increase	$	(7	)	$	(4	)
Estimated impact on fair value of a 20% increase	$	(14	)	$	(9	)
Weighted-average coupon interest rate		5.33	%		5.69	%
Weighted-average remaining maturity (months)		283			289
Weighted-average servicing fee (basis points)		28.6			29.1

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the

effect of an adverse variation in a particular assumption on the fair value of the mortgage servicing rights is calculated without changing any other assumption, while in reality changes in one factor may result in changes in another which may either magnify or counteract the effect of the change. The derivative instruments utilized by Regions would serve to reduce the estimated impacts to fair value included in the table above.

Regions uses various derivative instruments and/or trading securities to mitigate the effect of changes in the fair value of its mortgage servicing rights in the statements of operations. The table below presents the impact on the statements of operations associated with changes in mortgage servicing rights and related derivative and/or trading securities for the three and six months ended June 30, 2011 and 2010.


	Three Months Ended June 30					Six Months Ended June 30
	2011			2010		2011			2010
	(In millions)
Net interest income	$	—		$	—	$	—		$	3
Brokerage, investment banking and capital markets income		—			—		—			4
Mortgage income		(2	)		12		(13	)		28

Total	$	(2	)	$	12	$	(13	)	$	35

The following table presents servicing-related fees, which includes contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of mortgage loans for the three and six months ended June 30, 2011 and 2010.


	Three Months Ended June 30				Six Months Ended June 30
	2011		2010		2011		2010
	(In millions)
Servicing related fees	$	21	$	20	$	42	$	40

Loans are sold in the secondary market with standard representations and warranties regarding certain characteristics such as the quality of the loan, the absence of fraud, the eligibility of the loan for sale and the future servicing associated on the loan. Regions may be required to repurchase these loans at par or make-whole, or indemnify the purchasers for losses incurred when representations and warranties are breached.

Regions maintains a repurchase liability related to mortgage loans sold with representations and warranty provisions. This repurchase liability reflects management’s estimate of losses based on historical repurchase and loss trends, as well as other factors that may result in anticipated losses different from historical loss trends. The table below presents an analysis of Regions’ repurchase liability, related to mortgage loans sold with representations and warranty provisions, for the three and six months ended June 30, 2011 and 2010:


	Three Months Ended June 30						Six Months Ended June 30
	2011			2010			2011			2010
	(In millions)
Balance, beginning of period	$	32		$	28		$	32		$	29
Additions/(Reductions), Net		5			6			13			9
Losses		(5	)		(4	)		(13	)		(8	)

Balance, end of period		32		$	30		$	32		$	30

During 2011, settled repurchase claims were related to one of the following alleged breaches: 1) underwriting guideline violations; 2) misrepresentation of income, assets or employment; or 3) property evaluation not supported. These claims stem primarily from the 2006—2008 vintages.

NOTE 5—Goodwill

Goodwill allocated to each reportable segment is presented as follows:


	June 30 2011		December 31 2010		June 30 2010
	(In millions)
Banking/Treasury	$	4,691	$	4,691	$	4,691
Investment Banking/Brokerage/Trust		745		745		745
Insurance		125		125		125

	$	5,561	$	5,561	$	5,561

Regions evaluates each reporting unit’s goodwill for impairment on an annual basis in the fourth quarter, or more often if events or circumstances indicate that there may be impairment. Adverse changes in the economic environment, declining operations, or other factors could result in a decline in the implied fair value of goodwill. A goodwill impairment test includes two steps. Step One, used to identify potential impairment, compares the estimated fair value of a reporting unit with its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. Step Two of the goodwill impairment test compares the implied estimated fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of goodwill for that reporting unit exceeds the implied fair value of that unit’s goodwill, an impairment loss is recognized in an amount equal to that excess.

During the second quarter of 2011, Regions assessed the indicators of goodwill impairment as of May 31, 2011, and through the date of the filing of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2011. The indicators assessed included:

•

Recent operating performance,

•

Changes in market capitalization,

•

Regulatory actions and assessments,

•

Changes in the business climate (including legislation, legal factors and competition),

•

Company-specific factors (including changes in key personnel, asset impairments, and business dispositions), and

•

Trends in the banking industry.

Based on the assessment of the indicators above, quantitative testing of goodwill was required for all of Regions’ reporting units for the June 30, 2011 interim period.

For purposes of performing Step One of the goodwill impairment test, Regions uses both the income and market approaches to value its reporting units. The income approach, which is the primary valuation approach, consists of discounting projected long-term future cash flows, which are derived from internal forecasts and economic expectations for the respective reporting units. The significant inputs to the income approach include expected future cash flows, the long-term target tangible equity to tangible assets ratio, and the discount rate.

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 metric of the reporting unit (e.g. last twelve months of earnings before interest, taxes and deprecation, tangible book value, etc.) and an implied control premium to the respective reporting unit. The control premium is evaluated and compared to similar financial services transactions. The transaction method applies a value multiplier to a financial metric of the reporting unit based on comparable observed purchase transactions in the financial services industry for the reporting unit (where available).

Regions uses the output from these approaches to determine the estimated fair value of each reporting unit. Listed below are tables of assumptions used in estimating the fair value of each reporting unit for the June 30, 2011, December 31, 2010 and June 30, 2010 interim periods. The tables include the discount rate used in the income approach, the market multiplier used in the market approaches, and the public company method control premium applied to all reporting units.


As of Second Quarter 2011	Banking/ Treasury			Investment Banking/ Brokerage/Trust			Insurance
Discount rate used in income approach		15	%		14	%		12	%
Public company method market multiplier (1)		1.0	x		2.1	x		16.9	x
Transaction method market multiplier (2)		1.2	x		2.1	x		n/a

(1)

For the Banking/Treasury and Investment Banking/Brokerage/Trust reporting units, these multipliers are applied to tangible book value. For the Insurance reporting unit, this multiplier is applied to the last twelve months of net income. In addition to the multipliers, a 30 percent control premium is assumed for each reporting unit.

(2)	For the Banking/Treasury and Investment Banking/Brokerage/Trust reporting units, these multipliers are applied to tangible book value.


As of Fourth Quarter 2010	Banking/ Treasury			Investment Banking/ Brokerage/Trust			Insurance
Discount rate used in income approach		15	%		14	%		11	%
Public company method market multiplier (1)		1.0	x		1.6	x		17.3	x
Transaction method market multiplier (2)		1.3	x		2.1	x		n/a

(1)

(2)	For the Banking/Treasury and Investment Banking/Brokerage/Trust reporting units, these multipliers are applied to tangible book value.


As of Second Quarter 2010	Banking/ Treasury			Investment Banking/ Brokerage/Trust			Insurance
Discount rate used in income approach		16	%		13	%		12	%

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents