Regions Bank 2008 Annual Report Download - page 37

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
INTRODUCTION
GENERAL
The following discussion and financial information is presented to aid in understanding Regions Financial
Corporation’s (“Regions” or the “Company”) financial position and results of operations. The emphasis of this
discussion will be on the years 2008, 2007 and 2006; in addition, financial information for prior years will also
be presented when appropriate. Certain amounts in prior year presentations have been reclassified to conform to
the current year presentation, except as otherwise noted.
Regions’ profitability, like that of many other financial institutions, is dependent on its ability to generate
revenue from net interest income and non-interest income sources. Net interest income is the difference between
the interest income Regions receives on interest-earning assets, such as loans and securities, and the interest
expense Regions pays on interest-bearing liabilities, principally deposits and borrowings. Regions’ net interest
income is impacted by the size and mix of its balance sheet components and the interest rate spread between
interest earned on its assets and interest paid on its liabilities. Non-interest income includes fees from service
charges on deposit accounts, brokerage, investment banking, capital markets, and trust activities, mortgage
servicing and secondary marketing, insurance activities, and other customer services which Regions provides.
Results of operations are also affected by the provision for loan losses and non-interest expenses such as salaries
and employee benefits, occupancy and other operating expenses, including income taxes. In addition, in 2008
Regions non-interest expense was impacted by a non-cash goodwill impairment charge.
Economic conditions, competition, and the monetary and fiscal policies of the Federal government
significantly affect most financial institutions, including Regions. Lending and deposit activities and fee income
generation are influenced by levels of business spending and investment, consumer income, consumer spending
and savings, capital market activities, and competition among financial institutions, as well as customer
preferences, interest rate conditions and prevailing market rates on competing products in Regions’ market areas.
Other factors, including the Company’s balance sheet capacity, capital levels and its liquidity management
efforts also influence Regions’ lending and deposit taking activities as well as its overall profitability.
Regions’ business strategy has been and continues to be focused on providing a competitive mix of products
and services, delivering quality customer service and maintaining a branch distribution network with offices in
convenient locations. Regions delivers this business with the personal attention and feel of a community bank
and with the service and product offerings of a large regional bank.
Acquisitions
The acquisitions of banks and other financial services companies have historically contributed significantly
to Regions’ growth. The acquisitions of other financial services companies have also allowed Regions to better
diversify its revenue stream and to offer additional products and services to its customers. From time to time,
Regions evaluates potential bank and non-bank acquisition candidates.
On January 1, 2008, Regions Insurance Group, Inc., a subsidiary of Regions Financial Corporation, acquired
certain assets of Barksdale Bonding and Insurance, Inc., a multi-line insurance agency headquartered in Jackson,
Mississippi. During the third quarter of 2008, the Company assumed approximately $900 million of deposits
from a failed Atlanta-area bank in a Federal Deposit Insurance Corporation (“FDIC”)-assisted transaction. In
addition, in December 2008, Morgan Keegan & Company, Inc. (“Morgan Keegan”) a subsidiary of Regions
Financial Corporation, acquired Revolution Partners, LLC, a Boston-based investment banking boutique
specializing in mergers and acquisitions and private capital advisory services for the technology industry.
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