Regions Bank 2009 Annual Report Download - page 29

(beginning April 1, 2009) to twelve to forty-five basis points per $100 of insured deposits. Such base assessment
rates are subject to adjustments based upon the institution’s ratio of (i) long-term unsecured debt to its domestic
deposits, (ii) secured liabilities to domestic deposits and (iii) brokered deposits to domestic deposits (if greater
than 10%). The stated purposes of the New Assessments Rule is to make the assessment system more sensitive to
risk and more fair by limiting the subsidization of riskier institutions by safer institutions.
In addition, on November 17, 2009, the FDIC implemented a final rule requiring insured institutions, such
as Regions Bank, to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009, and
for all of 2010, 2011 and 2012. Such prepaid assessments were paid on December 30, 2009, along with each
institution’s quarterly risk-based deposit insurance assessment for the third quarter of 2009 (assuming 5% annual
growth in deposits between the third quarter of 2009 and the end of 2012 and taking into account, for 2011 and
2012, the annualized three basis point increase referred to in the following paragraph). The FDIC will begin to
draw down an institution’s prepaid assessments on March 30, 2010, representing payment for the regular
quarterly risk-based assessment for the fourth quarter of 2009.
The FDIA, as amended by the Federal Deposit Insurance Reform Act of 2005 (the “FDI Reform Act”),
requires the FDIC to set a ratio of deposit insurance reserves to estimated insured deposits, the designated reserve
ratio (the “DRR”), for a particular year within a range of 1.15% to 1.50%. Because the reserve ratio for the
federal deposit insurance fund that covers both banks and savings associations (the “DIF”) ratio fell below 1.15%
as of June 30, 2008, and was expected to remain below 1.15%, the FDI Reform Act required the FDIC to
establish and implement a Restoration Plan that would restore the reserve ratio to at least 1.15% within five
years. In October of 2008, the FDIC adopted such a restoration plan (the “Restoration Plan”). In February of
2009, in light of the extraordinary challenges facing the banking industry, the FDIC amended the Restoration
Plan to allow seven years for the reserve ratio to return to 1.15%. In May of 2009, the FDIC adopted a final rule
that imposed a five basis point special assessment on each institution’s assets minus Tier 1 capital (as of June 30,
2009). Such special assessment was collected on September 30, 2009. In October of 2009, the FDIC passed a
final rule extending the term of the Restoration Plan to eight years. Such final rule also included a provision that
implements a uniform three basis point increase in assessment rates, effective January 1, 2011, to help ensure that
the reserve ratio returns to at least 1.15% within the eight year period called for by the Restoration Plan. The
FDIC will, at least semi-annually, update its income and loss projections for the DIF and, if necessary to bring
the DIF reserve ratio back to at least 1.15% by the end of the eight year period of the Restoration Plan, propose
rules to further increase assessment rates. See also “Recent Regulatory Developments—Incentive Compensation”
above.
Under the FDI Reform Act and the FDIC’s revised premium assessment program, every FDIC-insured
institution will pay some level of deposit insurance assessments regardless of the level of the DRR. We cannot
predict whether, as a result of an adverse change in economic conditions or other reasons, the FDIC will in the
future further increase deposit insurance assessment levels. The FDIC also adopted rules providing for a one-time
credit assessment to each eligible insured depository institution based on the assessment base of the institution on
December 31, 1996. The credit was allowed to be applied against the institution’s 2007 assessment, and for the
three years thereafter the institution was allowed to apply the credit against up to 90% of its assessment. Regions
Bank qualified for a credit of approximately $110 million, of which $34 million was applied in 2007, $41 million
in 2008, and the remaining balance of $35 million in 2009, thereby exhausting the credit.For more information,
see the “Bank Regulatory Capital Requirements” section of Item 6. “Management’s Discussion and Analysis of
Financial Condition and Results of Operation” of this Annual Report on Form 10-K.
In addition, the Deposit Insurance Funds Act of 1996 authorized the Financing Corporation (“FICO”) to
impose assessments on DIF applicable deposits in order to service the interest on FICO’s bond obligations from
deposit insurance fund assessments. The amount assessed on individual institutions by FICO will be in addition
to the amount, if any, paid for deposit insurance according to the FDIC’s risk-related assessment rate schedules.
FICO assessment rates may be adjusted quarterly to reflect a change in assessment base. The FICO annual
assessment rate for the fourth quarter of 2009 was 1.02 cents per $100 deposits and will rise to 1.06 cents per
$100 deposits for the first quarter of 2010. Regions Bank had a FICO assessment of $9 million in FDIC deposit
premiums in 2009.
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