Regions Bank 2009 Annual Report Download - page 90

Regions has pledged certain residential first mortgage loans on one-to-four family dwellings as collateral for the
FHLB advances outstanding. See Note 5 “Loans” to the consolidated financial statements for loans pledged to
the FHLB at December 31, 2009 and 2008. Additionally, membership in the FHLB requires an institution to hold
FHLB stock, which was $473 million at December 31, 2009 and $458 million at December 31, 2008.
In October 2008, the FDIC announced a new program—the Temporary Liquidity Guarantee Program
(“TLGP”)—to strengthen confidence and encourage liquidity in the banking system by guaranteeing newly
issued senior unsecured debt of banks, thrifts and certain holding companies, and by providing full coverage of
non-interest bearing deposit transaction accounts, regardless of dollar amount. Under the original rules, certain
newly issued senior unsecured debt with maturities greater than 30 days issued on or before June 30, 2009, would
be backed by the “full faith and credit” of the U.S. government through June 30, 2012. The FDIC’s payment
obligation under the guarantee for eligible senior unsecured debt would be triggered by a payment default. The
guarantee is limited to 125% of senior unsecured debt as of September 30, 2008 that was scheduled to mature
before June 30, 2009. This includes federal funds purchased, promissory notes, commercial paper and certain
types of inter-bank funding. Participants were charged a 50-100 basis point fee to protect their new debt issues
which varies depending on the maturity date. Additionally, participants could elect to pay a fee of 37.5 basis
points on their TLGP capacity for the right to issue non-guaranteed debt during the program. This fee was
non-refundable and used to offset the guarantee fee for issuances until exhausted. In December 2008, Regions
Bank completed an offering of $3.75 billion of qualifying senior bank notes covered by the TLGP. Payment of
principal and interest on the notes will be guaranteed by the full faith and credit of the United States pursuant to
the TLGP.
As of December 31, 2009, Regions had outstanding subordinated notes totaling $4.3 billion compared to
$4.4 billion at December 31, 2008. Regions’ subordinated notes consist of ten issues with interest rates ranging
from 4.85 percent to 7.75 percent. All issuances of these notes are, by definition, subordinated and subject in
right of payment of both principal and interest to the prior payment in full of all senior indebtedness of the
Company, which is generally defined as all indebtedness and other obligations of the Company to its creditors,
except subordinated indebtedness. Payment of the principal of the notes may be accelerated only in the case of
certain events involving bankruptcy, insolvency proceedings or reorganization of the Company. The
subordinated notes described above qualify as Tier 2 capital under Federal Reserve guidelines. Approximately
$175 million in subordinated notes matured during the first quarter of 2009. None of the subordinated notes are
redeemable prior to maturity.
As of December 31, 2009, Regions had senior debt and bank notes totaling $5.3 billion, compared to $4.8
billion at December 31, 2008. The increase reflects Regions November 2009 issuance of $700 million of senior
notes (gross of discount) bearing an initial fixed rate of 7.75%, with a final maturity of November 2014 (see Note
13 “Long-Term Borrowings” to the consolidated financial statements). Approximately $250 million of senior
debt notes matured during the second quarter of 2009. The $497 million of notes that mature on December 1,
2010 have an interest rate of 4.375%. Several notes related to the TLGP also mature during 2010. Approximately
$250 million of the notes will mature June 11, 2010, which currently have an interest rate of 0.66%, $500 million
will mature on December 10, 2010, which currently have an interest rate of 0.91% and $999 million will also
mature on December 10, 2010, which have an interest rate of 2.75%. None of the senior notes are redeemable
prior to maturity.
During 2009, the Company issued 33 million common shares in exchange for $202 million of outstanding
6.625% trust preferred securities issued by Regions Financing Trust II (“the Trust”). The trust preferred
securities were exchanged for junior subordinated notes issued by the Company to the Trust. The Company
recognized a pre-tax gain of approximately $61 million on the extinguishment of the junior subordinated notes
(see Note 15 “Stockholders’ Equity and Comprehensive Income” to the consolidated financial statements).
Other long-term debt at December 31, 2009 and 2008, had weighted-average interest rates of 2.9 percent in
both 2009 and 2008 and a weighted-average maturity of 5.3 years and 4.9 years at December 31, 2009 and 2008,
respectively. As of December 31, 2009, Regions has $59 million included in other long-term debt in connection
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