Regions Bank 2010 Annual Report Download - page 148

of the goodwill impairment test because the carrying amount of the reporting unit is zero or negative, despite the
existence of the qualitative factors that indicate goodwill is more likely than not impaired. The amended
guidance is effective for fiscal years, and for interim periods within those years, beginning after December 15,
2010, with early adoption prohibited. The adoption of this guidance is not expected to have a material impact to
the consolidated financial statements.
NOTE 2. VARIABLE INTEREST ENTITIES
Regions is involved in various entities that are considered to be VIEs, as defined by authoritative accounting
literature. Generally, a VIE is a corporation, partnership, trust or other legal structure that either does not have
equity investors with substantive voting rights or has equity investors that do not provide sufficient financial
resources for the entity to support its activities. The following discusses the VIEs in which Regions has a
significant interest.
Regions owns the common stock of subsidiary business trusts, which have issued mandatorily redeemable
preferred capital securities (“trust preferred securities”) in the aggregate of approximately $1 billion at the time
of issuance. These trusts meet the definition of a VIE of which Regions is not the primary beneficiary; the trusts’
only assets are junior subordinated debentures issued by Regions, which were acquired by the trusts using the
proceeds from the issuance of the trust preferred securities and common stock. The junior subordinated
debentures are included in long-term borrowings (see Note 12 ) and Regions’ equity interests in the business
trusts are included in other assets. Interest expense on the junior subordinated debentures is reported in interest
expense on long-term borrowings. For regulatory reporting and capital adequacy purposes, the Federal Reserve
Board has indicated that such trust preferred securities will continue to constitute Tier 1 capital.
Regions Morgan Keegan Timberland Group, a wholly-owned subsidiary of Regions, operates and acts as
trustee for timber land and related assets in timber land funds, primarily serving institutional investors. These
funds individually meet the definition of a VIE, of which Regions is not the primary beneficiary, and collectively
meet the criteria for a qualified asset manager; accordingly, Regions Morgan Keegan Timberland Group does not
currently consolidate these funds. The accounting standard related to consolidation accounting for qualified asset
managers is expected to be revisited at some point in the future.
Regions periodically invests in various limited partnerships that sponsor affordable housing projects, which
are funded through a combination of debt and equity. These partnerships meet the definition of a VIE. Due to the
nature of the management activities of the general partner, Regions is not the primary beneficiary of these
partnerships and accounts for these investments using the equity method. Regions reports its equity share of the
partnership gains and losses as an adjustment to non-interest income. The Company also receives credits toward
its federal income tax liabilities, which are reported as a reduction of income tax expense (or increase to income
tax benefit). Additionally, Regions has short-term construction loans or letters of credit commitments with
certain limited partnerships. The funded portion of the short-term loans and letters of credit is classified as
commercial and industrial loans on the consolidated balance sheets.
A summary of Regions’ equity method investments and related loans and letters of credit, representing
Regions’ maximum exposure to loss as of December 31 is as follows:
2010 2009
(In millions)
Equity method investments included in other assets .................... $893 $827
Unfunded commitments included in other liabilities ................... 196 258
Short-term construction loans and letters of credit commitments ......... 213 324
Funded portion of short-term loans and letters of credit ................. 61 150
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