Regions Bank 2010 Annual Report Download - page 26

Payment of Dividends by Regions Bank. Under the Federal Reserve’s Regulation H, Regions Bank may
not, without the approval of the Federal Reserve, declare or pay a dividend to Regions if the total of all dividends
declared in a calendar year exceeds the total of (a) Regions Bank’s net income for that year and (b) its retained
net income for the preceding two calendar years, less any required transfers to additional paid-in capital or to a
fund for the retirement of preferred stock. As a result of Regions Bank’s $975 million loss in 2009 and $252
million loss in 2010, Regions Bank cannot, without approval from the Federal Reserve, declare or pay a dividend
to Regions until such time as Regions Bank is able to satisfy the criteria discussed in the preceding sentence.
Given the losses in 2009 and 2010, Regions Bank may not be able to pay dividends to Regions in the near term
without obtaining regulatory approval.
Under Alabama law, Regions Bank may not pay a dividend in excess of 90 percent of its net earnings until
the bank’s surplus is equal to at least 20 percent of capital. Regions Bank is also required by Alabama law to
obtain approval of the Alabama Superintendent of Banking prior to the payment of dividends if the total of all
dividends declared by Regions Bank in any calendar year will exceed the total of (a) Regions Bank’s net earnings
(as defined by statute) for that year, plus (b) its retained net earnings for the preceding two years, less any
required transfers to surplus. Also, no dividends may be paid from Regions Bank’s surplus without the prior
written approval of the Alabama Superintendent of Banking.
Payment of Dividends by Regions. The ability of Regions to pay dividends to its stockholders is not totally
dependent on the receipt of dividends from Regions Bank, as Regions has other cash available to make dividend
payments. As of December 31, 2010, Regions had $6.9 billion of cash and cash equivalents on a consolidated
basis, of which $3.8 billion is attributable to the parent company. These funds are available for corporate
purposes, including debt service and to pay dividends to its stockholders. This is compared to an anticipated
common dividend requirement, assuming current dividend payment levels, of approximately $50 million and
preferred cash dividends of approximately $175 million for the full year 2011. Expected long-term borrowings
maturities in 2011 are approximately $6.0 billion, of which approximately $1.0 billion is attributable to the
parent company.
Although Regions currently has capacity to make common dividend payments in 2011, the payment of
dividends by Regions and the dividend rate are subject to management review and approval by Regions’ Board
of Directors on a quarterly basis. Regions’ dividend payments are also subject to the oversight of the Federal
Reserve. Under temporary guidance issued by the Federal Reserve in November 2010, the dividend policy of
large bank holding companies, such as Regions, is reviewed by the Federal Reserve based on capital plans and
stress tests as submitted by the bank holding company, and will be assessed against, among other things, the bank
holding company’s ability to achieve the Basel III capital ratio requirements referred to above as they are phased
in by U.S. regulators and any potential impact of the Dodd-Frank Act on the company’s risk profile, business
strategy, corporate structure or capital adequacy. The Federal Reserve’s current guidance provides that, for large
bank holding companies like Regions, dividend payout ratios exceeding 30 percent of after-tax net income will
receive particularly close scrutiny.
Prior to November 14, 2011, unless Regions has redeemed all of the Fixed Rate Cumulative Perpetual
Preferred Stock, Series A (“Series A Preferred Stock”), issued to the U.S. Treasury on November 14, 2008 or
unless the U.S. Treasury has transferred all the preferred securities to a third party, the consent of the U.S.
Treasury will be required for Regions to declare or pay any dividend or make any distribution on common stock
other than (i) regular quarterly cash dividends of not more than $0.10 per share, as adjusted for any stock split,
stock dividend, reverse stock split, reclassification or similar transaction, (ii) dividends payable solely in shares
of common stock and (iii) dividends or distributions of rights or junior stock in connection with a stockholders’
rights plan. Regions has reduced its quarterly dividend to $0.01 per share and does not expect to increase its
quarterly dividend above such level for the foreseeable future.
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