Regions Bank 2010 Annual Report Download - page 35

• A decrease in the value of our loans held for sale or other assets secured by consumer or commercial
real estate;
• An impairment of certain intangible assets, such as goodwill;
• A decrease in interest income from variable rate loans, due to potential reductions in interest rates; and
• An increase in the number of clients and counterparties who become delinquent, file for protection
under bankruptcy laws or default on their loans or other obligations to us. An increase in the number of
delinquencies, bankruptcies or defaults could result in a higher level of nonperforming assets, net
charge-offs, provision for loan losses, and valuation adjustments on loans held for sale.
Overall, during the past three years, the general business environment has had an adverse effect on our
business. Although the general business environment has shown some improvement, there can be no assurance
that it will continue to improve. If economic conditions worsen or remain volatile, our business, financial
condition and results of operations could be adversely affected.
Market developments may adversely affect our industry, business and results of operations.
Dramatic declines in the housing market during recent years, with falling home prices and increasing
foreclosures, unemployment and under-employment, have negatively impacted the credit performance of real
estate-related loans and resulted in, and may continue to result in, significant write-downs of asset values by us
and other financial institutions, including government-sponsored entities and major commercial and investment
banks. These write-downs, initially of mortgage-backed securities but spreading to credit default swaps and other
securities and loans, have caused many financial institutions to seek additional capital, to reduce or eliminate
dividends, to merge with larger and stronger institutions and, in some cases, to fail. Reflecting concern about the
stability of the financial markets generally and the strength of counterparties, many lenders and institutional
investors have reduced, and in some cases, ceased to provide funding to borrowers including financial
institutions.
Further negative market developments may affect consumer confidence levels and may cause adverse
changes in payment patterns, causing increases in delinquencies and default rates, which may impact our charge-
offs and provisions for credit losses. Continuing economic deterioration that affects household or corporate
incomes could also result in reduced demand for credit or fee-based products and services. A worsening of these
conditions would likely exacerbate the adverse effects of these difficult market conditions on us and others in the
financial services industry.
Our status as a non-investment grade issuer and any future reductions in our credit ratings may increase our
funding costs or place limitations on business activities related to providing credit support to customers.
The major rating agencies regularly evaluate us and their ratings of our long-term debt based on a number of
factors, including our financial strength and conditions affecting the financial services industry generally. Over
the past two years, all of the major ratings agencies downgraded Regions’ and Regions Bank’s credit ratings, and
many of our ratings remain on negative watch or negative outlook. Negative watch, negative outlook or other
similar terms mean that a future downgrade is possible. Most recently, Regions’ Senior ratings were downgraded
to Ba3, BB+, BBB- and BBB by Moody’s Investor Services, Standard & Poor’s, Fitch Ratings and Dominion
Bond Rating Service, respectively. Our ratings with Moody’s Investor Services and Standard & Poor’s are below
investment grade.
In general, ratings agencies base their ratings on many quantitative and qualitative factors, including capital
adequacy, liquidity, asset quality, business mix and level and quality of earnings, and we may not be able to
maintain our current credit ratings. The ratings assigned to Regions and Regions Bank remain subject to change
at any time, and it is possible that any ratings agency will take action to downgrade Regions, Regions Bank or
both in the future.
21