Regions Bank 2010 Annual Report Download - page 41

Increases in FDIC insurance premiums may adversely affect our earnings.
Our deposits are insured by the FDIC up to legal limits and, accordingly, we are subject to FDIC deposit
insurance assessments. We generally cannot control the amount of premiums we will be required to pay for FDIC
insurance. High levels of bank failures over the past three years and increases in the statutory deposit insurance
limits have increased resolution costs to the FDIC and put pressure on the DIF. In order to maintain a strong
funding position and restore the reserve ratios of the DIF, the FDIC increased assessment rates on insured
institutions, charged a special assessment to all insured institutions as of June 30, 2009 and required banks to
prepay three years’ worth of premiums on December 30, 2009. If there are additional financial institution
failures, we may be required to pay even higher FDIC premiums than the recently increased levels, or the FDIC
may charge additional special assessments. Further, the FDIC recently increased the DIF’s target reserve ratio to
2.0 percent of insured deposits following the Dodd-Frank Act’s elimination of the 1.5 percent cap on the DIF’s
reserve ratio. Additional increases in our assessment rate may be required in the future to achieve this targeted
reserve ratio. These recent increases in deposit assessments and any future increases, required prepayments or
special assessments of FDIC insurance premiums may adversely affect our business, financial condition or
results of operations.
Additionally, pursuant to the Dodd-Frank Act, the FDIC must amend its regulations regarding assessment
for federal deposit insurance to base such assessments on the average total consolidated assets of the insured
institution during the assessment period, less the average tangible equity of the institution during the assessment
period. Currently, we are assessed only on deposit balances, and this change may result in a substantial increase
in the base to which the assessment rate is applied. The FDIC adopted a rule implementing this change, as well as
adopting a revised risk-based assessment calculation in February 2011. The FDIC has also proposed a rule tying
assessment rates of FDIC-insured institutions to the institution’s employee compensation programs. The exact
nature and cumulative effect of these recent changes are not yet known, but they are expected to increase the
amount of premiums we must pay for FDIC insurance. Any such increase may adversely affect our business,
financial condition or results of operations.
The recent repeal of federal prohibitions on payment of interest on demand deposits could increase our
interest expense.
All federal prohibitions on the ability of financial institutions to pay interest on demand deposit accounts
were repealed as part of the Dodd-Frank Act. As a result, beginning on July 21, 2011, financial institutions could
commence offering interest on demand deposits to compete for clients. We do not yet know what interest rates or
products other institutions may offer. Our interest expense will increase and our net interest margin will decrease
if we begin offering interest on demand deposits to attract additional customers or maintain current customers.
Consequently, our business, financial condition or results of operations may be adversely affected, perhaps
materially.
We may be subject to more stringent capital requirements.
Regions and Regions Bank are each subject to capital adequacy guidelines and other regulatory
requirements specifying minimum amounts and types of capital which each of Regions and Regions Bank must
maintain. From time to time, the regulators implement changes to these regulatory capital adequacy guidelines. If
we fail to meet these minimum capital guidelines and other regulatory requirements, our financial condition
would be materially and adversely affected. In light of proposed changes to regulatory capital requirements
contained in the Dodd-Frank Act and the regulatory accords on international banking institutions formulated by
the Basel Committee and implemented by the Federal Reserve, we likely will be required to satisfy additional,
more stringent, capital adequacy standards. The ultimate impact of the new capital and liquidity standards on us
cannot be determined at this time and will depend on a number of factors, including the treatment and
implementation by the U.S. banking regulators. These requirements, however, and any other new regulations,
could adversely affect our ability to pay dividends, or could require us to reduce business levels or to raise
capital, including in ways that may adversely affect our financial condition or results of operations. For more
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