Regions Bank 2010 Annual Report Download - page 95

LONG-TERM BORROWINGS
Regions’ long-term borrowings consist primarily of FHLB borrowings, subordinated notes, senior notes and
other long-term notes payable. Total long-term borrowings decreased $5.3 billion to $13.2 billion at
December 31, 2010. See Note 12 “Long-Term Borrowings” to the consolidated financial statements for further
discussion and detailed listing of outstandings and rates.
Membership in the FHLB system provides access to a source of lower-cost funds. As of December 31,
2010, Regions had total long-term FHLB advances of $3.7 billion, compared to $7.4 billion at December 31,
2009. During 2010, Regions prepaid approximately $2 billion of FHLB advances, realizing $108 million in
pre-tax losses on early extinguishment. These extinguishments were part of the company’s asset/liability
management process. The remaining decrease between years was due to maturities. Long-term FHLB structured
advances have stated maturities during 2011, but are convertible quarterly at the option of the FHLB. The
convertible feature provides that after a specified date in the future, the advances will remain at a fixed rate, or
Regions will have the option to either pay off the advance or convert from a fixed rate to a variable rate based on
the LIBOR index. The FHLB structured advances had a weighted-average interest rate of 2.5% at December 31,
2010 and 3.1% at December 31, 2009. Other FHLB advances at December 31, 2010, 2009 and 2008 had a
weighted-average interest rate of 1.0%, 3.4% and 3.8%, respectively, with maturities of one to nineteen years.
FHLB borrowings are contingent upon the amount of collateral pledged to the FHLB. Regions has pledged
certain residential first mortgage loans on one-to-four family dwellings and home equity lines of credit as
collateral for the FHLB advances outstanding. See Note 4 “Loans” to the consolidated financial statements for
loans pledged to the FHLB at December 31, 2010 and 2009. Additionally, membership in the FHLB requires an
institution to hold FHLB stock, and Regions held $419 million at December 31, 2010 and $473 million at
December 31, 2009. Regions’ borrowing availability with the FHLB as of December 31, 2010, based on assets
available for collateral at that date, was $1.2 billion.
As of December 31, 2010, Regions had outstanding subordinated notes totaling $4.3 billion, essentially
unchanged from December 31, 2009. Regions’ subordinated notes consist of ten issues with interest rates ranging
from 4.85% to 7.75%. 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. None of the subordinated notes are
redeemable prior to maturity.
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 percent 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. At December 31, 2010, approximately $2 billion of this offering remained outstanding and will
mature in December 2011.
81