Regions Bank 2012 Annual Report Download - page 129

review committees noted in the previous paragraph, Regions will continue to assess and monitor disclosure controls
and procedures and internal controls over financial reporting, and will make refinements as necessary.
COMPARISON OF 2011 WITH 2010—CONTINUING OPERATIONS
Regions reported a net loss available to common shareholders of $429 million, or $0.34 per diluted common
share, in 2011 compared to a net loss available to common shareholders of $763 million, or $0.62 per diluted share,
in 2010. Regions reported a loss from continuing operations available to common shareholders of $25 million, or
$0.02 per diluted common share, in 2011 compared to a loss from continuing operations available to common
shareholders of $692 million, or $0.56 per diluted share, in 2010. Significant drivers of 2011 results included a
fourth quarter non-cash goodwill impairment charge of $731 (net of $14 million income tax impact) within the
former Investment Banking/Brokerage/Trust segment. Based on a relative fair value allocation, $478 million of the
impairment charge was recorded within discontinued operations and $253 million within continuing operations.
Net interest income from continuing operations was $3.4 billion in both 2011 and 2010. The net interest
margin from continuing operations (taxable-equivalent basis) was 3.07 percent in 2011, compared to 2.91 percent
during 2010. The margin improvement was driven primarily by a decrease of 34 basis points in the cost of
interest-bearing liabilities, while being partially offset by a 15 basis point decline in the overall yield on interest
earning assets. This dynamic reflected efforts to improve deposit costs and pricing on loans, while managing the
challenges posed by a low interest rate environment. Long-term interest rates in particular remained low in 2011,
pressuring yields on fixed-rate loan and securities portfolios, and contributed to the decline in the yield on
taxable securities from 3.66 percent in 2010 to 3.08 percent in 2011. The overall costs of deposits improved from
0.78 percent in 2010 to 0.49 percent in 2011.
Non-interest income from continuing operations totaled $2.1 billion in 2011, compared to $2.5 billion in
2010. The year-over-year decrease was due primarily to lower gains from both sales of securities and leveraged
lease terminations.
Service charges on deposit accounts decreased less than 1 percent in 2011 and totaled $1.2 billion in both
2011 and 2010. This modest decrease was driven by policy changes related to Regulation E, as well as a decline
in interchange income as a result of debit interchange price controls implemented in the fourth quarter of 2011.
These factors were offset by the restructuring of checking accounts from free to fee-eligible and a higher level of
customer transactions.
In 2011, mortgage income decreased $27 million, or 11 percent to $220 million. The decrease was primarily
driven by lower mortgage origination volume in 2011 as compared to 2010 due to decreased refinance activity during
2011 as compared to 2010. Mortgage originations totaled $6.3 billion in 2011 as compared to $8.2 billion in 2010. In
addition to the decrease in origination income, market valuation adjustments for mortgage servicing rights and related
derivatives subtracted $22 million and added $16 million to mortgage income in 2011 and 2010, respectively.
Regions reported net gains of $112 million from the sale of securities available for sale in 2011, compared
to net gains of $394 million in 2010. The Company’s gains for both years were due to increased sales activity
within the available-for-sale category as part of the Company’s asset/liability management strategies. In 2011,
the Company repositioned its securities portfolio and sold $7.7 billion of securities that were primarily agency
available for sale securities. The proceeds were reinvested predominately into similar securities with shorter
durations. In 2010, the Company repositioned its securities portfolio and sold $9.9 billion to mitigate prepayment
risk and extended the duration of the investment portfolio. The proceeds from the sales in 2011 and 2010 were
reinvested in U.S. government agency mortgage-backed securities classified as available for sale.
Credit card / bank card income increased $34 million in 2011 as compared to 2010. Credit card income is
derived from activity related to the Regions-branded credit card amounts purchased from FIA Card Services in
the second quarter of 2011 and any subsequent originations. Bank card income relates to commercial purchasing
cards. The increase in 2011 was primarily due to the 2011 credit card portfolio purchase.
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