Regions Bank 2012 Annual Report Download - page 143

Securities held to maturity are presented at amortized cost. Debt securities not classified as securities held to
maturity or trading account assets and marketable equity securities not classified as trading account assets are
classified as securities available for sale. Securities available for sale are presented at estimated fair value with
changes in unrealized gains and losses, net of taxes, reported as a component of accumulated other
comprehensive income (loss). See the “Fair Value Measurements” section below for discussion of determining
fair value.
The amortized cost of debt securities classified as securities held to maturity and securities available for sale
is adjusted for amortization of premiums and accretion of discounts to maturity, or in the case of mortgage-
backed securities, over the estimated life of the security, using the effective yield method. Such amortization or
accretion is included in interest income on securities. Realized gains and losses are included in net securities
gains (losses). The cost of securities sold is based on the specific identification method.
The Company reviews its securities portfolio on a regular basis to determine if there are any conditions
indicating that a security has other-than-temporary impairment. Factors considered in this determination include
the length of time and the extent to which the market value has been below cost, the credit standing of the issuer,
whether the Company expects to receive all scheduled principal and interest payments, Regions’ intent to sell
and whether it is more likely than not that the Company will have to sell the security before its market value
recovers. For debt securities, activity related to the credit loss component of other-than-temporary impairment is
recognized in earnings, and the portion of other-than-temporary impairment related to all other factors is
recognized in other accumulated comprehensive income (loss). Additionally, the Company recognizes
impairment of available for sale equity securities when the cost basis is above the highest traded price within the
past six months; the cost basis of the securities is adjusted to current fair value with the entire offset recorded in
the statement of operations. Refer to Note 4 for further detail and information on loans.
LOANS HELD FOR SALE
At December 31, 2012 and 2011, loans held for sale included commercial loans, investor real estate loans
and residential real estate mortgage loans. Commercial and investor real estate loans held for sale consist of
certain non-performing loans for which management has the intent to sell in the near term. Regions classifies
new 15 and 30-year conforming residential real estate mortgage loans as held for sale based on intent, which is
determined when Regions enters into an interest rate lock commitment on this loan type. Regions has elected the
fair value option for residential real estate mortgage loans held for sale. Residential real estate mortgage loans not
designated as held for sale are retained based on available liquidity, interest rate risk management and other
business purposes. Commercial and investor real estate loans held for sale are carried at the lower of cost or
estimated fair value. See the “Fair Value Measurements” section below for discussion of determining fair value.
Gains and losses of non-performing commercial and investor real estate are included in other non-interest
expense as such amounts are viewed as credit costs. Gains and losses on residential mortgage loans held for sale
for which the fair value option has been elected are included in mortgage income.
LOANS
Loans are carried at the principal amount outstanding, net of premiums, discounts, unearned income and
deferred loan fees and costs. Interest income on loans is accrued based on the contractual interest rate and the
principal amount outstanding, except for those loans classified as non-accrual. Premiums and discounts on
purchased loans and non-refundable loan origination and commitment fees, net of direct costs of originating or
acquiring loans, are deferred and recognized over the estimated lives of the related loans as an adjustment to the
loans’ effective yield, which is included in interest income on loans. See Note 5 for further detail and information
on loans.
Regions engages in both direct and leveraged lease financing. The net investment in direct financing leases
is the sum of all minimum lease payments and estimated residual values, less unearned income. Unearned
income is recognized over the terms of the leases to produce a level yield. The net investment in leveraged leases
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