Regions Bank 2012 Annual Report Download - page 190

In addition, Regions must adhere to various U.S. Department of Housing and Urban Development (“HUD”)
regulatory guidelines including required minimum capital to maintain their Federal Housing Administration
approved status. Failure to comply with the HUD guidelines could result in withdrawal of this certification. As of
December 31, 2012, Regions was in compliance with HUD guidelines. Regions is also subject to various capital
requirements by secondary market investors.
NOTE 14. STOCKHOLDERS’ EQUITY AND ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)
On March 19, 2012, the Company issued 153 million shares of common stock at $5.90 per share, generating
proceeds of approximately $875 million, net of issuance costs.
On November 1, 2012, Regions issued 20 million depositary shares each representing a 1/40th ownership
interest in a share of the Company’s 6.375% Non-Cumulative Perpetual Preferred Stock, Series A, par value
$1.00 per share (“Series A Preferred stock”), with a liquidation preference of $1,000 per share of Series A
Preferred Stock (equivalent to $25 per depositary share). The issuance generated proceeds of approximately
$486 million, net of issuance costs. The Board of Directors declared $4 million in cash dividends on this Series A
Preferred Stock for 2012. Due to the Company being in a retained deficit position, the preferred dividends are
recorded as a reduction of preferred stock, including related surplus.
On November 14, 2008, Regions completed the sale of 3.5 million shares of its Fixed Rate Cumulative
Perpetual Preferred Stock, Series A, to the U.S. Treasury as part of the Capital Purchase Program (“CPP”). Under
this agreement, Regions was required to pay the U.S. Treasury on a quarterly basis a 5 percent dividend, or $175
million annually, for each of the first five years of the investment, and 9 percent thereafter until redemption. As
part of its purchase of the preferred securities, the U.S. Treasury also received a warrant to purchase 48.3 million
shares of Regions’ common stock at an exercise price of $10.88 per share, subject to anti-dilution and other
adjustments. Regions received $3.5 billion from issuance of the Series A preferred shares and the warrant; the
warrant was recorded in additional paid-in capital. The fair value allocation of the $3.5 billion between the
preferred shares and the warrant resulted in $3.304 billion allocated to the preferred shares and $196 million
allocated to the warrant. On April 4, 2012, Regions repurchased all 3.5 million shares of the Series A preferred
stock issued to the U.S. Treasury Department under the CPP. Therefore, during the second quarter of 2012,
Regions derecognized the carrying value of the Series A shares in the amount of approximately $3.4 billion and
recorded approximately $71 million of amortization related to the remaining unaccreted discount, which reduced
net income available to common shareholders. The total reduction to shareholders’ equity was $3.5 billion. In
early May of 2012, Regions repurchased the warrant from the U.S. Treasury Department for $45 million. The
transaction reduced additional paid-in capital within stockholders’ equity by $45 million. The warrant repurchase
did not impact results of operations. Accrued dividends on the Series A preferred shares reduced retained
earnings by $44 million in 2012 and by $175 million in both 2011 and 2010. The unamortized discount on the
preferred shares was zero and $81 million at December 31, 2012 and 2011, respectively. Discount accretion on
the preferred shares reduced retained earnings by $10 million during 2012, $39 million in 2011 and $37 million
in 2010. Both the preferred securities and the warrant were accounted for as components of Regions’ regulatory
Tier 1 capital.
On May 20, 2009, the Company issued 287,500 shares of mandatorily convertible preferred stock, Series B
(“Series B shares”), generating net proceeds of approximately $278 million. Accrued dividends on the Series B
shares reduced retained earnings $12 million during 2010. In November 2009, a single investor converted
approximately 20,000 Series B shares to common shares as allowed under the original transaction documents. On
June 18, 2010, as allowed by the terms of the Series B shares, Regions initiated an early conversion of all of the
remaining outstanding Series B shares. Dividends accrued and unpaid at the conversion date were settled through
issuance of common shares in accordance with the original document. Approximately 63 million common shares
were issued in the conversion and dividend settlement.
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