Regions Bank 2012 Annual Report Download - page 224

NOTE 23. COMMITMENTS, CONTINGENCIES AND GUARANTEES
COMMERCIAL COMMITMENTS
Regions issues off-balance sheet financial instruments in connection with lending activities. The credit risk
associated with these instruments is essentially the same as that involved in extending loans to customers and is
subject to Regions’ normal credit approval policies and procedures. Regions measures inherent risk associated
with these instruments by recording a reserve for unfunded commitments based on an assessment of the
likelihood that the guarantee will be funded and the creditworthiness of the customer or counterparty. Collateral
is obtained based on management’s assessment of the creditworthiness of the customer.
Credit risk associated with these instruments as of December 31 is represented by the contractual amounts
indicated in the following table:
2012 2011
(In millions)
Unused commitments to extend credit ......................... $38,160 $37,872
Standby letters of credit .................................... 1,872 2,084
Commercial letters of credit ................................. 27 33
Liabilities associated with standby letters of credit ............... 37 37
Assets associated with standby letters of credit .................. 37 36
Reserve for unfunded credit commitments ...................... 83 78
Unused commitments to extend credit—To accommodate the financial needs of its customers, Regions
makes commitments under various terms to lend funds to consumers, businesses and other entities. These
commitments include (among others) credit card and other revolving credit agreements, term loan commitments
and short-term borrowing agreements. Many of these loan commitments have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of these commitments are expected to expire
without being funded, the total commitment amounts do not necessarily represent future liquidity requirements.
Standby letters of credit—Standby letters of credit are also issued to customers, which commit Regions to
make payments on behalf of customers if certain specified future events occur. Regions has recourse against the
customer for any amount required to be paid to a third party under a standby letter of credit. Historically, a large
percentage of standby letters of credit expired without being funded. The contractual amount of standby letters of
credit represents the maximum potential amount of future payments Regions could be required to make and
represents Regions’ maximum credit risk.
Commercial letters of credit—Commercial letters of credit are issued to facilitate foreign or domestic trade
transactions for customers. As a general rule, drafts will be drawn when the goods underlying the transaction are
in transit.
LEASE COMMITMENTS
Regions and its subsidiaries lease land, premises and equipment under cancelable and non-cancelable leases,
some of which contain renewal options under various terms. The leased properties are used primarily for banking
purposes. Total rental expense on operating leases for the years ended December 31, 2012, 2011 and 2010 was
$170 million, $197 million and $203 million, respectively.
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