Regions Bank 2012 Annual Report Download - page 61

(“Raymond James”). The transaction, which closed on April 2, 2012, did not include Regions Investment
Management Inc. (formerly known as Morgan Asset Management, Inc.) and Regions Trust. The total
purchase price received by the Company was $1.2 billion. An estimated $15 million pre-tax gain on sale,
which included a $256 million adjustment of liabilities to record the legal indemnification at fair value, was
recorded in the second quarter of 2012 as a component of discontinued operations. Based upon the terms of
the sale, additional pre-tax adjustments were made in the second half of 2012 increasing the gain by
$4 million, bringing the total pre-tax gain on sale to $19 million. The transaction reduced the Company’s
overall risk profile, provided substantial liquidity at the holding company level, and improved key capital
ratios. For more information, refer to the following additional sections within this Form 10-K:
• Note 3 “Discontinued Operations” to the consolidated financial statements
• Note 23 “Commitments, Contingencies and Guarantees” to the consolidated financial statements
Redemption of TARP and Warrant Repurchase—In April 2012, Regions completed its repurchase of
$3.5 billion of Series A Preferred Stock issued under the U.S. Treasury’s Troubled Asset Relief Program’s
(“TARP”) Capital Purchase Program. In addition to fully repaying the government’s investment, Regions
paid a total of $592 million in dividends over a 15-quarter period. On an annual ongoing basis, the
repurchase eliminated the payment of $175 million in annual dividends on these securities. The repurchase
followed Regions’ successful completion of an $875 million common equity offering and the completion of
its aforementioned sale of Morgan Keegan. In early May of 2012, Regions repurchased the warrant issued to
the U.S Department of Treasury in relation to the TARP Capital Purchase Program, which provided the U.S
Treasury Department the right to purchase 48.3 million common shares at $10.88 per share. Regions
repurchased the warrant from the U.S. Treasury Department for $45 million. The warrant repurchase
resulted in a reduction to additional paid-in capital in the second quarter but did not impact the results of
operations. For more information, refer to the following additional sections within this Form 10-K:
• Stockholders’ Equity section of MD&A
• Note 14 “Stockholders’ Equity and Accumulated Other Comprehensive Income (Loss)” to the
consolidated financial statements
Preferred Stock Issuance and Redemption of Trust Preferred Securities – During the fourth quarter of 2012,
Regions issued $500 million of 6.375% Non-Cumulative Perpetual Preferred Stock, Series A. Following a
notice by the Federal Reserve of proposed rulemaking which would phase out the Tier 1 capital treatment of
trust preferred securities, Regions used a portion of the proceeds from the preferred stock issuance to
redeem approximately $345 million of issued and outstanding 8.875% trust preferred securities issued by
Regions Financing Trust III. For more information, refer to the following additional sections within this
form 10-K:
• Note 2 “Variable Interest Entities” to the consolidated financial statements
• Note 12 “Long-Term Borrowings” to the consolidated financial statements
• Note 13 “Regulatory Capital Requirements and Restrictions” to the consolidated financial statements
• Note 14 “Stockholders’ Equity and Accumulated Other Comprehensive Income (Loss)” to the
consolidated financials
Liquidity
At the end of 2012, Regions Bank had over $3.5 billion in cash on deposit with the Federal Reserve,
the loan-to-deposit ratio was 78 percent and cash and cash equivalents at the parent company totaled
$857 million. Regions’ internal minimum cash requirement utilizes a three step process that requires the
parent to hold the greater of (1) two years of corporate dividends, debt service, and maturities by utilizing
cash on hand, and the next four quarters’ expected dividend capacity from Regions Bank, (2) enough cash
on hand with no upstream dividend capacity from Regions Bank to meet corporate dividends, debt service
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