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CHAIRMAN’S MESSAGE AND 10-K REPORT2008REGIONS 2008 CHAIRMAN’S MESSAGE AND 10-K REPORT
Regions Financial CorporationInvestor Relations1900 Fifth Avenue NorthBirmingham, AL 35203M. List Underwood, Jr.Director of Investor Relations(205) 801-0265STRATEGY DESIGN: UNBOUNDARYIWWW.UNBOUNDARY.COMFOR MORE INFORMATIONTobin N. VinsonAssociate Director of Investor Relations(205) 326-4891Helen S. JohnsonShareholder Services Manager(205) 326-5807
– MESSAGE FROM C. DOWD RITTER –To my fellow shareholders:As Americans closed out 2008 in the midst of a rapidly declining economy,Regions also finished the year with results that were both disappointing andreflective of a turbulent operating environment. Investment banks, largenational lenders, regional banks and community banks disappeared over thecourse of the year. No part of the financial services industry was immune.The speed of change and level of unpredictability in our industry wasunprecedented, requiring government action on a scale never seen before.In hindsight, the causes are clear. Easy consumer credit led to newbuyers and to highly unconventional mortgages; commercial banks andgovernment-sponsored agencies fueled the growth of residential real estatelending; and investment banks packaged and sold these riskier assets toinvestors, who had little transparency into what they were buying. Afterreal estate prices peaked in March 2007, the subsequent decline of housingprices brought destructive results to the mortgage and credit markets.Ultimately, the destruction led to a capital and funding crisis that resultedin failed firms, federally-assisted acquisitions and investment banksconverting into bank holding companies.While Regions did not suffer the devastating results that larger financialservices institutions experienced, the impact we felt was proportionateto our size and business mix. I recognize that this industry context is oflittle comfort to our shareholders.
– MESSAGE FROM C. DOWD RITTER –REGIONS REMAINS A SAFE HARBORFOR CUSTOMER DEPOSITSIn my 2007 letter to shareholders, I wroteof how our three-year strategic plan andcorporate-wide initiatives were designedto address the challenges we expected ourindustry to face in 2008. These challenges,I am confident in saying, exceeded everyone’sexpectations. Important, though, is thateven while we made strategic adjustmentsto our operating processes and policiesto address the emerging challenges, weremained keenly focused on our customers.Our associates endeavored to preserve thetrust and relationships that are critical toour success and to our ability to delivershareholder value.Unlike some, we have no exoticsecurities, no brokered loans, andalmost no sub-prime loans in ourportfolio, which has allowed us toserve customers from a more stableand relatively stronger position.As a true crisis of confidence in the UnitedStates’ banking system developed in the thirdand fourth quarters of 2008, we investedtime and resources in communicating tocustomers that Regions remains a safe harborfor their deposits. In addition to being wellcapitalized by regulatory standards, Regionstakes a comparatively conservative approachto banking. Unlike some, we have no exoticsecurities, no brokered loans, and almost nosub-prime loans in our portfolio, which hasallowed us to serve customers from a morestable and relatively stronger position.2REGIONS 2008 10-KThe FDIC demonstrated its confidence inRegions’ stability and strength by selectingour company to acquire the deposits of twofailing banks, the most recent on February 6,2009. These acquisitions meant additionaldeposits and liquidity and an expandingpresence in Atlanta, Georgia, a long-termstrategic market for our franchise.2008 RESULTSRegions ended 2008 with results thatreflected a very tough economic and creditenvironment, as well as actions taken toaggressively recognize and deal with problemassets. Another factor largely influencing ouryear-end results was a fourth quarter 6 billion non-cash goodwill impairmentcharge. It is important to note that thischarge did not impact our solid regulatoryor tangible capital ratios, nor our earningscapacity for the future. Excluding thegoodwill impairment and merger charges,we finished 2008 with full-year profit of 514 million, or 74 cents per share.In spite of the credit crunch that hasaccompanied the current economic recession,Regions is committed to working withcustomers to meet their credit needswithout jeopardizing shareholder value.In fact, we grew loans 2% for the full year.Regions continues to be in the businessof making quality loans that meet highstandards for credit quality, full pricing anddepository relationships.Revenues from Regions’ fee incomeproducing businesses increased during2008 by 8% to 3.1 billion. And, while ournon-interest expenses were higher in 2008compared to 2007, much of the increase was
– MESSAGE FROM C. DOWD RITTER –credit-related costs tied to the turbulentoperating environment.Regions’ deposit-gathering efforts weresuccessful due in large part to the newLifeGreen Checking and Savings productsintroduced in July of 2008. We experiencedan increase in total customer deposits of4% during the fourth quarter and areencouraged by the momentum this productis creating as we begin 2009.Our non-performing assets and credit lossescertainly reflect the challenging economicconditions of 2008, but remain below industrylevels due to our consistent and prudentunderwriting. Non-performing assets, as apercentage of total loans and repossessed assets,were 1.76% at December 31, 2008, comparedto 0.90% a year earlier, while net charge-offsincreased to 1.59% of average loans, up from0.29% in 2007. We recently intensified ourefforts to dispose of non-performers, sellingor moving to held for sale approximately 1 billion of these assets. These actionshelped drive a 27% fourth quarter versusthird quarter reduction in non-performingloans, the largest component of nonperforming assets, to 1.1 billion at the endof 2008. The aggressive action we took todeal with non-performing assets in 2008will put us in a stronger position once theenvironment begins to improve.We also made good progress in reducingthe number of stressed assets in our loanportfolio. In fact, we reduced exposure tothese troubled assets by 3.1 billion in 2008.Our overarching credit message remainsunchanged: we are focused on proactivelyidentifying problem assets and disposing ofthem as judiciously as possible — while, atthe same time, making sure that reservelevels remain appropriate.In times like these, capital strength isparamount. Last fall, the U.S. Treasuryinvested in many financial servicesinstitutions to strengthen capital levels andopen up the credit markets. Participatingin the U.S. Treasury’s Capital PurchaseProgram raised our Tier 1 capital ratio from7.5% to 10.4% — 5 billion above the“well-capitalized” regulatory minimums. Wefinished the year with a tangible commonRegions continues to be in the businessof making quality loans that meet highstandards for credit quality, full pricingand depository relationships.equity ratio of 5.2%, which puts us aroundthe median for our peer group. And, as theTreasury and Congress intended, we are usingincreased capital to strengthen our balancesheet and to prudently lend. In fact, during thefourth quarter, the government’s investmentsupported our ability to commit 16.5 billionin new and renewed loans and lines.SERVING CUSTOMERS FROM A POSITIONOF STRENGTH AND STABILITYWhile I am not satisfied with our 2008results and understand our shareholders’disappointment, we enter a new year witha sense of confidence that comes frompursuing a clear purpose — to protect,preserve and strengthen our capital, liquidityand risk management.REGIONS 2008 10-K3
– MESSAGE FROM C. DOWD RITTER –Associates are focused on building stronger,broader customer relationships. To makethis goal a reality, we will work to establishprimary banking relationships with ourcustomers through the cross-selling ofproducts and services and growing depositsand fee-based revenue. And, of course, wewill continue delivering the kind of highservice quality that differentiates us fromour competitors.delivering shareholder value and servicequality begins by assisting the customerin front of them — helping them find theaccount or service that will keep or makeRegions that customer’s primary bankingrelationship. Regions’ associates supportour commitment to make life better for allof our stakeholders, as well as ourcommitment to maintain high ethicalstandards in how we operate.You can also count on us to do what is rightfor the communities we serve. Over thepast year, we reached out to over 100,000residential first mortgage and home equityI thank our associates for their hard workand commitment to our customersand shareholders. I would also like to expressmy gratitude to our Board of Directorsfor their valued perspective during a yearthat was sometimes difficult and alwayschallenging. Let us hope that unemploymentlevels improve and housing values stabilizein 2009, and that valuations for financialservices stocks, especially Regions,improve significantly.In spite of the credit crunch that hasaccompanied the current economicrecession, Regions is committedto working with customers tomeet their credit needs withoutjeopardizing shareholder value.customers to help them avoid hardship.Through our Customer Assistance Program,we took steps to renegotiate the terms ofmortgages, keeping families in their homes.This program not only helps our customers,but it also allows Regions to maintaina foreclosure rate that is about half thenational average.Regions associates — more than 30,000of them — come to work each day witha purpose to serve our customers. Each ofthem understands that while we may not beable to control the economy, we can focuson our customers and strive for performanceexcellence. They also understand that4REGIONS 2008 10-KFinally, I thank our shareholders foryour confidence, continuing supportand investment.C. Dowd RitterChairman, President andChief Executive Officer
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 10-KÍANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the fiscal year ended December 31, 2008OR‘TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period fromtoCommission File Number 000-50831REGIONS FINANCIAL CORPORATION(Exact name of registrant as specified in its charter)Delaware63-0589368(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification No.)1900 Fifth Avenue North, Birmingham, Alabama 35203(Address of principal executive offices)Registrant’s telephone number, including area code: (205) 944-1300Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, .01 par valueNew York Stock Exchange8.875% Trust Preferred Securities of Regions Financing Trust IIINew York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct. Yes Í No ‘Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of theAct. Yes ‘ No ÍIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for the past 90 days. Yes Í No ‘Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, andwill not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by referencein Part III of this Form 10-K or any amendment to this Form 10-K. ÍIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” inRule 12b-2 of the Exchange Act.Large accelerated filer ÍAccelerated filer ‘Non-accelerated filer ‘ (Do not check if a smaller reporting company)Smaller reporting company ‘Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No ÍState the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference tothe price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the lastbusiness day of the registrant’s most recently completed second fiscal quarter.Common Stock, .01 par value— 7,294,300,055 as of June 30, 2008.Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.Common Stock, .01 par value—694,631,959 shares issued and outstanding as of February 17, 2009DOCUMENTS INCORPORATED BY REFERENCEPortions of the proxy statement for the Annual Meeting to be held on April 16, 2009 are incorporated by reference intoPart III.
REGIONS FINANCIAL CORPORATIONForm 10-KINDEXPAGEPART IForward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121523232324PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation . . . . .Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . .Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . .Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2526272790155155155PART IIIItem 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . .Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .156157158158158PART IVItem 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .159SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .165i
PART IFORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K, other periodic reports filed by Regions Financial Corporation(“Regions”) under the Securities Exchange Act of 1934, as amended, and any other written or oral statementsmade by or on behalf of Regions may include forward-looking statements. The Private Securities LitigationReform Act of 1995 (the “Act”) provides a safe harbor for forward-looking statements which are identified assuch and are accompanied by the identification of important factors that could cause actual results to differmaterially from the forward-looking statements. For these statements, we, together with our subsidiaries, unlessthe context implies otherwise, claim the protection afforded by the safe harbor in the Act. Forward-lookingstatements are not based on historical information, but rather are related to future operations, strategies, financialresults or other developments. Forward-looking statements are based on management’s expectations as well ascertain assumptions and estimates made by, and information available to, management at the time the statementsare made. Those statements are based on general assumptions and are subject to various risks, uncertainties andother factors that may cause actual results to differ materially from the views, beliefs and projections expressedin such statements. These risks, uncertainties and other factors include, but are not limited to, those describedbelow: In October of 2008, Congress enacted, and President Bush signed into law, the Emergency EconomicStabilization Act of 2008, and on February 17, 2009 the American Recovery and Reinvestment Act of2009 was signed into law. Additionally, the U.S. Treasury and federal banking regulators areimplementing a number of programs to address capital and liquidity issues in the banking system, all ofwhich may have significant effects on Regions and the financial services industry, the exact nature andextent of which cannot be determined at this time. Possible changes in interest rates may affect funding costs and reduce earning asset yields, thusreducing margins. Possible changes in general economic and business conditions in the United States in general and in thecommunities Regions serves in particular. Possible changes in the creditworthiness of customers and the possible impairment of collectibility ofloans. Possible other changes in trade, monetary and fiscal policies, laws and regulations, and other activitiesof governments, agencies, and similar organizations, including changes in accounting standards, mayhave an adverse effect on business. The current stresses in the financial and real estate markets, including possible continued deteriorationin property values. Regions’ ability to manage fluctuations in the value of assets and liabilities and off-balance sheetexposure so as to maintain sufficient capital and liquidity to support Regions’ business. Regions’ ability to achieve the earnings expectations related to businesses that have been acquired orthat may be acquired in the future. Regions’ ability to expand into new markets and to maintain profit margins in the face of competitivepressures. Regions’ ability to develop competitive new products and services in a timely manner and theacc
LifeGreen Checking and Savings products introduced in July of 2008. We experienced an increase in total customer deposits of 4% during the fourth quarter and are encouraged by the momentum this product is creating as we begin 2009. Our non-performing assets and credit losses certainly refl ect the challenging economic
