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Regions Financial Corporation And Subsidiaries Financial Supplement Second Quarter 2012

Mortgage revenue grows while credit related expenses decline

Non-interest revenues from continuing operations totaled $507 million, down 3 percent linked quarter. Mortgage revenue increased 17 percent linked quarter or $13 million driven by new home purchases and refinance activity, as customers took advantage of low interest rates and the extended Home Affordable Refinance Program, or HARP II. Mortgage production for the quarter was $2.1 billion, a 28 percent increase from the prior quarter. While closed application volumes have increased 50 percent since last year, the company has maintained efficient completion times that have aided productivity.

Account service fees and charges were down $21 million linked quarter due to the establishment of a reserve for certain customer fee refunds resulting from a change in the company’s non-sufficient funds policy. Excluding this item, total service charges would have been consistent with the first quarter.

Non-interest expenses from continuing operations declined $71 million linked quarter, an improvement of 8 percent, and are down $114 million or 12 percent from the prior year. This reduction in expenses is primarily driven by lower credit related expenses; in particular, held for sale expenses in the second quarter benefited from $26 million in gains related to sales of properties, reflecting asset value improvements.

Commercial and industrial loan growth led by expertise in specialized lending

Despite continued economic headwinds and uncertainty, Regions was able to grow loans in targeted areas through expertise and service quality. Second quarter results reflect growth in lending to middle market commercial and industrial customers, in particular the specialized banking groups. Average loans in this category were up 4 percent compared to prior quarter and total commercial and industrial commitments grew $441 million, or 1.4 percent linked quarter. Commercial loan production (including renewals) totaled $11.6 billion, of which $4.3 billion were new loan originations.

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