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Regions Financial Corporation And Subsidiaries Financial Supplement Third Quarter 2012

The company’s aggregate loan yield was down 11 basis points linked quarter to 4.18 percent. This was primarily driven by the continued low interest rate environment, higher mortgage prepayments and pricing competition. In addition, the previous quarter benefited from significant interest recoveries on loan reversals.

Funding mix improvement continues to drive decline in deposit costs

Average low-cost deposits grew 0.5 percent linked quarter while higher cost time deposits declined 9.5 percent. This shift drove an improvement in the company’s funding mix during the quarter, as average low-cost deposits as a percentage of total deposits rose to 84 percent compared to 78 percent last year. This positive mix shift resulted in deposit costs declining to 28 basis points for the quarter, down 4 basis points from second quarter and 18 basis points from last year. Total funding costs declined to 56 basis points, down 19 basis points from one year ago.

Net interest income from continuing operations was $817 million, a $21 million or 3 percent decrease linked quarter. The resulting net interest margin declined linked quarter to 3.08 percent due to lower loan yields and higher prepayments resulting in lower yields in the investment portfolio partially offset by lower deposit costs.

Record mortgage income drives growth in non-interest revenue

Non-interest revenues from continuing operations totaled $533 million, up 5 percent linked quarter. Mortgage revenue increased to a record high of $106 million, which is 18 percent higher than the previous quarter and 56 percent higher than prior year. Mortgage production for the quarter was approximately $2.2 billion, an 8 percent increase from the prior quarter. HARP II loan production year to date was $1.2 billion, already surpassing the full year company goal of $1 billion in HARP II loans. Throughout 2012 approximately 50 percent of HARP II applications were for homeowners whose mortgage was not originally serviced by Regions. Customers continue to take advantage of the low interest rate environment through traditional and HARP II mortgages for both refinancing and new home purchases.

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