Rewards for Regions execs may take a dive - 23 March 2010, The Birmingham News

http://blog.al.com/businessnews/2010/03/rewards_for_regions_bank_execu.html

By


Russell Hubbard -- The Birmingham News

March 20, 2010, 5:30AM

The stock and options Regions Financial Corp. executives were
awarded last year -- which caused a furor because they were granted
within days of the suspension of retirement benefit contributions for
the rank-and-file -- might wind up being worth less than originally
thought.

The Birmingham-based company said so in regulatory documents filed
last week that detailed 2009 executive pay, the latest period for which
the company must disclose such information, citing new government
executive pay rules.

The stock and stock option awards were granted on Feb. 24, 2009, when
top executives were given stock and options to buy stock that totaled
5.3 million shares. A few days later, the company said it was suspending
contributions to the employee 401(k) plan and the traditional pension
program.

Such awards are a contingent part of executive compensation. Share
prices go up and down, and so do the value of restricted stock awards
and options, which in most cases can't be turned into cash for a period
of years.

But such awards are also a lucrative part of compensation. Outgoing
Chief Executive Dowd Ritter's combined stock and option award
compensation for 2009 was $6.6 million. Ritter is retiring March 31.

The awards are also big for incoming CEO Grayson Hall, who was
president in 2009. His stock and option compensation for 2009 was $2.6
million, according to the Regions filing.

But there is a big fly in the ointment for the executives: the
Troubled Assets Relief Program.

In November 2008, Regions accepted $3.5 billion in bailout investment
cash from the U.S. Treasury, to bolster the balance sheet after high
losses on unpaid real-estate loans. The money came with strings
attached.

Last year, the Treasury Department promulgated regulations
prohibiting "restricted stock" from qualifying for eventual
transformation into cash during any period during which TARP investments
have yet to be repaid by the affected company.

"Pursuant to the provisions of TARP, the value may not inure to the
benefit of executive as long as Regions remains a TARP participant,"
reads Regions' Securities and Exchange Commission filing from last week.
"It is likely that executives will not receive the entire amount."

It might be costly for the executives. The stock and options granted
in February 2009 were awarded just as the company's share price was
rebounding from an all-time low amid the bank and credit crisis. On Feb.
9, 2009, Regions shares closed at $2.35. Two weeks later, when the
awards were made, shares closed at $3.29. That means at any price below
$3.29, the executives would have no incentive to sell the shares or
exercise the options to buy shares based on the $3.29 per share awards.

But since Feb. 24, 2009, Regions shares have rallied spectacularly.
Shares closed Friday at $7.38, more than double what they were when the
awards were made.

Regions spokesman Tim Deighton said Regions' board customarily makes
stock and option awards in February.

"The unit value of the options and restricted stock was determined by
the market," Deighton said. "They are based on the market closing price
on the day they were granted."

E-mail: rhubbard@bhamnews.com

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