In re THOMAS A. NEELY

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 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
 
SECURITIES ACT OF 1933 
Release No. 9605 / June 25, 2014 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 72470 / June 25, 2014 
 
ACCOUNTING AND AUDITING ENFORCEMENT 
Release No. 3559 / June 25, 2014 
 
ADMINISTRATIVE PROCEEDING 
File No.  3-  15945 
 
 
In the Matter of 
 
THOMAS A. NEELY, JR.,  
 
Respondent. 
 
 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDING PURSUANT TO 
SECTION 8A OF THE SECURITIES ACT 
OF 1933 AND SECTION 21C OF THE 
SECURITIES EXCHANGE ACT OF 1934 
  
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that a 
cease-and-desist proceeding be, and hereby are, instituted pursuant to Section 8A of the Securities 
Act of 1933 (“Securities Act”), and Section 21C of the Securities Exchange Act of 1934 
(“Exchange Act”), against Thomas A. Neely, Jr. (“Respondent” or “Neely”).   
 
II. 
 
After an investigation, the Division of Enforcement alleges that: 
 
SUMMARY 
 
 This proceeding arises from the intentional misconduct of the Respondent while employed 
by Regions Bank and its parent holding corporation, Regions Financial Corporation (“Regions”).  
During the quarter ended March 31, 2009, in accordance with Regions’ policies and procedures, 
personnel within Regions Bank’s Special Asset Department (“SAD”) who reported up to the 
Respondent, initiated the procedures to place approximately $168 million of certain commercial 
loans (the “Loans”) into non-accrual status.  In March 2009, the Respondent, arbitrarily and 
without supporting documentation, took intentional steps to keep the Loans in accrual status.  The 
deliberate misclassification under its policies prevented Regions from appropriately measuring 
impairment in accordance with Generally Accepted Accounting Principles (“GAAP”).  Such 

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deliberate misconduct by the Respondent to evade existing policies and procedures constituted a 
fraudulent scheme that rendered Regions’ financial statements for the quarter ended March 31, 
2009 materially misstated and not in conformity GAAP, and caused a failure by Regions to 
maintain a system of internal accounting controls sufficient to provide reasonable assurances that 
the Loans were recorded as necessary to permit the preparation of financial statements in 
conformity with GAAP. 
 
 A.  RESPONDENT 
 
1. Thomas A. Neely, Jr., 53, was formerly an Executive Vice President for Regions’ 
Risk Management Credit Division, where he reported to Michael J. Willoughby.  Neely also 
oversaw Regions’ Risk Analytics Group and together with Jeffrey C. Kuehr functionally 
controlled Regions’ SAD.  Neely’s employment with Regions terminated on November 30, 
2010. 
 
 B. OTHER RELEVANT PERSONS AND ENTITY 
 
2. Jeffrey C. Kuehr, 50, was formerly an Executive Vice President and the head of 
Regions’ SAD.  During the relevant period, Kuehr reported to Willoughby who at the time was 
Regions’ Chief Credit Officer (“CCO”).  Kuehr’s employment with Regions terminated on 
December 29, 2010. 
 
3. Michael J. Willoughby, 68, was formerly a Senior Executive Vice President and 
Regions’ CCO.  As CCO, Willoughby directly reported to Regions’ Chief Risk Officer.  
Willoughby’s employment with Regions terminated on November 30, 2010. 
 
4. Regions Financial Corporation is a Delaware financial holding corporation 
headquartered in Birmingham, Alabama.  Regions conducts its banking operations through its 
subsidiary Regions Bank, which is a member of the Federal Reserve System.  Regions’ common 
stock is registered with the Commission pursuant to Section 12(b) of the Securities Act and trades 
on the New York Stock Exchange under the symbol “RF.”  As of December 31, 2013, Regions had 
approximately $117 billion in assets. 
 
C. REGIONS’ TRACKING OF NON-ACCRUAL LOANS 
 
5. Throughout the relevant time-period, including the quarter ended March 31, 2009, 
Region’s tracked and recorded its non-performing loans (“NPLs”) as part of both internal 
performance metrics and its regular financial reporting.  NPLs at Regions primarily consisted of 
loans in a non-accrual status.
1
   
 
6. Regions’ policies and procedures required that loans be placed on non-accrual 
status when it was determined that payment of all contractual principal and interest was in doubt, 
or the loan was past due 90 days or more as to principal and interest, unless the loan was well-
secured and in the process of collection.  When a loan was placed in non-accrual status, 
uncollected interest that had accrued during the current year would be reversed, reducing Regions’ 
interest income.  In addition, placing a loan on non-accrual status served as a trigger for Regions to 
                                                 
1
  GAAP does not provide guidance regarding placing loans on a non-accrual status. 

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consider whether that specific loan was impaired and thus how to determine an allowance for loan 
and lease losses in accordance with GAAP.  
 
7. Regions’ policies and procedures provided that the decision to place a loan in non-
accrual status was to be made by Relationship Managers (“RMs”) within SAD.  RMs were 
responsible for reviewing loan file details, monitoring payments and communicating with 
borrowers.  Under Regions’ policies and procedures, RMs had the greatest degree of knowledge 
within SAD of the relevant loan status and a borrower’s ability to make payments of principal and 
interest. 
 
8. Regions’ policies and procedures required that when RMs initiated an action to 
place a loan on non-accrual status, they would submit a supporting form to their regional manager 
that showed their conclusion and justified how they determined a loan should be placed in non-
accrual status.  Regions’ policies and procedures then provided for the regional manager to conduct 
a detailed review of the loan with the responsible RM, after which the approval was granted by the 
regional manager.  
 
9. Once approval for non-accrual classification was granted by the regional manager, 
Regions’ policies and procedures specified that any subsequent exception to classifying the loan in 
non-accrual status was required to be fully documented and justified on an approved 
“Recommendation to Continue Accrual Status” form and a signed “Risk Rating Change” form. 
  
10. Once the RM and the regional manager concluded that a loan should be classified 
in non-accrual status, it was then listed by SAD managers in the Asset Quality Forecast report 
(“AQF”).  The AQF identified which loans had been approved by the RM and regional manager 
for being placed on non-accrual status, and it forecasted charge-offs and nonperforming assets for 
the quarter. 
 
11. The AQF was a principal forecasting tool of SAD that was prepared under the 
direction of the Respondent.  The AQF was discussed weekly at meetings regularly conducted and 
attended by the Respondent.  Neely and Willoughby also regularly utilized the AQF in 
presentations to Regions’ E xecutive Council, which consisted of, among others, Regions’ Chief 
Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), in discussing current trends in 
NPLs. 
 
12. The SAD, under the control of Kuehr and Neely, had authority over the preparation, 
content, and dissemination of the AQF.  Once a loan recommended for non-accrual status by the 
RMs and regional managers was included on the AQF, the responsible RMs would complete 
information required for a processing list and submit it to Regions’ Risk Analytics Group.  The 
processing list was designed as an electronic record documenting the specific actions for individual 
loans to be formally taken by Regions and reflected in Regions’ accounting systems.  Neely 
maintained final authority over the processing list.  Following Neely’s approval, his subordinates 
would submit the processing list for the identified loans to be recorded as non-accrual in Regions’ 
accounting systems. 
 

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D. NEELY’S INTENTIONAL MISCLASSIFICATION OF THE LOANS AND 
EVASION OF REGIONS’ POLICIES AND PROCEDURES DURING THE 
QUARTER ENDED MARCH 31, 2009 
 
13. As of the beginning of March 2009, Regions’ AQF identified NPLs of 
approximately $1.6 billion.  Neely had discussed with Kuehr and Willoughby the then current 
AQF and NPLs.  The AQF and related NPLs tracking for the quarter were made available to 
Regions’ CEO and CFO. 
 
14. On or about March 13, 2009, Kuehr, Neely and Willoughby were informed by a 
subordinate that an error had resulted in an underreporting of NPLs by an amount approximating 
$200 million, or 13% as reported in the AQF data made available to Regions’ CEO and CFO. 
 
15. In a March 17, 2009 email to Willoughby and Kuehr, Neely recommended that a 
$6.8 commercial million loan be recorded as an accruing loan despite being recommended for non-
accrual status by the assigned RM and regional manager.  Based on Neely’s recommendation, this 
loan was not placed on the AQF or a processing list and was improperly classified by Regions as 
being in accrual status as of March 31, 2009.  The failure to document the justification for this 
action was contrary to Regions’ policies and procedures.   
 
16. On or about March 18, 2009, Neely and Willoughby instructed subordinates to 
take specific actions to remove from the AQF approximately $150 million of commercial loans 
that had been recommended by the assigned RMs and regional managers, in accordance with 
Regions’ policies and procedures, as being classified as non-accrual.  Neely and Willoughby 
issued such instructions to their subordinates without any documentation or justification 
supporting the removal of these loans from the AQF.  The failure to provide justification or 
documentation violated Regions’ policies and procedures.  As a result, Regions improperly 
classified $168 million of the Loans as being in accrual status.  Had Regions classified the 
relevant loans on non-accrual status in accordance with its policies, it would have prompted a 
determination that the identified loans were impaired in accordance with GAAP.  That 
determination would have resulted in Regions recording a higher allowance for loan and lease 
losses. 
 
17. On or about March 23, 2009, Willoughby and Neely attended a meeting at which 
they knowingly provided understated NPL data for the quarter to certain senior executives, 
including Regions’ CFO. 
 
18. In accordance with Regions’ policies and procedures, the Loans were required to 
have been classified in non-accrual status at the quarter ended March 31, 2009.  Had Regions 
classified the relevant loans on non-accrual status in accordance with its policies, it would have 
prompted a determination that the Loans were impaired in accordance with Statement of Financial 
Accounting Standard No. 114, Accounting by Creditors for Impairment of a Loan (“SFAS No. 
114”).
2
 
                                                 
2
 See SFAS No. 114, which states that “a loan is impaired when, based on current information and events, it is 
probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan 
agreement” and it requires lenders to measure impairment based on the present value of expected cash flows or an 
observable fair value of the collateral (i.e., an appraisal) if the loan is collateral dependent. 

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19. In taking the undocumented and unjustified steps above, Neely intentionally 
circumvented Regions’ policies and procedures regarding the classification of loans into non-
accrual status.  Neely’s intentional scheme directly resulted in the improper classification of the 
Loans pursuant to Regions’ policies, and further prevented Regions’ from appropriately 
determining those Loans were impaired in accordance with GAAP at the quarter ended March 31, 
2009. 
 
E. INTENTIONAL MISCLASSIFICATION OF LOANS HELD FOR SALE 
 
20. As part of his responsibilities at Regions, Neely had final approval to accept bids 
for loan sales.  On or about March 16, 2009, Neely contacted a third-party in an effort to sell a 
$24.7 million commercial loan (the “Shopped Loan”), which was one of the Loans.  A potential 
buyer immediately responded to Neely’s solicitation, offering to buy the Shopped Loan for 
between 35 and 50 cents-on-the-dollar.  Neely responded to the buyer that the offer was not 
sufficient.  Neely responded to the potential buyer that Regions was looking for a price closer to 
65 to 70 cents-on-the-dollar for the Shopped Loan, and asked the potential buyer to reconsider 
the recent offer to Regions.   
 
21. On or about March 20, 2009, the potential buyer indicated that Neely’s requested 
sale price for the Shopped Loan was too high. 
 
22. On or about April 6, 2009, the potential buyer submitted an additional offer to 
purchase the Shopped Loan for 58.5% of the loan value.   
 
23. On or about June 23, 2009, Regions, at Neely’s direction, reclassified the 
Shopped Loan from loans held for investment to the “Loans Held for Sale” category with a 
related write-down to fair value.
3
   
 
24. On or about September 2, 2009, the Shopped Loan was sold to a new buyer for 
60% of its loan value.   
 
25. In accordance with both GAAP and Regions’ policies and procedures, the Shopped 
Loan was required to have been reclassified to “Loans Held for Sale,” with a corresponding charge 
to earnings, prior to the close of the quarter ended March 31, 2009 because a decision to sell the 
loan had been made prior to the quarter end. 
 
E. IMPACT OF NEELY’S INTENTIONAL MISCONDUCT ON REGIONS’ 
FINANCIAL STATEMENTS 
 
26. Regions’ system of internal accounting controls was insufficient to provide 
reasonable assurances that the Loans were recorded as necessary to permit preparation of 
financial statements in conformity with GAAP. 
 
                                                 
3
  See AICPA Statement of Position 01-6, Accounting by Certain Entities (Including Entities With Trade 
Receivables) That Lend to or Finance the Activities of Others which states that once a decision has been made to 
sell loans not previously classified as “held for sale,” such loans should be transferred into the “held-for-sale” 
account and reported at the lower of cost or fair value. 

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27. Neely intentionally circumvented Regions’ existing internal accounting controls 
through his recording and reporting of the Loans in a manner that was not in accordance with 
Regions’ policies and procedures. 
 
28. Neely’s intentional misconduct resulted in Regions’ failing to make and keep 
books, records, and accounts, in reasonable detail, which accurately and fairly reflected the Loans.  
Further, Regions’ accounts were falsified through the intentional misconduct of the Respondents. 
 
29. The books, records and accounts reflecting the Loans were incorporated into 
Regions’ consolidated financial statements for the quarter ended March 31, 2009.  As a result of 
failing to properly account for the Loans in accordance with GAAP, for the quarter ended March 
31, 2009, Regions’ income before income taxes was overstated by $16 million, its net income 
applicable to common shareholders was overstated by approximately $11 million, and its earnings 
per common share was overstated by approximately $.02 per share.  
 
30. Had the Shopped Loan been properly written down to fair value in conformity 
with GAAP and Regions’ policies and procedures, Regions’ net income available to common 
shareholders would have been reduced an additional approximately $2.9 million beyond the 
approximate $11 million overstatement attributable to the Loans. 
 
31. The above misstatements were included in Regions’ April 21, 2009 press release 
included in its Form 8-K dated April 21, 2009 and filed with the Commission on April 21, 2009, in 
its exhibits to its Form 8-K dated May 20, 2009 and filed with the Commission on May 20, 2009, 
in its March 31, 2009 Form 10-Q filed May 11, 2009, and two subsequent amendments to its 
March 31, 2009 Form 10-Q filed on May 13, 2009 and June 9, 2009, in a Form S-4 filed on May 
20, 2009 and in three subsequent amendments to this registration statement on May 22, 2009, June 
4, 2009, and June 9, 2009, and in a Form S-8 filed on August 28, 2009 (collectively, the “Public 
Filings”). 
 
32. The Public Filings did not include other information as was necessary to ensure that 
the statements made in the Public Filings were not, under the circumstances, materially misleading. 
 
33. In connection with Regions’ financial reporting for the quarter ended March 31, 
2009, Neely executed a sub-certification provided to Regions’ Controller and Chief Accounting 
Officer.  Neely’s knowingly made false statements and/or misleading omissions in the sub-
certification when he averred that the was “not aware of ... [a]ny significant deficiencies in the ... 
internal control over financial reporting ... [or] [a]ny fraud, whether or not material.”  Neely knew 
that the sub-certification would be relied on as part of the financial reporting process for the 
quarter. 
 
 F. CONDUCT FOLLOWING THE QUARTER ENDED MARCH 31, 2009 
 
34. On or about May 14, 2009, Neely instructed a subordinate to change the name of an 
internal SAD document to falsely reflect that RMs, and not Neely as in fact occurred, had 
recommended that the Loans remain in accrual status at March 31, 2009.  Neely took additional 
actions to conceal his prior conduct regarding the Loans from personnel at Regions as well as 
Regions Bank’s regulators. 

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 G. VIOLATIONS 
 
35. As a result of Neely’s intentional scheme to misclassify the Loans as in accrual 
status and to prevent the Shopped Loan from being classified in “Loans Held for Sale” as of the 
quarter ended March 31, 2009, Neely violated Section 17(a) of the Securities Act, which prohibits 
fraudulent conduct in the offer or sale of securities, and Exchange Act Section 10(b) and Rule 10b-
5 thereunder, which prohibit fraudulent conduct in connection with the purchase or sale of 
securities. 
 
36. As a result of the conduct described above, Neely acted through Regions to make 
material misrepresentations in the Public Filings, and as a result, Neely violated Sections 20(b) and 
10(b) of the Exchange Act, and Rule 10b-5 thereunder. 
 
37. As a result of the conduct described above, Neely aided and abetted and caused 
Regions’ violations of Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 
thereunder of the Exchange Act. 
 
38. As a result of the conduct described above, Neely caused Regions to violate Section 
13(a) of the Exchange Act and Rules 13a-11, 13a-13 and 12b-20 thereunder because its financial 
statements for the quarter ended March 31, 2009 included in current and quarterly reports, failed to 
record the Loans and the Shopped Loan in conformity with GAAP.  
 
39. As a result of the conduct described above, Neely caused Regions to violate Section 
13(b)(2)(A) of the Exchange Act because it did not keep books, records or accounts that 
accurately reflected the Loans and the Shopped Loan. 
 
40. As a result of the conduct described above, Neely caused Regions to violate Section 
13(b)(2)(B) of the Exchange Act because it failed to maintain a system of internal accounting 
controls sufficient to provide reasonable assurances that the Loans and the Shopped Loan were 
recorded as necessary to permit preparation of its financial statements in accordance with GAAP. 
 
41. As a result of the conduct described above, Neely violated Section 13(b)(5) of the 
Exchange Act when he knowingly circumvented and knowingly falsified Regions’ books, records, 
and accounts related to the Loans and the Shopped Loan. 
 
42. As a result of the conduct described above, Neely violated Rule 13b2-1 of the 
Exchange Act by directly or indirectly falsifying or causing to be falsified Regions’ books, 
records and accounts relating to the Loans and the Shopped Loan which were subject to Section 
13(b)(2)(A) of the Exchange Act. 
 
43. As a result of the conduct described above, Neely violated Rule 13b2-2 of the 
Exchange Act when he directly or indirectly made or caused to be made materially false or 
misleading statements, or omitted to state material facts necessary in order to make statements 
made, in light of the circumstances under which such statements were made, not misleading to 
accountants in connection with the preparation or filing of documents and reports which were 
required to be filed with the Commission. 

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III. 
 
In view of the allegations made by the Division of Enforcement, the Commission deems it 
appropriate that a cease-and-desist proceeding be instituted to determine: 
 
A.  Whether the allegations set forth in Section II hereof are true and, in connection 
therewith, to afford Respondent an opportunity to establish any defenses to such allegations;  
 
B. Whether, pursuant to Section 8A of the Securities Act and Section 21C of the 
Exchange Act Respondent should be ordered to cease and desist from committing or causing 
violations of and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the 
Exchange Act and Rule 10b-5 thereunder, including committing or causing any such violations 
directly or indirectly through or by means of any other person, as prohibited by Section 20(b) of 
the Exchange Act, Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Exchange Act and 
Rules 12b-20, 13a-11, 13a-13, 13b2-1, and 13b2-2 thereunder, whether Respondent should be 
ordered to pay a civil penalty pursuant to Section 8A(g) of the Securities Act and Section 21B(a) of 
the Exchange Act, and whether pursuant to Section 21C(f) of the Exchange Act, Respondent should 
be prohibited from acting as an officer or director of any issuer that has a class of securities 
registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to 
Section 15(d) of the Exchange Act. 
 
IV. 
 
IT IS ORDERED that a public hearing for the purpose of taking evidence on the questions 
set forth in Section III hereof shall be convened not earlier than 30 days and not later than 60 days 
from service of this Order at a time and place to be fixed, and before an Administrative Law Judge 
to be designated by further order as provided by Rule 110 of the Commission's Rules of Practice, 17 
C.F.R. § 201.110. 
 
IT IS FURTHER ORDERED that Respondent shall file an Answer to the allegations 
contained in this Order within twenty (20) days after service of this Order, as provided by Rule 220 
of the Commission's Rules of Practice, 17 C.F.R. § 201.220.  
 
If Respondent fails to file the directed answer, or fails to appear at a hearing after being duly 
notified, the Respondent may be deemed in default and the proceedings may be determined against 
him upon consideration of this Order, the allegations of which may be deemed to be true as 
provided by Rules 155(a), 220(f), 221(f) and 310 of the Commission's Rules of Practice, 17 C.F.R.  
§§ 201.155(a), 201.220(f), 201.221(f) and 201.310. 
 
This Order shall be served forthwith upon Respondent personally or by certified mail. 
 
IT IS FURTHER ORDERED that the Administrative Law Judge shall issue an initial 
decision no later than 300 days from the date of service of this Order, pursuant to Rule 360(a)(2) of 
the Commission’s Rules of Practice. 
 
 

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In the absence of an appropriate waiver, no officer or employee of the Commission engaged 
in the performance of investigative or prosecuting functions in this or any factually related 
proceeding will be permitted to participate or advise in the decision of this matter, except as witness 
or counsel in proceedings held pursuant to notice.  Since this proceeding is not “rule making” within 
the meaning of Section 551 of the Administrative Procedure Act, it is not deemed subject to the 
provisions of Section 553 delaying the effective date of any final Commission action. 
 
 By the Commission. 
 
 
 
        Jill M. Peterson 
        Assistant Secretary 
 

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 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
 
SECURITIES ACT OF 1933 
Release No. 9605 / June 25, 2014 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 72470 / June 25, 2014 
 
ACCOUNTING AND AUDITING ENFORCEMENT 
Release No. 3559 / June 25, 2014 
 
ADMINISTRATIVE PROCEEDING 
File No.  3-15945 
 
 
In the Matter of 
 

THOMAS A. NEELY, JR.,  
 
Respondent. 
 

 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDING PURSUANT TO 
SECTION 8A OF THE SECURITIES ACT 
OF 1933 AND SECTION 21C OF THE 
SECURITIES EXCHANGE ACT OF 1934 

  
I. 

 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that a 
cease-and-desist proceeding be, and hereby are, instituted pursuant to Section 8A of the Securities 
Act of 1933 (“Securities Act”), and Section 21C of the Securities Exchange Act of 1934 
(“Exchange Act”), against Thomas A. Neely, Jr. (“Respondent” or “Neely”).   

 
II. 

 
After an investigation, the Division of Enforcement alleges that: 

 
SUMMARY 

 
 This proceeding arises from the intentional misconduct of the Respondent while employed 
by Regions Bank and its parent holding corporation, Regions Financial Corporation (“Regions”).  
During the quarter ended March 31, 2009, in accordance with Regions’ policies and procedures, 
personnel within Regions Bank’s Special Asset Department (“SAD”) who reported up to the 
Respondent, initiated the procedures to place approximately $168 million of certain commercial 
loans (the “Loans”) into non-accrual status.  In March 2009, the Respondent, arbitrarily and 
without supporting documentation, took intentional steps to keep the Loans in accrual status.  The 
deliberate misclassification under its policies prevented Regions from appropriately measuring 
impairment in accordance with Generally Accepted Accounting Principles (“GAAP”).  Such 



-2- 

deliberate misconduct by the Respondent to evade existing policies and procedures constituted a 
fraudulent scheme that rendered Regions’ financial statements for the quarter ended March 31, 
2009 materially misstated and not in conformity GAAP, and caused a failure by Regions to 
maintain a system of internal accounting controls sufficient to provide reasonable assurances that 
the Loans were recorded as necessary to permit the preparation of financial statements in 
conformity with GAAP. 
 
 A.  RESPONDENT 
 

1. Thomas A. Neely, Jr., 53, was formerly an Executive Vice President for Regions’ 
Risk Management Credit Division, where he reported to Michael J. Willoughby.  Neely also 
oversaw Regions’ Risk Analytics Group and together with Jeffrey C. Kuehr functionally 
controlled Regions’ SAD.  Neely’s employment with Regions terminated on November 30, 
2010. 
 
 B. OTHER RELEVANT PERSONS AND ENTITY 
 

2. Jeffrey C. Kuehr, 50, was formerly an Executive Vice President and the head of 
Regions’ SAD.  During the relevant period, Kuehr reported to Willoughby who at the time was 
Regions’ Chief Credit Officer (“CCO”).  Kuehr’s employment with Regions terminated on 
December 29, 2010. 

 
3. Michael J. Willoughby, 68, was formerly a Senior Executive Vice President and 

Regions’ CCO.  As CCO, Willoughby directly reported to Regions’ Chief Risk Officer.  
Willoughby’s employment with Regions terminated on November 30, 2010. 

 
4. Regions Financial Corporation is a Delaware financial holding corporation 

headquartered in Birmingham, Alabama.  Regions conducts its banking operations through its 
subsidiary Regions Bank, which is a member of the Federal Reserve System.  Regions’ common 
stock is registered with the Commission pursuant to Section 12(b) of the Securities Act and trades 
on the New York Stock Exchange under the symbol “RF.”  As of December 31, 2013, Regions had 
approximately $117 billion in assets. 

 
C. REGIONS’ TRACKING OF NON-ACCRUAL LOANS 

 
5. Throughout the relevant time-period, including the quarter ended March 31, 2009, 

Region’s tracked and recorded its non-performing loans (“NPLs”) as part of both internal 
performance metrics and its regular financial reporting.  NPLs at Regions primarily consisted of 
loans in a non-accrual status.1   

 
6. Regions’ policies and procedures required that loans be placed on non-accrual 

status when it was determined that payment of all contractual principal and interest was in doubt, 
or the loan was past due 90 days or more as to principal and interest, unless the loan was well-
secured and in the process of collection.  When a loan was placed in non-accrual status, 
uncollected interest that had accrued during the current year would be reversed, reducing Regions’ 
interest income.  In addition, placing a loan on non-accrual status served as a trigger for Regions to 
                                                 
1  GAAP does not provide guidance regarding placing loans on a non-accrual status. 



-3- 

consider whether that specific loan was impaired and thus how to determine an allowance for loan 
and lease losses in accordance with GAAP.  

 
7. Regions’ policies and procedures provided that the decision to place a loan in non-

accrual status was to be made by Relationship Managers (“RMs”) within SAD.  RMs were 
responsible for reviewing loan file details, monitoring payments and communicating with 
borrowers.  Under Regions’ policies and procedures, RMs had the greatest degree of knowledge 
within SAD of the relevant loan status and a borrower’s ability to make payments of principal and 
interest. 

 
8. Regions’ policies and procedures required that when RMs initiated an action to 

place a loan on non-accrual status, they would submit a supporting form to their regional manager 
that showed their conclusion and justified how they determined a loan should be placed in non-
accrual status.  Regions’ policies and procedures then provided for the regional manager to conduct 
a detailed review of the loan with the responsible RM, after which the approval was granted by the 
regional manager.  

 
9. Once approval for non-accrual classification was granted by the regional manager, 

Regions’ policies and procedures specified that any subsequent exception to classifying the loan in 
non-accrual status was required to be fully documented and justified on an approved 
“Recommendation to Continue Accrual Status” form and a signed “Risk Rating Change” form. 
  

10. Once the RM and the regional manager concluded that a loan should be classified 
in non-accrual status, it was then listed by SAD managers in the Asset Quality Forecast report 
(“AQF”).  The AQF identified which loans had been approved by the RM and regional manager 
for being placed on non-accrual status, and it forecasted charge-offs and nonperforming assets for 
the quarter. 

 
11. The AQF was a principal forecasting tool of SAD that was prepared under the 

direction of the Respondent.  The AQF was discussed weekly at meetings regularly conducted and 
attended by the Respondent.  Neely and Willoughby also regularly utilized the AQF in 
presentations to Regions’ Executive Council, which consisted of, among others, Regions’ Chief 
Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), in discussing current trends in 
NPLs. 

 
12. The SAD, under the control of Kuehr and Neely, had authority over the preparation, 

content, and dissemination of the AQF.  Once a loan recommended for non-accrual status by the 
RMs and regional managers was included on the AQF, the responsible RMs would complete 
information required for a processing list and submit it to Regions’ Risk Analytics Group.  The 
processing list was designed as an electronic record documenting the specific actions for individual 
loans to be formally taken by Regions and reflected in Regions’ accounting systems.  Neely 
maintained final authority over the processing list.  Following Neely’s approval, his subordinates 
would submit the processing list for the identified loans to be recorded as non-accrual in Regions’ 
accounting systems. 

 



-4- 

D. NEELY’S INTENTIONAL MISCLASSIFICATION OF THE LOANS AND 
EVASION OF REGIONS’ POLICIES AND PROCEDURES DURING THE 
QUARTER ENDED MARCH 31, 2009 

 
13. As of the beginning of March 2009, Regions’ AQF identified NPLs of 

approximately $1.6 billion.  Neely had discussed with Kuehr and Willoughby the then current 
AQF and NPLs.  The AQF and related NPLs tracking for the quarter were made available to 
Regions’ CEO and CFO. 

 
14. On or about March 13, 2009, Kuehr, Neely and Willoughby were informed by a 

subordinate that an error had resulted in an underreporting of NPLs by an amount approximating 
$200 million, or 13% as reported in the AQF data made available to Regions’ CEO and CFO. 

 
15. In a March 17, 2009 email to Willoughby and Kuehr, Neely recommended that a 

$6.8 commercial million loan be recorded as an accruing loan despite being recommended for non-
accrual status by the assigned RM and regional manager.  Based on Neely’s recommendation, this 
loan was not placed on the AQF or a processing list and was improperly classified by Regions as 
being in accrual status as of March 31, 2009.  The failure to document the justification for this 
action was contrary to Regions’ policies and procedures.   

 
16. On or about March 18, 2009, Neely and Willoughby instructed subordinates to 

take specific actions to remove from the AQF approximately $150 million of commercial loans 
that had been recommended by the assigned RMs and regional managers, in accordance with 
Regions’ policies and procedures, as being classified as non-accrual.  Neely and Willoughby 
issued such instructions to their subordinates without any documentation or justification 
supporting the removal of these loans from the AQF.  The failure to provide justification or 
documentation violated Regions’ policies and procedures.  As a result, Regions improperly 
classified $168 million of the Loans as being in accrual status.  Had Regions classified the 
relevant loans on non-accrual status in accordance with its policies, it would have prompted a 
determination that the identified loans were impaired in accordance with GAAP.  That 
determination would have resulted in Regions recording a higher allowance for loan and lease 
losses. 

 
17. On or about March 23, 2009, Willoughby and Neely attended a meeting at which 

they knowingly provided understated NPL data for the quarter to certain senior executives, 
including Regions’ CFO. 

 
18. In accordance with Regions’ policies and procedures, the Loans were required to 

have been classified in non-accrual status at the quarter ended March 31, 2009.  Had Regions 
classified the relevant loans on non-accrual status in accordance with its policies, it would have 
prompted a determination that the Loans were impaired in accordance with Statement of Financial 
Accounting Standard No. 114, Accounting by Creditors for Impairment of a Loan (“SFAS No. 
114”).2 

                                                 
2 See SFAS No. 114, which states that “a loan is impaired when, based on current information and events, it is 
probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan 
agreement” and it requires lenders to measure impairment based on the present value of expected cash flows or an 
observable fair value of the collateral (i.e., an appraisal) if the loan is collateral dependent. 



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19. In taking the undocumented and unjustified steps above, Neely intentionally 
circumvented Regions’ policies and procedures regarding the classification of loans into non-
accrual status.  Neely’s intentional scheme directly resulted in the improper classification of the 
Loans pursuant to Regions’ policies, and further prevented Regions’ from appropriately 
determining those Loans were impaired in accordance with GAAP at the quarter ended March 31, 
2009. 

 
E. INTENTIONAL MISCLASSIFICATION OF LOANS HELD FOR SALE 
 
20. As part of his responsibilities at Regions, Neely had final approval to accept bids 

for loan sales.  On or about March 16, 2009, Neely contacted a third-party in an effort to sell a 
$24.7 million commercial loan (the “Shopped Loan”), which was one of the Loans.  A potential 
buyer immediately responded to Neely’s solicitation, offering to buy the Shopped Loan for 
between 35 and 50 cents-on-the-dollar.  Neely responded to the buyer that the offer was not 
sufficient.  Neely responded to the potential buyer that Regions was looking for a price closer to 
65 to 70 cents-on-the-dollar for the Shopped Loan, and asked the potential buyer to reconsider 
the recent offer to Regions.   

 
21. On or about March 20, 2009, the potential buyer indicated that Neely’s requested 

sale price for the Shopped Loan was too high. 
 
22. On or about April 6, 2009, the potential buyer submitted an additional offer to 

purchase the Shopped Loan for 58.5% of the loan value.   
 
23. On or about June 23, 2009, Regions, at Neely’s direction, reclassified the 

Shopped Loan from loans held for investment to the “Loans Held for Sale” category with a 
related write-down to fair value.3   

 
24. On or about September 2, 2009, the Shopped Loan was sold to a new buyer for 

60% of its loan value.   
 
25. In accordance with both GAAP and Regions’ policies and procedures, the Shopped 

Loan was required to have been reclassified to “Loans Held for Sale,” with a corresponding charge 
to earnings, prior to the close of the quarter ended March 31, 2009 because a decision to sell the 
loan had been made prior to the quarter end. 

 
E. IMPACT OF NEELY’S INTENTIONAL MISCONDUCT ON REGIONS’ 

FINANCIAL STATEMENTS 
 

26. Regions’ system of internal accounting controls was insufficient to provide 
reasonable assurances that the Loans were recorded as necessary to permit preparation of 
financial statements in conformity with GAAP. 

 

                                                 
3  See AICPA Statement of Position 01-6, Accounting by Certain Entities (Including Entities With Trade 
Receivables) That Lend to or Finance the Activities of Others which states that once a decision has been made to 
sell loans not previously classified as “held for sale,” such loans should be transferred into the “held-for-sale” 
account and reported at the lower of cost or fair value. 



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27. Neely intentionally circumvented Regions’ existing internal accounting controls 
through his recording and reporting of the Loans in a manner that was not in accordance with 
Regions’ policies and procedures. 
 

28. Neely’s intentional misconduct resulted in Regions’ failing to make and keep 
books, records, and accounts, in reasonable detail, which accurately and fairly reflected the Loans.  
Further, Regions’ accounts were falsified through the intentional misconduct of the Respondents. 

 
29. The books, records and accounts reflecting the Loans were incorporated into 

Regions’ consolidated financial statements for the quarter ended March 31, 2009.  As a result of 
failing to properly account for the Loans in accordance with GAAP, for the quarter ended March 
31, 2009, Regions’ income before income taxes was overstated by $16 million, its net income 
applicable to common shareholders was overstated by approximately $11 million, and its earnings 
per common share was overstated by approximately $.02 per share.  

 
30. Had the Shopped Loan been properly written down to fair value in conformity 

with GAAP and Regions’ policies and procedures, Regions’ net income available to common 
shareholders would have been reduced an additional approximately $2.9 million beyond the 
approximate $11 million overstatement attributable to the Loans. 

 
31. The above misstatements were included in Regions’ April 21, 2009 press release 

included in its Form 8-K dated April 21, 2009 and filed with the Commission on April 21, 2009, in 
its exhibits to its Form 8-K dated May 20, 2009 and filed with the Commission on May 20, 2009, 
in its March 31, 2009 Form 10-Q filed May 11, 2009, and two subsequent amendments to its 
March 31, 2009 Form 10-Q filed on May 13, 2009 and June 9, 2009, in a Form S-4 filed on May 
20, 2009 and in three subsequent amendments to this registration statement on May 22, 2009, June 
4, 2009, and June 9, 2009, and in a Form S-8 filed on August 28, 2009 (collectively, the “Public 
Filings”). 

 
32. The Public Filings did not include other information as was necessary to ensure that 

the statements made in the Public Filings were not, under the circumstances, materially misleading. 
 
33. In connection with Regions’ financial reporting for the quarter ended March 31, 

2009, Neely executed a sub-certification provided to Regions’ Controller and Chief Accounting 
Officer.  Neely’s knowingly made false statements and/or misleading omissions in the sub-
certification when he averred that the was “not aware of … [a]ny significant deficiencies in the … 
internal control over financial reporting … [or] [a]ny fraud, whether or not material.”  Neely knew 
that the sub-certification would be relied on as part of the financial reporting process for the 
quarter. 

 
 F. CONDUCT FOLLOWING THE QUARTER ENDED MARCH 31, 2009 

 
34. On or about May 14, 2009, Neely instructed a subordinate to change the name of an 

internal SAD document to falsely reflect that RMs, and not Neely as in fact occurred, had 
recommended that the Loans remain in accrual status at March 31, 2009.  Neely took additional 
actions to conceal his prior conduct regarding the Loans from personnel at Regions as well as 
Regions Bank’s regulators. 



-7- 

 
 G. VIOLATIONS 
 

35. As a result of Neely’s intentional scheme to misclassify the Loans as in accrual 
status and to prevent the Shopped Loan from being classified in “Loans Held for Sale” as of the 
quarter ended March 31, 2009, Neely violated Section 17(a) of the Securities Act, which prohibits 
fraudulent conduct in the offer or sale of securities, and Exchange Act Section 10(b) and Rule 10b-
5 thereunder, which prohibit fraudulent conduct in connection with the purchase or sale of 
securities. 

 
36. As a result of the conduct described above, Neely acted through Regions to make 

material misrepresentations in the Public Filings, and as a result, Neely violated Sections 20(b) and 
10(b) of the Exchange Act, and Rule 10b-5 thereunder. 

 
37. As a result of the conduct described above, Neely aided and abetted and caused 

Regions’ violations of Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 
thereunder of the Exchange Act. 

 
38. As a result of the conduct described above, Neely caused Regions to violate Section 

13(a) of the Exchange Act and Rules 13a-11, 13a-13 and 12b-20 thereunder because its financial 
statements for the quarter ended March 31, 2009 included in current and quarterly reports, failed to 
record the Loans and the Shopped Loan in conformity with GAAP.  

 
39. As a result of the conduct described above, Neely caused Regions to violate Section 

13(b)(2)(A) of the Exchange Act because it did not keep books, records or accounts that 
accurately reflected the Loans and the Shopped Loan. 

 
40. As a result of the conduct described above, Neely caused Regions to violate Section 

13(b)(2)(B) of the Exchange Act because it failed to maintain a system of internal accounting 
controls sufficient to provide reasonable assurances that the Loans and the Shopped Loan were 
recorded as necessary to permit preparation of its financial statements in accordance with GAAP. 

 
41. As a result of the conduct described above, Neely violated Section 13(b)(5) of the 

Exchange Act when he knowingly circumvented and knowingly falsified Regions’ books, records, 
and accounts related to the Loans and the Shopped Loan. 

 
42. As a result of the conduct described above, Neely violated Rule 13b2-1 of the 

Exchange Act by directly or indirectly falsifying or causing to be falsified Regions’ books, 
records and accounts relating to the Loans and the Shopped Loan which were subject to Section 
13(b)(2)(A) of the Exchange Act. 

 
43. As a result of the conduct described above, Neely violated Rule 13b2-2 of the 

Exchange Act when he directly or indirectly made or caused to be made materially false or 
misleading statements, or omitted to state material facts necessary in order to make statements 
made, in light of the circumstances under which such statements were made, not misleading to 
accountants in connection with the preparation or filing of documents and reports which were 
required to be filed with the Commission. 



-8- 

 
III. 

 
In view of the allegations made by the Division of Enforcement, the Commission deems it 

appropriate that a cease-and-desist proceeding be instituted to determine: 
 
A.  Whether the allegations set forth in Section II hereof are true and, in connection 

therewith, to afford Respondent an opportunity to establish any defenses to such allegations;  
 
B. Whether, pursuant to Section 8A of the Securities Act and Section 21C of the 

Exchange Act Respondent should be ordered to cease and desist from committing or causing 
violations of and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the 
Exchange Act and Rule 10b-5 thereunder, including committing or causing any such violations 
directly or indirectly through or by means of any other person, as prohibited by Section 20(b) of 
the Exchange Act, Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Exchange Act and 
Rules 12b-20, 13a-11, 13a-13, 13b2-1, and 13b2-2 thereunder, whether Respondent should be 
ordered to pay a civil penalty pursuant to Section 8A(g) of the Securities Act and Section 21B(a) of 
the Exchange Act, and whether pursuant to Section 21C(f) of the Exchange Act, Respondent should 
be prohibited from acting as an officer or director of any issuer that has a class of securities 
registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to 
Section 15(d) of the Exchange Act. 
 

IV. 
 
IT IS ORDERED that a public hearing for the purpose of taking evidence on the questions 

set forth in Section III hereof shall be convened not earlier than 30 days and not later than 60 days 
from service of this Order at a time and place to be fixed, and before an Administrative Law Judge 
to be designated by further order as provided by Rule 110 of the Commission's Rules of Practice, 17 
C.F.R. § 201.110. 

 
IT IS FURTHER ORDERED that Respondent shall file an Answer to the allegations 

contained in this Order within twenty (20) days after service of this Order, as provided by Rule 220 
of the Commission's Rules of Practice, 17 C.F.R. § 201.220.  

 
If Respondent fails to file the directed answer, or fails to appear at a hearing after being duly 

notified, the Respondent may be deemed in default and the proceedings may be determined against 
him upon consideration of this Order, the allegations of which may be deemed to be true as 
provided by Rules 155(a), 220(f), 221(f) and 310 of the Commission's Rules of Practice, 17 C.F.R.  
§§ 201.155(a), 201.220(f), 201.221(f) and 201.310. 

 
This Order shall be served forthwith upon Respondent personally or by certified mail. 
 
IT IS FURTHER ORDERED that the Administrative Law Judge shall issue an initial 

decision no later than 300 days from the date of service of this Order, pursuant to Rule 360(a)(2) of 
the Commission’s Rules of Practice. 

 
 



-9- 

In the absence of an appropriate waiver, no officer or employee of the Commission engaged 
in the performance of investigative or prosecuting functions in this or any factually related 
proceeding will be permitted to participate or advise in the decision of this matter, except as witness 
or counsel in proceedings held pursuant to notice.  Since this proceeding is not “rule making” within 
the meaning of Section 551 of the Administrative Procedure Act, it is not deemed subject to the 
provisions of Section 553 delaying the effective date of any final Commission action. 

 
 By the Commission. 
 
 
 
        Jill M. Peterson 
        Assistant Secretary