Regions Financial Corp was sued by investors over its acquisition of AmSouth Bancorp, but on Tuesday it's case was strongly enhanced by a ruling issued by the 2nd Circuit Court of Appeals.  That court affirmed a lower court's ruling that Regions' statements were opinions, which were not alleged to have falsely represented its beliefs at the the time. 

Plaintiffs allege that the company and its senior officials were well aware of the deteriorating condition in the Florida real estate market, but they failed to recognize the non-performing loans in the acquiree's portfolio.  As a result, the Regions "repeatedly, yet falsely, claimed that the $6 billion in goodwill associated with the AmSouth acquisition was unimpaired." 

The case stemmed from the crisis in the housing and residential mortgage markest that started to take hold around the time that Regions acquired AmSouth.  The problems were particularly pronounced in Southern states, where AmSouth had invested heavily in the real estate market.

According to the complaint, the bank failed to write down goodwill connected with the acquisition and to sufficiently increase loan loss reserves in light of the negative trends.  Regions overstated goodwill and "vastly underestimated" loan loss reserves in securities offering documents.

Eventually, Regions was forced to write down its goodwill by $6 billion and increase its loan loss reserves by over $1 billion, causing the stock price to drop.  The suit blames that drop in share price on misstatements made by the bank.    [Thomson Reuters, 8/23/11]