The Federal Reserve said Regions Bank will pay a $46 million misconduct penalty for incorrectly identifying and reporting nonperforming loans and that three former employees will be sanctioned while avoiding prosecution.

The enforcement action taken against the Regions Financial Corp. unit was issued jointly with the Alabama Department of Banking, which assessed the Birmingham-based lender a separate $5 million penalty, the Fed said today in a statement issued in Washington. The Fed acted in conjunction with the Securities and Exchange Commission.

"The enforcement actions are based on deficiencies in the controls and procedures in place at Regions Bank in the first quarter of 2009 for identifying loans for non-accrual status and for assuring that accurate and complete information was provided" to Fed and Alabama bank examiners investigating the lender, the central bank said in the statement.

The former employees participated in the deficient non- accrual loan process in 2009 and provided "inaccurate, incomplete, and misleading information to examiners about that process," the Fed said.

The central bank said it's initiating administrative proceedings against Thomas Neely Jr., a former senior commercial credit executive, to ban him from the banking industry and also is seeking a $2.4 million civil penalty.

The Fed said it's also issuing consent orders against Michael Willoughby, the bank's former chief credit officer, and Jeffrey Kuehr, former head of the problem loan workout department, to bar them from the banking industry.

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