Regions Financial Corporation
) second-quarter 2013 earnings from continuing operations came in
at 21 cents per share, in line with the Zacks Consensus Estimate.
However, results compared unfavorably with the prior-quarter
earnings of 23 cents per share.
In the reported quarter, Regions' capital actions undertaken
enhanced the company's financial performance by reducing funding
costs and providing higher returns to shareholders through an
increase in common stock dividends (up 200%) and repurchase of
However, some of these actions reduced pre-tax net income to
common shareholders by $56 million and earnings per share by 3
cents in second-quarter 2013.
Net income available to common shareholders was $259 million or
18 cents per share, down from $327 million or 23 cents per share
reported in the prior quarter.
Performance in Detail
Total revenue (net of interest expense) came in at $1.3 billion,
in line with the Zacks Consensus Estimate. However, revenues
increased modestly on a sequential basis.
Regions reported adjusted pre-tax pre-provision income from
continuing operations of $421 million, down 7.9%
sequentially. Excluding $56.0 million in costs related to
the early termination of certain debt and preferred securities
coupled with securities gains, pre-tax pre-provision income
surged 6% sequentially.
Net interest margin rose 3 basis points sequentially to 3.16% in
the quarter, attributed to lower deposit costs and reduced cash
holdings at the Federal Reserve. Funding mix showed an
improvement as average low-cost deposits inched up as a
percentage of total deposits from 86% in the prior quarter to
Taxable equivalent net interest income was $821 million, up 1.0%
sequentially. The rise was mainly attributed to growth in loans,
an additional day count along with the persistent decline in
On the flip side, Regions' non-interest income was $497 million,
down 1% sequentially. Non-interest income included $8 million in
securities gains. Reduced service charges income and mortgage
revenues led to the fall in non-interest income. In the quarter
under review, mortgage production stood at about $1.9 billion, up
Non-interest expense increased 5% sequentially to $884 million.
Excluding $56 million in costs associated with capital plan
actions, non-interest expense declined 2%. Better expense
management partially mitigated the increase in salaries and
Credit quality was a mixed bag during the second quarter at
Regions. Non-performing assets reduced 5% sequentially to $1.7
billion. Net charge-offs decreased 20% sequentially to $144
million. Additionally, net charge-offs as a percentage of average
net loans stood at 0.77%, down 22 basis points sequentially.
However, inflow of non-performing loans surged 18% sequentially
to $328 million. Moreover, provision for loan losses more than
doubled to $31 million as compared with the prior quarter.
Regions' capital position was strong at the end of the quarter.
As of Jun 30, 2013, Regions' Tier 1 capital ratio came in at
11.7% compared with 12.3% in the prior quarter.
Tier 1 common capital ratio was 11.2%, in line with the prior
quarter. The company's loan-to-deposit ratio was 81.0% as of the
same date, up from 79% in the prior quarter. Tangible common book
value per share came in at $7.11 in the reported quarter compared
with $7.29 in the prior quarter.
We believe the company's favorable funding mix, improved core
business performance, its expansion mode and strategies will
continue to yield profitable earnings in the upcoming quarters.
Additionally, significant improvement in its credit quality and
control in non-interest expenses would act as positive catalysts.
Moreover, replacement of higher cost liabilities by lower cost
liabilities is expected to reduce funding costs further, thereby
enhancing overall profitability. Yet, regulatory issues and
reducing fee income remain major areas of concern.
Regions currently carries a Zacks Rank #2 (Buy). Besides Regions,
other banks in Southeast that are currently performing well
Capital City Bank Group Inc.
Home Bancshares, Inc. (Conway, AR)
). All the 3 companies carry a Zacks Rank #1 (Strong Buy).
CAPITAL CITY BK (CCBG): Free Stock Analysis
HOME BANCSHARES (HOMB): Free Stock Analysis
REGIONS FINL CP (RF): Free Stock Analysis
WESBANCO INC (WSBC): Free Stock Analysis
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