Regions Financial Corporation
) entered into a deferred prosecution agreement with the Securities
and Exchange Commission (SEC) for cooperation with the
investigation and settlement of federal and state allegations for
$51 million. Notably, the Alabama-based lender will pay a fine
worth $46 million to the Federal Reserve, while $5 million will be
paid to the Alabama Department of Banking.
Regulators alleged that Regions was responsible for misappropriate
accounting of bad commercial loans worth $168 million, which
increased the bank's income in the financial reports, thereby
showing inflated earnings. The settlement agreement entails the
resolution of regulatory inquiry over Regions' accounting issues
with certain problem loans at the end of first-quarter 2009.
Notably, as disclosed earlier, the company put aside a sufficient
amount as reserve in the fourth quarter of 2013 to settle this
Moreover, the deferred prosecution agreement was entered with the
SEC on Regions' failure to sustain adequate controls over its
accounting, which led to securities laws violations in 2009. As per
the terms, the bank will not be indicted if it abstains from such
violations and meets other conditions for a 2-year period ending
The Fed and the SEC levied civil penalty against 3 former managers
at the company's Regions Bank unit. According to the SEC, in the
first quarter of 2009, these executives intentionally evaded
Regions' internal accounting controls and inappropriately
classified troubled commercial loans worth $168 million as
performing. Allegedly, the move was taken to reserve less money for
loan and lease losses, thereby inflating earnings per share.
Regions Bank's head of special assets - Jeffrey Kuehr and former
chief credit officer - Michael Willoughby would be paying $70,000
each as civil penalty, besides facing a 5-year ban from acting as
officers or directors of any public company. Though Kuehr and
Willoughby neither denied nor admitted any wrongdoings, they agreed
to abstain from securities laws violations in the future.
Notably, the case filed by the SEC will be continued against the
former head of the bank's risk analytics group - Thomas Neely - who
has claimed the charges to be baseless and will fight the case.
Such regulatory issues alleging banks of wrongdoings tarnish their
reputation and financials over time. With the settlement of the
same, Regions plan to move forward with the business strategies,
after attempting to end issues related to the financial crisis.
The company has returned to sustainable profitability since the
financial crisis. We believe favorable funding mix, improved core
business performance, expansion spree, and other strategic
initiatives will yield profitable earnings in the coming quarters.
Currently, Regions carries a Zacks Rank # 3 (Hold). Some
better-ranked Southeast banks include
Capital City Bank Group Inc.
Middleburg Financial Corporation
Midsouth Bancorp Inc.
). All 3 carry a Zacks Rank #1 (Strong Buy).
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REGIONS FINL CP (RF): Free Stock Analysis
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