Regions Financial Corporation (RF)

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Regions Financial Corporation (RF)

Q3 2009 Earnings Call

October 20, 2009 11:00 AM ET


M. List Underwood - Director of Investor Relations

C. Dowd Ritter - Chairman and Chief Executive Officer

Irene Esteves - Chief Financial Officer and Senior Executive Vice President, Finance Group

O. B. Grayson Hall, Jr. - President and Chief Operating Officer

Barb Guidon - Head of Consumer Credit

William C. Wells, II - Chief Risk Officer and Senior Executive Vice President, Risk Management Group

G. Timothy Laney - Senior Executive Vice President Chief Credit Officer

Tom Neely - Director, Risk Analytics


Betsy L. Graseck - Morgan Stanley

Matthew D. O'Connor - Deutsche Bank

Craig Siegenthaler - Credit Suisse

Christopher M. Mutascio - Stifel Nicolaus & Company, Inc.

Jefferson Harralson - Keefe, Bruyette & Woods

Phillip Gutfleish - Elm Ridge Capital

Albert Savastano - Fox-Pitt Kelton

Edwin Groshans - Ladenburg Thalmann & Co. Inc.

Kevin Fitzsimmons - Sandler O'Neill & Partners, LP

Todd Hagerman - Collins Stewart LLC

Heather Wolf - UBS

Christopher Marinac - FIG Partners

Marty Mosby - FTN Equity Capital Markets

Jason M. Goldberg - Barclays Capital

Scott Valentin - Friedman, Billings & Ramsey

Carole Berger - Soleil Securities



Good morning and welcome to the Regions Financial Corporation's Quarterly Earnings Call. My name is Wes and I will be your operator for today's call. I would like to remind everyone that all participant phone lines have been placed on listen-only. At the end of the call, there will be a question-and-answer session. (Operator Instructions).

I will now turn the call over to Mr. List Underwood, before Mr. Ritter begins the conference call.

M. List Underwood

Thank you, operator and good morning everyone. We appreciate very much your participation today. Our presenters are Chairman and Chief Executive Officer Dowd Ritter; and our Chief Financial Officer; Irene Esteves. Also joining us and available to answer questions are Bill Wells, our Chief Risk Officer; Tom Neely, Director of Risk Analytics; and Barb Guidon, our Head of Consumer Credit. Here with us also is our recently appointed Chief Credit Officer Tim Laney.

Let me quickly touch on our presentation format. We have prepared a short slide presentation to accompany Irene's comments. It's available under the Investor Relations section of For those of you in the investment community that dialed in by phone, once you are on the Investor Relations section of our website, just click on via phone player and the slides will automatically advance in sync with the audio of Irene's presentation. A copy of the slides will be available on our website shortly after the call.

Our presentation this morning, we'll discuss Regions business outlook and includes forward-looking statements. These statements may include descriptions of management's plans, objectives, or goals for future operations, products or services, forecasts of financial or other performance measures, statements about the expected quality, performance or collectability of loans and statements about Regions general outlook for economic and business conditions.

We also may make other forward-looking statements in the question-and-answer period following the discussion. These forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially. Information on the risk factors that could cause actual results to differ is available from today's earnings press release, in today's Form 8-K, our 10-Q for the quarters ended March 31st, and June 30th 2009 and in our Form 10-K for the year ended December 31, 2008.

As a reminder, forward-looking statements are effective only as of the date they are made and we assume no obligation to update information concerning our expectations. Let me also mention that our discussions may include the use of non-GAAP financial measures. A reconciliation of these to the same measures on a GAAP basis can be found in our earnings release and related supplemental financial schedules.

Now, I'll turn it over to Dowd.

C. Dowd Ritter

Thank you List and good morning everyone. We appreciate you joining Regions third quarter earnings conference call this morning.

Before I begin discussing the quarterly results, I will mention one other item of importance to this company and its future performance. Last week, I am sure most of you saw we announced that Grayson Hall was named President and Chief Operating Officer of the company. This is the logical next step in establishing a clear management succession plan. As well as further strengthening our corporate governance and most importantly positioning Regions well for growth in the years ahead.

This appointment of recognition of Grayson's tremendous leadership of building and accomplishments over his 29 years with the company in ever increasing roles of responsibility as well as our Board's future expectations. Under Grayson's leadership for example, customer satisfaction at Regions has reached an all time high and consistently relaxed in the top quota versus other banks as measured by Gallup surveys.

Finally, sign of the economic environment remains difficult and I am committed to working with Grayson and the other senior members of our management team over the coming years to continue to manage the company for the long-term benefit of our shareholders. By the way, I should add that Grayson is here with us today and available to answer questions as well.

Let me turn now to core. Regions third quarter loss of $0.47 per fully diluted share was driven by our ongoing efforts to proactively identify -- deal with a reserve for credit related problems as we further improve the risk profile of our balance sheet.

Additionally, non-interest expenses were inflated by costs associated with our branch consolidation initiative and other rising costs reflective of the current recessionary environment. Examples of these would include FDIC insurance, other real estate costs and professional fees. These items more than offset to build debts of strong and low cost customer deposit growth. And including net interest margin and solid core fee based revenue and good core operating expense containment.

Let's first talk about credit quality in the third quarter's loan loss provision and OREO cost, which totaled nearly $1.1 billion or $0.56 per share which were up $150 million or a link quarter basis. As Irene will detail for you both non-performing assets and net loan charge-offs continue to rise during the third quarter. Therefore, we increased the allowance for credit losses to 2.90% of loans. The good news is that the gross inflows of non-performing loans appears to be stabilizing. Also of note, related to our $7.3 billion shared national credit portfolio, we recorded just $37 million of net charge-offs and we placed an additional $109 million of non-accrual status in the current quarter.

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