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Regions Latest Regional With Earnings Beat (Update 2)

Updated with market close information, along with comments from KBW analyst Melissa Roberts, Stifel Nicolaus analyst Christopher Mutascio, and Jefferies analyst Ken Usdin.

NEW YORK ( TheStreet) -- Regions Financial (RF - Get Report) on Tuesday reported a sharp decline in its credit expenses, along with an improved funding mix and solid commercial loan growth.

The Birmingham, Ala., lender's shares rose over 4% to close at $6.65.

The company followed the trend for large regional bank holding companies beating analysts' consensus second-quarter estimates, as credit costs continued to decline. According to KBW analyst Melissa Roberts, a sample of 64 large banks that had already reported second-quarter earnings showed that "on an operating-per-share basis, 46 banks (72%) beat consensus estimates, 4 (6%) met estimates, and 14 (22%) missed estimates. This compares to 2Q11 and 1Q12 when 67% and 69% of the banks beat estimates, respectively."

Regions reported second-quarter net income available to common shareholders of $284 million, or 20 cents a share, beating the consensus estimate of a 16-cent profit, among analysts polled by Thomson Reuters.

Earnings grew from $145 million, or 11 cents a share during the first quarter, and $55 million, or four cents a share, during the second quarter of 2011.

The second-quarter earnings were reduced by $71 million, or five cents a share, from the accelerated discount accretion related to the company's redemption in April of $3.5 billion in preferred shares held by the government, for bailout assistance received in October 2008, through the Troubled Assets Relief Program, or TARP.

The second-quarter results were boosted by a decline in the provision for loan losses to $26 million, from $117 million the previous quarter, and $398 million a year earlier, as asset quality continued to improve. Regions Financial's annualized ratio of net charge-offs to average loans was 1.39% during the second quarter, improving from 1.73% in the first quarter, and 2.71% during the second quarter of 2011.

Even after releasing $239 million in loan loss reserves during the second quarter, loan loss reserves covered 3.01% of net loans as of June 30, indicating that the company will continue to release reserves over coming quarters, boosting earnings.

Regions had $122.3 billion in total assets as of June 30, declining 5% from the previous quarter, and 7% from a year earlier. Nonperforming assets totaled $2.3 billion as of June 30 and made up 1.91% of total assets, improving from 2.06% in March and 2.75% in June 2011.

During the second quarter, the bank's net interest margin - the spread between the average yield on loans and investments and the average cost for deposits and borrowings - expanded to a tax-adjusted 3.16%, from 3.09% in the first quarter, and 3.07% in the second quarter of 2011, with the sequential improvement reflecting "lower deposit costs, lower non-accrual levels and further deployment of excess cash." The company said that during the second quarter, "average low-cost deposits improved 2 percent linked quarter while higher cost time deposits declined 10 percent."
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