Regions Financial Corporation And Subsidiaries Financial Supplement Third Quarter 2012

Regions Financial Corporation (NYSE:RF) today reported earnings for the quarter ending September 30, 2012.

Key points:

• Reported net income available to common shareholders of $301 million or $0.21 per diluted share as compared to $284 million or $0.20 per diluted share in the second quarter
  • Reported net income available to common shareholders from continuing operations was $312 million or $0.22 per diluted share
• Balance sheet reflects commercial loan growth amid continued customer deleveraging
  • Loan growth in the middle market commercial and industrial portfolio continued, with average loans up 1.5 percent linked quarter, while consumer loans declined 1.3 percent
  • Loan yields were down linked quarter to 4.18 percent or 11 basis points
  • Deposit costs declined to 28 basis points down 4 basis points from second quarter and 18 basis points from the prior year
  • Funding mix continued to improve as average low cost deposits grew $385 million linked quarter and higher cost time deposits declined $1.6 billion
• Pre-tax pre-provision income ¹ (PPI) from continuing operations totaled $481 million, a 4 percent decrease from the prior quarter
  • Net interest income totaled $817 million, and the resulting net interest margin was 3.08 percent
  • Non-interest revenue from continuing operations was $533 million, a 5 percent increase on a linked quarter basis primarily related to an increase in mortgage income
  • Total revenue was $1.35 billion, an increase of $5 million linked quarter
  • Non-interest expenses from continuing operations totaled $869 million, reflecting a 3 percent increase linked quarter
• Asset quality improved
  • Non-performing loans, excluding loans held for sale, declined $31 million or 2 percent linked quarter; inflows of non-performing loans amounted to $463 million
  • Net charge-offs were relatively steady linked quarter; loan loss provision of $33 million was $229 million less than net charge-offs
  • Business services criticized loans declined $305 million linked quarter or 6 percent
• Allowance for loan losses as a percentage of loans declined 27 basis points linked quarter to 2.74 percent, while the coverage ratio of non-performing loans decreased 11 basis points to 1.09x
• Strong capital position with an estimated Tier 1 ratio of 11.5 percent and Tier 1 Common ratio ¹ of 10.5 percent at September 30, 2012
• Liquidity position remains solid with a low loan-to-deposit ratio of 79 percent
• Tangible book value per share was $7.02, an increase of $0.33 from the prior quarter

Highlights				Three Months Ended:
(In millions, except per share data)				September 30, 2012			June 30, 2012			September 30, 2011
				Amount			Amount			Amount
Net Income
Net interest income				$817			$838			$850
Securities gains / (loss), net				12			12			(1)
Other non-interest income				521			495			514
Total revenue				1,350			1,345			1,363
Provision for loan losses				33			26			355
Non-interest expense				869			842			850
Pre-tax income				448			477			158
Income tax expense				136			126			17
Income from continuing operations	(A)			312			351			141
Income / (loss) from discontinued operations, net of tax				(11)			4			14
Net income				301			355			155
Preferred dividends and accretion	(B)			0			71			54
Net income available to common shareholders				$301			$284			$101
Income from continuing operations available to common shareholders (A) – (B)				$312			$280			$87
				Three Months Ended
				September 30, 2012			June 30, 2012			September 30, 2011
				Amount/Dil. EPS			Amount/Dil. EPS			Amount/ Dil. EPS
Pre-tax Pre-Provision Income (non-GAAP) 1
Income from continuing operations available to common shareholders (GAAP) (A) – (B)				$312			$280			$87
Plus: Preferred dividends and accretion (GAAP)				0			71			54
Plus: Income tax expense (GAAP)				136			126			17
Pre-tax income from continuing operations (GAAP)				448			477			158
Plus: Provision for loan losses (GAAP)				33			26			355
Pre-tax pre-provision income from continuing operations (non-GAAP) 1				$481			$503			$513
GAAP to non-GAAP EPS Reconciliation
Earnings per share (GAAP)				$0.21			$0.20			$0.08
Earnings (loss) per share from discontinued operations (GAAP)				(0.01)			0.00			0.01
Earnings per share from continuing operations (GAAP)				$0.22			$0.20			$0.07

					Three Months Ended
					September 30, 2012			June 30, 2012			September 30, 2011
Key ratios*
Net interest margin (FTE)					3.08%			3.16%			3.04%
Tier 1 capital					11.5%			11.0%			12.8%
Tier 1 common 1 risk-based ratio (non-GAAP)					10.5%			10.0%			8.2%
Tangible common stockholders’ equity to tangible assets 1 (non-GAAP)					8.49%			8.04%			6.48%
Tangible common book value per share 1 (non-GAAP)					$7.02			$6.69			$6.38
Asset quality
Allowance for loan losses as % of net loans					2.74%			3.01%			3.73%
Net charge-offs as % of average net loans~					1.38%			1.39%			2.52%
Non-accrual loans, excluding loans held for sale, as % of loans					2.50%			2.51%			3.41%
Non-performing assets as % of loans, foreclosed properties andnon-performing loans held for sale					2.93%			3.04%			4.23%
Non-performing assets (including 90+ past due) as % of loans, foreclosed properties andnon-performing loans held for sale					3.47%			3.57%			4.75%
*Tier 1 Common and Tier 1 Capital ratios for the current quarter are estimated. ~Annualized 1 Non-GAAP, refer to pages 8 and 16-19 of the financial supplement to this earnings release

Focusing on customers and steady business performance

Regions reported third quarter net income available to common shareholders of $301 million or $0.21 per diluted share and net income available to common shareholders from continuing operations of $312 million or $0.22 per diluted share. Pre-tax pre-provision income ¹ totaled $481 million as compared to $503 million in the prior quarter and $513 million in the prior year. The sequential quarter decline of 4 percent reflected a decrease in net interest income and increases in non-interest expenses partially offset by an increase in non-interest revenue. Total revenue increased during the quarter from $1,345 million to $1,350 million or $5 million.

Regions continues to make prudent investments in its business to meet more customer needs and diversify revenue streams in an efficient and sustainable manner. This quarter the company announced the expansion of Regions’ Wealth Management solutions, and rolled out several new consumer products and technology enhancements designed to deepen customer relationships, including an integrated customer rewards program. In addition, the company introduced a suite of credit card offerings for consumers and businesses, successfully converting some 500,000 credit card accounts to Regions’ products and systems.

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