Regions Financial Corporation And Subsidiaries Financial Supplement Fourth Quarter 2012

Regions Financial Corporation (NYSE:RF) today reported earnings for the quarter and year ended December 31, 2012.

Key points:

• Reported net income available to common shareholders of $261 million or $0.18 per diluted share as compared to $301 million or $0.21 per diluted share in the third quarter
  • Reported net income from continuing operations available to common shareholders of $273 million or $0.19 per diluted share
  • Adjusted net income available to common shareholders from continuing operations ¹ was $311 million or $0.22 per diluted share as compared to $312 million or $0.22 per diluted share in the third quarter
• Reported full year 2012 net income from continuing operations available to common shareholders of $1.1 billion or $0.76 per diluted share
• Adjusted pre-tax pre-provision income ¹ (PPI) from continuing operations totaled $493 million, a 5 percent increase from the prior quarter
  • Net interest income was stable and totaled $818 million; the resulting net interest margin was 3.10 percent
  • Non-interest revenue was $536 million, a 1 percent increase on a linked quarter basis. Total revenue was $1.35 billion, stable linked quarter
  • Non-interest expenses totaled $902 million, reflecting a 4 percent increase linked quarter. Adjusted non-interest expenses ¹ decreased $20 million, or 2 percent linked quarter.
• Asset quality improvement continues
  • Non-performing assets declined $296 million or 13 percent linked quarter; inflows of non-performing loans amounted to $350 million, down 24% linked quarter
  • Net charge-offs of $180 million decreased 31 percent linked quarter to 96 basis points; loan loss provision of $37 million was $143 million less than net charge-offs
  • Business services criticized loans declined $639 million linked quarter or 12 percent
  • Allowance for loan losses as a percentage of loans declined 15 basis points linked quarter to 2.59 percent, while the ratio of allowance for loan losses to non-performing loans increased 5 basis points to 1.14x
• Balance sheet
  • Funding mix continued to improve as low-cost deposits grew $2.1 billion linked quarter and higher cost time deposits declined $1.5 billion
  • Deposit costs declined to 22 basis points, down 6 basis points from third quarter and 18 basis points from the prior year
  • Loan growth in the middle market commercial and industrial and indirect auto portfolios continued, with average loans up 1.5 percent and 6.7 percent linked quarter, respectively. Average total loans decreased 1.4 percent linked quarter due to continued business and consumer deleveraging.
  • Loan yields were up 3 basis points linked quarter to 4.21 percent
• Capital and liquidity positions remain strong
  • Solid capital position with an estimated Tier 1 ratio of 12.0 percent and Tier 1 Common ratio ¹ of 10.8 percent at December 31, 2012
  • Successfully issued depositary shares representing preferred stock of $500 million, redeemed $345 million of trust preferred securities, and extinguished a $203 million liability associated with an investment by a third party in a subsidiary
  • Tangible common book value per share ¹ was $7.11, an increase of $0.09 from the prior quarter
  • Liquidity position remains strong with a low loan-to-deposit ratio of 78 percent

Highlights					Three Months Ended
(In millions, except per share data)					December 31, 2012			September 30, 2012			December 31, 2011
					Amount			Amount			Amount
Net Income
Net interest income					$818			$817			$849
Securities gains, net					12			12			7
Other non-interest income					524			521			500
Total revenue					1,354			1,350			1,356
Provision for loan losses					37			33			295
Goodwill impairment					0			0			253
Non-interest expense, excluding goodwill impairment					902			869			871
Pre-tax income (loss)					415			448			(63)
Income tax expense					138			136			18
Income (loss) from continuing operations		(A)			277			312			(81)
Loss from discontinued operations, net of tax					(12)			(11)			(467)
Net income (loss)					265			301			(548)
Preferred dividends and accretion		(B)			4			0			54
Net income (loss) available to common shareholders					$261			$301			($602)
Income (loss) from continuing operations available to common shareholders (A) – (B)					$273			$312			($135)
					Three Months Ended
					December 31, 2012			September 30, 2012			December 31, 2011
					Amount/Dil. EPS			Amount/Dil. EPS			Amount/Dil. EPS
Pre-tax Pre-Provision Income (non-GAAP) 1
Income (loss) from continuing operations available to common shareholders (GAAP) (A) – (B)					$273			$312			($135)
Plus: Preferred dividends and accretion (GAAP)					4			0			54
Plus: Income tax expense (GAAP)					138			136			18
Pre-tax income (loss) from continuing operations (GAAP)					415			448			(63)
Plus: Provision for loan losses (GAAP)					37			33			295
Pre-tax pre-provision income from continuing operations (non-GAAP) 1					$452			$481			$232
Plus: Goodwill impairment and other adjustments					41			(12)			236
Adjusted pre-tax pre-provision income from continuing operations (non-GAAP) 1					$493			$469			$468
					Three Months Ended
					December 31, 2012			September 30, 2012			December 31, 2011
					Amount/Dil. EPS			Amount/Dil. EPS			Amount/Dil. EPS
GAAP to non-GAAP EPS Reconciliation
Earnings (loss) per share as reported (GAAP)					$0.18			$0.21			($0.48)
Earnings (loss) per share from discontinued operations (GAAP)					(0.01)			(0.01)			(0.37)
Earnings (loss) per share from continuing operations (GAAP)					0.19			0.22			(0.11)
Goodwill impairment from continuing operations					(0.00)			(0.00)			(0.20)
REIT investment early termination cost					(0.03)			(0.00)			(0.00)
Adjusted earnings per share from continuing operations, excluding goodwill impairment and REIT investment early termination cost (non-GAAP) 1					$0.22			$0.22			$0.09
					Three Months Ended
					December 31, 2012			September 30, 2012			December 31, 2011
Key ratios*
Net interest margin (FTE)					3.10%			3.08%			3.08%
Tier 1 capital					12.0%			11.5%			13.3%
Tier 1 common 1 risk-based ratio (non-GAAP)					10.8%			10.5%			8.5%
Tangible common stockholders’ equity to tangible assets 1 (non-GAAP)					8.63%			8.49%			6.57%
Tangible common book value per share 1 (non-GAAP)					$7.11			$7.02			$6.37
Asset quality
Allowance for loan losses as % of net loans					2.59%			2.74%			3.54%
Net charge-offs as % of average net loans~					0.96%			1.38%			2.16%
Non-accrual loans, excluding loans held for sale, as % of loans					2.27%			2.50%			3.06%
Non-performing assets as % of loans, foreclosed properties and non-performing loans held for sale					2.59%			2.93%			3.83%
Non-performing assets (including 90+ past due) as % of loans, foreclosed properties and non-performing loans held for sale					3.19%			3.47%			4.40%
*Tier 1 Common and Tier 1 Capital ratios for the current quarter are estimated.
~Annualized
1 Non-GAAP, refer to pages 10 and 18-20 of the financial supplement to this earnings release

Building a foundation for sustainable growth

Regions reported fourth quarter net income available to common shareholders of $261 million or $0.18 per diluted share and net income available to common shareholders from continuing operations of $273 million or $0.19 per diluted share.

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