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Regions Financial Corporation And Subsidiaries Financial Supplement To Second Quarter 2013 Earnings Release

Regions Financial Corporation (NYSE:RF) today reported earnings for the quarter ended June 30, 2013.

Key points:

  • Reported net income available to common shareholders of $259 million, as compared to $327 million in the first quarter and $284 million in the second quarter of the prior year. Reported earnings available to common shareholders per diluted share of $0.18.
    • Pre-tax pre-provision income 1 from continuing operations totaled $421 million, which included $56 million in costs associated with the early termination of certain debt and preferred securities. Excluding these costs and securities gains, pre-tax pre-provision income 1 increased 6 percent from the previous quarter.
    • Net interest income totaled $808 million, up $10 million from the prior quarter
    • Net interest margin was 3.16 percent, an improvement of 3 basis points from the prior quarter
    • Non-interest revenue totaled $497 million, down 1 percent from the prior quarter
    • Non-interest expenses totaled $884 million; excluding costs associated with the early termination of certain debt and preferred securities 1, non-interest expenses declined 2 percent from the prior quarter
  • Balance sheet improvement highlighted by loan growth
    • Total ending loans rose $1.1 billion linked quarter or 1.4 percent. Total new loan production was $8 billion, an increase of 23 percent linked quarter and 14 percent year over year.
    • Total business lending, which includes commercial and investor real estate portfolios, increased 2 percent linked quarter, led by commercial and industrial loans, which grew 5 percent
    • Total consumer loans were flat linked quarter, with growth in indirect auto, credit card and other consumer loans offset by a decline in residential mortgage and home equity lending
    • Funding mix continued to improve as average time deposits declined $1.5 billion
    • Deposit costs declined to 15 basis points, down 3 basis points from the first quarter, and total funding costs were down 5 basis points linked quarter to 40 basis points
  • Asset quality continues to improve
    • Net charge-offs of $144 million, or 77 basis points, were down linked quarter; the loan loss provision of $31 million was $113 million less than net charge-offs
    • Both non-performing assets and non-performing loans decreased 5 percent linked quarter
    • Allowance for loan losses as a percentage of loans declined 19 basis points linked quarter to 2.18 percent, while the ratio of allowance for loan losses to non-performing loans decreased one basis point to 1.09x
  • Capital and liquidity positions remain strong
    • Successfully completed several capital plan actions reducing funding costs
    • Solid capital position with an estimated Tier 1 ratio of 11.7 percent and Tier 1 Common ratio 1 of 11.2 percent at June 30, 2013
    • Liquidity position remains solid with a low loan-to-deposit ratio of 81 percent
 

Highlights

    Three Months Ended
(In millions, except per share data) June 30, 2013     March 31, 2013     June 30, 2012
Amount Amount Amount
 
Net Income
Net interest income $808 $798 $838
Securities gains, net 8 15 12
Other non-interest income 489 486 495
Total revenue 1,305 1,299 1,345
Provision for loan losses 31 10 26
Non-interest expense 884 842 842
Pre-tax income 390 447 477
Income tax expense 122 114 126
Income from continuing operations (A) 268 333 351
Income (loss) from discontinued operations, net of tax (1) 2 4
Net income 267 335 355
Preferred dividends and accretion (B) 8 8 71
Net income available to common shareholders $259 $327 $284

Income from continuing operations available to common shareholders (A)–(B)

$260

$325

$280

 
 

Three Months Ended
June 30, 2013 March 31, 2013 June 30, 2012
Amount Amount Amount

Pre-tax Pre-Provision Income (non-GAAP) 1

Income from continuing operations available to common shareholders (GAAP) (A)–(B)

$260

$325

$280

Plus: Preferred dividends (GAAP) 8 8 71
Plus: Income tax expense (GAAP) 122 114 126
Pre-tax income from continuing operations (GAAP) 390 447 477
Plus: Provision for loan losses (GAAP) 31 10 26

Pre-tax pre-provision income from continuing operations

(non-GAAP) 1

$421 $457 $503
Plus: Securities gains, net, and other adjustments 1 48 (15) (17)

Adjusted pre-tax pre-provision income from continuing operations (non-GAAP) 1

$469

$442

$486

 
 

Three Months Ended
June 30, 2013 March 31, 2013 June 30, 2012
Key ratios*  
Net interest margin (FTE) 3.16% 3.13% 3.16%
Tier 1 capital* 11.7% 12.4% 11.0%

Tier 1 common* risk-based ratio 1 (non-GAAP)

11.2% 11.2% 10.0%
Tangible common stockholders’ equity to tangible assets 1 (non-GAAP) 8.72% 8.98% 8.04%

Tangible common book value per share 1 (non-GAAP)

$7.11 $7.29 $6.69
Asset quality
Allowance for loan losses as % of net loans 2.18% 2.37% 3.01%

Net charge-offs as % of average net loans~

0.77% 0.99% 1.39%
Non-accrual loans, excluding loans held for sale, as % of loans 2.01% 2.15% 2.51%
Non-performing assets as % of loans, foreclosed properties and non-performing loans held for sale 2.25% 2.41% 3.04%

Non-performing assets (including 90+ past due) as % of loans, foreclosed properties and non-performing loans held for sale 2

2.68% 2.88% 3.49%
 
*Tier 1 Common and Tier 1 Capital ratios for the current quarter are estimated
~Annualized

1 Non-GAAP, refer to pages 8 and 16-17 of the financial supplement to this earnings release

2 Guaranteed residential first mortgages were excluded from the 90+ past due amounts, refer to pages 11 and 14 of the financial supplement to this earnings release

 
 

Positive momentum continues

Regions reported second quarter net income available to common shareholders of $259 million, or $0.18 per diluted share. During the second quarter the company executed several liability management activities that reduced diluted earnings per share by $0.03.

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