2. Regions Financial

Company Profile

Shares of Regions Financial ( RF) of Birmingham, Ala. closed at $7.21 Wednesday, returning 35% year-to-date. The company owes $3.5 billion in TARP money.

Income Statement

Regions reported a second-quarter net loss to common shareholders of $335 million, or 28 cents a share, compared to net losses to common shareholders of $255 million, or 21 cents a share, in the first quarter and $244 million or 28 cents a share for the second quarter of 2009. Results for the second quarter of 2010 included a charge of $200 million to cover what the company termed "probably" losses by the company's Morgan Keegan subsidiary, which is facing regulatory actions by the Securities and Exchange Commission and several states related to "certain funds previously administered."

Excluding the Morgan Keegan charge, Regions said the net loss would have been 11 cents a share.

The company's second-quarter provision for loan losses was $651 million, slightly exceeding net loan charge-offs.

The second quarter tax-adjusted net interest margin was 2.90% according to SNL Financial, improving from 2.62% a year earlier.

Balance Sheet

Total assets were $135.4 billion as of June 30. The nonperforming assets ratio was 3.59% and the second-quarter net charge-off ratio was 2.95%. Loan loss reserves covered 3.65% of total loans.

Regions Financial's Tier 1 leverage ratio was 9.10% and the total risk-based capital ratio was 15.90% as of June 30. The tangible common equity ratio was 6.26%, and many analysts assume the company will need to raise significant capital to continue working through its problem loans and exit TARP.

Christopher Marinac of FIG Partners said in an August report that his firm's earnings estimates for the company reflect "$2 Billion in new capital by early 2011 at a sub$6.50 share price or about 100% of our estimated tangible book."

Stock Ratios

The shares trade for 1.1 times tangible book value and 21.9 times the consensus earnings estimate of 33 cents for 2011, and 9.4 times the 2012 consensus earnings estimate of 77 cents a share. Of course, the P/E ratios don't take into account the dilution of shares that would result from an offering of common stock.

Analyst Ratings

Out of 19 analysts covering Regions Financial, only one has a buy rating while 16 recommend investors hold the shares and two recommend selling.

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