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Regions Financial Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 5, 2011 01:21PM
Regions Financial Corp. (RF) filed Quarterly Report for the period ended 2011-03-31.
Highlight of Business Operations:
Regions reported net income available to common shareholders of $17 million, or $0.01 per diluted share in the first quarter of 2011, compared to a net loss available to common shareholders of $255 million, or $0.21 loss per diluted share in the first quarter of 2010. A decline in the provision for loan losses was the primary driver of the improvement in operations from the prior year period. During the first quarter of 2011, Regions recorded a $482 million provision for loan losses, $288 million lower than the first quarter of 2010, reflecting improving credit trends. Higher net interest income and non-interest income along with lower non-interest expenses also contributed to the improved results from operations. Slower prepayments resulted in lower premium amortization on mortgage-backed securities and lower deposit pricing drove the net interest margin to 3.07 percent for the first quarter of 2011, a 30 basis point improvement over the first quarter of 2010.
Net interest income on a fully taxable-equivalent basis for the first quarter of 2011 was $872 million compared to $839 million in the first quarter of 2010. Improved deposit pricing resulting from a favorable mix shift to lower cost products, as evidenced by a decline in deposit costs from 1.00 percent to 0.59 percent, drove the increase in net interest income.
Net charge-offs totaled $481 million, or an annualized 2.37 percent of average loans, in the first quarter of 2011, compared to $700 million, or an annualized 3.16 percent for the first quarter of 2010. Charge-offs were lower across most major categories when comparing the 2011 period to the prior year period, with investor real estate representing the most significant driver of the decrease. The provision for loan losses, which essentially matched net charge-offs, totaled $482 million in the first quarter of 2011 compared to $770 million during the first quarter of 2010. The allowance for loan losses at March 31, 2011 was 3.92 percent of total loans, net of unearned income, compared to 3.84 percent at December 31, 2010 and 3.61 percent at March 31, 2010. Total non-performing assets were $3.9 billion at both March 31, 2011 and December 31, 2010, compared to $4.6 billion at March 31, 2010.
Non-interest income for the first quarter of 2011 increased by $31 million compared to the first quarter of 2010. The increase was primarily driven by increases in brokerage, investment banking and capital markets income as well as securities gains. These increases are offset somewhat by decreases in mortgage income. Total non-interest expense was $1.2 billion in the first quarter of 2011, a $63 million decrease from the first quarter of 2010, primarily the result of a $53 million loss on the prepayment of approximately $1.5 billion of FHLB advances during the first quarter of 2010.
Regions total assets at March 31, 2011 were $131.8 billion, compared to $132.4 billion at December 31, 2010. The decrease in total assets from year-end 2010 resulted primarily from decreases in the loan portfolio, a product of strategic decisions to reduce the concentration in investor real estate loans. A decrease in other assets, primarily driven by settlements of securities sales, also drove the overall decrease in assets. These decreases were partially offset by increases in securities available for sale.
The home equity portfolio totaled $13.9 billion at March 31, 2011 as compared to $14.2 billion at December 31, 2010 and $15.1 billion at March 31, 2010. Substantially all of this portfolio was originated through Regions branch network. Losses in this portfolio generally track overall economic conditions. The main source of economic stress has been in Florida, where residential property values have declined significantly while unemployment rates have risen to historically high levels. Losses in Florida where Regions is in a second lien position are higher than first lien losses.
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