Regions Financial Corp. (RF, Financial) filed Quarterly Report for the period ended 2010-03-31.
Regions Financial Corp. has a market cap of $10.25 billion; its shares were traded at around $8.58 with and P/S ratio of 1.2. The dividend yield of Regions Financial Corp. stocks is 0.4%.RF is in the portfolios of Fairholme Fund, Bruce Berkowitz of Fairholme Capital Management, Arnold Schneider of Schneider Capital Management, Michael Price of MFP Investors LLC, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, John Paulson of Paulson & Co., RS Investment Management, Brian Rogers of T Rowe Price Equity Income Fund, Charles Brandes of Brandes Investment, Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC.
Net interest income on a fully taxable-equivalent basis for the first quarter of 2010 was $839 million compared to $817 million in the first quarter of 2009. The net interest margin (taxable-equivalent basis) was 2.77% in the first quarter of 2010, compared to 2.64% during the first quarter of 2009. Improved deposit pricing, as well as a favorable mix shift to lower cost products drove the improvement.
Net charge-offs totaled $700 million, or an annualized 3.16% of average loans, in the first quarter of 2010, compared to 1.64% for the first quarter of 2009. Charge-offs were higher across most major categories when comparing the 2010 period to prior year, with investor real estate representing the most significant driver of the increase. The provision for loan losses totaled $770 million in the first quarter of 2010 compared to $425 million during the first quarter of 2009. The allowance for loan losses at March 31, 2010 was 3.61% of total loans, net of unearned income, compared to 3.43% at December 31, 2009 and 1.94% at March 31, 2009. Total non-performing assets, excluding loans held for sale, at March 31, 2010 were $4.3 billion, compared to $4.1 billion at December 31, 2009 and $1.9 billion at March 31, 2009. During 2009, the growth in non-performing loans was driven by the land, single family, condominium and the income producing components of investor real estate. For the quarter ended March 31, 2010, there was a slight decline of land, single family and condominium non-performing loans, while income-producing increased at a more moderate rate. Additionally, commercial and industrial loans contributed to the quarterly increase. In spite of the increase in non-performing assets, credit costs and related metrics have begun to stabilize. Net inflows of non-performing assets for the first quarter of 2010 were lower than recent quarters. Some categories of internally risk rated problem assets, an indicator of future non-performing assets, showed improvement during the first quarter of 2010. The Company expects non-performing assets and net charge-offs to peak by the end of the second quarter of 2010 and decline thereafter.
Non-interest income for the first quarter of 2010 decreased by $254 million compared to the first quarter of 2009. Non-interest income included $19 million in leveraged lease termination gains for the first quarter of 2010 versus $323 million for the 2009 period. The decrease in termination gains was partially offset by increases in income from service charges on deposit accounts and brokerage, investment banking and capital markets. Service charges will be negatively impacted going forward due to new policies implemented during the second quarter of 2010 as well as regulatory changes. Mortgage income, while relatively stable period over period, benefitted from mortgage servicing rights and related derivative valuation adjustments during the 2010 period. This increase was offset by the normalization of income related to mortgage origination activity, which was unusually high during the first quarter of 2009.
Total non-interest expense was $1.2 billion and $1.1 billion in the first quarter of 2010 and 2009, respectively. The 2010 period included a $53 million loss on the prepayment of approximately $1.5 billion in FHLB advances. Higher FDIC premiums and higher salaries and employee benefits expenses also contributed to the period over period increase in non-interest expense.
Beginning in late 2007, the land, single-family, and condominium components of the investor real estate portfolio came under significant pressure. Credit quality of the investor real estate portfolio is sensitive to risks associated with construction loans such as cost overruns, project completion risk, general contractor credit risk, environmental and other hazard risks, and market risks associated with the sale or rental of completed properties. While losses within these loan types were influenced by conditions described above, the most significant drivers of losses were the continued decline in demand for residential real estate and in the value of property. Beginning in 2008, Regions strategically reduced exposures in these product types through pro-active workouts, appropriate charge-offs, and asset dispositions. Land totaled $2.6 billion at March 31, 2010, a decrease of approximately $1.2 billion from March 31, 2009 levels. Single-family totaled $1.9 billion at March 31, 2010, a decrease of approximately $0.8 billion from March 31, 2009 levels. Regions exposure to condominium loans is $487 million at March 31, 2010, a decrease of approximately $0.4 billion since March 31, 2009.
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Regions Financial Corp. has a market cap of $10.25 billion; its shares were traded at around $8.58 with and P/S ratio of 1.2. The dividend yield of Regions Financial Corp. stocks is 0.4%.RF is in the portfolios of Fairholme Fund, Bruce Berkowitz of Fairholme Capital Management, Arnold Schneider of Schneider Capital Management, Michael Price of MFP Investors LLC, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, John Paulson of Paulson & Co., RS Investment Management, Brian Rogers of T Rowe Price Equity Income Fund, Charles Brandes of Brandes Investment, Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC.
Highlight of Business Operations:
Regions reported a net loss available to common shareholders of $255 million, or $0.21 loss per diluted share in the first quarter of 2010, compared to first quarter 2009 earnings per diluted share of $0.04. Higher credit costs was the primary driver of the period over period decrease in earnings. During the first quarter of 2010, Regions recorded a $770 million provision for loan losses, $345 million higher than the first quarter of 2009. However, as compared to more recent quarters, credit costs are stabilizing. Loans, net of unearned income, decreased $2.5 billion from December 31, 2009 to March 31, 2010, reflecting weak customer demand as well as strategic reductions of investor real estate exposure. Average low cost deposits at March 31, 2010 increased $4.2 billion, or 6.5% from December 31, 2009, continuing an increasing trend. Average low cost deposits increased $9.6 billion or 16.4% from the first quarter of 2009 to the first quarter of 2010.Net interest income on a fully taxable-equivalent basis for the first quarter of 2010 was $839 million compared to $817 million in the first quarter of 2009. The net interest margin (taxable-equivalent basis) was 2.77% in the first quarter of 2010, compared to 2.64% during the first quarter of 2009. Improved deposit pricing, as well as a favorable mix shift to lower cost products drove the improvement.
Net charge-offs totaled $700 million, or an annualized 3.16% of average loans, in the first quarter of 2010, compared to 1.64% for the first quarter of 2009. Charge-offs were higher across most major categories when comparing the 2010 period to prior year, with investor real estate representing the most significant driver of the increase. The provision for loan losses totaled $770 million in the first quarter of 2010 compared to $425 million during the first quarter of 2009. The allowance for loan losses at March 31, 2010 was 3.61% of total loans, net of unearned income, compared to 3.43% at December 31, 2009 and 1.94% at March 31, 2009. Total non-performing assets, excluding loans held for sale, at March 31, 2010 were $4.3 billion, compared to $4.1 billion at December 31, 2009 and $1.9 billion at March 31, 2009. During 2009, the growth in non-performing loans was driven by the land, single family, condominium and the income producing components of investor real estate. For the quarter ended March 31, 2010, there was a slight decline of land, single family and condominium non-performing loans, while income-producing increased at a more moderate rate. Additionally, commercial and industrial loans contributed to the quarterly increase. In spite of the increase in non-performing assets, credit costs and related metrics have begun to stabilize. Net inflows of non-performing assets for the first quarter of 2010 were lower than recent quarters. Some categories of internally risk rated problem assets, an indicator of future non-performing assets, showed improvement during the first quarter of 2010. The Company expects non-performing assets and net charge-offs to peak by the end of the second quarter of 2010 and decline thereafter.
Non-interest income for the first quarter of 2010 decreased by $254 million compared to the first quarter of 2009. Non-interest income included $19 million in leveraged lease termination gains for the first quarter of 2010 versus $323 million for the 2009 period. The decrease in termination gains was partially offset by increases in income from service charges on deposit accounts and brokerage, investment banking and capital markets. Service charges will be negatively impacted going forward due to new policies implemented during the second quarter of 2010 as well as regulatory changes. Mortgage income, while relatively stable period over period, benefitted from mortgage servicing rights and related derivative valuation adjustments during the 2010 period. This increase was offset by the normalization of income related to mortgage origination activity, which was unusually high during the first quarter of 2009.
Total non-interest expense was $1.2 billion and $1.1 billion in the first quarter of 2010 and 2009, respectively. The 2010 period included a $53 million loss on the prepayment of approximately $1.5 billion in FHLB advances. Higher FDIC premiums and higher salaries and employee benefits expenses also contributed to the period over period increase in non-interest expense.
Beginning in late 2007, the land, single-family, and condominium components of the investor real estate portfolio came under significant pressure. Credit quality of the investor real estate portfolio is sensitive to risks associated with construction loans such as cost overruns, project completion risk, general contractor credit risk, environmental and other hazard risks, and market risks associated with the sale or rental of completed properties. While losses within these loan types were influenced by conditions described above, the most significant drivers of losses were the continued decline in demand for residential real estate and in the value of property. Beginning in 2008, Regions strategically reduced exposures in these product types through pro-active workouts, appropriate charge-offs, and asset dispositions. Land totaled $2.6 billion at March 31, 2010, a decrease of approximately $1.2 billion from March 31, 2009 levels. Single-family totaled $1.9 billion at March 31, 2010, a decrease of approximately $0.8 billion from March 31, 2009 levels. Regions exposure to condominium loans is $487 million at March 31, 2010, a decrease of approximately $0.4 billion since March 31, 2009.
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