01—Abstract
Summary
Summary of the 10-K filed February 25, 2009. Cited figures are marked; the original filing is the authoritative source.
Regions Financial Corporation, a financial holding company headquartered in Birmingham, Alabama, reported a net loss available to common shareholders of $5.6 billiona for 2008, compared with net income of $1.3 billion in 2007.
The loss was driven by a $6.0 billionb non-cash goodwill impairment charge recorded in the fourth quarter of 2008 against the General Banking/Treasury reporting unit. Excluding the goodwill impairment and merger-related charges, earnings from continuing operations were $513.6 million in 2008 compared with $1.6 billion in 2007. Net interest income fell to $3.8 billion from $4.4 billion, with the net interest margin declining to 3.23 percent from 3.79 percent.
Provision for loan losses rose to $2.1 billionc from $555.0 million, and net charge-offs were $1.5 billion, or 1.59 percent of average loans. Credit quality deteriorated sharply, with non-performing assets reaching $1.7 billion, or 1.76 percent of ending loans, up from $864.1 million at year-end 2007. The company attributed the stress primarily to its residential homebuilder, condominium and Florida-concentrated home equity portfolios.
Total assets were $146.2 billiond and total deposits were $90.9 billion at year-end 2008. Tier 1 capital ratio was 10.38 percent and total capital ratio was 14.64 percent, both above regulatory well-capitalized thresholds, following the company's receipt of $3.5 billion from the U.S. Treasury under the Capital Purchase Program in November 2008. The filing also highlights dividend and regulatory constraints.
The quarterly common dividend was cut to $0.10 per share, and the company's ability to increase dividends or repurchase shares is limited under the CPP until November 14, 2011. Regions Bank does not expect to be able to pay dividends to the parent company in the near term without regulatory approval. Moody's downgraded the company's long-term senior debt from A2 to A3 in February 2009, and the filing notes that the ratings remain on negative outlook.
02—Key points
Key Highlights
- Net loss available to common shareholders of $5.6 billion in 2008, versus net income of $1.3 billion in 2007, driven by a $6.0 billion non-cash goodwill impairment charge.
- Net interest income fell to $3.8 billion from $4.4 billion, and the net interest margin declined to 3.23 percent from 3.79 percent.
- Provision for loan losses rose to $2.1 billion from $555.0 million; net charge-offs were $1.5 billion, or 1.59 percent of average loans.
- Non-performing assets reached $1.7 billion, or 1.76 percent of ending loans, up from $864.1 million at December 31, 2007.
- Common dividend reduced to $0.96 per share for 2008 from $1.46 in 2007; the quarterly rate is now $0.10 per share, with limits under the CPP through November 14, 2011.
- Received $3.5 billion from the U.S. Treasury under the Capital Purchase Program in November 2008; Tier 1 capital ratio was 10.38 percent at year-end.
- Moody's downgraded long-term senior debt from A2 to A3 in February 2009; all ratings remain on negative outlook.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 25, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Operating Income | -$5.58B$1.39B | −500.9% |
| Interest Expense | $2.72B$3.68B | −26.0% |
| Net Income | -$5.60B$1.25B | −547.3% |
| EPS (Basic) | $-8.09$1.77 | −557.1% |
| EPS (Diluted) | $-8.09$1.76 | −559.7% |
| Shares Outstanding (Basic) | 695.00M708.00M | −1.8% |
| Shares Outstanding (Diluted) | 695.00M713.00M | −2.5% |
05—Questions
Frequently Asked Questions
Why did Regions report a net loss in 2008?
The loss was primarily caused by a $6.0 billion non-cash goodwill impairment charge in the fourth quarter of 2008 related to the General Banking/Treasury reporting unit. The company also recorded a much higher provision for loan losses of $2.1 billion, driven by residential housing market deterioration.
Is Regions' dividend at risk?
The company declared $0.96 per common share for 2008 and currently pays $0.10 per quarter. The filing states that the board reviews the dividend quarterly and that Regions currently has capacity to make common dividend payments in 2009. However, Regions Bank does not expect to pay dividends to the parent company in the near term without regulatory approval, and the company may reduce or eliminate its common dividend in the future.
How strong is Regions' capital position?
At December 31, 2008, the Tier 1 capital ratio was 10.38 percent and the total capital ratio was 14.64 percent, with a leverage ratio of 8.47 percent. These exceed the regulatory well-capitalized thresholds. The company received $3.5 billion from the U.S. Treasury under the CPP in November 2008, which added approximately 300 basis points to the Tier 1 ratio.
Which loan portfolios are driving credit losses?
The filing identifies residential homebuilder loans (totaling $4.4 billion), condominium loans, and second-lien home equity loans in Florida as the most stressed portfolios. These stressed portfolios amounted to $9.0 billion, or 9.3 percent of the loan portfolio. Florida second-lien home equity losses were 3.67 percent in 2008. Management expects net charge-offs to remain at elevated levels through 2009.
What did the filing say about the company's credit ratings?
In February 2009, Moody's downgraded Regions' senior notes from A2 to A3 and subordinated notes to Baa1, reflecting concentration in residential homebuilder and home equity lending, particularly in Florida. Regions Bank's long-term bank deposits were downgraded to A2. The filing states these downgrades are not expected to have a significant impact on earnings in 2009.
06—Continue