01—Abstract
Summary
Summary of the 10-K filed February 24, 2012. Cited figures are marked; the original filing is the authoritative source.
Regions Financial Corporation (RF) reported a net loss available to common shareholders of $429 milliona, or $0.34 per diluted share, for 2011.
The result was driven largely by a $731 millionb (net of $14 million tax impact) non-cash goodwill impairment tied to the sale of Morgan Keegan, of which $253 million was in continuing operations and $478 million in discontinued operations. Excluding the goodwill impairment and a $44 million income tax benefit from a regulatory settlement, the company reports income from continuing operations available to common shareholders of $211 million, or $0.17 per diluted share. Credit trends improved: the provision for loan losses fell to $1.5 billion from $2.9 billion, net charge-offs totaled $2.0 billion, and non-performing assets declined to $3.0 billion from $3.9 billion.
On January 11, 2012, Regions agreed to sell Morgan Keegan to Raymond James Financial for approximately $930 millionc in cash, plus a $250 million pre-closing dividend, for total proceeds of about $1.18 billion, subject to adjustment. The transaction is expected to close around the end of the first quarter of 2012, subject to regulatory approvals.
Capital and liquidity remain sound: the Tier 1 capital ratio was 13.28%, the Tier 1 common ratio 8.51%, and the parent company held $2.5 billiond in cash. Regions' senior debt remains below investment grade at Moody's and S&P, and the quarterly dividend has been cut to $0.01 per share, with no expected increase.
02—Key points
Key Highlights
- Net loss available to common shareholders of $429 million, or $0.34 per diluted share, in 2011, versus $763 million in 2010.
- Excluding the $731 million goodwill impairment and a $44 million regulatory-settlement tax benefit, income from continuing operations available to common shareholders was $211 million, or $0.17 per diluted share.
- Provision for loan losses fell to $1.5 billion from $2.9 billion; net charge-offs were $2.0 billion, or 2.44 percent of average loans.
- Agreement to sell Morgan Keegan to Raymond James Financial for about $930 million in cash, plus a $250 million pre-closing dividend, for total proceeds of about $1.18 billion.
- Tier 1 capital ratio of 13.28% and Tier 1 common ratio of 8.51% at December 31, 2011; Basel III estimates of 11.39% and 7.70%.
- Net interest margin rose to 3.07 percent from 2.91 percent, and deposit costs fell to 0.49 percent from 0.78 percent.
- Senior debt remains below investment grade at Moody's and S&P, and the quarterly dividend is $0.01 per share with no planned increase.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 24, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Operating Income | $189.00M-$468.00M | +140.4% |
| Interest Expense | $842.00M$1.25B | −32.5% |
| Net Income | -$215.00M-$539.00M | +60.1% |
| EPS (Basic) | $-0.34$-0.62 | +45.2% |
| EPS (Diluted) | $-0.34$-0.62 | +45.2% |
| Shares Outstanding (Basic) | 1.26B1.23B | +2.5% |
| Shares Outstanding (Diluted) | 1.26B1.23B | +2.5% |
05—Questions
Frequently Asked Questions
Why did Regions report a net loss in 2011?
The loss was driven mainly by a $731 million non-cash goodwill impairment tied to the pending sale of Morgan Keegan, with $253 million recorded in continuing operations and $478 million in discontinued operations. Net loss available to common shareholders was $429 million, or $0.34 per diluted share.
How is the Morgan Keegan sale structured?
Regions agreed on January 11, 2012 to sell Morgan Keegan and related affiliates to Raymond James Financial for about $930 million in cash. Morgan Keegan will also pay a $250 million dividend before closing, for total proceeds of about $1.18 billion, subject to adjustment based on tangible book value and employee retention. Regions will indemnify Raymond James for pre-closing litigation. The deal is expected to close around the end of the first quarter of 2012.
Is credit quality improving?
Yes. The provision for loan losses declined to $1.5 billion from $2.9 billion, net charge-offs fell to $2.0 billion from $2.8 billion, and non-performing assets decreased to $3.0 billion from $3.9 billion. Management expects net charge-offs to decline in 2012 but remain elevated.
What is the company's capital position?
At December 31, 2011, the Tier 1 capital ratio was 13.28%, the total capital ratio 16.99%, and the Tier 1 common ratio 8.51%. Estimated Basel III ratios were 11.39% for Tier 1 capital and 7.70% for Tier 1 common, both above the Basel III minimums of 8.5% and 7%.
Will the dividend increase?
Not in the foreseeable future. Regions has reduced its quarterly common dividend to $0.01 per share and does not expect to increase it above that level. Its dividend policy is also subject to Federal Reserve review under the capital planning process.
06—Continue