01—Abstract
Summary
Summary of the 10-K filed February 21, 2013. Cited figures are marked; the original filing is the authoritative source.
Regions Financial Corporation, headquartered in Birmingham, Alabama, reported net income available to common shareholders of $991 milliona, or $0.71 per diluted common share, for 2012, compared with a net loss of $429 million in 2011.
Results from continuing operations improved markedly: the provision for loan losses fell to $213 millionb from $1.5 billion, and income from continuing operations available to common shareholders was $1.05 billion. Net charge-offs totaled $1.0 billion, or 1.37 percent of average loans, down from $2.0 billion, or 2.44 percent, in 2011. Non-performing assets decreased $1.1 billion to $1.9 billion at year-end.
The company ended 2012 with total assets of $121.3 billionc, deposits of $95.5 billion and stockholders' equity of $15.5 billion. It sold Morgan Keegan to Raymond James Financial, Inc., which closed on April 2, 2012 for a total purchase price of $1.2 billion, and redeemed $3.5 billion of TARP Series A preferred stock. Regions also issued $500 million of 6.375% Non-Cumulative Perpetual Preferred Stock, Series A, in November 2012.
The Tier 1 common risk-based ratio was 10.84 percent, and the estimated Basel III Tier 1 common ratio was approximately 8.87 percent, above the 7 percent minimum. Key risks highlighted in the filing include the Morgan Keegan indemnification obligation, carried at approximately $345 milliond; the Dodd-Frank Act and pending Basel III rules; concentration of operations in the Southeastern United States; and exposure to real estate markets, particularly Florida second-lien home equity loans. The filing states that the Federal Reserve committed to responding to the 2013 capital plan by March 14, 2013.
02—Key points
Key Highlights
- Net income available to common shareholders of $991 million, or $0.71 per diluted share, in 2012, versus a net loss of $429 million in 2011
- Provision for loan losses declined to $213 million from $1.5 billion; net charge-offs fell to $1.0 billion, or 1.37 percent of average loans, from 2.44 percent in 2011
- Non-performing assets decreased $1.1 billion to $1.9 billion at December 31, 2012
- Sold Morgan Keegan to Raymond James Financial, Inc. for a total purchase price of $1.2 billion, closing April 2, 2012
- Repurchased $3.5 billion of Series A preferred stock issued to the U.S. Treasury under TARP and repurchased the related warrant for $45 million
- Tier 1 common risk-based ratio of 10.84 percent; Basel III Tier 1 common ratio estimated at approximately 8.87 percent versus a 7 percent minimum
- Morgan Keegan indemnification obligation carried at approximately $345 million, a key contingent liability
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 21, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Operating Income | $1.18B$189.00M | +523.8% |
| Interest Expense | $603.00M$842.00M | −28.4% |
| Net Income | $1.12B-$215.00M | +620.9% |
| EPS (Basic) | $0.72$-0.34 | +311.8% |
| EPS (Diluted) | $0.71$-0.34 | +308.8% |
| Shares Outstanding (Basic) | 1.38B1.26B | +9.8% |
| Shares Outstanding (Diluted) | 1.39B1.26B | +10.3% |
05—Questions
Frequently Asked Questions
How did Regions' credit quality change in 2012?
Credit quality improved significantly. The provision for loan losses fell to $213 million from $1.5 billion in 2011, net charge-offs were $1.0 billion versus $2.0 billion, and the allowance for loan losses was 2.59 percent of loans at December 31, 2012, down from 3.54 percent a year earlier. Investor real estate loans declined 28 percent during 2012.
What was the impact of the Morgan Keegan sale?
Regions sold Morgan Keegan & Company, Inc. and related affiliates to Raymond James Financial, Inc. for a total purchase price of $1.2 billion, closing April 2, 2012. The company recorded a total pre-tax gain on sale of $19 million after a $256 million adjustment to record the legal indemnification at fair value. Results of Morgan Keegan are reported as discontinued operations, which produced a net loss of $59 million in 2012.
What are the main regulatory capital risks for Regions?
Regions has $50 billion or more in total consolidated assets, so it is subject to enhanced supervision, including annual Comprehensive Capital Analysis and Review (CCAR) capital plans and stress tests. The filing notes that Basel III rules have been delayed indefinitely, trust preferred securities will be phased out of Tier 1 capital over three years beginning in 2013, and the company may face additional capital requirements. Regions submitted its 2013 CCAR capital plan on January 7, 2013, with a Federal Reserve response expected by March 14, 2013.
How much is the company's funding base and what are its liquidity sources?
Customer deposits totaled $95.5 billion at December 31, 2012, and low-cost deposits rose to $82.0 billion. Regions Bank held over $3.5 billion in cash on deposit with the Federal Reserve, and the parent company had $857 million in cash and cash equivalents. Borrowing capacity was $19.6 billion from the Federal Reserve Discount Window and $6.7 billion from the Federal Home Loan Bank.
What is the company's exposure to Florida and the Southeast?
Regions' operations are concentrated in the Southeastern United States, particularly in Alabama, Arkansas, Georgia, Florida, Louisiana, Mississippi and Tennessee. Of the $11.8 billion home equity portfolio, approximately $6.2 billion was in a second lien position, including approximately $2.4 billion in Florida. The company notes it has realized higher charge-offs on second liens, particularly in Florida, where real estate valuations have been depressed.
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