01—Abstract
Summary
Summary of the 10-K filed February 21, 2014. Cited figures are marked; the original filing is the authoritative source.
Regions Financial Corporation, a financial holding company headquartered in Birmingham, Alabama, reported net income available to common shareholders of $1.1 billiona, or $0.77 per diluted share, for 2013, compared with $991 million, or $0.71 per diluted share, in 2012.
At December 31, 2013, the company had total consolidated assets of approximately $117.4 billionb, deposits of approximately $92.5 billion and stockholders' equity of approximately $15.8 billion. Net interest margin rose to 3.20 percent from 3.11 percent, the provision for loan losses fell to $138 million from $213 million, and non-performing assets declined to $1.3 billion from $1.9 billion. Loan growth returned in 2013, with total loans up $614 million to $74.6 billion, led by commercial and industrial loans and indirect auto lending.
Non-interest income declined to $2.0 billionc from $2.1 billion, mainly because mortgage income fell $127 million. Non-interest expense rose to $3.6 billion, including a $58 million regulatory charge tied to inquiries from banking supervisors. Capital was strengthened: the Tier 1 capital ratio was 11.68 percent, the total capital ratio 14.73 percent, and the estimated Basel III CET1 ratio 10.58 percent.
The company raised its quarterly common dividend from $0.01 to $0.03d per share and repurchased approximately $340 million of common stock under a $350 million plan. The filing also flags several risks.
Regions' long-term debt is rated below investment grade by Moody's, the company is cooperating with a HUD Office of Inspector General and Department of Justice inquiry into FHA-insured mortgage origination, and it has a $260 million indemnification obligation to Raymond James related to the 2012 sale of Morgan Keegan. Its operations are concentrated in the Southeastern United States.
02—Key points
Key Highlights
- Net income available to common shareholders of $1.1 billion, or $0.77 per diluted share, versus $0.71 in 2012.
- Net interest margin of 3.20 percent in 2013, up from 3.11 percent in 2012, helped by lower deposit costs of 15 basis points versus 30 basis points.
- Provision for loan losses of $138 million, down from $213 million, and non-performing assets of $1.3 billion, down from $1.9 billion.
- Total loans of $74.6 billion, up $614 million, the first year of net loan growth reported since 2008.
- Non-interest income of $2.0 billion, down from $2.1 billion, mainly due to a $127 million decrease in mortgage income; non-interest expense included a $58 million regulatory charge.
- Tier 1 capital ratio of 11.68 percent, total capital ratio of 14.73 percent, and estimated Basel III CET1 ratio of 10.58 percent at December 31, 2013.
- Quarterly common dividend increased to $0.03 per share from $0.01, and about $340 million of common stock repurchased under a $350 million plan.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 21, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Operating Income | $1.10B$1.18B | −6.4% |
| Interest Expense | $384.00M$603.00M | −36.3% |
| Net Income | $1.09B$1.12B | −2.6% |
| EPS (Basic) | $0.76$0.72 | +5.6% |
| EPS (Diluted) | $0.75$0.71 | +5.6% |
| Shares Outstanding (Basic) | 1.40B1.38B | +1.0% |
| Shares Outstanding (Diluted) | 1.41B1.39B | +1.7% |
05—Questions
Frequently Asked Questions
How did Regions' core profitability change in 2013?
Net interest income on a taxable-equivalent basis declined about $34 million to $3.3 billion, but the net interest margin widened to 3.20 percent from 3.11 percent. Lower deposit costs and a mix shift toward cheaper deposits offset lower asset yields, and a smaller provision for loan losses supported earnings.
What are the main credit quality trends?
Credit metrics improved. Net charge-offs were $716 million, or 0.96 percent of average loans, versus $1.0 billion, or 1.37 percent, in 2012. The allowance for loan losses fell to 1.80 percent of total loans from 2.59 percent, and total non-performing assets declined 32 percent to $1.3 billion. Management expects net charge-offs in 2014 to continue improving.
What regulatory and legal risks does the filing highlight?
Regions recorded a $58 million non-tax-deductible charge in the fourth quarter of 2013 tied to inquiries from banking supervisors about 2009 matters. It is also cooperating with a HUD Office of Inspector General and Department of Justice investigation into FHA-insured mortgage origination and may pay a monetary penalty. Regions must also meet Basel III capital rules that take effect January 1, 2015, and the Federal Reserve's CCAR process governs its capital actions.
How strong is the company's capital position?
At December 31, 2013, Regions' Tier 1 capital ratio was 11.68 percent, its total capital ratio 14.73 percent, and its leverage ratio 10.03 percent, all above well-capitalized thresholds. Tier 1 common equity was 11.21 percent under the current framework, and the estimated Basel III CET1 ratio was 10.58 percent. Stockholders' equity was $15.8 billion.
06—Continue