01—Abstract
Summary
Summary of the 10-K filed February 17, 2015. 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 $0.80 per diluted share, for 2014, compared with $1.1 billion, or $0.77 per diluted share, in 2013.
Net interest income was $3.3 billionb in both years, and the net interest margin was 3.21 percent in 2014. The provision for loan losses fell to $69 million from $138 million, and net charge-offs were 0.40 percent of average loans versus 0.96 percent in 2013. Non-interest income declined to $1.8 billion from $2.0 billion, driven mainly by an $87 million decrease in mortgage income, while non-interest expense fell to $3.4 billion from $3.6 billion, although 2014 included a $100 million charge for contingent legal and regulatory accruals.
At December 31, 2014, Regions had total consolidated assets of approximately $119.7 billionc, deposits of approximately $94.2 billion and stockholders' equity of approximately $17.0 billion. The Tier 1 capital ratio was 12.54 percent, the total capital ratio was 15.26 percent, and the estimated Basel III CET1 ratio under a fully phased-in framework was 11.00 percent, against a stated Basel III minimum of 7 percent. Management expects 2015 period-end loan growth of 4 to 6 percent and states that the net interest margin will remain stable to moderately rising if rates moderately increase, or come under pressure of about 10 to 12 basis points if rates remain at year-end 2014 levels.
Capital actions were significant in 2014. The Federal Reserve did not object to the 2014 capital plan, which included raising the quarterly common dividend from $0.03 to $0.05d per share, issuing $500 million of 6.375% Series B preferred stock, and up to $350 million in share repurchases.
Regions repurchased about 25 million shares for roughly $248 million under that plan and completed it in February 2015. The filing also discloses ongoing regulatory matters, including a June 2014 joint consent order and deferred prosecution agreement, a Federal Housing Administration mortgage investigation, and an indemnification obligation to Raymond James related to the 2012 sale of Morgan Keegan, carried at about $206 million.
02—Key points
Key Highlights
- Net income available to common shareholders was $1.1 billion, or $0.80 per diluted share, in 2014, up from $0.77 in 2013.
- Net interest margin rose 1 basis point to 3.21 percent, as deposit costs fell to 11 basis points from 15 basis points.
- Provision for loan losses declined to $69 million from $138 million, and net charge-offs fell to 0.40 percent of average loans from 0.96 percent.
- Non-interest income fell to $1.8 billion from $2.0 billion, mainly due to an $87 million decrease in mortgage income, while non-interest expense fell to $3.4 billion from $3.6 billion.
- Tier 1 capital ratio was 12.54 percent and total capital ratio was 15.26 percent at December 31, 2014; estimated fully phased-in Basel III CET1 ratio was 11.00 percent.
- Common dividend was raised to $0.05 per quarter in 2014, and a $350 million share repurchase plan was completed in February 2015 after about $248 million had been used by year-end.
- Regions Bank entered into a joint consent order with the Federal Reserve and the Alabama State Banking Department and a deferred prosecution agreement with the SEC in June 2014, and the company is cooperating with FHA-related mortgage investigations.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 17, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Operating Income | $1.13B$1.10B | +2.7% |
| Interest Expense | $309.00M$384.00M | −19.5% |
| Net Income | $1.15B$1.09B | +5.1% |
| EPS (Basic) | $0.80$0.76 | +5.3% |
| EPS (Diluted) | $0.79$0.75 | +5.3% |
| Shares Outstanding (Basic) | 1.38B1.40B | −1.4% |
| Shares Outstanding (Diluted) | 1.39B1.41B | −1.6% |
05—Questions
Frequently Asked Questions
How did Regions' profitability and credit quality change in 2014?
Net income available to common shareholders was $1.1 billion, or $0.80 per diluted share, versus $0.77 in 2013. The provision for loan losses dropped to $69 million from $138 million, and net charge-offs were $307 million, or 0.40 percent of average loans, compared with $716 million, or 0.96 percent, in 2013. Non-performing assets fell to $991 million from $1.3 billion, and the allowance for loan losses was 1.43 percent of total loans, down from 1.80 percent.
What drove the decline in non-interest income and expense?
Non-interest income fell to $1.8 billion from $2.0 billion, mainly from an $87 million decrease in mortgage income tied to lower production and a market valuation decline in the servicing portfolio, plus a $39 million decrease in service charges on deposit accounts. Non-interest expense fell to $3.4 billion from $3.6 billion, although 2014 included a $100 million charge for contingent legal and regulatory accruals and a $16 million branch consolidation charge, partly offset by a $35 million gain on the sale of modified residential loans.
How strong is Regions' capital position?
At December 31, 2014, the Tier 1 capital ratio was 12.54 percent, the total capital ratio was 15.26 percent, and the leverage capital ratio was 10.86 percent, all estimated and above the stated well-capitalized thresholds. The Tier 1 common equity ratio was 11.65 percent. The estimated Basel III CET1 ratio under a fully phased-in framework was 11.00 percent, which the filing says exceeds the 7 percent Basel III minimum. Tangible common equity to tangible assets was 9.75 percent.
What capital return actions did Regions take and plan?
In 2014 the Board raised the quarterly common dividend from $0.03 to $0.05 per share, and total cash dividends declared were $0.18 per share. Regions issued $500 million of 6.375% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series B, with net proceeds of about $486 million. About 25 million common shares were repurchased for approximately $248 million in 2014 under a $350 million plan, which concluded in February 2015 with about 11 million additional shares repurchased for roughly $102 million. The filing says future capital actions remain subject to Federal Reserve non-objection and results of operations.
What are the main regulatory and legal risks disclosed?
In June 2014 Regions Bank entered into a joint consent order with the Federal Reserve and the Alabama State Banking Department and a deferred prosecution agreement with the SEC. Regions is cooperating with investigations by HUD's Office of Inspector General, the Department of Justice and the FHFA Office of Inspector General regarding FHA-insured and GSE-sold mortgage loans, and it says a monetary penalty is possible. Regions has an indemnification obligation to Raymond James tied to Morgan Keegan with a carrying value of about $206 million, and it estimates reasonably possible losses in excess of accruals of up to about $160 million.
06—Continue