01—Abstract
Summary
Summary of the 10-K filed February 16, 2016. Cited figures are marked; the original filing is the authoritative source.
Regions Financial Corporation, a financial holding company headquartered in Birmingham, Alabama, reported total consolidated assets of approximately $126.1 billiona, deposits of approximately $98.4 billion and stockholders' equity of approximately $16.8 billion at December 31, 2015.
The company reported net income available to common shareholders from continuing operations of $1.0 billionb, or $0.76 per diluted share, in 2015, compared with $1.1 billion, or $0.78 per diluted share, in 2014. Net interest margin (taxable-equivalent) was 3.13 percent, down 8 basis points, and the provision for loan losses rose to $241 million from $69 million, driven mainly by criticized and classified energy-related commercial loans, which totaled $3.4 billion at year-end. Non-interest income rose to $2.1 billion, helped by $91 million of insurance proceeds tied to the settlement of a 2010 class-action lawsuit, while non-interest expense increased to $3.6 billion.
Regions reported a Basel III CET1 ratio of 10.93 percent on a transitional basis and an estimated fully phased-in CET1 ratio of 10.69 percent. The company repurchased approximately 52 million shares under its $875 millionc plan through year-end and continued repurchases into 2016. The filing also discloses that Regions Bank's CRA rating was downgraded from Satisfactory to Needs to Improve, which restricts certain acquisitions and branch applications, and that the company operates under regulatory orders entered in June 2014.
For investors, the filing shows a bank with stable capital ratios, growing loans of $81.2 billiond, and improving credit metrics overall, offset by pressure in the energy portfolio, margin compression, and ongoing regulatory constraints. The company guides to 2016 net interest income growth of 2 to 4 percent and average loan growth of 3 to 5 percent.
02—Key points
Key Highlights
- Total loans, net of unearned income, grew $3.9 billion (5 percent) to $81.2 billion at December 31, 2015, led by commercial and industrial loans, which increased $3.1 billion.
- Net interest margin fell 8 basis points to 3.13 percent, while the provision for loan losses increased to $241 million from $69 million, mainly due to energy-related commercial loans.
- Criticized and classified commercial loans rose to $3.4 billion from $2.7 billion, primarily from a small number of larger energy-portfolio loans.
- Net income available to common shareholders from continuing operations was $1.0 billion, or $0.76 per diluted share, versus $0.78 in 2014; non-interest income included $91 million of insurance proceeds.
- Regions returned capital through a common dividend increased to $0.06 per quarter and share repurchases of approximately 52 million shares ($520 million) under an $875 million plan; the Basel III CET1 ratio was 10.93 percent transitional and 10.69 percent fully phased-in.
- Regions Bank's overall CRA rating was downgraded to Needs to Improve, restricting certain mergers, acquisitions and branch applications until the rating improves.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 16, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Operating Income | $1.07B$1.13B | −5.2% |
| Interest Expense | $268.00M$309.00M | −13.3% |
| Net Income | $1.06B$1.15B | −7.4% |
| EPS (Basic) | $0.75$0.80 | −6.3% |
| EPS (Diluted) | $0.75$0.79 | −5.1% |
| Shares Outstanding (Basic) | 1.32B1.38B | −3.6% |
| Shares Outstanding (Diluted) | 1.33B1.39B | −3.8% |
05—Questions
Frequently Asked Questions
How did Regions' profitability change in 2015?
Income from continuing operations was $1.075 billion versus $1.134 billion in 2014, and net income available to common shareholders from continuing operations was $1.0 billion, or $0.76 per diluted share, compared with $0.78 in 2014. Net interest income rose to $3.3 billion, but higher provisions for loan losses and non-interest expenses of $3.6 billion weighed on earnings, partly offset by $2.1 billion of non-interest income.
What is driving credit concerns in the loan portfolio?
Net charge-offs were 0.30 percent of average loans, lower than 0.40 percent in 2014, and several metrics improved. However, criticized and classified commercial loans increased to $3.4 billion from $2.7 billion, primarily due to weakening in a small number of larger energy-portfolio loans. Energy-related loans were about $2.5 billion directly and $3.1 billion including indirect exposure, and the allowance for loan losses was 1.36 percent of total loans.
How strong is Regions' capital position?
At December 31, 2015, Regions' Basel III Tier 1 capital ratio was an estimated 11.65 percent and total capital ratio was 13.88 percent. The transitional Basel III CET1 ratio was 10.93 percent, and the estimated fully phased-in CET1 ratio was 10.69 percent, above the 7 percent fully phased-in minimum. Both Regions and Regions Bank were classified as well-capitalized.
What regulatory restrictions affect Regions?
Regions Bank's CRA rating was downgraded from Satisfactory to Needs to Improve, which restricts certain mergers and acquisitions of insured depository institutions and applications to open branches until the rating improves. Regions Bank also 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 must devote resources to meeting those requirements.
What is management's outlook for 2016?
Management expects net interest income and other financing income to increase 2 to 4 percent in 2016, with average loan growth of 3 to 5 percent, excluding the lease reclassification. Net loan charge-offs are expected to range from 0.25 to 0.35 percent, with management expecting to be at the top end of that range given the current price of oil.
06—Continue