01—Abstract
Summary
Summary of the 10-K filed February 24, 2017. Cited figures are marked; the original filing is the authoritative source.
Regions Financial Corporation, a Birmingham, Alabama-based financial holding company operating in the South, Midwest and Texas, reported total consolidated assets of approximately $126.0 billiona, deposits of approximately $99.0 billion and stockholders' equity of approximately $16.7 billion at December 31, 2016.
Net income available to common shareholders from continuing operations was $1.1 billionb, or $0.87 per diluted share, in 2016, compared with $1.0 billion, or $0.76 per diluted share, in 2015. Net interest margin (taxable-equivalent) was 3.14 percent, up 1 basis point, and the provision for loan losses rose to $262 million from $241 million, driven by higher net charge-offs, including $37 million of 2016 energy charge-offs and downward risk rating migration in the energy portfolio. Capital return was a major focus.
The Federal Reserve did not object to Regions' 2016 capital plan, which included a quarterly common dividend of $0.065 per share and up to $640 millionc in share repurchases; the Board later authorized an additional $120 million, bringing the plan to $760 million. As of December 31, 2016, about 46.5 million shares had been repurchased for roughly $485 million, with further repurchases continuing into 2017. Estimated Basel III fully phased-in CET1 was 11.05 percent, and both Regions and Regions Bank were classified as well-capitalized.
Management expects 2017 net interest income to rise 2 to 4 percent and net charge-offs of 35 to 50 basis points, and it flagged energy-related credit as a continuing pressure point. Regions' credit ratings were upgraded during 2016 by Moody's and DBRS, and S&P revised its outlook to Positive on February 10, 2017. The filing also discloses a Community Reinvestment Act rating downgrade to "Needs to Improve" that was reinstated to "Satisfactory" on December 19, 2016, and an ongoing indemnification obligation to Raymond James related to the 2012 sale of Morgan Keegan, carried at approximately $28 milliond.
02—Key points
Key Highlights
- Total consolidated assets of approximately $126.0 billion, deposits of approximately $99.0 billion and stockholders' equity of approximately $16.7 billion at December 31, 2016.
- 2016 net income available to common shareholders from continuing operations of $1.1 billion, or $0.87 per diluted share, versus $0.76 in 2015.
- Net interest margin (taxable-equivalent) of 3.14 percent in 2016, up 1 basis point; net interest income and other financing income rose about $100 million, or 3 percent.
- Provision for loan losses rose to $262 million from $241 million, with net charge-offs of 0.34 percent of average loans, including $37 million of energy charge-offs.
- Capital returns: $0.065 quarterly common dividend and up to $640 million in share repurchases under the 2016 capital plan, later increased to a $760 million repurchase plan; about 46.5 million shares repurchased for approximately $485 million by year-end.
- Estimated fully phased-in Basel III CET1 ratio of 11.05 percent at December 31, 2016; Regions and Regions Bank were well-capitalized.
- 2017 expectations include net interest income up 2 to 4 percent, full-year net charge-offs of 35 to 50 basis points, and an adjusted efficiency ratio of approximately 62 percent.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 24, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $58.00M— | — |
| Operating Income | $1.15B$1.07B | +7.3% |
| Interest Expense | $313.00M$268.00M | +16.8% |
| Net Income | $1.16B$1.06B | +9.5% |
| EPS (Basic) | $0.87$0.75 | +16.0% |
| EPS (Diluted) | $0.87$0.75 | +16.0% |
| Shares Outstanding (Basic) | 1.25B1.32B | −5.3% |
| Shares Outstanding (Diluted) | 1.26B1.33B | −5.5% |
05—Questions
Frequently Asked Questions
How did Regions' profitability change in 2016?
Net income available to common shareholders from continuing operations was $1.1 billion, or $0.87 per diluted share, compared with $1.0 billion, or $0.76 per diluted share, in 2015. Non-interest income rose to $2.2 billion from $2.1 billion, while non-interest expense was $3.6 billion in both years.
What is driving credit risk at Regions?
The energy portfolio was the main pressure point. Criticized and classified commercial loans rose largely due to downward risk rating migration in energy, and direct energy non-accrual loans increased to $311 million from $83 million. Total non-performing loans were $1.0 billion at year-end 2016, and the allowance for loan losses was 1.36 percent of total loans.
How much capital is Regions returning to shareholders?
Common dividends declared were $0.255 per share for 2016, and the company repurchased about $839 million of common stock during 2016. Under the 2016 capital plan, the Federal Reserve did not object, and the board authorized a total repurchase plan of $760 million running through the second quarter of 2017. The plan also contemplates a possible dividend increase beginning in the second quarter of 2017.
What are the main risks to Regions' outlook for 2017?
Management cites continued energy-related credit pressure, the sustained low interest rate environment, and the effects of regulatory and policy change. The filing notes that the Dodd-Frank Act and Basel III requirements, the CFPB's rulemaking, and the CCAR process could affect capital distributions. It also says the new CECL standard, effective January 1, 2020, is likely to have a potentially material negative impact on the allowance and capital.
What is the status of Regions' Community Reinvestment Act rating?
The Federal Reserve Bank of Atlanta downgraded Regions Bank's overall CRA rating from "Satisfactory" to "Needs to Improve" following an examination communicated in the fourth quarter of 2015, tied to a 2015 CFPB consent order on overdrafts. On December 19, 2016, the rating was reinstated to "Satisfactory," and Regions Bank received "High Satisfactory" ratings on the lending, investment and service portions.
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