01—Abstract
Summary
Summary of the 10-K/A filed March 1, 2017. Cited figures are marked; the original filing is the authoritative source.
Regions Financial Corporation reported 2016 net income available to common shareholders from continuing operations of $1.1 billiona, or $0.87 per diluted share, compared with $1.0 billion, or $0.76 per diluted share, in 2015.
Net interest income and other financing income (taxable-equivalent basis) from continuing operations rose to $3.5 billionb from $3.4 billion, and the net interest margin was 3.14 percent, up 1 basis point. Non-interest income was $2.2 billion and non-interest expenses were $3.6 billion in both 2016 and 2015. The provision for loan losses increased to $262 million from $241 million, primarily reflecting higher net charge-offs, including $37 million of energy charge-offs, and downward risk rating migration in the energy portfolio.
Total loans declined $1.1 billion, or 1 percent, to $80.1 billionc, with the decline concentrated in commercial and industrial loans, owner-occupied commercial real estate and investor real estate, partially offset by growth in residential first mortgages and indirect-other consumer loans. Net charge-offs were 0.34 percent of average loans, compared with 0.30 percent in 2015. The allowance for loan losses was 1.36 percent of total loans at both year-end 2016 and 2015, and the allowance-to-non-performing loans coverage ratio fell to 1.10x from 1.41x.
Non-performing loans increased, primarily because of pressure on the energy lending portfolio. Capital and liquidity remained strong. Regions reported a Basel III CET1 ratio of 11.21 percent on a transitional basis and an estimated fully phased-in CET1 ratio (non-GAAP) of 11.05 percent at December 31, 2016.
The Federal Reserve did not object to the 2016 capital plan, which covers the period through the second quarter of 2017 and includes a quarterly common dividend of $0.065 per share and up to $640 milliond in share repurchases. The Company had repurchased about 46.5 million shares at a cost of about $485 million under the plan through year-end, and total authorization was increased to $760 million. For 2017, management expects net interest income and other financing income to rise 2 to 4 percent, full-year net charge-offs of 35 to 50 basis points, and average loan growth in the low single digits.
02—Key points
Key Highlights
- Net income available to common shareholders from continuing operations was $1.1 billion, or $0.87 per diluted share, in 2016, up from $0.76 per diluted share in 2015.
- Net interest margin (taxable-equivalent basis) rose 1 basis point to 3.14 percent, and net interest income and other financing income increased $100 million to $3.5 billion.
- The provision for loan losses rose to $262 million from $241 million, driven by higher net charge-offs including $37 million of energy charge-offs.
- Total loans decreased $1.1 billion, or 1 percent, to $80.1 billion, with a $436 million reduction in direct energy loans.
- Non-performing loans increased, primarily due to pressure on the energy lending portfolio; the allowance-to-non-performing loans ratio declined to 1.10x from 1.41x.
- Basel III CET1 ratio was 11.21 percent on a transitional basis and an estimated 11.05 percent on a fully phased-in basis at December 31, 2016.
- Management expects 2017 net interest income and other financing income to increase 2 to 4 percent and full-year net charge-offs of 35 to 50 basis points.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-K/AFY2016filed March 1, 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' earnings change in 2016?
Net income available to common shareholders from continuing operations was $1.1 billion, or $0.87 per diluted share, in 2016, compared with $1.0 billion, or $0.76 per diluted share, in 2015. Net interest income and other financing income (taxable-equivalent basis) rose to $3.5 billion from $3.4 billion, while non-interest income increased to $2.2 billion from $2.1 billion and non-interest expenses were flat at $3.6 billion.
What drove the increase in the provision for loan losses and the decline in loan balances?
The provision rose to $262 million from $241 million, primarily due to higher net charge-offs, including $37 million of 2016 energy charge-offs, and downward risk rating migration in the energy portfolio. Loan balances fell $1.1 billion, with the largest decline in commercial and industrial loans, which included a $436 million reduction in direct energy loans; growth in residential first mortgages and indirect-other consumer loans partly offset these declines.
How strong is Regions' capital position and what is the capital plan?
At December 31, 2016, the estimated Basel III CET1 ratio was 11.21 percent on a transitional basis and 11.05 percent on a fully phased-in basis (non-GAAP). The Federal Reserve did not object to the 2016 capital plan, which covers the second quarter of 2016 through the second quarter of 2017 and includes a $0.065 quarterly common dividend and up to $640 million in share repurchases. The total repurchase authorization was increased to $760 million, and about $485 million had been repurchased under the plan as of year-end 2016.
What are management's expectations for 2017?
Management expects full-year 2017 net interest income and other financing income to increase 2 to 4 percent, adjusted non-interest income (non-GAAP) to grow 3 to 5 percent, and adjusted non-interest expenses (non-GAAP) to be flat to up 1 percent. It also expects average loan and deposit growth in the low single digits, full-year net charge-offs of 35 to 50 basis points, and an adjusted efficiency ratio (non-GAAP) of approximately 62 percent. These expectations assume market forward interest rates as of November 10, 2016.
What is the status of Regions' energy loan exposure?
Direct energy loans were approximately $2.1 billion at December 31, 2016, and the entire energy-related portfolio, combining direct and indirect loans, was approximately $2.6 billion, or 3 percent of total loans. Energy-related criticized and classified loans drove the increase in commercial criticized loans, and the energy portfolio contributed to higher non-performing loans. The filing states that the energy portfolio may face additional pressure on credit quality metrics given recent oil price volatility.
06—Continue