01—Abstract
Summary
Summary of the 10-K filed February 26, 2018. Cited figures are marked; the original filing is the authoritative source.
Regions Financial Corporation reported 2017 net income of $1.263 billiona, or $1.00 per diluted share from continuing operations available to common shareholders of $1.2 billion, compared with $0.87 per diluted share in 2016.
Net interest income and other financing income (taxable-equivalent basis) rose to $3.6 billionb from $3.5 billion, with the net interest margin up 18 basis points to 3.32 percent. Non-interest income declined to $2.1 billion from $2.2 billion, while non-interest expense held at $3.6 billion. The provision for loan losses fell to $150 million from $262 million, and net charge-offs were 0.38 percent of average loans, up from 0.34 percent.
The allowance for loan losses was 1.17 percent of total loans at year-end, down from 1.36 percent. The company's capital position was reported as well-capitalized at both Regions Financial Corporation and Regions Bank as of December 31, 2017. The estimated Basel III CET1 ratio was 11.05 percent, and the fully phased-in pro-forma CET1 ratio (non-GAAP) was 10.95 percent.
The company repurchased approximately 65.7 million shares under a $1.47 billionc plan authorized in June 2017, with additional repurchases of about 12.5 million shares through February 21, 2018. The quarterly common dividend was increased to $0.09 per share beginning in the third quarter of 2017. Total assets were $124.3 billion, deposits were $96.9 billion, and stockholders' equity was $16.2 billion at December 31, 2017.
The filing notes that Tax Reform, enacted December 22, 2017, lowered the federal corporate tax rate to 21 percent and required an additional income tax expense of approximately $52 milliond in the fourth quarter of 2017. Management's 2018 expectations include average loan growth in the low single digits (excluding the indirect-vehicle portfolio), adjusted net interest income growth of 3 to 5 percent, and net charge-offs of 35 to 50 basis points, currently expected at the lower end of that range.
02—Key points
Key Highlights
- Net income of $1.263 billion for 2017, compared with $1.163 billion in 2016; diluted EPS from continuing operations of $1.00 versus $0.87.
- Net interest margin rose 18 basis points to 3.32 percent, driven by higher earning-asset yields that exceeded the slight increase in funding costs.
- Provision for loan losses decreased to $150 million from $262 million, including a $40 million hurricane-related provision; net charge-offs were $307 million, or 0.38 percent of average loans.
- Non-interest income fell to $2.1 billion from $2.2 billion, mainly from lower mortgage income, bank-owned life insurance, and the absence of 2016 insurance proceeds.
- Regions repurchased about 65.7 million shares for roughly $1.0 billion under its $1.47 billion plan, and the quarterly common dividend increased to $0.09 per share from $0.065.
- All regulatory capital measures exceeded requirements at year-end 2017; the company and Regions Bank were classified as well-capitalized, with an estimated CET1 ratio of 11.05 percent.
- Tax Reform added about $52 million of income tax expense in the fourth quarter of 2017; the 2018 effective tax rate is expected to be 20 to 22 percent.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 26, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $60.00M$58.00M | +3.4% |
| Operating Income | $1.24B$1.15B | +7.5% |
| Interest Expense | $373.00M$313.00M | +19.2% |
| Net Income | $1.26B$1.16B | +8.6% |
| EPS (Basic) | $1.01$0.87 | +16.1% |
| EPS (Diluted) | $1.00$0.87 | +14.9% |
| Shares Outstanding (Basic) | 1.19B1.25B | −5.5% |
| Shares Outstanding (Diluted) | 1.20B1.26B | −5.0% |
05—Questions
Frequently Asked Questions
How did Regions' profitability change in 2017?
Net income rose to $1.263 billion in 2017 from $1.163 billion in 2016. Diluted earnings per share from continuing operations were $1.00, up from $0.87. Growth came mainly from higher net interest income, which rose to $3.6 billion on a taxable-equivalent basis, and a lower provision for loan losses, partly offset by lower non-interest income.
What is the outlook for 2018 according to management?
Management expects full-year average loan growth in the low single digits, excluding the indirect-vehicle portfolio, and average deposit growth in the low single digits. Adjusted net interest income is expected to grow 3 to 5 percent, adjusted non-interest income 3 to 6 percent, and adjusted non-interest expense to be relatively stable. The adjusted efficiency ratio is expected to be below 60 percent, and net charge-offs are expected at 35 to 50 basis points, at the lower end of that range.
How strong is Regions' capital position?
At December 31, 2017, Regions Financial Corporation and Regions Bank were both well-capitalized. The estimated Basel III CET1 ratio was 11.05 percent, and the fully phased-in pro-forma CET1 ratio (a non-GAAP measure) was 10.95 percent, above the 7.0 percent minimum including the capital conservation buffer. Total stockholders' equity was $16.2 billion.
How is Regions returning capital to shareholders?
In 2017 Regions repurchased about 65.7 million common shares for roughly $1.0 billion under a $1.47 billion plan approved in June 2017, and it continued repurchases into early 2018, buying about 12.5 million additional shares for approximately $235.0 million through February 21, 2018. The quarterly common dividend increased from $0.065 to $0.09 per share beginning in the third quarter of 2017. Cash dividends declared were $0.315 per share for 2017.
What is the impact of Tax Reform on Regions?
Tax Reform reduced the federal corporate statutory tax rate from 35 percent to 21 percent effective January 1, 2018. Regions recorded additional income tax expense of about $52 million in the fourth quarter of 2017, including $25 million from revaluing net deferred tax assets, $23 million from revising its low-income housing amortization calculation, and $4 million from revaluing unrecognized tax benefits. The company expects its 2018 effective tax rate to be between 20 and 22 percent.
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