01—Abstract
Summary
Summary of the 10-K filed February 22, 2019. Cited figures are marked; the original filing is the authoritative source.
Regions Financial Corporation, a Birmingham, Alabama-based financial holding company with total consolidated assets of approximately $125.7 billiona, deposits of approximately $94.5 billion and stockholders' equity of approximately $15.1 billion at December 31, 2018, reported 2018 net income from continuing operations available to common shareholders of $1.5 billion, or $1.36 per diluted share, compared with $0.98 per diluted share in 2017.
Net interest margin (taxable-equivalent) rose to 3.50 percent from 3.32 percent, driven by higher earning-asset yields, while non-interest income was $2.0 billionb in both years and non-interest expense rose to $3.6 billion from $3.5 billion. The provision for loan losses increased to $229 million from $150 million, and net charge-offs were 0.40 percent of average loans. The effective tax rate fell to 19.8 percent from 33.3 percent, primarily due to Tax Reform's reduction of the federal statutory rate to 21 percent.
Net income also benefited from discontinued operations, including a $196 millionc after-tax gain on the sale of Regions Insurance Group, Inc. that closed July 2, 2018. Capital and shareholder returns were significant in 2018. The Federal Reserve did not object to Regions' 2018 capital plan, which raised the quarterly common dividend from $0.09 to $0.14 per share and authorized up to $2.031 billion in share repurchases; roughly $1.7 billion had been repurchased under that plan by year-end.
The Basel III common equity Tier 1 ratio was estimated at 9.90 percent, and the company and its bank were classified as well-capitalized. Management expects 2019 adjusted average loan growth in the low single digits, an effective tax rate of 20 to 22 percent, and full-year net charge-offs of 40 to 50 basis points of average loans. The filing also highlights regulatory and strategic developments.
Regions expects to be a Category IV firm under proposed Tailoring rules, which would remove LCR and company-run stress testing requirements, and the Federal Reserve granted a one-year extension of the capital plan submission deadline. In January 2019 Regions decided to discontinue its indirect auto lending business.
Total deposits declined about $2.4 billiond during 2018, while long-term borrowings rose to $12.4 billion. Ratings agencies included a Moody's outlook revision to Positive and a DBRS upgrade to A (Low) for the holding company's senior unsecured debt.
02—Key points
Key Highlights
- Net income from continuing operations available to common shareholders was $1.5 billion, or $1.36 per diluted share, in 2018, up from $0.98 in 2017.
- Net interest margin (taxable-equivalent) increased to 3.50 percent in 2018 from 3.32 percent in 2017, with net interest income and other financing income of $3.8 billion.
- The effective tax rate fell to 19.8 percent from 33.3 percent, primarily due to Tax Reform's reduction of the federal statutory rate to 21 percent.
- The $2.031 billion share repurchase plan was approved with no objection from the Federal Reserve; about $1.7 billion had been repurchased by December 31, 2018, and the quarterly dividend was increased to $0.14 per share.
- Basel III CET1 ratio was estimated at 9.90 percent at December 31, 2018, and Regions and Regions Bank were classified as well-capitalized.
- Loan growth was 4.0 percent to $83.2 billion, while total deposits decreased about $2.4 billion and long-term borrowings increased to $12.4 billion.
- Regions discontinued its indirect auto lending business in January 2019 and expects 2019 net charge-offs of 40 to 50 basis points of average loans.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 22, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $71.00M$60.00M | +18.3% |
| Operating Income | $1.57B$1.24B | +26.3% |
| Interest Expense | $602.00M$373.00M | +61.4% |
| Net Income | $1.76B$1.26B | +39.3% |
| EPS (Basic) | $1.55$1.01 | +53.5% |
| EPS (Diluted) | $1.54$1.00 | +54.0% |
| Shares Outstanding (Basic) | 1.09B1.19B | −7.9% |
| Shares Outstanding (Diluted) | 1.10B1.20B | −8.0% |
05—Questions
Frequently Asked Questions
What drove the increase in Regions' 2018 earnings?
Net interest income and other financing income rose to $3.7 billion from $3.5 billion as earning-asset yields, particularly on loans, increased faster than funding costs. Income from discontinued operations also rose to $191 million, including the $196 million after-tax gain on the sale of Regions Insurance Group, Inc. Income tax expense fell to $387 million from $619 million.
How did the lower tax rate affect results?
The effective tax rate dropped to 19.8 percent in 2018 from 33.3 percent in 2017, principally because Tax Reform reduced the federal statutory rate from 35 percent to 21 percent effective January 1, 2018. The filing states management expects a 2019 effective tax rate of 20 to 22 percent.
How is Regions returning capital to shareholders?
Regions paid $0.46 per share in cash dividends in 2018 and raised its quarterly common dividend to $0.14 per share under its 2018 capital plan. It also repurchased about 90.4 million shares for approximately $1.7 billion under the $2.031 billion plan through December 31, 2018, and repurchased an additional 7.4 million shares for about $114.0 million through February 21, 2019.
What are the company's capital and liquidity positions?
At December 31, 2018, the Basel III CET1 ratio was estimated at 9.90 percent, Tier 1 capital ratio at 10.68 percent and total capital ratio at 12.46 percent. Regions and Regions Bank were well-capitalized, and the company's LCR was above the minimum requirement. Holding company cash was $1.9 billion.
What regulatory changes could affect Regions going forward?
Regions expects to be classified as a Category IV firm under proposed Tailoring rules, which would eliminate LCR and NSFR requirements and company-run stress testing and move supervisory stress testing to a two-year cycle. The Federal Reserve also extended the deadline for Regions' capital plan submission to April 5, 2020, and Regions is not subject to supervisory or company-run stress testing for 2019.
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