01—Abstract
Summary
Summary of the 10-K filed February 21, 2020. Cited figures are marked; the original filing is the authoritative source.
Regions Financial Corporation, headquartered in Birmingham, Alabama, reported net income from continuing operations available to common shareholders of $1.5 billiona, or $1.50 per diluted share, in 2019, compared with $1.5 billion, or $1.36 per diluted share, in 2018.
Net interest income and other financing income (taxable-equivalent basis) was $3.8 billionb in both years, with the net interest margin at 3.45 percent in 2019, down 3 basis points from 2018. Non-interest income rose to $2.1 billion and non-interest expense fell to $3.5 billion from $3.6 billion. The provision for loan losses increased to $387 million from $229 million, driven by higher average loan balances, higher net charge-offs and an increase in classified loans.
At December 31, 2019, the company reported total consolidated assets of approximately $126.2 billionc, deposits of approximately $97.5 billion and stockholders' equity of approximately $16.3 billion. Basel III Tier 1 and total capital ratios were estimated at 10.91 percent and 12.68 percent, and the CET1 ratio at 9.68 percent. During 2019 the company increased its quarterly common dividend from $0.14 to $0.155 per share and began a $1.37 billion share repurchase plan, under which it had repurchased approximately 47.5 million shares for about $721.5 million by year-end.
Management's 2020 expectations include low single digit adjusted average loan growth, net charge-offs of 45 to 55 basis points of average loans, and an effective tax rate of 20 to 22 percent. The company also disclosed that it adopts the CECL accounting standard on January 1, 2020, with an expected allowance increase of approximately $500 milliond. The filing also highlights several risk and business developments: the company discontinued its indirect auto lending business in January 2019, sold Regions Insurance Group in 2018 for a $281 million pre-tax gain, and is cooperating with an investigation by the United States Attorney's Office for the Eastern District of New York related to a former customer's accounts and Bank Secrecy Act compliance.
02—Key points
Key Highlights
- Net income from continuing operations available to common shareholders was $1.5 billion, or $1.50 per diluted share, in 2019, compared with $1.36 per diluted share in 2018.
- Net interest margin (taxable-equivalent) was 3.45 percent in 2019, a 3 basis point decrease from 2018, as funding cost increases outpaced asset yield increases.
- The provision for loan losses rose to $387 million from $229 million, reflecting higher average loan balances, higher net charge-offs and more classified loans.
- Non-interest expense decreased to $3.5 billion from $3.6 billion, driven mainly by lower salaries and employee benefits, occupancy and FDIC insurance assessments.
- Capital position: Basel III CET1 ratio of 9.68 percent, Tier 1 capital ratio of 10.91 percent and total capital ratio of 12.68 percent at December 31, 2019, all estimated.
- Capital return: quarterly common dividend increased to $0.155 per share from $0.14, and about $721.5 million of the $1.37 billion repurchase plan had been executed by year-end.
- Discontinued indirect auto lending in January 2019, reducing the indirect-vehicles portfolio by $1.2 billion during 2019.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 21, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $79.00M$71.00M | +11.3% |
| Operating Income | $1.58B$1.57B | +0.9% |
| Interest Expense | $851.00M$602.00M | +41.4% |
| Net Income | $1.58B$1.76B | −10.1% |
| EPS (Basic) | $1.51$1.55 | −2.6% |
| EPS (Diluted) | $1.50$1.54 | −2.6% |
| Shares Outstanding (Basic) | 995.00M1.09B | −8.9% |
| Shares Outstanding (Diluted) | 999.00M1.10B | −9.3% |
05—Questions
Frequently Asked Questions
How did Regions perform in 2019 compared with 2018?
Net income from continuing operations available to common shareholders was $1.5 billion, or $1.50 per diluted share, in 2019, versus $1.36 per diluted share in 2018. Net interest income and other financing income was $3.8 billion in both years, while non-interest income rose to $2.1 billion from $2.0 billion and non-interest expense fell to $3.5 billion from $3.6 billion.
What is the outlook for 2020 according to management?
Management expects full-year adjusted average loan growth in the low single digits, positive adjusted operating leverage, net charge-offs of 45 to 55 basis points of average loans, and an effective tax rate of 20 to 22 percent.
How strong is the company's capital position?
At December 31, 2019, Regions and Regions Bank were classified as well-capitalized. Estimated Basel III CET1 was 9.68 percent, Tier 1 capital 10.91 percent, total capital 12.68 percent and leverage capital 9.65 percent for the holding company.
What is the expected impact of CECL adoption?
The company adopts CECL on January 1, 2020, and expects the allowance for credit losses to increase by approximately $500 million, mainly in the consumer portfolio. The impact is expected to reduce retained earnings by about $375 million, and Regions plans to use the regulatory phase-in option over three years.
Are there any significant legal or regulatory matters disclosed?
Regions is cooperating with an investigation by the United States Attorney's Office for the Eastern District of New York concerning its banking relationship with a former customer and related accounts, as well as aspects of its Anti-Money Laundering and Bank Secrecy Act compliance program. Management believes pending litigation and inquiries will not have a material effect, though the company acknowledges an adverse outcome could be material. It also has an indemnification obligation to Raymond James related to the 2012 sale of Morgan Keegan, which is carried at an immaterial value.
06—Continue