RF
REGIONS FINANCIAL Corp
16.9800
-0.59%
16.9800
-0.59%
13.0000 17.1750
52 weeks
52 weeks

Mkt Cap 20.41B

Shares Out 1.20B

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Regions Reports Second Quarter 2017 Earnings from Continuing Operations of $301 Million, up 18 Percent over the Prior Year, and Earnings Per Share of $0.25, up 25 Percent

Regions Financial Earnings Supplement 2Q2017

BIRMINGHAM, Ala.--(BUSINESS WIRE)--Regions Financial Corporation (NYSE:RF) today announced earnings for the second quarter ended June 30, 2017. The company reported net income available to common shareholders from continuing operations of $301 million, an increase of 18 percent compared to the second quarter of 2016 and 8 percent compared to the first quarter of 2017. Earnings per diluted share from continuing operations were $0.25, an increase of 25 percent from the second quarter of 2016 and 9 percent from the first quarter of 2017.

“We are pleased with our second quarter results, which demonstrate that we are continuing to execute our strategic plan to build long-term, sustainable growth while delivering value to our customers, communities and shareholders”

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“We are pleased with our second quarter results, which demonstrate that we are continuing to execute our strategic plan to build long-term, sustainable growth while delivering value to our customers, communities and shareholders,” said Grayson Hall, Chairman, President and CEO. “Regions' strong capital position led to another successful completion of the Comprehensive Capital Analysis and Review (CCAR) process. We remain committed to increasing shareholder returns while making prudent investments to position our company to meet more customers' needs through deeper relationships and a well-diversified business. Further, our disciplined approach to credit continues to deliver positive results as we reported improvements in almost every credit metric.”

Hall added, “During the second quarter, Regions also received further recognition for its approach to business. Based on customer feedback, Javelin Strategy & Research recognized Regions as a Trust in Banking Leader reflecting our reliability in meeting customers' needs and the confidence our customers have in Regions to look out for their best interests. Regions also received the Gallup Great Workplace Award for the third consecutive year. These examples illustrate how Regions' comprehensive approach to providing financial services creates greater value for all of our stakeholders.”

SUMMARY OF SECOND QUARTER 2017 RESULTS:

Quarter Ended
($ amounts in millions, except per share data) 6/30/2017 3/31/2017 6/30/2016
Income from continuing operations (A) $ 317 $ 294 $ 272
Income (loss) from discontinued operations, net of tax (1 ) 7 3
Net income 316 301 275
Preferred dividends (B) 16 16 16
Net income available to common shareholders $ 300 $ 285 $ 259

Net income from continuing operations available to common shareholders (A) – (B)

$ 301 $ 278 $ 256
Diluted earnings per common share from continuing operations $ 0.25 $ 0.23 $ 0.20
Diluted earnings per common share $ 0.25 $ 0.23 $ 0.20

Second quarter 2017 results compared to first quarter 2017:

  • Net interest income and other financing income on a fully taxable equivalent basis increased 3 percent; the resulting net interest margin was 3.32 percent, up 7 basis points.
  • Average loans and leases remained relatively stable at $80.1 billion.
    • Consumer lending balances decreased $87 million on an average basis.
    • Business lending balances increased $19 million on an average basis.
  • Average deposit balances totaled $97.5 billion, a decrease of $478 million or less than 1 percent; low-cost deposits decreased $335 million.
  • Allowance for loan and lease losses declined 3 basis points to 1.30 percent of total loans; the allowance for loan and lease losses attributable to direct energy loans increased from 6.1 percent to 6.9 percent.
  • Net charge-offs decreased 17 basis points to 0.34 percent of average loans, and non-accrual loans, excluding loans held for sale, decreased 18 percent to 1.03 percent of loans outstanding.

Second quarter 2017 results compared to second quarter 2016:

  • Net interest income and other financing income on a fully taxable equivalent basis increased 4 percent; the resulting net interest margin increased 17 basis points.
  • Non-interest income was relatively flat on both a reported and adjusted basis(1).
  • Non-interest expenses decreased 1 percent, but increased 1 percent on an adjusted basis(1).
  • Average loans and leases decreased $1.9 billion or 2 percent.
    • Consumer lending balances increased 1 percent on an average basis.
    • Business lending balances decreased 4 percent on an average basis.
  • Average deposit balances remained relatively stable; while low-cost deposits increased $325 million.
  • Net charge-offs decreased 1 basis points to 0.34 percent of average loans, and non-accrual loans, excluding loans held for sale, decreased 20 percent to 1.03 percent of loans outstanding.
SECOND QUARTER 2017 FINANCIAL RESULTS:

Selected items impacting earnings:

Quarter Ended
($ amounts in millions, except per share data) 6/30/2017 3/31/2017 6/30/2016
Pre-tax adjusted items:
Branch consolidation, property and equipment charges $ (7 ) $ (1 ) $ (22 )
Salaries and benefits related to severance charges (3 ) (4 ) (1 )
Professional, legal and regulatory expense (3 )
Gain on sale of affordable housing residential mortgage loans 5
Securities gains (losses), net 1 6
Diluted EPS impact* $ $ $ (0.01 )
Pre-tax additional selected items**:
Pension settlement charge $ (10 ) $ $
Operating lease impairment charges (7 ) (5 )
FDIC insurance refund 6

* Based on income taxes at a 38.5% incremental rate.

** Items represent an outsized or unusual impact to the quarter or quarterly trends, but are not considered non-GAAP adjustments.

The company continues to optimize its retail network and incurred $7 million of expenses during the second quarter primarily associated with the consolidation of 22 additional branches expected to close during the fourth quarter of 2017. A previously announced consolidation of 27 branches were closed during the second quarter. Together, this will bring the total number of consolidated branches since the fourth quarter of 2015 to approximately 160, exceeding the company's previous commitment to consolidate at least 150 branches by the end of 2017. The consolidations are part of Regions' ongoing efficiency initiatives as the company refines its branch network while also making prudent investments in new technologies, delivery channels and other areas of growth.

In addition, the company recognized $5 million of deferred gains in the second quarter associated with the sale of $171 million of affordable housing residential mortgage loans to Freddie Mac during the fourth quarter of 2016. The company also incurred a $10 million pension-related settlement charge during the second quarter, and a $7 million impairment charge reducing the value of certain operating lease assets. The pension settlement charge is included in salaries and employee benefits, and the operating lease impairment charge is recorded as a reduction in other non-interest income.

Total revenue

Quarter Ended
($ amounts in millions) 6/30/2017 3/31/2017 6/30/2016 2Q17 vs. 1Q17 2Q17 vs. 2Q16

Net interest income and other financing income

$ 882 $ 859 $ 848 $ 23 2.7 % $ 34 4.0 %

Net interest income and other financing income - fully taxable equivalent (FTE)

$ 904 $ 881 $ 869 $ 23 2.6 % $ 35 4.0 %
Net interest margin (FTE) 3.32 % 3.25 % 3.15 %
Non-interest income:
Service charges on deposit accounts 169 168 166 1 0.6 % 3 1.8 %
Wealth management 108 109 103 (1 ) (0.9 )% 5 4.9 %
Card & ATM fees 104 104 99 NM 5 5.1 %
Mortgage income 40 41 46 (1 ) (2.4 )% (6 ) (13.0 )%
Capital markets fee income and other 38 32 38 6 18.8 % NM
Bank-owned life insurance 22 19 20 3 15.8 % 2 10.0 %
Commercial credit fee income 18 18 18 NM NM
Market value adjustments on employee benefit assets* 2 5 8 (3 ) (60.0 )% (6 ) (75.0 )%
Securities gains (losses), net 1 6 1 NM (5 ) (83.3 )%
Other 23 14 22 9 64.3 % 1 4.5 %
Non-interest income $ 525 $ 510 $ 526 $ 15 2.9 % $ (1 ) (0.2 )%
Total revenue, taxable-equivalent basis $ 1,429 $ 1,391 $ 1,395 $ 38 2.7 % $ 34 2.4 %

Adjusted total revenue, taxable-equivalent basis (non-GAAP)(1)

$ 1,423 $ 1,391 $ 1,389 $ 32 2.3 % $ 34 2.4 %

NM - Not Meaningful

* These market value adjustments relate to assets held for certain employee benefits, and are offset within salaries and employee benefits expense.

Comparison of second quarter 2017 to first quarter 2017

Total revenue on a fully taxable equivalent basis was $1.43 billion in the second quarter, an increase of $38 million or 3 percent compared to the first quarter of 2017. On an adjusted basis(1), total revenue on a fully taxable equivalent basis increased $32 million or 2 percent from the prior quarter.

Net interest income and other financing income on a fully taxable equivalent basis was $904 million, an increase of $23 million or 3 percent. The resulting net interest margin was 3.32 percent, an increase of 7 basis points. Net interest margin and net interest income and other financing income benefited from higher market interest rates, as well as favorable credit-related interest recoveries. Further, one additional day in the quarter resulted in an increase to net interest income and other financing income of approximately $5 million, but reduced net interest margin by approximately 2 basis points.

Non-interest income totaled $525 million, an increase of $15 million or 3 percent. This included the recognition of a $5 million deferred gain associated with the sale of affordable housing residential mortgage loans during the fourth quarter of 2016, and an operating lease impairment charge of $7 million included in other non-interest income during the second quarter compared to a $5 million impairment charge recorded in the first quarter. On an adjusted basis(1), non-interest income increased $9 million or 2 percent primarily due to increases in capital markets income and bank-owned life insurance. Capital markets income increased $6 million or 19 percent during the quarter driven primarily by fees generated from the placement of permanent financing for real estate customers and merger and acquisition advisory services. Bank-owned life insurance increased $3 million or 16 percent.

Mortgage production increased 25 percent during the quarter, while mortgage income remained relatively stable. Within total mortgage production, 80 percent was related to purchase activity and 20 percent was related to refinancing. An increase in mortgage servicing income was offset by modest spread compression and lower hedging gains. The company completed its purchase of rights to service $2.7 billion of mortgage loans during the quarter, bringing the total rights purchased to more than $15 billion of mortgage loans over the past four years. Increased servicing income is expected to help offset the impact of lower refinancing volumes.

Comparison of second quarter 2017 to second quarter 2016

Total revenue on a fully taxable equivalent basis increased $34 million or 2 percent compared to the second quarter of 2016. Adjusted(1) total revenue on a fully taxable equivalent basis also increased $34 million or 2 percent.

Net interest income and other financing income on a fully taxable equivalent basis increased $35 million or 4 percent compared to the prior year. The resulting net interest margin increased 17 basis points. Net interest margin and net interest income and other financing income benefited from higher market interest rates, including prudent deposit cost management, as well as the impact of balance sheet management strategies, including higher securities balances, and favorable credit-related interest recoveries, partially offset by lower average loan balances.

Non-interest income was relatively flat on a reported and adjusted basis(1). Service charges increased $3 million or 2 percent reflecting growth in checking accounts of 1.3 percent. Card & ATM fees increased $5 million or 5 percent driven by a 10 percent increase in spending volume. Wealth management income increased $5 million or 5 percent driven by growth in investment management & trust fees as assets under management increased 12 percent. Bank-owned life insurance increased $2 million, or 10 percent. Market value adjustments on employee benefit assets, which are offset in salaries and benefits, decreased $6 million.

Mortgage income decreased $6 million or 13 percent compared to the prior year primarily due to lower production and modest spread compression. These decreases were partially offset by an increase in mortgage servicing income. Capital markets income remained unchanged as an increase in fees generated from the placement of permanent financing for real estate customers was offset by reduced income from merger and acquisition advisory services and revenues associated with debt underwriting and loan syndications. In addition, other non-interest income included an operating lease impairment charge of $7 million recorded in the current quarter.

Non-interest expense

Quarter Ended
($ amounts in millions) 6/30/2017 3/31/2017 6/30/2016 2Q17 vs. 1Q17 2Q17 vs. 2Q16
Salaries and employee benefits $ 497 $ 478 $ 480 $ 19 4.0 % $ 17 3.5 %
Net occupancy expense 86 85 86 1 1.2 % NM
Furniture and equipment expense 85 80 79 5 6.3 % 6 7.6 %
Outside services 43 40 39 3 7.5 % 4 10.3 %
Marketing 22 24 28 (2 ) (8.3 )% (6 ) (21.4 )%
FDIC insurance assessments 26 27 17 (1 ) (3.7 )% 9 52.9 %

Professional, legal and regulatory expenses

28 22 21 6 27.3 % 7 33.3 %
Branch consolidation, property and equipment charges 7 1 22 6 NM (15 ) (68.2 )%
Credit/checkcard expenses 12 14 14 (2 ) (14.3 )% (2 ) (14.3 )%
Visa class B shares expense 1 3 2 (2 ) (66.7 )% (1 ) (50.0 )%
Provision (credit) for unfunded credit losses (3 ) 1 11 (4 ) (400.0 )% (14 ) (127.3 )%
Other 105 102 116 3 2.9 % (11 ) (9.5 )%
Total non-interest expense from continuing operations $ 909 $ 877 $ 915 $ 32 3.6 % $ (6 ) (0.7 )%
Total adjusted non-interest expense(1) $ 899 $ 872 $ 889 $ 27 3.1 % $ 10 1.1 %

NM - Not Meaningful

Comparison of second quarter 2017 to first quarter 2017

Non-interest expense totaled $909 million in the second quarter, an increase of $32 million or 4 percent compared to the first quarter of 2017...


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