ยป Financial Supplements
BIRMINGHAM, Ala. (BUSINESS WIRE) July 14, 2006 โ Regions Financial Corporation (NYSE:RF) today announced highlights for the quarter ended June 30, 2006, including:
- Record earnings of 75 cents per diluted share
- Higher net interest income
- Strong fee-based revenues
- Improved operating efficiency
- Outstanding credit quality
- Good merger preparation progress
- Reaping Rewards of Merger Opportunities, Balance Sheet Positioning
"Regions' significant second quarter earnings gain sets the stage for record full-year 2006 operating profits," said Regions Chairman, President and Chief Executive Officer Jackson W. Moore. "We continue to see the powerful benefits of Regions' mid-2004 merger of equals with Union Planters as incremental revenue generating opportunities are realized and operating efficiency is improved.
"Strong revenue, combined with lower expenses, drove Regions' sharp bottom line increase first-to-second quarter," according to Moore. "A well-positioned balance sheet enabled continued net interest income growth, and fee-based revenues were solid. Additionally, net loan charge-offs remained low. As a result, Regions' annualized return on tangible common equity increased to approximately 26 percent.
"This was a milestone quarter due to our record-breaking profits as well as our May 25 announcement of an agreement to merge with Birmingham-based AmSouth," Moore stated. "The merger planning process is well underway, with a fourth quarter close anticipated.
"I'm excited about the Regions-AmSouth merger and its substantial opportunities to accelerate our vision of Regions becoming the leading regional financial services provider by creating significant shareholder value, enhancing products and services for our customers and enhancing career opportunities for our associates. Regions' year-to-date 2006 results validate the power of a complementary, well-executed merger of equals. I am confident in our ability to successfully integrate the two companies and realize the combined entity's enhanced long-term profit potential."
EPS Climbs to New Quarterly High
Second quarter 2006 net income was $345 million, or 75 cents per diluted share compared to first quarter 2006's 64 cents per diluted share and year-ago second quarter's 53 cents per diluted share, including 6 cents of merger-related charges. Thus, per share quarterly earnings rose 17 percent linked quarter and 27 percent year-over-year, excluding merger charges.
For the first six months of 2006, net income totaled $640 million, or $1.39 per diluted share compared to $1.04 per diluted share, including 12 cents of merger and other charges, reported in the first six months of 2005. The 20 percent annual increase, excluding merger and other charges, reflected solid revenue growth and merger-related cost save benefits.
Banking Operations Continue to Grow Net Interest Income
"Regions' banking business posted good revenue growth first-to-second quarter--both spread-related and fee-based," Moore noted. "Regions' ongoing disciplined balance sheet management positively impacted spread-related net interest income."
Taxable equivalent net interest income rose $25 million, or an annualized 13 percent linked quarter, reflecting a higher net interest margin (4.24 percent) and an additional business day in the second quarter. The year-over-year quarterly increase was 10 percent, driven by 39 basis point margin expansion and modest balance sheet growth.
Total loans grew 5 percent, linked-quarter, annualized. Increases in commercial and industrial credits drove overall community bank loan growth, offset somewhat by a decline in commercial real estate and consumer lines of credit.
Total deposits grew 6 percent linked-quarter, annualized. Customer preferences continued to move toward higher-yielding instruments such as retail certificates of deposit, shifting funds out of interest free and low-cost deposit accounts. Regions continues to actively control deposit pricing while strengthening its core funding base.
Fee-Based Revenues Remain Strong
"We're pleased with Regions' broad and expanding base of fee revenues," stated Moore. "Total fees have risen 8 percent since second quarter 2005, excluding securities transactions."
Linked-quarter fee-based revenue comparisons were steady-to-favorable, leading to an aggregate 4 percent increase even with first quarter's unusually strong contribution from capital markets-related businesses. Service charges on deposit accounts jumped 15 percent from first quarter's seasonal low and were up 12 percent year-over-year second quarter.
Mortgage-related servicing and origination fees improved 5 percent compared to first quarter, helped by EquiFirst's higher origination volume. Gain on sale of mortgage loans improved significantly given higher sales volumes and slightly better gain on sale margins at EquiFirst.
Morgan Keegan Remains Well Positioned for Record Full-Year Earnings
"Morgan Keegan's second quarter results were excellent," Moore said. "Profits were $33 million, or 34 percent higher than a year ago, and support our expectations that full-year 2006 will be another record earnings year for Morgan Keegan. Second quarter earnings, though, did drop from first quarter 2006's particularly strong $41 million, which included a $9 million after tax gain on the swap of NYSE seats for stock."
Revenue aggregated $239 million, up 22 percent from a year earlier but down from first quarter 2006's $252 million. First quarter revenues included a $13 million pre-tax gain related to the exchange of NYSE seats for stock.
All divisions reported good business flows, helped by Morgan Keegan's increased distribution system and larger sales force.
Operating Efficiency Improves
Non-interest expenses dropped 4 percent linked-quarter, to $727 million from first quarter's $756 million. Favorable expense trends reflect cost savings from the Union Planters merger, continuing efforts to streamline operations, and seasonally lower second quarter expenses. Also included in first quarter and second quarter non-interest expense were recoveries of $9 million and $10 million, respectively, from valuation of mortgage servicing rights.
Regions' operating efficiency ratio improved to 57 percent from first quarter's 61 percent, driven by strong gains in total revenue combined with favorable expense trends.
Non-performing Assets Fall, Loan Charge-offs Stay Low
Credit quality was excellent in the second quarter. Non-performing assets declined 22 percent linked quarter, or $89 million, to $320 million at June 30, 2006 โ 0.54 percent of loans and foreclosed real estate. This compares to $456 million (0.78 percent of loans and foreclosed real estate) at June 30, 2005. Loans greater than 90 days past due also improved, dropping $15 million, or 16 percent, first-to-second quarter.
During the second quarter, Regions sold $10 million of foreclosed real estate, realizing a net $5 million gain. Additionally, $59 million of non-performing residential mortgage loans were sold, with no income statement impact.
Net loan charge-offs remained low at $31 million, or an annualized 0.21 percent of average loans. Aggregate net charge-offs rose slightly from first quarter's seasonally low $29 million (annualized 0.20 percent of average loans), and declined from second quarter 2005's $34 million (annualized 0.23 percent of average loans).
Second quarter's provision for loan losses was $30 million, resulting in a $778 million loan loss allowance (1.32 percent of loans) at June 30, 2006.
Adheres to Active Capital Management Strategy
During the second quarter, Regions repurchased 3.6 million common shares at an average cost of $35.08 per share. Year-to-date June 30, buybacks totaled 7.3 million shares, leaving up to an additional 20.3 million common shares that can be repurchased under the company's current authorization.
Regions remained well capitalized. Tangible stockholders' equity-to-tangible assets was 6.69 percent at June 30, 2006 โ down slightly from March 31's 6.77 percent.
Strikes Agreement to Merge with AmSouth
On May 25, 2006, Regions and AmSouth announced an agreement to merge, creating a top ten U. S. banking organization with approximately $140 billion in assets and a $24 billion market capitalization. AmSouth shareholders will receive 0.7974 Regions shares for each AmSouth share. The newly formed entity will retain the name Regions Financial Corporation. Pending shareholder and regulatory approvals, the transaction is expected to close during the fourth quarter of 2006.
About Regions Financial Corporation
Regions Financial Corporation (NYSE: RF), headquartered in Birmingham, Ala., is a full-service provider of retail and commercial banking, trust, securities brokerage, mortgage and insurance products and services. Regions had $86.1 billion in assets as of June 30, 2006, making it one of the nation's top 15 banks. Regions' banking subsidiary, Regions Bank, operates some 1,300 offices and a 1,600-ATM network across a 16-state geographic footprint in the South, Midwest and Texas. Its investment and securities brokerage, trust and asset management division, Morgan Keegan & Company Inc., provides services from over 300 offices. Additional information about Regions, which is a member of both the Forbes and Fortune 500, can be found at www.regions.com.
Financial Highlights
(Unaudited)
(Dollar amounts in thousands, except per share amounts)
Three Months Ended
June 30
--------------------------
2006 2005 Change
------------ ------------ ------
Earnings
Net income $345,257 $248,351 39%
Per share:
Net income $0.76 $0.54 41%
Net income-diluted $0.75 $0.53 42%
Cash dividends declared $0.35 $0.34 3%
June 30
--------------------
Financial Condition 2006
------------
Total assets $86,062,786
Loans, net of unearned income $59,130,632
Securities $11,788,018
Total earning assets $75,598,113
Total deposits $61,404,826
Stockholders' equity $10,698,359
Stockholders' equity per share $23.56
As of and for six
months ended June 30
--------------------
Selected Ratios 2006
------------
Return on average tangible equity 24.04%
Return on average stockholders'
equity 12.09%
Return on average total assets 1.51%
Stockholders' equity to total
assets 12.43%
Allowance for loan losses as a
percentage of loans, net of
unearned income 1.32%
Loans, net of unearned income, to
total deposits 96.30%
Net charge-offs to average loans 0.21%
Six Months Ended June 30
--------------------------
2006 2005 Change
------------ ------------ ------
Earnings
Net income $639,937 $489,992 31%
Per share:
Net income $1.40 $1.06 32%
Net income-diluted $1.39 $1.04 34%
Cash dividends declared $0.70 $0.68 3%
June 30
------------
2005 Change
------------ ------------
Financial Condition
Total assets $85,279,098 1%
Loans, net of unearned income $58,338,944 1%
Securities $12,226,332 -4%
Total earning assets $74,842,001 1%
Total deposits $60,870,850 1%
Stockholders' equity $10,743,305 -
Stockholders' equity per share $23.28 1%
As of and
for six months
ended June 30
------------
2005
------------
Selected Ratios
Return on average tangible equity 18.33%
Return on average stockholders'
equity 9.21%
Return on average total assets 1.17%
Stockholders' equity to total
assets 12.60%
Allowance for loan losses as a
percentage of loans, net of
unearned income 1.30%
Loans, net of unearned income, to
total deposits 95.84%
Net charge-offs to average loans 0.20%
For additional information, including supplemental financial information, refer to Regions' Form 8-K furnished to the Securities and Exchange Commission on July 14, 2006, or visit Regions' Web site at www.regions.com. Regions' Investor Relations contact is Jenifer Goforth Kimbrough at 205/244-2823; Regions' Media contact is Sonya L. Smith at 205/244-2859.
Statements made in this press release, other than those containing historical information, are forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Act of 1995. Such statements involve risks and uncertainties that may cause results to differ materially from those set forth in these statements. Regions cautions readers that results and events subject to forward-looking statements could differ materially due to the following factors: possible changes in economic and business conditions; the existence or exacerbation of general geopolitical instability and uncertainty; the ability of Regions to integrate recent acquisitions and attract new customers; possible changes in monetary and fiscal policies, and laws and regulations; the effects of easing of restrictions on participants in the financial services industry; the cost and other effects of legal and administrative cases; possible changes in the credit worthiness of customers and the possible impairment of collectibility of loans; the effects of changes in interest rates and other risks and factors identified in the company's filings with the Securities and Exchange Commission.
Contact:
Regions Financial Corporation
Investor Relations:
Jenifer Goforth Kimbrough,
205/244-2823
or
Media Relations:
Sonya L. Smith,
205/244-2859
www.regions.com
Source: Regions Financial Corporation
