Regions Financial Corp. returned to profitability in the first quarter due to a relatively small loan-loss provision and a number of special items.

Regions' loan-loss provision, at $425 million, was one-third its fourth-quarter size. Net chargeoffs were halved from a quarter earlier, at $390 million. But nonperforming assets continued to grow, rising 35.5% from the fourth quarter, to $2.33 billion. The allowance for loan losses was 1.13 times the amount of nonperforming loans at the end of the first quarter, compared to a 1.74 ratio the quarter earlier.

C. Dowd Ritter, the company's chairman, president and chief executive, complained about the "stubbornly high" level of nonperforming assets, calling the first-quarter results "disappointing" as a consequence.

"I'm not about to suggest that the tough times are behind us," Ritter added, "because they're not."

Chief financial officer Irene Esteves defended the reduced loss provision during a conference call, saying that Regions took aggressive steps in the fourth quarter to contain its most problematic loans. Credit problems remain contained to mortgages and home equity and condominium loans, she said. The company also recorded a $4 million gain in the first quarter from selling some of those loans, "showing that our marks last quarter when we moved them to 'held for sale' were adequate," she said.

The gain was one of several items helping the $142 billion-asset Birmingham, Ala., company nudge back into the black after losing $6.24 billion a quarter earlier. Regions earned $26 million, or 4 cents a share, after paying dividends on preferred stock. The results also included $53 million in securities gains and a net $8 million gain on the termination of sale-in lease-out relationships.

The loan book shrank 1.8% from a quarter earlier, to $93.8 billion, despite the company's receipt last year of $3.5 billion in capital from the Treasury Department. Esteves said the decline was due largely to reduced balances in the commercial and industrial portfolio and because the company sold most of its $2.8 billion of first-quarter mortgage originations into the secondary market.

Kevin Fitzsimmons, an analyst at Sandler O'Neill & Partners LP, wrote in a note that, excluding the special items, Regions' results would have been a loss of 4 cents a share. Analysts on average had expected the company to lose 42 cents, according to Thomson Reuters.

Its shares closed up 5.86%, to $6.14.

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