NEW YORK — Regions Financial Corp.'s second-quarter earnings report addressed an array of concerns hanging over the Alabama regional bank, including its worrisome loan books, legal troubles with regulators and even its exposure to the Gulf of Mexico oil spill.
The Birmingham-based bank Tuesday posted a loss of $277 million for the quarter after it set aside $200 million to settle legal charges stemming from a Securities and Exchange Commission probe into accounting practices at its Morgan Keegan & Co. investment bank. Regions, which has 1,800 branches in 16 states, including Gulf states like Florida, Louisiana and Mississippi, also said fallout from the oil spill will cost it as much as $100 million.
Regions is the nation's 12th-largest bank by assets and has faced an embattled journey through the banking crisis, having faced mammoth losses from bad bets on boom-time real-estate loans and, more lately, heavy scrutiny from a collection of regulators over some big losses in Morgan Keegan mutual funds that ensnared wealthy investors, including professional basketball players.
The bank said in a statement Tuesday that it is currently working to settle the charges.
Shares in Regions were recently up 3.7% to $7.34.
Regions also disclosed Tuesday that its troubled loan books, which have faced big losses tied to investor-owned commercial real estate projects, are improving in health. The bank's quarterly loan losses fell to $651 million, down for the third straight quarter, while its nonperforming assets--or loans at risk of becoming uncollectable--fell to $4 billion during the quarter, but were still up about 30% over a year ago.
Unlike some other regional banks, Regions didn't boost its earnings by reducing its loan-loss reserves, which is a sign a bank's forecast for future losses has improved. Instead, Regions kept its reserves unchanged, and also wrote off permanent losses from loans of $651 million during the quarter.
"The slow and fragile nature of the economic recovery requires we remain cautious," said David Turner, the bank's chief financial officer, during a conference call with investors. The bank has lost money for the last five quarters.
The bank's total loans fell again during the quarter, mirroring a national trend in which businesses and consumers are largely avoiding new debt, and banks are looking to lend money only to very credit-worthy borrowers. Regions held $86 billion in total loans at the end of June, down more than 10% over a year ago.
