Regions Financial in Birmingham, Ala., reported double-digit earnings growth in the fourth quarter as gains in both fee income and loan balances helped to offset a sharply higher loan-loss provision related to weakness in its energy portfolio.

The $126 billion-asset company said Friday that it earned $269 million in the quarter that ended Dec. 31, up 35% from the same period in 2014. Its earnings per share climbed 40%, to 21 cents, a penny higher than estimates of analysts polled by Bloomberg.

Loan balances increased 5% year over year, to $81 billion, resulting in a 2% increase in net interest income, to $836 million. The net interest margin fell 9 basis points, however, to 3.08%. If not for an accounting adjustment related to a portion of Regions' lease portfolio, the net interest income and margin would have been slightly higher.

Noninterest income climbed 8.4% year over, to $514 million, due largely to gains in fees from wealth management, cards and ATMs and mortgage and capital markets activity. Fee-income growth was a big reason total revenues were up 4.3% year over year, to nearly $1.4 billion.

Regions continued to increase its loan-loss provision to cover potential defaults on loans made to oil, gas and other energy-related firms. It set aside $69 million in the quarter, up 15% from three months earlier and 762% from the fourth quarter of 2014. In a news release the company said it expects more “volatility” in its commercial portfolio as a result of falling oil and gas prices.

Still, despite signs of weakness in the loan book, the company’s performance ratios continued to improve. Its return on assets climbed 21 basis points, to 0.87%, year over year, while its return on equity increased from 7.04% to 9.61%. Its efficiency ratio fell to 63.4% from 66.1% at the end of 2014.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.