Improved credit quality boosted second-quarter profits at Regions Financial in Birmingham, Ala.

The company has frequently indicated an aversion to loan categories that seem to be overly frothy, and has been cutting exposure to indirect auto, multifamily and medical office lending.

Net income at the $125 billion-asset company rose 18% to $301 million from the same period a year earlier. Earnings per share of 25 cents were a penny better than the mean of estimates compiled by FactSet Research Systems.

Regions Chairman and CEO Grayson Hall.
“Our disciplined approach to credit continues to deliver positive results as we reported improvements in almost every credit metric,” says Regions Chairman and CEO Grayson Hall.

The results included a $10 million charge related to a pension settlement, and a $7 million impairment charge to mark down the value of some operating lease assets.

“Our disciplined approach to credit continues to deliver positive results as we reported improvements in almost every credit metric,” Chairman and CEO Grayson Hall said in a news release.

Net interest income rose 7% to $834 million, as the loan-loss provision shrunk 33% to $48 million. The net interest margin improved 17 basis points to 3.32%.

Total loans fell 2% to $80.1 billion on lower balances of indirect auto loans, business loans and commercial real estate loans. Regions reduced its exposure to the energy sector, and to multifamily and medical office properties. However, Regions also increased its credit card lending and indirect consumer lending.

Noninterest income was little changed at $525 million. Mortgage income fell 1% to $40 million, offsetting a slight increase in deposit service charges.

Noninterest expenses rose 3% to $899 million. Regions incurred $10 million of expenses related to branch closures and severance pay. FDIC insurance assessments rose 53% to $26 million.

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Andy Peters

Andy Peters

Andy Peters writes about regional banks, consumer finance and debt collections for American Banker.