- Key insight: Regions reported strengthened first-quarter credit quality and CEO John Turner predicted key metrics would likely show further improvement.
- Supporting data: Regions repositioned its balance sheet, selling $900 million of lower-yielding securities shortly after the first-quarter ended.
- Expert quote: "Businesses are continuing to manage their balance sheets and income statements prudently." —Regions Chairman and CEO John Turner
Regions Financial Corp. in Birmingham, Alabama, reported increased first-quarter profit Friday as broad-based growth in both commercial and commercial real estate lending helped push net interest income higher, while improved credit quality allowed the company to downsize its allowance for credit losses.
Solid credit quality appears to be a developing trend after a week of bank earnings disclosures, as several large institutions, including the Charlotte, North Carolina–based
For the $160.7 billion-asset Regions, the bias leaned toward improvement in the first quarter. Though the ratio of net charge-offs to average annualized loans ticked up two basis points from a year ago, ending the first quarter at 0.54%, nonperforming loans and criticized business loans both declined, as risk rating upgrades outpaced downgrades, according to
Regions is continuing to work out problem credits, so credit quality should continue to improve, according to Chairman and CEO John Turner. The ratio of nonperforming loans to total loans, which totaled 0.71% on March 31, could "drop into the 60s," Turner said on a conference call with analysts.
Both Turner and Chadha expressed confidence net charge-offs, which Turner characterized as a "trailing indicator of credit quality," would drop within the company's 40 to 50 basis-point target range by the end of 2026. Given the positive trend line, Regions reported a $91 million first-quarter provision for credit losses, down from $124 million a year ago.
Industry-wide, consumer credit "is very well-controlled," SSA & Company analyst Pierre Buhler told American Banker Friday in an interview. Buhler, however, expressed concern that some banks may not have underwritten their private-credit exposure as thoroughly as their in-house commercial loans.
"There are elements of credit that may be a little more fragile," Buhler said.
Regions' loans to so-called nondepository financial institutions totaled $12.8 billion on March 31. The credits are primarily investment-grade, with about half of the total linked to Regions' long-standing business serving real estate investment trusts, Chadha said.
Regions' higher-level credit quality continued to improve," RBC Capital Markets analyst Gerard Cassidy wrote in a research note.
Regions reported net income of $559 million for the quarter ended March 31, up 14% from the same period in 2025. Adjusted net income of $539 million rose 16%. On a per-share basis, Regions earned $0.62 per share, according to S&P Capital IQ. Investors had forecast $0.60.
Loan growth, especially in the commercial and commercial real estate portfolios, was a key driver behind the better-than-expected results. Business loans totaled $65.7 billion on March 31, up 4.6% from a year earlier. That jump offset a modest consumer-lending decline and pushed quarterly net interest income to $1.25 billion, up 4.5% year over year. Total revenue of $1.87 billion increased 5%.
Deposits totaled $131.9 million on March 31, representing a 1% year-over-year increase. Regions attributed the modest bump to seasonal factors, including tax payments. It reiterated full-year 2026 guidance forecasting a low-single-digit deposit increase.
After the quarter ended, Regions sold $900 million of lower-yielding securities, Chadha said on the conference call. The company expects to invest the proceeds into higher-yielding investments, which should boost spread income and total revenue.
First-quarter noninterest income of $625 million rose 6% from a year ago, driven by a 9% year-over-year spike in wealth management fee income. Noninterest expense rose 2.8%, totaling $1.07 billion for the three months ended March 31.
Though elevated macroeconomic uncertainty remains a cause for concern, it hasn't significantly impacted operations, Turner said.
"Conversations with customers suggest that despite recent volatility, sentiment remains generally optimistic," the CEO said. "Businesses are continuing to manage their balance sheets and income statements prudently, with strong liquidity and solid capital positions."
"We are seeing some pressure among lower-income [consumer] customers, but larger tax refunds compared to last year have helped offset a portion of that impact," Turner added.
