Interest rate pressures and an upturn in loan losses dampened fourth-quarter earnings at Regions Financial Corp.

The Birmingham, Ala.-based company reported net income of $129 million for the quarter, up 2% over the year earlier. For the year, profits rose 25%, to $525 million. The results for both the quarter and year each missed analysts' consensus estimate by a penny.

Regions, with $42.7 billion of assets and branches in eight southern states, said its loan portfolio increased 16% during the year. However, the company's net interest margin declined to 3.94%, from 4.25% at the end of 1998, pinching profits from the lending business.

Rising interest rates also dried up the market for mortgages, leading to a 24% decline in mortgage servicing and loan origination fees for the quarter and an 8% decline for the full year, the bank said.

Total chargeoffs increased by almost 50%, to $99.2 million in 1999.

Fee income rose 6% during the quarter, to $139 million. "I am very pleased that we were able to increase earnings, even with a challenging interest rate environment and higher loan losses," said Carl E. Jones Jr., president and chief executive officer.

Christopher T. Kelley, an analyst with Morgan Keegan & Co. in Memphis, said rising rates probably cut into results at Regions more than at some of the other banks he follows.

"Regions is not as big a commercial lender as some of the other banks in the area," he said. "This is a much more rural franchise, with a lot more retail loans and mortgages on the books."

Mr. Kelley, who has a neutral rating on the stock, said he expects the pressure to continue this year, especially if the Federal Reserve raises interest rates again this year. "The company has a very big mortgage banking component," he said. "Rising rates are going to make it awfully tough to make a lot of money this year in the mortgage business."

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