Shares of Regions Financial Corp. in Birmingham, Ala., have fallen 13% as investors reacted to word that the banking company's net interest margin has continued to slide this quarter.

Company officials told analysts that its net interest margin - the profit margin on its loans - could slip as much as 12 basis points, to 3.55%. The selloff in $42.7 billion-asset Regions accelerated after Wachovia Corp. of Winston-Salem, N.C., issued an earnings warning last Thursday, prompting speculation that Regions would follow suit, traders said.

Since shares in Regions began their decline American Banker's index of 50 largest banks has fallen 7% and its index of 225 banks, 7.8%

In trading Tuesday, Regions shares fell 18.75 cents, or 0.88%, to $21.125, as the American Banker index of 50 largest banks fell 0.40% and the index of 225 banks 0.83%.

Rising interest has pinched margins for many banks as the Federal Open Markets Committee raised interest rates six times since last summer, to 6.5%, to stave off inflation.

But Regions, which has a traditional balance sheet heavy with commercial credit, consumer loans, and mortgages, has been more vulnerable than most, analysts said. The margin for a typical commercial bank has slipped 14 basis points, to 4.17%, in the past year, while Regions' has fallen 44 basis points, to 3.65%, said Marni Pont O'Doherty of Keefe, Bruyette & Woods Inc.

The 12 basis point decline for this quarter would follow declines of 7 basis points in the first quarter, 11 in the fourth, and 20 in the third, said Gerard Cronin, an analyst at McDonald Investments.

"They started to suffer from those interest rate hikes very early," said Mr. Cronin, who cut his estimate of per-share earnings in the second quarter to 56 cents, from 57, and his fully-year estimate to $2.30, from $2.40. He also cut his 2001 estimate, to $2.50 from $2.60.

Regions is having a hard time building up its deposits, said Mr. Cronin.

The analyst pointed out that the company's loans are growing about 15% annually but its deposit growth only about 5%, which forces the bank to fund its growth from the much more expensive wholesale market.

"With that kind of gap between your loan growth and deposit growth, it is much more difficult to maintain your margin," he said.

Another potential problem, Mr. Cronin said, is the company's declining reserve-to-loans ratio. That slide means the company will be working with a thin cushion if nonperforming assets go up.

In the first quarter Regions' reserve/loan ratio was 1.21%, just above Wachovia's ratio of 1.17%. Last week, Wachovia said that it would not meet analysts' earnings estimates because of higher interest rates and a special provision for higher nonperforming assets.

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