Regions Posts Q4 Loss Amid $6 Billion Goodwill Write-down

Regions Financial Corporation (RF) reported a $6.2 billion, or $9.01 per share, fourth-quarter loss Tuesday, largely driven by a $6 billion goodwill write-down and raised loan-loss provisions. The company’s non-performing assets eased slightly in the fourth quarter, but full-year losses still reached $5.6 billion or $8.09 per share. Fourth quarter’s loss reflects intensified efforts by the company to aggressively reduce exposure in its most stressed loan portfolios as well as incremental weakness in housing valuations and the overall economy, according to the firm’s press release Tueasday. “Although we’re encouraged by steps the government has taken to stabilize the housing market and revitalize the economy, there is no quick fix for credit quality issues currently plaguing the financial services industry,” said Dowd Ritter, chairman, president and CEO. During the fourth quarter, Regions either sold or transferred to held for sale around $1 billion of non-performing loans and foreclosed properties. Losses on those transactions, most of which were included in net-charge-offs, totaled $479 million, driving the linked-quarter increase in net loan charge-offs to $796 million, up from third-quarter’s $416 million. Commercial real estate construction write-offs, primarily related to homebuilders and condominiums, drove the losses. Home equity loan charge-offs increased modestly to an annualized 1.72 percent of average loans and lines from third quarter’s 1.59 percent. Embedded in the residential mortgage net charge-offs for the quarter, was $17 million related to loan dispositions. As expected, Regions’ most stressed portfolios continue to be residential homebuilders; home equity, mainly second liens in Florida; and condominiums. The company has made progress in working through homebuilder and condo exposures, the company said, which declined during 2008. These assets currently amount to $9.0 billion, or about 9 percent of the total loan portfolio. “We fully acknowledge the challenges that we face in 2009. We have been aggressively preparing for those challenges and will continue to take appropriate actions to successfully steer Regions through this difficult environment,” Ritter said. Regions received $3.5 billion in November from the Treasury’s Troubled Asset Relief Program, strengthening the company’s Tier 1 capital ratio, as it sat $5 billion above “well capitalized” status at the close of the fourth-quarter. During the fourth quarter, the company’s total customer deposits grew 4 percent on average — The Integrity Bank acquisition on August 29 played a significant role in this growth. Write to Kelly Curran at Disclosure: The authors held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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