REGIONS FINANCIAL CORP 10-K Analysis & Summary – 2/21/2025

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Regions Financial Corporation

10-K

Annual report

Filing date:

02/21/2025

TLDR:

Regions Financial Corp’s 10-K filing for FY 2024 indicates a decrease in net income due to higher funding costs, but a stable allowance for credit losses. The company faces risks like interest rate volatility and regulatory changes, but also has opportunities in capital markets and mortgage income.

ELI5:

Regions Bank made less money this year because it cost more to borrow money. They have to watch out for changing interest rates and new rules, but they could make more money from investments and mortgages.

Accession #:

0001281761-25-000010

Published on

March 16, 2025

Analyst Summary

Net income available to common shareholders decreased from $2.0 billion in 2023 to $1.8 billion in 2024.
Net interest income decreased from $5.4 billion in 2023 to $4.9 billion in 2024.
Net interest margin decreased from 3.90% in 2023 to 3.54% in 2024.
Provision for credit losses decreased from $553 million in 2023 to $487 million in 2024.
Total assets increased from $152.2 billion in 2023 to $157.3 billion in 2024.
Total loans decreased from $98.4 billion in 2023 to $96.7 billion in 2024.
Net Interest Margin: 3.54% (down from 3.90% in 2023)
Net Charge-Offs to Average Loans: 0.47% (up from 0.40% in 2023)
Allowance for Credit Losses to Total Loans: 1.79% (up from 1.73% in 2023)
Gross Profit Margin: 67.78%, Trend: -4.72%
Operating Profit Margin: 40.24%, Trend: -15.23%
Net Profit Margin: 26.73%, Trend: -2.98%
Return on Assets (ROA): 1.20%, Trend: -5.38%
Return on Equity (ROE): 10.57%, Trend: -4.48%
Earnings Per Share (EPS) – Basic: $1.94, Trend: -8.06%
Earnings Per Share (EPS) – Diluted: $1.93, Trend: -8.53%
Current Ratio: 0.32, Trend: -1.84%
Quick Ratio (Acid-Test Ratio): 0.31, Trend: -1.84%
Cash Ratio: 0.08, Trend: 12.5%
Debt-to-Equity Ratio: 7.78, Trend: 1.77%
Debt-to-Assets Ratio: 0.89, Trend: 1.77%
Interest Coverage Ratio (Times Interest Earned): 2.03, Trend: -11.51%
Days Sales Outstanding (DSO): 962.13 days, Trend: 10.18%
Days Payable Outstanding (DPO): 842.83 days, Trend: -19.84%
Asset Turnover: 0.045, Trend: -4.35%
Price-to-Earnings Ratio (P/E): 12.12
Price-to-Book Ratio (P/B): 1.20
Price-to-Sales Ratio (P/S): 3.00
Enterprise Value to EBITDA (EV/EBITDA): 5.24
Revenue Growth: -6.46%
Net Income Growth: -8.73%
EPS Growth: -8.53%

Opportunities and Risks

Interest Rate Volatility: Fluctuations in market interest rates could adversely affect revenue, asset values, and the cost of capital.
Credit Quality: Potential increases in credit losses in loan portfolios could negatively impact earnings.
Regulatory Changes: Changes in laws and regulations, including those related to bank products and services, could require changes in business practices and increase compliance costs.
Cybersecurity: The company faces ongoing cybersecurity threats that could disrupt operations and result in data breaches and financial losses.
Economic Conditions: Adverse economic conditions in the Southeastern United States, the company’s primary market, could negatively affect its business.
Competition: Increased competition from traditional and non-traditional financial services companies, including fintechs, could impact market share and profitability.
Climate Change: Weather-related events and the transition to a lower-carbon economy could negatively impact operations and financial condition.
Capital Markets Income: Increased transaction volume and deal activity in capital markets could drive revenue growth.
Mortgage Income: Bulk purchases of mortgage servicing rights and increased mortgage production could boost mortgage income.
Investment Services: Strong advisor production in investment services could lead to higher fee income.
Expense Management: The company’s expense management initiatives could improve profitability.

Potential Implications

Company Performance

The increase in net charge-offs and the potential impact of new regulations warrant close monitoring.
The company’s opportunities in capital markets, mortgage income, and investment services could provide some offset to these challenges.
Regions faces challenges in growing its earnings and needs to focus on improving efficiency and revenue generation.

Regions Financial Corp (RF) 10-K Filing Analysis – FY 2024

Executive Summary

This report analyzes Regions Financial Corp’s 10-K filing for the fiscal year 2024. Key findings include a decrease in net income compared to 2023, driven by higher funding costs, and a stable allowance for credit losses. The report identifies both risks and opportunities for the company, including interest rate volatility, credit quality concerns, and the potential impact of new regulations. Overall, a HOLD recommendation is suggested, pending further observation of the company’s ability to navigate the evolving economic and regulatory landscape.

Company Overview

Regions Financial Corporation is a financial holding company operating primarily in the South, Midwest, and Texas. It provides a range of banking and financial services, including retail and commercial banking, wealth management, and mortgage services. The company’s performance is influenced by economic conditions, interest rates, and regulatory changes.

Detailed Analysis

Financial Statement Analysis

Income Statement:

Net income available to common shareholders decreased from $2.0 billion in 2023 to $1.8 billion in 2024.
Net interest income decreased from $5.4 billion in 2023 to $4.9 billion in 2024.
Net interest margin decreased from 3.90% in 2023 to 3.54% in 2024.
Provision for credit losses decreased from $553 million in 2023 to $487 million in 2024.
Non-interest income remained relatively stable at $2.3 billion.
Non-interest expense decreased from $4.4 billion in 2023 to $4.2 billion in 2024.

Key Ratios:

Net Interest Margin: 3.54% (down from 3.90% in 2023)
Net Charge-Offs to Average Loans: 0.47% (up from 0.40% in 2023)
Allowance for Credit Losses to Total Loans: 1.79% (up from 1.73% in 2023)

Balance Sheet:

Total assets increased from $152.2 billion in 2023 to $157.3 billion in 2024.
Total loans decreased from $98.4 billion in 2023 to $96.7 billion in 2024.
Total deposits remained relatively stable at $127.6 billion.
Shareholders’ equity increased from $17.4 billion in 2023 to $17.9 billion in 2024.

Cash Flow:

Net cash from operating activities decreased from $2.3 billion in 2023 to $1.6 billion in 2024.
Net cash from investing activities decreased from -$1.6 billion in 2023 to -$0.3 billion in 2024.
Net cash from financing activities decreased from -$5.1 billion in 2023 to $2.6 billion in 2024.

Management’s Discussion and Analysis (MD&A) Insights

Management attributes the decrease in net income and net interest margin to higher funding costs, including increased deposit costs due to continued re-mixing.
The decrease in the provision for credit losses was driven primarily by asset quality normalization.
Management highlights the company’s strong capital position and its ability to meet regulatory requirements.
The company is actively managing interest rate risk through the use of derivatives and debt securities.

Risks and Opportunities

Risks:

Interest Rate Volatility: Fluctuations in market interest rates could adversely affect revenue, asset values, and the cost of capital.
Credit Quality: Potential increases in credit losses in loan portfolios could negatively impact earnings.
Regulatory Changes: Changes in laws and regulations, including those related to bank products and services, could require changes in business practices and increase compliance costs.
Cybersecurity: The company faces ongoing cybersecurity threats that could disrupt operations and result in data breaches and financial losses.
Economic Conditions: Adverse economic conditions in the Southeastern United States, the company’s primary market, could negatively affect its business.
Competition: Increased competition from traditional and non-traditional financial services companies, including fintechs, could impact market share and profitability.
Climate Change: Weather-related events and the transition to a lower-carbon economy could negatively impact operations and financial condition.

Opportunities:

Capital Markets Income: Increased transaction volume and deal activity in capital markets could drive revenue growth.
Mortgage Income: Bulk purchases of mortgage servicing rights and increased mortgage production could boost mortgage income.
Investment Services: Strong advisor production in investment services could lead to higher fee income.
Expense Management: The company’s expense management initiatives could improve profitability.

Red Flags and Uncommon Metrics

Increased Net Charge-Offs: The increase in net charge-offs, particularly in the commercial and industrial and commercial investor real estate mortgage portfolios, warrants close monitoring.
Deposit Remixing: Continued deposit remixing into higher-interest-bearing categories could put pressure on net interest margin.
Long-Term Debt: The proposed long-term debt requirements could impact the company’s capital structure and ability to return capital to shareholders.

Conclusion and Actionable Insights

Regions Financial Corp faces a challenging environment with rising interest rates, increased competition, and evolving regulatory requirements. While the company is actively managing these risks, its ability to maintain profitability and asset quality will be crucial. The increase in net charge-offs and the potential impact of new regulations warrant close monitoring. The company’s opportunities in capital markets, mortgage income, and investment services could provide some offset to these challenges.

Recommendation: HOLD. Monitor the company’s performance in managing credit risk, controlling expenses, and navigating the evolving regulatory landscape. A more positive outlook would require evidence of sustained improvement in asset quality and a successful adaptation to the changing economic and regulatory environment.

Financial Ratio and Metric Analysis

Note: All calculations are based on the provided data. Industry comparisons are based on my general knowledge as a financial analyst and data that is publicly available. A specific source will be listed if used.

Profitability

Gross Profit Margin:
- Calculation: (Total Interest Income – Total Interest Expense) / Total Interest Income = (7,108 – 2,290) / 7,108 = 67.78%
- Trend: (67.78% – (5,320/6,897)) / (5,320/6,897) = -4.72%
- Industry: The average gross profit margin for banks is generally high, often exceeding 70%, reflecting the nature of their business. Regions’ margin is slightly below this average.
Operating Profit Margin:
- Calculation: (Net Interest Income + Total Non-Interest Income – Total Non-Interest Expense) / Total Revenue = (4,818 + 2,265 – 4,242) / (4,818 + 2,265) = 40.24%
- Trend: (40.24% – (4,767+2,256-4,416)/(4,767+2,256)) / (4,767+2,256-4,416)/(4,767+2,256) = -15.23%
- Industry: Banks typically have operating margins in the 30-50% range. Regions’ operating margin is within this range.
Net Profit Margin:
- Calculation: Net Income / Total Revenue = 1,893 / (4,818 + 2,265) = 26.73%
- Trend: (26.73% – (2,074/(5,320+2,256))) / (2,074/(5,320+2,256)) = -2.98%
- Industry: Net profit margins for well-performing banks are often in the 20-30% range. Regions’ net profit margin is within this range.
Return on Assets (ROA):
- Calculation: Net Income / Total Assets = 1,893 / 157,302 = 1.20%
- Trend: (1.20% – (2,074/152,194)) / (2,074/152,194) = -5.38%
- Industry: A good ROA for a bank is generally considered to be 1% or higher. Regions’ ROA is slightly above this benchmark.
Return on Equity (ROE):
- Calculation: Net Income / Total Equity = 1,893 / 17,910 = 10.57%
- Trend: (10.57% – (2,074/17,493)) / (2,074/17,493) = -4.48%
- Industry: A good ROE for a bank is typically in the range of 10-15%. Regions’ ROE is within this range.
Earnings Per Share (EPS) – Basic:
- Calculation: Net Income Available to Common Shareholders / Weighted-Average Shares Outstanding (Basic) = 1,774 / 916 = $1.94
- Trend: (1.94 – 2.11) / 2.11 = -8.06%
- Industry: EPS varies widely based on the size, profitability, and share structure of individual banks.
Earnings Per Share (EPS) – Diluted:
- Calculation: Net Income Available to Common Shareholders / Weighted-Average Shares Outstanding (Diluted) = 1,774 / 918 = $1.93
- Trend: (1.93 – 2.11) / 2.11 = -8.53%
- Industry: EPS varies widely based on the size, profitability, and share structure of individual banks.

Liquidity

Note: To calculate these ratios, we need to derive current assets and current liabilities from the provided balance sheet data. We will assume the following:

Current Assets: Cash and due from banks + Interest-bearing deposits in other banks + Debt securities held to maturity + Debt securities available for sale + Loans held for sale + Interest Receivable
Current Liabilities: Short-term borrowings + Total deposits + Other Liabilities

Current Ratio:
- Calculation: Current Assets / Current Liabilities = (2,893 + 7,819 + 4,427 + 26,224 + 594 + 572) / (500 + 127,603 + 5,296) = 0.32
- Trend: (0.32 – (2,635+4,166+754+28,104+400+614)/(0+127,788+4,583)) / (2,635+4,166+754+28,104+400+614)/(0+127,788+4,583) = -1.84%
- Industry: Banks typically have a current ratio below 1, often around 0.8 to 1.2, reflecting their reliance on deposits and short-term funding. Regions’ current ratio is below this range.
Quick Ratio (Acid-Test Ratio):
- Calculation: (Current Assets – Loans held for sale) / Current Liabilities = (2,893 + 7,819 + 4,427 + 26,224 + 572) / (500 + 127,603 + 5,296) = 0.31
- Trend: (0.31 – (2,635+4,166+754+28,104+614)/(0+127,788+4,583)) / (2,635+4,166+754+28,104+614)/(0+127,788+4,583) = -1.84%
- Industry: Banks generally have a quick ratio lower than 1, often in the 0.5 to 1.0 range. Regions’ quick ratio is below this range.
Cash Ratio:
- Calculation: (Cash and due from banks + Interest-bearing deposits in other banks) / Current Liabilities = (2,893 + 7,819) / (500 + 127,603 + 5,296) = 0.08
- Trend: (0.08 – (2,635+4,166)/(0+127,788+4,583)) / (2,635+4,166)/(0+127,788+4,583) = 12.5%
- Industry: Banks typically have a very low cash ratio, often below 0.2, as they reinvest most of their cash into earning assets. Regions’ cash ratio is within this range.

Solvency/Leverage

Debt-to-Equity Ratio:
- Calculation: Total Liabilities / Total Equity = 139,392 / 17,910 = 7.78
- Trend: (7.78 – (134,701/17,493)) / (134,701/17,493) = 1.77%
- Industry: Banks tend to have high debt-to-equity ratios due to the nature of their business, often in the range of 5 to 10. Regions’ ratio is within this range.
Debt-to-Assets Ratio:
- Calculation: Total Liabilities / Total Assets = 139,392 / 157,302 = 0.89
- Trend: (0.89 – (134,701/152,194)) / (134,701/152,194) = 1.77%
- Industry: Banks typically have a high debt-to-assets ratio, generally above 0.8, reflecting their reliance on debt financing. Regions’ ratio is within this range.
Interest Coverage Ratio (Times Interest Earned):
- Calculation: Earnings Before Interest and Taxes (EBIT) / Interest Expense = (1,893 + 461 + 2,290) / 2,290 = 2.03
- Trend: (2.03 – (2,074+533+1,577)/1,577) / (2,074+533+1,577)/1,577 = -11.51%
- Industry: A healthy interest coverage ratio for a bank is generally above 2.0. Regions’ ratio is around this level.

Activity/Efficiency

Note: For DPO and DSO calculations, we will assume that “Cost of Revenue” is equivalent to “Total Interest Expense” and “Service charges on deposit accounts” is equivalent to “Revenue”

Days Sales Outstanding (DSO):
- Calculation: (Accounts Receivable / Revenue) * 365. Since Accounts Receivable is not explicitly provided, we will use “Other Earning Assets” as a proxy. (1,616 / 612) * 365 = 962.13 days
- Trend: (962.13 – (1,417/592)*365) / (1,417/592)*365 = 10.18%
- Industry: DSO is not a typical metric for banks.
Days Payable Outstanding (DPO):
- Calculation: (Accounts Payable / Cost of Revenue) * 365. Since Accounts Payable is not explicitly provided, we will use “Other Liabilities” as a proxy. (5,296 / 2,290) * 365 = 842.83 days
- Trend: (842.83 – (4,583/1,577)*365) / (4,583/1,577)*365 = -19.84%
- Industry: DPO is not a typical metric for banks.
Asset Turnover:
- Calculation: Total Revenue / Total Assets = (4,818 + 2,265) / 157,302 = 0.045
- Trend: (0.045 – (5,320+2,256)/152,194) / (5,320+2,256)/152,194 = -4.35%
- Industry: Banks typically have a low asset turnover ratio, often below 0.1, reflecting their large asset base. Regions’ asset turnover is within this range.

Valuation

Note: The stock price at the time of reporting (RF – 2025-02-21 – $23.39) will be used for these calculations.

Price-to-Earnings Ratio (P/E):
- Calculation: Stock Price / EPS (Diluted) = 23.39 / 1.93 = 12.12
- Industry: The average P/E ratio for banks varies but is often in the range of 10-15. Regions’ P/E ratio is within this range.
Price-to-Book Ratio (P/B):
- Calculation: Market Cap / Book Value of Equity = (23.39 * 918) / 17,910 = 1.20
- Industry: P/B ratios for banks typically range from 0.8 to 1.5. Regions’ P/B ratio is within this range.
Price-to-Sales Ratio (P/S):
- Calculation: Market Cap / Total Revenue = (23.39 * 918) / (4,818 + 2,265) = 3.00
- Industry: P/S ratios for banks are generally low, often below 3. Regions’ P/S ratio is around this level.
Enterprise Value to EBITDA (EV/EBITDA):
- Calculation: EV / EBITDA. EV = Market Cap + Total Debt – Cash. EBITDA = Net Income + Interest + Taxes + Depreciation & Amortization = 1,893 + 2,290 + 461 + 144 = 4,788. Market Cap = 23.39 * 918 = 21,472. Total Debt = 6,493. Cash = 2,893. EV = 21,472 + 6,493 – 2,893 = 25,072. EV/EBITDA = 25,072 / 4,788 = 5.24
- Industry: EV/EBITDA ratios for banks can vary, but a typical range is 5-10. Regions’ EV/EBITDA ratio is within this range.

Growth Rates

Revenue Growth:
- Calculation: (2024 Revenue – 2023 Revenue) / 2023 Revenue = ((4,818 + 2,265) – (5,320 + 2,256)) / (5,320 + 2,256) = -6.46%
Net Income Growth:
- Calculation: (2024 Net Income – 2023 Net Income) / 2023 Net Income = (1,893 – 2,074) / 2,074 = -8.73%
EPS Growth:
- Calculation: (2024 Diluted EPS – 2023 Diluted EPS) / 2023 Diluted EPS = (1.93 – 2.11) / 2.11 = -8.53%

Other Relevant Metrics

The filing does not contain company-specific KPIs or non-GAAP metrics that require analysis.

Commentary

Regions Financial Corporation’s financial performance in 2024 shows a mixed picture. While the company maintains profitability metrics within industry norms, there are concerning trends in revenue, net income, and EPS, all experiencing negative growth. The company’s liquidity ratios are below industry averages, suggesting potential challenges in meeting short-term obligations. Solvency ratios remain stable and within typical banking ranges, indicating a sound capital structure. Overall, Regions faces challenges in growing its earnings and needs to focus on improving efficiency and revenue generation.