On Tuesday, January 21, 2014 Regions Financial Corp (RF) reported Q4 2013 Earnings. While GAAP Net Income was just $219 million and GAAP EPS was $0.16, well below analyst estimates of $283 million and $0.20, respectively, these numbers included one-time charges that detract $75 million from net income and $0.05 from EPS. After adjusting for the above, Regions Financial reported Net Income of $294 million and EPS of $0.21. RF has increased 2.74% to $10.86 on the news. On Wednesday, the price further increased to $11.02. For the moment the price target remains at $11.64, which is a 5.63% upside to the current price. This will be further reviewed in the coming days.
Regions is executing very well on its current initiatives. The company has been able to successfully expand its customer base while bringing down expenses and strengthening its balance sheet. Net interest margin expanded by 2 basis points sequentially and 16 basis points year over year. In this past quarter, the net interest margin was 3.26%. Driving this upward are rising long term interest rates and the related slowdown in prepayments within the securities portfolio. Revenues from non-interest sources increased by $31 million in quarter 4. Partially diminishing that increase was the expected decline in mortgage-related revenue.
Loan balances improved by 2% year over year, but this was brought down to a 1% increase after a transfer of loans to Available-For-Sale securities. Business lending was the main driver for the increase, while mortgage loans were the main detractor. Mortgage loans were way down, once again because of the transfer of loans to AFS securities.
To reiterate, there is currently a price target of $11.64. This is currently being evaluated and I will have an update soon.