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Regions Financial (NYSE:RF) earnings were out Tuesday and similar to our other banks we see degradation but a still profitable company. They "missed" but bank earnings in this environment are a complete dart throw so that's not the point.

It is always hard to know what is priced into a stock or is not; the stock opened down, but on word they have qualified for the government's bailout, err, assistance program (I believe the qualification criteria are "are you a bank"? If so "yes, you're in the assistance club!") - the stock jumped to a +6% day. With government hand A helping on one side and government hand B (Federal Reserve which should be lowering rates AGAIN soon enough) helping on the other, you just have to believe at some point in 2009 some of these banks are going to be among the best performers. All hands are on deck. At which point we'll sell these things off and never look at banks again for another decade - boring.... we should be chock full of more interesting stocks like homebuilders by then. :)

Even some of the worst banks are rallying now into this socialism. We'll stick to the profitable ones.

  • Regions Financial Corp. said Tuesday its third-quarter profit fell 80 percent as it set aside more cash to offset defaulting loans and its deposit base shrunk. Net income fell to $79.5 million, or 11 cents per share, during the quarter ended Sept. 30, from $394.2 million, or 56 cents per share, during the same period a year earlier. Excluding charges tied to merger costs and discontinued operations, Regions earned $105.6 million, or 15 cents per share, during the third quarter.
  • Regions set aside $417 million during the third quarter to cover loan losses.
  • Charge-offs -- loans written off as not being repaid -- totaled $416 million during the third quarter. Regions said about $186 million in charge-offs were related to the sale or transfer to a held-for-sale portfolio of about $430 million in non-performing loans and foreclosed properties. By taking the charges now, it reduces balance sheet risk in future quarters.
  • Regions' charge-off rate -- which measures loans written off as not being repaid compared with the bank's total lending portfolio -- increased to 1.68 percent from 0.27 percent during the same quarter in 2007. (similar to others we're watching)
  • Regions reported that 60 percent of the third quarter net charge-offs to its second mortgages came from Florida, which accounted for just 23 percent of its second mortgage portfolio. Regions also had trouble with its $1.3 billion in Florida homebuilder loans. It said $195.7 million, or 14.8 percent, of them were non-accruing.
  • Regions Financial said it plans to participate in the (Treasury) program and is eligible to receive between $1.17 billion and $3.51 billion in capital.
  • Regions currently carries a Tier 1 capital ratio of 7.47 percent, which is considered "well capitalized" by regulatory standards.
  • Net interest income, the difference between how much it costs a bank to borrow money and how much it receives from lending money to customers, fell 14 percent to $930.6 million during the quarter from $1.09 billion during the year-ago period. Deposits declined by $683 million from the end of the second quarter. Customers concerned about the strength of regional banks shifted their money to safer investments such as Treasury securities during the quarter.
  • Non-interest income, money derived from fees and other charges, declined slightly to $719.3 million from $729.1 million during the same quarter last year.
  • Morgan Keegan & Co. Inc., the brokerage and investment banking subsidiary of Regions, posted total revenue of $293 million in the quarter, a drop of $46 million from the second quarter. The Memphis-based company’s earnings were hurt by lower revenues in fixed income and equity capital markets.
It appears if we could just close down the state of Florida, Regions would be doing splendidly. After some of the most wicked volatility this side of a 2001 dot com, the stock seems to be "stabilizing" in a "tight" range of +/-20% of late. hah - well this company had some days it moved 40% in 1 session so it is all relative. Hopefully it can make an advance to test that 200 day moving average at some point in the next month. It does look like $8 is its unofficial floor short of global depression.

Disclosure: Author is long Regions Financial in fund; no personal position.

Source: Regions Financial: Missed Earnings but Still Profitable