This week's "The Good, The Bad & The Ugly" from BankRegData.com reviews Regions Bank and we will primarily focus on their loan book.
Regions (RF) has $133 Billion in Assets and is the nation's 15th largest bank. They have $102 billion in Deposits and operate over 1,800 branches, primarily in the South and Southeast.
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The Good: 1-4 Family 1st Liens 30-89 Days Past Due
The Early Stage delinquency rate on the 1-4 Family First Liens portfolio dropped from 2.07% to 1.93%. Their 99 closest peers on loan size are running a 30-89 Days Past Due delinquency rate of 2.50%. A continued trending downward would bode well for charge offs 6-12 months from now.
Regions has also seen a drop in Early Stage delinquencies for Commercial RE and Commercial & Industrial. In summary, their top 3 loan portfolios, making up 52.60% of all loans, have seen a drop in 30-89 Days Past Due.
The Bad: Commercial & Industrial NPLs
The Nonperforming Rate on Commercial & Industrial loans has jumped significantly from 2.61% to 3.02%. Their peers are at 2.20% and have been trending downward the past 2 quarters.
Nonperforming is defined as loans 90+ Days Past Due plus Nonaccrual Loans.
The increase takes their total C&I NPLs from $352 million to $406 million and marks the first time in over 5 years that they have been significantly worse than their peers.
The Ugly: Commercial Real Estate NPLs
At $20.18 Billion, CRE is the largest of all their portfolios and makes up 22.60% of their loan base. Their performance puts them in the 89th percentile relative to their peer group. In other words, only 11 other banks with similar size CRE portfolios have a worse performing NPL rate.
Bonus Good: While not a normal feature of the weekly mailing, I do want to point out that Regions is aggressively cleaning up their problems. NOI came in at -$206.7 million and marked the 5th time out of the past 6 quarters where they took a substantial loss. How is this good? Well, unlike many of their large brethren, Regions is working through the issues as opposed to just building up NPLs and hoping the problems will work out down the line:
1) They are charging off bad loans. Looking at NPLs to Charge Offs across their loan portfolios shows that their NPL 'inventory' relative to their Charge Offs is fairly good. On their 1-4 Family 1st Liens they have $8.22 in NPLs for every $1 charged off. Their peers are running $26.48. Scroll to the bottom of the page to look at peer performance and you'll note that Regions ranks 12th in their peer group.
2) They are liquidating OREO. Regions took a -$32 million dollar hit to Non Interest Income due to losses on sales of OREO.
3) They are selling underperforming loans. Regions took a -$11.6 million dollar hit to Non Interest Income due to losses on sales of Loans. As a percentage of Loans Held For Sale, Regions is trying to sell slightly less than their peers. What they are trying to sell, however, has a NPL rate of 27.59%.
On the surface, each of these three items may not look good, but they represent a coordinated management effort to clean up their loan book today. Relative to peers, they may look less appealing now, but will be positioned much better down the line.
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