Regions Financial's (NYSE: RF ) fourth-quarter earnings of $0.18 per share were good enough to push the stock up nicely in early trading this morning. But that earnings tally is in the past. What's really important about Regions Financial's release was what it says about the future, and I think savvy investors are now looking at three reasons Regions is improving.
1. Slight increase in net interest margin
While other banks have been making news for shrinking net interest margins, Regions actually went the other way. During the quarter, the bank's deposit mix shifted, with lower-cost deposits climbing as time deposits fell, and that mix shift helped bolster Regions' margin.
Though the improvement was very slight -- net interest margin increased by only two basis points -- it was an increase nonetheless. This fact alone could be why some investors drove up the bank's stock price this morning. In the current low interest rate environment, interest rate spreads have been a definite growth headwind.
It is hard to say if this is something the bank can continue into the future, but at least it is trending in the right direction for now.
2. Improvement in asset quality
Perhaps more impressive than the increase in net interest margin is the continued improvement of the bank's assets. Nonperforming assets declined 13% from the previous quarter, and now make up a respectable 2.59% of its total loans, foreclosed properties, and the non-performing loans it's trying to sell. While not as impressive as some other banks out there, this is a marked improvement for Regions, which is affected greatly by the economic climate in the Southeast. However, with the economy seemingly on the path to recovery, Regions could ride those tailwinds forward, and should be poised to continue its strong performance from 2012.
3. Improved from loss during same quarter last year
To say that 2011 was a bad year for Regions would be an understatement. It was among the worst performing regional banks during the year, and its year was capped off by a loss of $135 million during the fourth quarter. However, behind the stellar leadership of CEO Grayson Hall, Regions has recovered nicely during 2012: Its stock performance has been strong compared to even the likes of Apple, and it reported nearly $600 million in income during the third and fourth quarters alone. Whether or not the bank continues this strong performance going forward remains to be seen, but it sure appears to be on the right track.