Magazine article American Banker

Regions: Merger Costs Are Higher Than Expected

Magazine article American Banker

Regions: Merger Costs Are Higher Than Expected

Article excerpt

A year after buying Union Planters Corp. of Memphis, Regions Financial Corp. of Birmingham, Ala., said that related costs will be higher than it had expected.

Regions had projected merger costs of $300 million. On Friday it said it now foresees another $50 million, spread over the next couple of quarters.

But the deal also helped boost profits in the second quarter, the $85 billion-asset company said Friday. Profits rose 56% from a year earlier, to $248 million, and much of the increase came from Union Planters.

Operating earnings of 59 cents a share met analysts' estimates but excluded merger-related charges of $30 million, or 6 cents a share.

The Union Planters deal influenced other benchmarks. It boosted Regions' loan portfolio to $58.5 billion, 73% more than a year earlier.

But total loans increased by less than 1% from the first quarter. Just two days earlier another southeastern banking company, BB&T Corp., reported similarly slow growth, 4%.

Regions also reported that commercial loans fell 1.2% from the first quarter, to $15.4 billion, and construction and real estate loans were virtually unchanged, totaling $21.5 billion. Mortgages and consumer loans rose by 2.4%, to $21.4 billion. The net interest margin widened by 1 basis point.

During a conference call with analysts, chief financial officer D. Bryan Jordan attributed the decline in C&I loans to Regions' unwillingness to compete in structure and pricing. In addition, the commercial pipeline "was not as robust as we would have liked," he said.

Net interest income of $697 million was up 2% from the first quarter and 83% from a year earlier. Noninterest income rose 18% from the first quarter and 54% from a year earlier.

The second-quarter results included $53 million of securities gains, which offset a similar amount of impairment charges for mortgage servicing rights. …

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