Regions earns more as higher rates slow new property lending

What happened

After Truist, Citizens and M&T, Regions Financial reported on Friday 16 October that it earned $611 million for common shareholders in the third quarter, against $548 million a year earlier. ^{[1, 2, 7]}

Net interest income, what a bank earns on loans and securities less what it pays for funds, was $1,298 million, against $1,257 million. Average loans were $99.2 billion, up 0.5 percent on the quarter, the release says. ^[1]

Why it matters

Lower credit costs did much of the work. Regions set aside $68 million for credit losses, against $105 million a year earlier, and net charge-offs, loans written off less recoveries, were $72 million, against $135 million. ^{[1, 2]}

Regions said multifamily bridge loans grew 'as elevated long-term interest rates have slowed permanent financing,' and that recent increases in rates partly offset a smaller reserve. ^[1]

Property and deposits at Regions

Chief executive John Turner said on the call that new investor real estate activity 'is slowing because of rising cost and difficulty to make the economics of those transactions work.' He noted 'little weakness in the multifamily business primarily in Texas.' ^[3]

Average deposits were $129.1 billion, against $129.6 billion a year earlier. The release said a few large commercial clients moved interest-bearing balances into investment products the bank manages off its balance sheet. ^[1]

Two smaller lenders

First Financial Bankshares of Abilene, Texas, earned $74.31 million, against $52.27 million, and its net interest income was $138.51 million, against $127.00 million. Its provision was $2.03 million, against $24.44 million, when a fraud loss hit the year-earlier quarter. ^[4]

Higher long-term rates widened its unrealized loss on securities to $489.55 million after tax, from $279.67 million at Tuesday 30 June, the release says. Mortgage income was hurt by 'the spike in long term rates.' ^[4]

WaFd of Seattle, in its fiscal fourth quarter, earned $59.99 million, against $60.60 million, with net interest income of $182.4 million, against $169.9 million. Net charge-offs were $39.2 million, mostly a $36 million charge-off on one loan, the release says. It agreed on Monday 7 September to merge with EverBank. ^[5]

WaFd's chief executive Brent Beardall wrote that the 10-year bond was 'at levels above 5.20%.' The Treasury's table put the 10-year yield at 5.21 percent on Tuesday 13 October and 5.09 percent on Friday 16 October. ^{[5, 8]}

What settles it next

Regions' Anil Chadha said on the call that, assuming the next Federal Reserve rate increase comes in December, the bank expects fourth-quarter net interest income to grow 1 to 2 percent. Reuters reported that regional lenders saw loan demand hold up despite the Fed's September increase. ^{[3, 6]}

Regions and First Financial file their quarterly reports within 40 days of the quarter's end, Monday 9 November by the desk's count. WaFd's annual report is due 60 days after its year ended on Wednesday 30 September, on Monday 30 November by the desk's count. ^{[9, 10]}

Who it reaches

Regions Financial (RF), First Financial Bankshares (FFIN) and WaFd (WAFD) are direct: the figures are each company's own, from releases filed with the SEC on Friday 16 October. ^{[1, 4, 5]}