Grade: A — Strong Financial Health
Framework: Bank-specific credit quality analysis + Schilit principles (traditional manufacturing checks partially N/A for banks)
Data: SEC EDGAR 10-K (Filed 2026-02-24, FY ended December 31, 2025) + Yahoo Finance
Auditor: Ernst & Young LLP — Unqualified opinion
One-line verdict: Regions Financial is a clean, well-run Southeast regional bank with one minor watch item. Revenue grew 6.3% to $7.53B, net income grew 14.3% to $2.16B, and CFFO/NI of 1.01x shows earnings are exactly cash-backed. The watch flag is goodwill and intangibles at $6.8B (36% of equity) — elevated but manageable and declining slightly YoY. Cash of $10.9B covers $4.9B in total debt by 2.2x. Accruals ratio is essentially zero (0.0%). Net margin improved to 28.6%. The M-Score and Z-Score are not applicable to banks, but all applicable checks pass cleanly.
| Metric | Result |
|---|---|
| Red Flags | **0** |
| Watch Items | **1** (goodwill + intangibles at 36% of equity) |
| Checks Completed | **12/18** (6 N/A — standard checks inapplicable to banks) |
| Beneish M-Score | **N/A** (model does not apply to financial institutions) |
| F-Score (Fraud Probability) | **0.63** (0.23% probability — very low) |
| Altman Z-Score | **N/A** (not applicable to banks) |
| Auditor | Ernst & Young LLP — Unqualified opinion |
| Fiscal Year | 2025 (ended December 31, 2025) |
| Report Date | 2026-04-05 |
A Southeast-Focused Regional Bank
Per the 10-K, Regions Financial Corporation operates primarily across the South, Midwest, and Texas through Regions Bank. The bank's geographic footprint includes markets with "significant population growth and economic development."
| Metric | 2022 | 2023 | 2024 | 2025 | Trend |
|---|---|---|---|---|---|
| Total Revenue | $7.17B | $7.58B | $7.08B | **$7.53B** | +6.3% |
| Net Income | $2.25B | $2.07B | $1.89B | **$2.16B** | +14.3% |
| Net Margin | 31.3% | 27.4% | 26.7% | **28.6%** | Recovering |
| ROE | 14.1% | 11.9% | 10.6% | **11.3%** | Improving |
| CFFO | $3.10B | $2.31B | $1.60B | **$2.18B** | +36.5% |
| CFFO/NI | 1.38x | 1.11x | 0.84x | **1.01x** | Normalized |
| FCF | $2.81B | $2.15B | $1.45B | **$2.15B** | +47.7% |
| Total Debt | $2.28B | $2.33B | $6.49B | **$4.88B** | -24.8% |
Revenue and earnings have recovered from the 2024 trough (when rate cuts compressed NIM). CFFO improved 36.5% and is now tracking net income at 1.01x. Total debt spiked in 2024 (likely FHLB borrowings) but has been reduced to $4.88B. CapEx declined 79.5%, contributing to FCF improvement.
The 18-Point Screening
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | PASS | DSO 28 days, -2 days — improving |
| A2 | AR vs Revenue Growth | PASS | AR -0.2% vs revenue +6.3% |
| A3 | Revenue vs CFFO | PASS | Revenue +6.3%, CFFO +36.5% |
| B1 | Inventory vs COGS | PASS | No inventory |
| B2 | CapEx vs Revenue | PASS | CapEx declining sharply |
| B3 | SG&A Ratio | N/A | Bank |
| B4 | Gross Margin | N/A | Bank |
| C1 | CFFO vs Net Income | PASS | CFFO/NI = 1.01 |
| C2 | Free Cash Flow | PASS | FCF $2.15B |
| C3 | Accruals Ratio | PASS | 0.0% — essentially zero |
| C4 | Cash vs Debt | PASS | Cash $10.9B covers $4.88B debt — 2.2x |
| D1 | Goodwill + Intangibles | WATCH | $6.8B = 36% of equity |
| D2 | Leverage | N/A | Bank |
| D3 | Soft Asset Growth | N/A | Bank |
| D4 | Asset Impairment | N/A | No data |
| E1 | Serial Acquirer FCF | PASS | Positive |
| E2 | Goodwill Surge | PASS | -1% YoY — declining |
| F1 | Beneish M-Score | N/A | Bank |
Key Risks from the 10-K
1. Credit Quality in a Shifting Economy
Per Item 1A, Regions' geographic footprint in the Southeast makes it sensitive to regional economic conditions. The filing warns that "adverse changes in the economic conditions in these regions could materially adversely affect our business." CRE exposure, particularly office and retail, is a focus area.
2. Interest Rate Risk
Regions uses hedging strategies (derivatives) to mitigate interest rate impact on NII and balance sheet value. Per the filing, "the overall effectiveness of these hedging strategies is subject to market conditions, the quality of Regions' execution, the accuracy of its valuation assumptions."
3. Residential Real Estate Exposure
Per the 10-K, "weakness in the residential real estate markets could adversely affect our performance." A housing market downturn in the Southeast growth markets would impact the residential mortgage portfolio.
4. Competition in Growth Markets
The filing notes that "significant population growth and economic development" in Regions' markets makes them "attractive to both existing and new financial institutions," creating competitive pressure on loan pricing and deposit costs.
Summary
Grade: A. Strong financial health. A clean Southeast regional bank with zero red flags, solid capital, and improving earnings.
Regions Financial passes every applicable check cleanly. CFFO/NI of exactly 1.01x, accruals ratio of 0.0%, cash covering debt 2.2x, and goodwill declining slightly. The single watch item (goodwill at 36% of equity) is legacy from prior acquisitions and is stable/declining. The F-Score of 0.63 (0.23% fraud probability) is among the lowest in the batch. The real risks are macroeconomic — credit cycle, interest rates, and regional concentration — not accounting quality.
**Disclaimer**: This report is based on Regions Financial Corporation's fiscal year 2025 10-K filed with the SEC on February 24, 2026. This is NOT investment advice.
**About EarningsGrade**: We screen earnings reports for financial red flags using an 18-point forensic framework. Grade A means strong financial health with no significant concerns.