Regions Financial was the loser among the largest U.S. banks on Monday, with shares down over 2 percent in morning trading, to $6.96.
According to a Wall Street Journal report, Regions — headquartered in Birmingham, Ala. — is being investigated by federal bank regulators, the U.S. Securities and Exchange Commission, and the Special Inspector General for the Troubled Asset Relief Program, for improperly accounting for nonperforming loans during the financial crisis.
Regions received $3.5 billion in government bailout funds through the Troubled Assets Relief Program, or TARP, in November 2008, and redeemed in full the preferred shares held by the U.S. Treasury in April, after the company in the first quarter sold its Morgan Keegan brokerage subsidiary to Raymond James Financial for $930 million, and raised $900 million in capital through a common equity offering.
According to the Journal, the government investigations of Regions sprang from two civil lawsuits brought against the company in 2010 by pension funds holding the company's stock, alleging that "Regions hid problems by moving loans out of nonaccrual status, which means interest payments were overdue and collection of the principal unlikely," according to the Journal piece.
Regions Financial didn't return a call requesting comment.
The company's shares were up 67 percent year-to-date, through Friday's close at $7.11. The shares traded for just above tangible book value, according to Thomson Reuters Bank Insight, and for 9.2 times the consensus 2013 earnings estimate of 77 cents, among analysts polled by Thomson Reuters. The consensus 2014 earnings per share (EPS) estimate is 82 cents.
Regions currently pays a nominal quarterly dividend of a penny a share. Following the next round of Federal Reserve stress tests that should be completed in March, investors are expecting the company to begin returning capital to shareholders. Credit Suisse analyst Craig Siegenthaler in November estimated that Regions would be approved to raise the quarterly dividend to four cents, and to buy back $249 million worth of shares during 2013. Of course, it is too early to predict whether or not the investigations will affect any payout by Regions.
Miller Tabak analyst Thomas Miller wrote on Monday that the investigation of Regions Financial's accounting "is not 'new news,'" and the malefactors, if there were any, are long gone from RF's management. Management has aggressively addressed problem loans, and loan classification processes, in recent quarters, and we take the bank's recent improving credit metrics as a sign that a very substantial percentage of RF's recession legacy problem loans have been fully addressed."
Miller added that "the investigations well may lead to RF paying a modest settlement and agreeing to maintain better practices — practices already implemented — in future periods."
A Quiet Christmas Eve
The broad indexes were all slightly lower during an abbreviated holiday trading sessions, as investors continued to hope that President Barack Obama and Congress would come up with a compromise to avert the "fiscal cliff," and also pass an annual "patch" the Alternative Minimum Tax, or AMT.
The AMT is meant to ensure that taxpayers with a lot of deductions to their adjustable income pay a minimum in federal income taxes, but it is not indexed to inflation. Each year, Congress passes a bill in order to address this problem. The patch hasn't yet been passed, and time is short, because the Internal Revenue System needs to know the AMT rules for 2012, in order to do process tax returns and tax refunds in a timely fashion, beginning in January.
Acting IRS Commissioner Steven Miller sent a letter to Congress in November and another letter last Wednesday, saying that "the most recent AMT Patch, and the exemption amounts of $74,450 for joint filers and $48,450 for single taxpayers, expired at the end of 2011," and that without a new patch for 2012, "the current-law AMT exemption amounts are much lower: $45,000 for joint filers and $33,750 for single taxpayers."
"This means that 30 million additional taxpayers will become subject to the AMT on their 2012 income tax returns."
Discussions between the president and the Republican leadership of the House of Representatives are expected to resume on Thursday, giving the Washington crew plenty of time to rattle investors' nerves before the end of the year.
The KBW Bank Index was down slightly in morning trading, with 14 of the 24 index components seeing declines.
—By TheStreet.com's Philip van Doorn
TheStreet does not permit any employees on its editorial staff to individually hold positions in individual stocks, though they are permitted to own stock in TheStreet.