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* Net loss $0.37/shr; Street view loss $0.25
* Loan loss provision $1 billion
* Loan problems concentrated in Florida, Georgia
* Shares up 3.3 percent in afternoon trading (Recasts, adds comments, updates share price)
By Joe Rauch
CHARLOTTE, N.C., Oct 20 (Reuters) - Regions Financial Corp (RF.N) said it lost $437 million in the third quarter, but its shares rose as much as 7.2 percent as the regional bank's credit performance showed signs of improvement.
The bank said fewer loans to companies and for commercial property were past due. Bad commercial real estate loans rose 29 percent during the quarter, compared with a 74 percent increase during the second quarter.
"The bar was set so low that it was encouraging to see things get bad at a decelerating rate," said Joe Plevelich, an equity research analyst at Schneider Capital Management in Wayne, Pennsylvania, which owns Regions shares.
The seventh-largest U.S. bank by assets, like other larger regional U.S. banks, has been hit by the real estate downturn, particularly the home construction bust.
"While everyone talks about green shoots in the economy, unemployment is still increasing and it's still a tough market," Regions Chief Executive Dowd Ritter said during the company's earnings conference call.
Regions posted a third-quarter net loss of 37 cents per share, compared with net income of $79.5 million, or 11 cents per share, a year earlier.
Analysts had expected a quarterly loss of 25 cents per share, according to a Thomson Reuters I/B/E/S.
The loss was driven by a $1.025 billion loan loss provision.
Nonperforming assets totaled $4 billion in the quarter, up 131 percent from a year earlier. Regions' primary loan losses are in commercial real estate in Florida and the area around Atlanta, Georgia, and account for half of the increase.
Ritter said he expects nonperforming assets to peak in the fourth quarter or early in first quarter of 2010.
Loan charge-offs, or loans it does not expect to be repaid, totaled $680 million.
Regions shares were up 3.3 percent in afternoon trading to $5.89. The shares have dropped 26 percent this year, compared with a 6 percent increase for the KBW Bank index .BKX.
The shares trade at about 0.8 percent of their tangible book value, a sign that investors see more credit losses ahead for Regions. Many banks' shares trade above their tangible book value.
The bank appears to be writing down bad loans aggressively, analysts said, which may mean better earnings in the future.
"They're positioning themselves for next year," said FTN Equity Capital Markets analyst Marty Mosby, adding that other banks are taking a similar approach.
Regions was one of 19 U.S. banks subjected to a government stress test earlier this year. After receiving a $3.5 billion taxpayer bailout last year, it was found to need an additional $2.5 billion this spring. It raised the funds by June.
The Birmingham, Alabama-based bank said third-quarter net interest, or lending, income decreased 8.3 percent from a year earlier to $845 million.
Noninterest income, or fees, increased 7.3 percent to $772 million, and noninterest expense, such as salaries and equipment, increased 10 percent to $1.2 billion.
Net interest margin, the difference between what the bank earns on loans and pays on deposits, decreased to 2.73 percent from 3.1 percent.
Loans decreased 7.3 percent to $90.1 billion, deposits increased 6.3 percent to $94.8 billion, and assets declined 2.9 percent to $139 billion. (Reporting by Joe Rauch; Editing by John Wallace and Derek Caney)