Regions Financial Corporation · NYSE:RF
Regions Financial — Q4 2021 Earnings Presentation
47 slides from Regions Financial's earnings presentation, Jan 20, 2022
Slide 1: 4th Quarter Earnings Conference Call
Exhibit 99.3 4th Quarter Earnings Conference Call January 20, 2022
Slide 2: 2021 overview
2021 overview 4Q21 FY 2021 Net Income Available to $414M $2.4B Common Shareholders Diluted Earnings Per $0.43 $2.49 Share • 2021 reported pre-tax pre-provision Adjusted Total $1.6B $6.4B Revenue(1) income(1) represents the highest level on record. • 2021 adjusted pre-tax pre-provision Adjusted Non-
Slide 3: Strong foundation - accelerating growth
Strong foundation- accelerating growth Innovating through investments and business segments to accelerate growth Growing highly efficient business segments Digital investments generate return Grew consumer checking accounts by 3% and small 2021 active digital users are up 7%, including active busine
Slide 4: Loan growth momentum
Loan growth momentum Adjusted loans and leases(1) QoQ highlights & outlook • 4Q adjusted loans grew 7% on an ending basis (Average, $ in billions) and 6% on an average basis $84.3 ◦ Excl. ~$3B acquired EnerBank loans, $80.3 $79.8 full-year ending adj. loans increased 4% 27.4 27.1 30.3 and full-year
Slide 5: Deposit growth continues
Deposit growth continues Average deposits by segment QoQ highlights & outlook ($ in billions) $136.7 • Pace of deposit growth has slowed, balances $131.9 3.0 continued to increase to new record levels. 0.4 10.1 $119.8 9.9 0.4 • Average deposits QoQ growth primarily due to higher 8.9 account balances
Slide 6: NII & margin performance
NII & margin performance NII and NIM(1) ($ in millions) $1,017 $1,029 $976 3.40% 3.30% 3.34% 3.13% 2.76% 2.83% 4Q20 3Q21 4Q21 NII(1) NIM NIM excl. PPP/Cash(2) • In 4Q, deposit and cash balances remained elevated. • PPP and cash account for -51 bps NIM and $42M NII within the quarter (+3 bps / +$8M Q
Slide 7: NII & margin - core drivers
NII & margin - core drivers NII Attribution $1,019 Drivers of NII and NIM • Adjusted loan(1) growth excl. EnerBank in 4Q21 of +~$1.3B average and +~$2.4B ending $965 Stable core NII excluding loan • Rate environment impacts continue to be offset accrual adjustments through active balance sheet manag
Slide 8: Interest Rate Exposure
Interest Rate Exposure • Regions' balance sheet is asset sensitive; well positioned for rising short-term and/or long-term interest rates Short-term Rate Sensitivity Drivers Cash-to-Earning Assets(2) Deposits-to-Earning Assets(2) 25bps rate hike adds +$60-80M of NII over 12 months • ~50% floating ra
Slide 9: Non-interest income
Non-interest income QoQ highlights & outlook Change vs • Adjusted non-interest income decreased ~5%. 4Q21 3Q21 4Q20 • Newly announced NSF/OD policy changes combined ($ in millions) with 2021's previously announced changes will result Service charges on deposit accounts $166 2.5% 3.8% in 20-30% lower
Slide 10: Non-interest expense
Non-interest expense Adjusted non-interest expense(1) QoQ highlights & outlook ($ in millions) • Adjusted non-interest expenses increased ~5%; includes $967 impact of 4Q acquisitions. $930 $918 ◦ Salaries and benefits increased 4% due to higher base salaries and incentive comp. 58.8% 55.8% 56.6% ◦ A
Slide 11: Asset quality improvement continues
Asset quality improvement continues Net charge-offs and ratio ACL to loans ratio ($ in millions) ($ in millions) 2.81% $94 53 2.69% 1.71% 1.83% 1.81% 0.43% $44 1.71% 1.80% 1.79% $30 12 5 Day 1 (2) 4Q20 3Q21 4Q21 0.20% 41 25 0.14% 32 (1) ACL/Loans (incl. PPP) ACL/Loans (excl. PPP) 4Q20 3Q21 4Q21 Cons
Slide 12: Capital and liquidity
Capital and liquidity Tier 1 capital ratio(1) Common equity Tier 1 ratio(1) 12.3% 10.8% 11.4% 9.8% 9.5% 11.0% 4Q20 3Q21 4Q21 4Q20 3Q21 4Q21 QoQ Highlights & Outlook • Common Equity Tier 1 (CET1) ratio decreased 130 bps in 4Q due primarily to non-bank acquisitions and share repurchases. Loan-to-depos
Slide 13: 2022 expectations
2022 expectations FY 2022 Expectations for 1Q22 & Beyond Category Expectations • Expect consumer exit portfolios to have an average impact of ~$700M in FY22 Total Adjusted Revenue Up 3.5-4.5% (from adjusted 2021 of $6,412)(1)(2)(3) • Linked-quarter NII expected to grow modestly in 1Q22 excluding red
Slide 14: Appendix
> GENERATING Consistent Sustainable Long-term Performance Appendix (( A REGIONS] 14
Slide 15: Fourth quarter 2021 highlights
Fourth quarter 2021 highlights Summary of fourth quarter results Selected items impact QoQ YoY FY ($ amounts in millions, except per share data) 4Q21 Change Change (amounts in millions, except per share data) 4Q21 2021 Net interest income $ 1,019 5.6% 1.3% Pre-tax adjusted items(1): Provision for (b
Slide 16: Deposit account announcement
Deposit account announcement Providing customers capabilities to be more financially sound Adjusted Non-Interest Income(1) Updated NSF/OD Policies ($ in millions) Regions is committed to making banking easier for $2,498 our customers. $2,109 Details of Regions' Announcement(2): • By end of 1Q22-Elim
Slide 17: Growth in digital
Growth in digital Digital Usage Sales and Transactions Zelle Transactions (Millions) (1) Active Users (Millions) Digital Sales (Accounts in Thousands) +13% 2.3 +106% +208% 2.66 3.1 +22% 82.9 2.7 2.9 63.9 8.8 2.0 1.9 10.6 1.79 40.2 9.2 74.1 53.3 31.0 0.86 4Q19 4Q20 4Q21 4Q19 4Q20 4Q21 4Q19 4Q20 4Q21
Slide 18: Deposit advantage
Deposit advantage (1) Business Deposit Mix (1) Funding Mix - Current vs. Prior % of Total Deposits Balance in 4Q 2021 Average Rising Rate Cycle Accounts Less than $250k(2) ($ in billions) ($ in billions) $142 6% 64% $107 30% 57% Corporate 50% $43 12% 44% 44% 43% 42% 42% 26% 41% 38% 37% 35% Consumer
Slide 19: Balance sheet management
Balance sheet management Cash management update • Recent liquidity inflows represent an NII opportunity, ~$39B Ending Deposit Growth excl. EnerBank (Dec 2019 to Dec 2021) with cash deployment dependent on: ◦ stability and rate-sensitivity of deposit inflows • Deposit growth broadly distributed acros
Slide 20: Future NII drivers
Future NII drivers NII is positioned to benefit from higher rates, as well as natural loan growth and strategic opportunities. Hedge proceeds (~$1.5B total return) and the capital generated has been invested into strategically important businesses, such as Ascentium and EnerBank. NII Drivers - Curre
Slide 21: Hedging strategy update
Hedging strategy update Net Receive Hedge Notional(1) Net Receive Hedge Notional(1) (Quarterly Avg) (Annual Avg) Active Hedge Notional 1mo. LIBOR 4Q21 Adjustments 3Q21 Adjustments 1H21 Adjustments 1 1Q22 2 2Q22 3 3Q22 4 4Q22 1 2021 2 2022 3 2023 4 2024 5 2025 6 2026 (2,3,4) (2,3,4) Hedge Notional $2
Slide 22: PPP loan details
PPP loan details ($ in millions) 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 Round 1-average $ 3,213 $ 4,558 $ 4,143 $ 3,171 $ 2,401 $ 814 $ 288 Round 2-average — — — 627 1,500 1,324 800 Total-average $ 3,213 $ 4,558 $ 4,143 $ 3,798 $ 3,901 $ 2,138 $ 1,088 NII(1) $ 18 $ 31 $ 54 $ 40 $ 43 $ 31 $ 39 Round 1-en
Slide 23: CET1 waterfall
CET1 waterfall 10.8% 0.6% 9.5% (0.1)% (0.2)% (0.4)% (1.2)% Common Pre-tax pre- RWA Dividend/ 4Q21 3Q21 Other(2) Acquisitions(4) provision Growth(3) Share CET1%(5) CET1% income(1) Repurchases (1) Non-GAAP; see appendix for reconciliation. (2) 'Other' includes impact of tax, provision, CECL deferral,
Slide 24: Allowance for credit losses waterfall
Allowance for credit losses waterfall ($ in millions) QoQ highlights $168 $1,574 • 4Q ending allowance, excluding EnerBank, $1,499 decreased $93M due to continued $2 improvement in the economic outlook and $(44) $(51) expectations of improving credit performance in certain sectors / clients. • The b
Slide 25: Base R&S economic outlook
Base R&S economic outlook (as of December 2021) Pre-R&S period 4Q2021 1Q2022 2Q2022 3Q2022 4Q2022 1Q2023 2Q2023 3Q2023 4Q2023 Real GDP, annualized % change 6.4 % 4.0 % 4.2 % 4.0 % 3.4 % 2.6 % 2.2 % 2.1 % 2.2 % Unemployment rate 4.4 % 3.9 % 3.8 % 3.7 % 3.7 % 3.6 % 3.6 % 3.5 % 3.5 % HPI, year-over-yea
Slide 26: Allowance allocation
Allowance allocation As of 12/31/2021 As of 12/31/2020 (in millions) Loan Balance ACL ACL/Loans Loan Balance ACL ACL/Loans C&I $43,758 613 1.40 % $42,870 $1,027 2.40 % CRE-OO mortgage 5,287 118 2.23 % 5,405 242 4.47 % CRE-OO construction 264 9 3.53 % 300 24 7.98 % Total commercial $49,309 $740 1.50
Slide 27: Ascentium Capital acquisition
Ascentium Capital acquisition Acquisition exceeding expectations Company Overview Integration Updates Acquisition closed April 1, 2020, and • Ascentium Capital was the largest independent integration with Regions' systems, policies equipment finance lender in the U.S. and people is now complete. • P
Slide 28: EnerBank acquisition
EnerBank acquisition Expanding our consumer lending products and services Regions is focused on serving as the Premier Lender to Homeowners. By adding EnerBank’s suite of home improvement financing, Regions is able to expand options for homeowners throughout the company’s footprint while establishin
Slide 29: Sabal Capital Partners acquisition
Sabal Capital Partners acquisition Continues build-out of Regions' fee-based businesses Company Overview & Regions' Strategic Rationale • Announced October 4, 2021; closed December 1, • Sabal expands Regions’ agency (Fannie/Freddie) CRE 2021 lending product suite and provides Regions the • Sabal Cap
Slide 30: Clearsight Advisors acquisition
Clearsight Advisors acquisition Further expand Regions specialty capabilities and M&A advisory services Company Overview Regions' Strategic Rationale • Announced December 17, 2021; closed December 31, $100M 32 35%+ 2021 Average Deal Clearsight Revenue CAGR • Clearsight Advisors is a leading-edge mer
Slide 31: Environmental Social & Governance
Environmental Social & Governance State Street MSCI Global Advisors S&P Global Sustainalytics AA 68 S&P 500 Low-Risk ESG Rating R-Factor Score ESG Index ESG Risk Rating Human Rights JUST Capital JUST Capital Disability Equality FTSE Russell Campaign Index 100 Top 100 Companies Score in 2021 2021 Sup
Slide 32: Non-GAAP information
Non-GAAP information Management uses pre-tax pre-provision income (non-GAAP) and adjusted pre-tax pre-provision income (non-GAAP), as well as the adjusted efficiency ratio (non-GAAP) and the adjusted fee income ratio (non-GAAP) to monitor performance and believes these measures provide meaningful in
Slide 33: Non-GAAP reconciliation
Non-GAAP reconciliation Core net interest income and adjusted net interest margin Quarter-ended 12/31/2021 9/30/2021 Net interest income (FTE) (GAAP) $ 1,029 $ 976 Impact of SBA PPP loans (39) (31) Impact of excess cash (3) (3) Core net interest income (FTE) (non-GAAP) $ 987 $ 942 Net interest margi
Slide 34: Non-GAAP reconciliation
Non-GAAP reconciliation Adjusted average loans Average Balances ($ amounts in millions) 4Q21 3Q21 2Q21 1Q21 4Q20 4Q21 vs. 3Q21 4Q21 vs. 4Q20 Commercial and industrial $ 42,254 $ 41,892 $ 43,140 $ 42,816 $ 43,889 $ 362 0.9 % $ (1,635) (3.7)% Add: Commercial loans held for sale reclassified to the por
Slide 35: Non-GAAP reconciliation
Non-GAAP reconciliation Adjusted full year average loans Average Balance Average Balance Average Balance Twelve Months Twelve Months Twelve Months Ended Ended Ended December 31, December 31, ($ amounts in millions) 2021 2020 2021 vs. 2020 Total Loans $ 84,802 $ 87,813 $ (3,011) (3.4)% Add: Commercia
Slide 36: Non-GAAP reconciliation
Non-GAAP reconciliation Adjusted ending loans As of 12/31/2021 12/31/2021 ($ amounts in millions) 12/31/2021 9/30/2021 6/30/2021 3/31/2021 12/31/2020 vs. 9/30/2021 vs. 12/31/2020 Commercial and industrial $ 43,758 $ 41,748 $ 42,628 $ 43,241 $ 42,870 $ 2,010 4.8 % $ 888 2.1 % Add: Commercial loans he
Slide 37: Non-GAAP reconciliation
Non-GAAP reconciliation Non-interest expense Year Ended December 31 ($ amounts in millions) 2021 2020 2019 2018 2017 2016 Non-interest expense (GAAP) $ 3,747 $ 3,643 $ 3,489 $ 3,570 $ 3,491 $ 3,483 Adjustments: Contribution to Regions Financial Corporation foundation (3) (10) — (60) (40) — Professio
Slide 38: Non-GAAP reconciliation
Non-GAAP reconciliation ACL/Loans excluding PPP As of ($ amounts in millions) 12/31/2021 9/30/2021 6/30/2021 3/31/2021 12/31/2020 Total Loans $ 87,784 $ 83,270 $ 84,074 $ 84,755 $ 85,266 Less: SBA PPP Loans 748 1,536 2,948 4,317 3,624 Loans excluding PPP, net (non- GAAP) $ 87,036 $ 81,734 $ 81,126 $
Slide 39: Non-GAAP reconciliation
Non-GAAP reconciliation Pre-tax pre-provision income (PPI) Quarter Ended ($ amounts in millions) 12/31/2021 9/30/2021 6/30/2021 3/31/2021 12/31/2020 4Q21 vs. 3Q21 4Q21 vs. 4Q20 Net income (loss) available to common shareholders (GAAP) $ 414 $ 624 $ 748 $ 614 $ 588 $ (210) (33.7)% $ (174) (29.6)% Pre
Slide 40: Non-GAAP reconciliation
Non-GAAP reconciliation Pre-tax pre-provision income (PPI) Year Ended ($ amounts in millions) 12/31/2021 12/31/2020 2021 vs. 2020 Net income available to common shareholders (GAAP) $ 2,400 $ 991 $ 1,409 142.2 % Preferred dividends (GAAP) 121 103 18 17.5 % Income tax expense (GAAP) 694 220 474 215.5
Slide 41: Non-GAAP reconciliation
Non-GAAP reconciliation NII, non-interest income/expense, and efficiency ratio Quarter Ended ($ amounts in millions) 12/31/2021 9/30/2021 6/30/2021 3/31/2021 12/31/2020 4Q21 vs. 3Q21 4Q21 vs. 4Q20 Non-interest expense (GAAP) A $ 983 $ 938 $ 898 $ 928 $ 987 $ 45 4.8 % $ (4) (0.4)% Adjustments: Contri
Slide 42: Non-GAAP reconciliation
Non-GAAP reconciliation NII, non-interest income/expense, and efficiency ratio Twelve Months Ended December 31 ($ amounts in millions) 2021 2020 2021 vs. 2020 Non-interest expense (GAAP) K $ 3,747 $ 3,643 $ 104 2.9 % Adjustments: Contribution to the Regions Financial Corporation foundation (3) (10)
Slide 43: Non-GAAP reconciliation
Non-GAAP reconciliation Non-interest income Year Ended ($ amounts in millions) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Non-interest income (GAAP) $ 2,226 $ 2,201 $ 2,096 $ 1,785 $ 1,937 $ 2,011 $ 1,962 $ 2,019 $ 2,116 $ 2,393 $ 2,524 Security (gains) losses, net (112) (48) (26) (27) (
Slide 44: Forward-looking statements
Forward-looking statements Forward-Looking Statements This presentation may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not based on historical information, but rather are related to future operations, strategi
Slide 45: Forward-looking statements (continued)
Forward-looking statements (continued) • Our ability to comply with stress testing and capital planning requirements (as part of the CCAR process or otherwise) may continue to require a significant investment of our managerial resources due to the importance of such tests and requirements. • Our abi
Slide 46: Forward-looking statements (continued)
Forward-looking statements (continued) • Market replacement of LIBOR and the related effect on our LIBOR-based financial products and contracts, including, but not limited to, derivative products, debt obligations, deposits, investments, and loans. • Possible downgrades in our credit ratings or outl
Slide 47: A REGIONS
A REGIONS A REGIONS«