Regions Financial Corporation · NYSE:RF
Regions Financial — Investor Presentation (May 2020)
53 slides from Regions Financial's investor presentation, May 19, 2020
Slide 1: Investor Information May - June 2020
Exhibit 99.1 Investor Information May - June 2020
Slide 2: Table of contents
Table of contents Topic Page # Profile and Strategy 3-10 Net Interest Income and Asset Sensitivity 11-16 Fee Income and Efficiencies 17-19 Balance Sheet 20-27 Credit 28-43 Appendix 44-53 2
Slide 3: Our banking franchise
Our banking franchise Ranked 16th in the U.S. in total deposits(1) Branch locations by state (2) Alabama – 205 Louisiana – 96 Birmingham, Alabama Line of business coverage Arkansas – 79 Mississippi – 121 Florida – 301 Missouri – 56 Georgia – 114 North Carolina – 7 Illinois – 44 South Carolina – 22 I
Slide 4: Business segments
Business segments 1Q20 Pre-tax pre- Average loans Average deposits provision income(1) 1% 2% 6% 8% 28% 36% 38% $621M $83B $96B 60% 58% 63% Consumer Corporate Wealth Management Other (1) Excludes the pre-tax pre-provision income (loss) from the Other Segment totaling $(44) million. 4
Slide 5: Delivering consistent performance
Delivering consistent performance Interest Rate Proactive strategic hedging Sensitivity program Credit Risk Balance sheet de-risking & Framework optimization Capital Allocation Focused on risk-adjusted returns Improving Simplify & Grow, technology, Efficiency priority markets, and efficiency 5
Slide 6: Supporting our customers
Supporting our customers Customer SBA-Paycheck Additional Customer Protection Program Loan Assistance(2) Modifications (PPP) • Granting extension, • Began receiving PPP • Penalty-free CD withdrawal deferrals, and forbearance applications April 3rd • Waived fees for excessive • Loan payment deferral
Slide 7: Top market share plays a valuable role in the competitive landscape
Top market share plays a valuable role in the competitive landscape (1) Markets with top 5 market share • Ranked 16th in the U.S. in total deposits(1) • 87% of deposits in 7 states: Alabama, Tennessee, Florida, Louisiana, Mississippi, Georgia, Arkansas • Top 5 or better market share in ~70% of MSAs
Slide 8: Presence in strong growth markets
Presence in strong growth markets Population growth vs. peers(1) (2020-2025) More than 60% of top(2) MSAs are projected to grow faster than the U.S. national average Peer #1 4.9% Top Faster Market (1) Growing MSAs Deposits Rank(2) '20-'25 Population Growth RF 3.4% Nashville, Tennessee $7.8 3 Peer #2
Slide 9: Our footprint has significant economic advantages
Our footprint has significant economic advantages Jobs Population Footprint Retirees 42% of all new jobs 52% of all U.S. 35% of the U.S. GDP 6 of the top 10 states created in the U.S. since population growth in generated in our where retirees are 2009 were in our last 10 years occurred footprint mov
Slide 10: Regions receives top honors
Regions receives top honors Regions Bank Named Top Customer Experience Leader Five Years Strong: Regions Bank Regions Bank recognized 2018-2019 Highest Rated in Large Retail Bank Again Named Gallup Great by Javelin as a Leader in Traditional Bank in Segments in Market Force Workplace Award Winner in
Slide 11: Focused on earnings stability through the cycle
Focused on earnings stability through the cycle NII(1) and NIM NIM Performance vs Peers ($ in millions) 3.6 3.49% 3.52% 3.45% $961 3.5 3.44% $931 $940 3.37% 3.39% 3.36% 3.39% 3.4 3.32% 3.3 3.35% 3.26% 3.51% 3.34% 3.44% 3.2 3.16% 3.27% 3.29% 3.16% 3.39% 3.22% 3.1 3.14% 3.04% 3.10% 3.0 RF Peer Median
Slide 12: Balance sheet profile
Balance sheet profile (as of March 31, 2020) • Naturally asset sensitive balance sheet, Portfolio compositions supported by a large, stable deposit base Assets Other Liabilities • Sensitivity to short-term rates has been 15% largely neutralized though balance sheet Securities Deposits Borrowings hed
Slide 13: Proactive hedging strategy
Proactive hedging strategy Notional cash flow derivatives at 3/31/20(1) ($ in billions) $22.75 $22.75 $22.75 • Comprehensive hedging strategy intended $21.50 $21.75 to protect NII and promote earnings $18.50 stability $15.50 • Majority of hedges active in 1Q20; additional $7.25B starting by 3Q20 • P
Slide 14: Significant down-side market rate protection
Significant down-side market rate protection Securities and hedges(1) as % of earning assets(2) Change in AOCI / earning assets 1Q20 vs 1Q19(2) 50% 200 40% 150 30% Peer Median 27% 20% 100 Peer Median 64bps 10% basis points 50 0% F 1 2 4 7 8 3 6 9 5 0 2 1 0 F 1 2 3 4 5 6 7 8 9 -10% 0 1 2 R 1 1 1 r r
Slide 15: Interest rate exposure of future business and long-term rates
Interest rate exposure of future business and long-term rates Fixed / float loan mix(1) • The majority of Regions’ residual NII exposure to interest rates comes 100% from future business activities and cash-flow reinvestment; full year 2020 90% estimate: 80% 70% ◦ ~$10B fixed rate loan production 60
Slide 16: Deposit advantage
Deposit advantage Expected to continue (1) Deposit costs Deposit costs RF 35bps Peer 1 36bps Peer 2 40bps 0.53% Peer 3 43bps 0.49% Peer 4 51bps 0.46% Peer 5 51bps 0.41% Peer 6 52bps 0.35% Peer 7 53bps Peer 8 58bps Peer 9 61bps 0.17% Peer 10 65bps Peer 11 66bps Peer 12 72bps 1Q19 2Q19 3Q19 4Q19 1Q20
Slide 17: Non-interest revenue and expense
Non-interest revenue and expense Adjusted total revenue(1) Non-interest expense ($ in millions) ($ in millions) $1,449 $1,482 $1,411 $897 $860 $836 948 918 928 28 8 12 3.51% 58.3% 58.1% 57.9% 3.44% 3.39% 852 869 824 501 564 483 1Q19 4Q19 1Q20 1Q19 4Q19 1Q20 (1) (1) Adjusted non-interest income(1) Ne
Slide 18: Diversified non-interest revenue
Diversified non-interest revenue (1) Consumer 1Q20 fee revenue by segment • Consumer fee income categories are an important component of ($ in millions) fee revenue and are expected to contribute to overall growth • Service charges and card and ATM fees were negatively impacted by COVID-19 shelter-i
Slide 19: Continuous improvement initiatives delivering solid results
Continuous improvement initiatives delivering solid results Simplify & Grow initiative tracker Simplify & Grow expense initiatives (% represents $ of savings) Initiatives Total Initiatives to be number of All others complete completed initiatives Top 6-10 to Revenue 6 21 27 be completed 3% Organizat
Slide 20: Average loans and deposits
Average loans and deposits Adjusted average loans and leases(1) Average deposits by segment ($ in billions) ($ in billions) $94.2 $94.5 $95.7 $80.8 $81.6 1.4 0.6 1.3 $80.4 7.9 7.9 8.1 28.3 28.4 28.6 26.9 26.6 26.6 52.5 52.0 53.0 58.0 59.4 59.7 1Q19 4Q19 1Q20 1Q19 4Q19 1Q20 Adjusted business loans(1)
Slide 21: 1Q20 average loan composition
1Q20 average loan composition Average consumer loans Average business loans ($ in billions) ($ in billions) Mortgage $14.5 CRE Mortgage - OO $5.5 Indirect-Vehicles CRE Construction - OO $0.3 $30.3B $1.7 Commercial and $53.0B Industrial $40.5 IRE - Mortgage $5.0 Other $1.2 Indirect-Other Credit Card
Slide 22: Commercial loans by industry
Commercial loans by industry As of 3/31/20 ($ in millions) Total Outstanding % Utilization Commitments Balances Administrative, Support, Waste & Repair $2,368 $1,558 66% Agriculture 672 422 63% • Includes Commercial and Commercial Real Educational Services 533,579 2,801 78% Estate-Owner Occupied Loa
Slide 23: Regions unsecured debt and credit ratings profile
Regions unsecured debt and credit ratings profile Debt maturity profile(1) Select credit ratings ($ in millions) Moody's S&P Fitch $2,260 Regions Financial Corporation Senior Unsecured Debt Baa2 BBB+ BBB+ 1,900 $1,000 $1,000 Subordinated Debt Baa2 BBB BBB $900 $800 500 Regions Bank 1,000 1,000 $100
Slide 24: Strong capital and liquidity position
Strong capital and liquidity position (1) • Granular and stable deposit base provides superior liquidity value; Tier 1 capital ratio enhanced by low loan-to-deposit ratio 10.9% • Beyond deposits, have readily available liquid assets and cash of $28B, 10.6% 10.7% and additional significant liquidity
Slide 25: Ample sources of additional liquidity aided by strong Risk Management
Ample sources of additional liquidity aided by strong Risk Management Liquidity Risk Management Additional Liquidity Sources Regions’ Risk Management and Stress Testing have guided Beyond deposits, Regions has additional liquidity us to liquidity levels that are well prepared for the current sources
Slide 26: Focus on risk-adjusted returns
Focus on risk-adjusted returns Capital Optimization Investments Mortgage Corporate/Commercial Mortgage Servicing Rights • Sold ~$421M of portfolioed residential • ~$117B of loan exposures • ~$17B in MSR bulk purchases since beginning of mortgage loans since 2017 have been reviewed in depth 2016 by C
Slide 27: Ascentium Capital Acquisition
Ascentium Capital Acquisition Company Overview Highlights • Headquartered in Kingwood, TX, Ascentium Capital is the • Adds capabilities for Regions' small business largest independent equipment finance lender in the U.S. customers from both a product standpoint and • Best-in-class management team wi
Slide 28: Diversification through comprehensive concentration framework
Diversification through comprehensive concentration framework Industry Concentrations Geographic Concentrations • Risk Appetite driven approach • Market scorecards are product Concentration Risk Framework specific • Multi-tiered hierarchy e.g., Consumer vs. Investor Real Estate 9 sectors, 24 industr
Slide 29: Significant expansion of portfolio risk indicators
Significant expansion of portfolio risk indicators Portfolio Performance Metrics Early Warning Indicators Regions maintains a robust library of over 150 quantitative and qualitative Metrics are cascaded to ensure measures accountability and permit strategic allocation of risk capacity Capital Market
Slide 30: CECL allowance for credit losses waterfall
CECL allowance for credit losses waterfall ($ in millions) Highlights • Day 1 adjustment due to 1/1/20 CECL adoption resulted in an allowance for credit losses (ACL) $207 $1,665 of $1.415B $36 • Q1 allowance increased $250M due primarily $501 $16 to the uncertainty associated with COVID–19, $(9) and
Slide 31: Asset quality
Asset quality Net charge-offs and ratio Criticized business loans ($ in millions) $123 ($ in millions) 63 $2,524 $96 $2,119 $2,251 $78 31 0.59% 20 0.46% 0.38% 53 58 65 60 1Q19 4Q19 1Q20 1Q19 4Q19 1Q20 Consumer net Commercial net Net charge-offs ratio • Adopted CECL 1/1/20; 1Q20 provision $373M ($123
Slide 32: COVID-19 high-risk industry segments
COVID-19 high-risk industry segments (as of March 31, 2020) (1) % of total Utilization % % Balances (1) (2) (3) C&I portfolio ($ in billions) loans rate Leveraged % SNC Deferral Ongoing Portfolio Energy - Oil, gas and coal $2.38 2.7% 51% —% 84% 0.4% Surveillance Freight transportation - Rail, trucki
Slide 33: Leveraged portfolio
Leveraged portfolio (outstanding balances as of March 31, 2020) Leveraged Balances by Industry Regions' Leveraged Lending Definition - $6.8B in balances • Commitments are $10M • Leverage exceeds 3x senior debt; 4x total debt Professional Services 15% • Includes investment & non-investment grade loan
Slide 34: SNC portfolio
SNC portfolio (outstanding balances as of March 31, 2020) Shared National Credit Balances by Industry 10% Portfolio Characteristics 9% • Diverse Industry mix 47% $24.7B 8% • 42% of balances are Investment Grade 7% 7% • 22% of balances are Leveraged 6% 6% • 23% of balances are sponsor backed • Only 4
Slide 35: Energy lending
Energy lending • Leader in the Energy lending business for over 50 years As of 3/31/20 • Throughout 2019 and 1Q20, growth in Energy commitments Total Outstanding and outstandings have been essentially flat ($ in millions) Commitments Balances % Utilization $ Criticized % Criticized Oilfield services
Slide 36: Energy lending (continued)
Energy lending (continued) Balances by Category Gross Losses $1,500 $80 $75.1 $70 $1,200 $60 53 ) s ) $50 s n $900 n o i o l i l l l i i $40 $36.7 M M $32.9 ( ( $600 $ $28.5 $ $30 $24.5 $20 $300 $10 $6.0 $0.0 $0 $0 P es m m er 4 5 6 7 8 9 0 E& ic a a th 01 01 01 01 01 01 02 rv tre tre O 2 2 2 2 2 2
Slide 37: Restaurant lending
Restaurant lending • Team of bankers in place with specialization in this industry • Greater risk focus on quality of sponsor • Prior to the pandemic, Regions had strategically exited some higher risk restaurant relationships at As of 3/31/20 par through natural attrition and proactive risk 53 % of
Slide 38: Hotel lending
Hotel lending As of 3/31/20 • CRE – Unsecured outstanding balance is comprised of 12 REIT customers ($ in millions) Total Outstanding % Utilization $ Criticized % of Commitments Balances Outstanding 53 Criticized • 75% of balances are investment grade CRE-Unsecured $871 $795 91% $0 0% • 73% are SNCs
Slide 39: Commercial retail lending
Commercial retail lending • Approximately $556M of outstanding balances across the REIT and IRE portfolios relate to shopping malls and outlet centers, As of 3/31/20 comprised of ~$348M Class A and ~$208M Class B/C. Total Outstanding % $ % • Portfolio exposure to REITs specializing in enclosed malls
Slide 40: Transportation lending
Transportation lending As of 3/31/20 ($ in millions) Total Outstanding % Utilization $ Criticized % Criticized Commitments Balances General Freight $886 $570 64% $14 2% Trucking - Long Distance 53 Support Activities 342 219 64% — 0% for Water • 9% of balances are Leveraged Transportation Inland Wate
Slide 41: Loans to Small Business and Small Farms
Loans to Small Business and Small Farms (outstanding balances as of March 31, 2020) Balances by Industry Balances by State Healthcare 14% Real Estate 13% Florida 35% 14% Professional, Alabama 13% Scientific & 27% 35% Technical Tennessee 12% 13% 45% Services 10% $4.5B Georgia 7% Retail Trade 9% $4.5B
Slide 42: SBA loans
SBA loans (outstanding balances as of March 31, 2020) Balances by Industry Balances by State Manufacturing 15% Retail Trade 13% Florida 32% 15% Restaurant, 25% Texas 17% Accommodation 31% 32% & Lodging 12% Georgia 11% 13% Religious, $805M Alabama 8% Leisure 11% $805M 7% 12% 9% Arkansas 7% Real Estat
Slide 43: Consumer lending portfolio statistics
Consumer lending portfolio statistics Residential Mortgage Consumer Third Party Lending Consumer Credit Card • Avg. origination FICO 750 • Avg. origination FICO 754 • Avg. origination FICO 774 • Current LTV 60% • Avg. new line $33,033 • Avg. new line $5,485 • 96% owner occupied • 50% home improvemen
Slide 44: Appendix
> GENERATING Consistent Sustainable \ Long-term Performance APPENDIX Max REGIONS 44
Slide 45: Footprint economic advantages source references
Footprint economic advantages source references Fact Source Bureau of Labor Statistics. "Employment, Hours, and Earnings from the Current Employment Statistics Survey." Databases, Tables & Calculators by Subject, 18 Feb. 2020, data.bls.gov/ Job Growth timeseries/CES0000000001. Accessed 18 Feb. 2020.
Slide 46: Non-GAAP and additional selected items impacting earnings
Non-GAAP and additional selected items impacting earnings Quarter Ended Selected items impacting earnings: 3/31/2020 12/31/2019 3/31/2019 Pre-tax adjusted items Branch consolidation, property and equipment charges $ (11) $ (12) $ (6) Loss on early extinguishment of debt — (16) — Salaries and benefit
Slide 47: Non-GAAP information
Non-GAAP information This document contains non-GAAP financial measures, which exclude certain items management does not consider indicative of the Company’s on-going financial performance. Management believes that the exclusion of these items provides a meaningful base for period- to-period compari
Slide 48: Non-GAAP reconciliation: NII, non-interest income/expense, operating leverage and efficiency ratio
Non-GAAP reconciliation: NII, non-interest income/expense, operating leverage and efficiency ratio Quarter Ended ($ amounts in millions) 3/31/2020 12/31/2019 3/31/2019 1Q20 vs. 4Q19 1Q20 vs. 1Q19 Non-interest expense (GAAP) A $ 836 $ 897 $ 860 $ (61) (6.8)% $ (24) (2.8)% Adjustments: Branch consolid
Slide 49: Non-GAAP reconciliation: adjusted average loans
Non-GAAP reconciliation: adjusted average loans Average Balances ($ amounts in millions) 1Q20 4Q19 1Q19 1Q20 vs. 4Q19 1Q20 vs. 1Q19 Total consumer loans $ 30,250 $ 30,418 $ 31,207 $ (168) (0.6)% $ (957) (3.1)% Less: Indirect—vehicles 1,679 1,948 2,924 (269) (13.8)% (1,245) (42.6)% Adjusted total con
Slide 50: Non-GAAP reconciliation: adjusted ending loans
Non-GAAP reconciliation: adjusted ending loans As of 3/31/2020 3/31/2020 ($ amounts in millions) 3/31/2020 12/31/2019 3/31/2019 vs. 12/31/2019 vs. 3/31/2019 Total consumer loans $ 29,988 $ 30,567 $ 30,903 $ (579) (1.9)% $ (915) (3.0)% Less: Indirect—vehicles 1,557 1,812 2,759 (255) (14.1)% (1,202) (
Slide 51: Forward-looking statements
Forward-looking statements Forward-Looking Statements This release 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, strategies, f
Slide 52: Forward-looking statements continued
Forward-looking statements continued • The success of our marketing efforts in attracting and retaining customers. • Our ability to recruit and retain talented and experienced personnel to assist in the development, management and operation of our products and services may be affected by changes in
Slide 53: Generating Consistent Sustainable Long-term Performance
> GENERATING Consistent Sustainable \ Long-term Performance A REGIONS Mm REGIONS 33