Regions Financial Corporation · NYSE:RF
Regions Financial — Q3 2022 Earnings Presentation
38 slides from Regions Financial's earnings presentation, Oct 21, 2022
Slide 1: 3rd Quarter Earnings Conference Call
Exhibit 99.3 3rd Quarter Earnings Conference Call October 21, 2022
Slide 2: Third quarter 2022 overview
Third quarter 2022 overview Key Performance Metrics Reported Adjusted(1) 3Q22 Key Highlights Net Income Available to $404M • 3Q adjusted pre-tax pre-provision Common Shareholders income(1) represents highest level Diluted Earnings on record $0.43 • Settled outstanding regulatory Per Share matter rel
Slide 3: Investments in our businesses
Investments in our businesses We are investing in talent, technology, and strategic acquisitions; the investments we are making across all three of our businesses are paying off. CORPORATE CONSUMER WEALTH Mobile users increased YTD non-interest Increased number of Treasury 6.5% YoY income growth of
Slide 4: Loan growth continues
Loan growth continues Loans and leases QoQ highlights & outlook (Average, $ in billions) 4% • Avg business loans growth was broad-based $90.8 $94.6 across all businesses and industries; driven $83.4 mostly by existing clients. Commitments 31.3 32.2 increased $4.4B and utilization decreased to 28.5 4
Slide 5: Deposits
Deposits Normalization occurring as expected Deposits by Segment QoQ highlights & outlook (Average, $ in billions) $139.6 $135.5 • Avg consumer balances modestly lower, $131.9 2.5 0.4 10.0 2.3 decline consistent with typical pre- 9.9 9.4 pandemic seasonal effects. 41.9 39.1 42.5 • Avg corporate depo
Slide 6: NII & margin performance
NII & margin performance NII and NIM(1) ($ in millions) $1,274 $1,119 $976 3.68% 3.30% 3.44% 3.53% 3.06% 2.76% 3Q21 2Q22 3Q22 NII NIM NIM excl. PPP/Cash (2) • In 3Q, deposit and cash balances remain elevated; expect normalization to continue at a modest pace; reported NIM and NIM excl. PPP/Cash expe
Slide 7: NII & margin - core drivers
NII & margin - core drivers NII Attribution Drivers of NII and NIM Rate Environment • NII increased +$154M, or +14% linked-quarter $1,262 • Higher short-term rates largely drive NII growth Contractual balance sheet and hedge repricing outpaced ◦ Hand-off from hedging benefit to deposit cost increase
Slide 8: Hedging strategy update
Hedging strategy update Net Receive Hedge Notional(1) (Quarterly Avg) (Annual Avg) 3Q22 Swap Notional Removal 3Q22 Swap Additions/ Extension 1 3Q22 2 4Q22 3 1Q23 4 2Q23 5 3Q23 6 4Q23 7 1Q24 1 2023 2 2024 3 2025 4 2026 5 2027 6 2028 Swap Notional - 2Q22 $17.0B $11.7B $9.4B $9.4B $15.7B $18.7B $19.8B
Slide 9: Non-interest income
Non-interest income Non-Interest Income Adj. Non-Interest Income (1) QoQ outlook ($ in millions) ($ in millions) • As of 9/30 all 2022 announced OD policy $649 $640 $646 $640 $605 $606 enhancements completed; expected to result in FY22 service charges of ~$630M. Expect to implement grace feature in
Slide 10: Non-interest expense
Non-interest expense Non-Interest Expense Adj. Non-Interest Expense(1) QoQ highlights & outlook ($ in millions) ($ in millions) $988 $1,170 $954 • Non-interest expense increased ~23% on a $918 reported basis and ~4% on an adjusted $938 $948 basis(1). 62.3% ◦ Salaries and benefits increased ~3% 57.7%
Slide 11: Asset quality
Asset quality 3Q impacted by consumer loan sale and hurricane reserve Provision for Credit Losses Net charge-offs Allowance for Credit Losses (ACL) ($ in millions) ($ in millions) ($ in millions) 0.46% $1,499 $1,514 $1,539 $146 $20 $135 0.14% 0.17% 0.19% 410% $(31) $110 311% 283% $63 1.80% 1.62% 1.6
Slide 12: Capital and liquidity
Capital and liquidity Tier 1 capital ratio(1) Common equity Tier 1 ratio(1) 12.3% 10.8% 9.2% 9.3% 10.6% 10.6% 2Q21 1Q22 3Q22 3Q21 2Q22 3Q22 Loan-to-deposit ratio(2) QoQ Highlights & Outlook • Common Equity Tier 1 (CET1) ratio increased 68% 70% to 9.3%, reflecting solid capital generation 63% through
Slide 13: 2022 expectations
2022 expectations Expectations for 4Q22 & Beyond • 4Q NII expected to grow 7-9%(3); 2022 NII growth expected to be +20-22%(3), excl. PPP +23-25%(3); expect 4Q22 NII to be ~33-35% higher than FY 2022 Category 1Q22(3) Expectations • Total ending deposits declining in-line with Total Adjusted Revenue u
Slide 14: Appendix
> GENERATING Consistent Sustainable Long-term Performance Appendix \ A REGIONS] 14
Slide 15: Third quarter 2022 highlights
Third quarter 2022 highlights Summary of third quarter results Selected items impact QoQ YoY ($ amounts in millions, except per share data) 3Q22 Change Change (amounts in millions, except per share data) 3Q22 Net interest income $ 1,262 13.9% 30.8% Pre-tax adjusted items(1): Branch consolidation, pr
Slide 16: Growth in digital
Growth in digital Digital Usage Sales and Transactions Zelle Transactions (Millions) (1) Active Users (Millions) Digital Sales (Accounts in Thousands) +16% % +17% +106% 3.16 3.30 +19 2.39 86.7 2.85 2.25 84.4 3.23 73.8 2.01 12.5 16.5 10.4 2.40 63.4 71.9 70.3 1.57 3Q20 3Q21 3Q22 3Q20 3Q21 3Q22 3Q20 3Q
Slide 17: Deposit surge and beta
Deposit surge and beta Pandemic-Related Deposit Growth Adds to Low-Cost, Stable Funding Base(1) $150 $9 $134 $13 Business/ $15 Other $97 Deposits $100 Business/ Other Deposits Low-beta deposits have grown considerably and remain relatively stable. Other pandemic era increases (approx. 2/3) Retail $5
Slide 18: State of the consumer
State of the consumer Regions' exposure to low-FICO borrowers remains negligible; customers with historically low deposit balances still have significant cushion Regions' consumer borrowers are in a strong position More broadly, Regions' lower-deposit-balance customers relative to pre-pandemic pre-p
Slide 19: Median customer deposit balances
Median customer deposit balances Consumer and Corporate Median Consumer Customer Deposit Balances(1) Median Corporate Deposit Balances(2) (12/31/2019-9/30/2022) (12/31/2019-8/31/2022) Stimulus Round 2 Up 63% Stimulus Round 1 Up 44% Retail Deposits 2 2 1 1 1 1 0 0 0 0 9 0 2 0 1 0 1 0 1 9 2 1 2 -202 -
Slide 20: Asset sensitive balance sheet
Asset sensitive balance sheet Well positioned for rising short-term and/or long-term interest rates Longer-Term Adjusted(1) NIM Expectations Short-term Rate Sensitivity Drivers Constructed a balance sheet profile for a NIM range of 3.60% • ~50% floating rate loans excl. hedges to 4.00% over the long
Slide 21: Future NII drivers
Future NII drivers NII is positioned to benefit from higher rates, as well as natural loan growth and strategic opportunities. Hedge proceeds and the capital generated has been invested into strategically important businesses, such as Ascentium and EnerBank. NII Drivers - Current Support Relative Im
Slide 22: Allowance for credit losses waterfall
Allowance for credit losses waterfall ($ in millions) QoQ highlights • 3Q allowance increased $25M $40 compared to prior quarter, resulting $79 in a $135M provision expense. $1,514 $1,539 $(94) • Key drivers of the increase in ACL: ◦ Significant growth in commitments in both core Business (primarily
Slide 23: Base R&S economic outlook
Base R&S economic outlook (as of September 2022) Pre-R&S period 3Q2022 4Q2022 1Q2023 2Q2023 3Q2023 4Q2023 1Q2024 2Q2024 3Q2024 Real GDP, annualized % change 1.8 % 1.0 % 1.2 % 1.2 % 1.4 % 1.5 % 1.6 % 1.9 % 1.9 % Unemployment rate 3.6 % 3.6 % 3.6 % 3.7 % 3.9 % 4.0 % 4.1 % 4.2 % 4.2 % HPI, year-over-ye
Slide 24: Allowance allocation
Allowance allocation As of 9/30/2022 As of 12/31/2021 (in millions) Loan Balance ACL ACL/Loans Loan Balance ACL ACL/Loans C&I $49,591 622 1.25 % $43,758 $613 1.40 % CRE-OO mortgage 5,167 107 2.08 % 5,287 118 2.23 % CRE-OO construction 282 6 2.30 % 264 9 3.53 % Total commercial $55,040 $735 1.34 % $4
Slide 25: Well positioned for next downturn
Well positioned for next downturn Highly Diversified Business Portfolio(1) Commercial Portfolio Migrates to Lower Risk Distribution All Other Commercial 47% 46% 46% 6.9% 16.3% (2) Business Services 38% 7.7% 33% 26% Technology Services 16% 15% 7.8% 12% $63.2B Investor Real Estate 11% 6% 4% 12.9% Manu
Slide 26: Consumer lending portfolio statistics
Consumer lending portfolio statistics Consumer Credit Card Residential Mortgage Consumer FICO Scores(1) • Avg. origination FICO 776 • Avg. origination FICO 757 3% 2% • Avg. new line $6,367 • Current LTV 51% 2% • 3Q22 Yield 13.79% • 98% owner occupied • 3Q22 QTD NCO 2.39% 63% Other Consumer(2) 81% 77
Slide 27: Environmental, Social & Governance
Environmental, Social & Governance ESG Governance Suite of ESG Disclosures BOARD OF DIRECTORS ESG-related elements of the Strategic Plan, annual budget, and capital planning process ■ Annual Review & ESG Report ■ TCFD Report O Board-Level Committees ■ SASB Index V ■ GRI Index ESG strategies, initiat
Slide 28: Environmental, Social & Governance
Environmental, Social & Governance 2021 Highlights Pursuing environmental Fostering diversity, equity, Promoting financial inclusivity sustainability and inclusion ▪ Introduced Regions Now CheckingSM to ▪ Surpassed 2023 target to reduce ▪ Nurtured inclusive corporate suite of Regions Now Banking® pr
Slide 29: Non-GAAP information
Non-GAAP information Management uses pre-tax pre-provision income (non-GAAP) and adjusted pre-tax pre-provision income (non-GAAP), as well as the adjusted efficiency ratio (non-GAAP) and the adjusted fee income ratio (non-GAAP) to monitor performance and believes these measures provide meaningful in
Slide 30: Non-GAAP reconciliation
Non-GAAP reconciliation Core net interest income and adjusted net interest margin Quarter-ended 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Net interest margin (FTE) (GAAP) 3.53 % 3.06 % 2.85 % 2.83 % 2.76 % Impact of SBA PPP loans (0.01)% (0.01)% (0.02)% (0.09)% (0.05)% Impact of excess cash
Slide 31: Non-GAAP reconciliation
Non-GAAP reconciliation Adjusted Net Charge-Offs and Ratio For the Quarter Ended ($ amounts in millions) 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Net loan charge-offs (GAAP) $110 $38 $46 $44 $30 Less: charge-offs associated with the sale of unsecured consumer loans 63 — — — — Adjusted net
Slide 32: Non-GAAP reconciliation
Non-GAAP reconciliation Non-interest expense Year Ended December 31 ($ 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 33: Non-GAAP reconciliation
Non-GAAP reconciliation Pre-tax pre-provision income (PPI) Quarter Ended ($ amounts in millions) 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 3Q22 vs. 2Q22 3Q22 vs. 3Q21 Net income (loss) available to common shareholders (GAAP) $ 404 $ 558 $ 524 $ 414 $ 624 $ (154) (27.6)% $ (220) (35.3)% Pref
Slide 34: Non-GAAP reconciliation
Non-GAAP reconciliation NII, non-interest income/expense, and efficiency ratio Quarter Ended ($ amounts in millions) 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 3Q22 vs. 2Q22 3Q22 vs. 3Q21 Non-interest expense (GAAP) A $ 1,170 $ 948 $ 933 $ 983 $ 938 $ 222 23.4 % $ 232 24.7 % Adjustments: Bra
Slide 35: 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 36: 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 37: 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 38: A REGIONS
A REGIONS A REGIONS =