Regions Financial Corporation · NYSE:RF
Regions Financial — Q3 2021 Earnings Presentation
45 slides from Regions Financial's earnings presentation, Oct 22, 2021
Slide 1: 3rd Quarter Earnings Conference Call
Exhibit 99.3 3rd Quarter Earnings Conference Call October 22, 2021
Slide 2: Third quarter 2021 overview
Third quarter 2021 overview Net Income Available to $624M Common Shareholders Diluted Earnings Per $0.65 Share Adjusted Total • Adjusted pre-tax pre-provision $1,611M Revenue(1) income(1) increased 4% QoQ • Adjusted efficiency ratio(1) improved Adjusted Non- 30 bps QoQ to 56.6% $918M Interest Expens
Slide 3: Strong foundation-positioned for growth
Strong foundation-positioned for growth Committed to continuous expansion of platforms and capabilities Innovating through digital investments and enhancing our customer experiences to generate shareholder return Digital investments Growing highly efficient Strong & recovering generate return busine
Slide 4: Loan growth momentum
Loan growth momentum Adjusted loans and leases(1) QoQ highlights & outlook • Adjusted average and ending loans increased ~1% (Average, $ in billions) QoQ; positioning us well for continued momentum for loan growth in 4Q and beyond. $82.3 $79.2 $79.8 • Commercial pipelines have surpassed pre-pandemic
Slide 5: Deposit growth continues
Deposit growth continues Average deposits by segment QoQ highlights & outlook ($ in billions) $131.1 $131.9 • Pace of deposit growth has slowed, balances 0.4 0.4 $116.7 9.5 9.9 continued to increase to new record levels. 0.4 8.7 • Average deposits QoQ growth primarily due to 43.0 42.5 higher account
Slide 6: Stable NII & margin
Stable NII & margin NII and NIM(1) ($ in millions) $1,000 $975 $976 3.41% 3.31% 3.30% 3.13% 2.81% 2.76% 3Q20 2Q21 3Q21 NII(1) NIM NIM excl. PPP/Cash(2) • In 3Q, deposit and cash balances remained elevated. • PPP and cash account for -54 bps NIM and +$34M NII within the quarter (-4 bps / -$12M QoQ) ◦
Slide 7: NII & margin - core drivers
NII & margin - core drivers Core(1) NII Attribution Drivers of Core(1) NII and NIM Offset ongoing impacts of $942 • Rate environment impacts offset through active balance reinvestment through balance sheet management sheet management strategies $929 ◦ Hedging benefit of $108M NII in 3Q(3) ◦ Lower de
Slide 8: 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 (~$1.6B total return) and the capital generated has been invested into strategically important businesses, such as Ascentium and EnerBank. NII Drivers - Curre
Slide 9: Non-interest income
Non-interest income QoQ highlights & outlook Change vs • Changes in customer behavior and additional customer benefits likely keep service charges ($ in millions) 3Q21 2Q21 3Q20 10-15% below 2019 levels. Service charges on deposit accounts $162 (0.6)% 6.6% • Capital markets increase driven by record
Slide 10: Non-interest expense
Non-interest expense Adjusted non-interest expense(1) QoQ highlights & outlook ($ in millions) • Adjusted non-interest expenses increased 3% driven $889 $895 $918 primarily by higher salary and benefits and professional and legal fees, offset by a decline in marketing expenses. 55.3% 56.9% 56.6% ◦ S
Slide 11: Asset quality improvement continues
Asset quality improvement continues Net charge-offs and ratio ACL to loans ratio ($ in millions) ($ in millions) $113 2.90% 75 2.74% 2.07% 0.50% 1.71% 1.83% $47 1.71% 1.80% 2.00% 23 $30 (2) 0.23% 5 Day 1 3Q20 2Q21 3Q21 38 24 25 0.14% (1) ACL/Loans (incl. PPP) ACL/Loans (excl. PPP) 3Q20 2Q21 3Q21 • 3
Slide 12: Capital and liquidity
Capital and liquidity Tier 1 capital ratio(1) Common equity Tier 1 ratio(1) 12.3% 10.8% 11.9% 10.4% 10.8% 9.3% 3Q20 2Q21 3Q21 3Q20 2Q21 3Q21 QoQ Highlights & Outlook • During 3Q, Regions declared $164M in common dividends. (2) Loan-to-deposit ratio • Stress Capital Buffer requirement for 4Q21 throug
Slide 13: 2021 expectations
2021 expectations FY 2021 Category Expectations Up modestly (dependent on Total Adjusted Revenue timing & amount of PPP (from adjusted 2020 of $6,206)(1)(2) forgiveness) Adjusted Non-Interest Expense Up modestly (from adjusted 2020 of $3,541)(1)(2) Adjusted Average Loans Down low single digits (from
Slide 14: Appendix
> GENERATING Consistent Sustainable Long-term Performance Appendix (( A REGIONS] 14
Slide 15: Third quarter 2021 highlights
Third quarter 2021 highlights Summary of third quarter results Selected items impact QoQ YoY ($ amounts in millions, except per share data) 3Q21 Change Change (amounts in millions, except per share data) 3Q21 Net interest income $ 965 0.2% (2.3)% Pre-tax adjusted items(1): Provision for (benefit fro
Slide 16: Strong recovery within footprint
Strong recovery within footprint Projected Employment Recovery Unemployment Rates (August 2021)(1) by Region(2) 6.0% United States 5.2%* 5.0% 4.6% 4.0% 3.5% 3.1% 2.0% —% Q32022 Q42022 2023 TN FL AL GA • Our top 4 deposit states (almost 70% our deposit franchise) had an unemployment rate in August be
Slide 17: Making banking easier
Making banking easier Providing transparency, simplicity and speed into how accounts work Improved Visibility and Enhanced Product New Product - Transparency Features Regions Now Checking Expanded Alert Capabilities Simplified Transaction Posting Order New Checking Account Product – ◦ Balance alerts
Slide 18: Growth in digital
Growth in digital (2)(3) Active Digital Banking Users Active Mobile Banking Users Mobile Banking Log-Ins Customer Transactions (Millions) (Millions) (Millions) 14% 23% 34% 2.3 40% 34% 31% 3.1 162 2.7 2.8 143 2.0 120 69% 66% 60% 1.8 3Q19 3Q20 3Q21 3Q19 3Q20 3Q21 3Q19 3Q20 3Q21 3Q19 3Q20 3Q21 Digital
Slide 19: Hedging strategy update
Hedging strategy update Hedge Notional Maturity Profile Long-term NII Sensitivity Profile to Rates Active Hedge Notional - scenarios assume no 1mo. LIBOR Cumulative NII growth (2021-2024) loan growth in any Current Unwind scenario and no Hedges Hedges(6) benefit from surge 3Q21 Adjustments Forwards
Slide 20: Balance sheet management
Balance sheet management Cash management update • Recent liquidity inflows represent an NII opportunity, ~$35B Ending Deposit Growth (Dec 2019 to Sep 2021) with cash deployment dependent on: • Deposit growth broadly distributed across ◦ stability and rate-sensitivity of deposit inflows products, bus
Slide 21: Strategy yielding strong ROATCE improvement
Strategy yielding strong ROATCE improvement 2020 ROATCE(1)(2) vs. 2014 ROATCE(2) 26.3% 20.5% 2014: Peer Median 11.3% 2020: Peer Median 13.4% 17.6% 16.8% 16.4% 15.2% 14.5% 14.3% 13.3% 13.4% 12.1% 11.1% 12.5% 12.1% 14.7% 10.8% 13.7% 12.1% 12.0% 11.3% 10.8% 10.4% 9.7% 8.7% 5.0% 6.4% 6.9% 6.6% ) (3 7 3
Slide 22: PPP loan details
PPP loan details ($ in millions) 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 Round 1-average $ 3,213 $ 4,558 $ 4,143 $ 3,171 $ 2,401 $ 814 Round 2-average — — — 627 1,500 1,324 Total-average $ 3,213 $ 4,558 $ 4,143 $ 3,798 $ 3,901 $ 2,138 NII(1) $ 18 $ 31 $ 54 $ 40 $ 43 $ 31 Round 1-ending $ 4,498 $ 4,594 $ 3,624
Slide 23: CET1 waterfall
CET1 waterfall 0.6% 0.1% 10.8% 10.4% (0.1)% (0.2)% Pre-tax pre- 2Q21 Provision Tax & Common 3Q21 provision CET1% benefit(2) Other Dividend CET1%(3) income(1) 23 (1) Non-GAAP; see appendix for reconciliation. (2) Provision benefit includes the impact of CECL deferral. (3) Current quarter ratios are e
Slide 24: Projected preferred stock expense
Projected preferred stock expense ($ in millions) Regions Preferred Par Value 3Q21 4Q21E Series B $500.0 $8.0 $8.0 Series C $500.0 $7.1 $7.1 Series D $350.0 $5.0 $5.0 Series E $400.0 $6.5 $4.5 Total $26.6 $24.6 • The 3Q dividend for Series E includes a long first dividend period to include accrual s
Slide 25: Allowance for credit losses waterfall
Allowance for credit losses waterfall ($ in millions) $1,684 QoQ highlights $(30) • 3Q ending allowance decreased $185M $1,499 $(91) due to continued improvement in the $(64) economic outlook and expectations of improving credit performance in certain sectors / clients. • The benefits of the improvi
Slide 26: Base R&S economic outlook
Base R&S economic outlook (as of September 2021) Pre-R&S period 3Q2021 4Q2021 1Q2022 2Q2022 3Q2022 4Q2022 1Q2023 2Q2023 3Q2023 Real GDP, annualized % change 3.8 % 5.6 % 5.2 % 4.1 % 3.2 % 2.6 % 2.3 % 2.2 % 2.3 % Unemployment rate 5.2 % 4.8 % 4.6 % 4.4 % 4.2 % 4.1 % 4.0 % 3.9 % 3.8 % HPI, year-over-ye
Slide 27: Allowance allocation
Allowance allocation As of 9/30/2021 As of 12/31/20 (in millions) Loan Balance ACL ACL/Loans Loan Balance ACL ACL/Loans C&I $41,748 647 1.55 % $42,870 $1,027 2.40 % CRE-OO mortgage 5,446 128 2.35 % 5,405 242 4.47 % CRE-OO construction 252 9 3.64 % 300 24 7.98 % Total commercial $47,446 $784 1.65 % $
Slide 28: Bottom up review informs and narrows COVID-19 high-risk industry sectors
Bottom up review informs and narrows COVID-19 high-risk industry sectors (as of September 30, 2021) % of Utilization C&I Portfolio BAL$(1) BAL$ Rate(2) % Criticized Energy – Oil & Gas Extraction, Oilfield Services, Coal $0.93b 1.1% 48% 22% Consumer Services & Travel – Amusement, Arts and Recreation,
Slide 29: Ascentium Capital
Ascentium Capital 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. • Partners with
Slide 30: EnerBank acquisition
EnerBank acquisition Closed: October 1, 2021 Overview Portfolio Overview • Headquartered in Salt Lake City, UT, EnerBank LTM Originations Heat Map(1) originates prime and super-prime home improvement point-of-sale loans through a national network of contractors • A top 5 originator in the home impro
Slide 31: 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; expected close 4Q21 • Sabal expands Regions’ agency (Fannie/Freddie) CRE • Sabal Capital Partners is a market leader in the lending pro
Slide 32: ESG - Recognitions and resources
ESG - Recognitions and resources State Street MSCI Global Advisors S&P Global Sustainalytics AA 63 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 Supp
Slide 33: 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 34: Non-GAAP reconciliation
Non-GAAP reconciliation Core net interest income and adjusted net interest margin Quarter-ended 9/30/2021 6/30/2021 Net interest income (FTE) (GAAP) $ 976 $ 975 Impact of SBA PPP loans (31) (43) Impact of excess cash (3) (3) Core net interest income (FTE) (non-GAAP) $ 942 $ 929 Net interest margin (
Slide 35: Non-GAAP reconciliation
Non-GAAP reconciliation Adjusted average loans Average Balances ($ amounts in millions) 3Q21 2Q21 1Q21 4Q20 3Q20 3Q21 vs. 2Q21 3Q21 vs. 3Q20 Commercial and industrial $ 41,892 $ 43,140 $ 42,816 $ 43,889 $ 46,405 $ (1,248) (2.9)% $ (4,513) (9.7)% Add: Commercial loans held for sale reclassified to th
Slide 36: Non-GAAP reconciliation
Non-GAAP reconciliation Adjusted full year average loans Average Balance Twelve Months Ended ($ amounts in millions) December 31, 2020 Total Loans $ 87,813 Add: Commercial loans held for sale reclassified to the portfolio 1 Less: SBA PPP Loans 2,986 Less: Indirect—other consumer exit portfolio 1,417
Slide 37: Non-GAAP reconciliation
Non-GAAP reconciliation Adjusted ending loans As of 9/30/2021 9/30/2021 ($ amounts in millions) 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 vs. 6/30/2021 vs. 9/30/2020 Commercial and industrial $ 41,748 $ 42,628 $ 43,241 $ 42,870 $ 45,199 $ (880) (2.1)% $ (3,451) (7.6)% Add: Commercial loans
Slide 38: Non-GAAP reconciliation
Non-GAAP reconciliation Non-interest expense Year Ended December 31 ($ amounts in millions) 2020 2019 2018 2017 2016 Non-interest expense (GAAP) $ 3,643 $ 3,489 $ 3,570 $ 3,491 $ 3,483 Adjustments: Contribution to Regions Financial Corporation foundation (10) — (60) (40) — Professional, legal and re
Slide 39: Non-GAAP reconciliation
Non-GAAP reconciliation ACL/Loans excluding PPP As of ($ amounts in millions) 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Total Loans $ 83,270 $ 84,074 $ 84,755 $ 85,266 $ 88,359 Less: SBA PPP Loans 1,536 2,948 4,317 3,624 4,594 Loans excluding PPP, net (non- GAAP) $ 81,734 $ 81,126 $ 80,438
Slide 40: Non-GAAP reconciliation
Non-GAAP reconciliation Pre-tax pre-provision income (PPI) Quarter Ended ($ amounts in millions) 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 3Q21 vs. 2Q21 3Q21 vs. 3Q20 Net income (loss) available to common shareholders (GAAP) $ 624 $ 748 $ 614 $ 588 $ 501 $ (124) (16.6)% $ 123 24.6 % (1) Pre
Slide 41: Non-GAAP reconciliation
Non-GAAP reconciliation NII, non-interest income/expense, and efficiency ratio Quarter Ended Year Ended ($ amounts in millions) 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 3Q21 vs. 2Q21 3Q21 vs. 3Q20 12/31/2020 Non-interest expense (GAAP) A $ 938 $ 898 $ 928 $ 987 $ 896 $ 40 4.5 % $ 42 4.7 %
Slide 42: 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 43: 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 44: 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 45: A REGIONS
A REGIONS A REGIONS «