Regions Financial Corporation · NYSE:RF
Regions Financial — Q3 2017 Earnings Presentation
28 slides from Regions Financial's earnings presentation, Oct 24, 2017
Slide 1: 3rd Quarter Earnings Conference Call
3rd Quarter Earnings Conference Call October 24, 2017
Slide 2: 3rd quarter 2017 results reflect continued execution of strategic plan
3rd quarter 2017 Results reflect continued execution of our strategic plan Balance Sheet and Focused on the Profitability Capital Optimization Fundamentals • Reported EPS of $0.25 per share • Remain committed to prudently • Plan to eliminate $400 million in and generated positive operating growing l
Slide 3: Prudently managing loans
Prudently managing loans Quarter-over-Quarter: Average loans and leases • Total new and renewed loan production remained solid; however elevated loan ($ in billions) payoffs and pay downs drove quarter-over-quarter decline in total average balances • Average Consumer lending portfolio increased $180
Slide 4: Optimizing deposit mix
Optimizing deposit mix Average deposits by type Quarter-over-Quarter: ($ in billions) • Average deposits decreased $626 million Low-cost deposits • Strategic actions to reduce higher cost deposits contributed to the $97.9 $98.5 $98.0 $97.5 $96.9 decline 7.4 7.5 7.2 7.0 7.0 Time deposits + Other ◦ Av
Slide 5: Deposit advantage
Deposit advantage Deposits by Customer Type(1) Non-Interest Bearing Deposits Interest Bearing Deposits (Retail vs. Business) by Customer Type(1) by Customer Type(1) 3Q17 ($ in billions) ($ in billions) ($ in billions) Private Institutional $36 $36 $36 $37 $63 $62 $62 $61 $60 Wealth* Trust* $35 $1 $8
Slide 6: Improving net interest income and net interest margin
Improving net interest income(1) and net interest margin Quarter-over-Quarter: (1) Net interest income(1) and net interest margin • Net interest income (FTE) increased $17 million or 2%, and the net interest margin increased 4 bps ($ in millions) $921 ◦ Interest recoveries benefited net interest inc
Slide 7: Building sustainable franchise value
Building sustainable franchise value Quarter-over-Quarter: Non-interest income • Non-interest income decreased $10 million or 2%; Adjusted ($ in millions) non-interest income(1) decreased $13 million or 3% ◦ Driven primarily by declines in mortgage and capital $599 markets partially offset by an inc
Slide 8: Prudently managing expenses
Prudently managing expenses Quarter-over-Quarter: Non-interest expense • Non-interest expense decreased $23 million or 3%; adjusted non- ($ in millions) interest expense(1) decreased $19 million or 2% ◦ Salaries and benefits decreased $14 million or 3% primarily $934 due to reduced pension settlemen
Slide 9: Stable asset quality
Stable asset quality Net charge-offs and ratio NPLs and coverage ratio(1) ($ in millions) $1,078 ($ in millions) $100 $995 $1,004 773 $83 87 684 694 $823 $760 $76 69 $68 556 $54 48 163% 513 50 138% 135% 180% 123% 48 0.51% 0.41% 127% 137% 0.34% 0.38% 104% 110% 106% 0.26% 18 28 305 311 310 267 247 6 1
Slide 10: Industry leading capital and liquidity ratios
Industry leading capital and liquidity ratios Tier 1 capital ratio(1) • Repurchased $500 million or 34.6 million shares of common stock, and declared $105 million in dividends to 12.1% 12.3% 12.1% common shareholders 11.9% 12.0% • Basel III common equity tier 1 ratio estimated at 11.3%(1); Fully pha
Slide 11: 2017 expectations
2017 expectations • Excluding the impact of the third-party indirect-vehicle portfolio, full-year average loans are expected to be down slightly compared to the prior year • Full-year average deposits are expected to be relatively stable with the prior year • Net interest income and other financing
Slide 12: Appendix
Appendix Ar REGIONS 12
Slide 13: Selected items impacting earnings
Selected items impacting earnings Quarter Ended • Incurred $5 million of expenses associated ($ amounts in millions, except per share data) 9/30/2017 6/30/2017 9/30/2016 with branch consolidations and transfer of Pre-tax adjusted items: land held for future branch sites to held Branch consolidation,
Slide 14: Pre-tax pre-provision income
(1) Pre-tax pre-provision income Quarter-over-Quarter: • Despite softness in non-interest income, $527 pre-tax pre-provision income(1) increased (4) 3 (5) $29 million or 6% compared to 2Q17; (12) $500 $498 adjusted pre-tax pre-provision income(1) $492 33 $476 (4) (5) increased $22 million or 4% (12)
Slide 15: Commercial retail lending overview
Commercial retail lending overview Total retail • Approximately $200 million of outstanding balances across the REIT and IRE portfolios relate to shopping malls • Portfolio exposure to REITs specializing in enclosed malls consists of a small number of credits, all of which are investment grade As of
Slide 16: Energy lending overview
Energy lending overview As of 9/30/17 As of 6/30/17 Total energy Total Total Commitments Commitments • Total outstandings and commitments Loan / Including Loan / Including declined primarily due to paydowns Lease Outstanding % $ % Lease Outstanding % $ % ($ in millions) Balances Balances Utilization
Slide 17: Energy lending - oil field services and exploration & production detail
Energy lending - oil field services and exploration & production detail Type As of 9/30/17 # of Clients* Commentary OFS Portfolio ($ in millions) Marine $324 7 Sector remains under stress and will likely • 39% shared national credit (SNC) loans remain under stress in 2018. Contract coverage totals 5
Slide 18: Loan balances by select states
Loan balances by select states Texas Louisiana Consumer Non-Real Estate Commercial - Energy Commercial - Energy Consumer Non-Real Estate Secured, $1,013 (Direct), $1,043 (Direct), $378 Secured, $292 Consumer Real Consumer Real Estate Estate Secured, Secured, $1,163 $1,145 $8.5B $4.2B Investor Real E
Slide 19: Loan balances by select states (continued)
Loan balances by select states (continued) Alabama Mississippi Commercial- Energy Commercial - Consumer Non-Real Estate (Direct), $18 Energy (Direct), Consumer Non-Real Estate Secured, $807 $26 Secured, $356 Commercial - Consumer Real Estate Secured, $9.5B Commercial - Non- Energy, $4,866 Consumer R
Slide 20: Loan balances by select states (continued)
Loan balances by select states (continued) Florida Investor Real Estate Commercial- Energy (Direct), $0 ($ in millions) Consumer Non-Real Estate Multi- Single Secured, $1,360 Office Retail Other Total Family Family Commercial - Non- Miami-Fort Lauderdale Energy, $5,583 CBSA/Key West $32 $132 $106 $4
Slide 21: Non-GAAP reconciliation: non-interest income, non-interest expense and efficiency ratio
Non-GAAP reconciliation: non-interest income, non-interest expense and efficiency ratio The table below presents computations of the efficiency ratio (non-GAAP), which is a measure of productivity, generally calculated as non-interest expense divided by total revenue. Management uses this ratio to m
Slide 22: Non-GAAP reconciliation continued: non-interest income, non-interest expense and efficiency ratio
Non-GAAP reconciliation continued: non-interest income, non-interest expense and efficiency ratio Nine Months Ended September 30 ($ amounts in millions) 2017 2016 2017 vs. 2016 ADJUSTED EFFICIENCY, FEE INCOME AND OPERATING LEVERAGE RATIOS, ADJUSTED NON-INTEREST INCOME/ EXPENSE- CONTINUING OPERATIONS
Slide 23: Non-GAAP reconciliation: pre-tax pre-provision income
Non-GAAP reconciliation: pre-tax pre-provision income Pre-Tax Pre-Provision Income ("PPI") and Adjusted PPI (non-GAAP) The Pre-Tax Pre-Provision Income table below presents computations of pre-tax pre-provision income from continuing operations excluding certain adjustments (non-GAAP). Regions belie
Slide 24: Non-GAAP reconciliation: adjusted allowance for loan losses to non-performing loans
Non-GAAP reconciliation: adjusted allowance for loan losses to non-performing loans, excluding loans held for sale The table below presents computations of the adjusted allowance for loan losses to non-performing loans, excluding loans held for sale ratio (non-GAAP), generally calculated as adjusted
Slide 25: Non-GAAP reconciliation: Basel III common equity tier 1 ratio
Non-GAAP reconciliation: Basel III common equity tier 1 ratio – fully phased-in pro-forma The calculation of the fully phased-in pro-forma "Common equity Tier 1" (CET1) is based on Regions’ understanding of the Final Basel III requirements. For Regions, the Basel III framework became effective on a
Slide 26: Forward-looking statements
Forward-looking statements The following list of factors is not exhaustive. For discussion of these and other factors that may cause actual results to differ from expectations, look under the captions “Forward-Looking Statements” and “Risk Factors" of Regions' Annual Report on Form 10-K for the year
Slide 27: Forward-looking statements (continued)
Forward-looking statements (continued) • Our ability to execute on our strategic and operational plans, including our ability to fully realize the financial and non-financial benefits relating to our strategic initiatives. • The success of our marketing efforts in attracting and retaining customers.
Slide 28: Regions
A REGIONS