Regions Financial Corporation · NYSE:RF
Regions Financial — Q2 2024 Earnings Presentation
38 slides from Regions Financial's earnings presentation, Jul 19, 2024
Slide 1: 2nd Quarter Earnings
Exhibit 99.3 2nd Quarter Earnings July 19, 2024
Slide 2: Second Quarter Overview
Second Quarter Overview Continue to deliver consistent, sustainable long-term performance 2Q24 Key Performance Metrics Highlights Reported Adjusted(1) • Consistently generating top-quartile Net Income Available to Common returns in our peer group $477M Shareholders • Continued focus on disciplined c
Slide 3: Loans
Loans Average Loans & Leases QoQ Highlights & Outlook ($ in billions) $98.6 $97.4 $97.3 • Avg and ending loans remained relatively stable 32.9 33.4 33.3 • Avg business loans remained relatively stable, while ending loans increased ~1%; 65.7 64.0 64.0 Despite near-term macroeconomic and political unc
Slide 4: Deposits
Deposits Deposit trends are stabilizing Average Deposits by Segment QoQ Highlights & Outlook ($ in billions) $127.1 $126.9 $125.5 2.2 3.1 2.9 • Average deposits decreased 7.4 34.9 7.7 7.5 36.7 modestly; Ending deposits 37.1 decreased ~2% reflecting anticipated tax seasonality 81.0 79.2 79.8 • Deposi
Slide 5: NII & Margin Performance
NII & Margin Performance NII has troughed; Expect growth over 2H24 FTE NII and NIM Drivers of NII and NIM $1,393 ($ in millions) • NII +$2M QoQ; NIM -4bps to 3.51% $1,197 $1,198 • Elevated long-term interest rates increase new production fixed- rate asset yields • Sold $980M Govt/Agency securities a
Slide 6: 2024 NII Range and Assumptions
2024 NII Range and Assumptions "Neutral" interest rate risk position; NII performance will depend mostly on deposit dynamics 2024 NII(1) Performance Range NII Sensitivity to Interest Rates Expect to operate toward upper end of range • Through hedging, managed NII Upper End sensitivity to be mostly n
Slide 7: Non-Interest Income
Non-Interest Income Non-Interest Income Adj. Non-Interest Income(1) ($ in millions) ($ in millions) QoQ Highlights & Outlook $613 $595 • NIR decreased ~3% on a reported basis and included $50M $576 $563 $576 $545 pre-tax loss on securities repositioning in both 1Q and 2Q; NIR decreased ~3% on an adj
Slide 8: Non-Interest Expense
Non-Interest Expense Non-Interest Expense Adj. Non-Interest Expense(1) ($ in millions) ($ in millions) QoQ Highlights & Outlook $1,111 $1,131 $1,004 $1,110 $1,097 • NIE decreased ~11% on a reported basis including $37M $1,032 contingent reserve release related to a prior acquisition, $82 $22 $— an a
Slide 9: Asset Quality
Asset Quality Broad-based improvement Net Charge-Offs(1) Non-Performing Loans (NPLs)(1) $121 $906 $847 $101 $81 $492 0.94% 0.87% 0.33% 0.50% 0.42% 0.50% 2Q23 1Q24 2Q24 2Q23 1Q24 2Q24 Net Charge-Offs Net Charge-Offs Ratio NPLs - excluding LHFS NPL/Loans QoQ Highlights & Outlook Allowance for Credit L
Slide 10: Capital and Liquidity
Capital and Liquidity Tier 1 Capital Ratio(1) QoQ Highlights & Outlook 11.4% 11.6% 11.7% • Basel III Endgame - Estimate a low to mid-single digit increase in RWAs under the Expanded Risk Based Approach in addition to the phase-in of AOCI into regulatory capital 2Q23 1Q24 2Q24 ◦ CET1 adjusted to incl
Slide 11: 2024 Expectations
2024 Expectations Expectations for 3Q24 & Beyond(3) FY 2024 Expectations • NII to grow in 2H24, with asset turnover at elevated rate levels being the primary driver Net Interest Income $4.7-$4.8B (vs. 2023 of $5,320)(3) (expect to operate toward upper end) ◦ 3Q24 NII expected to be flat to up 2% vs
Slide 12: Appendix
Appendix 4 a
Slide 13: Second Quarter 2024 Highlights
Second Quarter 2024 Highlights Summary of Second Quarter Results Selected Items Impact QoQ YoY ($ amounts in millions, except per share data) 2Q24 Change Change (amounts in millions, except per share data) 2Q24 Net interest income $ 1,186 0.2% (14.1)% Pre-tax adjusted items(1): Provision for (benefi
Slide 14: Growth in Digital
Growth in Digital Digital Usage Sales & Transactions Zelle Transactions (Millions) (1) (4) Mobile Banking Active Users (Millions) Consumer Checking Sales by Channel +64% 4.89 +10% 3.85 2.52 2.59 2% 2% 1% 2.99 2.36 77% 71% 80% 21% 27% 19% 2Q22 2Q23 2Q24 2Q22 2Q23 2Q24 2Q22 2Q23 2Q24 Digital Branch Co
Slide 15: Investments in Our Businesses
Investments in Our Businesses Investments in talent, technology and strategic acquisitions continue to pay off Corporate Consumer Wealth • Real Estate Capital Markets 2Q24 • 1st in VISA Power Score for 41 • Total Wealth Management origination revenue up 15% vs 2Q23 consecutive quarters on Debit Rela
Slide 16: Hedging Strategy Update
Hedging Strategy Update Creates mostly "neutral" interest rate risk position with well-protected margin in 3.50%s Cash Flow Hedge Notional(1) (Quarterly Avg) (Annual Avg) Swaps Collars 1 2Q24 2 3Q24 3 4Q24 4 1Q25 1 2024 2 2025 3 2026 4 2027 5 2028 6 2029 2030 as of 6/30/2024 Swap Notional - 1Q24 $20
Slide 17: Securities Portfolio
Securities Portfolio Provides downside rate protection/liquidity • Portfolio constructed to protect against changes in market rates ◦ Duration is fully extended at ~4.5 years as of 06/30/2024; provides offset to Securities Portfolio Composition(1) long-duration deposit book Agency/UST Corporate Bond
Slide 18: Historical Credit Profile
Historical Credit Profile Total Net Charge-Offs 2.00% 1.50% Average Pre-Pandemic Average Pandemic 0.46% 0.35% 1.00% 0.42% 0.50% —% 13 20 22 24 1Q 1Q 4Q 2Q Non-Performing Loans 2.50% 2.00% Average Pre-Pandemic Average Pandemic 1.07% 0.64% 1.50% 0.87% 1.00% 0.50% —% 13 20 22 24 1Q 1Q 4Q 2Q • Non-Accru
Slide 19: Commercial Real Estate
Commercial Real Estate (Outstanding balances as of June 30, 2024) Highly Diversified Portfolio (IRE including Unsecured CRE) Key Portfolio Metrics Other Hotel 3.8% 5.2% Res. Homebuilders Healthcare • Unsecured loans for RE purposes generally have low 7.2% 8.2% leverage, with strong access to liquidi
Slide 20: CRE- Office Portfolio
CRE- Office Portfolio (Outstanding balances as of June 30, 2024) Key Portfolio Metrics(1) Investor Real Estate Office Portfolio Overview Balances $ $1,574 % of Total Loans 1.6% 7% 24% NPL $237 39% NPL / Loans 15.1% 61% 76% Charge-offs $0 93% Charge-offs / Loans —% ACL $101 Class A Class B Multi-Tena
Slide 21: CRE- Multi-Family Portfolio
CRE- Multi-Family Portfolio (Outstanding balances as of June 30, 2024) Key Portfolio Metrics(1) Predominantly Secured and Weighted to the South(2) Balances $ $4,279 4% % of Total Loans 4.4% 15% 10% NPL $0 NPL / Loans —% Charge-offs $0 85% 86% Charge-offs / Loans —% ACL $77 ACL / Loans 1.8% Secured U
Slide 22: CRE- Senior Housing Portfolio
CRE- Senior Housing Portfolio (Outstanding balances as of June 30, 2024) Ongoing Portfolio Surveillance Key Portfolio Metrics(1) • The fundamentals of the senior housing market are Balances $ $1,231 improving, driven by demographic, economic, and sectoral trends % of Total Loans 1.3% • At current pe
Slide 23: Transportation - Trucking
Transportation - Trucking (Outstanding balances as of June 30, 2024) Ongoing Portfolio Surveillance Key Portfolio Metrics(1) • Trucking companies are working through one of the Balances $ $1,482 most prolonged downturns in the U.S. domestic freight market in recent memory • The weak volumes over the
Slide 24: Consumer Lending Portfolio
Consumer Lending Portfolio Consumer Credit Card Home Equity Consumer FICO Scores(1) • Avg. origination FICO 783 • Avg. origination FICO 773 2% 2% 2% • Avg. new line $7,962 • Current LTV 35% • 2Q24 Yield 14.62% • 62% of portfolio is 1st lien • 2Q24 QTD NCO 4.00% • Avg. loan size $34,529 67% 82% 78% •
Slide 25: Allowance for Credit Losses
Allowance for Credit Losses QoQ Highlights ($ in millions) • 2Q allowance essentially flat compared to the prior quarter, resulting in a $102M $1,731 $20 $2 $1,732 provision expense $(21) • Primary drivers of the overall flat ACL were a relatively stable economic forecast and improvement in the over
Slide 26: Base R&S Economic Outlook
Base R&S Economic Outlook (As of June 2024) Pre-R&S period 2Q2024 3Q2024 4Q2024 1Q2025 2Q2025 3Q2025 4Q2025 1Q2026 2Q2026 Real GDP, annualized % change 2.1 % 1.9 % 2.2 % 2.4 % 2.3 % 2.4 % 2.1 % 2.1 % 2.2 % Unemployment rate 3.9 % 4.0 % 4.1 % 4.2 % 4.2 % 4.2 % 4.1 % 4.1 % 4.0 % HPI, year-over-year %
Slide 27: Allowance Allocation
Allowance Allocation As of 6/30/2024 As of 12/31/2023 (in millions) Loan Balance ACL ACL/Loans Loan Balance ACL ACL/Loans C&I $50,222 $701 1.40 % $50,865 $697 1.37 % CRE-OO mortgage 4,781 109 2.27 % 4,887 110 2.25 % CRE-OO construction 370 11 3.07 % 281 7 2.38 % Total commercial $55,373 $821 1.48 %
Slide 28: Non-GAAP Information
Non-GAAP Information Management uses computations of earnings and certain other financial measures, which exclude certain adjustments that are included in the financial results presented in accordance with GAAP, to monitor performance and believes these measures provide meaningful information to inv
Slide 29: Non-GAAP Reconciliation
Non-GAAP Reconciliation Adjusted Net Charge-Offs and Ratio For the Quarter Ended ($ amounts in millions) 6/30/2024 3/31/2024 12/31/2023 9/30/2023 6/30/2023 Net loan charge-offs (GAAP) $ 101 $ 121 $ 132 $ 101 $ 81 Less: charge-offs associated with the sale of loans — — 35 — — Adjusted net loan charge
Slide 30: Non-GAAP Reconciliation
Non-GAAP Reconciliation Pre-tax Pre-Provision Income (PPI) Quarter Ended ($ amounts in millions) 6/30/2024 3/31/2024 12/31/2023 9/30/2023 6/30/2023 2Q24 vs. 1Q24 2Q24 vs. 2Q23 Net income available to common shareholders (GAAP) $ 477 $ 343 $ 367 $ 465 $ 556 $ 134 39.1 % $ (79) (14.2)% Preferred divid
Slide 31: Non-GAAP Reconciliation
Non-GAAP Reconciliation NII, non-interest income/expense, and efficiency ratio Quarter Ended ($ amounts in millions) 6/30/2024 3/31/2024 12/31/2023 9/30/2023 6/30/2023 2Q24 vs. 1Q24 2Q24 vs. 2Q23 Non-interest expense (GAAP) A $ 1,004 $ 1,131 $ 1,185 $ 1,093 $ 1,111 $ (127) (11.2)% $ (107) (9.6)% Adj
Slide 32: Non-GAAP Reconciliation
Non-GAAP Reconciliation Non-Interest Expense Twelve Months Ended December 31 ($ amounts in millions) 2023 2022 2021 2020 2019 2018 2017 2016 Non-interest expense (GAAP) $ 4,416 $ 4,068 $ 3,747 $ 3,643 $ 3,489 $ 3,570 $ 3,491 $ 3,483 Adjustments: FDIC special assessment (119) — — — — — — — Contributi
Slide 33: Non-GAAP Reconciliation
Non-GAAP Reconciliation Adjusted CET1- inclusive of AOCI(4) Quarter Ended ($ amounts in millions) 6/30/2024 3/31/2024 12/31/2023 9/30/2023 ADJUSTED CET1 RATIO Common Equity Tier 1(1) A $ 13,093 $ 12,913 $ 12,976 $ 13,056 Adjustments: AOCI gain (loss) on securities(2) (2,298) (2,264) (2,064) (3,084)
Slide 34: Non-GAAP Reconciliation
Non-GAAP Reconciliation Tangible Common Ratios As of and for Quarter Ended ($ amounts in millions, except per share data) 6/30/2024 3/31/2024 12/31/2023 9/30/2023 6/30/2023 TANGIBLE COMMON RATIOS Shareholders’ equity (GAAP) A $ 17,169 $ 17,044 $ 17,429 $ 16,100 $ 16,639 Less: Preferred stock (GAAP)
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. The words “future,” “anticipates,” “assumes,” “intends,” “plans,” “seeks,” “believes,” “predicts,” “potential,” “objectiv
Slide 36: Forward-Looking Statements (continued)
Forward-Looking Statements (continued) • Our inability to develop and gain acceptance from current and prospective customers for new products and services and the enhancement of existing products and services to meet customers’ needs and respond to emerging technological trends in a timely manner co
Slide 37: 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
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