Regions Financial Corporation · NYSE:RF
Regions Financial — Q3 2024 Earnings Presentation
40 slides from Regions Financial's earnings presentation, Oct 18, 2024
Slide 1: 3rd Quarter Earnings
Exhibit 99.3 3rd Quarter Earnings October 18, 2024
Slide 2: Third Quarter Overview
Third Quarter Overview Continue to deliver consistent, sustainable long-term performance 3Q24 Key Performance Metrics Highlights Reported Adjusted(1) • Consistently generating top-quartile Net Income Available to Common returns in our peer group $446M Shareholders • Continued focus on disciplined ca
Slide 3: Loans
Loans Average Loans & Leases QoQ Highlights & Outlook ($ in billions) $98.8 $97.3 $97.0 • Avg loans remained stable while ending loans declined slightly $33.4 $33.3 $33.2 • Avg business loans remained stable; $65.4 $64.0 $63.8 • Pipelines are expected to remain soft as customers continue to seek mor
Slide 4: Deposits
Deposits Deposit trends are stabilizing Average Deposits by Segment QoQ Highlights & Outlook ($ in billions) $125.2 $126.9 $126.0 • Ending deposits were stable; Average $2.8 $2.9 $2.8 $7.5 $7.5 $7.4 deposits decreased ~1% reflecting $36.7 $34.9 $36.9 consumer seasonal spending patterns 1.59% 1.60% 1
Slide 5: NII & Margin Performance
NII & Margin Performance NII growth expected to continue following post-pandemic normalization FTE NII and NIM Drivers of NII and NIM ($ in millions) • NII +3% QoQ; NIM increased 3 bps to 3.54% $1,304 $1,198 $1,230 • Elevated long-term interest rates increase new production fixed-rate asset yields •
Slide 6: Non-Interest Income
Non-Interest Income Non-Interest Income Adj. Non-Interest Income(1) ($ in millions) ($ in millions) QoQ Highlights & Outlook $650 $566 $545 $572 $567 $595 • NIR increased ~5% on a reported basis and included $75M pre-tax loss on securities repositioning in 3Q; NIR increased ~9% on an adjusted(1) bas
Slide 7: Non-Interest Expense
Non-Interest Expense Non-Interest Expense Adj. Non-Interest Expense(1) ($ in millions) ($ in millions) QoQ Highlights & Outlook $1,093 $1,069 $1,004 $1,089 $1,069 • NIE increased ~6% on a reported basis as 3Q adjusted $1,032 $53 items offset, but 2Q included a $37M contingent $— reserve release rela
Slide 8: Asset Quality
Asset Quality Customers remain healthy - Credit Metrics stabilizing Net Charge-Offs(1) Non-Performing Loans (NPLs)(1) $117 $847 $821 $101 $101 $642 0.40% 0.42% 0.48% 0.87% 0.85% 0.65% 3Q23 2Q24 3Q24 3Q23 2Q24 3Q24 Net Charge-Offs Net Charge-Offs Ratio NPLs - excluding LHFS NPL/Loans QoQ Highlights &
Slide 9: Capital and Liquidity
Capital and Liquidity Tier 1 Capital Ratio(1) QoQ Highlights & Outlook 11.6% 11.7% 11.9% • Declared 3Q common dividends of $229M and executed $101M in share repurchases 3Q23 2Q24 3Q24 • Anticipate continuing to manage CET1 consistent with current levels over the near Common Equity Tier 1 Ratio(1) te
Slide 10: CET1 Under Basel III Endgame
CET1 Under Basel III Endgame Basel III Endgame Update Volatility Management • Basel III Endgame has yet to be finalized but expect AOCI to be • Reclassified ~$2.5B of Available-for-Sale included in Regulatory Capital securities into Held-to-Maturity late in the • Reduction in interest rates along wi
Slide 11: 2024 Expectations
2024 Expectations Expectations for 4Q24 & Beyond(3) FY 2024 Expectations Net Interest Income • NII to grow going forward, with asset ~$4.8B (vs. 2023 of $5,320) (3) turnover at elevated rate levels being the Adjusted Non-Interest Income primary driver (1)(2) (vs. adjusted 2023 of $2,259) $2.45-$2.5B
Slide 12: Appendix
Appendix 4 a
Slide 13: Third Quarter 2024 Highlights
Third Quarter 2024 Highlights Summary of Third Quarter Results Selected Items Impact QoQ YoY ($ amounts in millions, except per share data) 3Q24 Change Change (amounts in millions, except per share data) 3Q24 Net interest income $ 1,218 2.7% (5.7)% Pre-tax adjusted items(1): Provision for (benefit f
Slide 14: Growth in Digital
Growth in Digital Digital Usage Sales & Transactions Zelle Transactions (Millions) Mobile Banking Active Users (Millions)(1) Consumer Checking Sales by Channel(4) +49% +9% 4.78 4.14 2.55 2.61 2% 2% 1% 3.20 2.39 75% 66% 79% 23% 32% 20% 3Q22 3Q23 3Q24 3Q22 3Q23 3Q24 3Q22 3Q23 3Q24 Digital Branch Conta
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 small • 1st in VISA Power Score for 42 • Record 3Q24 NIR, up 14% vs 3Q23 balance originations increased in 3Q24 consecutive quarters
Slide 16: NII Positioning for Falling Rates
NII Positioning for Falling Rates "Neutral" interest rate risk position; NII performance will depend mostly on deposit dynamics NII Sensitivity to Interest Rates Interest-bearing Deposit Yields(1) 6.00% Outperformed in 5.43% Through hedging, managed NII sensitivity to 5.00% rising rate cycle; 5.00%
Slide 17: Hedging Strategy Update
Hedging Strategy Update Creates mostly "neutral" interest rate risk position with well-protected margin Cash Flow Hedge Notional(1) (Quarterly Avg) (Annual Avg) Swaps Collars 1 3Q24 2 4Q24 3 1Q25 4 2Q25 1 2024 2 2025 3 2026 4 2027 5 2028 6 2029 2030 as of 9/30/2024 Swap Notional - 2Q24 $19.6B $19.0B
Slide 18: Securities Portfolio
Securities Portfolio Provides downside rate protection/liquidity • Portfolio constructed to protect against changes in market rates ◦ AFS+HTM duration of ~4.7 years as of 9/30/2024; provides offset to long- Securities Portfolio Composition(1) duration deposit book Agency/UST Corporate Bonds ◦ ~27% o
Slide 19: Securities Portfolio - Repositioning
Securities Portfolio - Repositioning Provides efficient use of capital/downside rate protection Multiple, distinct securities repositioning strategies Rationale for Securities Repositioning occurred since the start of 2024 Efficient Portfolio Favorable Capital Use Management Market • Sold mostly sho
Slide 20: 4Q24 Projected Preferred Stock Expense
4Q24 Projected Preferred Stock Expense Regions Preferred Par Value 3Q24A 4Q24E Series B $500.0 $23.0 $— Series C $500.0 $7.1 $7.1 Series D $350.0 $5.0 $5.0 Series E $400.0 $4.5 $4.5 Series F $500.0 $4.4 $8.7 Total $44.0 $25.3 • Series B shares were redeemed on 9/16/24 at Par; Upon redemption, $15M o
Slide 21: 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% 0.48% 0.50% —% 13 20 22 24 1Q 1Q 4Q 3Q Non-Performing Loans 2.50% 2.00% Average Pre-Pandemic Average Pandemic 1.07% 0.64% 1.50% 0.85% 1.00% 0.50% —% 13 20 22 24 1Q 1Q 4Q 3Q • Non-Accru
Slide 22: Portfolios of Interest
Portfolios of Interest Key Portfolio Metrics(1) Senior Office Multi-Family Housing(2) Trucking Commitments (CMT) $ $1,653 $6,701 $1,291 $1,862 Balances $ $1,555 $4,243 $1,126 $1,418 % of Total Loans 1.6% 4.4% 1.2% 1.5% Non-Performing Loans (NPL) $ $225 $0 $62 $61 NPL / Portfolio Loans 14.5% —% 5.5%
Slide 23: Commercial Real Estate
Commercial Real Estate (Outstanding balances as of September 30, 2024) Highly Diversified Portfolio (IRE including Unsecured CRE) Key Portfolio Metrics Other Hotel Healthcare 1.7% 5.2% Res. Homebuilders 7.6% • Unsecured loans for RE purposes generally have low 7.5% leverage, with strong access to li
Slide 24: CRE- Office Portfolio
CRE- Office Portfolio (Outstanding balances as of September 30, 2024) Key Portfolio Metrics(1) Investor Real Estate Office Portfolio Overview(4) Balances $ $1,555 % of Total Loans 1.6% 7% 24% 39% NPL $225 61% 76% NPL / Loans 14.5% 93% Charge-offs $9 Class A Class B Multi-Tenant Single Tenant Suburba
Slide 25: Transportation - Trucking
Transportation - Trucking (Outstanding balances as of September 30, 2024) Ongoing Portfolio Surveillance Key Portfolio Metrics(1) • Trucking companies have been working through Balances $ $1,418 the most prolonged downturn in the U.S. domestic freight market since 2016 % of Total Loans 1.5% • Recent
Slide 26: Consumer Lending Portfolio
Consumer Lending Portfolio Consumer Credit Card Home Equity Consumer FICO Scores(1) • Avg. origination FICO 774 • Avg. origination FICO 781 2% 2% 2% • Current LTV 35% • Avg. new line $7,904 • 61% of portfolio is 1st lien • 3Q24 Yield 14.82% • Avg. loan size $34,600 • 3Q24 QTD NCO 3.84% 67% • $60M to
Slide 27: Allowance for Credit Losses
Allowance for Credit Losses QoQ Highlights ($ in millions) • 3Q allowance essentially flat compared to the prior quarter, resulting in a $113M $1,732 $16 $6 $1,728 provision expense $(26) • A consistent ACL resulted from: ◦ Decreases in Specific Reserve borrowers due to charge-offs offset by increas
Slide 28: Base R&S Economic Outlook
Base R&S Economic Outlook (As of September 2024) Pre-R&S period 3Q2024 4Q2024 1Q2025 2Q2025 3Q2025 4Q2025 1Q2026 2Q2026 3Q2026 Real GDP, annualized % change 1.8 % 1.9 % 2.0 % 1.8 % 2.1 % 2.3 % 2.2 % 2.1 % 1.9 % Unemployment rate 4.2 % 4.2 % 4.3 % 4.3 % 4.4 % 4.4 % 4.3 % 4.3 % 4.2 % HPI, year-over-ye
Slide 29: Allowance Allocation
Allowance Allocation Regions "Day 1" CECL ACL ratio on 1/1/2020 was 1.71%. The company has executed a number of de-risking strategies that have improved the overall loan portfolio. Taking the 3Q24 loan portfolio and applying the "Day 1" ACL rates would produce a proforma Day 1 ACL ratio of 1.61%. As
Slide 30: Non-GAAP Information
Non-GAAP Information Management uses computations of earnings and certain other financial measures, which exclude certain adjustments that are included in the financial results presented in accordance with GAAP, to monitor performance and believes these measures provide meaningful information to inv
Slide 31: Non-GAAP Reconciliation
Non-GAAP Reconciliation Adjusted Net Charge-Offs and Ratio For the Quarter Ended ($ amounts in millions) 9/30/2024 6/30/2024 3/31/2024 12/31/2023 9/30/2023 Net loan charge-offs (GAAP) $ 117 $ 101 $ 121 $ 132 $ 101 Less: charge-offs associated with the sale of loans — — — 35 — Adjusted net loan charg
Slide 32: Non-GAAP Reconciliation
Non-GAAP Reconciliation Pre-Tax Pre-Provision Income (PPI) Quarter Ended ($ amounts in millions) 9/30/2024 6/30/2024 3/31/2024 12/31/2023 9/30/2023 3Q24 vs. 2Q24 3Q24 vs. 3Q23 Net income available to common shareholders (GAAP) $ 446 $ 477 $ 343 $ 367 $ 465 $ (31) (6.5)% $ (19) (4.1)% Preferred divid
Slide 33: Non-GAAP Reconciliation
Non-GAAP Reconciliation NII, Non-Interest Income/Expense, and Efficiency Ratio Quarter Ended ($ amounts in millions) 9/30/2024 6/30/2024 3/31/2024 12/31/2023 9/30/2023 3Q24 vs. 2Q24 3Q24 vs. 3Q23 Non-interest expense (GAAP) A $ 1,069 $ 1,004 $ 1,131 $ 1,185 $ 1,093 $ 65 6.5 % $ (24) (2.2)% Adjustmen
Slide 34: 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 insurance special assessment (119) — — — — — — —
Slide 35: Non-GAAP Reconciliation
Non-GAAP Reconciliation Adjusted CET1- inclusive of AOCI(4) Quarter Ended ($ amounts in millions) 9/30/2024 6/30/2024 3/31/2024 12/31/2023 ADJUSTED CET1 RATIO Common Equity Tier 1(1) A $ 13,184 $ 13,093 $ 12,913 $ 12,976 Adjustments: AOCI gain (loss) on securities(2) (1,369) (2,298) (2,264) (2,064)
Slide 36: Non-GAAP Reconciliation
Non-GAAP Reconciliation Tangible Common Ratios As of and for Quarter Ended ($ amounts in millions, except per share data) 9/30/2024 6/30/2024 3/31/2024 12/31/2023 9/30/2023 TANGIBLE COMMON RATIOS Shareholders’ equity (GAAP) A $ 18,676 $ 17,169 $ 17,044 $ 17,429 $ 16,100 Less: Preferred stock (GAAP)
Slide 37: 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 38: Forward-Looking Statements
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 39: Forward-Looking Statements
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 40: Slide 40