Regions Financial Corporation · NYSE:RF
Regions Financial — Q3 2019 Earnings Presentation
28 slides from Regions Financial's earnings presentation, Oct 22, 2019
Slide 1: 3rd Quarter Earnings Conference Call
Exhibit 99.3 3rd Quarter Earnings Conference Call October 22, 2019
Slide 2: Third quarter & YTD 2019 highlights
Third quarter & YTD 2019 highlights Net Income(1) Adj. Revenue(2) Adj. Expenses(2) $385M $1.5B $865M + 9% YoY + 3% YoY + 1% YoY 3Q19 EPS(1) of $0.39 up NII down 1%; adjusted NIR Adjusted expenses remain (2) 22% YoY up 8% YoY well controlled Adj. PPI(2) Adj. positive Adj. efficiency operating leverag
Slide 3: Delivering consistent performance
Delivering consistent performance Interest Rate Proactive strategic hedging Sensitivity program Credit Risk Balance sheet de-risking & Framework optimization Capital Allocation Focused on risk-adjusted returns Improving Simplify and Grow, technology, Efficiency priority markets, and efficiency 3
Slide 4: Successful execution of strategic plan drives growth
Successful execution of strategic plan drives growth Business segments continue to grow • Total revenue increased 6% • Expenses remained relatively flat • 3Q19 consumer checking accounts grew • Generated operating leverage of +5% 1.0% YoY • Efficiency ratio improved ~300 bps • 3Q19 consumer househol
Slide 5: Balance sheet continues to reflect de-risking and optimization activities
Balance sheet continues to reflect de- risking and optimization activities Adjusted average loans and leases Average deposits by segment ($ in billions) ($ in billions) $93.9 $94.9 $94.0 $78.1 $81.3 $80.7 1.4 1.5 1.3 8.2 7.9 7.8 28.2 28.2 26.2 25.7 28.2 26.6 49.9 53.1 52.5 57.7 59.3 59.2 3Q18 2Q19 3
Slide 6: Net interest income and net interest margin
Net interest income and net interest margin NII(1) and NIM NIM drivers ($ in millions) NIM Driver $955 $956 $950 3.45% 2Q19 (0.04)% Lower market interest rates (excluding deposits) 0.03% Lower deposit costs 3.47% 3.45% 3.44% 0.03% 2Q19 investment portfolio optimization (0.02)% One additional day (0.
Slide 7: Growing non-interest income & disciplined expense management
Growing non-interest income & disciplined expense management (1) (1) Adjusted non-interest income Adjusted ($ in millions) non-interest expense ($ in millions) $557 $515 $513 $865 $853 $857 58.1% 58.3% 57.4% 3Q18 2Q19 3Q19 3Q18 2Q19 3Q19 (1) Adjusted non-interest expense Adjusted efficiency ratio(1)
Slide 8: Asset quality performing as expected
Asset quality performing as expected Criticized business loans NPLs and coverage ratio ($ in millions) ($ in millions) $2,124 $2,319 $539 $533 $2,029 $462 840 1,048 1,158 188% 1,479 156% 160% 981 966 53 3Q18 2Q19 3Q19 3Q18 2Q19 3Q19 Classified Special Mention NPLs - excluding LHFS Coverage ratio Net
Slide 9: Strong capital and liquidity position
Strong capital and liquidity position Tier 1 capital ratio(1) • Repurchased $589M or 39.7M shares of common stock and declared $150M in dividends to common shareholders in 3Q19 11.0% 11.1% 10.8% • CET1 ratio of 9.6% in line with target of 9.5% • Fully compliant with LCR rule as of quarter 3Q18 2Q19
Slide 10: Appendix
> GENERATING Long-term Performance Appendix \ Consistent Sustainable Ma REGIONS 10
Slide 11: Proactive hedging strategy reduces sensitivity over time
Proactive hedging strategy reduces sensitivity over time • Comprehensive hedging strategy Notional cash flow derivatives designated for hedging at 9/30/19(1) commenced in 1Q18; program largely ($ in billions) $19.50 $19.50 complete $18.25 $18.50 $16.50 • Forward starting hedges began 3Q19 with -2.6%
Slide 12: Leveraged portfolio
Leveraged portfolio (outstanding balances as of September 30, 2019) Leveraged Balances by Industry Regions Leveraged Lending Definition - $6.1B in balances • Commitments greater than $10M • Leverage exceeds 3x senior debt; 4x total debt 16% • Purpose test secondary to leverage test 24% • Includes in
Slide 13: SNC portfolio
SNC portfolio (outstanding balances as of September 30, 2019) Shared National Credit Balances by Industry 10% Portfolio Characteristics 9% 46% 8% • Diverse industry mix $20.6B 7% • 41% of balances are investment grade 7% • 25% of balances are leveraged 6% 7% • 25% of balances are sponsor backed • 4%
Slide 14: Energy lending
Energy lending As of 9/30/19 • Leader in the Energy lending business for over 50 years % of Total Outstanding Outstanding • In 2019, growth in Energy commitments has been ($ in millions) Commitments Balances % Utilization $ Criticized Criticized essentially flat, although outstandings have grown as
Slide 15: Restaurant lending
Restaurant lending • Team of bankers in place with specialization in this As of 9/30/19 53 industry % of ($ in Total Outstanding % Outstanding millions) # of Clients* Commitments Balances Utilization $ Criticized Criticized • Consumer spending will continue to support this Quick 2,869 $1,476 $1,182
Slide 16: Commercial retail lending
Commercial retail lending • Approximately $350 million of outstanding balances across the REIT and IRE portfolios relate to shopping malls and outlet centers, comprised of ~ As of 9/30/19 $200 million Class A and ~$150 million Class B/C % of ($ in Total Outstanding % $ Outstanding • Portfolio exposu
Slide 17: Other portfolios
Other portfolios Manufacturing - Consumer Balances by Industry Transportation Balances by Industry As of 9/30/19 As of 9/30/19 % of % of Total Outstanding Outstanding Total Outstanding Outstanding ($ in millions) Commitments Balances % Utilization $ Criticized Criticized ($ in millions) Commitments
Slide 18: Consumer lending portfolio statistics
Consumer lending portfolio statistics Residential Mortgage Home Equity Portfolio Statistics • Avg. origination FICO 768 • Avg. origination FICO 756 • Current LTV 59% • Current LTV 46% • 95% owner occupied • Only $409M of resets through 2021 • 66% of portfolio is 1st lien • Avg. loan size $40,567 Con
Slide 19: LIBOR transition
LIBOR transition Four pillars of execution ◦ Regions completed a comprehensive LIBOR Impact Assessment in 1H 2019 ◦ Using the results of the assessment, we have mobilized a company-wide initiative to transition to alternative rate(s) by YE 2021 Core Products & Corporate Strategy & Legacy Contracts C
Slide 20: Non-GAAP information
Non-GAAP information This document contains non-GAAP financial measures, which exclude certain items management does not consider indicative of the Company’s on-going financial performance. Management believes that the exclusion of these items provides a meaningful base for period- to-period compari
Slide 21: Non-GAAP items impacting earnings
Non-GAAP items impacting earnings Adjusted Items Quarter Ended • 3Q19 items include charges (amounts in millions, except per share data) 9/30/2019 6/30/2019 9/30/2018 associated with ongoing efficiency Non-GAAP adjusted items impacting earnings from continuing operations: efforts, including refineme
Slide 22: Non-GAAP reconciliation: adjusted average loans
Non-GAAP reconciliation: adjusted average loans Average Balances ($ amounts in millions) 3Q19 2Q19 3Q18 3Q19 vs. 2Q19 3Q19 vs. 3Q18 Commercial and industrial $ 40,200 $ 40,707 $ 37,410 $ (507) (1.2)% $ 2,790 7.5 % Add: Purchasing card balances (1) — — 239 — NM (239) (100.0)% Adjusted commercial and
Slide 23: Non-GAAP reconciliation: NII, non-interest income/expense, operating leverage and efficiency ratio
Non-GAAP reconciliation: NII, non-interest income/expense, operating leverage and efficiency ratio Quarter Ended ($ amounts in millions) 9/30/2019 6/30/2019 9/30/2018 3Q19 vs. 2Q19 3Q19 vs. 3Q18 Non-interest expense (GAAP) A $ 871 $ 861 $ 922 $ 10 1.2 % $ (51) (5.5)% Adjustments: Contribution to the
Slide 24: Non-GAAP reconciliation: NII, non-interest income/expense, operating leverage and efficiency ratio (continued)
Non-GAAP reconciliation: NII, non-interest income/expense, operating leverage and efficiency ratio (continued) Nine Months Ended September 30 ($ amounts in millions) 2019 2018 2019 vs. 2018 Non-interest expense (GAAP) K $ 2,592 $ 2,717 $ (125) (4.6)% Adjustments: Contribution to the Regions Financia
Slide 25: Non-GAAP reconciliation: Pre-tax pre-provision income (PPI)
Non-GAAP reconciliation: Pre-tax pre-provision income (PPI) Quarter Ended ($ amounts in millions) 9/30/2019 6/30/2019 9/30/2018 3Q19 vs. 2Q19 3Q19 vs. 3Q18 Net income from continuing operations available to common shareholders (GAAP) $ 385 $ 374 $ 354 $ 11 2.9 % $ 31 8.8 % Preferred dividends (GAAP)
Slide 26: 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 27: Forward-looking statements (continued)
Forward-looking statements (continued) • The success of our marketing efforts in attracting and retaining customers. • Our ability to recruit and retain talented and experienced personnel to assist in the development, management and operation of our products and services may be affected by changes i
Slide 28: Regions
A REGIONS Am REGIONS «