Regions Financial Corporation · NYSE:RF
Regions Financial — Q1 2022 Earnings Presentation
35 slides from Regions Financial's earnings presentation, Apr 22, 2022
Slide 1: 1st Quarter Earnings Conference Call
Exhibit 99.3 1st Quarter Earnings Conference Call April 22, 2022
Slide 2: First quarter 2022 overview
First quarter 2022 overview $524M Net Income Available to Common Shareholders $0.55 Diluted Earnings Per Share • ROATCE(1) ratio improved ~590 bps QoQ to 21.0%. $1.6B Total Revenue • Annualized net charge-off ratio totaled 0.21% of average loans. $933M Non-Interest Expense • Efficiency ratio was 57.
Slide 3: Loan growth continues
Loan growth continues Loans and leases QoQ highlights & outlook • 1Q loans grew 1% on an average basis and 2% on an ending basis. (Average, $ in billions) • Business loans increased 3% driven by broad-based growth $84.8 $86.5 $87.8 in corporate, middle market, and real estate lending. Line of credit
Slide 4: Deposit growth continues
Deposit growth continues Average deposits by segment QoQ highlights & outlook ($ in billions) $136.7 $138.7 • While pace of deposit growth has slowed, 3.0 2.6 balances continued to increase seasonally $122.9 10.4 10.1 this quarter to new record levels. 0.4 9.3 42.6 • Consumer and Wealth Management d
Slide 5: Deposit surge and beta
Deposit surge and beta Pandemic-Related Deposit Growth Adds to Low-Cost, Stable Funding Base(1) $150 $150 $14 $139 $13 Business/ $15 Other $97 Deposits $100 $100 Business/ Other Low-beta deposits have grown considerably. Other Deposits pandemic era increases (approx. 2/3's) are assumed to Retail $50
Slide 6: NII & margin performance
NII & margin performance NII and NIM(1) ($ in millions) $1,029 $1,026 $978 3.40% 3.34% 3.43% 3.02% 2.83% 2.85% 1Q21 4Q21 1Q22 NII NIM NIM excl. PPP/Cash(2) • In 1Q, deposit and cash balances remained elevated. • PPP and cash account for -58 bps NIM and $15M NII within the quarter (-7 bps / -$27M QoQ
Slide 7: NII & margin - core drivers
NII & margin - core drivers NII Attribution Drivers of NII and NIM Positioned well for continued $1,019 growth from market rates • Avg. loans excl. PPP grew +1.8B in 1Q $1,015 and balance sheet expansion • Higher short-term rates now benefiting NII ◦ Contractual loan and cash repricing ◦ Hedging ben
Slide 8: Asset sensitive balance sheet
Asset sensitive balance sheet Well positioned for rising short-term and/or long-term interest rates Adjusted(1) NIM Range by Rate Level and Assumptions Short-term Rate Sensitivity Drivers As rates increase to more normal levels, Regions' 25bps rate hike adds +$60-80M of NII over 12 months(2) NIM wil
Slide 9: Hedging strategy update
Hedging strategy update Net Receive Hedge Notional(1) (Annual Avg) Legacy Hedge Notional 2022 Hedge Additions 1 2022 2 2023 3 2024 4 2025 5 2026 6 2027 7 2028 Legacy Hedge Notional $18.1B $9.3B $6.5B $1.4B $0B $0B $0B 2022 Hedge Additions $0B $0.5B $4.7B $4.7B $4.7B $4.0B $1.7B (2) Total Hedge Notio
Slide 10: Non-interest income
Non-interest income QoQ highlights & outlook Change vs • Non interest income decreased ~5% on both a reported and adjusted basis(1). ($ in millions) 1Q22 4Q21 1Q21 Service charges on deposit • Expect 2022 capital markets to generate quarterly $168 1.2% 7.0% revenue in $90-$110M range, excl. impact o
Slide 11: Non-interest expense
Non-interest expense Adjusted non-interest expense(1) QoQ highlights & outlook ($ in millions) • Non-interest expense decreased ~5%. $967 $918 $932 • Adjusted non-interest expense(1) decreased ~4%. 58.8% ◦ Salaries and benefits decreased 56.8% 57.9% 5% due to lower incentive compensation despite hig
Slide 12: Asset quality improvement continues
Asset quality improvement continues Net charge-offs and ratio ACL to loans ratio ($ in millions) ($ in millions) 2.44% $83 46 0.40% $44 $46 1.79% 12 13 1.67% 0.20% 0.21% 1.71% 37 32 33 Day 1 (1) 1Q21 4Q21 1Q22 1Q21 4Q21 1Q22 Consumer net Business services Net charge-offs ACL/Loans charge-offs net ch
Slide 13: Capital and liquidity
Capital and liquidity Tier 1 capital ratio(1) Common equity Tier 1 ratio(1) 11.9% 10.3% 11.0% 9.6% 9.4% 10.8% 1Q21 4Q21 1Q22 1Q21 4Q21 1Q22 QoQ Highlights & Outlook • Common Equity Tier 1 (CET1) ratio decreased 20 bps (2) Loan-to-deposit ratio to 9.4% in 1Q. ◦ Continue to prioritize capital utilizat
Slide 14: 2022 expectations
2022 expectations FY 2022 Expectations for 2Q22 & Beyond Category • 2Q NII expected to grow +5-7% (assumes 50bps hikes in Expectations both May and June); 2022 NII growth expected to be Total Adjusted Revenue +10-12%, excl. PPP +13-16% (assuming 3/31 forward Up 4.5-5.5% (from adjusted 2021 of $6,412
Slide 15: Appendix
> GENERATING Consistent Sustainable Long-term Performance Appendix (( Aw REGIONS| 15
Slide 16: First quarter 2022 highlights
First quarter 2022 highlights Summary of first quarter results Selected items impact QoQ YoY ($ amounts in millions, except per share data) 1Q22 Change Change (amounts in millions, except per share data) 1Q22 Net interest income $ 1,015 (0.4)% 5.0% Pre-tax adjusted items(1): Provision for (benefit f
Slide 17: Growth in digital
Growth in digital Digital Usage Sales and Transactions Zelle Transactions (Millions) (1) Active Users (Millions) Digital Sales (Accounts in Thousands) +15% +25% +104% +166% 3.0 3.2 2.3 2.73 2.7 82.4 81.6 2.1 10.3 15.8 1.9 2.03 40.0 5.0 72.1 65.8 35.0 1.03 1Q20 1Q21 1Q22 1Q20 1Q21 1Q22 1Q20 1Q21 1Q22
Slide 18: Deposit advantage
Deposit advantage (1) Business Deposit Mix (1) Funding Mix - Current vs. Prior % of Total Deposits Balance in 1Q 2022 Average Rising Rate Cycle Accounts Less than $250k(2) ($ in billions) ($ in billions) $141 4% 63% $105 30% Corporate 50% 10% $43 44% 43% 42% 42% 27% 38% 38% 37% 37% 37% 34% Consumer
Slide 19: Future NII drivers
Future NII drivers NII is positioned to benefit from higher rates, as well as natural loan growth and strategic opportunities. Hedge proceeds and the capital generated has been invested into strategically important businesses, such as Ascentium and EnerBank. NII Drivers - Current Support Relative Im
Slide 20: CET1 waterfall
CET1 waterfall 9.6% 0.6% 9.4% (0.1)% (0.2)% (0.2)% (0.3)% Pre-tax pre- 4Q21 Common Share Tax & RWA 1Q22 provision CET1% Dividend Repurchases Other(2)(3) Growth CET1%(4) income(1) (1) Non-GAAP; see appendix for reconciliation. (2) 'Other' includes impact of tax, provision expense, CECL deferral, pref
Slide 21: Allowance for credit losses waterfall
Allowance for credit losses waterfall ($ in millions) QoQ highlights $1,574 • 1Q allowance decreased $82M compared $23 $1,492 to prior quarter, resulting in a $36MM $(46) credit provision. $(54) $(5) • Despite significant growth in balances during the quarter, there were offsetting factors that redu
Slide 22: Base R&S economic outlook
Base R&S economic outlook (as of March 2022) Pre-R&S period 1Q2022 2Q2022 3Q2022 4Q2022 1Q2023 2Q2023 3Q2023 4Q2023 1Q2024 Real GDP, annualized % change 1.1 % 3.4 % 4.8 % 3.5 % 3.2 % 3.0 % 2.5 % 2.5 % 2.3 % Unemployment rate 3.8 % 3.5 % 3.3 % 3.3 % 3.2 % 3.1 % 3.1 % 3.1 % 3.0 % HPI, year-over-year %
Slide 23: Allowance allocation
Allowance allocation As of 3/31/2022 As of 12/31/2021 (in millions) Loan Balance ACL ACL/Loans Loan Balance ACL ACL/Loans C&I $45,643 557 1.22 % $43,758 $613 1.40 % CRE-OO mortgage 5,181 107 2.07 % 5,287 118 2.23 % CRE-OO construction 273 8 2.83 % 264 9 3.53 % Total commercial $51,097 $672 1.31 % $4
Slide 24: Environmental, Social & Governance
Environmental, Social & Governance ESG Governance Suite of ESG Disclosures BOARD OF DIRECTORS ESG-related elements of the Strategic Plan, annual budget, and capital planning process ■ Annual Review & ESG Report ■ TCFD Report O Board-Level Committees ■ GRI Content Index V ■ CDP Climate Change ESG str
Slide 25: Environmental, Social & Governance
Environmental, Social & Governance Highlights Promoting financial inclusivity Pursuing environmental Maintaining accountability sustainability for our ESG progress ▪ Introduced Regions Now CheckingSM to ▪ Announced new goal to reduce our ▪ Released first standalone TCFD suite of Regions Now Banking®
Slide 26: 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 27: Non-GAAP reconciliation
Non-GAAP reconciliation Core net interest income and adjusted net interest margin Quarter-ended 3/31/2022 12/31/2021 Net interest income (FTE) (GAAP) $ 1,026 $ 1,029 Impact of SBA PPP loans (12) (39) Impact of excess cash (3) (3) Core net interest income (FTE) (non-GAAP) $ 1,011 $ 987 Net interest m
Slide 28: Non-GAAP reconciliation
Non-GAAP reconciliation Non-interest expense Year Ended December 31 ($ amounts in millions) 2021 2020 2019 2018 2017 2016 Non-interest expense (GAAP) $ 3,747 $ 3,643 $ 3,489 $ 3,570 $ 3,491 $ 3,483 Adjustments: Contribution to Regions Financial Corporation foundation (3) (10) — (60) (40) — Professio
Slide 29: Non-GAAP reconciliation
Non-GAAP reconciliation Pre-tax pre-provision income (PPI) Quarter Ended ($ amounts in millions) 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 1Q22 vs. 4Q21 1Q22 vs. 1Q21 Net income (loss) available to common shareholders (GAAP) $ 524 $ 414 $ 624 $ 748 $ 614 $ 110 26.6 % $ (90) (14.7)% Preferre
Slide 30: Non-GAAP reconciliation
Non-GAAP reconciliation NII, non-interest income/expense, and efficiency ratio Quarter Ended ($ amounts in millions) 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 1Q22 vs. 4Q21 1Q22 vs. 1Q21 Non-interest expense (GAAP) A $ 933 $ 983 $ 938 $ 898 $ 928 $ (50) (5.1)% $ 5 0.5 % Adjustments: Contrib
Slide 31: Non-GAAP reconciliation
Non-GAAP reconciliation Return on average tangible common shareholders' equity Quarter Ended ($ amounts in millions) 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 RETURN ON AVERAGE TANGIBLE COMMON SHAREHOLDERS' EQUITY Net income available to common shareholders A $ 524 $ 414 $ 624 $ 748 $ 614 A
Slide 32: 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 33: 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 34: 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 35: A REGIONS
A REGIONS A REGIONS