Regions Financial Corporation · NYSE:RF
Regions Financial — Q1 2024 Earnings Presentation
41 slides from Regions Financial's earnings presentation, Apr 19, 2024
Slide 1: 1st Quarter Earnings Conference Call
Exhibit 99.3 1st Quarter Earnings Conference Call April 19th, 2024
Slide 2: First Quarter Overview
First Quarter Overview Continue to deliver consistent, sustainable long-term performance 1Q24 Highlights Key Performance Metrics Reported Adjusted(1) • Consistently generating top-quartile returns in our peer group Net Income Available to $343M Common Shareholders • Continued focus on disciplined ca
Slide 3: Loans
Loans Softening demand but continuing to support our clients Average Loans & Leases QoQ Highlights & Outlook ($ in billions) • Avg and ending loans decreased modestly QoQ $97.3 $98.3 $97.4 • Avg business loans declined ~1% as modest 32.4 33.4 33.4 increases associated with the funding up of previous
Slide 4: Deposits
Deposits Normalization occurring as expected Average Deposits by Segment QoQ Highlights & Outlook ($ in billions) $129.0 • Deposits increased both on an average and $126.4 $127.1 2.0 3.0 3.1 ending basis, typical for 1Q tax refund 8.5 7.7 36.3 7.7 36.3 37.1 season ◦ Expect declines in 2Q in overall
Slide 5: NII & Margin Performance
NII & Margin Performance FTE NII and NIM Drivers of NII and NIM ($ in millions) • NII -$47M, or -3.8% QoQ; NIM -5bps to 3.55% $1,430 • Elevated long-term interest rates increase new production fixed- $1,244 $1,197 rate asset yields • Sold $1.3B Govt/Agency securities at $50mm pre-tax loss; 4.22% rei
Slide 6: 2024 NII Range and Assumptions
2024 NII Range and Assumptions "Neutral" interest rate risk position; NII performance will depend mostly on deposit dynamics 2024 NII(1) Performance Range(2) NII Sensitivity to Interest Rates Upper End • Through hedging, managed NII sensitivity to be • Easing fed funds rate and steeper mostly neutra
Slide 7: Non-Interest Income
Non-Interest Income Non-Interest Income Adj. Non-Interest Income(1) QoQ Highlights & Outlook ($ in millions) ($ in millions) • NIR decreased ~3% on a reported basis and included $50M pre-tax loss $613 on securities repositioning; NIR increased ~6% on an adjusted(1) basis $580 $563 $581 $534 $535 wit
Slide 8: Non-Interest Expense
Non-Interest Expense Non-Interest Expense Adj. Non-Interest Expense(1) QoQ Highlights & Outlook ($ in millions) ($ in millions) $1,097 • NIE decreased ~5% on a reported basis including ~$18M $1,185 $1,025 $1,038 $1,131 increase to FDIC special assessment accrual and ~$13M in $1,027 $22 severance-rel
Slide 9: Asset Quality
Asset Quality Underlying credit continues to perform as expected Net Charge-Offs Allowance for Credit Losses (ACL) ($ in millions) ($ in millions) 0.54% 0.50% 0.35% $1,700 $1,731 $1,596 0.39% 288% 211% 191% $132 $121 $83 $35 1.63% 1.73% 1.79% 1Q23 4Q23 1Q24 Adjusted Net Charge-Offs(1) 1Q23 4Q23 1Q24
Slide 10: Capital and Liquidity
Capital and Liquidity Tier 1 Capital Ratio(1) QoQ Highlights & Outlook • Basel III Endgame - Estimate a low to mid-single digit increase in 11.6% 11.6% 11.2% RWAs under the Expanded Risk Based Approach in addition to the phase-in of AOCI into regulatory capital ◦ CET1 adjusted to include AOCI at 3/3
Slide 11: 2024 Expectations
2024 Expectations Expectations for 2Q24 & Beyond(3) FY 2024 Expectations • NII and NIM to bottom in 2Q, with Net Interest Income (vs. 2023 of $5,320)(3) $4.7-$4.8B declines from deposit cost normalization offset by asset turnover at Adjusted Non-Interest Income (1)(2) $2.3-$2.4B elevated rate levels
Slide 12: Appendix
> GENERATING 1 Consi Sustainabl Appendix ((Ctsegterm Performance Aw REGIONS| 12
Slide 13: First Quarter 2024 Highlights
First Quarter 2024 Highlights Summary of First Quarter Results Selected Items Impact QoQ YoY ($ amounts in millions, except per share data) 1Q24 Change Change (amounts in millions, except per share data) 1Q24 (1) Pre-tax adjusted items : Net interest income $ 1,184 (3.8)% (16.4)% Securities gains (l
Slide 14: Growth in Digital
Growth in Digital Digital Usage Sales and Transactions Zelle Transactions (Millions) (1) Active Users (Millions) Consumer Checking Sales by Channel(4) +11% 2.57 2% 2% 2% 2.46 +59% 2.31 77% 73% 81% 4.35 21% 25% 17% 3.50 1Q22 1Q23 1Q24 2.73 1Q22 1Q23 1Q24 Digital Contact Center Branch Mobile Banking D
Slide 15: Investments in Our Businesses
Investments in Our Businesses Investments in talent, technology and strategic acquisitions continue to pay off CORPORATE CONSUMER WEALTH Acquisitions remain well-positioned for revenue synergies: 1st in VISA Power Score for 40 consecutive Total Wealth Management Relationship quarters on Debit growth
Slide 16: Treasury Management
Treasury Management Enabling our clients to optimize cash flow and manage risk with a comprehensive & competitive suite of Treasury Management solutions Steadily Growing our Treasury Management Business Continually Investing in Technology +7% Treasury Management Revenue(1) • First in the marketplace
Slide 17: Hedging Strategy Update
Hedging Strategy Update Hedging helps create a mostly "neutral" interest rate risk position with a well-protected margin in 3.50% range Cash Flow Hedge (Quarterly Avg) (Annual Avg) Notional(1) Swaps Collars 1 1Q24 2 2Q24 3 3Q24 4 4Q24 1 2024 2 2025 3 2026 4 2027 5 2028 6 2029 2030 as of 3/31/2024 Sw
Slide 18: Securities Portfolio
Securities Portfolio Provides downside rate protection/liquidity • Portfolio constructed to protect against changes in market rates ◦ Duration is fully extended at ~4.6 years as of 03/31/2024; provides Securities Portfolio Composition(1) offset to long-duration deposit book Agency/UST Corporate Bond
Slide 19: 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% 0.50% 0.50% —% 13 20 22 24 1Q 1Q 4Q 1Q Non-Performing Loans 2.50% 2.00% Average Pre-Pandemic Average Pandemic 1.07% 0.64% 1.50% 0.94% 1.00% 0.50% —% 13 20 22 24 1Q 1Q 4Q 1Q • Non-Accru
Slide 20: Commercial Real Estate
Commercial Real Estate (Outstanding balances as of March 31, 2024) Highly Diversified Portfolio (IRE including Unsecured CRE) Other Hotel $ in billions % of Total 3.7% 5.1% Loans Res. Homebuilders Healthcare 6.5% 9.0% Unsecured CRE $ 6.6 6.8 % (incl. REITS) IRE 8.8 9.1 % Retail 9.1% Total(1) $ 15.4
Slide 21: CRE- Office Portfolio
CRE- Office Portfolio (Outstanding balances as of March 31, 2024) Key Portfolio Metrics(1) Investor Real Estate Office Portfolio Overview Balances $ $1,504 % of Total Loans 1.6% 7% 24% NPL $161 39% NPL/Loans 10.7% 61% 76% 93% Charge-offs $0 Charge-offs / Loans —% ACL $84 Class A Class B Multi-Tenant
Slide 22: CRE- Multi-Family Portfolio
CRE- Multi-Family Portfolio (Outstanding balances as of March 31, 2024) Key Portfolio Metrics(1) Predominantly Secured and Weighted to the South(2) Balances $ $4,052 % of Total Loans 4.2% 4% 1% 14% 12% NPL $0 NPL/Loans —% Charge-offs $0 83% 86% Charge-offs / Loans —% ACL $74 Secured Unsecured South
Slide 23: CRE- Senior Housing Portfolio
CRE- Senior Housing Portfolio (Outstanding balances as of March 31, 2024) Key Portfolio Metrics(1) Ongoing Portfolio Surveillance • Underlying market fundamentals continue to bounce Balances $ $1,338 back from the lows experienced during COVID-19 pandemic, with occupancy increasing, construction % o
Slide 24: Allowance for Credit Losses
Allowance for Credit Losses QoQ Highlights • 1Q allowance increased $31M ($ in millions) compared to the prior quarter, resulting in a $152M provision $1,700 $33 $24 $1,731 expense $(26) • Primary drivers of the net increase in ACL were adverse risk migration, specific reserves for large borrowers,
Slide 25: Base R&S Economic Outlook
Base R&S Economic Outlook (As of March 2024) Pre-R&S period 1Q2024 2Q2024 3Q2024 4Q2024 1Q2025 2Q2025 3Q2025 4Q2025 1Q2026 Real GDP, annualized % change 1.9 % 1.8 % 2.2 % 2.5 % 2.6 % 2.7 % 2.4 % 2.4 % 2.2 % Unemployment rate 3.8 % 3.9 % 3.9 % 4.0 % 4.1 % 4.1 % 4.0 % 4.0 % 3.9 % HPI, year-over-year %
Slide 26: Allowance Allocation
Allowance Allocation As of 3/31/2024 As of 12/31/2023 (in millions) Loan Balance ACL ACL/Loans Loan Balance ACL ACL/Loans C&I $49,701 $730 1.47 % $50,865 $697 1.37 % CRE-OO mortgage 4,788 106 2.21 % 4,887 110 2.25 % CRE-OO construction 306 7 2.36 % 281 7 2.38 % Total commercial $54,795 $843 1.54 % $
Slide 27: Well Positioned for Next Downturn
Well Positioned for Next Downturn Highly Diversified Business Portfolio(1) Healthcare All Other Commercial 5.2% 3.8% Distribution 6.4% Investor Real Estate 13.8% Business Services 7.9% Utilities 3.8% Financial Services Agriculture 11.6% 0.4% Energy $63.6B 2.5% Manufacturing 7.7% (2) CRE Unsecured, i
Slide 28: Consumer Lending Portfolio
Consumer Lending Portfolio Consumer Credit Card Home Equity Consumer FICO Scores(1) • Avg. origination FICO 783 • Avg. origination FICO 772 • Avg. new line $7,915 • Current LTV 36% 2% 2% 2% • 1Q24 Yield 15.21% • 64% of portfolio is 1st lien • 1Q24 QTD NCO 4.39% • Avg. loan size $34,457 66% • $112M t
Slide 29: Leveraged Portfolio
Leveraged Portfolio (Outstanding balances as of March 31, 2024) Diversified Portfolio Important Factors • Commitments are $3.6B; 75% of which are funded Administrative, Support, Other (Portfolios <5% of total) Waste & Repair 18% • Not a strategic growth objective; used to support client 7% Restauran
Slide 30: SNC Portfolio
SNC Portfolio (Outstanding balances as of March 31, 2024) Shared National Credit Balances by Sector Portfolio Characteristics • Improved portfolio composition and asset Other (Portfolios <5% of total) quality through focus on lower risk segments 17% • 46% of balances consist of investment grade CRE
Slide 31: Non-GAAP Information
Non-GAAP Information Management uses computations of earnings and certain other financial measures, which exclude certain adjustments that are included in the financial results presented in accordance with GAAP, to monitor performance and believes these measures provide meaningful information to inv
Slide 32: Non-GAAP Reconciliation
Non-GAAP Reconciliation Non-Interest Expense Twelve Months Ended December 31 ($ 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 Net Charge-Offs and Ratio For the Quarter Ended ($ amounts in millions) 3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023 Net loan charge-offs (GAAP) $ 121 $ 132 $ 101 $ 81 $ 83 Less: charge-offs associated with the sale of unsecured consumer loans — 35 — — — Adjust
Slide 34: Non-GAAP Reconciliation
Non-GAAP Reconciliation Pre-tax Pre-Provision Income (PPI) Quarter Ended ($ amounts in millions) 3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023 1Q24 vs. 4Q23 1Q24 vs. 1Q23 Net income available to common shareholders (GAAP) $ 343 $ 367 $ 465 $ 556 $ 588 $ (24) (6.5)% $ (245) (41.7)% Preferred div
Slide 35: Non-GAAP Reconciliation
Non-GAAP Reconciliation NII, non-interest income/expense, and efficiency ratio Quarter Ended ($ amounts in millions) 3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023 1Q24 vs. 4Q23 1Q24 vs. 1Q23 Non-interest expense (GAAP) A $ 1,131 $ 1,185 $ 1,093 $ 1,111 $ 1,027 $ (54) (4.6)% $ 104 10.1 % Adjustm
Slide 36: Non-GAAP Reconciliation
Non-GAAP Reconciliation Adjusted CET1- inclusive of AOCI(4) Quarter Ended ($ amounts in millions) 3/31/2024 12/31/2023 9/30/2023 6/30/2023 ADJUSTED CET1 RATIO Common equity(1) A $ 12,912 $ 12,976 $ 13,056 $ 12,786 Adjustments: AOCI gain (loss) on securities(2) (2,264) (2,064) (3,084) (2,490) AOCI ga
Slide 37: Non-GAAP Reconciliation
Non-GAAP Reconciliation Tangible Common Ratios As of and for Quarter Ended ($ amounts in millions, except per share data) 3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023 TANGIBLE COMMON RATIOS Shareholders’ equity (GAAP) A $ 17,044 $ 17,429 $ 16,100 $ 16,639 $ 16,883 Less: Preferred stock (GAAP)
Slide 38: 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 39: 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 40: 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 41: Regions
A REGIONS AM REGIONS: