Regions Financial Corporation · NYSE:RF
Regions Financial — Investor Presentation (May 2019)
62 slides from Regions Financial's investor presentation, May 10, 2019
Slide 1: Investor Information May - June 2019
Exhibit 99.1 Investor Information May - June 2019
Slide 2: Table of contents
Table of contents Topic Page # Profile and Strategy 3-10 Net Interest Income and Asset Sensitivity 11-16 Fee Income and Efficiencies 17-20 Balance Sheet 21-25 Credit 26-30 Technology & Continuous Improvement 31-38 Capital, Debt and Liquidity 39-45 Near-Term and Long-Term Expectations 46-47 Environme
Slide 3: Profile and Strategy
> NE ( nsistent Sustainable \ Long-term Performance PROFILE AND STRATEGY Ma REGIONS 3
Slide 4: Our banking franchise
Our banking franchise Ranked 15th in the U.S. in total deposits(2) Branch locations by state (1) Alabama – 197 Louisiana – 95 Birmingham, Alabama Line of business coverage Arkansas – 72 Mississippi – 117 Florida – 305 Missouri – 62 Georgia – 117 North Carolina – 7 Illinois – 46 South Carolina – 23 I
Slide 5: Business segments
Business segments 1Q19 Pre-tax pre- Average loans(2) Average deposits(2) provision income(1) 1% 3% 6% 8% 29% 40% $637M 38% $84B $94B 59% 54% 62% Consumer Corporate Wealth Management Other (1) Excludes the pre-tax pre-provision income (loss) from the Other Segment totaling $(47) million. (2) Reflects
Slide 6: Why Regions?
Why Regions? 1 FOOTPRINT advantage 2 Valuable DEPOSIT FRANCHISE Focus on risk adjusted returns and 3 PROFITABILITY ENHANCED risk management and 4 governance infrastructure Simplify and Grow underpins 5 LONG-TERM PERFORMANCE 6
Slide 7: Top market share plays a valuable role in the competitive landscape
Top market share plays a valuable role in the competitive landscape (1) Markets with top 5 market share(1) • Ranked 15th in the U.S. in total deposits • 86% of deposits in 7 states: Alabama, Tennessee, Florida, Louisiana, Mississippi, Georgia, Arkansas • Top 5 or better market share in ~70% of MSAs
Slide 8: Presence in strong growth markets
Presence in strong growth markets Population Growth vs. Peers(1) (2019-2024) More than 60% of top(2) MSAs are projected to grow faster than the U.S. national average Peer #1 5.1% Market Top MSAs Deposits Rank(2) '19-'24 Population Growth RF 3.6% Nashville, Tennessee $7.6 3 Peer #2 3.6% Tampa, Florid
Slide 9: Our footprint has significant economic advantages
Our footprint has significant economic advantages Markets Jobs Population Footprint Retirees 42% of all new jobs 51% of all U.S. 35% of the U.S. GDP 6 of the top 10 states created in the US since population growth in generated in our where retirees are 2009 were in our last 10 years occurred footpri
Slide 10: Regions receives top honors
Regions receives top honors Regions Bank Named 2018 Temkin Group Ranks Regions Ranked Among Top Five Years Strong: Regions Javelin Trust in Banking Regions Bank Among Top Banks in J.D. Power banking Bank Again Named Gallup Leader for Second Companies for Customer Satisfaction Study Great Workplace A
Slide 11: Net Interest Income and Asset Sensitivity
NET INTEREST INCOME AND ASSET SENSITIVITY 11
Slide 12: Asset liability management philosophy
Asset liability management philosophy Strategies to protect net interest margin through the economic cycle Net Interest Margin Has Outperformed Forward Strategies Reduce Market Risk 3.60% Asset sensitivity levels & asymmetric risk will decline to be roughly neutral 3.40% by early 2020 as forward sta
Slide 13: Balance sheet profile
Balance sheet profile (as of March 31, 2019) Portfolio compositions • Naturally asset sensitive balance sheet, supported by a large, stable deposit base Assets Other Liabilities 14% • A portion of asset sensitivity is driven by repricing over next 12 months of fixed rate Securities Deposits Borrowin
Slide 14: Interest rate scenario assumptions
Interest rate scenario assumptions (as of March 31, 2019) Interest rate risk assumptions Hedging program assumptions Baseline scenario Standard shock scenarios • Forward hedges begin mostly in 1H 2020 • Combination of interest rate swap and floor contracts +100/-100bps parallel, instant Market inter
Slide 15: Positioned to support NIM profile through 2021
Positioned to support NIM profile through 2021 (1) Net Interest Margin Forecast Assumptions - Upper Range Upper End =3.70% • Modest GDP growth and stable credit environment • 3.55% Increases in market interest rates through 2021 • 3.49% 3.53% Fed Funds between 2.75% and 3.00% Current Range • 10-year
Slide 16: Deposit advantage
Deposit advantage Expected to continue Average deposits by customer type NIB deposits to total deposits(1) Deposit costs(1) (Retail vs. Business) 1Q19, ($ in billions) Peer #14 Peer #14 Private Institutional Peer #13 Peer #13 (3) (3) Wealth Services RF 36% Peer #11 $7 $1 Peer #12 RF 47 bps Peer #11
Slide 17: Fee Income and Efficiencies
FEE INCOME AND EFFICIENCIES 17
Slide 18: Growing total revenue
Growing total revenue Adjusted total revenue(1) Non-interest income ($ in millions) $1,412 $1,439 $1,449 Change vs 3.55% 909 3.53% 1Q19 4Q18 1Q18 3.46% 958 948 Service charges $ 175 (5.4)% 2.3 % Card and ATM fees 109 (1.8)% 4.8 % Wealth management income 76 (1.3)% 1.3 % 503 481 501 Capital markets i
Slide 19: Diversified non-interest revenue
Diversified non-interest revenue 1Q19 fee revenue by segment(1) Consumer ($ in millions) • Consumer fee income categories are an important and stable component of fee revenue and are expected to contribute to overall growth • Service charges are expected to increase consistent with growth in checkin
Slide 20: Disciplined expense management
Disciplined expense management QoQ highlights Non-interest expense • Non-interest expense increased 1% on a reported ($ in millions) and adjusted(1) basis QoQ; decreased 3% on a (1) $884 reported basis and 1% on an adjusted basis YoY $853 $860 22 • Salaries and benefits increased 2% due to 10 8 seas
Slide 21: Balance Sheet
> GENERATING Consistent Sustainable \ Long-term Performance BALANCE SHEET Mm REGIONS 21
Slide 22: Focus on risk-adjusted returns
Focus on risk-adjusted returns Capital Optimization Investments Mortgage Corporate/Commercial Mortgage Servicing Rights • Sold ~$1.3B of primarily under- • ~$86B of loan exposures • Over the last three years ~$16B in MSR performing loans in recent years have been reviewed in depth bulk purchases by
Slide 23: Growing loans and deposits
Growing loans and deposits Average loans and leases Average deposits by segment ($ in billions) ($ in billions) $81.9 $83.7 $95.4 $93.2 $94.2 $79.9 2.9 1.7 1.4 2.9 1.5 3.3 8.9 8.0 7.9 28.3 28.4 27.8 Adjusted 27.7 26.3 26.9 Consumer business Bank loans (1) Corporate Adjusted Bank consumer loans (1) W
Slide 24: 1Q19 average loan composition
1Q19 average loan composition Average consumer loans Average business loans ($ in billions) ($ in billions) Mortgage $14.2 CRE Mortgage - OO $5.6 Indirect-Vehicles CRE Construction - $2.9 $31.2B Commercial and $52.5B OO $0.4 Industrial $40.0 IRE - Mortgage $4.7 Other $1.2 Indirect-Other $2.4 Credit
Slide 25: Securities portfolio
Securities portfolio (as of March 31, 2019) • Portfolio is managed within the construct of the overall balance sheet and risk management process (1) Securities portfolio composition • Expected to perform well in a variety of economic environments • Supports regulatory and market/liquidity objectives
Slide 26: Credit
> GENERATING \ Consistent Sustainable \ Long-term Performance CREDIT Ma REGIONS 6
Slide 27: Diversification through comprehensive concentration framework
Diversification through comprehensive concentration framework Industry Concentrations Geographic Concentrations • Risk Appetite driven approach • Market scorecards are product Concentration Risk Framework specific • Multi-tiered hierarchy e.g., Consumer vs. Investor Real Estate 9 sectors, 24 industr
Slide 28: Significant expansion of portfolio risk indicators
Significant expansion of portfolio risk indicators Portfolio Performance Metrics Early Warning Indicators Material increase in monitoring Leading macroeconomic variables drive advanced early warning indicators metrics; from 10 pre-crisis to over 100 today Capital Market Loss / Default Macroeconomic
Slide 29: Asset quality performing in-line with expectations
Asset quality performing in-line with expectations Criticized business loans NPLs and coverage ratio ($ in millions) ($ in millions) $601 $2,223 $496 $523 $1,922 $2,119 925 939 1,063 169% 140% 163% 1,298 983 53 1,056 1Q18 4Q18 1Q19 1Q18 4Q18 1Q19 Classified Special mention NPLs - excluding LHFS Cove
Slide 30: Select portfolios
Select portfolios (outstanding balances as of March 31, 2019) Leveraged(1) balances by industry SNC balances by industry Information 17% Manufacturing Manufacturing 10% 16% Financial Restaurant & Services 10% 10% 17% Accommodations 22% 12% 10% Energy 9% Professional 44% Retail 8% Services 10% 6% $5.
Slide 31: Technology & Continuous Improvement
TECHNOLOGY & CONTINUOUS IMPROVEMENT 31
Slide 32: Focused technology strategy
Focused technology strategy Innovation Customer Experiences • Continue deployment of AI • Mobile-first thinking • Strategic investments and • Continued digitization of customer partnerships experiences • Talent acquisition • Making banking easier • Develop processes that enable continuous agility Co
Slide 33: Significant spending on new technology initiatives
Significant spending on new technology initiatives 2019 technology investment Strong technology Investments (11% of 2018 revenue) in place continue Cybersecurity & risk management • Single branch platform • AI and Robotics • New SEI wealth platform • Voice New technology 10% • New nCino commercial •
Slide 34: Delivering AI solutions to better serve customers and improve efficiency
Delivering AI solutions to better serve customers and improve efficiency ROSIE REGGIE Regions Optimal Solutions Intelligence our Contact Center Virtual Banker Engine ROSIE looks at more than Providing bankers Handles select customer calls 350GBs of data to deliver a personalized Answers bankers' que
Slide 35: Rapid digital adoption continues
Rapid digital adoption continues Usage Growth Enhancements 2.7M Active Digital Users 49% increase YoY in checking Digital Application 63% of 5% Growth YoY accounts opened through digital • Pre-filled/personalized mortgage apps • Minutes to apply entered online • Increased adoption +112% YoY of all c
Slide 36: Simplify and Grow: a continuous improvement journey
Simplify and Grow: a continuous improvement journey 2018 - 2019 YTD successes • Completed 12 of 46 Simplify and Grow initiatives Making Banking Easier • Completed organizational simplification Revenue Growth including spans and layers improvements Efficiency Improvements • 2.0M calls handled by AI v
Slide 37: Continuous improvement
Continuous improvement Full time equivalent employees(1) Declining square footage 21,714 13.7M 13.0M 19,969 20,056 11.6M 53 2017 2018 1Q19 2017 1Q19 2021E rd Cumulative 3 party spend reduction • Reduced management positions ~17% in 2018; additional staffing reductions expected 2019 - 2021 2018 2019
Slide 38: Optimizing the branch network
Optimizing the branch network Cumulative branch consolidations & Over the last five years de novos • Between 2014 and 2018, consolidated 284 Consolidations branches while opening 33 branches De Novos 53 Forward strategies • Further reduce branch count ~25 by 2021 with ~100 closures(1) and ~75 de nov
Slide 39: Capital, Debt & Liquidity
CAPITAL, DEBT & LIQUIDITY 39
Slide 40: Prudently managing and optimizing capital
Prudently managing and optimizing capital Adjusted ROATCE(1) Capital priorities 16.5% 16.3% 9.0% 53 Organic growth 2015 2018 2019 YTD Dividends Dividend per common share Strategic investments $0.46 $0.23 $0.14 Share repurchases 2015 2018 2019 YTD (1) Non-GAAP; see appendix for return on average tang
Slide 41: Creating sustained value for shareholders
Creating sustained value for shareholders Total implied shareholder return 9-12% Implied Capital Shareholder Generation Return • Low-to-mid single digit organic loan growth 1. Growth & • Focus on disciplined underwriting and appropriate risk- Strategic adjusted returns Investments 10% - 20% 3% - 4%
Slide 42: Capital positioned for flexible management in any environment
Capital positioned for flexible management in any environment Strong capital position - CET1(1) • Capital targets are calibrated using 9.8% internal scenario planning to balance 9.5% 53 Management Buffer 0.5% stakeholder expectations across full range Quantitative Buffer 2% of potential environments
Slide 43: Balance sheet optimization
Balance sheet optimization Historical debt profile(1) Unsecured debt as a % of assets(2) ($ in billions) Peer median 7.3% Peer #1 .8% 11.64% 11.30% Peer #2 1.9% 9.11% 11.20% $14.50 $14.50 Peer #3 2.4% $14.00 7.05% 6.97% 6.59% 6.51% 8.95 8.50 Peer #4 3.3% 5.86% 6.22% 6.16% 5.90% 8.50 5.44% 4.80% 4.82
Slide 44: Regions unsecured debt and credit ratings profile
Regions unsecured debt and credit ratings profile Debt maturity profile(1) Select credit ratings ($ in millions) $3,000 Moody's S&P Fitch Regions Financial 1,900 Corporation Senior Unsecured Debt Baa2 BBB+ BBB+ $1,000 $1,000 Subordinated Debt Baa2 BBB BBB $800 500 Regions Bank 1,100 1,000 1,000 $100
Slide 45: Solid liquidity
Solid liquidity Loan-to-deposit ratio(1) • Strong, core funded balance sheet • Future debt maturities are 88% 88% 88% manageable and allow for efficient re- 84% 82% financing • Liquidity policy requires the holding company maintain at least 18 months coverage of maturities, debt service and other ca
Slide 46: Near-Term and Long-Term Expectations
NEAR-TERM AND LONG-TERM EXPECTATIONS 46
Slide 47: Near-term and long-term expectations
Near-term and long-term expectations 2019 Expectations Three-Year Expectations (2019-2021) FY 2019 Category Expectations Category Expectations Adjusted average loan growth Low to mid-single 2021 adjusted return on average (1) (1) 18% - 20% (from adjusted 2018 of $77,667 million) digits tangible comm
Slide 48: Environmental, Social & Corporate Governance
ENVIRONMENTAL, SOCIAL & CORPORATE GOVERNANCE 48
Slide 49: Corporate governance
Corporate governance Engagement The Company understands that good governance is the • We take a long-term view of how we create value, and we foundation of sustainable business and good decision making is take a similar approach to corporate governance necessary for creating shareholder value over t
Slide 50: Environmental & social highlights
Environmental & social highlights(1) ASSOCIATES 12 weeks 5% $15/hour Continued to invest in the Expanded parental leave plan to Increased the 401(k) Plan Raised the entry-level wage to development of our associates provide 12 weeks of fully paid matching contribution from 4% $15 an hour, while also
Slide 51: Appendix
> GENERATING Consistent Sustainable \ Long-term Performance APPENDIX Mm REGIONS 51
Slide 52: Footprint economic advantages source references
Footprint economic advantages source references Fact Source Bureau of Labor Statistics. "Employment, Hours, and Earnings from the Current Employment Statistics Survey." Databases, Tables & Calculators by Subject, 18 Feb. 2019, data.bls.gov/ Job Growth timeseries/CES0000000001. Accessed 18 Feb. 2019.
Slide 53: Forecast model assumptions
Forecast model assumptions (as of April 30, 2019) Upper Range 2018 2019 2020 2021 Real GDP, annual % change 2.9% 2.6% 1%- 2% 2%- 3% 10-year U.S. Treasury Yield, average of daily figures 2.9% 2.8% 3.0% 3.0% Fed Funds Target - Upper End, average of daily figures 1.9% 2.5% 2.8% 3.0% Stable Yield Curve
Slide 54: Non-GAAP information
Non-GAAP information This document contains non-GAAP financial measures, which exclude certain items management does not consider indicative of the Company’s on-going financial performance. Management believes that the exclusion of these items provides a meaningful base for period- to-period compari
Slide 55: Non-GAAP items impacting earnings
Non-GAAP items impacting earnings Adjusted Items Quarter Ended • 1Q19 items include charges associated with the company's continued focus on (amounts in millions, except per share data) 3/31/2019 12/31/2018 3/31/2018 increasing organizational efficiency and Non-GAAP adjusted items impacting earnings
Slide 56: Adjusted net income and Return on average tangible common equity
Adjusted net income and Return on average tangible common equity Quarter Ended Year Ended ($ amounts in millions) 3/31/2019 12/31/2018 12/31/2015 ADJUSTED RETURN ON AVERAGE TANGIBLE COMMON STOCKHOLDERS' EQUITY Net income from continuing operations available to common shareholders (GAAP) A $ 378 $ 1,
Slide 57: 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) 3/31/2019 12/31/2018 3/31/2018 1Q19 vs. 4Q18 1Q19 vs. 1Q18 Non-interest expense (GAAP) A $ 860 $ 853 $ 884 $ 7 0.8 % $ (24) (2.7)% Adjustments: Branch consolidati
Slide 58: Non-GAAP reconciliation: adjusted average loans
Non-GAAP reconciliation: adjusted average loans Average Balances ($ amounts in millions) 1Q19 4Q18 1Q18 1Q19 vs. 4Q18 1Q19 vs. 1Q18 Commercial and industrial $ 39,999 $ 38,111 $ 36,464 $ 1,888 5.0 % $ 3,535 9.7 % Add: Purchasing card balances (1) — 252 208 (252) (100.0)% (208) (100.0)% Adjusted comm
Slide 59: Non-GAAP reconciliation: Adjusted net charge-off ratio
Non-GAAP reconciliation: Adjusted net charge-off ratio Quarter Ended ($ amounts in millions) 3/31/2019 12/31/2018 3/31/2018 Residential first mortgage net charge-offs (GAAP) A $ — $ 1 $ 7 Less: Net charge-offs associated with TDR sale — — 5 Adjusted residential first mortgage net charge-offs (non-GA
Slide 60: Forward-looking statements
Forward-looking statements Forward-Looking Statements This release may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which reflect Regions’ current views with respect to future events and financial performance. Forward-looking statements are n
Slide 61: Forward-looking statements continued
Forward-looking statements continued • 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 in laws and regulations in effect from time to time. • Fraud or misconduct by our
Slide 62: GENERATING
> GENERATING Consistent Sustainable \ Long-term Performance A REGIONS Ma REGIONS 0&2