Delivered pre-tax pre-provision income(1) of
$577 million, despite challenging macroeconomic environment
Regions Financial Corporation (NYSE:RF) today announced earnings
for the first quarter ended March 31, 2020. The company reported
net income available to common shareholders of $139 million, and
earnings per diluted share of $0.14. Pre-tax pre-provision
income(1) of $577 million was driven by loan and deposit growth and
a proactive interest rate hedging strategy amid a challenging
macroeconomic environment.
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"This quarter Regions continued to deliver steady performance
across our businesses while managing the impacts of an uncertain
and challenging economic backdrop," said John Turner, President and
CEO. “Over the past decade we’ve strengthened our capital position,
risk management framework and have constructed a balance sheet that
is resilient, sustainable and will perform consistently over time.
In anticipation of lower market interest rates, we also executed a
significant hedging strategy that protects us against interest rate
volatility."
"Our industry and our company have strong capital and liquidity
levels and we will use this position of strength to assist our
customers and communities through these trying times," continued
Turner. "In response to the COVID-19 pandemic, and informed by past
experiences managing through natural disasters and market
disruption, we have spent the past several weeks supporting the
implementation of the CARES Act and introducing tailored assistance
for customers. We are also providing additional support for our
associates, and I’m extremely proud of the flexibility and
commitment our team continues to demonstrate. For this challenge,
we will be part of the solution and a source of support for our
customers."
Regions is offering special financial assistance to support
customers who are experiencing financial hardships related to the
COVID-19 pandemic. Through April 14, 2020, the company has
processed approximately 17,000 consumer payment deferral requests,
including approximately 4,000 related to residential mortgages. In
addition, the company has processed requests for approximately
12,000 mortgage loans serviced for others. From a business customer
perspective, the company has processed approximately 4,000 payment
deferral requests. Regions is also a certified SBA lender and has
dedicated significant additional staff and other resources to help
our customers complete and submit their applications and supporting
documentation for loans offered under the new Paycheck Protection
Program, obtain SBA approval and receive funding as quickly as
possible. Through April 15, 2020, the company has facilitated
assistance to its business customers totaling approximately $2.8
billion.
Importantly, the bank continues to support customers outside of
the stimulus programs. During the quarter, new and renewed
originations to business customers totaled just over $10
billion.
Regions has also committed approximately $5 million toward
consumer and small-business recovery efforts. Further, the company
is donating advertising time, originally purchased for promoting
bank products and services, to food banks across its footprint.
These advertisements encourage viewers to financially support food
banks as they strive to help those in need.
SUMMARY OF FIRST QUARTER 2020 RESULTS:
Quarter Ended
(amounts in millions, except per share data)
3/31/2020
12/31/2019
3/31/2019
Net income
$
162
$
389
$
394
Preferred dividends
23
23
16
Net income available to common shareholders
$
139
$
366
$
378
Weighted-average diluted shares outstanding
961
968
1,028
Actual shares outstanding—end of period
957
957
1,013
Diluted earnings per common share
$
0.14
$
0.38
$
0.37
Selected items impacting earnings:
Pre-tax adjusted items(1):
Branch consolidation, property and equipment charges
$
(11
)
$
(12
)
$
(6
)
Loss on early extinguishment of debt
—
(16
)
—
Salaries and benefits related to severance charges
(1
)
—
(2
)
Securities gains (losses), net
—
(2
)
(7
)
Leveraged lease termination gains
2
—
—
Gain on sale of affordable housing residential mortgage loans
—
—
8
Total pre-tax adjusted items(1)
$
(10
)
$
(30
)
$
(7
)
Diluted EPS impact*
$
(0.01
)
$
(0.02
)
$
—
Pre-tax additional selected items**:
CECL provision in excess of net charge-offs***
$
(250
)
$
—
$
(13
)
Capital markets income - CVA/DVA
(34
)
5
(2
)
MSR net hedge performance
14
7
(7
)
Total pre-tax selected / adjusted items
$
(280
)
$
(18
)
$
(29
)
*
Based on income taxes at an approximate
25% incremental rate. Tax rates associated with leveraged lease
terminations are incrementally higher based on their structure.
**
Items represent an outsized or unusual
impact to the quarter or quarterly trends, but are not considered
non-GAAP adjustments.
***
CECL was adopted January 1, 2020. Prior
periods reflect results under the incurred loss model.
During the first quarter of 2020, total revenue decreased
approximately 5 percent on a reported and adjusted basis(1)
compared to the fourth quarter of 2019 as an increase in net
interest income was offset by a decline in non-interest income.
Market volatility, economic uncertainty and decreased customer
activity led to a decrease in non-interest income across many
businesses with the exception of mortgage. Non-interest expense
remained well controlled during the quarter down 7 percent on a
reported basis and 5 percent on an adjusted basis(1), led by
decreases in salaries and benefits, professional fees, and
marketing expenses. Despite a challenging economic backdrop, the
Company generated pre-tax pre-provision income(1) of $577
million.
The company adopted the current expected credit losses (CECL)
accounting standard effective January 1, 2020, and recorded an
approximate $500 million increase to its allowance for credit
losses that was offset in shareholders' equity and deferred tax
assets. During the first quarter, credit loss provision expense
totaled $373 million. The provision includes the impact of $123
million in net charge-offs, as well as $250 million of additional
provision reflecting an increase in expected losses over the life
of the portfolio. The additional provision was impacted by higher
specific reserves associated with downgrades primarily in the
energy and restaurant portfolios, as well as adverse economic
conditions impacting the company's economic forecast, including
uncertainty regarding the benefits of government stimulus enacted,
and potential additional stimulus, since the initial assessment.
Compared to the fourth quarter of 2019, annualized net charge-offs
increased to 0.59 percent of average loans, and total
non-performing loans increased 11 basis points to 0.72 percent of
total loans outstanding. Business services criticized loans
increased 5 basis points to 4.34 percent of total business services
loans outstanding. The allowance for credit losses increased to
1.89 percent of total loans and 261 percent of non-performing
loans, excluding loans held for sale.
Non-GAAP adjusted items(1) impacting the company's earnings are
identified to assist investors in analyzing Regions' operating
results on the same basis as that applied by management and provide
a basis to predict future performance. Non-GAAP adjusted items(1)
in the current quarter reflect, among other things, the company's
continued focus on increasing organizational efficiency and
effectiveness. This included $11 million of net expenses associated
with branch consolidations and property and equipment charges.
Total revenue
Quarter Ended
($ amounts in millions)
3/31/2020
12/31/2019
3/31/2019
1Q20 vs. 4Q19
1Q20 vs. 1Q19
Net interest income
$
928
$
918
$
948
$
10
1.1
%
$
(20
)
(2.1
)%
Taxable equivalent adjustment
12
13
13
(1
)
(7.7
)%
(1
)
(7.7
)%
Net interest income, taxable equivalent basis
$
940
$
931
$
961
$
9
1.0
%
$
(21
)
(2.2
)%
Net interest margin (FTE)
3.44
%
3.39
%
3.51
%
Non-interest income:
Service charges on deposit accounts
$
178
$
187
$
175
$
(9
)
(4.8
)%
$
3
1.7
%
Card and ATM fees
105
112
109
(7
)
(6.3
)%
(4
)
(3.7
)%
Wealth management income
84
84
76
—
—
%
8
10.5
%
Capital markets income
9
61
42
(52
)
(85.2
)%
(33
)
(78.6
)%
Mortgage Income
68
49
27
19
38.8
%
41
151.9
%
Commercial credit fee income
18
18
18
—
—
%
—
—
%
Bank-owned life insurance
17
18
23
(1
)
(5.6
)%
(6
)
(26.1
)%
Securities gains (losses), net
—
(2
)
(7
)
2
100.0
%
7
100.0
%
Market value adjustments on employee benefit assets - defined
benefit
—
—
5
—
NM
(5
)
(100.0
)%
Market value adjustments on employee benefit assets - other*
(25
)
7
(1
)
(32
)
NM
(24
)
NM
Other
31
28
35
3
10.7
%
(4
)
(11.4
)%
Non-interest income
$
485
$
562
$
502
$
(77
)
(13.7
)%
$
(17
)
(3.4
)%
Total revenue
$
1,413
$
1,480
$
1,450
$
(67
)
(4.5
)%
$
(37
)
(2.6
)%
Adjusted total revenue (non-GAAP)(1)
$
1,411
$
1,482
$
1,449
$
(71
)
(4.8
)%
$
(38
)
(2.6
)%
NM - Not Meaningful
*
These market value adjustments relate to
assets held for employee benefits that are offset within salaries
and employee benefits expense.
Comparison of first quarter 2020 to fourth
quarter 2019
Total revenue of approximately $1.4 billion decreased 5 percent
on a reported and adjusted basis(1) compared to the prior quarter.
Net interest income increased 1 percent and net interest margin
increased 5 basis points to 3.44 percent. The negative impact on
net interest margin and net interest income of lower market
interest rates was completely offset by lower funding costs and the
benefit from forward starting hedges becoming active in the
quarter. Higher average loan balances aided net interest income but
reduced net interest margin, while one fewer day in the quarter
negatively impacted net interest income but increased net interest
margin. Loan remixing into higher yielding products and the full
quarter benefit from the fourth quarter debt tender also benefitted
net interest margin and net interest income.
Non-interest income decreased approximately 14 percent on a
reported and an adjusted basis(1) as an increase in mortgage income
was more than offset by declines in capital markets, service
charges, and card & ATM fees, as well as lower market value
adjustments on employee benefit assets. Mortgage income increased
39 percent driven primarily by elevated sales and record
application volumes associated with the favorable rate environment,
as well as positive net hedge performance on mortgage servicing
rights. Capital markets income decreased $52 million reflecting
declines across most categories. Within capital markets, the
commercial swap business experienced a record quarter; however,
this increase was more than offset by $34 million of negative
market-related credit valuation adjustments during the first
quarter, compared to $5 million of positive valuation adjustments
during the prior quarter. Service charges income decreased 5
percent driven by seasonality, one fewer day in the quarter and a
general decrease in spending late in the quarter associated with
the COVID-19 pandemic. Similarly, card & ATM fees decreased 6
percent driven by a reduction in debit and credit card spend and
transaction volumes. During the final two weeks of the quarter,
customer spending activity was observed to be approximately 30
percent lower than historical levels. If current levels persist,
total consumer non-interest income would be negatively impacted by
approximately $20 to $25 million per month from pre-March
levels.
Comparison of first quarter 2020 to first
quarter 2019
Total revenue decreased 3 percent on a reported and adjusted
basis(1) compared to the first quarter of 2019. Net interest income
decreased 2 percent, while net interest margin decreased 7 basis
points. Net interest margin and net interest income were negatively
impacted by lower market interest rates, somewhat offset by lower
funding costs, a higher amount of active loan hedge notional and
remixing into higher yielding consumer loans. One additional day in
the current quarter associated with leap year also increased net
interest income but reduced net interest margin, while lower
average loan balances reduced net interest income but improved net
interest margin.
Non-interest income decreased 3 percent on a reported basis and
4 percent on an adjusted basis(1). Mortgage income increased
significantly to $68 million driven by increased production and
sales income reflecting a 60 percent increase in total mortgage
production as lower market interest rates drove increased
applications. Hedging and valuation adjustments on residential
mortgage servicing rights also contributed to the increase. Wealth
management income increased 11 percent reflecting growth in both
investment services and investment management and trust income
which includes the 2019 acquisition of Highland Associates, Inc.
Capital markets income decreased significantly in the current
quarter as modest increases in customer interest rate swap income
and fees generated from the placement of permanent financing for
real estate customers were offset by declines in most other
categories. The increase in swap income was also offset by a
significant decrease in market-related credit valuation adjustments
tied to customer derivatives. Similarly, market value adjustments
on employee benefit assets were also negative during the current
quarter.
Non-interest expense
Quarter Ended
($ amounts in millions)
3/31/2020
12/31/2019
3/31/2019
1Q20 vs. 4Q19
1Q20 vs. 1Q19
Salaries and employee benefits
$
467
$
488
$
478
$
(21
)
(4.3
)%
$
(11
)
(2.3
)%
Net occupancy expense
79
79
82
—
—
%
(3
)
(3.7
)%
Furniture and equipment expense
83
82
76
1
1.2
%
7
9.2
%
Outside services
45
44
45
1
2.3
%
—
—
%
Professional, legal and regulatory
expenses
18
28
20
(10
)
(35.7
)%
(2
)
(10.0
)%
Marketing
24
28
23
(4
)
(14.3
)%
1
4.3
%
FDIC insurance assessments
11
11
13
—
—
%
(2
)
(15.4
)%
Credit/checkcard expenses
13
15
16
(2
)
(13.3
)%
(3
)
(18.8
)%
Branch consolidation, property and
equipment charges
11
12
6
(1
)
(8.3
)%
5
83.3
%
Visa class B shares expense
4
2
4
2
100.0
%
—
—
%
Provision (credit) for unfunded credit
losses
—
(3
)
(1
)
3
100.0
%
1
100.0
%
Loss on early extinguishment of debt
—
16
—
(16
)
(100.0
)%
—
NM
Other
81
95
98
(14
)
(14.7
)%
(17
)
(17.3
)%
Total non-interest expense
$
836
$
897
$
860
$
(61
)
(6.8
)%
$
(24
)
(2.8
)%
Total adjusted non-interest expense(1)
$
824
$
869
$
852
$
(45
)
(5.2
)%
$
(28
)
(3.3
)%
NM - Not Meaningful
Comparison of first quarter 2020 to fourth
quarter 2019
Non-interest expense decreased 7 percent on a reported basis and
5 percent on an adjusted basis(1) compared to the fourth quarter.
The decrease was driven primarily by lower salaries and benefits,
professional fees and marketing expenses. Salaries and benefits
decreased 4 percent driven by lower production-based incentive pay
and negative market value adjustments to employee benefit assets.
Professional fees declined 36 percent driven primarily by an
elevated level of legal, consulting and professional fees in the
fourth quarter. Marketing expenses decreased 14 percent due
primarily to elevated marketing campaigns executed in the prior
quarter. Other non-interest expense also decreased during the
quarter driven primarily by a reduction in non-service related
pension costs associated with improved plan asset values at year
end.
The company's first quarter efficiency ratio was 58.6 percent on
a reported basis and 57.9 percent on an adjusted basis(1). The
effective tax rate was approximately 20.6 percent.
Comparison of first quarter 2020 to first
quarter 2019
Non-interest expense decreased 3 percent on a reported and
adjusted basis(1) compared to the first quarter of 2019. Salaries
and benefits decreased 2 percent driven primarily by negative
market value adjustments to employee benefit assets. Staffing
levels declined and full-time equivalent positions decreased 2
percent from the first quarter of 2019. Occupancy expense decreased
4 percent driven primarily by ongoing targeted reductions of
corporate real estate, while professional fees decreased 10 percent
driven primarily by lower consulting fees. In addition, other
non-interest expense decreased driven primarily by a reduction in
operational losses.
Loans and Leases
Average Balances
($ amounts in millions)
1Q20
4Q19
1Q19
1Q20 vs. 4Q19
1Q20 vs. 1Q19
Commercial and industrial
$
40,519
$
39,743
$
39,999
$
776
2.0
%
$
520
1.3%
Commercial real estate—owner-occupied
5,832
5,846
5,969
(14
)
(0.2
)%
(137
)
(2.3)%
Investor real estate
6,648
6,385
6,550
263
4.1
%
98
1.5%
Business Lending
52,999
51,974
52,518
1,025
2.0
%
481
0.9%
Residential first mortgage
14,469
14,416
14,203
53
0.4
%
266
1.9%
Home equity
8,275
8,478
9,135
(203
)
(2.4
)%
(860
)
(9.4)%
Indirect—vehicles*
1,679
1,948
2,924
(269
)
(13.8
)%
(1,245
)
(42.6)%
Indirect—other consumer
3,263
3,005
2,429
258
8.6
%
834
34.3%
Consumer credit card
1,348
1,337
1,304
11
0.8
%
44
3.4%
Other consumer
1,216
1,234
1,212
(18
)
(1.5
)%
4
0.3%
Consumer Lending
30,250
30,418
31,207
(168
)
(0.6
)%
(957
)
(3.1)%
Total Loans
$
83,249
$
82,392
$
83,725
$
857
1.0
%
$
(476
)
(0.6)%
Adjusted Consumer Lending (non-GAAP)(1)
28,571
28,470
28,283
101
0.4
%
288
1.0%
Adjusted Total Loans (non-GAAP)(1)
$
81,570
$
80,444
$
80,801
$
1,126
1.4
%
$
769
1.0%
NM - Not Meaningful
*
Indirect vehicles is an exit
portfolio.
Comparison of first quarter 2020 to fourth
quarter 2019
Average loans and leases increased approximately 2 percent on a
reported basis and 1 percent on an adjusted basis(1) compared to
the prior quarter. Ending loans and leases increased 6 percent on a
reported basis and 7 percent on an adjusted basis(1) reflecting an
increase in line of credit draws late in the quarter as companies
responded to the COVID-19 pandemic. Loan growth was driven
primarily by an approximate 9 percentage point increase in loan
utilization levels within the business lending portfolio.
Adjusted(1) average balances in the consumer lending portfolio
remained relatively stable as growth in residential first mortgage,
indirect-other consumer and consumer credit card was offset by
declines in home equity lending.
Comparison of first quarter 2020 to first
quarter 2019
Average loans and leases decreased 1 percent on a reported
basis, but increased 1 percent on an adjusted basis(1) compared to
the first quarter of 2019. Average balances in the business lending
portfolio increased 1 percent led by growth in commercial and
industrial loans. Owner-occupied commercial real estate loans
declined 2 percent, while investor real estate loans increased 1
percent. Adjusted(1) average balances in the consumer lending
portfolio increased 1 percent as growth in indirect-other consumer,
residential first mortgage, consumer credit card, and other
consumer loans was partially offset by declines in home equity
lending.
Deposits
Average Balances
($ amounts in millions)
1Q20
4Q19
1Q19
1Q20 vs. 4Q19
1Q20 vs. 1Q19
Customer low-cost deposits
$
87,451
$
86,671
$
86,046
$
780
0.9%
$
1,405
1.6%
Customer time deposits
7,302
7,543
7,471
(241
)
(3.2)%
(169
)
(2.3)%
Corporate treasury time deposits
280
189
496
91
48.1%
(216
)
(43.5)%
Corporate treasury other deposits
639
109
157
530
486.2%
482
307.0%
Total Deposits
$
95,672
$
94,512
$
94,170
$
1,160
1.2%
$
1,502
1.6%
($ amounts in millions)
1Q20
4Q19
1Q19
1Q20 vs. 4Q19
1Q20 vs. 1Q19
Consumer Bank Segment
$
59,711
$
59,359
$
57,952
$
352
0.6%
$
1,759
3.0%
Corporate Bank Segment
26,618
26,627
26,904
(9
)
—%
(286
)
(1.1)%
Wealth Management Segment
8,073
7,891
7,948
182
2.3%
125
1.6%
Other
1,270
635
1,366
635
100.0%
(96
)
(7.0)%
Total Deposits
$
95,672
$
94,512
$
94,170
$
1,160
1.2%
$
1,502
1.6%
Comparison of first quarter 2020 to fourth
quarter 2019
Total average deposit balances increased 1 percent to $95.7
billion in the first quarter. Average Consumer and Wealth segment
deposits increased during quarter, while Corporate segment deposits
remained relatively stable. Average Other segment deposits also
increased during the quarter.
Total deposits increased 3 percent on an ending basis to $100.0
billion. Corporate segment deposits increased 8 percent as many
corporate customers drawing on lines of credit kept those excess
cash balances in their deposit accounts. Wealth and Consumer
segment deposits also increased 3 percent on an ending basis as
customers seek the safety and soundness of regulated and insured
financial institutions during periods of stress. Increases in
Corporate, Consumer, and Wealth segment deposits were offset by a
decrease in brokered deposits within the Other segment.
Comparison of first quarter 2020 to first
quarter 2019
Total average deposit balances increased 2 percent compared to
the first quarter of 2019 as growth in low-cost deposits was
partially offset a decrease in average time deposits. Growth in
average Consumer and Wealth segment deposits was partially offset
by reductions in Corporate and Other segment deposits. Within the
Consumer segment, steady growth in primary operating accounts
contributed to a 3 percent increase in total average segment
deposits.
Asset quality
As of and for the Quarter
Ended
($ amounts in millions)
3/31/2020
12/31/2019
3/31/2019
ACL/Loans, net
1.89%
1.10%
1.07%
ALL/Loans, net
1.77%
1.05%
1.01%
Allowance for credit losses to non-performing loans, excluding
loans held for sale
261%
180%
173%
Allowance for loan losses to non-performing loans, excluding loans
held for sale
244%
171%
163%
Provision for credit losses*
$373
$96
$91
Net loans charged-off
$123
$96
$78
Net loan charge-offs as a % of average loans, annualized
0.59%
0.46%
0.38%
Non-accrual loans, excluding loans held for sale/Loans, net
0.72%
0.61%
0.62%
NPAs (ex. 90+ past due)/Loans, foreclosed properties,
non-marketable investments and non-performing loans held for sale
0.79%
0.70%
0.71%
NPAs (inc. 90+ past due)/Loans, foreclosed properties,
non-marketable investments and non-performing loans held for sale**
0.96%
0.89%
0.88%
Total TDRs, excluding loans held for sale
$599
$659
$756
Total Criticized Loans—Business Services***
$2,524
$2,251
$2,119
*
Upon adoption of CECL on Jan. 1, 2020, the
provision for credit losses is the sum of the provision for loan
losses and the provision for unfunded credit commitments. Prior to
the adoption of CECL, the provision for unfunded commitments was
included in other non-interest expense.
**
Excludes guaranteed residential first
mortgages that are 90+ days past due and still accruing.
***
Business services represents the combined
total of commercial and investor real estate loans.
Comparison of first quarter 2020 to fourth
quarter 2019
Regions adopted the CECL accounting standard as of January 1,
2020. As permitted by the Federal Reserve, the company will defer a
portion of the impact from the CECL accounting standard on
regulatory capital. As of March 31, 2020, the amount deferred is
approximately $440 million and represents the initial after-tax
adjustment recorded as an offset to shareholders' equity on January
1, 2020 and 25 percent of the first quarter 2020 provision expense
in excess of net charge-offs.
Under the CECL standard, credit loss provision expense for the
first quarter totaled $373 million representing a $277 million
increase over the fourth quarter. The provision includes the impact
of $123 million in net charge-offs, as well as $250 million of
additional provision reflecting an increase in expected losses over
the life of the portfolio. The additional provision was impacted by
higher specific reserves associated with downgrades primarily in
the energy and restaurant portfolios, as well as adverse economic
conditions impacting the company's economic forecast, including
uncertainty regarding the benefits of government stimulus enacted,
and potential additional stimulus, since the initial assessment at
adoption on January 1, 2020. The resulting allowance for credit
losses is equal to 1.89 percent of total loans and 261 percent of
total non-accrual loans, excluding loans held for sale. Annualized
net charge-offs increased to 59 basis points of average loans.
Total non-accrual loans, excluding loans held for sale, increased
$131 million driven primarily by energy-related loans. Total
delinquencies and troubled debt restructured loans decreased 4
percent and 9 percent, respectively, while business services
criticized loans increased 12 percent.
Comparison of first quarter 2020 to first
quarter 2019
Annualized net charge-offs increased 21 basis points compared
with the first quarter of 2019, and the allowance for credit losses
as a percent of total loans increased 82 basis points reflecting
the adoption of CECL. As a percent of total non-accrual loans,
excluding loans held for sale, the allowance for credit losses
increased 88 percentage points. Total business services criticized
loans increased 19 percent driven primarily by an increase in
energy-related loans. Total delinquencies increased 1 percent,
while total troubled debt restructured loans decreased 21
percent.
Capital and liquidity
As of and for Quarter
Ended
3/31/2020
12/31/2019
3/31/2019
Basel III Common Equity Tier 1 ratio(2)
9.4%
9.7%
9.8%
Tier 1 capital ratio(2)
10.6%
10.9%
10.6%
Tangible common stockholders’ equity to tangible assets
(non-GAAP)(1)
8.68%
8.34%
7.95%
Tangible common book value per share (non-GAAP)(1)*
$11.67
$10.58
$9.72
*
Tangible common book value per share
includes the impact of quarterly earnings and changes to market
value adjustments within accumulated other comprehensive income, as
well as continued capital returns.
Regions maintains a strong liquidity position. Its granular and
stable deposit base provides superior liquidity value and is
enhanced by a low loan-to-deposit ratio of 88 percent as of quarter
end, which includes the impact of increased line of credit draws
observed by customers late in the quarter. In addition, the
company's risk management and stress testing frameworks are
designed to ensure its liquidity positions and liquidity risks
remain prudently aligned while enabling Regions to meet customer
liquidity needs in challenging economic environments.
Beyond deposits, Regions has ample sources of additional
liquidity including cash balances held at the Federal Reserve,
borrowing capacity at the Federal Home Loan Bank, unencumbered
highly liquid securities, and borrowing availability at the Federal
Reserve's discount window, which support a strong ongoing liquidity
position. Further, additional liquidity is available through the
Federal Reserve's Paycheck Protection Program Liquidity
Facility.
Regions also maintains a strong capital position. Estimated
capital ratios remain well above current regulatory requirements
under the Basel III capital rules. The Tier 1(2) and Common Equity
Tier 1(2) ratios were estimated at 10.6 percent and 9.4 percent,
respectively, at quarter-end.
The company declared $149 million in dividends to common
shareholders during the first quarter. The company did not
repurchase shares in the first quarter and announced it will
temporarily suspend share repurchases through the end of the second
quarter due to the COVID-19 pandemic.
(1)
Non-GAAP; refer to pages 6, 9, 10, 16, 17,
and 20 of the financial supplement to this earnings release.
(2)
Current quarter Basel III common equity
Tier 1, and Tier 1 capital ratios are estimated.
Conference Call
A replay of the earnings call will be available beginning
Friday, April 17, 2020, at 2 p.m. ET through Sunday, May 17, 2020.
To listen by telephone, please dial 855-859-2056, and use access
code 6654967. An archived webcast will also be available on the
Investor Relations page of www.regions.com.
About Regions Financial Corporation
Regions Financial Corporation (NYSE:RF), with $133 billion in
assets, is a member of the S&P 500 Index and is one of the
nation’s largest full-service providers of consumer and commercial
banking, wealth management, and mortgage products and services.
Regions serves customers across the South, Midwest and Texas, and
through its subsidiary, Regions Bank, operates approximately 1,400
banking offices and 2,000 ATMs. Regions Bank is an Equal Housing
Lender and Member FDIC. Additional information about Regions and
its full line of products and services can be found at
www.regions.com.
Forward-Looking Statements
This release may include forward-looking statements as defined
in the Private Securities Litigation Reform Act of 1995. Any
statement that does not describe historical or current facts is a
forward-looking statement, including statements regarding the
potential effects of the COVID-19 pandemic on our businesses and
financial results and conditions. Forward-looking statements are
not based on historical information, but rather are related to
future operations, strategies, financial results or other
developments. Forward-looking statements are based on management’s
current expectations as well as certain assumptions and estimates
made by, and information available to, management at the time the
statements are made. Those statements are based on general
assumptions and are subject to various risks, and because they also
relate to the future they are likewise subject to inherent
uncertainties and other factors that may cause actual results to
differ materially from the views, beliefs and projections expressed
in such statements. Therefore, we caution you against relying on
any of these forward-looking statements. These risks, uncertainties
and other factors include, but are not limited to, those described
below:
- Current and future economic and market conditions in the United
States generally or in the communities we serve (in particular the
Southeastern United States), including the effects of possible
declines in property values, increases in unemployment rates,
financial market disruptions and potential reductions of economic
growth, which may adversely affect our lending and other businesses
and our financial results and conditions.
- Possible changes in trade, monetary and fiscal policies of, and
other activities undertaken by, governments, agencies, central
banks and similar organizations, which could have a material
adverse effect on our earnings.
- Possible changes in market interest rates or capital markets
could adversely affect our revenue and expense, the value of assets
and obligations, and the availability and cost of capital and
liquidity.
- The impact of pandemics, including the COVID-19 pandemic, on
our businesses and financial results and conditions.
- Any impairment of our goodwill or other intangibles, any
repricing of assets, or any adjustment of valuation allowances on
our deferred tax assets due to changes in law, adverse changes in
the economic environment, declining operations of the reporting
unit or other factors.
- The effect of changes in tax laws, including the effect of any
future interpretations of or amendments to Tax Reform, which may
impact our earnings, capital ratios and our ability to return
capital to stockholders.
- Possible changes in the creditworthiness of customers and the
possible impairment of the collectability of loans and leases,
including operating leases.
- Changes in the speed of loan prepayments, loan origination and
sale volumes, charge-offs, loan loss provisions or actual loan
losses where our allowance for loan losses may not be adequate to
cover our eventual losses.
- Possible acceleration of prepayments on mortgage-backed
securities due to low interest rates, and the related acceleration
of premium amortization on those securities.
- Loss of customer checking and savings account deposits as
customers pursue other, higher-yield investments, which could
increase our funding costs.
- Possible changes in consumer and business spending and saving
habits and the related effect on our ability to increase assets and
to attract deposits, which could adversely affect our net
income.
- Our ability to effectively compete with other traditional and
non-traditional financial services companies, some of whom possess
greater financial resources than we do or are subject to different
regulatory standards than we are.
- 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 could have a negative impact on our revenue.
- Our inability to keep pace with technological changes could
result in losing business to competitors.
- Changes in laws and regulations affecting our businesses,
including legislation and regulations relating to bank products and
services, as well as changes in the enforcement and interpretation
of such laws and regulations by applicable governmental and
self-regulatory agencies, which could require us to change certain
business practices, increase compliance risk, reduce our revenue,
impose additional costs on us, or otherwise negatively affect our
businesses.
- Our ability to obtain a regulatory non-objection (as part of
the CCAR process or otherwise) to take certain capital actions,
including paying dividends and any plans to increase common stock
dividends, repurchase common stock under current or future
programs, or redeem preferred stock or other regulatory capital
instruments, may impact our ability to return capital to
stockholders and market perceptions of us.
- 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 ability to comply with applicable capital and liquidity
requirements (including, among other things, the Basel III capital
standards), including our ability to generate capital internally or
raise capital on favorable terms, and if we fail to meet
requirements, our financial condition could be negatively
impacted.
- The effects of any developments, changes or actions relating to
any litigation or regulatory proceedings brought against us or any
of our subsidiaries.
- The costs, including possibly incurring fines, penalties, or
other negative effects (including reputational harm) of any adverse
judicial, administrative, or arbitral rulings or proceedings,
regulatory enforcement actions, or other legal actions to which we
or any of our subsidiaries are a party, and which may adversely
affect our results.
- Our ability to manage fluctuations in the value of assets and
liabilities and off-balance sheet exposure so as to maintain
sufficient capital and liquidity to support our business.
- Our ability to execute on our strategic and operational plans,
including our ability to fully realize the financial and
non-financial benefits relating to our strategic initiatives.
- The risks and uncertainties related to our acquisition or
divestiture of businesses.
- 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 in laws and
regulations in effect from time to time.
- Fraud or misconduct by our customers, employees or business
partners.
- Any inaccurate or incomplete information provided to us by our
customers or counterparties.
- Inability of our framework to manage risks associated with our
business such as credit risk and operational risk, including
third-party vendors and other service providers, which could, among
other things, result in a breach of operating or security systems
as a result of a cyber attack or similar act or failure to deliver
our services effectively.
- Dependence on key suppliers or vendors to obtain equipment and
other supplies for our business on acceptable terms.
- The inability of our internal controls and procedures to
prevent, detect or mitigate any material errors or fraudulent
acts.
- The effects of geopolitical instability, including wars,
conflicts and terrorist attacks and the potential impact, directly
or indirectly, on our businesses.
- The effects of man-made and natural disasters, including fires,
floods, droughts, tornadoes, hurricanes, and environmental damage
(specifically in the Southeastern United States), which may
negatively affect our operations and/or our loan portfolios and
increase our cost of conducting business. The severity and impact
of future earthquakes, fires, hurricanes, tornadoes, droughts,
floods and other weather-related events are difficult to predict
and may be exacerbated by global climate change.
- Changes in commodity market prices and conditions could
adversely affect the cash flows of our borrowers operating in
industries that are impacted by changes in commodity prices
(including businesses indirectly impacted by commodities prices
such as businesses that transport commodities or manufacture
equipment used in the production of commodities), which could
impair their ability to service any loans outstanding to them
and/or reduce demand for loans in those industries.
- Our ability to identify and address cyber-security risks such
as data security breaches, malware, “denial of service” attacks,
“hacking” and identity theft, including account take-overs, a
failure of which could disrupt our business and result in the
disclosure of and/or misuse or misappropriation of confidential or
proprietary information, disruption or damage to our systems,
increased costs, losses, or adverse effects to our reputation.
- Our ability to achieve our expense management initiatives.
- Possible cessation or 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 outlook could
increase the costs of funding from capital markets.
- The effects of a possible downgrade in the U.S. government’s
sovereign credit rating or outlook, which could result in risks to
us and general economic conditions that we are not able to
predict.
- The effects of problems encountered by other financial
institutions that adversely affect us or the banking industry
generally could require us to change certain business practices,
reduce our revenue, impose additional costs on us, or otherwise
negatively affect our businesses.
- The effects of the failure of any component of our business
infrastructure provided by a third party could disrupt our
businesses, result in the disclosure of and/or misuse of
confidential information or proprietary information, increase our
costs, negatively affect our reputation, and cause losses.
- Our ability to receive dividends from our subsidiaries could
affect our liquidity and ability to pay dividends to
shareholders.
- Changes in accounting policies or procedures as may be required
by the FASB or other regulatory agencies could materially affect
our financial statements and how we report those results, and
expectations and preliminary analyses relating to how such changes
will affect our financial results could prove incorrect.
- Other risks identified from time to time in reports that we
file with the SEC.
- Fluctuations in the price of our common stock and inability to
complete stock repurchases in the time frame and/or on the terms
anticipated.
- The effects of any damage to our reputation resulting from
developments related to any of the items identified above.
The foregoing list of factors is not exhaustive. For discussion
of these and other factors that may cause actual results to differ
from expectations, look under the captions “Forward-Looking
Statements” and “Risk Factors” of Regions’ Annual Report on Form
10-K for the year ended December 31, 2019 as filed with the
SEC.
Further, statements about the potential effects of the COVID-19
pandemic on our businesses and financial results and conditions may
constitute forward-looking statements and are subject to the risk
that the actual effects may differ, possibly materially, from what
is reflected in those forward-looking statements due to factors and
future developments that are uncertain, unpredictable and in many
cases beyond our control, including the scope and duration of the
pandemic, actions taken by governmental authorities in response to
the pandemic, and the direct and indirect impact of the pandemic on
our customers, third parties and us.
The words “future,” “anticipates,” “assumes,” “intends,”
“plans,” “seeks,” “believes,” “predicts,” “potential,”
“objectives,” “estimates,” “expects,” “targets,” “projects,”
“outlook,” “forecast,” “would,” “will,” “may,” “might,” “could,”
“should,” “can,” and similar terms and expressions often signify
forward-looking statements.
You should not place undue reliance on any forward-looking
statements, which speak only as of the date made. Factors or events
that could cause our actual results to differ may emerge from time
to time, and it is not possible to predict all of them. We assume
no obligation and do not intend to update or revise any
forward-looking statements that are made from time to time, either
as a result of future developments, new information or otherwise,
except as may be required by law.
Regions’ Investor Relations contact is Dana Nolan at (205)
264-7040; Regions’ Media contact is Evelyn Mitchell at (205)
264-4551.
Use of non-GAAP financial measures
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 information to investors. Non-interest expense
(GAAP) is presented excluding certain adjustments to arrive at
adjusted non-interest expense (non-GAAP), which is the numerator
for the efficiency ratio. Non-interest income (GAAP) is presented
excluding certain adjustments to arrive at adjusted non-interest
income (non-GAAP), which is the numerator for the fee income ratio.
Adjusted non-interest income (non-GAAP) and adjusted non-interest
expense (non-GAAP) are used to determine adjusted pre-tax
pre-provision income (non-GAAP). Net interest income (GAAP) on a
taxable-equivalent basis and non-interest income are added together
to arrive at total revenue on a taxable-equivalent basis.
Adjustments are made to arrive at adjusted total revenue on a
taxable-equivalent basis (non-GAAP), which is the denominator for
the fee income and efficiency ratios. Regions believes that the
exclusion of these adjustments provides a meaningful base for
period-to-period comparisons, which management believes will assist
investors in analyzing the operating results of the Company and
predicting future performance. These non-GAAP financial measures
are also used by management to assess the performance of Regions’
business. It is possible that the activities related to the
adjustments may recur; however, management does not consider the
activities related to the adjustments to be indications of ongoing
operations. Regions believes that presentation of these non-GAAP
financial measures will permit investors to assess the performance
of the Company on the same basis as that applied by management.
Tangible common stockholders’ equity ratios have become a focus
of some investors and management believes they may assist investors
in analyzing the capital position of the Company absent the effects
of intangible assets and preferred stock. Analysts and banking
regulators have assessed Regions’ capital adequacy using the
tangible common stockholders’ equity measure. Because tangible
common stockholders’ equity is not formally defined by GAAP or
prescribed in any amount by federal banking regulations it is
currently considered to be a non-GAAP financial measure and other
entities may calculate it differently than Regions’ disclosed
calculations. Since analysts and banking regulators may assess
Regions’ capital adequacy using tangible common stockholders’
equity, management believes that it is useful to provide investors
the ability to assess Regions’ capital adequacy on this same
basis.
Non-GAAP financial measures have inherent limitations, are not
required to be uniformly applied and are not audited. Although
these non-GAAP financial measures are frequently used by
stakeholders in the evaluation of a company, they have limitations
as analytical tools, and should not be considered in isolation, or
as a substitute for analyses of results as reported under GAAP. In
particular, a measure of earnings that excludes selected items does
not represent the amount that effectively accrues directly to
stockholders.
Management and the Board of Directors utilize non-GAAP measures
as follows:
- Preparation of Regions' operating budgets
- Monthly financial performance reporting
- Monthly close-out reporting of consolidated results (management
only)
- Presentation to investors of company performance
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200417005093/en/
Media Contact: Evelyn Mitchell (205) 264-4551
Investor Relations Contact: Dana Nolan (205) 264-7040
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