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| 8-K - 8-K - REGIONS FINANCIAL CORP | d550629d8k.htm |
 Morgan Stanley
Financials Conference
June 12, 2013
David Turner
Chief Financial Officer
Exhibit 99.1 |
 2
Balance Sheet
1Q13
1Q11
Improvement
Deposit Costs
(1)
0.18%
0.59%
41 bps
Total Funding Costs
(1)
0.45%
0.86%
41 bps
Time Deposits as % of Total Deposits
13%
24%
1,100 bps
Low-Cost Deposits
$81.9B
$73.7B
11%
Profitability
Mortgage Revenue
$72MM
$45MM
60%
Net Interest Margin
(1)
3.13%
3.09%
4 bps
Efficiency Ratio
(2)
64.9%
68.3%
340 bps
Credit Risk Profile
Non-Performing Assets
$1.8B
$3.9B
54%
Net Charge-Offs
$180MM
$481MM
63%
Allowance for Loan Losses / Loans
2.37%
3.92%
155 bps
Capital and Liquidity
Tier 1 Common Ratio
(2)
11.2%
7.9%
330 bps
Loan to Deposit Ratio
79%
84%
More liquid
Stronger company today
(1)
From continuing operations
(2)
Non-GAAP -
see appendix for reconciliation |
 3
Loan trends
Total Loan Balances
(1)
($ in millions)
(1)
Ending balances |
 4
Net interest margin stable as peers decline
Note: Peer banks include BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC,
ZION Source: SNL Financial
Net Interest Margin vs. Peers |
 5
Deposit trends
Deposit Balances
(1)
and Deposit Costs
($ in millions)
(1)
Average balances |
 6
Expense control –
a culture, not a campaign
(1) 1Q13 Adjusted to exclude non-core items, ratios are annualized –
See appendix for reconciliation
Peer banks include: BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC, ZION
Source: SNL Financial
Non-Interest Expense
(1)
/ Average Assets
Non-
Interest Expense
(1)
1Q13 vs. 1Q12 % Change |
 7
Continued asset quality improvement
Significant credit leverage remains
Note: Peer banks include BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC,
ZION Source: SNL Financial
46% decrease Y-O-Y
Allowance for Loan Losses / Total Loans
Net Charge-Offs and Ratio |
  8
Strong capital and solid liquidity
(1) Non-GAAP –
See appendix for reconciliation
Note: Peer banks include BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC,
ZION Source: SNL Financial
Estimated Basel III
(1)
at the end of
1Q13 was 9.1%
Loan to Deposit Ratio
Tier 1 Common Ratio
(1) |
 9
Moving forward in 2013
•
Through
, maximize opportunities to deepen quality customer
relationships
•
Grow households
•
Positioned for continued increases in loan production
•
Indirect auto portfolio
•
Commercial and Industrial
•
Credit card
•
Retention of 15-year fixed rate mortgages
•
Continue to leverage NOW Banking suite of products
•
Improve efficiency through investments in technology
•
Further enhancements to lower-cost delivery channels
•
Enhanced services and technology platforms within Wealth Management
•
Continue to seek opportunities to reduce expenses
•
Commitment to positive operating leverage |
 10
Appendix |
 11
Forward-looking statements
This
presentation
may
include
forward-looking
statements
which
reflect
Regions’
current
views
with
respect
to
future
events
and
financial
performance.
The
Private
Securities
Litigation
Reform
Act
of
1995
(“the
Act”)
provides
a
“safe
harbor”
for
forward-looking
statements
which
are
identified
as
such
and
are
accompanied
by
the
identification
of
important
factors
that
could
cause
actual
results
to
differ
materially
from
the
forward-looking
statements.
For
these
statements,
we,
together
with
our
subsidiaries,
unless
the
context
implies
otherwise,
claim
the
protection
afforded
by
the
safe
harbor
in
the
Act.
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
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,
uncertainties
and
other
factors
that
may
cause
actual
results
to
differ
materially
from
the
views,
beliefs
and
projections
expressed
in
such
statements.
These
risks,
uncertainties
and
other
factors
include,
but
are
not
limited
to,
those
described
below:
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,
2012,
and
the
caption
“Foward-Looking
Statements”
of
Regions'
Quarterly
Report
on
Form
10-Q
for
the
quarter
ended
March
31,
2013,
as
filed
with
the
Securities and Exchange Commission.
The words “believe,”
“expect,”
“anticipate,”
“project,”
and similar 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. We assume no obligation to update or revise any forward-looking statements
that are made from time to time.
›
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Dodd-Frank Act”) became law in July 2010, and a number of legislative, regulatory and tax proposals remain pending.
Future
and
proposed
rules,
including
those
that
are
part
of
the
Basel
III
process
are
expected
to
require
banking
institutions
to
increase
levels
of
capital
and
to
meet
more
stringent
liquidity
requirements.
All
of
the
foregoing
may
have
significant
effects
on
Regions
and
the
financial
services
industry,
the
exact
nature
and
extent
of
which
cannot
be
determined
at
this
time.
›
Possible additional loan losses, impairment of goodwill and other intangibles, and
adjustment of valuation allowances on deferred tax assets and the impact on earnings and capital.
›
Possible
changes
in
interest
rates
may
increase
funding
costs
and
reduce
earning
asset
yields,
thus
reducing
margins.
Increases
in
benchmark
interest
rates
could
also
increase
debt
service
requirements
for
customers
whose
terms
include
a
variable
interest
rate,
which
may
negatively
impact
the
ability
of
borrowers
to
pay
as
contractually
obligated.
›
Possible
changes
in
general
economic
and
business
conditions
in
the
United
States
in
general
and
in
the
communities
Regions
serves
in
particular,
including
any
prolonging
or
worsening
of
the
current challenging economic conditions including unemployment levels.
›
Possible changes in the creditworthiness of customers and the possible impairment of
the collectability of loans. ›
Possible changes in trade, monetary and fiscal policies, laws and regulations and
other activities of governments, agencies, and similar organizations, may have an adverse effect on business.
›
Possible
regulations
issued
by
the
Consumer
Financial
Protection
Bureau
or
other
regulators
which
might
adversely
impact
Regions’
business
model
or
products
and
services.
›
Possible stresses in the financial and real estate markets, including possible
deterioration in property values. ›
Regions’
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
Regions'
business.
›
Regions’
ability to expand into new markets and to maintain profit margins in the face of
competitive pressures. ›
Regions’
ability
to
develop
competitive
new
products
and
services
in
a
timely
manner
and
the
acceptance
of
such
products
and
services
by
Regions'
customers
and
potential
customers.
›
Regions’
ability
to
keep
pace
with
technological
changes.
›
Regions’
ability
to
effectively
identify
and
manage
credit
risk,
interest
rate
risk,
market
risk,
operational
risk,
legal
risk,
liquidity
risk,
reputational
risk,
counterparty
risk,
international
risk,
and
regulatory
and
compliance
risk.
›
Regions’
ability
to
ensure
adequate
capitalization
which
is
impacted
by
inherent
uncertainties
in
forecasting
credit
losses.
›
The
cost
and
other
effects
of
material
contingencies,
including
litigation
contingencies,
and
any
adverse
judicial,
administrative
or
arbitral
rulings
or
proceedings.
›
The
effects
of
increased
competition
from
both
banks
and
non-banks.
›
The
effects
of
geopolitical
instability
and
risks
such
as
terrorist
attacks.
›
Regions
ability
to
identify
and
address
data
security
breaches.
›
Possible
changes
in
consumer
and
business
spending
and
saving
habits
could
affect
Regions'
ability
to
increase
assets
and
to
attract
deposits.
›
The
effects
of
weather
and
natural
disasters
such
as
floods,
droughts,
wind,
tornados
and
hurricanes,
and
the
effects
of
man-made
disasters.
›
Possible
downgrades
in
ratings
issued
by
rating
agencies.
›
Possible
changes
in
the
speed
of
loan
prepayments
by
Regions’
customers
and
loan
origination
or
sales
volumes.
›
Possible
acceleration
of
prepayments
on
mortgage-backed
securities
due
to
low
interest
rates
and
the
related
acceleration
of
premium
amortization
on
those
securities.
›
The
effects
of
problems
encountered
by
larger
or
similar
financial
institutions
that
adversely
affect
Regions
or
the
banking
industry
generally.
›
Regions’
ability
to
receive
dividends
from
its
subsidiaries.
›
The
effects
of
the
failure
of
any
component
of
Regions’
business
infrastructure
which
is
provided
by
a
third
party.
›
Changes
in
accounting
policies
or
procedures
as
may
be
required
by
the
Financial
Accounting
Standards
Board
or
other
regulatory
agencies.
›
The
effects
of
any
damage
to
Regions
reputation
resulting
from
developments
related
to
any
of
the
items
identified
above. |
 12
Non-GAAP reconciliation: Tier 1 common
The following table provides calculations of Tier 1 capital (regulatory) and
"Tier 1 common equity" (non-GAAP). Traditionally, the Federal Reserve and other banking
regulatory bodies have assessed a bank's capital adequacy based on Tier 1 capital,
the calculation of which is prescribed in amount by federal banking regulations.
In connection with the Company's Comprehensive Capital Analysis and Review
("CCAR"), these regulators are supplementing their assessment of the capital
adequacy of a bank based on a variation of Tier 1 capital, known
as Tier 1 common equity. While not prescribed in amount by federal banking
regulations, analysts and banking regulators have assessed Regions'
capital adequacy using the Tier 1 common equity measure. Because Tier 1 common equity is not formally defined
by GAAP or prescribed in any amount by federal banking regulations, this measure is
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 Tier 1 common
equity, management believes that it is useful to provide investors the ability to
assess Regions' capital adequacy on this same basis. Tier 1 common equity is
often expressed as a percentage of risk-weighted assets. Under the risk-based capital framework, a company's balance sheet assets and
credit equivalent amounts of off-balance sheet items are assigned to one of
four broad risk categories. The aggregated dollar amount in each category is then
multiplied by the risk-weighted category. The resulting weighted values
from each of the four categories are added together and this sum is the risk-weighted assets
total that, as adjusted, comprises the denominator of certain risk-based
capital ratios. Tier 1 capital is then divided by this denominator (risk-weighted assets) to
determine the Tier 1 capital ratio. Adjustments are made to Tier 1 capital to
arrive at Tier 1 common equity (non-GAAP). Tier 1 common equity (non-GAAP) is also
divided by the risk-weighted assets to determine the Tier 1 common equity ratio
(non-GAAP). The amounts disclosed as risk-weighted assets are calculated
consistent with banking regulatory requirements.
($ amounts in millions)
3/31/13
12/31/12
9/30/12
6/30/12
3/31/12
As of
TIER
1
COMMON
RISK-BASED
RATIO
-
CONSOLIDATED
Stockholders' equity (GAAP)
15,740
15,499
$
14,901
$
14,455
$
17,534
$
Accumulated other comprehensive (income) loss
12
(65)
(202)
(54)
60
Non-qualifying goodwill and intangibles
(4,819)
(4,826)
(4,836)
(4,852)
(4,881)
Disallowed deferred tax assets
-
(35)
(238)
(336)
(345)
Disallowed servicing assets
(37)
(33)
(33)
(33)
(36)
Qualifying non-controlling interests
93
93
93
92
92
Qualifying trust preferred securities
501
501
846
846
846
Tier 1 capital (regulatory)
11,490
$
11,134
$
10,531
$
10,118
$
13,270
$
Qualifying non-controlling interests
(93)
(93)
(93)
(92)
(92)
Qualifying trust preferred securities
(501)
(501)
(846)
(846)
(846)
Preferred stock
(474)
(482)
-
-
(3,429)
Tier 1 common equity (non-GAAP)
A
10,422
$
10,058
$
9,592
$
9,180
$
8,903
$
Risk-weighted assets (regulatory)
B
92,787
92,811
91,723
91,779
92,546
Tier 1 common risk-based ratio (non-GAAP)
A/B
11.2%
10.8%
10.5%
10.0%
9.6% |
 13
Non-GAAP reconciliation: non-interest
income / expense, fee income ratios and
efficiency ratios
The table below presents computations of the efficiency ratio (non-GAAP), which
is a measure of productivity, generally calculated as non-interest expense divided by total revenue. The table also shows
the fee
income ratio (non-GAAP), generally calculated as non-interest income divided
by total revenue. Management uses these ratios 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. Net interest income on a taxable-equivalent basis and non-
interest income are added together to arrive at total revenue. Adjustments are
made to arrive at adjusted total revenue (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.
($ amounts in millions)
3/31/13
12/31/12
9/30/12
6/30/12
3/31/12
Continuing Operations
Non-interest expense (GAAP)
842
$
902
$
869
$
842
$
913
$
(60)
$
-6.7%
(71)
$
-7.8%
Adjustments:
REIT investment early termination costs
-
(42)
-
-
-
42
-100.0%
-
-
Loss on early extinguishment of debt
-
(11)
-
-
-
11
-100.0%
-
-
Securities impairment, net
-
-
-
(2)
-
-
-
-
-
Adjusted non-interest expense (non-GAAP)
A
842
$
849
$
869
$
840
$
913
$
(7)
$
-0.8%
(71)
$
-7.8%
Net interest income (GAAP)
798
$
818
$
817
$
838
$
827
$
(20)
$
-2.4%
(29)
$
-3.5%
Taxable-equivalent adjustment
13
13
13
12
12
-
-
1
8.3%
Net interest income, taxable-equivalent basis
811
831
830
850
839
(20)
-2.4%
(28)
-3.3%
Non-interest income (GAAP)
501
536
533
507
524
(35)
-6.5%
(23)
-4.4%
Adjustments:
Securities gains, net
(15)
(12)
(12)
(12)
(12)
(3)
25.0%
(3)
25.0%
Leveraged lease termination gains, net
-
-
-
(7)
(7)
-
-
7
-100.0%
Adjusted non-interest income (non-GAAP)
B
486
524
521
488
505
(38)
-7.3%
(19)
-3.8%
Adjusted total revenue (non-GAAP)
C
1,297
$
1,355
$
1,351
$
1,338
$
1,344
$
(58)
$
-4.3%
(47)
$
-3.5%
Adjusted fee income ratio (non-GAAP)
B/C
37.5%
38.7%
38.6%
36.5%
37.6%
Adjusted efficiency ratio (non-GAAP)
A/C
64.9%
62.7%
64.3%
62.8%
67.9%
Quarter Ended
1Q13 vs. 4Q12
1Q13 vs. 1Q12 |
 14
Non-GAAP reconciliation: Basel III
(1)
Under Basel III, regulatory capital must be reduced by purchased
credit card relationship intangible assets. These assets
are partially allowed in Basel I capital.
(2)
Regions continues to develop systems and internal controls to precisely calculate
risk-weighted assets as required by Basel III. The amount included
above is a reasonable approximation, based on our understanding of the requirements.
Estimate based on June
2012 U.S. Notices of
Proposed Rulemaking
($ amounts in millions)
3/31/13
Stockholders' equity (GAAP)
15,740
Non-qualifying goodwill and intangibles
(1)
(4,956)
Adjustments, including other comprehensive income related to cash flow hedges,
disallowed deferred tax assets,
threshold deductions and other adjustments
(301)
Non-Common Tier 1
(474)
Basel III Tier 1 Common (non-GAAP)
10,009
Basel I risk-weighted assets
92,787
Basel III risk-weighted assets
(2)
109,728
Basel III Tier 1 Common Ratio
9.1%
The following table provides calculations of Tier 1 common, based on Regions’ current
understanding of Basel III requirements, as proposed by the U.S. Notices of Proposed Rulemaking
released in June 2012. Regions currently calculates its risk-based capital ratios under guidelines adopted by the Federal Reserve based on the
1988 Capital Accord (“Basel I”) of the Basel Committee on Banking Supervision (the
“Basel Committee”). In December 2010, the Basel Committee released its final
framework for Basel III, which will strengthen international capital and liquidity regulation.
In June 2012, U.S. Regulators released three separate Notices of Proposed Rulemaking covering
U.S. implementation of the Basel III framework. When implemented by U.S. bank regulatory agencies and fully phased-in, Basel III will change
capital requirements and place greater emphasis on common equity. The Federal Reserve has
announced a delay in the implementation date of the final rules. However, when
implemented there will be a phase in period of up to 6 years. The calculations provided below are estimates, based on Regions’ current understanding
of the framework, including the Company’s reading of the requirements, and informal
feedback received through the regulatory process. Regions’ understanding of the
framework is evolving and will likely change as the regulations are finalized. Because the Basel
III implementation regulations are not formally defined by GAAP and have not yet been finalized
and codified, these measures are considered to be non-GAAP financial measures, and other entities may calculate them differently from
Regions’ disclosed calculations. Since analysts and banking regulators may assess
Regions’ capital adequacy using the Basel III framework, we believe that it is useful
to provide investors the ability to assess Regions’ capital adequacy on the same basis.
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