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| 8-K - 8-K - REGIONS FINANCIAL CORP | d593054d8k.htm |
 1
Barclays Global Financial
Services Conference
September 10, 2013
David Turner
Chief Financial Officer
Exhibit 99.1 |
 2
2013 Imperatives
We remain focused on three key imperatives in 2013:
2013 Imperatives
Grow loans
Grow Quality
Households
Continue to Manage
Expenses
•
Leveraged specialized
lending groups
•
Expanded indirect dealer
network
•
Developed home equity
loan product
Execute
•
Committed to customer
service
•
Emphasis on providing
products and services
that meet customers’
needs and preferences
at a fair price
•
Expense control is part of
our culture, not just a
campaign
•
Invest in people, products
and technology to enhance
our productivity and
efficiency |
 3
Loans grew $1.1B linked quarter
Total Loan Balances
(1)
($ in millions)
(1)
Ending balances
Note: Peer banks include BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC,
ZION Source: SNL Financial
Loan Growth vs Peers
•
Total loan balances grew $1.1
billion linked quarter
•
Commercial and industrial loans
increased 5% linked quarter
•
Investor real estate portfolio
experienced more modest pace
of decline
•
Indirect auto production up 21%
linked quarter as dealer network
expands
•
Credit card balances were up
as the number of card holders
increased over 2%
•
Continue to project loan growth
in the low single-digits for 2013 |
 4
Broad based loan growth
•
Almost 70% of our areas experienced
loan growth during 2Q13
•
All loan categories experienced an
increase in loan production
•
Business lending experienced loan
growth in several areas:
•
Regions Business Capital
•
Real Estate Corporate Banking
•
Healthcare
•
Transportation
•
Technology
•
Continue to expand customer base
which includes business, consumer
and wealth customers
Linked quarter loan growth by county |
 5
Lower deposit costs driven by deposit mix
Deposit Balances
(1)
and Deposit Costs
($ in millions)
(1)
Average balances |
 6
Continued increases in net interest margin
Note: Peer banks include BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC,
ZION Source: SNL Financial
Net Interest Margin vs. Peer Median
35 bps
Variance
18 bps
Variance
2Q13 vs. 1Q13 Net Interest Margin
Change |
 7
Interest rate sensitivity summary
Net interest income remains asset sensitive to increases in both
short-term
and longer-term rates
(1)
NII impact due to instantaneous rate versus base case scenario
*Based on market forward rates as of June 30, 2013
12-
Month Net Interest Income Impact From
Incremental Longer-term Rate Increases
(1)
LT Rate Change
NII Impact
+100 bps
+$119 MM
-50 bps
-$66 MM
12-
Month Net Interest Income Impact From
Incremental Short-term Rate Increases
(1)
ST Rate Change
NII Impact
+100 bps
+$78MM
-50 bps
-$51MM
•
As long-term rates rise, reinvestment yields are more favorable in the
securities portfolio •
Premium amortization declines as mortgage prepayments slow
•
Securities portfolio consists of $20 billion or 84% mortgage-backed
securities |
 8
Non-interest revenue relatively flat
•
Mortgage income was slightly down
•
Mortgage loan production was
$1.9 billion dollars, an
increase of 6% over the prior
quarter
•
Service charges income was
impacted by lower NSF fees
•
Experienced an increase in
net checking accounts and
number of households
•
Continued focus on other revenue
generating products and services,
such as Now banking suite of
products
Non-Interest Revenue
($ in millions) |
 9
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)
2Q13 vs. 1Q13 % Change |
 10
Continued asset quality improvement
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
($ in millions)
$265
$262
$180
$180
$144
3.01%
2.18%
1.76%
2.14%
2Q12
3Q12
4Q12
1Q13
2Q13
2Q12
3Q12
4Q12
1Q13
2Q13
1.39%
1.38%
0.96%
0.99%
0.77%
Regions
Peer Group Median |
 11
Strong capital position
(1)
Non-GAAP
–
See
appendix
for
reconciliation
(2)
Peer banks include BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC,
ZION (3)
Peer banks include BBT, CMA, FHN, FITB, KEY, PNC, STI, USB, WFC
Source: SNL Financial
Basel III Tier 1 Common Ratio
(1) (3)
Tier 1 Common Ratio
(1) (2)
Bank #8
Bank #10
Bank #4
Bank #7
Bank #5
Bank #6
Bank #3
Bank #9
Bank #1
10.0%
10.5%
10.8%
11.2%
11.1%
10.2%
10.1%
10.0%
9.9%
9.8%
10.8%
10.3%
9.5%
9.3%
9.1%
8.9%
8.6%
8.3%
8.2%
8.1%
2Q12
3Q12
4Q12
1Q13
2Q13
Peer Median
Regions |
 12
2013 Imperatives
We remain focused on three key imperatives in 2013:
2013 Imperatives
Grow loans
Grow Quality
Households
Continue to Manage
Expenses
•
Leveraged specialized
lending groups
•
Expanded indirect dealer
network
•
Developed home equity
loan product
Execute
•
Committed to customer
service
•
Emphasis on providing
products and services
that meet customers’
needs and preferences
at a fair price
•
Expense control is part of
our culture, not just a
campaign
•
Invest in people, products
and technology to enhance
our productivity and
efficiency |
 13
Appendix |
 14
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 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
may
have
significant
effects
on
Regions
and
the
financial
services
industry,
the
exact
nature
and
extent
of
which
cannot
be
determined
at
this
time.
>Current
developments
in
recent
litigation
against
the
Board
of
Governors
of
the
Federal
Reserve
System
could
result
in
possible
reductions
in
the
maximum
permissible
interchange
fee
that
an
issuer
may
receive
for
electronic
debit
transactions
and/or
the
possible
expansion
of
providing
merchants
with
the
choice
of
multiple
unaffiliated
payment
networks
for
each
transaction,
each
of
which
could
negatively
impact
the
income
Regions
currently
receives
with
respect
to
those
transactions.
>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
adverse
changes
in
general
economic
and
business
conditions
in
the
United
States
in
general
and
in
the
communities
Regions
serves
in
particular.
>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.
>Regions’
ability
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
issue
or
redeem
preferred
stock
or
other
regulatory
capital
instruments,
is
subject
to
the
review
of
such
proposed
actions
by
the
Federal
Reserve
as
part
of
Regions’
comprehensive
capital
plan
for
the
applicable
period
in
connection
with
the
regulators’
Comprehensive
Capital
Analysis
and
Review
(CCAR)
process
and
to
the
acceptance
of
such
capital
plan
and
non-objection
to
such
capital
actions
by
the
Federal
Reserve.
>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.
>Cyber-security
risks,
including
“denial
of
service,”
“hacking”
and
“identity
theft,”
that
could
adversely
affect
our
business
and
financial
performance,
or
our
reputation.
>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,
regulatory
risk,
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,
tornadoes 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.
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 "Foward-Looking Statements" section of Regions' Quarterly Reports on Form
10-Q for the quarters ended March 31 and June 30, 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.
Forward-looking statements |
 15
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
(under
Basel
I),
analysts
and
banking
regulators
have
assessed
Regions'
capital
adequacy
using
th
e 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
(under
Basel
I),
this
measure
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
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)
6/30/13
3/31/13
12/31/12
9/30/12
6/30/12
As of and for Quarter Ended
Stockholders' equity (GAAP)
15,329
$
15,740
$
15,499
$
14,901
$
14,455
$
Accumulated other comprehensive (income) loss
478
12
(65)
(202)
(54)
Non-qualifying goodwill and intangibles
(4,812)
(4,819)
(4,826)
(4,836)
(4,852)
Disallowed deferred tax assets
-
-
(35)
(238)
(336)
Disallowed servicing assets
(30)
(37)
(33)
(33)
(33)
Qualifying non-controlling interests
-
93
93
93
92
Qualifying trust preferred securities
3
501
501
846
846
Tier 1 capital (regulatory)
10,968
$
11,490
$
11,134
$
10,531
$
10,118
$
Qualifying non-controlling interests
-
(93)
(93)
(93)
(92)
Qualifying trust preferred securities
(3)
(501)
(501)
(846)
(846)
Preferred stock
(466)
(474)
(482)
-
-
Tier 1 common equity (non-GAAP)
A
10,499
$
10,422
$
10,058
$
9,592
$
9,180
$
Risk-weighted assets (regulatory)
B
94,640
92,787
92,811
91,723
91,779
Tier 1 common risk-based ratio (non-GAAP)
A/B
11.1%
11.2%
10.8%
10.5%
10.0%
TIER 1 COMMON RISK-BASED RATIO - CONSOLIDATED
|
 16
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)
6/30/13
3/31/13
12/31/12
9/30/12
6/30/12
Continuing Operations
Non-interest expense (GAAP)
884
$
842
$
902
$
869
$
842
$
42
$
5.0%
42
$
5.0%
Adjustments:
REIT investment early termination costs
-
-
(42)
-
-
-
NM
-
NM
Loss on early extinguishment of debt
(56)
-
(11)
-
-
(56)
NM
(56)
NM
Securities impairment, net
-
-
-
-
(2)
-
NM
2
-100.0%
Adjusted non-interest expense (non-GAAP)
A
828
$
842
$
849
$
869
$
840
$
(14)
$
-1.7%
(12)
$
-1.4%
Net interest income (GAAP)
808
$
798
$
818
$
817
$
838
$
10
$
1.3%
(30)
$
-3.6%
Taxable-equivalent adjustment
13
13
13
13
12
-
NM
1
8.3%
Net interest income, taxable-equivalent basis
821
811
831
830
850
10
1.2%
(29)
-3.4%
Non-interest income (GAAP)
497
501
536
533
507
(4)
-0.8%
(10)
-2.0%
Adjustments:
Securities gains, net
(8)
(15)
(12)
(12)
(12)
7
-46.7%
4
-33.3%
Leveraged lease termination gains, net
-
-
-
-
(7)
-
NM
7
-100.0%
Adjusted non-interest income (non-GAAP)
B
489
486
524
521
488
3
0.6%
1
0.2%
Adjusted total revenue (non-GAAP)
C
1,310
$
1,297
$
1,355
$
1,351
$
1,338
$
13
$
1.0%
(28)
$
-2.1%
Adjusted efficiency ratio (non-GAAP)
A/C
63.1%
64.9%
62.7%
64.3%
62.8%
Adjusted fee income ratio (non-GAAP)
B/C
37.3%
37.5%
38.7%
38.6%
36.5%
Quarter Ended
vs. 1Q13
vs. 2Q12
2Q13
2Q13 |
 17
Non-GAAP reconciliation: Basel III
(1)
Under Basel III, in addition to goodwill and other identified intangibles
regulatory capital must be reduced by purchased credit card relationship
intangible assets. The majority of these assets are 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.
The
following
table
provides
calculations
of
Tier
1
common,
based
on
Regions’
current
understanding
of
the
Final
Basel
III
requirements,
released
in
July
2013.
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.
In
July
2013,
U.S.
Regulators
released
final
rules
covering
the
U.S.
implementation
of
the
Basel
III
framework,
which
will
change
capital
requirements
and
place
greater
emphasis
on
common
equity.
For
Regions,
the
Basel
III
framework
will
be
phased
in
beginning
in
2015
with
full
implementation
complete
beginning
in
2019.
The
calculations
provided
below
are
estimates,
based
on
Regions’
current
understanding
of
the
final
framework,
including
the
Company’s
interpretation
of
the
requirements,
and
informal
feedback
received
through
the
regulatory
process.
Regions’
understanding
of
the
framework
is
evolving
and
will
likely
change
as
analysis
and
discussions
with
regulators
continue.
Because
the
Basel
III
implementation
regulations
are
not
formally
defined
by
GAAP,
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.
Estimate based on July
2013 Final Rules
($ amounts in millions)
6/30/2013
Stockholders' equity (GAAP)
15,329
$
Non-qualifying goodwill and intangibles
(1)
(4,946)
Final Rules Adjustments
Adjustments, including all components of Accumulated Other Comprehensive Income,
disallowed deferred tax assets,
threshold deductions and other adjustments
291
Non-Common Tier 1
(466)
Basel III Tier 1 Common (non-GAAP)
10,208
$
Basel I risk-weighted assets
94,640
Basel III risk-weighted assets
(2)
99,048
Basel III Tier 1 Common Ratio
10.3% |
 18 |