Revenue increases reflect growth in deposits and non-interest income
BIRMINGHAM, Ala.--(BUSINESS WIRE)--
Regions Financial Corporation (NYSE: RF) today announced earnings for
the third quarter ended September 30, 2016. The company reported net
income available to common shareholders of $304 million, an increase of
26 percent over the prior year and earnings per diluted share of $0.24,
an increase of 33 percent.
This Smart News Release features multimedia. View the full release here:
http://www.businesswire.com/news/home/20161018005414/en/
"These results demonstrate Regions is delivering solid revenue growth by
increasing deposits and non-interest income as we continue to execute
our strategic plan," said Grayson Hall, chairman, president and CEO. "In
light of a continued low interest rate environment, we are maintaining
our disciplined approach to risk management and our focus on increasing
efficiency while also continuing to make prudent investments in our
businesses to generate further long-term growth."
Third quarter 2016 results compared to second
quarter 2016:
-
Average loans and leases totaled $81.3 billion, a decrease of 1
percent.
-
Business lending balances decreased $979 million on an average
basis.
-
Consumer lending balances increased $302 million on an average
basis.
-
Average deposit balances totaled $97.9 billion, an increase of $439
million; low-cost deposits increased $330 million.
-
Net interest income and other financing income on a fully taxable
equivalent basis decreased $13 million or 1 percent. The resulting net
interest margin was 3.06 percent.
-
Non-interest income increased 14 percent, or 5 percent on an adjusted
basis(1).
-
Non-interest expenses increased 2 percent, or 3 percent on an adjusted
basis(1).
-
Allowance for loan and lease losses declined 2 basis points to 1.39
percent of total loans; the allowance for loan and lease losses
attributable to direct energy decreased from 9.4 percent of energy
loans outstanding to 7.9 percent.
-
Net charge-offs decreased 25 percent while non-accrual loans,
excluding loans held for sale, increased to 1.33 percent of loans
outstanding. Troubled debt restructured loans and total delinquencies
remained relatively flat.
-
The Common Equity Tier 1 ratio(2) was estimated at 11.1
percent at September 30, 2016. The fully phased-in pro-forma Common
Equity Tier 1 ratio(1)(2) was estimated at 11.0 percent and
the loan-to-deposit ratio was 81 percent.
Third quarter 2016 results compared to third
quarter 2015:
-
Average loans and leases increased $668 million or 1 percent.
-
Business lending balances decreased $591 million or 1 percent on
an average basis.
-
Consumer lending balances increased $1.3 billion or 4 percent on
an average basis.
-
Average deposit balances increased $770 million; low-cost deposits
increased $1.4 billion or 2 percent.
-
Net interest income and other financing income on a fully taxable
equivalent basis was relatively flat.
-
Non-interest income increased 21 percent, or 12 percent on an adjusted
basis(1).
-
Non-interest expenses increased 4 percent, or 2 percent on an adjusted
basis(1).
-
Net charge-offs decreased 10 percent and represented 0.26 percent of
average loans, and non-accrual loans, excluding loans held for sale,
increased from 0.97 percent to 1.33 percent of loans outstanding.
During the third quarter, the company received $47 million of insurance
proceeds related to a previously disclosed settlement with the
Department of Justice on behalf of the Department of Housing and Urban
Development regarding Federal Housing Administration (FHA) insured
mortgage loans endorsed by FHA insurance. Expenses related to the
settlement were accrued in prior periods. The company also received a
recovery of approximately $10 million related to the 2010 Gulf of Mexico
oil spill.
The company incurred $11 million of expense in the quarter associated
with Visa class B shares sold in a prior year. Also during the quarter,
the company completed a cash tender offer for Regions Financial
Corporation's 2.00% Senior Notes due 2018. Approximately $649 million of
the $750 million aggregate principal amount outstanding were tendered
resulting in a $14 million charge for the early extinguishment.
Additionally, Regions incurred $5 million of expenses related to the
branch consolidations announced during the second quarter; the branches
are expected to close during the fourth quarter of 2016.
Comparison of third quarter 2016 to second quarter
2016
Total revenue on a fully taxable equivalent basis was $1.46 billion in
the third quarter, an increase of $60 million. On an adjusted basis(1),
total revenue on a fully taxable equivalent basis increased $11 million
or 1 percent. Net interest income and other financing income on a fully
taxable equivalent basis was $856 million, a decrease of $13 million or
1 percent, and the resulting net interest margin was 3.06 percent. Net
interest income and other financing income was negatively impacted by an
increase in premium amortization, a leveraged lease residual value
adjustment, and lower loan balances. These decreases were partially
offset by higher short-term rates and one additional day in the quarter.
Non-interest income totaled $599 million, an increase of $73 million or
14 percent, which included insurance proceeds recognized in the current
quarter. On an adjusted basis(1), the company produced
another strong quarter of non-interest income increasing 5 percent,
driven by revenue diversification initiatives with growth in almost
every category. This growth was led by capital markets, card & ATM fees,
and wealth management income.
The capital markets group achieved record fee income during the quarter
increasing $4 million or 11 percent from the prior quarter primarily due
to contributions from the mergers and acquisition advisory services
group. Card & ATM income increased 6 percent as the number of active
cards and spend volume increased during the quarter. The wealth
management group also achieved record income during the quarter
increasing $4 million or 4 percent. The current quarter growth was
driven by increased investment management and trust fees as assets under
administration increased 5 percent from $88.1 billion to $92.6 billion.
Mortgage income was stable during the quarter as increased gains from
loan sales were offset by declines in the market valuation of mortgage
servicing rights and related hedging activity. Within total mortgage
production, 67 percent was related to purchase activity and 33 percent
was related to refinancing.
Consistent with its ongoing efforts to grow and diversify revenue, the
company recently announced the acquisition of the low income housing tax
credit corporate fund syndication and asset management businesses of
First Sterling Financial. This acquisition complements Regions' existing
low income housing tax credit origination business and further expands
its capital markets capabilities to serve more clients and communities.
Included in other non-interest income, Regions recognized a recovery of
approximately $10 million related to the 2010 Gulf of Mexico oil spill
during the quarter. The company also recognized an $8 million leveraged
lease termination gain during the quarter, which was substantially
offset by a related increase in income taxes. Additionally, the net
change to market value adjustments related to employee benefit assets
decreased $4 million. These market value adjustments are offset in
salaries and benefits expense resulting in no impact to pre-tax income.
Comparison of third quarter 2016 to third quarter
2015
Total revenue on a fully taxable equivalent basis increased $103 million
or 8 percent compared to the third quarter of 2015. On an adjusted basis(1),
total revenue on a fully taxable equivalent basis increased $61 million
or 5 percent. Net interest income and other financing income on a fully
taxable equivalent basis was relatively flat. The benefit of higher
short-term interest rates, higher loan balances and balance sheet
optimization strategies were offset by higher borrowing costs, a
leveraged lease residual value adjustment, lower loan fees, and lower
dividends received on Federal Reserve Bank stock.
Non-interest income increased $102 million or 21 percent compared to the
third quarter of 2015. On an adjusted basis(1), non-interest
income increased $60 million or 12 percent driven by increased capital
markets income, card & ATM income, mortgage income and wealth management
income. Capital markets income increased $13 million or 45 percent as
the company expanded merger and acquisition advisory service offerings
and generated additional fees from the placement of permanent financing
for real estate customers. Card & ATM income increased $12 million or 13
percent compared to the third quarter of 2015, primarily due to an
increase in transaction volume as the company grew active debit and
credit cards. Mortgage income increased $7 million or 18 percent due to
increased gains from loan sales partially offset by declines in the
market valuation of mortgage servicing rights and related hedging
activity. Also during the quarter, the company purchased the rights to
service approximately $2.8 billion of mortgage loans. Regions' mortgage
portfolio serviced for others has increased from approximately $26
billion to $30 billion over the past year contributing to an increase in
mortgage servicing income. In addition, wealth management income
improved $5 million or 5 percent due to increased investment management
and trust fees. Market value adjustments related to assets held for
certain employee benefits also increased $9 million compared to the
prior year. Service charges were relatively flat as income associated
with growing checking accounts 2 percent effectively offset the impact
of posting order changes that went into effect in November of 2015.
Comparison of third quarter 2016 to second quarter
2016
Non-interest expense totaled $934 million in the third quarter, an
increase of $19 million or 2 percent. On an adjusted basis(1),
non-interest expense increased $23 million or 3 percent. Total
salaries and benefits increased $6 million and included increases for
one additional weekday in the quarter as well as increased
production-based incentives related to capital markets income growth. In
addition, severance expense increased $2 million over the same period.
These increases were partially offset by reduced expenses related to
market value adjustments associated with assets held for certain
employee benefits, which are offset in non-interest income. Staffing
levels declined 232 positions or 1 percent compared to the second
quarter, and are down 1,178 positions or just over 5 percent
year-to-date.
Professional, legal and regulatory expenses increased $8 million
primarily due to increased legal reserves. FDIC insurance assessments
increased $12 million from the second quarter including $5 million
related to the implementation of the FDIC assessment surcharge. In
addition, the second quarter of 2016 FDIC insurance assessment benefited
from a $6 million refund related to overpayments in prior periods. The
company also incurred $11 million of expense related to Visa class B
shares sold in a prior year and $8 million for unfunded commitments
during the quarter.
The company's efficiency ratio was 64.2 percent in the third quarter and
64.1 percent year-to-date. The adjusted efficiency ratio(1)
was 65.3 percent in the quarter and 63.3 percent year-to-date. The
company has generated 3 percent positive operating leverage year-to-date
on an adjusted basis(1). In the current operating environment
with continued low interest rates, the company remains committed to
disciplined expense management and is taking steps to continue to
improve efficiencies and lower costs.
The effective tax rate for the third quarter was 32.2 percent compared
to 29.7 percent in the second quarter. The current quarter increase is
primarily due to higher pre-tax income and the termination of certain
leveraged leases. The effective tax rate is expected to be in the 29 to
31 percent range for the full year of 2016.
Comparison of third quarter 2016 to third quarter
2015
Non-interest expense increased $39 million or 4 percent from the third
quarter of last year, and includes the impact of a $14 million charge
related to the early extinguishment of debt recognized in the current
quarter. Non-interest expense increased $18 million or 2 percent on an
adjusted basis(1). Total salaries and benefits increased $16
million from the previous year, primarily attributable to increased
incentives related to revenue initiatives partially offset by the impact
of staffing reductions. Year-over-year, staffing levels have declined
1,208 positions or 5 percent. Occupancy expense decreased $3 million
from the previous year reflecting the benefits from property-related
optimization and efficiency initiatives. The company also incurred
branch consolidation, property and equipment charges totaling $5 million
in the third quarter of 2016 compared to $1 million in the third quarter
of the prior year. FDIC insurance assessments decreased $17 million;
however, the prior year included $23 million of additional expense
related to prior period assessments.
Comparison of third quarter 2016 to second quarter
2016
Average loans and leases were $81.3 billion for the third quarter, a
decrease of $677 million or 1 percent. Average balances in the consumer
lending portfolio increased $302 million or 1 percent. The increase in
average consumer loans was more than offset by a decline in the business
lending portfolio as average balances decreased $979 million or 2
percent.
The consumer lending portfolio experienced another quarter of solid
growth. Residential first mortgage balances increased $259 million
reflecting another seasonally strong quarter of production.
Indirect-other increased $93 million or 14 percent as the company
continued to grow its point-of-sale portfolio. Consumer credit card
balances increased $44 million as active credit cards increased 3
percent. Other consumer loans increased $36 million or 3 percent
primarily due to growth in unsecured loans. These increases were
partially offset by home equity balances which decreased $94 million as
the pace of run-off exceeded production. Indirect-vehicle lending
balances also decreased $36 million or 1 percent as the company
continues to focus on growing its preferred dealer network while exiting
certain smaller dealers.
The decrease in average business services loans during the quarter was
driven by an approximate $300 million decrease in average direct energy
loans. In addition, loan growth was impacted by continued softness in
demand for middle market commercial and small business loans, management
of concentration risk limits, and a continued focus on achieving
appropriate risk-adjusted returns. The company remains focused on
prudent loan growth with a continued emphasis on diversification and
profitability.
Comparison of third quarter 2016 to third quarter
2015
Average loans and leases increased $668 million or 1 percent over the
prior year as growth in the consumer lending portfolios exceeded a
decline in the business lending portfolio. Adjusting for the impact of
operating leases reclassified from loans into other earning assets in
the fourth quarter of 2015, average loans and leases increased $1.4
billion or 2 percent over the prior year(1).
The consumer lending portfolio experienced growth in almost every
product category as average balances increased $1.3 billion or 4 percent
from the prior year. Residential first mortgage balances increased $600
million or 5 percent benefiting from continued low interest rates.
Indirect-other increased $340 million or 77 percent, as the company
continued to execute its point-of-sale initiatives. Indirect-vehicle
lending balances increased $250 million or 6 percent. Consumer credit
card balances increased $106 million or 11 percent as active credit
cards increased 12 percent, and the company's penetration rate of
deposit customers increased 130 basis points over the prior year to
approximately 18.2 percent. In addition, other consumer loans increased
$90 million or 9 percent primarily due to growth in unsecured loans.
These increases were partially offset by home equity balances which
decreased $127 million as the pace of run-off exceeded production.
Average business lending balances decreased $591 million or 1 percent
primarily due to declines in direct energy loans and owner-occupied
commercial real estate loans. Adjusting for the impact of operating
leases reclassified from loans into other earning assets in the fourth
quarter of 2015, average business lending loans increased $170 million
or 0.3 percent over the prior year(1). The declines in direct
energy loans are the result of energy customers appropriately working
down their bank debt in response to lower oil prices. The declines in
owner-occupied commercial real estate mortgage loans reflect the
softness in loan demand from middle market and small business customers,
and the competitive market for this asset class.
Comparison of third quarter 2016 to second quarter
2016
Total average deposit balances were $98 billion in the third quarter,
reflecting an increase of $439 million compared to the prior quarter.
Average low-cost deposits increased $330 million and represented 92
percent of average deposits. Deposit costs remained near historical lows
at 12 basis points, and total funding costs were 30 basis points in the
third quarter.
Average deposits in the Consumer segment increased $483 million or 1
percent from the prior quarter. Average Corporate segment deposits
increased $675 million or 2 percent, while average deposits in the
Wealth Management segment declined $637 million or 6 percent as a result
of ongoing strategic reductions of certain collateralized deposits.
Comparison of third quarter 2016 to third quarter
2015
Total average deposit balances increased $770 million from the prior
year. Average low-cost deposits increased $1.4 billion or 2 percent.
Average deposits in the Consumer segment increased $2.3 billion or 4
percent from the prior year and average Corporate segment deposits
increased $802 million or 3 percent. Average deposits in the Wealth
Management segment declined $1.7 billion or 14 percent.
Comparison of third quarter 2016 to second quarter
2016
Net charge-offs totaled $54 million, an $18 million decrease from the
previous quarter. Net charge-offs as a percent of average loans were
0.26 percent compared to 0.35 percent in the second quarter. The
provision for loan losses was $25 million less than net charge-offs
primarily attributable to a reduction in loans outstanding and the
overall net improvement in the energy portfolio. The resulting allowance
for loan and lease losses declined to 1.39 percent of total loans
outstanding. Total non-accrual loans, excluding loans held for sale,
increased to 1.33 percent of loans outstanding. Troubled debt
restructured loans and total delinquencies were relatively flat while
total business services criticized loans increased 2 percent. At
quarter-end, the company's allowance for loan losses as a percent of
non-accrual loans, or coverage ratio, was approximately 104 percent.
Charge-offs related to the company's energy portfolio totaled $6 million
in the quarter. Additionally, there were five large energy and
energy-related loans which primarily drove the increase in non-accrual
loans. However, the increased provision associated with these loans was
more than offset by credit quality improvement in the balance of the
energy portfolio driven by continued energy price stabilization as well
as declines in loans outstanding. The allowance for loan and lease
losses associated with the direct energy loan portfolio decreased to 7.9
percent in the third quarter compared to 9.4 percent in the second
quarter. Given the current phase of the credit cycle, volatility in
certain credit metrics can be expected, especially related to
large-dollar commercial credits and fluctuating commodity prices.
Comparison of third quarter 2016 to third quarter
2015
Net charge-offs decreased 10 percent compared to the third quarter of
2015, and represented 0.26 percent of average loans compared to 0.30
percent in the prior year. The allowance for loan and lease losses as a
percent of total loans increased 1 basis point.
Total non-accrual loans, excluding loans held for sale, increased from
0.97 percent to 1.33 percent of loans outstanding driven primarily by
deterioration in the energy portfolio, while troubled debt restructured
loans increased 2 percent. Total business services criticized loans
increased 15 percent, primarily related to risk rating migration in the
energy portfolio.
Under the Basel III capital rules, Regions' estimated capital ratios
remain well above current regulatory requirements. The Tier 1(2)
and Common Equity Tier 1(2) ratios were estimated at 11.9
percent and 11.1 percent, respectively, at quarter-end under the
phase-in provisions. In addition, the Common Equity Tier 1 ratio(1)(2)
was estimated at 11.0 percent on a fully phased-in basis.
During the third quarter, the company repurchased $215 million or 23
million shares of common stock, and declared $81 million in dividends to
common shareholders. The company returned 97 percent of third quarter
earnings to shareholders. The company's liquidity position remained
solid with its loan-to-deposit ratio at the end of the quarter at 81
percent, and, as of quarter-end, the company remained fully compliant
with the liquidity coverage ratio rule.
(1) Non-GAAP, refer to pages 11, 12, 19 and 23 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 from Tuesday, October
18, 2016, at 2 p.m. ET through Friday, November 18, 2016. To listen by
telephone, please dial 1-855-859-2056, and use access code 81336524. An
archived webcast will also be available until November 18 on the
Investor Relations page of www.regions.com.
About Regions Financial Corporation
Regions Financial Corporation (NYSE: RF), with $125 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, mortgage, and insurance products and services. Regions
serves customers across the South, Midwest and Texas, and through its
subsidiary, Regions Bank, operates approximately 1,600 banking offices
and 2,000 ATMs. 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, which reflect Regions'
current views with respect to future events and financial performance.
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:
-
Current and future economic and market conditions in the United States
generally or in the communities we serve, including the effects of
declines in property values, unemployment rates 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.
-
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.
-
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.
-
Any impairment of our goodwill or other intangibles, or any adjustment
of valuation allowances on our deferred tax assets due to adverse
changes in the economic environment, declining operations of the
reporting unit, or other factors.
-
Possible changes in the creditworthiness of customers and the possible
impairment of the collectability of loans.
-
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.
-
Our ability to effectively compete with other financial services
companies, some of whom possess greater financial resources than we do
and are subject to different regulatory standards than we are.
-
Loss of customer checking and savings account deposits as customers
pursue other, higher-yield investments, which could increase our
funding costs.
-
Our inability to develop and gain acceptance from current and
prospective customers for new products and services in a timely manner
could have a negative impact on our revenue.
-
The effects of any developments, changes or actions relating to any
litigation or regulatory proceedings brought against us or any of our
subsidiaries.
-
Changes in laws and regulations affecting our businesses, such as the
Dodd-Frank Act and other 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 and intensity of such tests and requirements.
-
Our ability to comply with applicable capital and liquidity
requirements (including, among other things, the Basel III capital
standards and the LCR rule), 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 Basel III framework calls for additional risk-based capital
surcharges for globally systemically important banks. Although we are
not subject to such surcharges, it is possible that in the future we
may become subject to similar surcharges.
-
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 success of our marketing efforts in attracting and retaining
customers.
-
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 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.
-
The risks and uncertainties related to our acquisition and integration
of other companies.
-
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.
-
The inability of our internal disclosure 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,
which may negatively affect our operations and/or our loan portfolios
and increase our cost of conducting business.
-
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 inability to keep pace with technological changes could result in
losing business to competitors.
-
Our ability to identify and address cyber-security risks such as data
security breaches, "denial of service" attacks, "hacking" and identity
theft, a failure of which could disrupt our business and result in the
disclosure of and/or misuse or misappropriation of confidential or
proprietary information; increased costs; losses; or adverse effects
to our reputation.
-
Our ability to realize our efficiency ratio target as part of our
expense management initiatives.
-
Significant disruption of, or loss of public confidence in, the
Internet and services and devices used to access the Internet could
affect the ability of our customers to access their accounts and
conduct banking transactions.
-
Possible downgrades in our credit ratings or outlook could increase
the costs of funding from capital markets.
-
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 stockholders.
-
Changes in accounting policies or procedures as may be required by the
FASB or other regulatory agencies could materially affect how we
report our financial results.
-
Other risks identified from time to time in reports that we file with
the SEC.
-
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, 2015, as filed with the Securities and Exchange Commission.
The words "anticipates," "intends," "plans," "seeks," "believes,"
"estimates," "expects," "targets," "projects," "outlook," "forecast,"
"will," "may," "could," "should," "can," 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.
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 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. Net
interest income and other financing income 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.
The calculation of the fully phased-in pro-forma "Common equity Tier 1"
(CET1) is based on Regions' understanding of the Final Basel III
requirements. For Regions, the Basel III framework became effective on a
phased-in approach starting in 2015 with full implementation beginning
in 2019. The calculation includes estimated pro-forma amounts for the
ratio on a fully phased-in basis. Regions' current understanding of the
final framework includes certain assumptions, 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 Regions is not currently subject to the
fully-phased in capital rules, this pro-forma measure is considered to
be a non-GAAP financial measure, and other entities may calculate it
differently from Regions' disclosed calculation.
A company's regulatory capital 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 broad risk categories. The
aggregated dollar amount in each category is then multiplied by the
prescribed risk-weighted percentage. The resulting weighted values from
each of the 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. CET1 capital is then divided by
this denominator (risk-weighted assets) to determine the CET1 capital
ratio. The amounts disclosed as risk-weighted assets are calculated
consistent with banking regulatory requirements on a fully phased-in
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: http://www.businesswire.com/news/home/20161018005414/en/
Regions Financial Corporation
Media:
Evelyn
Mitchell, 205-264-4551
or
Investor Relations:
Dana
Nolan, 205-264-7040
Source: Regions Financial Corporation
News Provided by Acquire Media