BIRMINGHAM, Ala.--(BUSINESS WIRE)--
Regions Financial Corporation (NYSE:RF) today announced earnings for the
second quarter ended June 30, 2017. The company reported net income
available to common shareholders from continuing operations of $301
million, an increase of 18 percent compared to the second quarter of
2016 and 8 percent compared to the first quarter of 2017. Earnings per
diluted share from continuing operations were $0.25, an increase of 25
percent from the second quarter of 2016 and 9 percent from the first
quarter of 2017.
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"We are pleased with our second quarter results, which demonstrate that
we are continuing to execute our strategic plan to build long-term,
sustainable growth while delivering value to our customers, communities
and shareholders," said Grayson Hall, Chairman, President and CEO.
"Regions' strong capital position led to another successful completion
of the Comprehensive Capital Analysis and Review (CCAR) process. We
remain committed to increasing shareholder returns while making prudent
investments to position our company to meet more customers' needs
through deeper relationships and a well-diversified business. Further,
our disciplined approach to credit continues to deliver positive results
as we reported improvements in almost every credit metric."
Hall added, "During the second quarter, Regions also received further
recognition for its approach to business. Based on customer feedback,
Javelin Strategy & Research recognized Regions as a Trust in Banking
Leader reflecting our reliability in meeting customers' needs and the
confidence our customers have in Regions to look out for their best
interests. Regions also received the Gallup Great Workplace Award for
the third consecutive year. These examples illustrate how Regions'
comprehensive approach to providing financial services creates greater
value for all of our stakeholders."
Second quarter 2017 results compared to first
quarter 2017:
-
Net interest income and other financing income on a fully taxable
equivalent basis increased 3 percent; the resulting net interest
margin was 3.32 percent, up 7 basis points.
-
Non-interest income increased 3 percent, and 2 percent on an adjusted
basis(1).
-
Non-interest expenses increased 4 percent, and 3 percent on an
adjusted basis(1).
-
Average loans and leases remained relatively stable at $80.1 billion.
-
Consumer lending balances decreased $87 million on an average
basis.
-
Business lending balances increased $19 million on an average
basis.
-
Average deposit balances totaled $97.5 billion, a decrease of $478
million or less than 1 percent; low-cost deposits decreased $335
million.
-
Allowance for loan and lease losses declined 3 basis points to 1.30
percent of total loans; the allowance for loan and lease losses
attributable to direct energy loans increased from 6.1 percent to 6.9
percent.
-
Net charge-offs decreased 17 basis points to 0.34 percent of average
loans, and non-accrual loans, excluding loans held for sale, decreased
18 percent to 1.03 percent of loans outstanding.
Second quarter 2017 results compared to second
quarter 2016:
-
Net interest income and other financing income on a fully taxable
equivalent basis increased 4 percent; the resulting net interest
margin increased 17 basis points.
-
Non-interest income was relatively flat on both a reported and
adjusted basis(1).
-
Non-interest expenses decreased 1 percent, but increased 1 percent on
an adjusted basis(1).
-
Average loans and leases decreased $1.9 billion or 2 percent.
-
Consumer lending balances increased 1 percent on an average basis.
-
Business lending balances decreased 4 percent on an average basis.
-
Average deposit balances remained relatively stable; while low-cost
deposits increased $325 million.
-
Net charge-offs decreased 1 basis points to 0.34 percent of average
loans, and non-accrual loans, excluding loans held for sale, decreased
20 percent to 1.03 percent of loans outstanding.
The company continues to optimize its retail network and incurred $7
million of expenses during the second quarter primarily associated with
the consolidation of 22 additional branches expected to close during the
fourth quarter of 2017. A previously announced consolidation of 27
branches were closed during the second quarter. Together, this will
bring the total number of consolidated branches since the fourth quarter
of 2015 to approximately 160, exceeding the company's previous
commitment to consolidate at least 150 branches by the end of 2017. The
consolidations are part of Regions' ongoing efficiency initiatives as
the company refines its branch network while also making prudent
investments in new technologies, delivery channels and other areas of
growth.
In addition, the company recognized $5 million of deferred gains in the
second quarter associated with the sale of $171 million of affordable
housing residential mortgage loans to Freddie Mac during the fourth
quarter of 2016. The company also incurred a $10 million pension-related
settlement charge during the second quarter, and a $7 million impairment
charge reducing the value of certain operating lease assets. The pension
settlement charge is included in salaries and employee benefits, and the
operating lease impairment charge is recorded as a reduction in other
non-interest income.
Comparison of second quarter 2017 to first quarter
2017
Total revenue on a fully taxable equivalent basis was $1.43 billion in
the second quarter, an increase of $38 million or 3 percent compared to
the first quarter of 2017. On an adjusted basis(1), total
revenue on a fully taxable equivalent basis increased $32 million or 2
percent from the prior quarter.
Net interest income and other financing income on a fully taxable
equivalent basis was $904 million, an increase of $23 million or 3
percent. The resulting net interest margin was 3.32 percent, an increase
of 7 basis points. Net interest margin and net interest income and other
financing income benefited from higher market interest rates, as well as
favorable credit-related interest recoveries. Further, one additional
day in the quarter resulted in an increase to net interest income and
other financing income of approximately $5 million, but reduced net
interest margin by approximately 2 basis points.
Non-interest income totaled $525 million, an increase of $15 million or
3 percent. This included the recognition of a $5 million deferred gain
associated with the sale of affordable housing residential mortgage
loans during the fourth quarter of 2016, and an operating lease
impairment charge of $7 million included in other non-interest income
during the second quarter compared to a $5 million impairment charge
recorded in the first quarter. On an adjusted basis(1),
non-interest income increased $9 million or 2 percent primarily due to
increases in capital markets income and bank-owned life insurance.
Capital markets income increased $6 million or 19 percent during the
quarter driven primarily by fees generated from the placement of
permanent financing for real estate customers and merger and acquisition
advisory services. Bank-owned life insurance increased $3 million or 16
percent.
Mortgage production increased 25 percent during the quarter, while
mortgage income remained relatively stable. Within total mortgage
production, 80 percent was related to purchase activity and 20 percent
was related to refinancing. An increase in mortgage servicing income was
offset by modest spread compression and lower hedging gains. The company
completed its purchase of rights to service $2.7 billion of mortgage
loans during the quarter, bringing the total rights purchased to more
than $15 billion of mortgage loans over the past four years. Increased
servicing income is expected to help offset the impact of lower
refinancing volumes.
Comparison of second quarter 2017 to second
quarter 2016
Total revenue on a fully taxable equivalent basis increased $34 million
or 2 percent compared to the second quarter of 2016. Adjusted(1)
total revenue on a fully taxable equivalent basis also increased $34
million or 2 percent.
Net interest income and other financing income on a fully taxable
equivalent basis increased $35 million or 4 percent compared to the
prior year. The resulting net interest margin increased 17 basis points.
Net interest margin and net interest income and other financing income
benefited from higher market interest rates, including prudent deposit
cost management, as well as the impact of balance sheet management
strategies, including higher securities balances, and favorable
credit-related interest recoveries, partially offset by lower average
loan balances.
Non-interest income was relatively flat on a reported and adjusted basis(1).
Service charges increased $3 million or 2 percent reflecting growth in
checking accounts of 1.3 percent. Card & ATM fees increased $5 million
or 5 percent driven by a 10 percent increase in spending volume. Wealth
management income increased $5 million or 5 percent driven by growth in
investment management & trust fees as assets under management increased
12 percent. Bank-owned life insurance increased $2 million, or 10
percent. Market value adjustments on employee benefit assets, which are
offset in salaries and benefits, decreased $6 million.
Mortgage income decreased $6 million or 13 percent compared to the prior
year primarily due to lower production and modest spread compression.
These decreases were partially offset by an increase in mortgage
servicing income. Capital markets income remained unchanged as an
increase in fees generated from the placement of permanent financing for
real estate customers was offset by reduced income from merger and
acquisition advisory services and revenues associated with debt
underwriting and loan syndications. In addition, other non-interest
income included an operating lease impairment charge of $7 million
recorded in the current quarter.
Comparison of second quarter 2017 to first quarter
2017
Non-interest expense totaled $909 million in the second quarter, an
increase of $32 million or 4 percent compared to the first quarter of
2017. On an adjusted basis(1), non-interest
expense totaled $899 million, an increase of $27 million or 3 percent.
Increases in salaries and benefits, professional, legal and regulatory,
and furniture and equipment expenses were partially offset by reductions
in the provision for unfunded credit losses.
Total salaries and benefits increased $19 million or 4 percent primarily
due to merit increases, higher production-based incentives, and a $10
million pension settlement charge, partially offset by lower payroll
taxes. Professional, legal and regulatory expenses increased $6 million,
primarily due to an increase in legal settlement expense. Furniture and
equipment expense increased $5 million or 6 percent associated with
capital investment projects including an enhanced online banking
platform as well as other technology initiatives.
The company's efficiency ratio was 63.6 percent, or 63.2 percent on an
adjusted basis(1). The effective tax rate was 29.5 percent
compared to 30.4 percent in the first quarter.
Comparison of second quarter 2017 to second
quarter 2016
Non-interest expense decreased $6 million or 1 percent from the second
quarter of 2016. On an adjusted basis(1), non-interest
expense increased $10 million or 1 percent primarily due to higher
salaries and benefits, FDIC insurance assessments, professional, legal
and regulatory, and furniture and equipment expenses. These increases
were partially offset by a reduction in the provision for unfunded
credit losses, as well as lower marketing and other real estate expenses.
Total salaries and benefits increased $17 million or 4 percent primarily
due to merit increases and a $10 million pension settlement charge,
partially offset by lower production-based incentives and the impact of
a 1 percent reduction in staffing levels.
FDIC insurance assessments increased $9 million reflecting the
implementation of the FDIC assessment surcharge that went into effect in
the third quarter of 2016, as well as the impact of a $6 million refund
related to overpayments recorded in the second quarter of 2016.
Professional, legal and regulatory expense increased $7 million
primarily due to higher legal fees and consulting expenses. Furniture
and equipment expense increased $6 million primarily associated with the
completion of certain capital investment projects increasing expense in
the current quarter.
Marketing expense decreased $6 million compared to the second quarter of
2016 primarily due to changes in the timing of campaigns, and overall
expense reductions. Other real estate expense, included in other
non-interest expenses, also decreased $6 million.
Comparison of second quarter 2017 to first quarter
2017
Average loans and leases remained stable at $80.1 billion for the second
quarter, as modest growth in the business lending portfolio was offset
by declines in the consumer lending portfolio; however, total new and
renewed loan production increased 46 percent.
Average balances in the consumer lending portfolio totaled $31.1 billion
in the second quarter reflecting a decrease of $87 million. Total
consumer production increased 22 percent, but this growth was offset by
the company's decision to exit a third-party arrangement within the
indirect-vehicle portfolio. Average third-party indirect-vehicle
balances declined $224 million or 12 percent during the quarter.
Excluding the third-party indirect-vehicle portfolio, average consumer
balances increased $137 million.
Average residential first mortgage balances increased $168 million or 1
percent primarily attributable to a seasonal increase in production
during the second quarter. Home equity balances declined $131 million or
1 percent as growth of $52 million in home equity loans was offset by a
decline of $183 million in home equity lines of credit. Further, average
line utilization decreased 66 basis points compared to the first quarter.
Average indirect-other consumer loans increased $64 million or 7 percent
as the company continued to grow its point-of-sale portfolio.
Additionally, the company purchased approximately $138 million in
unsecured consumer loans from a point-of-sale third-party at the end of
the second quarter. Consumer credit card balances remained relatively
stable with the prior quarter as an increase in active credit cards was
offset by a seasonal decline in average customer account balances.
Average balances in the business lending portfolio totaled $49 billion
in the second quarter reflecting an increase of $19 million as growth in
commercial and industrial was partially offset by declines in
owner-occupied commercial real estate and investor real estate
construction loans. The company experienced solid production increases
in both commercial and investor real estate and a 20 basis point
increase in commercial line utilization during the quarter; however,
this growth was offset by declines in select portfolios reflecting the
company's risk management decisions in certain industries and asset
classes. Specifically, average direct energy and medical office building
loans declined $67 million and $40 million, respectively. Investor real
estate construction loans decreased $41 million due in part to ongoing
efforts to better diversify production between construction and term
lending. Additionally, declines in average owner-occupied commercial
real estate loans reflect continued softness in demand and increasing
competition for middle market and small business loans.
Growth in commercial and industrial loans was led by new relationships
and expansion of existing relationships in the government and
institutional banking, asset-based lending, financial services, and real
estate investment trust portfolios. The company expects to maintain
momentum experienced this quarter through the second half of the year
with future growth driven in part by the technology & defense, financial
services, power & utilities, and asset-based lending portfolios.
Comparison of second quarter 2017 to second
quarter 2016
Average loans and leases declined $1.9 billion or 2 percent compared to
the second quarter of 2016 as growth in the consumer lending portfolio
was more than offset by declines in the business lending portfolio.
The average consumer lending portfolio increased $329 million or 1
percent. Residential first mortgage balances increased $647 million or 5
percent despite the impact from the affordable housing residential
mortgage loan sale in the fourth quarter of 2016. Indirect-other
increased $315 million or 46 percent, as the company continued to
successfully execute its point-of-sale lending initiative. Consumer
credit card balances increased $98 million or 9 percent as active credit
cards increased 7 percent. In addition, other consumer loans increased
$70 million or 7 percent primarily due to growth in unsecured loans
generated through the branch network. These increases were partially
offset by declines in indirect-vehicle and home equity balances. Average
third-party indirect-vehicle balances decreased $441 million or 21
percent reflecting the company's decision to exit a third-party
arrangement, and home equity balances decreased $394 million or 4
percent as growth in home equity loans continues to be offset by
declines in home equity lines of credit.
The average business lending portfolio decreased $2.2 billion or 4
percent primarily due to declines in the direct energy, multi-family,
and medical office building portfolios, as well as owner-occupied
commercial real estate loans. Average direct energy loans decreased $554
million or 22 percent, average multi-family investor real estate loans
decreased $479 million or 23 percent, and average medical office
building loans decreased $93 million or 24 percent. The declines in
owner-occupied commercial real estate loans reflect the competitive
market and continued softness in loan demand from middle market and
small business customers.
Comparison of second quarter 2017 to first quarter
2017
Total average deposit balances were $97.5 billion in the second quarter,
a decrease of $478 million or less than 1 percent from the first quarter
of 2017. Average low-cost deposits decreased $335 million while
representing 93 percent of total average deposits. Deposit costs
remained low at 15 basis points, and total funding costs were 34 basis
points in the second quarter.
Average deposits in the Consumer segment increased $890 million or 2
percent. Average Corporate segment deposits decreased $581 million or 2
percent driven by seasonal declines. Average deposits in the Wealth
Management segment declined $496 million or 5 percent as a result of
ongoing strategic reductions of certain collateralized deposits. Average
deposits in the Other segment decreased $291 million or 8 percent driven
primarily by declines in average retail brokered sweep deposits.
Comparison of second quarter 2017 to second
quarter 2016
Total average deposit balances remained relatively stable with the prior
year, while average low-cost deposits increased $325 million. Average
deposits in the Consumer segment increased $2.4 billion or 4 percent,
while average Corporate segment deposits remained relatively stable.
Average deposits in the Wealth Management segment declined $1.7 billion
or 15 percent, and average deposits in the Other segment declined $669
million or 17 percent. The decline in Wealth Management segment deposits
relates to ongoing strategic reductions of certain collateralized
deposits. The decline in Other segment deposits was driven by the
decision to reduce approximately $500 million of higher cost retail
brokered sweep deposits that were no longer a necessary component of the
company's current funding strategy.
Comparison of second quarter 2017 to first quarter
2017
Net charge-offs totaled $68 million or 0.34 percent of average loans
during the second quarter compared to $100 million or 0.51 percent of
average loans in the previous quarter. The provision for loan losses was
$20 million less than net charge-offs. A reduction in non-performing and
criticized loans resulted in an allowance for loan and lease losses
decline of 3 basis points to 1.30 percent of total loans outstanding.
Total non-accrual loans, excluding loans held for sale, decreased 18
percent to 1.03 percent of loans outstanding, and total business
services criticized loans and total delinquencies decreased 7 percent
and 5 percent, respectively. The decreases to non-accrual loans and
business services criticized loans were driven by broad-based
improvement in commercial loans.
Charge-offs related to the company's direct energy portfolio totaled $18
million in the quarter. The allowance for loan and lease losses
associated with the direct energy loan portfolio increased to 6.9
percent compared to 6.1 percent in the previous quarter. The company's
direct energy exposure ended the quarter at 2.5 percent of total loans
outstanding. 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.
The allowance for loan losses as a percentage of total non-accrual loans
was approximately 127 percent at quarter end. Excluding direct energy,
the allowance for loan losses, as a percent of non-accrual loans, or the
adjusted coverage ratio(1), was 163 percent.
Comparison of second quarter 2017 to second
quarter 2016
Net charge-offs decreased 1 basis point compared to the second quarter
of 2016 and represented 0.34 percent of average loans compared to 0.35
percent. The allowance for loan and lease losses as a percent of total
loans decreased 11 basis points.
Total non-accrual loans, excluding loans held for sale, decreased 20
percent to 1.03 percent of loans outstanding, and total business lending
criticized loans and total delinquencies decreased 10 percent and 11
percent, respectively.
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 12.2
percent and 11.4 percent, respectively, at quarter-end under the
phase-in provisions. In addition, the Common Equity Tier 1 ratio(1)(2)
was estimated at 11.3 percent on a fully phased-in basis.
During the second quarter, the company repurchased $125 million or 9.1
million shares of common stock and declared $84 million in dividends to
common shareholders reflecting 70 percent of earnings returned to
shareholders. The company's liquidity position remained solid with its
loan-to-deposit ratio at the end of the quarter at 82 percent, and as of
quarter-end, the company remained fully compliant with the liquidity
coverage ratio rule.
Additionally, during the second quarter, Regions completed the annual
Comprehensive Capital Analysis and Review (CCAR) process and received no
objection regarding planned capital actions. Capital actions include the
repurchase of up to $1.47 billion in common shares over the next four
quarters and a proposed increase to its quarterly common stock dividend
to $0.09 per common share beginning in the third quarter of 2017. The
$1.47 billion share repurchase program was previously approved by the
Board of Directors, and the proposed dividend increase will be
considered by the Board of Directors at its meeting later in July 2017.
(1) Non-GAAP, refer to pages 11, 16, and 25 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, July
21, 2017, at 2 p.m. ET through Monday, August 21, 2017. To listen by
telephone, please dial 1-855-859-2056, and use access code 88441563. 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 $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 1,500 banking offices
and 1,900 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 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.
-
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; disruption or damage to our systems;
increased costs; losses; or adverse effects to our reputation.
-
Our ability to realize our adjusted 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, 2016, as filed with the SEC.
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.
The Company's allowance for loan losses as a percentage of non-accrual
loans, or coverage ratio is an important credit metric to many
investors. Much of the Company's energy exposure is collateralized and
therefore requires a lower specific allowance. Adjusting the Company's
total allowance for loan losses to exclude the portion attributable to
energy and excluding non-accrual energy loans produces an adjusted
coverage ratio that management believes could be meaningful to investors.
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/20170721005081/en/
Regions Financial Corporation
Media Contact:
Evelyn Mitchell,
205-264-4551
or
Investor Relations Contact:
Dana Nolan,
205-264-7040
Source: Regions Financial Corporation
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