Generates positive operating leverage and continued improvement in
asset quality
BIRMINGHAM, Ala.--(BUSINESS WIRE)--
Regions Financial Corporation (NYSE:RF) today announced earnings for the
first quarter ended March 31, 2018. The company reported net income
available to common shareholders from continuing operations of $398
million, an increase of 44 percent compared to the first quarter of
2017. Earnings per diluted share from continuing operations were $0.35,
an increase of 52 percent from the first quarter of 2017. The company
generated positive operating leverage with reported pre-tax
pre-provision income increasing 9 percent over the first quarter of 2017
and continued broad-based asset quality improvement.
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Subsequent to the end of the first quarter, Regions announced it had
entered into a definitive agreement to sell its Regions Insurance
subsidiary and affiliates. Subject to regulatory approval, the
transaction is expected to close in the third quarter. In connection
with management's decision to sell, the pending transaction meets the
criteria for reporting as discontinued operations at March 31, 2018.
Results of the entities being sold are reported in Regions' consolidated
statements of income separately as discontinued operations for all
periods presented. The company expects the transaction will result in an
after-tax gain of approximately $200 million, and will generate Common
Equity Tier 1 of approximately $300 million. Capital generated from this
transaction at the time of closing is expected to be used to repurchase
shares of common stock, subject to review and non-objection by the
Federal Reserve as part of the 2018 Comprehensive Capital Analysis and
Review.
“We began 2018 with positive momentum, and our first quarter financial
performance demonstrates our focus on sustainable growth is producing
results,” said Grayson Hall, Chairman and CEO. “During the quarter, we
grew loans and net interest income while continuing to prudently manage
asset quality. In addition, we made progress related to our Simplify and
Grow initiative with our recently announced organizational changes,
which will further streamline our field structure while also deepening
our commitment to support local customers and communities.”
Hall added, “Earlier this month, we also announced an agreement to sell
our Regions Insurance subsidiary, which will allow increased focus on
businesses where we can add the most value for our customers, associates
and shareholders. This decision was an outcome of Regions' robust
strategic planning and capital allocation process and aligns with our
commitment to simplify our company and generate long-term benefits for
all of our stakeholders.”
First quarter 2018 results compared to fourth
quarter 2017:
-
Reported net interest income and other financing income increased $8
million; net interest margin was 3.46 percent, up 9 basis points.
-
Net interest income and other financing income increased $2 million on
an adjusted basis(1); net interest margin increased 7 basis
points on an adjusted basis(1).
-
Non-interest income decreased 2 percent, and 1 percent on an adjusted
basis(1).
-
Non-interest expense decreased 4 percent, and 1 percent on an adjusted
basis(1).
-
Average loans and leases increased $368 million and totaled $79.9
billion; adjusted(1) loans and leases increased $620
million or 1 percent.
-
Consumer lending balances decreased $95 million, but increased
$157 million on an adjusted basis(1).
-
Business lending balances increased $463 million.
-
Average deposits decreased $1.6 billion and totaled $95.4 billion.
-
Net charge-offs increased 11 basis points to 0.42 percent of average
loans, and 9 basis points to 0.40 percent of average loans on an
adjusted basis(1).
-
Non-performing loans, excluding loans held for sale, decreased 8
percent to 0.75 percent of loans outstanding.
-
Business services criticized loans decreased 9 percent.
-
Allowance for loan and lease losses decreased 12 basis points to 1.05
percent of total loans.
-
Allowance for loan losses as a percent of non-performing loans
decreased 4 basis points to 140 percent.
First quarter 2018 results compared to first
quarter 2017:
-
Net interest income and other financing income increased 6 percent;
net interest margin increased 21 basis points.
-
Non-interest income increased 7 percent, and 6 percent on an adjusted
basis(1).
-
Non-interest expenses increased 5 percent, and 3 percent on an
adjusted basis(1).
-
Average loans and leases decreased $287 million, but increased $577
million on an adjusted basis(1).
-
Consumer lending balances increased $38 million, and $902 million
on an adjusted basis(1).
-
Business lending balances decreased $325 million.
-
Average deposits decreased 3 percent.
-
Net charge-offs decreased 9 basis points, and 11 basis points on an
adjusted basis(1).
-
Non-performing loans, excluding loans held for sale, decreased 40
percent.
-
Business services criticized loans decreased 37 percent.
FIRST QUARTER 2018 FINANCIAL RESULTS:
* Based on income taxes at a 25.0% incremental rate beginning in 2018,
and 38.5% for all prior periods.
** Items represent an outsized or unusual impact to the quarter or
quarterly trends, but are not considered non-GAAP adjustments.
Regions continues to take actions with respect to its Simplify and Grow
initiative, including streamlining its structure and refining its branch
network while making prudent investments in new technologies, delivery
channels and other areas of growth. As a result, during the first
quarter the company incurred $15 million of severance expense, as well
as $3 million of expenses associated primarily with plans to consolidate
between 30 and 40 branches during 2018. Including these branches, the
company will have consolidated approximately 12 percent of its retail
branch network since the end of 2015.
In addition, the company sold $254 million of residential mortgage loans
during the first quarter of 2018 incurring $4 million in expenses
associated with the transaction, which consisted primarily of performing
troubled debt restructured loans. The company recognized $5 million in
net charge-offs associated with the loan sale; however, the company also
released approximately $21 million of loan loss allowance resulting in a
$16 million net benefit to provision for loan losses.
Regions also incurred a $4 million net impairment charge reducing the
value of certain operating lease assets and recognized $4 million of
leveraged lease termination gains during the quarter.
Lower than anticipated losses associated with certain 2017 hurricanes
resulted in a reduction to the company's hurricane-specific loan loss
allowance of approximately $30 million.
NM - Not Meaningful
* Changes in corporate income tax rates effective in 2018 resulted in a
decrease to the taxable equivalent adjustment.
** These market value adjustments relate to assets held for certain
employee benefits and are offset within salaries and employee benefits
expense.
Comparison of first quarter 2018 to fourth quarter
2017
Total revenue was $1.4 billion on a reported and adjusted basis(1),
consistent with the fourth quarter.
Net interest income and other financing income was $909 million. On an
adjusted basis(1), net interest income and other financing
income increased $2 million over the prior quarter. Net interest margin
was 3.46 percent, reflecting a 7 basis point increase over the prior
quarter's adjusted basis(1). Adjusted net interest margin and
net interest income and other financing income primarily benefited from
higher interest rates offset by higher funding costs associated with
bank debt issued during the quarter. In addition, two fewer days in the
quarter reduced net interest income and other financing income
approximately $10 million, but benefited net interest margin by
approximately 4 basis points.
Non-interest income totaled $507 million, a decrease of $9 million or 2
percent. On an adjusted basis(1), non-interest income
decreased $3 million or 1 percent primarily due to decreases in capital
markets and card & ATM fees, partially offset by an increase in mortgage
income. Other non-interest income also reflects a $6 million increase to
the value of an equity investment based on observable price transactions
that occurred during the first quarter and recognized $7 million in net
gains associated with the sale of certain low income housing
investments. Offsetting these gains, the company incurred $4 million of
net impairment charges reducing the value of certain operating lease
assets.
Capital markets income declined $6 million or 11 percent from a record
high fourth quarter, and seasonal declines in card & ATM fees resulted
in a $2 million decrease reflecting lower interchange income. Mortgage
income increased $2 million or 6 percent driven by increases in the
market valuation of mortgage servicing rights and related hedging
activity.
Comparison of first quarter 2018 to first quarter
2017
Total revenue increased $83 million or 6 percent compared to the first
quarter of 2017. Adjusted(1) total revenue increased $79
million or 6 percent.
Net interest income and other financing income increased $50 million or
6 percent. Net interest margin increased 21 basis points. Net interest
margin and net interest income and other financing income benefited from
higher interest rates and prudent deposit cost management, partially
offset by modest increases in funding costs and lower average loan
balances.
Non-interest income increased $33 million or 7 percent on a reported
basis and $29 million or 6 percent on an adjusted basis(1) driven
primarily by growth in capital markets and service charges, partially
offset by lower mortgage income. Other non-interest income includes an
increase to the value of an equity investment and net gains associated
with the sale of certain low income housing investments during the
current quarter.
Capital markets income increased $18 million or 56 percent reflecting
higher merger and acquisition advisory services, customer interest rate
swap income, and fees generated from the placement of permanent
financing for real estate customers. Service charges income increased $3
million or 2 percent consistent with customer account growth; however,
mortgage income decreased $3 million or 7 percent compared to the prior
year consistent with lower production volumes.
NM - Not Meaningful
Comparison of first quarter 2018 to fourth quarter
2017
Non-interest expense totaled $884 million in the first quarter, a
decrease of $36 million or 4 percent, driven primarily by a $40 million
contribution to the company's charitable foundation during the fourth
quarter. On an adjusted basis(1),non-interest
expense totaled $862 million, a decrease of $7 million or 1 percent.
Decreases in expense associated with Visa class B shares sold in a prior
year, as well as lower FDIC assessments were partially offset by
increases in salaries and benefits and professional fees. Excluding the
impact of severance charges, the increase to salaries and benefits was
driven primarily by seasonally higher payroll taxes partially offset by
staffing reductions. Consistent with the company's efforts to simplify
and streamline its organization, staffing levels are lower by
approximately 350 positions since year-end and 735 positions since the
first quarter of the prior year.
The company's reported first quarter efficiency ratio was 61.9 percent
and 60.5 percent on an adjusted basis(1), essentially
unchanged from the prior quarter, and the effective tax rate was 23.6
percent.
Comparison of first quarter 2018 to first quarter
2017
Non-interest expense increased $41 million or 5 percent in the first
quarter compared to the first quarter of the prior year. On an adjusted
basis(1),non-interest expense increased $24
million or 3 percent primarily due to higher salaries and benefits and
professional fees. Excluding the impact of severance charges, the
increase to salaries and benefits was driven primarily by merit
increases and higher production-based incentives, partially offset by
staffing reductions.
NM - Not meaningful.
* 2018 average residential first mortgage balances include the impact of
a $254 million loan sale.
Comparison of first quarter 2018 to fourth quarter
2017
Average loans and leases increased $368 million to $79.9 billion in the
first quarter. Adjusted(1) average loans and leases increased
$620 million or 1 percent reflecting modest growth in the business and
consumer lending portfolios.
Average balances in the consumer lending portfolio decreased $95 million
to $31.3 billion. Adjusted(1) average consumer loans
increased $157 million reflecting growth in residential mortgage,
indirect-other consumer, indirect-vehicle, and consumer credit card,
partially offset by continued declines in home equity.
Despite the first quarter loan sale, average residential first mortgage
balances increased $23 million. Average indirect-other consumer loans
increased $131 million or 9 percent as the company continued to expand
and grow its point-of-sale portfolio, and credit card balances increased
$19 million or 2 percent consistent with an increase in active credit
cards. Average indirect-vehicle loans increased $71 million or 3
percent, while home equity portfolio balances declined $165 million or 2
percent driven primarily by declines in home equity lines of credit.
Average balances in the business lending portfolio totaled $48.6 billion
reflecting an increase of $463 million as growth in commercial and
industrial loans was partially offset by declines in owner-occupied
commercial real estate and investor real estate. Commercial and
industrial loans grew $775 million during the quarter, led by growth in
government & institutional banking, energy & natural resources, and
technology & defense. Owner-occupied commercial real estate loans
decreased $108 million reflecting a slowing pace of decline, and
investor real estate loans decreased $204 million driven by maturities
and refinancing activity. The company is encouraged by increasing
opportunities in 2018 as economic conditions and customer sentiment
continue to modestly improve.
Comparison of first quarter 2018 to first quarter
2017
Despite a 24 percent increase in total new and renewed loan production,
average loans and leases declined modestly compared to the first quarter
of 2017. Adjusted(1) average loans increased $577 million or
1 percent.
Average balances in the consumer lending portfolio remained relatively
stable. Adjusted(1) average consumer balances increased $902
million or 3 percent as solid growth in residential first mortgage,
indirect-other consumer, indirect-vehicle, consumer credit card, and
other consumer loans was partially offset by declines in home equity
balances.
Average balances in the business lending portfolio decreased $325
million or 1 percent primarily due to elevated loan payoffs and pay
downs as well as de-risking efforts within certain loan portfolios
throughout the prior year, including decreases in direct energy loans,
multi-family investor real estate loans, and medical office building
loans. In addition, 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 first quarter 2018 to fourth quarter
2017
Total average deposit balances decreased $1.6 billion to $95.4 billion
in the first quarter reflecting continued optimization of the company's
deposit portfolio reducing certain higher cost brokered and
collateralized deposits. Average low-cost deposits represented 93
percent of total average deposits, and deposit costs increased to 21
basis points, while total funding costs remained low at 46 basis points
in the first quarter.
Average deposits in the Consumer segment increased $225 million while
average Corporate segment deposits decreased $690 million, or 2 percent
driven primarily by seasonal declines. Average deposits in the Wealth
Management segment declined $221 million or 2 percent and includes the
impact of ongoing strategic reductions of certain collateralized
deposits. Average deposits in the Other segment decreased $946 million
or 36 percent driven primarily by the decision to reduce higher cost
retail brokered sweep deposits that were no longer a necessary component
of the company's current funding strategy.
Comparison of first quarter 2018 to first quarter
2017
Total average deposit balances decreased $2.5 billion or 3 percent from
the prior year. Growth in average Consumer segment deposits was offset
by strategic reductions in Corporate, Wealth Management, and Other
segment deposits.
* Excludes guaranteed residential first mortgages that are 90+ days past
due and still accruing.
** Business services represents the combined total of commercial and
investor real estate loans.
Comparison of first quarter 2018 to fourth quarter
2017
Broad-based asset quality improvement continued during the first
quarter. Non-performing, criticized and troubled debt restructured
loans, as well as total delinquencies, all declined. Total
non-performing loans, excluding loans held for sale, decreased 8 percent
to 0.75 percent of loans outstanding, marking consecutive quarters at a
new 10-year low. Business services criticized and total troubled debt
restructured loans decreased 9 percent and 13 percent, respectively, and
total delinquencies decreased 4 percent.
Net charge-offs totaled $84 million or 0.42 percent of average loans
compared to $63 million or 0.31 percent of average loans in the previous
quarter. The increase in net charge-offs was primarily attributable to
larger recoveries in the fourth quarter and approximately $5 million
associated with the sale of primarily troubled debt restructured
residential mortgage loans during the current quarter. Improving
economic conditions drove improvements in credit metrics, particularly
pay downs and payoffs of adversely rated loans. This improvement,
combined with a $30 million reduction of hurricane-specific allowance
and a $21 million reduction of allowance associated with the loan sale,
resulted in a credit provision of $10 million. The allowance for loan
and lease losses decreased 12 basis points to 1.05 percent of total
loans outstanding. The resulting allowance for loan and lease losses as
a percent of total non-accrual loans decreased 4 basis points to 140
percent. Given the current phase of the credit cycle, volatility in
certain credit metrics can be expected, especially related to
large-dollar commercial credits.
Comparison of first quarter 2018 to first quarter
2017
Net charge-offs decreased 9 basis points compared to the first quarter
of 2017 and represented 0.42 percent of average loans compared to 0.51
percent in the prior year. The allowance for loan and lease losses as a
percent of total loans decreased 28 basis points. Total non-performing
loans, excluding loans held for sale, decreased 40 percent, and total
business lending criticized loans decreased 37 percent.
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 first quarter, the company repurchased $235 million or 12.5
million shares of common stock and declared $101 million in dividends to
common 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.
(1) Non-GAAP, refer to pages 6, 9, 10, 15, 21 and 24 of the financial
supplement to this earnings release
(2) Current quarter Basel III common equity Tier 1, and Tier 1 capital
ratios are estimated.
Conference Call
A replay of the earnings call will be available beginning Friday, April
20, 2018, at 2 p.m. ET through Sunday, May 20, 2018. To listen by
telephone, please dial 1-855-859-2056, and use access code 5947769. 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 $123 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, increased in 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, any repricing of
assets, or any adjustment of valuation allowances on our deferred tax
assets due to changes in law, adverse changes in the economic
environment, declining operations of the reporting unit or other
factors.
-
The effect of changes in tax laws, including the effect of Tax Reform
and any future interpretations of or amendments to Tax Reform, which
may impact our earnings, capital ratios and our ability to return
capital to shareholders.
-
Possible changes in the creditworthiness of customers and the possible
impairment of the collectability of loans and leases, including
operating leases.
-
Changes in the speed of loan prepayments, loan origination and sale
volumes, charge-offs, loan loss provisions or actual loan losses where
our allowance for loan losses may not be adequate to cover our
eventual losses.
-
Possible acceleration of prepayments on mortgage-backed securities due
to low interest rates, and the related acceleration of premium
amortization on those securities.
-
Loss of customer checking and savings account deposits as customers
pursue other, higher-yield investments, which could increase our
funding costs.
-
Possible changes in consumer and business spending and saving habits
and the related effect on our ability to increase assets and to
attract deposits, which could adversely affect our net income.
-
Our ability to effectively compete with other traditional and
non-traditional financial services companies, some of whom possess
greater financial resources than we do or are subject to different
regulatory standards than we are.
-
Our inability to develop and gain acceptance from current and
prospective customers for new products and services and the
enhancement of existing products and services to meet customers’ needs
and respond to emerging technological trends in a timely manner could
have a negative impact on our revenue.
-
Our inability to keep pace with technological changes could result in
losing business to competitors.
-
Changes in laws and regulations affecting our businesses, including
legislation and regulations relating to bank products and services, as
well as changes in the enforcement and interpretation of such laws and
regulations by applicable governmental and self-regulatory agencies,
which could require us to change certain business practices, increase
compliance risk, reduce our revenue, impose additional costs on us, or
otherwise negatively affect our businesses.
-
Our ability to obtain a regulatory non-objection (as part of the CCAR
process or otherwise) to take certain capital actions, including
paying dividends and any plans to increase common stock dividends,
repurchase common stock under current or future programs, or redeem
preferred stock or other regulatory capital instruments, may impact
our ability to return capital to stockholders and market perceptions
of us.
-
Our ability to comply with stress testing and capital planning
requirements (as part of the CCAR process or otherwise) may continue
to require a significant investment of our managerial resources due to
the importance 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 effects of any developments, changes or actions relating to any
litigation or regulatory proceedings brought against us or any of our
subsidiaries.
-
The costs, including possibly incurring fines, penalties, or other
negative effects (including reputational harm) of any adverse
judicial, administrative, or arbitral rulings or proceedings,
regulatory enforcement actions, or other legal actions to which we or
any of our subsidiaries are a party, and which may adversely affect
our results.
-
Our ability to manage fluctuations in the value of assets and
liabilities and off-balance sheet exposure so as to maintain
sufficient capital and liquidity to support our business.
-
Our ability to execute on our strategic and operational plans,
including our ability to fully realize the financial and non-financial
benefits relating to our strategic initiatives.
-
The risks and uncertainties related to our acquisition or divestiture
of businesses.
-
The success of our marketing efforts in attracting and retaining
customers.
-
Our ability to recruit and retain talented and experienced personnel
to assist in the development, management and operation of our products
and services may be affected by changes in laws and regulations in
effect from time to time.
-
Fraud or misconduct by our customers, employees or business partners.
-
Any inaccurate or incomplete information provided to us by our
customers or counterparties.
-
Inability of our framework to manage risks associated with our
business such as credit risk and operational risk, including
third-party vendors and other service providers, which could, among
other things, result in a breach of operating or security systems as a
result of a cyber attack or similar act or failure to deliver our
services effectively.
-
Dependence on key suppliers or vendors to obtain equipment and other
supplies for our business on acceptable terms.
-
The inability of our internal controls and procedures to prevent,
detect or mitigate any material errors or fraudulent acts.
-
The effects of geopolitical instability, including wars, conflicts and
terrorist attacks and the potential impact, directly or indirectly, on
our businesses.
-
The effects of man-made and natural disasters, including fires,
floods, droughts, tornadoes, hurricanes, and environmental damage,
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 ability to identify and address cyber-security risks such as data
security breaches, malware, “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.
-
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.
-
Fluctuations in the price of our common stock and inability to
complete stock repurchases in the time frame and/or on the terms
anticipated.
-
The effects of any damage to our reputation resulting from
developments related to any of the items identified above.
The foregoing list of factors is not exhaustive. For discussion of these
and other factors that may cause actual results to differ from
expectations, look under the captions “Forward-Looking Statements” and
“Risk Factors” of Regions’ Annual Report on Form 10-K for the year ended
December 31, 2017 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 pre-tax pre-provision income (non-GAAP) and adjusted
pre-tax pre-provision income (non-GAAP), as well as the adjusted
efficiency ratio (non-GAAP) and the adjusted fee income ratio (non-GAAP)
to monitor performance and believes these measures provide meaningful
information to investors. Non-interest expense (GAAP) is presented
excluding certain adjustments to arrive at adjusted non-interest expense
(non-GAAP), which is the numerator for the efficiency ratio. Net
interest income and other financing income (GAAP) is presented excluding
certain adjustments related to tax reform to arrive at adjusted net
interest income and other financing income (non-GAAP). Non-interest
income (GAAP) is presented excluding certain adjustments to arrive at
adjusted non-interest income (non-GAAP), which is the numerator for the
fee income ratio. Adjusted non-interest income (non-GAAP) and adjusted
non-interest expense (non-GAAP) are used to determine adjusted pre-tax
pre-provision income (non-GAAP). Net interest income and other financing
income (GAAP) on a taxable-equivalent basis and non-interest income are
added together to arrive at total revenue on a taxable-equivalent basis.
Net interest income and other financing income on a taxable-equivalent
basis is presented excluding certain adjustments related to tax reform
to arrive at adjusted net interest income and other financing income on
a taxable-equivalent basis (non-GAAP). 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: https://www.businesswire.com/news/home/20180420005108/en/
Regions Financial Corporation
Media Contact:
Evelyn
Mitchell, 205-264-4551
or
Investor Relations Contact:
Dana
Nolan, 205-264-7040
Source: Regions Financial Corporation