Solid revenue and pre-tax pre-provision income growth over the prior
year
BIRMINGHAM, Ala.--(BUSINESS WIRE)--
Regions Financial Corporation (NYSE:RF) today announced earnings for the
second quarter ended June 30, 2018. The company reported net income
available to common shareholders from continuing operations of $362
million, an increase of 21 percent compared to the second quarter of
2017. Earnings per diluted share from continuing operations were $0.32,
an increase of 28 percent from the second quarter of 2017. Total revenue
grew 5 percent while pre-tax pre-provision income grew 6 percent over
the prior year. Adjusted pre-tax pre-provision(1) income
increased 12 percent.
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“Regions is making meaningful progress on its strategic plan to grow
revenues, develop deeper customer relationships, deliver enhanced
services to the marketplace, and operate more effectively over time,”
said John Turner, President and CEO. “We continue to make prudent
investments to ensure Regions is well-positioned to meet the needs of
today’s customers, and also anticipate and meet the needs of tomorrow’s
customers. Importantly, our deposit base remains strong, and asset
quality continues to improve. We are also pleased that our capital
planning process led to another successful completion of the
Comprehensive Capital Analysis and Review (CCAR).”
Turner added, “Regions also received further recognition for our
customer-focused approach to business. Based on customer feedback,
Javelin Strategy & Research designated Regions as a Trust in Banking
Leader for the second consecutive year, reflecting our reliability in
meeting customers’ needs and the confidence customers have in Regions to
look out for their best interests. Our commitment to service and the
quality of our customer interactions are the hallmarks of our business.
These qualities are part of the culture that Executive Chairman, Grayson
Hall, established during his successful tenure as CEO and will continue
to define our comprehensive approach to customer service and
relationship banking.”
Second quarter 2018 results compared to first
quarter 2018:
-
Net interest income and other financing income increased $17 million,
and net interest margin was 3.49 percent, up 3 basis points.
-
Non-interest income increased 1 percent, and 2 percent on an adjusted
basis(1).
-
Non-interest expense increased 3 percent, and 2 percent on an adjusted
basis(1).
-
Average loans and leases increased $66 million and totaled $80.0
billion; adjusted(1) loans and leases increased $382
million.
-
Consumer lending balances decreased $95 million, and increased
$221 million on an adjusted basis(1).
-
Business lending balances increased $161 million.
-
Average deposits decreased $175 million and totaled $95.3 billion.
-
Net charge-offs decreased 10 basis points on a reported basis and 8
basis points on an adjusted basis(1) to 0.32 percent of
average loans.
-
Non-performing loans, excluding loans held for sale, decreased 1 basis
point to 0.74 percent of loans outstanding.
-
Business services criticized loans decreased 14 percent.
-
Allowance for loan and lease losses decreased 1 basis point to 1.04
percent of total loans.
-
Allowance for loan and lease losses as a percent of non-performing
loans increased to 141 percent from 140 percent.
Second quarter 2018 results compared to second
quarter 2017:
-
Net interest income and other financing income increased 5 percent;
net interest margin increased 17 basis points.
-
Non-interest income increased 4 percent, and 6 percent on an adjusted
basis(1).
-
Non-interest expenses increased 4 percent, and 1 percent on an
adjusted basis(1).
-
Average loans and leases decreased $153 million, and increased $803
million on an adjusted basis(1).
-
Consumer lending balances increased $30 million, and $986 million
on an adjusted basis(1).
-
Business lending balances decreased $183 million.
-
Average deposits decreased 2 percent.
-
Net charge-offs decreased 2 basis points to 0.32 percent of average
loans.
-
Non-performing loans, excluding loans held for sale, decreased 29
basis points to 0.74 percent of loans outstanding.
-
Business services criticized loans decreased 42 percent.
Regions continues to take actions with respect to its Simplify and Grow
initiative, including streamlining its structure and refining its branch
network while making investments in new technologies, delivery channels
and other drivers of growth. Related to this continuous improvement
process, the company incurred $34 million of related severance expense
during the second quarter, as well as $1 million of expenses associated
with previously announced branch consolidations.
Regions also incurred a $5 million net impairment charge reducing the
value of certain operating lease assets during the quarter, and $10
million of expense associated with Visa class B shares sold in a prior
year.
Lower than anticipated losses associated with 2017 hurricanes resulted
in a reduction of the company’s remaining hurricane-related loan loss
allowance of $10 million.
Comparison of second quarter 2018 to first quarter
2018
Total revenue was $1.4 billion reflecting an increase of 2 percent on
both a reported and adjusted basis(1).
Net interest income and other financing income increased $17 million
over the prior quarter while net interest margin rose 3 basis points to
3.49 percent. Net interest margin and net interest income and other
financing income benefited from higher interest rates and prudent
deposit cost management partially offset by a leveraged lease residual
value adjustment. One additional day in the quarter benefited net
interest income and other financing income by approximately $5 million,
but reduced net interest margin by approximately 2 basis points.
Non-interest income increased $5 million on a reported basis, and $8
million on an adjusted basis(1),as increases in
service charges, card & ATM fees, wealth management, and capital markets
income were partially offset by a decrease in other non-interest income.
The decline in other non-interest income was attributable primarily to
net gains associated with the sale of certain low income housing
investments and a positive valuation adjustment associated with a
private equity investment totaling approximately $13 million during the
first quarter that did not repeat. In addition, net impairment charges
reducing the value of certain operating lease assets increased $1
million during the second quarter.
Reflecting account growth and seasonally higher interchange income,
service charges and card & ATM fees increased 2 percent and 8 percent,
respectively. Wealth management income increased 3 percent driven by an
increase in investment services income.
Investments in capital markets continue to pay off as the company
delivered a record quarter, with income totaling $57 million, a 14
percent increase compared to the prior quarter. The second quarter
increase was driven primarily by increases in merger and acquisition
advisory services and customer derivative activity.
Mortgage income remained stable during the quarter. The company
continues to evaluate opportunities to grow its loan servicing
portfolio, and in the second quarter, reached an agreement to purchase
the rights to service approximately $3.6 billion of mortgage loans with
an expected close date of July 31, 2018, subject to customary closing
conditions. Increased servicing income is expected to help offset the
impact of lower mortgage production associated with rising interest
rates and lack of housing supply.
Comparison of second quarter 2018 to second
quarter 2017
Total revenue increased 5 percent on both a reported and adjusted basis(1)
compared to the second quarter of 2017.
Net interest income and other financing income increased 5 percent. Net
interest margin increased 17 basis points. Net interest margin and net
interest income and other financing income benefited from higher
interest rates and prudent deposit cost management.
Non-interest income increased 4 percent on a reported basis and 6
percent on an adjusted basis(1) driven primarily by growth in
capital markets income, card and ATM fees, wealth management income and
service charges, partially offset by lower mortgage and bank-owned life
insurance income.
Capital markets income increased 50 percent reflecting higher merger and
acquisition advisory fees, customer interest rate swap income, and fees
generated from securities underwriting and placement. Card and ATM fees
increased 8 percent primarily due to higher interchange revenue
associated with account growth. Wealth management income increased 7
percent led by growth in investment services income. Service charges
income increased 4 percent reflecting continued customer account growth.
Partially offsetting these increases, mortgage income declined 8 percent
compared to the prior year consistent with lower production volumes, and
bank-owned life insurance decreased 18 percent.
Comparison of second quarter 2018 to first quarter
2018
Non-interest expense increased 3 percent compared to the first quarter.
On an adjusted basis(1), non-interest expense increased 2
percent primarily due to increases in expense associated with Visa class
B shares sold in a prior year and increased professional fees associated
with higher legal costs. Excluding the impact of severance charges,
salaries and benefits decreased $3 million or 1 percent reflecting
staffing reductions and lower payroll taxes partially offset by annual
merit increases. Consistent with the company’s efforts to rationalize
and streamline its organization, staffing levels declined by 340
full-time equivalent positions from the prior quarter and approximately
1,100 full-time equivalent positions from the second quarter of the
prior year.
The company’s reported second quarter efficiency ratio was 62.7 percent
and 60.4 percent on an adjusted basis(1), down slightly from
the prior quarter. The effective tax rate was 19.2 percent in the
quarter and was favorably impacted by excess tax benefits related to the
vesting of share-based payments.
Comparison of second quarter 2018 to second
quarter 2017
Non-interest expense increased 4 percent compared to the second quarter
of the prior year. On an adjusted basis(1),non-interest
expense increased 1 percent primarily due to higher salaries and
benefits and expense associated with Visa class B shares sold in a prior
year. 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.
Comparison of second quarter 2018 to first quarter
2018
Average loans and leases increased to $80.0 billion in the second
quarter. Adjusted(1) average loans and leases increased $382
million reflecting modest growth in the business and consumer lending
portfolios.
Adjusted(1) average consumer loans increased 1 percent.
Excluding the impact of the first quarter loan sale, average residential
first mortgage balances increased $167 million or 1 percent. Average
indirect-other consumer loans increased 14 percent as the company
continued to expand and grow its point-of-sale portfolio. Average
indirect-vehicle loans increased 5 percent, while home equity balances
declined 2 percent.
Average balances in the business lending portfolio totaled $48.8 billion
reflecting modest growth. Growth in commercial and industrial loans was
led by increases in specialized lending. Owner-occupied commercial real
estate and investor real estate loans decreased as production increases
continue to reduce the impact of maturities and refinancing activity.
Comparison of second quarter 2018 to second
quarter 2017
Average loans and leases declined modestly compared to the second
quarter of 2017; however, adjusted(1) average loans increased
$803 million or 1 percent. The company experienced an 8 percent increase
in total new and renewed loan production.
Adjusted(1) average consumer balances increased 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 modestly
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 second quarter 2018 to first quarter
2018
Total average deposit balances decreased modestly to $95.3 billion in
the second 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 totaled 24 basis
points, while total funding costs remained low at 52 basis points in the
second quarter.
Average deposits in the Consumer segment increased $1.0 billion or 2
percent while average Corporate segment deposits decreased $512 million,
or 2 percent driven primarily by customers using liquidity to pay down
debt or invest in their businesses, as well as seasonal declines in
public fund accounts. Average deposits in the Wealth Management segment
declined $414 million or 5 percent and included the impact of ongoing
strategic reductions of certain collateralized deposits. Average
deposits in the Other segment decreased $255 million or 15 percent
driven primarily by the decision to reduce higher cost retail brokered
sweep deposits consistent with the company’s current funding strategy.
Comparison of second quarter 2018 to second
quarter 2017
Total average deposit balances decreased $2.2 billion or 2 percent from
the prior year. Growth in average Consumer segment deposits was offset
by strategic reductions in Corporate, Wealth Management, and Other
segment deposits.
Comparison of second quarter 2018 to first quarter
2018
Broad-based asset quality improvement continued during the second
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 to 0.74
percent of loans outstanding, the lowest level since 2007. Business
services criticized and total troubled debt restructured loans decreased
14 percent and 17 percent, respectively, and total delinquencies
decreased 21 percent.
Net charge-offs totaled $62 million or 0.32 percent of average loans
compared to $79 million or 0.40 percent of average loans in the previous
quarter on an adjusted basis(1). The provision for loan
losses approximated net charge-offs during the second quarter and
included the release of the company’s remaining hurricane-specific loan
loss allowance of $10 million. The allowance for loan and lease losses
totaled 1.04 percent of total loans outstanding, and 141 percent of
total non-accrual loans. However, volatility in certain credit metrics
can be expected, especially related to large-dollar commercial credits.
Comparison of second quarter 2018 to second
quarter 2017
Net charge-offs decreased 2 basis points compared to the second quarter
of 2017. The allowance for loan and lease losses as a percent of total
loans decreased 26 basis points. Total non-performing loans, excluding
loans held for sale, decreased 28 percent, and total business lending
criticized loans decreased 42 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 11.8
percent and 11.0 percent, respectively, at quarter-end under the
phase-in provisions. In addition, the Common Equity Tier 1 ratio(1)(2)
was estimated at 10.9 percent on a fully phased-in basis.
During the second quarter, the company repurchased $235 million or 13
million shares of common stock and declared $100 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 84 percent,
and as of quarter-end, the company remained fully compliant with the
liquidity coverage ratio rule.
On July 2, 2018, Regions completed the sale of its Regions Insurance
subsidiary and affiliates. The after-tax gain associated with the
transaction was approximately $200 million and Common Equity Tier 1
capital generated was approximately $300 million. The after-tax gain
will be reflected in Regions’ third quarter consolidated statements of
income as a component of discontinued operations.
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 incorporate the
capital generated from the sale of Regions Insurance and include up to
$2.031 billion in common share repurchases over the next four quarters
and a proposed 56 percent increase to its quarterly common stock
dividend to $0.14 per common share beginning in the third quarter of
2018. The $2.031 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 July 2018 meeting.
(1) Non-GAAP, refer to pages 7, 11, 12, 17, 23, 24 and 27 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
20, 2018, at 2 p.m. ET through Monday, August 20, 2018. To listen by
telephone, please dial 1-855-859-2056, and use access code 7489087. 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, and mortgage 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 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
possible declines in property values, increases 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 “future,” “anticipates,” “assumes,” “intends,” “plans,”
“seeks,” “believes,” “predicts,” “potential,” “objectives,” “estimates,”
“expects,” “targets,” “projects,” “outlook,” “forecast,” “would,”
“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 and do not intend 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.
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/20180720005022/en/
Regions Financial Corporation
Media:
Evelyn
Mitchell, 205-264-4551
or
Investor Relations:
Dana
Nolan, 205-264-7040
Source: Regions Financial Corporation