Delivers 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
third quarter ended September 30, 2018. The company reported net income
available to common shareholders from continuing operations of $354
million, a 20 percent increase compared to the third quarter of 2017.
Earnings per diluted share from continuing operations were $0.32, a 28
percent increase. Total revenue grew 6 percent while pre-tax
pre-provision income grew 2 percent over the prior year. Adjusted
pre-tax pre-provision(1) income increased 15 percent.
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Regions also completed the sale of its Regions Insurance subsidiary and
affiliates during the third quarter. The after-tax gain associated with
the transaction was $196 million and is reflected in Regions'
consolidated statements of income as a component of discontinued
operations. As a result, the company reported total third quarter net
income available to common shareholders of $548 million, and total
earnings per diluted share of $0.50.
“With respect to our financial performance, Regions continues to execute
on its strategic plan,” said John Turner, President and CEO. “We
produced solid revenues this quarter as we grew loans while maintaining
credit discipline and operating more efficiently. These results
demonstrate our commitment to continuous improvement and show that our
investments in technology and talent are building a stronger company
that benefits all stakeholders.”
“Communities throughout the Southeast are facing a long road to recovery
following Hurricanes Michael and Florence,” continued Turner. “There’s
nothing more important than helping our customers, neighbors and
associates during the aftermath of these hurricanes, and I appreciate
the responsiveness of our teams who worked quickly to provide resources
and restore essential financial services in hard-hit areas. We are
assessing the long-term impacts of these events and will continue to
work closely with our customers to address their disaster-recovery
needs.”
Turner added, “We are also focused on creating opportunities for growth
in our communities, as evidenced by our $60 million contribution to the
Regions Financial Corporation Foundation during the third quarter,
building upon the $40 million contributed in December of 2017. Through
the Foundation, Regions will strategically invest in community programs
and organizations that support economic and community development,
education and workforce readiness, and financial wellness. Through these
contributions, we are positioning the Foundation to provide consistent
and sustained investments in our communities for many years to come.”
SUMMARY OF THIRD QUARTER 2018 RESULTS:
Third quarter 2018 results compared to second
quarter 2018:
-
Net interest income and other financing income increased 2 percent,
and net interest margin was 3.50 percent, up 1 basis point.
-
Non-interest income increased 1 percent on a reported and adjusted
basis(1).
-
Non-interest expense increased 1 percent, but decreased 3 percent on
an adjusted basis(1).
-
Average loans and leases increased 1 percent and totaled $81.0
billion; adjusted(1) loans and leases increased 2 percent.
-
Consumer lending balances increased 1 percent on a reported and
adjusted basis(1).
-
Business lending balances increased 2 percent.
-
Average deposits decreased 1 percent and totaled $93.9 billion.
-
Annualized net charge-offs increased 8 basis points to 0.40 percent of
average loans.
-
Non-performing loans, excluding loans held for sale, decreased 8 basis
points to 0.66 percent of loans outstanding.
-
Allowance for loan and lease losses decreased 1 basis point to 1.03
percent of total loans.
-
Allowance for loan and lease losses as a percent of non-performing
loans increased to 156 percent from 141 percent.
-
Business services classified loans decreased 7 percent while total
business services criticized loans increased 6 percent, and total
troubled debt restructured loans, excluding loans held for sale,
increased 3 percent.
-
Recorded an after-tax gain of $196 million associated with the sale of
Regions Insurance subsidiary reflected in discontinued operations.
Third quarter 2018 results compared to third
quarter 2017:
-
Net interest income and other financing income increased 5 percent;
net interest margin increased 14 basis points.
-
Non-interest income increased 8 percent, and 9 percent on an adjusted
basis(1).
-
Non-interest expenses increased 8 percent, and 1 percent on an
adjusted basis(1).
-
Average loans and leases increased 2 percent, and 3 percent on an
adjusted basis(1).
-
Consumer lending balances were relatively unchanged on a reported
basis and increased 3 percent on an adjusted basis(1).
-
Business lending balances increased 3 percent.
-
Average deposits decreased 3 percent.
-
Annualized net charge-offs increased 2 basis points to 0.40 percent of
average loans.
-
Non-performing loans, excluding loans held for sale, decreased 30
basis points to 0.66 percent of loans outstanding.
-
Business services criticized loans decreased 31 percent including a 51
percent decrease in business services classified loans, and total
troubled debt restructured loans, excluding loans held for sale,
decreased 36 percent.
THIRD QUARTER 2018 FINANCIAL RESULTS:
Selected items impacting earnings from
continuing operations:
Regions continues to take actions with respect to its Simplify and Grow
strategic priority, including streamlining its structure and refining
its branch network while making investments in new technologies,
delivery channels and other drivers of growth. The company incurred $5
million of severance expense related to this continuous improvement
process during the third quarter, as well as $4 million of expenses
associated with previously announced branch consolidations.
As noted, Regions also contributed $60 million to the Regions Financial
Corporation Foundation during the third quarter.
Total revenue from continuing operations
Comparison of third quarter 2018 to second quarter
2018
Total revenue of approximately $1.5 billion in the third quarter
increased 2 percent on a reported basis and 1 percent on an adjusted
basis(1) compared to the prior quarter.
Net interest income and other financing income increased $16 million or
2 percent over the prior quarter while net interest margin rose 1 basis
point to 3.50 percent. Net interest margin and net interest income and
other financing income benefited from higher interest rates partially
offset by increased wholesale funding costs. Higher average loan
balances also contributed to the increase in net interest income and
other financing income. Further, 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 $7 million or 1 percent on a reported
basis, and $4 million or 1 percent on an adjusted basis(1),as increases in service charges, market value adjustments on
employee benefit assets and other non-interest income were partially
offset by decreases in capital markets and mortgage income. The increase
in other non-interest income was attributable primarily to a net $5
million increase in the value of certain equity investments and $2
million in net gains associated with the sale of low income housing tax
credit investments. Other non-interest income also benefited from a $4
million decrease in net impairment charges reducing the value of certain
operating lease assets.
Service charges increased $4 million or 2 percent, reflecting continued
account growth. Card & ATM fees as well as wealth management income
remained relatively unchanged during the third quarter.
Capital markets income declined $12 million or 21 percent from a record
second quarter primarily attributable to lower merger and acquisition
advisory services.
Mortgage income decreased $5 million or 14 percent primarily due to
hedging and valuation adjustments on residential mortgage servicing
rights. During the quarter, the company completed the purchase of rights
to service approximately $3.4 billion of mortgage loans. 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 third quarter 2018 to third quarter
2017
Total revenue increased 6 percent on a reported and adjusted basis(1)
compared to the third quarter of 2017.
Net interest income and other financing income increased 5 percent. Net
interest margin increased 14 basis points. Net interest margin and net
interest income and other financing income benefited primarily from
higher interest rates. Higher average loan balances combined with a mix
shift within the consumer loan portfolio into higher yielding products
also contributed to the increase in net interest income and other
financing income. This increase was partially offset by additional
wholesale funding and less favorable credit-related interest recoveries.
Non-interest income increased 8 percent on a reported basis and 9
percent on an adjusted basis(1) driven primarily by growth in
capital markets income, card and ATM fees, wealth management income,
service charges and other non-interest income. The increase in other
non-interest income includes net gains associated with sale of low
income housing tax credit investments and net positive valuation
adjustments associated with certain equity investments. Other
non-interest income also benefited from a $9 million decrease in net
impairment charges reducing the value of certain operating lease assets.
Capital markets income increased 29 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 increased transactions and new account growth. Wealth
management income increased 5 percent led by growth in investment
services income. Service charges income increased 2 percent reflecting
continued customer account growth.
Non-interest expense from continuing operations
Comparison of third quarter 2018 to second quarter
2018
Non-interest expense increased 1 percent compared to the second quarter
driven primarily by a $60 million contribution to the Regions Financial
Corporation Foundation during the third quarter. On an adjusted basis(1),
non-interest expense decreased 3 percent primarily due to a reduction in
salaries and benefits and lower expense associated with Visa class B
shares sold in a prior year. The company also benefited from a modest
reduction in most expense categories during the quarter. Excluding the
impact of severance charges, salaries and benefits decreased $9 million
or 2 percent reflecting continued staffing reductions and lower
production-based incentives. Consistent with the company's efforts to
rationalize and streamline its organization, staffing levels declined by
457 full-time equivalent positions or 2 percent from the prior quarter.
The company's reported third quarter efficiency ratio was 62.6 percent
and 58.1 percent on an adjusted basis(1), down approximately
230 basis points from the prior quarter. The effective tax rate was 18.7
percent in the quarter. The full-year 2018 effective tax rate is
expected to be approximately 21 percent.
Comparison of third quarter 2018 to third quarter
2017
Non-interest expense increased 8 percent compared to the third quarter
of the prior year. On an adjusted basis(1),non-interest
expense increased 1 percent primarily due to higher salaries and
benefits and professional fees partially offset by lower occupancy and
other real estate expenses that were elevated in the prior year as a
result of hurricane-related charges. Excluding the impact of severance
charges, salaries and benefits increased $5 million or 1 percent driven
primarily by merit increases and higher production-based incentives,
partially offset by staffing reductions. Staffing levels declined by
1,522 full-time equivalent positions or 7 percent from the third quarter
of the prior year.
Loans and Leases
Comparison of third quarter 2018 to second quarter
2018
Average loans and leases increased 1 percent to $81.0 billion in the
third quarter. Adjusted(1) average loans and leases increased
$1.2 billion or 2 percent reflecting broad-based growth across the
business and consumer lending portfolios. Total new and renewed loan
production remained strong compared to the second quarter.
Average balances in the business lending portfolio increased $833
million or 2 percent. Growth in commercial and industrial loans was
broad-based across the corporate and middle market portfolios, aided by
growth within specialized lending. Owner-occupied commercial real estate
loans remained relatively stable, and investor real estate loans
increased $301 million or 5 percent driven primarily by growth in term
lending.
Adjusted(1) average consumer loans increased $365 million or
1 percent. Indirect-other consumer loans increased 17 percent as the
company continued to expand and grow its point-of-sale portfolio.
Residential first mortgage balances increased 1 percent, and
indirect-vehicle loans increased 3 percent, offsetting home equity
balance declines of 3 percent.
Comparison of third quarter 2018 to third quarter
2017
Average loans and leases increased 2 percent compared to the third
quarter of 2017, and adjusted(1) average loans increased $2.3
billion or 3 percent. The company generated a 3 percent increase in
total new and renewed loan production.
Average balances in the business lending portfolio increased $1.4
billion or 3 percent as growth in commercial and industrial loans was
partially offset by declines in owner-occupied commercial real estate
and investor real estate loans.
Adjusted(1) average consumer balances increased $966 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.
Deposits
Comparison of third quarter 2018 to second quarter
2018
Total average deposit balances decreased 1 percent to $93.9 billion
reflecting seasonal declines in Consumer and Corporate segments, as well
as the impact of the company's continued deposit optimization efforts.
Average deposits in the Consumer and Corporate segments decreased
approximately 1 percent and 2 percent, respectively driven primarily by
seasonal declines. Average deposits declined approximately 3 percent in
the Wealth Management segment and included the impact of ongoing
strategic reductions of certain collateralized deposits. Average
deposits in the Other segment increased modestly as the strategic
reduction of retail brokered sweep deposits has stabilized.
Comparison of third quarter 2018 to third quarter
2017
Total average deposit balances decreased 3 percent from the prior year
as growth in average Consumer segment deposits was primarily offset by
strategic reductions in Wealth Management and Other segment deposits.
Corporate segment deposits decreased $1.0 billion or 4 percent primarily
due to customers using liquidity to pay down debt or invest in their
businesses.
Asset quality
Comparison of third quarter 2018 to second quarter
2018
Overall asset quality remained stable during the third quarter. Total
non-performing loans, excluding loans held for sale, decreased to 0.66
percent of loans outstanding, the lowest level since 2007, and business
services classified loans decreased 7 percent. Business services
criticized loans as well as total troubled debt restructured loans
increased modestly.
Annualized net charge-offs increased 8 basis points to 0.40 percent of
average loans. The provision for loan losses approximated net
charge-offs, and the resulting allowance for loan and lease losses
totaled 1.03 percent of total loans outstanding and 156 percent of total
non-accrual loans. While overall asset quality remains benign,
volatility in certain credit metrics can be expected, especially related
to large-dollar commercial credits.
Comparison of third quarter 2018 to third quarter
2017
Annualized net charge-offs increased 2 basis points compared to the
third quarter of 2017, while 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 29 percent and total
business services criticized loans decreased 31 percent, including a 51
percent decline in classified loans. In addition, total troubled debt
restructured loans, excluding loans held for sale, decreased 36 percent.
Capital and liquidity
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 11.0
percent and 10.2 percent, respectively, at quarter-end under the
phase-in provisions. In addition, the Common Equity Tier 1 ratio(1)(2)
was estimated at 10.1 percent on a fully phased-in basis.
During the third quarter, the company repurchased $581 million or 30.6
million shares of common stock through open market purchases and
declared $148 million in dividends to common shareholders. On August 27,
2018, the company entered into an accelerated share repurchase agreement
to repurchase an additional $700 million of its common stock and
received an initial delivery of 29.1 million shares. The final
settlement of the transaction is scheduled to occur prior to year-end.
The company’s loan-to-deposit ratio at the end of the quarter was 88
percent, and as of quarter-end, the company remained fully compliant
with the liquidity coverage ratio rule.
(1) Non-GAAP, refer to pages 7, 11, 12, 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 Tuesday,
October 23, 2018, at 2 p.m. ET through Friday, November 23, 2018. To
listen by telephone, please dial 1-855-859-2056, and use access code
8039849. 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. Therefore, we caution you
against relying on any of these forward-looking 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,” “might,” “could,” “should,” “can,” and similar terms and
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. Factors or events that could cause our actual
results to differ may emerge from time to time, and it is not possible
to predict all of them. We assume no obligation and do not intend to
update or revise any forward-looking statements that are made from time
to time, either as a result of future developments, new information or
otherwise, except as may be required by law.
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/20181023005330/en/
Regions Financial Corporation
Media Contact:
Evelyn
Mitchell, 205-264-4551
or
Investor Relations Contact:
Dana
Nolan, 205-264-7040
Source: Regions Financial Corporation