2012 MORGAN STANLEY FINANCIALS CONFERENCE June 13, 2012 David Turner Chief Financial Officer Exhibit 99.1 |
2 FRANCHISE OVERVIEW • Bank Associates: 23,619 • Assets: $128B • Loans: $77B • Deposits: $97B • Branches: 1,722 • Insurance Offices: 30 • ATMs: 2,070 • Market Cap: $9.0B* *As of May 29, 2012 Business Services Small and mid-sized C&I lending Commercial Real Estate Equipment Finance Consumer Services Direct Lending Indirect Auto Wealth Management Private Banking Insurance Trust Services Ranked 4th or Better in Market Share Targeted Growth Areas Mortgage Home Equity Credit Card |
3 Top 10 MSAs Deposits Market Share Market Rank ’10-’15 Population Growth Birmingham, AL $11.0 37.6% 1 Nashville, TN $6.6 17.3% 1 Miami, FL $4.8 3.1% 7 Tampa, FL $4.4 8.7% 4 Memphis, TN $3.8 16.8% 2 Atlanta, GA $3.4 3.0% 6 St. Louis, MO $3.0 4.7% 4 Jackson, MS $2.8 25.5% 2 New Orleans, LA $2.4 8.3% 4 Mobile, AL $2.3 38.2% 1 ($ in billions) National Average: 3.9% REGIONS’ FOOTPRINT IS CHARACTERIZED BY EITHER HIGH MARKET SHARE, HIGH GROWTH MARKETS OR BOTH Source: SNL Financial Note: Core Markets include AL, FL, LA, MS, AR, TN Weighted Average Deposit Market Share in Regions’ Core Markets Rank Name Market Share 1 Bank of America 11.5% 2 Regions 9.8% 3 Wells Fargo 9.4% 4 SunTrust 6.9% 5 JPMorgan Chase 3.3% 6 BB&T 2.5% 7 Capital One 2.3% 8 First Horizon 2.0% 9 Hancock 1.9% 10 PNC 1.4% 1.0% 8.8% 4.4% 2.0% 10.1 % 4.3% 3.7% 1.4% 9.6% 3.4% |
4 A QUARTER OF SIGNIFICANT ACCOMPLISHMENT Key Milestones • No regulatory objection to Capital Plan • Closed Morgan Keegan Sale • Successful common equity offering • Credit Ratings upgrade • Redeemed $3.5 billion of Series A preferred stock • Repurchased warrant from U.S. Treasury for $45 million Broad-Based Asset Quality Improvement • Net charge-offs decreased $98MM or 23% to $332MM • Lowest quarterly loan loss provision in more than four years at $117MM • NPLs declined 9% • Inflows of NPLs down 32% to $381MM 1Q12 Results • Net income available to common shareholders of $145MM or $0.11 per diluted share • Income from continuing operations $0.14 per diluted share |
5 MARKED IMPROVEMENT IN ASSET QUALITY METRICS NPL Gross Migration NPLs and Coverage Ratio NPL Balances Paying Current and as Agreed*** Loan Loss Provision 48% Decline* 30% Decline in Total NPLs* 11 bps Increase* 76% Decline* *Year-over-year change **Excludes loans held for sale ***Business services $730 $555 $755 $561 $381 1Q11 2Q11 3Q11 4Q11 1Q12 $3,087 $2,784 $2,710 $2,372 $2,151 103% 112% 109% 116% 118% 95% 100% 105% 110% 115% 120% 1Q11 2Q11 3Q11 4Q11 1Q12 NPLs ALL / NPL** 38% 42% 45% 48% 49% 1Q11 2Q11 3Q11 4Q11 1Q12 316 397 358 282 191 165 151 153 148 141 (150) (156) (135) (215) $482 $398 $355 $295 $117 1Q11 2Q11 3Q11 4Q11 1Q12 Business Services and HFS Net Charge-offs Consumer Net Charge-offs Reserve Reduction |
STRONG FUNDING PROFILE AND LIQUIDITY POSITION Source: SNL Financial - Peers include BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC, ZION *Based on ending balances $66B $79B 6 29% 31% 14% 20% 5% 6% 29% 24% 23% 19% 1Q11 1Q12 Time Money Market Savings Interest Bearing Interest Free 72% 71% Regions Peer Median 93% 93% 90% 90% 89% 84% 84% 83% 81% 79% 1Q11 2Q11 3Q11 4Q11 1Q12 Deposit Cost 0.59% 0.37% Funding Cost 0.86% 0.65% Deposit Profile* 1Q12 Low Cost Deposits as a % of Total Funding Loans* / Deposits* Low Cost Deposits* Peer Median Regions |
7 STRONG CAPITAL RATIOS Tangible Common Equity / Tangible Assets Tier 1 Capital Ratio Tier 1 Common Ratio (2) (1) Non-GAAP - Subject to change as interpretation of Basel III rules is ongoing and dependent on guidance from Basel and regulators (2) Non-GAAP – See appendix for reconciliation • Tier 1 ratio is 14.3%, or 100 basis points higher linked quarter • Tier 1 Capital adjusted to exclude TARP (2) stood at 10.6% at quarter-end • Basel III Tier 1 ratio estimated at 12.5% (1) • Tier 1 Common ratio (2) is 9.6%, or an increase of 110 bps linked quarter • The $900 million common stock issuance contributed 95 basis points to quarter over quarter improvement • Basel III Tier 1 Common ratio estimated at 8.9% (1) 6.0% 6.2% 6.5% 6.6% 7.4% 1Q11 2Q11 3Q11 4Q11 1Q12 8.8% 8.8% 9.1% 9.4% 10.6% 3.7% 3.8% 3.7% 3.9% 3.7% 12.5% 12.6% 12.8% 13.3% 14.3% 1Q11 2Q11 3Q11 4Q11 1Q12 TARP Impact Tier 1 Capital Excluding TARP (2) 7.9% 7.9% 8.2% 8.5% 9.6% 1Q11 2Q11 3Q11 4Q11 1Q12 |
8 RENEWED FOCUS ON C&I AND CONSUMER LENDING BUSINESS SERVICES • 61% of Total Loan Portfolio • Focused on middle market and small business • Broad based middle-market commercial loan growth across footprint and industries • Driven by specialized industries, including healthcare, franchise restaurant, energy, as well as technology and defense 1Q12 Business Services Loans: $46B 1Q12 Consumer Services Loans: $30B * Includes commercial real estate owner occupied loans C&I 54% CRE* 24% IRE 22% 1st Mort 45% Home Equity 42% Indirect 6% Credit Card 3% Other 4% 39% of Total Loan Portfolio Consumer loan growth will be fueled by new businesses as well as growth in existing businesses Mortgage loan production totaled $1.6 billion Non-real estate consumer portfolio has increased 45% YoY $1B Regions-branded credit card portfolio repurchased in 2011 Indirect auto lending grew 19% YoY Consumer services |
MIX AND COST OF DEPOSITS PROVIDES FURTHER OPPORTUNITY TO LOWER DEPOSIT COSTS AND IMPROVE MARGIN Deposit Cost Opportunity Gap • Regions has additional room to reduce deposit costs, most significantly through profitably re-pricing maturing CDs • Approximately $4B of CDs maturing in 2Q12 at an average rate of 1.1% • Additional $5.2B of CDs maturing in the second half of 2012 at an average rate of 1.9% Deposit Mix Compared to Peers* Regions Peer Average *Ending basis for 1Q12 Source: SNL Financial: Peer banks include BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC, ZION 49 bps 30 bps 10 bps 7 bps 1Q11 1Q12 Peer Median Regions Opportunity Gap Time 19% NIB 31% Other 50% Time 16% NIB 30% Other 54% 9 |
FUNDING MIX AND DEPLOYMENT OF CASH RESERVES HAS AIDED NET INTEREST MARGIN AND CLOSING THE GAP TO PEERS Impact of Excess Cash Reserves & Non- Accruals on NIM* Regions has closed a portion of its gap vs. peers in the last 5 quarters * From continuing operations Source: SNL Financial: Peer banks include BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC, ZION 10 3.09% 3.07% 3.04% 3.08% 3.09% 0.10% 0.14% 0.16% 0.14% 0.13% 0.16% 0.15% 0.15% 0.13% 0.10% 3.35% 3.36% 3.35% 3.35% 3.32% 1Q11 2Q11 3Q11 4Q11 1Q12 Reported Net Interest Margin Impact of Excess Cash Reserves 3.09% 3.07% 3.04% 3.08% 3.09% 3.70% 3.62% 3.65% 3.60% 3.61% 1Q11 2Q11 3Q11 4Q11 1Q12 Regions Peer Group Average Impact of Non-Accruals |
11 ABILITY TO ADAPT OUR BUSINESS MODEL HELPS MITIGATE NEW LEGISLATION IMPACT • 3% linked quarter • Mortgage revenues increased 35% linked quarter and 71% over last year • Factors offsetting debit card legislation • Ongoing restructuring of our accounts from free to fee-eligible • Increased hurdle to obtain free checking • New revenue initiatives including Now Banking Suite of products (expedited bill pay, check cashing, reloadable prepaid debit card and money transfer services) Fee Income by Quarter (1) From continuing operations adjusted to exclude security gains and leveraged lease terminations gains–Non-GAAP, see appendix for GAAP to Non-GAAP reconciliation 1 287 308 310 263 254 81 70 44 68 77 45 50 68 57 77 24 24 23 28 25 27 26 28 60 66 43 52 46 $501 $519 $516 $490 $505 1Q11 2Q11 3Q11 4Q11 1Q12 Service charges Capital Markets, Investment Income & Trust Mortgage Income Credit Card Income Insurance Income Other Adjusted non-interest revenue increased 1 |
12 SEASONAL INCREASE IN EXPENSES; COST CONTAINMENT CONTINUES TO BE A FOCUS (1) Non-GAAP excludes 4Q11 goodwill impairment, see appendix for GAAP to Non-GAAP reconciliation (2) Excludes Morgan Keegan Associates Headcount – Bank Associates 2 • Non-interest expenses from continuing operations were $913 million • higher than prior quarter; however, down 2% year-over-year • Salaries and benefits costs increased $50 million linked quarter due to payroll taxes and pension expenses • Headcount reduced 737 positions, down 3% over the last year • Other real estate and HFS expenses decreased $19 million over prior quarter or 56% Other Real Estate and HFS Expenses 24,356 23,966 23,713 23,707 23,619 1Q11 2Q11 3Q11 4Q11 1Q12 $41 $41 $48 $34 $15 1Q11 2Q11 3Q11 4Q11 1Q12 Adjusted non-interest expenses were 5% 1 |
13 OPPORTUNITY FOR OUTPERFORMANCE REVENUE EXPENSES CREDIT • Tangible opportunity to close peer margin gap • Continued momentum in C&I and Consumer lending • Real estate expertise intact • Durbin mitigation efforts underway • Ongoing expense initiatives • Removed Morgan Keegan overhead / cost structure • Anticipating reduced credit related / OREO expenses • Solid reserve position • Reduced provisions with continued credit improvement • Positioned for increased future capital return CAPITAL • Over $11 billion of deposit repricing • Lower liquidity costs • Level of non-accruals |
14 APPENDIX |
FORWARD-LOOKING STATEMENTS 15 This presentation may include forward-looking statements which reflect Regions’ current views with respect to future events and financial performance. The Private Securities Litigation Reform Act of 1995 (“ the Act” ) provides a “ safe harbor” for forward-looking statements which are identified as such and are accompanied by the identification of important factors that could cause actual results to differ materially from the forward-looking statements. For these statements, we, together with our subsidiaries, claim the protection afforded by the safe harbor in the Act. 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: › The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “ Dodd-Frank Act” ) became law on July 21, 2010, and a number of legislative, regulatory and tax proposals remain pending. Additionally, the U.S. Treasury and federal banking regulators continue to implement, but are also beginning to wind down, a number of programs to address capital and liquidity in the banking system. Future and proposed rules, including those that are part of the Basel III process, could require banking institutions to increase levels of capital. All of the foregoing may have significant effects on Regions and the financial services industry, the exact nature of which cannot be determined at this time. › Regions' ability to mitigate the impact of the Dodd-Frank Act on debit interchange fees through revenue enhancements and other revenue measures, which will depend on various factors, including the acceptance by our customers of modified fee structures for Regions' products and services. › Possible additional loan losses, impairment of goodwill and other intangibles, and adjustment of valuation allowances on deferred tax assets and the impact on earnings and capital. › Possible changes in interest rates may increase funding costs and reduce earning asset yields, thus reducing margins. Increases in benchmark interest rates would also increase debt service requirements for customers whose terms include a variable interest rate, which may negatively impact the ability of borrowers to pay as contractually obligated. › Possible changes in general economic and business conditions in the United States in general and in the communities Regions serves in particular, including any prolonging or worsening of the current unfavorable economic conditions including unemployment levels. › Possible changes in the creditworthiness of customers and the possible impairment of the collectability of loans. › Possible changes in trade, monetary and fiscal policies, laws and regulations and other activities of governments, agencies, and similar organizations, may have an adverse effect on business. › Possible stresses in the financial and real estate markets, including possible continued deterioration in property values. › Regions' 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 Regions' business. › Regions' ability to expand into new markets and to maintain profit margins in the face of competitive pressures. › Regions' ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by Regions' customers and potential customers. › Regions' ability to keep pace with technological changes. › Regions' ability to effectively manage credit risk, interest rate risk, market risk, operational risk, legal risk, liquidity risk, and regulatory and compliance risk. › Regions’ ability to ensure adequate capitalization which is impacted by inherent uncertainties in forecasting credit losses. › The cost and other effects of material contingencies, including litigation contingencies, and any adverse judicial, administrative or arbitral rulings or proceedings. › The effects of increased competition from both banks and non-banks. › The effects of geopolitical instability and risks such as terrorist attacks. › Possible changes in consumer and business spending and saving habits could affect Regions' ability to increase assets and to attract deposits. › The effects of weather and natural disasters such as floods, droughts, wind, tornados and hurricanes, and the effects of man-made disasters. › Possible downgrades in ratings issued by rating agencies. › Potential dilution of holders of shares of common stock resulting from any future efforts by Regions to raise additional capital. › Possible changes in the speed of loan prepayments by Regions’ customers and loan origination or sales volumes. › Possible acceleration of prepayments on mortgage-backed securities due to low interest rates and the related acceleration of premium amortization on those securities. › The effects of problems encountered by larger or similar financial institutions that adversely affect Regions or the banking industry generally. › Regions’ ability to receive dividends from its subsidiaries. › The effects of the failure of any component of Regions’ business infrastructure which is provided by a third party. › Changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies. › With regard to the sale of M organ Keegan the possibility of business disruption following the transaction; reputational risks and the reaction of customers and counterparties to the transaction; and occurrences which could cause post-closing adjustments to the purchase price. › The effects of any damage to Regions’ 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” in Regions’ Annual Report on Form 10-K for the year ended December 31, 2011. › The words "believe," "expect," "anticipate," "project," 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. |
16 NON-GAAP RECONCILIATION: NON-INTEREST EXPENSE AND NON-INTEREST REVENUE In the table below non-interest expense (GAAP) and non-interest income (GAAP) are presented excluding certain adjustments to arrive at adjusted non-interest expense (non-GAAP) and non-interest income (non-GAAP). Net interest income on a fully taxable-equivalent basis (GAAP) and non-interest income are added together to arrive at total revenue (GAAP). Adjustments are made to arrive at adjusted total revenue (non-GAAP). 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. ($ amounts in millions) 3/31/12 12/31/11 9/30/11 6/30/11 3/31/11 Continuing Operations Non-interest expense (GAAP) 913 $ 1,124 $ 850 $ 956 $ 932 $ Adjustments: Securities impairment, net - (2) - - - Branch consolidation and property and equipment charges - 2 - (77) - Goodwill impairment - (253) - - - Adjusted non-interest expense (non-GAAP) 913 $ 871 $ 850 $ 879 $ 932 $ Net interest income, taxable-equivalent basis (GAAP) 839 $ 858 $ 859 $ 864 $ 864 $ Non-interest income (GAAP) 524 $ 507 $ 513 $ 543 $ 580 $ Adjustments: Securities (gains) losses, net (12) (7) 1 (24) (82) Leveraged lease termination (gains) losses, net (7) (10) 2 - - Loss (gain) on sale of mortgage loans - - - 3 Adjusted non-interest income (non-GAAP) 505 490 516 519 501 Adjusted total revenue (non-GAAP) 1,344 $ 1,348 $ 1,375 $ 1,383 $ 1,365 $ As of and for Quarter Ended |
17 NON-GAAP RECONCILIATION: TIER 1 CAPITAL ($ amounts in millions) As Reported Series A Retirement As Adjusted TIER 1 RISK-BASED RATIO Stockholders' equity 17,534 $ (3,500) 14,034 Accumulated other comprehensive loss 60 - 60 Non-qualifying goodwill and intangibles (4,881) - (4,881) Disallowed deferred tax assets (345) - (345) Disallowed servicing assets (36) - (36) Qualifying non-controlling interests 92 - 92 Qualifying trust preferred securities 846 - 846 Tier 1 capital 13,270 $ (3,500) $ 9,770 $ Risk-weighted assets 92,546 92,546 Tier 1 capital ratio 14.3% 10.6% ($ amounts in millions) As Reported Series A Retirement As Adjusted TIER 1 RISK-BASED RATIO Stockholders' equity 16,499 $ (3,500) 12,999 Accumulated other comprehensive loss 69 - 69 Non-qualifying goodwill and intangibles (4,900) - (4,900) Disallowed deferred tax assets (432) - (432) Disallowed servicing assets (35) - (35) Qualifying non-controlling interests 92 - 92 Qualifying trust preferred securities 846 - 846 Tier 1 capital 12,139 $ (3,500) $ 8,639 $ Risk-weighted assets 91,449 91,449 Tier 1 capital ratio 13.3% 9.4% ($ amounts in millions) As Reported Series A Retirement As Adjusted TIER 1 RISK-BASED RATIO Stockholders' equity 17,263 $ (3,500) 13,763 Accumulated other comprehensive income (92) - (92) Non-qualifying goodwill and intangibles (5,649) - (5,649) Disallowed deferred tax assets (506) - (506) Disallowed servicing assets (35) - (35) Qualifying non-controlling interests 92 - 92 Qualifying trust preferred securities 846 - 846 Tier 1 capital 11,919 $ (3,500) $ 8,419 $ Risk-weighted assets 92,786 92,786 Tier 1 capital ratio 12.8% 9.1% As of December 31, 2011 As of September 30, 2011 As of March 31, 2012 ($ amounts in millions) As Reported Series A Retirement As Adjusted TIER 1 RISK-BASED RATIO Stockholders' equity 16,888 $ (3,500) 13,388 Accumulated other comprehensive loss 177 - 177 Non-qualifying goodwill and intangibles (5,668) - (5,668) Disallowed deferred tax assets (498) - (498) Disallowed servicing assets (35) - (35) Qualifying non-controlling interests 92 - 92 Qualifying trust preferred securities 846 - 846 Tier 1 capital 11,802 $ (3,500) $ 8,302 $ Risk-weighted assets 93,865 93,865 Tier 1 capital ratio 12.6% 8.8% ($ amounts in millions) As Reported Series A Retirement As Adjusted TIER 1 RISK-BASED RATIO Stockholders' equity 16,619 $ (3,500) 13,119 Accumulated other comprehensive loss 387 - 387 Non-qualifying goodwill and intangibles (5,686) - (5,686) Disallowed deferred tax assets (463) - (463) Disallowed servicing assets (28) - (28) Qualifying non-controlling interests 92 - 92 Qualifying trust preferred securities 846 - 846 Tier 1 capital 11,767 $ (3,500) $ 8,267 $ Risk-weighted assets 93,929 93,929 Tier 1 capital ratio 12.5% 8.8% As of March 31, 2011 As of June 30, 2011 Regions Series A preferred stock was retired on April 4, 2012. The following tables present the calculations of Tier 1 capital and the Tier 1 capital ratio, adjusted as if the retirement occurred on the last day of the quarter for each period presented. The amount retired includes the Series A preferred stock plus the remaining balance of the related discount. The tables do not include an adjustment for the retirement of the warrant to purchase 48.3 million shares of Regions common stock at $10.88 as this amount cannot be estimated at this time. |
18 NON-GAAP RECONCILIATION: TIER 1 COMMON As of and for Quarter Ended ($ amounts in millions) 12/31/11 9/30/11 6/30/11 3/31/11 Stockholders' equity (GAAP) 17,534 $ 16,499 $ 17,263 $ 16,888 $ 16,619 $ Accumulated other comprehensive (income) loss 60 69 (92) 177 387 Non-qualifying goodwill and intangibles (4,881) (4,900) (5,649) (5,668) (5,686) Disallowed deferred tax assets (345) (432) (506) (498) (463) Disallowed servicing assets (36) (35) (35) (35) (28) Qualifying non-controlling interests 92 92 92 92 92 Qualifying trust preferred securities 846 846 846 846 846 Tier 1 capital (regulatory) 13,270 $ 12,139 $ 11,919 $ 11,802 $ 11,767 $ Qualifying non-controlling interests (92) (92) (92) (92) (92) Qualifying trust preferred securities (846) (846) (846) (846) (846) Preferred stock (3,429) (3,419) (3,409) (3,399) (3,389) Tier 1 common equity (non-GAAP) N 8,903 $ 7,782 $ 7,572 $ 7,465 $ 7,440 $ Risk-weighted assets (regulatory) O 92,546 91,449 92,786 93,865 93,929 Tier 1 common risk-based ratio (non-GAAP) N/O 9.6% 8.5% 8.2% 7.9% 7.9% 3/31/12 TIER 1 COMMON RISK-BASED RATIO - CONSOLIDATED The following table provides a reconciliation of stockholder’s equity to "Tier 1 common equity" (non-GAAP). Traditionally, the Federal Reserve and other banking regulatory bodies have assessed a bank's capital adequacy based on Tier 1 capital, the calculation of which is codified in federal banking regulations. In connection with the Company's Comprehensive Capital Assessment and Review ("CCAR"), these regulators are supplementing their assessment of the capital adequacy of a bank based on a variation of Tier 1 capital, known as Tier 1 common equity. While not codified, analysts and banking regulators have assessed Regions' capital adequacy using the Tier 1 common equity measure. Because Tier 1 common equity is not formally defined by GAAP or codified in the federal banking regulations, this measure is considered to be non-GAAP and other entities may calculate it differently than Regions' disclosed calculations. Since analysts and banking regulators may assess Regions' capital adequacy using TIer 1 common equity, we believe that it is useful to provide investors the ability to assess Regions' capital adequacy on these same bases. Tier 1 common equity 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 one of four broad risk categories. The aggregated dollar amount in each category is then multiplied by the risk-weighted category. The resulting weighted values from each of the four 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. Tier 1 capital is then divided by this denominator (risk-weighted assets) to determine the Tier 1 capital ratio. Adjustments are made to Tier 1 capital to arrive at Tier 1 common equity. Tier 1 common equity is also divided by the risk-weighted assets to determine the Tier 1 common risk-based ratio (non-GAAP). The amounts disclosed as risk- weighted assets are calculated consistent with banking regulatory requirements. |
19 (1) Under Basel III, regulatory capital must be reduced by purchased credit card relationship intangible assets. These assets are partially allowed in Basel I capital. (2) Regions continues to develop systems and internal controls to precisely calculate risk-weighted assets as required by Basel III. The amount included above is a reasonable approximation, based on our understanding of the requirements. NON-GAAP RECONCILIATION: BASEL III ($ amounts in millions) 3/31/12 Stockholders' equity (GAAP) 17,534 $ Non-qualifying goodwill and intangibles (1) (5,041) Adjustments, including other comprehensive income related to cash flow hedges, disallowed deferred tax assets, threshold deductions and other adjustments (680) 11,813 $ Qualifying non-controlling interests 4 Basel III Tier 1 Capital (non-GAAP) 11,817 $ Basel III Tier 1 Capital (non-GAAP) 11,817 $ Preferred Stock (3,429) Qualifying non-controlling interests (4) Basel III Tier 1 Common (non-GAAP) 8,384 $ Basel I risk-weighted assets 92,546 Basel III risk-weighted assets (2) 94,334 Minimum Basel III Tier 1 Capital Ratio 12.5% 8.5% Basel III Tier 1 Common Ratio 8.9% 7.0% The following table provides calculations of Tier 1 capital and Tier 1 common, based on Regions’ current understanding of Basel III requirements. Regions currently calculates its risk-based capital ratios under guidelines adopted by the Federal Reserve based on the 1988 Capital Accord (“Basel I”) of the Basel Committee on Banking Supervision (the “Basel Committee”). In December 2010, the Basel Committee released its final framework for Basel III, which will strengthen international capital and liquidity regulation. When implemented by U.S. bank regulatory agencies and fully phased-in, Basel III will change capital requirements and place greater emphasis on common equity. Implementation of Basel III will begin on January 1, 2013, and will be phased in over a multi-year period. The U.S. bank regulatory agencies have not yet finalized regulations governing the implementation of Basel III. Accordingly, the calculations provided below are estimates, based on Regions’ current understanding of the framework, including the Company’s reading of the requirements, and informal feedback received through the regulatory process. Regions’ understanding of the framework is evolving and will likely change as the regulations are finalized. Because the Basel III implementation regulations are not formally defined by GAAP and have not yet been finalized and codified, these measures are considered to be non-GAAP financial measures, and other entities may calculate them differently from Regions’ disclosed calculations. Since analysts and banking regulators may assess Regions’ capital adequacy using the Basel III framework, we believe that it is useful to provide investors the ability to assess Regions’ capital adequacy on the same basis. |
20 SIGNIFICANT REDUCTION IN HIGH RISK LOAN PORTFOLIOS Total Investor Real Estate Higher Risk Investor Real Estate Portfolio Reduced Investor Real Estate $13.6 B or 57% over 5 years Reduced High Risk Portfolios $10.5 B or 86% over 5 years 11.8 9.1 11.9 $23.7 $10.1 1Q07 1Q12 Mortgage Construction $6.2 $2.0 $4.0 $0.8 $0.1 $0.8 Land Condo Single Family 1Q07 1Q12 |