Citi US Financial Services Conference March 6, 2013 David Turner Chief Financial Officer 1 Exhibit 99.1 |
Why Regions? Competitive Position • Strong market presence • Competitive product set • Stronger company today than three years ago • Revenue growth on par with peers • Disciplined expense management Opportunity for Outperformance • Improving efficiency ratio • Stable net interest margin • Significant credit leverage remains • Low loan to deposit ratio Moving Forward • Creating shared value for our customers, communities, associates and shareholders • Business plan to support growth 2 Proven Track Record |
A leading southeastern banking franchise Company Snapshot December 2012 Associates 23,427 Assets $121B Loans $74B Deposits $95B Branches 1,711 ATMs 2,054 Market Cap* $10.8B * As of February 27, 2013 Regions Branches Deposit Market Share Regions Insurance Group 3 #1 #2 #1 #1 #6 #4 #4 # • 14 largest full-service bank • Operating in sixteen states; however, seven states represent 85% of total deposits • Primary business lines: Consumer Services, Business Services and Wealth Management • Full line insurance brokerage firm offering all lines of personal and commercial insurance th |
4 Top 10 MSAs Deposits Market Rank ’10-’15 Population Growth Birmingham, AL $10.1 1 Nashville, TN $7.0 1 Tampa, FL $5.0 4 Miami, FL $4.0 11 Memphis, TN $3.9 2 Atlanta, GA $3.3 6 St. Louis, MO $3.0 4 Jackson, MS $2.9 2 New Orleans, LA $2.4 4 Mobile, AL $2.3 1 ($ in billions) National Average: 3.9% Source: SNL Financial Note: Core Markets include AL, FL, LA, MS, AR, TN Rank Name Market Share 1 Bank of America 11.1% 2 Wells Fargo 9.9% 3 Regions 9.4% 4 SunTrust 6.7% 5 JPMorgan Chase 3.8% 6 BB&T 3.0% 7 Capital One 2.2% 8 First Horizon 2.0% 9 Hancock 1.7% 10 Citi 1.6% Weighted Average Deposit Market Share in Regions’ Core Markets Characterized by high market share, high growth markets 3.4% 9.6% 3.7% 1.4% 4.3% 10.1% 2.0% 4.4% 8.8% 1.0% Footprint positioning |
5 Balance Sheet 4Q12 4Q09 Improvement Deposit Costs 0.22% 1.15% 93 bps Total Funding Costs 0.50% 1.45% 95 bps Time Deposits as % of Total Deposits 14% 32% Reduced by half Low-Cost Deposits $82.0B $67.1B 22% Profitability Mortgage Revenue $90MM $46MM 96% Net Interest Margin (1) 3.10% 2.72% 38 bps Efficiency Ratio (2) 64.42% 67.88% 346 bps Credit Risk Profile Non-Performing Assets $1.9B $4.4B 57% Net Charge-Offs $180MM $692MM 74% Allowance for Loan Losses / Loans 2.59% 3.43% 84 bps Capital and Liquidity Tier 1 Common Ratio (3) 10.8% 7.1% 370 bps Loan to Deposit Ratio 78% 92% More liquid Stronger company today (1) 4Q12 from continuing operations; 4Q09 as reported (2) Annual Ratio (3) Non-GAAP - see appendix for reconciliation |
6 Revenue growth – continuing to make progress Peer banks include BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC, ZION Note: Net interest income on FTE basis and non-interest revenue adjusted to exclude non-recurring items Source: SNL Financial Growth in Total Revenue Linked Quarter vs Peers -2.0% -0.3% -0.4% 1.0% 0.3% -0.2% 2.2% 0.9% 1.0% 0.5% 4Q11 1Q12 2Q12 3Q12 4Q12 Regions Peer Median |
Regions has the second lowest expense to assets ratio vs peers and reduced expenses faster than almost all our peers Non-Interest Expense (1) / Average Assets Full Year 2012 vs. Full Year 2011 % Change 2.6% 2.8% 3.0% 3.0% 3.1% 3.2% 3.3% 3.4% 3.5% 3.5% 3.5% 3.9% 4.3% Bank #1 RF Bank #3 Bank #4 Bank #5 Bank #6 Bank #7 Bank #8 Bank #9 Bank #10 Bank #11 Bank #12 Bank #13 -4% -2% -1% 0% 2% 4% 4% 4% 5% 5% 9% 11% 12% Bank #1 RF Bank #3 Bank #4 Bank #5 Bank #6 Bank #7 Bank #8 Bank #9 Bank #10 Bank #11 Bank #12 Bank #13 7 (1) 4Q12 Adjusted to exclude non-core items, ratios are annualized – Peer banks include: BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC, ZION Source: SNL Financial See appendix for reconciliation |
8 Focused on improved efficiency (1) Non-GAAP – See appendix for reconciliation Note: Results from Continuing Operations Peer banks include: BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC, ZION Source: SNL Financial Target: Mid to High 50s Efficiency Ratio (1) 70.1% 67.9% 64.6% 65.0% 64.2% 65.3% 62.8% 64.3% 62.7% 4Q11 1Q12 2Q12 3Q12 4Q12 Regions Peer Median 64.3% |
• Net interest margin was up 2 bps linked quarter, primarily due to lower deposit costs and interest recoveries • Opportunities to protect the margin through: • Continued reduction of deposit costs • Retention of 15-year fixed rate mortgages • Liability management opportunities • Outlook is for a relatively stable margin in 2013 Net interest margin improves Note: Peer banks include BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC, ZION Source: SNL Financial Net Interest Margin vs. Peers 4Q11 1Q12 2Q12 3Q12 4Q12 3.53% 3.51% 3.52% 3.44% 3.47% 3.08% 3.16% 3.09% 3.10% 3.08% Regions Peer Average 9 |
Continued asset quality improvement Significant credit leverage remains Note: Peer banks include BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC, ZION Source: SNL Financial 58% decrease Y-O-Y Allowance for Loan Losses / Total Loans Net Charge-Offs and Ratio ($ in millions) 10 $430 $332 $265 $262 $180 2.16% 1.73% 1.39% 1.38% 0.96% 4Q11 1Q12 2Q12 3Q12 4Q12 Net Charge-Offs Net Charge-Offs as % of Average Loans 3.54% 2.59% 2.34% 1.89% 4Q11 1Q12 2Q12 3Q12 4Q12 Regions Peer Group Median |
11 (1) Non-GAAP – See appendix for reconciliation Note: Peer banks include BBT, CMA, FHN, FITB, HBAN, KEY, MTB, PNC, STI, USB, WFC, ZION Source: SNL Financial Estimated Basel III (1) at the end of 4Q12 was 8.9% Loan to Deposit Ratio Tier 1 Common Ratio (1) 8.5% 9.6% 10.0% 10.5% 10.8% 9.6% 9.7% 9.8% 9.9% 10.0% 4Q11 1Q12 2Q12 3Q12 4Q12 Regions Peer Median 81% 79% 80% 79% 78% 89% 87% 88% 88% 88% 4Q11 1Q12 2Q12 3Q12 4Q12 Regions Peer Median Solid capital and liquidity |
12 • Getting a full and detailed view of customer financial needs – 360° View • Deepening customer relationships through cross-sell • Going to market as One bank, One team, One Regions – making referrals and meeting needs • Providing service quality that creates exceptional loyalty and retention communities, our associates and our shareholders through… Creating for our customers, our shared value |
13 Transportation/ Restaurant Technology & Defense Energy Healthcare (Houston) (Atlanta) (Charlotte) (Nashville) Business Services – key focus areas for 2013 • Acquire, retain and deepen relationships through • Maintain disciplined focus on specialized industries to drive growth: • Healthcare • Restaurant • Transportation • Technology & Defense • Energy • We are still in the Investor Real Estate business, where appropriate • Get paid for the risks we take • Stay focused on prudent Risk Management disciplines Transition to growth through shared value |
14 Wealth Management - key focus areas for 2013 • Broaden and deepen relationships • Grow trust assets under management • Roll out branch-based Financial Consultants in partnership with Cetera • Enhance performance management and coaching culture • Stay focused on prudent risk management disciplines • Listen to customers’ goals and deliver products and services they need • Expand service and product offerings Transition to growth through shared value |
• Deepen relationships • Attract, retain and expand quality consumer households • Stabilize and grow quality earning assets – get paid for the risks we take • Leverage NOW Banking products to bank the under-banked markets • Continue to prudently grow credit cards, mortgage and indirect lending • Remain focused on disciplined risk management, compliance and regulatory issues • Provide trustworthy advice, guidance and education to help our customers succeed financially • Leverage technology to improve channel capabilities, sales and efficiency Consumer Services – key focus areas for 2013 Transition to growth through shared value 15 |
Moving forward in 2013 • Through , maximize opportunities to deepen quality customer relationships • Grow households • Positioned for continued increases in loan production • Indirect auto portfolio • Commercial and Industrial • Credit card • Retention of 15-year fixed rate mortgages • Continue to leverage Now Banking suite of products • Improve efficiency through investments in technology • Further enhancements to lower-cost delivery channels • Enhanced services and technology platforms within Wealth Management • Continue to seek opportunities to reduce expenses • Commitment to positive operating leverage 16 |
Why Regions? Competitive Position • Strong market presence • Competitive product set • Stronger company today than three years ago • Revenue growth on par with peers • Disciplined expense management Opportunity for Outperformance • Improving efficiency ratio • Stable net interest margin • Significant credit leverage remains • Low loan to deposit ratio Moving Forward • Creating shared value for our customers, communities, associates and shareholders • Business plan to support growth 17 Proven Track Record |
Appendix 18 |
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, 2012. 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: Forward-looking statements › Possible acceleration of prepayments on mortgage-backed securities due to low interest rates and the related acceleration of premium amortization on those securities. › The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) became law in July 2010, and a number of legislative, regulatory and tax proposals remain pending. Future and proposed rules, including those that may be part of the Basel III process, are expected to require banking institutions to increase levels of capital and to meet more stringent liquidity requirements. All of the foregoing may have significant effects on Regions and the financial services industry, the exact nature and extent of which cannot be determined at this time. › 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. › 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 challenging economic conditions including unemployment levels. › Possible changes in consumer and business spending and saving habits could affect Regions' ability to increase assets and to attract deposits. › 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 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. › The effects of any damage to Regions reputation resulting from developments related to any of the items identified above. › Possible regulations issued by the Consumer Financial Protection Bureau or other regulators which might adversely impact Regions' business model or products and services. › Regions' ability to effectively manage credit risk, interest rate risk, market risk, operational risk, legal risk, liquidity risk, reputational risk, counterparty risk, international 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. › Changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies. › 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. › 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. › The effects of problems encountered by larger or similar financial institutions that adversely affect Regions or the banking industry generally. › Possible changes in the speed of loan prepayments by Regions’ customers and loan origination or sales volumes. 19 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. |
Non-GAAP reconciliation: non-interest income / expense, fee income ratios and efficiency ratios ($ amounts in millions) 12/31/12 9/30/12 6/30/12 3/31/12 12/31/11 Continuing Operations Non-interest expense (GAAP) 902 $ 869 $ 842 $ 913 $ 1,124 $ 33 $ 3.8% (222) $ -19.8% Adjustments: REIT investment early termination costs (42) - - - - (42) NM (42) NM Loss on early extinguishment of debt (11) - - - - (11) NM (11) NM Securities impairment, net - - (2) - (2) - - 2 -100.0% Branch consolidation and property and equipment charges - - - - 2 - - (2) -100.0% Goodwill impairment - - - - (253) - - 253 -100.0% Adjusted non-interest expense (non-GAAP) F 849 $ 869 $ 840 $ 913 $ 871 $ (20) $ -2.3% (22) $ -2.5% Net interest income (GAAP) 818 $ 817 $ 838 $ 827 $ 849 $ 1 $ 0.1% (31) $ -3.7% Taxable equivalent adjustment 13 13 12 12 9 - - 4 44.4% Net interest income, taxable-equivalent basis 831 830 850 839 858 1 0.1% (27) -3.1% Non-interest income (GAAP) 536 $ 533 $ 507 $ 524 $ 507 $ 3 $ 0.6% 29 $ 5.7% Adjustments: Securities gains, net (12) (12) (12) (12) (7) - - (5) 71.4% Leveraged lease termination gains, net - - (7) (7) (10) - - 10 -100.0% Adjusted non-interest income (non-GAAP) G 524 521 488 505 490 3 0.6% 34 6.9% Adjusted total revenue (non-GAAP) H 1,355 $ 1,351 $ 1,338 $ 1,344 $ 1,348 $ 4 $ 0.3% 7 $ 0.5% Adjusted fee income ratio (non-GAAP) G/H 38.7% 38.6% 36.5% 37.6% 36.4% Adjusted efficiency ratio (non-GAAP) F/H 62.7% 64.3% 62.8% 67.9% 64.6% Quarter Ended vs. 3Q12 vs. 4Q11 4Q12 4Q12 20 The table below presents computations of the efficiency ratio(non-GAAP), which is a measure of productivity, generally calculated as non-interest expense divided by total revenue. The table also shows the fee income ratio ratio (non-GAAP), generally calculated as non-interest income divided by total revenue. Management uses these ratios to monitor performance and believes these measures provide meaningful information to investors. Non-interest-expense (GAAP) is presented excluding certain adjustments to arrive at adjusted non-interest expense (non-GAAP), which is the numerator for the efficiency ratio. Non-interest income (GAAP) is presented excluding certain adjustments to arrive at adjusted non-interest income (non-GAAP), which is the numerator for the fee income ratio. Net interest income on a taxable-equivalent basis and non-interest income are added together to arrive at total revenue. Adjustments are made to arrive at adjusted total revenue (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. |
21 Non-GAAP reconciliation: tier 1 common ($ amounts in millions) 12/31/12 9/30/12 6/30/12 3/31/12 12/31/11 As of and for Quarter Ended TIER 1 COMMON RISK-BASED RATIO - CONSOLIDATED Stockholders' equity (GAAP) 15,499 $ 14,901 $ 14,455 $ 17,534 $ 16,499 $ Accumulated other comprehensive (income) loss (65) (202) (54) 60 69 Non-qualifying goodwill and intangibles (4,826) (4,836) (4,852) (4,881) (4,900) Disallowed deferred tax assets (35) (238) (336) (345) (432) Disallowed servicing assets (33) (33) (33) (36) (35) Qualifying non-controlling interests 93 93 92 92 92 Qualifying trust preferred securities 501 846 846 846 846 Tier 1 capital (regulatory) 11,134 $ 10,531 $ 10,118 $ 13,270 $ 12,139 $ Qualifying non-controlling interests (93) (93) (92) (92) (92) Qualifying trust preferred securities (501) (846) (846) (846) (846) Preferred stock (482) - - (3,429) (3,419) Tier 1 common equity (non-GAAP) N 10,058 $ 9,592 $ 9,180 $ 8,903 $ 7,782 $ Risk-weighted assets (regulatory) O 92,811 91,723 91,779 92,546 91,449 Tier 1 common risk-based ratio (non-GAAP) N/O 10.8% 10.5% 10.0% 9.6% 8.5% The following table provides calculations of Tier 1 capital (regulatory) and "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 prescribed in amount by federal banking regulations. In connection with the Company's Comprehensive Capital Analysis 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 prescribed in amount by federal banking regulations, 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 prescribed in any amount by federal banking regulations, this measure is 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 Tier 1 common equity, management believes that it is useful to provide investors the ability to assess Regions' capital adequacy on this same basis. 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 (non-GAAP). Tier 1 common equity (non-GAAP) is also divided by the risk-weighted assets to determine the Tier 1 common equity ratio (non-GAAP). The amounts disclosed as risk-weighted assets are calculated consistent with banking regulatory requirements. |
Non-GAAP reconciliation: basel III Estimate based on June 2012 U.S. Notices of Proposed Rulemaking ($ amounts in millions) 12/31/2012 Stockholders' equity (GAAP) $15,499 (4,968) Adjustments, including other comprehensive income related to cash flow hedges, disallowed deferred tax assets, threshold deductions and other adjustments (780) Basel III tier 1 common equity (non-GAAP) 9,751 Basel I risk-weighted assets (regulatory) 92,811 109,941 Basel III tier 1 common ratio (non-GAAP) 8.87% The following table provides calculations of Tier 1 common, based on Regions’ current understanding of Basel III requirements, as proposed by the U.S. Notices of Proposed Rulemaking released in June 2012. 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 Committe released its final framework for Basel III, which will strengthen international capital and liquidity regulation. In June 2012, U.S. Regulators released three separate Notices of Proposed Rulemaking covering U.S. implementation of the Basel III framework. 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. The Federal Reserve has announced a delay in the implementation date of the final rules. However, when implemented there will be a phase in period of up to 6 years. 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. 22 (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-qualifying goodwill and intangibles (1) Basel III risk-weighted assets (non-GAAP) (2) |