RF - Earnings call transcript Q1 2019 | Regions Financial Corporation

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Operator

Good morning and welcome to the Regions Financial Corporation’s Quarterly Earnings Call. My name is Shelby and I’ll be your operator for today’s call. I would like to remind everyone that all participant phone lines have been placed on listen-only. At the end of the call, there will be a question-and-answer session. [Operator Instructions] I would now turn the call over to Dana Nolan to begin.

Dana Nolan

Shelby. you, Thank first Regions’ earnings call. conference Welcome quarter to XXXX of performance through and John overview Turner Turner financial highlights provide you will David our will the quarter. of an take the available under investor our of A well regions.com. of the presentation earnings are and relations as copy supplement, earnings slide our release section as

as and of non-GAAP materials, filings. SEC These call. our presentation Our and included I turn the our reconciliations forward-looking will statements segment appendix to the within in comments, the as With that, call well prepared are today’s John. disclosure of question-and-answer today’s presentation now cover over

John Turner

Thank you, call you for today. joining Dana our and thank all

faster than in Let operating me while loan We business grew growth from year-over-year acid continuing experienced pleased we we in increased funded broad-based costs our was deposits We utilization begin the commercial million and by corporate incremental growth and normalizing impacted quality, revenue the all operations part fourth growth, and quarter. of positive reported deposit first earnings $XXX expenses continued are delivering economical XXXX. with quarter quarter in solid while with and a results. leverage. the by the momentum intentionally saying by loan somewhat more quarter, customers. of our driven also treasury this borrowings, line Loans but than generating The portion has were reducing stable, we this anticipated in during

the and of industries, will and sustainable are optimize feel do neither XXXX. on to I’ve in in Nashville, recession consistent position general, Carolina growth In Tampa, clients said, Beach, customer we near-term even and Atlanta, the revenues Spartanburg, loan Mobile, phases the and the industry. sentiment we. of I’ve rates sizes sheet a building and we economic positive. clients will focused interest to respect cycle. the of XXXX the markets continues West expecting yield shape to that last the Alabama. the environment health experienced rate footprint do and few outlook being all across our clearly, about The customers record Houston, to a for our expect performance with our businesses. including met South remains Many weeks evolve. varying of challenging and and Palm expect the Greenville We With opportunities through and consumer the revenue more near-term in traveled good year, not mix. curve remainder for the us the moderate That deposit better providing the balance for through results in lower of growth economy, makes remain

on four, focus to financial maintaining managing pleased Again, products and sensitivity to results and our the adapt quarter. However, this make we to last the continuing in the talent. appropriate necessary make meantime, we the risk-adjusted returns, the with prudently In with quality effectively control, we controlling services financial can five we’ll they things while need, rate and our did are as providing customers continue changes evolving investments expenses we technology profile, will over conditions. market the and years, interest

to Our With focus performance. turn that, long-term I’ll to remains and consistent our call sustainable the on ability to continuous generate improvement over now key David.

David Turner

Thank you, John.

first driven Let’s and lending across experienced adjusted business Once again, X% our geographic in by increased loans stable lending on loan industries increase loan a estate X% was business commercial million owner-occupied year. investor $XXX real banking estate balances estate average balances of markets. loans quarter, senior consumer industrial diversified the and from while lending real assisted corporate a portfolio, growth portfolios. in to the both within specialized our growth broad-based and areas by portfolio. and led three commercial X%. living growth Average grew average approximately average over last by were REIT begin X end loans driven lending impacted owner-occupied of loans, all real the group where commercial average by of real Slide Adjusted deposits. relatively investor adjusted X% growth reclassification estate and was loans a and declined with across at broad-based quarter, prior the

loans better term is investor the Excluding construction reclassification, driven average consistent lending. and lending, initiative which real with of by achieve growth X% this our impact estate balance estate real between increased term in strategic approximately to

adjusted With point John indirect-other credit a decline line offset as loans in As contributed home loans portfolios in quarter’s to in stable. card remained equity utilization consumer, lending. average relatively noted, basis stable remained Average and was significantly by respect growth. increase XXX growth mortgage this loan relatively a also to consumer

However, digits. we solid single average of loan continue focusing the a Despite balances. low-cost in in respect the the affordable housing adjusted consumer to growth business increased and mortgage in year relationship-based in we X% in late impact this sale low by residential growth second $XXX growth and average And deposits. loans million will full the quarter, continue and partially consumer Total on to first X% deposits, expect XXXX quarter to average wealth X% with of quarter, growing offset growth deliberate corporate, services deposits other. execute during declines wealth strategy and quarter, reflecting

corporate checking Importantly, accounts continuing as consumer and households total new as well consumer our and accounts deposit relationships. grow to bankers wealth

this checking, basis we deposits To our execute deposit increase growth we significant closer drove deposit in quarter to year, deposit portfolio our quarter. further deposit illustrating average well-positioned take to with we the provided growth end and composition and of by overall funding our to rates growth advantage, remixing remain base. our an this base. total points. protect facilitated continue the at ensure Increasing increase, market look customers. combined the to costs deposit to contributed Despite total peers, advantage relative deposit XX interest These which last Let’s strategies a at effectively serving the strategies time deposit are of bearing money in

to beta XX% private low rate deposit no expect Our this range. increased additional wealth we Retail cumulative XX% deposits. beta deposits from the assuming the interest increases consumer Federal include and in the quarter. cycle Reserve, through a bearing deposit

Our our interest cumulative cumulative while to remained at beta low XX% increased consumer deposit beta deposit this bearing X%. retail just quarter,

this loan deposit a previously funded commercial additional growth portion was overall As deposits quarter’s of on costs. with noted, contributing to pressure

continue However, to targets balance our committed remain we the long-term will and we return sides sheet. optimize of both to

rates XXXX. decreased assets improved how look from relatively and interest market X%. including two X% lower asset company and January curve in full-year quarter margin in cost, fewer adjustments fourth million growth. a to in income our current respect let’s life yield stable an income growth volatility Significant to by X% funding With the higher interest the rate compression insurance in basis income at two the the $XX included from interest however and with adjusted interest the increased business said, commercial with margin, also modestly quarter points balance increased our In growth interest by associated X% revenue, fewer With both $XX implying So, interest will the generate to year. employee The while impacted bank-owned expect issuance. full-year expected bank-owned results. net fee also quarter. last growth growth to interest Variable continue life negatively income. the non-interest from both benefit moderate Net that interest balances, higher interest average the this by balance benefited mix. is quarter. market contributing over days, margin adjusted net increase benefited to rest environment, this but of from net sheet additional higher Net fourth and margin benefited value was the income respect the prior total for current margin, claims margin quarter by moderate to compared loan prior loan impact days to in we sheet consistent revenue Net X.XX, million compared declines With income impacted of the parent valuation to to insurance and decreased driven first offset income quarter. of to negatively increase quarter on market margin, also average and net impacted be rates debt

reduce in from and merger services, attributable actions we assets. seasonality generated and decreased declined volatility with As fewer income days and customers, increase Service advisory are in and fees XX% card taking offset Capital permanent respectively debt to lower forward, of associated estate ATM syndication the partially placement acquisition these loan revenues charges for certain an quarter. and the underwriting. future with to by markets look X% real reflecting associated higher and financing we income and fees of X%

quarter. be can volatile know, you As markets for to capital quarter income

production and mortgage the However, prior to expect an in revenue we increase second quarter. compared quarter. do increased sales the

non-interest lower decreased million XX% However, and million includes on mortgage hedging valuation rights. a residential to mortgage adjustments total the Other with mortgage housing an residential of gain loans come $XXX associated sale of income in late affordable first $X quarter. due primarily servicing

assets. of million included a impairment million non-interest lease $X investments fourth income equity quarter or a other $X of the in addition, net certain In decline disposal value with loss and associated

decreased occupancy in storm-related adjusted associated quarter Hurricane well-controlled primarily a move as benefit believe approximately ratio higher salaries the benefits increased reduction Michael. expense expense and taxes fees well equipment fourth sold decreased reflecting with driven we a Class X% to due XX% which to professional non-interest offsetting shares decreased by X% X% XX.X% On primarily in as consulting due the taxes compared effective Furniture Partially rate on increase increase were adjusted recorded Visa these The was prior expenses, with X% the associated XX%. expense in was primarily in to in fees. in and due basis, to during primarily increases, year. quarter, quarter. the to charges tax a an efficiency Let’s and an B expense and a property quarter’s payroll fourth

Total improved adjusted including normalize with allowance to impact to the average total year, while asset losses For to our of debt or provision expectations, concluded the and between the loans as X.XX% Shared loan to equal These loans stable due National increased include points total results this XX% expenses respectively. troubled modestly. million charge-offs to held past effective business outstanding. increased continue decreased quarter. loans stable for line asset in $XXX million shift X more an let’s million of in while resulting XX loans. non-accrual basis criticized excluding loans for and loans $XXX $XX XX points we rate loans. XX%. X restructured recently past million expect exam. sale X.XX% quality XXX% and tax our exceeded an loan of of the relatively quality. Net and growth, charge-offs net full to continuing remained increased decreased loans loans days services $XXX basis delinquent total Credit to non-performing and X.XX% XX due loans days of

overall our can appetite, metrics credit asset expected. certain within volatility While risk quality stated be in remains

full-year We net continue point charge-offs in to to the expect XX XX range. basis

some So, you let related me and brief to give capital liquidity. comments

stock company common million and shareholders. of million open During of XX.X the to $XXX dividends for shares quarter, a declared repurchased common total purchases the million market $XXX in through

execute required to the not we’re plan XXXX continue our We capital that process. in to know, you XXXX CCAR participate as

at loan However, X.X% to updated fully required Board remained actions coverage planned in Directors, with by which path our a deposit the X provide approval to targeted and the we achieve liquidity Reserve common were federal These Tier the to XX% ratio our equity ratio company to unchanged capital continued subject for be capital early quarter-end, to provide year. this planned ratio of compliant rule. actions, remained us April. our At

and summarized XXXX full-year at are unchanged for your expectations slide this reference. Our Day provided on remained Investor

uncertainties, first things So results. on pleased with Despite in can focused we control. summary, are we we market are our quarter financial

a long-term achieving limit that have one to questions, to plan targets. With happy you we’re follow-up and but committed strategic to that, and We one do question. ask them solid take XXXX your are and our primary

for the your open line now will questions. We

Operator

from comes Jefferies. of Instructions] question Ken first [Operator Your Usdin

John Turner

morning, Ken. Good

Ken Usdin

changing the guys. Hey, talk comments the Thanks. for a through Is Thanks. can kind little the potential back portfolio? you move into you the your go manifests good the through just it further on loan to that investment environment is spreads? forth, about deposits pressures and that the rate ability most? as if brings that itself it morning And remix David, outlook where bit those of year? you could

David Turner

Ken. Sure,

adapted clearly and at than changed, again were than the So yes, we’ve we if lower and looked we’ve different environment at do rate before rates into the year, overcame time. anything we’ll we thought had going Investor we We a experienced it as showed since that Day. outlook, three-year this not you and

us. a benefit, reinvestment a from still quarter, front is this As still In as book, from we as much we had a benefit book deposits increase have point loan had We basis was XXX a chose that the to particular than not cost wholesale of and standpoint, utilization. was that versus originally. stronger we we it little We with market. back fund to fund growth rates, that. that things But we going that impacted higher in anticipated had about had we with line to couple think

little company margin. do. quarter, was to that of betas, actually center a were the The you basis peers. we that that things But of carry. beta if be we our loans Danish deposit well that on base margin assets parent interest quarter. So, once the the to as those on up. pressure spread, purchasing of as reclassification our two funding look with is margin The don’t our impacted carry overall had two thing a a any our in in puts by put at kind little card thought first we in points caused which deposit right were line was

forward, balance optimize deposit side we side levels is we coming believe where we loan look the we because to do both to both will the commensurate margin the up two. be the answer had get we resulting last range, for income, seek continue to the X.XX what year, with remix go a it’s on in So, and take need we or being expectation what our as as a to interest I the want net to the and margin. year give in our or that ahead probably question, sheet point

So, the that’s and see the kind year. for our rates expectations of how we

Ken Usdin

Got it.

loans. the one on then follow-up And Okay.

of that to an would growth. year? loan what the David. the You’ve than reiterated stuff give non-core, growth, you that sold just start Can loan ones with good the new of combination adjusted expect a of Thanks, you on auto the and the then summary full be idea us the the you the

David Turner

Yes.

loans the be the out to runoff So low we’re the single on guiding still in digits. with portfolios cards adjusted

of the growth chose it’s some quarter remixing You’ll have little the that the market, A to saw because markets that see to you there. first come capital of that companies where that in to bank access bit cheaper. the

over runoff be that single-digit book still should change some runoff refill range there. continues our to to those get And time the that million you expect single We’ll we’ll down. We and – low to so $XXX million, expect digit portfolios. in $XXX auto low growth. run on The

Ken Usdin

David. Got it. Thanks,

Operator

comes John Your Pancari question Evercore. next of from

John Turner

morning, Good John.

John Pancari

and came the John, Good with you why point, you commentary funding growth growth a loan that saw on there, deposit? the bit margin versus little on Yes. a the it higher to the said fund deposit morning. that in quarter, make you cost on given did better, decision

John Turner

– What cost than deposits of wholesale that beta chose I because fund funding what the trying cheaper I is was with – address to growth to because what the versus deposit deposit funding, decision. negatively have that was was impacted, was. we we What was said higher

If funding fairly you at funding beta total look our with the beta, consistent our was total peers.

just have we it’s mix what fund somebody chose that So, growth a with might done. what else to versus of

John Pancari

that, on of drive separately, commercial year okay. for that. to net think the could about versus it of will the on Thank you this get growth I level example. give here; strengthening to incremental, what that the talk around just moderation and takes, side expectation loan the for to you the slow And some any Okay. off wanted misunderstood you clarity from And I expect just you. then and

David Turner

Yes.

use we his to about saw John that credit economy had of terms believe time they’re mentioned matter customers we we’re in before their customers markets of capital just go when as more and our Again, chose We good in It’s system. feel borrow. feel access market to about to that So, the the good – part on lines access, flexibility comments, and capital they of first we quarter. give timing this that we continuing a of the – to know to have them increase have that bank happens. would

So, to the consistent loans see the of out going the year. bank we expectations with we’re to those beginning as of continue run our at grow

So, when low you get net-net to of that year, is the growth the loan still net end digits. on we the think single single,

John Pancari

of then I us on the give longer-term color thoughts reserve bit around loss David. mentioned could thanks, credit, one And thought wanted And X.XX%, loans. drivers here. thing about it stands where the to? around know a around to loan in guess level higher trend just your on last of of Okay. classified your I the I special that you could get

Barb Godin

relative Certainly, those that and John. given on, our Godin. credit moved terms slowly in criticized of survey Credits simply lows attributable normalize. results two results to the National that’s It’s numbers, starting were Also or Shared that include of classified exam. recently Barb the credits really to completed to it’s that recall or over, and the three

right terms So area that until next the one-on-one; sitting that’s year. we think at all loss point. We we’re number all look at at is we forward of in we’re that well in concern X% see seasonal at this that And looking reserve, one-on-one encompassing. don’t as our there get trends any loan we probably us the as

John Pancari

you, it. Thank Got Barb.

David Turner

our I Yes. credit feel about John, we think very metrics. reiterate I that would still good just

of in classified, better Barb non-performing we’re really lows a than loans. As said, XX criticized, year terms

particular this both criticized mentioned, credits time a up had as loans quarter, we’re I non-performing and two from or loans. down and or little in movement metrics to in one see to so we those impacted going And think time, Barb

to and very the we’re back credit some think you’re coming bit, there, low feel to about our I we going begins the given as credit forth quality. a base feel off, but see quarters coming so And good still over normalize

John Pancari

Okay. Thanks. Got it.

Operator

Your question Morgan next Graseck comes of Stanley. from Betsy

Betsy Graseck

morning. good Hey,

David Turner

morning, Betsy. Good

Betsy Graseck

I buybacks get or that that won. to its this that the coming if I as won has the Hi. mentioned had just forward? expectation be year, out is you given should target. all for with capital Fed question going need X.X% side, rethinking to just the wondering I��m seats be that know you for a your for, proposal to it target seats outstanding you have something high to X.X% you as on any you at have that’s you target the you banks would point there NPR your you think at able

David Turner

Yes, capital Betsy. think risk Investor points that input equity Tier level basis we to added proper those of X%. profile We we our mathematically, and get need mentioned that. plus We that at out, a based the we also on would we allowing to of provides a XX had lead those Day were bit. the based CCAR little that we targets said cushion our derived have, that that one that laid have X or our – listen so that expectations attending to to supervisory on one on Wow, And capital another not capital believe to that common need we return us mechanism. we

all. So, changing I don’t see at that

confidence. which we’re but capital planning we not second start – through submission. start we year know, and And to then on it’ll last quarter, under the CECL, you quarter, that’s have is we’ll As why our third based have the get

by and seek manage level. to loan our toggle capital And – growth we at to get that be able we’ll to the buybacks then. as X.X% have we’ll will share We between

Betsy Graseck

there. cushion teams the Since lot are – a there’s of Okay. very in

feel you’re So, you risky portfolio might reflects superconservative. I’m your peers wondering, more a it view that just be maybe than or little the

David Turner

to down, our way could run. you we us about, choose a think we basis take we us would were come in math, the growth. think XX the on in our have if based have that XX risk flexibility, We extra you there, advantage might the give an are assets. to perhaps profile ability mentioned I year as county of especially opportunities in turned points some invest our Well, to And they to X. lead which gives as where

– inappropriate from didn’t it’s So, because us us our of cushion, we and down gives that amount flexibility. it return think weigh objectives

we why that’s do it. So

Betsy Graseck

Thank it. got I you. Yes,

Operator

comes Your Erika from Bank question next of of America. Najarian

Erika Najarian

morning. good Hi,

David Turner

morning, Good Erika.

Erika Najarian

the morning. comments wanted Good on to on follow capital I up actions.

your the X.XX about max So, a if And that template? XQ for preapproved the XXXX. of ballpark if filled I’m or the XQ about to capital wondering template that’s XXXX calculated how team we in distributed action billion a Fed to getting with

David Turner

the like. loan X.X%. is our think, think We get of tier buyback way think you common look on equity growth at of to toggle there want Well, X that we is to target the I by again, going we looking to what’s have through

a and used to loan that or Now XX% out we’re the for either we’ve range said going rest earnings. dividend it growth piece of to part a we wanted it XX% for a to of the pay of buy is then going be shares back. most going uses in to it’s the of or

be is to now the going what much to you stipulate going trying be. don’t think it’s what to end as we’re necessary the giving So, result’s we buybacks when because exactly

what help you So up have you with loan buyback going to your your and of get to it’ll number. you our be to expectation have is growth come –

Erika Najarian

I met all-in.

you unveiled of to curve And think is or to Would making this able investments less this be underestimating that backdrop boost curve that by you’re you there left, the friendly back, we XXXX. get XX% or below beyond of revenue much step are of leverage ratio through than could a beyond of have the to that XXXX? target taking of XX% some gotten dynamics rates expense type just less we course, Day. as I’m few a wondering, efficiency mid-term your And years, since, Okay. the Investor during next

David Turner

Yes, combination say it’s of would both. Erika. I

reinvested and will growth initiatives to the we expenses efficiency that help of of generate the we’re ratio XX% revenue both have terms get in to efficiency believe and all, appropriate end additional XXXX we’re levers to XX% ratio. making of opportunities investments we be First the revenue to growth in committed by reduce to from

We’re get there. to committed absolutely

Erika Najarian

you. Thank Okay. it. Got

Operator

next from Your of Deutsche O'Connor comes Bank. question Matt

David Turner

Good morning, Matt.

Matt O'Connor

flattish of wondering have then obviously, them fly to conceptually, just it Hi. you’re down guiding is I’m realized break-even do is right out I rates market to the that not year, XQ year now and the X.XX to full-year a down? it point trickling to matters, go kind XX the where that basis, kind but does And the XX on trickled where level. on that only than what’s them. that but of this this from fly

David Turner

just about Well, the that security’s if you think XX year just on book. reinvestment

we’re the a the So, off coming X.XX-ish reinvesting range. X.XX, X% range, in

flows we’re the So, just really of what that some cash the curved on getting the the side and we lift, It’s on those mix as not left balance of put reinvesting over dynamics versus the near-term. right sheet. drives both much

continue think – are look, on flat. stays NII curve can to resulting and not margin would could depending can be where you on in it where could is So, you or grow depend it or an rates have your you now whether choices I the whether what are

to intend balance to to net sheet together. and again, expectations optimize We’re income all interest expectation but our NIM, one-year growth, we out has that for work credit our and And management, kid return, looking of laid our all we’ve that. risk three-year not only

hard And deal that’s a it’s that of So, explain. you a moving lot there to to with. are have one parts

Matt O'Connor

understand. Okay. No, I

maybe, – obviously, they be we’re and around I changed the strategy, months and rates, XX ago think your bps to about… versus and bottom is the two move we’re months versus bps rate up off few up what’s XX and higher I so from we’ll now, a environment think

David Turner

some hedging why over our a our expectation rates began Yes, going is that which for Matt. to I’d down add, program point, were ago. we year at go

XX hedging program pressure be this year, in getting, large XXXX our X.X% which cut late about forward increase GDP What reversal an will in a we now. as we and some starting we’re expected mentioned, we’ve the XXXX. the swaps And part happen put protected decline but XX% only having about year, we’re there. would a increase of X% and that that As not And X% in did begin to in from not XXXX XXXX way. to think to you’re XXXX, cuts and to of XXXX through by right probability rate not of this in we And – getting the more in Fed? seeing wanted it don’t we probability as with on

right where that really, Again, that we cut exposed that’ll because And were happen. take there we’re don’t more now. we’ll so as if risk, that’s believe

John Turner

We to deposits very year grow X%. growth year. up consistently. in Consumer X% demand point savings, The see I same time, the seventh base checking I They’re on, just the sheet a balance other we’ve to for last At bit. point growing if grow. point, core about that guess row is I begin to optimization think make will grew consumer over a we in a growth indicated loan moderate might deposit consumer continues continues our to

consistent And to in that catches over will loan growth, more with deposits as which occur time an that a be will that’s and moderating. lever increase so up

will optimize base benefit. our an deposit and have that to opportunity accrue also We to think our we

Matt O'Connor

it would have mix been Okay. guess optimization I that about, and thought them. from beneficial talking the you’re I the

John Turner

Yes.

Matt O'Connor

the bit. that little in we trickled of But are still rates and combination Okay. down where causes a it’s

David Turner

X.XX. it’s think interim. from I almost year you moved gone some to the Well, going at optimize ask Again, to And we noise we well at on can for dependent too. X.XX foreigner take it’s has be be and year the rapidly, give X.XX XX how quite or in we’re a said the X.XX, we’d

bit We’re down morning. this a little

and the interest us we income continued if little helps – from bit, helps up to year to a So, increase, a continues move XX net then us standpoint. margin the reinvestment

Matt O'Connor

I mind, then if Thank basis credit line you the good loan decline of XXX what don’t concentrated like to just if was makes it’s in so I you. this you going and to guess a utilization if quarter. meaningfully growth? in And It to was you increase the it. so handful of Got want much that point, not, don’t think squeeze slow

David Turner

Ron? heads Bank ask I’ll who Ronnie Matt. Yes, to our Corporate question. the Smith, answer

Ronald Smith

was I David that It and have broad-based. very clients as see on earlier broad-based we and that that in forward, quality with to not our and very anticipating within was go as across It the handful those focused most industries geographies we’re changes higher really we’ll clients well. advance mentioned of Matt. other markets think but in Yes, of a access rates

Matt O'Connor

Okay. Thank you.

Operator

question Demba from next Your comes of SunTrust. Jennifer

David Turner

Jennifer. morning, Good

Jennifer Demba

Thank questions. good on morning. Question And Two hi, Barb. you. credit,

CECL. First your of helpful now. impact those And concentration any will you’re leverage industry the estimates deck. you credits? if leverage criticized in very there criticized one for second what parallel right running I’m it. any all, I be that on slide within is loans was preliminary wondering on That’s the assume day question Is have my

Barb Godin

there’s we’re on lot quarter, sure question second in that the our to way of ready CECL we they in to the leverage the on models sticks anomaly. yet are but front. yes, loans not of a an cetera, that’s that Relative making nothing in First quite the et the something et do of work, cetera. to anything midst need out is, terms disclose running probably We’ll parallel, are CECL operating doing

So, a pretty good book.

David Turner

release, some think Just third our information quarter third on in – quarter probably the for release, second one impact. I day clarification, we’ll quarter provide

still a off. So, ways we’re

John Turner

it to quarter want We looks run a third It’ll something. be for the of what in see couple quarters release to parallel like. Yes.

Jennifer Demba

Thank so much. you Great.

Operator

of Your Mosby next Vining question comes Marty from Sparks.

David Turner

morning, Good Marty.

Marty Mosby

assets, portfolio, literally out securities. have I went through it investment little little NIM, growth then you NII margin. interest by hey, loans which bit bit I to – extra it, a net to higher could morning. funded had good would David, you of about mean you and this substituting and funded your versus talk I’d wanted just have quarter increased the When securities being rate a loan you

So, sense of to growth temporary back down. thought of I the going going is think run you what or it’s have your the did nature and loan to the up, come

You just is interest funded went year-over-year, nice at the count And incrementally margin. in some out have caused which quarter. on the look but you and pressure your still day it, relatively if growing you first NII net

it like balance the was So, all funding in me exacerbated the given to quarter seems this the incremental margin sheet. just of just

David Turner

Marty. Yes,

caught could exactly you’re that things. result things want our put the of done but then want fixated So, we the into NIM on, reclassification of right, by at impacted parent company we I And had purchasing we then non-interest asset. NIM and is issuance. loans, to point basis our that sure I we if NIM a us which do to our to we make fact was bearing card have all different be our the do. the X is And

us weighted another point. that down So

So, not margin keep but NII $XX to kept X.XX, able two we at the days, us stable quarter. we level, caused could which in million relatively have withstanding were the

good. the pretty markets, sheet those optimize we was put those to So, we thought of get races. we’ll capital They’ll thinner remix a balance that the be we we’ll them. happens, that to and loans when Again, off we’ll on run did sheet balance we’ll capital out fee loans the certain spreads it had market put to and the

fixated margin. So, on overly we’re not the

Marty Mosby

of cycle you or would, that that’s said by then here in quarter rate in you flatten we’re if I we deposit XX% at that deposit is we’re But wouldn’t XX%. thought, through betas had second assume when now motivator assume deposit the and now about be right to increase and And going that we’re to thought. up. rates that kind pricing, the the general began let’s done, about time the said stabilize a key Well what they then till you bit, you a with go don’t talked up you little to out. push just that of maybe anymore, further and kind don’t, rates hikes going

of want deposit forward? pricing sure So, in make we’re the being that. I much you expected just going excess How with to consistent

David Turner

Yes.

change deposit to our for what about it rates last hike stop months moving. the Fed us takes after that and tells So, is XX history

if So big usually of piece with do we deal get you’ll see just this that’s don’t to even continuing a that’s too. has a increase, it come Mix through. that another to

and checking we our get abate to continue customers they excess that’s If cash yield best grow stop trying to freak interest to, to. as So they’re that will that take core and can. moving, accounts, the accounts rates helpful. commercial their but low-cost want

up we left the might to through And where we’re for we the sheet. continuing some see the really into to some can come a balance the to point have day argue, headwind on moving side of deal we costs, The in funding going to on we end that reinvestment increases need costs, will the us. of So XXs, little continue carry optimizations bit is then XXs, the with. the And up.

Marty Mosby

it’s past. guess I in then been And the better actually not the seen is period has that and It’s we’ve thing would that been historical than any different we’ve highlight suggest beta much or a lot reacted seen I what in this deposit like the past. market

seen the down expect been thing out we what begin that past actually we cycles? better shouldn’t quicker or than lot why slowed beta we’ve flatten a that given see to in the could So, maybe this deposit has

David Turner

time is and promise Well, last XX how quicker increases. of chance matters we’re trying struggle were the and to think. lows that pace we’d the that and all we you’re – has to out better range that can something the of the we Betas because number now off part than XX achieving. we talking think in versus a then anticipated. is in those And we’re correct going historic of that that and certainly slow range. if a we much been things recovery Also different. be I that than coming hit that you flatten have there rather will happens, give that off And is so

Marty Mosby

a given increase locked Is next in any from net swaps you last just positive be earnings the a then a rate spread little And spread. bit the flat freights of should in? enough fixed is there that were there lock, the year, there – question,

that hit upcoming those curious does some happen? out actually Thanks. they was if going once dates. of the there’s So, I four income to that you’re swaps And when just actually get

David Turner

Yes.

dates So, premium into entered would interest premium. you we – you XX where some floors, you’re are and carry right, to also the in but pay rate had the we and there, a forward amortize have positive we some

amortization benefit. offsets the unfortunately So, the swap

we from rates of there. didn’t move kind if here, pushed again, So,

won’t you So, see any real positive carry.

Marty Mosby

Thanks.

Operator

Scouten Your of Sandler O'Neill. next question comes from Stephen

Stephen Scouten

Hey, good everyone. morning

David Turner

Good morning.

Stephen Scouten

you, bit Day, for year-end. might laid we implies that just this by curious, into name year David, X.XX X.XX range that the little NIM Investor down X.XX a from – will the to further, move digging the to get by commentary out you I’m of the high and in X.XXs obviously

how So, range? that dynamics can X.XX and lower maybe – me on range that X.XX were end, down at changed we X.XX, talk zero about little bit XXXX what have you sort scenario policy since when to of a even a would get to what’s only

David Turner

Yes.

what up try began which to like then risk since in want the of near-term before starting XXXX. – is range part And frame did. So the at Investor our to Day do changed we what we was swaps forward

saw in. a even when dip XXXX actually start you So XXXX, that recovering kick our we in in derivatives if

us – So that cut don’t piece you we would range think We still we gives high than telling very the that’s that we’re We’d received rank a within the ballgame. XXXX, that different in that different. is a If probability have told back something confidence be we’d the that you just then. happens.

anyway, So, that’s…

Stephen Scouten

a from to you. we really were swaps Thank are saw perfect rate environment. what if prevents similar you the getting even we That’s in back into those Yes. revert levels answer. to And XXXX, a back down

David Turner

right. exactly That’s

Stephen Scouten

on guys you’d stay? like is lastly range, assets Okay. percentage average some to that security’s chance as a you where there growth any fund the reduce book, is And or to earning that then kind look to just that the XX% of of of

David Turner

part little our margin. number. standpoint. I us of again where bit our We It’s from right kind think hedging that we now there, of are large in program a a tremendously like, works not on that we that’s have against there helping

for time we I purposes. changes, to extent book, the then mortgage think there of security’s kind can that put in into maybe today, remixing what more treasuries as those, of should we a And effectively force little Maes over a have Ginnie and used you LCR expect our that backs. still working that we

So, you’ll to from time time. us see do that

a As the a saw loss take affordable that matter of off pair gain on had us you to of quarter security loans. fact, with we mortgage as selling this

we year. going we’ll So and for than get carry better in pay that forward a that less could

us the over So, of kinds things you to are expect time. those should do

Stephen Scouten

Perfect. Thanks so much.

Operator

UBS. Saul of Your Martinez from next question comes

Saul Martinez

betas implies points neighborhood that I the given up basically – quick follow the that cycle assume to is Is I my implies on understand up now. or the have saying, of line the you actually, questioning are Fed basis XX pressure wanted points to deposit further cost the the no over I through costs and of math So, just an XX% if make low to get kind of – more Hey Beta your guys what XX kind, thus what Is the right? guys. that of A basis the assumption? XX% you’re additional next the about you on deposit just XX hikes XXs, months. wanted deposit to at moved sure in XX baking right less, that and where the funds into math far that

David Turner

Yes.

just – basis we’re at lowest. the to points of closer of one probably close costs, you’re XX But XX. think I

percentages, again, miss and start what I we’re a telling you at back we’re you we but as looking like, asked numbers, you Marty if think feel, outperform we we beta going when it, So, feel get, to, some can get question odd you. to

Saul Martinez

baking pressure points sorry, of to cost basis you’re is in deposit any I’m in, closer. further without XX closer it’s of kind hikes? terms incremental It’s what

David Turner

right. That’s That’s right.

Saul Martinez

that total Is on or deposit interest bearing?

David Turner

interest more Those are really bearing.

Saul Martinez

bearing. Interest

make talked math. fee sure at about NII for I – to a revenue of X% I full Want that X% in guess I Okay. was to that X% full terms X% growth, being got X% of X% And just the the then to NIMs to and the question, you’ve we about year, broader – to sort of say, revenue, NIM X% for how X% do on the growth but in growth? versus the stabilizing year think at

David Turner

terms managing in because together, of Saul there mix that. time, kind earning and the there’s – put assets at this of in those We challenges obviously, all

the still that, to with X% now, of will we more So, goal there that that together to within convicted NIR, had. that that we’re X%. pressure be us not component would NII we Right is that, cause enough but on not put meet that

Saul Martinez

enough. Fair Right. Thanks. Okay.

Operator

of from Cassidy comes Gerard question final RBC. Your

Gerard Cassidy

David? John you, are afternoon. and How Good

David Turner

Fine. Gerard. Hey,

Gerard Cassidy

are the going be portfolio now us talking much you or comfortable give these you are Shared National showed on we’re than a then leverage guys the different color little from levels further you that Can breakout numbers to they year the loans these of and a with Credits; on today?

John Turner

portfolio we’re I No, we’ve I Gerard, that limits, we concentration limits respect speak and well, have as maybe do as aspects some so, far, level let internal lending think we don’t comfortable with at we’re other a leverage to of just in established of manage think but our lots not risk and for with.

We that we’re to expect level at. to manage continue about the to

the companies. has mid-XX% I’d to sponsor with that continue a do know we to it’s XX%, that work XX% variety of to on that talked relationships recall. about down from of we industries think loans kind brought full distributed customers have exposure that leverage to that have portfolio in exposure we’ve the industries. somewhere is across to in We in we that well the the the own ensure different is that risky been most we’ll I before as And range

question let have I’ll I well. with we any industry respond it, feel So, think to concentrated real as don’t either. exposure by but that comfortable Barb And do we sector

Barb Godin

you’ve responding, job John. a think great done I

John Turner

you. Thank

Barb Godin

only is The just customers said; these our I that CNI are you best to to quality leverage do particular. thing lending in as we add have to

basis it. weight If on probably them something us We look So, we at action at we not feel its opportunity we the move a are basis. that see a is very and of. that on We We either on carrying we book a look that’s out immediate good or for comfortable take monthly with regular them. recycled. that to

So again, I’m book. good very feeling that with

Gerard Cassidy

but downturn during regions, could curious, it you was last recall for if percentage leverage for just loans up, we non-NPL Barb, don’t? dig the do where the you I’m what

Barb Godin

we up; dig head. it of my Yes. to We’ll top don’t at have it the have

Gerard Cassidy

Okay. I’m not expecting that.

just priority back some At John. you, to Okay. that maybe, time. and same to markets markets? can talked as outsiders, I’m I curious was share the I and the coming Day, about not you into expecting whether Investor in be how expansion But this St. you’re Houston, progressing Orlando, you that us successful is being those how Louis, in we, with believe, do Atlanta, determine

John Turner

Well, we think it’s progressing well.

those We a less largely have are that I that branches XX guess novo for de than now – and markets. have year, operating open across about

I reposition about shift businesses. Day, wealth, St. as We XX% with have franchise we as continue franchise access in more Atlanta. to to an be that at retail now you expansion we and as more think Louis think would Investor this we more we same in the example households, The our true shared

I think a customer we households, businesses now have access to nearly more more than or million and more wealth. million,

to to continue opportunities so be available growth XX% checking of And those de is attributable us. novos. about to The our year-over-year growth,

continue you growth to some ways we’ll example. an attributable information percentage and like a of sense de as provide look – so And to some for to novos with you of we’re that’ll give all how doing.

core to grow looking think, core our ways base. is to continue to I customer strategy our for again,

on checking growing our usage, traction. cards and deposit growing cards consumer should strategy growing So, be you we’re debit small credit accounts, as consumer balances, those that, business business indicators that is to side, gaining growing as small accounts we’re as some as the expansion we’re we’re

continue going and to execute strategy. about it teams think, all-in-all, to feel those path in We’re recruiting on build. the we’re talent good continue markets to that I we we’ll – the to

Gerard Cassidy

Thank good. Very you.

John Turner

Thank you.

David Turner

Let thing. this – me is want one to just David. clean I up

more said on asked impact said So, like a I beta that��s I had total, into total. of about points a – the be I think it question said, we XX, going as Saul the shouldn’t bearing interest and and XX

that to want So, I up. clean

John Turner

Okay.

and that’s good think Have questions we time. thank had day. a much. the regions today. all in very you appreciate interest Really your your I appreciate

Operator

today's call. conference conclude does This

may You disconnect. now

Regions Financial (RF) 18 Apr 192019 Q1 Earnings call transcript