RF - Earnings call transcript Q3 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 [Operator Instructions].

I will now turn the call over to Dana Nolan to begin.

Dana Nolan

Thank you, Shelby. quarter conference third Regions' to XXXX call. earnings Welcome of performance through and Turner overview will Turner, financial highlights provide you John David our will the quarter. of an take including site. the documents, Earnings available statements, of Web section under related our Investor forward-looking Relations are our prepared comments, cover Q&A as as materials, call. today's of presentation disclosures well the These segment

With will turn call the now I that, over John. to

John Turner

X% we of And joining quarter year, our of This $X.XX, a morning, prior-year. for $XXX third thank operations call an the continuing all reported over you Dana. from of you, resulting Thank per earnings the in increase increase million, share over today. last XX% earnings of

we rates very solid produced leverage volatility, positive quarter, income operating a delivered a and pre-provision it All-in-all, was X% pre-tax that in lower despite significant adjusted This year-to-date. we market interest the decade, also quarter. highest nearly while generating

phases consistent rising We've when to to no Over and long-term performance the our reflected benefit we last intention all the would credit two when has environment, normalize. years, and a the from time sustainable messaging longer planning for core of economic generate rate would our begin through been cycle.

maintain a reduce late growth. rate improve We stronger taking to stretch Since began actions interest healthy declining allows robust loan hedging sheet stable a incremental a to a for and protect executed we risk, in rate environment, returns will build and to us balance XXXX, resilient margin capital. more without our and on that us having strategy and

Today, risk, servicing underwriting, years fundamentally appropriate problems. credit improving to process, robust of better team last potential identification With risk we and XX sound part concentration and a our credit, of on dynamic spent the client and have sitting our rigorous early respect management framework. has changing the

focus our returns and intensified adjusted on derisking, repositioning. capital and allocation, sheet balance risk optimization, also appropriate We've

our customers launched driving effectiveness. Grow, desire growth revenue make and and for and we focusing improvement associates, initiative efficiency our to important banking as our on easier accelerating Just continuous and called, Simplify

have We've much already benefited we do. and to more significantly from these efforts

XX more and efforts have of investments. in allowed significant initiatives, seeing better XX customers our expect the and These make us year-end. investments benefits complete to seven We those serve have we're completed technology of to to by

platform, example, card and through deposits. off paying represent deposits and have and For positively now all all impacting our XX% of XX% with applications XX% checking mortgage of businesses. have online. respectively. completed performance increased XX% applications in have are approximately credit digital XX%, Loan our particular year-to-date and production the efforts XX%, are increased of increased These Mobile

Simplify and while Grow investments are has prudently all to and make our also in improve investments allowed and capabilities expense base, talent, and our markets, off. us managing these paying in services

assets well average. wealth under Louis. deposits continue households, than We We're checking growth our and Houston, than succeeding and accounts grow as in as the in accounts consumer management. times faster more markets and two are priority St. Consumer these growing checking Atlanta, consumer also bank markets, to Orlando

growing Bank the Corporate loans revenue faster average. Similarly, Corporate than are and Bank

we are we pleased performance expectations. early, as results with relatively delivering Although, very our the these it's markets are of above

it uncertainty wait With and businesses. Many investments. their becoming continued approach customers about comes are generally more respect the tariffs. business they volatility cautious, market taking a still to are to our are But optimistic and given trade economy, see regarding when and

great. steady, but good, not remain pipelines However,

have momentum lot good So of in and how a we feel positioned. we're summary, about positive

order with customers focused the can we We're making focused that control; We plan on our is it focused us. with service, Our things disciplined economic on of the our leverage efforts consistent, to through will prudent business; easier our growth making the meeting every operating results soundness, best-in-class expense cycle. of investment customers We're while and deliver through positioned decisions. believe company fundamentals and sustainable keep the priority. also to positive remain while leveraging of needs on profitability our management, to generating and bank technology for

for morning. turn now this I your will David. over call to time and you Thank attention the

David Turner

you, Thank John.

sheet. Let's X% start loans Adjusted loans business X%. and selectivity average relationship with total by modestly, profitability. on client continued other consumer the impacted also Average business by consumer loans reflected loans were balance mortgage increased Adjusted and indirect average Adjusted approximately decreased led focus residential our average decreased overall lending. and

loans including lower the line activity quarter, reflected utilization during also and elevated activities. capital business Average increased paydown markets

nominal part and to pursuing not mid in loan We to continue growth continue program, our on adjusted risk-adjusted we said, John the are benefit. returns full-year growth noted, for interested growth. pressured short-term expect as stretch we average With hedging to to not loan single-digits. for in And that to focus in due low are

during interest on and fund Turning less X% franchise. decreases in to average deposits deposit accounts, the of our the rate exhibiting decreased quarter, Despite deposits. strength than seasonal average deposits declines public

and to investment impacted at point the impacted So let's rates, only just offset look market and X in and net strategies Net were deposit repositioning X.XX%. and to portfolio quarter. of was declining interest net this net the slightly income and quarter second the that interest in executed second lower rates interest were partially down average negatively by Despite by net margin. loan benefits the compared income basis interest lower margin interest interest income declined lower costs how margin balances,

net also day impacted the Net in interest negatively from additional benefited which income quarter, interest margin. one

total expected, declined the interest-bearing points, in one declined the industry. to basis of points compared basis cost quarter basis XX points to second lowest cost and X deposit basis X As to points the deposit XX

an XX% premium X% interest rates, The We're also a and with deposit XX% our reallocations securities of this to long-term quarter, by in In $X.X approximately These exposure billion protected opportunities XX% securities to mortgage-backed book approximately X%. reduced additional to expect to to deposit sensitivity quarter. fourth of in to quarter. by into prepayment approximately effort related experience reduce declining we exploring to further sensitivity repositioned reduce we rates associated our mortgage-backed securities beta rates. this net interest income was beta long-term the the out range and

In fact, subsequent lower intended added that rates XXXX of long-term originations. reduce are we on quarter-end hedges to impact the loan additional to

Assuming we expected costs. two move we deposit funds rate some by in near-term in reductions fourth Fed interest interest the the point the XXXs high in in pressure year-end, basis XX the reductions net margin which net through expect margin interest and mitigate fourth is income to quarter, in can Net partially on quarter.

began. low expand we However, quarter the into XXXs, our benefits the the expect to of margin as hedging first strategy

revenue management expenses. We at results strong fee X% second let's income delivered in compared increasing by with the adjusted this well led quarter service an Highland recent look Now favorable and wealth quarter, from take charges, benefit institutional growth on non-interest a and in firm, acquisition as employee mortgage, includes The market adjustments investment increase the assets. wealth of management value Associates. as modest benefit a income to

Total mortgage income increased adjustments hedging significantly, valuation residential driven servicing increasing primarily rights. and on mortgage by

sales and in in these and increased, strategic capital focus the also production, markets and income earlier production card add ATM Partially consistent increases decision loan year. highlighting elevated with and originators were offsetting benefit mortgage to the declines mortgage Additionally, our income fees. of our

by advisory and decreases attributable in The CVA syndication income during to M&A revenue. declining loan markets quarter. capital primarily adjustments services income negatively swap was Customer was the impacted also

quarter to with strong adjustments did markets quarter we this this not reflected decline that expect a The revenue fourth the finish results. prior and quarter's ahead, capital year note commercial in in ATM the Looking impact recorded of rebate on card favorable exceeding repeat. fees reported interchange

We continue growth expect of revenue to year X%. full adjusted approximately

in fees weekday non-interest driven primarily in in was increase The Adjusted production-based as of compared staffing by expense and partially in incentives, X% as value offset were to decreases reductions. addition continued increase benefit outside the to services. driven one Let's the Highland market higher primarily increased by partially the Associates. on expense. salaries and move increases quarter benefits, by well less higher and prior overall an These employee on and by benefits quarter, assets, the non-interest than salaries offset professional additional

lower adjusted were ratio to and professional approximately The XX due spends. rate primarily legal in third third-party to costs, the efficiency overall basis decreases and points was and services reducing XX.X%, The XX.X%. company's continued tax our effective quarter in fees success decreased outside

mentioned, from Simplify our several benefit Grow and improvement expectations. to initial continue and John process, continuous our we initiatives As are exceeding

committed Day, total by $XX reducing to by square square feet million our For we million Investor third-party our example, footage by $XX XXXX. X.X million at spend and to

period. also branches the to consolidate We during same we you told plan XXX

to on proud XXXX effective rate, With and exhibit to to months operating we'll nine expand expect first and we the each forward we or with say our commitment positive the leverage. relatively achieving be pull in through to for quarter, XXXX. range continue targets are stable XX%. year to to tax tightened are on expectations can. results our XXXX expenses track we our to to full look fourth on where our opportunities year efforts of to Based that XX% initiatives areas, these our full for We adjusted we These exceed respect

of credit experiencing to line saw total points loans. Net line The in XX basis at during risk loan remained non-accrual in were XXX% total categories, and let's losses points range allowance our some for several basis improvement basis charge-offs shift with others. for So Overall, expected of normalization asset results expectations our the while quality. We with XX XXXX. in X.XX% in quarter. unchanged to XX points, of to amounted loans,

in Non-performing reductions loans loans. debt were by X%, energy, X% manufacturing increases non-accrual criticized total respectively. sectors. loans to and loans and partially classified offset in driven attributable increases classified decreased trade and to delinquencies by X%, loans retail restructured while special largest decreased loans, increased mention XX%, services The troubled and primarily Business

also charge-offs as our due begun within Credit stress and include to exceeded to exam. these the energy the results sectors. credit we've reminder, Provision tariff-related National during most downgrades As third a Shared metrics some net see of completed quarter quarter, recently the primarily

losses few be full potential quarters. these expected are to modest associated in over with next cure the Moreover, will within we However, expectations. and several our anticipate credits

an approximately allowance XX-Q, In due in million $XXX comment the the to of to losses our me briefly expected on Let $XXX implementation credit CECL. we of for second increase million our quarter CECL. disclosed

and any closer tighter and reflect composition will conditions evolving disclosures to impact quality. as updates expect range as to well a As include we macroeconomic of forecast, and get loan adoption, to we appropriate subsequent

a take let's look capital liquidity. and So at

quarter, stock in the During million shares $XXX declared XX.X for company the and common $XXX of million million dividends. repurchased

level ratio loan Tier fully target equity compliant X of anticipate is this approximate with estimated level The third remain quarter we in line with XX%. as ratio of forward. end X.X%, quarter deposit the common at at the rule. ratio our liquidity of was X.X%. the And going And we Our at end, managing coverage

pleased are we up, Wrapping financial our light with challenging and in changing backdrop, things the third of quarter economic results.

We and have any designed sustainable plan, performance cycle. consistent deliver strategic throughout economic a to solid

With that, for ask your ask we're question do each happy one But more callers. that allow questions. to take only to caller

questions. will the line We for open your

Operator

The you. now for [Operator is floor Thank Instructions]. questions open

Your first Ryan Sachs. question from of Nash Goldman comes

Ryan Nash

on wanted Maybe to I of So a questions. deposit just costs. ask handful first

down I peers next the on to you October. So we of double high-end down. to just potential we a on I up. come way And and nicely them outperforming sure the the of you're the And guess, wanted based XX% quarter. that's saw to for decline make saw on XX% September only the performance check banks now top one you're way know, on quartile an

cut and talk of next further is you if commercial seeing So costs? bring October just there about you're beyond in about what room a maybe to couple down deposit times and both across Fed year, to is could consumer

David Turner

this is Ryan, Yes, David.

deposit So key input being manage is we've about awful margin both. to costs interest in and income lot talked rate how changing important a manage to and environments net an

good that's adjusting And me competing of competitive start So let big been cost are really cost a We've job while in markets done driver the a with deposit our our deposit we consumer. staying of declining. in.

coming deposits A going I those are recall done job. more if is quarter, the lot first think pretty from what in indexed, you'll the see commercial probably a good forward we you of they've growth contribution loan subsided and clearly use average way on fund above growth we that's deposits had those adjusting had to we cost looking loan that at the because deposit that cost deposit we're increased side down. to

XX% to and XX% giving of potential to two for guidance rate year. the cuts you apply think the -- the will that for rate that beta a have are we see we of we that remainder we So

Ryan Nash

environment better XX And of on have has saving before year, then about talked and the David, the XX others a initiatives upside areas for a follow-up the challenging, job Simplify you're that guys end three are mean of of I revenue defend going you I areas than to handful the if that you're on the expenses. could cost. clearly more margin. about doing been Grow completing big some done and and you talked the you

ahead, stable and think cost flat to Thanks. continue to levers clearly enough the business are holding invest So but XXXX? continue like as you things for in to grow beyond you you're this expenses hold year, technology there and

David Turner

So is customers. won't investments continue it 'XX, make on have spent we talent, technology, need quite ORMs, we We've we in commercial make the is, mortgage XX% I comment that think to But new things our of continuing about on yet. investments for loan continued to banking to make to way $XXX million in our are wealth advisors. originators, easier to

make have for everything to to and that. we we do. We continue to do literally at control order in get do that will we and that costs, have better to room But

of here, do to yesterday, how that we better XX,XXX So to we has tomorrow did continue that asked John get work can we all investments whatever than make so people we that us, we make. want room do for at all

We base in X.X%. our inflation of have about expense

our inflation overcome to that the to able for done the stable hold like So last couple we've investments relatively plus years. cost we have of to be

continue are We're XX% were but to continue at and up. becoming it's challenging will rate seek XX.X% of a to to forward. goal giving going efficiency cost get hold go we We today, range, a Investor as seek the very we more our to efficient to We to Day. that in low mentioned we down obviously we environment, not have

room XXXX. still cost control So is -- there to control into

Operator

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

Matt O'Connor

talk been good NIM, relatively seeing you could helping charges. protecting it's service ratios the was wondering growth balancing, obviously picture, deposits I of about you've think keeping profitability how sheet, if you just growing about the kind versus big you're stable, in balance

about about puts the But then grow profitability. But some balance sheet? takes. also between trying focus the and there's So trade-off thinking talk the protect the to to

John Turner

think a a I is much is it Yes, question. great very It balance.

that, business economic going means sustainable. consistently that's balance to We traded-off to performing, build and going We've Matt. are growth a be on for And it clearly do sheet to be is building it's that going be some that we've a resilient focused every we'll to cycle. resilient, got quality to that's through continue

thoughtful, economic need we that us. a time As to in period is to exiting of on, careful, really important we our we selectivity it's client focus Early think identification important of may really the problems, future. and cycle, to be relationships become problematic,

the profitability are importance We So just grow grow. to we about growth growth. need we then talk of nominal soundness last, to and don't going often first not

to and consistent that focus. profitability the continue we positioned We will deliver to believe that will sustainable think reward sheet is and balance and the shareholders our adequately be performance our

David Turner

on about I'll single-digits we were to add, year. X.X% would Matt. to the We of loans year-to-date for as We mid do up grow adjusted an low grow, in expect said we basis. terms

going to if saying do force grow. harmed. balance gets and we the revenue generate the expect we're not growth what sheet We're so nominal on just return to to income And nominal is,

Matt O'Connor

really And kind put Thank of by in obviously loans. other It's mean, all as half the I start of a grow guess as deposits the then term bit one made, first medium and it of think the end comments of you terms kind on just the I you of also in that you. you year, comment of run-off nice year. outlook a might just what's well. And this -- run-off your together growth of loan following I quarter to little portfolios up, had in more

John Turner

in that we've plus with in said is that's loan Well, do services has low X.X%. portfolios typically run-off been growing economy, anticipate little year-over-year appropriate we consumer that we the at look single-digits to think growth, with markets business think that growth a some the We I We in you operate what respect about have in. loan particular. if

business. equity focus lending build to on loan our to our we appropriate business allow capping to time, particularly the drive lending and lending, indirect growth We've commercial grow market believe At exposure declines on us the the our the balance sheet. to commitment seen indirect in an same unsecured but consumer lending some continuing of amount assets middle out We're to auto. will that services continue and

grow we're small their on Similarly, account which to to look and We're and continuing of a can respect with most faster with primary And grow than deposits demand of low-cost our we we XX% accounts of consumer deposits, focused we is on maintain low-cost to plus we still our when time. core deposits checking relationships. think with core their business, you growing And strength the our operating at consumer winning think business, consumer us. a to our rate believe the at that of medium-sized consumer peers, really focus our franchise. business businesses, continue operating over deposits, customers

Operator

question next from comes Jefferies. Ken of Usdin Your

Ken Usdin

bit David, about talk sheet bit protection, balance the a more. little little you a could

Just on you rates. reading to deck, little bit side in impact the long-term more lower of hedging a added the

year. is get first how So magnitude completed, guess, and as math to step-up you you the Thanks. program fourth you said own look largely of cascade then that up on I just from of the the us its NIM can will understand the helps that the throughout help the

David Turner

Yes.

low So Ken year, -- the increase the to We next range. end mid-X.XX could I'll into start the in with going think margin our we about mind. talked into

to What we a year. lot peers. do the bit on of By the in and We taken all the through beginning little hedges want our kick our that our first is have the zero. with primarily sensitivity is the starting, of in more year exposure the regards sensitivity chart short-term the a close but than to have we fourth part long-end of quarter, to

we kind to So a that bit. of wanted neutralize

So the that tied into and of itself really us reinvestment when of come was couple we've the would flows business -- worth got from And be of tenure a that's in that to manifests million off of that really cash mid-low entered dollar help every range hedges in the kind long-end. XXX the month.

So the our this. not the believe we relative giving guidance after a that's we're correlation going disproportionate And have that into tenure to we're peers to to that you. baked

Ken Usdin

premium this And does was expect. balance the you can sheet, MBS you'd just on you that and side David. the that left magnitude discuss how the repositioning and that Thanks, what of did change

David Turner

Yes.

the about we duration, million we quarter. $XX longer, a was is the premium to sell, relatively in low-yielding a us. carry more more little those, stable little some quarter So we securities took in took could those amortization we into we repositioned What did that help investment

boost from reinvested. yielding but that and again were securities we Just sold standpoint, they NII an a mortgage-backed bit little really lower

Operator

Your of Betsy from next comes Morgan Stanley. question Graseck

Betsy Graseck

So couple of questions.

for ROTC put You background do longer-term the to I for out just know which the has at. outlook know question the with you

I is XX% think at XX%, that like the to it was right Investor Day?

John Turner

XX%. to XX% Actually,

Betsy Graseck

XX% to XX%, yeah, Sorry XX%, to XX% sorry.

John Turner

different interest rate environment. Little

Betsy Graseck

that thinking you it, I'm is, I'm how question that, have know, hearing. I about are you the when at looking So

Okay.

know that's banks X.X% still about been you're else came target, opportunity the your couple everything through for equation got also you the have X.X% expense your as lot and and a in but given happening then the for improves that. right on out of you? side tailoring You've But I number capital sizes, operating rule next more the how the the expense go side and that here wondering maybe of thinking about years. leverage we I'm that --

David Turner

Yes.

on the We our the yes, iota start models. I'll tailoring have the our that are of driven, we amount regulatory not planning year we that We but put of and have, the by your capital submission. we need amount it's not to encouraged and last Not, in based capital we So calculate with management. does CCAR still other have, rigor one every relief question. change

our So says, though could prepared to X.X% our even put really for get to that target. to we in the X%. was math try time comments being, our We

us to We've enable opportunities take of of arise. cushion added XX they points should basis to advantage

a decline uncertainty As conditions the to the economic continue bit. market and

get it are we going given think and X.X% the to the to we're to circumstances As returns the was under. of allow kind relates, that us appropriate

Day. rates clearly period to that was was, down up middle down in are Now your XX% of the all very through are environment, had, this covered have year XX% John forecasted that by we the and be question and thought we different go were time going rate as of they we the interest to and to was Investor they're saying that

getting to do. which to be would some very without not do So to taking risk, we unusual XX% will difficult XX%

for So has to update and later, expectations. terms out but return clearly, some targets there going you been exact we'll come decline the in we're of

But little the need those where rates stock get better think go. that's industry have exactly, handle reflected. in prices what's we will I our will -- our where we a think be, to

baked two this probably in for 'XX have We one there's year, well. another as in coming

So more to come, Betsy.

Operator

of comes question from John Evercore next Your ISI. Pancari

John Pancari

there I wondered you just you're core considering looking I in -- well system next issue. on you replacing on believe, if bit cost deposit in deposit and can I the more you around we what's could project, what's that are and a -- IT. the some core of at timeframe around so little side us you. impact or making system type then impact is as be here, And you're the if investments systems as your the currently year's numbers. give of that could terms details the other Thank it system wonder should talk the evaluating, then, loan that

John Turner

Owen just talking strategic spend ask planning John address a topic about with lot our it. We time the so had to and our meeting Board, offsite of I

John Owen

about upgraded, need either out find about systems to that to and plus professionals five upgrade talk the XXXX year we through in XX $XXX three each identify process, or year just systems about need go technology, that replaced. or strategic replace. year we'll have year, our and back technology we there's at Investor to we annual and planning every be a will Yes, view and bank a spend Day, out year to go to what on about million consolidated And go about

this So normal just cause is business from of case of today. a business a

of around systems the core some mentioned You deposits.

out We that an in are first go RFP system. the going our for will quarter to deposit have

will those timeframe this. probably very to year we'll for it's period. a we us. back a choice platform We big do be that, This results year approach multi-year the over incremental do what's six time you'll get for probably for What find make bang with three many journey We us, don't right on and The mid-year a an when upgrades. will upgrades.

So again this is a probably a four year particular to six year case. system exchange in this

we We these but back But did tell year, platform, go I our would on to couple into fortunate a consolidated in be you, of systems we're point XX at years of consumer this do platform a to seeing a and in one, would one. XX now point and this about We're time. implementing of the larger one of again, we ago. SCI course, to wealth operate

So I you, would is it tell large. what

we that RFP is of do XX nothing year. this to XX We process, every the are but don't in

John Turner

work complete the our spend. In analysis we we can indicate context John, technology that the within current our of

we see outsized any sort expense to system allocation of changes. with core associated any the of So don't

John Pancari

and to little change the And control. But management of additional us control on how that of modifying then a common an component executives. your bit, beyond you the is C-suite to of -- it in you're Friday, the color, just of you're this a that Can expanding change you that you're team relates give little you your -- issued one, X-K what bit bit I apologize, provisions announced that off question. this is little radar

David Turner

both what concern a the Yes, what really our I our happen It are, of to the our we lot may concluded there's thank respect us period lot agreements lot questions were the what to of to the and we and you in of to -- a going with things over of because change truest intentions of for announcement, severance. you intended guess, caused a about control imagine was both of did standardize, is of with about future time, what bank banks question. fair our was two combination quickly can a a inconsistency of look had we amount change agreements forward. at control long

or asked an we consider to And the to both and control applied similarly severance, so our they group more consistent, them in change modifications apply Board to to and change they that a both make of appropriate so to group.

get for associates. simply everything was real, change the in our significant order. it of frankly initiative to But shareholders so our create consistency. or does sort No housecleaning it us for And for some

Operator

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

Erika Najarian

clearly, it too Given continued for Is think outlook very your out laid interest loan that income mid-single-digit low for net specific growth margin. to to and year? interest a path could next you flat optimistic net be

David Turner

Well, we what on guidance next yet give to don't want is. year

lot we the that -- environment sheet about still don't a grow will with that, know to able We income, being talked balance do interest have and then a GDP what Clearly, some, pressure we've look little. we the about, have things rate think with like. that consistent puts on net then growing

on getting that the also Now, make a we're of we've recycling to good sure business done capital lot relationship books.

our expect there. grow, have some on and so And growth we teams absolute that expectation. you've pressure loan seen to But

of that have we feel it, about. good So we piece

see Lower just rates year. going put the obviously profit on rate what into us next Let's us. some gives pressure

Erika Najarian

And improvement? potentially as And potentially there continued guess context peaking given an for as be is fees say ROTC I did on the reach response get to I you're clearly XX%. on that efficiency we but think and because this revenue range year. basis and challenges about absolute to you room expenses about of down of REITs actually on if you out outlook, rate of the your earlier giving not interest is potentially think up is the with

David Turner

be any Well, environment. so our commitment positive operating has been and in to generating leverage continues

are we than the So revenue to grow faster expenses. seeking

feel be can we So expense to continue harder we do management, work that continues challenge, where revenue even that. will to on

half is clearly had the rates and be the of revenue of going So the from will challenged half. back first because revenue to in to revenue XX% think challenged, comes of that kind higher our I back part, the last the versus be spread, question we year is last

comp a to that very be in on would revenue so grow least to 'XX, at it And NII. hard 'XX

will growth, loan So help bit. a us there

is, NIR, that control made, we we continue We'll positive we and we ratio environment good generate operating at down we've time. the our see what continuous investments just to continue have help same through expenses, work we the efficiency believe improvement leverage to have our will to and as rate talked but good grow that and program expect to

Erika Najarian

where an leverage. is it's want deliver in And committed I just to positive still clear, to that mentioned revenue, you Regions hard grow environment even be very to operating

David Turner

That's correct.

Operator

comes next Martinez Saul from Your UBS. question of

Saul Martinez

Couple of questions.

on of average, and more First, obviously because I September trying point understand beta to not that, quarter. make XX am want there. basis it's quarter. to clarification, to sure what's fourth in two a reduction deposit in cuts not. you I fully the just that denominator the rate XX% had fourth make with the hence July average cost, I basis Is it's is XX on point on sure cut and it's funds that's numerator an the the just XX% fed to deposit the that denominator the in and a

David Turner

October in two December So rate baked right now. and cuts in that it's on based are

Saul Martinez

point to at be would the it reduction. point basis XX So XX basis

David Turner

right. that's Round numbers,

Saul Martinez

over think year-on-year. C&I and at I I if on up end it conditions, balance under you the I some. your hear -- in loan your quarter loan that you're look saying I more important X% -- sheet run then normal period this hopefully line guess grow question what long growth, growth But can with under

isn't growing. off Home rolling a Going It's hundred CRE your you a forward, little still have a of do indirect equity headwind, book a you maybe GreenSky headwind. have as quarter, contracting. a really is bit to vehicles few

the I given you're see I I how headwinds growth asset material loan get earning understand where how, I'm from mean, think not it do -- XXXX. offsets, growth just you where how giving year. loan about think guidance mortgage owner you interest you I and multiple struggling pretty in on But occupied, with have lines. help know next for Can you conceptually, me

David Turner

of inside book. loan So is lot stories yes, a the there

top. Let's kind at of start the

from dollar of seen line We growth we in lumpy and they're Those It I with it's, investment. depends fixed to we quarter in in on feel this this the feel time been So utilization, our and our pressure and good watching lot wanting you've the put book. access with conversations. our no on happen our capital It growth to there're having markets. of trade big next of traditionally some year. driver downward and a sentiment that they time. are be make terms had in about growth C&I in about loan has some our but depends first tariffs with can to regards of pipelines, clearly the optimistic capital We're to cautious, third quarter. second, good the -- uncertainty our clients, mean

some there standpoint still real have the from to is opportunities our of we be estate going being probably we've estate said, that second-lowest have But some concentration think growth real of investor an there there. peers, investor we

We selective are with very careful and being clients.

is but down, will move estate I it from time move investor see opportunity. think you'll then an So pay-offs to back time, and up that real

an third and two-thirds was we, of had to that keep was a half of quarter, opportunity. of of almost we we production a bit continues what little produce. refinanced it what was growth Resi-mortgage up. And purchased. be this About We about

think be We it's we investments GreenSky to have in though I off, consumer, is avenues. running plus be So unsecured a direct even we that'll think our going making other plus. a in

mentioned, a John bit we're growth there. continue cap to to little think unsecured, but see opportunities I we for of going

time, decline bit of has bit. Now think a that slow home we equity down a quite will been -- and that on over

when profitable Those key are I of loan lot drivers. think, have growth, we'll growth had So that solid down. a Again, looking loan will really I think indirect you not the we're vehicles being but for and mentioned you be Company. for that the

Saul Martinez

Can remind and you does roughly average And $X life the What's it. quickly the is I believe the average, can remind weighted GreenSky of you -- that? how billion.

David Turner

this little terms $X.X at of while, but bulk about at It low It's two pieces will linear of duration. billion for right a that's the be actually. has years of year. two There in

David Turner

off. lending help to we far grow the our own direct so and in our We've commitment run-off yearly we unsecured to And are far the match side that on of modestly growing which we with increase capabilities, the Saul that so capabilities believe can us portfolio investing and all begins unsecured -- bank of growing lending. and while lending it's should card mortgage, run to to the increased timing consumer and addition in and

Operator

Your next question comes from Gerard Cassidy of RBC.

Gerard Cassidy

Can you technology we and guys with hear share spend. us, touched you guys already your on

remain of How you're you're you're of keeping million spending, from how measure should dollars banks about hear know to do What the digital bigger outsiders, measure the we smaller you standpoint as can are you to with a big the expected the whether how banks? what some we this these to guys whether can lot -- I is taking we banks, that the keeping you from bigger metrics I look $XXX you be whether stories technological up outsiders with competitive market a you're but banks. share do think -- had is year. mentioned determine up keeping expense

John Owen

infrastructure I quick John Like about we based and this and forward is new things XX% projects XX% which bank, is and of initiatives Yes, that new digital how systems looking $XXX is earlier, maintain be a XX% forward. about spend really, we the on into million, part that, just is going of big said maintain risk. on around real About new our on about that, cyber would Owen.

factors. and online banks all We how XX all JD about ranks banking. Number the to we our we on branch list everything they their rank and keeping out JD pace. way a up would they the in are Powers -- one banking perform few are external with through from ranking the come way of -- and quarterly mobile be we Powers a The and think use top keeping

consistently. that's So we data point a use

and are the online, quartile mobile top for branch top second quartile. We and in moves between quartile

trying that's that where the top always again in So quartile. to keep an area we're

also on need digital where performing we and source customers from other Gallup. in advance. to be The insights Gallup us how we're gives areas good should our

point The would to our thing I bank. other of digital is the just the at growth rapid

were the logins our Over digital up online our mobile to three years, XX%. and last properties

You heard sales. on digital talk John earlier about

sales XX% up about and sales were digital XX%. and savings year-over-year. card, Our XX% accounts credit digital are up accounts, our checking In

and of from rates. our a it parties also couple of validate at kind factors, do we our what internal external look growth So we're doing how

John Turner

Gerard. add, just I'll Yes,

consumer half our I of who other at roughly age are thing Are growing The our under is, accounts? checking look customers are XX. of cost customers? the deposits new are new it we we and growing low And

and offering of are we fact all that success, compelling indicators things for technology our me customers. competing in are so to And having those

Gerard Cassidy

And increase, David, number put guys you talked mentioned, CECL quarter a bit the you about in the second you the out Q.

that which I able $XXX the million, handle to described, appears XX% -- level increase. of just yourself included be you impact think Everybody us. if can how $XXX to day said compare over that existing frame to you reserves out can a you for you one to your million

are you impact If that how for going are that one at the Should assume outsiders of what what we going loss day everybody, loan impacts to was to similar as you looking this provisions can or like? to increases look day two at we're stage? the guys see

David Turner

with and one -- one. level really those their out still are and see through. say think peers not longer their that coming remotely Day what kind of those have two, are shorter-term loan CECL dependent to Day charge-offs come their other we day dated would services about, be you numbers than anything I are that is need consumer you charges that close business going that are what have loans higher sets portfolios -- or are two would on duration what books. just to we'll day to of oriented have

than the CECL You type and provisioning of difference. again, model dependent somewhat on what growing, so loans very have big makes those reserves be you're mix tendency a Under higher we provide incurred to growth, to loan a and on have have today.

So get XX/January December looks to we they million it difference looks commercial if how are forward. and from commercial do makes factor than our what's what economic we given last is the that to provision that's particular you're see $XXX like that on then time odd going worse. but worse the mortgages real changing when million, big going versus prepared estate, like as put what to really you as a sounds. when That time growing why that in estate comments, $XXX better in things the change getting occurs get worse, the or to higher is key X, forecasted dependent day two, carry mortgages outlook, -- real is think in you And we've a forecast or

that's is which downturn. be because about as You we've availability for supposed what growth, was going than pro-cyclical as loan can a of provisions and in more in other And get you than was be to model current rate It a -- can do talked to and standard down do. your concerned to why you're which pro-cyclicality about quicker. reserving see bigger causes have cycle, in you the to much one of cost the standards credit is that's trying much reserve the

Operator

Autonomous. of from Your comes next Foran Brian question

Brian Foran

I I your guess a appendix. had couple of questions on slide

key the manufacturing, maybe Are because just the before. detail manufacturing I highlighting XX How retail, and of questions Slide quite actively a The maybe positioning of Slide retail, to are these for you're commercial I concerned. Slide transportation. I transportation? or restaurant, interpret this It guess, where some how seen responsive being level sub is the some areas the are market investor any you take portfolios lot. through the Is there XX look all, this about loan you're guess to this? you're share. thank of all or why this detail opportunity on portfolio or you through areas you should really talked XX you've I restaurant, First highlighting. energy as

Barbara Godin

portfolio. the in in restaurant note, have bit some Barb portfolios, ability is potentially felt opportunity you and concerns we the see On of was we little will time seeing some to to go years. with with energy you transparent, like much and good softening been happen the and portfolio, this -- There's Godin. credit good that portfolios and large, in look in portfolio transparent next more do said, all what's be, but Brian, couple be in the as softening just their our that we that particularly some that manufacturing, restaurant we a an manage much providing on cycle portfolio, of feel so about have to our portfolio, information our that we by certainly it we to now we about say, look, their as looks the feel we more I a into decided

Brian Foran

billion I lightning recognizing And hate a always a ask in almost of but for little loan similar rod a to billion. maybe the bit produce you highlight when then think is standard the first would on this billion, leverage But I gave much of investors. this, Slide $X XX. than slides. certainly mean, I vein you about which in bigger is $X.X $X.X number it's a the balances The definition

gotten crept bit up it just leverage that months is So why is little definition. or past number a kind Why bigger? over you to your a months, little more is that is the tripping the nine of into participating some six credits

Barbara Godin

that it, way credits become leveraged. define of even We have off do on number started a will the not we based again as though they leverage

him portfolio of runs to going it. make couple got a here, comments I'm that on Additionally, who Ronnie Smith and ask we've to

Ronald Smith

pushed Yes, one just of events of just of and short one is exactly that We a good really definition about particular couple on responses leverage least was had target. within we'll comments. see and a those companies publicly a it our relationships We had over couple credit over you of traded feel if that your million. long-term And resolved time. into it period two, very those at combine of companies positive of lending $XXX those

broad existing build but The time, that continuing online. support given where of on the growing relationships resolve a deep relationships intermediate lending is other portfolio, of our than there more not can we transaction to outside bit focus other little and period really will a

John Turner

do like actually portfolio. our of we as I'd just add we part manage other concentration a every risk it

Operator

comes Montgomery question from of Marinac next Your Janney Christopher Scott.

Christopher Marinac

lot that this wanted now credit or know than I I we on gave, ask driving a see vary. do of had total you the number that explanation just kind further level to will quarterly criticized a of you higher spec the change should of we shifts?

Barbara Godin

Yes, number drove it's I portfolio pointing classified, criticized again. to the which In that think particular what on up. you're is Barb

saying, despite were our We expectation. for risk experienced first quarter me improvement broader all the metrics areas. several let our within So with in that, credit start

charge-offs down were delinquencies down X%, TDRs down flat. know, and X%, NPLs XX%, were you As

So our mentioned, Shared feel And good we there. well David, Credits National were included. did you as as

has proven energy energy services what resolved came perform one on And I'm to way. any staying are of through and our and Credits, have from speak weren't just category, credits that which well over to cycle. moved credits credits other ability categorize customer, the credits these agent into since the the going comment of they the totally to quarter-end, to on National three happened category, XX a by we is half loan the those large quarter the of Shared years I classified over If to increase for but as five with the specifically that's really this us follows,

stressed make against price, in XX% for looked oilfield I'll price I have book $XX that's It and only right about gone comment our through morning. and which And as well energy accounts deck a the we our last give on to this today's service lend we services was that now $XX.XX. general, both also So our as down barrel, was take. have or

energy somewhere next a the our losses million energy $XX So lot a in about based over year, on believe manageable really within $XX year, addition all three work, of million sorry. of to this and of stay range -- to next we've done we will

had currently some to values. with asset move asset-based all we we them of quarter energy, classified this their within well to loans being that also addition In

based we this for XX we're slowing points the and quarter our comfortable as basis the And to over moved credits. on basis XX So range our year a we loss review credits loss of XX on such, points of that this lastly, anticipate points economy. points XX classified those to also to both next on again XX% basis based to minimal category top no this, and year basis

coming historically to saying, off a believe such, be we low by systemic summarize increase we're as numbers quarter expected. we as would a and this issue, being I of that we happened where So was some don't see are period what

David Turner

add, Barbara. XX XX The basis loss three will points over to basis points I was years. the next rate

Barbara Godin

sorry. Three years. I'm

Christopher Marinac

And just and again, in that categories, additional deterioration great, helpful with background. the general? that restaurants had does transparency again imply in inclusion others to giving Okay, and of the more those ABL or the that's quarter you're

Barbara Godin

much we're to get really are more There deterioration, but trying transparency. is marginal some just

Operator

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

Stephen Scouten

the a to where, had the a from was you follow-up muted going not maybe kind I the down, I why move around around Investor question and kind and a just would maybe -- I guidance pretty your remember specifically of funds think question were million. a policy to guys earlier but range ROTCE Day, that of negative, this GDP even Fed had more $XXX just zero roaring on view economy to go. tenure, Betsy's maybe

you So granted a lot of what we're seeing today kind is of what predicted. guys

specifically driving what what is relative the expectations you wondering, I'm to in So said that? change

David Turner

out. Steven, million. think, was $XXX gave than to the tenure of closer I that X%, the At our time we expectation the

denominator. increased are impact the that fair fair those value return that the When the falling the there So obviously denominator that the increases all of pressure clearly, denominator is on value of investment portfolio things it's the and therefore rates the pretty rate you same book tough. and on two and environment, is derivatives we've value and lower thing have numerator on added have that putting drive

meaningful think. you more So a that's might than that's --

through clearly, high of guidance been XXX. had That's a as When low you margin to go calculation that and are. down standpoint, had net expectations as from income we we a rate the where XXX,

wouldn't range. the And end to the being low predicated XX% so at of XX% on

if core that. I when there banking, expand. continuing have can on just industry you good a margins and environment to think, don't of commercial get are XX% So rising at you We -- at capital return can our get you rate look think have you

couple flat market over change at years. a of yield no rates, expectations least curve have rates We the and low relatively to no -- real saying, the next for

But we're environment, making through it income really good credit if return those quality. you watching investments and grow it's, in IR, of to expenses, And that's to hammering doing. persist. this tabs can't in get what growth keeping net it's type out returns on So it's,

John Turner

Okay, have since no further we questions.

day. Have a thank So much. interest your for all good you it very Appreciate today.

Operator

call. This concludes today's conference

You may now disconnect.

Regions Financial (RF) 22 Oct 192019 Q3 Earnings call transcript