RF - Earnings call transcript Q2 2020 | 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 will 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 will now turn the call over to Dana Nolan to begin.

Dana Nolan

Shelby. you, Thank second Regions’ earnings call. conference Welcome quarter to XXXX high and an David John of Turner will commentary some provide through will Turner level take quarter. the overview you Relations are Earnings-related forward-looking available section of under documents, our statements, the including website. Investor prepared These as the call. well today's comments, disclosures of presentation segment as our cover materials, Q&A turn I And over John. with will that, to call the

John Turner

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

inequality. uncertainty The four resulting months, challenging. on profound, examples we've caused and by last disruption overt been both the communities, Over of operating customers, tremendous social impact our has been and and COVID-XX experienced environment associates has the and

streams. effort to sustainable while in balance over in was creates revenue operating our highest challenges. quarter, customers our As we on performance. our making sustainable and committed the reflection deliver to and racial foundation through disruptive systemic and Region's and difficult $XXX all injustices our XX crisis of million health PPI that optimize change can opportunities investments, use to is reduce our to The delivered by associates, things support impact ways in we supporting that pre-provision providing uncertain advice to financial performance deliver remain through to years, and long our This focused and we and capital, variability In decade value adjusted pre-tax much strategic guidance, people create that current stakeholders environment providing all resources income. expertise both the presented control. society, take country these improve our second so has We're to positive our and long-term and our the the works sheet us needed steps address adjusted on many and communities, the times risk returns a in in incumbent

the economic core risk credit offset provisions impact resulting by outlook than in on business by solid, and it ratings performance caused However, further while elevated an deterioration the the was and was more quality.

acknowledging fragile, economy about the fared fact the prospect the the that majority been to closed cautiously had a The national other the weeks consumer unemployment region, deferral as than Just because by parts the spend conditions while operate than southeast toward consumer better also said we And and the the continued the were evidenced better southeastern we our of that where levels. begun I reopened, ago, the were of of recovery within footprint. states of for rate in economic in crisis, of it off few number normal national average. optimistic businesses and small taper average. to below Most increase was states have requests the more had

clearly, there were signs that good about. So we pretty some felt positive

CARES view recovery. infections, with of our potential COVID-XX in renewal acceleration end their The reopening aid our surrounding or extension, areas second quarter, the has COVID-XX programs paused the and of wave by states impacted of pace the included some certain the in plans. in on uncertainty coupled began potential Act a various the the an experiencing of cases However, footprint or reversed for

While we that. the reflects quarter, have our and latter experienced provisioning positive much uncertainty part of remains momentum the over

offs. energy, with $XXX downgrades within the this particularly second credit uncertainty hotel, outlook, significant recorded net certain and environment, adverse in of quarter loss provision the as of restaurant, $XXX portfolios, of result a million we charge reflects as As and well retail a provision The in conditions economic impact million. combined

X. which assisting $XX allowance purchase closed includes provision the committed time. related deteriorated non-credit quarter’s to on to this customers same This difficult for also We're April through the of loans the acquired our million capital, initial in

risk make our not modified and necessary. process have rating rigorous have to review continued we adjustments credit However, as

do a assumptions reviewed, granted policies. we've have loans and and Based business the adjusted risk around our crisis. we existing economy accordance been to we experience anticipate work had reserve been continue the remainder stress of economic done We with upon will health XXXX. In combat outlook, ratings addition, our in substantial to public the not as deferral bills know the all during

minimum However, our round a In well conducted management of by economic strengthening tests have stress weather decade supervisory capital the framework, to most positioned the credit Reserve, and exceeded capital Federal we've recent which spent regions position downturn. risk us all levels. the

additional revenue. pleased Reserve industry our hedging an introduced income. net net of of we stock the dividend next the were we the to stress, quarters] the under became to our XXXX common capital trailing program, for resiliency leading dividend, support income week provide with our exceed test we With While common pre-provision respect believe Management to Federal the [four in that average will which effective maintain cannot quarter later where XXXX. has recommend dividend board third will the the

to focus I'll the capital managing time over being of we in for organic growth, attention value lending With morning. for we challenging to communities face That turn managing our control effectively generate shareholders, said, on this continue sustainable David. long-term can a what are revenue now customers and environment. you that, your and prudently and remain to our continue committed Thank support expenses to the it activities to strengthen downturn. We economic and must and committed during

David Turner

Thank John. you,

highlights. with start quarterly our Let's

was newly negative quarter, million. $XXX credit loans. highlighted during as by as income adjusted CVA improved our Items a Capital, business additional results as million selected the provision, total, expenses, extinguishment equipment derived a branch loss loss customer quarter on the items results this net slide adjustments available spreads reduced $X.XX included credit charges, a common items. derivatives on associated share to quarter consolidation significantly In the or $XXX interest results offsetting originated favorable Program debt. of are expenses of with Protection with early Partially net a Paycheck well pandemic-related Ascentium and and the the significant approximately our reflected impacting pre-tax finance Second from per our associated loss purchase shareholders

look commercial addition driven $X loans Program elevated in billion draw take average balance Loan our starting $X to quarter. at the billion results Protection from Let's a with by XX%. average impact finance and growth Adjusted originated Paycheck loans equipment the during newly acquisition, primarily activity, increased sheet. our the loans related was of

Looking markets. focus Commercial borrowers eased, ahead, the our corporate quarter, and remains risk-adjusted utilization have during normalized returns. selectivity loan the concerns on with relationships accessed and appropriate have capital client’s levels as liquidity full

In generally about the addition, borrowers economic outlook reopen. started were to feeling the better economy as corporate

loan anticipate forgiveness begin the respect that into Although fourth. third the in the recent quarter requests Currently, temper] [may to and loans, difficult timing it forgiveness. cases the we to of and With rise remains perspective. PPP to COVID-XX continue predict

consumer Adjusted low rates. begins. all have We will a of timing market idea declines across once loans up the reflecting forgiveness except X% decreased around interest categories reflective mortgage, historically which better process average X% was

record excess XX% to deposits draws, increased cash deposits decrease consumer basis, accounts. segment have their On deposits increased X% regions, respectively. were the to government levels brokered quarter. balances back a and deposits stimulus other These many deposits in while by XX%, increased segment corporate ending in offset while and deposit increases partially XX%, wholesale our this deposits and commercial also increase within brought Turning deposit wealth an while customers ending increased other segment. PPP line from deposits, keeping as excess to loans their Average of XX% their

to spending overall The deadline of corporate rates line programs, received down year, in have customers to of until the commercial as line deposit elevated consumer the delay in end with utilization cash the in improvement to end the using bank draws, funds levels. payments, PPP coupled is and make stimulus, July. the round benefits continues with to increase to government current tax rates of unemployment Although of begin the a July spent year, half be filing consumers are expire We will increase spend. the contributor. at to decline through deposits primarily balances outside and normalized, economy us the held the We lower which pay deposits remaining consumer due of and by support stimulus government have federal anticipate higher. with move Similarly, will stay the also second until interest anticipate tax commensurate continued the

of loan for income market income remains margin, linked shift decreased and Net net Let's as net points of Federal net Net interest spread ongoing. these extremely and and compression. expected are with to finance strong balances program liquidity, backdrop. significant decline source at in to our elevated loan interest interest our for deposit specifically, X% XX levels approximately volatile acquisition quarter, higher margin PPP cash supported mostly regions associated Linked regions. increased interest for which X.XX%. income Reserve elevated an story the a remain attributable accounted to to margin Efforts income. elevated interest and was net hedging XX cash interest stability quarter, and basis elevated equipment low interest points balances basis reduce the The despite margin rate levels

interest early over balances. the quarter of cash the The reduced on billion implications tender million During FHLB expected year. of extinguishment are $X.X a abate directly outstanding of advances, and to margin of bank debt liquidity the $XXX net remainder

of amount system. the remains given the uncertain However, in liquidity impact the

our quarter, the hedges $XX balance rates for move to quarter. of year valuation our roughly leading costs Loan starting decline begun, the exhibiting the have was franchise. from deposit from short-term important basis a hedging Recall, Regions approximating were Total forward that XX the XX our Now largely and strength net tenors benefits in in differentiator. estimates in will have and approximately basis our most representing points third ability $X.X insulated of given quarter. fourth third market deposit to deliver the hedges our increase points have continues lower, performance pre-tax quarter sheet Current to quarter. benefits quarter-end basis to majority an relative this of billion deposit and linked the million XX the million and continue starting per to points. $XX industry of costs of remaining quarters hedging The hedges a this income the for decline margin. interest hedges begin forward added space as five

to reduced quarters net increased costs $XX negatively interest loans lower Premium X and attributable we income the to further basis interest interest net decline rates in-part low coming during Furthermore, respectively. margin quarter. an interest million to securities of million lows. by amortization and interest rate historical and Lower $X quarter. the and impacted at rates market expect Over long-term deposit million income margin $X net unusually to points, net fixed the first re-pricing

activity line given forgiveness to ahead currently decline Looking third loans me of the in normalization mostly from between interest saying second surrounding may uncertainty quarter. quarter, timing was We income impacts NII PPP quarter, in quarters, across anticipate the for from X.X% linked create the X.X% net that elevated of volatility fee let the the the to by start acceleration. and

Excluding is cash interest our liquidity, stabilize mid-to-high [X.XXs]. net PPP excess in and core the margin expected to

Now XX% million fee adjusted expense. environment, quarter, operating let’s income challenging Capital producing income. markets at Despite experienced take quarter-over-quarter. and a revenue non-interest $XX a the increased record look of

driven capital million. the to $XX was Excluding rates underwriting, and income production. with primarily generated the favorable in contributed CVA, record income by markets real the generate increase totaled favorable well volumes customers. is have driven markets Lower environment. permanent record to of it production Mortgage Growth CVA million to as for fees year-over-year debt $XX capital quarterly revenue, a financing from expect and to associated light in placement by current significant interest increased capital environment, $XX reasonable as estate markets of In equity record rate million a XX% excluding range.

mortgage decision fact, business Mortgage significant core number a mortgage add throughout highest volumes regions full-year bankers is elevated XXXX paying to history and XX%. production of loans the and experience month we for represent off. in year expected May is the a to continue levels our of quarter. In XXXX last single month by Closed full-year strategic to remains in our company's our the exceed application

servicing mortgage to a be In addition, continues strategic initiative.

portfolio arrangement, quarter, the allowing net servicing to quarters we flow us after grow several of the new experiencing decline. initiated During the

The lower the slightly while are lower current Consumer charges driven below respectively, bank year-over-year, lower card consumer card the Service for X% across environment year, month spend transaction card spend and X%. spend although been approximately down primarily year-over-year. to declined in was second quarter credit debit year. expect remainder ATM reduced up over negatively up X% by by June, strength impacted income, which overdrafts revenue has prior fees by in improved of to the was activity. XX% services balances remain quarter-over-quarter. driven mortgage & activity. spend Consumer X% fact, and of has card spend as the fee improved a were well, the Wealth transactions has and credit the levels revenue We investment decreased customer has reduced management XX% while were June led in branch

Looking to $XX persist, service consumer and forward, pre-March if spend million ATM approximately levels month estimate fees charges $XX from we reduced levels. be will card million current & by per

despite of while with improving; consumers appear strength, the holding levels quarter-over-quarter improved entered So, their position assets customers the quarter, continue carefully during managing well. to a a elevated benefit. to spend up values Wrapping in non-interest up in are pandemic unemployment, market benefit be significant deliver resulting and while finances. associated income, certain employee They

and it benefits offset increased expense. this employee was non-interest income, While in increase corresponding salaries fully by

finance primarily the prior positive the as XX% liability XXX increases, well driven unsecured higher completion equipment by temporary acquisition. of based acquisition, Salaries to increased to our of move value assessment market in [COVID effects increase. to primarily Let's on Adjusted the a economic by Elevated associated with employee and with attributable our benefits non-interest increased benefit production XX% expenses the as XX%, adjustments debt. primarily accounts. incentives, associated of Professional unfavorable increases, from our driven annual non-interest the approximately fees to expense. a the also associates legal fees compared impact bank contributed FDIC reduction pay] increased base quarter. and X%, on addition assessment conditions, increased merit

shares company's with quarter to year and XX.X%. a adjusted was sold the effective ratio Visa addition, second prior increased efficiency The In expenses million. XX.X% B $X rate tax was associated class in

We benefit of just XX% we have as continue continuous current list to from processes, identified improvement completed over the initiatives. of

and the equipment the we by X% how our customers square total Through quarter finance have learned corporate For other to pandemic, last and since reduced year. of second we with space in acquisition, communicate XXX,XXX interact feet, excluding have example, ways. each almost new or

and a success video continue using in increase digital calling conferencing. adoption through seen dramatic have efforts We increased to have

have to Our clear since we video conferencing are in-person associates number in have and by already XXX% all increased sessions This XXXX. embracing surpassed year-to-date of conferencing meetings. is video a evidence alternatives customers accounts and our conducted mid-March, of

have Deposit digital In addition, our digital are come Further, year-over-year customers users in digitally mobile opened XX%. deposits and are older. from and up XX%. almost up are XX logins new accounts up XX% of half XXXX years

loans ability In submitted fact, digital XX% played in customers e-signature. the of to applications using a significant closed role during assist pandemic. Approximately online our in PPP obtaining our were and XX% were

retail now. have size We our for several the been actively years of reducing network

desire consolidated In digital changing customer we an and model for Because an banking fact, we continue. increasing consolidations adoption Customers branches branch delivery to expect preferences, their this quarter. for needs. have omni-channel XX of increased

This we advice priorities continue locations will while suited modern capabilities experiencing. focus expect. leveraging So enhancing capabilities, further add on for customers in our consolidate we our will advancing sales digital best new we banking branches, banking to technology Similarly, provide that we to our digital allow the easier the momentum customers. to are make our are spend and digital to are best shift to guidance e-signature leverage digital and us evaluating

additional We confident square where from or decline. scheduling; is continue of believe to there whether footage also we corporate through modified increased concerned office are [hotelling], are opportunities will work space overall use home

of minutes want and bit a walking number this I has noise Our spend to a quarter few expense in it, through.

out of range. be you associated total our benefit don't run To items of related If for, you adjust the remain accounts million making $XXX we adjusted million with we to employee finance the and to start our and COVID in to get such expense expenses as expenses, with rate, the committed $XXX million equipment acquisition to clear, investments total back business. quarterly $XXX our the back grow needed inclusive core unusual

However, be always environment. our the expense overall reflective revenue must base of

extent, opportunities. is will to the efficiency look an So we environment additional revenue for challenged,

charge-offs. unemployment while credit combined centered impact hotel, to stimulus the net uncertainty in made conditions as within economic outlook reflects loss primarily already on as million. outlook within move energy, totaled portfolios, certain adverse the $XXX in for restaurant, quality. the impact with uncertainty of quarter downgrades The the and were significant provision well for the enacted The potential the asset benefits let's So $XXX provisions and and is level million retail Portfolio additional government of of and downgrades on primarily stimulus. economic

non-accrual business finance X.XX% of quarter’s credit which part resulting This allowance and $XX our million for loans includes initial provision acquired also XXX% is non-credit deteriorated on for small equipment of total losses of X. April the the acquisition, loans. closed total as establishing loans allowance The

Importantly, our restaurant of increases charge-offs credit this to excluding were the and net loans. taken the losses increase for The within quarter. reflects X.XX% energy points Annualized PPP total basis portfolios. loans, fully charges guaranteed allowance XX

our XX%. Despite Additionally, criticized are well equipment approach These This policies related loans. charge-offs Total during loans. led and to in specific customers total X% time, our restructuring in increased for with increase ratings and willingness recent charge-offs to now the non-performing X%, contributed a troubled time, include million services portfolio relaxing we our our this significant results as respectively. credit first Business loans level to to our loans debt necessary. to difficult increased downgrades finance delinquencies not criticized decline $XX and as revise work as risk continue acquisition.

momentum recent in numbers entered to good been have in stressed to loan stimulus, respect second and executed the relation They cetera. potential et shape the in the approach have all to the stress benefited this business of the and We positive. portfolios over into clearly us insight up gives With pandemic loss jobs, and our has devalues, consumers, of feel income, half review a bottom government good they underlying year. from jobs

ending what of benefits has July federal we do re-openings XXXX. the and reserve builds cases completed during create some some and know expectation COVID-XX anticipate on not substantial Based of we resurgence today, the work we certain downside risk. in slowed have of remainder However,

net anticipate second levels the the quarter. charge-off we with remainder to the year consistent Additionally, for be of

resulting we've at-risk quarter, view portfolios more through continued can engagement gained view the in In withstand sectors informed market actual observations this addition, have refine which a we Through operations and normal. from to the of our new pandemic. of customers our with

during due portfolio potential quarter the result, June to from declined respect a the acquired With initial at highest from loans risk our better end pandemic we last the be we underlying at includes we finance at of continue the will have acquisition. in of portion quarter our This loss the few deferral to $X.X but periods billion equipment loan consider As XX. to weeks the to as $XX.X insight positive deferrals, to see expire, billion of amount next trends. the

July As in of XX clients of have XX% approximately made in last mortgage X, payments, days. [while the forbearance]

have deferral For XX%; last equity, XX%; a banking while is payment in in XX clients of home been deferral XX%; approximately the and card in made at have credit at payments days. and XX% is corporate auto our

business or request early XX%, modeled tracking at approximately commitments trends have indicate we and XX% While loan at both deferral request second less for relationships. than

Let's liquidity. and at take look capital a

company test. Tier levels estimated X X.X%. minimum capital equity we stress notice that the late common June, at exceeded Our In received supervisory the under ratio all is

planned lending dividends. stock quarters severely These allow capital amount estimated stress appropriate focus of preliminary degradation quarter under Regions third of the returns. for represents at in and through shareholder This XXXX inclusive support results supervisory and on capital the quarter of four is of capital of currently of Our is common the to activities XXXX buffer fourth X%. the scenario manage adverse

will share dividend stock the current of respect level. quarter the through the a current management at Our repurchases the that third to plan With of reflects announced recommend suspension its dividend, remain Board end capital to common XXXX. previously

Looking ahead, we to maintain expect the dividend.

and capital will important payout However, have we year Federal not of absorb approximately capacity OCI is by note We imposed gains advanced unlike second that it from nonetheless, over any it calculations, potential losses. our Reserve. to the is on be but to earnings pre-tax numbers future dependent in regulatory included approach are that of half available our constraints Also, OCI $X billion the security the exclude capital in banks.

of As our and additional of billion previously as hedges not gains would hedges low into capital noted, based therefore capital. the which be from flow would on on believe the forward gain five-year supporting these over or OCI, deferred recognition We a we cash net designed $X.X derivatives. life incremental rate the provide in are regulatory immediate hedges remaining the These is curve. environment. protect there current capital leaving live in LIBOR is excluded pre-tax Terminating to amortized also have value a income in income transactions in hedges an income

decisioning respect significant in capacity, capital we which our points. to during growth and loss regulatory not significant discuss evaluate continue additional to the the However, reflected our sources This record levels. quarter liquidity, demonstrates is absorbing XX percentage historically deposit contributed quarter levels and at to XX%. liquidity for loan-to-deposit decline company. ratio the has point to elevated ended a to Deposits in With contributed

needs liquidity planning our and helping of as internally, communities designed our navigate we environment, Despite as uncertainty. our remain on the well focused meet stressed difficult customers, resilience gives and communities regulators, in period and that externally are time. during customers we ensure capital to and confidence associates through So the continue us This sustainability. of exceptional to uncertain can robust this our processes, this which by summary, economic are

questions Regions do strategic take participants. to each ready assured, solid questions. that and Considering current time, and committed stands of ask ask a support your this and have execution. happy We during to environment, only all we allow for are are that, you stakeholders. one Rest extraordinary we to continued plan more help With question the to its

your open for We will the line questions. now

Operator

open Graseck Stanley. of The Betsy questions. is Your [Operator now you. is Instructions] question floor Morgan first for Thank from

John Turner

Betsy. morning, Good

Betsy Graseck

good morning. much. very Hi, Thanks

David Turner

morning. Good

Betsy Graseck

Hi.

run I you you're outlook it you're from the near-term you know, so questions, you is it portfolio? the, you Or understand trajectory feel expect net an the there. couple guess charge-offs Is I'm uptick to just one, stimulus just rate, highlighted, a for current the charge-offs, trying on like thinking things and impact Okay, at how that or don't know, net flat about here XH until on anticipating in this like you roll-off? that in

Barb Godin

Hey, that, a dive in things. to I'll respond One done go we've couple of Betsy. all and Barb ahead portfolios. of our deep it’s It's is and a

services XX% et some virtually line our of know, monthly, the to them et some ongoing some business of portfolio, had them cetera. weekly, – had and with we've we've You conversations first together; are cetera; we've customer-by-customer, happening of talked discussions credit of of them bi-weekly,

we have an also good recession, thinking which we in problems to So, last age. feel a say really we want and know about don't let may great information customers you the but since – look on is which the to the we which issue, our over create made change

is problem towards there hoping a think we charge-off, out. see that to it due a be So recovery going we'll much we course, might actually hit recovery in moving out we and if are but a it get further towards charge-off,

of that's in as So, we about – and getting the think to part what's thinking. half second

cetera, far, how encouraged I'm but behave? still on people deferrals, once our to a early like you're book, things the the bit front. part because to right, services the stimulus encouraged deferments But wild indeed they et what relative As next I roll-off on, off, those second consumer will on of beginning that get see we will card business is that so year, side, and of pretty asking anticipate the is come by we rolls down commercial somewhat what numbers that and for of the the

Betsy Graseck

moving noticed, [MPLs]. Can stance, bit the that's that Okay, And the of Q-on-Q what other institutions, yes, color. with NCOs more helpful so I a reflects are we've more give you … your little up I into seen proactive than guess, us people out

John Turner

you a through non-performing Yes, which fact is charge-offs just quarter-over-quarter, system. the and that, little we're loans decline a of correlate reflection I to know, that Betsy, see moving the again, think you those in

Betsy Graseck

Yes. Yes, exactly.

just – Okay. on for could regard NIM some us X.X] give XXXs. for NII the your asset average then A around outlook the that with in Q-on-Q, know thinking give And hedges, to follow-up in what you [X.X the to growth color core just question I guide inputs mid-to-high XQ the with is NIM? you're to versus earning down about

then, You the know, at And well, benefit quarters as through that some of through from PPP, sense couple Thanks. main should PPP we some anticipate for next you've us how flows some as got you pieces point we look the of into so for can the from here? give trajectory XQ.

David Turner

Yes, there's lot a in there.

So, let I me can if down]. see [bullet

by we we what regimes the saw getting, loan quarter, of going the of lot anything the that low of what know, to be that about are biggest in those end were book a really don't we carry other know through we we meaningful and late see. still more to going so through. PPP, coming driver forgiveness second is, the than is carry. on of be is in repaid Probably So There in have happened don't the draws be the some first but are and that quarter which quarter there's that you reduction XX% the pretty coming the second

that it's think in decline I loans. continued of so, And reflective

our so – XX%. up is deposits other some The were

You was that, date driven moved is the July of big to also the by we part know, tax believe fact payment XX. that

a of assets And standpoint. some so, in we and should expect quarter, that therefore, from run-off deposits the using

of that premium terms kind you when amortization of up, in have So, we're going to prepayment. add all

see reinvestment quarter the we prevailing that increase. at on in us from to quarter about past we the that cash going then, range $XX loans rate go to rates, quarter, component XXs this that's the harder this billion next as you $X fixed this books million prepayments of of be close the about have had out. hedge know, flows it to And upper talked So, and securities that talked to being that's we've probably cost and up

short-term but exposure some the to the fully aren't piece. reinvestment we're we moves, have still we protected So on –

So, all decline and from. that coming up you that add is that's NII where in the

Betsy Graseck

[Sure].

David Turner

quarter first million. Betsy, in about about way the was point saw out about the $XX the in hedges and benefit is see assuming the know, third the and this that, rates you years our were quarter all quarter $XX third in the What million. five quarter also we'll from are benefit million I for beyond should $XX we

we're NII hedges, and stability part the us very of big So thankful of keeping and margins. have core that we that's those our the resulting a

Betsy Graseck

for know one-off, so a you you don't uptick And kind to – your a are loans know thinking so how anything you're obviously as get going I and temporary we of you in you but it? know, your in should just is for forgiven, those NII, have numbers your about be as, then, guidance treat that PPP, that

David Turner

we depends again, any quarter, If investors in that it an we’ll point out what given that unusual that. bump having understand the Well, end up so regime on is.

in further so it if for our and know maybe the wouldn't, right reforecast of business, to on over be time just we now, part regime is guidance we’ll we what it's but you. going of don't – just it's You everybody kind get comes and and when we know that tell

Ronnie Smith

is, Betsy. And you David Ronnie – this Smith, know,

PPP. extension eight-week reiterate, to been has there uses an from period that able for that the funds the count initial to were under Just businesses qualified

bit a on customers select. So has that depending out that which XX weeks the process pushed

Betsy Graseck

you. thank Okay. All right,

John Turner

Betsy. you, Thank

Operator

Jefferies. Your of next Usdin question Ken is from

John Turner

Ken. Hey,

Ken Usdin

Thanks. good morning, Hey, everyone.

your a about you comfortable. obviously, flush reserve of too? ask little that sit, dividend, on and to slipped this other Thanks. can that ratio the your you And comments forth with ratio know, out And just the put about wanted between comfort income CETX know, to where where of the about, below back the constraint where zone you get vis-a-vis think I being you how you do the that recommend to? know You think kind quarter, the bit then, back continuing big you that, X% – talked context and in CETX to the

David Turner

Sure.

the everybody's where you contribution I from PPNR our So, at see XX, and assume looking Slide and the engine, core of generated our then we impact waterfall have the dividend. the our could positive

Ascentium to provision basis two drove points So is the as as acquisition that between have of plus. well the down, those expense XX our that in first quarter. did We

and occurred, X% equity of country stress our to advantage a always calculation excess we've in – Tier one of of would some common a So us desiring all to we’re I think we're and capital well, X which holding said the opportunities, Ascentium. form little we'd acknowledge mathematical in lead take

And provision don't to we should we so, the chart, had. have expect, at as and again, at a level you look waterfall just expect that you

quickly, can accrete that pretty pretty back we capital So, have also while reserves. we robust

know, If [X.X]. couldn't you you pick where to comfortable coverage, dividend we losses issue. when went particular We're so transaction look we not at now, that are, timing is capital distress a hit. We but the of adequacy our

the came that from that analysis DFAST can through. You glean

based as third quarters, the four we'll of Board past you the sustain third the we limitation to quarter is the know, going we're that we of we we're do test and some know look not dividend in fourth on Now, to is form stress the on have, in sure to a What for that our our dividend like. remarks, through math, quarter prepared be going regime exactly what mentioned quarter. recommending the in

of looks financial you two may do expectations and September necessary. earnings. the it fourth prepare said, we first As like we in our our into year, that on let's quarter therefore, believe quarter we'll know regime being sustainable fourth whatever think and have adjustments supervisors when quarter And the Reserve you we and going don't what based analysis, we are, then, is economy suspect fourth quarter and we statements about the we are out the know, forecasted might. whatever first the Federal continue of And the will that know. the gave if make, next guidance caveats XX and to for That the that this into we see don't quarter dividend

the caveats, the see, but what So, about good feel based on two we are can sustaining we dividend. those

John Turner

Thank you, Ken.

Operator

Our next Sandler. question is Piper from Stephen Scouten of

John Turner

Good morning, Stephen.

Stephen Scouten

guys were Hey, how but that be terms are rating it from color good of like you morning. loan want I loans a see deferred can those expectation you if are much tracking of may you little wondering I'm for deferrals. And I the a are said Yes, peers XX%, bit. feels wondering in little changing guys your that up ahead know perspective of more risk for you us of performing was your could to second I give a maybe also deferrals still downgraded because you're [XX%]. under kind frame ratings, around if

John Turner

that? Barb, you to to want speak

Barb Godin

you begin Sure. my in Stephen. work start Yes, about talk – referrals way as really general, Services with to when I’ll we with, quick, Business so consumer, to

in this consumer, for so, is And what fact about so in coming in, sign. looking it’s it's in are morning we deferrals and that saw rolling X%. no early was I we've off, just still in a numbers at, encouraging down all deferral the consumer, for rate the that but it's yet. those you, is second fact, fact, for What Mind earlier early, good company, of some and are had deferral requests far first

that second Services we've limited to X% to you deferred well. front. Business those and deferrals, chart need all-in, that And you given that for those criticized heard those, on you talking as are of of again, a a the [intuit] news are the we've do from it very Page again, about of a percent, deferral, encouraging so that know can were our include within portion – the criticized again, the the percentages it's give large benefit criticized but conversations, that's Relative criticized know, very from deferral. portion customers, one-by-one – the doesn't are For XX portfolio, these that

John Turner

book? Ronnie Smith, you want the to talk about wholesale

Ronnie Smith

Yes, John.

opening low requested we And very X,XXX we particular back from we've that if that – Just comments, book David step deferral seeing, it, a said out wholesale this into seeing but we're in numbers, the a have his request think Stephen, universe, and – in I for of just have second a clients deferral period. the are and I go appropriately its to a in to period. on a second XX% requesting are as a a name-by-name and deferral. as early can you that less risk tell, using of those finding, to deferral requested leading are those indicator ratings and we returns, assign basis than provide early, to who the stress want I a in scrub clients We're had

strength And up. they cash of flows, so, that have liquidity that shows built the

to point, these good of we at need about where work And mature with deferrals that so, there's we continue each a more clients. we are to this but as lot feel

Stephen Scouten

you if expenses term to run rate, number, think of to I one when on $XXX gave, do clarifier you can David the better Okay. have if is that of get longer guidance you PPP-related you million ask a of within Very, information maybe And guidance you there? any expense could helpful. said are level? million or level kind And very kind $XXX what that

David Turner

Yes.

this going now. So to acknowledge there’s in that's gave and that loan material some related amortized what a It's can We you better to expect actually forward. and that They or deferred be came – noise those there to I PPP. we over we were we quarter, any fees the of we expenses past would a think just of the part get as had in numbers particularly weren't our of through lot why of guidance get the originations little loan. life that

expect So, in that third hit I and anything wouldn't quarter standpoint the us material forward. going from

Stephen Scouten

color. I time. the Great. the appreciate for Thanks

John Turner

you. Thank

Operator

Deutsche is Bank. question of Your from O’Connor next Matt

Matt O’Connor

Hi.

John Turner

morning, Matt. Good

Matt O’Connor

folks yes, more. stock little I know have getting interesting day hit to your for credit bit, think because an today because, you you know, this back you guys you is but worst on credit, is reserve because a touched coming

taking reserving. today for out and was came company under Another some maybe heat

Is able your who's and view, I others? point than data your little why know, guess of from mix? as just last six quite the to the that tell, it's you outside you to you hard have, like who's do bit like, kind view, you think a loan behind an from some has weeks? maybe Is So, know, a of more you’ve changed aggressive it markets, are of you the maybe in mentioned, being it aggressive, point be

John Turner

I’ll answer that?

Matt O’Connor

pain in on that? you else last anything could there Is downturn? through that the you add that went the you. Thank Is

John Turner

You know, I credit. were reserving is under criticized think we banks know doing. to you questions what about quarter I can't potentially and doing. last know, is, think, there's What this are we're I for I other what it quarter, speak And do

current we're appropriate has of applying you currently allowance with that's two portfolio will, deteriorate economic based we in levels economic life it's there any large as and don't risk and allowance considered our, doesn't believe we Over been [over have quarters. additional those have we years, Well, if economic the think further quality through to environment their processes. the credit risk in And, reflects companies, majority, the our really as least described, assumptions expected losses. anticipation David those consistent a of so not the the charge-offs improve perform approximate portfolio be given the we're ratings. wholesale our will described, credit Barb our portfolios, upon to ability appropriately. and because rated know, in next changes the] portfolios, and presented what loan for anticipate risk repay, losses risk result, actively credit credits, in monitoring if large and industries, our to the we We've you we an the And, exposures, environment. as at changes our we've are hard XX of of and last no all know, the Ronnie provisioning portfolios, worked And high-risk significant side our if business, future, management our on that and

David Turner

XX and the is the trying the in $XXX primary see for showing Page to can of that's outlook reflection we’re and component economic our reserve a this Yes, – that waterfall everybody million of was driver to you help allowance added unemployment. the

goes lot quarter, work needs were the big What's the be? is And at of So, of you going unemployment impact Today, that of what the into stimulus? when we determining the to be. closer there's to question XX%. is know, to the expectation allowance That's delta. was quick recovery X%. So our its first ultimately a how a

up in earlier We see of see middle what and Barb, page. you is And in remember, was number are this on that the of [$XXX grading. of And ground from risk process you may million. the that in grading million] we the relative charge-off the top want risk to to that the chime described about $XXX on that book that's

[$XXX $XXX So if our that, provision. you add to million about million] of it's

about risk rating? to the Barb, So want you talk

John Turner

one there that distinguish credit is [begets] of effectively deterioration make covered. it's the we've and I'd though hard the economic environment – point is changes think between in The other. to the I because portfolio

David Turner

Yes.

John Turner

that what visually know, I upon we're based in. represents the our stress overall, just it current is assumptions think environment you

Matt O’Connor

through was again. helpful. Thanks Alright, for that that coming

Operator

Your next question is of from Wedbush Peter Winter Securities.

John Turner

Good Peter. morning,

Peter Winter

the I was Good or missing especially it the capital when there won to Fed, anything strongest they Hi, wondering to the is buffer? with DFAST the that anything you like that seemed when stressed I can at just PPNR. look Fed on And is good morning. they have address comes been morning. results, do should a it

David Turner

So in didn't of years a comments, unique – them. year our that hedges a of put of had quarter this prepared until have but first we forward you know, ago, for become place piece down our as benefit starting we we couple a lay Peter, we they effective of the

slide our deck. then that second Because had chart and wasn't got the we last and in PPNR step more that believe DFAST. that you in our can in of benefit we quarter, one rate, that piece, a The up another in in third estimation there's see the quarter we don't put that full run benefit

group, which should was our it peer that we middle the the median [part believe test it peers, outperform matter was in group. of] of in peer a of As the a PPNR, fact, our

differently. them test So by this PPNR [indiscernible] our stressful knowledge stress come the they how of especially protect through Obviously, derivatives the They'll of reviewed times, on how some in environment. fourth we're in low-rate be – go having in form a quarter. going to discussions to have that and we're the into can our

so of August until test the it’s we'll final what top evaluate both fourth that, quarter stress some then, see as they SCB. And let's of have continue SCB, out The be won't on preliminary the happens So a type. XX. to

Peter Winter

Alright, thanks.

John Turner

you. Thank

Operator

of Demba from Jennifer Your is next SunTrust. question

John Turner

Good morning, Jennifer.

Jennifer Demba

morning. Good

looking rate for Just of that were run they waivers in? future $XXX $XXX And million a we item back on line question charges, second at much of service down the from coming quarters? kind million. how are quarter, in deposit are What in

John Turner

guidance. we a little bit Yes, give to so, of Jennifer, tried

first from the me So let quarter. it roll forward

In charges state that cost If a you that consumer per that and on this usage, spin about number card level. bit us on at we the our $XX at to service $XX prepared and down quite card concerned month level comments, the between debit is back, down $XX recall, million current a because fees. to were million that ATM particular was of at and in million side spin going to month is coming

a in have is the and deposit level bit, accounts A amount see of had interchange pick card Now, of sitting instance, NSF that month stimulus fees, in customers. you not coming credit the the up through pre-crisis. of that’s June, to to the driver have that coming still but started don't still we our we you for big Therefore, that don't seen through.

million to So right $XX $XX model. through million as now, you really to we're guiding month think you pre-March to ought that per from the numbers

Jennifer Demba

Thanks so much.

David Turner

you. Thank

Operator

from is Saul UBS. question next of Martinez Your

David Turner

Saul. morning, Good

Saul Martinez

dividend year, extended your presumably to that math because quarter And, XXX. know, $X.XX goes keep the you bit into in pay in in it's guys Hey, difficult by morning. you have cap go income estimates XXXX quarter, the end dividend my know, good if even to you wanted – the you just as guys I would then of should to a and $XXX a lot net the little to fourth rolls be for But your dividend based little math up does, deferreds best Fed bit at uncertainty of the your share. on about you able to calculation, extend here, the of there's realizing do to a said more Hey, the dividend. off closer know through and detail more I gets third if million next a

net confident guess saying I threshold so better meeting when over for want dividends, the that �� get confident you're you in basically So, kind sense are quarters? what of is of next to able be to couple that you're that your a you that say meet income I you'll that

David Turner

that's Yes, we're what saying.

Saul Martinez

the That's one respectful of be good. All right. question rule. I’ll

So you. thank

John Turner

Saul. Okay. Thanks,

Operator

Dave from Point. Compass is of question Rochester next Your

Dave Rochester

Hey, good morning, guys.

John Turner

morning. Good

Dave Rochester

reserve the those overall have which quantitative what you the and and all as that loss guys is you're given work here, downgrades book? have the, just the reserve of you book these know, was Hey, potential but the seeing at-risk bills lot guys drove, wondering you more done, Or at-risk on you what credits a you know, there? stress, have that ratio content under

Barb Godin

you an would and point you XX.X% Barb, on Yes, give as restaurants if some know, and a book look sub-sectors, X%. sense, at-risk reserve the is over then, X%. that at little right ratio of of segments energy out, we that over now, this a example, we And to those high-risk a have about you

it. we healthy reserve think have pretty we So, a on

Dave Rochester

Great. All guys. Appreciate thanks, it. right,

John Turner

you. Thank

Operator

Marinac of next is question Montgomery. Your Christopher Janney from

John Turner

Good morning.

Christopher Marinac

good morning. Thanks,

earlier. follow Just Bob up some making to that want on points was

further given deteriorate? quarter? business and So, feel of changes Do on the with made this this changes quarter, results of criticized, change ahead that you to like has the the to you're that the see you that what

Barb Godin

Yes, say in as certainly wild economy. the I would And is of to course, top we're we the on card, of going it. all happen know, what's

to, So, more and you get the in all down, closes economy we you a on view incorporated going really back based sudden and of is it. everything be into comes thinking what but is. know, pain, some there's of to our I'm know, best If confident a know what's on that wave today, we our what second

a They ongoing discussion. As discussions. I an said, are discussion. the [one we've and not gone through; They're we've had done]

there, and again going have set team through have up We we hours Ronnie’s in we it. we meetings use credit these all I’ll – spend there; have in with them

to that happening nothing going talking what thoughts of me more loan classified and about or gives a importantly, that call reflecting seeing, for that back charge-off an again, are MPL level around loan, we or we're criticized that that's not our a So that matter. confidence there's giving in to or

John Turner

federal Yes, to we modeling very sort and caveat is level government is any the I really for us – it relief other is of unprecedented the apply difficult that. think of to

currently like, factor upon well. economic of depending conditions as would or a is but the certainly not, what extended is forward, influence that, the relief we so, whether think And that we're as that looks assuming course, look I

Barb we said, an our issues. of on and top we're like unusual reserving is time, as but feel it credit So,

Barb Godin

Absolutely.

Christopher Marinac

for I appreciate additional color. the Thanks it. Great.

John Turner

you. Thank

Operator

of Juneja is question Vivek from next Your JPMorgan.

John Turner

good Vivek, morning.

Vivek Juneja

Hi, good morning. you. Thank

charge-offs I net a charge-offs on of David, gave a second expecting given will Where’s Just am where guide at you're your line you – that the at so yet, reserves then, to think David, David expecting guidance, starting you've you reserve build. reserve to levels? are are for of this clarifications presume know So down, expecting not you related are you provisions in two some start obviously you loans which around that couple you're right? going match Are mentioned charge time that, to come are same credit, in no more at to to and least – presuming to to sight you not I – to charge-offs? offs? release categories, And those? mentioned, to quarter remain you're the that, your point, elements reserves

David Turner

part. the part Well, first back let your Barb and answer of the with start me question, will

for that all supposed and – portfolio to reserve observe, the can indicators we're sheet date based on that is works factors in CECL way at are the losses all the like. economic we balance So the the

doesn't aren't so, loans You do credit to level provision know, it change, to the necessarily and in no then wouldn't takes expect there's balance degradation – kind you that we if be charge-offs. to the portfolio needs metrics, date. of whatever the get sheet to equal economy provision at the – It's have the to reserve and you growing, it can't right have

know, did at were degraded what but do you economy gave then, reserves. we even it subsequent now, know know, you from like to first closing on [where quarter, We we the you right you in all. we materially So, what don't to we're look going XX, hadn't the to to think have now. we going books, the But we the is when] we as based know, economy the the caveat give September we set

So, going you the than the which better about going is feeling that third into quarter, into different second. know, we're

want to answer the… Barb, you So,

Barb Godin

going to and conversations that estimation Again, part of already talked the restaurant. about in question, that done, are first charge-offs the from had. primarily two come portfolios based from we've where energy we've we've analysis the which the on our the Yes, is

could see that We have that's some and would out. that some of as well, to be generally play to to. impact the hotel what There's it size retail rest going I but up

Vivek Juneja

you. thank Okay,

John Turner

Vivek. you, Thank

Operator

Gerard from Your Cassidy next of is RBC. question

John Turner

morning, Gerard. Good

Gerard Cassidy

are How you? John. morning, Good

John Turner

thank you. Good,

Gerard Cassidy

technical got past And ends quarter forbearance, carry you once to, second know, of question of I've accruing when have Fed are those you they it are higher more the levels the paying? the And the of loans? say, that may not is, any of a and some the paying XXXX capital part third go you the into even on, part on back them start loans, off let's those conversations against forbearance? part still says, the you and ones in this immediately interest versus will because for had forbearance, portfolio. immediately is, the that on question you their on you though the forbearance days loans questions put will second Once be traditional then a they non-performing non-accrual status the all due, a they're go a XX more banks question to in being stance already got on just on have with you may going know, forbearance how customers Fed meaning, or

David Turner

Georgia, this start the with is I'll part. first David.

it the were we to balance, interest, any have the policy. case, already principal principal write loans our on payments it unless accounting go onto status had non-accrual actually to of which principal we accrue ability that receive, – all So and that's its pay or was didn't that we forbearance, and loan interest its down still contractual

this performance on payments, see but those. the people type part, accruing interest most on in we can the where of and for if not, making not that even still are fact nonaccrual you they're forbearance they're So seeing, are their you're

You talk part. second want to about

John Turner

gave Fed work with they part their of is, the we we may second customers change customers, had forbearance to haven't might with including have month initial how not we conversations how with respect about guidance The guidance coronavirus. guidance working periods the of of about any examples since the and six we then. in when question consider really Their examples, as had any

to what talk we pay, want XX of about part and still think I a can't out hypothetically Barb months, was nine third do question that? we months do your get you if customer The

Barb Godin

point. lot see to deferral, but in category. risk input looking determination may place place which a process time, cliff a the today, is, right at I that are point We're criticized Yeah, we're their cash taking we that is, have who at information in paying other going at the things one a moved make because is looking see We're and don't why to loan doing we now customers non-performing that's the flows. have we're category that on of the in to customers rating, what on in reclassified have a you're all we what of sitting

of because deferral, So, we are making I those a risk said simply but the rating point. changes, deferral as not is

So, I any huge don't on a see Cliff of that.

John Turner

today. at not that And indicator XX, And that Barb we facing. challenges the trailing is information but relationship, go into] are current what using looking leading deeper a the is what to that as deferral relationship [drawn dig

see to it Barb's calling today. – we we're So, point, we're as it

David Turner

to I important is David, pile understand This that people this, hate that. it on but

– we believe If needs are given forbearance be doing a rich are way that. regulatory that you to because a leeway on We from graded certain we're standpoint.

independently. what why We're you of we Fed or shouldn't regardless or loans about cliff that that's independent treat – So says the see how TDRs anything. calling a effect, can

Barb Godin

Exactly.

Gerard Cassidy

you. Thank

David Turner

Gerard. you, Thank

Operator

final of Your Pancari John Evercore. question from is

John Turner

Good morning, John.

Rahul Patil

ratio that. you the year-end? you sure any are level the least there assuming if or little efficiency know it willingness is behalf Because if your Can current of talked in update around on challenge. the Rahul to expenses going sort kind efficiency about XXXX look you like mean forward, you I one is was basis of I through how the at a ratio at is John. this persist revenue XX.X%, ratio, about about Hi, efficiency past have not reasonable, I’m closely bit is adjusted stayed know on thinking talked what talk question know just you of a environment Patil on XQ you’ve about that is of the the conditions mid-XX%, I

David Turner

harder. still pushing it we goal get down that going we then efficiency have ratio to the so be as long-term get and mid-XXs are even our Yes, our we there into to when

So, that's environment, on pressure then changing expenses. a we've to of And and ago, have you back we'll of little program. we given the next have bit quarter, go a little of work minute NII in our volatility obviously you challenges as a our mentioned bit revenue have on on rate when just for have revenue, part but

working I that you over way standpoint. bit, good work hedges down may third now a while see as and to quarter to sustainable over force from actually perhaps think we a So, will where from time right further change percentage any come quarter, we that is are us and the continue as on time revenue benefits the we that expenses into help quarter and

John Turner

[With really today. Okay. your for appreciate Have we Thank questions, a participation our weekend. no] further good company. you in your interest

Operator

call. today's concludes This conference

disconnect. now may You

Regions Financial (RF) 17 Jul 202020 Q2 Earnings call transcript